SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                 FORM 10-QSB/A-2


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

For the quarterly period ended March 31, 1998

                                       OR

/ /   TRANSITION REPORT PURSUANT TO SECTION 13 0R 15 (d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

For the transition period from                to
                               --------------    ---------------
Commission file number: 33-23693

                                 Entropin, Inc.
             ------------------------------------------------------
             (Exact name of Registrant as specified in its charter)

           Colorado                                        84-1090424
-------------------------------                     ----------------------------
(State or other jurisdiction of                     (IRS Employer Identification
 incorporation or organization)                      Number)

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

                                  (760) 775-8333
                         -------------------------------
                         (Registrant's telephone number)

                                       N/A
              ----------------------------------------------------
              (Former name, former address and former fiscal year,
                          if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed  by  Section  13 of 15 (d) of the  Securities  Exchange  Act of 1934
during the preceding 12 months (or for such shorter  period that the  registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days: Yes X   No
                                      ---    ---

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

The number of shares  outstanding  of the issuer's  common stock,  as of May 14,
1998 is 6,000,051 shares $.001 par value.

<PAGE>
                                      INDEX


                                                                  Page No.
                                                                  --------

PART I.           FINANCIAL INFORMATION
-------           ---------------------

Item 1.     Financial statements:

Balance Sheet - December 31, 1997 and March 31, 1998 (unaudited          2

Statement of Operations -  For the Three Months Ended March 31,
1997 and 1998 and Cumulative Amounts from Inception (August 27,
1984) Through March 31, 1998 (unaudited)                                 3

Statement of Stockholders' Equity - For the Three Months Ended
March 31, 1998 (unaudited)                                               4

Statement of Cash Flows - For the Three Months Ended March 31,
1997 and 1998 and Cumulative Amounts from Inception (August 27,
1984) Through March 31, 1998 (unaudited)                                 5

Notes to Unaudited Financial Statements                                  6

Item 2. Management's Discussion and Analysis or Results of Operations   13



PART II.          OTHER INFORMATION                                     15
--------          -----------------                                     --

<PAGE>
<TABLE>
<CAPTION>
                                       ENTROPIN, INC.

                                (A DEVELOPMENT STAGE COMPANY)

                                       BALANCE SHEET

                             December 31, 1997 and March 31, 1998

                                          ASSETS
                                          ------

                                                                  1997         1998
                                                                  ----         ----
<S>                                                            <C>          <C>
Current assets:
   Cash                                                        $      291   $  538,506
   Accounts receivable - stockholder                                5,000        5,000
                                                               ----------   ----------
     Total current assets                                           5,291      543,506

Deferred stock offering costs (Note 5)                             10,746            -

Patent costs, less accumulated amortization of
   $40,300 (1997) and $44,800 (1998)                              266,456      261,956
                                                               ----------   ----------
                                                               $  282,493   $  805,462
                                                               ==========   ==========

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

Current liabilities:
   Accounts payable                                            $  329,813   $   31,567
   Advances - stockholders (Note 2)                                98,873            -
                                                               ----------   ----------
     Total current liabilities                                    428,686       31,567

Long-term debt:
   Stockholders (Note 4)                                        1,710,487            -
   Deferred royalty agreement (Note 7)                            155,495      159,067
   Compensation agreement (Note 4)                              1,500,000            -
                                                               ----------   ----------
     Total long-term debt                                       3,365,982      159,067

Commitments (Notes 2 and7)

Series A redeemable preferred stock,
   $.001 par value, 3,210,487 shares
   authorized, 3,210,487 shares issued
   and outstanding (1998)(Note 4)                                       -    3,210,487

Stockholders' equity (deficit) (Note 5):
   Preferred stock, $.001 par value; 10,000,000 shares
     authorized, Series A reported above                                -            -
   Common stock, $.001 par value; 50,000,000 shares
     authorized, 5,220,000 (1997) and 6,000,051 (1998)
     shares issued and outstanding                                  5,220        6,000
   
   Additional paid-in capital                                   1,296,780    2,314,210
   Deficit accumulated during the development stage            (4,814,175)  (4,915,869)
                                                               ----------   ----------
    
     Total stockholders' equity (deficit)                      (3,512,175)  (2,595,659)
                                                               ----------   ----------
                                                               $  282,493   $  805,462
                                                               ==========   ==========
</TABLE>
                                 See accompanying notes.
                                            -2-
<PAGE>
                                 ENTROPIN, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                             STATEMENT OF OPERATIONS

