UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
DC 20549





FORM
10-Q





[X]  Quarterly
Report Pursuant To Section 13 or 15(d) Of The Securities Exchange Act Of
1934.





FOR THE
QUARTERLY PERIOD ENDED JUNE 30, 2008





OR





[_]  Transition
Report Pursuant To Section 13 Or 15(d) Of The Securities Exchange Act Of
1934.





For The
Transition Period From __________ To __________





COMMISSION
FILE NUMBER: 001-31925





VASO
ACTIVE PHARMACEUTICALS, INC.


(Exact
name of registrant as specified in its charter)





DELAWARE
            02-0670926(State
      or other jurisdiction
            (IRS
      Employerof
      incorporation or organization)
            Identification
      No.)





99
      ROSEWOOD DRIVE, SUITE 260DANVERS,
      MA
            01923(Address
      of principal executive offices)
            (Zip
      code)





REGISTRANT’S
TELEPHONE NUMBER: (978) 750-1991





Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 [_] No [X]





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filed, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “larger accelerated filer”,
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.





Large
      accelerated filer [_]
            Accelerated
      filer [_]Non-accelerated
      filer   [_] (do not check if smaller reporting
      company)
            Smaller
      reporting company [X]





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes [_]
No [X]





Indicate
the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:





Common
      stock, Class A, $0.0001 par value
            5,828,604
      shares outstanding on August 11, 2008Common
      stock, Class B, $0.0001 par value
            4,500,000
      shares outstanding on August 11,
2008




















VASO
ACTIVE PHARMACEUTICALS, INC.





INDEX TO
FORM 10-QSB











PART
I.     FINANCIAL INFORMATION





ITEM 1 -
Condensed Financial Statements (unaudited):





PageCondensed
      Balance Sheets as of June 30, 2008 and December 31, 2007
            3Condensed
      Statements of Operations for the Three and Six-Month Periods Ended June
      30, 2008
              and
      2007
            4Condensed
      Statements of Cash Flows for the Six-Month Periods Ended June 30, 2008 and
      2007
            5Notes
      to the Condensed Financial Statements
            6ITEM
      2 - Management's Discussion and Analysis of Financial Condition and
      Results of Operations
            7ITEM
      4T - Controls and Procedures
            19PART
      II.    OTHER INFORMATION
              
              ITEM
      1.  Legal Proceedings
            19ITEM
      6 - Exhibits and Reports on Form 8-K
            20Signature
            21





Unless
the context requires otherwise, references in this Quarterly Report to "Vaso
Active," "the Company," "we," "our" and "us" refer to Vaso Active
Pharmaceuticals, Inc. Vaso Active, A-R Extreme(R), Termin8(R), and our logo are
trademarks of the Company. Osteon(R), RepiDerm(R) and PENtoCORE(R) are
registered trademarks of BioChemics, Inc. This Quarterly Report also contains
trademarks and trade names of other parties.


2





VASO
ACTIVE PHARMACEUTICALS, INC.


CONDENSED
BALANCE SHEETS








JUNE
      30,
            
            
            DECEMBER
      312008
            
            
            2007(UNAUDITED)ASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
            
            $
            3,165
            
            
            $
            6,324Restricted
      cash
            
            
            11,683
            
            
            
            11,683Accounts
      receivable
            
            
            14,091
            
            
            
            25,699Inventory
            
            
            35,832
            
            
            
            57,515Prepaid
      expenses
            
            
            20,850
            
            
            
            19,783TOTAL CURRENT
    ASSETS
            
            
            85,621
            
            
            
            121,004Property
      and equipment net
            
            
            7,046
            
            
            
            17,638$
            92,667
            
            
            $
            138,642LIABILITIES
      AND STOCKHOLDERS' EQUITY (DEFICIENCY)CURRENT
      LIABILITIES:Accounts
      payable
            
            $
            808,097
            
            
            $
            597,733Accrued
      compensation
            
            
            324,798
            
            
            
            233,290Other
      accrued expenses
            
            
            605,953
            
            
            
            389,120Obligations
      under capital leases - short-term portion
            
            
            -
            
            
            
            2,558Senior
      secured convertible notes, net of discount
            
            
            2,781,250
            
            
            
            2,612,500Notes
      payable
            
            
            860,000
            
            
            
            860,000Due
      to parent company
            
            
            2,881,871
            
            
            
            2,395,475Deferred
      revenue
            
            
            31,000
            
            
            
            26,000TOTAL CURRENT
      LIABILITIES
            
            
            8,292,969
            
            
            
            7,116,676LONG-TERM
      LIABILITIES:Obligations
      under capital leases - long-term portion
            
            
            -
            
            
            
            6,5298,292,969
            
            
            
            7,123,205Commitments
      and contingencies (Note 1)STOCKHOLDERS'
      EQUITY:Preferred
      stock - $0.0001 par value; authorized10,000,000 shares; issued and
      outstanding, none
            
            
            
            
            
            
            -Common
      stock - $0.0001 par value; authorized60,000,000 shares; issued and
      outstanding,
              10,328,613
            
            
            1,033
            
            
            
            1,033Additional
      paid-in capital
            
            
            8,971,004
            
            
            
            8,968,669Deferred
      compensation
            
            
            -
            
            
            
            (4,007
            )Accumulated
      deficit
            
            
            (17,172,339
            )
            
            
            (15,950,258
            )TOTAL STOCKHOLDERS'
      DEFICIENCY
            
            
            (8,200,302
            )
            
            
            (6,984,563
            )$
            92,667
            
            
            $
            138,642





See notes
to the unaudited condensed financial statements.


