KRONOS ADVANCED TECHNOLOGIES, INC.

 

(Exact name of registrant as specified in its charter)

 

Nevada (State or other jurisdiction of incorporation or organization)

87-0440410 (I.R.S. Employer Identification No.)

 

464 Common Street, Suite 301, Belmont, MA 02478

(Address of principal executive offices) (Zip Code)

 

(617) 364-5089

(Registrant's telephone number, including area code)

 

(Former name, former address and former fiscal year,

if changed since last report)

 

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

[_] Yes [X] No

 

As of May 12, 2008, there were 487,626,791 shares outstanding of the issuer's common stock.

 

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ITEM 1. FINANCIAL STATEMENTS

 

The following comprise our (unaudited) consolidated financial statements for the nine months ended March 31, 2008.

 

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

 

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NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

 (UNAUDITED)

 

NOTE 1 - ORGANIZATION AND NATURE OF OPERATIONS

 

Kronos Advanced Technologies, Inc. ("Kronos" or the "Company") is a Nevada corporation. The Company's shares began trading on the over-the-counter bulletin board exchange on August 28, 1996 under the symbol "TSET." Effective January 12, 2002, the Company began doing business as Kronos Advanced Technologies, Inc. and, as of January 18, 2002, it changed the Company ticker symbol to "KNOS." On March 31, 2008, AirWorks Funding LLLP ("AirWorks") and Hilltop Holding Company, LP ("Hilltop") converted $731,440 of their Secured Convertible Promissory Notes into 243,813,400 shares of Kronos common stock resulting in a change of control of Kronos (refer to Note 9 - Commitments and Contingencies).

 

NOTE 2 - BASIS OF PRESENTATION

 

The accompanying unaudited consolidated financial statements of Kronos 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 and nine months ended March 31, 2008 are not necessarily indicative of the results that may be experienced for the fiscal year ending June 30, 2008.

 

These consolidated financial statements are those of the Company and its wholly-owned subsidiary. All significant inter-company accounts and transactions have been eliminated in the preparation of the consolidated financial statements.

 

The accompanying consolidated financial statements should be read in conjunction with the Kronos Advanced Technologies, Inc. Form 10-KSB for the fiscal year ended June 30, 2007, which was filed on September 28, 2007.

 

NOTE 3 - REALIZATION OF ASSETS AND GOING CONCERN

 

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company has sustained losses from operations in recent years, and such losses have continued through the year ended June 30, 2007. Prior to the nine months ended March 31, 2008, the Company had used more cash than that provided from cash in its operations. The Company is currently using its resources to commercialize its technology and develop viable commercial products, and to provide for its working capital needs.

 

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

 

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

 

Tessera. In March 2008, Kronos executed an Intellectual Property Transfer and License Agreement with Tessera Technologies, Inc. (“Tessera”) for the transfer and license of certain intellectual property (“IP”) rights related to Kronos proprietary technologies to Tessera.  Kronos received $3.5 million from Tessera in exchange for the transfer of select Kronos patents covering micro-cooling applications and for an exclusive license to the Kronos technology for ionic micro-cooling of integrated circuit devices or discrete electrical components. Kronos retained the rights to use these patents for all applications outside of the field of micro-cooling. Tessera further has the right to acquire additional Kronos IP relating to micro-cooling applications for four quarterly payments of $0.5 million each beginning in July 1, 2008.

 

Washington Technology Center. In June 2007, the Washington Technology Center awarded the Company, in conjunction with the University of Washington and Intel Corporation, continued funding for a research and development project based on a novel cooling system for microelectronics and computer chips. This Phase III award follows the Company's Phase 1 and Phase II awards in December 2005 and June 2006, respectively.

 

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EOL. In December 2005, Kronos executed a non-exclusive License Agreement with EOL LLC, a Russian Federation corporation ("EOL"), based in Korolev, Moscow Region. EOL is leveraging the Kronos technology to produce, market, and distribute Kronos commercial air purification products, bacteriological and virus destruction devices in select Commonwealth of Independent States. The agreement comes after successful completion of multiple tests in Eastern Europe, which found the Kronos technology capable of decontaminating rooms infected with airborne viruses and bacteria. Under the terms of the five-year agreement, EOL is providing Kronos a fixed percentage royalty on every product sold, as well as upfront licensing and quarterly maintenance fees. The initial medical products are currently being marketed in Russia and Ukraine and marketing plans are being put in place in, Kazakhstan, Moldova and Byelorussia. During the fiscal year ended June 30, 2007, Kronos earned $104,000 in revenue from the sale of power supplies, other electrical components and engineering services and from the royalty from the sale of finished products by EOL. During the nine months ended March 31, 2008, Kronos earned $45,000 in licensing fees.

 

Global Appliance Manufacturers. In October 2006, a leading global home appliance manufacturer committed to fund 20% of the cost for Kronos to manufacturer a silent kitchen range hood product. This next generation range hood device represented the culmination of more than twelve months of product design and development effort by Kronos to apply our technology to this unique embedded residential application. The product was shipped to the customer in October 2006. In January 2007, the prototype design was modified based on customer input and a revised unit was shipped to the customer. In addition to financial support, the customer has also provided Kronos with product components for Kronos testing and evaluation. In February 2007, a second global appliance manufacturer committed to purchase additional prototypes from Kronos. During the fiscal year ended June 30, 2007, Kronos earned $37,000 in revenue from the development of prototype devices for the residential range hood market place. In October 2007, Kronos shipped the additional prototypes to the customer for testing and evaluation. During the nine months ended March 31, 2008, Kronos earned $34,000 in product development fees.

 

NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Accounting Method. The Company's consolidated financial statements are prepared using the accrual method of accounting. The Company has elected a June 30 fiscal year end.

 

Principles of Consolidation. The consolidated financial statements of the Company include those of the Company and its subsidiary for the periods in which the subsidiary was owned by the Company. All significant intercompany accounts and transactions have been eliminated in the preparation of the consolidated financial statements. At March 31, 2008, the Company had only one subsidiary, Kronos Air Technologies, Inc.

