UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
/X/ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended SEPTEMBER 30, 2001
/ / Transition Report under Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from __________ to __________
Commission File No. 000-30191
TSET, INC.
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(Exact name of registrant as specified in its charter)
NEVADA 87-0440410
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(State of other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
14523 WESTLAKE DRIVE, LAKE OSWEGO, OREGON 97034
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(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (503) 598-1900
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(1) Registrant has filed all reports required to be filed by Section 13
or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such
reports), and
(2) has been subject to such filing requirements for the past 90 days.
/X/ Yes / / No
As of November 12, 2001, there were 34,643,695 shares outstanding of
the issuer's common stock.
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following comprise our condensed (unaudited) consolidated financial
statements for the three months ended September 30, 2001.
2
TSET, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, JUNE 30,
2001 2001
-------------------- -------------------
(UNAUDITED) (AUDITED)
ASSETS
CURRENT ASSETS
Cash $ 97,645 $ 32,619
Prepaids 60,106 37,679
-------------------- -------------------
TOTAL CURRENT ASSETS 157,751 70,298
-------------------- -------------------
PROPERTY AND EQUIPMENT 62,723 62,723
Less: Accumulated Depreciation (21,848) (18,016)
-------------------- -------------------
NET PROPERTY AND EQUIPMENT 40,875 44,707
-------------------- -------------------
OTHER ASSETS
Intangibles 2,400,423 2,431,524
Deferred financing fees 595,800 520,800
-------------------- -------------------
2,996,223 2,952,324
TOTAL OTHER ASSETS -------------------- -------------------
TOTAL ASSETS $3,194,849 $3,067,329
==================== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $785,357 $323,045
Accrued expenses 1,249,730 1,284,268
Notes payable, current portion 629,221 313,900
-------------------- --------------------
TOTAL CURRENT LIABILITIES 2,664,308 1,921,213
Net liabilities of discontinued operations 750,096 667,550
-------------------- -------------------
TOTAL LIABILITIES 3,414,404 2,588,763
-------------------- -------------------
Redeemable warrants 686,000 -
SHAREHOLDERS' EQUITY
Common stock, authorized 500,000,000
shares of $.001 par value 34,240 34,001
Capital in excess of par value 12,498,224 12,418,350
Deferred equity compensation (411,600) -
Retained earnings (Accumulated deficit) (13,026,419) (11,973,785)
-------------------- -------------------
TOTAL SHAREHOLDERS' EQUITY (905,555) 478,566
-------------------- -------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $3,194,849 $3,067,329
==================== ===================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
3
TSET, INC
CONSOLIDATED STATEMENTS OF OPERATIONS
--------------------------------------------
FOR THE QUARTER ENDED SEPTEMBER 30,
--------------------------------------------
2001 2000 (RESTATED)
(UNAUDITED) (UNAUDITED)
-------------------- --------------------
Sales $ 25,014 $ -
Cost of sales 10,014 -
-------------------- --------------------
Gross Profit 15,000 -
-------------------- --------------------
Selling, General and Administrative expenses
Compensation and benefits 176,218 289,132
Research and development 90,191 52,567
Professional services 644,817 19,498
Depreciation and amortization 71,674 79,121
Other selling general & administrative expenses 66,711 92,808
-------------------- --------------------
Total Selling, General and Administrative expenses 1,049,611 533,126
-------------------- --------------------
Net Operating Income (Loss) (1,034,611) (533,126)
Other Income / (expense) 269
Interest Expense (18,292) -
-------------------- --------------------
Net Income (Loss) Before Taxes $ (1,052,634) $ (533,126)
==================== ====================
Provision for Taxes - -
-------------------- --------------------
Net Income (Loss) from continuing operations $ (1,052,634) (533,126)
Income (Loss) from discontinued operations, net
of income tax of $0 - (360,356)
Loss on disposal of discontinued operations, net of
income tax of $0 - -
-------------------- --------------------
Net Income (Loss) $ (1,052,634) $ (893,482)
==================== ====================
Basic Earnings (Loss) Per Share
Income (loss) from continuing operations (0.03) (0.02)
Loss from discontinued operations - (0.01)
-------------------- --------------------
Net Income (loss) $ (1,052,634) $ (0.03)
==================== ====================
Diluted Earnings (Loss) Per Share
Income (loss) from continuing operations (0.03) (0.02)
Loss from discontinued operations - (0.01)
-------------------- --------------------
Net Income (loss) $ (0.03) $ (0.03)
==================== ====================
4
TSET, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE QUARTER ENDED SEPTEMBER 30,
-----------------------------------
2001 2000
CASH FLOWS FROM OPERATING ACTIVITIES (RESTATED)
(UNAUDITED) (UNAUDITED)
-----------------------------------
NET LOSS FROM CONTINUING OPERATIONS $(1,052,634) $ (533,126)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
(USED IN) PROVIDED BY OPERATIONS
Depreciation and amortization 71,674 79,121
Common stock/warrants issued for compensation/services 274,513 6,560
CHANGE IN
Inventory - (40,000)
Accounts receivable - 4,648
Prepaid expenses and other assets (97,427) (26,750)
Accounts payable 462,312 41,642
Accrued expenses and other liabilities (34,538) 15,776
------------------------------
NET CASH (USED IN) PROVIDED BY CONTINUING OPERATIONS (376,100) (452,129)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment - (9,526)
Investment in patent protection (36,740) -
Investment in discontinued operations 82,545 (79,999)
------------------------------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES 45,805 (89,525)
------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term borrowings 315,321 -
Issuance of common stock 80,000 1,021,000
----------------------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES 395,321 1,021,000
-----------------------------
NET (DECREASE) INCREASE IN CASH 65,026 479,346
CASH
BEGINNING OF PERIOD 32,619 102,949
-----------------------------
END OF PERIOD $ 97,645 $ 582,295
=============================
Supplemental schedule of non-cash investing and financing activities:
Interest paid in cash $ - $ -
Income taxes $ - $ -
Non-cash financing activities:
Debt satisfied with stock $ - $ 419,143
The accompanying notes are an integral part of this financial statement
5
TSET, INC
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
COMMON STOCK
-------------------------------
SHARES AMOUNT CAPITAL IN EXCESS OF PAR RETAINED EARNINGS TOTAL SHAREHOLDERS' EQUITY
VALUE (ACCUMULATED DEFICIT) (DEFICIT)
-----------------------------------------------------------------------------------------------------
BALANCE at June 30, 2000
(Restated) 29,651,661 29,652 9,316,743 (2,107,703) 7,238,692
Purchase price adjustment on
Cancer Detection
International, Inc. (20,000) (20) (39,230) (39,250)
Shares issued on July 20,
2000 for cash 161,538 161 188,839 189,000
Shares issued on August 3,
2000 5,000 5 6,555 6,560
Shares issued to liquidate
debt of Atomic Soccer USA, Ltd 362,259 362 375,981 376,343
Shares issued in September
2000 for cash 832,000 832 831,168 832,000
Shares issued in September to
liquidate TSET, Inc. debt 42,800 43 42,757 42,800
Shares issued on December 8,
2000 for cash 168,492 169 99,831 100,000
Shares issued on December 27,
2000 for cash 39,091 39 22,301 22,340
Shares issued on January 8,
2001 for cash 687,500 688 399,312 400,000
Shares issued on January 12,
2001 for cash 57,693 57 34,943 35,000
Shares issued on January 19,
2001 for cash 10,000 10 6,390 6,400
Shares issued on January 19,
2001 for services and comp 44,915 45 56,098 56,143
Shares issued on March 23,
2001 for cash 186,302 186 134,814 135,000
Shares issued on April 9,
2001 as compensation 2,000 2 1,768 1,770
Shares issued on April 9,
2001 to liquidate debt of
Atomic Soccer 97,020 97 96,923 97,020
Shares issued in April 2001
for cash 38,038 38 17,492 17,530
Shares issued on May 3, 2001
for cash 52,778 53 18,947 19,000
Shares issued on May 7, 2001
for cash 891,891 892 299,108 300,000
Shares issued on June 14,
2001 as compensation 50,000 50 47,450 47,500
Shares issued on June 29,
2001 as a financing fee 640,000 640 460,160 460,800
Deferred equity compensation - - (411,600) - (411,600)
Net loss for the year ended
June 30, 2001 - - - (1,052,634) (1,052,634)
-----------------------------------------------------------------------------------------------------
BALANCE at June 30, 2001 34,000,978 $ 34,001 $ 12,418,350 $ (11,973,785) $ 478,566
Shares issued on July 6, 2001
for cash 238,806 239 79,761 80,000
Shares issued on July 20,
2001 as compensation 250 113 113
Deferred equity
compensation - - (411,600) - (411,600)
Net loss for the year ended
June 30, 2001 - - - (1,052,634) (1,052,634)
6
COMMON STOCK
-------------------------------
SHARES AMOUNT CAPITAL IN EXCESS OF PAR RETAINED EARNINGS TOTAL SHAREHOLDERS' EQUITY
VALUE (ACCUMULATED DEFICIT) (DEFICIT)
-----------------------------------------------------------------------------------------------------
BALANCE at September 30,
2001 34,240,034 $ 34,240 $ 12,086,624 $ (13,026,419) $ (905,555)
======================================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT.
