U.S. SECURITIES AND EXCHANGE COMMISSION
                         Washington, D.C. 20549

                               FORM 10-KSB

[ X ]     Annual report under Section 13 or 15(d) of the Securities
          Exchange Act of 1934 [Fee Required] for the fiscal year ended:
          December 31, 1997  
          -----------------

[   ]     Transition report under Section 13 or 15(d) of the Securities
          Exchange Act of 1934 [No Fee Required] for the transition period
          from ___________ to __________

COMMISSION FILE NUMBER:   33-23693     
                       --------------

                             ENTROPIN, INC.
              ---------------------------------------------
             (Name of small business issuer in its charter)

           Colorado                                         84-1090424   
-------------------------------                         ---------------- 
(State or other jurisdiction of                         (I.R.S. Employer 
incorporation or organization)                        Identification No.)

                           45926 Oasis Street
                         Indio, California 92201
                        ------------------------
           (Address of principal executive offices) (Zip Code)

Issuer's telephone number:  (760) 775-8333
                          ----------------

Securities to be registered under Section 12(b) of the Act: None

Securities registered under Section 12(g) of the Act: None

Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past
12 months (or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing requirements
for at least the past 90 days.  Yes   X    No 
                                   -------   -------

Check if there is no disclosure of delinquent filers pursuant to Item 405
of Regulation S-B contained herein, and will not be contained, to the best
of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment
to this Form 10-KSB.  [ X ]

Issuer's revenues for its most recent fiscal year:  $-0-    
                                                  -------

Aggregate market value of voting stock held by non-affiliates as of April
6, 1998:  $5,495,868 
          ----------
Shares of Common Stock, $.001 par value, outstanding as of April 6, 1998:
6,000,051
---------

Documents incorporated by reference: See Part III, Item 13-"Exhibits and
Reports on Form 8-K" for a listing of documents incorporated by reference
into this annual report on Form 10-KSB.

<PAGE>

                            TABLE OF CONTENTS

PART I


Item 1.  Description of Business.. . . . . . . . . . . . . . . . . . . .1

Item 2.  Description of Property.. . . . . . . . . . . . . . . . . . . .8

Item 3.  Legal Proceedings.. . . . . . . . . . . . . . . . . . . . . . .9

Item 4.  Submission of Matters to a Vote of Security Holders . . . . . .9


PART II

Item 5.  Market Price of the Registrant's Common Stock and
          Related Security Holder Matters. . . . . . . . . . . . . . . 10

Item 6.  Management's Discussion and Analysis of Financial Condition
          and Results of Operations. . . . . . . . . . . . . . . . . . 10

Item 7.  Financial Statements. . . . . . . . . . . . . . . . . . . . . 12

Item 8.  Changes in and Disagreements with Accountants on 
          Accounting and Financial Disclosure. . . . . . . . . . . . . 12


PART III

Item 9.  Directors and Executive Officers, Promoters and Control
          Persons; Compliance With Section 16(a) of the Exchange
          Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Item 10.  Executive Compensation . . . . . . . . . . . . . . . . . . . 17

Item 11.  Security Ownership of Certain Beneficial Owners and
           Management. . . . . . . . . . . . . . . . . . . . . . . . . 19

Item 12.  Certain Relationships and Related Transactions.. . . . . . . 21

Item 13.  Exhibits, Financial Statements and Reports on Form 8-K . . . 23



<PAGE>

                             ENTROPIN, INC.

                               FORM 10-KSB

                                 PART I

ITEM 1.  DESCRIPTION OF BUSINESS.

BACKGROUND

     Entropin, Inc. (the "Company") was incorporated in the State of
Colorado in 1987 as Vanden Capital Group, Inc., for the primary purpose of
providing business and management advisory services. The Company also had
been considering business acquisitions. The Company commenced operations
after it completed its initial public offering of securities in December
1988.   On January 15, 1998, the Company and Entropin, Inc., a California
corporation, ("Old Entropin") consummated an Agreement and Plan of Merger
(the "Merger Agreement"), whereby the Company acquired all of the issued
and outstanding shares of Old Entropin which consisted of 5,700,001 shares
of Common Stock and 3,210,487 shares of Series A non-voting preferred stock
in exchange for the issuance of 5,700,001 shares of the Company's Common
Stock and 3,210,487 shares of Series A non-voting preferred stock.  In
connection with the Merger, the Company changed its name to Entropin, Inc.
and succeeded to the business activity of Old Entropin. The Company has
accounted for the transaction as a recapitalization of Old Entropin and
assets and liabilities are combined at historical cost.

BUSINESS OF THE ISSUER

     The Company is currently engaged in pharmaceutical research and will
be developing a patented medicinal preparation known as Esterom(R) for sale
to the public.  The Company is the beneficiary of more than 19 years of
extensive research and development with respect to the product, Esterom(R),
undertaken by Lowell M. Somers, MD, the inventor of the product, and  James
E. Wynn, Ph.D., the Company's scientific advisor.  The present formulation
of Esterom(R) is based on early chemical and clinical studies performed by
Drs. Somers and Wynn, in conjunction with other doctors.

     The Company is currently pursuing approval of the product with the
U.S. Food and Drug Administration ("FDA").  Esterom(R) is a medicinal
preparation formulated for the treatment of impaired range of motion
associated with acute lower back sprain and acute painful shoulder.  The
Company has been assigned seven patents issued by the U.S. Patent Office. 
The Company has a current and open Investigational New Drug ("IND") file
with the FDA and is in Phase II of the approval process.

     The two indications tested with the topical application of Esterom(R)
were acute lower back sprain and acute painful shoulder.  The range of
motion of each condition was improved significantly

                                   -1-

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when compared with patients receiving a placebo.  The Company believes that
these two conditions affect about sixty million Americans each year and
represent a substantial domestic market.  While palliative treatment is
available, there is no effective drug therapy recognized for acute back
strain today.  There is no estimate available for the size of the
international market, which also appears to have potential.  Additional
markets that will be considered in the future are the domestic and
international veterinary market.

THE PRODUCT - ESTEROM(R)

     Dr. Somers originally discovered Esterom(R), a medicinal preparation,
in 1979.  The product name is derived from its chemical identity and
medical purpose since it is an ESTER that improves the range of motion
(ROM) of patients suffering from a painful shoulder or back sprain/strain.

     In 1979, Drs. Somers and Wynn initiated a collaborative effort to
study the chemical composition of Esterom(R) and its clinical effects which
effort continues today under the Company's aegis.  As Chairman of the
Department of Pharmaceutical Sciences, College of Pharmacy, Medical
University of South Carolina, Dr. Wynn developed a manufacturing method
that produced a consistent and stable product which could satisfy FDA
requirements.  The reproducible hydrolytic process that Dr. Wynn developed
led to the discovery of three new molecules in 1993.  The three newly
discovered molecules are a novel class of benzoylecgonine ("BE"), ecgonine
("EC") and ecgonidine derivatives.

GOVERNMENTAL REGULATIONS

     GENERAL.  The manufacturing and marketing of the Company's proposed
products and its research and development activities are and will continue
to be subject to regulation by federal, state and local governmental
authorities in the United States and other countries.  In the United
States, pharmaceuticals are subject to rigorous regulation by the FDA's
Center for Drug Evaluation and Research, which reviews and approves
marketing of drugs.  The Federal Food, Drug and Cosmetic Act, the
regulations promulgated thereunder, and other federal and state statutes
and regulations govern, among other things, the testing, manufacture,
labeling, storage, record keeping, advertising and promotion of the
Company's potential products.

     APPROVAL PROCESS.  The process of obtaining FDA approval for a new
drug takes several years and generally involves the expenditure of
substantial resources.  The steps required before a new drug can be
produced and marketed for human use include clinical trials and the
approval of the New Drug Application ("NDA").

     PRE-CLINICAL TESTING.  The compound is subjected to extensive
laboratory and animal testing to determine if the compound is biologically
safe and has the functionality for which its therapeutic use is intended. 
All animal safety studies must be performed under current good laboratory
practices ("GLP").

                                   -2-

<PAGE>

     INVESTIGATIONAL NEW DRUG (IND).  Before human tests can begin, the
drug sponsor must file an IND application with the FDA, showing how the
drug is made and the results of animal testing.  If the FDA does not reject
the application within 30 days, IND status permits the Sponsor to undertake
initial studies in human volunteer subjects.

     HUMAN TESTING (CLINICAL).  Under an IND, the human clinical testing
program involves three phases.  Clinical trials are conducted in accordance
with protocols that detail the objectives of the study, the parameters to
be used to monitor safety and the efficacy criteria to be evaluated,
including the type of statistical analysis that will be done.  Each
protocol is submitted to the FDA as part of the IND filing.  At the present
time, two well-controlled clinical trials are required to establish
efficacy. Each clinical study is conducted under the auspices of an
independent Institutional Review Board ("IRB") for each institution at
which the study will be conducted.  The IRB will consider, among other
things, information on the product, ethical factors, the risk to human
subjects, and the potential benefits of therapy relative to risk.

     In Phase I clinical trials, studies usually are conducted on healthy
volunteers to determine the maximum tolerated dose, adverse events and
pharmacokinetics of a product.  Efficacy endpoints, even if surrogate
measures, are also obtained if possible.  Phase II studies are conducted on
a statistically relevant number of patients having a specific disease to
determine initial efficacy in humans for a specific disease, and possible
adverse effects and safety risks.  Phase III normally involves the pivotal
trials of a drug, consisting of wide-scale studies on patients with the
disease for which the drug is intended, in order to evaluate the overall
benefits and risks of the drug for the treated disease.  In addition to a
placebo, these studies may compare the Company's drug product with other
available therapies.  Phase I, II and III studies are planned to
demonstrate safety and efficacy as required for FDA approval.  The FDA
continually reviews the clinical trial plans and results and may suggest
design changes or may discontinue the trials at any time if significant
safety or other issues arise.

     NEW DRUG APPLICATION (NDA).  Upon completion of Phase III, the drug
sponsor may file an NDA containing all pre-clinical, pharmacology and
toxicology information, and clinical and chemical, manufacturing and
control ("CMC") information that has been gathered, as well as all other
information that is known from any other sources.  The information must
include essentially all the data collected during the IND phase (e.g.
chemical structure and characterization of the drug, formula and
manufacturing process, stability in the proposed packaging, animal and
laboratory studies, results of all human tests, etc.) and proposed
labeling.  Once submitted, the FDA has 90 days to accept the application. 
If the application is accepted, the Company must pay the FDA approximately
$200,000 as a user fee in order to continue with the review process.

     APPROVAL.  Once a NDA is approved, the manufacturer is required to
keep the FDA informed at all times regarding any adverse reactions. 
Moreover, contract manufacturers that the Company may use must adhere at
all times to current Good Manufacturing Practices ("GMP") regulations
enforced by the FDA through its facilities inspection program.  These
facilities must pass a pre-approval plant inspection before the FDA will
issue a pre-market approval of the product. The FDA may also require post-
marketing testing (Phase IV) to support the conclusion of efficacy and
safety

                                   -3-

<PAGE>

of the product, which can involve significant expense.  After FDA approval
is obtained for initial indications, further clinical trials are necessary
to gain approval for the use of the product for additional indications.

     The testing and approval process is likely to require substantial time
and effort, and there can be no assurance that any FDA approval will be
granted on a timely basis, if at all.  The approval process is affected by
a number of factors, primarily the adverse effects of the drug (safety) and
its therapeutic benefits (efficacy).  Additional preclinical or clinical
trials may be required during the FDA review period and may delay marketing
approval.  A task force established by the FDA has recently proposed
significant changes in the design, analysis and reporting of clinical
studies conducted under INDs, in response to the results of a Phase III
trial of a drug by another company in which severe complications and death
occurred.  The task force recommended increased requirements for reporting
adverse effects and new, more stringent rules that would require clinical
trial investigators to assume that toxicities reported by patients are
drug-related.  If these recommendations are implemented, the length of time
and costs associated with obtaining market approval by the FDA are likely
to be significantly increased.

     Outside the United States, the Company will be subject to foreign
regulatory requirements governing human clinical trials and marketing
approval for its products.  The requirements governing the conduct of
clinical trials, product licensing, pricing and reimbursements vary widely
from country to country.

FDA STATUS/CONTINUING RESEARCH AND DEVELOPMENT

     IND APPLICATION.  Drs. Somers and Wynn filed the IND application on
March 9, 1987.  The results of four pre-clinical animal studies with no
toxicity noted, were incorporated within the IND Application for FDA
approval.

     HUMAN TESTING.  The Phase I Clinical Study involving 24 healthy male
subjects, was concluded with little or no toxicity observed.

