<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-QSB

[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934.

                  FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2006

                                       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 small business issuer as specified in its charter)


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


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

                    ISSUER'S TELEPHONE NUMBER: (978) 750-1991

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

      State 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     5,828,613 shares outstanding on
                                                        November 6, 2006

  Common stock, Class B, $0.0001 par value     4,500,000 shares outstanding on
                                                        November 6, 2006



<PAGE>

                        VASO ACTIVE PHARMACEUTICALS, INC.

                              INDEX TO FORM 10-QSB


                                                                            Page
PART I.     FINANCIAL INFORMATION

ITEM 1 - Condensed Financial Statements (unaudited):

Condensed Balance Sheets as of September 30, 2006 and December 31, 2005...    3
Condensed Statements of Operations for the Three and nine-month Periods
   Ended September 30, 2006 and 2005......................................    4
Condensed Statements of Cash Flows for the Nine-Month Periods Ended
   September 30, 2006 and 2005............................................    5
Notes to the Condensed Financial Statements...............................    6

ITEM 2 - Management's Discussion and Analysis of Financial Condition
         and Results of Operations........................................   10

ITEM 3 - Controls and Procedures..........................................   19

PART II.    OTHER INFORMATION

ITEM 6 - Exhibits and Reports on Form 8-K.................................   20

Signature.................................................................   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), RepiDerm(R), and
our logo are trademarks of the Company. Osteon(R) and PENtoCORE(R) are
registered trademarks of BioChemics, Inc. This Quarterly Report on Form 10-QSB
may contain trademarks and trade names of other parties.


                                       2


<PAGE>

<TABLE>

                                             VASO ACTIVE PHARMACEUTICALS, INC.
                                                 CONDENSED BALANCE SHEETS


                                                                                       SEPTEMBER 30,       DECEMBER 31
                                                                                    ------------------  ------------------
                                                                                           2006                2005
                                                                                    ------------------  ------------------
                                                                                       (UNAUDITED)
<S>                                                                                 <C>                 <C>
                                     ASSETS
CURRENT ASSETS:
Cash and cash equivalents...................................................        $           8,677   $         707,640
Accounts receivable......... ...............................................                   41,261                 628
Inventory...................................................................                  168,315              14,964
Debt issuance costs.........................................................                  120,248             274,852
Prepaid expenses............................................................                   25,142              76,954
                                                                                    ------------------  ------------------

   TOTAL CURRENT ASSETS.....................................................                  363,643           1,075,038

Restricted cash.............................................................                  199,265             385,901
Property and equipment - net................................................                   42,546              53,802
                                                                                    ------------------  ------------------
                                                                                    $         605,454   $       1,514,741
                                                                                    ==================  ==================

                      LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Accounts payable ........................................................           $         746,501   $         401,668
Accrued compensation.....................................................                     108,303              18,019
Other accrued expenses...................................................                      88,510             151,723
Obligations under capital leases - short-term portion....................                       2,495               2,387
Senior secured convertible notes, net of discount........................                   2,306,629                   -
Due to parent company....................................................                     565,715              79,505
                                                                                    ------------------  ------------------
   TOTAL CURRENT LIABILITIES.............................................                   3,818,153             653,302

LONG-TERM LIABILITIES:
Accrued legal settlement.................................................                           -             885,000
Deferred revenue.........................................................                       4,401
Senior secured convertible notes, net of discount........................                           -           2,058,011
Notes payable............................................................                     870,000                   -
Obligations under capital leases - long-term portion.....................                       9,736              11,622
                                                                                    ------------------  ------------------
   TOTAL LONG-TERM LIABILITIES...........................................                     884,137           2,954,633
                                                                                    ------------------  ------------------

                                                                                            4,702,290           3,607,935
                                                                                    ------------------  ------------------

Commitments and contingencies (Note 1)...................................

STOCKHOLDERS' EQUITY:
Preferred stock - $0.0001 par value; authorized
    10,000,000 shares; issued and outstanding, none......................                                               -
Common stock - $0.0001 par value; authorized
    60,000,000 shares; issued and outstanding, 10,328,613................                       1,033               1,033
Additional paid-in capital...............................................                   8,812,218           8,674,344
Deferred compensation....................................................                     (85,256)           (130,559)
Accumulated deficit......................................................                 (12,824,831)        (10,638,012)
                                                                                    ------------------  ------------------

   TOTAL STOCKHOLDERS' DEFICIENCY........................................                  (4,096,836)         (2,093,194)
                                                                                    ------------------  ------------------
                                                                                    $         605,454   $       1,514,741
                                                                                    ==================  ==================


                                See notes to the unaudited condensed financial statements.