7
TSET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - ACCOUNTING MATTERS
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information. Accordingly, they do not include all the information and notes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments necessary to present
fairly the information set forth therein have been included. Operating results
for the three-month period ended September 30, 2001 are not necessarily
indicative of the results that may be experienced for the fiscal year ending
June 30, 2002.
These financial statements are those of the Company and its wholly
owned subsidiaries. All significant inter-company accounts and transactions have
been eliminated in the preparation of the consolidated financial statements.
EdgeAudio is disclosed as discontinued operations in these financial statements.
The accompanying financial statements should be read in conjunction
with the TSET, Inc. Form 10K for the fiscal year ended June 30, 2001 filed on
October 15, 2001.
RECENT ACCOUNTING PRONOUNCEMENTS. On July 20, 2001, the FASB issued
SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other
Intangible Assets." These statements make significant changes to the accounting
for business combinations, goodwill, and intangible assets.
SFAS No. 141 establishes new standards for accounting and reporting
requirements for business combinations and will require that the purchase method
of accounting be used for all business combinations initiated after June 30,
2001. Use of the pooling-of-interests method will be prohibited. This statement
is effective for business combinations initiated after June 30, 2001.
SFAS No. 142 establishes new standards for goodwill acquired in a
business combination, eliminates amortization of goodwill and instead sets forth
methods to periodically evaluate goodwill for impairment. Intangible assets with
a determinable useful life will continue to be amortized over that period. The
Company expects to adopt this statement during the quarter ending September 30,
2002. Goodwill and intangible assets acquired after June 30, 2001 will be
subject immediately to the non-amortization and amortization provisions of the
statement. The Company does not currently have any goodwill recorded on its
financial statements and it is expected that there will be no immediate impact
on the Company's financial statements as a result of the adoption of this
statement.
In June 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard (SFAS) No. 143, "Accounting for Asset
Retirement Obligations." This statement addresses the financial accounting and
reporting for the retirement of tangible long-lived assets and the associated
asset retirement costs. The Company believes the adoption of SFAS 143 will have
no significant impact on its financial statements.
In August 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard (SFAS) No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." This statement addresses the
financial accounting and reporting for the impairment or disposal of long-lived
assets. The Company believes the adoption of SFAS 144 will have no significant
impact on its financial statements.
8
NOTE 2 -- INCOME TAXES
The composition of deferred tax assets and the related tax effects at
September 30 and June 30, 2001 are as follows:
September 30, 2001 June 30, 2001
--------------------- --------------------
Benefit from carryforward of net operating losses $ 2,456,635 $ 2,225,520
Other temporary differences 1,008,189 1,008,189
Less:
Valuation allowance (3,464,824) (3,233,709)
--------------------- --------------------
Net deferred tax asset $ - $ -
===================== ====================
The other temporary differences shown above relate primarily to loss on
discontinued operations, impairment reserves for intangible assets, and accrued
and deferred compensation. The difference between the income tax benefit in the
accompanying statements of operations and the amount that would result if the
U.S. Federal statutory rate of 34% were applied to pre-tax loss is as follows:
September 30, 2001 June 30, 2001
----------------------------------------------------------------------------
Amount % of pre-tax Loss Amount % of pre-tax
Loss
----------------------------------------------------------------------------
Benefit for income tax at
federal statutory rate $ 357,896 34.0% $3,374,793 34.2
Non-deductible expenses (126,781) (12.0)% (357,007) (3.6)%
Disposed subsidiary NOL - - (578,370) (5.9%)
Increase in valuation allowance (231,115) (22.0)% (2,439,416) (24.7)%
----------------------------------------------------------------------------
$ - 0.0% $ - 0.0%
============================================================================
The non-deductible expenses shown above related primarily to the
amortization of intangible assets and to the accrual of stock options for
compensation using different valuation methods for financial and tax reporting
purposes.
At September 30, 2001, for federal income tax and alternative minimum
tax reporting purposes, the Company has approximately $7.2 million of unused net
operating losses available for carryforward to future years. The benefit from
carryforward of such net operating losses will expire in various years between
2011 and 2023 and could be subject to limitations if significant ownership
changes occur in the Company. Of the $7.2 million of unused net operating losses
noted above, approximately $153,000 relates to losses incurred by the Company's
subsidiary, EdgeAudio. In fiscal years prior to June 30, 2000, EdgeAudio did not
file its tax returns on a consolidated basis with the Company. Accordingly, the
$153,000 loss incurred by EdgeAudio is further subject to separate limitations
that restrict the ability of the Company to use such losses.
NOTE 3 - SEGMENTS OF BUSINESS
The Company operates principally in one segment of business: The Kronos
segment licenses, manufactures and distributes air movement and purification
devices utilizing the Kronos(TM) technology. All other segments have been
disposed of or discontinued. Although there are future plans for expansion into
foreign markets, in the year ended June 30, 2001, the Company operated only in
the U.S.
NOTE 4 - EARNINGS PER SHARE
As of September 30, 2001, there were outstanding options to purchase
1,730,975 shares of TSET common stock. These options have been excluded from the
earnings per share calculation as their effect is anti-dilutive.
NOTE 5 - DISCONTINUED OPERATIONS
In early January 2001, management committed to a formal plan of action
to sell or otherwise dispose of Atomic Soccer. Agreement was reached with a
buyer group, that included current and former Atomic Soccer management, to sell
them the outstanding shares of common stock of Atomic Soccer for $1,000. The
9
transaction was effective on April 11, 2001. On September 14, 2001 the board
approved a formal plan of action to sell or otherwise dispose of EdgeAudio. The
Company has accrued $150,000 for anticipated operating loses during the
phase-out period. As a result, both Atomic Soccer and EdgeAudio are included in
the financial statements as discontinued operations.
