<TABLE>
<CAPTION>
                                        UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                                                      WASHINGTON, DC 20549

                                                           FORM 10-Q

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

                                            For the quarterly period ended SEPTEMBER 30, 2001

                 / /           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
                             ------                                                         ----------
<S>                          <C>                                             <C>            <C>

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

           14523 WESTLAKE DRIVE, LAKE OSWEGO, OREGON                                          97034
           -----------------------------------------                                          -----
            (Address of principal executive offices)                                        (Zip Code)


REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:                                       (503) 598-1900
---------------------------------------------------                                       --------------


         (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.


</TABLE>
                              /X/    Yes                            / /    No

         As of November 12, 2001,  there were 34,643,695  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, 2001.

                                       2
<PAGE>

<TABLE>
<CAPTION>
                                                     TSET, INC.
                                            CONSOLIDATED BALANCE SHEETS

                                                               SEPTEMBER 30,            JUNE 30,
                                                                   2001                   2001
                                                         --------------------    -------------------
                                                                (UNAUDITED)           (AUDITED)
<S>                                                      <C>                     <C>
 ASSETS
 CURRENT ASSETS
          Cash                                                   $     97,645           $     32,619
          Prepaids                                                     60,106                 37,679

                                                         --------------------    -------------------
                     TOTAL CURRENT ASSETS                             157,751                 70,298
                                                         --------------------    -------------------

 PROPERTY AND EQUIPMENT                                                62,723                 62,723
          Less: Accumulated Depreciation                             (21,848)               (18,016)

                                                         --------------------    -------------------
                     NET PROPERTY AND EQUIPMENT                        40,875                 44,707
                                                         --------------------    -------------------
 OTHER ASSETS
          Intangibles                                               2,400,423              2,431,524
          Deferred financing fees                                     595,800                520,800

                                                         --------------------    -------------------
                                                                    2,996,223              2,952,324
                     TOTAL OTHER ASSETS                  --------------------    -------------------

 TOTAL ASSETS                                                      $3,194,849             $3,067,329
                                                         ====================    ===================

 LIABILITIES AND SHAREHOLDERS' EQUITY

 CURRENT LIABILITIES
          Accounts payable                                           $785,357               $323,045
          Accrued expenses                                          1,249,730              1,284,268
          Notes payable, current portion                              629,221                313,900
                                                         --------------------    --------------------

                     TOTAL CURRENT LIABILITIES                      2,664,308              1,921,213

 Net liabilities of discontinued operations                           750,096                667,550
                                                         --------------------    -------------------

                     TOTAL LIABILITIES                              3,414,404              2,588,763
                                                         --------------------    -------------------

 Redeemable warrants                                                  686,000                      -

 SHAREHOLDERS' EQUITY
          Common stock, authorized 500,000,000
            shares of $.001 par value                                  34,240                 34,001
          Capital in excess of par value                           12,498,224             12,418,350
          Deferred equity compensation                              (411,600)                      -
          Retained earnings (Accumulated deficit)                (13,026,419)           (11,973,785)

                                                         --------------------    -------------------
                     TOTAL SHAREHOLDERS' EQUITY                     (905,555)                478,566
                                                         --------------------    -------------------

 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                        $3,194,849             $3,067,329
                                                         ====================    ===================

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

                                       3
<PAGE>

<TABLE>
<CAPTION>
                                                          TSET, INC
                                            CONSOLIDATED STATEMENTS OF OPERATIONS

                                                         --------------------------------------------
                                                              FOR THE QUARTER ENDED SEPTEMBER 30,
                                                         --------------------------------------------
                                                                2001               2000 (RESTATED)
                                                             (UNAUDITED)             (UNAUDITED)
                                                         --------------------    --------------------
<S>                                                         <C>                     <C>
 Sales                                                      $       25,014          $            -

 Cost of sales                                                      10,014                       -

                                                         --------------------    --------------------
 Gross Profit                                                       15,000                       -
                                                         --------------------    --------------------

 Selling, General and Administrative expenses
     Compensation and benefits                                     176,218                 289,132
     Research and development                                       90,191                  52,567
     Professional services                                         644,817                  19,498
     Depreciation and amortization                                  71,674                  79,121
     Other selling general & administrative expenses                66,711                  92,808

                                                         --------------------    --------------------
 Total Selling, General and Administrative expenses              1,049,611                 533,126
                                                         --------------------    --------------------

 Net Operating Income (Loss)                                   (1,034,611)               (533,126)
 Other Income / (expense)                                              269

 Interest Expense                                                 (18,292)                       -

                                                         --------------------    --------------------
 Net Income (Loss) Before Taxes                             $  (1,052,634)          $    (533,126)
                                                         ====================    ====================

 Provision for Taxes                                                     -                       -
                                                         --------------------    --------------------

