Vaso Active's Claims Prompt SEC to Step In

Vaso Active Pharmaceuticals(VAPH Quote), one of the hottest stocks of the year, was stopped dead in its tracks Thursday by securities regulators.

The Securities and Exchange Commission suspended trading in shares of the tiny Massachusetts company, which claims to have developed a miracle treatment for athlete's foot and a "revolutionary" transdermal delivery system for over-the-counter drugs.

The SEC imposed the suspension "because of questions regarding the accuracy of assertions" by the company in press releases, its annual report and other corporate filings. SEC officials have been investigating the company, which went public in a mid-December IPO, for a little over month.

The action followed a series of articles on TheStreet.com questioning the company's statements about its clinical trials and medical endorsements and noting troubling aspects of its corporate pedigree.

In a press release announcing the temporary suspension, the SEC says the questions surround statements Vaso Active made about Food and Drug Administration approval of "certain key products" and "the regulatory consequences of the future application of their primary product."

The trading suspension expires at midnight on April 15, and it gives time for the SEC to gather information and possibly bring an emergency enforcement action against a company.

Mark Kreitman, an SEC assistant chief litigation counsel, declined to comment on the suspension, but he said the investigation is continuing. The company did not return telephone calls seeking comment.

Matt Meister, president of Kashner Davidson, the small Florida brokerage that was the underwriter on the IPO, declined to comment.

Shares of Vaso Active were frozen at $7.59 a share. The stock is up 314% since its December 2003 initial public offering, after adjusting for a 3-for-1 stock split last month.

The past few months have been a helter-skelter ride for Vaso Active, a money-losing company with just seven employees and less than $60,000 in annual sales. The stock soared on the company's claim that its Termin8 foot lotion and its patented transdermal technology system will revolutionize the over-the-counter drug market.