**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      DC 20549**

**FORM      10-QSB**

| DELAWARE                                                                                    |   | 71-0659511                                       |
|---------------------------------------------------------------------------------------------|--------|--------------------------------------------------|
| (State                or Other Jurisdiction ofIncorporation                or Organization) |   | (IRS                Employer Identification No.) |

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**THERMOENERGY      CORPORATON**

**INDEX      **

| ** **              | ** ** | ** **                           | ** ** | ** **                                                                                                                                                                                                       | ** ** | **Page****No.** |
|-------------------------|------------|--------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------|
| Part                I.  |       | Financial                Information |
|                    |       | Item                1.               |       | Financial                Statements                                                                                                                                                                              |       |            |
|                    |       |                                 |       | Balance                Sheets as of June 30, 2007 (Unaudited) and December 31,                2006                                                                                                     |       | 3               |
|                    |       |                                 |       | Statements                of Operations for the six months ended June 30, 2007 and 2006                (Unaudited)                                                                                          |       | 4               |
|                    |       |                                 |       | Statements                of Changes in Stockholders’ Equity (Deficit) for the period ended January                1, 2006 through December 31, 2006 and the six months ended June 30,                2007 |       | 5               |
|                    |       |                                 |       | Statements                of Cash Flows for the six months ended June 30, 2007 and 2006                (Unaudited)                                                                                          |       | 6               |
|                    |       |                                 |       | Notes                to Financial Statements (Unaudited)                                                                                                                                                         |       | 7               |
|                    |       | Item                2.               |       | Management's                Discussion and Analysis or Plan of Operation                                                                                                                                         |       | 11              |
|                    |       | Item                3.               |       | Controls                and Procedures                                                                                                                                                                           |       | 15              |
| Part                II. |       | Other                Information     |       | 16                                                                                                                                                                                                               |
|                    |       | Item                1.               |       | Legal                Proceedings                                                                                                                                                                                 |       | 16              |
|                    |       | Item                2.               |       | Unregistered                Sales of Equity Securities and Use of Proceeds                                                                                                                                       |       | 16              |
|                    |       | Item                3.               |       | Defaults                Upon Senior Securities                                                                                                                                                                   |       | 16              |
|                    |       | Item                4.               |       | Submission                of Matters to a Vote of Security Holders                                                                                                                                               |       | 16              |
|                    |       | Item                5.               |       | Other                Information                                                                                                                                                                                 |       | 16              |
|                    |       | Item                6.               |       | Exhibits                and Reports on Form 8-K                                                                                                                                                                  |       | 17              |
| Signature               |       | 18                                   |

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**THERMOENERGY        CORPORATION**

