UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549

                                    FORM 10-Q
<TABLE>
<CAPTION>
 <S>       <C>
 Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

                For the quarterly period ended DECEMBER 31, 2001

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


             For the transition period from __________ to __________

                          Commission File No. 000-30191

                                   TSET, INC.
                                   ----------
             (Exact name of registrant as specified in its charter)

                   NEVADA                                                           87-0440410
                   ------                                                           ----------
(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.

                              /X/  Yes                          / /  No

      As of February 8, 2001, there were 37,602,284 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, 2001.










                                       2
<PAGE>

                           TSET, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                                                 December 31,        June 30,
                                                     2001             2001
                                                --------------     -------------
ASSETS

CURRENT ASSETS
     Cash                                            $ 66,042         $ 32,619
     Accounts receivable, net                              -
     Prepaids and other current assets                140,594           37,679
                                                --------------     -------------
          TOTAL CURRENT ASSETS                        206,636           70,298
                                                --------------     -------------
 PROPERTY AND EQUIPMENT                                62,723           62,723
     Less: Accumulated Depreciation                   (25,681)         (18,016)
                                                --------------     -------------
          NET PROPERTY AND EQUIPMENT                   37,042           44,707
                                                --------------     -------------
 OTHER ASSETS
     Intangibles                                    2,347,053        2,431,524
     Deferred financing fees                          588,281          520,800
                                                --------------     -------------
          TOTAL OTHER ASSETS                        2,935,334        2,952,324
                                                --------------     -------------
 TOTAL ASSETS                                     $ 3,179,012      $ 3,067,329
                                                ==============     =============

 LIABILITIES AND SHAREHOLDERS' EQUITY

 CURRENT LIABILITIES
      Accounts payable                            $ 1,225,835        $ 323,045
      Accrued expenses                                821,836        1,284,268
      Notes payable, current portion                  427,114          313,900
                                                --------------     -------------
          TOTAL CURRENT LIABILITIES                 2,474,785        1,921,213
                                                --------------     -------------
 LONG TERM LIABILITIES
      Notes payable                                   270,000                -
                                                --------------     -------------
          TOTAL LONG TERM LIABILITIES                 270,000                -
                                                --------------     -------------
                                                --------------     -------------
 Net liabilities of discontinued operations           741,426          667,550
                                                --------------     -------------

                                                --------------     -------------
          TOTAL LIABILITIES                         3,486,211        2,588,763
                                                --------------     -------------
 REDEEMABLE WARRANTS                                  686,000                -

 SHAREHOLDERS' EQUITY
      Common stock, authorized 500,000,000             36,427           34,001
          shares of $.001 par value
      Capital in excess of par value               13,225,392       12,418,350
      Deferred equity compensation                          -
      Retained earnings (Accumulated deficit)     (14,255,018)     (11,973,785)
                                                --------------     -------------
          TOTAL SHAREHOLDERS' EQUITY                 (993,199)         478,566
                                                --------------     -------------
 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY       $ 3,179,012      $ 3,067,329
                                                ==============     =============

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


                                       3
<PAGE>

<TABLE>
<CAPTION>
                                                                                TSET. INC. AND SUBSIDIARIES
                                                                                      INCOME STATEMENT

                                                  FOR THE THREE MONTHS ENDED DECEMBER 31,   FOR THE SIX MONTHS ENDED DECEMBER 31,
                                                -----------------------------------------  ---------------------------------------
                                                            2001                2000                2001                 2000
                                                      (UNAUDITED)         (UNAUDITED)         (UNAUDITED)          (UNAUDITED)
                                                      -------------       -------------       -------------       --------------
<S>                                                    <C>                 <C>                 <C>                  <C>
 Sales                                                 $     40,056        $          -        $     65,070         $          -

 Cost of sales                                               40,056                   -              50,070                    -
                                                       ------------        ------------        ------------         ------------

 Gross Margin                                                     -                   -              15,000                    -
                                                       ------------        ------------        ------------         ------------
 Selling, General and Administrative expenses:
      Compensation and benefits                              83,636             378,814             259,854              667,946
      Research and development                               48,643              59,300             138,834              111,867
      Professional services                                 880,559             267,584           1,525,376              287,082
      Depreciation and amortization                          71,674              76,677             143,347              153,354
      Other selling general & administrative expenses       128,433             161,468             195,145              256,720
                                                       ------------        ------------        ------------         ------------

 Total Selling, General and Administrative expenses       1,212,945             943,843           2,262,556            1,476,969
                                                       ------------        ------------        ------------         ------------

 Net Operating Income (Loss)                             (1,212,945)           (943,843)         (2,247,556)          (1,476,969)

 Other Income / (expense)                                     1,217               4,541               1,486                4,541

 Interest Expense                                           (16,871)                  -             (35,163)                   -

 Minority Interests                                               -                                       -
                                                       ------------        ------------        ------------         ------------

 Net Income (Loss) Before Taxes                        $ (1,228,599)       $   (939,302)       $ (2,281,233)        $ (1,472,428)