                                                             3


<PAGE>

                                               VASO ACTIVE PHARMACEUTICALS, INC.
                                         UNAUDITED CONDENSED STATEMENTS OF OPERATIONS


                                                            THREE-MONTH PERIOD ENDED            NINE-MONTH PERIOD ENDED
                                                                  SEPTEMBER 30,                       SEPTEMBER 30,
                                                         ------------------------------      ------------------------------
                                                             2006              2005              2006              2005
                                                         ------------      ------------      ------------      ------------

Net revenues .......................................     $     42,783      $      4,261      $     58,933      $     20,057
Cost of revenues ...................................           21,066             4,553            48,559            24,268
                                                         ------------      ------------      ------------      ------------
      GROSS PROFIT .................................           21,717              (292)           10,374            (4,211)
                                                         ------------      ------------      ------------      ------------

Costs and expenses:
     Marketing, advertising and promotion ..........              999            10,221            64,488           211,957
     Selling, general and administrative ...........          407,256           760,332         1,501,066         1,905,424
     Research and development ......................               --            67,879                --           272,772
     Legal settlement ..............................               --           135,000                --           885,000
     Stock based compensation ......................           15,101                --            45,303                --
                                                         ------------      ------------      ------------      ------------

      Loss from operations .........................         (401,639)         (973,724)       (1,600,483)       (3,279,364)

Interest income (expense), net .....................         (197,452)          (93,872)         (586,336)          (81,910)
                                                         ------------      ------------      ------------      ------------

 NET LOSS ..........................................     $   (599,091)     $ (1,067,596)     $ (2,186,819)     $ (3,361,274)
                                                         ============      ============      ============      ============

 Net loss per share - basic and diluted (Note 2) ...     $      (0.06)     $      (0.10)     $      (0.21)     $      (0.33)
                                                         ============      ============      ============      ============

Weighted average shares outstanding - basic and
  diluted (Note 2) .................................       10,328,613        10,328,613        10,328,613        10,328,613
                                                         ============      ============      ============      ============


                                 See notes to the unaudited condensed financial statements.

                                                             4


<PAGE>

                                            VASO ACTIVE PHARMACEUTICALS, INC.
                                      UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS


                                                                                              NINE-MONTH PERIOD ENDED
                                                                                                    SEPTEMBER 30,
                                                                                            ----------------------------
                                                                                               2006             2005
                                                                                            -----------      -----------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ..............................................................................     $(2,186,819)     $(3,361,274)
Adjustments to reconcile net loss to net cash used in operating activities:
   Depreciation and amortization ......................................................          11,256           74,454
   Stock-based compensation (Note 4) ..................................................         183,177           45,303
   Amortization of discount and offering costs associated with convertible debt .......         403,222               --
   Inventory write-off ................................................................              --           10,632
   Accrued legal settlement ...........................................................         885,000
   Increase (decrease) in cash from change in:
   Accounts receivable ................................................................         (40,633)             (16)
      Inventory .......................................................................        (153,351)           2,947
      Prepaid expenses ................................................................          51,812          (14,487)
      Accounts payable ................................................................         344,833           51,041
      Accrued compensation ............................................................          90,284          (14,147)
      Deferred revenue ................................................................           4,401               --
      Other accrued expenses ..........................................................         (63,213)          29,096
                                                                                            -----------      -----------
                Net cash used in operating activities .................................      (1,355,031)      (2,291,451)
                                                                                            -----------      -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Decrease (additions) in restricted cash ............................................         186,636         (437,000)
   Purchase of property and equipment .................................................              --          (14,064)
                                                                                            -----------      -----------
                Net cash provided by (used in) investing activities ...................         186,636         (451,064)
                                                                                            -----------      -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Accrued legal settlement ...........................................................         (15,000)              --
   Issuance of senior secured convertible notes .......................................              --        2,500,000
   Offering costs associated with the issuance of senior secured convertible notes ....              --         (352,155)
   Obligations under capital leases ...................................................          (1,778)            (753)
   Due to/from parent company .........................................................         486,210           33,973
                                                                                            -----------      -----------
                Net cash provided by financing activities .............................         469,432        2,181,065
                                                                                            -----------      -----------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ..................................        (698,963)        (561,450)


CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ........................................         707,640        2,175,388
                                                                                            -----------      -----------


CASH AND CASH EQUIVALENTS, END OF PERIOD ..............................................     $     8,677      $ 1,613,938
                                                                                            ===========      ===========

SUPPLEMENTAL DISCLOSURES:
   Interest paid ......................................................................     $   586,336      $        --
   Income taxes paid ..................................................................     $        --      $        --

NONCASH DISCLOSURES:
   Issuance of capital leases and acquired equipment ..................................     $        --      $    15,335


                               See notes to the unaudited condensed financial statements.