 Net Income (Loss) from continuing operations               $  (1,052,634)               (533,126)
 Income (Loss) from discontinued operations, net
  of income tax of $0                                                    -               (360,356)
 Loss on disposal of discontinued operations, net of
  income tax of $0                                                       -                       -

                                                         --------------------    --------------------
 Net Income (Loss)                                          $  (1,052,634)          $    (893,482)
                                                         ====================    ====================

 Basic Earnings (Loss) Per Share
     Income (loss) from continuing operations                       (0.03)                  (0.02)

     Loss from discontinued operations                                   -                  (0.01)
                                                         --------------------    --------------------
     Net Income (loss)                                      $  (1,052,634)          $       (0.03)
                                                         ====================    ====================

 Diluted Earnings (Loss) Per Share
     Income (loss) from continuing operations                       (0.03)                  (0.02)

     Loss from discontinued operations                                   -                  (0.01)
                                                         --------------------    --------------------
     Net Income (loss)                                      $       (0.03)          $       (0.03)
                                                         ====================    ====================
</TABLE>

                                       4
<PAGE>

<TABLE>
<CAPTION>
                                                             TSET, INC
                                               CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                  FOR THE QUARTER ENDED SEPTEMBER 30,
                                                                                  -----------------------------------
                                                                                       2001           2000
CASH FLOWS FROM OPERATING ACTIVITIES                                                               (RESTATED)
                                                                                  (UNAUDITED)      (UNAUDITED)
                                                                                  -----------------------------------
<S>                                                                                  <C>            <C>
      NET LOSS FROM CONTINUING OPERATIONS                                            $(1,052,634)   $  (533,126)
      ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
           (USED IN) PROVIDED BY OPERATIONS
            Depreciation and amortization                                                  71,674         79,121

            Common stock/warrants issued for compensation/services                        274,513          6,560

      CHANGE IN
          Inventory                                                                             -       (40,000)

          Accounts receivable                                                                   -          4,648

          Prepaid expenses and other assets                                              (97,427)       (26,750)

          Accounts payable                                                                462,312         41,642

          Accrued expenses and other liabilities                                         (34,538)         15,776
                                                                                  ------------------------------
                NET CASH (USED IN) PROVIDED BY CONTINUING OPERATIONS                    (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
           Proceeds from short-term borrowings                                            315,321             -
           Issuance of common stock                                                        80,000     1,021,000
                                                                                  ----------------------------

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

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

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


Supplemental schedule of non-cash investing and financing activities:
      Interest paid in cash                                                          $         -    $         -

      Income taxes                                                                   $         -    $         -

      Non-cash financing activities:
          Debt satisfied with stock                                                  $         -    $   419,143
</TABLE>

         The accompanying notes are an integral part of this financial statement

                                       5
<PAGE>

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

                                         COMMON STOCK
                               -------------------------------
                                 SHARES        AMOUNT     CAPITAL IN EXCESS OF PAR   RETAINED EARNINGS    TOTAL SHAREHOLDERS' EQUITY
                                                                  VALUE            (ACCUMULATED DEFICIT)           (DEFICIT)
                               -----------------------------------------------------------------------------------------------------
<S>                                <C>          <C>             <C>                <C>                       <C>
 BALANCE at June 30, 2000
(Restated)                         29,651,661      29,652             9,316,743              (2,107,703)                   7,238,692

 Purchase price adjustment on
 Cancer Detection
 International, Inc.                 (20,000)        (20)              (39,230)                                             (39,250)

 Shares issued on July 20,
 2000 for cash                        161,538         161               188,839                                              189,000

 Shares issued on August 3,
 2000                                   5,000           5                 6,555                                                6,560

 Shares issued to liquidate
 debt of Atomic Soccer USA, Ltd       362,259         362               375,981                                              376,343

 Shares issued in September
 2000 for cash                        832,000         832               831,168                                              832,000

 Shares issued in September to
 liquidate TSET, Inc. debt             42,800          43                42,757                                               42,800

 Shares issued on December 8,
 2000 for cash                        168,492         169                99,831                                              100,000

 Shares issued on December 27,
 2000 for cash                         39,091          39                22,301                                               22,340

 Shares issued on January 8,
 2001 for cash                        687,500         688               399,312                                              400,000

 Shares issued on January 12,
 2001 for cash                         57,693          57                34,943                                               35,000

 Shares issued on January 19,
 2001 for cash                         10,000          10                 6,390                                                6,400

 Shares issued on January 19,
 2001 for services and comp            44,915          45                56,098                                               56,143

 Shares issued on March 23,
 2001 for cash                        186,302         186               134,814                                              135,000

 Shares issued on April 9,
 2001 as compensation                   2,000           2                 1,768                                                1,770

 Shares issued on April 9,
 2001 to liquidate debt of
 Atomic Soccer                         97,020          97                96,923                                               97,020

 Shares issued in April 2001
 for cash                              38,038          38                17,492                                               17,530