**BALANCE          SHEETS**

|                                                                                                                                                                                                                                                                                                        |   | **June                  30, 2007** |        | **December                  31, 2006** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|-------------|----------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                   |   | **(Unaudited)**                    |        |                                   |   |
|                                                                                                                                                                                                                                                                                                   |   |                               |        |                                   |   |
| **ASSETS**                                                                                                                                                                                                                                                                                             |   |                               |        |                                   |   |
| Current                  Assets:                                                                                                                                                                                                                                                                       |   |                               |        |                                   |   |
| Cash                                                                                                                                                                                                                                                                                                   |   |                               | 2,539,677   |                                   |   | 637,041 |   |
| Accounts                  Receivable                                                                                                                                                                                                                                                                   |   |                               | 997,296     |                                   |   | 874,282 |   |
| Note                  Receivable - CAStion                                                                                                                                                                                                                                                             |   |                               | 878,376     |                                   |   | 493,376 |   |
| Prepaid                  Insurance                                                                                                                                                                                                                                                                     |   |                               | 78,556      |                                   |   | 117,111 |   |
| Other                  Current Assets                                                                                                                                                                                                                                                                  |   |                               | 33,488      |                                   |   | 34,688 |   |
| Total                  Current Assets                                                                                                                                                                                                                                                                  |   |                               | 4,527,393   |                                   |   | 2,156,498 |   |
|                                                                                                                                                                                                                                                                                                   |   |                               |        |                                   |   |   |   |
| Property                  and Equipment, at cost:                                                                                                                                                                                                                                                      |   |                               |        |                                   |   |   |   |
| Equipment,                  Furniture and Fixtures                                                                                                                                                                                                                                                     |   |                               | 295,653     |                                   |   | 295,704 |   |
| Less                  Accumulated Depreciation                                                                                                                                                                                                                                                         |   |                               | (56,386     | )                                      |   | (43,350 | ) |
| Total                  Fixed Assets                                                                                                                                                                                                                                                                    |   |                               | 239,267     |                                   |   | 252,354 |   |
|                                                                                                                                                                                                                                                                                                        |   |                               |        |                                   |   |   |   |
| **Total                  Assets**                                                                                                                                                                                                                                                                      |   |                               | 4,766,660   |                                   |   | 2,408,852 |   |
|                                                                                                                                                                                                                                                                                                   |   |                               |        |                                   |   |   |   |
| **LIABILITIES                  AND STOCKHOLDERS' EQUITY (DEFICIT)**                                                                                                                                                                                                                                    |   |                               |        |                                   |   |   |   |
|                                                                                                                                                                                                                                                                                                        |   |                               |        |                                   |   |   |   |
| Current                  Liabilities:                                                                                                                                                                                                                                                                  |   |                               |        |                                   |   |   |   |
| Accounts                  Payable                                                                                                                                                                                                                                                                      |   |                               | 559,525     |                                   |   | 497,855 |   |
| Other                  Current Liabilities                                                                                                                                                                                                                                                             |   |                               | 206,524     |                                   |   | 350,521 |   |
| Total                  Current Liabilities                                                                                                                                                                                                                                                             |   |                               | 766,049     |                                   |   | 848,376 |   |
|                                                                                                                                                                                                                                                                                                   |   |                               |        |                                   |   |   |   |
| Long                  Term Liabilities:                                                                                                                                                                                                                                                                |   |                               |        |                                   |   |   |   |
| Deferred                  Comp Retirement Plan for Officers Net of Current Portion                                                                                                                                                                                                                     |   |                               | 324,140     |                                   |   | 347,000 |   |
| Long-Term                  Note Payable (Net of Discount)                                                                                                                                                                                                                                              |   |                               | 476,749     |                                   |   | - |   |
| Total                  Long Term Liabilities                                                                                                                                                                                                                                                           |   |                               | 800,889     |                                   |   | 347,000 |   |
|                                                                                                                                                                                                                                                                                                        |   |                               |        |                                   |   |   |   |
| **Total                  Liabilities**                                                                                                                                                                                                                                                                 |   |                               | 1,566,938   |                                   |   | 1,195,376 |   |
|                                                                                                                                                                                                                                                                                                        |   |                               |        |                                   |   |   |   |
| Stockholders'                  Equity (Deficit):                                                                                                                                                                                                                                                       |   |                               |        |                                   |   |   |   |
| Preferred                    Stock, $0.01 par value (2007), $1 par value (2006): authorized                    -                    20,000,000 shares (2007), 10,000,000 shares (2006); issued and                    outstanding: 2007 - 5,515,004 shares; 2006 - 6,198,671                    shares |   |                               | 55,150      |                                   |   | 6,198,671 |   |
|                                                                                                                                                                                                                                                                                                   |   |                               |        |                                   |   |   |   |
| Common                  Stock, $.001 par value: authorized - 150,000 shares (2007), 75,000,000                  shares (2006); issued:                                                                                                                                                                 |   |                               |        |                                   |   |   |   |
| 2007                    - 29,239,051 shares; 2006 - 23,220,612 shares; outstanding: 2007                    -                    29,155,254 shares; 2006 - 23,136,815 shares                                                                                                                           |   |                               | 29,239      |                                   |   | 23,221 |   |
|                                                                                                                                                                                                                                                                                                   |   |                               |        |                                   |   |   |   |
| Additional                  Paid-In Capital                                                                                                                                                                                                                                                            |   |                               | 40,005,825  |                                   |   | 29,862,326 |   |
|                                                                                                                                                                                                                                                                                                   |   |                               |        |                                   |   |   |   |
| Accumulated                  Deficit                                                                                                                                                                                                                                                                   |   |                               | (36,890,492 | )                                      |   | (34,870,742 | ) |
|                                                                                                                                                                                                                                                                                                   |   |                               |        |                                   |   |   |   |
| Total                  Equity                                                                                                                                                                                                                                                                          |   |                               | 3,199,722   |                                   |   | 1,213,476 |   |
|                                                                                                                                                                                                                                                                                                   |   |                               |        |                                   |   |   |   |
| TOTAL                  LIABILITIES AND EQUITY                                                                                                                                                                                                                                                          |   |                               | 4,766,660   |                                   |   | 2,408,852 |   |