               For the Three Months Ended March 31, 1997 and 1998
      and for the Period from August 27, 1984 (inception) to March 31, 1998
                                  (Unaudited)

                                                                    Cumulative
                                                                   amounts from
                                             1997          1998     inception
                                             ----          ----    ------------
   
Costs and expenses:
   Research and development               $  37,843     $   3,772   $ 3,950,626
   General and administrative                 6,598        95,372       665,627
   Rent - related party (Note 2)                  -         2,080         2,080
   Depreciation and amortization              3,862         4,500        61,868
                                          ---------     ---------   -----------
     Operating loss                         (48,305)     (105,724)   (4,680,201)

Other  income (expense):
   Interest income                                -         4,509         4,509
   Interest expense                         (36,579)         (479)     (240,177)
                                          ---------     ---------   -----------
     Total other income (expense)           (36,579)        4,030      (235,668)
                                          ---------     ---------   -----------
Net loss                                  $ (84,884)    $(101,694)  $(4,915,869)
                                          =========     =========   ===========
Basic loss per common share               $    (.02)    $    (.02)  $      (.94)
                                          =========     =========   ===========
    
Weighted average common shares
   outstanding (Note 6)                   5,220,000     5,870,000     5,232,000
                                          =========     =========   ===========

                            See accompanying notes.
                                       -3-
<PAGE>
<TABLE>
<CAPTION>
                                           ENTROPIN, INC.
                                   (A DEVELOPMENT STAGE COMPANY)

                       STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

                              For the Three Months Ended March 31, 1998
                                                                                                      Deficit
                                                                                                     accumulated
                                                                  Common Stock        Additional      during the
                                                              --------------------     paid-in       development
                                                              Shares        Amount     capital          stage
                                                              ------        ------    ----------     -----------
   
<S>                                                          <C>            <C>       <C>            <C>
Balance, December 31, 1997                                   5,220,000      $5,220    $1,296,780     $(4,814,175)

   Sale of common stock for cash ($2.75 per share)             300,000         300       797,810               -
     (Note 5)

   Issuance of common stock pursuant to recapitalization
      (Note 5)                                                 480,051         480       219,620               -
   Net loss for the three months ended March 31, 1998                -           -             -        (101,694)
                                                             ---------      ------    ----------     -----------
Balance, March 31, 1998                                      6,000,051      $6,000    $2,314,210     $(4,915,869)
                                                             =========      ======    ==========     ===========
    
</TABLE>






                                                 See accompanying notes.
                                                           -4-
<PAGE>
<TABLE>
<CAPTION>
                                     ENTROPIN, INC.
                              (A DEVELOPMENT STAGE COMPANY)

                                 STATEMENT OF CASH FLOWS

             For the Three Months Ended March 31, 1997 and 1998 and for the
               Period from August 27, 1984 (inception) to March 31, 1998
                                      (Unaudited)

                                                                               Cumulative
                                                                                amounts
                                                                                 from
                                                     1997         1998          inception
                                                     ----         ----         ----------
   
<S>                                                <C>          <C>            <C>
Cash flows from operating activities:
   Net loss                                        $(84,884)    $(101,694)     $(4,915,869)
   Adjustments to reconcile net loss to net
    cash used in operating activities:
      Depreciation and amortization                   3,862         4,500           61,868
      IBC partner royalty agreement                   4,763         3,572          159,067
      Services contributed in exchange
        for stock                                         -             -          947,000
      Services contributed in exchange for
        compensation agreements                      23,333             -        2,231,678
      Increase in accounts receivable -
        shareholder                                       -             -           (5,000)
      Increase (decease) in accounts payable          3,761      (298,246)          31,567
      Increase in accrued interest                   32,188             -          169,139
      Other                                               -             -              131
                                                   --------     ---------      -----------
      Total adjustments                              67,907      (290,174)       3,595,450
                                                   --------     ---------      -----------
      Net cash used in operations                   (16,977)     (391,868)      (1,320,419)

Cash flows from investing activities:
   Purchase of equipment                                  -             -          (17,207)
   Patent costs                                           -             -         (306,756)
                                                   --------     ---------      -----------
      Net cash used in investing activities               -             -         (323,963)