 Shares issued on May 3, 2001
 for cash                              52,778          53                18,947                                               19,000

 Shares issued on May 7, 2001
 for cash                             891,891         892               299,108                                              300,000

 Shares issued on June 14,
 2001 as compensation                  50,000          50                47,450                                               47,500

 Shares issued on June 29,
 2001 as a financing fee              640,000         640               460,160                                              460,800

 Deferred equity compensation               -           -              (411,600)                      -                    (411,600)

 Net loss for the year ended
 June 30, 2001                              -           -                     -              (1,052,634)                 (1,052,634)

                               -----------------------------------------------------------------------------------------------------

 BALANCE at June 30, 2001          34,000,978   $  34,001       $    12,418,350    $        (11,973,785)         $           478,566

 Shares issued on July 6, 2001
 for cash                             238,806         239                79,761                                               80,000

 Shares issued on July 20,
 2001 as compensation                     250                               113                                                  113

 Deferred equity
 compensation                               -           -              (411,600)                      -                    (411,600)

 Net loss for the year ended
 June 30, 2001                              -           -                     -              (1,052,634)                 (1,052,634)


                                       6
<PAGE>

                                        COMMON STOCK
                              -------------------------------
                                SHARES        AMOUNT     CAPITAL IN EXCESS OF PAR   RETAINED EARNINGS    TOTAL SHAREHOLDERS' EQUITY
                                                                 VALUE            (ACCUMULATED DEFICIT)           (DEFICIT)
                              -----------------------------------------------------------------------------------------------------
 BALANCE at September 30,
  2001                            34,240,034    $  34,240       $    12,086,624    $        (13,026,419)       $           (905,555)
                              ======================================================================================================

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

                                       7
<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,  2001  are  not  necessarily
indicative  of the results  that may be  experienced  for the fiscal year ending
June 30, 2002.

         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.
EdgeAudio is disclosed as discontinued operations in these financial statements.

         The  accompanying  financial  statements  should be read in conjunction
with the TSET,  Inc.  Form 10K for the fiscal  year ended June 30, 2001 filed on
October 15, 2001.

         RECENT  ACCOUNTING  PRONOUNCEMENTS.  On July 20, 2001,  the FASB issued
SFAS No. 141,  "Business  Combinations,"  and SFAS No. 142,  "Goodwill and Other
Intangible  Assets." These statements make significant changes to the accounting
for business combinations, goodwill, and intangible assets.

         SFAS No. 141  establishes  new standards for  accounting  and reporting
requirements for business combinations and will require that the purchase method
of accounting  be used for all business  combinations  initiated  after June 30,
2001. Use of the pooling-of-interests  method will be prohibited. This statement
is effective for business combinations initiated after June 30, 2001.

         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 expects to adopt 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 Statement
of  Financial   Accounting  Standard  (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.

         In  August  2001,  the  Financial  Accounting  Standards  Board  issued
Statement of Financial  Accounting Standard (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.

                                       8
<PAGE>

NOTE 2 -- INCOME TAXES

         The  composition  of deferred tax assets and the related tax effects at
September 30 and June 30, 2001 are as follows:

<TABLE>
<CAPTION>
                                                          September 30, 2001        June 30, 2001
                                                         ---------------------   --------------------
<S>                                                      <C>                     <C>
Benefit from carryforward of net operating losses              $  2,456,635           $  2,225,520
Other temporary differences                                       1,008,189              1,008,189
Less:
  Valuation allowance                                           (3,464,824)            (3,233,709)
                                                         ---------------------   --------------------
  Net deferred tax asset                                       $       -              $       -
                                                         =====================   ====================
</TABLE>


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

<TABLE>
<CAPTION>

                                             September 30, 2001                         June 30, 2001
                                      ----------------------------------------------------------------------------
                                           Amount         % of pre-tax Loss        Amount          % of pre-tax
                                                                                                       Loss
                                      ----------------------------------------------------------------------------
<S>                                       <C>                 <C>              <C>                    <C>
Benefit for income tax at
 federal statutory rate                   $  357,896            34.0%            $3,374,793            34.2
Non-deductible expenses                    (126,781)          (12.0)%             (357,007)            (3.6)%
Disposed subsidiary NOL                            -                -             (578,370)           (5.9%)
Increase in valuation allowance            (231,115)          (22.0)%           (2,439,416)           (24.7)%
                                      ----------------------------------------------------------------------------
                                           $       -             0.0%          $         -               0.0%
                                      ============================================================================
</TABLE>

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

         At September 30, 2001, for federal income tax and  alternative  minimum
tax reporting purposes, the Company has approximately $7.2 million of unused net
operating  losses  available for  carryforward to future years. The benefit from
carryforward  of such net operating  losses will expire in various years between
2011 and 2023 and could be  subject  to  limitations  if  significant  ownership
changes occur in the Company. Of the $7.2 million of unused net operating losses
noted above,  approximately $153,000 relates to losses incurred by the Company's
subsidiary, EdgeAudio. In fiscal years prior to June 30, 2000, EdgeAudio did not
file its tax returns on a consolidated basis with the Company.  Accordingly, the
$153,000 loss incurred by EdgeAudio is further  subject to separate  limitations
that restrict the ability of the Company to use such losses.