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

 Net Income (Loss) from continuing operations            (1,228,599)           (939,302)         (2,281,233)          (1,472,428)
 Income (Loss) from discontinued operations, net of               -            (430,139)                  -             (790,495)
   income tax of $0
 Loss on disposal of discontinued operations, net of              -                   -                   -                    -
   income tax of $0

 Net Income (Loss)                                     $ (1,228,599)       $ (1,369,441)       $ (2,281,233)        $ (2,262,923)
                                                       =============       =============       =============        =============

 Basic Earnings (Loss) Per Share

      Income (loss) from continuing operations                (0.03)              (0.03)              (0.07)               (0.05)
      Loss from discontinued operations                           -               (0.01)                  -                (0.03)
                                                       ------------        ------------        ------------         ------------

      Net Income (loss)                                $      (0.03)       $      (0.04)       $      (0.07)        $      (0.08)
                                                       =============       =============       =============        =============

 Diluted Earnings (Loss) Per Share
      Income (loss) from continuing operations                (0.03)              (0.03)              (0.07)               (0.05)
      Loss from discontinued operations                           -               (0.01)                  -                (0.03)
                                                       ------------        ------------        ------------         ------------

      Net Income (loss)                                $      (0.03)       $      (0.04)       $      (0.07)        $      (0.08)
                                                       =============       =============       =============        =============

      The accompanying notes are an integral part of these financial statements.
</TABLE>


                                       4
<PAGE>

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

                                                                       For the six months ended December 31,
                                                                  ----------------------------------------------
                                                                         2001                         2000
                                                                      (Unaudited)                  (Unaudited)
                                                                  -----------------             ----------------
<S>                                                               <C>                           <C>
CASH FLOWS FROM OPERATING ACTIVITIES
     Net loss from continuing operations                          $    (2,281,233)              $   (1,472,428)
     Adjustments to reconcile net loss to net cash
        (used in) provided by operations:
        Depreciation and amortization                                     143,347                      153,354
        Common stock issued for compensation/services                     788,361                        6,560
     Change In:
        Accounts receivable                                                     -                        6,000
        Prepaid expenses and other assets                                (170,396)                        (489)
        Accounts payable                                                  902,790                      227,943
        Accrued expenses and other liabilities                           (112,432)                      57,144
                                                                  -----------------             ----------------
           Net cash (used in) provided by continuing operations          (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                                          707,107                    1,344,340
        Proceeds from short-term borrowings                                33,214                            -
        Repayments of short-term borrowings                                     -                            -
                                                                  -----------------             ----------------
           Net cash (used in) provided by financing Activities            740,321                    1,344,340
                                                                  -----------------             ----------------
NET (DECREASE) INCREASE IN CASH                                            33,423                     (102,949)

CASH
     Beginning of period                                                   32,619                      102,949
                                                                  -----------------             ----------------
     End of period                                                $        66,042               $            -
                                                                  =================             ================

Supplemental schedule of non-cash investing and financing activities:

     Debt satisfied with stock                                    $       100,000                $     419,143
     Note payable issued in satisfaction of accrued liabilities   $       350,000
</TABLE>

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


                                       5

<PAGE>
<TABLE>
<CAPTION>
                           TSET, INC. AND SUBSIDIARIES
                  STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY


                                                                                                     Retained
                                                                Common Stock         Capital in      Earnings        Total
                                                            --------------------    Excess of Par  (Accumulated    Shareholders'
                                                              Shares      Amount        Value        Deficit)     Equity (Deficit)
                                                            ----------------------------------------------------------------------
<S>                                                         <C>           <C>       <C>           <C>              <C>
 BALANCE at June 30, 2001                                   34,000,978    $ 34,001  $ 12,418,350  $ (11,973,785)       $ 478,566
   Shares issued on July 6, 2001 for cash                      238,806         239        79,761                          80,000
   Shares issued on July 20, 2001 as compensation                  250           -           113                             113
   Shares issued on October 1, 2001 for consulting services    360,000         360       100,440                         100,800
   Shares issued on October 1, 2001 as compensation              2,250           2         1,446                           1,448
   Shares issued on October 1, 2001 for cash                 1,000,000       1,000       446,982                         447,982
   Shares issued on November 30, 2001 for cash                 100,000         100        23,400                          23,500
   Shares issued on December 10, 2001 for cash                  50,000          50        10,950                          11,000
   Shares issued on December 12, 2001 for cash                 100,000         100        20,900                          21,000
   Shares issued on December 13, 2001 for cash                  75,000          75        16,050                          16,125
   Shares issued on December 14, 2001 for cash                 500,000         500       107,000                         107,500
   Net loss for the period ended December 31, 2001                                                  (2,281,233)       (2,281,233)
                                                             --------------------------------------------------------------------
 BALANCE at December 31, 2001                               36,427,284    $ 36,427  $ 13,225,392  $ (14,255,018)      $ (993,199)
                                                            =====================================================================
</TABLE>






 The accompanying notes are an integral part of this financial statement.