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**THERMOENERGY        CORPORATION**

**STATEMENTS          OF OPERATIONS**

|                                        |   | **Six                  Months Ended** |       | **Three                  Months Ended** |   |
|---------------------------------------------|--------|---------------------------------------|------------|-----------------------------------------|--------|
|                                        |   | **June                  30,**         |       | **June                  30,**           |   |
|                                        |   | **2007**                              |       | **2006**                                |   | **2007** |   | **2006** |   |
|                                        |   | **(Unaudited)**                       |       | **(Unaudited)**                         |   |
|                                        |   |                                  |       |                                    |   |   |   |   |   |
| Operating                  Income:          |   |                                  |       |                                    |   |   |   |   |   |
| Water                  Group                |   | $                                     | -          |                                    | $      | 85,000 |   | $ | - |   | $ | 25,000 |   |
| Power                  Group                |   |                                  | 181,469    |                                    |   | 325,825 |   |   | 108,014 |   |   | 133,702 |   |
| Total                  Operating Income     |   |                                  | 181,469    |                                    |   | 410,825 |   |   | 108,014 |   |   | 158,702 |   |
|                                        |   |                                  |       |                                    |   |   |   |   |   |   |   |   |   |
| Cost                  of Goods Sold         |   |                                  | 75,551     |                                    |   | 163,501 |   |   | 36,152 |   |   | 103,581 |   |
| Gross                  Operating Income     |   |                                  | 105,918    |                                    |   | 247,324 |   |   | 71,862 |   |   | 55,121 |   |
|                                        |   |                                  |       |                                    |   |   |   |   |   |   |   |   |   |
| Operating                  Expenses:        |   |                                  |       |                                    |   |   |   |   |   |   |   |   |   |
| General                  and Admin.         |   |                                  | 1,817,409  |                                    |   | 2,194,978 |   |   | 1,094,275 |   |   | 795,847 |   |
| Payments                  under licenses    |   |                                  | 57,673     |                                    |   | 20,000 |   |   | 47,673 |   |   | 10,000 |   |
| Travel                  & Entertainment |   |                                  | 257,172    |                                    |   | 271,312 |   |   | 169,530 |   |   | 147,044 |   |
| Total                  Operating Expenses   |   |                                  | 2,132,254  |                                    |   | 2,649,791 |   |   | 1,311,478 |   |   | 1,046,472 |   |
|                                        |   |                                  |       |                                    |   |   |   |   |   |   |   |   |   |
| Loss                  from Operations       |   |                                  | (2,026,336 | )                                       |   | (2,238,966 | ) |   | (1,234,616 | ) |   | (887,770 | ) |
|                                        |   |                                  |       |                                    |   |   |   |   |   |   |   |   |   |
| Other                  Income (Expense):    |   |                                  |       |                                    |   |   |   |   |   |   |   |   |   |
| Interest                  Income            |   |                                  | 6,586      |                                    |   | 53,440 |   |   | 2,557 |   |   | 33,440 |   |
| Total                  Other Income         |   |                                  | 6,586      |                                    |   | 53,440 |   |   | 2,557 |   |   | 33,440 |   |
|                                        |   |                                  |       |                                    |   |   |   |   |   |   |   |   |   |
| Net                  Loss                   |   |                                  | (2,019,750 | )                                       | $      | (2,185,526 | ) |   | (1,237,059 | ) | $ | (854,330 | ) |
|                                        |   |                                  |       |                                    |   |   |   |   |   |   |   |   |   |
| Per                  Common Share:          |   |                                  |       |                                    |   |   |   |   |   |   |   |   |   |
| Loss                  from Operations       |   | $                                     | (0.08      | )                                       | $      | (0.09 | ) | $ | (0.05 | ) | $ | (0.04 | ) |
| Net                  Loss                   |   | $                                     | (0.08      | )                                       | $      | (0.09 | ) | $ | (0.05 | ) | $ | (0.04 | ) |

