UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                                        WASHINGTON, DC 20549

                                             FORM 10-QSB

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

                          For the quarterly period ended December 31, 2002

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

                       For the transition period from __________ to __________

                                    COMMISSION FILE NO. 000-30191

                                 KRONOS ADVANCED TECHNOLOGIES, INC.
                                 ----------------------------------

                       (Exact name of registrant as specified in its charter)
<TABLE>
<S>       <C>                                                      <C>           <C>
              NEVADA                                                             87-0440410
          -------------                                                          ----------
(State of other jurisdiction of incorporation or organization)     (I.R.S. Employer Identification Number)


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


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

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

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

As of February 6, 2003, there were 47,737,180 shares outstanding of the issuer's common stock.

</TABLE>


<PAGE>


                                     PART I


FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

         The following comprise our condensed (unaudited) consolidated financial
statements for the three months and six months ended December 31, 2002.






                                       2
<PAGE>

             KRONOS ADVANCED TECHNOLOGIES, INC. (FORMERLY TSET, INC)
                           CONSOLIDATED BALANCE SHEETS



                                        September 30               June 30,
                                            2002                     2002
                                         (Unaudited)
                                        ---------------        -----------------
 ASSETS

 CURRENT ASSETS
    Cash                                  $    163,444                $ 21,510
    Accounts receivable, net                    27,620                     700
    Prepaids                                    49,824                 101,029

                                        ---------------        -----------------
      TOTAL CURRENT ASSETS                     240,888                  123,239
                                        ---------------        -----------------

 PROPERTY AND EQUIPMENT                         62,723                   62,723
    Less: Accumulated Depreciation             (41,095)                 (33,348)

                                        ---------------        -----------------
      NET PROPERTY AND EQUIPMENT                21,628                   29,375
                                        ---------------        -----------------

 OTHER ASSETS
    Intangibles                              2,078,235                2,213,917
                                        ---------------        -----------------

      TOTAL OTHER ASSETS                     2,078,235                2,213,917
                                        ---------------        -----------------

 TOTAL ASSETS                              $ 2,340,752              $ 2,366,531
                                        ===============        =================

 LIABILITIES AND SHAREHOLDERS' EQUITY

 CURRENT LIABILITIES
    Accrued expenses and payables to       $   998,110             $    886,447
      directors and officers
    Accounts paayble                           736,602                  254,201
    Accrued expenses                           162,523                  100,797
    Deferred revenue                           166,734                        -
    Notes payable, current portion             445,465                  535,700

                                        ---------------        -----------------
      TOTAL CURRENT LIABILITIES              2,509,434                1,777,145
                                        ---------------        -----------------

 LONG TERM LIABILITIES
    Notes payable                              169,890                  225,466

                                        ---------------        -----------------
      TOTAL LONG TERM LIABI1ITIES              169,890                  225,466
                                        ---------------        -----------------
      TOTAL LIABILITIES                      2,679,324                2,002,610
                                        ---------------        -----------------

                                        ---------------        -----------------
 REDEEMABLE WARRANTS                           805,300                  748,500
                                        ---------------        -----------------

 SHAREHOLDERS' EQUITY
    Common stock, authorized 500,000,000
      shares of $.001 par value                 47,737                   43,938
    Capital in excess of par value          14,640,718               14,371,113
    Deferred equity compensation               (10,420)                 (41,668)
    Retained earnings (Accumulated deficit)(15,821,907)             (14,757,963)

                                        ---------------        -----------------
      TOTAL SHAREHOLDERS                    (1,143,872)                (384,579)
                                        ===============        =================

 TOTAL LIABILITIES AND
 SHAREHOLDERS' EQUITY                        $2,340,752             $  2,366,531
                                        ===============        =================

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

                                       3
<PAGE>

<TABLE>

            KRONOS ADVANCED TECHNOLOGIES, INC. (FORMERLY TSET, INC.)
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<CAPTION>


                                                  For the three months ended December 31,      For the six months ended December 31,
                                                 ----------------------------------------      -------------------------------------
                                                             2002                     2001               2002              2001
                                                           (Unaudited)              (Unaudited)        (Unaudited)       (Unaudited)
                                                           -----------            -------------      -------------    -------------
<S>                                                        <C>                       <C>             <C>              <C>

 Sales                                                     $ 209,545                 $ 40,056          $ 318,162         $ 65,070


 Cost of sales                                                33,179                   40,056           125,304            50,070

                                                           ----------             ------------       -----------      ------------
 Gross Profit                                                176,366                        -           192,858            15,000
                                                           ----------             ------------       -----------      ------------

 Selling, General and Administrative expenses
     Compensation and benefits                              130,944                     83,636          265,733           259,854
     Research and development                                48,407                     48,643           78,682           138,834
     Professional services                                  402,852                    880,559          686,928         1,525,376
     Depreciation and amortization                           70,793                     71,674          143,429           143,347
     Facilities                                              26,009                     23,284           45,213            48,949
     Other selling general & administrative expenses         44,190                    105,150           77,059           146,196

                                                           ----------             ------------       -----------      ------------
 Total Selling, General and Administrative expenses         723,194                  1,212,945        1,297,044         2,262,556
                                                           ----------             -------------      -----------      ------------

 Net Operating Income (Loss)                               (546,828)                (1,212,945)      (1,104,185)       (2,247,556)

 Other Income / (expense)                                   108,376                      1,217          108,376             1,486

 Interest Expense                                           (34,361)                   (16,871)         (68,134)          (35,163)

                                                           ----------             -------------      -----------      ------------
 Net Income (Loss) Before Taxes                            (472,814)                (1,228,599)      (1,063,944)       (2,281,233)


 Provision for Taxes                                              -                          -                -                 -
                                                           ----------             ------------       -----------      ------------
 Net Income (Loss) from continuing operatiosn              (472,814)                (1,228,599)       (1,063,944)      (2,281,233)
                                                           ----------             ------------        ----------      ------------
 Income (Loss) from discontinued operations, net of income
 tax of $0                                                        -                          -                 -                -
 Loss on disposal of discontinued operations, net of income
 tax of $0                                                        -                          -                 -                -

                                                          -----------             ------------       -----------      ------------
 Net Income (Loss)                                        $(472,814)              $ (1,228,599)      $(1,063,944)     $(2,281,233)
                                                          ===========             ============       ===========      ============
 Basic Earnings (Loss) Per Share

     Income (loss) from continuing                            (0.01)                    (0.03)            (0.02)            (0.07)
     Loss from discontinued operations                            -                         -                 -                 -
                                                          -----------             ------------       -----------      ------------
     Net Income (loss)                                      $ (0.01)                  $ (0.03)          $ (0.02)      $     (0.07)
                                                          ===========             ============       ===========      ============
 Diluted Earnings (Loss) Per Share

     Income (loss) from continuing operations                 (0.01)                    (0.03)            (0.02)            (0.07)
     Loss from discontinued operations                            -                         -                 -                 -
                                                          -----------             ------------       -----------      ------------

     Net Income (loss)                                      $ (0.01)                  $ (0.03)          $ (0.02)      $     (0.07)
                                                          ===========             ============       ===========      ============
</TABLE>

