<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 JUNE 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
                                                        August 21, 2006

  Common stock, Class B, $0.0001 par value     4,500,000 shares outstanding on
                                                        August 21, 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 June 30, 2006 and December 31, 2005 .......    3
Condensed Statements of Operations for the Three and six-month Periods Ended
   June 30, 2006 and 2005.................................................    4
Condensed Statements of Cash Flows for the Six-Month Periods Ended
   June 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>
<CAPTION>

                                             VASO ACTIVE PHARMACEUTICALS, INC.
                                                  CONDENSED BALANCE SHEETS


                                                                                         JUNE 30,          DECEMBER 31
                                                                                    ------------------  ------------------
                                                                                           2006                2005
                                                                                    ------------------  ------------------
                                                                                        (UNAUDITED)
<S>                                                                                 <C>                 <C>
                                     ASSETS
CURRENT ASSETS:
Cash and cash equivalents...................................................        $          34,582   $         707,640
Accounts receivable......... ...............................................                    9,202                 628
Inventory...................................................................                  186,351              14,964
Debt issuance costs.........................................................                  171,783             274,852
Prepaid expenses............................................................                   25,295              76,954
                                                                                    ------------------  ------------------

   TOTAL CURRENT ASSETS.....................................................                  427,213           1,075,038

Restricted cash.............................................................                  262,181             385,901
Property and equipment - net................................................                   46,298              53,802
                                                                                    ------------------  ------------------
                                                                                    $         735,692   $       1,514,741
                                                                                    ==================  ==================

                      LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Accounts payable ........................................................           $         746,622   $         401,668
Accrued compensation.....................................................                      62,823              18,019
Other accrued expenses...................................................                      84,394             151,723
Obligations under capital leases - short-term portion....................                       2,454               2,387
Senior secured convertible notes, net of discount........................                   2,223,756                   -
Due to parent company....................................................                     292,854              79,505
                                                                                    ------------------  ------------------
   TOTAL CURRENT LIABILITIES.............................................                   3,412,903             653,302

LONG-TERM LIABILITIES:
Accrued legal settlement.................................................                           -             885,000
Deferred revenue.........................................................                       1,216
Senior secured convertible notes, net of discount........................                           -           2,058,011
Notes payable............................................................                     870,000                   -
Obligations under capital leases - long-term portion.....................                      10,378              11,622
                                                                                    ------------------  ------------------
   TOTAL LONG-TERM LIABILITIES...........................................                     881,594           2,954,633
                                                                                    ------------------  ------------------


Commitments and contingencies (Note 1)...................................                    4,294,497           3,607,935
                                                                                    ------------------  ------------------
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...............................................                   8,766,258           8,674,344
Deferred compensation....................................................                    (100,357)           (130,559)
Accumulated deficit......................................................                 (12,225,739)        (10,638,012)
                                                                                    ------------------  ------------------

   TOTAL STOCKHOLDERS' DEFICIENCY........................................                  (3,558,805)         (2,093,194)
                                                                                    ------------------  ------------------
                                                                                           $  735,692        $  1,514,741
                                                                                    ==================  ==================


                                 See notes to the unaudited condensed financial statements.
</TABLE>
                                                             3


<PAGE>
<TABLE>
<CAPTION>

                                               VASO ACTIVE PHARMACEUTICALS, INC.
                                         UNAUDITED CONDENSED STATEMENTS OF OPERATIONS


                                                        THREE-MONTH PERIOD ENDED JUNE 30,    SIX-MONTH PERIOD ENDED JUNE 30,
                                                       ----------------------------------  ----------------------------------
                                                             2006              2005              2006              2005
                                                       ----------------  ----------------  ----------------  ----------------
<S>                                                    <C>               <C>               <C>               <C>
Net revenues.......................................    $        10,607   $        11,199   $        16,150   $        15,796
Cost of revenues...................................             11,113            13,467            27,493            19,715
                                                       ----------------  ----------------  ----------------  ----------------
      GROSS PROFIT.................................               (506)           (2,268)          (11,343)           (3,919)
                                                       ----------------  ----------------  ----------------  ----------------