                                       6
<PAGE>


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


NOTE 1 - ACCOUNTING MATTERS

      The  accompanying  unaudited  financial  statements  have been prepared in
accordance with generally accepted  accounting  principles for interim financial
information.  Accordingly,  they do not  include all the  information  and notes
required by generally  accepted  accounting  principles  for complete  financial
statements.  In the opinion of management,  all adjustments necessary to present
fairly the information set forth therein have been included.  Operating  results
for the  three-month  and  six-month  periods  ended  December  31, 2001 are not
necessarily  indicative  of the results that may be  experienced  for the fiscal
year ending June 30, 2002.

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

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

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

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

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

      In June 2001, the Financial Accounting Standards Board issued Statement of
Financial  Accounting Standard (SFAS) No. 143,  "Accounting for Asset Retirement
Obligations."  This statement  addresses the financial  accounting and reporting
for the  retirement  of  tangible  long-lived  assets and the  associated  asset
retirement  costs.  The Company  believes  the adoption of SFAS 143 will have no
significant impact on its financial statements.

      In August 2001, the Financial  Accounting Standards Board issued Statement
of Financial  Accounting Standard (SFAS) No. 144, "Accounting for the Impairment
or Disposal of  Long-Lived  Assets."  This  statement  addresses  the  financial
accounting  and reporting for the  impairment or disposal of long-lived  assets.
The Company believes the adoption of SFAS 144 will have no significant impact on
its financial statements.


                                       7
<PAGE>


NOTE 2 -- INCOME TAXES

      The  composition  of  deferred  tax assets and the  related tax effects at
December 31 and June 30, 2001 are as follows:

                                           December 31, 2001    June 30, 2001
                                           -----------------    -------------
Benefit from carryforward of net
  operating losses                         $      2,710,439     $   2,225,520
Other temporary differences                       1,008,189         1,008,189
Less:
  Valuation allowance                            (3,718,628)       (3,233,709)
                                             ---------------    --------------
  Net deferred tax asset                   $              -     $           -
                                           =================    ==============

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

<TABLE>
                                       December 31, 2001            June 30, 2001
                                  ------------------------------------------------------
                                                % of pre-tax              % of pre-tax
                                     Amount         Loss       Amount        Loss
                                  ------------------------------------------------------
<S>                                 <C>              <C>      <C>              <C>
Benefit for income tax at
  federal statutory rate            $  775,619         34.0%  $ 3,374,793        34.0%
Non-deductible expenses              (290,700)       (12.7)%    (357,007)       (3.6)%
Disposed subsidiary NOL                      -            -     (578,370)       (5.2)%
Increase in valuation allowance      (484,920)       (21.3)%  (2,439,416)      (24.6)%
                                  ------------------------------------------------------
                                    $       -           0.0%  $        -          0.0%
                                  ======================================================
</TABLE>

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

      At December 31, 2001, for federal income tax and  alternative  minimum tax
reporting  purposes,  the Company has  approximately  $7.2 million of unused net
operating  losses  available for  carryforward to future years. The benefit from
carryforward  of such net operating  losses will expire in various years between
2011 and 2023 and could be  subject  to  limitations  if  significant  ownership
changes occur in the Company. Of the $7.2 million of unused net operating losses
noted above,  approximately $153,000 relates to losses incurred by the Company's
subsidiary, EdgeAudio. In fiscal years prior to June 30, 2000, EdgeAudio did not
file its tax returns on a consolidated basis with the Company.  Accordingly, the
$153,000 loss incurred by EdgeAudio is further  subject to separate  limitations
that restrict the ability of the Company to use such losses.


NOTE 3 - SEGMENTS OF BUSINESS

      The Company  operates  principally in one segment of business:  The Kronos
segment  licenses,  manufactures  and distributes air movement and  purification
devices  utilizing  the  Kronos(TM)  technology.  All other  segments  have been
disposed of or  discontinued.  In the six months ended  December  31, 2001,  the
Company operated only in the U.S.


NOTE 4 - EARNINGS PER SHARE

      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

      In early January 2001,  management committed to a formal plan of action to
sell or otherwise  dispose of Atomic Soccer.  Agreement was reached with a buyer
group, that included current and former Atomic Soccer  management,  to sell them
the  outstanding  shares  of common  stock of  Atomic  Soccer  for  $1,000.  The
transaction  was  effective on April 11, 2001.  On September  14, 2001 the board


                                       8
<PAGE>


approved a formal plan of action to sell or otherwise  dispose of Aperion  Audio
(formerly EdgeAudio). The Company has accrued $150,000 for anticipated operating
loses during the phase-out period.  As a result,  both Atomic Soccer and Aperion
are included in the financial statements as discontinued operations.

