UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549

                                   FORM 10-QSB

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

                For the quarterly period ended September 30, 2002

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

             For the transition period from __________ to __________

                          COMMISSION FILE NO. 000-30191

                                   TSET, INC.
                                   ----------

             (Exact name of registrant as specified in its charter)

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

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


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

(1) Registrant has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and

(2) has been subject to such filing requirements for the past 90 days. X Yes  No

As of November 10, 2002, there were 46,891,296 shares outstanding of the
issuer's common stock.


<PAGE>

                                     PART I


FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

      The following comprise our condensed  (unaudited)  consolidated  financial
statements for the three months ended September 30, 2002.


                                       2
<PAGE>

                                    TSET, INC
                           CONSOLIDATED BALANCE SHEETS

                                                   SEPTEMBER 30,      JUNE 30,
                                                       2002             2002
                                                   -------------  --------------
 ASSETS

 Current Assets
      Cash                                               $ 24        $ 21,510
      Accounts receivable, net                         26,650             700
      Prepaids                                         66,649         101,029
                                                  --------------  --------------
          TOTAL CURRENT ASSETS                         93,322         123,239
                                                  --------------  --------------

PROPERTY AND EQUIPMENT                                 62,723          62,723
      Less: Accumulated Depreciation                  (38,143)        (33,348)
                                                  --------------  --------------
          NET PROPERTY AND EQUIPMENT                   24,580          29,375
                                                  --------------  --------------
 OTHER ASSETS
      Intangibles                                   2,146,076       2,213,917
                                                  --------------  --------------
          TOTAL OTHER ASSETS                        2,146,076       2,213,917
                                                  --------------  --------------
 TOTAL ASSETS                                     $ 2,263,979     $ 2,366,531
                                                  ==============  ==============


 LIABILITIES AND SHAREHOLDERS' EQUITY

 CURRENT LIABILITIES
      Accounts payable                            $ 1,324,419       $ 956,684
      Accrued expenses                                403,962         284,761
      Notes payable, current portion                  463,165         535,700
                                                  --------------  --------------
          TOTAL CURRENT LIABILITIES                 2,191,546       1,777,145
                                                  --------------  --------------
 LONG TERM LIABILITIES
      Notes payable                                   210,000         225,466

                                                  --------------  --------------
          TOTAL LONG TERM LIABILITIES                 210,000         225,466
                                                  --------------  --------------

                                                  --------------  --------------
          TOTAL LIABILITIES                         2,401,546       2,002,610
                                                  --------------  --------------

                                                  --------------  --------------
 REDEEMABLE WARRANTS                                  748,500         748,500
                                                  --------------  --------------

 SHAREHOLDERS' EQUITY
      Common stock, authorized 500,000,000
          shares of $.001 par value                    45,141          43,938
      Capital in excess of par value               14,443,929      14,371,113
      Deferred equity compensation                    (26,044)        (41,668)
      Retained earnings (Accumulated deficit)     (15,349,093)    (14,757,963)

                                                  --------------  --------------
          TOTAL SHAREHOLDERS' EQUITY                 (886,067)       (384,579)
                                                  --------------  --------------

 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY       $ 2,263,979     $ 2,366,531
                                                  ==============  ==============

   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.


                                       3
<PAGE>

                                                   TSET, INC
                                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                 FOR THE QUARTER ENDED SEPTEMBER 30,
                                                    ----------------------------------------------------------
                                                            2002                2001              2000
                                                    -------------------   ----------------  ------------------
<S>                                                 <C>                    <C>               <C>                   <C>

 Sales                                              $      108,617         $     25,014      $        -

 Cost of sales                                              92,125               10,014               -
                                                    ---------------        --------------    ------------------
 Gross Profit                                               16,492               15,000               -
                                                    ---------------        --------------    ------------------

 Selling, General and Administrative expenses
      Compensation and benefits                            134,790              176,218         289,132             23%
      Research and development                              30,274               90,191          52,567              5%
      Professional services                                284,076              644,817          19,498             50%
      Depreciation and amortization                         72,636               71,674          79,121             13%
      Facilities                                            19,205               25,665           7,535
      Other selling general & administrative
       expenses                                             32,871               41,047          85,273              6%

                                                    ---------------        --------------    ------------------
 Total Selling, General and Administrative
   expenses                                                573,850            1,049,612         533,126
                                                    ---------------        --------------    ------------------

 Net Operating Income (Loss)                              (557,358)          (1,034,612)       (533,126)

 Other Income / (expense)                                      -                    269

 Interest Expense                                          (33,773)             (18,292)            -
                                                    ---------------        --------------    ------------------
 Net Income (Loss) Before Taxes                           (591,130)          (1,052,634)       (533,126)
                                                    ---------------        --------------    ------------------
 Provision for Taxes                                           -                    -               -
                                                    ---------------        --------------    ------------------

 Net Income (Loss) from continuing operations             (591,130)          (1,052,634)       (533,126)
 Income (Loss) from discontinued operations,
  net of income tax of $0                                      -                    -          (360,356)
                                                    ---------------        --------------    ------------------
 Net Income (Loss)                                  $     (591,130)        $ (1,052,634)     $ (893,482)
                                                    ===============        ==============    ==================

 Basic Earnings (Loss) Per Share

      Income (loss) from continuing operations               (0.01)               (0.03)          (0.02)
      Loss from discontinued operations                        -                    -             (0.01)
                                                    ---------------        --------------    ------------------
      Net Income (loss)                             $        (0.01)        $      (0.03)     $    (0.03)
                                                    ===============        ==============    ==================

 Diluted Earnings (Loss) Per Share

      Income (loss) from continuing operations               (0.01)               (0.03)           (0.02)
      Loss from discontinued operations                        -                    -              (0.01)
                                                    ---------------        --------------     ------------------
      Net Income (loss)                             $        (0.01)        $      (0.03)      $    (0.03)
                                                    ===============        ==============     ==================


              THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
</TABLE>

                                                 4
<PAGE>
                                             TSET, INC
                               CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                 FOR THE QUARTER ENDED SEPTEMBER 30,
                                                         ------------------------------------------------
                                                              2002              2001              2000
CASH FLOWS FROM OPERATING ACTIVITIES                     ------------------------------------------------
<S>                                                       <C>             <C>                 <C>
     NET LOSS FROM CONTINUING OPERATIONS                  $ (591,130)     $ (1,052,634)       $ (533,126)
     ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
        (USED IN) PROVIDED BY OPERATIONS
        Depreciation and amortization                         72,636            71,674            79,121
        Common stock issued for compensation/services          5,674           274,513             6,560

     CHANGE IN
        Inventory Assets                                           -                 -           (40,000)
        Accounts receivable                                  (25,950)                -             4,648
        Prepaid expenses and other assets                     34,380           (97,427)          (26,750)
        Accounts Payable                                     268,703           462,312            41,642
        Accrued Expenses and other liabilities               119,201           (34,538)           15,776
                                                          -----------------------------------------------

            NET CASH (USED IN) PROVIDED BY CONTINUING
             OPERATIONS                                     (116,486)         (376,100)         (452,129)

CASH FLOWS FROM INVESTING ACTIVITIES
        Purchases of property and equipment                        -                 -            (9,526)
        Investment in patent protection                            -           (36,740)                -
        Investment in discontinued operations                      -            82,545           (79,999)

            NET CASH (USED IN) PROVIDED BY INVESTING      -----------------------------------------------
             ACTIVITIES                                            -            45,805           (89,525)
                                                          -----------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
        Issuance of common stock                             183,000            80,000         1,021,000
        Proceeds from short-term borrowings                                    315,321                 -
        Repayments of short-term borrowings                  (88,001)                -                 -

            NET CASH (USED IN) PROVIDED BY FINANCING      -----------------------------------------------
             ACTIVITIES                                       94,999           395,321         1,021,000
                                                          -----------------------------------------------

NET (DECREASE) INCREASE IN CASH                              (21,486)           65,026           479,346

CASH

     BEGINNING OF PERIOD                                      21,510            32,619           102,949
                                                          -----------------------------------------------
     END OF PERIOD                                        $       24      $     97,645        $  582,295
                                                          ===============================================

Supplemental schedule of non-cash investing and
     financing activities:
     Debt satisfied with stock                            $        -      $          -        $  419,143
                                                          ===============================================


                  THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
</TABLE>
                                                      5
<PAGE>

<TABLE>
<CAPTION>
                                                              TSET, INC
                                            STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

                                                       COMMON STOCK
                                                 ------------------------
                                                                                                                           TOTAL
                                                                                             RETAINED                      SHARE-
                                                                             CAPITAL IN       EARNINGS     DEFERRED        HOLDERS'
                                                                            EXCESS OF PAR  (ACCUMULATED     EQUITY         EQUITY
                                                     SHARES       AMOUNT        VALUE         DEFICIT)    COMPENSATION    (DEFICIT)
                                                -----------------------------------------------------------------------------------
<S>                                              <C>           <C>        <C>             <C>              <C>           <C>
BALANCE at June 30, 2002                         43,937,907    $ 43,938   $ 14,371,113    $ (14,757,963)   $ (41,668)    $ (384,580)

  Shares issued in July 2002 for cash               150,000         150         26,100                                       26,250

  Shares issued in August 2002 for cash             790,248         790        116,928                                      117,718

  Shares issued in September 2002 for cash          263,141         263         38,769                                       39,032

  Stock options granted at Sept 30, 2002 for
   consulting services                                                           5,674                                        5,674

  Costs associated with equity financing                                      (114,655)                                    (114,655

  Amortization of deferred equity compensation                                                                 15,624        15,624

  Net loss for the year ended June 30, 2002                                                    (591,130)                   (591,130)

                                                -----------------------------------------------------------------------------------
BALANCE at September 30, 2002                    45,141,296    $ 45,141   $ 14,443,929    $ (15,349,093)   $ (617,174)   $ (886,067
                                                ===================================================================================

                              The accompanying notes are an integral part of this financial statement.
</TABLE>
                                                                     6
<PAGE>



                           TSET, INC. AND SUBSIDIARIES
                 NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE 1 - ACCOUNTING MATTERS

The accompanying unaudited financial statements 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-month  period ended September 30, 2002 are not  necessarily  indicative of
the results that may be experienced for the fiscal year ending June 30, 2003.

These  financial  statements  are  those  of the  Company  and its  wholly-owned
subsidiaries.  All significant inter-company accounts and transactions have been
eliminated in the preparation of the consolidated financial statements.  Aperion
Audio,  Inc.  is  disclosed  as  discontinued   operations  in  these  financial
statements.

The  accompanying  financial  statements  should be read in conjunction with the
TSET,  Inc.  Form  10-KSB  for the  fiscal  year  ended  June 30,  2002 filed on
September 28, 2002.