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

                                       4
<PAGE>

<TABLE>

            KRONOS ADVANCED TECHNOLOGIES, INC. (FORMERLY TSET, INC.)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>


                                                           For the six months ended December 31,
                                                      ----------------------------------------------------
                                                        2002                 2001                2000
CASH FLOWS FROM OPERATING ACTIVITES                     (Unaudited)      (Unaudited)          (Unaudited)
                                                      -----------------------------------------------------
<S>                                                    <C>              <C>                   <C>

   NET LOSS FROM CONTINUING OPERATIONS                 $(1,063,944)     $ (2,281,233)         $ (1,472,428)
   ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
     (used in) provided by operations
     Depreciation and amortization                         143,429           143,347               153,354
     Common stock issued for compensation/services         101,859           788,361                 6,560

   CHANGE IN
     Inventory Assets                                            -                 -                     -
     Accounts receivable                                   (26,920)                -                 6,000
     Prepaid expenses and other assets                      51,205          (170,396)                 (489)
     Deferred revenue                                      166,734                 -                     -
     Accounts Payable                                      387,743           902,790               227,943
     Accrued Expenses and other                            143,800          (112,432)               57,144
                                                       ----------------------------------------------------

      Net cash (used in) provided by Continuing Operations (130,255)        (729,563)           (1,021,916)

CASH FLOWS FROM INVESTING ACTIVITIES
     Purchases of property and equipment                          -                -               (21,886)
     Investment in patent protection                              -          (51,211)                    -
     Investment in discontinued operations                        -           73,876              (403,487)
                                                       ----------------------------------------------------

      Net cash (used in) provided by Investing Activities         -           22,665              (425,373)
                                                       ----------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
     Issuance of common stock                               418,000          707,107             1,344,340
     Proceeds from short-term borrowings                    165,889           33,214                     -
     Repayments of short-term borrowings                   (311,700)               -                     -

                                                       ----------------------------------------------------
      NET CASH (USED IN) PROVIDED  BY FINANCING ACTIVITIES  272,189          740,321             1,344,340
                                                       ----------------------------------------------------

NET (DECREASE) INCREASE IN CASH                             141,934           33,423              (102,949)

CASH

   BEGINNING OF PERIOD                                       21,510           32,619               102,949
                                                       ----------------------------------------------------

   END OF PERIOD                                          $ 163,444     $     66,042          $          -
                                                       =====================================================

Supplemental schedule of non-cash investing and
  financing activities:
   Debt satisfied with stock                             $ 206,000      $    100,000          $    419,143
                                                       ====================================================
</TABLE>

    THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.

                                       5
<PAGE>

<TABLE>

             KRONOS ADVANCED TECHNOLOGIES, INC. (FORMERLY TSET, INC)
                  STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<CAPTION>

                                      COMMON STOCK
                                     ---------------
                                                                                           RETAINED                         TOTAL
                                                                            CAPITAL IN     EARNINGS        DEFERRED    SHAREHOLDERS'
                                                                           EXCESS OF PAR (ACCUMULATED       EQUITY        EQUITY
                                                        SHARES     AMOUNT     VALUE        DEFICIT)     COMPENSATION     (DEFICIT)
                                     -----------------------------------------------------------------------------------------------
<S>                                                 <C>          <C>       <C>           <C>              <C>            <C>

 BALANCE at June 30, 2002                           43,937,907   $ 43,938  $ 14,371,113  $ (14,757,963)   $ (41,668)       (384,580)

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

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

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

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

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

     Amortization of deferred equity compensation                                                            15,624          15,624

     Net loss for the quarter ended September 30, 2002                                        (591,130)                    (591,130)
                                                     -------------------------------------------------------------------------------
 BALANCE at September 30, 2002 (Unaudited)           45,141,296   $45,141  $ 14,443,929  $ (15,349,093)   $  26,044      $ (886,067)

     Shares issued in October 2002 for cash           1,750,000     1,750       173,250                                     175,000

     Shares issued in November 2002 for cash            189,884       190        24,810                                      25,000

     Shares issued in December 2002 for cash            350,000       350        34,650                                      35,000

     Shares issued in December 2002 for cash            306,000       306        33,854                                      34,160

     Stock options granted at December 31, 2002 for
      consulting services                                                         5,225                                       5,225

     Costs associated with equity financing                                     (75,000)                                    (75,000)

     Amortization of deferred equity compensation                                                            15,624          15,624

     Net loss for the quarter ended December 31, 2002                                         (472,814)                  $ (472,814)
                                                     -------------------------------------------------------------------------------
 BALANCE at December 31, 2002 (Unaudited)            47,737,180  $ 47,737  $ 14,640,718   $(15,821,907)   $ (10,420)     $1,143,872)
                                                     ===============================================================================
</TABLE>

 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.

                                       6
<PAGE>


               KRONOS ADVANCED TECHNOLOGIES, 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  and six-month  periods ended December 31, 2002 are not  necessarily
indicative  of the results  that may be  experienced  for the fiscal year ending
June 30, 2003.

These  financial  statements  are  those  of the  Company  and its  wholly-owned
subsidiaries.  All significant inter-company accounts and transactions have been
eliminated in the preparation of the consolidated financial statements.  Aperion
Audio,  Inc.  is  disclosed  as  discontinued   operations  in  these  financial
statements  from when the Company decided to sell Aperion Audio on July 1, 2001,
until Aperion Audio was sold on June 7, 2002.

The  accompanying  financial  statements  should be read in conjunction with the
Kronos  Advanced  Technologies,  Inc. Form 10-KSB for the fiscal year ended June
30, 2002 filed on September  28, 2002 and the Form 10-QSB for the quarter  ended
September 30, 2002 filed on November 14, 2002.

NOTE 2 -- INCOME TAXES

The  composition  of deferred tax assets and the related tax effects at December
31, 2002 and June 30, 2002 are as follows:

                                               DECEMBER 31,
                                                  2002
                                               (UNAUDITED)       JUNE 30, 2002
                                              ------------       -------------

      Benefit from carryforward of capital    $  2,967,319         $2,685,915
       and net operating losses
      Other temporary differences                  248,527            220,332
      Less:
        Valuation allowance                    (3,215,846)        (2,906,247)
                                              ------------        -----------
      Net deferred tax asset
                                              $          -        $         -
                                              ============        ===========


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

<TABLE>
                                                               DECEMBER 31, 2002
                                                                  (UNAUDITED)                          JUNE 30, 2002
                                                       ---------------------------------       -----------------------------
                                                                              % OF                                 % OF
                                                            AMOUNT        PRE-TAX LOSS            AMOUNT       PRE-TAX LOSS
                                                       ---------------   ---------------       -------------  --------------
<S>                                                    <C>                      <C>            <C>                   <C>
Benefit for income tax at federal statutory rate       $        342,429           34.0%        $     946,620           34.0%
Benefit for income tax at state statutory rate                   20,074            2.0%               55,494            2.0%
Non-deductible expenses                                        (52,910)          (5.3)%            (111,274)          (4.0)%
Acquired NOL and other                                                -            0.0%              248,489            8.9%
Increase in valuation allowance                               (309,599)         (30.7)%          (1,139,325)         (40.9)%
                                                       ----------------  ---------------       -------------  --------------

                                                       $              -            0.0%        $           -            0.0%
                                                       ================  ===============       =============  ==============


</TABLE>


                                                                7
<PAGE>

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

The Company  has filed all of its  federal and state  income tax returns for all
years  through June 30, 2001.  The Company is current on all income tax filings.
At  December  31,  2002,  for  federal  income tax and  alternative  minimum tax
reporting purposes, the Company has approximately $7.2 million of unused Federal
net operating losses,  $1.0 million of capital losses and $4.0 million of unused
State net operating  losses  available  for  carryforward  to future years.  The
benefit from  carryforward  of such losses will expire in various  years between
2006 and 2022 and could be  subject  to  limitations  if  significant  ownership
changes occur in the Company.

