TSET,SCHEDULE 14A
                                 (Rule 14a-101)

                     INFORMATION REQUIRED IN PROXY STATEMENT

                            SCHEDULE 14A INFORMATION

                Proxy Statement Pursuant To Section 14(a) of the
                         Securities Exchange Act of 1934

Filed by the Registrant [X]
Filed by a Party other than the Registrant [  ]

Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material under Rule 14a-12
[ ] Confidential, for use of the Commission only (as permitted by
    Rule 14a-6(e)(2)

                       Kronos Advanced Technologies, Inc.
- --------------------------------------------------------------------------------
                  (Name of Registrant as Specified in Charter)


- --------------------------------------------------------------------------------
    (Name of Person(s) Filing Proxy Statement, if Other than the Registrant)

Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on the table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
         (1) Title of each class of securities to which transaction applies:
         (2) Aggregate number of securities to which transaction applies:
         (3) Per unit price or other underlying value of transaction computed
             pursuant to Exchange Act Rule 0-11:
         (4) Proposed maximum aggregate value of transaction:
         (5) Total fee paid:

[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.

         (1) Amount Previously Paid:
         (2) Form, Schedule or Registration Statement No.:
         (3) Filing Party:
         (4) Date Filed:



                       KRONOS ADVANCED TECHNOLOGIES, INC.
                          464 COMMON STREET, SUITECommon Street, Suite 301
                          BELMONT, MASSACHUSETTSBelmont, Massachusetts 02478




Dear Shareholder:

         You are cordially  invitedStockholder:

         On behalf of the Board of Directors, it is my pleasure to attend theinvite you to
Kronos' Annual Meeting of Shareholders
of TSET,  Inc.Stockholders. The annual meeting will be held on Wednesday,
NovemberDecember 20, 2002,2005, at 11:9:00 a.m., local time, at Caesar's  Palace,  3570 Las Vegas Boulevard South,
Las Vegas, Nevada.the offices of Kirkpatrick &
Lockhart Nicholson Graham, 75 State Street, Boston, Massachusetts.

         You will find information regarding the matters to be voted on in the
attached Notice of Annual Meeting of Stockholders and Proxy Statement. A copy of
our Annual Report on Form 10-KSB and Quarterly Report on Form 10-QSB are
enclosed with these materials.

         This meeting is for Kronos stockholders. If you attend the meeting in
person, you will need to present proper photo identification and an account
statement showing your ownership of Kronos stock. If you have any questions
regarding your ownership, you may contact our transfer agent, American Stock
Transfer & Trust Company, at 1.212.936.5100 or www.amstock.com.

         Your vote is important and I urge you to vote your shares by proxy,
whether or not you plan to attend the meeting. After you read this proxy
statement, please indicate on the proxy card the manner in which you want to
have your shares voted. Then date, sign and mail the proxy card in the
postage-paid envelope that is provided. If you sign and return your proxy card
without indicating your choices, it will be understood that you wish to have
your shares voted in accordance with the recommendations of the Company's Board
of Directors.

         We hope to see you at the meeting.

                                                     Sincerely,

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


October ___, 2002November 21, 2005



                       TSET,KRONOS ADVANCED TECHNOLOGIES, INC.
                          464 COMMON STREET, SUITECommon Street, Suite 301
                          BELMONT, MASSACHUSETTSBelmont, Massachusetts 02478


                    NOTICE OF ANNUAL MEETING OF SHAREHOLDERSSTOCKHOLDERS
                          TO BE HELD NOVEMBERDECEMBER 20, 20022005

         NOTICE IS HEREBY GIVEN that the Annual Meeting of ShareholdersStockholders (the
"ANNUAL  MEETING""Annual Meeting") of TSET,Kronos Advanced Technologies, Inc. (the "Company"), will be
held on Wednesday, NovemberDecember 20, 2002,2005, at 11:9:00 a.m., local time, at Caesar's Palace, 3570 Las Vegas
Boulevard South, Las Vegas,  Nevada,the offices
of Kirkpatrick & Lockhart Nicholson Graham, 75 State Street, Boston,
Massachusetts, for the following purposes, as more fully described in the
attached Proxy Statement:

         1.       To elect fivefour directors, each until the next annual meeting of
                  the Company's shareholdersstockholders or until their successors are duly
                  elected and qualified;

         2. To approve an amendment to the Company's  Articles of  Incorporation
to change the name of the Company to "Kronos Advanced Technologies, Inc."; and

         3.       To consider any other matters that may properly come before
                  the Annual Meeting or any adjournment thereof.

         The Board of Directors has fixed the close of business on October 22,
2002,November 17,
2005, as the record date for determining the shareholdersstockholders entitled to notice of
and to vote at the Annual Meeting or at any adjournment thereof. A complete list
of the shareholdersstockholders entitled to vote at the Annual Meeting will be open for
examination by any shareholderstockholder during ordinary business hours for a period of
ten days prior to the Annual Meeting at the offices of the Company's transfer
agent and registrar, MeritAmerican Stock Transfer & Trust Company, at 68 South Main Street, Suite 708,
Salt Lake City, Utah 84101.59 Maiden Lane,
New York, NY 10038.


                                    IMPORTANT

         You are cordially invited to attend the Annual Meeting in person. In
order to ensure your representation at the meeting, however, please promptly
complete, date, sign and return the enclosed proxy in the accompanying envelope.
If you should decide to attend the Annual Meeting and vote your shares in
person, you may revoke your proxy at that time.

                                           By Order of the Board of Directors,

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


October ___, 2002November 21, 2005



                                TABLE OF CONTENTS

                                                                        PAGE NO.Page No.


ABOUT THE MEETING.............................................................1
         WHAT IS THE PURPOSE OF THE ANNUAL MEETING?...............................1
     WHO IS ENTITLED TO VOTE?.................................................1
     WHO CAN ATTEND THE MEETING?..............................................1
     WHAT CONSTITUTES A QUORUM?...............................................1
     HOW DOWhat is the purpose of the annual meeting?...........................1
         Who is entitled to vote?.............................................1
         Who can attend the meeting?..........................................1
         What constitutes a quorum?...........................................1
         How do I VOTE?...........................................................1
     WHAT IFvote?.......................................................1
         What if I DO NOT SPECIFY HOW MY SHARES ARE TO BE VOTED?..................2
     CANdo not specify how my shares are to be voted?..............2
         Can I CHANGE MY VOTE AFTERchange my vote after I RETURN MY PROXY CARD?.......................2
     WHAT ARE THE BOARD'S RECOMMENDATIONS?....................................2
     WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?..............................2return my proxy card?...................2
         What are the Board's recommendations?................................2
         What vote is required to approve each item?..........................2
STOCK OWNERSHIP...............................................................3
         BENEFICIAL OWNERS........................................................3Beneficial Owners....................................................3
PROPOSAL 1 - ELECTION OF DIRECTORS............................................4
         DIRECTORS STANDING FOR ELECTION..........................................4
     RECOMMENDATION OF THE BOARD OF DIRECTORS.................................4
     DIRECTORSDirectors Standing for Election......................................4
         Recommendation Of The Board Of Directors.............................4
         Directors - PRESENT TERM EXPIRES AT THE ANNUAL MEETING...................4
     MEETINGS ................................................................7
     COMMITTEES OF THE BOARD OF DIRECTORS.....................................7
     COMPENSATION OF DIRECTORS................................................8
     EXECUTIVE COMPENSATION...................................................8
     STOCK OPTION PLAN.......................................................11
     EMPLOYMENT AGREEMENTS...................................................11
     EXECUTIVE SEVERANCE AGREEMENTS..........................................13
     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..........................13
PROPOSAL 2 - AMENDMENT TO THE ARTICLES OF INCORPORATION......................15
     RECOMMENDATION OF THE BOARD OF DIRECTORS................................15Present Term Expires at the Annual Meeting...............4
         Meetings.............................................................6
         Committees of the Board of Directors.................................7
         Compensation of Directors............................................7
         Executive Compensation...............................................8
         Stock Option Plan....................................................9
         Employment Agreements................................................9
         Executive Severance Agreements......................................10
         Certain Relationships and Related Transactions......................10
DESCRIPTION OF CAPITAL STOCK.................................................16
     COMMON STOCK............................................................16
     PREFERRED STOCK.........................................................16
     OPTIONS  ...............................................................16
     WARRANTS 18
     ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE ARTICLES OF
       INCORPORATION, BYLAWS AND FLORIDA LAW.................................18
     TRANSFER AGENT AND REGISTRAR............................................18
     OTHER MATTERS...........................................................19
     INDEPENDENT ACCOUNTANTS.................................................19
     ADDITIONAL INFORMATION..................................................19STOCK.................................................11
         Common Stock........................................................11
         Preferred Stock.....................................................11
         Options  ...........................................................11
         Warrants ...........................................................13
         Anti-Takeover Effects of Provisions of the Articles of
         Incorporation, Bylaws and Florida Law...............................14
         Transfer Agent And Registrar........................................14
         Other Matters.......................................................14
         Independent Accountants.............................................14
         Additional Information..............................................14

                                       i



                       TSET,KRONOS ADVANCED TECHNOLOGIES, INC.
                          464 COMMON STREET, SUITECommon Street, Suite 301
                          BELMONT, MASSACHUSETTSBelmont, Massachusetts 02478

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


                                 PROXY STATEMENT
                                OCTOBER ___, 2002December 20, 2005


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


         This proxy statement contains information related to the annual meetingAnnual Meeting
of shareholdersStockholders of TSET,Kronos Advanced Technologies, Inc. (the "Company"), to be
held on Wednesday, NovemberDecember 20, 2002,2005, at 11:9:00 a.m., local time, at Caesar's Palace,  3570 Las Vegas Boulevard South, Las
Vegas,  Nevada,the offices
of Kirkpatrick & Lockhart Nicholson Graham, 75 State Street, Boston,
Massachusetts, and any postponements or adjournments thereof. The Company is
making this proxy solicitation.


                                ABOUT THE MEETING


WHAT IS THE PURPOSE OF THE ANNUAL MEETING?What is the purpose of the annual meeting?

         At the Company's annual meeting, shareholdersstockholders will act upon the matters
outlined in the notice of meeting on the cover page of this proxy statement,
including the election of directors  and the  approval of an amendment to the
Company's  Articles of Incorporation to change the name of the Company to Kronos
Advanced Technologies, Inc.directors. In addition, the Company's management will
report on the performance of the Company during fiscal 20022005 and respond to
questions from shareholders.

WHO IS ENTITLED TO VOTE?stockholders.


Who is entitled to vote?

         Only shareholdersstockholders of record on the close of business on the record
date, October 22, 2002,November 17, 2005, are entitled to receive notice of the annual meeting
and to vote the shares of common stock that they held on that date at the
meeting, or any postponements or adjournments of the meeting. Each outstanding
share of common stock will be entitled to one vote on each matter to be voted
upon at the meeting.


WHO CAN ATTEND THE MEETING?Who can attend the meeting?

         All shareholdersstockholders as of the record date, or their duly appointed
proxies, may attend the meeting,  and each may be  accompanied  by one guest.meeting. Seating, however, is limited. Admission to the
meeting will be on a first-come, first-serve basis. Registration will begin at
10:9:00 a.m., and seating will begin at 10:9:30 a.m. Each shareholderstockholder may be asked to
present valid picture identification, such as a driver's license or passport.
Cameras, recording devices and other electronic devices will not be permitted at
the meeting.

