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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended February 29, 1996
Commission File No. 0-16354
EXTEN INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
Incorporated under the Laws 52-1412493
of the State of Delaware (IRS Employer
(State of other jurisdiction of Identification Number)
incorporation or organization)
9625 Black Mountain Road, Suite 218, San Diego, CA 92126-4564
(Address of principal executive offices)
(619) 578-9784
(Registrant's telephone number, including area code)
(Former name, former address, and former fiscal year,
if changed since last report)
Common Stock Outstanding at February 29, 1996
22,863,205 Shares of $0.01 Par Value Common Stock
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
--- ---
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EXTEN INDUSTRIES, INC.
FORM 10-QSB
INDEX
PART I FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheets at February 29, 1996
(Unaudited) and November 30, 1995...........................4
Consolidated Statements of Operation (Unaudited)
for the three months ended February 29, 1996 and
February 28, 1995...........................................6
Consolidated Statements of Cash Flows (Unaudited)
for the three months ended February 29, 1996 and
February 28, 1995...........................................7
Notes to Consolidated Financial Statements,
February 29, 1996...........................................8
Item 1A. Factors Which May Affect Future Results........................9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Overview...................................................15
Results from Operations....................................15
.
Liquidity and Capital Resources............................15
PART II OTHER INFORMATION
Item 1. Legal Proceedings........................... ..............16
Item 2. Changes in the Rights of the Company's
Security Holders...........................................16
Item 3. Defaults by the Company on its Senior Securities...........16
Item 4. Results of Votes of Security Holders.......................16
Item 5. Other Information..........................................16
Item 6(a). Exhibits...................................................16
Item 6(b). Reports of Form 8-K........................................16
SIGNATURES.................................................17
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PART I. FINANCIAL STATEMENTS
Item 1. Financial Statements
The Consolidated financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information presented not misleading.
In the opinion of the Company, all adjustments, consisting of only normal
recurring adjustments, necessary to present fairly the financial position of the
Company as of February 29, 1996, have been made. The result of operations for
such interim period is not necessarily indicative of the results to be expected
for the entire year.
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Exten Industries, Inc.
Consolidated Balance Sheet
<TABLE>
<CAPTION>
February 29, 1996 November 30, 1995
----------------- -----------------
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash $ 4,007 $ 8,233
Employee receivables 74,831 78,960
Accounts receivable 0 64,000
Prepaid expenses and other 83,079 164,400
-------- -------
TOTAL CURRENT ASSETS 161,917 315,593
FIXED ASSETS:
Property and equipment 157,951 158,024
OTHER ASSETS:
Real estate held for sale 354,000 354,000
Investments 48,170 48,170
Notes receivable 83,000 83,000
Deposits 0 62,500
----------- -----------
TOTAL OTHER ASSETS 485,170 705,694
TOTAL ASSETS 805,038 1,021,287
LIABILITIES AND STOCKHOLDER EQUITY
CURRENT LIABILITIES
Accounts payable $ 216,412 $ 187,948
Accrued expenses & other payables 192,130 167,694
Notes payable, current portion 738,350 638,838
----------- -----------
TOTAL CURRENT LIABILITIES 1,146,892 994,480
TOTAL LIABILITIES 1,146,892 994,480
</TABLE>
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<TABLE>
<S> <C> <C>
STOCKHOLDERS' EQUITY
Common Stock, $.01 par value; 50,000,000
shares authorized; 22,863,205 and 23,462,205
issued and outstanding at February 29, 1996 and
November 30, 1995 228,632 234,621
Additional paid-in capital 8,285,290 8,322.399
Preferred stock, $.01 par, 1,000,000 shares
authorized, Series C - 143 shares issued
and outstanding at February 29, 1996 and
November 30, 1995 1 1
Retained deficit (8,855,777) (8,530,214)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY (341,854) 26,807
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 805,038 $ 1,021,287
</TABLE>
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Exten Industries, Inc.
Consolidated Statements of Operation
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
February 29, 1996 February 28, 1995
----------------- -----------------
<S> <C> <C>
REVENUES
Sales $ 0 $ 1,170
Cost of Sales 0 0
--------- ---------
Gross Profit 1,170
Other Income 0 3,461
--------- ---------
TOTAL REVENUES 0 4,631
COSTS AND EXPENSES
Selling, General &
Administrative $ 100,724 $ 74,695
Consulting Fees 216,398 247,840
Interest 196 490
--------- ---------
TOTAL COSTS AND EXPENSES 317,318 323,025
OTHER INCOME (EXPENSES)
Gain on Sale of Assets 0 0
--------- ---------
TOTAL OTHER INCOME 0 0
Income (Loss) Before Income
Taxes (317,318) (318,394)
Provision for Delaware Franchise Tax (8,245) 0
Provision for Income Tax 0 800
--------- ---------
NET INCOME (LOSS) $(325,563) $(319,194)
INCOME (LOSS) PER SHARE (.02) (0.46)
</TABLE>
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Exten Industries, Inc.
Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
February 29, 1996 February 28, 1995
----------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $(325,563) $(319,194)
Adjustments to Reconcile Net Income
Adjustments to Reconcile Net Income (Loss)
to Net Cash Provided By (Used By)
Operating Activities:
Depreciation 73 5,266
Common Stock Issued for Services 0 22,330
Amortization 0 0
Other Non-Cash Items 0 8,449
(Increase) Decrease in:
Accounts Receivable 4,129 (90,000)
Deposits 62,500 0
Prepaid Expenses 105,321 0
Other Current Assets 0 (49,090)
Increase (Decrease) in:
Accounts Payable 28,464 62,262
Accrued Expenses 24,436 0
Other Current Liabilities 0 40,714
--------- ---------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES (100,640) (319,263)
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in Minority Interest 99,149 0
Payments on LT Notes Receivable 40,000 0
--------- ---------
NET CASH FROM INVESTMENT ACTIVITIES 139,149 0
CASH FLOW FROM FINANCING ACTIVITIES
Common Stock Issued 74,528 11,630
Preferred Stock Issued 0 0
Increase (Decrease) in Paid-In-Capital 117,625 295,640
Increase (Decrease) in LT Debt 362 0
--------- ---------
NET CASH PROVIDED BY FINANCING
ACTIVITIES (42,735) 307,270
NET INCREASE IN CASH (4,226) (11,993)
CASH AT BEGINNING OF PERIOD 8,233 (2,041)
CASH AT END OF PERIOD 4,007 (14,034)
</TABLE>
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EXTEN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 1996
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to the Form 10-QSB and Regulation S-B.
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, all adjustments (consisting of normal recurring
accruals considered necessary for a fair presentation) have been included.
Operating results for the interim period ended February 29, 1996 are not
necessarily indicative of the results that may be expected for the year ended
November 30, 1996.
The consolidated financial statements include the accounts of Exten
Industries, Inc. and its 91% owned subsidiary, Xenogenex, Inc. Intercompany
balances and transactions are eliminated in consolidation.
NOTE B - COMPUTATION OF INCOME PER SHARE
Income (Loss) per share was computed by dividing net income (loss) by the
weighted average number of common shares and common stock equivalents during
each period as follows:
Three Months Ended
February 29 (28)
Period 1996 1995
------ ----- -----
Weighted Average Number of 15,499,331 6,838,457
Shares Outstanding
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Part IA. Factors Which May Affect Future Results
An investment in the Common Stock of the Company involves a high degree of
risk. In addition to the other information contained in this From 10-QSB,
prospective investors should carefully consider the following risk factors:
1. SIGNIFICANT AND REPEATED LOSSES. The Company faces all the risks inherent
in a new business. The Company's Xenogenex subsidiary is without any record of
earnings and sales. There is no information at this time upon which to base an
assumption that Xenogenex's business plans will either materialize or prove
successful. There can be no assurance that any of the Company's business
activities will result in any operating revenues or profits. Investors should
be aware that they may lose all or substantially all of their investment.
2. QUALIFIED OPINION. The Company's certified public accountant issued a
qualified opinion on the Company's financial statements for the year ended
November 30, 1995 and the year ended November 30, 1994 with respect to
uncertainties concerning the Company's ability to continue as a going concern.
3. LACK OF REVENUES. The Company's only active business in the research and
development activities of its subsidiary, Xenogenex, Inc., from which the
Company generates little or no stream of revenues and there can be no assurance
that the Company will ever generate any revenues from Xenogenex, Inc., in the
near future. As a result, the Company may continue to incur losses and any
investor who purchases or acquires any shares of the Company's Common Stock will
likely incur further substantial dilution and loss in the value of their
investment.
4. SIGNIFICANT AND INCREASING CURRENT LIABILITIES. The Company's current
liabilities exceed its current assets. In the event that the Company is not
able to generate sufficient cash resources to pay its current debts and
obligations on or before their due dates, the Company will likely incur
substantial additional costs and expenses and otherwise risk whatever claims
creditors may assert against the Company in connection with any default thereby.
This may result in an investor losing all or substantially all of their
investment.
5. NEED FOR ADDITIONAL FINANCING & LACK OF UNDERWRITING COMMITMENT. The
Company's management recognizes that the Company needs to obtain additional
external financing from the sale of the Company's debt, common stock, or
preferred stock in order to support the Company and otherwise meet the Company's
growing financial obligations. While the Company may attempt to obtain a
commitment from an underwriter for a private placement or public offering of the
Company's securities, there can be no guarantee that the Company will be
successful. If the Company is not successful, the Company may suffer additional
and continuing financial difficulties with consequent loss to any investor
acquiring the Company's common stock.