3


VASO
ACTIVE PHARMACEUTICALS, INC.


UNAUDITED
CONDENSED STATEMENTS OF OPERATIONS





THREE-MONTH
      PERIOD
              ENDED
      JUNE 30,
            
            
            SIX-MONTH
      PERIOD
              ENDED
      JUNE 30,2008
            
            
            2007
            
            
            2008
            
            
            2007Net
      revenues
            
            $
            3,226
            
            
            $
            10,591
            
            
            $
            25,446
            
            
            $
            23,864Cost
      of revenues
            
            
            4,255
            
            
            
            12,016
            
            
            
            24,595
            
            
            
            18,586GROSS PROFIT
            
            
            (1,029
            )
            
            
            (1,425
            )
            
            
            851
            
            
            
            5,278Costs
      and expenses:Marketing, advertising and
      promotion
            
            
            7,332
            
            
            
            49,366
            
            
            
            39,249
            
            
            
            115,414Selling, general and
      administrative (1)
            
            
            395,757
            
            
            
            359,969
            
            
            
            786,476
            
            
            
            772,323Research and
      development
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            150Stock based
      compensation
            
            
            -
            
            
            
            15,101
            
            
            
            4,007
            
            
            
            30,202Loss from
    operations
            
            
            (404,118
            )
            
            
            (425,861
            )
            
            
            (828,881
            )
            
            
            (912,811
            )Interest
      income (expense), net
            
            
            (112,160
            )
            
            
            (140,674
            )
            
            
            (224,450
            )
            
            
            (337,511
            )Charge
      for default premium on
              senior
      secured convertible notes
            
            
            (168,750
            )
            
            
            (112,500
            )
            
            
            (168,750
            )
            
            
            (112,500
            )Debt
      restructuring (expense)
            
            
            -
            
            
            
            (43,993
            )
            
            
            -
            
            
            
            (43,993
            )NET
      LOSS
            
            $
            (685,028
            )
            
            $
            (723,028
            )
            
            $
            (1,222,081
            )
            
            $
            (1,406,815
            )Net
      loss per share - basic and diluted (Note 2)
            
            $
            (0.07
            )
            
            $
            (0.07
            )
            
            $
            (0.12
            )
            
            $
            (0.14
            )Weighted
      average shares outstanding - basic anddiluted (Note
2)
            
            
            10,328,613
            
            
            
            10,328,613
            
            
            
            10,328,613
            
            
            
            10,328,613(1)    
      Includes stock based compensation of:
            
            $
            2,335
            
            
            $
            45,960
            
            
            $
            2,335
            
            
            $
            91,920







See notes
to the unaudited condensed financial statements.


4


VASO
ACTIVE PHARMACEUTICALS, INC.


UNAUDITED
CONDENSED STATEMENTS OF CASH FLOWS





SIX-MONTH
      PERIOD ENDED JUNE 30,2008
            
            
            2007CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
            
            $
            (1,222,081
            )
            
            $
            (1,406,815
            )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
      and amortization
            
            
            4,075
            
            
            
            7,504Stock-based
      compensation (Note 4)
            
            
            6,342
            
            
            
            122,121Disposition
      of capital lease
            
            
            (2,102
            )
            
            
            -Amortization
      of discount and offering costs associated with convertible
      debt
            
            
            -
            
            
            
            179,211Reserve
      for doubtful accounts
            
            
            9,000
            
            
            
            -Increase
      in senior secured convertible notes for default
      premium
            
            
            168,750
            
            
            
            112,500Accrued
      debt restructuring expense
            
            
            -
            
            
            
            43,993Accrued
      legal settlementIncrease
      (decrease) in cash from change in:Accounts
      receivable
            
            
            2,608
            
            
            
            27,002Inventory
            
            
            21,683
            
            
            
            48,311Prepaid
      expenses
            
            
            (1,067
            )
            
            
            294Accounts
      payable
            
            
            210,364
            
            
            
            (65,670
            )Accrued
      compensation
            
            
            91,508
            
            
            
            46,884Deferred
      revenue
            
            
            5,000
            
            
            
            -Other
      accrued expenses
            
            
            216,833
            
            
            
            33,424Net
      cash used in operating activities
            
            
            (489,087
            )
            
            
            (851,241
            )CASH
      FLOWS FROM INVESTING ACTIVITIES:Decrease
      in restricted cash
            
            
            -
            
            
            
            124,636Net
      cash provided by  investing activities
            
            
            -
            
            
            
            124,636CASH
      FLOWS FROM FINANCING ACTIVITIES:Obligations
      under capital leases
            
            
            (468
            )
            
            
            (1,248
            )Due
      to/from parent company
            
            
            486,396
            
            
            
            725,226Net
      cash provided by financing activities
            
            
            485,928
            
            
            
            723,978NET
      INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
            
            
            (3,159
            )
            
            
            (2,627
            )CASH
      AND CASH EQUIVALENTS, BEGINNING OF PERIOD
            
            
            6,324
            
            
            
            8,627CASH
      AND CASH EQUIVALENTS, END OF PERIOD
            
            $
            3,165
            
            
            $
            6,000SUPPLEMENTAL
      DISCLOSURES:Interest paid
            
            $
            -
            
            
            $
            337,511Income taxes
    paid
            
            $
            -
            
            
            $
            -





See notes
to the unaudited condensed financial statements.