         Please note that if you hold your shares in "street name" (that is,
through a broker or other nominee), you will need to bring a copy of a brokerage
statement reflecting your stock ownership as of the record date and check in at
the registration desk at the meeting.


WHAT CONSTITUTES A QUORUM?What constitutes a quorum?

         The presence at the meeting, in person or by proxy, of the holders of a
majority of the shares of common stock outstanding on the record date will
constitute a quorum, permitting the meeting to conduct its business. As of the
record date, 46,891,29381,758,067 shares of common stock of the Company were outstanding.
Proxies received but marked as abstentions and broker non-votes will be included
in the calculation of the number of shares considered to be present at the
meeting.


HOW DOHow do I VOTE?vote?

         If you complete and properly sign the accompanying proxy card and
return it to the Company, it will be voted as you direct. If you are a
registered shareholderstockholder and attend the meeting, you may deliver your completed
proxy card in person or vote by ballot at the meeting. "Street name"
1


shareholdersstockholders who wish to vote at the meeting will need to obtain a proxy form
from the institution that holds their shares.

                                       WHAT IF1



What if I DO NOT SPECIFY HOW MY SHARES ARE TO BE VOTED?do not specify how my shares are to be voted?

         If you submit a proxy but do not indicate any voting instructions, then
your shares will be voted in accordance with the Board's recommendations.


CANCan I CHANGE MY VOTE AFTERchange my vote after I RETURN MY PROXY CARD?return my proxy card?

         Yes. Even after you have submitted your proxy card, you may change your
vote at any time before the proxy is exercised by filing with the Secretary of
the Company either a notice of revocation or a duly executed proxy bearing a
later date. The powers of the proxy holders will be suspended if you attend the
meeting in person and so request, although attendance at the meeting will not by
itself revoke a previously granted proxy.


WHAT ARE THE BOARD'S RECOMMENDATIONS?What are the Board's recommendations?

         Unless you give other instructions on your proxy card, the persons
named as proxy holders on the proxy card will vote in accordance with the
recommendation of the Board of Directors. The Board's recommendation is set
forth together with the description of each item in this proxy statement. In
summary, the Board recommends a vote:

          o    FORFor the election of the  nominated  slate of directors  (see page
               4);

         o   FOR the  approval  of an  amendment  to the  Company's  Articles of
             Incorporation  to change the name of the Company to Kronos Advanced
             Technologies, Inc. (see page 16).

         With respect to any other matter that properly comes before the
meeting, the proxy holders will vote as recommended by the Board of Directors
or, if no recommendation is given, in their own discretion.


WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?

         ELECTION OF DIRECTORS.What vote is required to approve each item?

         Election of Directors. The affirmative vote of a plurality of the votes
cast at the meeting is required for the election of directors. This means that
the fivefour nominees will be elected if they receive more affirmative votes than
any other person. A properly executed proxy marked "Withheld" with respect to
the election of any director will not be voted with respect to such director
indicated, although it will be counted for purposes of determining whether there
is a quorum.

         COMPANY NAME CHANGE.  For the approval of an amendment to the Company's
Articles of  Incorporation  to change the name of the Company to Kronos Advanced
Technologies,  Inc. and any other item that  properly  comes before the meeting,
the affirmative vote of the holders of a majority of the outstanding  shares, as
of the record date,  will be required for approval.  A properly  executed  proxy
marked "Abstain" with respect to any such matter will not be voted,  although it
will  be  counted  for  purposes  of  determining  whether  there  is a  quorum.
Accordingly, an abstention will have the effect of a negative vote.

         If you hold your shares in "street name" through a broker or other
nominee, your broker or nominee may not be permitted to exercise voting
discretion with respect to some of the matters to be acted upon. Thus, if you do
not give your broker or nominee specific instructions, your shares may not be
voted on those matters and will not be counted in determining the number of
shares necessary for approval. Shares represented by such "broker non-votes,"
however, will be counted in determining whether there is a quorum.




                                       2



                                 STOCK OWNERSHIP


BENEFICIAL OWNERSBeneficial Owners

         The following table presents certain information regarding the
beneficial ownership of all shares of common stock at October 14, 2002November 17, 2005 for each
executive officer and director of our companyCompany and for each person known to us
who owns beneficially more than 5% of the outstanding shares of our common
stock. The percentage ownership shown in such table is based upon the 46,891,29381,758,067
common shares issued and outstanding at October 14, 2002November 17, 2005 and ownership by these
persons of options or warrants exercisable within 60 days of such date. Also
included  is  beneficial   ownership  on  a  fully  diluted  basis  showing  all
authorized,  but  unissued,  shares of our common  stock at October  14, 2002 as
issued and outstanding.  Unless
otherwise indicated, each person has sole voting and investment power over such
shares.

                                                            COMMON STOCK
                                                       BENEFICIALLY OWNED
                                                       ------------------
NAME AND ADDRESS                                   NUMBER               PERCENTCommon Stock
                                                         Beneficially Owned
                                                 -------------------------------
Name and Address                                    Number               Percent
- ----------------                                   ------               ------------------------------------------------------- -------------------------------
HoMedics, Inc.                                   40,000,000(1)            32.9%
3000 Pontiac Trail
Commerce Township, MI 48390

Cornell Capital Partners, LP                      6,750,000                7.6%
101 Hudson Street - Suite 3700
Jersey City, NJ 07302

Daniel R. Dwight                                  3,215,818(1)               6.9%5,988,132(2)             6.8%
464 Common Street
Suite 301
Belmont, MA  02478

Richard F. Tusing                                 1,717,118(2)               3.8%
464 Common Street
Suite 301
Belmont, MA  02478

Richard A. Papworth                               822,114(3)               1.8%
464 Common Street
Suite 301
Belmont, MA  02478

Jeffrey D. Wilson                                 310,000(4)                  *
464 Common Street
Suite 301
Belmont, MA  02478

Erik Black                                        272,983(5)                  *
464 Common Street
Suite 301
Belmont, MA  02478

Charles D. Strang                                 100,000(6)                  *3,401,208(3)             4.0%
464 Common Street
Suite 301
Belmont, MA  02478

James P. McDermott                                  294,118                  *797,077(4)             1.0%
464 Common Street
Suite 301
Belmont, MA  02478

All Officers and Directors of TSET              6,732,151(7)              14.1%Milton M. Segal                                     388,000(5)             0.5%
464 Common Street
Suite 301
Belmont, MA  02478

                                                 57,324,417(6)            44.1%

- ---------------
*        Less than 1%.-----------------------
(1) Includes optionswarrants to purchase 1,321,70040,000,000 shares of common stock that can be
    acquired within sixty days of October 14, 2002November 17, 2005

(2) Includes options to purchase 473,0004,786,206 shares of common stock that can be
    acquired within sixty days of October 14, 2002.November 17, 2005.

(3) Includes options to purchase 448,4752,548,456 shares of common stock that can be
    acquired within sixty days of October 14, 2002.November 17, 2005.

(4) Includes options to purchase 310,000502,959 shares of common stock that can be
    acquired within sixty days of October 14, 2002.November 17, 2005.

(5) Includes options to purchase 50,000388,000 shares of common stock that can be
    acquired within sixty days of October 14, 2002.November 17, 2005.

(6) Includes warrants and options to purchase 100,00048,225,621 shares of common stock
    that can be acquired within sixty days of October 14, 2002.

(7)      Includes options to purchase  2,703,175 shares of common stock that can
         be acquired within sixty days of October 14, 2002.November 17, 2005.

                                       3



                       PROPOSAL 1 - ELECTION OF DIRECTORS


DIRECTORS STANDING FOR ELECTIONDirectors Standing for Election

         The Board of Directors of the Company consists of eight seats. Each
director holds office until the first annual meeting of shareholdersstockholders following
their election or appointment and until their successors have been duly elected
and qualified.

         The Board of Directors has nominated Daniel R. Dwight, Richard A.
Papworth,  Richard F.
Tusing, James P. McDermott and Erik W. BlackMilton J. Segal for election as directors. The
accompanying proxy will be voted for the election of these nominees, unless
authority to vote for one or more nominees is withheld. In the event that any of
the nominees is unable or unwilling to serve as a director for any reason (which
is not anticipated), the proxy will be voted for the election of any substitute
nominee designated by the Board of Directors. The nominees for directors have
previously served as members of the Board of Directors of the Company and have
consented to serve such term.


RECOMMENDATION OF THE BOARD OF DIRECTORS

         THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTERecommendation Of The Board Of Directors

         The Board of Directors unanimously recommends a vote "FOR" THE ELECTION
         OF EACH OF THE NOMINEES


DIRECTORSthe election
of each of the nominees


Directors - PRESENT TERM EXPIRES AT THE ANNUAL MEETING


DANIELPresent Term Expires at the Annual Meeting


Daniel R. DWIGHTDwight                      Daniel R.R Dwight has served as a Director
PRESIDENT AND CHIEF EXECUTIVEPresident and Chief Executive         of TSETKronos  since  NovemberDecember  2000,  and as
Officer                               a
OFFICER Director and Chief Executive  Officer of
AGE 42Age 45                                Kronos Air Technologies  since January
                                      2001. Effective  October 16, 2001, Mr.
                                      Dwight was appointed  President and Chief
                                      Executive Officer of the Company.Kronos.  Effective
                                      January 1, 2004, Mr. Dwight was appointed
                                      Acting Chief Financial Officer of Kronos.
                                      He has extensive experience in private
                                      equity and operations in a wide variety of
                                      high growth and core industrial
                                      businesses.
                                      From February  2000 to October  2001,  Mr.
                                      Dwight  was  an   independent   management
                                      consultant    who    provided     business
                                      development,     strategic     consulting,
                                      financial planning,  merchant banking, and
                                      operational  execution  services to a wide
                                      range of clients.  Prior to  starting  his
                                      consulting  practice, Mr. Dwight spent 17 years with
                                      General Electric including 10 years of
                                      operations, manufacturing, and business
                                      development experience with GE's
                                      industrial businesses, and seven years of
                                      international investment and private
                                      equity experience with GE Capital. He has
                                      had responsibility for over a $1 billion
                                      in merger and acquisition and private
                                      equity transactions at GE.  Most  recently, Mr. Dwight
                                      initiated GE Capital's entry in the Asia
                                      private equity market. Between 1995 and
                                      1999, the Asian equity portfolio grew to
                                      include consolidations, leveraged buyouts,
                                      growth capital and minority investments in
                                      diverse industries, including information
                                      technology, telecommunications services,
                                      consumer products, services and
                                      distribution, and contract manufacturing.
                                      Mr.  Dwight  led
                                      deal  teams  with  responsibility  for the
                                      execution of  transactions,  monitoring of
                                      portfolio  companies  and  realization  of
                                      investments.  Since 1982, Mr. Dwight has held other
                                      leadership positions domestically and
                                      internationally with GE Capital, as well
                                      as senior positions with GE Corporate
                                      Business Development (1989-1992) and GE
                                      Corporate Audit Staff (1984-1987). His responsibilities included
                                      identifying,  analyzing  and  implementing
                                      reorganizations,           restructurings,
                                      consolidating      acquisitions,       and
                                      divestitures of GE businesses. He also had
                                      responsibility  for the development of new
                                      business ventures and commercialization of
                                      new   technologies   strategic   to   GE's
                                      industrial businesses. Mr.
                                      Dwight holds an MBA in Finance and
                                      Marketing with Honors from theThe University
                                      of Chicago in 1989Graduate School of Business and
                                      a B.S. in Accounting with Honors from the
                                      University of Vermont in 1982.and is a member of
                                      the Association of Heating, Ventilation,
                                      Air conditioning and Refrigeration
                                      Engineers, Inc. (ASHRAE).