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**THERMOENERGY        CORPORATION**

**STATEMENTS          OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)**

**Period            Ended December 31, 2006 and the Six Months Ended **

**June              30, 2007 (Unaudited)**

|                                                                                                                                                                                                                                                                                                                                      |   | **Common                Stock** |   | **Series                A Convertible Preferred Stock** |   | **Additional                Paid-In Capital** |   | **Accumulated                Deficit** |        | **Total** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------|--------|---------------------------------------------------------|--------|-----------------------------------------------|--------|----------------------------------------|-------------|-----------|--------|
|                                                                                                                                                                                                                                                                                                                                      |   |                            |   |                                                    |   |                                          |   |                                   |        |      |   |
| Balance                (Deficit) January 1, 2006                                                                                                                                                                                                                                                                                          |   | $                               | 23,221 |                                                    | $      | 6,198,671                                     |   | $                                      | 29,130,717  |      | $      | (31,177,350 | ) | $ | 4,175,259 |   |
|                                                                                                                                                                                                                                                                                                                                      |   |                            |   |                                                    |   |                                          |   |                                   |        |      |   |   |   |   |   |   |
| Options:                issued to officers and directors                                                                                                                                                                                                                                                                                  |   |                            | -      |                                                    |   | -                                             |   |                                   | 298,333     |      |   | - |   |   | 298,333 |   |
|                                                                                                                                                                                                                                                                                                                                      |   |                            |   |                                                    |   |                                          |   |                                   |        |      |   |   |   |   |   |   |
| Warrants                issued for services                                                                                                                                                                                                                                                                                               |   |                            | -      |                                                    |   | -                                             |   |                                   | 433,276     |      |   | - |   |   | 433,276 |   |
|                                                                                                                                                                                                                                                                                                                                      |   |                            |   |                                                    |   |                                          |   |                                   |        |      |   |   |   |   |   |   |
| Net                Loss                                                                                                                                                                                                                                                                                                                   |   |                            | -      |                                                    |   | -                                             |   |                                   | -           |      |   | (3,693,392 | ) |   | (3,693,392 | ) |
|                                                                                                                                                                                                                                                                                                                                      |   |                            |   |                                                    |   |                                          |   |                                   |        |      |   |   |   |   |   |   |
| Balance                December 31, 2006                                                                                                                                                                                                                                                                                                  |   | $                               | 23,221 |                                                    | $      | 6,198,671                                     |   | $                                      | 29,862,326  |      | $      | (34,870,742 | ) | $ | 1,213,476 |   |
|                                                                                                                                                                                                                                                                                                                                      |   |                            |   |                                                    |   |                                          |   |                                   |        |      |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                      |   |                            |   |                                                    |   |                                          |   |                                   |        |      |   |   |   |   |   |   |
| Options                issued to directors                                                                                                                                                                                                                                                                                                |   |                            |   |                                                    |   |                                          |   |                                   | 127,720     |      |   |   |   |   | 127,720 |   |
|                                                                                                                                                                                                                                                                                                                                      |   |                            |   |                                                    |   |                                          |   |                                   |        |      |   |   |   |   |   |   |
| Stock                issued for services                                                                                                                                                                                                                                                                                                  |   |                            | 23     |                                                    |   | -                                             |   |                                   | 10,820      |      |   | - |   |   | 10,843 |   |
|                                                                                                                                                                                                                                                                                                                                      |   |                            |   |                                                    |   |                                          |   |                                   |        |      |   |   |   |   |   |   |