The Company's audited consolidated financial statements for all periods
have been reclassified to report separately results of operations and operating
cash flows from continuing operations and the discontinued operations. The net
revenues are included in the financial statements under Net Income (Loss) from
Discontinued Operations. The assets and liabilities of EdgeAudio at September
30, 2001 are included in the balance sheet Net Liabilities of Discontinued
Operations. Net assets of discontinued operations at September 30, 2001 and
operating results of discontinued operations for the three-months ended
September 30, are as follows:
Net liabilities of Discontinued Operations
Edge Audio
---------------------
Current Assets $ 375,319
Net Property and Equipment 48,923
Current Liabilities (649,148)
Minority interest (525,190)
---------------------
Net Assets (Liabilities) $ (750,096)
=====================
Operating Results of Discontinued Operations:
For the quarter ended September 30,
2001 2000
------------ --------------- -------------- ---------------
Edge Audio Atomic Edge Audio Total
------------ --------------- --------------- --------------
Sales $ 175,265 $ 365,848 $ 22,990 $ 388,838
Cost of sales (63,509) (230,117) (11,810) (241,927)
Depreciation
and amortization (3,309) (71,798) (64,934) (136,732)
General and
Administrative (208,330) (150,895) (233,483) (384,378)
------------ --------------- --------------- --------------
Operating income
(loss) (99,883) (86,962) (287,237) (374,199)
Other Income 5,090 - - -
Interest expense (7,744) (28,526) (2,615) (31,141)
Provision for future
operating losses 82,030 - - -
Minority interest 20,507 - 44,984 44,984
------------ --------------- ---------------- -------------
Income (Loss) pre-tax 0 (115,488) (244,868) (360,356)
Income taxes - - - -
------------ --------------- --------------- --------------
Loss from disconcinued
operations $ 0 $ (115,488) $ (244,868) $ (360,356)
============ =============== =============== ==============
NOTE 6 - ISSUANCE OF WARRANTS
On July 9, 2001, the Company signed an agreement to utilize the
strategic planning and business plan execution services of The Eagle Rock Group,
LLC. The Eagle Rock Group will work with the Kronos Air Technologies team to
fully develop and capitalize on the Kronos(TM) technology.
The Eagle Rock Group will focus on the following areas (i) capital
raising and allocation (ii) strategic partner introduction and evaluation, (iii)
distribution channel development, (iv) product focus and brand development, (v)
human resource placement, and (vi) capital market introduction and awareness.
Pursuant to the agreement that we entered into with The Eagle Rock
Group, we issued to The Eagle Rock Group a ten-year warrant granting them the
right to purchase 1,400,000 shares of our common stock at an exercise price of
$0.68 per share. The warrant was valued at $686,000 using the Black-Scholes
option valuation model and was recorded pro rata over the initial consulting
period. The shares underlying the warrant have piggy-back and demand
registration rights, as well as subscription rights in the event that we issue
any right to all of our stockholders to subscribe for shares of our common
stock. In addition, the warrant contains redemption rights in the event that we
enter into a transaction that results in a change of control of our company.
NOTE 7 - SUBSEQUENT EVENTS
In September 2001, the Company determined that, among other things, the
Board of Directors never validly approved Jeffrey D. Wilson's Employment
Agreement dated April 20, 1999. Accordingly, the Company determined that Mr.
Wilson's Employment Agreement and a Letter Agreement, dated April 10, 2001
amending the Employment Agreement, are null and void from their inception. As a
consequence, the Company has determined that the issuance of 1,000,000 shares of
common stock pursuant to Mr. Wilson's Employment Agreement and the grant of
options to purchase 350,000 shares of common stock pursuant to the Letter
Agreement are void as of the effective dates of the Employment Agreement and
Letter Agreement, respectively, and that these shares of common stock and
options are treated as if they were never issued or granted, as the case may be.
Effective October 10, 2001, Mr. Wilson resigned as Chairman of the Board of
Directors and Chief Executive Officer of the Company. Mr. Wilson remains as a
director of the Company.
In October 2001, the Company entered into an agreement with Jeffrey D.
Wilson pursuant to which the Company issued a promissory note to Mr. Wilson in
the amount of $350,000 and will pay $30,000 in cash to Mr. Wilson within sixty
10
days of October 15, 2001. The $380,000 represents all of Mr. Wilson's accrued
salary, bonus and interest. In addition, the Company will also pay Mr. Wilson
his unpaid reimburseable expenses.
In October 2001, the Company entered into a Consulting Agreement with
Jeffrey D. Wilson, pursuant to which Mr. Wilson will provide thirty-five hours
per month of management and other consulting services to the Company in exchange
for consulting fees payable in cash and options of the Company's common stock.
Out-of-pocket expenses incurred by Mr. Wilson in connection with the provision
of his services under the Consulting Agreement will also be reimbursed by the
Company. The Consulting Agreement was negotiated at arm's length and the
Company's management believes that the compensation and other provisions of the
Consulting Agreement are fair, reasonable, customary, and favorable to the
Company.
Effective October 16, 2001, Daniel R. Dwight was appointed President
and Chief Executive Officer of the Company.
Effective October 2001, the Company entered into a consulting agreement
with Steven G. Martin and Joshua B. Scheinfeld for a period of 15 months. Mssrs.
Martin and Scheinfield will be compensated by up to 360,000 shares of the
Company's common stock.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTORY STATEMENTS
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
This filing contains forward-looking statements, including statements
regarding, among other things: (a) the growth strategies of TSET, Inc. (the
"Company"); (b) anticipated trends in our Company's industry; (c) our Company's
future financing plans; and (d) our Company's ability to obtain financing and
continue operations. In addition, when used in this filing, the words
"believes," "anticipates," "intends," "in anticipation of," and similar words
are intended to identify certain forward-looking statements. These
forward-looking statements are based largely on our Company's expectations and
are subject to a number of risks and uncertainties, many of which are beyond our
Company's control. Actual results could differ materially from these
forward-looking statements as a result of changes in trends in the economy and
our Company's industry, reductions in the availability of financing and other
factors. In light of these risks and uncertainties, there can be no assurance
that the forward-looking statements contained in this filing will in fact occur.
Our Company does not undertake any obligation to publicly release the results of
any revision to these forward-looking statements that may be made to reflect any
future events or circumstances.
GENERAL
Historically, we had been seeking select business opportunities
globally among a wide range of prospects. Over the past two years, we made
several investments, including Kronos Air Technologies and EdgeAudio. After
further evaluation of these investments, we believe our investment in and the
full development of Kronos Air Technologies and the Kronos(TM) technology
represents the single best opportunity for us. As a result, we have prioritized
our management and financial resources to fully capitalize on this investment
opportunity. Effective October 10, 2001, Jeffrey D. Wilson resigned as Chairman
of the Board and Chief Executive Officer of TSET, as well as Chairman of the
Board of Kronos Air Technologies and EdgeAudio, respectively. Mr. Wilson remains
as a director of TSET. Effective October 16, 2001, Daniel R. Dwight was
appointed President and Chief Executive Officer of TSET. A more detailed
explanation of Kronos Air Technologies and the current status of EdgeAudio and
the other investments made by us are discussed below.