 

Use of Estimates. The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the periods. Actual results could differ from those estimates.

 

Concentrations of Credit Risk. Financial instruments which can potentially subject the Company to concentrations of credit risk consist principally of trade account receivables. The Company manages its exposure to risk through ongoing credit evaluations of its customers and generally does not require collateral. The Company maintains an allowance for doubtful accounts for potential losses and does not believe it is exposed to concentrations of credit risk that are likely to have a material adverse impact on the Company's financial position or results of operations.

 

Cash and Cash Equivalents. The Company considers all highly liquid short-term investments, with a remaining maturity when purchased of three months or less, to be cash equivalents. The Company maintains cash and cash equivalents with high-credit, quality financial institutions. At March 31, 2008 the cash balances held at financial institutions were in excess of federally insured limits.

 

Accounts Receivable. The Company provides an allowance for potential losses, if necessary, on trade accounts receivables based on a review of the current status of existing receivables and management's evaluation of periodic aging of accounts. Accounts receivable are shown net of allowances for doubtful accounts of $0 at March 31, 2008 and June 30, 2007. The Company charges off accounts receivable against the allowance for losses when an account is deemed to be uncollectable.

 

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Property and Equipment. Property and equipment are recorded at cost. Depreciation is provided over the estimated useful lives of the assets, which range from three to seven years. Expenditures for major renewals and betterments that extend the original estimated economic useful lives of the applicable assets are capitalized. Expenditures for normal repairs and maintenance are charged to expense as incurred. The cost and related accumulated depreciation of assets sold or otherwise disposed of are removed from the accounts, and any gain or loss is included in operations.

 

Intangibles. The Company uses assumptions in establishing the carrying value, fair value and estimated lives of the Company's long-lived assets and goodwill. The criteria used for these evaluations include management's estimate of the asset's continuing ability to generate positive income from operations and positive cash flow in future periods compared to the carrying value of the asset, the strategic significance of any identifiable intangible asset in its business objectives, as well as the market capitalization of the Company. Cash flow projections used for recoverability and impairment analysis use the same key assumptions and are consistent with projections used for internal budgeting, and for lenders and other third parties. If assets are considered to be impaired, the impairment recognized is the amount by which the carrying value of the assets exceeds the fair value of the assets. Useful lives and related amortization or depreciation expense are based on the Company's estimate of the period that the assets will generate revenues or otherwise be used by Kronos. Factors that would influence the likelihood of a material change in the Company's reported results include significant changes in the asset's ability to generate positive cash flow, loss of legal ownership or title to the asset, a significant decline in the economic and competitive environment on which the asset depends, significant changes in the Company's strategic business objectives, and utilization of the asset. The Company capitalizes to Intangibles the legal cost and filings fees for securing patents for the Company's proprietary technology.

 

Income Taxes. Income taxes are accounted for in accordance with the provisions of Statement of Financial Accounting Standards ("SFAS") No. 109. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amounts expected to be realized, but no less than quarterly.

 

Research and Development Expenses. Costs related to research and development are charged to research and development expense as incurred.

 

 

Revenue Recognition. The Company recognizes revenue in accordance with Staff Accounting Bulletin (SAB) 104, which requires evidence of an agreement, delivery of the product or services at a fixed or determinable price, and assurance of collection within a reasonable period of time. Further, Kronos Air Technologies recognizes revenue on the sale of the custom-designed contract sales under the percentage-of-completion method of accounting in the ratio that costs incurred to date bear to estimated total costs. For uncompleted contracts where costs and estimated profits exceed billings, the net amount is included as an asset in the balance sheet. For uncompleted contracts where billings exceed costs and estimated profits, the net amount is included as a liability in the balance sheet. Sales are reported net of applicable cash discounts and allowances for returns.

 

License Revenue. Nonrefundable, up-front perpetual license fees with standalone value that are not dependent on any future performance by the Company under the arrangements are recognized as revenue upon the earlier of when payments are received or collection is assured, but are deferred if we have continuing performance obligations. Term license fees are recognized over the term of the license.

 

Stock, Options and Warrants Issued for Services. Issuances of shares of the Company's stock to employees or third-parties for compensation or services is valued using the closing market price on the date of grant for employees and the date services are completed for non-employees. Issuances of options and warrants of the Companies stock are valued using the Black-Scholes option model.

 

Stock Options. In December 2004, the Financial Accounting Standards Board ("FASB") issued SFAS No. 123R, Share-Based Payment ("SFAS No. 123R"). This statement is a revision of SFAS No. 123, Accounting for Stock-Based Compensation, and supersedes Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and its related implementation guidance. SFAS No. 123R focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS No. 123R requires entities to recognize stock compensation expense for awards of equity instruments to employees based on the grant-date fair value of those awards (with limited exceptions). Kronos elected to implement the provisions of SFAS No. 123R in the fiscal year ended June 30, 2005.

 

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Recent Accounting Pronouncements

 

 

In December 2007, the FASB issued FASB Statement No. 141 (revised 2007), "Business Combinations." This statement replaces FASB Statement No. 141, Business Combinations. This statement retains the fundamental requirements in Statement 141 that the acquisition method of accounting (which Statement 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. This statement defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as the date that the acquirer achieves control. This statement's scope is broader than that of Statement 141, which applied only to business combinations in which control was obtained by transferring consideration. By applying the same method of accounting--the acquisition method--to all transactions and other events in which one entity obtains control over one or more other businesses, this statement improves the comparability of the information about business combinations provided in financial reports. This statement requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions specified in the statement. This replaces Statement 141's cost-allocation process, which required the cost of an acquisition to be allocated to the individual assets acquired and liabilities assumed based on their estimated fair values. This statement applies to all transactions or other events in which an entity (the acquirer) obtains control of one or more businesses (the acquirer), including those sometimes referred to as "true mergers" or "mergers of equals" and combinations achieved without the transfer of consideration, for example, by contract alone or through the lapse of minority veto rights. This statement applies to all business entities, including mutual entities that previously used the pooling-of-interests method of accounting for some business combinations. It does not apply to: (a) the formation of a joint venture, (b) the acquisition of an asset or a group of assets that does not constitute a business, (c) a combination between entities or businesses under common control, or (d) a combination between not-for-profit organizations or the acquisition of a for-profit business by a not-for-profit organization. This statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. An entity may not apply it before that date. Management believes this statement will have no impact on the financial statements of the Company once adopted.