                                                            5
</TABLE>


<PAGE>

                        VASO ACTIVE PHARMACEUTICALS, INC.

                NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

1.    NATURE OF BUSINESS

THE COMPANY

      Vaso Active Pharmaceuticals, Inc. (the "Company") is an early-stage
company focused on commercializing, marketing and selling over-the-counter
("OTC") pharmaceutical products that incorporate the vaso active lipid
encapsulated ("VALE") technology and the proprietary PENtoCORE technology. The
Company is subject to a number of risks similar to those of other companies in
an early stage of development. Principal among these risks are dependencies on
key individuals, competition from substitute products and larger companies, the
successful development and marketing of its products and the need to obtain
additional financing adequate to fund future operations.

      The Company is engaged in a single operating segment of the OTC
pharmaceutical industry

BUSINESS DEVELOPMENT

      The Company commenced operations in January 2001 as the OTC division of
BioChemics, Inc. ("BioChemics"), a privately owned biopharmaceutical company. In
January 2003, the Company incorporated in the state of Delaware and became a
wholly-owned subsidiary of BioChemics. The Company licenses the VALE patents and
PENtoCORE technology from BioChemics. The Company issued 4,500,000 shares of its
Class B common stock to BioChemics in consideration for the exclusive worldwide
rights to commercialize market and sell the VALE technology for OTC
pharmaceutical products. These shares were issued pursuant to authorization from
the Company's Board of Directors on June 20, 2003.

INITIAL PUBLIC OFFERING

      On December 15, 2003, the Company completed an initial public offering of
5,002,500 shares of Class A common stock at a price of $1.67 per share raising
approximately $6.4 million, net of issuance costs.

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      BASIS OF PRESENTATION - The accompanying unaudited condensed financial
statements have been prepared on the same basis as the annual financial
statements. In the opinion of management, all significant adjustments, which are
normal and recurring in nature and necessary for the fair presentation of the
Company's financial position, cash flows and results of operations, have been
consistently recorded. The operating results for the interim period presented
are not necessarily indicative of expected performance for the entire year.


                                       6


<PAGE>

      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 2006. 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.

      USE OF ESTIMATES - The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities and the reported amounts of revenue and expenses. Significant
estimates relied upon in preparing these financial statements include revenue
recognition, allowances for doubtful accounts, if necessary, product return
reserves, expected future cash flows used to evaluate the recoverability of
long-lived assets and the determination of the useful lives of property and
equipment. Although the Company regularly assesses these estimates, actual
results could differ materially from those estimates. Changes in estimates are
recorded in the period in which they become known.

      CASH AND CASH EQUIVALENTS - The Company classifies investments with
original maturities of three months or less when acquired as cash equivalents.
The Company invests its excess cash in money market funds that invest primarily
in U.S. government securities, commercial paper and municipal obligations and
are subject to minimal credit and market risk. The Company maintains deposits in
financial institutions, which occasionally exceed federally insured limits.
Management continually reviews the financial stability of these institutions.

      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 collectibility 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 Company held little
outstanding trade receivables at September 30, 2006 and December 31, 2005 and
therefore no allowance for doubtful accounts provision has been established.

      INVENTORY - Inventory is stated at the lower of cost or market, with cost
being determined on the first-in, first-out method. The Company uses third-party
contract manufacturers for the production of its products. Therefore, all
inventory is in the form of finished goods.

      PROPERTY AND EQUIPMENT - Property and equipment is stated at cost.
Depreciation is provided using the straight-line method over the estimated
useful lives of the related assets, generally three to five years. Repairs and
maintenance are expensed as incurred.

      DUE TO PARENT - The Company purchases its inventory through and reimburses
certain administrative services provided by BioChemics as well as general
overhead fees pursuant to agreements between the Company and BioChemics. The due
to parent balance represents the net obligation from the Company to BioChemics
at September 30, 2006 and December 31, 2005. In addition, Biochemics has been
providing working capital to the Company during 2006 which is also included in
the due to parent balance at September 30, 2006. See discussion under "Liquidity
and Capital Resources" in this quarterly report for further disccusion.