Cash flows from financing activities:
   Proceeds from recapitalization                         -       220,100          220,100
   Deferred stock offering costs                          -        10,746                -
   Proceeds from sale of common stock                     -       798,110        1,153,110
   Outstanding checks in excess of
    bank balance                                      3,300             -                -
   Proceeds from stockholder loans                        -             -          809,678
   Proceeds from (payments on) stockholder
    advances                                         12,000       (98,873)               -
                                                   --------     ---------      -----------
      Net cash provided by financing
         activities                                  15,300       930,083        2,182,888
                                                   --------     ---------      -----------
Net increase (decrease) in cash                      (1,677)      538,215          538,506

Cash at beginning of period                           1,677           291                -
                                                   --------     ---------      -----------
Cash at end of period                              $      -     $ 538,506      $   538,506
                                                   ========     =========      ===========
    
</TABLE>

                                  See accompanying notes.
                                            -5-
<PAGE>

                                  ENTROPIN, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

                                 March 31, 1998


The  accompanying  financial  statements  of the Company  have been  prepared in
accordance with generally accepted  accounting  principles for interim financial
information and with the  instructions  to Form 10-QSB.  Certain notes and other
information have been condensed or omitted from the interim financial statements
presented  in  this  report.  Accordingly,  they  do  not  include  all  of  the
information and footnotes required by generally accepted  accounting  principles
for complete financial statements.  In the opinion of management,  the financial
statements reflect all adjustments considered necessary for a fair presentation.
The  results of  operations  for the three  months  ended March 31, 1998 are not
necessarily  indicative  of the  results to be expected  for the full year.  For
further  information,  refer to the financial  statements and footnotes  thereto
included  in the  Company's  Annual  Report on Form  10-KSB  for the year  ended
December 31, 1997 as filed with the Securities and Exchange Commission.

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

     Organization:

     Entropin, Inc., a Colorado corporation,  was organized 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.

     On January 15,  1998,  the Company  consummated  an  agreement  and plan of
     merger with Vanden Capital Group, Inc.  (Vanden),  in which Vanden acquired
     all of the issued and  outstanding  common  shares of the Company (see Note
     5). The  Company  was merged into  Vanden,  and Vanden  changed its name to
     Entropin,  Inc. For accounting purposes the acquisition has been treated as
     a  recapitalization  of the Company,  based upon historical cost, a reverse
     acquisition with the Company as the acquirer.

     Basis of presentation and management's 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 an
     accumulated  deficit  at  March  31,  1998  of  $4,915,869.  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.
    
                                      -6-
<PAGE>
                                 ENTROPIN, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

                                 March 31, 1998


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

     As  described in Note 5, 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.

     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 5. 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.

     Impairment of long-lived assets:

     The Company  evaluates  the potential  impairment  of long-lived  assets in
     accordance  with  Statement  of  Financial  Accounting  Standards  No. 121,
     ACCOUNTING  FOR THE  IMPAIRMENT  OF  LONG-LIVED  ASSETS AND FOR  LONG-LIVED
     ASSETS TO BE  DISPOSED  OF.  The  Company  annually  reviews  the amount of
     recorded long-lived assets for impairment.  If the sum of the expected cash
     flows from these assets is less than the carrying amount,  the Company will
     recognize an impairment loss in such period.


                                     -7-


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

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

                                 March 31, 1998

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

     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,  the
     balance at any one financial institution may exceed FDIC limits.

     Reclassifications:

     Certain  reclassifications  have been made to the 1997 financial statements
     to conform to the 1998 financial statement presentation.

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

     Lease agreement:

     In February 1998, the Company entered into an office lease arrangement with
     a  shareholder.  The lease has a two-year term expiring on February 1, 2000
     and a monthly rent of $1,040.

     Advances - stockholders:

     At December  31, 1997,  an  aggregate  of $98,873 had been  advanced to the
     Company by two shareholders.  The advances were repaid in January 1998 from
     proceeds associated with the recapitalization of the Company (see Note 5).

3.   Income taxes
     ------------

     The  consummation  of the stock  exchange  with Vanden and the  issuance of
     preferred  stock in January 1998 (see Note 5),  resulted in a change in the
     Company's tax status from an S corporation  to a taxable  corporation.  The
     effect of the  change is 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.


                                     -8-
<PAGE>
                                 ENTROPIN, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

                                 March 31, 1998

4.   Redeemable 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.  The annual 8% dividend is based
     upon a $1.00 per share value, and is only payable out of earnings.