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  Kronos(TM)  technology.  All other  segments  have been
disposed of or discontinued.  Although there are future plans for expansion into
foreign  markets,  in the year ended June 30, 2001, the Company operated only in
the U.S.


NOTE 4 - EARNINGS PER SHARE

         As of September 30, 2001,  there were  outstanding  options to purchase
1,730,975 shares of TSET common stock. These options have been excluded from the
earnings per share calculation as their effect is anti-dilutive.


NOTE 5 - 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 for $1,000.  The

                                       9
<PAGE>

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 EdgeAudio.  The
Company  has  accrued  $150,000  for  anticipated  operating  loses  during  the
phase-out period. As a result,  both Atomic Soccer and EdgeAudio are included in
the financial statements as discontinued operations.

         The Company's audited 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.  The assets and  liabilities of EdgeAudio at September
30, 2001 are  included  in the balance  sheet Net  Liabilities  of  Discontinued
Operations.  Net assets of  discontinued  operations  at September  30, 2001 and
operating  results  of  discontinued   operations  for  the  three-months  ended
September 30, are as follows:

                     Net liabilities of Discontinued Operations
                                                      Edge Audio
                                                  ---------------------

Current Assets                                              $  375,319
Net Property and Equipment                                      48,923
Current Liabilities                                          (649,148)
Minority interest                                            (525,190)
                                                  ---------------------
Net Assets (Liabilities)                                   $ (750,096)
                                                  =====================

<TABLE>
<CAPTION>
                Operating Results of Discontinued Operations:
                                For the quarter ended September 30,
                         2001                         2000
                     ------------ --------------- -------------- ---------------
                      Edge Audio        Atomic       Edge Audio     Total
                     ------------ --------------- --------------- --------------
<S>                  <C>           <C>              <C>          <C>
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          (208,330)     (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             -             -                -            -
                     ------------ --------------- --------------- --------------

Loss from disconcinued
operations           $   0         $   (115,488)    $   (244,868) $  (360,356)
                     ============ =============== =============== ==============
</TABLE>


NOTE 6 - ISSUANCE OF WARRANTS

         On July 9,  2001,  the  Company  signed an  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.

         The Eagle  Rock Group will  focus on 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  warrant was valued at  $686,000  using the  Black-Scholes
option  valuation  model and was recorded  pro rata over the initial  consulting
period.   The  shares   underlying  the  warrant  have   piggy-back  and  demand
registration  rights, as well as subscription  rights in the event that we issue
any right to all of our  stockholders  to  subscribe  for  shares of our  common
stock. In addition,  the warrant contains redemption rights in the event that we
enter into a transaction that results in a change of control of our company.

NOTE 7 - SUBSEQUENT EVENTS

         In September 2001, the Company determined that, among other things, the
Board of  Directors  never  validly  approved  Jeffrey  D.  Wilson's  Employment
Agreement  dated April 20, 1999.  Accordingly,  the Company  determined that Mr.
Wilson's  Employment  Agreement  and a Letter  Agreement,  dated  April 10, 2001
amending the Employment Agreement,  are null and void from their inception. As a
consequence, the Company has determined that the issuance of 1,000,000 shares of
common stock  pursuant to Mr.  Wilson's  Employment  Agreement  and the grant of
options  to  purchase  350,000  shares of common  stock  pursuant  to the Letter
Agreement are void as of the  effective  dates of the  Employment  Agreement and
Letter  Agreement,  respectively,  and that  these  shares of  common  stock and
options are treated as if they were never issued or granted, as the case may be.
Effective  October 10,  2001,  Mr.  Wilson  resigned as Chairman of the Board of
Directors and Chief  Executive  Officer of the Company.  Mr. Wilson remains as a
director of the Company.

         In October 2001, the Company  entered into an agreement with Jeffrey D.
Wilson  pursuant to which the Company issued a promissory  note to Mr. Wilson in
the amount of $350,000 and will pay $30,000 in cash to Mr.  Wilson  within sixty

                                       10
<PAGE>

days of October 15, 2001. The $380,000  represents all of Mr.  Wilson's  accrued
salary,  bonus and interest.  In addition,  the Company will also pay Mr. Wilson
his unpaid reimburseable expenses.

         In October 2001, the Company  entered into a Consulting  Agreement with
Jeffrey D. Wilson,  pursuant to which Mr. Wilson will provide  thirty-five hours
per month of management and other consulting services to the Company in exchange
for consulting  fees payable in cash and options of the Company's  common stock.
Out-of-pocket  expenses  incurred by Mr. Wilson in connection with the provision
of his services  under the  Consulting  Agreement will also be reimbursed by the
Company.  The  Consulting  Agreement  was  negotiated  at arm's  length  and the
Company's  management believes that the compensation and other provisions of the
Consulting  Agreement  are fair,  reasonable,  customary,  and  favorable to the
Company.