                                       7


<PAGE>

      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
collectibility is reasonably assured.

      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 collectibility is reasonably assured. The
Company does not at present maintain 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, allowances may be
required.

STOCK-BASED COMPENSATION

      In the first fiscal 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, while the pro forma disclosure for the nine months and the three
months ended September 30, 2005 includes only those options that had been
forfeited during that period. The Company has continued to use the Black-Scholes
option pricing model to determine the fair value of options under SFAS 123(R)
and has elected to use the modified-prospective transition method, in which
prior period financial statements will not be restated but disclosure of the pro
forma net loss calculation will be included in the footnotes to the financial
statements for periods prior to fiscal 2006 and the adoption of 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 7 to the
Company's Annual Report on Form 10-KSB for the period ended December 31, 2005.

      Prior to the first quarter of fiscal 2006, the Company recorded
stock-based compensation issued to employees and non-employee directors using
the intrinsic value method and stock-based compensation issued to non-employees
using the fair value method. Stock-based compensation was previously recognized
on stock options issued to employees only if the option exercise price was less
than the market price of the underlying stock on the date of grant. During the
three and nine months ended September 30, 2006, no stock-based compensation was
recorded under the intrinsic value method.

      During the three and nine months ended September 30, 2006, the Company
recorded stock compensation expense of $45,960 and $137,874, respectively in
accordance with SFAS 123(R).


                                       8


<PAGE>

      The following table illustrates the effect on net loss and net loss per
share if the Company had applied the fair-value recognition provisions of SFAS
No. 123, as amended, to options granted under the stock option plans and rights
to acquire stock granted under the Company's stock option plans. For purposes of
this PRO-FORMA disclosure, the value of the options is estimated using a
Black-Scholes option pricing model and amortized ratably to expense over the
options' vesting periods. Because the estimated value is determined as of the
date of grant, the actual value ultimately realized by the employee may be
significantly different.

<TABLE>
                                                                                  THREE-MONTH
                                                                                    PERIOD
                                                                                     ENDED
                                                                                 SEPTEMBER 30,
                                                                                     2005
                                                                                 -------------
<S>                                                                              <C>
Net loss, as reported ......................................................     $ (1,067,596)
Add: stock-based compensation included in the determination of net loss ....           15,101
Less: stock-based compensation had all options been recorded at fair value..          111,133
                                                                                 ------------
Adjusted net loss ..........................................................     $ (1,163,628)
                                                                                 ============

Weighted average shares outstanding, basic and diluted .....................       10,328,613
Net loss per share, basic and diluted, as reported .........................     $      (0.10)
Adjusted net loss per share, basic and diluted .............................     $      (0.11)


                                                                                  NINE-MONTH
                                                                                    PERIOD
                                                                                     ENDED
                                                                                 SEPTEMBER 30,
                                                                                     2005
                                                                                 -------------

Net loss, as reported ......................................................     $ (3,361,374)
Add: stock-based compensation included in the determination of net loss ....           45,303
Less: stock-based compensation had all options been recorded at fair value..         (323,264)
                                                                                 ------------
Adjusted net loss ..........................................................     $ (3,639,335)
                                                                                 ============

Weighted average shares outstanding, basic and diluted .....................       10,328,613
Net loss per share, basic and diluted, as reported .........................     $      (0.33)
Adjusted net loss per share, basic and diluted .............................     $      (0.35)
</TABLE>

                                       9


<PAGE>

      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 antidilutive.

      For the six months ended September 30, 2006 and 2005, 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-QSB 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.


                                       10


<PAGE>

      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-QSB and the Company's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 2005. This Quarterly Report on Form
10-QSB, including the following discussion, contains 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-QSB 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.

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

      o     an inability to arrange additional debt or equity financing;

      o     our ability to finance our business;

      o     the timing, impact and other uncertainties related to pending and
            future acquisitions by us;

      o     the impact of new technologies;

      o     changes in laws or rules or regulations of governmental agencies;

      o     outcome in pending litigation matters;

      o     interruptions or cancellation of existing contracts;

      o     impact of competitive products and pricing;

      o     product demand and market acceptance and risks;

      o     the presence of competitors with greater financial resources;

      o     product development and commercialization risks;

      o     our ability to maintain our current pricing model and/or decrease
            our cost of sales;

      o     continued availability of supplies or materials used in
            manufacturing at the current prices;

      o     adverse regulatory developments in the United States;

      o     entrance of competitive products in our markets;

      o     the ability of management to execute plans and motivate personnel in
            the execution of those plans;

      o     adverse publicity related to our products or the company itself;

      o     adverse claims relating to our intellectual property licensed from
            Biochemics;

      o     the adoption of new, or changes in, accounting principles;

      o     legal proceedings;


                                       11


<PAGE>

      o     the costs inherent with complying with new statutes and regulations
            applicable to public reporting companies, such as the Sarbanes-Oxley
            Act of 2002;

      o     other new lines of business that the Company may enter in the
            future; and

      o     our ability to repay our indebtedness, including repayment of the
            notes issued recently.