RECENT ACCOUNTING PRONOUNCEMENTS. On July 20, 2001, the FASB issued Statement of
Financial  Accounting  Standard (SFAS) No. 142,  "Goodwill and Other  Intangible
Assets." This statement makes significant changes to the accounting for business
combinations, goodwill, and intangible assets.

SFAS No. 142  establishes  new  standards  for  goodwill  acquired in a business
combination,  eliminates amortization of goodwill and instead sets forth methods
to  periodically  evaluate  goodwill for  impairment.  Intangible  assets with a
determinable  useful life will  continue to be amortized  over that period.  The
Company  adopted this statement  during the quarter  ending  September 30, 2002.
Goodwill  and  intangible  assets  acquired  after June 30, 2001 will be subject
immediately  to  the  non-amortization   and  amortization   provisions  of  the
statement.  The Company does not  currently  have any  goodwill  recorded on its
financial  statements and it is expected that there will be no immediate  impact
on the  Company's  financial  statements  as a result  of the  adoption  of this
statement.

In June 2001,  the  Financial  Accounting  Standards  Board issued SFAS No. 143,
"Accounting  for Asset  Retirement  Obligations."  This statement  addresses the
financial  accounting  and reporting for the  retirement of tangible  long-lived
assets and the  associated  asset  retirement  costs.  The Company  believes the
adoption  of  SFAS  143  will  have  no  significant  impact  on  its  financial
statements.  This  statement is effective  for  financial  statements  issued in
fiscal years beginning after June 15, 2002.

In August 2001, the Financial  Accounting  Standards  Board issued SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets." This statement
addresses the financial  accounting and reporting for the impairment or disposal
of long-lived assets. The Company believes the adoption of SFAS 144 will have no
significant impact on its financial statements.  This statement is effective for
financial statements issued in fiscal years beginning after June 15, 2002.

In April 2002,  the Financial  Accounting  Standards  Board issued SFAS No. 145,
"Recission  of FASB  Statements 4, 44, 64,  Amendment of FASB  Statement 13, and
Technical  Corrections." This Statement rescinds FASB Statement No. 4, REPORTING
GAINS  AND  LOSSES  FROM  EXTINGUISHMENT  OF  DEBT,  and an  amendment  of  that
Statement,  FASB  Statement  No.  64,  EXTINGUISHMENTS  OF DEBT MADE TO  SATISFY
SINKING-FUND  REQUIREMENTS.  This Statement also rescinds FASB Statement No. 44,
ACCOUNTING FOR INTANGIBLE  ASSETS OF MOTOR CARRIERS.  This Statement amends FASB
Statement No. 13, ACCOUNTING FOR LEASES,  to eliminate an inconsistency  between
the  required  accounting  for  sale-leaseback  transactions  and  the  required
accounting for certain lease  modifications  that have economic effects that are
similar  to  sale-leaseback  transactions.  This  Statement  also  amends  other
existing  authoritative  pronouncements to make various  technical  corrections,
clarify meanings, or describe their applicability under changed conditions.  The
Company believes the adoption of SFAS 145 will have no significant impact on its
financial  statements.  This  statement is effective  for  financial  statements
issued on or after May 15, 2002.

In August 2002, the Financial  Accounting  Standards  Board issued SFAS No. 146,
"Accounting  for Costs  Associated  with Exit,  or  Disposal  Activities."  This
Statement addresses financial accounting and reporting for costs associated with
exit or disposal activities.  The Company believes the adoption of SFAS 145 will

                                      7
<PAGE>

have no  significant  impact on its  financial  statements.  This  statement  is
effective for exit or disposal activities initiated after December 31, 2002.

NOTE 2 -- INCOME TAXES

The  composition of deferred tax assets and the related tax effects at September
30, 2002 and June 30, 2002 are as follows:

                                           SEPTEMBER 30,
                                               2002
                                           (UNAUDITED)    JUNE 30, 2002
                                         _______________  ______________
        Benefit from carryforward of
          capital and net operating
          losses                            $2,872,231     $2,685,915
        Other temporary differences            220,332        220,332
        Less:
          Valuation allowance               (3,052,963)    (2,906,247)
                                         ---------------  --------------
        Net deferred tax asset
                                            $         -    $         -
                                         ===============  ==============

The other temporary differences shown above relate primarily to gain and loss on
discontinued  operations,  impairment  reserves for intangible  assets,  accrued
expenses,  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:

                                SEPTEMBER 30, 2002
                                   (UNAUDITED)              JUNE 30, 2002
                             ------------------------ -------------------------
                                              % OF                      % OF
                                             PRE-TAX                   PRE-TAX
                                AMOUNT        LOSS        AMOUNT         LOSS
                             ------------  ---------- -------------  ----------
Benefit for income tax
 at federal statutory rate  $   200,984       34.0%   $   946,620       34.0%
Benefit for income tax at
 state statutory rate            11,782        2.0%        55,494        2.0%
Non-deductible expenses         (26,445)      (4.5)%     (111,274)      (4.0)%
Acquired NOL and other                -        0.0%       248,489        8.9%
Increase in valuation
 allowance                     (186,316)     (31.5)%   (1,139,325)     (40.9)%
                             ------------  ---------- -------------  ----------
                            $         -         0.0%    $       -         0.0%
                             ============  ========== =============  ==========

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.

The Company  has filed all of its  federal and state  income tax returns for all
years  through June 30, 2001.  The Company is current on all income tax filings.
At  September  30,  2002,  for federal  income tax and  alternative  minimum tax
reporting purposes, the Company has approximately $6.4 million of unused Federal
net operating losses,  $1.0 million of capital losses and $3.3 million of unused
State net operating  losses  available  for  carryforward  to future years.  The
benefit from  carryforward  of such losses will expire in various  years between
2006 and 2022 and could be  subject  to  limitations  if  significant  ownership
changes occur in the Company.

NOTE 3 - SEGMENTS OF BUSINESS

The Company operates principally in one segment of business:  The Kronos segment
licenses,  manufactures  and distributes air movement and  purification  devices
utilizing the KronosTM  technology.  All other segments have been disposed of or
discontinued. In the three months ended September 30, 2002, the Company operated
only in the U.S.

                                      8
<PAGE>

NOTE 4 - EARNINGS PER SHARE

Weighted average shares  outstanding used in the earnings per share  calculation
were 44,526,735,  34,224,405,  and 25,950,780for the periods ended September 30,
2002, 2001,and 2000, respectively.

As of September 30, 2002, there were outstanding  options to purchase  7,641,975
shares of the Company's common stock.  These options have been excluded from the
earnings per share calculation as their effect is anti-dilutive. As of September
30, 2001,  there were  outstanding  options to purchase  1,557,075 shares of the
Company's  common stock.  These options have been excluded from the earnings per
share calculation as their effect is anti-dilutive.

NOTE 5 - DISCONTINUED OPERATIONS

As of September 30, 2002, the Company had no  discontinued operations.  In early
January  2001,  management  committed  to a  formal  plan of  action  to sell or
otherwise  dispose of Atomic  Soccer.  Agreement was reached with a buyer group,
that  included  current and former Atomic  Soccer  management,  to sell them the
outstanding  shares  of common  stock of  Atomic  Soccer.  The  transaction  was
effective on April 11, 2001. On September  14, 2001 the board  approved a formal
plan  of  action  to  sell or  otherwise  dispose  of  Aperion  Audio  (formerly
EdgeAudio). The Company accrued $150,000 for anticipated operating losses during
the phase-out  period.  At June 30, 2001,  the Company  recognized an impairment
loss on the  intangible  asset  related to its  acquisition  of Aperion Audio of
$2,294,000.  The sale of  TSET-owned  shares of Aperion  Audio  common stock was
completed  on June 7,  2002,  pursuant  to a  Settlement  Agreement  and  Mutual
Release.  At June 30, 2001,  the Company wrote down to $0 the  intangible  asset
associated  with its  investment in Aperion Audio creating a negative book value
for this investment of approximately  $800,000. The sale will resulted in a gain
of  approximately  $682,000.  For tax  purposes,  there was no write down in the
Aperion Audio intangible asset,  therefore,  there will be no tax effect on this
gain. As a result,  both Atomic Soccer and Aperion are included in the financial
statements as discontinued operations.

The  Company's  consolidated  financial  statements  for all  periods  have been
reclassified to report separately results of operations and operating cash flows
from continuing operations and the discontinued operations. The net revenues are
included in the financial  statements under Net Income (Loss) from  Discontinued
Operations.  Operating  results of discontinued  operations for the three-months
ended September 30, are as follows:

                   OPERATING RESULTS OF DISCONTINUED OPERATIONS:

                                  OPERATING RESULTS OF DISCONTINUED OPERATIONS:
                                 -----------------------------------------------
                                     FOR THE THREE MONTHS ENDED SEPTEMBER 30,
                                 -----------------------------------------------
                                     2001                     2000
                                 -----------------------------------------------
                                   APERION                  APERION
                                    AUDIO       ATOMIC       AUDIO       TOTAL
                                 ----------- ------------ ----------- ----------

Sales                             $175,265    $ 365,848     $ 22,990    $388,838
Cost of sales                     (63,509)    (230,117)     (11,810)   (241,927)
Depreciation and amortization      (3,309)     (71,798)     (64,934)   (136,732)
General and administrative       (208,331)    (150,895)    (233,483)   (384,378)
                                 ----------- ------------ ----------- ----------
Operating income (loss)           (99,883)     (86,962)    (287,237)   (374,199)

Other income                         5,090            -            -           -
Interest expense                   (7,744)     (28,526)      (2,615)    (31,141)
Provision for future operating
losses                              82,030            -            -           -
Minority interest                   20,507            -       44,984      44,984
                                 ----------- ------------ ----------- ----------
Income (Loss) pre-tax                    0    (115,488)    (244,868)   (360,356)

Income taxes (benefits)                  -            -            -           -
                                 ----------- ------------ ----------- ----------
Loss from discontinued
 operations                             $0   $(115,488)   $(244,868) $ (360,356)
                                 =========== ============ =========== ==========

                                        9
<PAGE>

NOTE 6 - NOTES PAYABLE

The Company had the following obligations at September 30 and June 30, 2000:

                                            September 30, 2002     June 30, 2002
                                            ------------------     -------------
 (1) Obligations to Fusion Capital          $           49,999     $     123,000
 (2) Obligation to Aperion Audio                       185,466           200,466
 (3) Obligation to Jeff Wilson                         360,000           360,000
 (4) Eagle Rock                                         70,000            70,000
     Obligations to stockholders                         7,700             7,700
                                            ------------------     -------------
      Total Notes Payable                              673,165           761,166
 Current portions:
     Obligations to Fusion Capital                      49,999           123,000
      Obligation to Aperion Audio                      185,466           205,000
      Obligation to Jeff Wilson                        150,000           130,000
      Eagle Rock                                        70,000            70,000
      Obligations to stockholders                        7,700             7,700
                                            ------------------     -------------
      Total current portion                            463,165           535,700
                                            ------------------     -------------
 Total long term obligations net of
      current portion                                  210,000           225,466
                                            ==================     =============

(1)   This is a non-interest  bearing demand  obligation and is only outstanding
      until Fusion  Capital  purchases  enough  common stock from the Company to
      eliminate the advance position.