     Since Esterom(R) maintained a clear toxicity profile and was shown to
be safe in both animals and in healthy male volunteers when applied
topically, the FDA approved a protocol for a Phase II Clinical Study.  The
Phase II clinical study involved a double-blind, randomized, placebo-
controlled investigation designed to continue to look for adverse effects
and to determine the efficacy of Esterom(R) as compared to a placebo in
patients who have an impaired range of motion resulting from acute lower
back sprain and acute painful shoulder. The Phase II Clinical Study
involved 97 patients, each of whom received two applications of Esterom(R)
or placebo, with the second application being performed 24 hours after the
first.  Overall, Esterom(R) provided relief in both the back and shoulders
which was sustained for seven days.  There was no clinically observed local
anesthetic or analgesic effect.  The range of motion for each condition was
improved significantly when compared with patients receiving a placebo. 
Range of motion for the shoulder may be defined as the number of degrees to
which the patient may move the arm away from the side in a forward,

                                   -4-

<PAGE>

backward or upward direction.

     The Company has designed the Phase III Protocol and must complete the
Phase III studies prior to completion of the New Drug Application required
by the FDA for final approval of a new prescription drug.  As currently
planned, the Phase III studies will include multiple trials in a number of
clinical site study centers in differing geographic areas of the U.S., with
approximately 300 patients involved in the study of which approximately 150
patients will receive the active drug and 150 patients will receive the
placebo.  The final study design may change according to possible new FDA
requirements.  The studies will be double-blind and placebo-controlled. 
Each study will include a regimen of two applications, with the second
application being performed 24 hours after the first and a 30 day follow
up.

     The Company is negotiating an agreement with the Western Center for
Clinical Studies ("WCCS"), a California corporation experienced in managing
pharmaceutical drug products which are at an early stage of development and
providing assistance to companies in the process of taking pharmaceutical
products to the FDA and through the IND and NDA stages of development in a
timely and cost-efficient manner.  The proposed WCCS agreement provides
that WCCS will implement a business plan to accomplish the scope of its
work and assist the Company in implementing its overall business plan.  In
addition, WCCS will provide additional experienced management with the
intent of assisting the Company in developing its product, Esterom(R), to
be able to be used commercially.  WCCS would be required to oversee
necessary studies and clinical trials of  Esterom(R), appoint and utilize
the services of a Scientific and Medical Advisory Board for the
Company, assist in developing a distribution plan, and identify and propose
strategic partners and/or distributors for the Company's product.  All work
preformed by WCCS will be provided by employees and consultants of WCCS, as
the Company's subcontractor.  The agreement is proposed to have a 33 month
term.  

     Through Phase II, all CMC work was performed at the Medical University
of South Carolina's Pharmaceutical Development Center, College of Pharmacy. 
Mallinckrodt, Inc. ("Mallinckrodt"), a leading manufacturer of chemicals
and drugs has agreed to continue to develop Esterom(R) to meet all FDA and
GMP requirements and develop a Drug Master File, file all appropriate CMC
documentation with the FDA, supply Phase III clinical study material, and
manufacture the product to be used commercially.  The proposed WCCS
agreement provides that WCCS will advise the Company concerning appropriate
monitoring procedures to manage the Company's manufacturing contract with
Mallinckrodt and seek alternative companies which have the capability of
manufacturing the Company's product, in an effort to minimize any potential
delays or setbacks.   See PROPOSED MANUFACTURING PLANS.

     Esterom(R) is presently a Schedule II controlled substance.  However,
the results of Phase I and Phase II Clinical Trials showed no central
nervous system activity, elevated blood pressure, increase in heart rate or
euphoria.  The Company believes that the components of the medicine do not
cross the blood brain barrier, and consequently, it is expected that there
is no propensity for abuse.  Therefore, an application has been made to the
Drug Enforcement Administration ("DEA")

                                   -5-

<PAGE>

to reclassify Esterom(R) and delist it as a controlled substance.

SUMMARY OF PHASE I/II FINDINGS

     Based on its clinical studies, the Company believes that Esterom(R)
may involve a new and unique mechanism of action.  The Phase I Study
demonstrated that the product did not cause detectable systemic effects
including no effect on the cardiovascular system.  During the
study, Esterom(R) caused no significant adverse events and was observed to
be safe.  The Company confirmed that in Phase I and Phase II trials, no
anesthetic activity or vasoconstrictive activity was observed.

     Although the precise functions of Esterom(R) are not known, the
medicinal preparation is neither a local anesthetic nor analgesic.  A local
anesthetic relieves pain at rest and pain with movement.  An analgesic
relieves major pain at rest and provides minor pain relief with movement. 
In comparison and according to patient evaluations, Esterom(R) provides
minor relief of pain at rest and major relief of pain during movement.

PROPOSED MANUFACTURING PLANS 

     Esterom(R) is made by the solvolysis of cocaine base in propylene
glycol and water. The Company believes that the components of the medicine
do not cross the blood brain barrier, and consequently, it is expected that
there is no propensity for abuse.  Cocaine is controlled by the DEA under
strict importation regulations specified in law.  To the Company's
knowledge, Stepan Company ("Stepan") is the only company that can import
coca leaves and process them for the extraction of cocaine bases.  This
base is shipped to Mallinckrodt for purification and sale on the medical
and scientific market.  Stepan and Mallinckrodt work with the DEA to set
annual quotas for importing the coca leaves related to projected use and
sale of the processed cocaine.  Because of federal restrictions, Esterom(R)
can not be manufactured outside of the United States for sale in the United
States.  As a result, Mallinckrodt is currently the sole source for cocaine
and for producing Esterom(R).

     Mallinckrodt has supplied all of the Company's cocaine for the
laboratory manufacture of the product for use in research and clinical
trials, and has been aware of the development of the drug since the IND
application was filed. The Company has entered into a ten (10) year 
manufacturing contract with Mallinckrodt.  Mallinckrodt has agreed to
perform the CMC work necessary to meet FDA Drug Master File requirements.
Although Mallinckrodt believes it can increase the coca leaf importation 
quotas to supply the bulk active material as required, there is no assurance
that sufficient importation quotas can be maintained, or that additional
governmental regulations are not imposed on the Company or its suppliers,
which may affect the Company's ability to market the product.

PROPOSED MARKETING PLANS

     The Company is a startup company engaged in research and development
of pharmaceuticals

                                   -6-

<PAGE>

and has no plans to market its products.  The proposed WCCS agreement
provides that WCCS will implement a business plan to accomplish the scope
of its work and assist the Company in implementing its overall business
plan.  In addition, WCCS will provide for additional experienced management
with the intent of assisting the Company in developing its product,
Esterom(R), to be able to be used commercially.  With the assistance of
WCCS, the Company will develop a distribution plan and identify and propose
strategic partners and/or distributors for the Company's product.

ROYALTY COMMITMENTS

     In 1993, the Company entered into a 30 year compensation agreement
with the limited partners of I.B.C., a California limited partnership,
which comprised 64.28% of the limited partnership.  The I.B.C. Limited
Partnership participated in the early development of Esterom(R) and owned
the patent rights to three patents and all intellectual property rights. 
Under the terms of the compensation agreement, the Company acquired all of
the patent and intellectual property rights in exchange for certain
compensation to the limited partners which is dependent upon the Company's
receipt of a marketing partner's technological access fee and royalty
payments.  The partnership was subsequently dissolved.  Compensation under
the agreement includes a bonus payment of $96,420 to be paid at the time
the Company is reimbursed by a drug company for past expenses paid for
development of the drug, as well as 64.28% of a decreasing payment rate (3%
to 1%) on cumulative annual royalties received by the Company.  As of
December 31, 1997, no liabilities have been accrued with respect to this
agreement.

     In a separate agreement with a former I.B.C. limited partner, the
Company has agreed to pay the partner 35.72% of a decreasing earned payment
(3% to 1% on cumulative annual sales of products by the Company) until
October 10, 2004.  From October 10, 2004 until October 10, 2014, the
Company will pay the partner 17.86% of the earned payment.  In accordance
with the agreement, the Company has agreed to pay the former limited
partner the amount of $40,000 and a minimum earned payment of $3,572 per
calendar quarter beginning on December 31, 1989.  Such minimum earned
payment is to be evidenced by a promissory note issued each quarter and
payable when the Company is either reimbursed for expenses paid for the
development of the medicine or from the first income received from the
Company from net sales of the medicine.  The quarterly payments are to be
applied against the earned payment to be received by the limited partner. 
As of December 31, 1997, the total liability accrued with respect to this
agreement aggregated $155,495.  See FINANCIAL STATEMENTS, NOTE 6.

PATENTS

     Esterom(R) is protected by a U.S. Composition Patent granted December
27, 1994 which includes safeguarding the discovery of three new molecules. 
The Company's patents are as follows: Patent #5,559,123 granted September
24, 1996 with the Company as Assignee; Patent #5,525,613 granted June 11.
1996 with the Company as Assignee; and, Patent #5,376,667 granted December
27, 1994 with the Company as Assignee.  In addition,  Dr. Lowell M. Somers
obtained the following

                                   -7-

<PAGE>

initial patents which he subsequently assigned to the Company in September,
1992; #4,512,996 granted April 1985; Patent #4,469,700 granted September
1984; and, Patent #4,556,663 granted December, 1985.  Although the Company
has obtained approval on  Patent Application #5,556,663, the Patent has not
yet been  issued.  The Company has estimated that an aggregate of
approximately 17 years of patent protection remains.

     Drs. Wynn and Somers have assigned to the Company their respective
rights to the U. S. Patents and for foreign countries.  In December, 1993,
an International Patent Application was filed under the Patent Cooperation
Treaty in the U.S. Receiving Officer, whereby the Company's technology will
be protected for a significant market worldwide.

EMPLOYEES

     As of December 31, 1997, the Company had no full time employees. As of
the date hereof, the Company has two full time employees at its corporate
headquarters in Indio, California. In addition, the Company has
subcontracted with an individual for corporate financial services.  The
Company believes that relations with its employees are good.

     The proposed WCCS agreement contemplates a period of 33 months for
purposes of completing the testing requirements necessary for FDA approval
for the Company's product, Esterom(R), in exchange for $880,400 and options
to purchase an aggregate of 450,000 shares of the Company's common stock at
$1.50 per share, exercisable over a five (5) year period.  Officers of WCCS
will serve in the following positions in the Company: Dr. Daniel L.
Azarnoff, President; Dr. Lois Rezler, Vice President of Science and
Regulatory Affairs; and, Dr. Roy S. Azarnoff, Chief Operating Officer. 
Drs. Azarnoff, Rezler and Azarnoff will  not receive compensation in
addition to the management fees paid to WCCS by the Company, for their
services rendered to the Company as its officers. The proposed WCCS
agreement provides that Daniel Azarnoff will serve as the Company's
President until such time as the Company hires an experienced individual to
serve as its President, and Drs. Rezler and Roy Azarnoff will serve in
their respective capacities until the termination of the WCCS contract.

ITEM 2.  DESCRIPTION OF PROPERTY.

     The Company leases 800 square feet of office space as its corporate
headquarters in Indio, California from one of its principal stockholders,
Thomas T. Anderson, at a monthly rent of $1,040, for a two year term which
expires February 1, 2000, which the Company believes to be market or below
market rate for comparable office space.

     Upon execution of the WCCS agreement, the Company will seek additional
office space in Woodland Hills, California in order to provide facilities
for the WCCS office staff. The present market rate for office space in
Woodland Hills, California ranges from $1.80 to $2.00 per square foot per
month and the Company anticipates that it will require approximately 3,000
square feet of office space.

                                   -8-

<PAGE>

ITEM 3.  LEGAL PROCEEDINGS.

     The Company is not a party to any legal proceedings which management
believes to be material, and there are no such proceedings which are known
to be contemplated for which the Company anticipates a material risk of
loss.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     No matters were submitted to a vote of security holders during the
fiscal year ended December 31, 1997.  However, on January 15, 1998, the
security holders of the Company voted on and approved:  (i) an Agreement
and Plan of Merger (the  Merger") pursuant to which the Company acquired
all of the issued and outstanding shares of stock of Entropin, Inc., a
California corporation; (ii) an amendment to the Company's Articles of
Incorporation to change the name from Vanden Capital Group, Inc. to
Entropin, Inc.; (iii) an amendment to the Company's Articles of
Incorporation to effect a 1-for-300 reverse stock split whereby each 300
currently authorized and outstanding shares of the Company's $.0001 par
value Common Stock (the "Old Common Stock") will be exchanged and converted
into one share of $.001 par value Common Stock (the "New Common Stock");
and, (iv) amendment to the Company's Articles of Incorporation to fix the
number of authorized shares of capital stock of the Company at a total of
60,000,000 shares, 50,000,000 of which shall be designated as New Common
Stock ($.001 par value), and 10,000,000 of which shall be classified as
$.001 par value Preferred Stock.  The amendments to the Company's Articles
of Incorporation were approved by a majority of the outstanding shares of
Common Stock at a meeting of all of the Company's shareholders held on
January 15, 1998, pursuant to applicable provisions of the Colorado
Business Corporation Act.