We have reorganized our Company to prioritize and focus management and
financial resources on Kronos Air Technologies and the Kronos(TM) technology.
This reorganization has resulted in the decision to sell or to no longer pursue
other investment opportunities previously identified. We sold our investment in
Atomic Soccer in April 2001; decided not to pursue investments in Cancer
Detection International, Electric Management Units, and Cancer Treatment Centers
in July 2001; established a formal plan to dispose of EdgeAudio in September
2001; and terminated by mutual consent of both parties a contract to distribute
Computerized Thermal Imaging equipment in August 2000.
Kronos Air Technologies is focused on the development and
commercialization of an air movement and purification technology known as
Kronos(TM) which is more fully described below. The Kronos(TM) technology
operates through the application of high-voltage management across paired
electrical grids that creates an ion exchange which move air and gases at high
velocities while removing odors, smoke, and particulates, as well as killing
pathogens, including bacteria. We believe the technology is cost-effective and
is more energy-efficient than current alternative fan and filter technologies.
Kronos(TM) has multiple U.S. and international patents pending.
The Kronos(TM) device is comprised of state-of-the-art high-voltage
electronics and electrodes on a single printed circuit board attached to one or
more sets of corona and target electrodes housed in a self-contained casing. The
device can be flexible in size, shape and capacity and can be used in embedded
electronic devices, standalone room devices, and integrated HVAC and industrial
applications. The Kronos(TM) device has no moving parts or degrading elements
and is composed of cost-effective, commercially available components.
The Kronos(TM) technology combines the benefits of silent air movement,
air cleaning, and odor removal. Because the Kronos(TM) air movement system is a
silent, non-turbulent, and energy-efficient air movement and cleaning system, we
believe that it is ideal for air circulation, cleaning and odor removal in all
types of buildings as well as compact, sealed environments such as airplanes,
submarines and cleanrooms. Additionally, because it has no moving parts or fans,
a Kronos(TM) device can instantly block or reverse the flow of air between
adjacent areas for safety in hazardous or extreme circumstances.
12
RESULTS OF OPERATIONS
The comparability of our financial statements between years is not
easily susceptible to narrative comparison by virtue of the fact that (a) we
were basically inactive from the time that we discontinued operations in 1996
until the time that we reactivated operations in mid-1999, (b) from inception we
have not had significant operating revenues, and (c) we acquired Kronos Air
Technologies, Atomic Soccer, EdgeAudio, and Cancer Detection International
towards the end of the year ending June 30, 2000.
REORGANIZATION
Based on our decision to focus our resources on Kronos Air
Technologies, several actions were taken which impacted the results of
operations. On April 10, 2001, we sold Atomic Soccer. The new ownership group
consisted of Timothy G. Belinger, Todd P. Ragsdale and James Eric Anderson. At
the time of the sale, Messrs. Belinger, Ragsdale and Anderson were members of
Atomic Soccer's Board of Directors. None of these individuals were then, or
currently are, officers, directors, employees or affiliates of TSET. At the time
of the sale, Erik W. Black, an officer and director of TSET, was Atomic Soccer's
Chairman of the Board of Directors. Mr. Black resigned from Atomic Soccer's
Board of Directors immediately following the execution of the sale document and
was not a member of Atomic Soccer's new ownership group. The sale resulted in a
loss of $2,297,000. During our fourth quarter of 2001, we determined that the
assets of EdgeAudio were impaired and we recognized an impairment loss of
$2,294,000. On September 14, 2001, the board authorized management to pursue a
formal plan for disposal of EdgeAudio. The anticipated loss from operations
during the phase-out period is $150,000. We do not anticipate a loss on the sale
of EdgeAudio. We also decided to discontinue development of Cancer Detection
International and we have recognized an impairment loss of the remaining
goodwill of $273,000 associated with that investment.
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 2001 AND 2000
REVENUE. Revenues are generated through sales of Kronos(TM) devices at
Kronos Air Technologies, Inc. For the three months ended September 30, 2001, our
Company had revenues of $25,014, as compared to no revenues for the three months
ended September 30, 2000.
COST OF SALES. For the three months ended September 30, 2001, our
Company had costs of sales of $10,014, as compared to no cost of sales for the
three months ended September 30, 2000.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. For the three months
ended September 30, 2001, selling, general and administrative expenses amounted
to $1,049,612, as compared to $533,126 for the three months ended September 30,
2000. This increase in selling, general and administrative expenses for the
three months ended September 30, 2001 of $516,486 represents a 96.9% increase
from the corresponding period in 2000, of which compensation and benefits
decreased $112,914 or 39.1%, research and development increased $37,624 or
71.6%, professional services increased $625,319 or 969.8%, depreciation and
amortization decreased $7,447 or 9.4% and other selling, general and
administrative expenses decreased by $26,096 or 28.1%. The increase in
professional services was the result of our company utilizing consulting
services to manage the day-to-day operations of the company. Consultants to the
Company included the Chief Executive Officer and Executive Vice-President,
Marketing and Sales of Kronos Air Technologies, as well as the Chief Operating
Officer of TSET. Also included in professional services is a pro rata portiion
of The Eagle Rock Group consulting fee of $274,400 which is based on the
valuation of 1.4 million warrants granted for the consulting provided by the
Eagle Rock Group.
CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 2001
Our total assets at September 30, 2001 were $3,194,849 compared with
$3,067,329 at June 30, 2001, an increase of $127,520. Total assets at September
30, 2001 were comprised mainly of $595,800 for deferred financing fees and
$2,400,423 of patents/intellectual property. Total assets at June 30, 2001 were
comprised principally of $2,431,524 of patents/intellectual property and
$520,800 of deferred financing fees. Total current assets at September 30, 2001
and June 30, 2001 amounted to $157,751 and $70,298, respectively, while total
current liabilities for those same periods amounted to $2,664,308 and
$1,921,213, respectively, creating a working capital deficit of $2,506,557 and
$1,850,915 at each respective period end. This working capital deficit is
principally attributable to the increase in accrued expenses in both years for
compensation and professional services. Total liabilities as at September 30,
2001 and June 30, 2001 were $3,414,404 and $2,588,763, respectively,
representing an increase of $825,641. Shareholders' equity as of September 30,
2001 and June 30, 2001 was $(905,555) and $478,566, respectively, representing a
decrease of $1,384,121. The decrease in shareholders' equity is principally the
result of incurring a $1,052,634 loss from continuing operations for the three
months ended September 30, 2001 and from deferred equity compensation from The
Eagle Rock Group warrants. The total valuation of these 1.4 million warrants was
$686,000, of which $274,400 was recorded as a current period expense and the
remaining $411,600 was recorded as a decrease to shareholders' equity. In
addition, equity increased during the three-months period ended September 30,
2001 through the sale and issuance of common stock.
13
LIQUIDITY AND CAPITAL RESOURCES
Historically we have relied principally on the sale of common stock to
finance our operations. Going forward, we plan to rely on the proceeds from a
Small Business Innovation Research contract with the United States Navy and
other government contracts and grants, and cash flow generated from the sale of
Kronos(TM) devices. We have also entered into a common stock purchase agreement
with Fusion Capital under which we have the right, subject to certain
conditions, to draw down approximately $12,500 per day from the sale of common
stock to Fusion Capital. In addition, in May 2001, Kronos Air Technologies
signed a Small Business Innovation Research contract. This contract is sponsored
by the United States Navy and is potentially worth up to $837,000 in product
development and testing support for Kronos Air Technologies. The first phase of
the contract is worth up to $87,000 in funding for manufacturing and testing a
prototype device for air movement and ventilation on board naval vessels over
the next six months. If awarded to Kronos Air Technologies, the second phase of
the contract would be worth up to $750,000 in additional funding.