(2)   This is a non-interest bearing note with monthly payments of $15,000.

(3)   This note is to a director of the Company and bears interest at 4.59%. The
      note calls for  quarterly  payments  of $20,000  until the  principal  and
      interest are paid in full.

(4)   This note bears  interest at a rate of 12%. The payment terms are interest
      only with the principal due on March 1, 2003.

NOTE 7 - CONSULTING AGREEMENTS

In July 2001, the Company signed a six-month  agreement to utilize the strategic
planning and business plan execution  services of The Eagle Rock Group, LLC. The
Eagle  Rock  Group  will work with the  Kronos  Air  Technologies  team to fully
develop and capitalize the Kronos(TM) technology.

Pursuant  to the  agreement  that the Company  entered  into with The Eagle Rock
Group,  the Company issued to The Eagle Rock Group a ten-year  warrant  granting
them the right to purchase  1,400,000 shares of the Company's common stock at an
exercise  price of $0.68 per share.  The warrants  were  immediately  vested and
non-forfeitable.  The  warrant was valued at  $686,000  using the  Black-Scholes
option   valuation   model  and  was  initially   recorded  as  deferred  equity
compensation and amortized into current period professional  services expense at
a rate of $137,200 per month over the term of the  agreement.  Amortization  for
the year ended June 30, 2002 was  $686,000.  The shares  underlying  the warrant
have subscription  rights in the event that the Company issues any rights to all
of its  stockholders  to subscribe for shares of the Company's  common stock. In
addition,  the warrant contains  redemption rights in the event that the Company
enters into a transaction that results in a change of control of the Company.

On October 1, 2001,  the Company  entered into a 15-month  consulting  agreement
with Joshua B.  Scheinfeld and Steven G. Martin,  principals of Fusion  Capital,
for consulting services with respect to operations, executive employment issues,
employee  staffing,  strategy,  capital structure and other matters as specified
from time to time.  As  consideration  for their  services,  the Company  issued
360,000  shares  of its  common  stock.  In  accordance  with  EITF  96-18,  the
measurement  date was established as the contract date of October 1, 2001 as the
share grant was  non-forfeitable  and fully  vested on that date.  The stock was
valued on that date at $0.28 a share (the closing price for the Company's common
stock on the  measurement  date).  The stock  issuance  has been  recorded  as a
prepaid  consulting  fee and is being  amortized  to  Professional  Fee  Expense
ratably over the 15 month term of the contract.

                                       10
<PAGE>

On March 1, 2002, the Company entered into a 12-month consulting  agreement with
The Eagle Rock Group.  Pursuant to the agreement,  the Company issued a note for
the outstanding balance of $120,000 due to The Eagle Rock Group. The note is due
on March 1, 2003 and bears  interest  at the rate of 12% per annum.  The Company
also granted The Eagle Rock Group a 10 year warrant for up to 2,000,000  shares.
The warrant contains redemption rights in the event that the Company enters into
a  transaction  that  results in a change of control  of the  Company.  Of this,
500,000 shares will be earned over a period of 12 months.  The exercise price of
the  initial  500,000  warrants is $0.42 for  250,000  warrants  and $0.205 (the
closing  price of the  Company's  common  stock on March 1,  2002)  for  250,000
warrants.  These warrants are irrevocable and are fully vested.  The measurement
date is March 1, 2002 as the warrants are fully  vested and  non-forfeitable  on
that date.  The value  assigned to these  warrants is $62,500 and was determined
using the  Black-Scholes  option  valuation  model. The 500,000 warrants are for
general consulting  services for a 12 month period. The $62,500 will be expensed
ratably over the term of the  consulting  contract.  The remainder of the shares
may be earned  contingent  upon the  occurrence  of various  events  including a
successful  capital  raise  equal to or  greater  than  $1.5  million,  securing
contracts with the U.S.  military,  securing  contracts  with  consumer-oriented
distribution  organizations,  and the adoption of a branding/marketing  campaign
which has been  principally  developed  by The Eagle Rock Group.  The  remaining
potential  1,500,000  shares  covered by the warrant  will be valued if and when
earned under the terms of the  contract.  The exercise  price for the  remaining
shares will be the market price on the date the grant is earned.

NOTE 8 - SUBSEQUENT EVENTS

In October  2002,  the Company  received a Notice of  Allowance  from the United
States Patent and Trademark  Office  indicating  that its  application  entitled
Electrostatic  Fluid Accelerator has been examined and allowed for issuance as a
U.S. patent. It is expected that the patent will issue in due course,  providing
protection for key aspects of Kronos' technology until late in 2019. A number of
corresponding applications have been filed and are pending outside of the United
States.  Kronos' Chief Technology Officer, Dr. Igor Krichtafovitch,  is the lead
inventor of this proprietary technology.

In October 2002, Kronos Air Technologies,  Inc., and HoMedics USA, Inc. executed
a  multiyear,  multi-million-dollar  Licensing  Agreement  to  bring  Kronos(TM)
proprietary  technology  to the consumer.  The agreement  provides for exclusive
North American,  Australian and New Zealand retail  distribution rights for next
generation  consumer air movement and  purification  products  based on patented
KronosTM technology.

The initial term of the agreement is three and one half years with the option to
extend the  agreement  for six  additional  years.  Kronos  will be  compensated
through an initial royalty payment and ongoing  quarterly royalty payments based
on a percentage of sales. HoMedics will pay minimum royalty payments of at least
$2 million during the initial term and on-going  royalty  payments to extend the
agreement. Kronos will retain full rights to all of its intellectual property.

In November  2002,  Kronos Air  Technologies,  Inc.  and the United  States Navy
executed a Small Business  Innovation  Research Phase II contract to develop and
demonstrate an advanced distributive air management system based on the patented
Kronos(TM)  technology.  The 24-month  contract is worth $585,000 with an option
for an additional $144,000 in funding.

This Phase II  contract is an  extension  of the Phase I and Phase I Option work
that  began  last  year and  represents  further  validation  of the  Kronos(TM)
technology by the U.S.  Department of Defense.  The work and funding on Phase II
will begin immediately.  During Phase II, Kronos shall develop and demonstrate a
set  of  fully  controlled  devices  that  represent  a  "cell"  of an  advanced
distributive  air management  system with medium capacity airflow in a U.S. Navy
unique  environment.  The "cell" will be designed to be easily  adjustable  to a
variety  of  applications,  such as duct  size,  airflow  requirements,  and air
quality. The goal of this development work is to significantly reduce or replace
altogether the current HVAC air handling systems on naval ships.

NOTE 9 - REALIZATION OF ASSETS

The  accompanying  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, 2002. In addition, the Company has used,
rather than provided cash in its operations.  The Company is currently using its
resources to raise capital  necessary to complete research and development work,
and to provide for its working capital needs.

In view of the matters described in the preceding paragraph, recoverability of a
major portion of the asset amounts  shown in the  accompanying  balance sheet is
dependent upon continued  operations of the Company,  which in turn is dependent
upon the Company's  ability to meet its financing  requirements  on a continuing
basis, to maintain  present  financing and to succeed in its future  operations.

                                       11
<PAGE>

The  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:

            1.    In May 2001,  Kronos Air  Technologies  was  awarded a
                  Small  Business  Innovation  Research  contract.  This
                  contract is sponsored by the United States Navy and is
                  potentially   worth   up  to   $816,000   in   product
                  development   and  testing   support  for  Kronos  Air
                  Technologies.  The  first  phase of the  contract  was
                  worth up to $87,000 in funding for  manufacturing  and
                  testing  a  prototype  device  for  air  movement  and
                  ventilation  onboard naval vessels. In April 2002, the
                  U.S. Navy and Kronos  mutually  agreed to exercise the
                  option  on the  first  phase  of the  U.S.  Navy  SBIR
                  contract.   The  option  was  to  provide  incremental
                  funding  to  Kronos  to  further   test  and  evaluate
                  Kronos(TM)devices   built   during  the  initial  SBIR
                  funding. Testing included demonstrating the ability of
                  these  U.S.  Navy  Kronos(TM)devices  to  capture  and
                  destroy  biological  hazards and to effectively manage
                  electrical  magnetic  interference.  In November 2002,
                  Kronos Air  Technologies,  Inc. and the United  States
                  Navy  executed a Small  Business  Innovation  Research
                  Phase  II  contract  to  develop  and  demonstrate  an
                  advanced  distributive air management  system based on
                  the  patented  Kronos(TM)  technology.   The  24-month
                  contract  is  worth  $585,000  with an  option  for an
                  additional $144,000 in funding.

            2.    In December 2001,  Kronos Air Technologies was awarded
                  an SBIR  contract  sponsored  by the U.S.  Army.  This
                  contract  is  potentially  worth  up  to  $850,000  in
                  product development and testing support for Kronos Air
                  Technologies. Phase One of the contract is worth up to
                  $120,000  in funding to  investigate  and  analyze the
                  feasibility  of  the  Kronos(TM)technology  to  reduce
                  humidity in heating,  ventilation and air conditioning
                  (HVAC)  systems.   Dehumidification  is  essential  to
                  making HVAC systems more energy  efficient.  Phase Two
                  of the contract is worth up to $730,000 in  additional
                  funding for product  development  and testing.  We are
                  currently under contract for and working on phase One.
                  In August 2002,  the U.S.  Army  requested the company
                  resubmit a detailed  Phase Two  proposal for review in
                  2003.