                                   -9-

<PAGE>

                                 PART II

ITEM 5.  MARKET PRICE OF THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY
HOLDER MATTERS.

MARKET INFORMATION

     The Company's Common Stock began trading on the Electronic Bulletin
Board on February 25, 1998, under the trading symbol "ETPN".  The following
table sets forth the high and low bid prices for the Company's Common Stock
for the past two years.  The quotations reflect inter-dealer prices, with
retail mark-up, mark-down or commissions, and may not represent actual
transactions.  The information presented has been derived from the National
Quotation Bureau, Inc. Library.

                                                 High            Low
                                                  Bid            Bid
                                                  ---            ---
          1998 Fiscal Year
          ----------------

          First Quarter                          $3.375         $3.00 

          Second Quarter
           (through April 6, 1998)               $3.375         $3.375

     On April 6, 1998, the last reported bid and asked prices for the
Common Stock were $3.375 and $5.00, respectively.

HOLDERS

     As of April 6, 1998, the Company had approximately 217 holders of
record of the Company's Common Stock, and 5 holders of record of the
Company's Series A Preferred Stock.

DIVIDENDS

     The payment of dividends by the Company is within the discretion of
its Board of Directors and depends in part upon the Company's earnings,
capital requirements, debt covenants and financial condition.  Since its
inception, the Company has not paid any dividends on its Common Stock and
does not anticipate paying such dividends in the foreseeable future.  The
Company intends to retain earnings, if any, to finance its operations.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

RESULTS OF OPERATIONS

     Entropin, Inc. is a development stage pharmaceutical company and has
not generated any

                                  -10-

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revenues for the period from August 27, 1984 (inception) through December
31, 1997.  Entropin has devoted substantially all its resources to
acquisition of patents, research and development of the medicine, and
expenses related to the startup of its business.  From inception until
December 31, 1997, Entropin has incurred expenses of $3,752,854 in research
and development fees, $511,255 in general and administrative expenses and
$239,698 in interest resulting in a loss of $4,561,175 for the period from
inception (August 27, 1984) to December 31, 1997.  For the year ended
December 31, 1997, Entropin incurred $683,209 in research and development
fees, $269,853 in general and administrative expenses and $127,386 in
interest expense, resulting in a loss of $1,098,448.  Research and
development fees incurred during 1997 were approximately $515,000 higher
than in 1996.  The increase related primarily to recording research and
development expense and contributed capital for the estimated value of
common stock ($518,000) contributed by certain shareholders to an
individual in exchange for research and development services provided since
inception of the Company.  General and administrative expenses incurred
during 1997 were approximately $168,000 higher than in 1996.  The increase
related primarily to recording legal expense and contributed capital for
the estimated value of common stock ($156,000) contributed by certain
shareholders to an individual for business advisory and legal services.

     Entropin has been unprofitable since inception and expects to incur
substantial additional operating losses for at least the next few years as
it increases expenditures on research and development and begins to
allocate significant and increasing resources to clinical testing,
marketing and other activities.  As described below, the Company has
successfully completed a private placement and a recapitalization of the
Company that will provide additional liquidity for the Company for current
operations.   The Company estimates, however, that it will require
additional funding of up to $8,000,000 over the next three years to
successfully complete the FDA approval process.  In addition, the Company
has had no experience in marketing the medicine.  As a result, Entropin's
activities to date are not as broad in depth or scope as the activities it
must undertake in the future, and Entropin's historical operations and
financial information are not indicative of Entropin's future operating
results or financial condition or its ability to operate profitably as a
commercial enterprise when and if it succeeds in bringing any product to
market.

CAPITAL RESOURCES AND LIQUIDITY

     In the years since inception, Entropin has financed its operations
primarily through the sale of shares of Entropin common stock, loans and
advances from shareholders.  At December 31, 1997, outstanding liabilities
to shareholders, including accrued interest, aggregated $1,710,487.

     On January 15, 1998, the Company completed a private placement of 30
units (10,000 shares of its $.001 par value common stock per unit) at
$27,500 per unit, or $2.75 per share, which resulted in gross proceeds of
$825,000.  Concurrent with the private placement the Company completed an
agreement and plan of merger with Vanden Capital Group, Inc. to exchange
all of the issued and outstanding common shares of the Company for
5,220,000 shares of Vanden's $.001 par value common stock.  Pursuant to the
agreement Vanden provided cash of $220,000.

                                  -11-

<PAGE>

     On January 15, 1998, the Company issued 3,210,487 shares of Series A
redeemable non-voting, noncumulative 8% preferred stock in exchange for an
aggregate of $3,210,487 of notes payable to shareholders and accrued
interest and for various other liabilities of the Company.

     The Company is currently negotiating an agreement with the Western
Center for Clinical Studies, a California company experienced in managing
pharmaceutical development, including providing assistance in taking
pharmaceutical products to the FDA and through clinical trials and New Drug
Application stages of development.  The proposed agreement has a 33-month
term, at the end of which the Company's primary product may be approved for
marketing.  The Company will be required to pay management fees of
approximately $880,400 over the term of the agreement, as well as provide
stock options to purchase 450,000 shares of Entropin common stock over a 33
month period at an exercise price of $1.50 per share.

EFFECT OF INFLATION AND FOREIGN CURRENCY EXCHANGE

     The Company has not experienced material unfavorable effects on its
results of operations due to currency exchange fluctuations with any
foreign suppliers or material unfavorable effects upon its results of
operations as a result of domestic inflation.

YEAR 2000 ISSUE

     The Company's management does not believe that the Company will be
materially adversely affected by the computer software Year 2000 issue. 
The Company does not have significant exposure to the Year 2000 issue.  The
Company's vendors and suppliers may have some exposure to the issue but at
this time, management does not anticipate a material adverse impact on the
Company's operations.

FORWARD LOOKING INFORMATION

     Statements of the Company's or management's intentions, beliefs,
anticipations, expectations and similar expressions concerning future
events contained in this document constitute "forward looking statements"
as defined in the Private Securities Litigation Reform Act of 1995. As with
any future event, there can be no assurance that the events described in
forward looking statements made in this report will occur or that the
results of future events will not vary materially from those described in
the forward looking statements made in this document. Important factors
that could cause the Company's actual performance and operating results to
differ materially from the forward looking statements include, but are not
limited to, (i) the ability of the Company to obtain regulatory approval
for its product including but not limited to the FDA, (ii) the ability of
the Company to obtain meaningful consumer acceptance and a successful
market for the product on a national and international basis at competitive
prices, (iii) the ability of the Company to develop and maintain an
effective national and international distribution plan, (iv) success of the
Company in forecasting demand for its product, (v) the ability of the
Company to maintain pricing and thereby maintain adequate profit margins,
(vi) the ability of the Company to achieve adequate intellectual property

                                  -12-

<PAGE>

protection.

ITEM 7.  FINANCIAL STATEMENTS.

     The Financial Statements set forth on pages F-1 to F-20 of this Report
are incorporated herein by reference.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE. 

      As reported in the Company's Form 8-K/A dated March 24, 1998, on
January 15, 1998,  Entropin, Inc. and Entropin, Inc., a California
corporation, ("Old Entropin") consummated an Agreement and Plan of Merger
(the "Merger") pursuant to which the Company acquired all of the issued and
outstanding shares of stock of Old Entropin.  In connection with the
Merger, the Company changed its name to Entropin, Inc. and succeeded to the
business activity of Old Entropin, which ceased to exist.  Further, in
connection with the Merger, the Company elected to change its accountants
to that of Old Entropin.  As a result, on January 15, 1998, the Company
dismissed the accounting firm of Schumacher & Associates, Inc., Englewood,
Colorado, who have acted as certifying accountants for the Company for the
year ending May 31, 1997.

     None of the prior certifying accountants' reports on the Company's
financial statements for the past two years contained an adverse opinion or
disclaimer of opinion, or was modified as to uncertainty, audit scope or
accounting principle.  The change of principal accountants was approved by
the Company's Board of Directors on February 16, 1998.  The Company is
unaware of any disagreement with Schumacher & Associates, Inc. on any
matter of accounting principle or practice, financial statement disclosure,
or auditing scope or procedure which would have caused said accountants to
make reference to the subject matter in connection with any report issued
by same.

     In connection with the Merger, effective January 15, 1998, the Company
has engaged the accounting firm of Causey Demgen & Moore Inc., to act as
certifying accountants for the year ending December 31, 1997.  The
application of accounting principles to a specific completed or
contemplated transaction, or to the type of audit opinion that might be
rendered was not an important factor in the decision to change accounting
firms.


                                PART III

ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

IDENTIFICATION OF DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES

     The following sets forth certain information with respect to the
officers and directors of the Company.

                                  -13-

<PAGE>



Name                     Age  Officer or Position           Director Since
----                     ---  -------------------           -------------

Higgins D. Bailey        68   President, Chief Executive    July, 1992
                              Officer, and Chairman of
                              the Board

Daniel L. Azarnoff, M.D. 71   Director                      January, 1998

Donald Hunter            64   Secretary and Director        January, 1998

Dewey H. Crim            61   Principal Accounting Officer, February, 1998
                              Treasurer and Director

James E. Wynn, Ph.D.     56   Director                      February, 1998

     The directors of the Company are elected to hold office until the next
annual meeting of shareholders and until their respective successors have
been elected and qualified.  Officers of the Company are elected annually
by the Board of Directors and hold office until their successors are
elected and qualified.

      The following sets forth biographical information concerning the
Company's directors and executive officers for at least the past five
years.

     HIGGINS D. BAILEY has been an officer and director of the Company
since July 1992 serving as its President and Chief Executive Officer and is
currently the Chairman of the Board of the Company.  From 1995 to 1996, Mr.
Bailey was serving as Interim President and Chief Executive Officer for the
Pharmaceutical Educational and Development Foundation at the Medical
University of South Carolina, Charleston, South Carolina, which formulates
and manufactures pharmaceutical products.  From 1991 to present, he was
also business manager for Thomas T. Anderson Law Firm, Indio, California. 
Prior to 1991, Mr. Bailey owned and operated various travel and tour
related companies which subsequently merged into larger organizations.  In
addition, Mr. Bailey was an educator for over 25 years.  Mr. Bailey
received a B.A. degree in biology from Eastern Washington University, a
M.S. degree in program planning and personnel and Ed.D. in administration
and management  from the University of California, Berkeley, California.

     DANIEL L. AZARNOFF, M.D., has been  a director of the Company since
February 1998.  From 1988 to present, Dr. Azarnoff has served as President
of D. L. Azarnoff Associates, a company engaged in consulting for various
pharmaceutical and biotechnology companies including Sandoz, Orion Pharma, 
DeNovo, Inc., Cibus Pharmaceutical  and Cellegy Pharmaceuticals, Inc.  From
1978 to 1985, Dr. Azarnoff was Corporate Senior Vice President of G.D.
Searle & Co., an international pharmaceutical company, and from 1978
through 1985 served as President of Searle Research and Development, a
division of G. D. Searle & Co.  Dr. Azarnoff was on the faculty of the
University

                                  -14-

<PAGE>

of Kansas Medical School ("KUMC") from 1962 through 1978 rising to the rank
of KUMC Distinguished Professor of Medicine and Pharmacology.  Dr. Azarnoff
has also held faculty positions at Northwestern University Medical School,
the University of Chicago Medical School, St. Louis University School of
Medicine and was a Fulbright Scholar at the Karolinska Institute in
Stockholm, Sweden.  Dr. Azarnoff is a member of various medical and
honorary societies including the Institute of Medicine of the National
Academy of Sciences.  He has lectured extensively within and outside the
United States, and published numerous scientific articles and books on
various aspects of clinical pharmacology.  Dr. Azarnoff has served on
various advisory committees, including the Endocrine and Metabolism and
other Ad Hoc advisory committees of the Food and Drug Administration, World
Heath Organization, American Medical Association, National Institutes of
Health and National Research Council of the National Academy of Sciences. 
Dr. Azarnoff has served on the Science Advisory Board of various
corporations which include Neurobolobical Technology, Inc., Gilead Science,
Inc., Oread, Inc., Cibus Pharmaceutical and Sandoz Research Institute. Dr.
Azarnoff has served or is serving as a director on the following privately
held pharmaceutical drug and development companies: Oread, Inc., Cibus
Pharmaceutical and DeNovo, Inc.  Dr. Azarnoff serves as Vice President,
Medical/Regulatory Affairs for Cellegy Pharmaceutical, Inc.  None of the
above corporations are developing drugs similar to the Company's products. 
Dr. Azarnoff received a B.S. degree in biology and a M.S. degree in zoology
from Rutgers University.  Dr. Azarnoff received an M.D. degree from the
University of Kansas Medical School.