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

                   Net Liabilities of Discontinued Operations

                                             Aperion Audio
                                             -------------
              Current Assets                  $   422,541
              Net Property and Equipment           46,268
              Current Liabilities               (682,893)
              Minority Interest                 (527,342)
                                              -----------
              Net Assets (Liabilities)        $ (741,426)
                                              ===========

                  Operating Resulting of Discontinued Operations:

                                   For the six months ended December 31,

                                 2001                     2000
                               ---------  -------------------------------------
                               Aperion      Atomic      Aperion       Total
                               ---------  ----------   ----------   -----------

     Sales                    $  410,512  $  466,565   $  368,225   $   834,790
     Cost of Sales             (143,816)   (295,177)    (191,222)     (486,399)
     Depn and Amort              (6,618)   (143,598)    (129,868)     (273,466)
     General and Admin         (356,892)   (266,397)    (645,628)     (912,025)
                               ---------  ----------   ----------   -----------
     Operating Income (Loss)    (96,813)   (238,607)    (598,423)     (837,100)
     Other Income                 21,360         735            -           735
     Interest Expense           (16,247)    (42,357)      (6,873)      (49,230)
     Provision for Future
       Operating Losses           73,361           -            -             -
     Minority Interest            18,340           -       95,100        95,100
                               ---------  ----------   ----------   -----------
     Income (Loss) Pre-Tax             0   (280,229)    (510,266)     (790,495)
     Income Taxes                      -           -            -             -
     Loss From Discontinued
       Operations             $        0  $(280,229)   $(510,266)    $(790,495)
                               =========  ==========   ==========   ===========


NOTE 6 - NOTES PAYABLE

      On October 15, 2001, the Company entered into an agreement with Jeffrey D.
Wilson pursuant to which the Company issued a promissory  note for  compensation
which was accrued but not paid to him during the time he served as an  executive
officer of the  Company.  The amount of the note is $350,000 and is disclosed in
the financial statements as follows:

                  Notes payable, current portion      $  80,000
                  Notes payable                         270,000
                                                      ---------
                  Total note payable                   $350,000
                                                      =========


                                       9
<PAGE>

NOTE 7 - ISSUANCE OF WARRANTS

      On July 9, 2001,  the Company signed an agreement to utilize the strategic
planning and business plan execution  services of The Eagle Rock Group, LLC. The
Eagle  Rock  Group  will work with the  Kronos  Air  Technologies  team to fully
develop and capitalize the KronosTM technology.

      Pursuant to the agreement  that we entered into with The Eagle Rock Group,
we issued to The Eagle Rock Group a ten-year  warrant granting them the right to
purchase  1,400,000 shares of our common stock at an exercise price of $0.68 per
share.  The  warrant  was  valued at  $686,000  using the  Black-Scholes  option
valuation mode and was initially  recorded as deferred  equity  compensation  to
amortized  into  current  period  professional  services  expense  at a rate  of
$137,200  per  month  over 5  months.  Amortization  for  the  three-months  and
six-months ended December 31, 2001 was $274,400 and $411,600,  respectively. The
shares underlying the warrant have piggy-back and demand registration rights, as
well as subscription  rights in the event that we issue any rights to all of our
stockholders  to subscribe  for shares of our common  stock.  In  addition,  the
warrant contains redemption rights in the event that we enter into a transaction
that results in a change of control of our company.


NOTE 8 - SUBSEQUENT EVENTS

     On January 11, 2002,  Aperion Audio,  Inc. (f/k/a  EdgeAudio.com,  Inc.), a
company to which TSET owns common  shares,  initiated  arbitration  in a dispute
over the  Agreement  and Plan of  Reorganization  between the  parties.  Aperion
Audio, Inc. requests damages of $213,900 plus consequential  damages.  Discovery
is ongoing.






                                       10
<PAGE>

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


      INTRODUCTORY STATEMENTS


      FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS

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

      GENERAL

     Historically,  we had been seeking select business  opportunities  globally
among a wide  range of  prospects.  Over the past  two  years,  we made  several
investments,  including Kronos Air Technologies,  Inc. and  EdgeAudio.com,  Inc.
After further evaluation of these investments,  we believe our investment in and
the full  development  of Kronos Air  Technologies  and the KronosTM  technology
represents the single best opportunity for us. As a result,  we have prioritized
our management and financial  resources to fully  capitalize on this  investment
opportunity.  Effective October 10, 2001, Jeffrey D. Wilson resigned as Chairman
of the Board and Chief Executive Officer of the Company,  as well as Chairman of
the Board of Kronos Air  Technologies  and  EdgeAudio,  respectively.  Effective
December 31, 2001,  Erik W. Black  resigned as Executive  Vice-President  of the
Company. Messrs. Wilson and Black remain as directors of the Company.  Effective
November 15, 2001, Daniel R. Dwight was appointed  President and Chief Executive
Officer of Kronos.  A more detailed  explanation of Kronos Air  Technologies and
the  current  status  of  EdgeAudio  and the  other  investments  made by us are
discussed below.