            3.    On July 2, 2001,  we signed a six month  agreement  to
                  utilize  the  strategic  planning  and  business  plan
                  execution  services of The Eagle Rock Group,  LLC. The
                  Eagle  Rock  Group  will  work  with  the  Kronos  Air
                  Technologies  team to fully develop and  capitalize on
                  the  Kronos(TM)technology.  We believe  that The Eagle
                  Rock Group can assist us in  unlocking  the  potential
                  value  of the  Kronos(TM)technology.  The  Eagle  Rock
                  Group's   multi-disciplined   approach,   which   uses
                  seasoned    business    executives    and    leverages
                  relationships   and  networks,   can   accelerate  the
                  Kronos(TM)opportunity    versus    the    timing   and
                  development  if we were to continue  on a  go-it-alone
                  strategy or if we were to work and coordinate with the
                  myriad of groups necessary to duplicate The Eagle Rock
                  Group  team.  Specifically,  The Eagle  Rock  Group is
                  working  to augment  and  enhance  our  efforts in the
                  following  areas (i) capital  raising and  allocation,
                  (ii) strategic  partner  introduction  and evaluation,
                  (iii) distribution channel  development,  (iv) product
                  focus  and  brand  development,   (v)  human  resource
                  placement,  and (vi) capital market  introduction  and
                  awareness.  Pursuant to the agreement  that we entered
                  into with The Eagle Rock Group, we issued to The Eagle
                  Rock Group a ten-year  warrant granting them the right
                  to purchase 1,400,000 shares of our common stock at an
                  exercise   price  of  $0.68  per  share.   The  shares
                  underlying  the  warrant  have  piggy-back  and demand
                  registration rights, as well as subscription rights in
                  the  event  that we  issue  any  rights  to all of our
                  stockholders  to  subscribe  for  shares of our common
                  stock. In addition, the warrant contains redemption

                                         12
<PAGE>

                  rights in the event that we enter  into a  transaction
                  that results in a change of control of our company.

            4.    On March 1, 2002, the Company  entered into a 12-month
                  consulting   agreement  with  The  Eagle  Rock  Group.
                  Pursuant to the  agreement,  the  Company  granted The
                  Eagle Rock Group a 10 year warrant for up to 2,000,000
                  shares of our common stock.  Of this,  500,000  shares
                  will be earned over a period of 12 months. The 500,000
                  warrants are for general consulting  services for a 12
                  month  period.  The  remainder  of the warrants may be
                  earned  contingent  upon  the  occurrence  of  various
                  events  including a successful  capital raise equal to
                  or greater than $1.5 million,  securing contracts with
                  the   U.S.    military,    securing   contracts   with
                  consumer-oriented distribution organizations,  and the
                  adoption of a  branding/marketing  campaign  which has
                  been principally developed by The Eagle Rock Group.

            5.    On May 7, 2002,  we  completed a private  placement of
                  our common stock  pursuant to which we sold  1,971,176
                  shares of our common stock at $0.17 per share to seven
                  accredited  investors  for  consideration  of $335,100
                  cash and 1,429,695 shares of our common stock at $0.17
                  per share to six  members of our  management  team for
                  consideration  of  $39,987  cash  and  commitments  to
                  convert $203,061 of debt.

            6.    In July  2002,  Kronos  Air  Technologies  executed  a
                  Memorandum of Understanding with Access Business Group
                  International  L.L.C.  for the production of a limited
                  number  of  Kronos(TM)devices  and for  the  potential
                  licensing  of   Kronos(TM)   based  air  movement  and
                  treatment  technologies.  Access Business Group is the
                  product   development,   manufacturing  and  logistics
                  subsidiary  of Alticor  Inc.  and an  affiliate of the
                  Amway  Corporation and Quixtar Inc. Under the proposed
                  arrangement,  Kronos will retain full rights to all of
                  our intellectual property, as well as manufacturing of
                  our proprietary  power-supply.  The final agreement is
                  subject to negotiations between the parties.

            7.    During our year ended June 30, 2002, we sold 5,059,752
                  shares  of our  common  stock to  Fusion  Capital  for
                  $1,194,608  under the terms of a Common Stock Purchase
                  Agreement  dated June 19, 2001. On August 12, 2002, we
                  entered  into a new Common  Stock  Purchase  Agreement
                  with Fusion.

            8.    In October 2002,  Kronos Air  Technologies,  Inc., and
                  HoMedics    USA,    Inc.    executed   a    multiyear,
                  multi-million-dollar   Licensing  Agreement  to  bring
                  Kronos(TM) proprietary technology to the consumer. The
                  agreement   provides  for  exclusive  North  American,
                  Australian and New Zealand retail  distribution rights
                  for  next   generation   consumer   air  movement  and
                  purification  products  based on  patented  Kronos(TM)
                  technology. The initial term of the agreement is three
                  and one half  years  with the  option  to  extend  the
                  agreement  for six  additional  years.  Kronos will be
                  compensated  through an initial  royalty  payment  and
                  ongoing   quarterly   royalty   payments  based  on  a
                  percentage of sales. HoMedics will pay minimum royalty
                  payments  of at least $2 million  during  the  initial
                  term and  on-going  royalty  payments  to  extend  the
                  agreement.  Kronos  will  retain full rights to all of
                  its intellectual property.

NOTE 10 - COMMITMENTS AND CONTINGENCIES

      LITIGATION.  On June 6,  2002,  Dutchess  Advisors  Ltd.  initiated  legal
proceedings  in Middlesex  County,  Massachusetts,  against TSET.  The complaint
alleges,  among  other  things,  breach  of  contract,  QUANTUM  MERUIT,  unjust
enrichment and  conversion  with respect to a letter  agreement,  dated June 19,
2001,  between TSET and Dutchess Advisors Ltd., and seeks, among other things, a
judgment in the amount of $75,000, exclusive of pre-judgment interest, costs and
attorneys'  costs.  TSET contested the allegations made by Dutchess by serving a
motion to dismiss all claims.  Dutchess  subsequently filed an amended complaint
with the court on August 16, 2002.  Dutchess  seeks to recover up to three times
its actual damages as well as its costs and attorneys' fees. TSET filed a motion

                                      13
<PAGE>

to dismiss  all  counts in the  amended  complaint.  TSET  believes  that it has
meritorious defenses and intends to vigorously defend this matter.

      On February 2, 2001, we initiated,  together with Kronos Air Technologies,
legal proceedings in Clackamas County,  Oregon against W. Alan Thompson,  Ingrid
T.  Fuhriman,  and Robert L. Fuhriman II, each of whom were  formerly  executive
officers and members of the Board of Directors of Kronos Air Technologies.  This
suit  alleges,  among other  things,  breach of  fiduciary  duties and breach of
contract by these individuals,  and seeks, among other things, an order from the
court referring the dispute to arbitration in accordance with the terms of these
individuals.  We have agreed to a change of venue of this matter to King County,
Washington,  and arbitrators have been selected.  The parties are in the process
of exchanging and complying with requests for discovery.







                                      14

<PAGE>

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) the growth  strategies of TSET, Inc., d/b/a
Kronos Advanced Technologies (the "Company" or "Kronos"); (b) anticipated trends
in our Company's industry; (c) our Company's future financing plans; and (d) our
Company's ability to obtain financing and continue operations. In addition, when
used in  this  filing,  the  words  "believes,"  "anticipates,"  "intends,"  "in
anticipation   of,"  and  similar   words  are  intended  to  identify   certain
forward-looking  statements.  These forward-looking statements are based largely
on our  Company's  expectations  and  are  subject  to a  number  of  risks  and
uncertainties,  many of which are beyond our Company's  control.  Actual results
could differ  materially  from these  forward-looking  statements as a result of
changes in trends in the economy and our Company's  industry,  reductions in the
availability  of  financing  and  other  factors.  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.  Our Company does not undertake any
obligation   to  publicly   release  the  results  of  any   revision  to  these
forward-looking  statements  that may be made to reflect  any  future  events or
circumstances.

GENERAL

      TSET, Inc., through its wholly subsidiary, Kronos Air Technologies,  Inc.,
is focused on the  development  and  commercialization  of an air  movement  and
purification  technology known as Kronos(TM) that is more fully described below.
The Kronos(TM)  technology  operates  through the  application  of  high-voltage
management  across paired  electrical  grids that creates an ion exchange  which
moves  air and  gases  at high  velocities  while  removing  odors,  smoke,  and
particulates,  as well as killing pathogens,  including bacteria. We believe the
technology  is  cost-effective  and  is  more   energy-efficient   than  current
alternative  fan and filter  technologies.  The  Kronos(TM)  technology has been
patented  by the United  States  Patent and  Trademark  Office.  The  Kronos(TM)
technology  has been patented by the United States Patent and Trademark  Office.
Additional U.S. and international patents are pending.

      The  Kronos(TM)  device  is  comprised  of  state-of-the-art  high-voltage
electronics  and  electrodes  attached  to one or more sets of corona and target
electrodes  housed in a  self-contained  casing.  The device can be  flexible in
size,  shape  and  capacity  and  can be used in  embedded  electronic  devices,
standalone room devices,  and integrated HVAC and industrial  applications.  The
Kronos(TM)  device has no moving parts or degrading  elements and is composed of
cost-effective, commercially available components.

      The  Kronos(TM)  technology  combines the benefits of silent air movement,
air cleaning, and odor removal.  Because the Kronos(TM) air movement system is a
silent, non-turbulent, and energy-efficient air movement and cleaning system, we
believe that it is ideal for air  circulation,  cleaning and odor removal in all
types of buildings as well as compact,  sealed  environments  such as airplanes,
submarines and cleanrooms. Additionally, because it has no moving parts or fans,
a  Kronos(TM)  device can  instantly  block or reverse  the flow of air  between
adjacent areas for safety in hazardous or extreme circumstances.

      On January 18, 2002, we began  trading  shares of our common stock under a
new ticker symbol  (KNOS).  At the same time, we announced that our company will
be doing business under the name of Kronos Advanced Technologies.  We have asked
our  shareholders  to vote for the  approval of an  amendment to our articles of
incorporation for a name change of our company to Kronos Advanced  Technologies,
Inc. At our annual meeting on November 20, 2002.

      PATENT AND  INTELLECTUAL  PROPERTY.  In October  2002,  Kronos  received a
Notice  of  Allowance  from  the  United  States  Patent  and  Trademark  Office
indicating that its application  entitled  Electrostatic  Fluid  Accelerator has
been examined and allowed for issuance as a U.S. patent. It is expected that the
patent will issue in due course, providing protection for key aspects of Kronos'
technology until late in 2019. A number of corresponding  applications have been
filed and are pending  outside of the United  States.  Kronos' Chief  Technology
Officer,  Dr. Igor  Krichtafovitch,  is the lead  inventor  of this  proprietary
technology.

                                       15

<PAGE>

      This  allowance  is for the first of a series of patent  applications  now
pending with the U.S. Patent and Trademark Office addressing  various aspects of
the Kronos' platform.  In addition to the Electrostatic Fluid Accelerator patent
application,  three additional  patent  applications  have been filed for, among
other things,  the control and management of Electrostatic  Fluid  Acceleration.
These  additional  patent  applications  are awaiting  examination by the Patent
Office. Each of these patent applications is directed towards Kronos' innovative
technology used to move, control and filter air electronically,  without the use
of fans or moving parts.