      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,
2005. 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 is an early stage company, organized in January 2003, which
focuses on commercializing, marketing and selling over-the-counter
pharmaceutical products that we believe incorporate a proprietary PENtoCORE
technology. Vaso Active is also focused on pre-clinical testing and research on
a patented vaso active lipid encapsulated ("VALE") technology.

      The unique VALE technology is intended to be a patchless, lipid-based
delivery system which the Company's parent, Biochemics, is formulating into
various applications which the Company hopes to market in the future, subject to
receipt of appropriate FDA approvals. The technology uses an active process,
incorporating chemical vasodilators, to deliver drugs through the skin and into
the bloodstream.

      The PENtoCORE technology is a topical formulation, in contrast to the VALE
transdermal technology. The Company is currently marketing three products that
incorporate the proprietary PENtoCORE technology; the Company has formulated one
additional product candidate for treatment of Acne, whose package design and
branding was placed on hold due to working capital constraints.

      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.

      As an early stage company, we are subject to a number of risks typical of
early stage companies including, but not limited to, our need to obtain
additional financing and generate profitability and cash flows from operations.
As a company engaged in the pharmaceutical industry, we are subject to a number
of risks typical of pharmaceutical companies including, but not limited to, our
need to adhere to strict governmental regulations, our ability to withstand
intense competition from larger companies with greater financial resources and
our ability to defend our intellectual property, as licensed from BioChemics.


                                       12


<PAGE>

      Our general business strategy was adversely affected beginning in April
2004 by regulatory action taken against us and our former President, and by
private securities actions taken against us and our management. At the same
time, we suspended the marketing and sale of our products until we were
reasonably sure that our product marketing was consistent with the FDA's
requirements and policies. We also voluntarily delisted our common stock from
trading on NASDAQ. As a result of our voluntary delisting, the action taken by
the SEC against us, issues regarding the regulatory status of our products, and
the significant decline in the market value of our securities concurrent with
and subsequent to these matters, several shareholder actions were filed against
Vaso Active and its officers and directors. Since February 17, 2006 our Class A
common stock has been quoted on the Over the Counter Bulletin Board under the
symbol "VAPH.ob".

      In September 2005, the Company and certain of its officers and directors
entered into agreements to settle (i) a consolidated securities class action
lawsuit that alleged that the Company and those individuals violated the federal
securities laws with respect to certain disclosures concerning the Company; and
(ii) derivative lawsuits based on the class action allegations. In October 2005,
the court granted preliminary approval to each of the litigation settlements,
following which joint notices of the settlements and claim forms were sent to
appropriate stockholders. The parties to the agreements obtained the court's
final approval of the settlements on December 14, 2005.

CRITICAL ACCOUNTING ESTIMATES

      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 collectibility 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.

      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. At September 30, 2006 we recorded deferred
revenue in the amount of $4,401.


                                       13


<PAGE>

      We do not recognize revenue unless collectibility 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 grant stock options. We grant stock options to employees based
on the fair value of the Class A common stock at the grant date. As allowed
under SFAS No. 123, "Accounting for Stock-Based Compensation," and SFAS No. 148,
"Accounting for Stock-Based Compensation - Transition and Disclosure," we have
adopted the disclosure-only requirements of these accounting standards.
Accordingly, we do not recognize stock-based compensation expense for stock
options granted to employees at their fair value. The fair value of options
granted to non-employees is expensed in accordance with SFAS 123 using the
Black-Scholes option-pricing model. See Note 4 to our condensed financial
statements for the impact on earnings had we fully adopted SFAS 123.

      In December 2004, the FASB issued a revision to SFAS No. 123, "Share-Based
Payment," requiring companies to recognize as compensation expense the fair
value of stock options and other equity-based compensation issued to employees.
This revised statement eliminates the intrinsic value method provided under
Accounting Principles Board, or APB, No. 25, "Accounting for Stock Issued to
Employees," which is the method we previously used to value stock options
awarded to our employees. This revised standard is effective as of the beginning
of the first annual reporting period beginning after December 15, 2005 and is
expected to have a material impact on our results of operations. We have elected
to use the modified-prospective transition method.