                                       4



RICHARD A. PAPWORTH                   Richard  A.  Papworth  became a Director of
CHIEF FINANCIAL OFFICER               the  Company in June 2001,  was  appointed
AGE 44                                Chief Financial  Officer of the Company in
                                      May 2000,  and has  served as a  Director,
                                      Chief Financial Officer,  and Treasurer of
                                      Kronos  Air  Technologies   since  January
                                      2001, and as Assistant Secretary of Kronos
                                      Air Technologies  since December 2000. Mr.
                                      Papworth has had diverse finance, tax, and
                                      accounting   experience   in  a  range  of
                                      industries,    including    real    estate
                                      development/construction,         software
                                      development,   publishing,   distribution,
                                      financial  institutions,   and  investment
                                      companies.    From   1997-2000,   he   was
                                      Vice-President  and Controller of the U.S.
                                      and   European   operations   of  Wilshire
                                      Financial   Services  Group,  a  Portland,
                                      Oregon-based  publicly held specialty loan
                                      servicing and investment company with more
                                      than $2 billion under management.  In this
                                      capacity, Mr. Papworth was responsible for
                                      accounting and control  system,  financial
                                      reporting  and   analysis,   and  business
                                      decision   support   for   the   worldwide
                                      organization.  From 1996-97,  he was Chief
                                      Financial Officer of First Bank of Beverly
                                      Hills, a $550 million  banking  subsidiary
                                      of WFSG.  From 1995-96,  Mr.  Papworth was
                                      Treasurer   for   Maintenance    Warehouse
                                      America  Corporation  in which capacity he
                                      successfully   negotiated  more  than  $50
                                      million of real estate and working capital
                                      financing,   and   was   responsible   for
                                      management   of   Maintenance    Warehouse
                                      America  Corporation's  insurance  program
                                      and  tax  compliance.   From  1994-95,  he
                                      maintained   a  private   management   and
                                      finance  consulting  practice  for  select
                                      clients. From 1989-94, Mr. Papworth worked
                                      for Morrison Homes, the U.S. home building
                                      division of U.K.-based George Wimpey Plc.,
                                      during   which   period  he  held  various
                                      positions    including   Chief   Financial
                                      Officer,    Treasurer,    and    Assistant
                                      Treasurer. From 1985-89, he engaged in tax
                                      consulting with Deloitte and Touche, a Big
                                      Five  accounting  firm. He received a B.S.
                                      in  accounting  (with  minors in business,
                                      economics,   and   Spanish)   and  a  Macc
                                      (Masters of Accountancy)  with emphasis in
                                      tax law, from Brigham Young  University in
                                      1984. Mr.  Papworth  became  licensed as a
                                      certified  public  accountant in the State
                                      of California in 1987. Mr. Papworth speaks
                                      Spanish fluently.



                                       5


RICHARD  F. TUSINGTusing                    Richard F. Tusing has served as a Director
CHIEF OPERATING OFFICERChief Operating Officer               of TSETKronos since October 2000 and as a
AGE 45Age 47                                Director of Kronos Air  Technologies since
                                      January  2001 and was  appointed  Chief
                                      Operating  Officer on January 1, 2002. Mr.
                                      Tusing has had  extensive  experience in
                                      developing new enterprises, negotiating
                                      the licensing of intellectual property
                                      rights, and managing technical and
                                      financial organizations, and has more than
                                      20 years of business development,
                                      operations, and consulting experience in
                                      the technology and telecommunications
                                      industries. He hasPrior to his services to
                                      Kronos, Mr. Tusing spent four years in
                                      executive management with several emerging
                                      technology companies, 14 years in various
                                      managerial and executive positions with
                                      MCI Communications Corporation, and three
                                      additional years in managerial consulting.
                                      While acting as an independent  management
                                      consultant  from 1996 to the present,  Mr.
                                      Tusing's    experience    with    emerging
                                      technology  companies  includes serving as
                                      Chief   Executive    Officer   and   Chief
                                      Technology  Officer for Avalon Media Group
                                      (a turnkey advertising  services company);
                                      primary   responsibility   for  technology
                                      planning,    licensing,    and   strategic
                                      technology architecture  relationships for
                                      ICU,  Inc.  (a mobile  video  conferencing
                                      company);  and  Executive  Vice-President,
                                      Chief Technology Officer,  and Director of
                                      Entertainment   Made   Convenient   (Emc3)
                                      International,  Inc.  (a  video  and  data
                                      downloading services company). Through his
                                      private consultancy,  Mr. Tusing provides,
                                      among other things, managerial,  financial
                                      planning,    technical,    and   strategic
                                      planning  services.
                                      From 1982-1996, Mr. Tusing held multiple
                                      managerial and executive positions with
                                      MCI Communications Corporation. From
                                      1994-1996, he served as MCI's Director of
                                      Strategy and Technology, managing MCI's
                                      emerging technologies division (having
                                      primary responsibility for evaluating,
                                      licensing, investing in, and acquiring
                                      third-party technologies deemed of
                                      strategic importance to MCI), and also
                                      oversaw the development of several
                                      early-stage and venture-backed software
                                      and hardware companies; in this capacity,
                                      Mr. Tusing managed more than 100
                                      scientists and engineers developing
                                      state-of-the-art technologies. From
                                      1992-1994, Mr. Tusing founded MCI Metro,
                                      MCI's entree into the local telephone
                                      services business and, as MCI Metro's
                                      Managing Director, managed
                                      telecommunications operations, developed
                                      financial and ordering systems, and led
                                      efforts in designing its marketing
                                      campaigns. From 1990-1992, he served as
                                      Director of Finance and Business
                                      Development for MCI's western region,
                                      overseeing    $1,000,000,000   in   annual
                                      revenue   and  a   $90,000,000   operating
                                      budget.region. From
                                      1982-1990, Mr. Tusing held other
                                      management and leadership positions within
                                      MCI, including service as MCI's Pacific
                                      Division's Regional Financial Controller,
                                      Manager of MCI's Western Region's
                                      Information Technology Division, and led
                                      MCI's National Corporate Financial Systems
                                      Development Organization. Mr. Tusing
                                      received B.S. degrees in business
                                      management and psychology from the
                                      University of Maryland in 1979.

6


ERIK W. BLACK                         Erik W.  Black  became a  Director  of the
AGE 32                                Company  in  June  2001,   was   appointed
                                      Executive    Vice-President   -   Business
                                      Development  of the  Company  in May 2000,
                                      and also  served as  Chairman of the Board
                                      of   Directors   of  Atomic   Soccer  from
                                      November  2000  until  the sale of  Atomic
                                      Soccer in April 2001.  Mr. Black  resigned
                                      as  Executive  Vice-President  -  Business
                                      Development   of  the  Company   effective
                                      December 31, 2001.  Before  joining  TSET,
                                      Mr.  Black  served  from  1997-2000  as  a
                                      business and corporate strategy consultant
                                      to the office of the  Chairman  on Funding
                                      Selection, Inc., an investment banking and
                                      mergers and acquisitions  company. He also
                                      developed,  launched,  and managed GI Bill
                                      Express.com  LLP from  February 1999 until
                                      its  acquisition by  Military.com in April
                                      2000.  Mr.  Black  has also  worked  as an
                                      e-business  associate  consultant  for IBM
                                      Global Services in Phoenix,  Arizona, from
                                      March 1999 until April 2000.  In addition,
                                      Mr. Black was the sole  proprietor of E.B.
                                      Web  Designs,   an  Internet   development
                                      services and consulting company founded in
                                      1998.    Mr.    Black    worked   as   the
                                      communications    coordinator    for   the
                                      Synthetic  Organic Chemical  Manufacturers
                                      Association  in   Washington,   D.C.  from
                                      1996-97 and as an associate consultant for
                                      Robert Charles Lesser & Co., a real estate
                                      consulting firm, from 1995-96. He received
                                      an  M.B.A.  and a Masters  of  Information
                                      Management   degrees  from  Arizona  State
                                      University  in 2000 (where he received the
                                      ASU MBA  Kiplinger  Foundation  Prize  for
                                      outstanding   scholarship,   service,  and
                                      contribution, and served as Vice-President
                                      -  communications  of the ASU MBA  Student
                                      Body  Association in 1999-2000),  a Global
                                      Leadership  Certificate from Thunderbird -
                                      The    American    Graduate    School   of
                                      International  Management  in 2000,  and a
                                      B.A. from Pomona College in 1995, where he
                                      graduated  magna cum laude and was elected
                                      to  Phi  Beta  Kappa.   Mr.  Black  speaks
                                      Russian fluently.

JAMESJames P. MCDERMOTTMcDermott                    James P. McDermott  became a Director of
AGE 40                                the  CompanyAge 43                                Kronos in July 2001. Mr. McDermott has
                                      over 1822 years of financial and operational
                                      problem-solving experience.  Mr. McDermott
                                      is currently President and CEO AF&L, Inc.
                                      and its wholly-owned subsidiaries. Through
                                      its wholly-owned subsidiaries, AF&L
                                      provides speciality insurance products to
                                      the seniors market place. Mr. McDermott is
                                      a co-founder and is also currently a
                                      Managing Director of Eagle Rock Advisors,
                                      LLC, the Manager for The Eagle Rock Group,
                                      LLC. From 1992 through 2000, Mr. McDermott
                                      held various managerial and executive
                                      positions with PennCorp Financial Group,
                                      Inc. and its affiliates. From 1998 through
                                      2000, Mr. McDermott was Executive
                                      Vice-President and Chief Financial Officer
                                      of PennCorp Financial Group. While serving
                                      in this position, Mr. McDermott was
                                      one-third of the executive management team
                                      that was responsible for developing and

                                       5



                                      implementing operational stabilization,
                                      debt reduction and recapitalization plans
                                      for the company. From 1995 through 1998,
                                      Mr. McDermott served as Senior
                                      Vice-President of PennCorp Financial
                                      Group. Mr. McDermott worked closely with
                                      the Audit Committee of the Board of
                                      Directors on evaluating the PennCorp's
                                      accounting and actuarial practices. In
                                      addition, Mr. McDermott was responsible
                                      for developing a corporate-wide technology
                                      management program resulting in technology
                                      convergence and cost savings to the
                                      company's technology budget. From 1994
                                      through 1998, Mr. McDermott was a
                                      principal in Knightsbridge Capital Fund I,
                                      LP, a $92 million investment fund
                                      specializing in leverage-equity
                                      acquisitions of insurance and
                                      insurance-related businesses. Mr.
                                      McDermott was also the founding Chairman
                                      of the e-business Internet service
                                      provider, Kivex.com, and a senior manager
                                      of one of the world's leading public
                                      accounting firms, KPMG. Mr. McDermott
                                      received a B.S. Degree in Business
                                      Administration from the University of
                                      Wisconsin, Madison.

