UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549




FORM
10-KSB




(Mark
One)


|X|   ANNUAL
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934


For the
fiscal year ended December 31, 2007 or




|_|   TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT


For the
transition period from _____ to _____




Commission
file number: 333-130394




VeruTEK Technologies,
      Inc.(Exact
      name of small business issuer in its charter)Nevada
            
            06-1828817(State
      or other jurisdiction of incorporation or organization)
            
            (I.R.S.
      Employer Identification No.)





65
      West Dudley Town Road, Suite 100
              Bloomfield, CT
            
            06002(Address
      of principal executive offices)
            
            (Zip
      Code)




Issuer's
telephone number: (860) 242-9800




Securities
Registered Under Section 12(b) of the Exchange Act: None




Securities
Registered Under Section 12(g) of the Exchange Act:


None


(Title of
class)






Check
whether the issuer is not required to file reports pursuant to Section 13 or
15(d) of the Exchange Act.    Yes |_|    No
|X|




Check
whether the issuer (1) has filed all reports required to be filed by Section 13
or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.    Yes
|X|    No |_|




Check if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.    |_|




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




Yes |_|    No |X|




State
issuer's revenues for its most recent fiscal year: $616,331.




The
aggregate market value of the voting common equity held by non-affiliates was
$9,472,608 based upon the closing sales price of Common Stock on the OTC
Bulletin Board on March 17, 2008 of $1.60 per share.




As of
March 17, 2008 21,310,813 shares of Common Stock, par value $.001 per share,
were outstanding.




DOCUMENTS
INCORPORATED BY REFERENCE




None.




Transitional
Small Business Disclosure Format (Check one):    Yes
|_|    No |X|












VeruTEK
Technologies, Inc.






INDEX










Part I
            
            Description
            Page
              NumberItem
      1
            
            Description
      of Business
            1Item
      2
            
            Description
      of Property
            21Item
      3
            
            Legal
      Proceedings
            21Item
      4
            
            Submission
      of Matters to a Vote of Security Holders
            21Part IIItem
      5
            
            Market
      for Common Equity and Related Stockholder Matters and Small Business
      Issuer Purchases of Equity Securities
            22Item
      6
            
            Management's
      Discussion and Analysis or Plan of Operation
            23Item
      7
            
            Financial
      Statements
            32Item
      8
            
            Changes
      In and Disagreements With Accountants on Accounting and Financial
      Disclosure
            52Item
      8A(T)
            
            Controls
      and Procedures
            53Item
      8B
            
            Other
      Information
            53Part IIIItem
      9
            
            Directors,
      Executive Officers, Promoters, Control Persons and Corporate Governance;
      Compliance with Section 16(a) of the Exchange Act
            54Item
      10
            
            Executive
      Compensation
            56Item
      11
            
            Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
            62Item
      12
            
            Certain
      Relationships and Related Transactions and Director
      Independence
            63Item
      13
            
            Exhibits
            64Item
      14
            
            Principal
      Accountant Fees and Services
            65Signatures
            
            
            66





FORWARD
LOOKING STATEMENTS





Forward Looking Statements -
Cautionary Statements





This Form
10-KSB contains certain "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Specifically, all statements other than statements of
historical facts included in this report regarding VeruTEK Technologies, Inc.'s
(the "Company") financial position, business strategy and plans and objectives
of the Company's management for future operations are forward-looking
statements. These forward-looking statements are based on the beliefs of the
Company's management, as well as assumptions made by and information currently
available to the Company's management. When used in this report, the words
"anticipate," "believe," "estimate," "expect," "intend," and words or phrases of
similar import, as they relate to the Company or Company management, are
intended to identify forward-looking statements. Such statements (the
"cautionary statements") reflect the current view of the Company's management
with respect to future events and are subject to risks, uncertainties, and
assumptions related to various factors including, without limitation,
competitive factors, general economic conditions, customer relations,
relationships with vendors, the interest rate environment, governmental
regulation and supervision, seasonality, product introductions and acceptance,
technological change, changes in industry practices, one-time events and the
other risks identified elsewhere herein. Although the Company believes that
expectations are reasonable, it can give no assurance that such expectations
will prove to be correct. Based upon changing conditions, should any one or more
of these risks or uncertainties materialize, or should any underlying
assumptions prove incorrect, actual results may vary materially from those
described herein as anticipated, believed, estimated, expected, or intended. All
subsequent written and oral forward-looking statements attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by the applicable cautionary statements. The Company does not assume
any responsibility to publicly update any of its forward-looking statements
regardless of whether factors change as a result of new information, future
events, or for any other reason. The Company advises you to review any
additional disclosures made in its Forms 10-QSB, 8-K, 10-KSB and other reports
filed with the Commission.




PART
I





Item
1.   Description of Business





Description of Our
Company





VeruTEK
Technologies, Inc. (“VeruTEK-Delaware”) was organized as a Delaware corporation
on February 1, 2006. VeruTEK-Delaware was formed to develop and commercialize
new technologies in the field of environmental remediation. VeruTEK-Delaware
provides technical and consulting services to clients to resolve complex
environmental remediation matters at a wide range of waste sites, principally by
combining surfactant and oxidant chemistries.





On May 9,
2007, a Nevada corporation formerly known as Streamscape Minerals, Inc.
("VeruTek-Nevada") entered into and closed a share exchange agreement with
VeruTEK-Delaware, and each of VeruTEK-Delaware's shareholders (the "Purchase
Agreement"). Pursuant to the Purchase Agreement, VeruTek-Nevada acquired all of
the issued and outstanding capital stock of VeruTEK-Delaware from the
VeruTEK-Delaware shareholders in exchange for 16,684,112 shares of
VeruTEK-Nevada common stock.





We
conduct our business operations through VeruTEK-Delaware, our wholly-owned
subsidiary. As used hereafter, the terms “Company”, “VeruTEK”, “we,” “us,” or
“our” refer to VeruTEK-Nevada and our wholly owned subsidiary,
VeruTEK-Delaware.





VeruTEK-Nevada
was incorporated in the State of Nevada on February 3, 2004. Until we acquired
VeruTek-Delaware, we were an exploration stage company in the business of the
acquisition and exploration of mining properties and intended to be in the
business of mineral property exploration. Management determined that the lack of
capital and a lack of funding sources to fund mining explorations and mining
operations would not allow us to execute our business plan in a viable fashion.
Management decided not to proceed with a mineral exploration program and
consequently elected to merge with VeruTEK-Delaware.





1




Description of
Business





We are an
environmental remediation company that provides environmental solutions for
complex environmental problems. We have developed new clean and green
technologies using food-grade surfactants and food additives that remove
contamination without risk to humans or the environment. We anticipate that our
technologies will allow development of the following revenue
streams:





•   remediation
of contaminated sites;


•   sale
of branded green chemicals,


•   licensing
of proprietary technology;


•   laboratory
services; and


•   high-level
consulting.





We
currently derive our revenue from high level consulting services related to the
evaluation of environmental contamination risks for clients, laboratory services
related to treatability studies intended to evaluate the effectiveness of our
technology, know-how and processes in addressing specific contamination issues
at specific client sites and from pilot projects intended to demonstrate the
effectiveness of our capabilities by directly addressing contamination issues at
client sites. Our objective is to utilize activities from each of the above
revenue sources to successfully demonstrate our capabilities in addressing
environmental remediation issues and thereby secure much larger contracts for
full scale remediation of environmental issues at client sites. We are
continuing to pursue such opportunities. As of this date, the Company has
secured one large project with Keyspan Corporate Services LLC (“Keyspan”) and
three relatively small commitments for full scale remediation projects. Securing
a sufficient number of full scale remediation projects at acceptable profit
margins is critical to ensure the long-term viability of the
Company.  We have not yet established revenue streams related to the
sale of branded green chemicals or licensing of proprietary
technology.





The
Company had two customers that accounted for approximately 83% of its revenues
for the year ended December 31, 2007. A major utility Company located in the
Northeastern United States and a major engineering firm accounted for 57% and
26% of fiscal 2007 revenues, respectively.





We have
successfully tested the first series of clean, green and effective technologies
for surface and subsurface contamination in laboratory and field studies. The
tests have involved both laboratory and field study. Laboratory studies were
conducted by an independent third-party laboratory. Field tests were observed by
a third party consultant and the New York State Department of Environmental
Conservation (“NYSDEC”). A report on field tests prepared by the third party
consultant has been accepted by the NYSDEC.  In addition, we have
received approvals from the South Carolina Department of Health and
Environmental Control and the Florida Department of Environmental Protection to
utilize our technology for remediation at potential client sites in their
respective states.  We will use this technology to diversify our
revenue streams. In the long term, these technologies will be used to penetrate
the fragmented environmental market  so the Company can become the
first large, green environmental services firm.





Currently,
most contaminated surface soil is excavated, treated at an off-site facility and
landfilled. Initially, remediation of contaminated sites will be our most
significant revenue stream. We will clean soils, sediments, and groundwater
especially for clients with large liabilities (such as Fortune 500 industrial
clients, utilities, the federal government and others). These solutions remove
contamination at complex (large) commercial/industrial and government sites. Our
opportunity and vision is to replace the dig/haul/landfill mentality that
pervades the environmental market. Instead of costly removal of vast quantities
of contaminated soil, we now have the ability to design treatments in place
using food-grade materials.





Branded
green chemical development is our second revenue stream. We have developed our
first line of green, biodegradable solutions for environmental cleanup. The
continual development and branding of the VeruSOL line of products will
facilitate movement of the marketplace to more intelligent, earth-friendly
solutions. We believe selling of branded green chemicals will catalyze our
position in the environmental marketplace.





2




The
environmental market is fragmented between water resources management,
laboratory and analytical, consulting, real estate, and remediation sectors.
Remediation (or cleanup) and laboratory services are common themes of these
markets; both are marketing vehicles and revenue generators. Initially, our
laboratory services will focus on high-end and specialty analysis of pollutants
with the expectation and treatability studies. As we grow, the laboratory will
grow to provide support for our growing services.





With a
previous dearth of real environmental solutions available, the environmental
consulting market is currently commodity driven by technologies centered on
excavation and landfill disposal. These traditional remediation technologies are
basic to many implementers and result in a lack of differentiation and higher
levels of competition. With more complete, long-term solutions for cleanup, the
environmental consulting market will be changed to high-end consulting for true
cost-effective remediation utilizing green chemistry that can be safely
implemented. We are positioned to capitalize on this trend in the
market.





Our
technologies can achieve complete or near complete cleanup of soils to provide a
real solution. We use plant-derived natural surfactants that constitute our
green solution.  The cost of our technology is comparable to
excavation and landfill disposal technologies for contamination near the surface
of the ground. However, unlike traditional excavation and landfill remediation,
our technology is not depth limited and consequently we are able to remediate
subsurface soil contamination at greater depths. The cost of excavation and
landfill disposal remediation at depth is prohibitive. In addition, excavation
and landfill disposal is almost never 100 percent effective and sometimes leaves
significant amounts of contamination in place. Excavation and landfill disposal
also increases the likelihood of exposure to contaminants for workers and
communities through which contaminants are hauled. By design, landfill disposal
moves the contamination from one location to the landfill location without
eliminating the contamination. Our technology has none of these
limitations.





Our
technologies are effective in remedying organic chemical based non-aqueous phase
liquids in soils and groundwater.  Organic chemicals are carbon and
hydrogen compounds that are important constituents of many products and
industries such as paints, plastics, food, explosives, drugs, petrochemicals, to
name but a few. As a result of our technology development, we have positioned
ourselves as a solution provider for many types of organic chemical
contamination by providing uniquely designed solutions in partnership with the
traditional environmental remediation consultants and implementers. We believe
our technology is unique and patent applications covering our technology are
pending. The Company is using its green chemistry solutions and implementation
technologies for a number of applications, including providing remedies to treat
herbicide and pesticide contamination and contaminated real
estate.  The Company is also evaluating opportunities in its
laboratory including oil spill remediation, oil extraction and water treatment.
Accordingly, we believe we are uniquely positioned to capitalize on the drive
toward more effective, safe and economical solutions to environmental
problems.





We expect
our technologies will have an impact on the “brownfields” real estate market.
These green technologies are non-intrusive and can safely remedy contamination
in-place in cities and residential areas without having to destroy structures or
move residents. Our technologies can be used to essentially eliminate
significant obstacles faced in the sale or resale of these properties. This area
offers another source of potential revenue.





We
believe we have the opportunity to redefine the environmental market with
green-brand, thoughtful, and cost-effective solutions. In addition, borrowing
marketing strategies from other industries will help transform the large
commodity-driven environmental market to a specialty market.





As of
December 31, 2007, we had 13 employees of which 10 are full time salaried
employees and 3 are hourly employees. We have not experienced any work stoppages
and we consider our relations with our employees to be good.





3




Products and
Services





We have
developed several new, patentable technologies that we believe will change the
nature of the environmental remediation market at complex waste sites. By
combining surfactant and oxidant chemistries, we have invented a proprietary
controlled dissolution and desorption process (by dilute surfactant mixtures)
with concomitant biological or chemical destruction processes. We have already
developed a simultaneously coupled co-solvent/surfactant activated persulfate
oxidation process. Our goal is to have our remedies replace generic site
remedies with designer surfactant/oxidant combinations that are environmentally
safe and non-intrusive to the nearby community. Designer remedial applications
have the same brand appeal to environmental stakeholders that “designer drugs”
have in the pharmaceutical industry. We expect the environmental industry to
evolve toward a pharmaceutical-like business with green chemicals (the VeruSOLTM
line, for example) continually developed and sold under developed brand
names.




Our
Surfactant-Enhanced In Situ Chemical Oxidation (S-ISCOTM) is a technology that
safely destroys (reduces to carbon dioxide and water) organic
contamination.  It can target contamination deep in the subsurface of
soils such that remediation is possible where previously it was not
possible.  It is disruptive because it will force Principal
Responsible Parties to remedy their subsurface contamination instead of leaving
it in place.  It also provides a cost-effective and safe means to
remedy surface and subsurface contamination in place without excavating it and
sending millions of tons of contaminated soils to landfills, many of which are
hundreds or thousands of miles away.  Our technology has been tested
in the laboratory for a specific contaminated site with coal tar in the
subsurface.  It was also successfully implemented at a pilot test site
from April 2006 to November 2006.  An independent third-party report
concluded that our S-ISCOTM mixtures traveled together (coeluted) to targeted
soil zones and contaminants were solubilized and destroyed through the pilot
test area. Results of the transport data show that contaminated soil strata were
and can be targeted for treatment by the S-ISCOTM method. The pilot test
demonstrated that S-ISCOTM can be used to treat the contaminants such as tar
saturated soils, tar blebs and tar-coated lenses beneath buildings and other
potential obstructions (for example, railroad tracks).  The State of
New York Department of Environmental Conservation (NYSDEC) has also approved the
application of S-ISCOTM for full scale remediation at the site of our pilot test.
S-ISCOTM is one type of a family of coelution technologies that we are
developing.  We have completed extensive laboratory work for the
remediation of chlorinated compounds.  We are beginning to work on
implementing a remedy for the remediation of common herbicides and pesticides
often found as residual material in farm soils.





We have
developed Green Chemistry solutions using plant-derived surfactants and
implementation technologies that remediate and eliminate the environmental
effects of chemical waste.





COELUENT
TECHNOLOGIESTM


Coelution
TechnologiesTM include Surfactant-enhanced in Situ Chemical Oxidation
(S-ISCOTM) and
provide treatment that enables the rapid removal of contaminants from soils and
groundwater.





S-ISCOTM


The
S-ISCOTM process uses groundwater to move Green chemicals that destroy
contaminants where they are located in the soil.  Alternatively, in
soils that have low permeability S-ISCOTM can be deployed using emplaced
fracturing methodologies or direct-push injection.  S-ISCOTM requires
no heavy equipment, no destruction of buildings, little odor control, and very
little community impact.





VeruSOLTM


The
Company’s VeruSOLTM product is a surfactant (surface active agent) based solvent.
By combining VeruSOLTM with traditional oxidant chemistries the Company is able
to remove contaminants from soils and groundwater through a controlled
dissolution and desorption process, eliminating the need for
excavation.


Currently
the Company provides five variants of VeruSOLTM, each designed for a specific
type of contamination:




•           VeruSOL
1 – Designed to clean MGP and heavy diesel contamination


•           VeruSOL
2 – Designed to clean lighter organics, NAPLs and gasoline


•           VeruSOL
3 – Designed to clean chlorinated DNAPLs


•           VeruSOL
4 – Designed to clean soil and groundwater PCBs


•           VeruSOL
5 – Designed specifically for clay matrices





4




Additional Product
Opportunities





The
Company’s primary market is the remediation of surface and subsurface soil and
groundwater contamination.  The Company also currently has field tests
which include herbicide/pesticide and contaminated real estate
remediation.  We believe our solutions have applications in oil spill
remediation, oil extraction and water treatment.





HERBICIDES
AND PESTICIDES


The
Company has developed a remedy for legacy soil and groundwater herbicides and
pesticides such as endrin and DDT that it is currently testing in a field
demonstration.  Remedying herbicide and pesticides is useful in
marketing to chemical companies that have a portfolio of contaminated properties
from past improper disposal practices, railroads that used them extensively on
their right of ways and military sites.  It also provides an
additional opportunity to formulate a retail product that can be sold for
residential buyers concerned about the presence of toxic compounds in their
lawns.  Notably, communities around the US are preventing residential
and commercial development of farmland soils that have had past agricultural
activities until removal of legacy herbicides and pesticides.





CONTAMINATED
REAL ESTATE REMEDIATION


The
Company believes its technologies will have an impact on the “Brownfield’s” real
estate market.  The Company’s green technologies can safely remedy
contamination in-situ in cities and residential areas without having to destroy
structures or move residents.  These technologies can be used to
essentially eliminate the stigma of these properties for sale and
resale.  A partnership or joint-venture with a real estate investment
companies to cleanup urban, contaminated properties is potentially one of our
most lucrative revenue streams.





OIL
SPILLS


S-ISCOTM
products are readily applicable to oil spills.  Because they are made
of natural surfactants, they do not impact the marine
environment.  Their action in slowly dissolving and then degrading
coal tar is easily transferred to beach oil, both on rocks and which has seeped
into the beach sands.




Demand





Government,
industry, and the public are interested in cleaning up the environment. Federal
and State laws require the cleanup of contamination that has been released into
the environment.  When hazardous waste is dumped in soil, it poses a
direct risk to dermal exposure and contaminants volatilize such that people can
be harmed by inhaling minute quantities of gas that volatilize from the
soil.  The hazardous waste also migrates to groundwater where minute
quantities of the organic compounds dissolve in the
groundwater.  These dissolved contaminants, benzene, for example, are
transported off-site, where they volatilize into the soil gas and eventually can
make their ways into houses.  The exposure pathways are called “vapor
intrusion.”  Inhalation of the minute quantities of contaminants has
been identified by the United States Environmental Protection Agency as a
significant potential exposure pathway to be evaluated on hazardous waste
sites.  There is no permanent remedy that removes contamination to
provide sufficient protection to the general public and
ecology.   As such, most owners of contaminated land generally
approach the clean up through a risk based standard where they do the minimum
clean up in order to limit their liability.  Risk-based standards are
not a permanent remedy for several reasons:  (1) they are constantly
being revised (usually downward) based on new or updated toxicological
information, (2) there are new compounds that added to the regulatory list as
new toxicological information is acquired and (3) based on new toxicological
information, any site that is “closed” but that has residual contamination (that
is, most, if not all, contaminated sites) can be reopened by EPA to require a
more extensive cleanup.  We believe parties engaged in site clean up
will begin to migrate from risk based standard remedies to designer
surfactant/oxidant combinations that are environmentally safe and non-intrusive
to the nearby community.





5




Distribution





Our
products and services will be distributed and marketed by direct marketing,
environmental consulting firms, licensees and chemical companies. We are
currently distributing exclusively through two channels (direct marketing and
environmental consulting firms). We will continue to patent site-specific
remedies for system and license upgrades. This plan assumes that we will
continue to rent, lease or resell equipment developed for the implementation of
these new technologies.





Environmental
Market





The
environmental market is fragmented between water resources management,
laboratory and analytical, consulting and remediation sectors. Remediation,
which is an endpoint of all environmental projects, ties these markets
together.





Trends in the Remediation
Market





The
market for environmental remediation is being driven by a number of trends
including:


•           a
better understanding of the health risks associated with environmental
contamination;


•           an
increased awareness as it relates to environmental conservation;


•           a
stricter regulatory environment;


•           an
improved understanding of the benefits of Green Chemistry solutions;
and


•           the
desire to solve environmental contamination with solutions that are economically
sustainable.





Government,
industry and the public are demanding the clean up of the environment, in no
small part due to the increasingly proven negative health effects of
contamination.  While consumer advocacy groups are stridently
demanding further regulatory and legislative mandates and are increasingly
vocal, it is important to note that federal and state laws already require the
cleanup of environmental contamination.





Additionally,
federal legislation such as the Clean Water Act, the Superfund law and
Sarbanes-Oxley, have created both a legal requirement and a financial incentive
to clean up contaminated sites, accelerating demand for environmental
remediation. The Clean Water Act restricts pollution of the “Waters of the
United States” without a permit.  The Superfund program forces people
who own or who have owned toxic waste sites to remedy contamination that has
leaked offsite.  The Superfund Amendment, Resource Conservation and
Recovery Act (RCRA), legislates that Potentially Responsible Parties (PRPs) are
responsible for onsite contamination.  Other important environmental
contamination legislation includes the Endangered Species Act, the Community
Right to Know Act and the Toxic Substances Control Act.





The
profit motive also drives the environmental remediation market.  Real
estate developers have increasingly focused on acquiring and remedying
contaminated properties due to their low acquisition costs and potential for
value recovery.  Property owners, insurers and shippers importantly
seek to mitigate their environmental liabilities through environmental
remediation.





Due to
such legislation, large corporations must set aside substantial reserves to pay
for environmental remediation.  These firms are required by Federal
and state law to cleanup the contamination that has been released into the
environment.  Corporate reserves mainly address the impact of
contamination on human health and the ecology.





As a
result, VeruTEK believes that over the next several years, federal, state, and
local governments and private industry will commit billions of dollars annually
to clean up sites contaminated with hazardous waste and petroleum products from
a variety of industrial sources, which should drive demand for environmental
remediation services and technologies.





Technology





Excavation
and landfilling is the most frequently used method of soil and groundwater
remediation in the US. However, much of the simple surface contamination
amenable to low-tech removal has been completed. The remaining problems are
deeper subsurface and contributing substantial contamination to groundwater and
vapor in residences and commercial establishments. Because there is no effective
remediation of subsurface contamination, there is a high demand for an effective
remedy to subsurface contamination.





6




Technology Implications of
VeruTEK Technologies





Remediation
costs have been a prohibitive factor in speeding the pace of cleanups and the
flow of revenues for firms concentrating on remedial construction. Cost
effectiveness is already a vital competitive differentiating factor for
contractors and is expected only to grow in importance. For many complex sites,
such as those with Light Non-Aqueous Phase Liquids (LNAPLs) or dense non-aqueous
phase liquids (DNAPLs), including chlorinated solvents, Manufactured Gas Plant
(MGP) residuals and Polynuclear Aromatic Hydrocarbons (PAHs), treatment has been
practically limited to excavation with off-site disposal.





Technology
has played a limited role to date in the remediation of hazardous waste sites
but will become increasingly important in the future as in situ remediation
(remediation of contaminants in the place they are situated) methods gain
importance. Previously, “dig and haul” was the method of choice for remediation.
The table below presents the limitations of traditional remediation
systems.




Remedy
            
            LimitationSoil
      excavation and incineration or disposal
            
            Incapable
      of handling enormous volumes; not able to nondestructively remedy

              beneath
      buildings; liability retention associated with off-site
      disposal.Off-site
      disposal
            
            Environmental
      and community concerns, cost.Pump
      and treat - groundwater
            
            Liability
      not eliminated, only shifted.
              Proven
      ineffective, especially for non-aqueous phase liquids - acknowledged as
      a
              containment
      method.





EPA
policy and a strong emphasis on cost effectiveness from the buyers of
remediation services are both helping to drive in-situ methods, which require
better technical solutions. The majority of “backlogged sites” are problem
sites, which may either require novel treatment or new technologies. There is an
urgent need in the marketplace for ways to treat both groundwater and soil
contamination.





Fewer of
the more complex sites have been cleaned up and many U.S. Department of Energy
sites are specifying “cap and contain” solutions to prevent contamination
problems from spreading or worsening while they await remediation. In effect,
this creates a technology waiting game until cost-effective on-site treatment
methods are proven and approved by regulators.





Development of In Situ
Technology





The
development of soil-vapor extraction (SVE) was a significant development in the
in situ remediation of petroleum-based wastes (Dr. Hoag, one of the founders of
VeruTEK was the primary developer of SVE technology in the early 1980s).
However, the presence of chlorinated compounds, NAPLs, or DNAPLs nullifies the
effectiveness of the combined SVE and current above-ground systems. Many
chlorinated Volatile Organic Chemicals (VOCs) are (1) not well absorbed onto
activated carbon, (2) resistant to effective catalysis, and (3) corrode internal
combustion engines because of hydrochloric acid formation. The slow rate of
extraction of NAPLs or DNAPLs makes SVE an impractical remedial method for those
contaminants, particularly those at depths lower than the water
table.