NOTE 3 - SEGMENTS OF BUSINESS

The Company operates principally in one segment of business:  The Kronos segment
licenses,  manufactures  and distributes air movement and  purification  devices
utilizing the KronosTM  technology.  All other segments have been disposed of or
discontinued.  In the six months ended December 31, 2002,  the Company  operated
only in the U.S.

NOTE 4 - EARNINGS PER SHARE

Weighted average shares  outstanding used in the earnings per share  calculation
were  47,021,691 and 35,760,303 for the three months ended December 31, 2002 and
2001,  respectively  and  45,774,213  and  34,992,354  for the six months  ended
December 31, 2002 and 2001, respectively.

As of December 31, 2002,  there were outstanding  options to purchase  7,818,675
shares of the Company's common stock.  These options have been excluded from the
earnings per share calculation as their effect is anti-dilutive.  As of December
31, 2001,  there were  outstanding  options to purchase  1,923,975 shares of the
Company's  common stock.  These options have been excluded from the earnings per
share calculation as their effect is anti-dilutive.

NOTE 5 - DISCONTINUED OPERATIONS

The  Company's  consolidated  financial  statements  for all  periods  have been
reclassified to report separately results of operations and operating cash flows
from continuing operations and the discontinued operations. The net revenues are
included in the financial  statements under Net Income (Loss) from  Discontinued
Operations.  Operating  results of  discontinued  operations  for the six-months
ended December 31, 2001 are as follows:

                                   OPERATING RESULTS OF DISCONTINUED OPERATIONS:

                                          OPERATING RESULTS OF DISCONTINUED
                                                     OPERATIONS:
                                      --------------------------------------
                                      FOR THE SIX MONTHS ENDED DECEMBER 31,
                                      --------------------------------------
                                                        2001
                                      --------------------------------------
                                                    APERION AUDIO
                                      --------------------------------------

Sales                                                               $410,512
Cost of sales                                                      (143,816)
Depreciation and amortization                                        (6,618)
General and administrative                                         (356,892)
                                      --------------------------------------
Operating income (loss)                                             (96,813)

Other income                                                          21,360
Interest expense                                                    (16,247)
Provision for future operating losses                                 73,361
Minority interest                                                     18,340
                                      --------------------------------------
Income (Loss) pre-tax                                                      0

Income taxes (benefits)                                                    -
                                      --------------------------------------

Loss from discontinued operations                                         $0
                                      ======================================





                                       8
<PAGE>

NOTE 6 - NOTES PAYABLE

The Company had the following note obligations at December 31 and June 30, 2002:

                                              December 31, 2002    June 30, 2002
                                             ------------------   --------------

  (1) Obligations to Fusion Capital                    $134,999         $123,000
  (2) Obligation to Aperion Audio                       140,466          200,466
  (3) Obligation to Jeff Wilson                         209,890          360,000
  (4) Obligation to the Eagle Rock Group                 70,000           70,000
  (5) Obligations to others                              60,000            7,700
                                             ------------------   --------------
      Total Notes Payable                              $615,355         $761,166

 Current portions:
      Obligations to Fusion Capital                     134,999          123,000
      Obligation to Aperion Audio                       140,466          205,000
      Obligation to Jeff Wilson                          40,000          130,000
      Obligation to the Eagle Rock Group                 70,000           70,000
      Obligations to others                              60,000            7,700
                                             ------------------   --------------
        Total current portion                          $445,465         $535,700
                                             ------------------   --------------
 Total long term obligations net of
        current portion                                $169,890         $225,466
                                             ==================   ==============

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

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

   (3) This note is to a former  officer  and  director of the Company and bears
       interest  at 12%.  The note  calls  for  quarterly  payments  of at least
       $10,000 until the principal and interest are paid in full.

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

   (5) This is a non-interest bearing obligation with monthly payments of $5,000

NOTE 7 - CONSULTING AGREEMENTS

In July 2001, the Company signed a six-month  agreement to utilize the strategic
planning and business plan execution  services of The Eagle Rock Group, LLC. The
Eagle Rock Group will work with the Kronos Advanced  Technologies  team to fully
develop and capitalize the Kronos(TM) technology. Pursuant to the agreement that
the Company  entered into with The Eagle Rock Group,  the Company  issued to The
Eagle  Rock  Group a  ten-year  warrant  granting  them the  right  to  purchase
1,400,000 shares of the Company's common stock at an exercise price of $0.68 per
share. The warrants were immediately vested and non-forfeitable. The warrant was
valued  at  $686,000  using the  Black-Scholes  option  valuation  model and was
initially  recorded as deferred equity  compensation  and amortized into current
period  professional  services  expense at a rate of $137,200 per month over the
term of the  agreement.  Amortization  for the  year  ended  June  30,  2002 was
$686,000.   The  shares  underlying  the  warrant  have  piggy-back  and  demand
registration  rights,  as well as  subscription  rights  in the  event  that the
Company issues any rights to all of its  stockholders to subscribe for shares of
the Company's common stock. In addition,  the warrant contains redemption rights
in the event that the Company enters into a transaction that results in a change
of control of the Company.

In October 2001, the Company entered into a 15-month  consulting  agreement with
Joshua B.  Scheinfeld and Steven G. Martin,  principals of Fusion  Capital,  for
consulting  services with respect to operations,  executive  employment  issues,
employee  staffing,  strategy,  capital structure and other matters as specified
from time to time.  As  consideration  for their  services,  the Company  issued
360,000  shares  of its  common  stock.  In  accordance  with  EITF  96-18,  the
measurement  date was established as the contract date of October 1, 2001 as the
share grant was  non-forfeitable  and fully  vested on that date.  The stock was
valued on that date at $0.28 a share (the closing price for the Company's common
stock on the  measurement  date).  The stock  issuance  has been  recorded  as a
prepaid  consulting  fee and is being  amortized  to  Professional  Fee  Expense
ratably over the 15-month term of the  contract.  During the three and six month
periods ending December 31, 2002, the Company recognized  professional  services


                                       9
<PAGE>

expenses of $20,000 and $40,000, respectively under this agreement compared with
$20,000 and $20,000 for the three and six month periods ended December 31, 2001.