MEETINGSMilton J. Segal                       Milton J. Segal  became a Director of
Age 60                                Kronos in  September  2003.  Mr. Segal has
                                      over 35  years  of  corporate  governance,
                                      entrepreneurial  and  investment  banking
                                      expertise. Mr. Segal founded the
                                      investment banking firm of M.J. Segal
                                      Associates in 1987. Since 1992, the firm
                                      has specialized in researching private
                                      equity opportunities in both private and
                                      emerging growth public companies. The
                                      Segal group caters primarily to
                                      institutional clients, private investment
                                      partnerships and professional money
                                      managers. After starting his career as a
                                      stockbroker and financial planner in 1966
                                      with Philadelphia based New York Stock
                                      Exchange firm, Robinson & Company, Mr.
                                      Segal joined Josephthal & Co. Inc., a
                                      leading full-service investment banking
                                      and brokerage firm in New York. Mr. Segal
                                      has served as senior vice president of the
                                      congressionally charted National
                                      Corporation for Housing Partnerships in
                                      Washington, D. C. and president of its
                                      investment banking subsidiary and has
                                      qualified as a NASD broker/dealer
                                      financial principal. Originally from
                                      Philadelphia, Mr. Segal attended the
                                      Wharton School of the University of
                                      Pennsylvania and is a graduate of The New
                                      York Institute of Finance.

Meetings

         During the Company's fiscal year ending June 30, 20022005 ("FISCAL  2002"Fiscal 2005")
the Board of Directors met on 10ten occasions. Each director attended more than
75% of the total number of meetings of the Board and Committees on which he
served.

                                       COMMITTEES OF THE BOARD OF DIRECTORS

         AUDIT COMMITTEE.  We currently do not have6



Committees of the Board of Directors

         Audit Committee. On September 10, 2003, the Board of Directors
established an Audit Committee consisting of at least two independent members of
the Board of Directors. The Audit Committee is charged with providing
independent and objective oversight of the accounting functions and internal
controls of the Company and its subsidiaries to ensure the objectivity of the
Company's financial statements. Messrs. McDermott and Segal are the current
members of the Audit Committee. 7


         COMPENSATION.During the year the Audit Committee held three
meetings. Each member attended at least 75% of the meetings.

         Compensation. On September 11, 2001, the Board of Directors established
a Compensation Committee consisting of at least two independent members of the Board of
Directors.  The Compensation  Committee currently consists of James P. McDermott
and  Charles  D.  Strang.  The  Compensation  Committee  and  Chairman  will  be
designated  annually by the
Board of Directors. The Compensation Committee is charged with reviewing and
making recommendations concerning the  Company'sKronos' general compensation strategy,
reviewing salaries for officers, reviewing employee benefit plans, and
administering TSET'sKronos' stock incentive plan.


COMPENSATION OF DIRECTORS

         CASH COMPENSATION.plan, once adopted and implemented.
Messrs. McDermott and Segal are the current members of the Compensation
Committee. During the year the Compensation Committee held two meetings. Each
member attended at least 75% of the meetings.

         Executive Committee. On September 4, 2003, the Board of Directors
established an Executive Committee. The purpose of the Executive Committee is to
exercise all the powers and authority of the Board of Directors in the
management of the property, affairs and business of the Company. The Committee
shall consist of no fewer than three members, including the Chief Executive
Officer of the Company. Messrs. Dwight, McDermott, Segal and Tusing are the
current members of the Executive Committee.


Compensation of Directors

         Cash Compensation. Our Bylaws provide that, by resolution of the Board
of Directors, each director may be reimbursed his expenses of attendance at
meetings of the Board of Directors; likewise, each director may be paid a fixed
sum or receive a stated salary as a director. As of the date of this prospectus,filing, no
director receives any salary or other form of cash compensation for such
service.

         No director is precluded from serving our Company in any other capacity
and receiving compensation from us in connection therewith.

         SHARE-BASED COMPENSATION.Share Based Compensation. Each non-executive director is entitled to
receive annually 50,000 restricted shares70,000 fully-vested stock option grants, 7,000 stock option
grants per meeting attended via conference call, 14,000 option grants per
meeting attended in person, 3,500 option grants per meeting for participation on
a committee or 5,000 stock option grants per meeting for chairing a committee,
as compensation for their services as members of our commonBoard of Directors.
Effective August 6, 2003, executive directors, including Messrs. Dwight and
Tusing are not being compensated separately for their services as members of our
Board of Directors.

         For the twelve month period ending June 30, 2005, Messrs. McDermott and
Segal have earned 189,000, each stock either granted as shares or in the
form of fully-vested options as compensation for their services
as members of our Board of Directors.


                                       The  Chairman of our Board of Directors is entitled to
receive annually an additional 50,000 shares of our common stock, either granted
as  shares  or in the form of  fully-vested  options,  as  compensation  for his
services  as  Chairman  of our  Board  of  Directors.  As of the  date  of  this
prospectus,  Messrs.  Wilson and Strang  have been  granted  200,000  and 50,000
options,  respectively as compensation for Mr. Wilson's  services as Chairman of
our Board of  Directors  and Mr.  Strang's  services as a member of our Board of
Directors. Messrs. Tusing and Dwight have each been granted 50,000 shares of our
common  stock as  compensation  for their  services  as  members of our Board of
Directors.


EXECUTIVE COMPENSATION7



Executive Compensation

         The following table sets forth compensation for the fiscal year ended
June 30, 20022005 for our executive officers:


SUMMARY COMPENSATION TABLE ANNUAL COMPENSATION LONG-TERM COMPENSATION ---------------------------------------------- --------------------------------------------------- AWARDS PAYOUTS ------ ------- RESTRICTED SECURITIES ALL OTHER STOCK UNDERLYINGAnnual Compensation Long-Term Compensation --------------------------------------- -------------------------------------------------------- Restricted Securities Name and Other Stock Underlying LTIP OTHER NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARDS OPTIONS/SAR'S PAYOUTS COMPENSATION FISCAL POSITION YEARAll Other Principal Salary Bonus Compensation Awards Options/SARS Payouts Compensation Fiscal Position Year $ $ $ $ # $ $ - ------------------- ----------------------- ----- --------- ------------------- -------------- ----------- ------------- ------------------------ -------- -------------- (a) (b) (c) (d) (e) (f) (g) (h) (i) - ------------------- ----------------------- ----- --------- ------------------- -------------- ----------- ------------- ------------------------ -------- -------------- Daniel R. 2005 180,000 67,500(4) 14,689 -- 750,000 -- -- Dwight, 2002 112,5002004 180,000 -- 7,62014,292 -- 2,600,000726,206 -- -- President and 20012003 180,000 118,800(5) 12,288 -- 660,000 -- -- Chief Executive Officer(1) Richard F. 2005 160,000 37,530(4) -- -- 450,000 -- -- Tusing, Chief 2004 160,000 -- -- -- 971,756 -- -- Operating 2003 80,000 -- -- -- -- -- -- Officer(2) Richard A. 2005 -- -- -- -- -- -- -- Papworth Chief Executive 20002004 120,000 -- -- -- -- -- -- -- Officer(1) Richard F. Tusing, 2002 -- -- -- -- -- -- -- Chief Operating 2001 -- -- -- -- -- -- -- Officer(2) 2000 -- -- -- -- -- -- -- Richard A. Papworth, 2002 120,000(3) --Financial 2003 120,000 21,000(5) -- -- 300,000 -- -- Chief Financial 2001 120,000 -- 2,000 -- 448,475(4) -- -- Officer 2000 10,000(5) -- -- 50,000(6) -- -- -- Jeffrey D. Wilson, 2002 70,000 -- 3,500 -- 50,000 -- -- Former Chairman of 2001 180,000 -- 12,000 -- 600,000(8) -- -- the Board of 2000 155,000(9) 30,000(10) 2,670(11) 700,000(12) -- -- -- Directors and Chief Executive Officer(7) Erik W. Black, 2002 60,000(14) -- 6,000 -- -- -- -- Former Executive 2001 100,000 -- 6,000 -- 50,000(15) -- -- Vice-President - 2000 4,167(16) -- 4,500(17) -- -- -- -- Business Development(13)Officer(3)
8 - -------------------- (1) Mr. Dwight became President and Chief Executive Officer of TSETKronos effective October 16, 2001. He executed a two year employment contract on December 15, 2001. His contract was renewed on August 13, 2003 and again on August 15, 2004 and August 15, 2005 by the Board of Directors. His annual salary is $180,000. (2) Mr. Tusing became Chief Operating Officer of TSETKronos effective January 1, 2002. Mr. Tusing continues to be compensated pursuant to his consulting agreement with TSET untilexecuted an employment agreementcontract effective January 1, 2003. The Board of Directors renewed Mr. Tusing's Employment Agreement on October 1, 2004 and again on October 1, 2005. Prior to this date, Mr. Tusing was compensated as a consultant to the Company. His annual salary is entered into by the parties.$160,000. (3) TSET accrued $45,000 of Mr. Papworth's 2002 salary. (4) Mr. Papworth was granted an option to purchase 398,475 restricted shares of our common stock pursuant to a letter agreement dated April 10, 2001 amending Mr. Papworth's employment agreement, datedthe Company's Chief Financial Officer from May 19, 2000. The options were fully vested as of April 10, 2001 and the exercise price is equal to $0.885 per share, which2000 until January 1, 2004. His annual salary was the closing price of our common stock as quoted on the Over-the-Counter Bulletin Board on April 9, 2001. In addition,$120,000. On July 1, 2004 Mr. Papworth was granted 50,000 options on April 9, 2001. These options are fully vested and the exercise price is equal to $0.885 per share. (5) Mr. Papworth joined our Company in May 2000. He is compensated $120,000 annually. (6) As a signing bonus toended his employment agreement, Mr. Papworth received 14,815 restricted shares of our common stock. The $50,000 value is determined by multiplyingwith Kronos. (4) Cash Bonuses earned in 2005 were paid through the number of such shares with the closing market price of our Company's unrestricted common stock ($3.374 per share) on the date such shares were granted (May 19, 2000). (7) Effective October 10, 2001, Mr. Wilson resigned as Chairman of the Board of Directors and Chief Executive Officer of TSET pursuant to a mutual agreement between TSET and Mr. Wilson. (8) Mr. Wilson was granted 350,000 options pursuant to a letter agreement dated April 10, 2001 amending Mr. Wilson's employment agreement, dated April 16, 1999. 125,000 options were fully vested as of April 10, 2001 and the remaining 225,000 options were to vest upon the achievement of certain performance objectives. The exercise price was equal to $0.885 per share, which was the closing price of our Company's common stock as quoted on the Over-the-Counter Bulletin Board on April 9, 2001. TSET has determined that the options to purchase 350,000 sharesissuance of common stock granted to Mr. Wilson pursuant toat the letter agreement are void as of April 10, 2001, the effective date of the letter agreement. Mr. Wilson was granted 50,000 optionsmarket closing price on April 9, 2001. These options are fully vested and the exercise price is equal to $0.885 per share. In addition, Mr. Wilson, was granted 200,000 options on May 3, 2001,June 30, 2005. (5) Cash Bonuses earned in connection with his service as Chairman of the Board of Directors2003 have been included in 1999 and 2000. These options are fully vested and the exercise price is equal to $0.71 per share. (9) Mr. Wilson's 2000 salary of $155,000 consisted of ten months at $12,500 and two months at $15,000. Mr. Wilson deferred all salary during fiscal years 1999 and 2000 and was entitled to receive 12% annual interest on all deferred amounts. Pursuant to an agreement between TSET and Mr. Wilson effective October 10, 2001, TSET issued a promissory note in the amount of $350,000 and will pay $30,000 in cash within sixty days of October 15, 2001, which represents all of Mr. Wilson's accrued salary, bonus and interest. In addition, TSET will also pay Mr. Wilson his unpaid reimbursable expenses. (10) Under the terms of his employment agreement, Mr. Wilson was to receive a cash bonus of $30,000 on or before May 1, 2000; however, Mr. Wilson deferred his cash bonus during fiscal year 2000 and was entitled to receive 12% annual interest on all deferred compensation. Pursuant to an agreement between TSET and Mr. Wilson dated October 10, 2001, TSET issued a promissory note in the amount of $350,000 and will pay $30,000 in cash within sixty days of October 15, 2001, which represents all of Mr. Wilson's accrued salary, bonus and interest. In addition, TSET will pay Mr. Wilson his unpaid reimbursable expenses. (11) Mr. Wilson was entitled to an automobile allowance of $1,000 per month, of which $2,670 was received in fiscal year 2000. (12) As a signing bonus to his employment agreement, Mr. Wilson's nominee, The Pangaea Group LLC, received 1,000,000 restricted shares of our common stock. Such stock vested at a rate of 100,000 shares per month over a 10-month period; 700,000 shares vested during fiscal year 2000. The $700,000 value was obtained by multiplying the vested shares with the closing market price of our unrestricted common stock ($1.00 per share) on the date such shares were granted (April 20, 1999). Notwithstanding the above calculation, we expensed such stock transaction at a value of $300,000, or $0.30 per share. TSET has determined that the issuance of the 1,000,000 shares of common stock is void as of April 16, 1999, the effective date of Mr. Wilson's employment agreement. (13) Mr. Black resigned as Executive Vice-President - Business Development of TSET effective December 31, 2001. (14) TSET accrued $60,000 of Mr. Black's 2002 salary. (15) Mr. Black was granted 50,000 options on April 9, 2001. These options are fully vested and the exercise price is equal to $0.885 per share. (16) Mr. Black joined our Company in May 2000. He was compensated $100,000 annually, of which $4,167 was received in fiscal year 2000. (17) Mr. Black was entitled to an automobile allowance of $500 per month, and a one-time relocation allowance of $5,000, of which $4,500 was received in fiscal year 2000. 9 Notes Payable. AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTIONS/SAR VALUES(1)
VALUE OF NUMBER OF SECURITIES VALUE OF UNEXERCISED SHARES UNDERLYING UNEXERCISED IN-THE-MONEY SHARES ACQUIRED ON VALUE OPTIONS/SAR'SSARS AT FISCAL OPTIONS/SAR'SSARS AT NAME ON EXERCISE VALUE REALIZED ($) FISCAL YEAR END(1) FISCAL YEAR END(2) ---- -------- ------------ ------------------ ------------------- ------------------- ----------------- ----------------- -------------------------- --------------------- Daniel R. Dwight, -0- -0- Exercisable: 1,321,700 $04,786,206 -0- President and Unexercisable: 1,600,000 $0-0- -0- Chief Executive Officer(3) Richard F. Tusing -0- -0- Exercisable: 473,000 $02,548,456 -0- Tusing, Chief Operating Officer(4) Unexercisable: 950,000 $0 Richard A. Papworth -0- -0- Exercisable: 448,475 $0 Chief Financial Officer Unexercisable: 300,000 $0 Jeffrey D. Wilson -0- -0- Exercisable: 310,000(6) $0 Former Chairman of the Board Unexercisable: 350,000(6) $0 of Directors and Chief Executive Officer(5) Erik W. Black -0- -0- Exercisable: 50,000 $0 Former Executive Vice-President Unexercisable: 0 $0 Business Development(7)Operating Officer(4)
- ---------------------------------8 (1) These grants represent options to purchase common stock. No SAR's have been granted. (2) The value of the unexercised in-the-money options were calculated by determining the difference between the fair market value of the common stock underlying the options and the exercise price of the options as of June 30, 2002.2005. (3) Mr. Dwight became President and Chief Executive Officer of TSETKronos effective November 15,October 16, 2001. (4) Mr. Tusing became Chief Operating Officer of TSETKronos effective January 1, 2002. (5) Effective October 10, 2001, Mr. Wilson resigned as Chairman of the Board of Directors and Chief Executive Officer of TSET pursuant to a mutual agreement between TSET and Mr. Wilson. (6) TSET has determined that the options to purchase 350,000 shares of common stock granted to Mr. Wilson pursuant to a letter agreement dated April 10, 2001 are void as of April 10, 2001, the effective date of the letter agreement. Of these options to purchase 350,000 shares of common stock, options to purchase 125,000 shares of common stock were exercisable at fiscal year end 2001 and 225,000 options were unexercisable at fiscal year end 2001. (7) Mr. Black resigned as Executive Vice President - Business Development of TSET effective as of December 31, 2001. 10
OPTION/Option/SAR GRANTS TABLEGrants Table % TOTAL NO. OF SECURITIES OPTIONS/SAR'S UNDERLYING GRANTED TO OPTIONS/SAR'S EMPLOYEES IN EXERCISE OR BASE PRICE NAME GRANTEDTotal No. of Securities Options/SAR's Underlying Granted to Options/SAR's Employees in Exercise or Base Price Name Granted (#) FISCAL YEARFiscal Year (%) ($ PER SHARE) EXPIRATION DATE ---- ----------- --------------- ------------- ---------------per Share) Expiration Date - -------------------------- ----------------- ---------------- ---------------------- -------------------- Daniel R. Dwight 93,600(2)50,000 1.5% $0.960 November 15, 2004$0.890 April 9, 2006 President and 1,000,000 16.4% $0.680 February 12, 2012 Chief Executive Officer(1) 600,000 9.9% $0.250 February 12, 2012 500,000(3)500,000 8.2% $0.420 NovemberDecember 15, 2011 250,000(3)250,000 4.1% $0.660 NovemberDecember 15, 2011 250,000(3)250,000 4.1% $0.560 NovemberDecember 15, 2011 660,000 26.0% $0.190 March 21, 2013 726,206 22.4% $0.180 March 22, 2014 750,000 43.5% $0.125 June 30, 2015 Richard F. Tusing 246,500(5) 4.1% $0.960 June 30, 200550,000 1.5% $0.890 April 9, 2006 Chief Operating Officer(4)Officer(2) 600,000 9.9% $0.680 February 12, 2012 350,000 5.8% $0.250 February 12, 2012 Jeffrey D. Wilson 50,000 0.8% $0.885 April 9,126,700 5.0% $0.960 June 30, 2006 Former Chairman of the Board 10,000 0.1% $0.210971,756 30.0% $0.180 March 31, 2005 of Directors and Chief Executive Officer(6) Richard A. Papworth 100,000 1.6% $0.680 February 12, 2012 Chief Financial Officer 200,000 3.3% $0.250 February 12, 201222, 2014 450,000 26.1% $0.125 June 30, 2015