More
recently, in-situ chemical oxidation has been used to remediate soils and
groundwater, especially in media that are contaminated with chlorinated VOCs.
In-situ chemical oxidation (ISCO) involves injecting chemical oxidants into the
soil and/or groundwater to oxidize organic contaminants. The common oxidants are
hydrogen peroxide-based, Fenton’s reagent, and potassium permanganate (KMnO 4),
better known as permanganate. Ozone can also oxidize organic contaminants
in-situ, but it has been used less frequently when higher levels of contaminants
are present. Complete mineralization to carbon dioxide and water is the desired
endpoint of an ISCO process. These ISCO technologies can work well on simple
sites with low-level soil and ground water contamination, but generally have
failed on sites (complex sites) that have NAPLs present. Potassium permanganate
is limited to treating chloroethenes, such as trichloroethene (TCE) but is
ineffective at treating non-chlorinated hydrocarbons and most pesticides,
herbicides and PCBs. Our successful combination of surfactant and oxidant
chemistry has allowed the development of a controlled release of NAPL and
absorbed contaminants into the aqueous phase with subsequent degradation by
oxidants. Coupled with free-radical based in-situ chemical oxidation processes
such as activated persulfate and Fenton’s Chemistry, industry and government
agencies will now have a remedial alternative that can treat their many waste
sites.




7




We
believe the more complex sites with chlorinated contaminants, heavier organics
(semi-VOCs) and metals make up the majority of waste sites that have not begun
remedial action.





The
Company has filed patent applications for both its S-ISCOTM green chemistry
solutions as well as its Coeluent TechnologiesTM implementation
equipment.  S-ISCOTM can target and destroy subsurface soil and ground
water contamination for complete remediation.  The Company’s Coeluent
TechnologiesTM are a controlled dissolution and desorption process for biological
or chemical destruction processes.





Technology
Opportunities





The
trends in technology applications and characteristics of waste sites requiring
remediation provide market opportunities for technologies that:





•    Are
completely in-situ;





•    Minimize
residuals;





•    Treat
chlorinated hydrocarbons;





•    Treat
LNAPLs and DNAPLs where conventional SVE and ISCO is generally
ineffective;





•    Are
proprietary and provide market differentiation;





•    Simultaneously
treat groundwater and soil;





•    Can
be used in tandem with other complementary technologies.





As
previously shown, our technologies are directly applicable to each of the most
likely remediation opportunities presented in the next 5 years.





Competition





The
remediation market is composed of a substantial number of companies. We believe
most top remediation companies are large construction management firms that
mainly provide low-technology solutions that move soils to treatment centers or
landfills. We believe the trend is toward smaller high-tech
companies.





Several
mid-sized, full-service remediation companies are poised to compete with the
larger remediation firms by using innovative technology as a differentiator. One
such company has also branded a calcium peroxide-based, slow-oxygen-release
product as a key technology. This technology may compete with our Company on
specific sites, but is more likely a useful partner to our Company on sites
requiring multiple strategies and higher levels of technologies required for
cleanup and site closure.





There are
several smaller remediation companies that would have a similar client base to
our Company. However, the quality of many smaller-sized implementers work has
become an issue amongst industry and regulatory agencies because of a lack of
focus. Their range of services and their implementation of “one remedy fits all”
is in line with the larger remediation market, where excavation and removal is
the clear choice. In the ISCO and innovative technology market, it is clear that
high-level consulting is a key success factor in what is now a niche
market.





Several
other smaller remediation companies provide a menu of new technologies including
chemical oxidation methods. Generally, they are regional companies with one
office and limited capabilities. As such, they can be considered potential
teaming partners of the Company.





8


We
believe the trend in environmental remediation is moving toward more
sophisticated cleanup operations that emphasizes risk and liability management.
The trend is moving away from specialization reflecting that a team should be
able to solve more than one problem or use one technology. This trend benefits
smaller firms that can provide niche services to the larger remediation
companies that dominate the market.





The
beliefs regarding the competitive dynamics in each of the three main remediation
markets are outlined below.





The
traditional excavation/landfill market is comprised of consultants, who
recommend dig and haul strategies and then contract the landfill type
companies.  These companies are also allies of the Company because
they are supposed to be technology neutral.  The Company also works
with landfill/treatment companies.





We
believe that the problems with traditional excavation include:


• Not
environmentally friendly and requires excavation of material in neighborhoods
and transporting through communities;


•           Not
a sustainable and green remedy, due to energy inefficiency;


•           Low
tech solution;


•           Landfill
capacity is shrinking and the cost of landfill space is increasing;


•           Potentially
responsible party continues to bear liability even in the landfill, if the
landfill leaks;


•           Contamination
often exceeds 25 feet and continues into the groundwater.





The
containment market is a remedy of last resort.  Containment solutions
include a wall constructed in the soil to keep contamination contained. We
believe that issues with this solution include:


•           It
does not solve the problem;


•           The
wall dissolves;


•           Liability
is still there;


•           Can
not generally reuse the property;


•           Expensive
solution;


•           Community
unfriendly.





The final
market, which is usage of an oxidant, is mainly employed by chemical companies.
We believe that oxidant solutions have several shortcomings which
include:


•           Remedy
is not permanent in nature;


•           It
can be expensive;


•           Inject
it and forget it;


•           Oxidant
solutions are not effective.





Barriers to
Entry





We have
identified four barriers to competition that are important to maintain during
implementation of our business plan. First, we have implemented an aggressive
patent program to ensure that intellectual property rights are maintained. A
provisional patent that acts as an umbrella for all S-ISCO technology was
applied for in April 2006. Final patents were applied for in March of 2007.
Second, we plan to focus our competitive efforts on more complex issues where
simple solutions such as excavation are not effective. We are providing the
leadership to refocus competition on the larger excavation market and partnering
with potential competitors in delivering its products and solutions to
clients.





Third,
the science and engineering behind ISCO is sufficiently complex to provide a
barrier to competition and barriers to entry. We have completed comprehensive
treatability studies and a field test regarding remediation of contaminants by
our S-ISCO chemical oxidation process. Together, these processes required 18
months of project implementation.





Fourth,
we will through research and development and branding begin to differentiate our
surfactant/oxidant formulations. This will provide potential clients with a
brand that provides assurance of effectiveness through a record of success. We
have begun this strategy by offering four different VeruSOL products for
specific applications.


9




Risk
Factors





The
following section describes the risks inherent with our business. You should
carefully consider the risks described below as well as other information
provided to you in this document, including information in the section of this
document entitled “Information Regarding Forward Looking Statements.” The risks
and uncertainties described below are not the only ones facing the Company.
Additional risks and uncertainties not presently known to us or that we
currently believe are immaterial may also impair our business operations. If any
of the following risks actually occur, our business, financial condition or
results of operations could be materially affected, the value of our common
stock could decline, and you may lose all or part of your
investment.





Our
substantial indebtedness could adversely affect our financial
condition.




We have
substantial debt and, in turn, substantial debt service requirements. Our
ability to make payments on our convertible notes due 2009 and any future
indebtedness we may incur depends on our ability to generate sufficient cash
flow. We cannot assure you that:




•
            
            our
      business will generate sufficient cash flow from operations to service our
      indebtedness;





•
            
            future
      borrowings or proceeds from equity issuances will be available in an
      amount sufficient to enable us to pay our indebtedness on or before the
      maturity date of such indebtedness;
or




•
            
            we
      will be able to refinance any of our indebtedness on commercially
      reasonable terms, if at all.




Factors
beyond our control may affect our ability to service our indebtedness. These
factors include those discussed in this “Risk Factors” section.






If, in
the future, we cannot generate sufficient cash flow from our operations to meet
our debt service obligations, we may need to refinance our debt, obtain
additional financing, issue equity or sell assets, which we may not be able to
do on commercially reasonable terms, if at all, and which we may be prohibited
from doing under the terms of our indebtedness. We cannot assure you that our
business will generate cash flow, or that we will be able to obtain funding,
sufficient to satisfy our debt service obligations. Our inability to generate
cash flow or obtain funding sufficient to satisfy our debt service obligations
could materially and adversely affect our financial condition.






Our limited operating history makes
it difficult for us to evaluate our future business prospects and make decisions
based on those estimates of our future performance.




Although
our management team has been engaged in the field of environmental remediation
for an extended period of time, VeruTEK-Delaware did not begin operations of its
current business concept until February 1, 2006. Further, we have only recently
completed the acquisition of VeruTEK-Delaware. We have a limited operating
history in our current combined form, which makes it difficult to evaluate our
business on the basis of historical operations.  As a consequence, it
is difficult, if not impossible, to forecast our future results based upon our
historical data. Because of the uncertainties related to our lack of
historical operations, we may be hindered in our ability to anticipate and
timely adapt to increases or decreases in sales, revenues or expenses.  If
we make poor budgetary decisions as a result of unreliable historical data, we
could be less profitable or incur losses, which may result in a decline in our
stock price.




Our
results of operations have not been consistent, and we may not be able to
achieve profitability.




We
incurred a net loss of approximately $4.2 million for the year ended December
31, 2006 and a net loss of approximately $5.9 million for the twelve months
ended December 31, 2007.  Our management believes that our current
business plan will be successful and that we will be able to limit our losses;
however, our business plan is speculative and unproven.  There is no
assurance that we will be successful in executing our business plan or that even
if we successfully implement our business plan, that we will be able to curtail
our losses now or in the future.  If we incur significant operating losses,
our stock price may decline, perhaps significantly.




10




There
is substantial doubt about our ability to continue as a going concern as a
result of our working capital deficiency, sustained net loss, the lack of a
sufficient number of full scale remediation projects with adequate profit
margins, the violation of certain terms of our term note facility and the fact
that three customers represent nearly all of our revenues and if we are unable
to generate significant revenue or alternative financing we may be required to
cease or curtail our operations.




As shown
in the accompanying financial statements, we have a working capital deficiency
of approximately $2.2 million as of the period ended December 31, 2007 and have
an accumulated deficit of approximately $10.1 million at December 31,
2007.   The working capital deficiency is largely affected by the
$2.2 million derivative instrument liability that we do not expect to be settled
with cash. As is typical with early stage growth companies, these losses are
largely a result of business development expenses as well as investment in
infrastructure for growing our business and operations.  We are also
not in compliance with certain provisions of our term note with our
bank which provides the bank with the right to demand repayment or increase the
stated interest rate. Should the Company’s bank choose to demand repayment
of the term note, all interest and principal would become due and payable
immediately. In addition, our revolving credit facility with our bank expired on
May 25, 2007 and all amounts owed were repaid. We are pursuing a
replacement facility and other potential sources of funding with other financial
institutions of which there is no guarantee that we will be successful in
obtaining such financing. As of this date, the Company has secured one large
project with Keyspan Corporate Services LLC (“Keyspan”) and three relatively
small commitments for full scale remediation projects. Securing a sufficient
number of full scale remediation projects at acceptable profit margins is
critical to ensure the long-term viability of the Company.  Further,
we have two customers that accounted for 83% of our revenues for the
twelve-month period ended December 31, 2007.  These factors raise
substantial doubt about our ability to continue as a going
concern.  The financial statements do not include adjustments that
might result from the outcome of this uncertainty and if we are unable to
generate significant revenue or alternative financing we may be required to
cease or curtail our operations.  If we do not secure a project or
projects for full scale environmental remediation of sufficient size and
profitability or if we do not secure additional funding from other sources, we
estimate current funding will sustain our operations through April of
2008.





We
are dependent upon two customers and if we are to lose any one of our customers
we may be forced to cease operations.





We have
two customers that accounted for 83% of our revenues for the twelve-month period
ended December 31, 2007.   If we are unable to develop additional
customers or lose one of our existing customers our operations may be severely
impacted and we may be forced to cease operations.





Our
management has limited experience in managing the day to day operations of a
public company and, as a result, we may incur additional expenses associated
with the management of our company.





Our
acquisition of VeruTEK-Delaware has only recently occurred on May 9, 2007.
Following the acquisition of VeruTEK-Delaware, the management team, consisting
of John Collins, George Hoag, and Michael Vagnini, is responsible for the
operations and reporting of the combined company. The requirements of operating
as a small public company are new to the management team and the employees as a
whole. This may require us to obtain outside assistance from legal, accounting,
investor relations, or other professionals that could be more costly than
planned. We may also be required to hire additional staff to comply with
additional SEC reporting requirements and compliance under the Sarbanes-Oxley
Act of 2002 not previously required as a private company prior to the
acquisition of VeruTEK-Delaware. Our failure to comply with reporting
requirements and other provisions of securities laws could negatively affect our
stock price and adversely affect our results of operations, cash flow and
financial condition.





Operating
as a small public company also requires us to make projections about future
operating results and to provide forecast guidance to the public markets. We
have limited experience as a management team in the combined company with
dealing with the public markets and as a result our projections may not be made
timely or set at expected performance levels and could materially affect the
price of our stock. Any failure to meet published projections that adversely
affect our stock price could result in losses to investors, shareholder lawsuits
or other litigation, sanctions or restrictions issued by the SEC or the exchange
upon which the combined company's stock is traded.





11




While
we believe that we currently have adequate internal control over financial
reporting, we are exposed to risks from recent legislation requiring companies
to evaluate internal control over financial reporting.




Section
404 of the Sarbanes-Oxley Act of 2002 ("Section 404") requires our
management to report on the operating effectiveness of the Company's
Internal Controls over financial reporting  for the year ended December 31,
2007. Carlin, Charron & Rosen, LLP, our independent registered public
accounting firm, will be required to attest to the effectiveness of our internal
control over financial reporting beginning with the year ended December 31,
2009. We must establish an ongoing program to perform the system and process
evaluation and testing necessary to comply with these requirements. We
expect that the cost of this program will require us to incur expenses and
to devote resources to Section 404 compliance on an ongoing basis.




It is
difficult for us to predict how long it will take to complete Management's
assessment of the effectiveness of our internal control over financial
reporting for each year and to remediate any deficiencies in our internal
control over financial reporting. As a result, we may not be able to complete
the assessment and process on a timely basis. In the event that our Chief
Executive Officer, Chief Financial Officer or independent registered public
accounting firm determine that our internal control over financial reporting is
not effective as defined under Section 404, we cannot predict how regulators
will react or how the market prices of our shares will be affected.




We
are dependent on the environmental remediation industry, which has experienced
volatility in capital spending.





We derive
the majority of our revenues from sales of products and services to the
environmental remediation industry. Purchases of our services may be deferred as
a result of many factors including mergers and acquisitions, regulatory
decisions, weather conditions, rising interest rates, clean-up specific
financial situations and general economic downturns. In the future, we may
experience variability in operating results, on both an annual and a quarterly
basis, as a result of these factors.





Environmental
remediation industry sales cycles can be lengthy and unpredictable, which can
cause delays in purchasing and variability to our financial projections and
could adversely affect our results of operations.





Sales
cycles with customers in the environmental remeditation industry are generally
long and unpredictable due to a variety of factors including political
influences, customers’ budgeting, purchasing and regulatory processes.
Accordingly, realization of revenues from projects can take longer than
expected. Our remediation customers typically issue requests for quotes and
proposals, establish evaluation committees, review different technical options
with vendors, analyze performance and cost/benefit justifications and perform a
regulatory review, in addition to applying the normal budget approval process
within a company. Delays in completing these processes can cause delays in
purchasing and variability to our financial projections and could adversely
affect results of operations.





12




We
face competitive pressures from a variety of companies in the markets we serve
which may have an adverse effect on our operating results.





We are a
small company in a highly competitive market. Some of our present and potential
competitors have, or may have, substantially greater financial, marketing,
technical or manufacturing resources, and in some cases, greater name
recognition and experience than we have. Some competitors may enter markets we
serve and sell products at low prices in order to obtain market share. Our
competitors may be able to respond more quickly to new or emerging technologies
and changes in customer requirements. They may also be able to devote greater
resources to the development, promotion and sale of their products and services
than we can. Current and potential competitors may make strategic acquisitions
or establish cooperative relationships among themselves or with third parties
that enhance their ability to address the needs of our prospective customers. It
is possible that new competitors or alliances among current and new competitors
may emerge and rapidly gain significant market share. Other companies may also
produce products or provide services that are equal or superior to our products
and services, which could reduce our market share, reduce our overall sales,
severely impair our ability to secure business and require us to invest
additional funds in new technology development. Our technology is new and we
have secured only one large scale remediation project and three relatively small
projects for the full scale remediation of contaminated environmental sites.
Securing a sufficient number of full scale remediation projects at acceptable
profit margins is critical to ensure the long-term viability of the
Company.  We may face competition from other environmental remediation
firms with alternative technologies that will be less costly to the client and
result in our inability to secure projects or result in our inability to secure
such projects at acceptable profit margins. If we cannot compete successfully
against current or future competitors, this will have a material adverse effect
on our business, financial condition, results of operations and cash
flow.





Our financial forecasts may not be achieved as a result of the
unpredictability of customer buying patterns, which could make our stock price
more volatile.





We do not
maintain significant levels of backlog. Revenue in any year or quarter is
dependent, in significant part, on contracts entered into, booked and completed
in that period. Forecasts may not be achieved, either because expected sales are
delayed or do not occur or because they occur at lower prices or on terms that
are less favorable to us.





In
addition, fluctuations may be caused by a number of other factors,
including:





·
            the
      timing and volume of customer contracts, projects and customer
      cancellations;




·
            a
      change in our revenue mix of services and a resulting change in the gross
      margins;




·
            the
      timing and amount of our expenses;




·
            the
      introduction of competitive services or products by existing or new
      competitors;




·
            reduced
      demand for any given service or
product;





·
            the
      market’s transition to new
technologies.





Due to
these factors, forecasts may not be achieved, either because expected revenues
do not occur or because they occur at lower prices, at later times, or on terms
that are less favorable to us. In addition, these factors increase the chances
that our results could diverge from the expectations of investors and analysts.
If so, the market price of our stock would likely decrease and may result in
shareholder lawsuits.





13




We
need to manage growth in operations to maximize our potential growth and achieve
our expected revenues and our failure to manage growth will cause a disruption
of our operations resulting in the failure to generate revenue.





In order
to maximize potential growth in our current and potential markets, we believe
that we must expand our, sales and marketing operations. This expansion will
place a significant strain on our management team and our operational,
accounting, and information systems. We expect that we will need to continue to
improve our financial controls, operating procedures, and management information
systems. We will also need to effectively hire, train, motivate, and manage our
employees. Our failure to properly manage our growth could disrupt our
operations and ultimately prevent us from generating the revenues we
expect.





If
we are not able to implement our strategies in achieving our business
objectives, our business operations and financial performance may be adversely
affected.




Our
business plan is based on circumstances currently prevailing and the assumptions
that certain circumstances will or will not occur, as well as the inherent risks
and uncertainties involved in various stages of development. However, there is
no assurance that we will be successful in implementing our strategies or that
our strategies, even if implemented, will lead to the successful achievement of
our objectives. If we are not able to successfully implement our strategies, our
business operations and financial performance may be adversely
affected.





If
we need additional capital to fund our growth, we may not be able to obtain
sufficient capital and may be forced to limit the scope of our
operations.





In
connection with our growth strategies, we may experience increased capital needs
and accordingly, we may not have sufficient capital to fund our future
operations without additional capital investments. Our capital needs will depend
on numerous factors, including the following:





·
            our
      profitability;·
            the
      release of competitive products by our competition;·
            the
      level of our investment in research and development;
and·
            the
      amount of our capital expenditures, including
  acquisitions.





We cannot
assure you that we will be able to obtain capital in the future to meet our
needs. If we cannot obtain additional funding, we may be required
to:





·
            limit
      our investments in research and development;·
            limit
      our marketing efforts; and·
            decrease
      or eliminate capital expenditures.





Such
reductions could materially adversely affect our business and our ability to
compete.





Even if
we do find a source of additional capital, we may not be able to negotiate terms
and conditions for receiving the additional capital that are acceptable to us.
Any future capital investments could dilute or otherwise materially and
adversely affect the holdings or rights of our existing shareholders. In
addition, new equity or convertible debt securities issued by us to obtain
financing could have rights, preferences and privileges senior to our common
stock. We cannot give you any assurance that any additional financing will be
available to us, or if available, will be on terms favorable to us.


14


We
depend on our ability to develop and release new products from development in a
timely and consistent manner.





Our
products have only recently reached the point of commercialization, been
approved for use by regulatory authorities and still may require additional and
continuing development to become competitive with other competing products and
services. We expect to continue to make substantial investments in technology
development. Our future success will depend, in part, on our ability to continue
to design and manufacture new competitive products and to enhance and sustain
our existing products. This product development will require continued
investment in order to maintain and grow our market position. We may experience
unforeseen problems in the development or performance of our technologies or
products. In addition, we may not meet our product development schedules.
Finally, we may not achieve market acceptance of our new products and solutions.
These factors could materially affect our ability to forecast operations and
negatively affect our stock price, results of operations, cash flow and
financial condition.





Our
technology may have defects that could lead to a loss of revenues or product
liability claims.





Our
products and services use complex development technologies and may contain
defects, especially when first introduced or when new technologies are
implemented. Despite laboratory testing, we may not detect defects in our new
products or technologies until after we have commenced commercial
implementation. If defects are discovered after commercial implementation of
either new products or technologies:




·
            potential
      customers may delay purchases;




·
            customers
      may react negatively, which could reduce future
  sales;




·
            our
      reputation in the marketplace may be
damaged;




·
            we
      may have to defend product liability
claims;




·
            we
      may be required to indemnify our customers, clients or
    others;




·
            we
      may incur additional service and warranty costs;
  and





·
            we
      may have to divert additional development resources to correct the
      defects, which may result in the delay of new product and technology
      implementations.




If any or
all of the foregoing occur, we may lose revenues, incur higher operating
expenses and lose market share, any of which could severely harm our financial
condition and operating results.





We
depend on a single, exclusive supplier for surfactants and a limited number of
suppliers for other chemicals which are a critical raw material in our
environmental solutions, and our inability to obtain sufficient supplies of this
raw material in a timely manner or at favorable prices could increase our prices
or otherwise harm our business.





Our
environmental solutions for complex environmental problems require
plant-derived, food-grade surfactants, for which we currently have a ten-year
exclusive relationship with a single manufacturer and
supplier.  Because we are dependent on this outside supplier for
surfactants and do not maintain an inventory of surfactants, we must obtain
sufficient quantities of quality surfactants from our supplier at acceptable
prices and in a timely manner.  This manufacturer and supplier could
discontinue manufacturing or supplying surfactants, experience interruptions in
their operations or raise their prices. We are also dependent on a limited
number of outside manufacturers and suppliers for other chemicals for which we
must obtain sufficient quantities of quality product from our suppliers at
acceptable prices and in a timely manner.  Any or all of these
manufacturers and suppliers could discontinue manufacturing or supplying
surfactants, experience interruptions in their operations or raise their
prices.





A major
decline in our suppliers’ financial condition could cause a production slowdown
or stoppage.  As a result, our customers could cancel orders, which
could have a material adverse effect on our business and results of
operations.  Any of the foregoing could reduce our sales in a given
period, cause a loss of business to a competitor, or otherwise cause our
financial condition to suffer.






15




Moreover,
we may not be able to identify alternative sources of supply in a timely fashion
or at all, and any relationship by us with such an alternative source could be
inconsistent with our ten-year exclusive relationship with our current
surfactant supplier.  Any transition to alternate suppliers may result
in delays with respect to the performance of our contracts with our customers or
otherwise limit our ability to perform under those contracts and could result in
a breach of our arrangement with our current surfactant supplier.





We have a
long-term letter of understanding with our surfactant supplier and believe we
are on good terms with all suppliers.  However, we cannot be certain
that we will continue to have access to our current sources of supply of
surfactants and other chemicals or that we will not encounter supply problems in
the future.





The
Company’s inability to maintain adequate manufacturer and supplier relationships
due to its financial position and working capital situation may limit the
availability of surfactants and other chemicals and impair the Company’s ability
to implement contracts with customers, which could adversely affect our
financial position.





We
are subject to regulatory compliance and we may incur substantial expenses in
complying with these regulations





We are
subject to various governmental regulations including those related to
occupational safety and health, labor and wage practices and regulations
regarding the performance of certain engineering services. Failure to comply
with current or future regulations could result in the imposition of substantial
fines, suspension of production, alteration of our production processes,
cessation of operations or other actions, which could materially and adversely
affect our business, financial condition and results of operations.





Our
operating results may be adversely affected by the uncertain geopolitical
environment and unfavorable factors affecting economic and market
conditions.





Adverse
factors affecting economic conditions worldwide have contributed to a general
inconsistency in environmental remediation spending and may continue to
adversely impact our business, resulting in:





·
            Reduced
      demand for our products as a result of a decrease in spending by our
      customers and potential customers;





·
            Increased
      price competition for our products and services;
  and





·
            Higher
      overhead costs as a percentage of
revenues.