5.   Stockholders' equity
     --------------------

     Recapitalization:

     On December 9, 1997,  the Company  entered  into an  agreement  and plan of
     merger  with 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, a reverse acquisition.
   
     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.   In   connection   with  the
     recapitalization,  the Company issued 180,001 shares of its $.001 par value
     common stock for cash of $100 and options to purchase an additional 180,001
     shares of common  stock for $2.80 per share,  as required  by a  management
     advisory  services  contract  as  compensation  for  arranging  a merger or
     acquisition  acceptable  to the Company.  The  difference  between the fair
     value of the stock, estimated by the Company to be $2.75 per share, and the
     purchase  price for the initial  180,001  shares was treated as  additional
     cost of the merger and changed to capital,  consistent  with accounting for
     the  reverse  acquisition  as a  recapitalization.  The net  effect of this
     transaction  was to record an increase and related  decrease to  additional
     paid-in  capital of  $495,000.  The  remaining  options to acquire  180,001
     shares are exercisable for a five-year period.
    
     Following the exchange, the Company's shareholders own approximately 95% of
     the outstanding  common stock of Vanden.  The reverse  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.

     Private placement:

     On January 15, 1998, the Company  completed a private  placement of 300,000
     shares of its $.001 par value common stock for gross  proceeds of $825,000,
     $2.75 per share.

                                     -9-
<PAGE>
                                 ENTROPIN, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

                                 March 31, 1998


6.   Loss per share
     --------------

     Basic net loss per share is based on the weighted  average number of shares
     outstanding during the periods. Shares issued for nominal consideration are
     considered outstanding since inception. Diluted loss per share has not been
     presented  as  exercise  of the  outstanding  stock  options  would have an
     anti-dilutive effect.

7.   Commitments
     -----------

     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 March 31, 1998 , 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  1,  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, and March 31, 1998, the total liability  accrued with respect to this
     agreement totaled $155,495 and $159,067, respectively.

                                     -10-
<PAGE>
                                 ENTROPIN, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

                                 March 31, 1998


7.   Commitments (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.

     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.

     Management agreement:

     During April 1998,  the Company  entered into an agreement with the Western
     Center for Clinical Studies, Inc. (WCCS), 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  Company is required to pay
     management  fees of $880,400  over the 33 month term of the  agreement,  as
     well as grant stock options to WCCS 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.

                                     -11-
<PAGE>
                                ENTROPIN, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

                                 March 31, 1998


7.   Commitments (continued)
     -----------------------

     The  difference  between the fair value of the options at date of grant and
     the  exercise   price,   totaling   approximately   $1,950,000   using  the
     Black-Scholes  option -  pricing  model,  will be  recorded  as  additional
     paid-in  capital  and  unearned  stock  compensation.  The  unearned  stock
     compensation will be amortized to expense on a straight-line basis over the
     33 month term of the agreement.

8.   Subsequent event
     ----------------

     On May 5,  1998,  the  Company  amended  an  existing  management  advisory
     services  agreement with an  organization  to extend the agreement  through
     October 28, 2000 and to provide a monthly fee of $5,000 to the organization
     through April 1, 1999. As additional  compensation,  the  organization  was
     granted an option to purchase up to 100,000  shares of the Company's  $.001
     par value common stock at a purchase  price of $4.00 per share.  The rights
     granted under the stock option are exercisable if written notice of a right
     to exercise  the option is given by the Company to the  organization  on or
     before 180 days from May 5, 1998.




                                      -12-
<PAGE>

Item 2. Management's discussion and analysis or plan of operation
        ---------------------------------------------------------

     PLAN OF OPERATION:

     Entropin,  Inc. is a development stage  pharmaceutical  company and has not
     generated  any  revenues  for the period from  August 27, 1984  (inception)
     through  March  31,  1998.  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.

     Entropin  has  been  unprofitable  since  inception  and  expects  to incur
     substantial  additional operating losses for the next 12 months, as well as
     for 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, in
     January 1998, the Company has  successfully  completed a private  placement
     and a  reverse  acquisition  accounted  for  as a  recapitalization  of the
     Company that will provide additional  liquidity for the Company for current
     operations.  The Company  estimates,  however,  that an additional  private
     placement of $2,000,000 in equity or debt securities may be required during
     1998, as well as additional funding of up to $6,000,000 over the next three
     years to successfully complete the FDA approval process.