- ---------------------------------------------------------------- (1) Mr. Dwight became President and Chief Executive Officer of TSETKronos Advanced Technologies effective October 16, 2001. (2) Represents options granted pursuant to Mr. Dwight's Consulting Agreements dated August 11, 2000 (individual agreement) and January 1, 2001 (Dwight Tusing & Associates' agreement), as amended April 12, 2001. (3) Represents options granted pursuant to Mr. Dwight's Employment Agreement effective November 15, 2001 and Stock Option Agreement dated April 1, 2002. (4) Mr. Tusing became Chief Operating Officer of TSETKronos Advanced Technologies effective January 1, 2002. (5) Represents options granted pursuant to Mr. Tusing's Consulting Agreements dated August 11, 2000 (individual agreement) and January 1, 2001 (Dwight Tusing & Associates' agreement), as amended April 12, 2001. (6) Effective October 10, 2001, Mr. Wilson resigned as Chairman of the Board of Directors and Chief Executive Officer of TSET pursuant to a mutual agreement between TSET and Mr. Wilson. STOCK OPTION PLANStock Option Plan On February 12, 2002, the Board of Directors approved the TSET, Inc. Stock Option Plan under which the Company'sKronos' key employees, consultants, independent contractors, officers and directors are eligible to receive grants of stock options. The CompanyKronos has reserved and issued a total of 6,250,000 shares of common stock under the Stock Option Plan. It is presently administered by the Company'sKronos' Board of Directors. Subject to the provisions of the Stock Option Plan, the Board of Directors has full and final authority to select the individuals to whom options will be granted, to grant the options and to determine the terms and conditions and the number of shares issued pursuant thereto. EMPLOYMENT AGREEMENTS The Employment Agreement of Jeffrey D. Wilson, our former Chairman and Chief Executive Officer, was dated as of April 20, 1999 and continued for an "evergreen" term of five years unless Mr. Wilson provided at least 60 days' prior written notice of his resignation. Such agreement provided for base cash compensation during the first 12-month period in the amount of $12,500 per month, plus a cash bonus in the amount of $30,000 to be paid in one lump sum on or before May 1, 2000. During the second 12-month period, Mr. Wilson's base cash compensation was to increase to $15,000 per month, and during the third 12-month period such base cash compensation was to increase to $20,000 per month. Mr. Wilson deferred all cash and bonus compensation from April 1999 through August 2000; however, commencing in September 2000, Mr. Wilson began receiving cash compensation in the amount of $17,500 per month, approved by the Board of Directors, in consideration of his previous deferral of such compensation. We were obligated to pay interest at the rate of 12% annually on all compensation deferred by Mr. Wilson until all such amounts have been paid in full. Mr. Wilson's nominee, The Pangaea Group, LLC, received a signing bonus of 100,000 fully vested and non-forfeitable restricted shares of our common stock; The 11 Pangaea Group, LLC received an additional 900,000 restricted shares of our common stock, which vested at the rate of 100,000 shares per month over the 9-month period following Mr. Wilson's acceptance of the terms of his employment agreement. Mr. Wilson was entitled to fully participate in any and all 401(k), stock option, stock bonus, savings, profit-sharing, insurance, and other similar plans and benefits of employment; however, as of the date of this prospectus, we have not adopted or implemented any such plans. Mr. Wilson had "piggyback" registration rights with respect to all restricted shares owned by him, as well as "demand" registration rights with respect thereto exercisable two times during each 5-year term of his employment. The cost of exercising such piggyback and demand registration rights was to be borne by us. As of the date of this prospectus, Mr. Wilson had not exercised such registration rights. Mr. Wilson is entitled to be indemnified, defended, and held harmless by us from and against any and all costs, losses, damages, penalties, fines, or expenses (including, without limitation, reasonable attorneys' fees, court costs, and associated expenses) suffered, imposed upon, or incurred by him in any manner in connection with his service as our Chairman and Chief Executive Officer. On April 10, 2001, we entered into a Letter Agreement with Mr. Wilson amending Mr. Wilson's Employment Agreement. Pursuant to the Letter Agreement, Mr. Wilson waived the anti-dilution provision of his Employment Agreement in consideration for options to purchase 350,000 shares of our restricted common stock. The option to purchase 125,000 shares of common stock was fully vested as of April 10, 2001 and the remaining 225,000 share option was to vest upon the achievement of certain performance objectives. The exercise price of these options was equal to $0.885 per share, which was the closing price of our common stock as quoted on the Over-the-Counter Bulletin Board on April 9, 2001. In September 2001, we determined that, among other things, our Board of Directors never validly approved Mr. Wilson's Employment Agreement. Accordingly, we determined that Mr. Wilson's Employment Agreement and the Letter Agreement are null and void from their inception. As a consequence, we have determined that the issuance of 1,000,000 shares of common stock pursuant to Mr. Wilson's Employment Agreement and the grant of options to purchase 350,000 shares of common stock pursuant to the Letter Agreement were void as of the effective dates of the Employment Agreement and Letter Agreement, respectively, and that these shares of common stock and options are treated as if they were never issued or granted, as the case may be. Effective October 10, 2001, Mr. Wilson resigned as Chairman of the Board of Directors and Chief Executive Officer of the Company. Mr. Wilson remains as a director of the Company.Agreements Daniel R. Dwight, our President and Chief Executive Officer, and our companyCompany entered into an Employment agreement effective as of NovemberDecember 15, 2001. The initial term of Mr. Dwight's Employment Agreement iswas for 2 years and will automatically renew for successive 1 year terms unless the CompanyKronos or Mr. Dwight provide the other party with written notice within 3 months of the end of the initial term or any subsequent renewal term. The Board of Directors renewed Mr. Dwight's Employment Agreement on August 13, 2003 and again on August 15, 2004 and August 15, 2005. Mr. Dwight's Employment Agreement provides for base cash compensation of $180,000 per year. Mr. Dwight is eligible for annual incentive bonus compensation in an amount equal to Mr. Dwight's annual salary based on the achievement of certain bonus objectives. In addition, the CompanyKronos granted Mr. Dwight 1,000,000 immediately vested and exercisable, ten-year stock options at various exercise prices. Mr. Dwight will be entitled to fully participate in any and all 401(k), stock option, stock bonus, savings, profit-sharing, insurance, and other similar plans and benefits of employment. Mr. Dwight is entitled to be indemnified, defended, and held harmless by us from and against any and all costs, losses, damages, penalties, fines, or expenses (including, without limitation, reasonable attorneys' fees, court costs, and associated expenses) suffered, imposed upon, or incurred by him in any manner in connection with his service as9 Richard F. Tusing, our Chief Executive Officer. Richard A. Papworth,Operating Officer, and our Chief Financial Officer, hasCompany entered into an Employment Agreement datedagreement effective as of May 19, 2000, which continues for an "evergreen"January 1, 2003. The initial term of twoMr. Tusing's Employment Agreement is for 2 years and will automatically renew for successive 1 year terms unless Kronos or Mr. Papworth provides at least 90 days' priorTusing provide the other party with written notice within 3 months of his resignation.the end of the initial term or any subsequent renewal term. The Board of Directors renewed Mr. Papworth'sTusing's Employment Agreement on October 1, 2004 and again on October 1, 2005. Mr. Tusing's Employment Agreement provides for base cash compensation in the amount of $10,000$160,000 per month, a signing bonus of $50,000 worth of fully vested and non-forfeitable restricted shares of our common stock, plus a year-end bonus payable in cash and additional shares, in a "blended" amount to be determined.year. Mr. PapworthTusing will be entitled to fully participate in any and all 401(k), stock option, stock bonus, savings, profit-sharing, insurance, and other similar plans and benefits of employment; however, as of the date of this prospectus, we have not adopted or implemented any such plans. Mr. Papworth is entitled to be indemnified, defended, and held harmless by us from and against any and all costs, losses, damages, penalties, fines, or expenses (including, without limitation, reasonable attorneys' fees, court costs, and associated expenses) suffered, imposed upon, or incurred by him in any manner in connection with his service as our Chief Financial Officer. On April 10, 2001, we entered into a Letter Agreement with Mr. Papworth amending Mr. Papworth's Employment Agreement. Pursuant to the Letter Agreement, Mr. Papworth waived the anti-dilution provision of his Employment Agreement in consideration for an option to purchase 398,475 shares of our restricted common stock. The option was fully vested as of April 10, 2001 and the exercise price is equal to $0.885 per share, which was the closing price of our common stock as quoted on the Over-the-Counter Bulletin Board on April 9, 2001. 12 EXECUTIVE SEVERANCE AGREEMENTS The Employment Agreement of Richard A. Papworth, our Chief Financial Officer, provides that upon the occurrence of any transaction involving a change of control of TSET pursuant to which his employment is terminated, any shares of our common stock to which Mr. Papworth is entitled through any stock option or other stock ownership plan shall immediately vest and Mr. Papworth will be entitled to receive all the compensation and benefits of employment that he would have received for the full term of his employment but for such termination (i.e., given the 2-year "evergreen" term of his employment, Mr. Papworth would therefore receive two years' worth of such compensation), the immediate vesting of shares in any stock option or other stock ownership plan, and the immediate vesting of all matching contributions made by us in any 401(k), savings, profit-sharing, or other similar plan or benefit program.employment. Executive Severance Agreements The Employment Agreement of Daniel R. Dwight, our Chief Executive Officer, provides that, upon the occurrence of any transaction as defined as a "change of control" of TSET,Kronos, Mr. Dwight shall receive his salary and benefits for a period of time that is the greater of (i) one year or (ii) the remainder of Mr. Dwight's employment term. AsThe Employment Agreement of Richard F. Tusing, our Chief Operating Officer, provides that, upon the record date, we haveoccurrence of any transaction as defined as a "change of control" of Kronos that is not adopted any separate executive severance agreements. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONSapproved by the Board of Directors, Mr. Tusing shall receive his salary and benefits for a period of time that is the greater of (i) one year or (ii) the remainder of Mr. Tusing's employment term. Certain Relationships and Related Transactions We believe that all prior related party transactions have been entered into upon terms no less favorable to us than those that could be obtained from unaffiliated third parties. Our reasonable belief of fair value is based upon proximate similar transactions with third parties or attempts to obtain the consideration from third parties. All ongoing and future transactions with such persons, including any loans or compensation to such persons, will be approved by a majority of disinterested members of the Board of Directors. In connection with his Employment Agreement, Jeffrey D. Wilson's nominee, The Pangaea Group LLC, received a signing bonus of 100,000 restricted shares of our common stock; such shares were fully vested and non-forfeitable upon issuance. In addition, The Pangaea Group LLC received an additional 900,000 restricted shares of our common stock, vesting at the rate of 100,000 shares per month over the 9-month period ended January 2000. In September 2001, the Company determined that, among other things, our Board of Directors never validly approved Mr. Wilson's Employment Agreement. Accordingly, the Company has determined that Mr. Wilson's Employment agreement was null and void from its inception. As a consequence, the Company has determined that the issuance of 1,000,000 shares of common stock pursuant to Mr. Wilson's Employment Agreement is void as of the effective date of the Employment Agreement, and that these shares of common stock are treated as if they were never issued. On August 11, 2000,March 31, 2004, we entered into a Consulting Agreementpromissory notes (the "Notes") with Daniel R. Dwight and Richard F. Tusing and Daniel R. Dwight, pursuant to which Messrs. Tusing and Dwight will provide management, financial, strategic, and other consulting services to us in exchange for consulting feespast due compensation, expenses and interest due and payable for $363,139 and $485,883, respectively. The Notes bear a simple interest rate 1% per month and call for aggregate monthly principal and interest payments $6,718 and $8,989, respectively, for each month in which the Company's beginning cash balance equals or exceeds $200,000. Subject to certain conditions, including default, these Notes become payable in cash and optionsfull. In the event of our common stock. Out-of-pocket expenses incurred by Messrs. Tusing and Dwight in connection with provision of their services under the Consulting Agreement will also be reimbursed by us. The Consulting Agreement was entered into prior to Messrs. Tusing's and Dwight's appointment as members of our Board of Directors in October 2000 and was negotiated at arm's length. We believe that the compensation and other provisionsa debt or equity financing, 20% of the Consulting Agreement are fair, reasonable, customary,proceeds derived from the financing will be used to pay down the outstanding interest and favorable to us. The Consulting Agreement was renewedprincipal obligations. As a result of a Cornell Capital financing, with Dwight, Tusing & Associates on similar terms and conditions with a rate adjustment as of January 1, 2001, and was amended on April 12, 2001 to decrease the strike price of the options granted as partial compensation thereunder. Pursuant to the Company on March 7, 2005, the Notes are due and Mr. Dwight entering into his Employment Agreement, effective November 15, 2001, Mr. Dwight's Consulting Agreement is no longerpayable in effect. Pursuant to his Consulting Agreement, Mr. Dwight earned $208,400 and $179,600, respectively, in the years endedfull. As of June 30, 2001 and 2002, respectively. Of the aggregate amount of $388,000, we have paid $202,400 to Mr. Dwight and the balance of $185,600 remains payable. Mr. Tusing's Consulting Agreement is currently in effect. The initial term of Mr. Tusing's Consulting Agreement2005, $348,513 was six months and is automatically renewed for successive terms of six months, unless our company or Mr. Tusing terminate the agreement upon 30 days' prior written notice. Mr. Tusing performs management and business consulting servicesstill outstanding under the Consulting Agreement. Pursuant to the agreement, Mr. Tusing is compensated $150 per hour for his services and the number of hours worked is mutually determined by our company and Mr. Tusing. At Mr. Tusing's discretion, he may elect to convert his unpaid hourly cash compensation for an option to purchase restricted shares of the Company's common stock at one hundred option shares for each hour of consulting services. Such option, once elected, is exercisable for three years at an exercise price of $2.00 per share. Pursuant to his Consulting Agreement, Mr. Tusing earned $207,400 and $377,750, respectively, in the years ended June 30, 2001 and 2002 and $30,750 through July 31, 2002. Of the aggregate amount of $615,900, we have paid $294,000 to Mr. Tusing and the balance of $331,900 remains payable. 