         Effective  October 16, 2001,  Daniel R. Dwight was appointed  President
and Chief Executive Officer of the Company.

         Effective October 2001, the Company entered into a consulting agreement
with Steven G. Martin and Joshua B. Scheinfeld for a period of 15 months. Mssrs.
Martin  and  Scheinfield  will be  compensated  by up to  360,000  shares of the
Company's common stock.

                                       11
<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. (the
"Company");  (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

         Historically,   we  had  been  seeking  select  business  opportunities
globally  among a wide  range of  prospects.  Over the past two  years,  we made
several  investments,  including Kronos Air  Technologies  and EdgeAudio.  After
further  evaluation of these  investments,  we believe our investment in and the
full  development  of Kronos  Air  Technologies  and the  Kronos(TM)  technology
represents the single best opportunity for us. As a result,  we have prioritized
our management and financial  resources to fully  capitalize on this  investment
opportunity.  Effective October 10, 2001, Jeffrey D. Wilson resigned as Chairman
of the Board and Chief  Executive  Officer of TSET,  as well as  Chairman of the
Board of Kronos Air Technologies and EdgeAudio, respectively. Mr. Wilson remains
as a  director  of TSET.  Effective  October  16,  2001,  Daniel R.  Dwight  was
appointed  President  and  Chief  Executive  Officer  of TSET.  A more  detailed
explanation of Kronos Air  Technologies  and the current status of EdgeAudio and
the other investments made by us are discussed below.

         We have  reorganized our Company to prioritize and focus management and
financial  resources on Kronos Air Technologies  and the Kronos(TM)  technology.
This  reorganization has resulted in the decision to sell or to no longer pursue
other investment opportunities previously identified.  We sold our investment in
Atomic  Soccer  in April  2001;  decided  not to  pursue  investments  in Cancer
Detection International, Electric Management Units, and Cancer Treatment Centers
in July 2001;  established  a formal plan to dispose of  EdgeAudio  in September
2001;  and terminated by mutual consent of both parties a contract to distribute
Computerized Thermal Imaging equipment in August 2000.

         Kronos   Air   Technologies   is  focused   on  the   development   and
commercialization  of an air  movement  and  purification  technology  known  as
Kronos(TM)  which 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 move 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.
Kronos(TM) has multiple U.S. and international patents pending.

         The  Kronos(TM)  device is comprised of  state-of-the-art  high-voltage
electronics  and electrodes on a single printed circuit board 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.

                                       12
<PAGE>

         RESULTS OF OPERATIONS

         The  comparability  of our  financial  statements  between years is not
easily  susceptible  to narrative  comparison  by virtue of the fact that (a) we
were basically  inactive from the time that we  discontinued  operations in 1996
until the time that we reactivated operations in mid-1999, (b) from inception we
have not had  significant  operating  revenues,  and (c) we acquired  Kronos Air
Technologies,  Atomic  Soccer,  EdgeAudio,  and Cancer  Detection  International
towards the end of the year ending June 30, 2000.


         REORGANIZATION

         Based  on  our   decision  to  focus  our   resources   on  Kronos  Air
Technologies,   several  actions  were  taken  which  impacted  the  results  of
operations.  On April 10, 2001, we sold Atomic Soccer.  The new ownership  group
consisted of Timothy G. Belinger,  Todd P. Ragsdale and James Eric Anderson.  At
the time of the sale,  Messrs.  Belinger,  Ragsdale and Anderson were members of
Atomic  Soccer's  Board of Directors.  None of these  individuals  were then, or
currently are, officers, directors, employees or affiliates of TSET. At the time
of the sale, Erik W. Black, an officer and director of TSET, was Atomic Soccer's
Chairman of the Board of  Directors.  Mr. Black  resigned  from Atomic  Soccer's
Board of Directors  immediately following the execution of the sale document and
was not a member of Atomic Soccer's new ownership  group. The sale resulted in a
loss of $2,297,000.  During our fourth  quarter of 2001, we determined  that the
assets of  EdgeAudio  were  impaired and we  recognized  an  impairment  loss of
$2,294,000.  On September 14, 2001, the board authorized  management to pursue a
formal plan for disposal of  EdgeAudio.  The  anticipated  loss from  operations
during the phase-out period is $150,000. We do not anticipate a loss on the sale
of EdgeAudio.  We also decided to discontinue  development  of Cancer  Detection
International  and we  have  recognized  an  impairment  loss  of the  remaining
goodwill of $273,000 associated with that investment.


         CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED
         SEPTEMBER 30, 2001 AND 2000

         REVENUE.  Revenues are generated through sales of Kronos(TM) devices at
Kronos Air Technologies, Inc. For the three months ended September 30, 2001, our
Company had revenues of $25,014, as compared to no revenues for the three months
ended September 30, 2000.

         COST OF SALES.  For the three months  ended  September  30,  2001,  our
Company had costs of sales of  $10,014,  as compared to no cost of sales for the
three months ended September 30, 2000.

         SELLING,  GENERAL AND  ADMINISTRATIVE  EXPENSES.  For the three  months
ended September 30, 2001, selling,  general and administrative expenses amounted
to $1,049,612,  as compared to $533,126 for the three months ended September 30,
2000.  This  increase in selling,  general and  administrative  expenses for the
three months ended  September 30, 2001 of $516,486  represents a 96.9%  increase
from the  corresponding  period  in 2000,  of which  compensation  and  benefits
decreased  $112,914 or 39.1%,  research  and  development  increased  $37,624 or
71.6%,  professional  services  increased  $625,319 or 969.8%,  depreciation and
amortization   decreased   $7,447  or  9.4%  and  other  selling,   general  and
administrative   expenses  decreased  by  $26,096  or  28.1%.  The  increase  in
professional  services  was  the  result  of our  company  utilizing  consulting
services to manage the day-to-day operations of the company.  Consultants to the
Company  included  the Chief  Executive  Officer and  Executive  Vice-President,
Marketing and Sales of Kronos Air  Technologies,  as well as the Chief Operating
Officer of TSET. Also included in  professional  services is a pro rata portiion
of The  Eagle  Rock  Group  consulting  fee of  $274,400  which  is based on the
valuation of 1.4 million  warrants  granted for the  consulting  provided by the
Eagle Rock Group.


         CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 2001

         Our total assets at September  30, 2001 were  $3,194,849  compared with
$3,067,329 at June 30, 2001, an increase of $127,520.  Total assets at September
30, 2001 were  comprised  mainly of $595,800  for  deferred  financing  fees and
$2,400,423 of patents/intellectual  property. Total assets at June 30, 2001 were
comprised  principally  of  $2,431,524  of  patents/intellectual   property  and
$520,800 of deferred  financing fees. Total current assets at September 30, 2001
and June 30, 2001  amounted to $157,751 and $70,298,  respectively,  while total
current   liabilities  for  those  same  periods   amounted  to  $2,664,308  and
$1,921,213,  respectively,  creating a working capital deficit of $2,506,557 and
$1,850,915  at each  respective  period end.  This  working  capital  deficit is
principally  attributable to the increase in accrued  expenses in both years for
compensation and professional  services.  Total  liabilities as at September 30,
2001  and  June  30,  2001  were   $3,414,404  and   $2,588,763,   respectively,
representing an increase of $825,641.  Shareholders'  equity as of September 30,
2001 and June 30, 2001 was $(905,555) and $478,566, respectively, representing a
decrease of $1,384,121.  The decrease in shareholders' equity is principally the
result of incurring a $1,052,634 loss from  continuing  operations for the three
months ended September 30, 2001 and from deferred equity  compensation  from The
Eagle Rock Group warrants. The total valuation of these 1.4 million warrants was
$686,000,  of which  $274,400 was recorded as a current  period  expense and the
remaining  $411,600  was  recorded as a decrease  to  shareholders'  equity.  In
addition,  equity increased  during the three-months  period ended September 30,
2001 through the sale and issuance of common stock.

                                       13
<PAGE>

         LIQUIDITY AND CAPITAL RESOURCES

         Historically we have relied  principally on the sale of common stock to
finance our  operations.  Going forward,  we plan to rely on the proceeds from a
Small  Business  Innovation  Research  contract  with the United States Navy and
other government  contracts and grants, and cash flow generated from the sale of
Kronos(TM)  devices. 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  $12,500 per day from the sale of common
stock to Fusion  Capital.  In  addition,  in May 2001,  Kronos Air  Technologies
signed a Small Business Innovation Research contract. This contract is sponsored
by the United  States  Navy and is  potentially  worth up to $837,000 in product
development and testing support for Kronos Air Technologies.  The first phase of
the contract is worth up to $87,000 in funding for  manufacturing  and testing a
prototype  device for air movement and  ventilation  on board naval vessels over
the next six months. If awarded to Kronos Air Technologies,  the second phase of
the contract would be worth up to $750,000 in additional funding.

         At September 30, 2001, we had a working  capital deficit of $2,506,557,
which  represented  a decline of $655,642  from net working  capital at June 30,
2001.  At  September  30,  2001,  we had $2.66  million in current  liabilities.
Current  liabilities  was  comprised  principally  of  compensation,   operating
management  consulting  fees and other  payroll  related  items of $1.4  million
(53%); other accrued liabilities and advances from shareholders for which shares
of the Company's  common stock will be issued during the second  quarter of $0.6
million (24%); a note payable to EdgeAudio for working  capital under the May 4,
2000 acquisition  agreement  of $0.3 million  (11%); and  accounts  payables for
professional fees and other vendors of $0.3 million (12%). Net cash flow used on
operating activities was $277,847 for the three months ended September 30, 2001.
We were able to satisfy some of our cash requirements for the three months ended
September 30, 2001 through the issuance and sale of our common stock.