5








VASO
ACTIVE PHARMACEUTICALS, INC.





NOTES TO UNAUDITED CONDENSED FINANCIAL
STATEMENTS





1.            
INTERIM FINANCIAL STATEMENTS





The
accompanying unaudited interim financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and pursuant to the rules and regulations of the Securities and
Exchange Commission for reporting on Form 10-Q. Accordingly, certain information
and footnote disclosure required for complete financial statements are not
included herein. It is recommended that these financial statements be read in
conjunction with the financial statements and related notes of Vaso Active
Pharmaceuticals, Inc. (the "Company") as reported in the Company's Annual Report
on Form 10-KSB for the year ended December 31, 2007. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation of financial position, results of
operations, and cash flows at the dates and for the periods presented have been
included. The results of operations for the three and six months ended June 30,
2008 may not be indicative of the results that may be expected for the year
ending December 31, 2008, or any other period.





2.             
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





GOING
CONCERN - These financial statements have been prepared on the assumption that
the Company will be able to realize its assets and discharge its liabilities in
the normal course of business. This assumption is presently in question and
contingent upon the Company's ability to raise additional funds. Management is
in the process of identifying various fund-raising strategies it will pursue in
2008. These strategies may include an additional private placement of the
Company's equity securities. There are no assurances that Management will
successfully execute such strategies.





ACCOUNTS
RECEIVABLE - Accounts receivable consist primarily of trade receivables from the
sale of OTC pharmaceutical products. The allowance for doubtful accounts is
based on the Company's assessment of the collectability of specific customer
accounts and an assessment of economic risk as well as the aging of the accounts
receivable. The Company's policy is to write-off uncollectible trade receivables
after significant measures have failed to result in their collection. An
allowance for doubtful accounts is established to represent the estimated
uncollectible trade receivables. The allowance for doubtful accounts was $9,000
at June 30, 2008.  No allowance was recorded at December 31,
2007.





NON-CASH
INVESTING AND FINANCING ACTIVITIES:  During the three months ended
June 30, 2008 the Company returned used office equipment with a net book value
of $6,518 to the vendor in exchange for cancellation of the remaining payments
due on a capital lease.  The value of the remaining payments on the
lease, discounted for interest, was $8,620.





DUE TO
PARENT - The Company reimburses certain administrative services provided by
BioChemics as well as general overhead fees pursuant to agreements between the
Company and BioChemics. In addition, the Company has been receiving working
capital advances from BioChemics in the form of cash advances and from
BioChemics’ payment of certain Company expenses on behalf of the
Company.  The due to parent balance represents the net obligation from
the Company to BioChemics at June 30, 2008 and December 31, 2007.





REVENUE
RECOGNITION - The Company recognizes revenue from product sales in accordance
with accounting principles generally accepted in the United States of America,
including the guidance in Staff Accounting Bulletin ("SAB") Bulletin No. 104
"Revenue Recognition" and Statement of Financial Accounting Standards ("SFAS")
No. 48, "Revenue Recognition When Right of Return Exists." Specifically, revenue
is recognized when there is persuasive evidence of an arrangement, delivery has
occurred, the price is fixed and determinable and collectability is reasonably
assured.


6





In
general, revenue is recognized when products are shipped to customers. It is the
Company's policy that all sales are final. As is common in the consumer products
industry, customers return products for a variety of reasons including products
damaged in transit, packaging changes, product discontinuance and shipping
errors. As sales are recorded, the Company accrues an estimated amount for
product returns as a reduction of revenue. These estimates are based on
historical experience and known specific events such as product expiration
dates.





Revenue
is not recognized unless collectability is reasonably assured. The Company
maintains allowances for doubtful accounts for estimated losses resulting from
the inability of customers to make required payments. If a customer's financial
condition were to deteriorate and result in an impairment of their ability to
make payments, additional allowances may be required.





STOCK-BASED
COMPENSATION - In the first quarter of 2006 the Company adopted Statement of
Financial Accounting Standards No. 123(R) "Share-Based Payments" ("SFAS
123(R)"), which requires all share-based payments to employees, including stock
options and stock issued under certain employee stock purchase plans, to be
recognized in the Company's financial statements at their fair value. SFAS
123(R) requires the Company to estimate future forfeitures of stock-based
compensation. The Company utilizes the Black-Sholes option pricing model to
determine the fair value of options under SFAS 123(R).





The
Company has an employee stock incentive plan and a non-employee director
compensation plan, which are described more fully in Note 6 to the Company’s
Annual Report on Form 10-KSB for the period ended December 31,
2007.





During
the three months ended June 30, 2008 and 2007, the Company recorded stock
compensation expense of $-0- and $61,061 respectively in accordance with SFAS
123(R), of which $-0- and $45,960 was included in selling, general and
administrative for the three months ended June 30, 2008 and 2007,
respectively.  During the six months ended June 30, 2008 and 2007, the
Company recorded stock compensation expense of $6,342 and $122,121 respectively,
of which $2,335 and $91,920 was included in selling, general and
administrative.





NET LOSS
PER SHARE - Basic net loss per share is computed by dividing net loss by the
weighted average number of common shares outstanding for the period. Diluted net
loss per share reflects, in addition to the weighted average number of common
shares, the potential dilution if stock options and warrants outstanding were
exercised and/or converted into common stock, unless the effect of such
equivalent shares was anti dilutive.





For the
three-month and six-month periods ended June 30, 2008 and 2007, the effect of
stock options and other potentially dilutive shares were excluded from the
calculation of diluted net loss per common share as their inclusion would have
been antidilutive.





ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS





FORWARD-LOOKING
INFORMATION





This
Quarterly Report on Form 10-Q contains "forward-looking statements" within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the
"1934 Act"), that are based on management's exercise of business judgment as
well as assumptions made by, and information currently available to management.
When used in this document, the words "may," "will," "anticipate," "believe,"
"estimate," "intend," and words of similar import, are intended to identify any
forward-looking statements. You should not place undue reliance on these
forward-looking statements. These statements reflect our current view of future
events and are subject to certain risks and uncertainties as noted below. Should
one or more of these risks and uncertainties materialize, or should underlying
assumptions prove incorrect, our actual results could differ materially from
those anticipated in these forward-looking statements. We undertake no
obligation and do not intend to update, revise or otherwise publicly release any
revisions to these forward-looking statements to reflect events or circumstances
after the date hereof or to reflect the occurrence of any unanticipated events
after the date hereof or to reflect the occurrence of any unanticipated events.
Although we believe that our expectations are based on reasonable assumptions,
we can give no assurance that our expectations will
materialize.


7





Management's
Discussion and Analysis should be read together with our condensed financial
statements and related notes included elsewhere in this Quarterly Report on Form
10-Q and the Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 2007. This Quarterly Report on Form 10-Q, including the following
discussion, may contain trend analysis and other forward-looking statements
within the safe harbor provisions of the Private Securities Litigation Reform
Act of 1995. Any statements in this Quarterly Report on Form 10-Q that are not
statements of historical facts are forward-looking statements. These forward
looking statements made herein are based on our current expectations, involve a
number of risks and uncertainties and should not be considered as guarantees of
future performance.





The
single most pressing factor that could cause actual results to differ materially
and adversely is our lack of working capital and our need to raise additional
capital to repay Senior Secured Convertible Notes in the principal amount of
$2,500,000 that became due on May 1, 2007 and 5% Subordinated Callable
Convertible Notes in the aggregate principal amount of $860,000 that became due
in December 2007 and February 2008 and that remain unpaid at this
time.  On July 24, 2008, we received a notice of default from Iroquois
Master Fund, Ltd (“Iroquois”), as further described herein.  See
“Liquidity and Capital Resources”.





Other
factors that could cause actual results to differ materially include without
limitation:





·
            our
      inability to repay our debt and the potential consequences thereof, such
      as bankruptcy;·
            an
      inability to arrange debt or equity
financing;





·
            our
      ability to finance our business;·
            the
      outcome of pending litigation or future legal
  proceedings;





·
            the
      impact of new technologies on our products and our
      competition;·
            adverse
      changes in laws or rules or regulations of governmental
      agencies;





·
            interruptions
      or cancellation of existing contracts;·
            impact
      of competitive products and pricing;·
            product
      demand and market acceptance and
risks;





·
            the
      presence of competitors with greater financial
  resources;·
            product
      development and commercialization
risks;





·
            our
      ability to maintain our current pricing model and/or decrease our cost of
      sales;·
            continued
      availability of supplies or materials used in manufacturing at the current
      prices;





·
            the
      ability of management to execute plans and motivate personnel in the
      execution of those plans;·
            adverse
      publicity related to our products or the Company
  itself;





·
            adverse
      claims relating to our intellectual property;·
            the
      adoption of new, or changes in, accounting
  principles;





·
            the
      costs inherent with complying with new statutes and regulations applicable
      to public reporting companies, such as the Sarbanes-Oxley Act of
      2002;·
            other
      new lines of business that the Company may enter in the future;
      and





8








These
factors are not necessarily all of the important factors that could cause actual
results to differ materially from those expressed in the forward-looking
statements in this quarterly report. Other unknown or unpredictable factors also
could have material adverse effects on our future results, including the factors
described under the heading "Risk Factors" in the Company's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 2007. The forward-looking
statements in this quarterly report are made only as of the date of this
quarterly report, and we do not have any obligation to publicly update any
forward-looking statements to reflect subsequent events or
circumstances.





BUSINESS
OVERVIEW





Vaso
Active, organized in January 2003, focuses on commercializing, marketing and
selling over-the-counter pharmaceutical products that we believe incorporate a
proprietary PENtoCORE technology. Vaso Active's earlier focus on pre-clinical
testing and research on a patented VALE technology has been adversely limited
due to lack of adequate working capital.





We began
our operations in January 2001, as a division of BioChemics, a privately-owned
pharmaceutical company engaged in the development of transdermal and topical
drug delivery systems. BioChemics is based in Danvers, Massachusetts. BioChemics
was founded in 1989 by John J. Masiz and was incorporated in Delaware in 1991.
BioChemics began developing the VALE technology in 1989 and has subsequently
been issued four U.S. patents in connection with this technology. BioChemics has
licensed the VALE patents and the PENtoCORE technology to us.





During
2006 the Company commenced wholesale distribution under purchase order to chain
drug and grocery stores. Currently our products are being distributed through
eight drug and grocery chains totaling more than 1,000 retail stores plus 120
independent pharmacies. In addition our products are available for purchase on
Amazon.com, AmericaRX.com, HarmonDiscount.com, and AlleonPharmacy.net. Online
sales have not been significant to date.