 

 

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In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133,” which requires additional disclosures about the objectives of the derivative instruments and hedging activities, the method of accounting for such instruments under SFAS No. 133 and its related interpretations, and a tabular disclosure of the effects of such instruments and related hedged items on our financial position, financial performance, and cash flows. SFAS No. 161 is effective for the Company beginning January 1, 2009. Management believes that, for the foreseeable future, this Statement will have no impact on the financial statements of the Company once adopted.

NOTE 5 – TESSERA TRANSACTION

On March 31, 2008, Kronos executed an Intellectual Property Transfer and License Agreement with Tessera Technologies, Inc. (“Tessera”) for the transfer and license of certain intellectual property (“IP”) rights related to Kronos proprietary technologies to Tessera.  Kronos received an upfront and nonrefundable fee of $3.5 million from Tessera in exchange for the transfer of select Kronos patents covering micro-cooling applications, an exclusive license to Kronos’ additional U.S. Patents and patents pending  and related foreign patent applications for ionic micro-cooling of integrated circuit devices or discrete electrical components (“Ionic Micro-cooling”); as well as a twelve month term option license  to acquire additional Kronos’ U.S. Patents and related foreign patents for Ionic Micro-cooling..  Tessera further has the right to acquire this additional Kronos IP relating to micro-cooling applications for $2 million payable in four quarterly payments of $0.5 million each beginning in July 1, 2008. Kronos retained the rights to use all its patents for all applications outside of the field of micro-cooling. Upon the receipt of the $3.5 million from Tessera, Kronos recognized $3,269,231 as revenue for the nonrefundable, up-front license and IP transfer granted to Tessera and $230,769 as deferred revenue for term license granted to Tessera. The deferred revenue will be recognized over the twelve month term of the license.

 

NOTE 6 -- INCOME TAXES

 

The composition of deferred tax assets and the related tax effects at March 31, 2008 and June 30, 2007 were as follows:

 

		March 31, 2008
		(unaudited)				June 30, 2007
Benefit from carryforward of capital
and net operating losses		$	(7,687,000	)		$	(7,698,000	)
Other temporary differences			(157,000	)			(157,000	)
Options issued for services			(208,000	)			(551,000	)
Less:
Valuation allowance			8,052,000				8,406,000
Net deferred tax asset		$	-			$	-

 

 

		March 31, 2008
		(Unaudited)								June 30,2007
						% of								% of
		Amount				Pre-Tax Loss				Amount				Pre-Tax Loss
Benefit for income tax at:
Federal statutory rate		$	266,000				34.0	%		$	(799,000	)			(34.0	)%
State statutory rate			16,000				2.0	%			(47,000	)			(2.0	)%
Non-deductible expenses			72,000				2.4	%			24,000				1.0	%
Increase in valuation allowance			(354,000	)			(33.6	)%			822,000				35.0	%
		$	-				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.

 

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NOTE 7 - SEGMENTS OF BUSINESS

 

The Company has only one reportable segment, which consists of developing, licensing, manufacturing and distributing air movement and purification devices utilizing the Kronos technology. For the nine months ended March 31, 2008 and the fiscal year ended June 30, 2007 the Company operated only in the U.S.

 

NOTE 8 - EARNINGS PER SHARE

 

Weighted average shares outstanding used in the earnings per share calculation were 325,658,791 and 185,967,097 for the nine months ended March 31, 2008 and 2007, respectively.

 

 

NOTE 9 - CONVERTIBLE NOTES PAYABLE AND NOTES PAYABLE

 

The Company had the following obligations as of as of March 31, 2008 and June 30, 2007:

 

		March 31, 2008
		(Unaudited)				June 30, 2007
Obligations to AirWorks Funding LLLP (1)		$	3,928,535			$	2,480,000
Obligations to Hilltop Holding Company, LP (1)			1,273,024				920,000
Obligations to Sands Brothers (2)			859,000				859,000
Obligations to Gumbinner and Sun (1)			200,000				200,000
Obligation to current employees (3)			166,572				202,307
Discount for beneficial conversion feature (4)			(3,774,760	)			(3,365,845	)
			2,652,371				1,295,462
Less: Current portion			1,653,572				1,061,307
Total long term obligations, net of current portion		$	998,799			$	234,155

 

(1) These notes bear interest at the rate of 12%, are secured by the assets of the Company and are convertible into shares of Kronos common stock at $0.003 or are payable in full on June 19, 2010.  On April 1, 2008, the Company made a $628,000 principle payment on the notes to AirWorks and Hilltop.  Under the terms of a Letter Agreement between AirWorks, Hilltop and the Company dated April 22, 2008 amending the Funding Agreement and Letter Agreement between Sun, Gumbinner and the Company dated April 30, 2008, AirWorks, Hilltop, Sun and Gumbinner may not convert prior to June 30, 2008 any outstanding principal amount of their respective notes, or any accrued and unpaid interest thereon, to the extent such conversion would require the Company to issue shares of Common Stock in excess of Kronos’ authorized and unissued shares of Common Stock.

(2) These notes bear interest at the rate of 12%, are secured by the assets of the Company and are payable in full on April 30, 2008.  The notes were paid in full by the Company on April 1, 2008.

(3) These notes bear interest at the rate of 12%. They represent obligations to current employees of the Company, which are currently due in full.

(4) Under GAAP, the Company recorded a discount for the beneficial conversion feature ("BCF") on the amount of the convertible debt issued to AirWorks, Hilltop, Sun and Gumbinner. The amount of BCF discount was calculated using the Black-Scholes model. Because the maximum value of the BCF discount can not exceed the full value of the issued debt, the Company recorded the discount at the full value of the debt. The Company is amortizing the BCF discount over the three year life of the debt. For the nine months ended March 31, 2008, the Company recorded a BCF discount amortization of $1,696,085.