      Kronos(TM)  device can be either  used as a  standalone  product or can be
embedded. Standalone products are self-contained;  the user would simply need to
plug the Kronos  device  into a wall outlet to obtain air  filtration  for their
home,  office or hotel  room.  Embedded  applications  of the Kronos  technology
require the  technology be added into another  device or become part of a larger
system  such as a piece of medical  equipment  to  replace  the  cooling  fan or
building ventilation system for more efficient air movement and filtration.

      STANDALONE PLATFORM.

      HOMEDICS  CONTRACT.  In October 2002, Kronos Air  Technologies,  Inc., and
HoMedics  USA,  Inc.  executed  a  multiyear,   multi-million-dollar   Licensing
Agreement to bring the Kronos(TM) proprietary  technology  to the  consumer. The
agreement  provides for exclusive  North  American,  Australian  and New Zealand
retail  distribution  rights  for next  generation  consumer  air  movement  and
purification products based on patented Kronos(TM) technology.

      The  initial  term of the  agreement  is three and one half years with the
option  to  extend  the  agreement  for six  additional  years.  Kronos  will be
compensated  through an initial  royalty payment and ongoing  quarterly  royalty
payments  based on a  percentage  of sales.  HoMedics  will pay minimum  royalty
payments of at least $2 million  during the initial  term and  on-going  royalty
payments to extend the  agreement.  Kronos will retain full rights to all of its
intellectual property.

      HoMedics   commitment  includes  a   multi-million-dollar   marketing  and
advertising campaign to promote the Kronos(TM)-based  product line. The products
will be manufactured and distributed by HoMedics. HoMedics currently distributes
their products through major domestic retailers, including Wal-Mart, Home Depot,
Sears,  Bed Bath & Beyond,  and Linens 'N Things.  Kronos will  manufacture  and
provide HoMedics with Kronos' proprietary electronics.

      EMBEDDED PLATFORM

      U.S. NAVY SBIR CONTRACTS. The U.S. Department of Defense and Department of
Energy have provided Kronos Air  Technologies  with various grants and contracts
to  develop,   test  and  evaluate  the   Kronos(TM)   technology  for  embedded
applications.  Since  May  2001,  the total  potential  value of Small  Business
Innovation Research (SBIR) contracts awarded to Kronos Air Technologies has been
$1.7 million.  In May 2001,  Kronos Air  Technologies was awarded its first SBIR
contract sponsored by the U.S. Navy. That contract is potentially worth $816,000
in product development and testing support.  The first phase of the contract was
worth up to $87,000 in funding for  manufacturing  and testing prototype devices
for air movement and ventilation onboard naval vessels.  The second phase of the
contract is worth up to $729,000 in additional funding.

      In April 2002,  the U.S. Navy and Kronos  mutually  agreed to exercise the
option  on the first  phase of the U.S.  Navy SBIR  contract.  The  option is to
provide  incremental  funding  to  Kronos  to  further  test  and  evaluate  the
Kronos(TM)  devices built during the initial SBIR funding.  Testing will include
demonstrating  the ability of these U.S. Navy Kronos(TM)  devices to capture and
destroy  biological  hazards  and  to  effectively  manage  electrical  magnetic
interference ("EMI").

      In November 2002, Kronos Air Technologies, Inc. and the United States Navy
executed a Small Business  Innovation  Research Phase II contract to develop and
demonstrate an advanced distributive air management system based on the patented
Kronos(TM)  technology.  The 24-month  contract is worth $585,000 with an option
for an additional $144,000 in funding.

      This Phase II contract is an  extension  of the Phase I and Phase I Option
work that began last year and  represents  further  validation of the Kronos(TM)
technology by the U.S.  Department of Defense.  The work and funding on Phase II
will begin immediately.  During Phase II, Kronos shall develop and demonstrate a
set  of  fully  controlled  devices  that  represent  a  "cell"  of an  advanced
distributive  air management  system with medium capacity airflow in a U.S. Navy
unique  environment.  The "cell" will be designed to be easily  adjustable  to a
variety  of  applications  such  as duct  size,  airflow  requirements,  and air
quality. The goal of this development work is to significantly reduce or replace
altogether the current HVAC air handling systems on naval ships.

      As part of its air management system,  Kronos will develop and test an air
filtration mechanism capable of performing to HEPA quality standards. Kronos(TM)
devices will replace all current HEPA filters with a permanent,  easily cleaned,
low-cost  solution.  The U.S. Navy unique  environment  includes shock exposure,
vibration, Electromagnetic Interference/Compatibility (EMI/EMC), and salt spray.
Kronos(TM)  devices will be tested and built to meet  specific  Navy  standards.
Testing shall include  assessments  for system  performance,  including  control
techniques, noise levels, acquisition and lifecycle costs.

      During  the  option  portion of the  contract,  Kronos((TM))  technology's
ability to kill bacteria and other pathogens will be confirmed and expanded to a
wide range of pathogens for space  disinfection  and  bio-terrorist  attacks.  A
unique  ability  of the  Kronos((TM))  technology  is to kill all or almost  all
airborne pathogens regardless of their nature, genetic structure, robustness, or
method of delivery.

      U.S. ARMY SBIR CONTRACT.  In December 2001,  Kronos Air  Technologies  was
awarded  an  SBIR  contract  sponsored  by  the  U.S.  Army.  This  contract  is
potentially worth up to $850,000 in product  development and testing support for
Kronos Air  Technologies.  Phase One of the  contract is worth up to $120,000 in
funding to investigate and analyze the feasibility of the Kronos(TM)  technology
to reduce humidity in heating,  ventilation and air conditioning (HVAC) systems.
Dehumidification  is essential  to making HVAC  systems  more energy  efficient.
Phase Two of the  contract  is worth up to $730,000  in  additional  funding for

                                       16
<PAGE>

product  development  and testing.  In August 2002,  the U.S. Army requested the
Company resubmit a detailed Phase Two proposal for review in 2003.

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 TSET.  We have used certain key  assumptions  in building the
cash  flow  projections  required  for  evaluating  the  recoverablility  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 TSET.
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

                                       17
<PAGE>

cash flow, loss of legal ownership or title to the asset, a significant  decline
in the  economic  and  competitive  environment  on  which  the  asset  depends,
significant changes in our strategic business objectives, and utilization of the
asset.

      VALUATION OF DEFERRED INCOME TAXES.  Valuation allowances are established,
when  necessary,  to reduce  deferred  tax assets to the amount  expected  to be
realized.  The  likelihood of a material  change in our expected  realization of
these assets is dependent on 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.

      ESTIMATED LOSSES FROM DISCONTINUED OPERATIONS.  We provided for an accrual
for the estimated  loss on our  discontinued  Aperion Audio  business based upon
management's  estimates  of the  estimated  operating  losses to be  incurred by
Aperion  Audio from the date we adopted our plan to dispose of Aperion  Audio in
September  2001,  through the ultimate  disposal date, as well as estimated cost
related to the disposal.

      REVENUE  RECOGNITION.  We recognize  revenue in  accordance  with SAB 101.
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  balance  sheet.  For
uncompleted contracts where billings exceed costs and estimated profits, the net
amount is included as a liability in the balance sheet.  Revenue from government
grants for  research  and  development  purposes is  recognized  as revenue when
received. Sales are reported net of applicable cash discounts and allowances for
returns.

RESULTS OF OPERATIONS

      The Company's  net loss from  continuing  operations  for the three months
ended  September  30, 2002 was $0.6  million,  compared  with a net loss of $1.1
million for the corresponding period for the prior year. The decrease in the net
loss was primarily the result of a reduction in professional fees and consulting
services and a reduction in compensation expense.

      REVENUE.  Revenues are generated  through  sales of Kronos(TM)  devices at
Kronos Air  Technologies,  Inc. Revenue for the three months ended September 30,
2002 was  $109,000.  Revenue of $25,000 was  recorded  during the  corresponding
period of the prior year.  These  revenues were primarily from our U.S. Navy and
U.S. Army Small  Business  Innovative  Research  contracts and from our contract
with Access Business Group.

      COST OF SALES. Cost of sales for the three months ended September 30, 2002
was $92,000, compared to $10,000 for the corresponding period in the prior year.
Cost of sales is primarily  research and development  costs  associated with our
U.S. Navy and U.S. Army Small Business  Innovative  Research  contracts and from
our contract with Access Business Group.

      SELLING,  GENERAL  AND  ADMINISTRATIVE  EXPENSES.   Selling,  General  and
Administrative  expenses for the three months ended  September 30, 2002 was $0.6
million,  compared  to $1.0  million for the  corresponding  period in the prior
year.  The  decrease is  attributable  to a reduction in  professional  fees and
consulting  services of $360,000  and a reduction  in  compensation  expenses of
$40,000.

CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 2002

      Our total assets at September  30, 2002 were $2.3  million,  compared with
$2.4 million at June 30, 2002. Total assets at September 30, 2002 were comprised
primarily of $2.1 million of patents/intellectual property. Total assets at June
30,  2002 were  comprised  primarily  of $2.2  million  of  patents/intellectual
property.  Total  current  assets at  September  30, 2002 and June 30, 2002 were
$93,000 and $123,000,  respectively,  while total current  liabilities for those
same  periods  were $2.2  million  and $1.8  million,  respectively,  creating a
working  capital  deficit of $2.1  million and $1.7  million at each  respective
period end. This working  capital  deficit is primarily due to accrued  expenses
for  compensation,   management  consulting  and  other  professional  services.
Shareholders'  equity as of  September  30,  2002 and June 30,  2002 were $(0.9)
million  and $(0.4)  million,  respectively,  representing  a  decrease  of $0.5
million.  The  decrease  in  shareholders'  equity is  primarily  the  result of
incurring a $0.6 million loss from  continuing  operations  for the three months
ended September 30, 2002, partially offset through the sale and issuance of $.02
million of common stock.

                                       18
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

      Historically  we have relied  principally  on the sale of common  stock to
finance  our  operations.  We  have  recently  signed  a  multi-million  dollar,
multi-year  licensing  agreement  with  HoMedics  as well  as a  Small  Business
Innovative  Research  Phase II contract with the U.S. Navy.  Going  forward,  in
addition to  continued  sales of common  stock,  we plan to rely on the proceeds
from Small Business  Innovation Research (SBIR) contracts with the U.S. Navy and
Army, as well as other government  contracts and grants, and cash flow generated
from the sale of Kronos(TM)  devices and the  execution of licensing  agreements
and other  contracts  with  commercial  customers.  We have also  entered into a
common stock  purchase  agreement  with Fusion  Capital  under which we have the
right, subject to certain conditions, to draw down approximately $10,000 per day
from the sale of common stock to Fusion Capital.