CRITICAL
ACCOUNTING POLICIES





GOING
CONCERN ASSUMPTION - The financial statements do not include any adjustments
relating to the recoverability and classification of assets or the amounts and
classification of liabilities that might be necessary should we be unable to
continue as a going concern. If the financial statements were prepared on a
liquidation basis, the carrying value of our assets and liabilities would be
adjusted to net realizable amounts. In addition, the classification of the
assets and liabilities would be adjusted to reflect the liquidation basis of
accounting.





REVENUE
RECOGNITION - We recognize revenue from product sales in accordance with
generally accepted accounting principles in the United States, including the
guidance in Staff Accounting Bulletin, or SAB, No. 104, "Revenue Recognition,"
which supersedes SAB No. 101, "Revenue Recognition in Financial Statements," and
Statement of Financial Accounting Standards, or SFAS, No. 48, "Revenue
Recognition When Right of Return Exists."





Revenue
from product sales is recognized when there is persuasive evidence of an
arrangement, delivery has occurred, the price is fixed and determinable, and
collectability is reasonably assured. However, because our products are sold
with limited rights of return, revenue is recognized when the price to the buyer
is fixed, the buyer is obligated to pay us and the obligation to pay is not
contingent on resale of the product, the buyer has economic substance apart from
the us, we have no obligation to bring about the sale of the product and the
amount of returns can be reasonably estimated.


9





We record
allowances for product returns, rebates and discounts, and report revenue net of
such allowances. We must make judgments and estimates in preparing the
allowances that could require adjustments in the future. For instance, our
customers have the right to return any product that is held past the labeled
expiration date. We base our estimates on historic patterns of returns and on
the expiration dates of product currently being shipped, or as a result of an
actual event that may give rise to a significant return amount such as the
discontinuance of a product.





We do not
recognize revenue unless collectability is reasonably assured. We maintain
allowances for doubtful accounts for estimated losses resulting from the
inability of our customers to make required payments. If the financial condition
of our customers were to deteriorate and result in an impairment of their
ability to make payments, additional allowances may be required.





EXPENSE
ALLOCATIONS / MANAGEMENT FEES - BioChemics provides us with certain
administrative, marketing and management services, as well as our facilities and
general corporate infrastructure. Our statement of operations includes
allocations of these costs that BioChemics and we considered to be
reasonable.





INCOME
TAXES - We account for income taxes and deferred tax assets and liabilities in
accordance with SFAS No. 109 "Accounting for Income Taxes." Because we project
future operating losses in the near term, we have provided a full valuation
allowance against the deferred tax assets created by these losses.





STOCK-BASED
COMPENSATION - As part of our compensation programs offered to our employees, we
have historically granted stock options. We grant stock options to employees
based on the fair value of the Class A common stock at the grant
date.





In the
first quarter of 2006 the Company adopted Statement of Financial Accounting
Standards No. 123(R) "Share-Based Payments" ("SFAS 123(R)"), which requires all
share-based payments to employees, including stock options and stock issued
under certain employee stock purchase plans, to be recognized in the Company's
financial statements at their fair value. SFAS 123(R) requires the Company to
estimate future forfeitures of stock-based compensation. The Company utilizes
the Black-Sholes option pricing model to determine the fair value of options
under SFAS 123(R).





The
Company has an employee stock incentive plan and a non-employee director
compensation plan, which are described more fully in Note 6 to the Company’s
Annual Report on Form 10-KSB for the period ended December 31,
2007.





THREE
MONTHS ENDED JUNE 30, 2008 AND 2007





NET
REVENUES - Net revenues decreased $7,365 to $3,226 for the three month period
ended June 30, 2008 as compared to $10,591 in the prior comparable period. In
the three months ended June 30, 2008 we recognized decreased sales of our three
OTC products to approximately the same number of chain supermarkets as in the
comparable period in 2007.





COST OF
SALES - Cost of sales decreased $7,761 to $4,255 during the three month period
ended June 30, 2008 from $12,016 in the comparable period in 2007. In general,
our cost of sales is variable to our net revenues. However, certain
manufacturing events such as inventory adjustments may distort our cost of
sales, and therefore our gross profit, during any particular
period.


10





GROSS
PROFIT - Gross profit as a percentage of net revenues was approximately (31.9%)
for the three month period ended June 30, 2008 compared to approximately (13.5%)
for the prior comparable period. We do not believe that any comparison between
periods is meaningful in our current stage of development and level of
sales.





MARKETING,
ADVERTISING AND PROMOTION - Marketing, advertising and promotion expenses
decreased by $42,034 to $7,332 for the three-month period ended June 30, 2008
from $49,366 during the three-month period ended June 30, 2007.  This
decrease is primarily related to budgetary reductions due to working capital
constraints.





SELLING,
GENERAL AND ADMINISTRATIVE - Selling, general and administrative expenses
increased by $35,788 to $395,757 during the three-month period ended June 30,
2008 as compared to $359,969 in the comparable period in 2007. The increase
resulted primarily from expert witness fees, in connection with the Company’s
lawsuit against Robinson & Cole LLP, of approximately $80,000, which were
not incurred in the prior comparable period, plus net changes to the bad debt
reserve by approximately $41,000, which were partially offset by decreases to
legal fees and stock based compensation in the approximate amounts of $23,000
and $46,000 respectively.





During
the three months ended June 30, 2008, other selling, general and administrative
expenses we incurred were $177,000 in salaries, wages and related personnel
costs; approximately $15,000 in legal fees; approximately $32,000 for various
insurance premiums typical of a public company; approximately $15,000 for board
of director compensation, approximately $11,000 in management fees from
BioChemics, approximately $24,000 in registered accountant fees, and
approximately $11,000 in rent expense. The remaining selling, general and
administrative expenses pertained to our general operations.