NOTE 10 - COMMITMENTS AND CONTINGENCIES

 

 

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The loan is secured by all of the Company's assets and is convertible into shares of the Company's common stock at a conversion price of $0.003 per share, subject to adjustment under certain circumstances.  The Company recorded a discount for BCF on the amount of the convertible debt. The amount of BCF discount was calculated using the Black-Scholes model. Because the maximum value of the BCF discount can not exceed the full value of the issued debt, the Company recorded the discount at the full value of the debt. The Company is amortizing the BCF discount over the three year life of the debt. A Under the terms of a Letter Agreement between AirWorks, Hilltop and the Company dated April 22, 2008 amending the Funding Agreement, AirWorks and Hilltop may not convert prior to June 30, 2008 any outstanding principal amount of the Airworks Note or the Hilltop Note, or any accrued and unpaid interest thereon, to the extent such conversion would require the Company to issue shares of Common Stock in excess of Kronos’ authorized and unissued shares of Common Stock. Future installments under the Funding Agreement, up to $11,995,000, may be advanced at the discretion of the lenders, even if not requested by the Company. Under the Funding Agreement and related notes, the Company pays interest on the notes at the rate of 12% per annum. Of the total amount of the initial advance, monthly interest payments commenced on July 1, 2007 on $859,000, which represented the Critical Capital and Sands note. On March 13, 2008, Critical Capital and Sands Brothers agreed to extend the maturity date of their note until April 30, 2008. On April 1, 2008, the Company repaid Critical Capital and Sands Brothers the full principal amount and interest on the note.  With respect to all other loan amounts, interest is paid quarterly starting January 1, 2008 and outstanding principal is due and payable June 19, 2010, unless earlier converted at the option of the lenders. The interest owed had been accrued but not paid by the Company.  On May 13, 2008, the Company paid the interest ($107,442) owed through March 31, 2008 to Hilltop.  The maximum loan amount is advanced under the Funding Agreement and related notes and the lenders convert the entire amount of the loan into Kronos common stock at the noted conversion price, the lenders would own approximately 93.3% of the Company's total equity on a fully diluted, as converted basis. On December 31, 2007, AirWorks and Hilltop converted $731,440 of their Secured Convertible Promissory Notes into 243,813,400 shares of Kronos common stock resulting in a change of control of Kronos. On April 1, 2008, the Company repaid $628,000 of the AirWorks and Hilltop notes.

 

In April 2007, Kronos entered into Convertible Promissory Notes with two accredited investors, Fred R. Gumbinner and Richard A. Sun. The Company received $200,000 in funding.  In June 2007, the terms of the Convertible Promissory Notes were modified to match the funding terms of the AirWorks and Hilltop notes.  The loan is secured by all of the Company's assets and is convertible into shares of the Company's common stock at a conversion price of $0.003 per share, subject to adjustment under certain circumstances. The Company recorded a discount for BCF on the amount of the convertible debt. The amount of BCF discount was calculated using the Black-Scholes model. Because the maximum value of the BCF discount can not exceed the full value of the issued debt, the Company recorded the discount at the full value of the debt. The Company is amortizing the BCF discount over the three year life of the debt. Under the terms of Letter Agreements between Gumbinner, Sun and the Company dated April 30, 2008, Gumbinner and Sun may not convert prior to June 30, 2008 any outstanding principal amount of their notes, or any accrued and unpaid interest thereon, to the extent such conversion would require the Company to issue shares of Common Stock in excess of Kronos’ authorized and unissued shares of Common Stock. Interest is paid quarterly starting January 1, 2008 and outstanding principal is due and payable June 19, 2010, unless earlier converted at the option of the lenders.

 

Daniel R. Dwight, President and Chief Executive Officer, and the Company entered into an employment agreement effective as of November 15, 2001. The initial term of Mr. Dwight's employment agreement was for two years and will automatically renew for successive one year terms unless Kronos or Mr. Dwight provide the other party with written notice within three months of the end of the initial term or any subsequent renewal term. Mr. Dwight's employment agreement was last renewed on August 15, 2007. In April 2006, the Board of Directors increased Mr. Dwight's base cash compensation to $225,000 per year effective April 15, 2006. 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. Mr. Dwight is 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.

 

Richard F. Tusing, Chief Operating Officer, and the Company entered into an employment agreement effective as of January 1, 2003. The initial term of Mr. Tusing's employment agreement was for two years and will automatically renew for successive one year terms unless Kronos or Mr. Tusing provide the other party with written notice within three months of the end of the initial term or any subsequent renewal term. Mr. Tusing's employment agreement was last renewed on November 1, 2007. Mr. Tusing's employment agreement provides for base cash compensation of $160,000 per year. Mr. Tusing 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.

 

In October 2006, Thompson E. Fehr filed a complaint in the Second Judicial District Court of Weber County in the state of Utah against Kronos with respect to prior services rendered to High Voltage Integrated, Inc. totaling $47,130, excluding claims for damages and legal costs. The Company is rigorously defending itself. As the Company believes this complaint is without merit, the Company believes a financial loss is remote and therefore has not recorded a contingent liability for this matter in its financial statements.

 

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NOTE 11 - SUBSEQUENT EVENTS

 

On April 1, 2008, the Company repaid $859,000 plus all the interest and fees ($59,487) owed on the Critical Capital and Sands Brothers Note and made a partial principal payment of $628,000 on the AirWorks and Hilltop Notes.

 

On May 13, 2008, the Company paid the interest ($107,442) owed on the Hilltop Note through March 31, 2008 to Hilltop.