     DONALD HUNTER has been a director and the Secretary of the Company
since January 1998.  Since 1994, Mr. Hunter has served as a consultant to
Entergy Corporation as well as other industrial concerns dealing with 
mergers/acquisitions and other business matters.  From 1991 to 1994, he was
senior vice president of Entergy Corporation and was responsible for the 
merger activities with Gulf States Utilities.  Prior to 1991, Mr. Hunter was
president and chief operating officer of Louisiana Power & Light Company and
executive vice president and chief operating officer of New Orleans Public 
Service, Inc.  In addition, he has served on the board of directors of a 
number of companies and service companies.  His prior business affiliations
include positions as vice president for Yankee Atomic Electric, president and
majority owner of Pioneer Steel Company, and various executive positions
with Helix Technology Corporation.  Mr. Hunter received a B.S. degree in
chemical engineering from Purdue University and a M.S. in nuclear
engineering from Iowa State University.

     DEWEY H. CRIM has been a director and the Treasurer of the Company
since January 1998. Mr. Crim currently serves as President and Chief
Executive Officer of the Links Foundation, Inc. From 1995 to 1997, he
served as Executive Vice President of The Inspirational Network, a national
cable television company.   From 1980 to 1995, Mr. Crim was employed with 
BellSouth Corporation, a national telecommunications company, where he
served as President of two subsidiaries: TechSouth, Inc., and BellSouth
Media Technology, Inc.  Mr. Crim later served as a senior business
development strategist on the BellSouth Corporate staff.  In addition, his
responsibilities included negotiating an alliance between Walt Disney
Company and three regional telephone companies which subsequently became
Americast Corporation.  Mr. Crim was also founder and President of Central
Computer Services, Inc., a computer service company which provided support
services to more than 50 banks. Mr. Crim began his career at Electronic
Data Systems Corp. in Dallas, Texas.  Mr. Crim

                                  -15-

<PAGE>

serves as a director on the following privately held companies: Telecom
Wireless Solutions, Inc., a wireless telecommunications company, and
Eastside Bank, a federal savings bank.  Mr. Crim received a B.S. degree in
business and accounting from the University of Alabama.

     JAMES E. WYNN, Ph.D. has been a director of the Company since February
1998.  Dr. Wynn has served as Professor and Assistant Dean for Research at
the Medical University of South Carolina.  His responsibilities include
faculty development and research funding plans for the college which are
currently being implemented.  From 1969 to 1982 Dr. Wynn was a faculty
member at the University of South Carolina College where he rose to the
rank of Professor of Medicinal Chemistry.  In 1982 he assumed the position
of Professor and Chairman of the Department of Pharmaceutical Sciences,
College of Pharmacy, Medical University of South Carolina.  In this
position Dr. Wynn implemented a new Ph.D. program and developed a viable
research program in pharmaceutical sciences.  He established and operated
South Carolina's only Drug Bioequivalence Evaluation Program, serving as
the principal investigator on 25 drug bioavailability/clinical evaluation
trials.  Dr. Wynn led the development of the Pharmaceutical Development
Center (PDC), a contract GMP facility for the formulation and manufacture
of clinical supplies for the pharmaceutical industry.  Dr. Wynn, as the
Company's scientific advisor, co-authored the patents, supervised the final
process for laboratory manufacturing of Esterom(R), and the analytical work
to identify three newly discovered molecules.  Since 1984, Dr. Wynn has
served as co-principal investigator for Entropin's Phase I and Phase II
clinical studies.  Dr. Wynn has authored numerous articles which have
appeared in scholarly and professional publications.  Recognized as an
outstanding educator in pharmacy, Dr. Wynn received 45 teaching awards over
the past 20 years, including recognition as the 1995 South Carolina
"Governor's Professor of the Year".  Dr. Wynn received his B.S. degree in
pharmacy and his Ph.D. in medicinal chemistry with a minor in analytical
chemistry from the Medical College of Virginia, Virginia Commonwealth
University, Richmond, Virginia.

FAMILY RELATIONSHIPS

      There are no family relationships between the Company's officers and
directors.

INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS

     No officer, director, significant employee, promoter or control person
of the Company has been involved in any event of the type described in Item
401(d) of Regulation S-B during the past five years.

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

     Not applicable.

                                  -16-

<PAGE>

ITEM 10.  EXECUTIVE COMPENSATION

     During the year ended December 31, 1997, no executive of the Company
received in excess of $100,000 in salary and/or bonuses.

COMPENSATION OF DIRECTORS

     STANDARD ARRANGEMENTS.

     Members of the Company's Board of Directors are not compensated in
their capacities as Board Members.  However, the Company reimburses all of
its officers, directors and employees for accountable expenses incurred on
behalf of the Company.

     OTHER ARRANGEMENTS.  The Company has no other arrangements pursuant to
which any director of the Company was compensated during the year ended
December 31, 1997, for services as a director.

EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS

     None of the Company's officers presently have employment agreements
with the Company.

REPORTING ON REPRICING OF OPTIONS/SARS

     Not applicable.

STOCK OPTION PLAN

     The Company has adopted a stock option plan (the "Plan") for key
employees reserving a total of 16,667 shares of the Company's Common Stock,
adjusted in accordance with subsequent recapitalization in the capital
structure of the Company, for issuance pursuant to the exercise of stock
options (the "Options") which may be granted to employees (including
officers), consultants and directors of the Company.  The plan is
administered by the Board of Directors, or at its discretion by a stock
option committee (the "Committee") consisting of not less than three
directors.  Members of the Committee are eligible to participate in the
Plan.  The Committee may determine which Options may be options intended to
qualify for special treatment under the Internal Revenue Code of 1986, as
amended ("Incentive Stock Options") or non-qualified options ("Non-Qualified
Stock Options") which are not intended to so qualify.  Options may
be granted to employees (including officers), consultants and directors
(whether or not they are employees) of the Company or its subsidiaries. 
The Committee may take into account the duties of persons selected, their
present and potential contributions to the success of the Company and such
other considerations as the Committee deems relevant to the purposes of the
Plan.  Incentive Stock Options may not be granted to consultants and
directors who are not also employees.  The Board is empowered to make all
other determinations deemed necessary or advisable for the administration
of the Plan.

     The Committee has broad discretion to determine the number of shares
with respect to which Options may be granted to participants.  The maximum
aggregate fair market value (determined as

                                  -17-

<PAGE>

of the date of grant) of the shares as to which the Incentive Stock Options
become exercisable for the first time during any calendar year may not
exceed $100,000.

     The Plan provides that the purchase price per share for each Incentive
Stock Option on the date of grant may not be less than 100% of the fair
market value of the Common Stock on the date of grant.  In addition, in the
case of Non-Qualified Stock Options, the Option price of such Options shall
be not less than 80% of the fair market value of the shares of Common Stock
of the Company on the date of grant of the Option, however, any option
granted under the Plan to a person owning more than ten percent of the
Common Stock shall be at a price of at least 110% of such fair market
value.

     If an optionee ceases to be employed by or be a director of or
consultant to the Company or its divisions or subsidiaries for any reason
other than death, disability, retirement or termination for cause, the
optionee may exercise all Options within three months following such
cessation to the extent exercisable on the date of cessation.  If an
optionee's employment or consulting relationship is terminated or a
director is removed for cause, all Options held by him will terminate
immediately.  If an optionee dies while a director of or while employed by,
or a consultant to the Company, or during the three-month period following
termination of the optionee's employment, directorship or consulting
relationship (other than for cause) or if the optionee retires or becomes
disabled, the optionee's Options, unless previously terminated, may be
exercised, whether or not otherwise exercisable, by the optionee or his
legal representative or the person who acquires the Options by bequest or
inheritance at any time within one year following the date of death,
disability or retirement of the optionee.  An Option granted under the Plan
is not transferable by the optionee other than by will or by the laws of
descent and distribution and, during the lifetime of the Optionee, may be
exercised only by the optionee, his guardian or legal representative. 
Unless sooner terminated, the Plan will expire on July 2, 1998.

     As of December 31, 1997, no options have been granted under the Plan.

STOCK BONUS PLAN

     As an incentive to attract and keep personnel of experience and
ability with the Company, the Board of Directors, with shareholder
approval, adopted a Stock Bonus Plan, whereby all salaried employees of the
Company and its subsidiaries, other than non-salaried directors ("eligible
employees"), are eligible to periodically receive shares of the Common
Stock of the Company.  Eligible employees shall not be eligible to receive
shares until they have been employed by the Company for at least one year. 
The aggregate fair market value of shares which may be allocated to an
employee in any year may not exceed 20% of his salary.  The value of the
shares allocated each year shall be based on the bid price of the Company's
stock on the date of allocation or, if there is no bid price quotation on
that date, on the most recent bid quotation within the prior 90 days, and,
if no bid quotation has been given in that period, the Stock Bonus Plan
Committee (the "Committee") shall determine the value of the shares on the
book value of the stock on the date of allocation.  A bonus share reserve
of 16,667 shares of Common Stock of the Company, adjusted in accordance
with subsequent recapitalization in the capital structure of the Company,
has been established from which the distributions may be made at the
discretion of the Committee.  The

                                  -18-

<PAGE>

Committee is to be appointed by the Board of Directors and to consist of at
least three members.  The Board of Directors shall act as the Committee if
no appointments are made.

     Pursuant to the plan, bonus shares may be allocated to an eligible
employee at any time, but delivery of the shares to the employee does not
take place until the employee has completed two full years of employment
with the Company commencing from the date of allocation.  During the two-year
period, the Company serves as custodian for the shares allocated and
the shares may not be transferred, sold, assigned or pledged (as collateral
for a loan or as security for the performance of an option or for any other
purpose).  In addition, if the employee leaves the employ of the Company
for any reason (including termination of operations of the Company) during
the two-year period, the shares allocated are forfeited.  Unless sooner
terminated, the Plan will expire on July 2, 1998.

     As of December 31, 1997, no shares have been granted under the Plan.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The following table sets forth, as of the date hereof, the ownership
of the Company's Common Stock and Series A Preferred Stock by (i) each
director and executive officer of the Company, (ii) all executive officers
and directors of the Company as a group, and (iii) all persons known by the
Company to beneficially own more than 5% of the Company's Common Stock.


     Common Stock   Series A Preferred Stock
     ------------   ------------------------


                                 Common Stock        Series A Preferred Stock
                                 ------------        ------------------------

                             Amount and                Amount and
                              Nature of                Nature of
Name and Address             Beneficial     Percent    Beneficial    Percent
 of Shareholder              Ownership(1)   of Class  Ownership(1)   of Class
-----------------            ------------   --------  ------------   --------
Higgins D. Bailey            1,404,093 (2)    23.4%     178,000         5.6%
45926 Oasis Street
Indio, CA 92201

Thomas T. Anderson           1,404,093 (3)    23.4%     710,041 (4)    22.1%
45926 Oasis Street
Indio, CA 92201

Milton D. McKenzie           1,650,417 (5)    27.5%         -0-          -0-
45926 Oasis Street
Indio, CA 92201

Caroline T. Somers           1,005,793        16.8%     822,446 (6)    25.6%
233 Paulin, No. 8512
Calexco, CA 92231

                                  -19-

<PAGE>

Lowell M. Somers             1,005,793 (7)    16.8%     822,446        25.6%
233 Paulin, No. 8512
Calexco, CA 92231

James E. Wynn                  518,085         8.6%   1,500,000        46.7%
306 Ayers Circle
Summerville, SC 29485

Daniel L. Azarnoff, MD             -0-          -0-         -0-          -0-
433 Airport Blvd., Suite 419
Burlingame, CA 94010-2014

Donald Hunter                  150,000 (8)     2.5%         -0-          -0-
598 Kinzie Island Court
Sanibel, FL 33957

Dewey H. Crim                   20,000 (9)     0.3%         -0-          -0-
242 Southern Hills Drive
Duluth, GA 30039

All Directors and            2,092,178        34.5%   1,678,000        52.3%
Executive Officers as a
group (5 persons)
____________
(1)  Calculated pursuant to Rule 13d-3(d) of the Securities Exchange
     Act of 1934.  Unless otherwise stated below, each such person has
     sole voting and investment power with respect to all such shares. 
     Under Rule 13d-3(d), shares not outstanding which are subject to
     options, warrants, rights or conversion privileges exercisable
     within 60 days are deemed outstanding for the purpose of
     calculating the number and percentage owned by such person, but
     are not deemed outstanding for the purpose of calculating the
     percentage owned by each other person listed.
(2)  Owned in joint tenancy with Shirley A. Bailey, the spouse of Higgins
     D. Bailey.
(3)  Held of record by Higgins D. Bailey as security for a loan made by Mr.
     Bailey to Mr. Anderson.  Milton D. McKenzie has sole voting power with
     respect to these shares.
(4)  Held of record by David M. Chapman and Samuel F. Trussell as security
     for deferred compensation owed to Messrs.  Chapman and Trussell by Mr.
     Anderson.
(5)  Including 1,404,093 shares held in the name of Higgins D. Bailey, as
     pledgee in connection with a loan made by Higgins D. Bailey to Thomas
     T. Anderson which is collateralized by the shares, and over which Mr.
     McKenzie has sole voting power as a result of an irrevocable proxy
     granted to Mr. McKenzie by Mr. Anderson in connection with a loan made
     by Mr. McKenzie to Mr. Anderson which is collateralized by the same
     shares.  In addition, includes 143,490 Shares held of record by CapMac
     Eighty-two, a limited partnership of which Mr. McKenzie is a general
     partner.
(6)  Includes 822,446 shares of Series A Preferred Stock owned by Lowell M.
     Somers, the spouse of Caroline T. Somers.
(7)  Includes 1,005,793 shares of Common Stock owned by Caroline T. Somers,
     the spouse of Lowell M. Somers.
(8)  Of these shares, 10,000 shares are held in the name of Deloras Decker
     Hunter, Trustee of the Deloras Decker Hunter Generation Skipping
     Trust.  Deloras Decker Hunter is the spouse of Mr. Hunter and Mr.
     Hunter is deemed to have voting control over these 10,000 shares.  In
     addition, these shares include 60,000 shares underlying an option
     assigned to Mr. Hunter in January, 1998.
(9)  These shares are owned in joint tenancy with Virginia Crim, the spouse
     of Dewey H. Crim.