Costs and expenses:
     Marketing, advertising and promotion..........             30,393            31,933            63,489           201,736
     Selling, general and administrative...........            568,589           458,805         1,093,810         1,142,346
     Research and development......................                  -            87,407                 -           177,437
     Legal settlement..............................                  -           750,000                 -           750,000
     Stock based compensation......................             15,101            15,101            30,202            30,202
                                                       ----------------  ----------------  ----------------  ----------------

      Loss from operations.........................           (614,589)       (1,345,514)       (1,198,844)       (2,305,640)

Interest income (expense), net.....................           (194,499)            4,624          (388,884)           11,960
                                                       ----------------  ----------------  ----------------  ----------------

 NET LOSS .........................................     $     (809,088)  $    (1,340,890)  $    (1,587,728)  $    (2,293,678)
                                                       ================  ================  ================  ================

 Net loss per share - basic and diluted (Note 2)...    $         (0.08)  $         (0.13)  $         (0.15)  $         (0.22)
                                                       ================  ================  ================  ================

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.
</TABLE>
                                                              4


<PAGE>
<TABLE>
<CAPTION>

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


                                                                                          SIX-MONTH PERIOD ENDED JUNE 30,
                                                                                        ----------------------------------
                                                                                              2006              2005
                                                                                        ----------------  ----------------
<S>                                                                                     <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.............................................................................   $    (1,587,728)  $    (2,293,678)
Adjustments to reconcile net loss to net cash used in operating activities:
   Depreciation and amortization.....................................................             7,504             5,643
   Stock-based compensation (Note 4).................................................           122,117            30,202
   Amortization of discount and offering costs associated with convertible debt......           268,814
   Inventory write-off...............................................................            14,481            10,632
   Accrued legal settlement..........................................................                             750,000
   Increase (decrease) in cash from change in:
   Accounts receivable...............................................................            (8,574)             (380)
      Inventory......................................................................          (185,868)            1,697
      Prepaid expenses...............................................................            51,659           (14,487)
      Accounts payable............................................ ..................           344,953          (116,285)
      Accrued compensation...........................................................             44,805            (6,335)
      Deferred revenue...............................................................             1,216
      Other accrued expenses.........................................................           (67,329)          (47,029)
                                                                                        ----------------  ----------------
                Net cash used in operating activities................................          (993,951)       (1,680,020)
                                                                                        ----------------  ----------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Decrease in restricted cash.......................................................           123,720                 -
   Purchase of property and equipment................................................                 -           (14,064)
                                                                                        ----------------  ----------------
                Net cash provided by (used in) investing activities..................           123,720           (14,064)
                                                                                        ----------------  ----------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Accrued legal settlement..........................................................           (15,000)                -
   Obligations under capital leases..................................................            (1,177)             (187)
   Due to/from parent company........................................................           213,349             9,739
                                                                                        ----------------  ----------------
                Net cash provided by financing activities............................           197,173             9,552
                                                                                        ----------------  ----------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.................................          (673,058)       (1,684,532)


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


CASH AND CASH EQUIVALENTS, END OF PERIOD.............................................   $        34,582   $       490,856
                                                                                        ================  ================

SUPPLEMENTAL DISCLOSURES:
   Interest paid.....................................................................    $      388,884   $             -
   Income taxes paid ................................................................    $            -   $             -

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


                                 See notes to the unaudited condensed financial statements.
</TABLE>
                                                             5


<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 June 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 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 June 30, 2006 and December 31,
2005.


                                       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 six months and the three
months ended June 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 six months ended June 30, 2006, no stock-based compensation was
recorded under the intrinsic value method.