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

      Based on our decision to focus our  resources on Kronos Air  Technologies,
several actions were taken, most of which impacted the results of operations. On
April  11,  2001,  we  sold  Atomic  Soccer.  The  sale  resulted  in a loss  of
$2,297,000.  During our fourth quarter of 2001, we determined that the assets of
EdgeAudio were impaired and we recognized an impairment  loss of $2,294,000.  On
September 14, 2001, the board authorized  management to pursue a formal plan for
disposal of EdgeAudio. The anticipated loss from operations during the phase-out
period is $150,000. We do not anticipate a loss on the sale of EdgeAudio.  Based
upon our decision to discontinue  development of Cancer Detection  International
and, we have recognized an impairment loss of the remaining goodwill of $273,000
associated with that investment.

     On January 18, 2002,  we began  trading  shares of our common stock under a
new ticker symbol  (KNOS).  At the same time, we announced that our Company will
be doing  business  under  the name of Kronos  Advanced  Technologies,  Inc.  We
anticipate  asking our  shareholders to vote for the approval of an amendment to
our  Articles  of  Incorporation  for a name  change  of our  Company  to Kronos
Advanced Technologies at our annual meeting in 2002.

      Kronos   Air    Technologies   is   focused   on   the   development   and
commercialization  of an air  movement  and  purification  technology  known  as
KronosTM that is more fully described  below. The KronosTM  technology  operates
through the  application of  high-voltage  management  across paired  electrical
grids that creates an ion exchange  which move air and gases at high  velocities
while removing odors,  smoke, and  particulates,  as well as killing  pathogens,
including  bacteria.  We believe the  technology is  cost-effective  and is more


                                       11
<PAGE>


energy-efficient than current alternative fan and filter technologies.  KronosTM
has multiple U.S. and international patents pending.

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

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

      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 KronosTM  technology.  Since May 2001, the total potential value of
Small  Business  Innovation  Research  (SBIR)  contracts  awarded  to Kronos Air
Technologies  has been $1.7 million.  In December 2001,  Kronos Air Technologies
was  awarded an SBIR  contract  sponsored  by the U.S.  Army.  This  contract is
potentially worth up to $850,000 in product  development and testing support for
Kronos Air  Technologies.  Phase One of the  contract is worth up to $120,000 in
funding to investigate and analyze the feasibility of the KronosTM technology to
reduce  humidity in heating,  ventilation and air  conditioning  (HVAC) systems.
Dehumidification  is essential  to making HVAC  systems  more energy  efficient.
Phase Two of the  contract  is worth up to $730,000  in  additional  funding for
product development and testing.

      In May 2001,  Kronos Air  Technologies was awarded its first SBIR contract
sponsored by the U.S.  Navy.  That  contract is  potentially  worth  $837,000 in
product  development  and testing  support.  The first phase of the  contract is
worth up to $87,000 in funding for  manufacturing  and testing prototype devices
for air movement and ventilation onboard naval vessels.  The second phase of the
contract is worth up to $750,000 in additional  funding. In January 2002, Kronos
Air  Technologies  received a Phase II  invitation  letter for this grant with a
potential  $750,000  commitment.  The KronosTM devices  manufactured  under this
contract  will  be  embedded  in an  existing  HVAC  systems  to move  air  more
efficiently than the traditional, fan based technology.


      RESULTS OF OPERATIONS

      The Company's  net loss from  continuing  operations  for the current year
second  quarter and six months was $1.2 million and $2.3 million,  respectively,
compared with a net loss of $0.9 million and $1.5 million for the  corresponding
periods  of the  prior  year.  The  increase  in the net loss was the  result of
increased  professional  fees and  consulting  services  offset by a decrease in
salaries and other general and administrative expenses.

      REVENUE.  Revenues  are  generated  through  sales of KronosTM  devices at
Kronos Air  Technologies,  Inc.  Revenue for the current year second quarter was
$40,000 and for the current year six months was $65,000. No revenue was recorded
during  the  corresponding  periods  of the  prior  year.  These  revenues  were
primarily from our U.S. Navy Small Business Innovative Research contract.

     COST OF SALES.  Cost of sales  for the  current  year  second  quarter  was
$40,000 and $50,000 for the current year six months, respectively. Cost of sales
is primarily  research and development costs associated with our U.S. Navy Small
Business Innovative Research contract.

      SELLING,  GENERAL  AND  ADMINISTRATIVE  EXPENSES.   Selling,  General  and
Administrative  expenses  in the  current  year  second  quarter  and six months
increased $269,000 and $786,000, respectively, to $1.2 million and $2.3 million.
The increase in the current year second  quarter was  primarily  due to non-cash
stock   warrants  to  the  Eagle  Rock  Group  of   $411,600,   non-cash   stock
options/grants  of  $25,000  and  cash-based  fees  paid/accrued  to  management
consultants,  legal and  accounting  professionals  engaged  by the  company  of
$176,000.  This was partially offset by a reduction in payroll and related costs
of $291,000.  The increase for the current year six months was  primarily due to
non-cash  stock  warrants to the Eagle Rock Group of  $686,000,  non-cash  stock
options/grants  of  $56,000  and  cash-based  fees  paid/accrued  to  management
consultants,  legal and  accounting  professionals  engaged  by the  company  of
$496,000.  This was partially offset by a reduction in payroll and related costs
of $418,000 and a reduction in travel related costs of $63,000.