| Warrants                issued for services                                                                                                                                                                                                                                                                                               |   |                            |   |                                                    |   |                                          |   |                                   | 166,154     |      |   |   |   |   | 166,154 |   |
|                                                                                                                                                                                                                                                                                                                                      |   |                            |   |                                                    |   |                                          |   |                                   |        |      |   |   |   |   |   |   |
| Converted                Preferred Stock to Common Stock                                                                                                                                                                                                                                                                                  |   |                            | 684    |                                                    |   | (683,667                                      | )      |                                   | 682,983     |      |   |   |   |   | - |   |
|                                                                                                                                                                                                                                                                                                                                      |   |                            |   |                                                    |   |                                          |   |                                   |        |      |   |   |   |   |   |   |
| Issuance                of Common Stock (1,238,095 at $0.42 per share)                                                                                                                                                                                                                                                                    |   |                            | 1,238  |                                                    |   | -                                             |   |                                   | 518,762     |      |   | - |   |   | 520,000 |   |
|                                                                                                                                                                                                                                                                                                                                      |   |                            |   |                                                    |   |                                          |   |                                   |        |      |   |   |   |   |   |   |
| Issuance                of Common Stock from Cashless Exercise                                                                                                                                                                                                                                                                            |   |                            |   |                                                    |   |                                          |   |                                   |        |      |   |   |   |   |   |   |
| of                Warrants, April 2007                                                                                                                                                                                                                                                                                                    |   |                            | 73     |                                                    |   |                                          |   |                                   | (73         | )         |   |   |   |   | - |   |
|                                                                                                                                                                                                                                                                                                                                      |   |                            |   |                                                    |   |                                          |   |                                   |        |      |   |   |   |   |   |   |
| Issuance                  of Common Stock, June 2007, net of Issuance Costs of $99,721.17                  (4,000,000                  shares at $0.75 per share) and 2,000,000 warrants at a price equal                  to a 12                  month average with a floor of $0.75 and a ceiling of $1.50 per                  share |   |                            | 4,000  |                                                    |   |                                          |   |                                   | 2,896,279   |      |   |   |   |   | 2,900,279 |   |
|                                                                                                                                                                                                                                                                                                                                      |   |                            |   |                                                    |   |                                          |   |                                   |        |      |   |   |   |   |   |   |
| Warrants                and beneficial conversion option issued with                                                                                                                                                                                                                                                                      |   |                            |   |                                                    |   |                                          |   |                                   |        |      |   |   |   |   |   |   |
| Convertible                Note                                                                                                                                                                                                                                                                                                           |   |                            |   |                                                    |   |                                          |   |                                   | 281,000     |      |   |   |   |   | 281,000 |   |
| Reincorporated              in Delaware and                                                                                                                                                                                                                                                                                               |   |                            |   |                                                    |   |                                          |   |                                   |        |      |   |   |   |   |   |   |
| reduced                par value of preferred shares                                                                                                                                                                                                                                                                                      |   |                            |        |                                                    |   | 6,459,854                                     |   |                                   | 5,459,854   |      |   |  |   |   |  |   |
| Net                Loss                                                                                                                                                                                                                                                                                                                   |   |                            |   |                                                    |   |                                          |   |                                   |        |      |   | (2,019,750 | ) |   | (2,019,750 | ) |
|                                                                                                                                                                                                                                                                                                                                      |   |                            |   |                                                    |   |                                          |   |                                   |        |      |   |   |   |   |   |   |
| Balance                June 30, 2007                                                                                                                                                                                                                                                                                                      |   | $                               | 29,239 |                                                    | $      | 55,150                                        |   | $                                      | (40,005,825 | )    | $      | (36,890,492 | ) | $ | 3,199,722 |   |