THREE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005

      NET REVENUES - Net revenues increased $38,522 to $42,783 for the three
month period ended September 30, 2006 as compared to $4,261 in the prior
comparable period. In the three months ended September 30, 2006 we recognized
approximately 95% of our revenue from shipments to chain supermarkets. In the
prior comparable period we recognized revenue from direct to consumer sales
through advertising and event marketing and no revenue from sales to chain
supermarkets.


                                       14


<PAGE>

      COST OF SALES - Cost of sales increased $16,513 to $21,066 during the
three month period ended September 30, 2006 from $4,553 in the comparable period
in 2005. 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.

      GROSS PROFIT - Gross profit as a percentage of net revenues for the three
month period ended September 30, 2006 was a positive 50.8% as compared to a
negative 6.9% the three month period ended September 30, 2005. We do not believe
that any comparison between periods is meaningful in our current stage of
development and due to our limited sales to date.

      MARKETING, ADVERTISING AND PROMOTION - Marketing, advertising and
promotion expenses decreased by $9,222 to $999 for the three-month period ended
September 30, 2006 from $10,221 during the three-month period ended September
30, 2005. Due to working capital constraints, we substantially reduced spending
in this area during the three months ended September 30, 2006. Our promotional
efforts during this period were predominately accomplished through mailing
samples of product written-off in previous periods.

      SELLING, GENERAL AND ADMINISTRATIVE - Selling, general and administrative
expenses decreased by $353,076 to $407,256 during the three-month period ended
September 30, 2006 as compared to $760,332 in the comparable period in 2005.
Legal and professional fees decreased by approximately $334,000 for the three
months ended September 30, 2006 over the comparable period in 2005. During the
comparable period in 2005, the Company incurred significant legal and
professional fees related to a financing transaction, preparation of a
registration statement in connection with that financing and in defending itself
against a consolidated securities class action and derivatives lawsuits. There
were no corresponding charges in the three months ended September 30, 2006.

      During the three months ended September 30, 2006, selling, general and
administrative expenses incurred were $183,104 in salaries, wages and related
personnel costs; approximately $23,196 in legal fees; approximately $40,153 for
various insurance premiums typical of a public company; approximately $15,000
for board of director compensation, approximately $11,463 in management fees
from BioChemics, approximately $7,109 in registered accountant fees,
approximately $19,097 in rent expense and approximately $25,000 in investment
banking fees. The remaining selling, general and administrative expenses
pertained to our general operations.

      RESEARCH AND DEVELOPMENT - Research and development expenses decreased by
$67,879 to $0 for the three-month period ended September 30, 2006 as compared to
$67,879 in the comparable prior period. Due to working capital constraints, we
suspended all research and development expenditures at the end of 2005.

      STOCK BASED COMPENSATION - We are required to record stock-based
compensation when we grant options to purchase our common stock to non-employees
in accordance with SFAS 123. The value of these options is calculated using the
Black-Scholes option-pricing model. Stock based compensation for both the
three-month periods ended September 30, 2006 and September 30, 2005 was $15,101
and since no grants were made to 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.


                                       15


<PAGE>

      LEGAL SETTLEMENT - On September 21 and 22, 2005, respectively, the Company
and certain of its officers and directors entered into agreements to settle the
previously reported consolidated securities class action and derivative lawsuits
based on the class action allegations and filed appropriate papers with the
Court seeking dismissal of the actions. As a result of the derivative
settlement, we incurred a charge of $135,000 in the three month period ended
September 30, 2005. Charges incurred for the settlement of the consolidated
securities class action were expensed in previous periods. There were no
corresponding charges in the three months ended September 30, 2006.

      INTEREST EXPENSE - Interest expense increased by $103,580 to $197,452 for
the three month period ended September 30, 2006, as compared to $93,872 for the
comparable prior year period. The increase is attributed to recognizing interest
charges for a full quarter on the $2,500,000 of senior secured convertible notes
for the three months ended September 30, 2006 compared to the prior comparable
period. The notes were sold on August 16, 2005 and, accordingly, interest
charges for the prior comparable period are proportionately lower.


NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005

      NET REVENUES - Net revenues increased $38,876 to $58,933 for the nine
month period ended September 30, 2006 as compared to $20,057 in the prior
comparable period. In the nine months ended September 30, 2006 we recognized
approximately 82% of our revenue from shipments to chain supermarkets. In the
prior comparable period we recognized revenue from direct to consumer sales
through advertising and event marketing and none through sales to chain
supermarkets.