In March 2002, the Company entered into a 12-month consulting agreement with The
Eagle Rock Group.  Pursuant to the agreement,  the Company issued a note for the
outstanding  balance of $120,000 due to The Eagle Rock Group. The note is due on
March 1, 2003 and bears interest at the rate of 12% per annum.  The Company also
granted The Eagle Rock Group a 10 year warrant for up to 2,000,000  shares.  The
warrant contains  redemption  rights in the event that the Company enters into a
transaction that results in a change of control of the Company. Of this, 500,000
shares  will be earned  over a period of 12 months.  The  exercise  price of the
initial 500,000  warrants is $0.42 for 250,000  warrants and $0.205 (the closing
price of the  Company's  common  stock on March 1, 2002) for  250,000  warrants.
These warrants are  irrevocable and are fully vested.  The  measurement  date is
March 1, 2002 as the warrants are fully vested and non-forfeitable on that date.
The value  assigned to these  warrants is $62,500 and was  determined  using the
Black-Scholes  option  valuation  model.  The 500,000  warrants  are for general
consulting  services for a 12-month period. The $62,500 will be expensed ratably
over the term of the  consulting  contract.  The  remainder of the shares may be
earned  contingent upon the occurrence of various events  including a successful
capital raise equal to or greater than $1.5 million, securing contracts with the
U.S.   military,   securing   contracts  with   consumer-oriented   distribution
organizations,  and the adoption of a branding/marketing campaign which has been
principally developed by The Eagle Rock Group. In October 2002, 400,000 warrants
were  earned  when  the  Company  secured  a  contract  with   consumer-oriented
distribution  organization  HoMedics.  The exercise  price for these warrants is
$0.145 (the  closing  price of the  Company's  common stock on October 22, 2003.
These warrants are  irrevocable and are fully vested.  The  measurement  date is
October 22, 2002 as the warrants are fully  vested and  non-forfeitable  on that
date. The value  assigned to these warrants is $56,800 and was determined  using
the Black-Scholes  option valuation model. The Company recognized this amount as
consulting  expense in the  quarter  ended  December  31,  2002.  The  remaining
potential 1.1 million  shares  covered by the warrant will be valued if and when
earned under the terms of the  contract.  The exercise  price for the  remaining
shares  will be the  market  price on the date the grant is  earned.  During the
three and six month periods  ending  December 31, 2002,  the Company  recognized
professional  services  expenses of $87,000 and  $118,000,  respectively,  under
these agreements  compared with $412,000 and $686,000 for the comparable periods
in the prior year.

NOTE 8 - SUBSEQUENT EVENTS

In January 2003,  Kronos  received  formal  notification  from the United States
Patent  and  Trademark   Office   indicating  that  its   application   entitled
Electrostatic  Fluid Accelerator has been examined and allowed for issuance as a
U.S. patent (#6,504,308).  The patent will provide protection for key aspects of
Kronos'(TM)   technology   until  late  in  2019.  A  number  of   corresponding
applications  have been filed and are  pending  outside  of the  United  States.
Kronos' Chief Technology Officer, Dr. Igor Krichtafovitch,  is the lead inventor
of this proprietary technology.

In January 2003,  Kronos extended its work into the  transportation  industry by
signing  a  Prototype  Development  and  Acquisition  Agreement  with a  premier
business  jet  manufacturer.  The  Agreement  was the  direct  result of initial
prototype development work performed by the Kronos Research Team with input from
the customer in 2002. The Kronos(TM)  devices will be designed and  manufactured
to meet all FAA safety  standards,  including  environmental,  flammability  and
electromagnetic interference (EMI).

NOTE 9 - REALIZATION OF ASSETS

The  accompanying  financial  statements  have been prepared in conformity  with
accounting principles generally accepted in the United States of America,  which
contemplate  continuation  of the  Company as a going  concern.  The Company has
sustained losses from operations in recent years, and such losses have continued
through the current year ended June 30, 2002. In addition, the Company has used,
rather than provided cash in its operations.  The Company is currently using its
resources   to   raise   capital   necessary   to   complete   development   and
commercialization work, and to provide for its working capital needs.

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

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

                                       10
<PAGE>


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

              2.  In November 2002, Kronos Air Technologies,  Inc. and
                  the United  States  Navy  executed a Small  Business
                  Innovation Research Phase II contract to develop and
                  demonstrate an advanced  distributive air management
                  system  based on the patented Kronos(TM) technology.
                  The  24-month  contract  is worth  $581,000  with an
                  option for an additional $144,000 in funding.

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

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

              5.  In  November  2002,   Kronos  Air  Technologies  and
                  HoMedics executed a Development Agreement to provide
                  Kronos with the  financial  resources  necessary  to
                  complete commercialization of  the  Kronos(TM)-based
                  consumer  product  line.   Kronos  is  working  with
                  HoMedics and  HoMedics'  engineers  and designers to
                  complete the product line for sales and distribution.

              6.  In January 2003,  Kronos  extended its work into the
                  transportation industry by signing a Development and
                  Acquisition  Agreement  with a premier  business jet
                  manufacturer.   The   Kronos(TM)   devices  will  be
                  designed  and  manufactured  to meet all FAA  safety
                  standards, including environmental, flammability and
                  electromagnetic interference (EMI).

NOTE 10 - COMMITMENTS AND CONTINGENCIES

         LITIGATION. 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


                                  11
<PAGE>


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 preparing for arbitration.









                                  12
<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 Kronos  Advanced
Technologies  (the  "Company"  or  "Kronos");  (b)  anticipated  trends  in  our
Company's  industry;  (c) our  Company's  future  financing  plans;  and (d) our
Company's ability to obtain financing and continue operations. In addition, when
used in  this  filing,  the  words  "believes,"  "anticipates,"  "intends,"  "in
anticipation   of,"  and  similar   words  are  intended  to  identify   certain
forward-looking  statements.  These forward-looking statements are based largely
on our  Company's  expectations  and  are  subject  to a  number  of  risks  and
uncertainties,  many of which are beyond our Company's  control.  Actual results
could differ  materially  from these  forward-looking  statements as a result of
changes in trends in the economy and our Company's  industry,  reductions in the
availability  of  financing  and  other  factors.  In light of these  risks  and
uncertainties,  there can be no assurance  that the  forward-looking  statements
contained in this filing will in fact occur.  Our Company does not undertake any
obligation   to  publicly   release  the  results  of  any   revision  to  these
forward-looking  statements  that may be made to reflect  any  future  events or
circumstances.

GENERAL

         Kronos  Advanced  Technologies,  Inc. is a high  technology  industrial
company  focused on  developing,  marketing  and selling  products  based on the
Company's  proprietary  air  movement  and  purification  technology.  Kronos is
actively commercializing its technology across multiple markets.

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

         In  December  2002,  the  shareholders  approved  an  amendment  to our
Articles of  Incorporation  for a name change of our Company to Kronos  Advanced
Technologies,  Inc.  (f/k/a TSET,  Inc.).  Kronos trades under the ticker symbol
KNOS.