     The Company  recently entered into an agreement with the Western Center for
     Clinical  Studies,  Inc.  (WCCS), a California  corporation  experienced in
     managing  pharmaceutical  development.  During  the 33  month  term  of the
     agreement,  WCCS will assist the Company in obtaining  FDA approval for its
     product Esterom(R),  implementing a business plan and providing experienced
     personnel to bring  Esterom(R)  to  commercialization.  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 the 33 month period at an exercise  price of
     $1.50 per share.

     RESULTS OF OPERATIONS:

     During the three months ended March 31, 1998,  Entropin  incurred a loss of
     $101,694, as compared to a loss of $84,884 for the three months ended March
     31, 1997.  The increase  resulted  primarily from an increase of $90,854 in
     general  and  administrative  expenses,  relating  to  recapitalization  of
     Entropin  and  negotiation  of an  agreement  with The  Western  Center for
     Clinical  Studies,  Inc.  (WCCS).  Interest  expense  decreased  in 1998 by
     $36,100 as a result of conversion of notes payable to redeemable  preferred
     stock on January 15, 1998. Research and development costs also decreased by
     $34,073 due to the Company  concentrating it's efforts on negotiations with
     WCCS and the recapitalization during the first quarter of 1998.

     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.

                                      -13-

<PAGE>

     CAPITAL RESOURCES AND LIQUIDITY:

     In  the  years  since  inception,  Entropin  has  financed  its  operations
     primarily  through the sale of shares of Entropin  common stock,  and loans
     and advances from shareholders.  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 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.
     The  Company  was  merged  into  Vanden,  and  Vanden  changed  its name to
     Entropin,  Inc. For accounting purposes the acquisition has been treated as
     a  recapitalization  of the Company based upon  historical  cost (a reverse
     acquisition),  with the Company as the acquirer. Pursuant to the agreement,
     Vanden provided cash of $220,000.

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

     In January 1997, the Company entered into Development and Supply Agreements
     with Mallinckrodt, Inc. ("Mallinckrodt") for ten (10) year terms to develop
     all of the chemistry,  manufacturing and controls  necessary to comply with
     the drug  master  file of the FDA,  as well as to  supply  the bulk  active
     product.  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 year ended December 31, 1997, the contract price of
     the  ingredient  was fixed  based on the  number of liters  ordered  by the
     Company.  In subsequent years, the cost per liter will be adjusted based on
     changes in the price of the components in the bulk active product.


                                     -14-


<PAGE>
                                     PART II

                                OTHER INFORMATION

ITEM 1.  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.

ITEM 2.   CHANGES IN SECURITIES.

         (a) On January 15, 1998,  the security  holders of the Company voted on
and approved 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") was exchanged  and  converted  into one share of $.001 par value
Common Stock (the "New Common 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.

         (c) During the past three years,  the Registrant or Old Entropin issued
its  securities  to the  following  persons for the cash or other  consideration
indicated in transactions that were not registered under the 1933 Act.

                                       I.

                  January 1998 Private Placement (Old Entropin)
                  ---------------------------------------------

                         No. of Shares of
Name                       Common Stock                   Consideration Received
----                     ----------------                 ---------------------

Suzanne Oliphant              10,000                             $27,500
Albert W. White               10,000                             $27,500
Stephen H. West               20,000                             $55,000
C. Richard Harrison           10,000                             $27,500
Jeanette Y. Mihaly            20,000                             $55,000
Joy Ann Svenson               10,000                             $27,500
Richard L. Monfort           180,000                            $495,000
David T. Treadwell            10,000                             $27,500


                                      -15-

<PAGE>
                         No. of Shares of
Name                       Common Stock                   Consideration Received
----                     ----------------                 ----------------------

David Bressler                 5,000                             $13,750
Gerald Olesh                  10,000                             $27,500
Arthur Kassoff                10,000                             $27,500
Armond A. Azharian             5,000                             $13,750
                             -------                            --------
        Total                300,000                            $825,000
                             =======                            ========

         The offers and sales set forth in I above  were made in  reliance  upon
the exemption from registration  provided by Section 4(2) of the 1933 Act and/or
Regulation D and Rule 506 adopted thereunder. All of the purchasers are known by
Old Entropin's  (now the  Registrant's)  president,  Higgins D. Bailey,  or were
referred to him by other  purchasers  in this  offering.  Based upon the written
representations  made by the  purchasers  and  other  information  known  to the
Registrant,  the  Registrant  believes  all of the  purchasers  were  accredited
investors as that term is defined in Rule 501 of Regulation D. No broker/dealers
were  involved  in the  sale  and  no  commissions  were  paid.  All  purchasers
represented  that  they  purchased  the  securities  for  investment,   and  all
certificates  issued to the purchasers were impressed with a restrictive  legend
advising  that  the  shares   represented  by  certificates  may  not  be  sold,
transferred, pledged or hypothecated without having first been registered or the
availability  of an  exemption  from  registration  established.  Stop  transfer
instructions have been placed against the transfer of these  certificates by the
Registrant's Transfer Agent.