                                  -20-

<PAGE>

CHANGES IN CONTROL

     There are no understandings, arrangements or agreements known by
management at this time which would result in a change in control of the
Company.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

TRANSACTIONS WITH MANAGEMENT AND OTHERS

     During 1997, the Company received advances from a stockholder totaling
$15,000.  The advances did not bear interest and were payable upon demand. 
In addition, during 1996 and 1997, the Company was advanced an aggregate of
$73,873 by a stockholder from the stockholder's personal line of credit. 
In January 1998, the above referenced debts were paid in full, along with
interest charges incurred by the stockholder resulting from the advances.

     The Company had accrued the following long-term debt owed to
stockholders at December 31, 1996 and 1997:

                                                  1997           1996
                                                  ----           ----
8% Note payable - Stockholder, issued for
cash advances, principal plus accrued
interest due December 31, 2000,
unsecured                                      $  631,678     $  631,678

8% Note payable - Stockholder, issued
for cash advances, principal plus 
accrued interest due December 31,
2000, unsecured                                   178,000        178,000

8% Note payable - Stockholder,
issued for past services, principal
plus accrued interest due December 31,
2000, unsecured                                   731,678        731,678

Accrued interest payable                           60,341        169,131
                                               ----------     ----------

                                               $1,601,697     $1,710,487
                                               ==========     ==========

     On January 15, 1998, the Company converted all above noted long-term
debt plus accrued interest to 1,710,487 shares of the Company's redeemable
8% non-voting, non-cumulative Series A Preferred Stock at $1 per share, for
a total of $1,710,487.

     During November 1997, the Company began negotiating with James E. Wynn
regarding compensation for research and development services provided since
the inception of the Company.  In exchange for these past services, the
Company agreed to issue an 8% note payable to the individual in the
principal amount of $1,500,000 maturing December 31, 2000.  Subsequent to
year end, the Company converted this obligation to 1,500,000 shares of its
non-voting, non-cumulative redeemable Series A preferred stock, at $1.00
per share.  In December, 1997, certain shareholders

                                  -21-

<PAGE>

of the Company contributed a portion of their common stock to Dr. Wynn as
partial settlement for research and development services (259,042 shares
valued at $518,000, approximately $2.00 per share).  The expense and
related capital contributions were reflected at December 31, 1997.  Dr.
Wynn was subsequently appointed a Director to the Company's Board in
February, 1998.

     In January 1998, the Company entered into an agreement with James E.
Wynn, a director of the Company, whereby the Company granted Dr. Wynn a
non-exclusive right to develop new products that contain the same active
ingredients as Esterom(R), but are formulated differently.   All rights to
the improved products will remain the exclusive property of the Company and
Dr. Wynn will receive two (2%) percent royalties on the net sales of all
new improved products.  The expiration date of this agreement is January 1,
2003.

     On January 29, 1998, the Company obtained Directors and Officers
indemnity liability insurance coverage, including securities coverages, in
the amount of $3,000,000 which indemnifies the Company against claims, as
well as provides coverage against any claims against the officers and
directors of the Company which (i) the Company is not legally permitted or
required to pay or (ii) when the Company is legally required or permitted
to pay such loss as indemnity to the Directors and Officers but cannot in
fact pay such loss due solely to the financial insolvency of the Company. 

     There is no pending litigation or proceeding involving a director,
officer, employee or other agent of the Company as to which indemnification
is being or may be sought, and the Company is not aware of any other
pending or threatened litigation that may result in claims for
indemnification by any director, officer, employee or other agent.

     Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Act") may be permitted to
directors, officers and controlling persons of the Company pursuant to the
foregoing provisions, or otherwise, the Company has been advised that in
the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable.  In the event that a claim for indemnification against such
liabilities (other than the payment by the small business issuer of
expenses incurred or paid by a director, officer or controlling person of
the Company in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Company will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

     In February 1998, the Company entered into a lease arrangement with
one of its principal shareholders, Thomas T. Anderson.  The lease
encompasses 800 square feet of office space at a monthly rate of $1,040.

     On February 16, 1998, the Company's Board of Directors approved a
contract between the Company and Dr. Wynn, whereby Dr. Wynn will
manufacture a duplicate sample of the Phase II

                                  -22-

<PAGE>

clinical material necessary for quality control of the clinical supply
manufactured in the Mallinckrodt laboratories.

     The Company is currently negotiating an agreement with WCCS whereby
WCCS will assist the Company in completing successfully the Phase III study
and NDA Phase for FDA approval of the Company's product, Esterom(R), in
exchange for $880,400 and options to purchase an aggregate of 450,000
shares of the Company's common stock at $1.50 per share over a five (5)
year period. The proposed agreement contemplates a term of 33 months and
will provide that certain officers of WCCS will serve in the following
positions in the Company: Daniel L. Azarnoff, President; Lois Rezler, Vice
President of Science and Regulatory Affairs; and, Roy S. Azarnoff, Chief
Operating Officer.  Dr. Daniel Azarnoff is an officer of WCCS and has
served as a Director on the Company's Board since February, 1998.

TRANSACTIONS WITH PROMOTERS

     Not applicable.


ITEM 13.  EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K.

     (a)  The following documents are filed as a part of this Form 10-KSB:

          Financial Statements of Entropin, Inc.

          Report of Independent Certified Public Accountants

          Balance Sheets - December 31, 1997 and 1996

          Statements of Operations - Years ended December 31, 1997 and
          1996, and for the Period from August 27, 1984 (Inception) Through
          December 31, 1997

          Statements of Changes in Stockholders' Equity  - For the Period
          from August 27, 1984 (Inception) Through December 31, 1997

          Statements of Cash Flows - Years ended December 31, 1997 and
          1996, and for the Period from August 27, 1984 (Inception) Through
          December 31, 1997

          Notes to Financial Statements - December 31, 1997 and 1996
          Exhibits required to be filed are listed below and, except where
          incorporated by reference, immediately follow the Financial
          Statements.

                                  -23-

<PAGE>

Exhibit
 Number   Description
-------   -----------

3.1       Articles of Incorporation(1)

3.2       Bylaws(1)

3.3       Articles of Merger, as filed with the Colorado Secretary of State
          on January 15, 1998.(2)

3.4       Amended and Restated Articles of Incorporation, as filed with the
          Colorado Secretary of State on January 15, 1998, as correct.(2)

4.3       Specimen copy of stock certificate for Common Stock,$.001 par
          value; Specimen copy of stock certificate for Series A Preferred
          Stock,$.001 par value(2)

10.1      Stock Option Plan(1)

10.2      Stock Bonus Plan(1)

10.3      Agreement and Plan of Merger, dated December 9, 1997 between
          Vanden Capital Group, Inc. and Entropin, Inc.(2)

10.4      Agreement dated January 1, 1997, between the Registrant and
          Mallinckrodt, Inc. (Development and Supply Agreement)

10.5      Lease Agreement, dated February 1, 1998, between the Registrant 
          and Thomas T. Anderson

10.6      License Agreement dated January 1, 1998, between the Registrant
          and Dr. James E. Wynn

10.7      Assignment of Patent #4,556,663 dated September 24, 1992, by
          Lowell M. Somers, M.D. to Entropin, Inc.

10.8      Assignment of Patent #4,512,996 dated September 24, 1992, by
          Lowell M. Somers, M.D. to Entropin, Inc.

10.9      Assignment of Patent #4,469,700 dated September 24, 1992, by
          Lowell M. Somers, M.D. to Entropin, Inc.

                                  -24-

<PAGE>

10.10     Assignment of rights in the application for Letters Patent under
          Serial Number 07/999,307 by Lowell M. Somers and James E. Wynn to
          Entropin, Inc., dated February 16, 1993

10.11     Assignment of rights in the application for Letters Patent under
          Serial Number 08/260,054 by Lowell M. Somers and James E. Wynn to
          Entropin, Inc., dated July 29, 1994

16.0      Statement from Schumacher & Associates, the prior certifying
          accountant in response to the information disclosed in the
          Company's Form 8-K dated March 25, 1998, captioned "Changes in
          Registrant's Certifying Accountant".(3)

27        Financial Data Schedule

___________
(1)  Incorporated by reference from the like numbered exhibits filed with
     the Registrant's Registration Statement  on Form S-1, No. 33-23693
     effective October 21, 1989.
(2)  Incorporated by reference  from the like numbered exhibits filed with
     the Registrant's Current Report on Form 8-K, dated January 15, 1998
(3)  Incorporated by reference  from an exhibit numbered 4.0 as filed with
     the Registrant's Current Report on Form 8-K, dated March 25, 1998

     During the quarter ended December 31, 1997, the Company filed no
Current Reports on Form 8-K.  However, during the quarter ended March 31,
1998, the Company filed Current Reports on Form 8-K as follows:

     (i)  Form 8-K, dated January 15, 1998, as amended, reporting the
          consummation of the acquisition of all of the issued and
          outstanding shares of Entropin, Inc. by the Company pursuant
          to Item 2 thereof.

     (ii) Form 8-K, dated January 22, 1998, reporting developments in the
          Company's business under Item 5 thereof.

     (iii)Form 8-K, dated February 25, 1998, reporting developments in
          the Company's business under Item 5 thereof.

                                  -25-

<PAGE>

     (iv) Form 8-K, dated March 25, 1998, reporting Changes in Registrant's
          Certifying Accountants under Item 4, and reporting change of the
          Company' fiscal year under Item 8.

          Required exhibits are attached hereto or are incorporated by
          reference and are listed in Item 13(a)(3) of this Report.

          Required financial statements are attached hereto and are listed
          in Item 13 of this Report.









                                  -26-

<PAGE>

                               SIGNATURES
                               -----------

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.

Date: April 14, 1998                    ENTROPIN, INC.


                                        By /s/ Higgins D. Bailey
                                          ----------------------------------
                                        Higgins D. Bailey,
                                        Chairman of the Board

     Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated. 

Signatures                 Title                          Date
----------                 -----                          ----

 /s/ Higgins D. Bailey     President, Chief Executive     April 14, 1998
-------------------------- Officer and Chairman of the
Higgins D. Bailey          Board


 /s/ Daniel L. Azarnoff    Director                       April 14, 1998
--------------------------
Daniel L. Azarnoff 


 /s/ Donald Hunter         Secretary and Director         April 14, 1998
--------------------------
Donald Hunter


 /s/ Dewey H. Crim         Treasury, Director and         April 14, 1998
-------------------------  Principal Accounting
Dewey H. Crim              Officer


 /s/ James E. Wynn         Director                       April 14, 1998
-------------------------
James E. Wynn



                                  -27-

<PAGE>

                      INDEX TO FINANCIAL STATEMENTS
                      -----------------------------

                             ENTROPIN, INC.



Report of Causey Demgen & Moore Inc. Independent
 Certified Public Accountants. . . . . . . . . . . . . . . . . . . . .F-2

Balance Sheets As of December 31, 1997 and 1996. . . . . . . . . . . .F-3

Statements of Operations
     For Years Ended December 31, 1997 and 1996, and for the
      Period from August 27, 1984 (Inception) Through
      December 31, 1997. . . . . . . . . . . . . . . . . . . . . . . .F-4

Statements of Changes in Stockholders' Equity
     For the Years  Period from August 27, 1984 (Inception) Through
      December 31, 1997. . . . . . . . . . . . . . . . . . . . . . . .F-5

Statements of Cash Flows
     For Years Ended December 31, 1997 and 1996, and for the
      Period from August 27, 1984 (Inception) Through
      December 31, 1997. . . . . . . . . . . . . . . . . . . . . . . .F-6

Notes to Financial Statements
     December 31, 1997 and 1996. . . . . . . . . . . . . . . . . . . .F-8









                                   F-1

<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


The Board of Directors and Stockholders
Entropin, Inc.