At September 30, 2001, we had a working capital deficit of $2,506,557,
which represented a decline of $655,642 from net working capital at June 30,
2001. At September 30, 2001, we had $2.66 million in current liabilities.
Current liabilities was comprised principally of compensation, operating
management consulting fees and other payroll related items of $1.4 million
(53%); other accrued liabilities and advances from shareholders for which shares
of the Company's common stock will be issued during the second quarter of $0.6
million (24%); a note payable to EdgeAudio for working capital under the May 4,
2000 acquisition agreement of $0.3 million (11%); and accounts payables for
professional fees and other vendors of $0.3 million (12%). Net cash flow used on
operating activities was $277,847 for the three months ended September 30, 2001.
We were able to satisfy some of our cash requirements for the three months ended
September 30, 2001 through the issuance and sale of our common stock.
On June 19, 2001, we entered into a common stock purchase agreement
with Fusion Capital. Pursuant to the common stock purchase agreement, Fusion
Capital has agreed subject to certain conditions to purchase on each trading day
during the term of the agreement, $12,500 of our common stock or an aggregate of
$10.0 million. The $10.0 million of our common stock is to be purchased over a
40-month period, subject to a six-month extension or earlier termination at our
sole discretion and subject to certain events. The purchase price of the shares
of common stock will be equal to a price based upon the future market price of
our common stock without any fixed discount to the then-current market price.
However, there can be no assurance of how much cash we will receive, if any,
under the common stock purchase agreement with Fusion Capital.
On November 1, 2001, our Registration Statement on Form S-1 was
declared effective by the Securities and Exchange Commission. As a result, the
Company may be able to raise capital by selling shares of its common stock to
Fusion Capital in accordance with the common stock purchase agreement.
On November 13, 2001, we entered into a Letter Agreement with Fusion
Capital amending the common stock purchase agreement. Pursuant to the Letter
Agreement, Fusion Capital will provide our Company with a $150,000 advance under
the common stock purchase agreement and our ability to receive advances is
limited.
GOING CONCERN OPINION
We do not have significant cash or other material assets to cover our
operating costs. Our ability to obtain additional funding will largely determine
our ability to continue in business. Accordingly, there is substantial doubt
about our ability to continue as a going concern. Our financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
We can make no assurance that we will be able to successfully
transition from research and development to manufacturing and selling commercial
products on a broad basis. While attempting to make this transition, we will be
subject to all the risks inherent in a growing venture, including, but no
limited to, the need to develop and manufacture reliable and effective products,
develop marketing expertise and expand our sales force.
CERTAIN RISK FACTORS
Our Company is subject to various risks which may materially harm our
business, financial condition and results of operations. Certain risks are
discussed below.
WE HAVE A LIMITED OPERATING HISTORY WITH SIGNIFICANT LOSSES AND EXPECT LOSSES TO
CONTINUE FOR THE FORESEEABLE FUTURE
We have only recently begun implementing our plan to prioritize and
concentrate our management and financial resources to fully capitalize on our
investment in Kronos Air Technologies and have yet to establish any history of
profitable operations. We incurred a net operating loss of $760,212 for the
three months ended September 30, 2001. We have incurred net losses from
continuing operations of $3,572,558 and $1,385,595 for the fiscal years ended
June 31, 2001 and 2000. We have incurred net losses from continuing operations
of $778,234 for the three months ended September 30, 2001. We have incurred
annual operating losses of $9,866,083, $1,965,183 and $51,674 respectively,
during the past three fiscal years of operation. As a result, at September 30,
2001 and June 30, 2001 we had an accumulated deficit of $12,752,019 and
$11,973,785, respectively. Our revenues have not been sufficient to sustain our
operations. We expect that our revenues will not be sufficient to sustain our
14
operations for the foreseeable future. Our profitability will require the
successful commercialization of our Kronos(TM) technology. No assurances can be
given when this will occur or that we will ever be profitable.
Our independent auditors have added an explanatory paragraph to their
audit opinion issued in connection with the financial statements for the years
ended June 30, 2001 and June 30, 2000 relative to our ability to continue as a
going concern. Our ability to obtain additional funding will determine our
ability to continue as a going concern. Our financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
WE WILL REQUIRE ADDITIONAL FINANCING TO SUSTAIN OUR OPERATIONS AND WITHOUT IT WE
WILL NOT BE ABLE TO CONTINUE OPERATIONS
At September 30, 2001 we had a working capital deficit of $2,506,557.
At June 30, 2001 we had a working capital deficit of $1,850,915. The independent
auditor's report for the years ended June 30, 2001 and June 30, 2000, includes
an explanatory paragraph to their audit opinion stating that our recurring
losses from operations and working capital deficiency raise substantial doubt
about our ability to continue as a going concern. We have an operating cash flow
deficit of $10,524 in 1999, an operating cash flow deficit of $288,262 in 2000
and an operating cash flow deficit of $1,613,573 in 2001. We do not currently
have sufficient financial resources to fund our operations or those of our
subsidiaries. Therefore, we need additional funds to continue these operations.
Subject to certain conditions, we have the right to receive $12,500 per
trading day under the common stock purchase agreement unless our stock price
equals or exceeds $3.00, in which case the daily amount may be increased at our
option. Since we initially registered 5,000,000 shares for sale by Fusion
Capital pursuant to the common stock purchase agreement, the selling price of
our common stock to Fusion Capital will have to average at least $2.00 per share
for us to receive the maximum proceeds of $10,000,000 without registering
additional shares of common stock or filing a post-effective amendment with
respect to the number of shares registered. Assuming a purchase price of $0.36
per share (the closing sale price of the common stock on November 15, 2001) and
the purchase by Fusion Capital of the full 5,000,000 shares under the common
stock purchase agreement, proceeds to us would only be $1,800,000 unless we
choose to register more than 5,000,000 shares, which we have the right, but not
the obligation, to do. The extent we rely on Fusion Capital as a source of
funding will depend on a number of factors including, the prevailing market
price of our common stock and the extent to which we are able to secure working
capital from other sources, such as through the sale of our Kronos(TM) air
movement and purification systems. If obtaining sufficient financing from Fusion
Capital were to prove prohibitively expensive and if we are unable to
commercialize and sell the products or technologies of our subsidiaries, we will
need to secure another source of funding in order to satisfy our working capital
needs. Even if we are able to access the funds available under the common stock
purchase agreement, we may still need additional capital to fully implement our
business, operating and development plans. Should the financing we require to
sustain our working capital needs be unavailable or prohibitively expensive when
we require it, the consequences would be a material adverse effect on our
business, operating results, financial condition and prospects.