Terrorist
and military actions may continue to put pressure on economic conditions. If
such an attack should occur or if the economic and market conditions in the
United States deteriorate as a result of a terrorist attack, we may experience a
material adverse impact on our business, operating results, and financial
condition as a consequence of the above factors or otherwise.





Stockholders
may experience significant dilutions if future equity offerings are used to fund
operations or acquire complimentary businesses.





If future
operations or acquisitions are financed through the issuance of equity
securities, stockholders could experience significant dilution. In addition,
securities issued in connection with future financing activities or potential
acquisitions may have rights and preferences senior to the rights and
preferences of our common stock. We expect to establish an incentive stock award
plan for management and employees. We expect to grant options to purchase shares
of our common stock to our directors, employees and consultants and we will
grant additional options in the future. The issuance of shares of our common
stock upon the exercise of these options may result in dilution to our
stockholders.





16




We
may have difficulty defending our intellectual property rights from infringement
resulting in lawsuits requiring us to devote financial and management resources
that would have a negative impact on our operating results.





We regard
our service marks, trademarks, trade secrets, patents and similar intellectual
property as critical to our success. We rely on trademark, patent and trade
secret law, as well as confidentiality and license agreements with certain of
our employees, customers and others to protect our proprietary rights. No
assurance can be given that our patents and licenses will not be challenged,
invalidated, infringed or circumvented, or that our intellectual property rights
will provide competitive advantages to us.





If
our patents do not protect our environmental remediation processes, or our
environmental remediation processes infringe third-party patents, we could have
difficulty protecting our technology or be subject to litigation and
liability.





We have
several patent applications pending in the United States, and intend to file
others.  Our success will depend, in part, on our ability to obtain
and maintain United States patent protection for our environmental remediation
chemicals, methods and processes.  We do not know whether any patents
will issue from any of our patent applications or, even if patents issue or have
issued, that the issued claims will provide us with any significant protection
against competitive products or otherwise be valuable
commercially.  If we are not able to obtain adequate patent
protection, our ability to prevent competitors from making, using and selling
similar environmental remediation chemicals, methods and/or processes may be
limited.  Furthermore, in a competitive environmental remediation
market, our activities may infringe the claims of patents held by third
parties.  Defense and prosecution of infringement or other
intellectual property claims, as well as participation in other inter-party
proceedings, can be expensive and time-consuming, regardless of whether or not
the outcome is favorable to us.  If the outcome of any such litigation
or proceeding were adverse, we could be subject to significant liabilities to
third parties, could be required to obtain licenses from third parties, or could
be required to cease sales of our environmental remediation chemicals, methods
and/or processes, any of which outcomes could have a material adverse effect on
our business.





If
we lose the services of any of our key personnel, including our Chief Executive
Officer, Chief Financial Officer and Director of Research and Development our
business may suffer.





We are
dependent on our key officers, including Chief Executive Officer, Chief
Financial Officer and Director of Research and Development, our directors, and
our key employees in our technology, finance, sales and marketing operations.
Our business could be negatively impacted if we were to lose the services of one
or more of these persons.





Our
executive officers, board of directors and key employees are crucial to our
business, and we may not be able to recruit, integrate and retain the personnel
we need to succeed.




Our
success depends upon a number of key management, sales, technical and other
critical personnel, including our executive officers, the Board of Directors and
key employees. The loss of the services of any key personnel, or our inability
to attract, integrate and retain highly skilled technical, management, sales and
marketing personnel could result in significant disruption to our operations,
including the timeliness of new product introductions, success of product
development and sales efforts, quality of customer service, and successful
completion of our initiatives, including growth plans and the results of our
operations. Any failure by us to find suitable replacements for our key senior
management may be disruptive to our operations. Competition for such personnel
in the technology industries is intense, and we may be unable to attract,
integrate and retain such personnel successfully.





Our
bylaws provide that we may indemnify our officers and directors which may
result in significant expenditures for our company, which may further exacerbate
our losses.





Our
Bylaws provide that we may indemnify our directors, officers, employees, and
agents to the fullest extent permitted by Nevada law. We will also bear the
expenses of litigation for any of our directors, officers, employees, or agents.
This indemnification policy could result in substantial expenditures which we
may be unable to recoup.






17




The
issuance of shares upon conversion of the Secured Convertible Notes and exercise
of outstanding warrants issued to the investors may cause immediate and
substantial dilution to our existing stockholders.





The
issuance of shares upon conversion of the convertible notes issued on May 9,
2007 (the “Notes”) and exercise of warrants may result in substantial dilution
to the interests of other stockholders since the investors may ultimately
convert and sell the full amount issuable on conversion. Although the investors
may not convert or exercise their Notes and common stock purchase warrants if
such conversion would cause them to own more than 9.99% of our outstanding
common stock, this restriction does not prevent the investors from converting
and/or exercising some of their holdings and then converting the rest of their
holdings. In this way, the investors could sell more than their limit while
never holding more than this limit.


We
are subject to certain restrictions and covenants under our Securities Purchase
Agreement with the holders our Notes and related warrants.
 
 Pursuant
to that certain Securities Purchase Agreement that we entered into with the May
2007 Investors, we are subject to certain restrictions and covenants, including,
among others, covenants prohibiting us from terminating our status as an issuer
required to file reports under the Exchange Act, generally prohibiting us from
selling all or substantially all of our assets except to certain purchasers,
limiting our ability to incur indebtedness or issue securities, prohibiting us
from amending or modifying our governing documents, and granting certain rights
of first offer to May 2007 Investors with respect to certain issuance and of our
securities. These restrictions and covenants may have the effect of delaying,
deterring or preventing certain transactions and activities by the Company,
which could adversely affect our results of operations, cash flow and financial
condition.




If
we breach our registration rights agreement with certain of our investors, we
could be subject to penalties or liabilities that could have a material adverse
effect on our business.





As noted
elsewhere herein, we previously agreed to effect the registration of shares of
our common stock issuable upon the conversion of our Notes and the related
warrants under the Securities Act of 1933 pursuant to a registration rights
agreement. On January 18, 2008, the Securities and Exchange Commission declared
effective our registration statement with respect to 3,270,327 shares of our
common stock, which included shares of common stock subject to the registration
rights agreement issuable upon the conversion of the Notes and related warrants.
This registration did not meet the requirement under the registration rights
agreement for the registration statement to be declared effective within 180
days following the May 9, 2007 closing of the “Merger” (as defined and discussed
below in “Item 6.  Management’s Discussion and Analysis or Plan of
Operation – Overview”). However, we did receive consents we believe extended the
registration deadline from investors comprising approximately 70% of the shares
of common stock issuable under the issued and outstanding Notes and warrants.
Accordingly, we provided an accrued liability of $24,250 for penalties related
to the Notes for which holders did not provide consents extending this
deadline.  See “Item 6.  Management’s Discussion and
Analysis or Plan of Operation – Liquidity and Capital Resources.”  To
the extent that we fail to meet any other requirements under the registration
rights agreement, we could be subject to additional penalties or liabilities,
which could have a material adverse effect on our business.








SPECIFIC
RISKS RELATING TO OUR COMMON STOCK





We
have not paid dividends in the past and do not expect to pay dividends in the
future. Any return on investment may be limited to the value of our common
stock.





We
have never paid cash dividends on our common stock and do not anticipate paying
cash dividends in the foreseeable future. The payment of dividends on our common
stock will depend on earnings, financial condition and other business and
economic factors affecting it at such time as the board of directors may
consider relevant. If we do not pay dividends, our common stock may be less
valuable because a return on your investment will only occur if its stock price
appreciates.





There
is a limited market for our common stock which may make it more difficult to
dispose of your stock.





Our
common stock is currently quoted on the Over the Counter Bulletin Board under
the symbol "VTKT". There is a limited trading market for our common stock.
Accordingly, there can be no assurance as to the liquidity of any markets that
may develop for our common stock, the ability of holders of our common stock to
sell our common stock, or the prices at which holders may be able to sell our
common stock.





A sale of a substantial number of
shares of our common stock may cause the price of our common stock to
decline.




If our
stockholders sell substantial amounts of our common stock in the public market,
the market price of our common stock could fall. These sales also may make it
more difficult for us to sell equity or equity-related securities in the future
at a time and price that we deem reasonable or appropriate. Stockholders who
have been issued shares in the May 9, 2007 Merger will be able to sell their
shares pursuant to Rule 144 under the Securities Act of 1933, beginning one year
after the stockholders acquired their shares.





18




In
addition, as noted elsewhere herein, we agreed to effect the registration of
shares issuable upon the conversion of our 6% secured convertible notes and
warrants under the Securities Act of 1933 pursuant to a registration rights
agreement. On January 18, 2008, the Securities and Exchange Commission declared
effective our registration statement with respect to 3,270,327 shares of our
common stock, which included shares of common stock subject to the registration
rights agreement and issuable upon conversion of our secured notes and warrants.
If the holders of shares of our common stock registered under the registration
statement sell substantial amounts of our common stock issued on the public
market, the market price of our common stock could fall.





Our
management controls a significant percentage of our common stock, and their
interests may conflict with those of our other stockholders.





Two of
our executive officers, John Collins, who is President, Chief Executive Officer,
and Director of the Company, and George Hoag, who is Senior Vice President,
Research and Development of the Company, together with their affiliates,
collectively and beneficially own or control approximately 62% of the Company’s
common stock, as of January 15, 2008.  The concentration of
voting control represented by these holdings gives Messrs. Collins and Hoag and
their respective affiliates substantial influence over, and the potential
ability to control, any matters which require a stockholder vote (which under
Nevada law can in certain circumstances be held without a meeting), including,
without limitation, the election of our directors, amendments to our articles of
incorporation, going private transactions, and the approval of mergers or other
business combination transactions.  The ownership positions of these
stockholders may have the effect of delaying, deterring or preventing a change
in the composition of our board of directors or a change in control transaction,
including a transaction in which the holders of the common stock might receive a
premium on their shares over a prevailing market
price.  Alternatively, such concentration of ownership could result in
the Company undertaking certain types of transactions, including change of
control transactions that it might not otherwise pursue.





The
interests of Messrs. Collins and Hoag, in their capacity as stockholders of the
Company, may not always coincide with the Company's interests or the interests
of other stockholders and they may act in their capacity as stockholders of the
Company in a manner that advances their best interests as stockholders and not
necessarily those of our other stockholders.  Sales of a significant
number of shares of our common stock by Messrs. Collins or Hoag, or the
expectation that such sales may occur, could also significantly reduce the
market price of our common stock.





Our
common stock is subject to the "Penny Stock" rules of the SEC and the trading
market in our securities is limited, which makes a transaction in our stock
cumbersome and may reduce the value of an investment in our stock.





The SEC
has adopted Rule 3a51-1 which establishes the definition of a "penny stock," for
the purposes relevant to us, is any equity security that has a market price of
less than $5.00 per share or with an exercise price of less than $5.00 per
share, subject to certain exceptions. For any transaction involving a penny
stock, unless exempt, Rule 15g-9 requires:





·
            that
      a broker or dealer approve a person's account for transactions in penny
      stocks; and·
            the
      broker or dealer receive from the investor a written agreement to the
      transaction, setting forth the identity and quantity of the penny stock to
      be purchased.





In order
to approve a person's account for transactions in penny stocks, the broker or
dealer must:





·
            obtain
      financial information and investment experience objectives of the person;
      and·
            make
      a reasonable determination that the transactions in penny stocks are
      suitable for that person and the person has sufficient knowledge and
      experience in financial matters to be capable of evaluating the risks of
      transactions in penny stocks.





The
broker or dealer must also deliver, prior to any transaction in a penny stock, a
disclosure schedule prescribed by the SEC relating to the penny stock market,
which, in highlight form:





·
            sets
      forth the basis on which the broker or dealer made the suitability
      determination; and·
            that
      the broker or dealer received a signed, written agreement from the
      investor prior to the transaction.





19




Disclosure
also has to be made about the risks of investing in penny stocks in both public
offerings and in secondary trading and about the commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities and the rights and remedies available to an investor in cases of
fraud in penny stock transactions. Finally, monthly statements have to be sent
disclosing recent price information for the penny stock held in the account and
information on the limited market in penny stocks.





Generally,
brokers may be less willing to execute transactions in securities subject to the
"penny stock" rules. This may make it more difficult for investors to dispose of
our common stock and cause a decline in the market value of our
stock.





Although
our common stock is currently subject to the Exchange Act, we may in the
future cease to be subject to the Exchange Act.





Shares of
our common stock are currently subject to the Exchange
Act.  This requires us, among other things, to file periodic
reports with the U.S. Securities and Exchange Commission (the “Commission”), but
those reporting requirements may be terminated in the future if our
common stock is not held by 300 or more holders of record.  The
Company may in the future determine that the continued costs associated with
being a public company subject to the Exchange Act outweigh the benefits arising
as a result of being subject to the Exchange Act, in which event the Company may
(if our common stock is not held by 300 or more holders of record, and subject
to certain contractual rights that prior investors in the Company may possess
requiring us to remain a public company) terminate its reporting under the
Exchange Act or, alternatively, take other action that may further limit
liquidity with respect to our common stock.  Termination of of
our reporting under the Exchange Act would substantially reduce the
information required to be furnished by us to our stockholders and would make
certain provisions of the Exchange Act no longer applicable to us, such as the
short-swing profit recovery provisions of Section 16(b) of the Exchange
Act, the requirement of furnishing a proxy statement pursuant to
Section 14(a) of the Exchange Act in connection with any stockholders’
meetings and the requirement of furnishing an annual report to
stockholders.  Furthermore, the ability of our “affiliates” and
persons holding our “restricted securities” to dispose of our common stock
pursuant to Rule 144 promulgated under the Securities Act (to the extent
Rule 144 would have otherwise been available) may be impaired or
eliminated.  In addition, if our common stock were to cease to
be subject to the Exchange Act, it would no longer be eligible for listing
on the OTCBB, which might further affect liquidity with respect to our common
stock and could significantly reduce the value of our common stock.


20




Item
2.   Description of Property





The
Company’s principal executive offices and laboratory facilities are located at
65 West Dudley Town Road, Suite 100, Bloomfield, Connecticut, 06002. The
location contains approximately 8,800 square feet of space which is leased.
Approximately one half of the space is office space, approximately 25% comprises
laboratory facilities, and approximately 25% is warehouse and storage space. The
term of the lease runs to July 31, 2012 with an option to extend the term for an
additional five years. We believe the facilities will adequately meet the needs
of the Company for at least the next year and possibly longer.








Item
3.   Legal Proceedings





It is
possible we may become involved in various lawsuits and legal proceedings, which
arise in the ordinary course of business. Litigation is subject to inherent
uncertainties, and an adverse result may arise from time to time that may harm
our business. We are currently not aware of any legal proceedings or claims that
we believe will have, individually or in the aggregate, a material adverse
affect on our business, financial condition or operating results.





Item
4. Submission of Matters to a Vote of Security Holders





There
were no matters submitted to a vote of security holders of the Company through
the solicitation of proxies or otherwise during the fourth quarter of the year
ended December 31, 2007.


21




PART
II




Item
5. Market for Common Equity and Related Stockholder Matters





Following
the May 9, 2007 Merger of VeruTEK-Nevada and VeruTEK-Delaware, the Company’s
common stock was listed for trading on May 17, 2007 on the OTC Bulletin Board
(“OTCBB”) under the symbol “VTKT”. Prior to May 17, 2007, there was no active
market for the common stock of VeruTEK-Delaware.





For the
periods indicated, the following table sets forth the high and low bid prices
per share of common stock as quoted on the OTCBB during each indicated quarter.
These prices represent inter-dealer quotations without retail markup, markdown,
or commission and may not necessarily represent actual
transactions.








Fiscal
      2007COMMON
      STOCK
            
            High
            
            
            LowFirst
      Quarter
            
            $
            --
            
            
            $
            --Second
      Quarter
            
            
            3.25
            
            
            
            .05Third
      Quarter
            
            
            15.00
            
            
            
            2.30Fourth
      Quarter
            
            
            4.25
            
            
            
            2.00








As of
December 31, 2007, we believe our shares of common stock were held by
approximately 134 stockholders of record. We believe that the number of
beneficial owners is substantially greater than the number of record holders
because a significant portion of our outstanding common stock is held of record
in broker “street names” for the benefit of individual investors. The transfer
agent of our common stock is Island Stock Transfer.





Securities Authorized for
Issuance Under Equity Compensation Plans





As of
December 31, 2007, we did not have an equity compensation plan authorizing us to
issue shares of common stock to employees or directors.





The
Company expects to grant certain officers, directors and employees’ common
stock, restricted common stock or stock option awards pursuant to a proposed
stock incentive plan that the Company expects to present to its shareholders for
approval during 2008. Only the officers, directors or employees who hold less
than 10% of stock in our Company will be able to participate in any stock
incentive plan.





Dividends





We have
never paid cash dividends and have no plans to do so in the foreseeable future.
Our future dividend policy will be determined by our board of directors and will
depend upon a number of factors, including our financial condition and
performance, our cash needs and expansion plans, income tax consequences, and
the restrictions that applicable laws and our credit arrangements then
impose.





Shares
Rescinded





On May 9,
2007, the Company issued to John Collins, the Chief Executive Officer of the
Company, 1,848,643 shares of the Company’s common
stock.  Subsequently, the Company determined that, because such shares
of common stock were unregistered, Mr. Collins would be unable to sell a portion
of such shares to pay the related income taxes with respect to the issuance of
478,802 of such shares of common stock.  As a result, on December 31,
2007, the Company’s Board of Directors and Mr. Collins agreed to rescind the
issuance of such 478,802 shares and Mr. Collins returned the shares to the
Company for no consideration and such shares were cancelled on December 31,
2007. The 478,802 shares granted to Mr. Collins were fully vested when granted
and compensation expense of $385,605 was recognized in the first quarter of
2007.


22




Item
6.   Management’s Discussion and Analysis or Plan of
Operation





FORWARD LOOKING STATEMENTS –
CAUTIONARY STATEMENTS





This Form
10-KSB contains certain "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Specifically, all statements other than statements of
historical facts included in this report regarding VeruTEK Technologies, Inc.'s
(the "Company") financial position, business strategy and plans and objectives
of the Company's management for future operations are forward-looking
statements. These forward-looking statements are based on the beliefs of the
Company's management, as well as assumptions made by and information currently
available to the Company's management. When used in this report, the words
"anticipate," "believe," "estimate," "expect," "intend," and words or phrases of
similar import, as they relate to the Company or Company management, are
intended to identify forward-looking statements. Such statements (the
"cautionary statements") reflect the current view of the Company's management
with respect to future events and are subject to risks, uncertainties, and
assumptions related to various factors including, without limitation,
competitive factors, general economic conditions, customer relations,
relationships with vendors, the interest rate environment, governmental
regulation and supervision, seasonality, product introductions and acceptance,
technological change, changes in industry practices, one-time events and other
risks identified elsewhere herein. Although the Company believes that
expectations are reasonable, it can give no assurance that such expectations
will prove to be correct. Based upon changing conditions, should any one or more
of these risks or uncertainties materialize, or should any underlying
assumptions prove incorrect, actual results may vary materially from those
described herein as anticipated, believed, estimated, expected, or intended. All
subsequent written and oral forward-looking statements attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by the applicable cautionary statements. The Company does not assume
any responsibility to publicly update any of its forward-looking statements
regardless of whether factors change as a result of new information, future
events, or for any other reason. The Company advises you to review any
additional disclosures made in its Forms 10-QSB, 8-K, 10-KSB and other reports
filed with the Commission.





OVERVIEW





VeruTEK
Technologies, Inc., a wholly owned subsidiary of the Company,
(“VeruTEK-Delaware”) was incorporated as a Delaware corporation on February 1,
2006. VeruTEK-Delaware was formed to develop and commercialize new technologies
in the field of environmental remediation.  VeruTEK-Delaware provides
technical and consulting services to clients to resolve complex environmental
remediation matters at a wide range of waste sites, principally by combining
surfactant and oxidant chemistries.





On May 9,
2007, a Nevada corporation formerly known as Streamscape Minerals, Inc.
(“VeruTEK-Nevada”) entered into and closed a reverse acquisition merger
agreement (hereafter defined as the “Merger”) with VeruTEK-Delaware, and each of
VeruTEK-Delaware's shareholders (the "Purchase Agreement"). Pursuant to the
Purchase Agreement, the Company acquired all of the 21,430 issued and
outstanding shares of capital stock of VeruTEK-Delaware from the
VeruTEK-Delaware shareholders in exchange for 16,684,112 shares of the Company's
common stock, issued $1,685,000 in convertible notes and warrants, and changed
its name to “VeruTEK Technologies, Inc.” (see Note 2 to the Condensed
Consolidated Financial Statements included elsewhere herein). The merged company
is hereafter referred to as the “Company.





The
Company has a working capital deficiency of approximately $2.2
million as of December 31, 2007 and has an accumulated deficit totaling
approximately $10.1 million for the period from February 1, 2006
(inception) through December 31, 2007.  The Company is also not in
compliance with certain provisions of its term note with its
bank  with a balance of approximately $64,000 at December 31, 2007,
which provides the bank with the right to demand repayment.  The
Company estimates it has sufficient funding to sustain operation through April
2008. Accordingly, it is pursuing potential sources of funding with investors
and financial institutions of which there is no guarantee that the Company will
be successful in obtaining such funding. These factors raise substantial doubt
about the Company’s ability to continue as a going concern.  The
attached financial statements do not include adjustments that might result from
the outcome of this uncertainty.





As is
typical with early stage growth companies, the accumulated deficit is largely a
result of business development expenses as well as investment in building
infrastructure for growing the Company’s business and operations.





23




Concurrent
with the May 9, 2007 Merger, the Company issued $1,685,000 of 6% secured
convertible notes and warrants. Proceeds from the transaction were
approximately $1.5 million, net of transaction commissions and
expenses.  The notes will be convertible under certain conditions into
shares of the Company’s common stock.  The Company agreed to effect the
registration of the shares issuable under the notes and warrants under the
Securities Act of 1933 pursuant to a registration rights agreement and received
a notice of effectiveness of its registration statement regarding shares of
common stock issuable under the notes and warrants, as well as certain other
outstanding shares of its common stock, from the U.S. Securities and Exchange
Commission on January 18, 2008. The Company believes that the registration
statement as of the time of its effectiveness registered all of the shares of
Company common stock then required to be registered pursuant to the terms of the
registration rights agreement. Additionally, on January 4, 2007, the Company
raised $600,000 through the issuance of convertible debt to accredited investors
(the “Bridge Loan”). Concurrent with the Merger, the Bridge Loan was converted
into shares of common stock of the Company (see Note 7 to the Condensed
Consolidated Financial Statements included elsewhere herein).





On
October 17, 2007, the Company completed a private placement of investment units
to accredited investors at the price of $1.50 per investment unit. Each
investment unit is comprised of one Common Share; a five year non-callable
warrant to purchase one Common Share at an exercise price of $1.80 per share;
and a five year non-callable warrant to purchase one Common Share at an exercise
price of $2.10 per share. The Company raised approximately $1.9 million (net of
$125,648 transaction related expenses) from 29 accredited investors, who were
issued 1,373,334 of the aforementioned investment units. There were no
underwriting discounts or commissions incurred in the transaction. The
securities issued in conjunction with the transaction are not subject to any
registration rights.





The
Company currently derives its revenue from consulting services related to the
evaluation of environmental contamination risks for clients, treatability
studies intended to evaluate the effectiveness of the Company’s technology,
know-how and processes in addressing specific contamination issues at specific
client sites and from pilot projects intended to demonstrate the effectiveness
of the Company’s services by directly addressing contamination issues at client
sites. The Company’s objective is to utilize activities from each of the
above revenue sources to successfully demonstrate its capabilities in addressing
environmental remediation issues and thereby secure much larger contracts for
full scale remediation of environmental issues at client sites. The Company is
continuing to pursue such opportunities. As of this date, the Company has
secured one large project with Keyspan Corporate Services LLC (“Keyspan”) and
three relatively small commitments for full scale remediation projects. Securing
a sufficient number of full scale remediation projects at acceptable profit
margins is critical to ensure the long-term viability of the
Company.





On March
3, 2008, the Company and Keyspan entered into an agreement, dated as of February
22, 2008 (the “Agreement”), pursuant to which the Company agreed to provide
Keyspan with professional services for the purpose of implementing the Company’s
Surfactant Enhanced In-Situ Chemical Oxidation ("S-ISCO") remedial measures at
Operable Unit number 4 (“OU-4”) Cesspool area of the Bay Shore former
manufactured gas plant (MGP) site in Bay Shore, New York.  The
Company’s services will be performed in accordance with the New York State
Department of Environmental Conservation approved Bay shore/Brightwaters Former
MGP Site OU-4, Former Cesspool, S-ISCO Work Plan, dated February 19,
2008.  The Company’s work under this Agreement will focus on the
Company’s implementation of S-ISCO at the former OU-4 cesspool area to remediate
the MGP-related impacts.  The Agreement contains customary terms and
conditions as applied to independent contractors of professional services,
including, but not limited to, warranties by the Company regarding the
performance of its services in a workmanlike and professional manner, covenants
regarding the Company’s compliance with applicable law, indemnification of
Keyspan by the Company with respect to, among other things, materials, goods,
work and services provided by the Company pursuant to the Agreement, and
non-disclosure obligations under the Agreement.  The term of the
Agreement will remain in effect until December 31, 2009, unless extended or
earlier terminated pursuant to the Agreement’s terms.  The Agreement
may be terminated in connection with certain specified events of default,
including, but not limited to, any failure by the Company to perform any
material covenant for period of thirty (30) days after notice of such failure
and any breach by the Company of its non-disclosure obligations under the
Agreement.  Keyspan may also terminate the Agreement for convenience
upon ten (10) days prior written notice.