         On June 19, 2001,  we entered into a common  stock  purchase  agreement
with Fusion  Capital.  Pursuant to the common stock purchase  agreement,  Fusion
Capital has agreed subject to certain conditions to purchase on each trading day
during the term of the agreement, $12,500 of our common stock or an aggregate of
$10.0  million.  The $10.0 million of our common stock is to be purchased over a
40-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 a price based upon the future  market price of
our common stock without any fixed  discount to the  then-current  market price.
However,  there can be no  assurance of how much cash we will  receive,  if any,
under the common stock purchase agreement with Fusion Capital.

         On  November  1,  2001,  our  Registration  Statement  on Form  S-1 was
declared effective by the Securities and Exchange  Commission.  As a result, the
Company may be able to raise  capital by selling  shares of its common  stock to
Fusion Capital in accordance with the common stock purchase agreement.

         On November 13, 2001,  we entered into a Letter  Agreement  with Fusion
Capital  amending the common stock  purchase  agreement.  Pursuant to the Letter
Agreement, Fusion Capital will provide our Company with a $150,000 advance under
the common  stock  purchase  agreement  and our  ability to receive  advances is
limited.

         GOING CONCERN OPINION

         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 no
limited to, the need to develop and manufacture reliable and effective products,
develop marketing expertise and expand our sales force.


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 $760,212  for the
three  months  ended  September  30,  2001.  We have  incurred  net losses  from
continuing  operations of $3,572,558  and  $1,385,595 for the fiscal years ended
June 31, 2001 and 2000. We have incurred net losses from  continuing  operations
of $778,234 for the three  months ended  September  30, 2001.  We have  incurred
annual  operating  losses of $9,866,083,  $1,965,183  and $51,674  respectively,
during the past three fiscal years of operation.  As a result,  at September 30,
2001  and  June  30,  2001 we had an  accumulated  deficit  of  $12,752,019  and
$11,973,785,  respectively. Our revenues have not been sufficient to sustain our
operations.  We expect that our revenues  will not be  sufficient to sustain our

                                       14
<PAGE>

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.

         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, 2001 and June 30,  2000  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, 2001 we had a working  capital  deficit of $2,506,557.
At June 30, 2001 we had a working capital deficit of $1,850,915. The independent
auditor's  report for the years ended June 30, 2001 and June 30, 2000,  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. We have an operating cash flow
deficit of $10,524 in 1999,  an operating  cash flow deficit of $288,262 in 2000
and an operating  cash flow deficit of  $1,613,573  in 2001. We do not currently
have  sufficient  financial  resources  to fund our  operations  or those of our
subsidiaries. Therefore, we need additional funds to continue these operations.

         Subject to certain conditions, we have the right to receive $12,500 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.  Since we  initially  registered  5,000,000  shares  for sale by  Fusion
Capital  pursuant to the common stock purchase  agreement,  the selling price of
our common stock to Fusion Capital will have to average at least $2.00 per share
for us to receive  the  maximum  proceeds  of  $10,000,000  without  registering
additional  shares of common  stock or filing a  post-effective  amendment  with
respect to the number of shares  registered.  Assuming a purchase price of $0.36
per share (the  closing sale price of the common stock on November 15, 2001) and
the  purchase by Fusion  Capital of the full  5,000,000  shares under the common
stock  purchase  agreement,  proceeds to us would only be  $1,800,000  unless we
choose to register more than 5,000,000 shares,  which we have the right, but not
the  obligation,  to do.  The  extent 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  from 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, the  consequences  would be a  material  adverse  effect on our
business, operating results, financial condition and prospects.


WE HAVE VERY LIMITED  MANUFACTURING,  SALES AND MARKETING  CAPABILITIES  FOR OUR
KRONOS(TM)  PRODUCTS AND OUR FAILURE TO DEVELOP ANY OF THESE  CAPABILITIES WOULD
HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS

         We have  only  recently  begun  to  manufacture  and  market  prototype
versions  of our  Kronos Air  Technologies  products  and we have no  experience
manufacturing, marketing or distributing commercial quantities of our Kronos Air
Technologies  products.  Kronos  Air  Technologies  currently  does not have any
commercial-scale manufacturing facilities. Kronos Air Technologies does not have
any  relationships  with  third  parties  to  contract  manufacture,  market  or
distribute  the Kronos(TM)  products.  If Kronos Air  Technologies  is unable to
acquire  adequate  manufacturing  capabilities  and  hire  sales  and  marketing
personnel  or if it cannot  enter  into  satisfactory  arrangements  with  third
parties to  manufacture,  market  and  distribute  the  Kronos(TM)  products  on
commercially  reasonable  terms,  the  consequences  would be a material adverse
effect on our business,  operating results,  financial  condition and prospects.
There can be no assurance that we will be able to acquire adequate manufacturing
capabilities  and hire sales and  marketing  personnel  or be able to enter into
satisfactory  arrangements  with  third  parties  to  manufacture,   market  and
distribute the Kronos(TM) products.


