SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended 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 11,
1998 is 6,000,051 shares $.001 par value.
<PAGE>
ENTROPIN, INC.
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 Month
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 Operation 12
PART II. OTHER INFORMATION 13
- -------- -----------------
1
<PAGE>
<TABLE>
<CAPTION>
ENTROPIN, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
December 31, 1997 and March 31, 1998
(Unaudited)
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 1,043,780 2,061,210
Deficit accumulated during the development
stage (4,561,175)
----------- -----------
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
---- ---- ------------
Interest income $ - $ 4,509 $ 4,509
Costs and expenses:
Research and development 37,845 3,772 3,756,626
General and administrative 6,598 97,452 608,707
Depreciation and amortization 3,862 4,500 61,868
Interest 36,579 479 240,177
--------- --------- ----------
Net loss 84,884 106,203 4,667,378
--------- --------- ----------
$ (84,884) $(101,694) $4,662,869)
========= ========= ==========
Basic loss per common share $ (.02) $ (.02) $ (.89)
========= ========== ==========
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
(Unaudited)
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 $1,043,780 $(4,561,175)
Sale of common stock for cash ($2.75 per
share (Note 5) 300,000 300 797,810 -
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 $2,061,210 $(4,662,869)
========= ======= ========== ===========
</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) $(4,662,869)
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 - - 694,000
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) 3,342,450
-------- --------- -----------
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. 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 March 31, 1998 of $4,662,869. 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.
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.
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)
----------------------------------------------------------------------
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. 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, the
balance at any one financial institution may exceed FDIC limits.
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.
7
<PAGE>
ENTROPIN, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
March 31, 1998
2. Related party transactions (continued)
--------------------------------------
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.
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.
5. Stockholders' equity
--------------------
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. 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. The options are exercisable for a five-year
period.
8
<PAGE>
ENTROPIN, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
March 31, 1998
5. Stockholders' equity (continued)
--------------------------------
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.
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.
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.
9
<PAGE>
ENTROPIN, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
March 31, 1998
7. Commitments (continued)
-----------------------
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, and March 31, 1998, the total liability accrued with respect to this
agreement totaled $155,495 and $159,067, respectively.
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.
10
<PAGE>
ENTROPIN, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
March 31, 1998
7. Commitments (continued)
-----------------------
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.
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.
11
<PAGE>
Item 2. Management's discussion and analysis or plan of operations
----------------------------------------------------------
Results of Operations:
Entropin, Inc. is a development stage pharmaceutical company and has not
generated revenues from operations for the period from August 27, 1984
(inception) through March 31, 1998. Entropin has devoted substantially all
it's resource to acquisition of patents, research and development of the
medicine, and expenses related to the startup of its business.
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 in 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 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. On January 15, 1998, the Company
successfully completed a private placement and a recapitalization of the
Company that provided 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, 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.
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, noncumulative 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.
The Company recently entered into an agreement with the Western Center for
Clinical Studies, Inc. a California corporation 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 agreement has a 33-month term, at
the end of which the Company's primary product may be approved for
marketing. The Company is 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.
12
<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") were 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) On Janauary 15, 1998, in order to consummate the Agreement and Plan of
Merger with Entopin, Inc., a California corporation ("Old Entropin"), the
Registrant issued 5,700,001 shares of its Common Stock, $.001 par value per
share, and 3,210,487 shares of the Company's non-voting, redeemable 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. These transactions were effected under the exemption from
registration provided under Section 4(2) of the Act and Rule 506 of Regulation D
promulagated thereunder, for transactions not involving a public offering. All
of the foregoing shares were issued with the appropriate restrictive legend.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
A Special Meeting of the Company's shareholders was held on January 15,
1997. 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.
13
<PAGE>
% of % of % of
shares shares shares
For outstanding Against outstanding Abstain outstanding
--- ----------- ------- ----------- ------- -----------
57,068,400 63.4% 167,000 Less than 1% 45,000 Less than 1%
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.
% of % of % of
shares shares shares
For outstanding Against outstanding Abstain outstanding
--- ----------- ------- ----------- ------- -----------
56,277,700 62.5% 757,000 Less than 1% 245,700 Less than 1%
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.
% of % of % of
shares shares shares
For outstanding Against outstanding Abstain outstanding
--- ----------- ------- ----------- ------- ----------
56,192,70 62.4% 267,000 Less than 1% 820,700 Less than 1%
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.
% of % of % of
shares shares shares
For outstanding Against outstanding Abstain outstanding
--- ----------- ------- ----------- ------- -----------
56,968,400 63.3% 167,000 Less than 1% 145,000 Less than 1%
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
14
<PAGE>
(b) Reports on Form 8-K
(1) 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.
(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.
15
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ENTROPIN, INC.
Date: May 14, 1998 By: /s/ Higgins D. Bailey
-----------------------------------
Higgins D. Bailey
Chairman of the Board of Directors
Date: May 14, 1998 By: /s/ Wellington A. Ewen
-----------------------------------
Wellington A. Ewen
Chief Financial Officer
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1998 AND IS QUALIFIED IN
ITS ENTIRETY TO SUCH FORM 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 538,506
<SECURITIES> 0
<RECEIVABLES> 5,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 543,506
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 805,462
<CURRENT-LIABILITIES> 31,567
<BONDS> 0
3,210,487
0
<COMMON> 6,000
<OTHER-SE> (2,601,659)
<TOTAL-LIABILITY-AND-EQUITY> 805,462
<SALES> 0
<TOTAL-REVENUES> 4,509
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 105,724
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 479
<INCOME-PRETAX> (101,694)
<INCOME-TAX> 0
<INCOME-CONTINUING> (101,694)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (101,694)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