 

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Standalone Platform

 

Residential Products. In October 2007, Kronos executed a Letter of Intent for the development, manufacture and sale of air purification devices based upon Kronos' proprietary air movement and purification technology with a leading national retailer. It is expected that Kronos and the retailer would enter into a definitive purchase and supply agreement providing for the exclusive sale of private label residential standalone air purifiers through the retailer's distribution channels. Actual purchases of the products are dependent on the successful development of the product, the negotiation of a definitive purchase and supply agreement incorporating the terms of the letter of intent, other usual and customary terms and the retailers' discretion. Under the terms of the Letter of Intent, the retailer has paid Kronos $250,000 towards the development costs of the new products and will contribute marketing resources to assist in the product development process. The intent of the parties is for Kronos to lead and manage all development, production and manufacturing activities for the Kronos air purifier and for the retailer to actively market the Kronos air purifier through their distribution channels. In December 2007, Kronos completed design and developed of an Alpha Prototype for the customer. In January 2008, the parties initiated negotiations of a definitive Product Development and Purchase Agreement. In February 2008, the retailer filed for bankruptcy, which could negatively impact the Company’s ability to finalize a definitive agreement and receive additional funds from the retailer. In March 2008, Kronos’ contract manufacturing partner completed development of a Beta Prototype.  During the nine months ended March 31, 2008, Kronos earned $250,000 in product development fees.

 

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Medical Products. In December 2005, the Company executed a non-exclusive license agreement with EOL LLC, a Russian Federation company ("EOL"), for manufacturing and distributing Kronos-based commercial standalone products in Russia and other select Commonwealth of Independent States. The initial medical products are currently being marketed in Russia and Ukraine and marketing plans are being implanted in, Kazakhstan, Moldova and Byelorussia. In November 2006, the Ministry of Health Care and Social Development of the Russian Federation issued a Registration Certificate for the product that designates the product for medical use. During the fiscal year ended June 30, 2007, Kronos earned $104,000 in revenue from the sale of power supplies, other electrical components and engineering services and from the royalty from the sale of finished products by EOL. During the nine months ended March 31, 2008, Kronos earned $35,000 in revenue from licensing fees.

 

In August 2006, the Russian Research Institute of Medical Equipment began the process for product certification of the EOL's Kronos-based Tree air purification device for use in medical facilities, including a successful clinical trial of EOL products in the Pulmonary Department of Municipal Hospital #2 in Moscow. In October 2006, Scientific Institution of Health Care, Central Clinical Hospital #2 in Moscow completed a second clinical trial. As a result of these clinical trials, the Russian Research Institute approved the Kronos-based Tree air purification device for use in hospitals and other healthcare facilities. The device received Category I approval, which means the product has met the strictest regulations required for a device to be used in operating rooms and other areas that require a sterile environment. In November 2006, following the Russian Research Institute approval, the Ministry of Health Care and Social Development of the Russian Federation issued a Registration Certificate that designates the Kronos-based Tree air purification device for medical use.

 

The Company is in discussions to enter the U.S. medical market with one or more medical products distribution companies.

 

Commercial and Other Standalone Products. Utilizing our expanded product development resources, Kronos completed the initial design, development and production of a series of small multifunctional devices that can be used as space heaters, vaporizers, disinfectors, deodorizers and/or fans. Based on the proprietary Kronos technology, these devices are currently undergoing testing and evaluation. Kronos has been meeting with potential strategic partners for manufacturing, marketing, selling and distributing these Kronos-based products.

 

Embedded Platform

 

Microelectronics Cooling Products. In December 2004, Kronos and the University of Washington were awarded a Phase I grant for a research and technology development project entitled "Heat Transfer Technology for Microelectronics and MEMS" by the Washington Technology Center (the "WTC"). The objective of the project is to develop a novel energy-efficient heat transfer technology for cooling microelectronics. In January 2006, Kronos and the University of Washington conducted a successful bench scale demonstration of micron cooling of a MEMS chip. In June 2006, the Company and the University of Washington were awarded a Phase II grant for continued funding in its novel cooling system for microelectronics and computer chips. The WTC contributed $100,000 as a Phase II grant for the project. Kronos provided $35,000 in funding and $38,000 in in-kind services, including use of the Kronos Research and Product Development Facility. Dr. Alexander Mamishev of the University of Washington Electrical Engineering Department is the principal investigator on the project and is leading a team of scientists and engineers from Kronos and Intel Corporation who are also collaborating on the project. In September 2006, Kronos hired a former Intel employee to lead Kronos' development of micro cooling applications. In June 2007, the Company and the University of Washington were awarded a Phase III grant for continued funding. This additional funding is to support the further development of prototype products. The WTC is contributing $100,000. Kronos will provide $20,000 in funding and $20,000 in in-kind services, including use of the Kronos Research and Product Development Facility.

 

Thermal management for microelectronics and MEMS systems is a challenge. Existing cooling devices aren't meeting increasing needs for energy consumption and heat dissipation. Kronos air handling technology is an emerging technology that uses an electric field to exert force on ionized gas. Kronos is attempting to develop an improved microchip air handling system that is smaller in size, has high speed airflow, allows more targeted delivery of cooling to areas of highest heat and is compatible with current processes.

 

In March 2008, Kronos executed an Intellectual Property Transfer and License Agreement with Tessera Technologies, Inc. (“Tessera”) for the transfer and license of certain intellectual property (IP) rights related to Kronos proprietary technologies to Tessera.  Kronos received $3.5 million from Tessera in exchange for the transfer of select Kronos patents covering micro-cooling applications and for an exclusive license to the Kronos technology for the field of ionic micro-cooling of integrated circuit devices or discrete electrical components. Kronos retained the rights to use these patents for applications outside of the field of micro-cooling. Tessera has the further right to acquire additional Kronos IP relating to micro-cooling applications for four quarterly payments of $0.5 million each beginning in July 1, 2008. The two companies have the option to continue to jointly develop new technologies in this field.