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**THERMOENERGY      CORPORATION**

**STATEMENTS      OF CASH FLOWS**

|                                                                 |   | **Six                  Months Ended June 30,** |       |
|----------------------------------------------------------------------|--------|------------------------------------------------|------------|
|                                                                 |   | **2007**                                       |       | **2006** |   |
|                                                                 |   | **(Unaudited)**                                |       |
|                                                                 |   |                                           |       |   |   |
| Operating                  Activities:                               |   |                                           |       |   |   |
| Net                  Loss                                            |   | $                                              | (2,019,750 | ) | $ | (2,185,496 | ) |
| Items                  not requiring (providing) cash:               |   |                                           |       |   |   |   |   |
| Depreciation                                                         |   |                                           | 13,036     |   |   | 11,104 |   |
| Expense                  of options issued to officers and directors |   |                                           | 127,720    |   |   | 298,333 |   |
| Expense                  of warrants vesting during the period       |   |                                           | 166,154    |   |   | 166,158 |   |
| Restricted                  Stock issued for services                |   |                                           | 10,820     |   |   | - |   |
| Discount                  on Convertible Debt                        |   |                                           | 7,749      |   |   | - |   |
| Changes                  in:                                         |   |                                           |       |   |   |   |   |
| Accounts                  Receivable                                 |   |                                           | (123,014   | ) |   | (362,365 | ) |
| Other                  Receivables                                   |   |                                           | -          |   |   | (125,000 | ) |
| Note                  Receivable CASTion                             |   |                                           | (385,000   | ) |   | - |   |
| Other                  Current Assets                                |   |                                           | 1,274      |   |   | - |   |
| Prepaid                  Expenses                                    |   |                                           | 38,555     |   |   | (91,159 | ) |
| Accounts                  Payable                                    |   |                                           | 61,670     |   |   | (156,002 | ) |
| Other                  Current Liabilities                           |   |                                           | (143,997   | ) |   | 102,480 |   |
| Deferred                  Compensation Retirement Plan               |   |                                           | (22,860    | ) |   | (2,500 | ) |
| Net                  Cash used in operating activities               |   |                                           | (2,267,643 | ) |   | (2,344,447 | ) |
|                                                                 |   |                                           |       |   |   |   |   |
| Investing                  Activities:                               |   |                                           |       |   |   |   |   |
| Purchase                  of fixed assets                            |   |                                           | -          |   |   | (173,050 | ) |
| Net                  Cash used in investing activities               |   |                                           | -          |   |   | (173,050 | ) |
|                                                                 |   |                                           |       |   |   |   |   |
| Financing                  Activities:                               |   |                                           |       |   |   |   |   |
| Issue                  Restricted Common Stock net of expenses in    |   |                                           |       |   |   |   |   |
| Private                  Placement                                   |   |                                           | 3,420,279  |   |   | - |   |
| Executed                  Convertible Debt Financing                 |   |                                           | 750,000    |   |   | - |   |
| Net                  cash provided by financing activities           |   |                                           | 4,170,279  |   |   | - |   |
|                                                                 |   |                                           |       |   |   |   |   |
| Increase                  (Decrease) in cash                         |   |                                           | 1,902,636  |   |   | (2,517,497 | ) |
| Cash,                  beginning of period                           |   |                                           | 637,041    |   |   | 4,325,801 |   |
| Cash,                  end of period                                 |   | $                                              | 2,539,677  |   | $ | 1,808,304 |   |

----

**THERMOENERGY      CORPORATION**

**NOTES      TO FINANCIAL STATEMENTS (Unaudited)**

**June      30, 2007**

**NOTE      1: BASIS OF PRESENTATION**

**NOTE      2: LOSS PER COMMON SHARE**

**NOTE      3: MANAGEMENT’S CONSIDERATION OF GOING CONCERN MATTERS**

----

**THERMOENERGY      CORPORATION**

**NOTES      TO FINANCIAL STATEMENTS (Unaudited)**

**June      30, 2007**

**NOTE      3: MANAGEMENT’S CONSIDERATION OF GOING CONCERN MATTERS      (Continued)**

**NOTE      4: ISSUANCE OF CONVERTIBLE PROMISSORY NOTE, WARRANT AND COMMON      STOCK**

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**NOTE      5: LEGAL MATTERS**

**NOTE      6: SUBSEQUENT EVENT**

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**Item      2. Management’s Discussion and Analysis or Plan of Operation.**

*General*

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*Current      Cash Requirements; Need for Additional Funds*

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*Second      Quarter 2007 Compared to Second Quarter 2006 *

*Six        Month Ended June 30, 2007 Compared to Six Months Ended June 30,        2006*

*Recent      Developments*

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*Research      and Development*