      COST OF SALES - Cost of Sales increased $24,291 to $48,559 during the nine
month period ended September 30, 2006 from $24,268 in the comparable prior
period. In general, our cost of sales is variable to our net revenues. Costs in
the comparable prior period were due primarily to inventory write-offs and
adjustments.

      GROSS PROFIT - Gross profit as a percentage of net revenues for the nine
month period ended September 30, 2006 was a positive 17.6% compared to a
negative 21% for the nine month period ended September 30, 2005. We do not
believe that any comparison between periods is meaningful in our current stage
of development and due to our limited sales to date.

      MARKETING, ADVERTISING AND PROMOTION - Marketing, advertising and
promotion expenses decreased $147,469 to $64,488 for the nine-month period ended
September 30, 2006 from $211,957 for the nine-month period ended September 30,
2005. This decrease was primarily attributable to $103,775 in costs we incurred
in connection with our launch of a series of 60 and 120 second television
commercials for the Osteon product throughout the United States during the nine
months ended September 30, 2005. We did not purchase direct to consumer
television commercials during the nine months ended September 30, 2006, as
previously planned. During the nine months ended September 30, 2006, our
expenses were primarily incurred in connection with print advertising in support
of our retail launch.

      SELLING, GENERAL AND ADMINISTRATIVE - Selling, general and administrative
expenses decreased by $404,358 to $1,501,066 during the nine-month period ended
September 30, 2006 as compared to $1,905,424 in the comparable period in 2005.
Approximately $293,000 of the savings was realized through lower legal fees,
insurance premiums and board of directors compensation. The balance of the
savings pertained to a net savings in general operations.

      During the nine-months ended September 30, 2006, other selling, general
and administrative expenses we incurred were $529,697 in salaries, wages and
related personnel costs; approximately $289,008 in legal fees; approximately
$123,828 for various insurance premiums typical of a public company;
approximately $45,000 for board of director compensation, approximately $34,389
in management fees from BioChemics, approximately $75,959 in registered
accountant fees; approximately $35,261 in rent expense. The remaining selling,
general and administrative expenses pertained to our general operations.


                                       16



<PAGE>

      RESEARCH AND DEVELOPMENT - Research and development expenses decreased by
$272,772 to $0 for the six-month period ended September 30, 2006 as compared to
$272,772 in the comparable prior period. Due to working capital constraints, we
suspended all research and development expenditures at the end of 2005.

      STOCK BASED COMPENSATION - We are required to record stock-based
compensation when we grant options or warrants to purchase our common stock to
non-employees in accordance with SFAS 123. The value of these options is
calculated using the Black-Scholes option-pricing model. Stock based
compensation for both the nine month periods ended September 30, 2006 and
September 30, 2005 was $45,303 and since no grants were made to 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.

      LEGAL SETTLEMENT - On September 21 and 22, 2005, respectively, the Company
and certain of its officers and directors entered into agreements to settle the
previously reported consolidated securities class action and derivative lawsuits
based on the class action allegations and filed appropriate papers with the
Court seeking dismissal of the actions. As a result of the settlements, we
incurred a charge of $885,000 in the nine month period ended September 30, 2005.

      The settlement of the lawsuits was finalized at the end of 2005. There was
no corresponding charge during the nine months ended September 30, 2006.

      STOCK-BASED COMPENSATION - Prior to the first quarter of fiscal 2006, the
Company recorded stock-based compensation issued to employees and directors
using the intrinsic value method and stock-based compensation issued to
non-employees using the fair value method. Stock-based compensation was
previously recognized on stock options issued to employees only if the option
exercise price was less than the market price of the underlying stock on the
date of grant. During the nine months ended September 30, 2005, no stock-based
compensation was recorded under the intrinsic value method.

      During the nine months ended September 30, 2006, the Company recorded
stock compensation expense of $45,303 for consultants in accordance with SFAS
123(R).

      INTEREST EXPENSE - Interest expense increased by $504,426 to $586,336 for
the nine month period ended September 30, 2006, as compared to $81,910 for the
comparable prior year period. The increase is attributed to recognizing interest
charges for a full nine months on the $2,500,000 of senior secured convertible
notes for the nine months ended September 30, 2006 compared to the prior
comparable period. The notes were sold on August 16, 2005 and, accordingly,
interest charges for the prior comparable period are proportionately lower.