STOCK
BASED COMPENSATION - We are required to record stock-based compensation when we
grant options to purchase our common stock to employees and non-employees in
accordance with SFAS 123R. The value of these options is calculated using the
Black-Scholes option-pricing model. Stock based compensation for the three-month
periods ended June 30, 2008 and 2007 was $0 and $45,960 to employees,
respectively, and $0 and $15,101 to non-employees, respectively. Since no grants
were made to employees or non-employees during these periods, the amount
recorded was attributable to the normal amortization of fair value of these
awards into expense over the vesting period of the awards.





INTEREST
EXPENSE, net – Interest expense, net decreased by $28,514 to $112,160 during the
three months ended June 30, 2008 from $140,674 in the comparable period in
2007.  The decrease resulted from decreased interest charges in
connection with debt issuance costs and warrant costs being fully accreted on
May 1, 2007.  The prior comparable quarter in 2007 recorded one month
of those charges.  This decrease was partially offset by increased
interest charges from May 2, 2007 to the present because the interest rate on
the Senior Secured Convertible Notes increased to 18% on May 2,
2007.





SIX
MONTHS ENDED JUNE 30, 2008 AND 2007





NET
REVENUES - Net revenues increased $1,582 to $25,446 for the six month period
ended June 30, 2008 as compared to $23,864 in the prior comparable period. In
the six months ended June 30, 2008 and 2007, we recognized revenue primarily
from re-order shipments to approximately the same number of chain
supermarkets.





COST OF
SALES - Cost of sales increased $6,009 to $24,595 during the six month period
ended June 30, 2008 from $18,586 in the comparable prior period. In general, our
cost of sales is variable to our net revenues. This increase was due primarily
to higher inventory write-offs and adjustments over the prior comparable
period.





GROSS
PROFIT - Gross profit as a percentage of net revenues was approximately 3.3% for
the six month period ended June 30, 2008 compared to approximately 22% for the
prior comparable period. We do not believe that any comparison between periods
is meaningful in our current stage of development and level of
sales.


11





MARKETING,
ADVERTISING AND PROMOTION - Marketing, advertising and promotion expenses
decreased $76,165 or approximately 66% for the six-month period ended June 30,
2008 from $115,414 for the six-month period ended June 30, 2007. This decrease
is primarily related to budgetary reductions, primarily in the second quarter of
2008, due to working capital constraints.





SELLING,
GENERAL AND ADMINISTRATIVE - Selling, general and administrative expenses
increased by $14,153 to $786,476 during the six-month period ended June 30, 2008
as compared to $772,323 in the comparable period in 2007.   The
increase resulted primarily from increases of approximately $17,000 in legal
fees plus expert witness fees of approximately $80,000, in connection with the
Company’s lawsuit against Robinson & Cole LLP, which were not incurred in
2007. These increases were partially offset by a decrease of approximately
$90,000 in stock based compensation.





During
the six-months ended June 30, 2008, other selling, general and administrative
expenses we incurred were $359,668 in salaries, wages and related personnel
costs; approximately $80,000 in expert witness fees; approximately $66,000 for
various insurance premiums typical of a public company; approximately $30,000
for board of director compensation, approximately $23,000 in management fees
from BioChemics, approximately $64,000 in registered accountant fees;
approximately $31,000 in rent expense. The remaining selling, general and
administrative expenses pertained to our general operations.





RESEARCH
AND DEVELOPMENT - Research and development expenses decreased from $150 to $-0-
for the six-month period ended June 30, 2008 as compared to $150 in the
comparable prior period in 2007. Due to working capital constraints, we
suspended substantially all research and development activities at the end of
2005.





STOCK-BASED
COMPENSATION - During the six months ended June 30, 2008 and 2007 the Company
recorded stock compensation expense of $2,335 and $91,920 to employees,
respectively, and $4,007 and $30,202 to consultants, respectively, in accordance
with SFAS 123(R).





INTEREST
EXPENSE, net – Interest expense, net decreased by $113,061 to $224,450 during
the six months ended June 30, 2008 from $337,511 in the comparable period in
2007.  The decrease results from decreased interest charges in
connection with debt issuance costs and warrant costs being fully accreted on
May 1, 2007.  The prior comparable period in 2007 recorded four months
of those charges.  This decrease was partially offset by increased
interest charges from May 2, 2007 to the present because the interest rate on
the Senior Secured Convertible Notes increased to 18% on May 2,
2007.





12


LIQUIDITY
AND CAPITAL RESOURCES





The
Company has incurred substantial operating losses and negative cash flows from
operations since inception. In 2004 and 2005, until the completion of our
private financing in August 2005, operations were financed primarily from the
proceeds of our December 2003 initial public offering and from the exercise of
warrants. Net of offering costs, we raised approximately $6.4 million and
$450,000, respectively, through these transactions. Prior to our receipt of
these proceeds, we relied on BioChemics, together with the proceeds from an
offering of convertible notes in early 2003, as the source of our working
capital. We have expended all of the funds raised from our initial public
offering.





On August
16, 2005, under a Securities Purchase Agreement (the "Purchase Agreement"), we
issued a series of Senior Secured Convertible Notes (the "Notes") due May 1,
2007 in the aggregate principal amount of $2,500,000. The Company received
approximately $1,700,000 in net cash proceeds from financing after placement
fees, legal expenses, other offering costs, and funding of an escrow for future
interest payments on the Notes. Placement fees, legal expenses and other
offering costs paid were approximately $360,000, and approximately $437,000 was
placed into escrow to fund substantially all of the Company's interest payments
on the Notes (assuming that the Notes continued to accrue interest at the
initial rate of 10% per annum).