13 Effective October 15, 2001, we entered into a Consulting Agreement with Jeffrey D. Wilson, pursuant to which Mr. Wilson will provide thirty-five hours per month of management and other consulting services to us in exchange for consulting fees payable in cash and options of our common stock. The term of Mr. Wilson's Consulting Agreement is one year. Mr. Wilson is compensated $150 per hour for his services. Pursuant to his Consulting Agreement, Mr. Wilson earned $51,200 in the year ended June 30, 2002 and $8,700 through October 15, 2002. Of the aggregate amount of $56,500, we have paid $5,200 to Mr. Wilson and the balance of $51,300 remains payable. In addition, our company granted Mr. Wilson an option to purchase 100,000 shares of the Company's common stock upon the successful conclusion of the Company's legal proceedings against W. Alan Thompson, Ingrid T. Fuhriman, Robert L. Fuhriman II and Weihao Long. The option is for three years and fully vests and becomes exercisable immediately upon the grant thereof. The exercise price of the option will be the closing price of the Company's common stock on the option's date of grant. Out-of-pocket expenses incurred by Mr. Wilson in connection with provision of his services under the Consulting Agreement will also be reimbursed by us. The Consulting Agreement was negotiated at arm's length. We believe that the compensation and other provisions of the Consulting Agreement are fair, reasonable, customary, and favorable to us. Mr. Wilson's Consulting Agreement was in effect until October 15, 2002. Pursuant to Daniel R. Dwight's Employment Agreement, effective November 15, 2001, our company and Mr. Dwight agreed that the Consulting Agreement, dated January 1, 2001, between our company and Mr. Dwight and the Finders Agreement, dated August 11, 2000, between our company and Mr. Dwight were terminated effective November 15, 2001. We acknowledged and agreed that pursuant to the terms of the Consulting Agreement, we owe Mr. Dwight past-due amounts equal to $250,582. We agreed that this past-due amount will accrue interest at 1% per month until paid in full. Payments from our company to Mr. Dwight shall be allocated first to out-of-pocket expenses, second to salary, and third to repayment of the past-due amount. In addition, we acknowledged and agreed that, pursuant to the Consulting Agreement and the Finders Agreement, Mr. Dwight has earned 271,700 options that are fully vested and exercisable under the terms and conditions of the Consulting Agreement, the Finders Agreement and a Letter Agreement, dated April 12, 2001 between our company and Mr. Dwight. 14 PROPOSAL 2 - AMENDMENT TO THE ARTICLES OF INCORPORATION Our Company's Board of Directors proposes an amendment to our Company's Articles of Incorporation to change the name of our Company to Kronos Advanced Technologies, Inc. If the amendment to our Company's Articles of Incorporation is adopted, Articles of Amendment shall be filed with the Nevada Secretary of State so that the first paragraph of Article I of the Articles of Incorporation shall be as follows: "That the name of said corporation shall be Kronos Advanced Technologies, Inc." Our Company is focused on the development and commercialization of the air-movement and purification technology known as KronosTM. Our Company's Board of Directors believes that it is desirable to change the name of our Company to Kronos Advanced Technologies, Inc., as it more directly associates our Company with our KronosTM technology. RECOMMENDATION OF THE BOARD OF DIRECTORS Our Board of Directors unanimously recommends a vote "FOR" the approval of an amendment to our Company's Articles of Incorporation to change the name of our Company to Kronos Advanced Technologies, Inc. 15Notes. 10 DESCRIPTION OF CAPITAL STOCK Our authorized capital stock consists of 500,000,000 shares of common stock, par value $0.001 per share, and 50,000,000 shares of preferred stock, no par value. As of October 14, 2002, 46,891,293November 17, 2005 81,758,067 shares of common stock were issued and outstanding; no shares of our preferred stock are issued and outstanding. The rights and preferences of the preferred stock will be determined upon issuance by our Board of Directors. The following description is a summary of our capital stock and contains the material terms thereof. Additional information can be found in our Articles of Incorporation and Bylaws, which were filed as exhibits to our Registration Statement on Form S-1 filed on August 7, 2001 with the Securities and Exchange Commission. COMMON STOCKCommon Stock Holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders, including the election of directors. Accordingly, holders of a majority of our common stock entitled to vote in any election of directors may elect all of the directors standing for election should they choose to do so. Neither our Articles of Incorporation nor our Bylaws provide for cumulative voting for the election of directors. Holders of our common stock are entitled to receive their pro rata share of any dividends declared from time to time by the Board of Directors out of funds legally available therefor. Holders of our common stock have no preemptive, subscription, conversion, sinking fund, or redemption rights. All outstanding shares of our common stock are fully paid and non-assessable. In the event of liquidation, dissolution, or winding up of the Company, the holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities, subject to prior distribution rights of preferred stock (if any) then outstanding. PREFERRED STOCKPreferred Stock Our Articles of Incorporation authorizes 50,000,000 shares of preferred stock, no par value. No shares of preferred stock are issued and outstanding as of the date of this prospectus. The Board of Directors is authorized, subject to any limitations prescribed by the Nevada Revised Statutes, or the rules of any quotation system or national securities exchange on which our stock may be quoted or listed, to provide for the issuance of shares of preferred stock in one or more series; to establish from time to time the number of shares to be included in each such series; to fix the rights, powers, preferences, and privileges of the shares of such series, without further vote or action by the stockholders. Depending upon the terms of the preferred stock established by the Board of Directors, any or all series of preferred stock could have preference over the common stock with respect to dividends and other distributions and upon liquidation of the Company or could have voting or conversion rights that could adversely affect the holders of the outstanding common stock. As of the date of this prospectus, the voting and other rights associated with the preferred stock have yet to be determined by the Board of Directors. There are no present plans by the Board of Directors to issue preferred shares or address the rights to be assigned thereto. OPTIONS In April 2001, we entered into agreements with employees, consultants and directors for the grant of stock options to purchase shares of our common stock. All stock option grants are exercisable at the fair market value of the shares on the date of grant, except for those options granted to the consultants. The exercise price in the consulting agreements is fixed and in excess of the fair market value on the date of grants. On April 10, 2001, Messrs. Jeffrey D. Wilson and Richard A. Papworth were granted options to acquire, collectively, 748,475 shares of common stock in consideration for their relinquishment of the anti-dilution clauses in their employment agreements. We have determined that the options to purchase 350,000 shares of common stock granted to Mr. Wilson on April 10, 2001 are void as of that date, and these options are treated as if they were never granted. On April 10, 2001, members of our management team and Board of Directors were granted stock options totaling 450,000 shares. On May 4, 2001, two members of the Board of Directors were granted stock options for 250,000 shares of common stock. On February 12, 2002, eight employees of the Company were granted stock options for 4,580,000 shares of common stock. On November 15, 2001, Daniel R. Dwight was granted stock options for 1,000,000 shares of common stock as a signing bonus in connection with Mr. Dwight's Employment Agreement.Options As of October 9, 2002,November 17, 2005, the following options had been granted in the amounts and to the individuals shown below; as of the date hereof, none of such options has been exercised: 1611
- --------------------------------- -------------------- ------------------------------------------------------- ------------------- ------------------ NUMBER NAME OF OPTIONS STRIKE PRICE DATE OF GRANT EXPIRATION-------------------------- ------------------------- Number Name of Options Strike Price Date of Grant Expiration - --------------------------------- --------------------------------------------------------- ------------------- ------------------ ------------------- -------------------------------------------- ------------------------- Daniel R. Dwight 50,000 $0.885 04/09/01 04/09/06 178,100(1) $0.960 05/07/01 05/07/04 93,600(1) $0.960 11/15/01 11/15/04April 9, 2001 April 9, 2006 1,000,000 $0.680 02/12/02 02/12/February 12, 2002 February 12, 2012 600,000 $0.250 12/12/02 02/12/February 12, 500,000(2)2002 February 12, 2012 500,000 $0.420 11/15/01 11/15/11 250,000(2)December 15, 2001 December 15, 2011 250,000 $0.660 December 15, 2001 December 15, 2011 250,000 $0.560 11/15/01 11/15/11 250,000(2) $0.660 11/15/01 11/15/11December 15, 2001 December 15, 2011 660,000 $0.185 March 21, 2003 March 21, 2013 726,206 $0.180 March 22, 2004 March 22, 2014 750,000 $0.125 June 30, 2005 June 30, 2015 Richard F. Tusing 50,000 $0.885 04/09/01 04/09/06 176,500(3) $0.960 05/07/01 05/07/04 246,500(3) $0.960 06/30/02 06/30/05April 9, 2001 April 9, 2006 600,000 $0.680 02/12/02 02/12/February 12, 2002 February 12, 2012 350,000 $0.250 02/12/02 02/12/February 12, 2002 February 12, 2012 126,700 $0.960 June 30, 2006 June 30, 2006 971,756 $0.180 March 22, 2004 March 22, 2014 450,000 $0.125 June 30, 2005 June 30, 2015 Igor Krichtafovitch 50,000 $0.885 April 9, 2001 April 9, 20/06 600,000 $0.680 February 12, 2002 February 12, 2012 400,000 $0.250 February 12, 2003 February 12, 2012 600,000 $0.185 March 21, 2003 March 21, 2013 500,000 $0.150 May 7, 2003 May 7, 2013 180,726 $0.180 March 22, 2004 March 22, 2014 525,000 $0.125 June 30, 2005 June 30, 2015 Wall Street Group 476,190 $0.070 July 15, 2005 July 15, 2015 J. Alexander Chriss 50,000 $0.885 April 9, 2001 April 9, 2006 350,000 $0.680 February 12, 2002 February 12, 2012 300,000 $0.250 February 12, 2002 February 12, 2012 405,000 $0.185 March 21, 2003 March 21, 2013 247,834 $0.180 March 22, 2004 March 22, 2014 Richard A. Papworth 50,000 $0.885 04/09/01 04/09/06April 9, 2001 April 9, 2006 398,475 $0.885 04/09/01 04/09/11April 9, 2001 April 9, 2011 100,000 $0.680 02/12/02 02/12/February 12, 2002 February 12, 2012 200,000 $0.250 02/12/02 02/12/February 12, Igor Krichtafovitch 50,000 $0.885 04/09/01 04/09/06 600,000 $0.680 02/12/02 02/12/2002 February 12, 400,000 $0.250 02/12/02 02/12/12 J. Alexander Chriss 50,000 $0.885 04/09/01 04/09/06 104,000(4) $1.120 04/30/01 04/30/04 104,800(4) $1.120 12/31/01 12/31/04 350,000 $0.680 02/12/02 02/12/122012 300,000 $0.250 02/12/02 02/12/12$0.185 March 21, 2003 March 21, 2013 Jeffrey D. Wilson 50,000 $0.885 04/09/01 04/09/06 200,000(5)April 9, 2001 April 9, 2006 200,000 $0.710 05/03/01 05/03/11 50,000(6) $0.360 10/10/01 10/10/04May 3, 2001 May 3, 2011 23,014 $0.590 October 15, 2001 Ocotber 15, 2006 10,000 $0.210 03/31/02 03/31/05March 31, 2002 March 31, 2007 50,000 $0.410 April 30, 2002 April 30, 2007 10,000 $0.190 June 30, 2002 June 30, 2007 10,000 $0.140 Septemner 30, 2002 September 30, 2007 42,000 $0.220 October 15, 2002 Ocotber 15, 2007 33,425 $0.180 December 30, 2002 December 30, 2007 50,000 $0.185 June 30, 2003 June 30, 2008 James P. McDermott 50,000 $0.280 July 30, 