We have audited the accompanying balance sheet of Entropin,  Inc. (a development
stage company) as of December 31, 1996 and 1997,  and the related  statements of
operations,  changes in  stockholders'  equity  (deficit) and cash flows for the
years then ended and for the period  from August 27,  1984  (inception)  through
December 31, 1997.  These  financial  statements are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of Entropin,  Inc. as of December
31, 1996 and 1997 and the results of its  operations  and its cash flows for the
years then ended and for the period  from August 27,  1984  (inception)  through
December 31, 1997, in conformity with generally accepted accounting principles.

Denver,  Colorado
February 22, 1998, except
for Note 9, as to which the               /s/ CAUSEY DEMGEN & MOORE INC.
date is March 19, 1998                    Causey Demgen & Moore Inc.

                                      F-2

<PAGE>
<TABLE>
<CAPTION>
                                 ENTROPIN, INC.
                         (A DEVELOPMENT STAGE COMPANY)

                                 BALANCE SHEET

                           December 31, 1996 and 1997

                                     ASSETS
                                     ------

                                                                  1996          1997
                                                                  ----          ----
<S>                                                           <C>           <C>
Current assets:
   Cash                                                       $    1,677    $      291
   Accounts receivable - stockholder (Note 2)                      5,000         5,000
                                                              ----------    ----------
     Total current assets                                          6,677         5,291

Deferred stock offering costs (Notes 4 and 8)                          -        10,746

Patent costs, less accumulated amortization of
   $22,300 (1996) and $40,300 (1997)                             218,326       266,456
                                                              ----------    ----------

                                                              $  225,003    $  282,493
                                                              ==========    ==========

                    LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
                    ----------------------------------------------

Current liabilities:
   Accounts payable                                           $  148,557    $  329,813
   Advances - stockholders (Note 2)                               21,036        98,873
                                                              ----------    ----------
     Total current liabilities                                   169,593       428,686

Long-term debt:
   Stockholders (Note 2)                                       1,601,697     1,710,487
   Deferred royalty agreement (Note 6)                           111,440       155,495
   Compensation agreement (Note 6)                             1,430,000     1,500,000
                                                              ----------    ----------
     Total long-term debt                                      3,143,137     3,365,982

Commitments and contingencies (Notes 6 and 8)

Series  A  redeemable  preferred  stock,  $.001  par  value,   3,210,487  shares
   authorized, no shares issued
   and outstanding (Notes 3 and 8)                                     -             -

Stockholders' equity (deficit) (Notes 4 and 8):
   Preferred stock, $.001 par value; 10,000,000 shares
     authorized, Series A reported above (Note 3)                      -             -
   Common stock, $.001 par value; 50,000,000 shares
     authorized, 5,220,000 shares issued and outstanding           5,220         5,220
   Additional paid-in capital                                    369,780     1,043,780
   Deficit accumulated during the development stage           (3,462,727)   (4,561,175)
                                                              -----------   -----------
     Total stockholders' equity (deficit)                     (3,087,727)   (3,512,175)
                                                              -----------   -----------

                                                              $  225,003    $  282,493
                                                              ==========    ==========
</TABLE>

                                  See accompanying notes.
                                            F-3
<PAGE>
<TABLE>
<CAPTION>

                                       ENTROPIN, INC.
                               (A DEVELOPMENT STAGE COMPANY)

                                  STATEMENT OF OPERATIONS

                 For the  Years  Ended  December  31,  1996 and 1997 and for the
                  Period from August 27, 1984 (inception) to December 31, 1997


                                                                               Cumulative
                                                                              amounts from
                                                 1996           1997            inception
                                                 ----           ----          -------------
<S>                                           <C>           <C>               <C>
Costs and expenses:
   Research and development (Note 4)          $ 167,818     $   683,209       $ 3,752,854
   General and administrative (Note 4)          101,894         269,853           511,255
   Depreciation and amortization                 10,550          18,000            57,368
   Interest (Note 2)                             94,876         127,386           239,698
                                              ---------     -----------       -----------

Net loss                                      $(375,138)    $(1,098,448)      $(4,561,175)
                                              ==========    ============      ===========

Basic loss per common share (Note 5)          $    (.07)    $      (.21)      $      (.87)
                                              =========     ===========       ===========
</TABLE>

                                  See accompanying notes.

                                      F-4

<PAGE>
<TABLE>
<CAPTION>

                                              ENTROPIN, INC.
                                      (A DEVELOPMENT STAGE COMPANY)

                          STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT

                   For the Period from August 27, 1984 (inception) to December 31, 1997

                                                                                                                Deficit
                                                                                                              accumulated
                                                              Common Stock        Additional                   during the
                                                         ---------------------     paid-in       Stock        development
                                                         Shares         Amount     capital    subscriptions      stage
                                                         ------         ------   -----------  -------------   -----------
<S>                                                    <C>            <C>       <C>           <C>            <C>
Balance at August 27, 1984 (inception)                         -      $    -    $        -    $      -       $         -

   Sale of common stock for cash
     in 1984 ($.005 per share)                           991,800         992         4,008           -                 -

   Issuance of common stock in exchange for
      services in 1991 ($.005 per share)               3,967,198       3,967        16,033           -                 -

   Cash contribution from shareholder in 1991                  -           -        50,000           -                 -

   Net loss for the period from inception through
     December 31, 1994                                         -           -             -           -        (2,824,221)
                                                       ---------      -------   ----------    --------       -----------

Balance, December 31, 1994                             4,958,998       4,959        70,041           -        (2,824,221)

   Cash received for common  stock subscription                -           -             -     150,000                 -

   Net loss for the year                                       -           -             -           -          (263,368)
                                                       ---------      -------   ----------    --------        ----------

Balance, December 31, 1995                             4,958,998       4,959        70,041     150,000        (3,087,589)

   Sale of common stock for cash ($1.15 per share)       261,002         261       299,739    (150,000)                -

   Net loss for the year                                       -           -             -           -          (375,138)
                                                       ---------      -------   ----------    --------       -----------

Balance, December 31, 1996                             5,220,000       5,220       369,780           -        (3,462,727)

   Capital contributions (Note 4)                              -           -       674,000           -                 -

   Net loss for the year                                       -           -             -           -        (1,098,448)
                                                       ---------      -------   ----------    --------        -----------

Balance, December 31, 1997                             5,220,000      $5,220    $1,043,780    $     -        $(4,561,175)
                                                       =========      ======    ==========    ========       ============
</TABLE>

                                                      See accompanying notes.

                                                               F-5

<PAGE>
<TABLE>
<CAPTION>

                                 ENTROPIN, INC.
                         (A DEVELOPMENT STAGE COMPANY)

                             STATEMENT OF CASH FLOWS

       For the Years  Ended  December  31,  1996 and 1997 and for the Period
              from August 27, 1984 (inception) to December 31, 1997


                                                                       Cumulative
                                                                         amounts
                                                                          from
                                                1996         1997      inception
                                                ----         ----      -----------
<S>                                          <C>         <C>           <C>
Cash flows from operating activities:
   Net loss                                  $(375,138)  $(1,098,448)  $(4,561,175)
   Adjustments to reconcile net loss to net
     cash used in operating activities:
       Depreciation and amortization            10,550        18,000        57,368
       IBC partner royalty agreement                 -        44,055       155,495
       Services contributed in exchange
         for stock                                   -       674,000       694,000
       Services contributed in exchange for
         compensation agreements               110,000        70,000     2,231,678
       Increase in accounts receivable -
         shareholder                                 -             -        (5,000)
       Increase in accounts payable             33,418       181,256       329,813
       Increase in accrued interest             60,341       108,790       169,139
       Other                                         -             -           139
                                             ---------   -----------   -----------
       Total adjustments                       214,309     1,096,101     3,632,624
                                             ---------   -----------   -----------

       Net cash used in operations            (160,829)       (2,347)     (928,551)

Cash flows from investing activities:
   Purchase of equipment                             -             -       (17,207)
   Patent costs                                (54,564)      (66,130)     (306,756)
                                             ----------  ------------  ------------

       Net cash used in investing activities   (54,564)      (66,130)     (323,963)

Cash flows from financing activities:
   Deferred stock offering costs                     -       (10,746)      (10,746)
   Proceeds from sale of common stock          150,000             -       355,000
   Proceeds from stockholder loans              19,972             -       809,678
   Proceeds from stockholder advances           21,035        77,837        98,873
                                             ---------   -----------   -----------

       Net cash provided by financing
          activities                           191,007        67,091     1,252,805
                                             ---------   -----------   -----------

Net increase (decrease) in cash                (24,386)       (1,386)          291

Cash at beginning of period                     26,063         1,677             -
                                             ---------   -----------   -----------

Cash at end of period                        $   1,677   $       291   $       291
                                             =========   ===========   ===========
</TABLE>

                          (Continued on following page) See accompanying notes.

                                      F-6

<PAGE>
<TABLE>
<CAPTION>
                                 ENTROPIN, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                             STATEMENT OF CASH FLOWS

       For the years  ended  December  31,  1996 and 1997 and for the Period
              from August 27, 1984 (inception) to December 31, 1997




                         (Continued from preceding page)

Supplemental disclosure of cash flow information:

                                                                               Cumulative
                                                                                amounts
                                                                                 from
                                                 1996          1997            inception
                                                 ----          ----            ---------
<S>                                             <C>           <C>               <C>
Cash paid during period for interest            $6,372        $15,598           $59,855
</TABLE>


Supplemental disclosure of non-cash financing activities:

During 1996, the Company  entered into a compensation  agreement with the spouse
of a shareholder for $731,678 in exchange for services performed for the Company
in prior years (see Note 2).

Pursuant to an agreement with an IBC limited partner,  the Company has accrued a
liability  totaling  $155,495 at December 31, 1997 for advance  royalties due to
the individual (see Note 6).

In November of 1997,  the Company  reached an agreement  with an  individual  to
enter into a compensation  agreement in exchange for services the individual has
provided the Company since  inception  (see Note 6). The Company has reflected a
liability of $1,430,000 and $1,500,000 in 1996 and 1997,  respectively,  related
to this agreement.



                            See accompanying notes.


                                      F-7
<PAGE>


                                 ENTROPIN, INC.
                         (A DEVELOPMENT STAGE COMPANY)
                         NOTES TO FINANCIAL STATEMENTS

                           December 31, 1996 and 1997

1.   Organization and summary of significant accounting policies
     -----------------------------------------------------------

     Organization:

     Entropin,  Inc.  was  incorporated  in  California  in  August  1984,  as a
     pharmaceutical research company developing Esterom(R),  a topically applied
     compound for the  treatment  of impaired  range of motion  associated  with
     acute  lower  back  sprain  and acute  painful  shoulder.  The  Company  is
     considered  to be a development  stage  enterprise as more fully defined in
     Statement No. 7 of the Financial  Accounting  Standards  Board.  Activities
     from inception  include  research and development  activities,  seeking the
     U.S. Food and Drug Administration (FDA) approval for Esterom(R), as well as
     fund raising.

     Basis of presentation and managements' plans:

     The Company's  financial  statements have been presented on a going concern
     basis which  contemplates the realization of assets and the satisfaction of
     liabilities  in the  normal  course  of  business.  The  Company  is in the
     development  stage  and  has  been  primarily   involved  in  research  and
     development  activities.  This has  resulted  in  significant  losses and a
     stockholders'  deficit at December 31, 1997 of  $4,561,175.  The  Company's
     continued  existence is  dependent on its ability to obtain the  additional
     funding  necessary to complete the FDA approval  process for Esterom(R) and
     market the product.

     As  described in Note 8, the Company has  successfully  completed a private
     placement  and  a  recapitalization  of  the  Company  which  will  provide
     additional  liquidity for the Company for current operations.  However, the
     Company  estimates it will require  additional  funding of up to $8,000,000
     over the  next  three  years  to  successfully  complete  the FDA  approval
     process. The financial statements do not include any adjustment relating to
     the  recoverability  and  classification  of recorded  asset amounts or the
     amount and classification of liabilities or other adjustments that might be
     necessary  should the Company be unable to  continue as a going  concern in
     its present form.

     Use of estimates:

     The  preparation  of financial  statements  in  conformity  with  generally
     accepted  accounting  principles  requires management to make estimates and
     assumptions  that affect the reported amounts of assets and liabilities and
     disclosure  of  contingent  assets  and  liabilities  at  the  date  of the
     financial  statements  and the  reported  amounts of revenues  and expenses
     during  the  reporting  period.  Actual  results  could  differ  from those
     estimates.

     Income Taxes:

     The  Company  has  elected  under the  Internal  Revenue  Code to be an 'S'
     corporation.  In lieu of corporation  income taxes,  the shareholders of an
     'S' corporation include their respective shares of the Company's net income
     or loss in their individual income tax returns.