THE
NOTES. The Notes had an initial term of 21 months, and the principal of the
Notes was due and payable in a single payment on May 1, 2007. The original terms
of the Notes provided for interest at the six month LIBOR plus 6% with a floor
of 10.0% and a ceiling of 12.0% and a default rate of interest of 18% per annum.
The Notes presently accrue interest at 18% per annum because they are currently
in default. We are not currently making any interest payments on these notes and
are not likely to be able to do so in the foreseeable future.





The Notes
are secured by all of the assets of the Company. The Notes are convertible, by
the holders of the Notes, at any time into shares of the Company's Class A
Common Stock at a price of $0.70 per share (subject to adjustment under certain
circumstances, e.g., anti-dilution adjustments).





On May 1,
2007, the Company failed to pay the principal amount outstanding under the Notes
and the principal amount plus accrued interest and certain default premiums
continue to be unpaid at this time. Under the terms of the Notes, this may be
deemed to be an Event of Default, which gives the holders of the Notes the right
to require the Company to repurchase the notes at 115% of the outstanding
principal, plus interest or, if greater, 115% of the value of the shares that
such holder could receive upon conversion of the Notes, based on a five day
trading average price, (the "Event Price"). The default rate of interest on any
unpaid amounts is 18%. In addition, Iroquois Master Fund, L.P. ("Iroquois"), as
collateral agent for the purchasers of the Notes, may assert its rights under
the Security Agreement, dated August 16, 2005, among the Company, Iroquois and
the purchasers of the Notes.





On May
18, 2007, the Company received written notice (the "Notice") from Portside
Growth and Opportunity Fund, ("Portside") that an Event of Default had occurred
under the Portside Note and that Portside had elected to require the Company to
redeem the Portside Note at the Event Price.





On July
17, 2007 Portside entered into a Secondary Securities Purchase Agreement (the
"Agreement") with Frontier Holdings Company, Inc. ("Frontier") whereby Portside
sold to Frontier an interest in its Senior Secured Convertible Note (the "Note")
due May 1, 2007, representing $253,772 in principal amount of the Note of
$341,617. John Masiz, a key employee and stockholder of the Company, holds a
controlling interest in Frontier.





Simultaneously
with the execution of the Agreement, Portside entered into an Amendment to
Senior Secured Convertible Note (the "Amendment") with the Company. Under the
terms of the Amendment, in exchange for an extension fee in the amount of
$43,993, payable December 31, 2007, Portside agreed to extend the original
maturity date of its remaining $87,845 in principal amount of the Note to
December 31, 2007. Upon the amended maturity date, the Company agreed to pay
Portside (i) $87,845 representing the principal amount of the Note outstanding,
(ii) any accrued and unpaid interest thereunder, and (iii) the extension fee in
the amount of $43,993. As part of the Amendment, Portside waived any Default or
Event of Default by the Company based on the failure by the Company to repay
amounts due under the Note any time prior to December 31, 2007 and rescinded the
Notice of an Event of Default previously disclosed in the Company's Form 8-K
dated May 18, 2007. Portside also dismissed a lawsuit it had filed in the
Supreme Court in the State of New York seeking to enforce its rights under the
Note. The Company also agreed that it would give Portside the benefit of any
higher extension fee that it may agree to pay to other holders of the Company's
Senior Secured Convertible Notes due May 1, 2007. The Company has recorded debt
restructuring expense in the amount of $43,993 for the year ended December 31,
2007 in connection with the Agreement. On December 31, 2007 the Company failed
to repay the remaining $87,845 in principal amount of the Portside Note and the
extension fee in the amount of $43,993 and those amounts continue to be
unpaid.


13





On June
1, 2007, the Company received written notice (the "Smithfield Notice") from
Smithfield Fiduciary, LLC ("Smithfield") that an Event of Default had occurred
under the Smithfield Note, in the original principal amount of $750,000, and
that Smithfield had elected to require the Company to redeem the Smithfield Note
at the Event Price, as defined in the Smithfield Note. The Event Price is equal
to 115% of the outstanding principal, plus accrued interest (or, if greater,
115% of the value of shares that such holder could receive upon conversion of
the Smithfield Note, based on a five day trading average price). In addition,
the default rate of interest on any unpaid amounts is 18%. In connection with
receipt of the Smithfield Notice, the Company has recorded a charge for default
premium on senior secured convertible notes in the amount of $112,500 during the
year ended December 31, 2007.





On July
24, 2008, the Company received written notice (the "Iroquois Notice") from
Iroquois Master Fund LTD ("Iroquois") that Events of Default had occurred under
the Iroquois Note, in the original principal amount of $1,125,000, and that
Iroquois had elected to require the Company to redeem the Iroquois Note at the
Event Price, as defined in the Iroquois Note. The Event Price is equal to 115%
of the outstanding principal, plus accrued interest (or, if greater, 115% of the
value of shares that such holder could receive upon conversion of the Iroquois
Note, based on a five day trading average price). In addition, the default rate
of interest on any unpaid amounts is 18%. In connection with receipt of the
Iroquois Notice, the Company has recorded a charge for default premium on senior
secured convertible notes in the amount of $168,750 during the quarter ended
June 30, 2008.  Iroquois is also the collateral agent for the other
note holders.