24




LIQUIDITY AND CAPITAL
RESOURCES





Financing and Bank
Default





On
October 17, 2007, the Company completed a private placement of investment units
to accredited investors at the price of $1.50 per investment unit. Each
investment unit is comprised of one Common Share; a five year non-callable
warrant to purchase one Common Share at an exercise price of $1.80 per share;
and a five year non-callable warrant to purchase one Common Share at an exercise
price of $2.10 per share. The Company raised approximately $1.9 million (net of
$125,648 transaction related expenses) from approximately 29 accredited
investors, who were issued 1,373,334 of the aforementioned investment units.
There were no underwriting discounts or commissions incurred in the transaction.
The securities issued in conjunction with the transaction are not subject to any
registration rights.





Concurrent
with the Merger of May 9, 2007, the Company issued $1,685,000 of notes
convertible into 1,685,000 shares of common stock, and detachable warrants to
purchase 842,500 shares of common stock which are exercisable for a 5 year
period at an exercise price of $1.20. Gross proceeds from the Merger amounted to
$1,685,000 and net proceeds amounted to approximately $1.5 million. Gross
proceeds were allocated to the convertible notes and warrants, respectively. The
amount allocated to the convertible notes was $1,396,767 and resulted in a
beneficial conversion discount of $151,650. The beneficial
conversion discount will be amortized to interest expense over the
term of the convertible notes. The $288,233 allocated to the warrants was
recorded as a discount to the convertible notes and as a derivative
instrument liability as of the Merger date in accordance with EITF Issue 00-19
“Accounting for Derivative Financial Instruments


Indexed
to, and Potentially Settled in, a Company’s Own Stock.” The $288,233 discount to
the convertible notes will be amortized to interest expense over the life of the
notes. The warrants are subject to mark-to-market adjustment in each period. As
a result, for the year ended December 31, 2007, the Company recorded a pre-tax
charge for derivative instrument expense of $1,878,767. The resulting derivative
instrument liability was $2,167,000 at December 31, 2007.  The fair
value of the warrants was determined by using the Black-Scholes model assuming a
risk free interest rate of 3.3%, volatility of 50% and an expected life equal to
the May 9, 2012 contractual life of the warrants.




The
Company agreed to effect the registration of the shares to be issued upon the
conversion of the 6% secured convertible notes and warrants under the Securities
Act of 1933 pursuant to a registration rights agreement. The registration rights
agreement required the Company to file a registration statement and have such
registration statement declared effective within 60 and 180 days, respectively,
following the May 9, 2007 closing of the Merger.  In the event that
the Company fails to file by the required filing deadline or have such
registration statement declared effective by the required effective deadline,
then the Company is required to make cash payments to holders of the convertible
notes equal to 2% of the purchase price for each 30 day period prorated for
partial periods.  However, the Company was entitled to suspend its
filing and effective deadline for a period of 10 consecutive business days under
certain circumstances.  The Company did not file its initial
registration statement until July 20, 2007 which was not within the 60 day
period allowed under the registration rights agreement.  The Company
believes it was entitled to suspend the filing of such registration period and,
as a result, does not owe a cash penalty in accordance with this provision of
the registration rights agreement.




The
Company received a notice of effectiveness from the U.S. Securities and Exchange
Commission on January 18, 2008 for registration of 3,270,327 shares of the
Company’s common stock. This registration did not meet the requirement under the
registration rights agreement for the registration statement to be declared
effective within 180 days following the May 9, 2007 closing of the Merger.
However, the Company did receive consents it believes extended the registration
deadline from investors comprising approximately 70% of the issued and
outstanding convertible notes and warrants. Accordingly, the Company has
provided an accrued liability of $24,250 for penalties related to those
convertible notes for which holders did not provide consents extending this
deadline.  The Company
believes the registration statement at the time of its effectiveness registered
all of the shares of the Company common stock then required to be registered
pursuant to the terms of the registration rights agreement.




In
addition, in the event that sales of shares related to the 6% secured
convertible notes or warrants issued on May 9, 2007 cannot be made pursuant to
the registration statement after it has been declared effective, or the Company
is required to file an amendment or supplement (or a new registration statement)
with certain timing exceptions, the Company is required to make cash payments to
holders of the convertible notes equal to 2% of the purchase price for each 30
day period prorated for partial periods. The Company does not currently believe
it is probable that it will incur these penalties under the registration rights
agreement and consequently has not recorded a provision for these
penalties.




25




The
Bridge Loan secured on January 4, 2007 was intended to support development plans
and fund operations until the Company secured additional financing. The Bridge
Loan carried a stated interest rate of 10% which was payable beginning on May
31, 2007. The Company incurred $65,000 in debt issuance costs which were being
amortized to interest expense over the term of the loan. The Bridge Loan was to
mature upon the earlier of (a) completion of an equity financing transaction, or
(b) May 31, 2008. Upon closing of the Merger, the Bridge Loan was converted into
750,000 shares of the Company’s common stock. As a result of the conversion,
accrued interest expense of $20,833 was paid through the issuance of 26,051
shares of the Company’s common stock. Additionally, in the second quarter of
2007 the Company accelerated the amortization of the remaining $51,040 of
unamortized debt issuance costs. In accordance with the terms of the Bridge
Loan, the Company has issued warrants to the holders of the Bridge Loan which
are exercisable for up to a 5 year period.  The warrants entitle the
holders to purchase shares of common stock of the Company equal to the number of
shares converted under the Bridge Loan at a price of $1.20 per share. The
Company allocated the gross proceeds of the Bridge Loan to the loan and detached
warrants, respectively. Gross proceeds allocated to the loan resulted in a
$200,345 beneficial conversion discount which was recognized as interest
expense in the second quarter of 2007. The $148,567 allocated to the warrants
was based on the fair value of the warrants and was recorded as a charge to
interest expense and additional paid-in capital in the second quarter of
2007.  The fair value of the warrants was determined by using the
Black-Scholes model assuming a risk free rate of 4.9%, volatility of 50% and an
expected life equal to the contractual life of the warrants (May
9, 2012).





On May
26, 2006 and August 16, 2006, the Company secured a $350,000 revolving credit
facility (the “Facility”) and an $82,500 term note (the “Term Note”),
respectively, from Webster Bank (the “Bank”). The Facility was available through
May 25, 2007. Proceeds received from the Merger were used to repay all amounts
due and payable on the Facility and the Facility was terminated. The Company is
attempting to secure a replacement facility or other sources of funding with
other financial institutions or investors.  The Term Note matures on
August 16, 2011. Payments of principal and interest on the Term Note total
$1,728 per month. The outstanding balance due on the Term note as of December
31, 2007 was approximately $64,000.





As a
result of the Company entering into the Bridge Loan financing arrangement on
January 4, 2007, and the subsequent issuance of convertible notes on May 9,
2007, the Company has been in default of certain provisions of the Facility and
the Term Note. All amounts due and payable under the Facility were repaid, but
the Company continues to be in default of certain provisions of the Term Note.
As a result, at the option of the Bank, the stated interest rates for the Term
Note could be increased and repayment of the Term Note could be accelerated.
Additionally, the Bank could elect to increase the stated interest rate for the
Term Note to 13.25%.





Should
the Bank choose to accelerate the Term Note, all interest and principal would
become due and payable immediately. As a result of the Bank having the option to
accelerate the Term Note, the amount outstanding under the Term Note as of
December 31, 2007 has been classified as a current liability. As of the
date of this filing, the Company has not received any notice that the Bank has
elected to increase the interest rate or accelerate the repayment of the Term
Note. The Term Note is guaranteed by certain officers and a director of the
Company.





Proceeds
of $600,000 from the January 2007 Bridge Loan were primarily used to fund
operations. Proceeds of $1,685,000 received from the May 2007 convertible notes
have been used for the repayment of the $349,407 revolving loan with the
Company’s bank, to fund operations and for the purchase of
equipment.  Proceeds from the October 17, 2007 sale of equity
securities is being used to fund operations. If the Company does not secure a
sufficient number of projects for full scale environmental remediation of
sufficient size and profitability or if it does not secure additional funding
from other sources, the Company estimates current funding will sustain its
operations through April 2008. Although the Company is currently pursuing
opportunities for full scale environmental remediation projects and additional
funding, there is no guarantee that the Company will be successful in securing a
sufficient number of full scale remediation projects or additional funding.
Securing a sufficient number of full scale remediation projects at acceptable
profit margins is critical to ensure the long-term viability of the Company. The
Company believes it will require additional funding to sustain operations beyond
April 2008.





On
January 7, 2008, the Company engaged the services of a placement agent to
provide exclusive assistance to the Company in securing additional equity
financing. The services will be provided on a best efforts basis. Under the
terms of the engagement, the Company is obligated to reimburse the placement
agent for all reasonable out-of-pocket legal fees and disbursements. Upon the
Company’s acceptance and completion of an equity financing transaction, the
Company would be obligated to pay the placement agent fees equal to 6% of the
gross proceeds, plus warrants entitling the placement agent to purchase common
shares of the Company equal to 6% of the securities included the
transaction.




26




The
Company has entered into a lease agreement for office and lab facilities
commencing August 1, 2007 and continuing for a 5 year term with an option to
renew for a further 5 years. The lease agreement requires annual rental payments
ranging from $38,000 in year one to $42,000 in year five. In addition, the
Company will be responsible for maintenance, taxes, insurance and other costs
related to the facility. The Company has incurred $82,055 in leasehold
improvement costs as of December 31, 2008 to substantially complete its
renovation plan for occupation of the facility. The Company terminated its
former lease concurrent with its occupation of the new facility on September 1,
2007. The former facility was leased on a month-to-month basis for $1,000 per
month.





The
Company does not have any off-balance sheet arrangements.








Employment
Agreements





The
Company has employment agreements effective May 4, 2007 with Mr. John Collins,
President and Chief Executive Officer (Mr. Collins) and Mr. George Hoag, Senior
Vice President, Research and Development (Mr. Hoag) and an employment agreement
effective May 14, 2007 with Mr. Michael F. Vagnini, Senior Vice President and
Chief Financial Officer (the “Agreements”). The agreements with Mr. Collins and
Mr. Hoag expire on December 31, 2016 and the agreement with Mr. Vagnini is an
“at-will” agreement. Mr. Collins’ Agreement includes a base salary of $250,000
per annum, Mr. Hoag’s Agreement includes a base salary of $350,000 per annum and
Mr. Vagnini’s Agreement includes a base salary of $200,000 per
annum.  Mr. Collins and Mr. Hoag are also owed $300,000 each as
deferred compensation to be paid at a future unspecified date. These amounts,
totaling $600,000, are included in due to officers/directors in the accompanying
balance sheets. Mr. Vagnini’s Agreement also included a grant 506,051
shares  of common stock and restricted common stock that will vest
over future periods. As of December 31, 2007, 194,635 shares had vested. Mr.
Vagnini would forfeit the 311,416 remaining unvested shares should his
employment with the Company terminate. Mr. Vagnini will have 77,854 common
shares vesting on February 5, 2008, 116,781 vesting on February 5, 2009 and
116,781 vesting on February 5, 2010. (See Note 9 to the consolidated financial
statements for further discussion of common stock grants.)





The
Agreements also include the following benefits and payments:





a.
            annual
      incentive payments equal to 50% of base salary to be paid at the
      discretion of the  Board of Directors;b.
            participation
      in any future stock option program offered by the Company if their
      respective equity holding is less than 10% of the total equity of the
      Company;


c.
            participation
      in a profit sharing plan if approved and implemented by the Board of
      Directors;d.
            twenty
      days of paid vacation annually;


e.
            an
      automobile allowance of $750 per month for Mr. Hoag.f.
            severance
      in the event of a termination (or effective termination) that is not for
      cause in the amount of one year’s salary that coincides with a like term
      of a non-compete agreement for Mr. Collins and Mr. Hoag and 90 days for
      Mr. Vagnini.




Director
Compensation





During
2007, the Board of Directors, then composed of the Company’s two largest
shareholders and senior executives determined that it would be in the Company’s
best interest to have a board of directors composed largely of independent,
non-employee directors.  The Board of Directors also determined that,
although it would be in the Company’s best interest for director compensation be
at least partly equity based, the Company did not have the requisite approvals
to issue equity as director compensation. Thereafter, and pursuant to a
selection process, the Board of Directors confirmed, ratified and approved on
October 12, 2007 the election and appointment of Douglas Anderson, Mark Ain, and
Carlos Naudon as independent non-employee members of the Company's Board of
Directors (the “Board”), effective as of such date.





Douglas
Anderson will serve as Chairman of the Board. Mark Ain and Carlos Naudon will
serve as board members. Committee chairmen will be determined at a future
date.





27




Effective
October 12, 2007, the Board of Directors has granted the following compensation
to Mark Ain and Carlos Naudon for their services as non-employee directors of
the Board. For the fiscal year 2007, an aggregate stipend of $60,000 for all
services to be rendered as a director of the Company, an aggregate stipend of
$24,000 for services as chair of such committee(s) of the Board as the Board may
from time to time request, and aggregate fees of $16,000 for attendance (either
in person or by telephone) at Board and/or committee meetings, all of which
aggregate amounts was paid in one lump sum following their October 12
appointment as directors. For fiscal year 2008, an aggregate stipend of $60,000
for all services to be rendered as a director of the Company, an aggregate
stipend of $24,000 for services as chair of such committee(s) of the Board as
the Board may from time to time request, and aggregate fees of $16,000 for
attendance (either in person or by telephone) at Board and/or committee
meetings, all of which aggregate amounts shall be payable in one lump sum as
soon as reasonably practicable after January 1, 2008. As of this date, payments
to directors for the fiscal year 2008 have not been made.





Effective
October 12, 2007, the Board of Directors has granted the following compensation
to Douglas Anderson for his services as the Chair of the Board. For fiscal year
2007, an aggregate stipend of $60,000 for all services to be rendered as a
director of the Company, an aggregate stipend of $74,000 for all services to be
rendered as Chair of the Board and for all services rendered as chair of such
committee(s) of the Board as the Board may from time to time request, and
aggregate fees of $16,000 for attendance (either in person or by telephone) at
Board and/or Board committee meetings, all of which aggregate amounts was
paid  in one lump sum following his October 12, 2007 appointment as
Chair of the Board. For fiscal year 2008, an aggregate stipend of $60,000 for
all services to be rendered as a director of the Company, an aggregate stipend
of $74,000 for all services rendered as Chair of the Board and for all services
rendered as chair of such committee(s) of the Board as the Board may from time
to time request, and aggregate fees of $16,000 for attendance (either in person
or by telephone) at Board and/or Board committee meetings, all of which
aggregate amounts shall be payable in one lump sum as soon as reasonably
practicable after January 1, 2008. As of this date, the payment to Mr. Anderson
for the fiscal year 2008 has not been made.





Such
stipends, fees and the composition of the compensation are subject to review by
the Board from time to time.





Cash Flows Provided By /
(Used In) Operations





Net cash
used in operations was approximately $2.1 million for the year ended December
31, 2007. The use of cash was primarily a result of operating losses incurred by
the Company. The Company’s net loss of approximately $5.9 million from
operations included non cash charges of $1,878,767 to mark a derivative
instrument liability to market, $874,709 for employee stock compensation
expense, $242,068 for the amortization of beneficial conversion
discounts, $51,040 for the acceleration of the amortization of debt
issuance costs, $79,300 for amortization of debt discounts related to warrants,
$148,567 for non-cash interest expense related to warrant issuances, $41,890 for
depreciation, $44,733 for amortization and $20,833 for interest paid for by the
issuance of common stock. Cash used in operations was partially offset by a
$94,369 reduction in accounts receivable, a $55,314 increase in accounts payable
and a $312,434 increase in other current liabilities. The decrease in accounts
receivable resulted from a decline in revenues. Increases in accounts payable
and other current liabilities resulted primarily from higher expenses and the
timing of payments. The increase in other current liabilities also included an
increase of $87,500 due to deposits received from customers for future services
to be provided by the Company.





Net cash
used in operations for the period from February 1, 2006 (inception) to December
31, 2006 of approximately $322,000 included a $220,412 increase in accounts
receivable that was offset by increases in accounts payable of $151,416, accrued
payroll and benefits of $202,976 and other current liabilities of $2,885. The
Company’s $4,226,149 net loss from operations included a non-cash charge of
$3,100,000 to expense the value of transferred research and development,
$600,000 for deferred compensation due to officers and directors, $37,087 for
employee stock compensation expense and $25,736 for depreciation.





Cash Flows Provided By /
Used In Investing and Financing Activities





Net cash
used in investing activities for the year ended December 31, 2007 amounted to
approximately $219,000. Expenditures amounted to approximately $95,000 for
machinery and equipment, $82,000 for leasehold improvements and $42,000 for
other assets including furniture, office equipment and laboratory equipment. Net
cash used in investing activities of approximately $124,000 for the period from
February 1, 2006 (inception) to December 31, 2006 was primarily for the purchase
of machinery and equipment amounting to $92,000 and  for the purchase
of furniture, office and lab equipment amounting to $32,000.




28




Cash
provided by financing activities for the year ended December 31, 2007
of  approximately $3.4 million included $2,060,001 in gross proceeds
from the October 17, 2007 sale of equity securities, $1,685,000 in gross
proceeds from convertible notes issued on May 9, 2007 and $510,000 in proceeds
from the January 4, 2007 Bridge Loan. These proceeds were partially offset by
the $349,407 repayment of the Company’s revolving credit facility, $140,000 in
debt issuance cost payments, $198,568 in payments directly related to the May 9,
2007 Merger and $125,648 in payments directly related to the October 17, 2007
sale of equity securities. Additionally, scheduled repayments of long-term debt
amounted to $18,630.





Cash
provided by financing activities for the period from February 1, 2006
(inception) to December 31, 2006 amounted to approximately $514,000. This
primarily resulted from $349,407 in net proceeds received from the revolving
credit facility, $82,500 in proceeds received from the Term Note and $90,000
received as an advance on the Bridge Loan.




RESULTS OF OPERATIONS – FOR
THE YEAR ENDED DECEMBER 31, 2007 VERSUS THE PERIOD FROM FEBRUARY 1, 2006
(INCEPTION) TO DECEMBER 31, 2006





Net
revenues for 2007 were $616,331 as compared to $1,650,143 for the period from
February 1, 2006 (inception) through December 31, 2006 (hereafter defined as the
“Prior Year Period”). In 2007, revenues were derived from consulting services
related to the evaluation of environmental contamination risks at various sites
for various clients and treatability studies intended to evaluate the
effectiveness of the Company’s remediation technology, know-how and processes in
addressing specific contamination issues at specific client sites. In 2006, the
Company generated revenues related to a pilot project at a customer site which
successfully confirmed the effectiveness of the Company’s technology at that
site. In addition, the Company also generated revenues in 2006 from the
evaluation of environmental contamination risks at various sites for various
clients. Revenues in 2006 from the pilot project amounted to $966,664 and were
the primary reason for the higher revenues being realized in the Prior Year
Period versus the year ended December 31, 2007.





The
Company’s objective is to utilize activities from each of the above mentioned
revenue sources to successfully demonstrate its capabilities in addressing
environmental remediation issues and thereby secure much larger contracts for
full scale remediation of environmental issues at client sites. The Company is
continuing to pursue such opportunities. As of this date, the Company has
secured one large project with Keyspan Corporate Services LLC (“Keyspan”) and
three relatively small commitments for full scale remediation projects. Securing
full scale remediation projects at acceptable profit margins are critical to
ensure the long-term viability of the Company. Management cannot provide any
guarantee that the Company will be successful in securing a sufficient number of
full scale remediation projects with acceptable profit margins.





For 2007,
approximately 30% of the Company’s revenue was derived from consulting services
related to the evaluation of environmental contamination risks at various sites
for various clients and 27% was derived from project planning activities related
to a contaminated client site. Approximately 43% of the Company’s revenue was
generated from treatability studies intended to evaluate the effectiveness of
the Company’s remediation technology, know-how and processes in addressing
specific contamination issues at specific client sites. For the Prior Year
Period, approximately 59% of the Company’s revenues were generated from the
above mentioned pilot project at a customer site, 32% were generated from
consulting services, 8% was related to project planning activities and 1% was
generated from treatability studies.





Costs of
revenues for 2007 of $1,101,303 were $1,212,306 less than the Prior Year Period.
Direct third party costs incurred in supporting projects of $87,123 for 2007
were $684,744 less than the Prior Year Period primarily due to higher costs
incurred in the Prior Year Period to support the above mentioned pilot project.
Fixed and other overhead costs for 2007 of $1,014,180 were $527,562 less than
the Prior Year Period. This decrease was primarily the result of $600,000 in
non-recurring accrued compensation costs recognized in 2006 in accordance with
the employment agreements of two officers, Mr. John Collins, President and Chief
Executive Officer, and Mr. George Hoag, Senior Vice President of Research and
Development and $21,625 in lower costs related to stock compensation. This was
partially offset by $63,628 in higher salaries and benefit costs and $23,139 in
higher laboratory costs and depreciation to support increased activity for
treatability studies.





29




Selling,
general and administrative expenses of $2,679,316 for 2007 were $2,318,018
higher than the Prior Year Period. The increase was primarily due to a $859,247
increase in non-cash stock compensation expense, a $443,635 increase for legal,
audit and professional fees, an increase of $350,000 for fees paid to members of
the Company’s board of directors, a $395,118 increase in salaries and benefits,
a $68,100 increase for advertising programs and a $65,103 increase for investor
relations costs. In addition, the increase also included $24,250 for estimated
penalties related to registration rights associated with the May 9, 2007 Merger,
$22,425 in recruiting costs associated with new employees hired, $31,624 in
higher insurance premiums and $17,313 in higher rent.





Research
and development expense declined from $3,178,805 for the Prior Year Period to
$167,618 for 2007. In accordance with FAS 2, “Accounting for Research and
Development Costs,” the Prior Year Period research and development expense
included a $3,100,000 non-cash charge to expense the fair value of technology
transferred to the Company by its founding officers and directors at inception.
All other research and development expenses incurred in the Prior Year Period
amounted to $78,805 as compared to $167,618 incurred for 2007. This remaining
increase of $88,813 reflects the increase in research and development activities
undertaken by the Company.





Derivative
instrument expense increased by $1,878,767 to mark-to-market derivative
instrument liabilities related to warrants issued in conjunction with the May 9,
2007 convertible notes.





Interest
expense of $677,359 for 2007 was $654,779 higher than the Prior Year
Period.  The increase primarily resulted from $200,345 for
amortization of the Bridge Loan beneficial conversion discount, $148,567 for
amortization of the discount related to Bridge Loan
warrants, the acceleration of $51,040 of debt issuance amortization
related to the bridge loan  (see Liquidity and Capital Resources
discussion above), $218,072 of interest expense related to the convertible
notes and $34,793 of interest related to the Bridge Loan. The $218,072 in
interest expense related to the convertible notes included non-cash amortization
of $30,773 for debt issuance costs, $41,723 for a beneficial conversion discount
and $79,300 for a discount related to warrants issued in conjunction with the
notes. The $34,793 of interest expense related to the Bridge Loan included
$13,960 in amortization of debt issuance costs and $20,833 of interest paid
though the issuance of common stock.





The
Company did not recognize any benefit or expense for income taxes for 2007. For
the period from February 1, 2006 (inception) to the May 9, 2007 Merger, VeruTEK
had elected to be treated as an S corporation under relevant sections of federal
and state income tax laws and, accordingly, was not subject to federal or state
income tax. Concurrent with the May 9, 2007 Merger, VeruTEK’s tax status changed
from an S corporation to a C corporation under sections of the federal and state
income tax laws. However, at December 31, 2007, the Company had established a
full valuation allowance against all tax benefits and accordingly recorded no
income tax benefit for the period ended December 31, 2007.







CRITICAL ACCOUNTING
ESTIMATES





The
Company’s financial statements have been prepared in conformity with accounting
principles generally accepted in the United States of America, which require
management to make estimates and assumptions that affect the amounts and
disclosures reported in the financial statements.  The Company’s estimates
are based on historical experience and currently available
information.  Actual results in these areas could differ from
management’s estimates.