WE HAVE VERY LIMITED MANUFACTURING, SALES AND MARKETING CAPABILITIES FOR OUR
KRONOS(TM) PRODUCTS AND OUR FAILURE TO DEVELOP ANY OF THESE CAPABILITIES WOULD
HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS
We have only recently begun to manufacture and market prototype
versions of our Kronos Air Technologies products and we have no experience
manufacturing, marketing or distributing commercial quantities of our Kronos Air
Technologies products. Kronos Air Technologies currently does not have any
commercial-scale manufacturing facilities. Kronos Air Technologies does not have
any relationships with third parties to contract manufacture, market or
distribute the Kronos(TM) products. If Kronos Air Technologies is unable to
acquire adequate manufacturing capabilities and hire sales and marketing
personnel or if it cannot enter into satisfactory arrangements with third
parties to manufacture, market and distribute the Kronos(TM) products on
commercially reasonable terms, the consequences would be a material adverse
effect on our business, operating results, financial condition and prospects.
There can be no assurance that we will be able to acquire adequate manufacturing
capabilities and hire sales and marketing personnel or be able to enter into
satisfactory arrangements with third parties to manufacture, market and
distribute the Kronos(TM) products.
COMPETITION IN THE MARKET FOR AIR MOVEMENT AND PURIFICATION DEVICES MAY RESULT
IN THE FAILURE OF THE KRONOS(TM) PRODUCTS TO ACHIEVE MARKET ACCEPTANCE
Kronos Air Technologies presently faces competition from other
companies that are developing or that currently sell air movement and
purification devices. Many of these competitors have substantially greater
financial, research and development, manufacturing, and sales and marketing
resources than we do. Many of the products sold by Kronos Air Technologies'
competitors already have brand recognition and established positions in the
15
markets that we have targeted for penetration. There can be no assurance that
the Kronos(TM) products will compete favorably with the products sold by our
competitors.
OUR COMMON STOCK IS DEEMED TO BE "PENNY STOCK," SUBJECT TO SPECIAL REQUIREMENTS
AND CONDITIONS, AND MAY NOT BE A SUITABLE INVESTMENT
Our common stock is deemed to be "penny stock" as that term is defined
in Rule 3a51-1 promulgated under the Securities Exchange Act of 1934. Penny
stocks are stocks:
o With a price of less than $5.00 per share;
o That are not traded on a "recognized" national exchange;
o Whose prices are not quoted on the Nasdaq automated quotation
system (Nasdaq listed stock must still have a price of not
less than $5.00 per share); or
o In issuers with net tangible assets less than $2.0 million (if
the issuer has been in continuous operation for at least three
years) or $5.0 million (if in continuous operation for less
than three years), or with average revenues of less than $6.0
million for the last three years.
Broker/dealers dealing in penny stocks are required to provide
potential investors with a document disclosing the risks of penny stocks.
Moreover, broker/dealers are required to determine whether an investment in a
penny stock is a suitable investment for a prospective investor. These
requirements may reduce the potential market for our common stock by reducing
the number of potential investors. This may make it more difficult for investors
in our common stock to resell shares to third parties or to otherwise dispose of
them. This could cause our stock price to decline.
WE RELY ON MANAGEMENT AND KRONOS AIR TECHNOLOGIES RESEARCH PERSONNEL, THE LOSS
OF WHOSE SERVICES COULD HAVE A MATERIAL ADVERSE EFFECT UPON OUR BUSINESS
We rely principally upon the services of our Board of Directors, senior
executive management, and certain key employees, including the Kronos Air
Technologies research team, the loss of whose services could have a material
adverse effect upon our business and prospects. We are in the process of
identifying suitable candidates for certain other senior management positions
deemed essential to the future successful development of Kronos Air Technologies
and the Kronos(TM) technology. Competition for appropriately qualified personnel
is intense. Our ability to attract and retain highly qualified senior management
and technical research and development personnel are believed to be an important
element of our future success. Our failure to attract and retain such personnel
may, among other things, limit the rate at which we can expand operations and
achieve profitability. There can be no assurance that we will be able to attract
and retain senior management and key employees having competency in those
substantive areas deemed important to the successful implementation of our plans
to fully capitalize on our investment in Kronos Air Technologies and the
Kronos(TM) technology, and the inability to do so or any difficulties
encountered by management in establishing effective working relationships among
them may adversely affect our business and prospects. Currently, our Chief
Executive Officer performs services pursuant to a consulting agreement.
Currently, we do not carry key person life insurance for any of our directors,
executive management, or key employees.
THE SALE OF OUR COMMON STOCK TO FUSION CAPITAL MAY CAUSE DILUTION AND THE SALE
OF THE SHARES OF COMMON STOCK ACQUIRED BY FUSION CAPITAL COULD CAUSE THE PRICE
OF OUR COMMON STOCK TO DECLINE
The purchase price for the common stock to be issued to Fusion Capital
pursuant to the common stock purchase agreement will fluctuate based on the
price of our common stock. All shares issued to Fusion Capital will be freely
tradable. Fusion Capital may sell none, some or all of the shares of common
stock purchased from us at any time. We expect that the shares sold to Fusion
Capital will be sold over a period of up to 40 months from the date of the
common stock purchase agreement. Depending upon market liquidity at the time, a
sale of shares by Fusion Capital at any given time could cause the trading price
of our common stock to decline. The sale of a substantial number of shares of
our common stock by Fusion Capital, or anticipation of such sales, could make it
more difficult for us to sell equity or equity-related securities in the future
at a time and at a price that we might otherwise wish to effect sales.
16
OUR FAILURE TO FILE FEDERAL AND STATE INCOME TAX RETURNS FOR CALENDAR YEARS 1997
THROUGH 2001 MAY RESULT IN THE IMPOSITION OF INTEREST AND PENALTIES
We failed to file federal and state income tax returns for calendar
years 1997 through 2001, respectively. We believe that we had operating losses
for each year during the period 1997 through 2001, and that there are no
expected income taxes due and owing for those years. We anticipate filing all
past due returns by December 31, 2001. When filed, these returns could be
subject to review and potential examination by the respective taxing
authorities. Should any of these returns come under examination by federal or
state authorities, our positions on certain income tax issues could be
challenged. The impact, if any, of the potential future examination cannot be
determined at this time. If our positions are successfully challenged, the
results may have a material impact on our financial position and results of
operations.
17
PART II
ITEM 1. LEGAL PROCEEDINGS
On February 2, 2001, we initiated, together with Kronos Air
Technologies, legal proceedings in Clackamas County, Oregon against W. Alan
Thompson, Ingrid T. Fuhriman, and Robert L. Fuhriman II, each of whom were
formerly executive officers and members of the Board of Directors of Kronos Air
Technologies. This suit alleges, among other things, breach of fiduciary duties
and breach of contract by these individuals, and seeks, among other things, an
order from the court referring the dispute to arbitration in accordance with the
terms of these individuals. We have agreed to a change of venue of this matter
to King County, Washington, and arbitrators have been selected. The parties are
in the process of exchanging and complying with requests for discovery.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On July 6, 2001, we authorized the issuance of 238,806 common shares,
valued at $.335 per share (the fair market value for our shares as of such
date), at an aggregate value of $80,000, to Periopolis, Inc., in exchange for
$80,000 cash.