      Net cash  flow  used on  operating  activities  was $0.1  million  for the
current year three  months.  We were able to satisfy our cash  requirements  for
this period  through the  issuance  and sale of our common stock as well as from
revenue on our U.S Army and Navy SBIR  contracts  and our  contract  with Access
Business Group.

      In May 2002, we completed a private placement of our common stock pursuant
to which we sold  2,559,412  shares  of our  common  stock at $0.17 per share to
eight  accredited  investors for  consideration  of $435,100 in cash and 841,459
shares of our common stock at $0.17 per share to five members of our  management
team for consideration of commitments to convert $143,048 of debt.

      In July 2002,  we entered into a Memorandum of  understanding  with Access
Business  Group  under the  terms of which we were to  provide  them with  three
working prototype Kronos((TM)) devices for testing and evaluation for $45,000.

      On August 12, 2002, we entered into a common stock purchase agreement with
Fusion Capital. Pursuant to the common stock purchase agreement,  Fusion Capital
has agreed to  purchase on each  trading  day during the term of the  agreement,
$10,000 of our common stock or an aggregate of $6.0 million. The $6.0 million of
our  common  stock is to be  purchased  over a  30-month  period,  subject  to a
six-month extension or earlier termination at our sole discretion and subject to
certain  events.  The purchase price of the shares of common stock will be equal
to the lesser of (i) the lowest price of our common stock on the purchase  date;
or (ii) the  average of the three (3) lowest  closing  sale prices of our common
stock  during the twelve (12)  consecutive  trading  days prior to the date of a
purchase by Fusion Capital.  However, there can be no assurance of how much cash
we will receive,  if any, under the common stock purchase  agreement with Fusion
Capital.

      In October 2002,  Kronos Air  Technologies,  Inc.,  and HoMedics USA, Inc.
executed  a  multiyear,   multi-million-dollar   Licensing  Agreement  to  bring
Kronos(TM)  proprietary  technology  to the  consumer.  The initial  term of the
agreement  is three and one half years  with the option to extend the  agreement
for six additional years. Kronos has been compensated through an initial royalty
payment  and  will  receive  ongoing  quarterly  royalty  payments  based  on  a
percentage of sales.  HoMedics will pay minimum royalty  payments of at least $2
million  during the initial  term and  on-going  royalty  payments to extend the
agreement. Kronos and HoMedics have agreed to execute a Development Agreement to
provide additional funding to Kronos for the development of unique  Kronos-based
products that will be marketed and distributed by HoMedics.  HoMedics has made a
multi-million dollar commitment to the marketing and advertising of their Kronos
product line over the initial 42 months of the agreement.

      In November 2002, Kronos Air Technologies, Inc. and the United States Navy
executed a Small Business  Innovation  Research Phase II contract to develop and
demonstrate an advanced distributive air management system based on the patented
Kronos(TM)  technology.  The 24-month  contract is worth $585,000 with an option
for an  additional  $144,000  in  funding.  Funding  on Phase  II will  begin in
December 2002.

GOING CONCERN OPINION

      Our  independent  auditors  have added an  explanatory  paragraph to their
audit  opinion  issued  in  connection  with the 2002,  2001 and 2000  financial
statements  that states that we do not have  significant  cash or other material
assets to cover our operating  costs. Our ability to obtain  additional  funding
will largely determine our ability to continue in business.  Accordingly,  there
is  substantial  doubt about our ability to  continue  as a going  concern.  Our
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.

      We can make no assurance that we will be able to  successfully  transition
from research and development to manufacturing and selling  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.

                                       19
<PAGE>

CERTAIN RISK FACTORS

      Our  Company is subject to various  risks  which may  materially  harm our
business,  financial  condition  and results of  operations.  Certain  risks are
discussed below.

WE HAVE A LIMITED OPERATING HISTORY WITH SIGNIFICANT LOSSES AND EXPECT LOSSES TO
CONTINUE FOR THE FORESEEABLE FUTURE

      We have  only  recently  begun  implementing  our plan to  prioritize  and
concentrate  our management and financial  resources to fully  capitalize on our
investment in Kronos Air  Technologies  and have yet to establish any history of
profitable operations.  We incurred a net operating loss of $0.6 million for the
three  months  ended  September  30,  2002.  We have  incurred  net losses  from
continuing  operations  of $3.5  million and $3.6  million for the fiscal  years
ended June 30, 2002 and 2001. We have incurred annual  operating  losses of $2.8
million,  $9.9  million and $2.0  million,  respectively,  during the past three
fiscal years of operation. As a result, at September 30, 2002 and June 30, 2002,
we had an accumulated deficit of $15.3 million and $14.8 million,  respectively.
Our revenues have not been sufficient to sustain our operations.  We expect that
our  revenues  will  not  be  sufficient  to  sustain  our  operations  for  the
foreseeable    future.   Our   profitability   will   require   the   successful
commercialization of our Kronos(TM) technology.  No assurances can be given when
this will occur or that we will ever be profitable.

WE HAVE BEEN SUBJECT TO A GOING CONCERN OPINION FROM OUR INDEPENDENT AUDITORS

      Our  independent  auditors  have added an  explanatory  paragraph to their
audit opinion issued in connection  with the financial  statements for the years
ended June 30, 2002 and June 30,  2001  relative to our ability to continue as a
going  concern.  Our ability to obtain  additional  funding will  determine  our
ability to continue as a going concern.  Our financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

WE WILL REQUIRE ADDITIONAL FINANCING TO SUSTAIN OUR OPERATIONS AND WITHOUT IT WE
WILL NOT BE ABLE TO CONTINUE OPERATIONS

      At September 30, 2002, we had a working  capital  deficit of $2.1 million.
At June  30,  2002,  we had a  working  capital  deficit  of $1.7  million.  The
independent  auditor's  report for the years  ended  June 30,  2002 and June 30,
2001, includes an explanatory  paragraph to their audit opinion stating that our
recurring   losses  from  operations  and  working  capital   deficiency   raise
substantial  doubt about our ability to  continue  as a going  concern.  For the
years ended 2002,  2001 and 2000, we had an operating  cash flow deficit of $1.5
million, $1.6 million and $0.3 million,  respectively.  We do not currently have
sufficient  financial  resources to fund our operations or pay certain  existing
obligations or those of our subsidiary.  Therefore,  we need additional funds to
continue these operations and pay certain existing obligations.

      Subject to the condition that Fusion Capital is not obligated and will not
be permitted to purchase  shares of our common stock if the  per-share  price of
our common stock is below the floor price of $0.10, we have the right to receive
$10,000 per trading day under the common  stock  purchase  agreement  unless our
stock  price  equals or exceeds  $3.00,  in which  case the daily  amount may be
increased  at our  option.  The  extent to which we rely on Fusion  Capital as a
source of funding will depend on a number of factors  including,  the prevailing
market  price of our common  stock and the extent to which we are able to secure
working capital form other sources, such as through the sale of our Kronos((TM))
air movement and purification  systems. If obtaining  sufficient  financing from
Fusion  Capital were to prove  prohibitively  expensive  and if we are unable to
commercialize and sell the products or technologies of our subsidiaries, we will
need to secure another source of funding in order to satisfy our working capital
needs.  Even if we are able to access the funds available under the common stock
purchase agreement,  we may still need additional capital to fully implement our
business,  operating and development  plans.  Should the financing we require to
sustain our working capital needs be  unavailable,  or  prohibitively  expensive
when we  require  it, we would be forced to  curtail  our  business  operations.
Additional financing could be prohibitively expensive due to the recent economic
downturn in the U.S. economy and the possibility of reduced investor  confidence
generally  in the  financial  markets  and in  emerging  growth  and  technology
companies.  In addition,  additional financing could be prohibitively  expensive
because (i) we have limited assets that have value to pledge as collateral; (ii)
we have negative cash flows with

                                       20
<PAGE>

an  accumulated   deficit;  and  (iii)  and  we  currently  have  no  definitive
contractual revenue stream from any customers.

THE SALE OF OUR COMMON STOCK TO FUSION CAPITAL MAY CAUSE  DILUTION  AND THE SALE
OF THE SHARES OF COMMON  STOCK  ACQUIRED BY FUSION CAPITAL COULD CAUSE THE PRICE
OF OUR COMMON STOCK TO DECLINE

      The  purchase  price for the common  stock to be issued to Fusion  Capital
pursuant to the common stock  purchase  agreement  will  fluctuate  based on the
price of our common stock.  All shares  issued to Fusion  Capital will be freely
tradable.  Fusion  Capital  may sell  none,  some or all of the shares of common
stock  purchased  from us at any time.  We expect that the shares sold to Fusion
Capital  will be sold  over a  period  of up to 30  months  from the date of the
common stock purchase agreement.  Depending upon market liquidity at the time, a
sale of shares by Fusion Capital at any given time could cause the trading price
of our common stock to decline.  The sale of a  substantial  number of shares of
our common stock by Fusion Capital, or anticipation of such sales, could make it
more difficult for us to sell equity or equity-related  securities in the future
at a time and at a price that we might otherwise wish to effect sales.


                                       21
<PAGE>

COMPETITION IN THE MARKET FOR AIR MOVEMENT AND  PURIFICATION  DEVICES MAY RESULT
IN THE FAILURE OF THE KRONOS(TM) PRODUCTS TO ACHIEVE MARKET ACCEPTANCE

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

OUR FAILURE TO OBTAIN INTELLECTUAL PROPERTY AND ENFORCE PROTECTION WOULD HAVE  A
MATERIAL ADVERSE EFFECT ON OUR BUSINESS

      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.

      We presently  have one patent that we have received a notice of allowance.
We have three additional U.S. and four foreign patent applications  pending. 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.

POSSIBLE  FUTURE IMPAIRMENT OF INTANGIBLE  ASSETS WOULD  HAVE A MATERIAL ADVERSE
EFFECT ON OUR FINANCIAL CONDITION

      Our net intangible  assets of approximately  $2.1 million and $2.2 million
as of  September 30 and June 30, 2002 relate only to the  acquisition  of Kronos
Air Technologies,  Inc. and consists  principally of purchased patent technology
and marketing  intangibles.  They comprise 95% and 94% of our total assets as of
September 30 and June 30, 2002,  respectively.  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  tangible  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  inventor of the

                                       22
<PAGE>

Kronos(TM) technology,  or the ability to create a customer base for the sale or
licensing of the Kronos(TM) technology.

      Although no events have  occurred  that would  indicate that an impairment
may exist with respect to these intangible  assets,  should an impairment occur,
we would be required to  recognize  it in our  financial  statements.  Since the
intangible  assets  comprise  95% and 94% of out total assets as of September 30
and June 30, 2002,  respectively,  a write-down of these intangible assets could
have a material  adverse  impact on our total  assets,  net worth and results of
operations.