30




Stock Based
Compensation





The
Company applies the provisions of Statement of Financial Accounting Standards
No. 123(Revised 2004), “Share-Based Payment,” (“SFAS
123(R)”) to all share based payment awards made to employees and directors.
Under SFAS 123(R) the Company is required to record compensation costs for all
share based payments based on the grant date fair value.  The Company
accounts for common stock issued to employees for services based on the fair
value of the common shares issued. Due to the absence of available arms-length
transactions with unrelated parties for the period prior to the Merger, the
Company utilized a discounted cash flow method to determine the fair value of
common stock shares as of the date such shares were granted to employees.
Appropriate discount rates were utilized reflecting venture capital discount
rates in the start-up or early development stages. The Company utilized a
start-up venture capital discount rate of 70% for the period up to and including
September 30, 2006. Subsequent to September 30, 2006 through the date of the
Merger, the Company adjusted its discount rate to 50% as a result of the
successful completion of a pilot remediation project at a client location,
thereby substantiating the effectiveness of the Company’s technology and
know-how. Subsequent to the Merger, the Company determines the fair value of
common stock shares granted to employees using the adjusted close price from an
active market.





Since the
Company has not generated any taxable income to date and has not paid any
federal or state taxes based on income since inception, it has provided a
valuation allowance for the full amount of its net deferred tax assets and,
accordingly, no tax benefits related to stock compensation expense have been
recorded in its consolidated financial statements.





Research and Development
Expense





Research
and development expenses include payroll, employee benefits, depreciation and
direct expenses associated with the discovery and development of new
technologies related to environmental remediation. Research and development
costs are expensed as incurred.





At
February 1, 2006 (inception), Mr. Collins and Mr. Hoag transferred proprietary
technology and “know-how” to the Company. In accordance with FAS 2, “Accounting
for Research and Development Costs,” the fair value of the transferred
technology at February 1, 2006 (inception) totaled $3,100,000 and was
immediately recognized as research and development expense with an offset to
additional paid-in capital. Fair value of the transferred proprietary technology
and know-how was determined by a discounted cash flow method. The Company used a
start-up venture capital discount rate of 70% for this purpose.





Accounts
Receivable





The
Company maintains allowances for doubtful accounts for estimated losses
resulting from the inability of our customers to make required payments. If the
financial condition of the Company’s customers were to deteriorate, resulting in
an impairment of their ability to make such payments, additional allowances may
be required. An increase in allowances for customer non-payment would increase
the Company’s expenses during the period in which such allowances are made. The
amount recorded as an allowance for doubtful accounts in any such period is
based on our estimate of probable losses potentially resulting from the
inability of the Company’s customers to make required payments. The Company did
not require an allowance for doubtful accounts as of December 31,
2007.





Revenue
Recognition





The
Company generates revenue by providing technical and consulting services related
to environmental remediation. Revenues related to technical and consulting
services are generally recognized on a time and materials basis in accordance
with agreed-upon billing rates in the period such services were
provided.





Certain
technical services provided by the Company are provided on a fixed price basis
and the customer is billed a specific fee upon the completion of the agreed-upon
service. For fixed price contracts, the Company recognizes revenue when
applicable tasks are completed in accordance with agreed-upon acceptance
criteria. In the case of fixed price contracts, the Company bears the risk of
cost overruns and inflation.  Accordingly, if circumstances indicate a
loss on a fixed price contract, a provision is made at that time for the entire
loss.  Revenues related to fixed price contracts comprise
approximately 43% and 1% of our total revenues for the year ended December 31,
2007 and from February 1, 2006 (inception) through December 31, 2006,
respectively.




Derivative Instrument
Liability





The
Company accounts for derivative instruments in accordance with SFAS No. 133
“Accounting for Derivative Instruments and Hedging Activities, as amended,”
which establishes accounting and reporting standards for derivative instruments
and hedging activities, including certain derivative instruments embedded in
other financial instruments or contracts and requires recognition of all
derivatives on the balance sheet at fair value, regardless of the hedging
relationship designation. Accounting for the changes in the fair value of the
derivative instruments depends on whether the derivatives qualify as hedge
relationships and the types of relationships designated are based on the
exposures hedged.





31




Item
7. Consolidated Financial Statements








VeruTEK
Technologies, Inc. and Subsidiaries





Index
to Financial Statements





Year
Ended December 31, 2007 and Period from Inception (February 1, 2006) to December
31, 2006













Report of
      Independent Registered Public Accounting Firm
            33Consolidated Balance
      Sheet
            34Consolidated
      Statements of Operation
            35Consolidated
      Statements of Changes in Stockholders' Equity (Deficiency)
            36Consolidated
      Statements of Cash Flows
            37Notes to
      Consolidated Financial Statements
            38













32




REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM








To the
Board of Directors and Stockholders of


VeruTEK
Technologies, Inc.








We have
audited the accompanying consolidated balance sheet of VeruTEK Technologies,
Inc. and subsidiary (the "Company") as of December 31, 2007, and the related
consolidated statements of operations, changes in stockholders' equity
(deficiency), and cash flows for the year then ended and for the period from
February 1, 2006 (inception) through December 31, 2006. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.





We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.





In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of VeruTEK Technologies, Inc. and
subsidiary as of December 31, 2007, and the results of their operations and
their cash flows for the year then ended and for the period from February 1,
2006 (inception) through December 31, 2006 in conformity with accounting
principles generally accepted in the United States of America.





The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As shown in the accompanying financial
statements, the Company has a working capital deficiency of approximately $2.2
million at December 31, 2007, has sustained net losses of approximately $5.9
million and $4.2 million for the year ended December 31, 2007 and for the period
from February 1, 2006 (inception) through December 31, 2006, respectively, and
has an accumulated deficit of approximately $10.1 million at December 31, 2007.
VeruTEK Technologies, Inc. is also not in compliance with certain provisions of
its bank debt agreement which provides the bank with the right to demand
repayment currently. These factors raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans regarding these
matters are described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.








/s/
Carlin, Charron & Rosen, LLP





Glastonbury,
Connecticut







33


VeruTEK
Technologies, Inc.


Consolidated
Balance Sheet


December
31, 2007




ASSETSCurrent
      assets:Cash
              
              $
              1,182,875Accounts
      receivable
              
              
              126,043Other
      current assets
              
              
              60,590Total
      current assets
              
              
              1,369,508Property
      and equipment, net
              
              
              321,756Other
      assets, net
              
              
              85,583Total
      assets
              
              $
              1,776,847LIABILITIES
      AND STOCKHOLDERS' EQUITY (DEFICIENCY)Current
      liabilities:Current
      portion of long-term debt
              
              $
              68,504Accounts
      payable
              
              
              206,730Accrued
      payroll and benefits
              
              
              198,500Due
      to officers / directors
              
              
              600,000Derivative
      instrument liability
              
              
              2,167,000Other
      current liabilities
              
              
              359,957Total
      current liabilities
              
              
              3,600,691Convertible
      notes          ,
      net
              
              
              1,366,140Long-term
      debt, less current portion
              
              
              18,365Total
      liabilities
              
              
              4,985,196Stockholders'
      equity (deficiency):Preferred
      stock, $.001 par value; 10,000,000 sharesauthorized,
      none issued and outstandingCommon
      stock, $.001 par value; 150,000,000 sharesauthorized,
      21,305,373 issued and outstanding
              
              
              21,305Additional
      paid-in capital
              
              
              6,884,527Accumulated
      deficit
              
              
              (10,114,181
              )Total
      stockholders' equity (deficiency)
              
              
              (3,208,349
              )Total
      liabilities and stockholders' equity (deficiency)
              
              $
              1,776,847


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





34





VeruTEK
Technologies, Inc.


Consolidated
Statements of Operations


For
the Year Ended December 31, 2007 and for the Period from


February
1, 2006 (Inception) to December 31, 2006





2007
              
              
              2006Net
      revenues
              
              $
              616,331
              
              
              $
              1,650,143Costs and
      expenses:Cost of
      revenues
              
              
              1,101,303
              
              
              
              2,313,609Selling, general and
      administration
              
              
              2,679,316
              
              
              
              361,298Research and
      development
              
              
              167,618
              
              
              
              3,178,805Interest
      expense
              
              
              677,359
              
              
              
              22,580Derivative
      instrument expense
              
              
              1,878,767
              
              
              
              -Total costs and
      expenses
              
              
              6,504,363
              
              
              
              5,876,292Loss before income
      taxes
              
              
              (5,888,032
              )
              
              
              (4,226,149
              )Provision for income
      taxes
              
              
              -
              
              
              
              -Net loss
              
              $
              (5,888,032
              )
              
              $
              (4,226,149
              )Weighted
      average common shares
                outstanding - basic and diluted
              
              
              18,818,130
              
              
              
              14,255,067Net loss per share -
      basic and diluted
              
              $
              (0.31
              )
              
              $
              (0.30
              )


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




35





VeruTEK
Technologies, Inc.


Consolidated
Statement of Changes in Stockholders' Equity (Deficiency)


For
the Year Ended December 31, 2007 and the Period from February 1, 2006
(Inception) through December 31, 2006





Common
      StockShares
      Issued
            
            
            Amount
            
            
            Additional
      Paid-in Capital
            
            
            Accumulated
      Deficit
            
            
            TotalCommon
      Stock issued in connection withincorporation
      (February 1, 2006)
            
            
            15,570,800
            
            
            $
            15,571
            
            
            $
            3,084,435
            
            
            $
            -
            
            
            $
            3,100,006Stock
      issued as compensation (Note 9)
            
            
            116,781
            
            
            
            117
            
            
            
            36,970
            
            
            
            -
            
            
            
            37,087Net
      loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (4,226,149
            )
            
            
            (4,226,149
            )Balance,
      December 31, 2006
            
            
            15,687,581
            
            
            
            15,688
            
            
            
            3,121,405
            
            
            
            (4,226,149
            )
            
            
            (1,089,056
            )Stock
      issued as compensation (Note 9)
            
            
            996,531
            
            
            
            996
            
            
            
            873,713
            
            
            
            -
            
            
            
            874,709Reverse
      acquisition recapitalizationadjustment,
      net (Note 2)
            
            
            2,950,678
            
            
            
            2,951
            
            
            
            (164,669
            )
            
            
            -
            
            
            
            (161,718
            )Conversion
      of bridge loan tocommon
      stock (Note 7)
            
            
            750,000
            
            
            
            750
            
            
            
            599,250
            
            
            
            -
            
            
            
            600,000Accrued
      interest on bridge loan satisfiedwith
      common stock (Note 7)
            
            
            26,051
            
            
            
            26
            
            
            
            20,807
            
            
            
            -
            
            
            
            20,833Beneficial
      conversion discount - bridgeloan
      (Note 7)
            
            
            -
            
            
            
            -
            
            
            
            200,345
            
            
            
            -
            
            
            
            200,345Issuance
      of warrants in connection withbridge
      loan (Note 7)
            
            
            -
            
            
            
            -
            
            
            
            148,567
            
            
            
            -
            
            
            
            148,567Beneficial
      conversion discount -convertible
      notes (Note 8)
            
            
            -
            
            
            
            -
            
            
            
            151,650
            
            
            
            -
            
            
            
            151,650Issuance
      of common stock and warrants inconnection
      with private placement, net ofissuance
      costs of $125,648 (Note 9)
            
            
            1,373,334
            
            
            
            1,373
            
            
            
            1,932,980
            
            
            
            -
            
            
            
            1,934,353Rescission
      and cancellation of commonshares
      (Note 9)
            
            
            (478,802
            )
            
            
            (479
            )
            
            
            479
            
            
            
            -
            
            
            
            -Net
      loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (5,888,032
            )
            
            
            (5,888,032
            )Balance,
      December 31, 2007
            
            
            21,305,373
            
            
            $
            21,305
            
            
            $
            6,884,527
            
            
            $
            (10,114,181
            )
            
            $
            (3,208,349
            )




The
accompanying notes are an integral part of these consolidated financial
statements.
  36


VeruTEK
Technologies, Inc.


Consolidated
Statements of Cash Flows


For
the Year Ended December 31, 2007 and for the Period from February 1, 2006
(Inception) through December 31, 2006




2007
              
              2006CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
              
              $
              (5,888,032
              )
              $
              (4,226,149
              )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
              
              
              41,890
              
              
              25,736Amortization
      – debt issuance costs
              
              
              95,773
              
              
              -Amortization
      of debt discounts – warrants
              
              
              79,300
              
              
              -Amortization
      of beneficial conversion discount
              
              
              242,068
              
              
              -Non-cash
      interest expense on warrant issuance
              
              
              148,567
              
              
              -Non-cash
      interest expense on bridge loan
              
              
              20,833
              
              
              -Loss
      on disposal of property, plant and equipment
              
              
              3,913
              
              
              -Derivative
      instrument expense
              
              
              1,878,767
              
              
              -Research
      and development expense - value of transferred technology
              
              
              -
              
              
              3,100,000Compensation
      expense due to officers / directors
              
              
              -
              
              
              600,000Compensation
      expense - common stock issued to employees
              
              
              874,709
              
              
              37,087Changes
      in operating assets and liabilities, net:Accounts
      receivable
              
              
              94,369
              
              
              (220,412
              )Other
      current assets
              
              
              (40,355
              )
              
              -Other
      assets, net
              
              
              (4,000
              )
              
              (20,741
              )Accounts
      payable
              
              
              55,314
              
              
              151,416Accrued
      payroll and benefits
              
              
              (4,476
              )
              
              202,976Other
      current liabilities
              
              
              312,434
              
              
              2,885Net
      cash used in operating activities
              
              
              (2,088,926
              )
              
              (322,202
              )CASH
      FLOWS FROM INVESTING ACTIVITIESPurchases
      of property and equipment
              
              
              (219,466
              )
              
              (123,663
              )Net
      cash used in investing activities
              
              
              (219,466
              )
              
              (123,663
              )CASH
      FLOWS FROM FINANCING ACTIVITIESProceeds
      from the issuance of common stock and warrants
              
              
              2,060,001
              
              
              6Proceeds
      from convertible notes
              
              
              1,685,000
              
              
              -Proceeds
      from long-term debt - bridge loan
              
              
              510,000
              
              
              90,000Proceeds
      from long-term debt
              
              
              -
              
              
              82,500Proceeds
      from (repayment of) revolving loan
              
              
              (349,407
              )
              
              349,407Payments
      directly related to recapitalization
              
              
              (198,568
              )
              
              -Payments
      for debt issuance costs
              
              
              (140,000
              )
              
              -Payments
      directly related to private placement issuance costs
              
              
              (125,648
              )
              
              -Repayments
      of long-term debt
              
              
              (18,630
              )
              
              (7,529
              )Net
      cash provided by financing activities
              
              
              3,422,748
              
              
              514,384NET
      INCREASE IN CASH
              
              
              1,114,356
              
              
              68,519CASH,
      beginning of period
              
              
              68,519
              
              
              -CASH,
      end of period
              
              $
              1,182,875
              
              $
              68,519SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATIONCash
      paid for:Interest
              
              $
              111,651
              
              $
              22,580Non-cash
      investing and financing activities:Common
      stock issued upon conversion of bridge loan and accrued
      interest
              
              
              620,833
              
              
              -Beneficial
      conversion discount – convertible notes
              
              
              151,650
              
              
              -Discount
      on bridge loan
              
              
              148,567
              
              
              -Common
      stock issued to advisors – recapitalization
              
              
              36,850
              
              
              -Property
      and equipment acquired through the assumption of debt
              
              
              -
              
              
              30,528Property
      and equipment acquired through capital leases
              
              
              -
              
              
              19,638Fair
      value of technology contributed as paid-in capital
              
              
              -
              
              
              3,100,000


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


37


VeruTEK
Technologies, Inc.


Notes
to Consolidated Financial Statements




NOTE
      1 –
            ORGANIZATION
      AND NATURE OF BUSINESS




On May 9,
2007, a Nevada corporation formerly known as Streamscape Minerals, Inc. ("SSMI")
and hereinafter referred to as “VeruTEK-Nevada”, entered into and closed a
reverse acquisition merger agreement (hereafter defined as the “Merger”) with a
Delaware corporation known as VeruTEK Technologies, Inc. ("VeruTEK-Delaware"),
and each of VeruTEK-Delaware's shareholders (the "Purchase Agreement"). Pursuant
to the Purchase Agreement, VeruTEK-Nevada acquired all of the 21,430 issued and
outstanding shares of capital stock of VeruTEK-Delaware from the
VeruTEK-Delaware shareholders in exchange for 16,684,112 shares of
VeruTEK-Nevada’s common stock (see Note 2).VeruTEK-Delaware was
organized as a Delaware corporation on February 1, 2006. VeruTEK-Nevada and its
wholly owned subsidiary, VeruTEK-Delaware, are hereinafter referred to as the
“Company”.




The
Company was formed to develop and commercialize new technologies in the field of
environmental remediation. The Company provides technical and consulting
services to clients to resolve complex environmental remediation matters at a
wide range of waste sites, principally by combining surfactant and oxidant
chemistries.





GOING
CONCERN / MANAGEMENT’S PLAN





The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern, which contemplates the realization of assets
and the settlement of liabilities and commitments in the normal course of
business.  As shown in the accompanying financial statements, the
Company has a working capital deficiency of approximately $2.2 million at
December 31, 2007 and has an accumulated deficit of approximately $10.1 million
at December 31, 2007.   The working capital deficiency is largely
affected by the $2.2 million derivative instrument liability (Note 8) that the
Company does not expect to be settled with cash. As is typical with early stage
growth companies, these losses are largely a result of business development
expenses as well as investments in infrastructure for growing the Company’s
business and operations.  The Company is also not in compliance with
certain provisions of its term note with its bank which provides the bank with
the right to demand repayment.  The Company is pursuing other
potential sources of funding with other financial institutions and investors of
which there is no guarantee that the Company will be successful in obtaining
such financing. These factors raise substantial doubt about the Company’s
ability to continue as a going concern.  The financial statements do
not include adjustments that might result from the outcome of this
uncertainty.





Management
believes that the Company will be successful in its efforts to adequately meet
its capital needs and continue to grow its business.  On January 4,
2007, the Company raised $600,000 through the issuance of convertible debt to
accredited investors (Note 7). On May 9, 2007, the Company completed the Merger
and raised approximately $1.5 million, net of transaction commissions and
expenses, through the issuance of $1.685 million of 6% secured convertible notes
and warrants (Note 8).  On October 17, 2007, the Company completed a
private placement raising approximately $1.9 million (net of transaction related
expenses) in funds from 29 accredited investors (Note 9).





NOTE
      2 –
            REVERSE
      ACQUISITION MERGER




In
connection with the Merger (Note 1), the Company raised approximately $1.5
million, net of approximately $150,000 in transaction costs. The transaction
included a share exchange whereby VeruTEK-Delaware and its shareholders
exchanged 100% of their 21,430 common shares outstanding for 16,684,112 common
shares of VeruTEK-Nevada. Concurrent with the merger, the Company issued 930,944
shares of its common stock to five advisors to the merger and also issued
approximately $1.7 million of 6% secured convertible notes and warrants. The
notes will be convertible under certain conditions into shares of the Company’s
common stock.




38




VeruTEK
      Technologies, Inc.


Notes
to Consolidated Financial Statements





NOTE
      2–
            REVERSE
      ACQUISITION MERGER (Continued)





The
Company agreed to effect the registration of the shares issuable upon the
conversion of the 6% secured convertible notes and warrants under the Securities
Act of 1933 pursuant to a registration rights agreement. The registration rights
agreement required the Company to file a registration statement and have such
registration statement declared effective within 60 and 180 days, respectively,
following the May 9, 2007 closing of the Merger.  In the event that
the Company failed to file by the required filing deadline or have such
registration statement declared effective by the required effective deadline,
then the Company would be required to make cash payments to holders of the
convertible notes equal to 2% of the purchase price for each 30 day period,
prorated for partial periods.  However, the Company was entitled to
suspend its filing and effective deadline for a period of 10 consecutive
business days under certain circumstances.  The Company did not file
its registration statement until July 20, 2007 which was not within the 60 day
period allowed under the registration rights agreement. The Company believes it
was entitled to suspend the filing of such registration period and, as a result,
does not owe a cash penalty in accordance with this provision of the
registration rights agreement.





Additionally,
the Company did not have the registration statement declared effective until
January 18, 2008 which was not within 180 days following the May 9, 2007 closing
of the Merger. However, the Company received consents it believes extended this
registration deadline from investors comprising approximately 70% of the shares
of common stock issuable under the issued and outstanding convertible notes and
warrants. Accordingly, the Company has provided an accrued liability of $24,250
for penalties related to those convertible notes for which holders did not
provide consents extending this deadline.




Prior to
the Merger, VeruTEK-Delaware was a non-reporting, privately held company. The
post-acquisition Company is accounted for as a recapitalization of
VeruTEK-Delaware using accounting principles applicable to reverse acquisitions
with VeruTEK-Delaware being treated as the accounting parent (acquirer) and
VeruTEK-Nevada (formerly known as SSMI), the legal parent, being treated as the
accounting subsidiary (acquiree). Prior to the consummation of the acquisition
on May 9, 2007, SSMI had been an inactive public shell with 2,019,734 shares of
common stock outstanding and at the date of the Merger, it had no material
assets, liabilities, or net stockholders' equity. VeruTEK-Delaware is regarded
as the predecessor entity. In accordance with the provisions governing the
accounting for reverse acquisitions, the historical figures presented are those
of VeruTEK-Delaware.




The key
components of the reverse acquisition recapitalization adjustment were as
follows:









Common
      Stock
            
            
            Additional
              Paid-inShares
            
            
            Amount
            
            
            CapitalPublic
      company shares already outstanding on date of Merger (May 9, 2007), par
      value $.001
            
            
            2,019,734
            
            
            $
            2,020
            
            
            $
            (2,020
            )Shares
      issued and cash paid - Merger costs
            
            
            930,944
            
            
            
            931
            
            
            
            (162,649
            )*Public
      company shares issued in a exchange for private company
      shares,  par value $.001
            
            
            16,684,112
            
            
            
            16,684
            
            
            
            (16,684
            )Private
      company shares exchanged,
              par
      value $.001
            
            
            (16,684,112
            )
            
            
            (16,684
            )
            
            
            16,684Reverse
      acquisition recapitalization  adjustment, net
            
            
            2,950,678
            
            
            $
            2,951
            
            
            $
            (164,669
            )




*Includes
cash payments for transaction related costs of $198,568, less $36,850 for stock
issued to advisors to the transaction.





39




VeruTEK
Technologies, Inc.


Notes
to Consolidated Financial Statements





NOTE
      3–
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES







BASIS
OF PRESENTATION






The
accompanying consolidated financial statements for the periods prior to the
Merger reflect the accounts of VeruTEK-Delaware and for periods subsequent to
the Merger, reflect the consolidated accounts of VeruTEK-Nevada and its wholly
owned subsidiary, VeruTEK-Delaware, collectively herein referred to as the
“Company.” All significant inter-company balances and transactions have been
eliminated in consolidation. The consolidated financial statements have been
prepared in conformity with accounting principles generally accepted in the
United States of America. Such principles require the Company to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.




CASH
AND CASH EQUIVALENTS





Cash and
cash equivalents consist of bank deposits with original maturities of three
months or less. All amounts shown as cash on the December 31, 2007 balance sheet
are held as immediately available deposits. There are no restrictions on cash
balances shown on the December 31, 2007 consolidated balance sheet.





REVENUE
RECOGNITION





The
Company generates revenue by providing technical and consulting services related
to environmental remediation. Revenues related to technical and consulting
services are generally recognized on a time and materials basis in accordance
with agreed-upon billing rates and in the period such services were provided. It
is the Company’s normal and customary business practice to enter into service
agreements that have been approved by authorized representatives of the Company
and its customer to be binding. In the absence of an approved service agreement,
or approved change order, the Company recognizes revenue only when persuasive
evidence of an arrangement exists.





Certain
technical services provided by the Company are provided on a fixed price basis
and the customer is billed a specific fee upon the completion of the agreed-upon
service. For these fixed price contracts, the Company recognizes revenue when
applicable tasks are completed in accordance with the completed contract method.
The Company bears the risk of cost overruns and inflation with respect to its
fixed price contracts.  If circumstances indicate a loss on a fixed
price contract, a provision is made at that time for the entire
loss.  Revenues related to such fixed price contracts comprised
approximately 43% of the Company’s total revenues for the twelve months ended
December 31, 2007 and approximately one percent for the period from February 1,
2006 (inception) to December 31, 2006.  At December 31, 2007, the
Company has $87,500 of deferred revenue in the form of customer deposits
received relating to future services to be provided by the Company. This
deferred revenue is included in deposits have been recorded as other current
liabilities in the consolidated balance sheet as of December 31, 2007. The
deferred revenue will be recognized as revenue  upon completion of the
services at a future date.





Deferred
revenue is comprised of amounts related to technical and consulting services
which have been billed to customers prior to the recognition of
revenue.  Deferred costs are comprised of costs incurred prior to the
recognition of the related revenue. Deferred revenue at December 31, 2007
amounted to $44,525 and is included in other current liabilities in the
consolidated balance sheet. Deferred costs at December 31, 2007 amounted to
$37,335 and are included in other current assets in the consolidated balance
sheet.