         TECHNOLOGY DESCRIPTION AND BENEFITS. The Kronos(TM) technology combines
state-of-the-art  high voltage  electronics and electrodes into an efficient but
simple  electrical  device.  As  a  result  of  this  combined   technology,   a
Kronos(TM)-based  device can both move and clean air without  any moving  parts.
Kronos(TM)  devices are  versatile,  energy- and  cost-efficient  and capable of
multiple  design  forms.  Kronos(TM)  devices can be made into any shape or size
and,  therefore,  have immediate potential to be used as a standalone product or
to replace a range of HVAC products  from low end  mini-splits  for  residential
usage to high end HEPA filtration systems for operating and manufacturing  clean
rooms.

         The proprietary  Kronos(TM) technology involves the application of high
voltage management across paired electrical grids to create an ion exchange that
moves  and  purifies  air.   Kronos(TM)   technology   has  numerous,   valuable
characteristics. It moves air and gases at high velocities while removing odors,
smoke and particulates and killing  pathogens,  including bacteria and mold. The
technology  is  cost-effective   and  is  more  energy  efficient  than  current
alternative fan and filter  (including HEPA filter and ultraviolet  light based)
technologies.

         Many of the scientific  claims of the Kronos(TM)  technology  have been
validated by the U.S.  government and  multi-national  companies,  including the
U.S.  Department of Energy,  the U.S.  Department of Defense,  General Dynamics,
Underwriters Laboratory, and Intel.

         Independent laboratory testing has verified the purification capability
of Kronos(TM)  technology.  Tests conducted at MicroTest Laboratories and at the
New  Hampshire  Materials  Laboratory  demonstrated  HEPA  Clean Room Class 1000
quality particulate reduction and up to 95% reduction of hazardous gases (in one
air pass through the Kronos(TM) system),  including numerous  contaminants found
in cigarette smoke.


                                       13
<PAGE>

         PATENT AND  INTELLECTUAL  PROPERTY.  In January 2003,  Kronos  received
formal   notification  from  the  United  States  Patent  and  Trademark  Office
indicating that its application  entitled  Electrostatic  Fluid  Accelerator has
been examined and allowed for issuance as a U.S. patent (#6,504,308). The patent
will provide protection for key aspects of Kronos'(TM)  technology until late in
2019.  A number of  corresponding  applications  have been filed and are pending
outside of the  United  States.  Kronos'  Chief  Technology  Officer,  Dr.  Igor
Krichtafovitch, is the lead inventor of this proprietary technology.

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

         STANDALONE PLATFORM.

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

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

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

         In November  2002,  Kronos Air  Technologies  and  HoMedics  executed a
Development  Agreement to provide Kronos with the financial  resources necessary
to complete  commercialization  of the  Kronos(TM)-based  consumer product line.
Kronos  is  working  with  HoMedics  and  HoMedics'  engineers,   designers  and
manufacturers to complete the product line for sales and distribution in 2003.

         ACCESS BUSINESS GROUP CONTRACT.  In July 2002,  Kronos Air Technologies
executed a Memorandum of Understanding with Access Business Group  International
L.L.C.  ("Access") for the potential  licensing of Kronos(TM) based air movement
and  treatment  technologies.  The  Company  completed  the  first  phase of the
Memorandum of  Understanding.  At this time,  Kronos and Access have not reached
terms and conditions of a licensing agreement acceptable to Kronos.

         EMBEDDED PLATFORM

         U.S. NAVY SBIR CONTRACTS. The U.S. Department of Defense and Department
of Energy  have  provided  Kronos  Air  Technologies  with  various  grants  and
contracts to develop,  test and evaluate the Kronos(TM)  technology for embedded
applications.   Kronos  has  developed   several   commercial   and   industrial
applications,  including  the  retrofit of berthing fan systems and embedded air
movement systems for U.S. Navy Aegis Class destroyers.  In November 2002, Kronos
executed an agreement with the U.S. Navy to develop a new ventilation system for
naval ships.  Working under a Small Business Innovation  Research contract,  the
Company  is in  Phase  II  (commercialization  phase)  of this  contract,  which
provides Kronos with up to an additional $725,000 of developmental  funding over
the next 24 months.

         During Phase II,  Kronos shall  develop and  demonstrate a set of fully
controlled  devices  that  represent  a "cell" of an advanced  distributive  air
management   system  with  medium  capacity   airflow  in  a  U.S.  Navy  unique
environment. The "cell" will be designed to be easily adjustable to a variety of
applications such as duct size, airflow requirements,  and air quality. The goal
of this development work is to  significantly  reduce or replace  altogether the
current HVAC air handling systems on naval ships.

         As part of its air  management  system,  Kronos  intends to develop and
test  an  air  filtration  mechanism  capable  of  performing  to  HEPA  quality
standards. We believe that Kronos(TM) devices could replace current HEPA filters
with a permanent, easily cleaned, low-cost solution. The U.S. Navy unique


                                       14
<PAGE>


environment    includes    shock    exposure,     vibration,     Electromagnetic
Interference/Compatibility  (EMI/EMC),  and salt spray.  Kronos(TM) devices will
be tested and  built to meet specific  Navy  standards.  Testing  shall  include
assessments for system performance,  including control techniques, noise levels,
acquisition and lifecycle costs.

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

         U.S. ARMY SBIR CONTRACT.  In December 2001, Kronos Air Technologies was
awarded  an  SBIR  contract  sponsored  by  the  U.S.  Army.  This  contract  is
potentially worth up to $850,000 in product  development and testing support for
Kronos Air  Technologies.  Phase I of the  contract  is worth up to  $120,000 in
funding to investigate and analyze the feasibility of the KronosTM technology to
reduce  humidity in heating,  ventilation and air  conditioning  (HVAC) systems.
Dehumidification  is essential  to making HVAC  systems  more energy  efficient.
Phase II of the  contract  is worth up to  $730,000  in  additional  funding for
product  development  and testing.  In August 2002,  the U.S. Army requested the
company resubmit a detailed Phase II proposal for review in 2003. The Company is
also  evaluating   other  potential   non-military   market   opportunities   to
commercialize dehumidification applications of the Kronos(TM) technology.

         PREMIER  BUSINESS JET CONTRACT.  In January 2003,  Kronos  extended its
work into the  transportation  industry by signing a Development and Acquisition
Agreement with a premier business jet manufacturer. The Agreement was the direct
result of initial  prototype  development  work performed by the Kronos Research
Team with  input from the  customer  in 2002.  The  Kronos(TM)  devices  will be
designed  and  manufactured  to  meet  all  FAA  safety   standards,   including
environmental, flammability and electromagnetic interference (EMI).

CRITICAL ACCOUNTING POLICIES

         USE OF ESTIMATES. The preparation of financial statements in conformity
with  accounting  principles  generally  accepted in the United States  requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities  and disclosures of contingent  assets and liabilities at
the date of the financial  statements  and the reported  amounts of revenues and
expenses  during the reporting  period.  Actual  results could differ from those
estimates.