                                       II.

         In  November  1997,  Old  Entropin  issued an 8% note in the  principal
amount of  $1,500,000  maturing  December  31, 2000  payable to James E. Wynn as
compensation for research and development  services provided since the inception
of the Company.  In January  1998,  Old Entropin  converted  this  obligation to
1,500,000  shares  of its  redeemable  8%  non-voting,  non-cumulative  Series A
preferred stock, at $1.00 per share. The issuance of the promissory note and the
subsequent  conversion  into  shares of Series A  preferred  stock  were made in
reliance upon the exemption  from  registration  provided by Section 4(2) of the
Act. The purchaser  represented  that he acquired the securities for investment,
and all  certificates  issued to the purchaser were impressed with a restrictive
legend  advising that the shares  represented by  certificates  may not be sold,
transferred, pledged or hypothecated without having first been registered or the
availability  of an  exemption  from  registration  established.  Stop  transfer
instructions have been placed against the transfer of these  certificates by the
Registrant's Transfer Agent.

                                      -16-
<PAGE>

                                      III.

                       Debt/Equity Exchange (Old Entropin)
                       -----------------------------------


                             No. of Shares of Series
      Name                      A Preferred Stock         Consideration Received
      ----                   -----------------------      ----------------------

Higgins D. Bailey                     178,000                   $  178,000
Lowell M. Somers                      822,446                   $  822,446
Thomas T. Anderson Trust              710,041                   $  710,041
                                    ---------                   ----------
      Total                         1,710,487                   $1,710,487
                                    =========                   ==========

         Old Entropin had accrued $1,710,487,  including interest,  in long-term
debt owed to the  abovementioned  stockholders at December 31, 1996 and 1997. On
January 15, 1998, Old Entropin converted all of such long-term debt plus accrued
interest  to  1,710,487  shares  of Old  Entropin's  redeemable  8%  non-voting,
non-cumulative  Series  A  Preferred  Stock  at $1 per  share,  for a  total  of
$1,710,487.  The issuance of the shares of Series A preferred  stock was made in
reliance upon the exemption  from  registration  provided by Section 4(2) of the
Act.  The  purchasers   represented   that  they  acquired  the  securities  for
investment,  and all certificates issued to the purchasers were impressed with a
restrictive  legend advising that the shares represented by certificates may not
be  sold,  transferred,  pledged  or  hypothecated  without  having  first  been
registered or the  availability of an exemption from  registration  established.
Stop  transfer  instructions  have been  placed  against  the  transfer of these
certificates by the Registrant's Transfer Agent.

                                       IV.

         In December,  1997,  Old Entropin  entered into an agreement with LMU &
Company  ("LMU").  As  partial   consideration  for  LMU's  services  under  the
agreement,  Old  Entropin  issued an option to  purchase  180,001  shares of Old
Entropin's  common  stock,  exercisable  for cash of $100.  The  issuance of the
option to LMU was made in reliance upon the exemption from registration provided
by Section 4(2) of the Act. No  broker/dealers  were involved in the sale and no
commissions  were  paid.  LMU  represented  that LMU  acquired  the  option  for
investment  and not with a view to  distribution.  LMU  exercised  its option in
January 1998. Stop transfer  instructions  have been placed against the transfer
of these certificates by the Registrant's transfer agent.

                                       V.