PROPERTY
AND EQUIPMENT





Property
and equipment is carried at cost less accumulated depreciation. Depreciation is
computed using the straight-line method over asset lives that range from 5 to 7
years. Renewals and improvements that extend the useful lives of assets are
capitalized. Capitalized leased assets are depreciated over the estimated useful
life of the related equipment. Expenditures for maintenance and repairs are
charged to expense as incurred. Leasehold improvements are depreciated over the
remaining life of the lease, excluding any renewal options.





40




VeruTEK
      Technologies, Inc.


Notes
to Consolidated Financial Statements





NOTE
      3–
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





ADVERTISING
EXPENSE





The
Company expenses advertising costs as incurred. Advertising expense for year
ended December 31, 2007 amounted to $68,100. There was no advertising expense
for 2006.





DERIVATIVE
INSTRUMENT EXPENSE





The
Company accounts for derivative instruments in accordance with SFAS No. 133
“Accounting for Derivative
Instruments and Hedging Activities, as amended,” which establishes
accounting and reporting standards for derivative instruments and hedging
activities, including certain derivative instruments embedded in other financial
instruments or contracts and requires recognition of all derivatives on the
balance sheet at fair value, regardless of the hedging relationship designation.
Accounting for changes in the fair value of the derivative instruments depends
on whether the derivatives qualify as hedge relationships and the types of
relationships designated are based on the exposures hedged. At December 31,
2007, the Company did not have any derivative instruments that were designated
as hedges.





Derivative
instrument expense of $1,878,767 for the year ended December 31, 2007 reflects a
non-cash mark-to-market charge for the derivative instrument liability related
to warrants issued in conjunction with the May 9, 2007 convertible notes (see
Note 8)





FINANCIAL
INSTRUMENTS




The
carrying amounts for cash, accounts receivable, other current assets, accounts
payable, other current liabilities and long term debt approximate their fair
value because of the short term maturities of these instruments. The fair value
of convertible notes is not determinable because of the lack of any quoted
market price or trading activity in the instruments (see Note 8 for a
description of these instruments).





Proceeds
allocated to the warrants issued on May 9, 2007 in conjunction with the Merger
are accounted for as a derivative instrument liability in accordance with EITF
Issue 00-19 “Accounting for
Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Company’s own Stock.” The warrants may require cash settlement at fair
value in the event of certain circumstances (see Note 8). The warrants are
subject to mark-to-market adjustment based on the fair value of the warrants as
determined by using the Black-Scholes model.





RECENT
ACCOUNTING DEVELOPMENTS




In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements
(“SFAS 157”). This statement defines fair value, establishes a framework
for measuring fair value and expands disclosures about fair value measurements.
This statement does not require any new fair value measurements. The effective
date of this statement is for fiscal years beginning after November 15,
2007, but the FASB has partially delayed the effective date for one year for
certain fair value measurements when those measurements are used for financial
statement items that are not measured at fair value on a recurring basis. The
Company is currently evaluating the impact, if any, of the adoption of
SFAS 157.




In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities—Including an amendment of FASB Statement
No. 115 (“SFAS 159”). This statement permits all entities to choose,
at specified election dates, to measure eligible items at fair value (the “fair
value option”). A business entity must report unrealized gains and losses
on items for which the fair value option has been elected in earnings at each
subsequent reporting date. Upfront costs and fees related to items for
which the fair value option is elected must be recognized in earnings as
incurred and not deferred. This statement is effective as of the beginning of an
entity’s first fiscal year that begins after November 15, 2007, but the
FASB has partially delayed the effective date for one year for certain fair
value measurements when those measurements are used for financial statement
items that are not measured at fair value on a recurring basis. The Company is
currently evaluating the impact, if any, of the adoption of SFAS
159.




41




VeruTEK
      Technologies, Inc.


Notes
to Consolidated Financial Statements





NOTE
      3–
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (Continued)








On
December 4, 2007, the FASB issued SFAS No. 141(R), Business Combinations, and
SFAS No. 160, Accounting
and Reporting of Noncontrolling Interest in Consolidated Financial Statements,
an amendment of ARB No. 51(SFAS No. 160). These new standards
will significantly change  the financial accounting and reporting of
business combination transactions and noncontrolling (or minority) interests in
consolidated financial statements. The Company will be required to adopt SFAS
No.141(R) and SFAS No. 160 on or after December 15, 2008. The Company has
not yet determined the effect, if any, that the adoption of SFAS 141(R) and SFAS
No.  160 will have on its consolidated financial
statements.





INCOME
TAXES





In June
2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes - an interpretation of FASB Statement No. 109 (“FIN No. 48”). The
interpretation contains a two step approach to recognizing and measuring
uncertain tax positions accounted for in accordance with FASB Statement No. 109.
The first step is to evaluate the tax position for recognition by determining if
the weight of available evidence indicates it is more likely than not that the
position will be sustained on audit, including resolution of related appeals or
litigation processes, if any. The second step is to measure the tax benefit as
the largest amount which is more than 50% likely of being realized upon ultimate
settlement. The Company has adopted FIN No. 48 as of January 1, 2007. The
adoption of FIN No. 48 did not have any material impact on the Company’s
financial statements.





Deferred
income taxes are computed in accordance with SFAS No. 109, Accounting for Income Taxes
and reflect the net tax effects of temporary differences between the financial
reporting carrying amounts of assets and liabilities and the corresponding
income tax amounts. The Company establishes a valuation allowance if it believes
that it is more likely than not that some or all of the deferred tax assets will
not be realized (see Note 12).





Prior to
the Merger, the Company had elected to be treated as an S corporation under
sections of the federal and state income tax laws which provide that, in lieu of
federal and state corporate income taxes, all income, deductions, losses and
credits pass through to the stockholders for them to report on their personal
tax returns. Accordingly, the financial statements do not include any provision
for federal or state corporate income taxes for the period prior to the
Merger.





RESEARCH
AND DEVELOPMENT COSTS





Research
and development costs are expensed as incurred. The amount of such costs charged
to expense totaled $167,618 and $3,178,805 for the year ended December 31, 2007
and the period from February 1, 2006 (inception) to December 31, 2006,
respectively.





SHARE
BASED COMPENSATION





The
Company applies the provisions of Statement of Financial Accounting Standards
No. 123(Revised 2004), “Share-Based Payment,” (“SFAS
123(R)”) to all share based payment awards made to employees and directors.
Under SFAS 123(R) the Company is required to record compensation costs for all
share based payments based on the grant date fair value.  The Company
accounts for common stock issued to employees for services based on the fair
value of the common shares issued. Due to the absence of available arms-length
transactions with unrelated parties for the period prior to the Merger, the
Company utilized a discounted cash flow method to determine the fair value of
common stock shares as of the date such shares were granted to employees.
Appropriate discount rates were utilized reflecting venture capital discount
rates in the start-up or early development stages. The Company utilized a
start-up venture capital discount rate of 70% for the period up to and including
September 30, 2006. Subsequent to September 30, 2006 through the date of the
Merger, the Company adjusted its discount rate to 50% as a result of the
successful completion of a pilot remediation project at a client location,
thereby substantiating the effectiveness of the Company’s technology and
know-how. Subsequent to the Merger, the Company determines the fair value of
common stock shares granted to employees using the adjusted close price from an
active market.





42




VeruTEK
      Technologies, Inc.


Notes
to Consolidated Financial Statements





NOTE
      3–
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





Since the
Company has not generated any taxable income to date and has not paid any
federal or state taxes based on income since inception, it has provided a
valuation allowance for the full amount of its net deferred tax assets and,
accordingly, no tax benefits related to stock compensation expense have been
recorded in its consolidated financial statements.





RECLASSIFICATIONS





Certain
prior period amounts have been reclassified to conform to the current year
presentation.








NOTE 4
-             
CONCENTRATIONS OF CREDIT RISK




Financial
instruments that potentially subject the Company to concentrations of credit
risk consist principally of cash and accounts receivable. The Company maintains
its cash accounts at high quality financial institutions with balances, at
times, in excess of federally insured limits. The Company controls this risk by
selecting high quality financial institutions to hold such cash deposits. The
Company controls credit risk associated with trade receivables through credit
approvals, customer limits and monitoring procedures. The Company has two
customers that accounted for approximately 83% of its revenues for the twelve
months ended December 31, 2007. The Company records an allowance for doubtful
accounts based on the Company’s estimated losses resulting from the inability of
its customers to make required payments. The Company did not require an
allowance for doubtful accounts as of December 31, 2007.





NOTE
      5 –
            PROPERTY
      AND EQUIPMENT





Property
and equipment at December 31, 2007 consists of the following:





Machinery
      and equipment
            
            $
            119,758Automobiles
            
            
            30,529Laboratory
      equipment
            
            
            25,231Office
      furniture and equipment
            
            
            64,864Leasehold
      improvements
            
            
            82,055Construction
      in process
            
            
            66,603389,040Less:
      accumulated depreciation
            
            
            67,284Property
      and equipment, net
            
            $
            321,756





Depreciation
expense for the year ended December 31, 2007 and for the period from February 1,
2006 (inception) through December 31, 2006 totaled $41,890 and $25,736,
respectively.





NOTE
      6 -
            REVOLVING
      CREDIT FACILITY NOTE





On May
26, 2006, the Company entered into a $350,000 revolving credit facility with a
bank. The facility expired on May 25, 2007 and all amounts owed were
repaid.





43




VeruTEK
      Technologies, Inc.


Notes
to Consolidated Financial Statements





NOTE
      7 –
            DEBT





A summary
of long-term debt as of December 31, 2007 is as follows:





Term
      note due on demand (see “Bank Default”), interest at 9.25%, collateralized
      by substantially all of the assets of the Company and a personal guarantee
      of certain officers and a director of the Company
            
            $
            63,760Vehicle
      financing loan due May 9, 2012, interest at 7.99%, collateralized by the
      vehicle and a personal guarantee of an officer and
    director.
            
            
            23,10986,869Less:  current
      portion
            
            
            68,504$
            18,365





At
      December 31, 2007, the scheduled maturities of long-term debt during the
      next five fiscal years were as
follows.





Year
      ending December 31:2008
            
            $
            19,9542009
            
            
            21,9032010
            
            
            24,0372011
            
            
            19,3822012
            
            
            1,593Total
            
            $
            86,869





BANK
DEFAULT





As a
result of the Company issuing the convertible notes associated with the Merger,
the Company is not in compliance with certain provisions of the Term Note and
thus is in default. As a result, the stated interest rates for the Term Note may
be increased and repayment of the Term Note may be subject to acceleration.
Accordingly, the Company’s bank could elect to increase the stated interest rate
for the Term note to 13.25%. Should the Company’s bank choose to accelerate the
Term Note, all interest and principal would become due and payable immediately.
The Term Note has been classified as a current liability as of December 31,
2007. As of the date of this filing, the Company has not received any notice
that the bank has elected to increase the interest rate or accelerate the
repayment of the Term Note.





44




VeruTEK
      Technologies, Inc.


Notes
to Consolidated Financial Statements





NOTE
      7 –
            DEBT
      (Continued)





BRIDGE
LOAN





On
January 4, 2007, the Company secured a $600,000 Bridge Loan (the “Bridge Loan”)
to support development plans and fund operations. The Bridge Loan had a stated
interest rate of 10% which, under the terms of the Bridge Loan, was payable
beginning on May 31, 2007. The Bridge Loan was to mature upon the earlier of (a)
completion of an equity financing transaction, or (b) May 31, 2008. As a result
of the May 9, 2007 Merger (Note 2), the Bridge Loan was converted into 750,000
shares of the Company’s common stock. In addition, as a result of the
conversion, accrued interest expense of $20,833 was paid through the issuance of
26,051 shares of the Company’s common stock and the Company accelerated the
amortization of the remaining $51,040 of unamortized debt issuance costs. In
accordance with the terms of the Bridge Loan, the Company also issued warrants
to the holders of the Bridge Loan. The warrants have a 5 year life (expiring in
May 9, 2012) and entitle the holders to purchase shares of common stock of the
Company equal to the number of shares issued from conversion of the Bridge Loan
(776,051 shares) at a price of $1.20 per share. The terms of the warrants do not
provide holders with the option to exercise on a cashless basis, nor do they
include any requirement to redeem the warrants based on a Black Scholes
calculation. In addition, the Bridge Loan warrants specifically contemplate
settlement of the warrants in unregistered shares. The Company has accordingly
concluded that these warrants meet the tests in EITF 00-19, Accounting for Derivative Financial
Instruments Indexed to, and Potentially Settled in, a Company's Own Stock,for equity classification.





The
Bridge Loan had a beneficial conversion discount because the conversion price of
the Bridge Loan was less than the fair value of the Company’s common stock. The
value of the beneficial conversion discount and associated warrants was
dependent upon the conversion ratio of existing shares of the Company’s common
stock to shares of the Company’s common stock after completion of an equity
financing transaction. The value of the warrants, and consequently the value of
the beneficial conversion discount, could not be determined until a conversion
ratio for an equity financing transaction had been established. Accordingly, the
total value of the beneficial conversion discount of $200,345 was recognized as
interest expense in the second quarter of 2007 as a result of the Merger. The
$148,567 allocated to the warrants was based on the fair value of the warrants
and was recorded as a charge to interest expense and additional paid-in capital
in the second quarter of 2007. The fair value of the warrants was determined by
using the Black-Scholes model assuming a risk free interest rate of 4.9%,
volatility of 50% and an expected life equal to the May 9, 2012 contractual life
of the warrants.





NOTE
8
–            CONVERTIBLE
NOTES





On May 9,
2007 the Company issued $1,685,000 of convertible notes (the “Notes”) and
related warrants in conjunction with the Merger. The Notes carry a stated
interest rate of 6%, mature two years from the date of issuance, and, at the
option of the holders, are convertible into common stock of the Company at $1.00
per share. The warrants entitle the holder to purchase the number of shares of
the Company’s common stock equal to 50% of the number of shares of common stock
into which the Notes are convertible. The warrants have a 5 year life and have
an exercise price of $1.20 per share. The holders of the Notes have been granted
a security interest in substantially all of the assets of the Company. The Notes
contain covenants that limit the ability of the Company to enter into certain
transactions and to further encumber the Company’s assets. The covenants include
restrictions on incurring additional indebtedness, payment of dividends,
distributions of capital stock, repurchases of capital stock and payments to
officers or directors other than reasonable compensation and reimbursements. Net
proceeds resulting from the Notes and the Merger amounted to approximately $1.5
million. Debt issuance costs attributed to the Notes of $111,850 are being
amortized to interest expense over the term of the Notes. The debt issue costs
consisted of cash payments totaling $75,000 and shares of common stock issued to
advisors that were valued at $36,850. For the year ended December 31, 2007, the
Company recorded interest expense of $30,773 related to the amortization of debt
issuance costs. Unamortized debt issuance costs as of December 31, 2007 amounted
to $81,077 and are included in other assets, net on the consolidated balance
sheet.





45




VeruTEK
      Technologies, Inc.


Notes
to Consolidated Financial Statements





NOTE
8
–             CONVERTIBLE
NOTES (Continued)





The Notes
contain a beneficial conversion discount of $151,650 because the value allocated
to the Notes is less than the fair value of the Company’s common stock. The
Company valued the warrants at $288,233 (see below) and  allocated
$1,396,767 to the Notes. The beneficial conversion discount will be amortized
over the life of the Notes through a charge to interest expense.
The convertible notes of $1,685,000 are reflected on the consolidated
balance sheet net of the unamortized portion ($208,933) of the $288,233 discount
on the convertible debt relating to the warrants and net of the unamortized
portion ($109,927) of the beneficial conversion discount of $151,650. The
discounts are being amortized to interest expense over the life of the
convertible notes. For the year ended December 31, 2007, the Company recorded
interest expense of $79,300 related to the warrants, and interest expense of
$41,723 related to the beneficial conversion discount.





The
$288,233 in proceeds allocated to the warrants was classified as a liability as
of the Merger date in accordance with EITF Issue 00-19 Accounting for Derivative Financial
Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock
(“EITF 00-19”). The warrants may require cash settlement at fair value in the
event of certain circumstances, including certain mergers or consolidations,
sale of substantially all of the assets of the Company, sale of more than 50% of
the outstanding common shares of the Company, or certain other stock purchase or
business combinations. Accordingly, the warrants have been accounted for as a
derivative instrument liability which is subject to mark-to-market adjustment.
As a result, for the year ended December 31, 2007, the Company recorded a
pre-tax charge for derivative instrument expense of $1,878,767. The resulting
derivative instrument liability was $2,167,000 at December 31,
2007.  The fair value of the warrants was determined by using the
Black-Scholes model assuming a risk free interest rate of 3.3%, volatility of
50% and an expected life equal to the May 9, 2012 contractual life of the
warrants.





NOTE 9
–            STOCKHOLDERS’
EQUITY





STOCK
ISSUANCES




The
Company is authorized to issue 150,000,000 shares of common stock with a par
value of $0.001 per share. There were 21,305,373 and 15,687,581 shares issued at
December 31, 2007 and 2006, respectively. The Company is authorized to issue
10,000,000 shares of preferred stock with a par value of $0.001 per share. There
were no shares of preferred stock issued or outstanding as of December 31,
2007.





On
October 17, 2007, the Company completed a private placement of investment units
to 29 accredited investors at the price of $1.50 per investment unit. Each
investment unit is comprised of one common share; a five year non-callable
warrant to purchase one common share at an exercise price of $1.80 per share;
and a five year non-callable warrant to purchase one common share at an exercise
price of $2.10 per share. The Company raised $1,934,353 net of transaction
related expenses, primarily legal fees, totaling $125,648 in exchange for
1,373,334 of the aforementioned investment units. There were no underwriting
discounts or commissions incurred in the transaction. The securities issued in
conjunction with the transaction are not subject to any registration rights. The
terms of the warrants do not provide holders with the option to exercise on a
cashless basis, nor do they include any requirement to redeem the warrants based
on a Black-Scholes calculation. In addition, the warrants specifically
contemplate settlement of the warrants in unregistered shares. The Company has
accordingly concluded that these warrants meet the tests in EITF 00-19 for
equity classification.





46




VeruTEK
      Technologies, Inc.


Notes
to Consolidated Financial Statements





NOTE 9
–            
STOCKHOLDERS’ EQUITY (Continued)





STOCK
RESCISSION





On May 9,
2007, the Company issued to John Collins, the Chief Executive Officer of the
Company, 1,848,643 shares of the Company’s common
stock.  Subsequently, the Company determined that, because such shares
of common stock were unregistered, Mr. Collins would be unable to sell a portion
of such shares to pay the related income taxes with respect to the issuance of
478,802 of such shares of common stock.  As a result, on December 31,
2007, the Company’s Board of Directors and Mr. Collins agreed to rescind the
issuance of such 478,802 shares and Mr. Collins returned the shares to the
Company for no consideration and such shares were cancelled on December 31,
2007. The 478,802 shares granted to Mr. Collins were fully vested when granted
and compensation expense of $385,605 was recognized in the first quarter 2007
with respect to the 478,802 shares granted.





STOCK
BASED COMPENSATION





The
Company granted certain key employees and advisors shares of common stock as
part of the Company’s offer of employment. The purpose was to enable the Company
to retain and motivate such employees. The grants are recognized ratably as
compensation expense over the requisite service periods based on the fair value
of the grants as of the grant dates. Because grant dates were prior to the
Merger and such shares were not publicly traded, fair value of shares at the
grant date was determined using a discounted cash flow model. Compensation
expense of $874,709  and $37,087 was recognized for the year ended
December 31, 2007 and for the period from February 1, 2006 (inception) to
December 31, 2006, respectively. Common shares totaling 311,416 will vest at
various times through February of 2010. Additional compensation expense for
unvested shares amounting to $122,179 will be recognized over the remaining
requisite future service periods for each respective grant.





Shares
granted as compensation expense are as follows:


Grant
      Date
            
            Fair
      Value at Grant Date
            
            
            Shares
      Granted as of December 31, 2007
            
            
            Shares
      Issued during the period from January 1, 2007 through December 31,
      2007
            
            
            Vested
      Shares as of December 31, 2007
            
            
            Unvested
      Shares as of December 31, 20072/13/2006
            
            $
            12,700
            
            
            
            77,854
            
            
            
            38,927
            
            
            
            77,854
            
            
            
            -4/17/2006
            
            
            14,800
            
            
            
            77,854
            
            
            
            38,927
            
            
            
            77,854
            
            
            
            -6/1/2006
            
            
            15,815
            
            
            
            77,854
            
            
            
            38,927
            
            
            
            77,854
            
            
            
            -2/1/2007
            
            
            407,550
            
            
            
            506,051
            
            
            
            506,051
            
            
            
            194,635
            
            
            
            311,4162/19/2007
            
            
            583,110
            
            
            
            724,042
            
            
            
            724,042
            
            
            
            724,042
            
            
            
            -Total
            
            $
            1,033,975
            
            
            
            1,463,655
            
            
            
            1,346,874
            
            
            
            1,152,239
            
            
            
            311,416





On
February 19, 2007, Dr. George Hoag, a founder of the Company and Senior Vice
President and Director of Research and Development, returned 350,343 common
shares to the Company for no consideration. Dr. Hoag received these shares on
February 1, 2006 (inception). These shares were reissued to the parties
receiving the 724,042 common shares granted on February 19, 2007. Consequently,
the total number of shares issued by the Company for stock compensation for the
period from January 1, 2007 through December 31, 2007 was 996,531 shares
(1,346,874 shares issued as stock compensation less 350,343 shares returned to
the Company by Dr. Hoag).





47




VeruTEK
      Technologies, Inc.


Notes
to Consolidated Financial Statements





NOTE 9
–            
STOCKHOLDERS’ EQUITY (Continued)





WARRANTS





A summary
of warrant activity is as follows.


Warrants
            
            
            Exercise
      Price per Warrant
            
            
            Weighted
      Average Exercise Price
            
            
            Weighted
      Average Remaining LifeOutstanding
      atJanuary 1, 2007
            
            
            -
            
            
            $
            -
            
            
            $
            -
            
            
            
            -Issued:May
      9, 2007 in conjunction withthe
      Bridge Loan (Note 7)
            
            
            776,051
            
            
            $
            1.20
            
            
            $
            1.20
            
            
            
            4.4May
      9, 2007 in conjunction with theConvertible
      Notes (Note 8)
            
            
            842,500
            
            
            $
            1.20
            
            
            $
            1.20
            
            
            
            4.4October
      17, 2007 in conjunction withthe
      sale of equity securities (Note 9)
            
            
            1,373,334
            
            
            $
            1.80
            
            
            $
            1.80
            
            
            
            4.8October
      17, 2007 in conjunction withthe
      sale of equity securities (Note 9)
            
            
            1,373,334
            
            
            $
            2.10
            
            
            $
            1.80
            
            
            
            4.8Exercised
            
            
            -
            
            
            $
            -
            
            
            $
            -
            
            
            
            -Expired
            
            
            -
            
            
            $
            -
            
            
            $
            -
            
            
            
            -Outstanding
      atDecember 31, 2007
            
            
            4,365,219
            
            
            
            
            
            
            $
            1.67
            
            
            
            4.60








NOTE
      10 –
            OPERATING
      LEASE COMMITMENTS





The
      Company leases its facilities and certain office equipment under operating
      leases which expire in July of 2012 and March of 2010, respectively. The
      Company has an option to renew its facility lease for an additional 5
      years. Future minimum rental commitments under these operating leases are
      as follows.





Year
      ending December 31:2008
            
            $
            41,4852009
            
            
            42,4852010
            
            
            41,1842011
            
            
            41,4172012
            
            
            24,500Total
      minimum lease payments
            
            $
            191,071





Rental
expenses under operating leases totaled $30,902 and $13,302 for the year ended
December 31, 2007 and for the period from February 1, 2006 (inception) through
December 31, 2006, respectively.





Real
estate taxes, insurance, utilities, repairs and maintenance expenses are
generally obligations of the Company, and accordingly, are not included above as
part of rental commitments and expenses.





48




VeruTEK
      Technologies, Inc.


Notes
to Consolidated Financial Statements





NOTE
      11 –
            LOSS
      PER SHARE





The
computation of basic net loss per common share is based on the weighted-average
number of common shares outstanding. The shares issuable upon conversion of
notes or exercise of warrants have been excluded from the calculation of diluted
shares as their effect would be anti-dilutive. Accordingly, basic and fully
diluted shares used in the calculation of weighted-average number of common
shares outstanding are equal for all periods presented. The weighted average of
anti-dilutive common share equivalents excluded from the loss per share
calculations for the year ended December 31, 2007 totaled 2,115,077 equivalent
shares.





Shares
outstanding in all prior periods presented have been revised to reflect the
exchange ratio of the May 9, 2007 Merger (Note 2). In accordance with the terms
of the Merger, each share of VeruTEK common stock was exchanged for 778.54
shares of the Company’s common stock.





NOTE
12
–                                INCOME
TAXES





For the
period January 1, 2006 through May 9, 2007, the Company was an S-Corporation
under Subchapter S of the Internal Revenue Code.  Under those
provisions, the Company did not pay federal or state corporate income taxes on
its taxable income.