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

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


                                       15
<PAGE>


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

         REVENUE  RECOGNITION.  We recognize revenue in accordance with SAB 101.
Further,   Kronos   Air   Technologies   recognizes   revenue  on  the  sale  of
custom-designed  contract  sales  under the  percentage-of-completion  method of
accounting  in the ratio that costs  incurred  to date bear to  estimated  total
costs.  For  uncompleted  contracts  where costs and  estimated  profits  exceed
billings,  the net amount is  included  as an asset in the  balance  sheet.  For
uncompleted contracts where billings exceed costs and estimated profits, the net
amount is included as a liability in the balance sheet.  Revenue from government
grants for  research  and  development  purposes is  recognized  as revenue when
received. Sales are reported net of applicable cash discounts and allowances for
returns.

RESULTS OF OPERATIONS

         The Company's net loss from continuing  operations for the three months
ended December 31, 2002 was reduced by 62% to $473,000, compared with a net loss
of $1.2 million for the corresponding period for the prior year. The decrease in
the net loss was primarily the result of a 54%  reduction in  professional  fees
and  consulting  services  and a 57%  reduction  in other  selling  general  and
administrative  expenses.  The Company's net loss from continuing operations for
the six months ended December 31, 2002 was reduced 53% to $1.1 million, compared
with a net loss of $2.3 million for the corresponding period for the prior year.
The  decrease in the net loss was  primarily  the result of a 55%  reduction  in
professional  fees and consulting  services and a 47% reduction in other selling
general and administrative expenses.

         REVENUE.  Revenues are generated through sales of Kronos(TM) devices at
Kronos Air Technologies,  Inc. Revenue for the three months and six months ended
December 31, 2002 was $210,000 and  $318,000,  respectively.  Revenue of $40,000
and $65,000 was  recorded  during the  corresponding  periods of the prior year.
These  revenues were primarily  from our HoMedics  contracts,  our U.S. Navy and
U.S. Army Small  Business  Innovative  Research  contracts and our contract with
Access Business Group.

         COST OF SALES.  Cost of sales for the three months and six months ended
December 31, 2002 was $33,000 and $125,000,  compared to $40,000 and $50,000 for
the corresponding periods in the prior year. Cost of sales is primarily research
and development costs associated with our HoMedics contracts,  our U.S. Navy and
U.S. Army Small  Business  Innovative  Research  contracts and our contract with
Access Business Group.

         SELLING,  GENERAL AND  ADMINISTRATIVE  EXPENSES.  Selling,  General and
Administrative  expenses for the three months and six months ended  December 31,
2002 was $0.7 million and $1.2  million,  respectively  compared to $1.2 million
and $2.3 million for the  corresponding  periods in the prior year. The decrease
is attributable to a reduction in professional  fees and consulting  services of
$478,000  and  $838,000   and  a  reduction   in  other   selling   general  and
administrative expenses of $61,000 and $69,000, respectively.

CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2002

         Our total assets at December 31, 2002 were $2.3 million,  compared with
$2.4 million at June 30, 2002.  Total assets at December 31, 2002 were comprised
primarily of $2.1 million of patents/intellectual property. Total assets at June
30,  2002 were  comprised  primarily  of $2.2  million  of  patents/intellectual
property.  Total  current  assets at  December  31,  2002 and June 30, 2002 were
$241,000 and $123,000,  respectively,  while total current liabilities for those
same  periods  were $2.5  million  and $1.8  million,  respectively,  creating a
working  capital  deficit of $2.3  million and $1.7  million at each  respective
period end. This working  capital  deficit is primarily due to accrued  expenses
for  compensation,   management  consulting  and  other  professional  services.
Shareholders'  equity as of  December  31,  2002 and June 30,  2002 were  $(1.1)
million  and $(0.4)  million,  respectively,  representing  a  decrease  of $0.7
million.  The  decrease  in  shareholders'  equity is  primarily  the  result of
incurring a $1.1  million  loss from  continuing  operations  for the six months
ended December 31, 2002,  partially offset through the sale and issuance of $0.3
million of common stock.

LIQUIDITY AND CAPITAL RESOURCES

         Historically we have relied  principally on the sale of common stock to
finance  our  operations.  We  have  recently  signed  a  multi-million  dollar,
multi-year  licensing  agreement  with  HoMedics  as well  as a  Small  Business
Innovative  Research Phase II contract with the U.S. Navy and a development  and
acquisition  agreement with a premier business jet manufacturer.  Going forward,


                                       16
<PAGE>


in addition to continued  sales of common stock, we plan to rely on the proceeds
from our HoMedics  Licensing  and  Development  Agreements,  our Small  Business
Innovation  Research (SBIR) contract with the U.S. Navy and our agreement with a
premier business jet  manufacturer,  as well as other  government  contracts and
grants,  cash  flow  generated  from  the  sale of  Kronos(TM)  devices  and the
execution of licensing agreements and other contracts with commercial customers.
We have also entered into a common stock purchase  agreement with Fusion Capital
under  which we have the  right,  subject to  certain  conditions,  to draw down
approximately $10,000 per day from the sale of common stock to Fusion Capital.

         Net cash flow used on operating activities was $130,000 for the current
year six months.  We were able to satisfy our cash  requirements for this period
through the issuance and sale of our common stock as well as from revenue on our
HoMedics and U.S.  Navy and Army SBIR  contracts  and our  contract  with Access
Business Group.

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

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

         In October 2002, Kronos Air Technologies,  Inc., and HoMedics USA, Inc.
executed  a  multiyear,   multi-million-dollar   Licensing  Agreement  to  bring
Kronos(TM)  proprietary  technology  to the  consumer.  The initial  term of the
agreement  is three and one half years  with the option to extend the  agreement
for six additional years. Kronos has been compensated through an initial royalty
payment  and  will  receive  ongoing  quarterly  royalty  payments  based  on  a
percentage of sales.  HoMedics will pay minimum royalty  payments of at least $2
million  during the initial  term and  on-going  royalty  payments to extend the
agreement.

         In November  2002,  Kronos Air  Technologies  and  HoMedics  executed a
Development  Agreement to provide Kronos with the financial  resources necessary
to complete  commercialization  of the  Kronos(TM)-based  consumer product line.
Kronos  is  working  with  HoMedics  and  HoMedics'  engineers,   designers  and
manufacturers to complete the product line for sales and distribution.

         In November 2002, Kronos Air  Technologies,  Inc. and the United States
Navy executed a Small Business  Innovation Research Phase II contract to develop
and  demonstrate an advanced  distributive  air  management  system based on the
patented Kronos(TM) technology.  The 24-month contract is worth $581,000 with an
option for an additional  $144,000 in funding.  Funding on Phase II commenced in
December 2002.

         In  January  2003,  Kronos  extended  its work into the  transportation
industry by signing a prototype  Development  and  Acquisition  Agreement with a
premier  business  jet  manufacturer.  The  Agreement  was the direct  result of
initial  prototype  development  work performed by the Kronos Research Team with
input from the  customer in 2002.  The  Kronos(TM)  devices will be designed and
manufactured  to  meet  all  FAA  safety  standards,   including  environmental,
flammability and electromagnetic interference (EMI).