WE RELY ON MANAGEMENT AND  KRONOS AIR TECHNOLOGIES  RESEARCH PERSONNEL, THE LOSS
OF WHOSE SERVICES COULD HAVE A MATERIAL ADVERSE EFFECT UPON OUR BUSINESS

      We rely  principally  upon the services of our Board of Directors,  senior
executive  management,  and  certain  key  employees,  including  the Kronos Air
Technologies  research  team,  the loss of whose  services could have a material
adverse effect upon our business and prospects.  Competition  for  appropriately
qualified  personnel  is  intense.  Our  ability  to attract  and retain  highly
qualified senior management and technical research and development personnel are
believed  to be an  important  element of our  future  success.  Our  failure to
attract and retain such  personnel  may,  among other things,  limit the rate at
which we can  expand  operations  and  achieve  profitability.  There  can be no
assurance  that we will be able to attract and retain senior  management and key
employees having  competency in those  substantive areas deemed important to the
successful  implementation of our plans to fully capitalize on our investment in
Kronos Air Technologies and the Kronos(TM)  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
directors, executive management, or key employees.

ITEM 3.  CONTROLS AND PROCEDURES

      EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. Within the 90 days prior
to the filing date of this report,  the Company carried out an evaluation of the
effectiveness  of the  design  and  operation  of its  disclosure  controls  and
procedures  pursuant to Exchange Act Rule 13a-14. This evaluation was done under
the supervision and with the participation of the Company's  President and Chief
Financial Officer. Based upon that evaluation, they concluded that the Company's
disclosure  controls and procedures  are effective in gatheering,  analyzing and
disclosing  information needed to satisfy the Company's  disclosure  obligations
under the Exchange Act.

      CHANGES IN INTERNAL  CONTROLS.  There were no  significant  changes in the
Company's internal controls or in other factors that could significantly  affect
those controls since the most recent evaluation of such controls.

                                       23
<PAGE>

                                     PART II


ITEM 1.  LEGAL PROCEEDINGS

      On June 6, 2002,  Dutchess  Advisors Ltd.  initiated legal  proceedings in
Middlesex  County,  Massachusetts,  against TSET. The complaint  alleges,  among
other  things,  breach  of  contract,  QUANTUM  MERUIT,  unjust  enrichment  and
conversion with respect to a letter agreement, dated June 19, 2001, between TSET
and Dutchess  Advisors  Ltd., and seeks,  among other things,  a judgment in the
amount of $75,000,  exclusive of  pre-judgment  interest,  costs and  attorneys'
costs.  TSET contested the  allegations  made by Dutchess by serving a motion to
dismiss all claims.  Dutchess  subsequently  filed an amended complaint with the
court on August 16, 2002. Dutchess seeks to recover up to three times its actual
damages  as well as its costs  and  attorneys'  fees.  TSET to filed a motion to
dismiss  all  counts  in  the  amended  complaint.  TSET  believes  that  it has
meritorious defenses and intends to vigorously defend this matter.

      On February 2, 2001, we initiated,  together with Kronos Air Technologies,
legal proceedings in Clackamas County,  Oregon against W. Alan Thompson,  Ingrid
T.  Fuhriman,  and Robert L. Fuhriman II, each of whom were  formerly  executive
officers and members of the Board of Directors of Kronos Air Technologies.  This
suit  alleges,  among other  things,  breach of  fiduciary  duties and breach of
contract by these individuals,  and seeks, among other things, an order from the
court referring the dispute to arbitration in accordance with the terms of these
individuals.  We have agreed to a change of venue of this matter to King County,
Washington,  and arbitrators have been selected.  The parties are in the process
of exchanging and complying with requests for discovery.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

      There were no sales of unregistered securities of the Company.


ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

      Not applicable.


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

      None.


ITEM 5.  EXHIBITS

EXHIBIT
NO.       DESCRIPTION                         LOCATION
-----------------------------------------------------------------------------

2.1       Articles of Merger for Technology   Incorporated by reference to
          Selection, Inc. with the Nevada     Exhibit 2.1 to the Registrant's
          Secretary of State                  Registration Statement on Form
                                              S-1 filed on August 7, 2001 (the
                                              "Registration Statement")

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

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

4.1       2001 Stock Option Plan              Incorporated by reference to
                                              Exhibit 4.1 to Registrant's


                                       24
<PAGE>

EXHIBIT
NO.       DESCRIPTION                         LOCATION
-----------------------------------------------------------------------------

                                              Form 10-Q for the quarterly period
                                              ended March 31, 2002 filed on
                                              May 15, 2002

10.1      Employment Agreement, dated         Incorporated by reference to
          April 16, 1999, by and between      Exhibit 10.1 to the Registration
          TSET, Inc. and Jeffrey D. Wilson    Statement on Form S-1 filed on
                                              August 7, 2001

10.2      Deal Outline, dated December 9,     Incorporated by reference to
          1999, by and between TSET, Inc.     Exhibit 10.2 to the Registration
          and Atomic Soccer, USA, Ltd.        Statement on Form S-1 filed on
                                              August 7, 2001

10.3      Letter of Intent, dated December    Incorporated by reference to
          27, 1999, by and between TSET,      Exhibit 10.3 to the Registration
          Inc. and Electron Wind              Statement on Form S-1 filed on
          Technologies, Inc.                  August 7, 2001

10.4      Agreement, dated February 5,        Incorporated by reference to
          2000, by and between DiAural,       LLC and Exhibit 10.4 to the
          EdgeAudio, LLC                      Registration Statement on Form
                                              S-1 filed on August 7, 2001

10.5      Stock Purchase Agreement, dated     Incorporated by reference to
          March 6, 2000, by and among         Exhibit 10.5 to the Registration
          TSET, Inc., Atomic Soccer USA,      Statement on Form S-1 filed on
          Ltd., Todd P. Ragsdale, James       August 7, 2001
          Eric Anderson, Jewel Anderson,
          Timothy Beglinger and Atomic
          Millennium Partners, LLC

10.6      Acquisition Agreement, dated        Incorporated by reference to
          March 13, 2000, by and among        Exhibit 10.6 to the Registration
          TSET, Inc., High Voltage            Statement on Form S-1 filed on
          Integrated, LLC, Ingrid             August 7, 2001
          Fuhriman, Igor Krichtafovitch,
          Robert L. Fuhriman and Alan
          Thompson

10.7      Letter of Intent, dated April 18,   Incorporated by reference to
          2000, by and between TSET,          Exhibit 10.7 to the Registration
          Inc. and EdgeAudio.com, Inc.        Statement on Form S-1 filed on
                                              August 7, 2001

10.8      Lease Agreement, dated May 3,       Incorporated by reference to
          2000, by and between                Exhibit 10.8 to the Registration
          Kronos Air Technologies,            Statement on Form S-1 filed on
          Inc. and TIAA Realty, Inc.          August 7, 2001

10.9      Agreement and Plan of               Incorporated by reference to
          Reorganization,                     Exhibit 10.9 to the Registration
          dated May 4, 2000, by and among     Statement on Form S-1 filed on
          TSET, Inc., EdgeAudio.com, Inc.,    August 7, 2001
          LYNK Enterprises, Inc.,
          Robert Lightman, J. David Hogan,


                                       25
<PAGE>

EXHIBIT
NO.       DESCRIPTION                         LOCATION
-----------------------------------------------------------------------------

          Eric Alexander and
          Eterna Internacional, S.A.
          de C.V.

10.10     Letter Agreement, dated May 4,      Incorporated by reference to
          2000, by and between TSET, Inc.     Exhibit 10.10 to the
          and Cancer Detection                Registration Statement on Form
          International, LLC                  S-1 filed on August 7, 2001

10.11     Employment Agreement, dated         Incorporated by reference to
          May 19, 2000, by and between        Exhibit 10.11 to the
          TSET, Inc. and Richard A.           Registration Statement on Form
          Papworth                            S-1 filed on August 7, 2001

10.12     Finders Agreement, dated August     Incorporated by reference to
          21, 2000, by and among TSET,        Exhibit 10.12 to the
          Inc., Richard  F. Tusing and        Registration Statement on Form
          Daniel R. Dwight                    S-1 filed on August 7, 2001

10.13     Contract Services Agreement,        Incorporated by reference to
          dated June 27, 2000, by and         Exhibit 10.13 to the
          between Chinook Technologies,       Registration Statement on Form
          Inc. and Kronos Air Technologies,   S-1 filed on August 7, 2001
          Inc.

10.14     Letter of Intent, dated July 17,    Incorporated by reference to
          2000, by and between Kronos Air     Exhibit 10.14 to the
          Technologies, Inc. and Polus        Registration Statement on Form
          Technologies, Inc.                  S-1 filed on August 7, 2001

10.15     Consulting Agreement, dated         Incorporated by reference to
          August 1, 2000, by and among        Exhibit 10.15 to the
          TSET, Inc., Richard F. Tusing       Registration Statement on Form
          and Daniel R. Dwight                S-1 filed on August 7, 2001

10.16     Preferred Stock Purchase Agreement, Incorporated by reference to
          dated September 12, 2000, by and    Exhibit 10.16 to the
          between EdgeAudio.com, Inc. and     Registration Statement on Form
          Bryan
          Holbrook                            S-1 filed on August 7, 2001

10.17     Shareholders Agreement, dated       Incorporated by reference to
          September 12, 2000, by and among    Exhibit 10.17 to the
          TSET, Inc., Bryan Holbrook and      Registration Statement on Form
          EdgeAudio.com,  Inc.                S-1 filed on August 7, 2001

10.18     Amendment to Agreement and Plan of  Incorporated by reference to
          Reorganization dated September 12,  Exhibit 10.18 to the
          2000, by and among TSET, Inc.,      Registration Statement on Form
          EdgeAudio.com, Inc., LYNK           S-1 filed on August 7, 2001
          Enterprises, Inc., Robert Lightman,
          J. David Hogan, Eric Alexander and
          Eterna Internacional, S.A. de C.V.