2001 July 30, 2006 20,959 $0.150 December 30, 2002 December 30, 2007 30,000 $0.150 August 6, 2003 August 6, 2008 213,000 $0.200 July 1, 2004 July 1, 2009 189,000 $0.125 July 1, 2005 July 1, 2010 Spencer Browne 213,000 $0.200 July 1, 2004 July 1, 2009 154,000 $0.125 July 1, 2005 July 1, 2010 Milton J. Segal 199,000 $0.200 July 1, 2004 July 1, 2009 189,000 $0.125 July 1, 2005 July 1, 2010 Charles D. Strang 50,000 $0.885 04/09/01 04/09/06 50,000(7)April 9, 2001 April 9, 2006 50,000 $0.710 05/03/01 05/03/11May 3, 2001 May 3, 2011 50,000 $0.280 August 14, 2002 August 14, 2007 18,904 $0.150 December 30, 2002 December 30, 2007 21,000 $0.150 August 6, 2003 August 6, 2008 50,000 $0.200 July 1, 2004 July 1, 2009 50,000 $0.125 July 1, 2005 July 1, 2010 Erik W. Black 50,000 $0.885 04/09/01 04/09/06April 9, 2001 April 9, 2006 29,041 $0.160 June 1, 2001 June 1, 2006 50,000 $0.380 December 30, 2002 December 30, 2007 30,000 $0.150 August 6, 2003 August 6, 2008 39,667 $0.200 October 6, 2003 October 6, 2008 12 - ------------------------------------- ------------------- ------------------ -------------------------- ------------------------- Number Name of Options Strike Price Date of Grant Expiration - ------------------------------------- ------------------- ------------------ -------------------------- ------------------------- William Poster 35,000 $0.280 July 30, 2002 July 30, 2007 35,575 $0.150 July 30, 2003 July 30, 2008 50,000 $0.200 July 1, 2004 July 1, 2009 50,000 $0.125 July 1, 2005 July 1, 2010 Vladimir Gorobets 30,000 $0.250 February 12, 2002 February 12, 2012 100,000 $0.185 March 21, 2003 March 21, 2013 Jacob Oharah 30,000 $0.250 February 12, 2002 February 12, 2012 50,000 $0.185 March 21, 2003 March 31, 2013 Sergey Karpov 30,000 $0.200 April 7, 2004 April 7, 2014 Vladimir Bibikov 25,000 $0.220 June 30, 2004 June 30, 2014 Terence Tam 25,000 $0.200 April 21, 2004 April 21, 2014 Maciej Ziomkowski 25,000 $0.130 Novermber 1, 2004 December 1, 2014 Christopher Martin 25,000 $0.130 Novermber 1, 2004 December 1, 2014 Charles H. Wellington, Jr. 50,000 $0.885 04/09/01 04/09/06 Vladimir GorobetsApril 9, 2001 April 9, 2006 Capitol Partners 30,000 $0.250 02/12/02 02/12/12 17 - --------------------------------- -------------------- ------------------ ------------------- ------------------ NUMBER NAME OF OPTIONS STRIKE PRICE DATE OF GRANT EXPIRATION - --------------------------------- -------------------- ------------------ ------------------- ------------------ Bruce Long 20,000 $0.250 02/12/02 02/12/12 Jacob Oharah 30,000 $0.250 02/12/02 02/12/12$0.360 December 27, 2001 December 27, 2011 Daniel Gladkowski 18,000 $0.100 April 1, 2003 April 1, 2008
- --------------- (1) Pursuant to consulting agreements dated as ofWarrants In August 11, 2000 (individually) and January 1, 2001 (as Dwight Tusing & Associates), as amended April 12, 2001. (2) Pursuant to an employment agreement dated November 15, 2001 and a corresponding stock option agreement dated November 15, 2001. (3) Pursuant to consulting agreements dated as of August 11, 2000 (individually) and January 1, 2001 (as Dwight Tusing & Associates), as amended April 12, 2001. (4) Pursuant to a consulting agreement dated as of March 18, 2001; option grant effective as of April 30, 2001. (5) Mr. Wilson was granted options to purchase 100,000 shares of common stock annually for his service as Chairman of TSET's Board of Directors. Options shown reflect such options for such service for years 1999 and 2000, respectively. (6) Pursuant to an agreement dated October 10, 2001 between TSET and Mr. Wilson, Mr. Wilson was granted an option to purchase 50,000 shares of common stock in consideration of Mr. Wilson's service in year 2001, prior to his resignation, as Chairman of TSET's Board of Directors. (7) Mr. Strang is entitled to receive 50,000 restricted shares of common stock annually for his service as a member of TSET's Board of Directors. WARRANTS On August 7, 2001, we entered into a Warrant Agreement with The Eagle Rock Group, LLC, pursuant to which The Eagle Rock Group was granted a ten-year warrant to acquire 1,400,000 shares of our common stock at an exercise price of $0.68 per share (the fair market value on the date of grant). The shares underlying the warrant have piggyback 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. We registered all of the shares underlying The Eagle Rock Group's warrant in a Form S-1 Registration Statement filed with the U.S. Securities & Exchange Commission on August 16, 2002. EffectiveIn March 11, 2002, we entered into an agreement with The Eagle Rock Group extending our relationship with The Eagle Rock Group until March 1, 2003. Pursuant to the agreement, we agreed to grant to The Eagle Rock Group a ten-year warrant for the right to purchase 2,000,000500,000 shares of our common stock. Five hundred thousand (500,000)In May 2003, Kronos entered into a Master Loan and Investment Agreement with a strategic customer, HoMedics, Inc., for $2.5 million in financing, including $2.4 million in secured debt financing and $100,000 for the purchase of warrants. In connection with this Agreement, we agreed to grant HoMedics a ten-year warrant for the right to purchase 13.4 million shares are earned over a 12-month period and will fully vest on March 1, 2003. The remainder of the shares may be earned, contingent upon the occurrence of various events, including a successful capital raise, securing contracts with the U.S. military, securing contracts with consumer-oriented distribution organizations, and the adoption of a branding/marketing campaign principally developed by The Eagle Rock Group.our common stock. The exercise price was set at the market price at the time of theseclosing ($0.10). In October 2004, in connection with the First Amendment to Master Loan and Investment Agreement with HoMedics, agreed to grant to HoMedics a ten-year warrant for the right to purchase 26.5 million shares will beof our common stock. The exercise price is $0.10 per share. In consideration for the warrant, HoMedics delivered to Kronos $75,000 by funding the closing fees owed by Kronos and HoMedics agreed to amend two (2) warrants to purchase 13.4 million shares of Kronos' common stock previously issued by Kronos by removing the anti-dilution protection previously granted to HoMedics. Kronos agreed to include new anti-dilution protection in the new warrant. HoMedics is entitled, under certain circumstances, to anti-dilution protection in order to maintain beneficial ownership of Kronos equal to our common stock's closing price as30%. HoMedics may not be diluted below 30% for any funds raised at less than $0.20 per share, excluding options or shares issued to management, directors, and consultants in the normal course of business or shares issued to Cornell Capital in repayment of the day an initial lettertwo promissory notes. There are no anti-dilution measures for funds raised at greater than $0.20 per share. In addition, Kronos agreed to grant HoMedics piggy-back registration rights and one (1) demand registration right with respect to any shares of intent or term sheet relatedcommon stock of Kronos that HoMedics may acquire pursuant to such transaction is executed. ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE ARTICLES OF INCORPORATION, BYLAWS AND FLORIDA LAWthe two (2) previously issued warrants and the warrant issued in October 2004 in connection with the First Amendment to Master Loan and Investment Agreement. HoMedics also agreed not to exercise any warrants until one year after the effective date of the registration statement to be filed pursuant to the Investor Registration Rights Agreement with Cornell Capital. 13 Anti-Takeover Effects of Provisions of the Articles of Incorporation, Bylaws and Nevada Law The following provisions of the Articles of Incorporation and Bylaws of our Company could discourage potential acquisition proposals and could delay or prevent a change in control of our Company. Such provisions may also have the effect of preventing changes in the management of our Company, and preventing shareholdersstockholders from receiving a premium on their common stock. AUTHORIZED BUT UNISSUED STOCK.Authorized but Unissued Stock. The authorized but unissued shares of common stock and preferred stock are available for future issuance without shareholderstockholder approval. These additional shares may be utilized for a variety of corporate purposes, including future public offerings to raise additional capital, corporate acquisitions and employee benefit plans. TRANSFER AGENT AND REGISTRARTransfer Agent And Registrar The transfer agent and registrar for our common stock is MeritAmerican Stock Transfer & Trust Company, 68 South Main Street, Suite 708, Salt Lake City, UT 84101,59 Maiden Lane, New York, NY 10038, Telephone (801) 531-7558. 18 OTHER MATTERS1.212.936.5100. Other Matters As of the date of this proxy statement, our Company knows of no business that will be presented for consideration at the meeting other than the items referred to above. If any other matter is properly brought before the meeting for action by shareholders,stockholders, proxies in the enclosed form returned to our Company will be voted in accordance with the recommendation of our Board of Directors or, in the absence of such a recommendation, in accordance with the judgment of the proxy holder. INDEPENDENT ACCOUNTANTSIndependent Accountants The firm of Grant Thornton,Sherb & Co., LLP served as our Company's independent accountants for Fiscal 2002.2005. Representatives of the firm will be available by telephone to respond to questions at the Annual Meeting of the Shareholders.Stockholders. These representatives will have an opportunity to make a statement if they desire to do so. The Company has not selected its independent accounts for Fiscal 2003. AUDIT FEES.Audit Fees. The aggregate fees billed for professional services rendered was $62,400$62,500 for the audit of the Company's annual financial statements for the year ended June 30, 20022005 and the reviews of the financial statements included in the Company's Forms 10-Q10-QSB for that fiscal year. FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES.Financial Information Systems Design and Implementation Fees. None of the professional services described in Paragraphs (c)(4)(ii) of Rule 2-01 of Regulation S-X were rendered by the principal accountant for the year ended June 30, 2002. ALL OTHER FEES.2005. All Other Fees. Other than the services described above under the captions "Audit Fees" and "Financial Information Systems Design and Implementation Fees," the aggregate fees billed for services rendered by the principal accountant was $105,000$76,665 for the year ended June 30, 2002.2005. These fees related to the review of the Company's Registration Statements and the preparation of federal and state income-tax returns. ADDITIONAL INFORMATION ADVANCE NOTICE PROCEDURES.Additional Information Advance Notice Procedures. Under our Company's Bylaws, no business may be brought before an annual meeting unless it is specified in the notice of the meeting (which includes shareholderstockholder proposals that our Company is required to include in its proxy statement pursuant to Rule 14a-8 under the Securities Exchange Act of 1934) or is otherwise brought before the meeting by or at the discretion of the Board or by a shareholderstockholder entitled to vote who has delivered notice to the Company (containing certain information specified in the bylaws) not less than 120 days nor more than 180 days prior to the first anniversary of the preceding year's annual meeting. These requirements are separate from and in addition to the SEC's requirements that a shareholderstockholder must meet in order to have a shareholderstockholder proposal included in our Company's proxy statement. SHAREHOLDER PROPOSALS FOR THE 2003 ANNUAL MEETING. ShareholdersStockholder Proposals for the 2006 Annual Meeting. Stockholders interested in submitting a proposal for inclusion in the proxy materials for our 2003 Annual Meeting of the ShareholdersStockholders may do so by following the procedures prescribed in SEC Rule 14a-8. To be eligible for inclusion, shareholderstockholder proposals must be received by our Company's Secretary no later than July 1, 2003.22, 2006. Any shareholderstockholder proposals should be addressed to our Company's Secretary, 464 Common Street, Suite 301, Belmont, Massachusetts 02478. PROXY SOLICITATION COSTS.14 Proxy Solicitation Costs. Our Company is soliciting the enclosed proxies. The cost of soliciting proxies in the enclosed form will be borne by our Company. Officers and regular employees of our Company may, but without compensation other than their regular compensation, solicit proxies by further mailing or personal conversations, or by telephone, telex, facsimile or electronic means. Our Company will, upon request, reimburse brokerage firms for their reasonable expenses in forwarding solicitation materials to the beneficial owners of stock. 19 INCORPORATION BY REFERENCE.Incorporation by Reference. Certain financial and other information required pursuant to Item 13 of the Proxy Rules is incorporated by reference to the Company's Annual Report, which is being delivered to the shareholdersstockholders with this proxy statement. In order to facilitate compliance with Rule 2-02(a) of Regulation S-X, one copy of the definitive proxy statement will include a manually signed copy of the accountant's report. BY ORDER OF THE BOARD OF DIRECTORSBy Order of the Board of Directors /s/ Daniel R. Dwight ------------------------------------- Daniel R. Dwight President and Chief Executive Officer Belmont, Massachusetts October ___, 2002 20November 21, 2005