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

                                       15
<PAGE>

markets that we have targeted for  penetration.  There can be no assurance  that
the  Kronos(TM)  products will compete  favorably  with the products sold by our
competitors.


OUR COMMON STOCK IS DEEMED TO BE "PENNY STOCK," SUBJECT TO SPECIAL  REQUIREMENTS
AND CONDITIONS, AND MAY NOT BE A SUITABLE INVESTMENT

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

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

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


WE RELY ON MANAGEMENT AND 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.  We are in the  process  of
identifying  suitable  candidates for certain other senior management  positions
deemed essential to the future successful development of Kronos Air Technologies
and the Kronos(TM) technology. 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,  our Chief
Executive  Officer  performs  services  pursuant  to  a  consulting   agreement.
Currently,  we do not carry key person life  insurance for any of our directors,
executive management, or key employees.


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 40  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.

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<PAGE>

OUR FAILURE TO FILE FEDERAL AND STATE INCOME TAX RETURNS FOR CALENDAR YEARS 1997
THROUGH 2001 MAY RESULT IN THE IMPOSITION OF INTEREST AND PENALTIES

         We failed to file  federal and state  income tax  returns for  calendar
years 1997 through 2001,  respectively.  We believe that we had operating losses
for each year  during  the  period  1997  through  2001,  and that  there are no
expected  income taxes due and owing for those years.  We anticipate  filing all
past due returns by  December  31,  2001.  When filed,  these  returns  could be
subject  to  review  and  potential   examination  by  the   respective   taxing
authorities.  Should any of these returns come under  examination  by federal or
state  authorities,  our  positions  on  certain  income  tax  issues  could  be
challenged.  The impact, if any, of the potential future  examination  cannot be
determined  at this time.  If our positions  are  successfully  challenged,  the
results  may have a material  impact on our  financial  position  and results of
operations.

                                       17
<PAGE>

PART II


ITEM 1.  LEGAL PROCEEDINGS

         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

         On July 6, 2001, we authorized  the issuance of 238,806  common shares,
valued at $.335  per share  (the  fair  market  value for our  shares as of such
date),  at an aggregate value of $80,000,  to Periopolis,  Inc., in exchange for
$80,000 cash.

         On July 20,  2001,  we issued  250 common  shares,  valued at $.452 per
share (the fair market  value for our shares as of such date),  at an  aggregate
value of $250 to an employee of TSET, as compensation.


ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         Not applicable.


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

         None.


ITEM 5.  EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO.            DESCRIPTION                                                 LOCATION
-------------- ----------------------------------------------------------- -------------------------------------------------
<S> <C>        <C>                                                         <C>
    2.1        Articles of Merger for Technology Selection, Inc. with      Incorporated by reference to Exhibit 2.1 to the
               the Nevada Secretary of State                               Registrant's 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

    5.1        Opinion re: Legality                                        Incorporated by reference to Exhibit 5.1 to
                                                                           Amendment No. 1 to Form S-1 filed on October
                                                                           19, 2001

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

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

                                       18
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                                       19
<PAGE>
EXHIBIT
NO.            DESCRIPTION                                                 LOCATION
-------------- ----------------------------------------------------------- -------------------------------------------------

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                                       20
<PAGE>
EXHIBIT
NO.            DESCRIPTION                                                 LOCATION
-------------- ----------------------------------------------------------- -------------------------------------------------

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                                       21
<PAGE>
EXHIBIT
NO.            DESCRIPTION                                                 LOCATION
-------------- ----------------------------------------------------------- -------------------------------------------------

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

    10.52      Consulting Agreement, dated October 10, 2001, by and        Incorporated by reference to Exhibit 10.52 to
               between TSET, Inc. and Jeffrey D. Wilson                    the Registrant's Form 10-K for the year ended
                                                                           June 30, 2001 filed on October 15, 2001

    10.53       Consulting Agreement, effective October 1, 2001,
                by and among Steven G. Martin and Joshua B. Scheinfeld     Provided herewith

    10.54       Letter Agreement dated November 13, 2001 by and between
                TSET, Inc. and Fusion Capital Fund II, LLC                 Provided herewith

    11.1       Statement re:  Computation of Earnings                      Not applicable

    27.1       Financial Data Schedule                                     Not applicable
</TABLE>

                                       22
<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 16, 2001        TSET, INC.

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

                                       23