      During the three and six months ended June 30, 2006, the Company recorded
stock compensation expense of $45,960 and $91,920, 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>
<CAPTION>
                                                                                  THREE-MONTH
                                                                                     PERIOD
                                                                                     ENDED
                                                                                 JUNE 30, 2005
                                                                                 -------------
<S>                                                                              <C>
Net loss, as reported ......................................................     $ (1,340,890)
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..         (103,544)
                                                                                 ------------
Adjusted net loss ..........................................................     $ (1,429,333)
                                                                                 ============

Weighted average shares outstanding, basic and diluted .....................       10,328,613
Net loss per share, basic and diluted, as reported .........................     $      (0.13)
Adjusted net loss per share, basic and diluted .............................     $      (0.14)

<CAPTION>

                                                                                   SIX-MONTH
                                                                                     PERIOD
                                                                                     ENDED
                                                                                 JUNE 30, 2005
                                                                                 -------------
<S>                                                                              <C>
Net loss, as reported ......................................................     $ (2,293,678)
Add: stock-based compensation included in the determination of net loss ....           30,202
Less: stock-based compensation had all options been recorded at fair value..         (215,502)
                                                                                 ------------
Adjusted net loss ..........................................................     $ (2,478,978)
                                                                                 ============

Weighted average shares outstanding, basic and diluted .....................       10,328,613
Net loss per share, basic and diluted, as reported .........................     $      (0.22)
Adjusted net loss per share, basic and diluted .............................     $      (0.24)
</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 June 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

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. For further information,
see Item 3, "Legal Proceedings."

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 June 30, 2006 we recorded deferred
revenue in the amount of $1,216.


                                       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 JUNE 30, 2006 AND 2005

      NET REVENUES - Net revenues decreased $592 to $10,607 for the three month
period ended June 30, 2006 as compared to $11,199 in the prior comparable
period. In the three months ended June 30, 2006 we recognized revenue primarily
from shipments to chain supermarkets. In the prior comparable period we
recognized revenue from direct to consumer sales through advertising and event
marketing.


                                       14


<PAGE>

      COST OF SALES - Cost of sales decreased $2,354 to $11,113 during the three
month period ended June 30, 2006 from $13,467 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 both the
three month period ended June 30, 2006 and June 30, 2005 are negative as a
direct result of the matters discussed under the Cost of Sales discussion above.
We do not believe that any comparison between periods is meaningful in our
current stage of development.

      MARKETING, ADVERTISING AND PROMOTION - Marketing, advertising and
promotion expenses decreased by $1,540 to $30,393 for the three-month period
ended June 30, 2006 from $31,933 during the three-month period ended June 30,
2005. Although the decrease is not significant in percentage terms, 4.8%, the
composition of advertising changed. During the three months ended June 30, 2006
we purchased primarily print advertising in support of the retail launch. During
the prior comparable period we purchased primarily direct to consumer
advertising. Due to limited working capital, we did not resume our direct to
consumer marketing during 2006, as previously planned.

      SELLING, GENERAL AND ADMINISTRATIVE - Selling, general and administrative
expenses increased by $109,784 to $568,589 during the three-month period ended
June 30, 2006 as compared to $458,805 in the comparable period in 2005. The net
increase was primarily related to stock compensation expense of $45,960 charged
for the three months ended June 30, 2006 in connection with stock options
previously granted to employees and directors in accordance with SFAS 123(R),
with no such charge recorded in the comparable prior period, and increased legal
fees, partially off-set by lower costs incurred for board of director
compensation; salaries and wages; and insurances.


      We incurred approximately $179,921 in legal fees and $28,850 in business,
financial and other professional fees during the three month period ended June
30 2006. In the comparable prior year period, we incurred approximately $19,500
in legal fees and $45,500 in business, financial and other professional
services. These two changes accounted for the majority of the decrease in
selling, general and administrative expenses.