 

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Commercial Products. In June 2006, the Company executed its first license for embedded applications of Kronos technology with DESA LLC ("DESA"). The agreement provides DESA the opportunity to embed the Kronos electrostatic air movement technology within fireplaces, hearth systems, zone heaters and mounted electric fans and heaters. In October 2006, DESA approved Kronos' designs for the first Kronos-based product and committed to the funding of the product development by Kronos. In January 2007, DESA committed additional funds for Kronos exploration of a second Kronos-based product application. By May 2007, various prototype configurations for each of the two product applications were under test and evaluation by Kronos and DESA. During the nine months ended March 31, 2008, Kronos and DESA developed a plan for product commercialization. During the nine months ended March 31, 2008, Kronos and DESA developed a plan for product commercialization, which the Company has not begun implementing pending the prioritization of resources.

 

In addition, Kronos has developed an air filtration and purification mechanism capable of performing to HEPA quality standards, while eliminating bacteria and viruses. The Company believes that Kronos devices could replace current HEPA filters with a permanent, easily cleaned, low-cost solution. Among the technical advantages of the Kronos technology over HEPA filters is the ability of the Kronos-based devices to eliminate the energy burden on air handling systems, which must generate high levels of backpressure necessary to move air through HEPA-based systems. Kronos-based devices enhance the air flow while providing better than HEPA level filtration and purification. Kronos is seeking one or more strategic partners to commercialize, market and distribute Kronos based commercial embedded air filtration and purification devices.

 

Transportation Products. In April 2006, Kronos was invited to serve as a member and an industrial partner in the Federal Aviation Administration's (the "FAA") Air Transportation Airliner Cabin Environment Research Center of Excellence. In this capacity, Kronos is providing its real-time decontamination, air filtration, purification and technology expertise to evaluate and develop solutions that proactively address and improve cabin air quality. The program, led by the FAA, includes senior executives from aerospace equipment manufacturers and leading American universities.

 

Patents and Intellectual Property

 

 

Date	U.S. Patent #	Patent Title	Description	Protection
August	7,262,564	Alternative	geometry, voltage ratios	2024
2007		Geometries and	and power requirements
		Voltage Supply	for improved operational
		Management	performance
July	7,248,003	Electric Field	effective electric field	2025
2007		Management	management for reduced
			sparking
October	7,122,070	Method of and	inertialess power supply for	2025
2006		Apparatus for	safe operation and spark
		Electrostatic Fluid	prevention
		Acceleration
August	7,157,704	Corona Discharge	method of generating air	2023
2006		Electrode and Method	flow and air cleaning with
		of Operating	reduced amount of ozone by-
			product and with extended
			life-span of the electrodes
July	7,150,780	Electrostatic Air	method for improving the	2024
2006		Cleaning Device	efficiency of electrodes for
			filtering micron and sub-
			micron size particles

 

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May	7,053,565	Electrostatic Fluid	effective powering of the	2024
2006		Accelerator - Power	electrodes for high level of
		Management	air velocity
November	6,963,479	Electrostatic Fluid	advanced voltage management	2023
2005		Accelerator -	impacts air filtration and
		Advanced Geometries	sterilization, air flow and
			ozone as well as safe operation
			and spark prevention
August	6,937,455	Spark Management	analysis, detection and	2022
2005		Method and Device	prevention of sparks in a
			high voltage field -
			creating safe, effective
			electrostatic technology
			products
July	6,919,698	Voltage Management	materials and geometry	2023
2005		for Electrostatic	allowing for spark free
		Fluid Accelerator	operation and use of light
			weight, inexpensive
			materials as the electrodes
May	6,888,314	Electrostatic Fluid	electrode design geometries	2022
2005		Accelerator -	and attributes including
		Electrode Design	micro channeling to achieve
		Geometries	unique air movement and
			purification performance
April	6,727,657	Electrostatic Fluid	synchronization of multiple	2022
2004		Accelerator for and	stages of arrays -
		a Method of	increasing air flow and air
		Controlling Fluid	flow efficiency
December	6,664,741	Method of and	ratio of voltage for	2022
2003		Apparatus for	producing ion discharge to
		Electrostatic Fluid	create air movement and
		Acceleration Control	base level filtration
		of a Fluid Flow
January	6,504,308	Electrostatic Fluid	electrode density core for	2019
2003		Accelerator	producing ion discharge to
			create air movement and
			base level filtration

 

 

RESULTS OF OPERATIONS

 

Consolidated Statement of Operations For the Nine Months Ended March 31, 2008 (“2008”) Compared with the Nine Months Ended March 31, 2007 (“2007”).

 

Our net losses for 2008 and 2007 were $2,339,000 and $2,501,000, respectively. The $162,000, or 6%, decrease in the net loss for 2008, as compared to 2007 was principally the result of a $3,134,000 increase in gross profit, partially offset by a $1,696,000 in accretion of note discount, a $1,039,000, or 45%, increase in operating costs to $3,341,000, and $237,000, or 91%, increase in interest expense to $499,000.

 

Revenue. Revenues are generated through the licensing of Kronos technology and through sales of services for design and development of Kronos devices at Kronos Air Technologies, Inc. Revenues for 2008 were $3,598,000 compared with $156,000 for 2007, an increase of $3,442,000. Revenues for 2008 were from our agreements with Tessera, a national retailer, global consumer products company and EOL. In comparison, revenues for 2007 were from our agreements with EOL, GE and DESA.

 

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Cost of Sales. Cost of sales for 2008 was $401,000 compared with $93,000 for 2007, an increase of $308,000, or 331%. Cost of sales for 2008 primarily consisted of the cost of the patents transferred to Tessera and the product development costs associated with our national retailer and global consumer products company agreements. In comparison, cost of goods sold for 2007 primarily consisted of product development costs associated with our EOL, GE and DESA agreements.

 

Selling, General and Administrative Expenses. Selling, General and Administrative expenses for 2008 increased $1,039,000, or 45%, to $3,341,000. The increase was principally the result of a $614,000, or 56%, increase in compensation and benefits primarily as a result of a $393,000, or 266%, increase in the expense for amortization of stock options that vested, a $288,000, or 109%, increase in professional services as a result of an increase in advisory services from our majority shareholder, as well as legal expenses and a $190,000, or 500%, increase in product development costs.