10.19     Agreement Regarding Sale of         Incorporated by reference to
          Preferred Stock, dated November 1,  Registration Statement on Form
          2000, by Exhibit 10.19 to the       S-1 filed on August 7, 2001
          and between EdgeAudio.com, Inc.
          and Bryan Holbrook

                                       26
<PAGE>

EXHIBIT
NO.       DESCRIPTION                         LOCATION
-----------------------------------------------------------------------------

10.20     Amendment to Subcontract, dated     Incorporated by reference to
          December 14, 2000, by and between   Exhibit 10.20 to the
          Bath Iron Works and High Voltage    Registration Statement on
          Integrated                          Form S-1 filed on
                                              August 7, 2001

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

10.22     Employment Agreement, dated March   Incorporated by reference to
          18, 2001, by and between TSET, Inc. Exhibit 10.22 to the
          and Alex Chriss                     Registration Statement on Form
                                              S-1 filed on August 7, 2001

10.23     Stock Option Agreement, dated       Incorporated by reference to
          April 9, 2001, by and between       Exhibit 10.23 to the
          TSET, Inc. and Jeffrey D. Wilson    Registration Statement on Form
                                              S-1 filed on August 7, 2001

10.24     Stock Option Agreement, dated       Incorporated by reference to
          April 9, 2001, by and between       Exhibit 10.24 to the
           TSET, Inc. and Jeffrey D. Wilson   Registration Statement on Form
                                              S-1 filed on August 7, 2001

10.25     Stock Option Agreement, dated       Incorporated by reference to
          April 9, 2001, by and between       Exhibit 10.25 to the
          TSET, Inc. and Daniel R. Dwight     Registration Statement on Form
                                              S-1 filed on August 7, 2001

10.26     Stock Option Agreement, dated       Incorporated by reference to
          April 9, 2001, by and between       Exhibit 10.26 to the
          TSET, Inc. and Richard F. Tusing    Registration Statement on Form
                                              S-1 filed on August 7, 2001

10.27     Stock Option Agreement, dated       Incorporated by reference to
          April 9, 2001, by and between       Exhibit 10.27 to the
          TSET, Inc. and Charles D. Strang    Registration Statement on Form
                                              S-1 filed on August 7, 2001

10.28     Stock Option Agreement, dated       Incorporated by reference to
          April 9, 2001, by and between       Exhibit 10.28 to the
          TSET, Inc. and Richard A. Papworth  Registration Statement on Form
                                              S-1 filed on August 7, 2001

10.29     Stock Option Agreement, dated       Incorporated by reference to
          April 9, 2001, by and between       Exhibit 10.29 to the
          TSET, Inc. and Richard A. Papworth  Registration Statement on Form
                                              S-1 filed on August 7, 2001

10.30     Stock Option Agreement, dated       Incorporated by reference to
          April 9, 2001, by and between       Registration Statement on Form
          TSET, Inc. and Exhibit 10.30 to     S-1 filed on August 7, 2001
          the Erik W. Black

                                       27
<PAGE>

EXHIBIT
NO.       DESCRIPTION                         LOCATION
-----------------------------------------------------------------------------

10.31     Stock Option Agreement, dated       Incorporated by reference to
          April 9, 2001, by and between       Exhibit 10.31 to the
          TSET, Inc. and J. Alexander         Registration Statement on Form
          Chriss                              S-1 filed on August 7, 2001

10.32     Stock Option Agreement, dated       Incorporated by reference to
          April 9, 2001, by and between       Exhibit 10.32 to the
          TSET, Inc. and Charles H.           Registration Statement on Form
          Wellington                          S-1 filed on August 7, 2001

10.33     Stock Option Agreement, dated       Incorporated by reference to
          April 9, 2001, by and between       Exhibit 10.33 to the
          TSET, Inc. and Igor Krichtafovitch  Registration Statement on Form
                                              S-1 filed on August 7, 2001

10.34     Letter Agreement, dated April 10,   Incorporated by reference to
          2001, by and between TSET, Inc.     Exhibit 10.34 to the
          and Richard  A. Papworth            Registration Statement on Form
                                              S-1 filed on August 7, 2001

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

10.36     Finders Agreement, dated April 20,  Incorporated by reference to
          2001, by and between TSET, Inc.     Exhibit 10.36 to the
          and Bernard Aronson, d/b/a Bolivar  Registration Statement on Form
          International Inc.                  S-1 filed on August 7, 2001

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

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

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

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

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

10.42     Indemnification Agreement, dated    Incorporated by reference to


                                       28
<PAGE>

EXHIBIT
NO.       DESCRIPTION                         LOCATION
-----------------------------------------------------------------------------

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

10.43     Stock Option Agreement, dated May   Incorporated by reference to
          3, 2001, by and between TSET, Inc.  Exhibit 10.43 to the
          and Jeffrey D. Wilson               Registration Statement on Form
                                              S-1 filed on August 7, 2001

10.44     Common Stock Purchase Agreement,    Incorporated by reference to
          dated June 19, 2001, by and         Exhibit 10.44 to the
          between TSET, Inc. and Fusion       Registration Statement on Form
          Capital Fund II, LLC                S-1 filed on August 7, 2001

10.45     Registration Rights Agreement,      Incorporated by reference to
          dated June 19, 2001, by and         Exhibit 10.45 to the
          between TSET, Inc. and Fusion       Registration Statement on Form
          Capital Fund II, LLC                S-1 filed on August 7, 2001

10.46     Mutual Release and Settlement       Incorporated by reference to
          Agreement, dated July 7, 2001,      Exhibit 10.46 to the
          by and between TSET, Inc. and       Registration Statement on Form
          Foster & Price Ltd.                 S-1 filed on August 7, 2001

10.47     Letter Agreement, dated July 9,     Incorporated by reference to
          2001, by and between TSET, Inc.     Exhibit 10.47 to the
          and The Eagle Rock Group, LLC       Registration Statement on Form
                                              S-1 filed on August 7, 2001

10.48     Finders Agreement, dated July 17,   Incorporated by reference to
          2001, by and between TSET, Inc.     Exhibit 10.48 to the
          and John  S. Bowles                 Registration Statement on Form
                                              S-1 filed on August 7, 2001

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

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

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

10.52     Consulting Agreement, dated         Incorporated by reference to
          October 10, 2001, by and between    Exhibit 10.52 to the
          TSET, Inc. and Jeffrey D. Wilson    Registrant's Form 10-K for the
                                              year ended June 30, 2001 filed


                                       29
<PAGE>

EXHIBIT
NO.       DESCRIPTION                         LOCATION
-----------------------------------------------------------------------------

                                              on October 15, 2001

10.53     Consulting Agreement effective      Incorporated by reference to
          October 1, 2001, by and among TSET, Exhibit 10.53 to the Registrant's
          Inc., Steven G. Martin and Joshua   Form 10-Q for the quarterly
          B. Scheinfeld                       period ended September 30, 2001
                                              filed on November 19, 2001

10.54     Letter Agreement dated November 13, Incorporated by reference to
          2001 by and between TSET, Inc. and  Exhibit 10.54 to the Registrant's
          Fusion Capital Fund II, LLC         Form 10-Q for the quarterly
                                              period ended September 30, 2001
                                              filed on November 19, 2001

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

10.56     Agreement, dated November 13, 2001  Incorporated by reference to
          by and between TSET, Inc. and       Exhibit 10.56 to the Registrant's
          Fusion Capital Fund II, LLC         Amendment No. 1 to Form S-1 filed
                                              on August 2, 2002

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

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

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

11.1      Statement re:  Computation of       Not applicable
          Earnings

12.1      Statement re:  Computation of       Not applicable
          Ratios

15.1      Letter re:  Unaudited Interim       Not applicable
          Financial
          Information

18.1      Letter re: Change in Accounting     Not applicable
          Principals

24.1      Power of Attorney                   Not applicable

27.1      Financial Data Schedule             Not applicable


                                       30
<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, 2002           TSET, INC.

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


                                      By: /s/ Richard A. Papworth
                                          ---------------------------------
                                      Richard A. Papworth
                                      Chief Financial Officer


                                       31
<PAGE>

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

      In connection  with the Quarterly  Report of TSET, Inc. (the "Company") on
Form  10-QSB  for the  quarter  ended  September  30,  2002 as  filed  with  the
Securities and Exchange  Commission on the date hereof (the  "Report"),  each of
the  undersigned,  in the capacities and on the dates  indicated  below,  hereby
certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that to his knowledge:

      1. The Report fully  complies  with the  requirements  of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

      2.  The  information  contained  in the  Report  fairly  presents,  in all
material  respects,  the  financial  condition  and results of  operation of the
Company.



/s/ Daniel R. Dwight
--------------------------------------
Daniel R. Dwight
President and Chief Executive Officer



/s/ Richard A. Papworth
--------------------------------------
Richard A. Papworth
Chief Financial Officer



                                       32
<PAGE>

                                  CERTIFICATION
                             PURSUANT TO SECTION 302



I, Daniel R. Dwight, certify that:


1. I have reviewed this quarterly report on Form 10-QSB of TSET, Inc.;

2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

         a) designed such disclosure controls and procedures to ensure
         that  material   information   relating  to  the  registrant,
         including its consolidated subsidiaries,  is made known to us
         by others  within  those  entities,  particularly  during the
         period in which this quarterly report is being prepared;

         b) evaluated the effectiveness of the registrant's disclosure
         controls and  procedures as of a date within 90 days prior to
         the filing date of this  quarterly  report  (the  "Evaluation
         Date"); and

         c) presented in this quarterly  report our conclusions  about
         the  effectiveness of the disclosure  controls and procedures
         based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

         a) all significant deficiencies in the design or operation of
         internal   controls   which   could   adversely   affect  the
         registrant's ability to record, process, summarize and report
         financial  data  and  have  identified  for the  registrant's
         auditors any material weaknesses in internal controls; and

         b)  any  fraud,  whether  or  not  material,   that  involves
         management or other employees who have a significant  role in
         the registrant's internal controls; and

6. The  registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.


Date: November 14, 2002                    By: /s/ Daniel R. Dwight
                                               ---------------------
                                               Daniel R. Dwight
                                               Chief Executive Officer



                                       33
<PAGE>


                                  CERTIFICATION
                             PURSUANT TO SECTION 302


I, Richard A. Papworth, certify that:

1. I have reviewed this quarterly report on Form 10-QSB of TSET, Inc.;

2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

         a) designed such disclosure controls and procedures to ensure
         that  material   information   relating  to  the  registrant,
         including its consolidated subsidiaries,  is made known to us
         by others  within  those  entities,  particularly  during the
         period in which this quarterly report is being prepared;

         b) evaluated the effectiveness of the registrant's disclosure
         controls and  procedures as of a date within 90 days prior to
         the filing date of this  quarterly  report  (the  "Evaluation
         Date"); and

         c) presented in this quarterly  report our conclusions  about
         the  effectiveness of the disclosure  controls and procedures
         based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

         a) all significant deficiencies in the design or operation of
         internal   controls   which   could   adversely   affect  the
         registrant's ability to record, process, summarize and report
         financial  data  and  have  identified  for the  registrant's
         auditors any material weaknesses in internal controls; and

         b)  any  fraud,  whether  or  not  material,   that  involves
         management or other employees who have a significant  role in
         the registrant's internal controls; and

6. The  registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.


Date: November 14, 2002                    By: /s/ Richard A. Papworth
                                               ------------------------
                                               Richard A. Papworth
                                               Chief Financial Officer and
                                               Principle Accounting Officer



                                       34