The
provision for income taxes differs from the amount computed by applying the
statutory rate as follows:




2007Income
      taxes using U.S. federal statutory rate
            
            $
            (2,007,730
            )State
      income taxes, net of federal benefit
            
            
            (76,032
            )Valuation
      allowance
            
            
            599,572S
      Corporation income
            
            
            432,830Stock
      compensation
            
            
            253,672Stock
      based expenses
            
            
            788,953Other
            
            
            8,735Total
            
            $
            -





Significant
      components of the Company’s deferred tax assets and liabilities at
      December 31, 2007 are as follows:





Deferred
      income tax liabilities:Fixed
      assets
            
            $
            (10,000
            )Deferred
      income tax assets:Deferred
      compensation
            
            
            297,000Net
      operating losses
            
            
            844,0001,141,000Net
      deferred income tax assets
            
            
            1,131,000Valuation
      allowance
            
            
            (1,131,000
            )Net
      deferred income tax assets/(liabilities)
            
            $
            -





As the
Company has not achieved profitable operations, management has determined that
it is more likely than not that the future benefits will not be realized.
Therefore, the Company recorded a valuation allowance for the full amount of the
deferred tax assets.





As of
December 31, 2007, the Company had net operating loss carry-forwards for federal
and state income tax purposes of approximately $2,000,000 which is available to
offset future federal taxable income through 2027.





49




VeruTEK
      Technologies, Inc.


Notes
to Consolidated Financial Statements





NOTE
12 –          INCOME TAXES
(Continued)





The
Company has a tax benefit of approximately $382,000 related to the grant of
common stock to certain key employees and advisors.  Pursuant to SFAS
No. 123 (R), the benefit will be recognized and recorded to APIC when the
benefit is realized through the reduction of taxes payable.





The
Company complies with the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income
Taxes – an interpretation of FASB Statement No. 109” (“FIN No. 48”). FIN
48 addresses the determination of whether tax benefits claimed or expected to be
claimed on a tax return should be recorded in the financial
statements.  Under FIN 48, the Company may recognize the tax benefit
from an uncertain tax position only if it is more likely than not that the tax
position will be sustained on examination by the taxing authorities, based on
the technical merits of the position. The Company's management has
determined that the Company has no uncertain tax positions requiring recognition
under FIN No. 48.





The
Company is subject to U.S. federal income tax as well as income tax of certain
state jurisdictions. The Company has not been audited by the U.S. Internal
Revenue Service or any states in connection with income taxes. The periods from
February 1, 2006 (inception) to December 31, 2006, January 1, 2007 to May 9,
2007 and May 10, 2007 to December 31, 2007 remain open to examination by the
U.S. Internal Revenue Service and state authorities.





We
recognize interest accrued related to unrecognized tax benefits and penalties,
if incurred, as a component of income tax expense.





NOTE 13
–          DUE TO OFFICERS /
DIRECTORS




The Company has employment agreements
dated May 4, 2007 with Mr. John Collins, President and Chief Executive Officer
(Mr. Collins) and Mr. George Hoag, Senior Vice President, Research and
Development (Mr. Hoag) (collectively the “Agreements”). The agreements expire on
December 31, 2016. Mr. Collins’ agreement includes a base salary of $250,000 per
annum and Mr. Hoag’s agreement includes a base salary of $350,000 per annum. Mr.
Collins and Mr. Hoag are also owed $300,000 for compensation earned in 2006,
payable at a future unspecified date and subject to the approval of convertible
note holders under the terms of the Merger. These amounts totaling $600,000 are
included in due to officers/directors in the accompanying balance
sheet.





NOTE 14
-           EMPLOYEE
RETIREMENT PLAN




The
Company offers certain employees the opportunity to contribute to a 401(k) plan
that is administered by a third party. At a future date, the Company will match
100% of the first $5,000 contributed by such employees and 25% of additional
contributions made by such employees up to a maximum additional contribution of
$2,500. As of December 31, 2007, the Company has not funded the matching
contributions and, as a result, has recorded $72,983 in accrued payroll and
benefits in the accompanying balance sheet. Expenses related to such matching
contributions totaled $44,689 and $28,294 for the year ended December 31, 2007
and for the period from February 1, 2006 (inception) through December 31, 2006,
respectively.








NOTE 15
-           CONTRIBUTED
TECHNOLOGY




Effective
February 1, 2006, Mr. Collins and Mr. Hoag transferred proprietary technology
and “know-how” to the Company. In accordance with SFAS No. 2, “Accounting for Research and
Development Costs,” the fair value of the transferred technology at
February 1, 2006 (inception) of $3,100,000 was immediately recognized as
research and development expense and additional paid-in capital.





50




VeruTEK
      Technologies, Inc.


Notes
to Consolidated Financial Statements





NOTE 16
-  RELATED
PARTIES




Certain
officers and directors have provided personal guarantees in connection with
certain of the Company’s financing transactions.





Douglas
Anderson, Mark Ain, and Carlos Naudon, each a director of the Company, purchased
investment units issued as part of the October 17, 2007 sale of equity
securities. Douglas Anderson purchased 200,000 investment units, Mark Ain
purchased 133,000 investment units and Carlos Naudon purchased 134,000
investment units.  Each investment unit is comprised of one Common
Share; a five year non-callable warrant to purchase one Common Share at an
exercise price of $1.80 per share; and a five year non-callable warrant to
purchase one Common Share at an exercise price of $2.10 per share (See Note
9).





During
2006, Mr. Peter G. Perakos, a former director of the Company, arranged for
certain legal services that were provided to the Company by a third party and
for the payment of certain filing fees on behalf of the Company. Mr. Perakos was
reimbursed $15,552 for services arranged and fees paid on behalf of the
Company.





During
2006, Mr. Perakos and Mr. Hoag provided working capital loans to the Company.
All such loans were repaid during 2006.





NOTE
17 –          SUBSEQUENT
EVENT








On March
3, 2008, the Company and Keyspan Corporate Services LLC (“Keyspan”) entered into
an agreement, dated as of February 22, 2008, (the “Agreement”) pursuant to which
the Company agreed to provide Keyspan with professional services for the purpose
of implementing the Company’s Surfactant Enhanced In-Situ Chemical Oxidation
(S-ISCO) remedial measures at Operable Unit number 4 (“OU-4”) Cesspool area of
the Bay Shore former manufactured gas plant (MGP) site in Bay Shore, New
York.  The Company’s services will be performed in accordance with the
New York State Department of Environmental Conservation approved Bay
shore/Brightwaters Former MGP Site OU-4, Former Cesspool, S-ISCO Work Plan,
dated February 19, 2008.  The Company’s work under this Agreement will
focus on the Company’s implementation of S-ISCO at the former OU-4 cesspool area
to remediate the MGP-related impacts.  The Agreement contains
customary terms and conditions as applied to independent contractors of
professional services, including, but not limited to, warranties by the Company
regarding the performance of its services in a workmanlike and professional
manner, covenants regarding the Company’s compliance with applicable law,
indemnification of Keyspan by the Company with respect to, among other things,
materials, goods, work and services provided by the Company pursuant to the
Agreement, and non-disclosure obligations under the Agreement.  The
term of the Agreement will remain in effect until December 31, 2009, unless
extended or earlier terminated pursuant to the Agreement’s terms.  The
Agreement may be terminated in connection with certain specified events of
default, including, but not limited to, any failure by the Company to perform
any material covenant for period of thirty (30) days after notice of such
failure and any breach by the Company of its non-disclosure obligations under
the Agreement.  Keyspan may also terminate the Agreement for
convenience upon ten (10) days prior written notice.


51




Item
8.   Changes In and Disagreements with Accountants on Accounting
and Financial Disclosure








On July
18, 2007 (the “Dismissal Date”), we advised Manning Elliot LLP (the “Former
Auditor”) that it was dismissed as our independent registered public
accounting firm. The decision to dismiss the Former Auditor as the
independent registered public accounting firm was approved by our Board of
Directors on July 18, 2007. Except as noted in the paragraph immediately below,
the report of the Former Auditor on the financial statements of Streamscape
Minerals, Inc. ("Streamscape") for the Fiscal Years ended May 31, 2006 and May
31, 2005 ("Fiscal Years") did not contain an adverse opinion or disclaimer of
opinion, and such reports were not qualified or modified as to uncertainty,
audit scope, or accounting principle.




The
reports of the Former Auditor on Streamscape Minerals, Inc. financial
statements as of and for the Fiscal Years contained an explanatory
paragraph which noted that there was substantial doubt as to Streamscape's
ability to continue as a going concern as Streamscape has generated no
revenues and has accumulated losses from operations since
inception.





During
the Fiscal Years and through the Dismissal Date, we have not had any
disagreements with the Former Auditor on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure, which
disagreements, if not resolved to the Former Auditor’s satisfaction, would have
caused them to make reference thereto in their reports on our financial
statements for such period.





During
the Fiscal Year and through the Dismissal, there were no reportable events,
as defined in Item 304(a)(1)(v) of Regulation S-B.







New independent registered
public accounting firm





On July
18 , 2007 (the “Engagement Date”), we engaged Carlin, Charron & Rosen, LLP
(“New Auditor”) as our independent registered public accounting firm for our
fiscal year ended December 31, 2007. The decision to engage the New Auditor as
our independent registered public accounting firm was approved by our Board of
Directors.





During
the two most recent fiscal years and through the Engagement Date, we have not
consulted with the New Auditor regarding either:





1.
            the
      application of accounting principles to any specified transaction, either
      completed or proposed, or the type of audit opinion that might be rendered
      on our financial statements, and neither a written report nor oral advice
      was provided that the New Auditor concluded was an important factor
      considered by our Company in reaching a decision as to the accounting,
      auditing or financial reporting issue; or2.
            any
      matter that was either subject of disagreement or event, as defined in
      Item 304(a)(1)(iv)(A) of Regulation S-B and the related instruction to
      Item 304 of Regulation S-B, or a reportable event, as that term is
      explained in Item 304(a)(1)(iv)(A) of Regulation
  S-B.





52




Item
8A(T).   Controls and Procedures





Disclosure Controls and
Procedures





As of the
end of the period covered by this report, the Company carried out an evaluation
under the supervision and with the participation of the Company’s management,
including the Company’s Chief Executive Officer and Chief Financial Officer, of
the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934, as amended). Based upon
this evaluation, the Company’s Chief Executive Officer and Chief Financial
Officer concluded that the Company’s disclosure controls and procedures were
effective as of the end of the period covered by this annual
report.





Changes in Internal Control
Over Financial Reporting





There was
no change in the Company’s internal control over financial reporting (as defined
in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as
amended) during the most recently completed fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the Company’s internal
control over financial reporting.





Report of Management on
Internal Control Over Financial Reporting





The
Company’s management is responsible for establishing and maintaining adequate
internal control over financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) under the Securities Exchange Act of 1934).





The
internal control over financial reporting at the Company was designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
accounting principles generally accepted in the United States of America.
Internal control over financial reporting includes those policies and procedures
that:





·
            pertain
      to the maintenance of records that, in reasonable detail, accurately and
      fairly reflect the transactions and dispositions of the assets of the
      Company;





·
            provide
      reasonable assurance that transactions are recorded as necessary to permit
      preparation of financial statements in accordance with accounting
      principles generally accepted in the United States of
    America;





·
            provide
      reasonable assurance that receipts and expenditures of the Company are
      being made only in accordance with authorization of management and
      directors of the Company; and





·
            provide
      reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use or disposition of assets that could have a
      material effect on the consolidated financial
  statements.





Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.





The
Company’s management assessed the effectiveness of the Company’s internal
control over financial reporting as of December 31, 2007. Management based this
assessment on criteria for effective internal control over financial reporting
described in “Internal Control — Integrated Framework” issued by the Committee
of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this
assessment, the Company’s management determined that, as of December 31, 2007,
the Company maintained effective internal control over financial reporting.
Management reviewed the results of its assessment with the Audit Committee of
the Company’s Board of Directors.





This
annual report on Form 10-KSB does not include an attestation report of the
Company’s registered public accounting firm regarding internal control over
financial reporting.  Management’s report was not subject to
attestation by the Company’s registered public accounting firm pursuant to
temporary rules of the Securities and Exchange Commission that permit the
Company to provide only management’s report in this annual report on Form
10-KSB.





Item
8B.   Other Information





None.


53




PART
III








Item
9.   Directors, Executive Officers, Promoters, Control Persons
and Corporate Governance; Compliance with Section 16(a) of the Exchange
Act








Executive Officers and
Directors




Below are
the names and certain information regarding our executive officers and directors
following the acquisition of VeruTEK-Delaware.





Employed
            
            Director
            
            TermName
            
            Age
            
            Position
      with Company
            
            Since
            
            Since
            
            ExpiresGeorge
      Hoag
            
            54
            
            Senior
      Vice President and Director of Research and Development
            
            2/1/2006
            
            NA
            
            NAJohn
      Collins
            
            48
            
            President,
      Chief Executive
              Officer,
      and Director
            
            2/1/2006
            
            5/9/2007
            
            2008Michael
      Vagnini
            
            51
            
            Senior
      Vice President and
              Chief
      Financial Officer
            
            2/5/2007
            
            NA
            
            NADouglas
      Anderson
            
            58
            
            Director
            
            NA
            
            10/12/2007
            
            2008





Mark
      Ain
            
            64
            
            Director
            
            NA
            
            10/12/2007
            
            2008





Carlos
      Naudon
            
            57
            
            Director
            
            NA
            
            10/12/2007
            
            2008








Officers
are elected annually by the Board of Directors (subject to the terms of any
employment agreement), at its annual meeting, to hold such office until an
officer’s successor has been duly appointed and qualified, unless an officer
sooner dies, resigns or is removed by the Board.





Background of Executive
Officers and Directors





John Collins serves as
President, Chief Executive Officer and Director. Dr. Collins received his Ph.D.
in Soil Physical Chemistry from the University of California (Riverside) in
1988, his MS from the University of Connecticut in 1985 and his BS from McGill
University in 1980. In his 20-year career, he has managed regional offices for
several large environmental consulting firms and has consulted to Department of
Defense/Energy/EPA and Fortune 500 companies on environmental risk, remediation,
insurance cost recovery and liability. Dr. Collins is a well-known proponent of
green technologies in solving the worldwide legacy of industrial contamination.
Since 1997, Mr. Collins has served as an environmental consultant for various
clients providing ecological risk assessment. From 1991 to 1997, Mr. Collins
served as a member of the U.S. Environmental Protection Agency - Hanford
Environmental Restoration Project where he advised EPA managers on human health
and ecological risk assessment issues at the Hanford sites.





George Hoag serves as Senior
Vice President and Director of Research and Development. Dr. Hoag has served in
this role since January, 2007. Dr. Hoag also served as President and Chief
Executive officer of the Company from its inception (February 1, 2006) through
January, 2007. Dr. Hoag was a director of the Company from its inception
(February 1, 2006 through October 12, 2007. Dr. Hoag received his Ph.D. in
Environmental Engineering in 1983, his MS from the University of Lowell in 1980
and his BA from the University of Colorado in 1976. He founded and directed the
Environmental Research Institute at the University of Connecticut until 2002 and
served as a Professor in Civil and Environmental Engineering through 2003. He
has been a manager of Hoag Environmental Systems, LLC, a sole proprietorship,
since 1998. Dr. Hoag has over 200 peer- reviewed scientific papers, 4 patents
and is considered one of the fathers of In Situ Chemical Oxidation (ISCO), Soil
Vapor Extraction and other environmental remediation methods.





54




Michael Vagnini serves as
Chief Financial Officer and Senior Vice President. Mr. Vagnini worked for
Chemtura Corporation (formerly Crompton Corporation and Uniroyal Chemical
Corporation) for 27 years serving finally as Senior Vice President and
Controller. Previously, he was CFO of Uniroyal Chemical Canada Ltd. from 1986
through 1994. Mr. Vagnini received his BS - Accounting from the University of
Connecticut in 1978 and his MBA - Finance from the University of Connecticut in
1980.




Douglas Anderson serves as the
Chairman of the Board.  Mr. Anderson is the former Chairman, CEO and
President of Open Solutions, Inc. (OSI), a leading provider of e-business and
software applications for community financial institutions. OSI was acquired in
January 2007 by private equity firms (The Carlyle Group and Providence Equity
Partners). In addition, Mr. Anderson was President of Manchester Savings Bank
before it was sold to New Alliance Bank.




Mark Ain serves as a
director.  Mr. Ain founded Kronic in 1977 and served as Kronos
Incorporate’s CEO through 2005 when it was acquired by Hellman & Friedman
Capital Partners, a private equity firm.  Mr. Ain has a BS in
electrical engineering from MIT, and an MBA from the Simon School at the
University of Rochester.  Mr. Ain is also a director for several
public and non-profit companies including KVH Industries, LTX Corporation, Mass.
High Tech Council, National Board of American Electronics Association (AeA),
North End Technologies, LLC, SpaceClaim Corporation, Walker Home & School,
YMCA of Boston; Board of Trustee member, University of Rochester, and Simon
School Executive Advisory Committee, University of Rochester.





Carlos Naudon serves as a
director.  Mr. Naudon has served as the President and CEO of Banking
Spectrum Inc. and partner of Allister & Naudon, counselors at law, both
since 1984.  Mr. Naudon received his Bachelors in economics and
computer science from the University of Maryland in 1972, his  MBA
(Accounting, Finance and Operations Management) in 1974 from the
University of  Rochester and his law degree from Brooklyn Law
School in 1981. Mr. Naudon is a retired Certified Public
Accountant.








Code of
Ethics




We adopted
a Code of Ethics and Business Conduct for Officers, Directors and Employees that
applies to all of the officers, directors and employees of our Company, a copy
of which is incorporated by reference as an exhibit to this Annual Report on
Form 10-KSB.





Section 16(a) Beneficial
Ownership Reporting Compliance





Section
16(a) of the Exchange Act requires the Company’s officers and directors, and
persons who own more than 10% of the Company’s Common Stock, to file reports of
ownership and changes in ownership of the Company’s Common Stock with the
Securities and Exchange Commission.  Based on a review of the copies
of such reports, the Company believes that during the fiscal year ending
December 31, 2007 its executive officers, directors and greater than ten percent
stockholders filed on a timely basis all reports due under Section 16(a) of the
Exchange Act, with the exception of the following:  John Collins,
President and Chief Executive Officer, inadvertently filed late a Form 3 for May
2007 reporting his becoming an officer, director and ten percent owner of the
Company; George Hoag, Senior Vice President and Director of Research and
Development, inadvertently filed late a Form 3 for May 2007 reporting his
becoming an executive officer and ten percent owner of the Company; and Michael
Vagnini, Senior Vice President and Chief Financial Officer, inadvertently filed
late a Form 3 for May 2007 reporting his becoming an executive officer of the
Company.


55





Item 10.   Executive
Compensation







SUMMARY COMPENSATION
TABLE




The
following table sets forth information concerning the annual and long-term
compensation earned by the Company’s Chief Executive Officer and the two other
most highly compensated executive officers who served during the year ended
December 31, 2007, and whose annual salary and bonus during the fiscal year
ended December 31, 2007 exceeded $100,000 (the “Named Executive
Officers”).  There were no other executive officers of the Company.
Each became an executive officer of our Company upon the acquisition of
VeruTEK-Delaware.





Name and Principal Position
  Year   Salary   Bonus   Awards Total





Name
      and Principal Position
            Year
            
            
            Salary
            
            
            Bonus
      and Other
            
            
            
            
            
            Stock
        Awards
            
            
            
            
            
            TotalGeorge
      Hoag (1)
            2006
            
            
            $
            238,716
            
            
            $
            -
            
            
            
            
            
            $
            -
            
            
            
            
            
            $
            238,716Senior
      Vice President and Director
            2007
            
            
            $
            371,250
            
            
            $
            5,250
            
            
            
            (3
            )
            
            $
            -
            
            
            
            
            
            $
            376,500of
      Research and DevelopmentJohn
      Collins (1)
            2006
            
            
            $
            161,419
            
            
            $
            -
            
            
            
            
            
            
            $
            -
            
            
            
            
            
            $
            161,419President
      and Chief Executive Officer
            2007
            
            
            $
            256,863
            
            
            $
            -
            
            
            
            
            
            
            $
            -
            
            
            
            
            
            $
            256,863Michael
      Vagnini (2)
            
            
            -
            
            
            $
            -
            
            
            $
            -
            
            
            
            
            
            
            $
            -
            
            
            
            
            
            $
            -Chief
      Financial Officer and Senior
            
            2007
            
            
            $
            148,037
            
            
            $
            -
            
            
            
            
            
            
            $
            675,225
            
            
            
            (4
            )
            
            $
            823,262Vice
      President




(1)
            The
      documented compensation for Hoag and Collins reflects their employment
      agreements for 2006 for VeruTEK-Delaware. However, Hoag and Collins were
      awarded $300,000 each in deferred compensation under their new employment
      agreements with our company in respect of fiscal year 2006. These amounts
      are included in due to officers / directors in the accompanying balance
      sheet included herein (See Note
13).




(2)
            Mr.
      Vagnini commenced employment with our Company in February of
      2007.(3)
            Mr.
      Hoag received an automobile allowance of $5,250.(4)
            Mr.
      Vagnini was granted 506,051 common shares of the Company’s common stock in
      accordance with the terms of his employment agreement of which 194,635
      have vested as of December 31, 2007. The value of such vested shares for
      the purposes of determining Mr. Vagnini’s compensation was based on the
      publicly traded market price of the common stock as published in the OTC
      Bulletin Board under the symbol “VTKT”  on the dates such shares
      vested. (See Note 9 to the consolidated financial statements for a further
      discussion of share based
compensation.)




Except as
set forth in the table above, there has been no other compensation paid to the
Named Executive Officers for the periods set forth above.




We have
employment agreements (the “Agreements”) with Mr. John Collins, President and
Chief Executive Officer (Mr. Collins), Mr. George Hoag, Senior Vice President,
Research and Development (Mr. Hoag) and Mr. Michael Vagnini, Senior Vice
President and Chief Financial Officer. The Agreements for Mr. Collins and Mr.
Hoag expire on December 31, 2016, and the Agreement for Mr. Vagnini is an
“at-will” agreement. Mr. Collins’ agreement includes a base salary of $250,000,
Mr. Hoag’s agreement includes a base salary of $350,000 and Mr. Vagnini’s
agreement includes a base salary of $200,000. The Agreements include the
following benefits and payments:





56




a.
            annual
      incentive payments to a maximum of 50% of their respective base salaries,
      at the discretion of the Board of
Directors;




b.
            participation
      in any future stock option program offered by the Company if they are then
      the owner of less than 10% of the total equity interest in the
      company;





c.
            participation
      in a profit sharing plan if approved and implemented by the Board of
      Directors;d.
            twenty
      days of paid vacation annually; ande.
            an
      automobile allowance of  $750 per month for Mr.
      Hoag




f
            severance
      in the event of a termination (or effective termination) that is not for
      cause in the amount of one year’s salary that coincides with a like term
      of a non-compete agreement for Mr. Collins and Mr. Hoag and 90 days for
      Mr. Vagnini.




To date,
Mr. Collins and Mr. Hoag have not received approximately $300,000 each in
compensation due to them under their employment agreements. The amounts payable
to Mr. Collins and Mr. Hoag with respect to deferred compensation are included
in due to officers/directors in the accompanying balance sheet (see Note
13).





Each of
the above named executives is eligible to participate in the Company’s 401(k)
retirement plan (see Note 14 to the accompanying consolidated financial
statements). As of December 31, 2007, the Company has not funded any matching
contributions. With respect to Mr. Collins, the Company has not matched $7,500
of contributions related to 2007 and $7,500 related to 2006. With respect to Mr.
Hoag and Mr. Vagnini, there are no matching contributions due.




We expect
to approve and implement a stock option plan in the near future. The purpose of
such plan will be to enable us to hire, retain and motivate employees. The plan
will be limited to 10% of the overall equity of our Company and shall be subject
to customary grant agreements and vesting schedules.






Equity Awards
Outstanding




There
were no options granted to the Named Executive Officers during the year ended
December 31, 2007.


The Named
Executive Officers did not hold any stock options at December 31,
2007.





Mr.
Vagnini was granted 506,051 shares of restricted common stock in accordance with
the terms of his employment agreement. As of December 31, 2007, 194,635 shares
have vested. Mr. Vagnini would forfeit the 311,416 unvested shares should his
employment with the Company terminate. Mr. Vagnini will have 77,854 common
shares vesting on February 5, 2008, 116,781 vesting on February 5, 2009 and
116,781 vesting on February 5, 2010. The value of Mr. Vagnini’s unvested shares
at December 31, 2007 was $1,089,956 based on the publicly traded market price of
the common stock as published in the OTC Bulletin Board under the symbol “VTKT”
as of that date. (See Note 9 to the consolidated financial statements for
further discussion of assumptions used in valuing common stock
grants.)





The
Company expects to grant the Named Executive Officers common stock, restricted
common stock or stock option awards pursuant to a proposed stock incentive plan
that the Company expects to present to its shareholders for approval during
2008. Only the Named Executive Officers who hold less than 10% of stock in our
Company will be able to participate in any stock incentive plan.