                    January 1998 Vanden-Old Entropin Merger
                    ---------------------------------------

     On January 15,  1998,  in order to  consummate  the  Agreement  and Plan of
Merger with  Entropin,  Inc., a California  corporation  ("Old  Entropin"),  the
Registrant  issued  5,700,001  shares of its Common  Stock,  $.001 par value per

                                      -17-


<PAGE>

share,  and  3,210,487  shares  of  the  Company's   redeemable  8%  non-voting,
non-cumulative  Preferred Stock,  $.001 par value per share, in exchange for all
of the issued and outstanding  shares of Common Stock and Preferred Stock of Old
Entropin on a one-for-one basis, as follows:
<TABLE>
<CAPTION>
                                                                                Consideration Received
                                                                                     No. of Old
                                              No. of Shares                        Entropin Shares
                                         ----------------------------        -----------------------------
                                                            Series A                             Series A
Name                                      Common            Preferred          Common            Preferred
----                                      ------            ---------          ------            ---------
<S>                                      <C>                <C>               <C>                <C>
Caroline T. Somers                       1,145,793                            1,145,793

Higgins D. & Shirley A. Bailey           1,404,093                            1,404,093

Higgins D. Bailey, Pledge                1,404,093                            1,404,093

Higgins D. Bailey                                             178,000                              178,000

Chandler G. Brown                          257,085                              257,085

CapMac Eighty-Two LP                        73,130                               73,130

Milton D. McKenzie, Trustee for
The Milton D. McKenzie
Revocable Trust                            102,834                              102,834

Milton D. McKenzie                          52,632                               52,632

James E. Wynn                              518,085          1,500,000           518,085          1,500,000

CKC Partners                                78,300                               78,300

Danny and Nancy Yu                          10,000                               10,000

Brent and Marlene Jackson                   50,000                               50,000

William J. Currin                           10,000                               10,000

Jacquelyn D. Anderson Baker                  5,455                                5,455

Interstate Johnson Lane Corp.               10,000                               10,000

Dennis K. Metzler                            5,000                                5,000

Jerry L. And Nancy Sands                     1,000                                1,000

The Macy Family Trust                       10,000                               10,000

Dewey H. And Virginia Crim                  20,000                               20,000

</TABLE>
                                                       -18-

<PAGE>
<TABLE>
<CAPTION>
                                                                                Consideration Received
                                                                                     No. of Old
                                              No. of Shares                        Entropin Shares
                                         ----------------------------        -----------------------------
                                                            Series A                             Series A
Name                                      Common            Preferred          Common            Preferred
----                                      ------            ---------          ------            ---------
<S>                                       <C>                <C>               <C>                <C>
James W. Toot                               7,500                                7,500

Robert L. Simpson                           5,000                                5,000

Gladys F. Decker & Deloras D.
Hunter, Trustees for Gladys F.
Decker Trust No. 1                         20,000                               20,000

Donald Hunter, Trustee of the
Donald Hunter Residuary Marital
Trust                                      80,000                               80,000

Deloras Decker Hunter, Trustee
of the Deloras Decker Hunter
Generation Skipping Trust                  10,000                               10,000

Lowell M. Somers                                             822,446                              822,446

Thomas T. Anderson Trust                                     710,041                              710,041

The Underwood Family Partners              60,001                               60,001

Steven C. & Lynn T. Quoy                   60,000                               60,000

Suzanne Oliphant                           10,000                               10,000

Albert W. White                            10,000                               10,000

Stephen H. West                            20,000                               20,000

C. Richard Harrison                        10,000                               10,000

Jeanette Y. Mihaly                         20,000                               20,000

Joy Ann Svenson                            10,000                               10,000

Richard L. Monfort                        180,000                              180,000

David T. Treadwell                         10,000                               10,000

David Bressler                              5,000                                5,000
</TABLE>

                                                     -19-

<PAGE>
<TABLE>
<CAPTION>
                                                                                Consideration Received
                                                                                     No. of Old
                                              No. of Shares                        Entropin Shares
                                         ----------------------------        -----------------------------
                                                            Series A                             Series A
Name                                      Common            Preferred          Common            Preferred
----                                      ------            ---------          ------            ---------
<S>                                      <C>                <C>               <C>                <C>
Gerald Olesh                                10,000                               10,000

Arthur Kassoff                              10,000                               10,000

Armond A. Azharian                           5,000                                5,000
                                         ---------          ---------         ---------          ---------
     TOTAL                               5,700,001          3,210,487         5,700,001          3,210,487
                                         =========          =========         =========          =========
</TABLE>

          The exchange of Old Entropin  shares for shares of the  Registrant was
effected  under the exemption from  registration  provided under Section 4(2) of
the Act and Rule 506 of Regulation D promulgated  thereunder,  for  transactions
not involving a public offering.  Based upon the written representations made by
the investors and other  information  known to the  Registrant,  the  Registrant
believes all of the investors were accredited  investors as that term is defined
in Rule 501 of Regulation D. All investors  represented  that they purchased the
securities for  investment,  and all  certificates  issued to the investors were
impressed  with a restrictive  legend  advising that the shares  represented  by
certificates  may not be sold,  transferred,  pledged  or  hypothecated  without
having  first  been  registered  or  the   availability  of  an  exemption  from
registration established. No broker/dealers were involved with the exchange, and
no commissions  were paid. Stop transfer  instructions  have been placed against
the transfer of these certificates by the Registrant's transfer agent.