On July 20, 2001, we issued 250 common shares, valued at $.452 per
share (the fair market value for our shares as of such date), at an aggregate
value of $250 to an employee of TSET, as compensation.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. EXHIBITS
EXHIBIT
NO. DESCRIPTION LOCATION
-------------- ----------------------------------------------------------- -------------------------------------------------
2.1 Articles of Merger for Technology Selection, Inc. with Incorporated by reference to Exhibit 2.1 to the
the Nevada Secretary of State Registrant's Registration Statement on Form S-1
filed on August 7, 2001 (the "REGISTRATION
STATEMENT")
3.1 Articles of Incorporation Incorporated by reference to Exhibit 3.1 to the
Registration Statement on Form S-1 filed on
August 7, 2001
3.2 Bylaws Incorporated by reference to Exhibit 3.2 to the
Registration Statement on Form S-1 filed on
August 7, 2001
5.1 Opinion re: Legality Incorporated by reference to Exhibit 5.1 to
Amendment No. 1 to Form S-1 filed on October
19, 2001
10.1 Employment Agreement, dated April 16, 1999, by and Incorporated by reference to Exhibit 10.1 to
between TSET, Inc. and Jeffrey D. Wilson the Registration Statement on Form S-1 filed on
August 7, 2001
10.2 Deal Outline, dated December 9, 1999, by and between Incorporated by reference to Exhibit 10.2 to
TSET, Inc. and Atomic Soccer, USA, Ltd. the Registration Statement on Form S-1 filed on
August 7, 2001
18
EXHIBIT
NO. DESCRIPTION LOCATION
-------------- ----------------------------------------------------------- -------------------------------------------------
10.3 Letter of Intent, dated December 27, 1999, by and between Incorporated by reference to Exhibit 10.3 to
TSET, Inc. and Electron Wind Technologies, Inc. the Registration Statement on Form S-1 filed on
August 7, 2001
10.4 Agreement, dated February 5, 2000, by and between Incorporated by reference to Exhibit 10.4 to
DiAural, LLC and EdgeAudio, LLC the Registration Statement on Form S-1 filed on
August 7, 2001
10.5 Stock Purchase Agreement, dated March 6, 2000, by and Incorporated by reference to Exhibit 10.5 to
among TSET, Inc., Atomic Soccer USA, Ltd., Todd P. the Registration Statement on Form S-1 filed on
Ragsdale, James Eric Anderson, Jewel Anderson, Timothy August 7, 2001
Beglinger and Atomic Millennium Partners, LLC
10.6 Acquisition Agreement, dated March 13, 2000, by and among Incorporated by reference to Exhibit 10.6 to
TSET, Inc., High Voltage Integrated, LLC, Ingrid the Registration Statement on Form S-1 filed on
Fuhriman, Igor Krichtafovitch, Robert L. Fuhriman and August 7, 2001
Alan Thompson
10.7 Letter of Intent, dated April 18, 2000, by and between Incorporated by reference to Exhibit 10.7 to
TSET, Inc. and EdgeAudio.com, Inc. the Registration Statement on Form S-1 filed on
August 7, 2001
10.8 Lease Agreement, dated May 3, 2000, by and between Kronos Incorporated by reference to Exhibit 10.8 to
Air Technologies, Inc. and TIAA Realty, Inc. the Registration Statement on Form S-1 filed on
August 7, 2001
10.9 Agreement and Plan of Reorganization, dated May 4, 2000, Incorporated by reference to Exhibit 10.9 to
by and among TSET, Inc., EdgeAudio.com, Inc., LYNK the Registration Statement on Form S-1 filed on
Enterprises, Inc., Robert Lightman, J. David Hogan, Eric August 7, 2001
Alexander and Eterna Internacional, S.A. de C.V.
10.10 Letter Agreement, dated May 4, 2000, by and between TSET, Incorporated by reference to Exhibit 10.10 to
Inc. and Cancer Detection International, LLC the Registration Statement on Form S-1 filed on
August 7, 2001
10.11 Employment Agreement, dated May 19, 2000, by and between Incorporated by reference to Exhibit 10.11 to
TSET, Inc. and Richard A. Papworth the Registration Statement on Form S-1 filed on
August 7, 2001
10.12 Finders Agreement, dated August 21, 2000, by and among Incorporated by reference to Exhibit 10.12 to
TSET, Inc., Richard F. Tusing and Daniel R. Dwight the Registration Statement on Form S-1 filed on
August 7, 2001
10.13 Contract Services Agreement, dated June 27, 2000, by and Incorporated by reference to Exhibit 10.13 to
between Chinook Technologies, Inc. and Kronos Air the Registration Statement on Form S-1 filed on
Technologies, Inc. August 7, 2001
10.14 Letter of Intent, dated July 17, 2000, by and between Incorporated by reference to Exhibit 10.14 to
Kronos Air Technologies, Inc. and Polus Technologies, Inc. the Registration Statement on Form S-1 filed on
August 7, 2001
10.15 Consulting Agreement, dated August 1, 2000, by and among Incorporated by reference to Exhibit 10.15 to
TSET, Inc., Richard F. Tusing and Daniel R. Dwight the Registration Statement on Form S-1 filed on
August 7, 2001
10.16 Preferred Stock Purchase Agreement, dated September 12, Incorporated by reference to Exhibit 10.16 to
2000, by and between EdgeAudio.com, Inc. and Bryan the Registration Statement on Form S-1 filed on
Holbrook August 7, 2001
10.17 Shareholders Agreement, dated September 12, 2000, by and Incorporated by reference to Exhibit 10.17 to
among TSET, Inc., Bryan Holbrook and EdgeAudio.com, Inc. the Registration Statement on Form S-1 filed on
August 7, 2001
19
EXHIBIT
NO. DESCRIPTION LOCATION
-------------- ----------------------------------------------------------- -------------------------------------------------
10.18 Amendment to Agreement and Plan of Reorganization dated Incorporated by reference to Exhibit 10.18 to
September 12, 2000, by and among TSET, Inc., the Registration Statement on Form S-1 filed on
EdgeAudio.com, Inc., LYNK Enterprises, Inc., Robert August 7, 2001
Lightman, J. David Hogan, Eric Alexander and Eterna
Internacional, S.A. de C.V.