 

Accretion of Note Discount. Accretion of note discount for 2008 of $1,696,000 represented the amortization of the beneficial conversion feature of the AirWorks, Hilltop, Sun and Gumbinner promissory notes.

 

Interest Expense. Interest expense for 2008 was $499,000 compared to $262,000 for the corresponding period of the prior year. The $237,000, or 90%, increase in interest expense for 2008, as compared to 2007, was principally the result of the increase in the debt outstanding in 2008 primarily to AirWorks, Hilltop, Sands and Critical Capital compared with debt outstanding in 2007 primarily to HoMedics.

 

Consolidated Balance Sheet as of March 31, 2008 Compared with June 30, 2007

 

Our total assets at March 31, 2008 were $5,060,000 compared with $2,111,000 at June 30, 2007. Total assets at March 31, 2008 and June 30, 2007 were comprised primarily of $3,579,000 and $364,000, respectively, of cash and $1,450,000 and $1,723,000, respectively, of patents/intellectual property. Total current assets at March 31, 2008 and June 30, 2007 were $3,602,000 and $381,000, respectively, while total current liabilities for such periods were $2,675,000 and $1,589,000, respectively. This created a working capital surplus of $927,000 at March 31, 2008 and a working capital deficit of $1,208,000 at June 30, 2007.

 

Stockholders' surplus as of March 31, 2008 was $1,386,000.  The recording of the discount on the beneficial conversion feature on AirWorks, Hilltop, Sun and Gumbinner promissory notes ($2,079,000), the issuance of equity from the conversion of promissory notes into stock ($731,000), the issuance of stock options for services ($604,000), and the issuance of stock for services ($24,000) were partially offset by the $2,339,000 net loss for 2008.

 

LIQUIDITY AND CAPITAL RESOURCES

 

Historically, we have relied principally on the sale of common stock and secured debt, customer contracts for research and product development and licensing royalties to finance our operations.

 

 

In March 2008, Kronos executed an Intellectual Property Transfer and License Agreement with Tessera Technologies, Inc. (“Tessera”) for the transfer and license of certain intellectual property (“IP”) rights related to Kronos proprietary technologies to Tessera.  Kronos received $3.5 million from Tessera in exchange for the transfer of select Kronos patents covering micro-cooling applications and for an exclusive license to the Kronos technology for ionic micro-cooling of integrated circuit devices or discrete electrical components. Kronos retained the rights to use these patents for all applications outside of the field of micro-cooling. Tessera further has the right to acquire additional Kronos IP relating to micro-cooling applications for four quarterly payments of $0.5 million each beginning in July 1, 2008. The two companies have the option to continue to jointly develop new technologies in this field.

 

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In June 2007, Kronos entered into a Funding Agreement with a group of lenders providing for a loan, at the discretion of the lenders, in the aggregate amount of up to $18,159,000. At the initial closing, the Company received an initial advance of $4,259,000. After payment in full of the amounts due under a convertible debenture issued to Cornell Capital Partners and the settlement agreement obligation to HoMedics and payment of the expenses of the transaction, the remainder of $1,069,000 was used for working capital purposes. The initial new lenders were: (i) AirWorks Funding LLLP, a newly-formed limited partnership; (ii) Critical Capital Growth Fund, L.P. and various Sands Brothers Venture Funds, all of which are affiliates of Laidlaw and Co. (UK) Ltd. and (iii) RS Properties I LLC, a New York-based private investment company. RS Properties assigned to Hilltop Holding Company, LP, a Delaware limited partnership, ("Hilltop") its promissory note together with certain other rights and agreements relating thereto, including, without limitation, its rights and obligations under the Funding Agreement. During the nine months ended March 31, 2008, the Company received an additional $2,533,000 in funding under the terms of the Funding Agreement and related notes.

 

The loan is secured by all of the Company's assets and is convertible into shares of the Company's common stock at a conversion price of $0.003 per share, subject to adjustment under certain circumstances. Under the terms of a Letter Agreement between AirWorks, Hilltop and the Company dated April 22, 2008 amending the Funding Agreement, AirWorks and Hilltop may not convert prior to June 30, 2008 any outstanding principal amount of the Airworks Note or the Hilltop Note, or any accrued and unpaid interest thereon, to the extent such conversion would require the Company to issue shares of Common Stock in excess of Kronos’ authorized and unissued shares of Common Stock. Future installments under the Funding Agreement, up to $11,995,000, may be advanced at the discretion of the lenders, even if not requested by the Company. Under the Funding Agreement and related notes, the Company pays interest on the notes at the rate of 12% per annum. Of the total amount of the initial advance, monthly interest payments commence on July 1, 2007 on $859,000, which was initially due and payable on March 31, 2008. On March 13, 2008, Critical Capital and Sands Brothers agreed to extend the maturity date of their note until April 30, 2008. On April 1, 2008, the Company repaid Critical Capital and Sands Brothers the full principal amount and interest on the note.  With respect to all other loan amounts, interest is paid quarterly starting January 1, 2008 and outstanding principal is due and payable June 19, 2010, unless earlier converted at the option of the lenders. The interest owed had been accrued but not paid by the Company.  On May 13, 2008, the Company paid the interest ($107,442) owed on the Hilltop Note through March 31, 2008 to Hilltop.  The maximum loan amount is advanced under the Funding Agreement and related notes and the lenders convert the entire amount of the loan into Kronos common stock at the noted conversion price, the lenders would own approximately 93.3% of the Company's total equity on a fully diluted, as converted basis. On December 31, 2007, AirWorks and Hilltop converted $731,440 of their Secured Convertible Promissory Notes into 243,813,400 shares of Kronos common stock resulting in a change of control of Kronos. On April 1, 2008, the Company repaid $628,000 of the AirWorks and Hilltop notes.