                                       12
<PAGE>

      CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2001

      Our total assets at December 31, 2001 were $3.2 million compared with $3.1
million at June 30, 2001, an increase of $100,000.  Total assets at December 31,
2001 were comprised primarily of $2.4 million of  patents/intellectual  property
and  $588,000 of deferred  financing  fees.  Total  assets at June 30, 2001 were
comprised  primarily  of  $2.4  million  of  patents/intellectual  property  and
$520,800 of deferred  financing fees.  Total current assets at December 31, 2001
and June 30, 2001 were $206,000 and $70,000,  respectively,  while total current
liabilities  for  those  same  periods  were  $2.5  million  and  $1.9  million,
respectively,  creating  a working  capital  deficit  of $2.3  million  and $1.9
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, 2001 and June 30,
2001 was $(993,000) and $479,000, respectively,  representing a decrease of $1.4
million.  The  decrease  in  shareholders'  equity is  primarily  the  result of
incurring a $2.3  million  loss from  continuing  operations  for the six months
ended  December  31,  2001,  partially  offset  through the sale and issuance of
$809,000 of common stock.


      LIQUIDITY AND CAPITAL RESOURCES

     Historically  we have  relied  principally  on the sale of common  stock to
finance our operations.  Going forward, in addition to continued sales of common
stock, we plan to rely on the proceeds from Small Business  Innovation  Research
(SBIR)  contracts  with  the U.S.  Navy  and  Army as well as  other  government
contracts and grants, and cash flow generated from the sale of KronosTM devices.
We have also entered into a common stock purchase  agreement with Fusion Capital
under  which we have the  right,  subject to  certain  conditions,  to draw down
approximately  $12,500 per day from the sale of common stock to Fusion  Capital.
The  SBIR  contracts  are  potentially  worth  up to  $1.7  million  in  product
development and testing support for Kronos Air Technologies.  The first phase of
the  contracts  is worth up to  $207,000  in  funding.  If awarded to Kronos Air
Technologies,  the  second  phase  of the  contracts  would  be worth up to $1.5
million in additional funding. In January 2002, Kronos Air Technologies received
a  Phase  II  invitation  letter  for  this  grant  with  a  potential  $750,000
commitment.

      Net cash  flow  used on  operating  activities  was $1.1  million  for the
current year six months.  We were able to satisfy some of our cash  requirements
for this period through the issuance and sale of our common stock.

      On June 19, 2001, we entered into a common stock  purchase  agreement with
Fusion Capital. Pursuant to the common stock purchase agreement,  Fusion Capital
has agreed to  purchase on each  trading  day during the term of the  agreement,
$12,500 of our common stock or an aggregate of $10.0 million.  The $10.0 million
of our common  stock is to be  purchased  over a 40-month  period,  subject to a
six-month extension or earlier termination at our sole discretion and subject to
certain  events.  The purchase price of the shares of common stock will be equal
to a price based upon the future  market price of our common  stock  without any
fixed  discount to the  then-current  market  price.  On November 13, 2001,  the
common stock purchase  agreement was amended to establish a floor price.  Fusion
Capital is obligated to purchase shares under the agreement as long as the share
price  exceeds  a floor of $0.25.  We plan to draw down as much as $3.0  million
annually from Fusion Capital which  management  believes should more than offset
our operating cash flow deficits. However, there can be no assurance of how much
cash we will receive,  if any,  under the common stock  purchase  agreement with
Fusion Capital.


      GOING CONCERN OPINION

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

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


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.

                                       13
<PAGE>


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

      We have  only  recently  begun  implementing  our plan to  prioritize  and
concentrate  our management and financial  resources to fully  capitalize on our
investment in Kronos Air  Technologies  and have yet to establish any history of
profitable operations.  We incurred a net operating loss of $2.2 million for the
current year six months. We have incurred net losses from continuing  operations
of $3.6  million and $1.4  million for the fiscal  years ended June 31, 2001 and
2000. We have incurred net losses from continuing operations of $1.2 million for
the three months ended  December 31, 2001.  We have  incurred  annual  operating
losses of $9.9 million, $2.0 million and $52,000  respectively,  during the past
three fiscal years of operation.  As a result, at December 31, 2001 and June 30,
2001  we  had an  accumulated  deficit  of  $14.3  million  and  $12.0  million,
respectively.  Our revenues have not been  sufficient to sustain our operations.
We expect that our revenues will not be sufficient to sustain our operations for
the  foreseeable   future.   Our  profitability   will  require  the  successful
commercialization  of our KronosTM  technology.  No assurances can be given when
this will occur or that we will ever be profitable.