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 incurred were approximately $360,000 and approximately
$440,000 was placed into escrow to fund substantially all of the Company's
interest payments on the Notes (assuming that the Notes continue to accrue
interest at the initial rate of 10% per annum).


                                       17


<PAGE>

      At September 30, 2006, we had unrestricted cash of approximately $8,677
and working capital deficit of approximately $3.5 million, excluding $199,265 of
restricted cash held in escrow to fund future interest payments on the senior
secured convertible notes we sold in 2005. This deficit includes the senior
secured convertible notes we sold in 2005 that mature on May 1, 2007. This
deficit also includes approximately $566,000 due to our parent, and
approximately $237,000 in legal fees payable to our initial public offering
counsel that we intend to contest.

      The August 2005 private financing investors have informally indicated to
us recently that they will not purchase the additional notes and warrants
available to them under the Additional Investment Rights acquired under the
above referenced Purchase Agreement unless we are willing to renegotiate the
terms of this purchase. Therefore, we are actively pursuing alternative
financing sources to replace this previously anticipated source of funds, but we
are uncertain whether we will be successful in obtaining any such financing, or
if we obtain any such financing that it will be on favorable terms to the
Company.

      We continue to rely on BioChemics for working capital. BioChemics has
orally agreed (the detailed terms of which agreement are expected to be
confirmed in writing) to defer any request for repayment of amounts in existence
(as of a date being negotiated, but not earlier than June 30, 2006) until at
least June 30, 2007 (or such other possible later date also being negotiated),
subject to renegotiation in good faith pending the Company completing a capital
raise of a minimum amount being negotiated, provided that BioChemics retains its
right to seek repayment in the event of any voluntary or involuntary filing of a
bankruptcy petition or any other steps are taken to otherwise liquidate or
dissolve the Company.

      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 or receiving net cash flows from sales of our products. 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.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

      The following table sets forth our contractual obligations and commitments
for the next five years, as of September 30, 2006.

<TABLE>

                                                          LESS THAN        1 - 3         3 - 5         5 - 7
                                             TOTAL         1 YEAR          YEARS         YEARS         YEARS

<S>                                       <C>            <C>             <C>           <C>           <C>
Long-term debt                            $         -    $         -     $       -     $       -     $       -
Capital lease obligations                      12,231          2,495         5,361         4,375             -
Operating lease obligations                         -              -             -             -             -
Note maturities                             2,500,000      2,500,000
Unconditional purchase obligations                  -              -             -             -             -
Employment agreements                       2,205,000        315,000       630,000       630,000       630,000
                                          --------------------------------------------------------------------

Total                                     $ 4,717,231    $ 2,817,495     $ 635,361     $ 634,375     $ 630,000
                                          ===========    ===========     =========     =========     =========
</TABLE>

      In February 2005, we appointed our Chief Financial Officer, Mr. Joseph
Frattaroli, as our President. Mr. Frattaroli will continue to serve as Chief
Financial Officer and Acting Chief Executive Officer. Mr. Frattaroli is not
employed under a written contract and accordingly is omitted from this table.
The written employment agreements with Mr. Masiz and Dr. Carter terminate their
initial terms on June 30, 2008, but are deemed automatically extended for
successive periods of two years under the terms of their respective written
agreements through 2012. This table is presented assuming the automatic
extensions are reflected.


                                       18


<PAGE>

      Mr. Masiz and Dr. Carter have agreed to waive, in writing, certain
termination payout clauses contained in their respective employment agreements
in the event that the Company becomes insolvent.

OFF-BALANCE SHEET ARRANGEMENTS

      We have no material off-balance sheet financing such as a facility lease
or other long-term commitments. We have employment agreements with three key
employees. Please refer to "Contractual Obligations and Commitments" for a
summary of the employment agreement obligations.

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 3.   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 rules 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 thereunder.

      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.


                                       19


<PAGE>

                           PART II - OTHER INFORMATION

ITEM 6 (A).  EXHIBITS

EXHIBIT     DESCRIPTION OF EXHIBIT
NUMBER

  31.1    Certification of Joseph Frattaroli, Acting Chief Executive Officer and
          Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley
          Act of 2002.(1)

  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.(1)

    (1)   Filed herewith.


                                       20


<PAGE>

                                    SIGNATURE

      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 November 14, 2006.

                                 VASO ACTIVE PHARMACEUTICALS, INC.


                                 By: /s/ Joseph Frattaroli
                                    --------------------------------------------
                                    Joseph Frattaroli
                                    President and Acting Chief Executive Officer
                                    Chief Financial Officer


                                       21