 

GOING CONCERN OPINION

 

The Report of Independent Registered Public Accounting Firm for the years ended June 30, 2007 and 2006 included an explanatory paragraph that stated that we do not have significant cash or other material assets to cover our operating costs. Our ability to obtain additional funding will largely determine our ability to continue in business. Accordingly, there is substantial doubt about our ability to continue as a going concern. Our consolidated 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 develop, manufacturer and sell commercial products on a broad basis. While attempting to make this transition, we will be subject to all the risks inherent in a growing venture, including, but not limited to, the need to develop and manufacture reliable and effective products, develop marketing expertise and expand our sales force.

 

FACTORS AFFECTING KRONOS' BUSINESS AND PROSPECTS

 

We are subject to various risks which may have a material adverse effect on our business, financial condition and results of operations, and may result in a decline in our stock price. Certain risks are discussed below:

 

We do not have sufficient cash to continue operations and to support our debt obligations and will require additional financing to sustain our operations.

 

 

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We have a limited operating history with significant losses.

 

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 a history of profitable operations. We incurred a net loss of $2,339,000 for the nine months ended March 31, 2008 and a net loss of $2,351,000 for the fiscal year ended June 30, 2007. As a result, at March 31, 2008 and June 30, 2007, we had an accumulated deficit of $35,508,000 and $33,469,000, respectively. We have sustained our operations through the issuance of our common stock, the incurrence of debt and the licensing of our technology. Our profitability will require the successful commercialization of our Kronos technologies. No assurances can be given that we will be able to successfully commercialize our Kronos technologies or that we will ever be profitable. If we do not achieve profitability we could be forced to curtail or cease our business operations.

 

Existing stockholders will experience significant dilution from our sale of shares under any equity financing.

 

The sale of shares pursuant to the conversion of the AirWorks, Hilltop Sun and Gumbinner Secured Convertible Promissory Notes, the exercise of stock options and warrants or any other future equity financing transaction will have a dilutive impact on our stockholders. As a result, our net income per share could decrease in future periods, and the market price of our common stock could decline. In December 2007, AirWorks and Hilltop converted $731,440 of their Secured Convertible Promissory Notes into 243,813,400 shares of Kronos common stock resulting in a change in control of Kronos and dilution to the Company's existing stockholders.

 

Competition in the market for air movement and purification devices may result in the failure of the Kronos products to achieve market acceptance.

 

Kronos presently faces competition from other companies that are developing or that currently sell air movement and purification devices. Many of these competitors have greater financial, research and development, manufacturing, and sales and marketing resources than we do. Many of the products sold by Kronos' competitors already have brand recognition and established positions in the markets that we have targeted for penetration. In the event that the Kronos products do not favorably compete with the products sold by our competitors, we would be forced to curtail or cease our business operations.

 

Our failure to enforce protection of our intellectual property would have a material adverse effect on our business.

 

A significant part of our success depends on our ability to obtain and defend our intellectual property, including patent protection for our products and processes, preserve our trade secrets, defend and enforce our rights against infringement and operate without infringing the proprietary rights of third parties, both in the United States and in other countries. Our limited amount of capital impedes our current ability to protect and defend our intellectual property. The validity and breadth of our intellectual property claims in ion wind generation and electrostatic fluid acceleration and control technology involve complex legal and factual questions and, therefore, may be highly uncertain. Despite our efforts to protect our intellectual proprietary rights, existing copyright, trademark and trade secret laws afford only limited protection. Our industry is characterized by frequent intellectual property litigation based on allegations of infringement of intellectual property rights. Although we are not aware of any intellectual property claims against us, we may be a party to litigation in the future. If we are unable to enforce protection of our intellectual property, we could be forced to curtail or cease our business operations.

 

Possible future impairment of intangible assets would have a material adverse effect on our financial condition.

 

 

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: (i) With a price of less than $5.00 per share; (ii) That are not traded on a "recognized" national exchange; or (iii) In issuers with net tangible assets less than $2,000,000 (if the issuer has been in continuous operation for at least three years) or $5,000,000 (if in continuous operation for less than three years), or with average revenues of less than $6,000,000 for the last three years.

 

 

 

ITEM 1. LEGAL PROCEEDINGS

 

From time to time the Company may be subject to law suits in the normal course of business.

 

In October 2006, Thompson E. Fehr filed a complaint in the Second Judical District Court of Weber County in the state of Utah against Kronos with respect to prior services rendered to High Voltage Integrated, Inc. totaling $47,130 excluding claims for damages and legal costs. The Company is rigorously defending itself. As the Company believes this complaint is without merit, the Company believes a financial loss is remote and therefore has not recorded a contingent liability for this matter in its financial statements.

 

 

 

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EXHIBIT NO.	DESCRIPTION		LOCATION
2.1	Articles of Merger for Technology Selection, Inc. with the Nevada Secretary of State		Incorporated by reference to Exhibit 2.1 to the 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
3.2	Bylaws		Incorporated by reference to Exhibit 3.2 to the Registration Statement
10.1	Amendment No.1 to Kronos Advanced Technologies, Inc. Secured Convertible Promissory Note with Sands, et. al. dated December 31, 2007		Incorporated by reference to Exhibit 10.1 to the Registrant's Form 8-K filed on January 7, 2008
10.2	Amendment No.2 to Kronos Advanced Technologies, Inc. Secured Convertible Promissory Note with Sands, et. al. dated March 13, 2008		Incorporated by reference to Exhibit 10.1 to the Registrant's Form 8-K filed on March 14, 2008
10.3	Intellectual Property Transfer and License Agreement between Kronos Advanced Technologies, Inc. and Tessera Technologies, Inc. dated March 31, 2008		Provided herewith
10.4	Letter Agreement amending the Funding Agreement between Kronos Advanced Technologies, Inc. AirWorks Funding LLLP and Hilltop Holding Company, LP dated April 22, 2008		Provided herewith
31	Certification of Chief Executive Officer pursuant to U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002		Provided herewith
32	Certification by Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002		Provided herewith

 

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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.

 

	KRONOS ADVANCED TECHNOLOGIES, INC.
DATED:   May 14, 2008	By:	/s/ DANIEL R. DWIGHT
		Daniel R. Dwight President, Chief Executive Officer and Chief Financial Officer