      Our  independent  auditors  have added an  explanatory  paragraph to their
audit opinion issued in connection  with the financial  statements for the years
ended June 30, 2001 and June 30,  2000  relative to our ability to continue as a
going  concern.  Our ability to obtain  additional  funding will  determine  our
ability to continue as a going concern.  Our financial statements do not include
any adjustments that might result from the outcome of this uncertainty.


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

      At December 31, 2001 we had a working capital deficit of $2.3 million.  At
June 30, 2001 we had a working capital deficit of $1.9 million.  The independent
auditor's  report for the years ended June 30, 2001 and June 30, 2000,  includes
an  explanatory  paragraph to their audit  opinion  stating  that our  recurring
losses from operations and working capital  deficiency raise  substantial  doubt
about our ability to continue as a going concern.  We had an operating cash flow
deficit of $11,000 in 1999,  an operating  cash flow deficit of $288,000 in 2000
and an operating  cash flow deficit of $1.6 million in 2001. We do not currently
have  sufficient  financial  resources  to fund our  operations  or those of our
subsidiaries. Therefore, we need additional funds to continue these operations.

      We only have the right to receive $12,500 per trading day under the common
stock  purchase  agreement  unless our stock price equals or exceeds  $3.00,  in
which case the daily amount may be  increased at our option.  Since we initially
registered  5,000,000  shares for sale by Fusion Capital  pursuant to the common
stock  purchase  agreement,  the  selling  price of our  common  stock to Fusion
Capital  will have to  average at least  $2.00 per share for us to  receive  the
maximum proceeds of $10,000,000 without registering  additional shares of common
stock or filing a post-effective  amendment with respect to the number of shares
registered.  On November 13, 2001,  Fusion Capital  established a floor price of
$0.25 under the common stock purchase agreement.  Fusion Capital, therefore, has
no obligation to purchase  shares under the common stock  purchase  agreement if
the price would be less than the floor price. Assuming a purchase price of $0.25
per share  (the  floor  price) and the  purchase  by Fusion  Capital of the full
5,000,000 shares under the common stock purchase agreement, proceeds to us would
only be  $1,250,000  unless we choose to register  more than  5,000,000  shares,
which we have the right,  but not the  obligation,  to do. The extent we rely on
Fusion  Capital  as a source of  funding  will  depend  on a number  of  factors
including,  the  prevailing  market  price of our common stock and the extent to
which we are able to secure working capital from other sources,  such as through
the sale of our KronosTM air movement  and  purification  systems.  If obtaining
sufficient  financing from Fusion Capital were to prove prohibitively  expensive
and if we are unable to  commercialize  and sell the products or technologies of
our  subsidiaries,  we will need to secure another source of funding in order to
satisfy  our  working  capital  needs.  Even if we are able to access  the funds
available  under  the  common  stock  purchase  agreement,  we  may  still  need
additional  capital to fully  implement our business,  operating and development
plans.  Should the financing we require to sustain our working  capital needs be
unavailable  or  prohibitively  expensive  when we require it, the  consequences
would be a material adverse effect on our business, operating results, financial
condition and prospects.


                                       14
<PAGE>

WE HAVE VERY LIMITED SALES AND MARKETING CAPABILITIES FOR OUR KRONOSTM  PRODUCTS
AND OUR  FAILURE  TO  DEVELOP  ANY OF THESE  CAPABILITIES  WOULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR BUSINESS

      We have no experience marketing or distributing  commercial  quantities of
our Kronos Air Technologies' products. Kronos Air Technologies does not have any
relationships  with third parties to market or distribute the KronosTM products.
If Kronos Air Technologies is unable to hire sales and marketing personnel or if
it cannot enter into satisfactory  arrangements with third parties to market and
distribute  the  KronosTM   products  on  commercially   reasonable  terms,  the
consequences  would be a  material  adverse  effect on our  business,  operating
results,  financial  condition and prospects.  There can be no assurance that we
will be able to hire  sales and  marketing  personnel  or be able to enter  into
satisfactory  arrangements  with  third  parties to market  and  distribute  the
KronosTM products.


COMPETITION IN THE MARKET FOR AIR MOVEMENT AND  PURIFICATION  DEVICES MAY RESULT
IN THE FAILURE OF THE KRONOSTM PRODUCTS TO ACHIEVE MARKET ACCEPTANCE

      Kronos Air Technologies  presently faces  competition from other companies
that are  developing  or that  currently  sell  air  movement  and  purification
devices.  Many  of  these  competitors  have  substantially  greater  financial,
research and development,  manufacturing, and sales and marketing resources than
we do. Many of the products sold by Kronos Air Technologies' competitors already
have brand  recognition  and  established  positions in the markets that we have
targeted for penetration.  There can be no assurance that the KronosTM  products
will compete favorably with the products sold by our competitors.


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

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

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

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


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

      We rely  principally  upon the services of our Board of Directors,  senior
executive  management,  and  certain  key  employees,  including  the Kronos Air
Technologies  research  team,  the loss of whose  services could have a material
adverse effect upon our business and prospects.  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 KronosTM 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.