*Expected      Changes in the Number of Employees*

*Off-Balance      Sheet Arrangements *

**Item      3. Controls and Procedures.**

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**PART      II — OTHER      INFORMATION**

**Item      1. Legal Proceedings.**

**Item      2. Unregistered Sales of Equity Securities and Use of      Proceeds**

**Item      3. Defaults Upon Senior Securities.**

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

| 1. | The                  election of two directors to serve on our Board of Directors for                  a term of                  three years until the 2010 Annual Meeting and until their respective                  successors are duly elected and                  qualified; |
|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2. | Ratifying                  the appointment of Kemp & Company as our independent registered public                  accounting firm for the fiscal year ending December 31, 2007; |
|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3. | The                  reincorporation of our corporation in the State of                  Delaware. |
|----|----------------------------------------------------------------------------------------------------|

| ***Nominee***                          | ***For***  | ***Withheld*** |
|----------------------------------------|------------|----------------|
| Louis                  J. Ortmann, DDS | 23,958,285 | 155,200        |
| Martin                  A. Roenigk     | 24,103,866 | 9,619          |

| ***For***  | ***Against*** | ***Abstained*** |
|------------|---------------|-----------------|
| 24,082,778 | 3,121         | 27,586          |

| ***For***  | ***Against*** | ***Abstained*** |
|------------|---------------|-----------------|
| 17,052,220 | 335,330       | 999             |

**Item      5. Other Information.**

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**Item      6. Exhibits.**

| Exhibit                  Number |   | Description                  of Exhibit                                                                                                                                    |   | Location |
|---------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|
|                            |   |                                                                                                                                                                       |   |     |
| 2.1                             |   | Agreement                  and Plan of Merger of ThermoEnergy Corporation (a Delaware corporation)                  and Thermoenergy Corporation (an Arkansas corporation) |   | (1)      |
|                            |   |                                                                                                                                                                       |   |     |
| 3.1                             |   | Certificate                  of Incorporation                                                                                                                              |   | (2)      |
|                            |   |                                                                                                                                                                       |   |     |
| 3.2                             |   | Certificate                  of Merger filed with the Secretary of State of the State of Delaware                  on                  June 20, 2007                       |   | *        |
|                            |   |                                                                                                                                                                       |   |     |
| 3.3                             |   | Articles                  of Merger filed with the Secretary of State of the State of Arkansas                  on                  June 25, 2007                          |   | *        |
|                            |   |                                                                                                                                                                       |   |     |
| 3.4                             |   | By-laws                                                                                                                                                                    |   | (3)      |
|                            |   |                                                                                                                                                                       |   |     |
| 31.1                            |   | Certification                  of C.E.O. pursuant to Rule 13a-14(a)                                                                                                        |   | *        |
|                            |   |                                                                                                                                                                       |   |     |
| 31.2                            |   | Certification                  of C.F.O. pursuant to Rule 13a-14(a)                                                                                                        |   | *        |
|                            |   |                                                                                                                                                                       |   |     |
| 32.1                            |   | Certification                  of C.E.O. pursuant to Rule 13a-14(b) and 18 U.S.C. Section                  1350                                                            |   | *        |
|                            |   |                                                                                                                                                                       |   |     |
| 32.3                            |   | Certification                  of C.F.O. pursuant to Rule 13a-14(b) and 18 U.S.C. Section                  1350                                                            |   | *        |

|   | (1) | Incorporated                  by reference to Annex B to Proxy Statement for 2007 Annual Meeting,                  filed                  on Schedule 14A on May 18, 2007. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | Incorporated                  by reference to Annex C to Proxy Statement for 2007 Annual Meeting,                  filed                  on Schedule 14A on May 18, 2007. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | Incorporated                  by reference to Annex D to Proxy Statement for 2007 Annual Meeting,                  filed                  on Schedule 14A on May 18,                  2007. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**SIGNATURE**

|         |                                           |                                    |
|--------------|------------------------------------------------|-----------------------------------------|
|         |                                           | THERMOENERGY                CORPORATION |
|    |                                      |                               |
|              |                                                | /s/                Dennis C. Cossey     |
|         | Dennis                C. Cossey, Chairman, and |
|         | Chief                Executive Officer         |

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