10.19 Agreement Regarding Sale of Preferred Stock, dated Incorporated by reference to Exhibit 10.19 to
November 1, 2000, by and between EdgeAudio.com, Inc. and the Registration Statement on Form S-1 filed on
Bryan Holbrook August 7, 2001
10.20 Amendment to Subcontract, dated December 14, 2000, Incorporated by reference to Exhibit 10.20 to the
by and between Bath Iron Works and High Voltage Registration Statement on Form S-1 filed on
Integrated August 7, 2001
10.21 Consulting Agreement, dated January 1, 2001, by and Incorporated by reference to Exhibit 10.21 to
between TSET, Inc. and Dwight, Tusing & Associates the Registration Statement on Form S-1 filed on
August 7, 2001
10.22 Employment Agreement, dated March 18, 2001, by and Incorporated by reference to Exhibit 10.22 to
between TSET, Inc. and Alex Chriss the Registration Statement on Form S-1 filed on
August 7, 2001
10.23 Stock Option Agreement, dated April 9, 2001, by and Incorporated by reference to Exhibit 10.23 to
between TSET, Inc. and Jeffrey D. Wilson the Registration Statement on Form S-1 filed on
August 7, 2001
10.24 Stock Option Agreement, dated April 9, 2001, by and Incorporated by reference to Exhibit 10.24 to
between TSET, Inc. and Jeffrey D. Wilson the Registration Statement on Form S-1 filed on
August 7, 2001
10.25 Stock Option Agreement, dated April 9, 2001, by and Incorporated by reference to Exhibit 10.25 to
between TSET, Inc. and Daniel R. Dwight the Registration Statement on Form S-1 filed on
August 7, 2001
10.26 Stock Option Agreement, dated April 9, 2001, by and Incorporated by reference to Exhibit 10.26 to
between TSET, Inc. and Richard F. Tusing the Registration Statement on Form S-1 filed on
August 7, 2001
10.27 Stock Option Agreement, dated April 9, 2001, by and Incorporated by reference to Exhibit 10.27 to
between TSET, Inc. and Charles D. Strang the Registration Statement on Form S-1 filed on
August 7, 2001
10.28 Stock Option Agreement, dated April 9, 2001, by and Incorporated by reference to Exhibit 10.28 to
between TSET, Inc. and Richard A. Papworth the Registration Statement on Form S-1 filed on
August 7, 2001
10.29 Stock Option Agreement, dated April 9, 2001, by and Incorporated by reference to Exhibit 10.29 to
between TSET, Inc. and Richard A. Papworth the Registration Statement on Form S-1 filed on
August 7, 2001
10.30 Stock Option Agreement, dated April 9, 2001, by and Incorporated by reference to Exhibit 10.30 to
between TSET, Inc. and Erik W. Black the Registration Statement on Form S-1 filed on
August 7, 2001
10.31 Stock Option Agreement, dated April 9, 2001, by and Incorporated by reference to Exhibit 10.31 to
between TSET, Inc. and J. Alexander Chriss the Registration Statement on Form S-1 filed on
August 7, 2001
10.32 Stock Option Agreement, dated April 9, 2001, by and Incorporated by reference to Exhibit 10.32 to
between TSET, Inc. and Charles H. Wellington the Registration Statement on Form S-1 filed on
August 7, 2001
20
EXHIBIT
NO. DESCRIPTION LOCATION
-------------- ----------------------------------------------------------- -------------------------------------------------
10.33 Stock Option Agreement, dated April 9, 2001, by and Incorporated by reference to Exhibit 10.33 to
between TSET, Inc. and Igor Krichtafovitch the Registration Statement on Form S-1 filed on
August 7, 2001
10.34 Letter Agreement, dated April 10, 2001, by and between Incorporated by reference to Exhibit 10.34 to
TSET, Inc. and Richard A. Papworth the Registration Statement on Form S-1 filed on
August 7, 2001
10.35 Letter Agreement, dated April 12, 2001, by and between Incorporated by reference to Exhibit 10.35 to
TSET, Inc. and Daniel R. Dwight and Richard F. Tusing the Registration Statement on Form S-1 filed on
August 7, 2001
10.36 Finders Agreement, dated April 20, 2001, by and between Incorporated by reference to Exhibit 10.36 to
TSET, Inc. and Bernard Aronson, d/b/a Bolivar the Registration Statement on Form S-1 filed on
International Inc. August 7, 2001
10.37 Indemnification Agreement, dated May 1, 2001, by and Incorporated by reference to Exhibit 10.37 to
between TSET, Inc. and Jeffrey D. Wilson the Registration Statement on Form S-1 filed on
August 7, 2001
10.38 Indemnification Agreement, dated May 1, 2001, by and Incorporated by reference to Exhibit 10.38 to
between TSET, Inc. and Daniel R. Dwight the Registration Statement on Form S-1 filed on
August 7, 2001
10.39 Indemnification Agreement, dated May 1, 2001, by and Incorporated by reference to Exhibit 10.39 to
between TSET, Inc. and Richard F. Tusing the Registration Statement on Form S-1 filed on
August 7, 2001
10.40 Indemnification Agreement, dated May 1, 2001, by and Incorporated by reference to Exhibit 10.40 to
between TSET, Inc. and Charles D. Strang the Registration Statement on Form S-1 filed on
August 7, 2001
10.41 Indemnification Agreement, dated May 1, 2001, by and Incorporated by reference to Exhibit 10.41 to
between TSET, Inc. and Richard A. Papworth the Registration Statement on Form S-1 filed on
August 7, 2001
10.42 Indemnification Agreement, dated May 1, 2001, by and Incorporated by reference to Exhibit 10.42 to
between TSET, Inc. and Erik W. Black the Registration Statement on Form S-1 filed on
August 7, 2001
10.43 Stock Option Agreement, dated May 3, 2001, by and between Incorporated by reference to Exhibit 10.43 to
TSET, Inc. and Jeffrey D. Wilson the Registration Statement on Form S-1 filed on
August 7, 2001
10.44 Common Stock Purchase Agreement, dated June 19, 2001, by Incorporated by reference to Exhibit 10.44 to
and between TSET, Inc. and Fusion Capital Fund II, LLC the Registration Statement on Form S-1 filed on
August 7, 2001
10.45 Registration Rights Agreement, dated June 19, 2001, by Incorporated by reference to Exhibit 10.45 to
and between TSET, Inc. and Fusion Capital Fund II, LLC the Registration Statement on Form S-1 filed on
August 7, 2001
10.46 Mutual Release and Settlement Agreement, dated July 7, Incorporated by reference to Exhibit 10.46 to
2001, by and between TSET, Inc. and Foster & Price Ltd. the Registration Statement on Form S-1 filed on
August 7, 2001
10.47 Letter Agreement, dated July 9, 2001, by and between Incorporated by reference to Exhibit 10.47 to
TSET, Inc. and The Eagle Rock Group, LLC the Registration Statement on Form S-1 filed on
August 7, 2001
10.48 Finders Agreement, dated July 17, 2001, by and between Incorporated by reference to Exhibit 10.48 to
TSET, Inc. and John S. Bowles the Registration Statement on Form S-1 filed on
August 7, 2001
10.49 Warrant Agreement, dated July 16, 2001, by and between Incorporated by reference to Exhibit 10.49 to
TSET, Inc. and The Eagle Rock Group, LLC the Registration Statement on Form S-1 filed on
August 7, 2001
10.50 Agreement and Release, dated October 10, 2001, by and Incorporated by reference to Exhibit 10.50 to
between TSET, Inc. and Jeffrey D. Wilson the Registrant's Form 10-K for the year ended
June 30, 2001 filed on October 15, 2001
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EXHIBIT
NO. DESCRIPTION LOCATION
-------------- ----------------------------------------------------------- -------------------------------------------------
10.51 Promissory Note dated October 10, 2001 payable to Mr. Incorporated by reference to Exhibit 10.51 to
Jeffrey D. Wilson the Registrant's Form 10-K for the year ended
June 30, 2001 filed on October 15, 2001
10.52 Consulting Agreement, dated October 10, 2001, by and Incorporated by reference to Exhibit 10.52 to
between TSET, Inc. and Jeffrey D. Wilson the Registrant's Form 10-K for the year ended
June 30, 2001 filed on October 15, 2001
10.53 Consulting Agreement, effective October 1, 2001,
by and among Steven G. Martin and Joshua B. Scheinfeld Provided herewith
10.54 Letter Agreement dated November 13, 2001 by and between
TSET, Inc. and Fusion Capital Fund II, LLC Provided herewith
11.1 Statement re: Computation of Earnings Not applicable
27.1 Financial Data Schedule Not applicable
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATED: NOVEMBER 16, 2001 TSET, INC.
By: /s/ Daniel R. Dwight
----------------------------------------
Daniel R. Dwight
President and Chief Executive Officer
23