                                      F-8
<PAGE>

                                 ENTROPIN, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                          NOTES TO FINANCIAL STATEMENTS

                           December 31, 1996 and 1997



1.   Organization and summary of significant accounting policies (continued)
     -----------------------------------------------------------------------

     Deferred stock offering costs:

     Deferred  stock  offering  costs  represent  costs incurred to December 31,
     1997, in connection with the private  placement of common stock, more fully
     discussed in Note 6. Costs  incurred as of December 31, 1997 and additional
     costs incurred  subsequent to that date,  were charged against the proceeds
     of the offering.

     Patents:

     Patents  are  stated  at  cost  less  accumulated   amortization  which  is
     calculated  on a  straight-line  basis over the useful lives of the assets,
     estimated by management to average 17 years. Research and development costs
     and any  costs  associated  with  internally  developed  patents  (with the
     exception  of  legal  costs)  are  expensed  in  the  year  incurred.   The
     recoverability  of carrying values of intangible  assets are evaluated on a
     recurring basis.

     Cash equivalents:

     For the purposes of the statement of cash flows, the Company  considers all
     highly liquid debt instruments purchased with a maturity of three months or
     less to be cash equivalents.

     Concentrations of credit risk:

     Financial   instruments   which   potentially   subject   the   Company  to
     concentrations  of credit risk  consist  principally  of cash.  The Company
     places its cash with high quality financial  institutions.  At times during
     the years,  the balance at any one  financial  institution  may exceed FDIC
     limits.

2.   Related party transactions
     --------------------------

     Office Space:

     The Company  presently uses part of an office  facility and  administrative
     services provided by a director and stockholder of the Company at no cost.

     Accounts receivable - stockholder:

     During 1994, the Company advanced $5,000 to a stockholder. The advance does
     not bear interest and is due on demand.  The Company expects the advance to
     be paid in full.

     Advances - stockholders:

     During 1996 and 1997, the Company was advanced an aggregate of $73,873 by a
     stockholder from the stockholder's personal line of credit. The Company has
     agreed to pay all interest  charges  incurred by the stockholder  resulting
     from the advances.


                                      F-9

<PAGE>

                                 ENTROPIN, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                          NOTES TO FINANCIAL STATEMENTS

                           December 31, 1996 and 1997



2.   Related party transactions (continued)
     --------------------------------------

     During 1997,  the Company  received  advances from a  stockholder  totaling
     $15,000. The advances do not bear interest and are payable upon demand.

     Long-term debt - stockholders:

     Long-term  debt -  stockholders  consisted of the following at December 31,
     1996 and 1997:

<TABLE>
<CAPTION>

                                                                        1996          1997
                                                                        ----          ----
     <S>                                                            <C>           <C>
     8% Note payable - stockholder, issued for cash advances,
           principal plus accrued interest due December 31,
           2000, unsecured                                          $  631,678     $  631,678

     8% Note payable - stockholder,  issued for cash advances,
          principal plus accrued interest due December 31,
          2000, unsecured                                              178,000        178,000

     8% Note payable - stockholder,  issued for past services,
          principal plus accrued interest due December 31, 2000,
          unsecured                                                    731,678        731,678

     Accrued interest payable                                           60,341        169,131
                                                                    ----------     ----------

                                                                    $1,601,697     $1,710,487
                                                                    ==========     ==========

</TABLE>

     As  described  in Note 6,  effective  January  15,  1998,  all above  noted
     long-term debt plus accrued  interest was converted to 1,710,487  shares of
     the Company's redeemable 8% non-voting,  non-cumulative  Series A Preferred
     Stock at $1 per  share,  for a total of  $1,720,487  which  represents  the
     recorded amount of the liability at December 31, 1997.

3.   Redeemable preferred stock
     --------------------------

     In December  1997,  the Board of  Directors  approved an  amendment  to the
     Articles of Incorporation to authorize 10,000,000 shares of $.001 par value
     preferred  stock.  3,210,487  shares of the Company's  preferred stock were
     designated as redeemable, non-voting,  non-cumulative 8% Series A Preferred
     Stock (see Note 8). The annual 8%  dividend is based upon a $1.00 per share
     value.

     The Series A Preferred Stock will be subject to mandatory  redemption.  The
     funds available for redemption will be equal to more than 20% but less than
     50% of annual earnings,  as determined  annually by the Board of Directors,
     but not exceeding cash flow from operations and will  automatically  cancel
     in seven years if not fully redeemed.  The Company may  voluntarily  redeem
     outstanding shares of preferred stock at $1 per share.


                                      F-10

<PAGE>


                                 ENTROPIN, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                          NOTES TO FINANCIAL STATEMENTS

                           December 31, 1996 and 1997




4.   Stockholders' equity
     --------------------

     Buy-sell agreement:

     On August 11, 1993, the Company entered into a buy-sell  agreement with the
     existing stockholders which, among other provisions,  requires stockholders
     desiring  to sell or  transfer  shares to a person or entity  other than an
     immediate  family member to first submit a proposal of the sale or transfer
     and its terms to the  Company.  Pursuant to the  agreement,  the Company is
     entitled to a first right  option to purchase  some or all of the shares on
     the terms and price  offered to the buyer after  which,  subject to certain
     provisions,  all  other  individual  shareholders  may  then  purchase  any
     remaining shares not purchased by the Company.  The buy-sell  agreement was
     cancelled January 15, 1998.

     Authorized capital:

     Pursuant  to the  recapitalization  more  fully  described  in  Note  8, in
     December 1997, the Board of Directors approved an amendment to the Articles
     of  Incorporation  to increase  the  authorized  common  stock to 7,000,000
     shares and to establish its par value at $.001 per share.

     Stock split:

     On December 10,  1997,  the Board of  Directors  approved a  198.36-for-one
     stock split.  Accordingly,  all  references to common shares  including the
     number of shares (except shares authorized),  stock option data, additional
     paid-in capital, and per share information have been retroactively restated
     to reflect the stock  split,  which  presentation  is  consistent  with the
     recapitalization of the Company (see Note 8).

     Private placement:

     As of December 31, 1997,  the Company had commenced a private  placement of
     30 units  (10,000  shares of its $.001 par value  common stock per unit) at
     $27,500 per unit,  $2.75 per share,  which  closed on January 15, 1998 with
     gross proceeds of $825,000 (see Note 8).

     Capital contributions:

     In December 1997, certain shareholders of the Company contributed a portion
     of their  common stock to an  individual  providing  business  advisory and
     legal   services  to  the  Company   (78,300  shares  valued  at  $156,000,
     approximately  $2.00 per share) and to the  Chairman of the  Pharmaceutical
     Sciences  Department of a university as partial settlement for research and
     development  services  (259,042  shares  valued at $518,000,  approximately
     $2.00 per  share).  The  expense  and  related  capital  contributions  are
     reflected at December 31, 1997.


                                      F-11

<PAGE>


                                 ENTROPIN, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                          NOTES TO FINANCIAL STATEMENTS

                           December 31, 1996 and 1997



5.   Basic net loss per share:
     -------------------------

     Basic net loss per share is based on the weighted  average number of shares
     outstanding  during the periods,  5,220,000 shares.  Diluted loss per share
     has not been presented as exercise of the  outstanding  stock options would
     have an antidilutive effect.

6.   Commitments and contingencies
     -----------------------------

     Compensation agreements:

     In 1993,  the Company  entered into a 30 year  compensation  agreement with
     I.B.C.  limited  partners  owning  64.28% of the limited  partnership.  The
     I.B.C.  Limited  Partnership  participated  in  the  early  development  of
     Estrom(R)  (the  medicine) and owned the patent rights to three patents and
     all  intellectual  property rights.  Under the terms of the Agreement,  the
     Company  acquired  all of the patent and  intellectual  property  rights in
     exchange  for  certain  compensation  to the  limited  partners,  which  is
     dependent upon the Company's receipt of a marketing partners  technological
     access  fee  and  royalty   payments.   The  partnership  was  subsequently
     dissolved.  Compensation  under the  agreement  includes a bonus payment of
     $96,420 to be paid at the time the Company is  reimbursed by a drug company
     for past expenses paid for  development of the medicine,  as well as 64.28%
     of a decreasing  payment  rate (3% to 1%) on  cumulative  annual  royalties
     received by the Company.  As of December 31, 1996 and 1997, no  liabilities
     have been accrued with respect to this agreement.

     In a separate agreement with a former I.B.C.  limited partner,  the Company
     has agreed to pay the partner 35.72% of a decreasing  earned payment (3% to
     1% on cumulative annual sales of products by the Company) until October 10,
     2004.  From October 10, 2004 until  October 10, 2014,  the Company will pay
     the partner 17.86% of the earned payment. In accordance with the agreement,
     the  Company  has agreed to pay the former  limited  partner  the amount of
     $40,000  and a minimum  earned  payment  of  $3,572  per  calendar  quarter
     beginning  on December  31,  1989.  Such  minimum  earned  payment is to be
     evidenced  by a  promissory  note issued each  quarter and payable when the
     Company is either  reimbursed for expenses paid for the  development of the
     medicine or from the first income  received from the Company from net sales
     of the  medicine.  The  quarterly  payments  are to be applied  against the
     earned  payment to be received by the limited  partner.  As of December 31,
     1996, and 1997, the total liability  accrued with respect to this agreement
     totaled $111,440 and $155,495, respectively.

     Consulting Agreement:

     On March 12, 1996, the Company  entered into a Consulting  Agreement with a
     firm  whereby  the  Company  has to pay  the  firm a  $50,000  success  fee
     concurrent  with the  Company's  signing of any  agreement  establishing  a
     corporate partnership, product license, or any other agreement relating to


                                      F-12

<PAGE>

                                 ENTROPIN, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                          NOTES TO FINANCIAL STATEMENTS

                           December 31, 1996 and 1997



6.   Commitments and contingencies (continued)
     -----------------------------------------

     the  marketing  of the  medicine.  As of December  31,  1997,  a payable of
     $25,000 has been recorded with respect to this agreement.

     Development of New Products Agreement:

     On January 26, 1987, the Company entered into a Development of New Products
     Agreement  with  a  university  whereby  the  university  provides  various
     services  including  research and development,  product  formulations,  and
     clinical supply for the Company relating to its development of the medicine
     on a project by project basis.  Prior to the  commencement of each project,
     the Company and the university will mutually agree on the nature, type, and
     timing of each special  project as well as the terms of compensation to the
     university.  Under the agreement, the university is required to disclose to
     the Company all inventions,  discoveries, or improvements conceived or made
     by the  university  and has  agreed  to  assign  all its  interests  to the
     Company.

     Compensation Agreement:

     During  November  1997,  the Company began  negotiating  with an individual
     regarding compensation for research and development services provided since
     the inception of the Company.  In exchange for these services,  the Company
     agreed  to issue an 8% note  payable  to the  individual  in the  principal
     amount of $1,500,000  maturing  December 31, 2000.  The Company has accrued
     related  costs of  $1,430,000  as of December 31, 1996,  and  increased the
     liability to  $1,500,000  as of December 31, 1997.  Subsequent to year end,
     the  Company   converted  this  obligation  to  1,500,000   shares  of  its
     non-voting,  non-cumulative redeemable 8% Series "A" preferred stock, at $1
     per share (see Note 8). In  addition,  effective  December  15,  1997 three
     stockholders  of the Company  agreed to transfer a portion of their  common
     stock to provide the individual  with  approximately  5% of the outstanding
     common shares (see Note 4).


                                      F-13



<PAGE>


                                 ENTROPIN, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                          NOTES TO FINANCIAL STATEMENTS

                           December 31, 1996 and 1997



6.   Commitments and contingencies (continued)
     -----------------------------------------

     Development and Supply Agreement:

     On January 1, 1997, the Company entered into 10 year Development and Supply
     Agreements  with  Mallinckrodt,  Inc.  to  develop  all of  the  chemistry,
     manufacturing  and controls to comply with the drug master file of the Food
     and Drug  Administration  as well as supply  the bulk  active  product  for
     marketing.  In  exchange  for these  services,  Mallinckrodt  will  receive
     exclusive rights as a supplier of the bulk active product to the Company in
     North  America.  For the first year ended  December 31, 1997,  the contract
     price of the ingredient will be fixed based on the number of liters ordered
     by the Company. Subsequent to December 31, 1997, the cost per liter will be
     adjusted based on changes in the price of the components in the bulk active
     product.

     In  addition,   pursuant  to  the   agreement,   the  Company  has  granted
     Mallinckrodt a right of first refusal to supply the Company's  requirements
     of the bulk active product in all other parts of the world outside of North
     America.