As of
August 11, 2008 the Company has not received similar notices from the other note
holders. If the Company had received similar notices from all the other
remaining note holders, the Company would have recorded an additional charge for
default premium on senior secured convertible notes in the amount of
approximately $80,250 during the quarter ended June 30, 2008.





THE
WARRANTS. The investors also received five-year warrants ("Warrants"), which
entitle the investors to purchase a total of 1,298,701 shares of the Company's
Class A Common Stock at an exercise price of $0.77 per share. The number of
shares which may be purchased upon exercise of the Warrants and the exercise
price per share of the Warrants are subject to adjustment under certain
circumstances, e.g., anti-dilution adjustments.





Under the
Purchase Agreement, the Company is required to reserve for issuance a total of
4,870,130 shares of Class A Common Stock, in connection with the possible
conversion of Notes and the possible exercise of the Warrants.





At June
30, 2008 the Company had unrestricted cash of $3,165 and a working capital
deficiency of approximately $7.97 million, excluding approximately $237,000 of
accounts payable related to legal fees that we intend to contest. Our financial
condition has been materially and adversely affected by regulatory and
shareholder actions taken against us during 2004 and 2005.


14





Our
ability to continue our business activities, including increasing our marketing
support for our existing products, funding of the development of our product
candidates through BioChemics and the commercialization of these product
candidates, will depend upon, among other things, raising capital from third
parties, receiving net cash flows from sales of our products, or a recovery in
our lawsuit against Robinson & Cole LLP. If we successfully generate cash
through any of these methods, our priorities will be: (i) to contribute to
support our existing products; (ii) to bring our acne product candidate to
market; and (iii) to commence clinical trials for our ibuprofen
candidate.





Presentations
and discussions with potential investors in an attempt to obtain financing in
order to provide important funds to the Company have been unsuccessful to date.
Without these funds, or some other source of capital, we will be unable to repay
our outstanding debt which is past due. We are uncertain whether we will obtain
any financing. To date the Company has not negotiated a forbearance, extension
or other arrangement, may be forced to seek relief from its creditors in
bankruptcy, or the holders of such notes might seek to foreclose on the Company
assets, liquidate the Company, or have it declared insolvent.





Working
capital has been provided to the Company by BioChemics, under a verbal
agreement, in the form of cash advances and payments made on behalf of the
Company. BioChemics it is under no obligation to make further advances. There
can be no assurance that BioChemics can or will be willing or able to continue
to provide working capital to the Company.





OFF-BALANCE
SHEET ARRANGEMENTS





We have
no material off-balance sheet financing such as a facility lease or other
long-term commitments.





OWNERSHIP
STRUCTURE





Through
our parent company, BioChemics, John J. Masiz controls approximately 70% of the
combined voting power of all classes of stock of the Company and approximately
44% of the combined equity interest of the Company. BioChemics owns 100% of the
Class B Common Stock of the Company.





ITEM 4T. CONTROLS AND
PROCEDURES





As of the
end of the period covered by this quarterly report, our Acting Chief Executive
Officer and Chief Financial Officer (the "Certifying Officer") conducted
evaluations of our disclosure controls and procedures. As defined under Sections
13a-15(e) and 15d-15(e) of the 1934 Act, the term "disclosure controls and
procedures" means controls and other procedures of an issuer that are designed
to ensure that information required to be disclosed by the issuer in the reports
that it files or submits under the 1934 Act is recorded, processed, summarized
and reported, within the time periods specified in the SEC's rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed by an
issuer in the reports that it files or submits under the 1934 Act is accumulated
and communicated to the issuer's management, including the Certifying Officer,
to allow timely decisions regarding required disclosure. Based on this
evaluation, the Certifying Officer has concluded that our disclosure controls
and procedures were effective to ensure that material information is recorded,
processed, summarized and reported by our management on a timely basis in order
to comply with our disclosure obligations under the 1934 Act, and the rules and
regulations promulgated there under.


15





Further,
there were no changes in our internal control over financial reporting during
the quarter that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.











PART II - OTHER INFORMATION




ITEM 1.  LEGAL PROCEEDINGS











As
previously disclosed in the Company's Annual Report filed on Form 10-KSB for the
fiscal year ended December 31, 2007, the Company filed a lawsuit in 2006 in
the Massachusetts Superior Court against the law firm of Robinson & Cole LLP
(Civil Action No. 06-4958-BLS2).  Discovery in the lawsuit has been
completed.  Robinson & Cole has moved for partial summary judgment, or
alternatively for an order in
limine, to preclude the Company from measuring its damages on the basis
of the drop in the value of the Company's common stock resulting from the
law firm's malpractice.  The Company has opposed the motion, which is
scheduled to be argued to the Court later this year.  The Company
anticipates that the case will be scheduled for a 2009 jury trial.







ITEM 6 . EXHIBITS





EXHIBIT
              NUMBER
            DESCRIPTIONOF
      EXHIBIT31.1
            Certification
      of Joseph Frattaroli, Acting Chief Executive Officer and Chief Financial
      Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.32.1
            Certification
      of Joseph Frattaroli, Acting Chief Executive Officer and Chief Financial
      Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.


___________





16











SIGNATURES





In
accordance with Section 13 and 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized, on August 14, 2008.











VASO
      ACTIVE PHARMACEUTICALS, INC.By: /s/ Joseph
      FrattaroliJoseph
      FrattaroliPresident
      and Acting Chief ExecutiveOfficer
      Chief Financial Officer