GOING CONCERN OPINION

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

         We can  make  no  assurance  that  we  will  be  able  to  successfully
transition from research and development to manufacturing and selling commercial
products on a broad basis. While attempting to make this transition,  we will be
subject  to all the risks  inherent  in a growing  venture,  including,  but not

                                       17

<PAGE>

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 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 $473,000 and $1.1 million for
the three months and six months ended December 31, 2002,  respectively.  We have
incurred net losses from continuing  operations of $3.5 million and $3.6 million
for the fiscal  years  ended June 30,  2002 and 2001.  We have  incurred  annual
operating losses of $2.8 million,  $9.9 million and $2.0 million,  respectively,
during the past three fiscal years of  operation.  As a result,  at December 31,
2002 and June 30, 2002, we had an accumulated deficit of $15.8 million and $14.8
million,  respectively.  Our revenues  have not been  sufficient  to sustain our
operations.  Our profitability will require the successful  commercialization of
our  Kronos(TM)  technology.  No assurances can be given when this will occur or
that we will ever be profitable.

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

         Our independent  auditors have added an explanatory  paragraph to their
audit opinion issued in connection  with the financial  statements for the years
ended June 30, 2002 and June 30,  2001  relative to our ability to continue as a
going  concern.  Our ability to obtain  additional  funding will  determine  our
ability to continue as a going concern. 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 WILL REQUIRE ADDITIONAL FINANCING TO SUSTAIN OUR OPERATIONS AND WITHOUT IT WE
WILL NOT BE ABLE TO CONTINUE OPERATIONS

         At December 31, 2002, we had a working capital deficit of $2.3 million.
At June  30,  2002,  we had a  working  capital  deficit  of $1.7  million.  The
independent  auditor's  report for the years  ended  June 30,  2002 and June 30,
2001, includes an explanatory  paragraph to their audit opinion stating that our
recurring   losses  from  operations  and  working  capital   deficiency   raise
substantial  doubt about our ability to  continue  as a going  concern.  For the
years ended 2002,  2001 and 2000, we had an operating  cash flow deficit of $1.5
million, $1.6 million and $0.3 million,  respectively.  We do not currently have
sufficient  financial  resources to fund our operations or pay certain  existing
obligations or those of our subsidiary.  Therefore,  we need additional funds to
continue these operations and pay certain existing obligations.

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 CASE THE PRICE OF
OUR COMMON STOCK TO DECLINE

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

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'

                                       18

<PAGE>

competitors  already have brand  recognition  and  established  positions in the
markets that we have  targeted for penetration. In the event that the Kronos(TM)
products do not favorably compete with the products sold by our competitors,  we
would be forced to curtail our business operations.

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

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

         We have received one patent from the U.S. Patent and Trademark  Office.
We have four additional U.S. and four foreign patent applications  pending.  The
validity and breadth of our intellectual  property claims in ion wind generation
and  electrostatic  fluid  acceleration and control  technology  involve complex
legal and factual questions and, therefore, may be highly uncertain. Despite our
efforts to protect our  intellectual  proprietary  rights,  existing  copyright,
trademark and trade secret laws afford only limited protection.

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

         Our net  intangible  assets  of  approximately  $2.1  million  and $2.2
million as of December 31 and June 30,  2002 relate only to the  acquisition  of
Kronos Air  Technologies,  Inc. and  consists  principally  of purchased  patent
technology  and  marketing  intangibles.  They comprise 88% and 94% of our total
assets as of December 31 and June 30, 2002, respectively.  Intangible assets are
subject to periodic review and consideration for potential  impairment of value.
Among the  factors  that could  give rise to  impairment  include a  significant
adverse change in legal factors or in the business climate, an adverse action or
assessment by a regulator,  unanticipated  competition, a loss of key personnel,
and projections or forecasts that demonstrate  continuing losses associated with
these assets.  In the case of our tangible  assets,  specific factors that could
give rise to impairment would be, but are not limited to, an inability to obtain
patents,  the  untimely  death or other  loss of Dr.  Igor  Krichtafovitch,  the
inventor of the Kronos(TM) technology,  or the ability to create a customer base
for the sale or licensing of the Kronos(TM) technology.

         Although no events have occurred that would indicate that an impairment
may exist with respect to these intangible  assets,  should an impairment occur,
we would be required to  recognize  it in our  financial  statements.  Since the
intangible assets comprise 88% and 94% of out total assets as of December 31 and
June 30, 2002, respectively,  a write-down of these intangible assets could have
a  material  adverse  impact on our total  assets,  net  worth  and  results  of
operations.

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

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

ITEM 3.  CONTROLS AND PROCEDURES

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

                                       19

<PAGE>

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

                                     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.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

         On December 6, 2002,  the Company  authorized  the  issuance of 100,000
common shares,  valued at $0.115 (the fair market value of our shares as of that
date) at an aggregate  value of $11,500,  to Aperion  Audio Inc. in exchange for
extending the term of its note payments.

         On December 24, 2002,  the Company  authorized  the issuance of 206,000
common  shares,  valued at $0.11 (the fair market value of our shares as of that
date) at an aggregate  value of $22,660,  to TI, Inc. in exchange for taking the
assignment of a note payable to a third party for $206,000.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         Not applicable.

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

        On December 30, 2002 the Company's annual stockholders  meeting was held
in  Boston,  MA.  There were two  matters  voted upon and each was passed by the
stockholder vote. The matters, along with the results of the voting for each are
as follows:

                 MATTER               VOTES FOR     VOTES AGAINST    ABSTENTIONS
--------------------------------------------------------------------------------
Change the name of the Company
to Kronos Advanced Technologies,
Inc.                                  42,411,330               0       2,846
Board of Directors for a 1 year
term:
  Daniel Dwight                       25,880,480      16,527,896       5,800
  Erik Black                          42,402,776           5,600       5,800
  James McDermott                     23,207,324      19,201,052       5,800
  Richard Papworth                    42,405,976           2,400       5,800
  Richard Tusing                      42,405,976           2,400       5,800

        There are no other  directors  whose term of office  continued after the
meeting.