57


Termination
Payments




John
Collins and George Hoag have entered into an Employment Agreement where the
Employee may terminate his employment thereunder for Good Reason. "Good Reason"
means (i) a material diminution of Employee's employment duties without
Employee's consent, which consent shall not be unreasonably withheld; or (ii) a
material and persistent breach by the Company of Section 3 of the Employment
Agreement (Compensation Section). Employee must provide the Corporation thirty
(30) days prior written notice of his intention to resign for Good Reason which
states his intention to resign and sets forth the reasons therefore, and any
resignation without delivery of such notice shall be considered to be a
resignation for other than Good Reason. In the event that Employee terminates
his employment for Good Reason, Employee shall be entitled to (i) payment of
Employee's then- current accrued, unpaid Base Compensation and accrued, unused
vacation, each prorated through the date of termination, and (ii) an amount in
respect of individual severance pay equal to the then current full year base
compensation plus bonus compensation. During the thirty (30) day period
following the delivery of such notice, Employee shall reasonably cooperate with
the Corporation in locating and training Employee's successor and arranging for
an orderly transference of his responsibilities. In addition, the Company may
terminate Employee’s employment without Cause upon fourteen (14) days written
notice. In the event that Employee is terminated without Cause, Employee shall
be entitled to (i) payment of Employee’s then-current accrued, unpaid Base
Compensation and accrued, unused vacation, each prorated through the date of
termination, and (ii) an amount in respect of individual severance pay equal to
the then current full year Base Compensation plus Bonus Compensation. During the
fourteen (14) day period following the delivery of such notice, Employee shall
reasonably cooperate with the Corporation in arranging for an orderly
transference of his responsibilities. “Cause” shall mean Employee’s: (i)
conviction of, or indictment for, criminal negligence or criminal acts in the
work place or conviction of a felony, (ii) violation of the Corporation’s
material policies or procedures that have been made known to Employee, or
violation by Employee on Corporation premises of any law or material regulation,
(iii) material breach or violation of this Agreement, (iv) commission of any act
of theft, fraud, dishonesty, or falsification of any employment or Corporation
records, (v) appropriation of a business opportunity or transaction in
contravention of Employee’s duties to the Corporation, (vi) any improper action
by Employee which has a detrimental effect on the Corporation’s reputation or
business, (vii) failure to perform the duties assigned or requested by
Employee’s superiors, or (viii) gross negligence, incompetence or willful
misconduct by Employee in the performance of Employee’s duties.





Michael
Vagnini has similar termination payments; however, his severance pay is for a
period of up to ninety (90) days.







Pension and Nonqualified
Deferred Compensation




We do not
presently have a pension plan or any nonqualified deferred compensation
plans.




Director
Compensation




During
the year ended December 31, 2006, the Directors of VeruTEK Delaware received no
compensation.





Director
compensation for the year ended December 31, 2007 is as follows.





Director
            
            Fee
      Paid for Services as a Director
            
            
            Dollar
      Amount of Stock Awards
            
            
            Dollar
      Amount of Other Stock Awarded
            
            
            TotalDouglas
      Anderson
            
            $
            150,000
            
            
            $
            -
            
            
            $
            9,135
            (1)
            
            $
            159,135Mark
      Ain
            
            $
            100,000
            
            
            $
            -
            
            
            $
            -
            
            
            $
            100,000Carlos
      Naudon
            
            $
            100,000
            
            
            $
            -
            
            
            $
            -
            
            
            $
            100,000




58





(1) Mr.
Anderson was granted and received 11,678 common shares of the Company prior to
his appointment as a director of the Company. Mr. Anderson’s shares were granted
and issued prior to the shares of the Company being publicly traded and
accordingly have been valued for compensation purposes as of the May 7, 2007
issue date using a discounted cash flow model. A discounted cash flow model has
also been used to determine the value of the shares awarded at the grant date,
February 19, 2007, in accordance with SFAS 123(revised 2004), “Share Based
Payments.” The value of shares awarded at the February 19, 2007 grant date and
reflected as compensation expense for the twelve-month period ended December 31,
2007 was approximately $9,000.





During
2007, the Board of Directors, then composed of the Company’s two largest
shareholders and senior executives, determined that it would be in the Company’s
best interest to have a board of directors composed largely of independent,
non-employee directors.  The Board of Directors also determined that,
although it would be preferable for director compensation be at least partly
equity based, the Company did not have the requisite approvals to issue equity
as director compensation.





Effective
October 12, 2007, the Board of Directors determined that it is advisable and in
the best interest of the Company to establish the compensation of each
individual who is retained as a director of the Company for services rendered as
a non-employee director of the Company. The Board authorized by resolution of
the Company to pay a director for services as a non-employee director of the
Company the following: (1) for fiscal year 2007, an aggregate stipend of $60,000
for all services to be rendered as a director of the Company, an aggregate
stipend of $24,000 for services as chair of such committee(s) of the Board as
the Board may from time to time request, and aggregate fees of $16,000 for
attendance (either in person or by telephone) at Board and/or committee
meetings, all of which aggregate amounts (less such deductions as shall be
required to be withheld by applicable laws and regulations) shall be payable in
one lump sum as soon as reasonably practicable after such individual becomes a
member of the Board, and (2) for fiscal year 2008, an aggregate stipend of
$60,000 for all services to be rendered as a director of the Company, an
aggregate stipend of $24,000 for services as chair of such committee(s) of the
Board as the Board may from time to time request, and aggregate fees of $16,000
for attendance (either in person or by telephone) at Board and/or committee
meetings, all of which aggregate amounts (less such deductions as shall be
required to be withheld by applicable laws and regulations) shall be payable in
one lump sum as soon as reasonably practicable after January 1, 2008. Such
stipends, fees and the composition of compensation are subject to review of the
Board from time to time. As of this date, payments to directors for fiscal year
2008 have not been made.





Effective
October 12, 2007, the Board of Directors authorized by resolution of the Company
to pay the Chair of the Board of the Company, the following: (1) for fiscal year
2007, an aggregate stipend of $60,000 for all services to be rendered as a
director of the Company, an aggregate stipend of $74,000 for all services to be
rendered as Chair of the Board and for all services rendered as chair of such
committee(s) of the Board as the Board may from time to time request, and
aggregate fees of $16,000 for attendance (either in person or by telephone) at
Board and/or Board committee meetings, all of which aggregate amounts (less such
deductions as shall be required to be withheld by applicable laws and
regulations) shall be payable in one lump sum as soon as reasonably practicable
after being appointed as Chair of the Board, and (2) for fiscal year 2008, an
aggregate stipend of $60,000 for all services to be rendered as a director of
the Company, an aggregate stipend of $74,000 for all services rendered as chair
of such committee(s) of the Board as the Board may from time to time request,
and aggregate fees of $16,000 for attendance (either in person or by telephone)
at Board and/or Board committee meetings, all of which aggregate amounts (less
such deductions as shall be required to be withheld by applicable laws and
regulations) shall be payable in one lump sum as soon as reasonably practicable
after January 1, 2008. Such stipends, fees and the composition of compensation
are subject to review of the Board from time to time. As of this date, the
payment to Mr. Anderson for fiscal year 2008 has not been made.








Indemnification of Directors
and Officers




Under
Section 78.138 of the Nevada Revised Statutes (“NRS”), a director or officer of
a corporation is generally not individually liable to the corporation or its
stockholders or creditors for any damages as a result of any act or failure to
act in his or her capacity as a director or officer, unless it is proven that
(i) his or her act or failure to act constituted a breach of his or her
fiduciary duties as a director or officer and (ii) his or her breach of those
duties involved intentional misconduct, fraud or a knowing violation of
law.





59




The
Company’s Articles of Incorporation, as amended, provide that no director or
officer of the Company shall be personally liable to the Company or any of its
stockholders for damages for breach of fiduciary duty as a director or officer
involving any act or omission of any such director or officer, except (i) for
acts or omissions which involve intentional misconduct, fraud or a knowing
violation of the law, or (ii) the payment of dividends in violation of Section
78.300 of the NRS.





The
Company’s directors and officers may be indemnified as provided by the NRS and
the Company’s Bylaws (the “Bylaws”).





Under NRS
Section 78.7502, a corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
except an action by or in the right of the corporation, by reason of the fact
that he or she is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses, including attorneys’ fees,
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him or her in connection with the action, suit or proceeding if he or she is
not liable pursuant to NRS Section 78.138 or acted in good faith and in a manner
which he or she reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was
unlawful.





In
addition, under NRS Section 78.7502, a corporation may indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he or she is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses, including amounts paid in settlement and attorneys’ fees actually and
reasonably incurred by him or her in connection with the defense or settlement
of the action or suit if he or she is not liable pursuant to NRS Section 78.138
or acted in good faith and in a manner which he or she reasonably believed to be
in or not opposed to the best interests of the corporation.





Under NRS
Section 78.7502, to the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to above, or in defense of any claim, issue
or matter therein, the corporation shall indemnify him or her against expenses,
including attorneys’ fees, actually and reasonably incurred by him or her in
connection with the defense.





Under NRS
Section 78.751, any discretionary indemnification pursuant to NRS Section
78.7502, unless ordered by a court, may be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the
circumstances.  The determination must be made (i) by the
stockholders, (ii) by the board of directors by majority vote of a quorum
consisting of directors who were not parties to the action, suit or proceeding,
(iii) if a majority vote of a quorum consisting of directors who were not
parties to the action, suit or proceeding so orders, by independent legal
counsel in a written opinion, or (iv) if a quorum consisting of directors who
were not parties to the action, suit or proceeding cannot be obtained, by
independent legal counsel in a written opinion.  Notwithstanding the
foregoing, the articles of incorporation, the bylaws or an agreement made by the
corporation may provide that the expenses of officers and directors incurred in
defending a civil or criminal action, suit or proceeding must be paid by the
corporation as they are incurred and in advance of the final disposition of the
action, suit or proceeding, upon receipt of an undertaking by or on behalf of
the director or officer to repay the amount if it is ultimately determined by a
court of competent jurisdiction that he or she is not entitled to be indemnified
by the corporation.





60




The
Bylaws provide that the Company must indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, except an action by or in the right of the Company, by reason of
the fact that such person is or was a director, officer, employee or agent of
the Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses, including attorneys’ fees,
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with the action, suit or proceeding, in each case
to the fullest extent permissible under NRS Sections 78.7502 or 78.751, as
amended from time to time, or the indemnification provisions of any successor
statutes, if such person acted in good faith and in a manner which such person
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe such conduct was unlawful.





In
addition, the Bylaws provide that the Company must indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Company to procure a judgment
in its favor by reason of the fact that such person is or was a director,
officer, employee or agent of the Company, or is or was serving at the request
of the Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses,
including amounts paid in settlement and attorneys’ fees actually and reasonably
incurred by such person in connection with the defense or settlement of the
action or suit if such person acted in good faith and in a manner which such
person reasonably believed to be in or not opposed to the best interests of the
Company, provided that no indemnification shall be made with respect to any
claim, issue or matter as to which such a person has been adjudged by a court of
competent jurisdiction, after exhaustion of all appeals therefrom, to be liable
to the Company or for amounts paid in settlement to the Company, unless and only
to the extent that the court in which the action or suit was brought or other
court of competent jurisdiction determines upon application that in view of all
the circumstances of the case, the person is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper.





The
Bylaws also provide that to the extent that a director, officer, employee or
agent of the Company has been successful on the merits or otherwise in defense
of any action, suit or proceeding referred to above, or in defense of any claim,
issue or matter therein, the Company must indemnify such person against
expenses, including attorneys’ fees, actually and reasonably incurred by such
person in connection with the defense.





In
addition, the Bylaws provide that expenses of officers and directors incurred in
defending a civil or criminal action, suit or proceeding referred to above must
be paid by the Company as they are incurred and in advance of the final
disposition of the action, suit or proceeding, upon receipt of an undertaking by
or on behalf of the director or officer to repay the amount if it is ultimately
determined by a court of competent jurisdiction that he or she is not entitled
to be indemnified by the Company.





The
Bylaws provide the indemnification provisions set forth therein must be
liberally construed in favor of indemnification and the payment of expenses
incurred in connection with a proceeding in advance of its final disposition and
there shall be a rebuttable presumption that a claimant under the
indemnification provisions set forth in the Bylaws is entitled to such
indemnification and the Company shall bear the burden of proving by a
preponderance of the evidence that such claimant is not so entitled to
indemnification.





The
Company has no agreements with any of its directors or officers providing for
indemnification of any such persons with respect to liability arising out of
their capacity or status as officers and directors.





Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers or persons controlling the Company pursuant to
the foregoing provisions, or otherwise, the Company has been advised that in the
opinion of the Commission, such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.


61




Item
11.   Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters





The
following table sets forth certain information, as of January 15, 2008 with
respect to the beneficial ownership of the outstanding common stock by (i) any
holder of more than five (5%) percent; (ii) each of our executive officers and
directors; and (iii) our directors and executive officers as a group. Except as
otherwise indicated, each of the stockholders listed below has sole voting and
investment power over the shares beneficially owned.





Name
      of Beneficial Owner (1)
            
            Common
      Stock
              Beneficially
      Owned
            
            
            Percentage
      of
              Common
      Stock (2)George
      Hoag*
            
            9,913,539
            (5)
            
            46.53%John
      Collins*
            
            
            3,295,949
            (6)
            
            15.47
      %Michael
      Vagnini*(3)
            
            
            506,051
            
            
            2.38%Douglas
      Anderson*
            
            
            611,678
            (7)
            
            2.82%Mark
      Ain*
            
            
            399,000
            (8)
            
            1.85%Carlos
      Naudon*
            
            
            410,000
            (9)
            
            1.90%Peter
      Perakos
            
            
            1,716,681
            (10)
            
            8.06
      %Hoag
      Environmental LP
            
            
            2,945,995
            
            
            13.83
      %Collins
      Family LP
            
            
            1,926,108
            
            
            9.04%Nite
      Capital, L.P.(4)
            
            
            2,088,275
            
            
            9.40
      %Allister
      & Naudon
            
            
            120,000
            (11)
            
            0.56%All
      officers and directors as a group ( persons)
            
            
            15,136,218
            
            
            68.06%


*Executive
officer and/or director of our company.




(1)
            Except
      as otherwise indicated, the address of each beneficial owner is c/o
      VeruTEK Technologies, Inc.,   65 West Dudley Town Rd., Suite
      100, Bloomfield, CT 06002.(2)
            Applicable
      percentage ownership is based on 21,305,373 shares of common stock
      outstanding as of January 15, 2008, together with securities exercisable
      or convertible into shares of common stock within 60 days of January 15,
      2008 for each stockholder. Beneficial ownership is determined in
      accordance with the rules of the Securities and Exchange Commission and
      generally includes voting or investment power with respect to securities.
      Shares of common stock that are currently exercisable or exercisable
      within 60 days of January 15, 2008 are deemed to be beneficially owned by
      the person holding such securities for the purpose of computing the
      percentage of ownership of such person, but are not treated as outstanding
      for the purpose of computing the percentage ownership of any other
      person.(3)
            The
      shares held by Mr. Vagnini are subject to reverse vesting in the case he
      terminates his employment with the Company prior to a certain
      date.  See “Item 10. Executive Compensation – Equity Awards
      Outstanding.”(4)
            Includes
      (i) 600,000 shares issuable upon the conversion of the convertible Notes
      and (ii) 300,000 shares issuable upon the exercise of the Common Stock
      Purchase Warrants. Keith Goodman has voting control and investment
      discretion over the shares of common stock held by the shareholder. The
      shareholder contractually agreed to restrict its ability to convert its
      securities and receive shares of our common stock such that the number of
      shares of our common stock held by it and its affiliates after such
      conversion does not exceed 9.9% of our then issued and outstanding shares
      of common stock.(5)
            Includes
      6,967,544 shares of common stock held by George Hoag and 2,945,995 shares
      of common stock held by Hoag Environmental, LP.(6)
            Includes
      1,369,841 shares of common stock held by John Collins and 1,926,108 shares
      of common stock held by Collins Family LP.(7)
            Includes
      (i) 200,000 warrants to purchase shares of common stock at a price of
      $1.80 per share and (ii) 200,000 warrants to purchase shares of common
      stock at a price of $2.10 per share.(8)
            Includes
      (i) 133,000 warrants to purchase shares of common stock at a price of
      $1.80 per share and (ii) 133,000 warrants to purchase shares of common
      stock at a price of $2.10 per share.(9)
            Includes
      (i) 40,000 shares of common stock held by Allister & Naudon, (ii)
      94,000 warrants to purchase shares of common stock at a price of $1.80 per
      share held by Carlos Naudon Dynasty Trust, (iii) 40,000 warrants held by
      Allister & Naudon to purchase shares of common stock at a price of
      $1.80 per share, (iv) 94,000 warrants to purchase shares of common stock
      at a price of $2.10 per share held by Carlos Naudon Dynasty Trust and (v)
      40,000 warrants held by Allister & Naudon to purchase shares of common
      stock at a price of $2.10 per share.(10)
            Includes
      1,278,363 shares of common stock held by Peter Perakos and 438,318 shares
      of common stock held by Perakos Environmental, LP.(11)
            Includes
      (i) 40,000 warrants to purchase shares of common stock at a price of $1.80
      per share and (ii) 40,000 warrants to purchase shares of common stock at a
      price of $2.10 per share.


62




Item 12.   Certain
Relationships and Related Transactions and Director
Independence





Effective
October 17, 2007, we completed a private placement of investment units to
accredited investors consisting of investment units at the price of $1.50 per
investment unit. Each investment unit is comprised of one (1) Common Share, a
five year non-callable warrant to purchase one Common Share at an exercise price
of $1.80 per share and a five year non-callable warrant to purchase one Common
Share at an exercise price of $2.10 per share (the “Investor Warrants”) (the
“Offering Round”). The Company raised in the Offering Round approximately $1.9
million (net of $125,648 transaction related expenses) from 29
accredited investors, who were issued approximately 1,370,000 investment units.
No underwriting discounts or commissions were applicable to this Offering
Round.  Douglas Anderson, Mark Ain, and Carlos Naudon (each a director
of our Company) purchased shares of common stock in our Company and were issued
warrants.








Director
Independence





As noted
above, the Company’s common stock is quoted on the OTC Bulletin
Board.  Since the OTC Bulletin Board does not have its own rules for
director independence, the Company intends to use the definition of independence
as established by The NASDAQ Stock Market (“NASDAQ”), under its Marketplace Rule
4200(a)(15).  The Company  believes  that Douglas
Anderson, Mark Ain, and Carlos Naudon are independent in accordance with the
definition of independent director set forth in NASDAQ Marketplace Rule
4200(a)(15).  Conversely, because a director is not considered to be
independent if he or she is also an executive officer or employee of the Company
under NASDAQ Marketplace Rule 4200(a)(15), the Company does not consider John
Collins, who is Chief Executive Officer and President of the Company, to be an
independent director.





In
addition, during fiscal year 2007, Mr. Peter Keller and Mr. Ezio Montagliani
served as employee-directors of the Company until May 9, 2007 and as directors
of the Company until June 5, 2007. Mr. George Hoag served as an
employee-director of the Company from June 5, 2007 until October 12,
2007.





Audit Committee Financial
Expert





At least
one member of the Company’s Audit Committee is a financial
expert.  The member serving as the Audit Committee’s financial expert
is Mr. Carlos Naudon.  The Company believes that Mr. Naudon is
independent in accordance with NASDAQ Marketplace Rule 4200(a)(15), as noted
above.


63




Item
13.   Exhibits





Exhibit
      Number
            
            Description2.1
            
            Agreement
      and Plan of Exchange (1)3.1
            
            Articles
      of Incorporation (2)3.2
            
            Certificate
      of Amendment to Articles of Incorporation (3)3.3
            
            Bylaws
      (4)4.1
            
            Securities
      Purchase Agreement (1)4.2
            
            Form
      of Secured Convertible Note (1)4.3
            
            Form
      of Common Stock Purchase Warrant (1)4.4
            
            Form
      of Registration Rights Agreement (1)4.5
            
            Form
      of Security Agreement (5)10.1
            
            Employment
      Agreement - George Hoag (1)10.2
            
            Employment
      Agreement - John Collins (1)10.3
            
            Employment
      Agreement - Michael Vagnini (1)10.4*
            
            Lease
      of offices and facilities dated June 29, 2007, between the Company and
      Wales Realty, LLC10.5*
            
            Agreement
      dated as of February 22, 2008, between the Company and Keyspan Corporate
      Services LLC14.1
            
            Code
      of Ethics (6)16.1
            
            Letter
      from Manning Elliot LP (7)21.1
            
            List
      of Subsidiaries of the Company (5)31.1*
            
            Certification
      pursuant to Rule 13a-14(a) under the Securities Exchange Act of
      193431.2*
            
            Certification
      pursuant to Rule 13a-14(a) under the Securities Exchange Act of
      193432.1*
            
            Certification
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 200232.2*
            
            Certification
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002





(1)
            Incorporated
      by reference to the Company’s Form 8-K Current Report filed with the
      Securities and Exchange Commission on May 15,
  2007.





(2)
            Incorporated
      by reference to the Company’s SB-2 Registration Statement filed with the
      Securities and Exchange Commission on December 16,
    2005.





(3)
            Incorporated
      by reference to the Company’s Form 8-K Current Report filed with the
      Securities and Exchange Commission on May 10,
  2007.





(4)
            Incorporated
      by reference to the Company’s Form 8-K Current Report filed with the
      Securities and Exchange Commission on September 28,
    2007.





(5)
            Incorporated
      by reference to the Company’s Form SB-2 Registration Statement filed with
      the Securities and Exchange Commission on July 20,
  2007.





(6)
            Incorporated
      by reference to the Company’s Form SB-2 Registration Statement filed with
      the Securities and Exchange Commission on December 14,
    2007.





(7)
            Incorporated
      by reference to the Company’s Form 8K/A Current Report filed with the
      Securities and Exchange Commission on September 11,
  2007.




* Filed
herewith


64




Item 14.   Principal
Accountant Fees and Services








The
following table presents fees for professional audit services rendered by
Carlin, Charron & Rosen, LLP for the audit of the Company’s annual financial
statements for the years ended December 31, 2007 and 2006, respectively, and
fees billed for other services rendered by Carlin, Charron & Rosen,
LLP.




Year
      Ended December 31,
      2007
              
              
              Year
      Ended December 31, 2006Audit
      Fees (1)
              
              $
              82,820
              
              
              $
              64,700Audit
      Related Fees (2)
              
              $
              89,595
              
              
              $
              -Tax
      Services (3)
              
              $
              470
              
              
              $
              -All
      Other Fees
              
              
              -
              
              
              $
              -


(1)
            Audit
      fees consist of fees for professional services rendered for the audit of
      the Company’s consolidated financial statements and review of consolidated
      financial statement included in the Company’s quarterly
      reports.


(2)
            Audit
      related fees are principally for professional services rendered in
      connection with accounting consultations related to the Company’s SB-2
      filing and other matters.


(3)
            Tax
      service fees are related to consultation on the tax compliance
      matters.





The Audit
Committee charter provides that the Audit Committee will review and approve fees
paid to the independent auditors, including audit fees and all other consulting
services. Non-audit services, other than de minimus amounts, will be approved by
the Audit Committee or the Audit Committee Chairman beginning with the 2007
year-end audit and 2008 fiscal year. The Audit Committee and its charter were
established subsequent to the engagement of Carlin, Charron & Rosen, LLP for
the audit of the 2006 fiscal year and all interim services provided during 2007.
Accordingly, only those services related to the 2007 fiscal year-end audit have
been approved by the Audit Committee. The approved Audit Fees of $65,000 for the
fiscal year-end 2007 audit represent 78% of the total $82,820 in Audit Fees
incurred for the year ended December 31, 2007.




65




SIGNATURES




In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.






VERUTEK
      TECHNOLOGIES, INC.By:
              /s/ John
      Collins
              Date:
      March 26, 2008John
      CollinsChief
      Executive Officer and Director




By:
              /s/ Michael
      Vagnini
              Date:
      March 26, 2008Michael
      VagniniChief
      Financial Officer







In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.




Signature
            
            Title
            
            Date/s/
      John Collins
            
            President,
      Chief Executive Officer and Director
            
            March 
      26, 2008John
      Collins
            
            (Principal
      Executive Officer)/s/
      George Hoag
            
            Senior
      Vice President and Director of Research and Development
            
            March
       26, 2008George
      Hoag/s/
      Michael Vagnini
            
            Senior
      Vice President and Chief Financial Officer
            
            March
       26, 2008Michael
      Vagnini
            
            (Principal
      Financial and Accounting Officer)





/s/
      Douglas Anderson
            
            Chairman
      of the Board
            
            March
       26, 2008Douglas
      Anderson





/s/
      Mark Ain
            
            Director
            
            March
       26, 2008Mark
      Ain





/s/
      Carlos Naudon
            
            Director
            
            March
       26, 2008Carlos
      Naudon