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

         A Special Meeting of the Company's shareholders was held on January 15,
1998.  The  following  matters were  submitted to and approved by the  Company's
shareholders:

         1. A proposal to approve the acquisition  (the "Entropin  Acquisition")
by the Company of all of the outstanding shares of Entropin,  Inc., a California
corporation  ("Entropin"),  for shares of the Company's  New Common  Stock,  and
shares of the Company's Preferred Stock, $.001 par value per share,  pursuant to
which:  (1) the  shareholders  of Entropin  acquired  control of the Company (by
ownership of approximately  95% of the outstanding  voting shares of the Company
following  completion of the Entropin  Acquisition);  and (2) the Company become
engaged in the  pharmaceutical  research business and commercially  developing a
patented  medicinal  preparation  known as  Esterom(R),  which  was the  current
business of Entropin.


                                      -20-

<PAGE>
<TABLE>
<CAPTION>
                            % of                                     % of                                     % of
                           shares                                   shares                                   shares
        For              outstanding           Against            outstanding           Abstain            outstanding
        ---              -----------           -------            -----------           -------            -----------
     <S>                    <C>                <C>               <C>                    <C>               <C>
     57,068,400             63.4%              167,000           Less than 1%           45,000            Less than 1%
</TABLE>

         2. A proposal to approve an amendment  to Article III of 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 were  exchanged  and  converted  into one share of $.001 par
value Common Stock.
<TABLE>
<CAPTION>
                            % of                                     % of                                     % of
                           shares                                   shares                                   shares
        For              outstanding           Against            outstanding           Abstain            outstanding
        ---              -----------           -------            -----------
     <S>                    <C>                <C>               <C>                    <C>               <C>
     56,277,700             62.5%              757,000           Less than 1%           245,700           Less than 1%
</TABLE>

         3. A proposal to approve an amendment  to Article III of 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 Common Stock and  10,000,000  of which shall be designated as
Preferred Stock.
<TABLE>
<CAPTION>
                            % of                                     % of                                     % of
                           shares                                   shares                                   shares
        For              outstanding           Against            outstanding           Abstain            outstanding
        ---              -----------           -------            -----------
     <S>                    <C>                <C>               <C>                    <C>               <C>
     56,192,700             62.4%              267,000           Less than 1%           820,700           Less than 1%
</TABLE>

         4. A proposal  to approve an  Amendment  to Article I of the  Company's
Articles of Incorporation to change the Company's name to Entropin, Inc.
<TABLE>
<CAPTION>
                            % of                                     % of                                     % of
                           shares                                   shares                                   shares
        For              outstanding           Against            outstanding           Abstain            outstanding
        ---              -----------           -------            -----------
     <S>                    <C>                <C>               <C>                    <C>               <C>
     56,968,400             63.3%              167,000           Less than 1%           145,000           Less than 1%
</TABLE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)      Exhibits

                  Exhibit 27        Financial Data Schedule

                                      -21-

<PAGE>

         (b)      Reports on Form 8-K

                  (1)      Form  8-K,   dated  January  15,  1998,  as  amended,
                           reporting  the change of control  pursuant to Item 1,
                           and  consummation  of the  acquisition  of all of the
                           issued and  outstanding  shares of Entropin,  Inc. by
                           the Company pursuant to 2 thereof.

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

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

                  (4)      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.






                                      -22-

<PAGE>
                                   SIGNATURES

         In accordance  with the requirement of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                 ENTROPIN, INC.



Date:  August 27, 1998                By:  /s/  Higgins D. Bailey
                                         ---------------------------------------
                                            Higgins D. Bailey
                                            Chairman of the Board of Directors


Date:  August 28, 1998                By:  /s/  Wellington A. Ewen
                                         ---------------------------------------
                                            Wellington A. Ewen
                                            Chief Financial Officer

                                           -21-