      During the three months ended June 30, 2006, other selling, general and
administrative expenses we incurred were $174,643 in salaries, wages and related
personnel costs; approximately $179,921 in legal fees; approximately $40,922 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 $28,850 in registered accountant fees, and
approximately $5,161 in rent expense. The remaining selling, general and
administrative expenses pertained to our general operations.

      RESEARCH AND DEVELOPMENT - Research and development expenses decreased by
$87,407 to $0 for the three-month period ended June 30, 2006 as compared to
$87,407 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 June 30, 2006 and June 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 June 1, 2005, we entered into a memorandum of
understanding to settle a consolidated securities class action lawsuit. We
recorded a charge of $750,000 during the three-month period ended June 30, 2005
in connection with this settlement. The settlement of the lawsuit was finalized
at the end of 2005. There was no corresponding charge during the three months
ended June 30, 2006.

SIX MONTHS ENDED JUNE 30, 2006 AND 2005

      NET REVENUES - Net revenues increased $354 to $16,150 for the six month
period ended June 30, 2006 as compared to $15,796 in the prior comparable
period. In the six months ended June 30, 2006 we recognized revenue primarily
from shipments to chain supermarkets. In the prior comparable period we
recognized revenue from direct to consumer sales through advertising and event
marketing.

      COST OF SALES - Cost of Sales increased $7,778 to $27,493 during the six
month period ended June 30, 2006 from $19,715 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 for both the
six month period ended June 30, 2006 and June 30, 2005 are negative as a direct
result of the matters discussed under the Cost of Sales discussion above related
to the expiration of products. We do not believe that any comparison between
periods is meaningful in our current stage of development.

      MARKETING, ADVERTISING AND PROMOTION - Marketing, advertising and
promotion expenses decreased $138,247, or approximately 68.5%, to $63,489 for
the six-month period ended June 30, 2006 from $201,736 for the six-month period
ended June 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 six months ended June 30, 2005. We did not purchase direct to
consumer television commercials during the six months ended June 30, 2006, as
previously planned. During the six months ended June 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 $48,536 to $1,093,810 during the six-month period ended
June 30, 2006 as compared to $1,142,346 in the comparable period in2005.

      During the six-months ended June 30, 2006, other selling, general and
administrative expenses we incurred were $346,593 in salaries, wages and related
personnel costs; approximately $265,842 in legal fees; approximately $83,675 for
various insurance premiums typical of a public company; approximately $30,000
for board of director compensation, approximately $22,926 in management fees
from BioChemics, approximately $68,850 in registered accountant fees;
approximately $16,163 in rent expense. The remaining selling, general and
administrative expenses pertained to our general operations.

      RESEARCH AND DEVELOPMENT - Research and development expenses decreased by
$177,437 to $0 for the six-month period ended June 30, 2006 as compared to
$177,437 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 six month periods ended June 30, 2006 and June 30,
2005 was $30,202 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.


                                       16


<PAGE>

      LEGAL SETTLEMENT - On June 1, 2005, we entered into a memorandum of
understanding to settle a consolidated securities class action lawsuit. We
recorded a charge of $750,000 during the six-month period ended June 30, 2005 in
connection with this settlement. The settlement of the lawsuit was finalized at
the end of 2005. There was no corresponding charge during the three months ended
June 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 six months
ended June 30, 2005, no stock-based compensation was recorded under the
intrinsic value method.

      During the six months ended June 30, 2006, the Company recorded stock
compensation expense of $30,202 for consultants in accordance with SFAS 123(R).

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 June 30, 2006, we had unrestricted cash of approximately $34,582 and
working capital deficit of approximately $3.4 million, excluding $262,181 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 $292,000 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 shortly) 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 June 30, 2005.

<TABLE>
<CAPTION>

                                                          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                      12,832          2,474         5,241         5,137             -
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                                     $ 4,717,832    $ 2,817,474     $ 635,241     $ 635,127     $ 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 August 21, 2006

                                 VASO ACTIVE PHARMACEUTICALS, INC.

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




                                       21