ITEM 5.  EXHIBITS
<TABLE>
<CAPTION>

EXHIBIT NO.     DESCRIPTION                                  LOCATION
-------------------------------------------------------------------------------------------------
<S>             <C>                                          <C>
2.1             Articles of Merger for Technology            Incorporated by reference to
                Selection, Inc. with the Nevada              Exhibit 2.1 to the Registrant's
</TABLE>
                                       20

<PAGE>

<TABLE>
<CAPTION>

EXHIBIT NO.     DESCRIPTION                                  LOCATION
-------------------------------------------------------------------------------------------------
<S>             <C>                                          <C>
                Secretary of State                           Registration Statement on Form
                                                             S-1 filed on August 7, 2001 (the
                                                             "Registration Statement")

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

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

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

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

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

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

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

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

10.6            Acquisition Agreement, dated March 13,       Incorporated by reference to
                2000, by and among TSET, Inc., High          Exhibit 10.6 to the Registration
                Voltage Integrated, LLC, Ingrid              Statement on Form S-1 filed on
                Fuhriman, Igor Krichtafovitch, Robert        August 7, 2001
</TABLE>
                                       21

<PAGE>

<TABLE>
<CAPTION>

EXHIBIT NO.     DESCRIPTION                                  LOCATION
-------------------------------------------------------------------------------------------------
<S>             <C>                                          <C>
                L. Fuhriman and Alan Thompson

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

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

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

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

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

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

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

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

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

10.16           Preferred Stock Purchase Agreement,          Incorporated by reference to
                dated September 12, 2000, by and             Exhibit 10.16 to the
                between EdgeAudio.com, Inc. and Bryan        Registration Statement on Form
                Holbrook                                     S-1 filed on August 7, 2001
</TABLE>
                                       22

<PAGE>

<TABLE>
<CAPTION>

EXHIBIT NO.     DESCRIPTION                                  LOCATION
-------------------------------------------------------------------------------------------------
<S>             <C>                                          <C>
10.17           Shareholders Agreement, dated September      Incorporated by reference to
                12, 2000, by and among TSET, Inc.,           Exhibit 10.17 to the
                Bryan Holbrook and EdgeAudio.com, Inc.       Registration Statement on Form
                                                             S-1 filed on August 7, 2001

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

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

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

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

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

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

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

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

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

10.27           Stock Option Agreement, dated April 9,       Incorporated by reference to
                2001, by and between TSET, Inc. and          Exhibit 10.27 to the
</TABLE>
                                       23

<PAGE>

<TABLE>
<CAPTION>

EXHIBIT NO.     DESCRIPTION                                  LOCATION
-------------------------------------------------------------------------------------------------
<S>             <C>                                          <C>
                Charles D. Strang                            Registration Statement on Form
                                                             S-1 filed on August 7, 2001

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

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

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

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

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

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

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

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

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

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

10.38           Indemnification Agreement, dated May 1,      Incorporated by reference to
                2001, by and between TSET, Inc. and          Exhibit 10.38 to the
                Daniel R. Dwight                             Registration Statement on Form
                                                             S-1 filed on August 7, 2001
</TABLE>
                                       24

<PAGE>

<TABLE>
<CAPTION>

EXHIBIT NO.     DESCRIPTION                                  LOCATION
-------------------------------------------------------------------------------------------------
<S>             <C>                                          <C>
10.39           Indemnification Agreement, dated May 1,      Incorporated by reference to
                2001, by and between TSET, Inc. and          Exhibit 10.39 to the
                Richard F. Tusing                            Registration Statement on Form
                                                             S-1 filed on August 7, 2001

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

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

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

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

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

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

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

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

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

10.49           Warrant Agreement, dated July 16, 2001,      Incorporated by reference to
                by and between TSET, Inc. and The Eagle      Exhibit 10.49 to the
                Rock Group, LLC                              Registration Statement on Form
                                                             S-1 filed on August 7, 2001
</TABLE>
                                       25

<PAGE>

<TABLE>
<CAPTION>

EXHIBIT NO.     DESCRIPTION                                  LOCATION
-------------------------------------------------------------------------------------------------
<S>             <C>                                          <C>
10.50           Agreement and Release, dated October         Incorporated by reference to
                10, 2001, by and between TSET, Inc. and      Exhibit 10.50 to the
                Jeffrey D. Wilson                            Registrant's Form 10-K for the
                                                             year ended June 30, 2001 filed
                                                             on October 15, 2001

10.51           Promissory Note dated October 10, 2001       Incorporated by reference to
                payable to Mr. Jeffrey D. Wilson             Exhibit 10.51 to the

                                                             Registrant's Form 10-K for
                                                             the year ended June 30, 2001
                                                             filed on October 15, 2001

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

10.53           Consulting Agreement effective               Incorporated by reference to
                October 1, 2001, by and among TSET,          Exhibit 10.53 to the Registrant's
                Inc., Steven G. Martin and Joshua            Form 10-Q for the quarterly
                B. Scheinfeld                                period ended December 31, 2001
                                                             filed on November 19, 2001

10.54           Letter Agreement dated November 13,          Incorporated by reference to
                2001 by and between TSET, Inc. and           Exhibit 10.54 to the Registrant's
                Fusion Capital Fund II, LLC                  Form 10-Q for the quarterly
                                                             period ended December 31, 2001
                                                             filed on November 19, 2001

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

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

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

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

10.59           Termination Agreement, dated                 Incorporated by reference to Exhibit
                August 12, 2002 by and between TSET,         10.59 to the Registrant's Amendment
                Inc. and Fusion Capital Fund II, LLC         No. 1 to Form S-1 filed on
                                                             September 16, 2002
</TABLE>
                                       26

<PAGE>

<TABLE>
<CAPTION>

EXHIBIT NO.     DESCRIPTION                                  LOCATION
-------------------------------------------------------------------------------------------------
<S>             <C>                                          <C>
11.1            Statement re:  Computation of Earnings       Not applicable

12.1            Statement re:  Computation of Ratios         Not applicable

15.1            Letter re:  Unaudited Interim Financial      Not applicable
                Information

18.1            Letter re: Change in Accounting              Not applicable
                Principals

24.1            Power of Attorney                            Not applicable

27.1            Financial Data Schedule                      Not applicable
</TABLE>
                                       27

<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:   FEBRUARY 7, 2003                  KRONOS ADVANCED TECHNOLOGEIS, INC.

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


                                           By: /S/ RICHARD A. PAPWORTH
                                              ------------------------
                                           Richard A. Papworth
                                           Chief Financial Officer







                                       28
<PAGE>


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

         In   connection   with  the   Quarterly   Report  of  Kronos   Advanced
Technologies, Inc. (the "Company") on Form 10-QSB for the quarter ended December
31, 2002 as filed with the Securities and Exchange Commission on the date hereof
(the  "Report"),  each of the  undersigned,  in the  capacities and on the dates
indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted
pursuant  to  Section  906  of  the  Sarbanes-Oxley  Act of  2002,  that  to his
knowledge:

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

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




/S/ DANIEL R. DWIGHT
---------------------
Daniel R. Dwight
President and Chief Executive Officer



/S/ RICHARD A. PAPWORTH
-----------------------
Richard A. Papworth
Chief Financial Officer







                                       29
<PAGE>


                                  CERTIFICATION
                             PURSUANT TO SECTION 302

         I, Daniel R. Dwight, certify that:

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

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

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

         4. The registrant's other certifying officers and I are responsible for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules l3a-14 and 15d-14) for the registrant and we have:

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

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

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

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

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

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

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

Date:    February 7, 2003                     By: /S/ DANIEL R. DWIGHT
                                                 ----------------------
                                              Daniel R. Dwight
                                              Chief  Executive Officer



                                       30

<PAGE>


                                  CERTIFICATION
                             PURSUANT TO SECTION 302

         I, Richard A. Papworth, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date:    February 7, 2003                  By: /S/ RICHARD A. PAPWORTH
                                              -----------------------------
                                           Richard A. Papworth
                                           Chief Financial Officer and
                                           Principal Accounting Officer







                                       31
<PAGE>