                                       15
<PAGE>

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

      The  purchase  price for the common  stock to be issued to Fusion  Capital
pursuant to the common stock  purchase  agreement  will  fluctuate  based on the
price of our common stock.  All shares  issued to Fusion  Capital will be freely
tradable.  Fusion  Capital  may sell  none,  some or all of the shares of common
stock  purchased  from us at any time.  We expect that the shares sold to Fusion
Capital  will be sold  over a  period  of up to 40  months  from the date of the
common stock purchase agreement.  Depending upon market liquidity at the time, a
sale of shares by Fusion Capital at any given time could cause the trading price
of our common stock to decline.  The sale of a  substantial  number of shares of
our common stock by Fusion Capital, or anticipation of such sales, could make it
more difficult for us to sell equity or equity-related  securities in the future
at a time and at a price that we might otherwise wish to effect sales.


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

      We failed to file federal and state income tax returns for calendar  years
1997 through 2000,  respectively.  We believe that we had  operating  losses for
each year during the period 1997  through  2000,  and that there are no expected
income taxes due and owing for those years.  We anticipate  filing these returns
in 2002.  When filed,  these  returns  could be subject to review and  potential
examination by the respective  taxing  authorities.  Should any of these returns
come under examination by federal or state authorities, our positions on certain
income tax issues  could be  challenged.  The impact,  if any, of the  potential
future  examination  cannot be  determined  at this time.  If our  positions are
successfully challenged, the results may have a material impact on our financial
position and results of operations.







                                       16
<PAGE>


PART II


ITEM 1.     LEGAL PROCEEDINGS

      On February 2, 2001, we initiated legal  proceedings in Clackamas  County,
Oregon against W. Alan Thomson,  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  breach of fiduciary
duties and breach of  contract  by these  individuals,  and seeks,  among  other
things,  relief  of  claims.  Thomson,  Fuhriman  and  Fuhriman  have  filed for
enforcement  of their  respective  employment  agreements  and related  damages.
Pursuant to those  agreements,  the proceedings have been moved into arbitration
in King County,  Washington,  and arbitrators  have been selected.  Discovery is
ongoing.

     On January 11, 2002,  Aperion Audio,  Inc. (f/k/a  EdgeAudio.com,  Inc.), a
company to which Kronos  Advanced  Technologies  owns common  shares,  initiated
arbitration in a dispute over the Agreement and Plan of  Reorganization  between
the parties. Aperion Audio, Inc. requests damages of $213,900 plus consequential
damages. Discovery is ongoing.


ITEM 2.     CHANGES IN SECURITIES AND USE OF PROCEEDS

      On October 1, 2001,  we authorized  the issuance of 360,000  common shares
pursuant to a  consulting  agreement,  valued at $.28 per share (the fair market
value for our shares as of such date),  at an aggregate  value of  $100,800,  to
Fusion Capital LLC, in exchange for consulting services.

      On October 1, 2001, we authorized the issuance of 1,000,000  common shares
pursuant  to a pledge,  valued  at $.448 per  share,  at an  aggregate  value of
$447,982, to Fusion Capital, LLC, in exchange for $447,982 cash.

      On October 1, 2001, we issued 2,250 common shares,  valued $.452 per share
(the fair market value for 1,000 of our shares on April 9, 2001 and 1,250 of our
shares on September 7, 2001), at an aggregate value of $1.447.50, to an employee
of the Company, as compensation.

      From November 30, 2001 through December 14, 2001, we issued 825,000 common
shares,  at an average  value of $0.21712 per share,  at an  aggregate  value of
$179,125, to Fusion Capital, LLC pursuant to the Common Stock Purchase Agreement
between our Company and Fusion Capital, in exchange for $179,125 in cash.


ITEM 3.     DEFAULTS UPON SENIOR SECURITIES

            Not applicable.


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

            None.


ITEM 5.     EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NO.         DESCRIPTION                              LOCATION
---------   ----------------------------------       ---------------------------------
<S>         <C>                                      <C>
   2.1      Articles of Merger for Technology        Incorporated by reference to
            Selection, Inc. with the Nevada          Exhibit 2.1 to the Registrant's
            Secretary of State                       Registration Statement on Form
                                                     S-1 filed on August 7, 2001 (the
                                                     "REGISTRATION STATEMENT")
                                                      ----------------------
   3.1      Articles of Incorporation                Incorporated by reference to
                                                     Exhibit 3.1 to the Registration
                                                     Statement on Form S-1 filed on
                                                     August 7, 2001



                                       17
<PAGE>

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

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

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

   10.1     Employment Agreement, dated April 16,    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
            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

                                       18
<PAGE>
EXHIBIT
NO.         DESCRIPTION                              LOCATION
---------   ----------------------------------       ---------------------------------

   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

   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
            Charles D. Strang                        Registration Statement on Form
                                                     S-1 filed on August 7, 2001

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

   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

   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

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

   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

   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 September 30, 2001
                                                     filed on November 19, 2001

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

   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>


                                       21
<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 14, 2002        TSET, INC.

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


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











                                       22
<PAGE>