     Management advisory services agreement:

     On October 28, 1997,  the Company  entered into a 3-year  agreement with an
     organization  providing  management  advisory services to the Company.  The
     organization provides assistance in developing and implementing a strategic
     plan of merger or  acquisition  and for  business and  financial  community
     relations.  Simultaneous  with the  closing  of any  merger or  acquisition
     arranged by the organization  and on terms  acceptable to the Company,  the
     organization  will  receive  two options to acquire  180,001  shares of the
     Company's  common stock for $100 and $504,000,  respectively  (see Note 8).
     The options  are  exercisable  for a five-year  period.  In  addition,  the
     organization  received  registration  rights for the shares  underlying the
     options.

7.   Financial instruments
     ---------------------

     The  carrying  values of cash,  accounts  receivable-shareholder,  accounts
     payable  and  advances-shareholders  approximated  fair  value  due  to the
     short-term maturities of these instruments.

     The Company  believes  that it is not  practical  to estimate a fair market
     value different from the carrying value of long-term debt.  Long-term debt,
     excluding the deferred  royalty  agreement,  was converted into  redeemable
     preferred  stock on January 15, 1998.  Both the redeemable  preferred stock
     and the deferred royalty  agreement have numerous  features unique to these
     securities and agreements as described in Notes 3 and 6.


                                      F-14
<PAGE>


8.   Subsequent events
     -----------------

     Recapitalization:

     On December 9, 1997,  the Company  entered  into an  agreement  and plan of
     merger with Vanden  Capital  Group,  Inc.  (Vanden) to exchange  all of the
     issued and  outstanding  common  shares of the  Company,  in  exchange  for
     5,220,000 shares of Vanden's $.001 par value common stock.

     Pursuant to the  agreement,  Vanden  agreed to have cash of $220,000 and no
     unpaid  liabilities at the effective date of the transaction.  The exchange
     was  consummated  on January  15,  1998.  As a condition  precedent  to the
     exchange,  the  Company  successfully  raised  gross  proceeds  of $825,000
     through a private placement of its common stock (see Note 3).

     Following the exchange, the Company's shareholders own approximately 95% of
     the outstanding  common stock of Vanden. The acquisition has been accounted
     for as a  recapitalization  of the  Company  based  upon  historical  cost.
     Accordingly,  the number authorized and issued common shares,  par value of
     common  stock and  additional  paid-in  capital  have been  restated on the
     balance sheet and the statement of stockholders' equity to give retroactive
     effect to the recapitalization.

     Issuance of preferred stock:

     On January 15, 1998,  the Company issued  3,210,487  shares of its Series A
     redeemable non-voting, non-cumulative 8% preferred stock in exchange for an
     aggregate $1,710,487 of notes payable to shareholders and accrued interest,
     and the $1,500,000 compensation agreement (see Notes 2 and 6).

     Issuance of common stock:

     In connection with the  recapitalization  effected on January 15, 1998, the
     Company  issued  180,001  shares of its $.001 par value  common stock to an
     unrelated  entity for cash of $100 as required by the  management  advisory
     services contract (see Note 6).

     License agreement:

     In January 1998,  the Company  entered into an agreement with a director of
     the Company, whereby the Company granted the director a non-exclusive right
     to make,  import  and use the  Company's  product,  Esterom(R),  under  the
     Company's   licensed   patents  and  to  use  the  Company's   confidential
     information   to  develop  new  products   that  contain  the  same  active
     ingredients as Esterom(R),  but are formulated  differently.  All rights to
     the improved products will remain the exclusive property of the Company and
     the  director  will  receive a two percent  royalty on the net sales of all
     improved products, and a negotiated royalty on new products. The expiration
     date of this agreement is January 1, 2003.


                                      F-15

<PAGE>

                                 ENTROPIN, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                          NOTES TO FINANCIAL STATEMENTS

                           December 31, 1996 and 1997



8.   Subsequent events (continued)
     ----------------------------

     Change in tax status:

     The  consummation  of the stock  exchange  with Vanden and the  issuance of
     preferred stock in January 1998,  resulted in a change in the Company's tax
     status from an S corporation  to a taxable  corporation.  The effect of the
     change  would be to provide for income tax based upon  reported  results of
     operations, and to provide deferred tax assets and liabilities on temporary
     differences between reported earnings and taxable income. Since the Company
     has had losses  since  inception,  no change in the  results of  operations
     would  have  occurred,  assuming  the  change  in  status  occurred  at the
     beginning of the periods presented.

     Unaudited pro forma combined balance sheet:

     The following table presents the unaudited pro forma combined balance sheet
     of the  Company  and  Vanden as though  the  combination  had  occurred  on
     December  31,  1997,  giving  effect to the  recapitalization,  the private
     placement and the other subsequent events described above.

     Assets:
         Current assets                               $1,034,247
         Other assets
                                                         266,456
                                                      ----------
                                                      $1,300,703
                                                      ==========
     Liabilities and stockholders' equity:
         Current liabilities                          $  428,686
         Other liabilities                               155,495
         Redeemable preferred stock                    3,210,487
         Stockholders' equity (deficit)               (2,493,965)
                                                      ----------
                                                      $1,300,703
                                                      ==========


9.   Proposed management agreement
     -----------------------------

     During March 1998,  the Company has been  negotiating  an agreement  with a
     company  experienced  in managing  pharmaceutical  development  , including
     providing  assistance  in  taking  pharmaceutical  products  to the FDA and
     through the clinical trials and New Drug Application stages of development.
     The  agreement is proposed to have a 33 month term, at the end of which the
     Company's primary product,  Esterom(R),  may be approved for marketing. The
     Company would be required to pay management fees of approximately  $900,000
     over  the term of the  agreement,  as well as grant  stock  options  to the
     company  within  thirty days after  execution of the  agreement to purchase
     450,000  shares of Entropin  common stock.  The options will have a term of
     five years from the grant date and an exercise price of $1.50.  The options
     will be exercisable in varying amounts on dates ranging from August 1998 to
     December 2000.

                                      F-16
<PAGE>
                         UNAUDITED PRO FORMA INFORMATION
                         -------------------------------



On December  9, 1997,  Vanden  Capital  Group,  Inc.  (Vanden)  entered  into an
agreement and plan of merger to acquire all of the issued and outstanding shares
of Entropin Inc. (Entropin) in exchange for 5,220,000 shares of Vanden $.001 par
value common stock and $220,000 in cash.

After  the  exchange   Entropin   shareholders  own  approximately  95%  of  the
outstanding  common stock of the surviving  company.  The Entropin  shareholders
have appointed a new Board of Directors who have in turn elected new officers.

Entropin is a pharmaceutical  research company developing Estrom(R), a topically
applied  compound for the treatment of impaired range of motion  associated with
acute lower back sprain and acute painful shoulder.

The following unaudited pro forma combined balance sheet and unaudited pro forma
combined  statement  of  stockholders'  equity  (deficit)  assume  the  exchange
occurred on December 31, 1997 and combines the financial  positions of Vanden as
of  November  30,  1997,  and  Entropin  as of  December  31,  1997,  using  the
assumptions   described  in  the  accompanying  notes.  Since  Entropin  is  the
predominant  entity,  this combination is accounted for as a recapitalization of
Entropin.

The  unaudited  pro forma  results  of the  combined  operations  of Vanden  and
Entropin  are not  presented  because  the  combination  is  accounted  for as a
recapitalization at historical cost, not a business combination.

Vanden received shareholder approval to effect the recapitalization and to amend
its  Articles  of  Incorporation  to  change  Vanden's  name to  Entropin  Inc.,
effective January 15, 1998.

                                      F-17
<PAGE>
<TABLE>

                            UNAUDITED PRO FORMA COMBINED BALANCE SHEET

                                        December 31, 1997

                                       "Vanden"      "Entropin"          Pro forma     Pro forma
                                      Historical     Historical          Adjustments   Combined
                                      ----------     ----------          -----------   --------

                                                 ASSETS
                                                 ------
<S>                                  <C>            <C>         <C>      <C>           <C>
Current assets:
   Cash                              $  307,301     $      291  (D)      $  808,856
                                                                (A)         (87,201)   $1,029,247
   Accounts receivable                        -          5,000                   -          5,000
                                     ----------     ----------           ----------    ----------

     Total current assets               307,301          5,291              721,655     1,034,247

Deferred offering costs                       -         10,746  (D)         (10,746)            -

Patent costs, net of
     amortization                             -        266,456                    -       266,456
                                     ----------     ----------           ----------    ----------

                                     $  307,301     $  282,493           $  710,909    $1,300,703
                                     ==========     ==========           ==========    ==========

                              LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
                              ----------------------------------------------

Current liabilites:
   Accounts payable                  $   12,643     $  329,813  (A)      $  (12,643)   $  329,813
   Advances-stockholders                      -         98,873                    -        98,873
                                     ----------     ----------           ----------    ----------

     Total current liabilites            12,643        428,686              (12,643)      428,686

Long-term debt:
   Stockholders                               -      1,710,487  (E)      (1,710,487)            -
   Deferred royalty agreement                 -        155,495                    -       155,495
   Compensation agreement                     -      1,500,000  (E)      (1,500,000)            -
                                     ----------     ----------           -----------    ---------

     Total long-term debt                     -      3,365,982           (3,210,487)      155,495

Redeemable preferred stock                    -              -            3,210,487     3,210,487

Stockholders' equity (deficit):
   Preferred stock                            -              -                    -             -
   Common stock                           9,002          5,220               (8,222)        6,000

   Additional paid-in capital           687,469      1,043,780              329,961     2,061,210

   Deficit accumulated during
     the development stage             (401,813)    (4,561,175)             401,813    (4,561,175)
                                     ----------     -----------          ----------    ----------

      Total stockholders'
         equity (deficit)               294,658     (3,512,175)             723,552    (2,493,965)
                                     ----------     ----------           ----------    ----------

                                     $  307,301     $  282,493           $  710,909    $1,300,703
                                     ==========     ==========           ==========    ==========
</TABLE>
                                                    F-18
<PAGE>
<TABLE>
<CAPTION>
            UNAUDITED PRO FORMA COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

                                       December 31, 1997

                                        "Vanden"     "Entropin"          Pro forma     Pro forma
                                        Historical   Historical          Adjustments   Combined
                                        ----------   ----------          -----------   ---------
<S>                                    <C>          <C>             <C>  <C>          <C>
Series A redeemable preferred
   stock, $.001 par value;
    3,210,487, shares issued
    and outstanding                    $      -     $         -     (E)  $3,210,487   $ 3,210,487
                                       ========     ============          ==========  ===========

Stockholders' equity (deficit):
   Preferred stock, $.001 par
     value; 10,000,000 shares
     authorized, Series A
     reported above                    $      -     $         -          $        -   $         -

   Common  stock,  $.001  par
     value;  50,000,000  shares
     authorized, 300,050 (Vanden),
     5,220,000 (Entropin) and
     6,000,051 (combined)
     shares issued and outstanding        9,002           5,220     (B)      (8,702)
                                                                    (D)         300
                                                                    (A)         180         6,000

   Additional paid-in capital           687,469       1,043,780     (B)       8,702
                                                                    (C)    (476,471)
                                                                    (D)     797,810
                                                                    (A)         (80)    2,061,210
   Deficit accumulated
     during the
     development stage                 (401,813)     (4,561,175)    (A)     (74,658)
                                                                    (C)     476,471    (4,561,175)
                                       --------     -----------          ----------   -----------
Total stockholders' equity
   (deficit)                           $294,658     $(3,512,175)         $  723,552   $(2,493,965)
                                       ========     ============         ==========   ============
</TABLE>

                                                    F-19
<PAGE>

           NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS


The pro forma  adjustments  assume the reverse split of Vanden common stock at 1
share for 300 shares,  the  issuance of 5,220,000  shares of Vanden's  $.001 par
value common stock in exchange for the 5,220,000  issued and outstanding  shares
of Entropin's  common stock,  the private  placement of 300,000 shares of common
stock at $2.75 per  share,  the  issuance  of  180,001  shares  of common  stock
pursuant to exercise of stock option issued in connection with  recapitalization
and the issuance of 3,210,487 shares of the Series "A" preferred stock at $1 per
share.

The acquisition is accounted for as  recapitalization of Entropin and therefore,
assets and liabilities are combined at historical cost.

The  following  is a summary of the  adjustments  required  based upon the above
assumptions.

A.   Record  additional  costs  incurred to effect the  exchange  and payment of
     existing Vanden liabilities, including issuance of 180,000 shares of common
     stock.

B.   Reverse  split of Vanden  common  stock at 1 share for 300  shares  and the
     increase par value thereof from $.0001 per share to $.001 per share.

C.   Issuance of Vanden common stock in exchange for Entropin common stock.

D.   Issuance of 300,000 shares of the Company's common stock at $2.75 per share
     pursuant to a private  placement  effective January 15 1998, gross proceeds
     of $825,000 less offering and merger expenses of $26,890.

E.   Issuance of 3,210,487 shares of $.001 par value preferred stock in exchange
     for notes  payable and  accrued  interest of  $1,710,487  and  compensation
     agreement of $1,500,000.


                                      F-20