6. NEGATIVE WORKING CAPITAL AND NEGATIVE CASH FLOW. While the Company's
management seeks additional financing for the Company to complete its business
plan, there can be no assurance that the Company will obtain any additional
financing or, if it is obtained, that it can be obtained on terms reasonable in
view of the Company's current circumstances. In addition, the Company has
experienced negative cash flow from the 1992, 1993, 1994 and 1995 fiscal years.
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7. POTENTIAL DILUTION. Funding of the Company's proposed business plan will
result in substantial and on-going dilution of the Company's existing
stockholders. While there can be no guarantee that the Company will be
successful in raising additional capital, if the Company is successful in
obtaining any additional capital, existing stockholders may incur substantial
dilution.
8. GOVERNMENT REGULATION AND PRODUCT APPROVALS. The Company's research,
testing, preclinical development, clinical trials, manufacturing and marketing
of its proposed therapeutic product are subject to extensive and ever-changing
regulation by numerous governmental authorities in the United States and other
countries. Clinical trials, manufacturing, and marketing of products in the
U.S. will be subject to the rigorous testing and approval processes of the U.S.
Food and Drug Administration (the "FDA") and by comparable regulatory
authorities in foreign countries. The testing and regulatory approval process
will likely take several years and require the expenditure of substantial
resources. Any testing of the Company's proposed products may not support the
safety and efficacy of the Company's products. There can be no assurance that
the Company will gain any regulatory approvals for the Company's proposed
products or, if such approvals are obtained, that such approvals may be limited
and far narrower than those sought by the Company. To the extent that the above
information described statutory or regulatory provisions, it is qualified in its
entirely by reference to the particular statutory and regulatory provisions
currently in effect. Any change in applicable law or regulation may have a
material effect on the business and prospect of the Company's subsidiary,
Xenogenex, Inc.
9. LACK OF INDEPENDENT EVALUATION OF TECHNOLOGY & COMMERCIAL VIABILITY. The
Company's current management does not possess any studies performed by an
independent third party which demonstrate that the synthetic bio-liver
technology has ever been rigorously evaluated. There can be no assurance that
this technology offers safe, efficacious, and cost-effective therapeutic
attributes relative to those provided by competing technologies or, if it does,
that the technology is commercially viable.
10. LIMITED MANAGEMENT. The Company currently has only one full time officer
and one full-time employees. The Company's limited cash flow and financial
resources do not allow the Company to increase or add to the Company's full time
management and there can be no guarantee that the Company's cash flow and
financial resources will increase in the near future. As a result, the Company
continues to rely upon consultants and others for a large part of its operations
and for the research and development work conducted by its subsidiary,
Xenogenex, Inc.
11. COSTS OF LITIGATION. The Company is likely to incur significant costs for
litigatoin in connectoin with a dispute with Robert H. Goldsmith, a past officer
and director, and other litigation. The Company is also investigating the
merit of actions against other former officers and directors. While the Company
seeks to resolve the disputes on terms favorable to the Company, there can be no
assurance that the Company will be successful or that the costs incurred will
not exceed any benefits that the Company may derive from this litigation.
12. LACK OF DIVIDENDS. The Company has never paid any cash dividends on its
common stock. The Company's board of directors intends to retain profits, if
any, to finance the Company's business.
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13. LIMITED MARKET FOR COMMON STOCK. The Company's Common Stock, traded on the
Electronic Bulletin Board (OTC), has experienced significant price fluctuations
and will likely remain highly volatile in the future. There can be no assurance
that a meaningful trading market for the Company's Common Stock will be
established, or, if established, that it can be maintained for any significant
period.
14. POSSIBLE RULE 144 STOCK SALES. The Company has a substantial amount of
shares of the Company's outstanding Common Stock as " restricted securities"
which may be sold only in compliance with Rule 144 adopted under the
Securities Act of 1933 or other applicable exemptions from registration. Rule
144 provides that a person holding restricted securities for a period of two
years may thereafter sell in brokerage transactions, an amount not exceeding
in any three month period the greater of either (i) 1% of the Company's
outstanding Common Stock, or (ii) the average weekly trading volume during a
period of four calendar weeks immediately preceding any sale. Persons who are
not affiliated with the Company and who have held their restricted securities
for at least three years are not subject to the volume limitation. Possible
or actual sales of the Company's Common Stock by present shareholders under
Rule 144 may have a depressive effect on the price of the Company's Common
Stock if any liquid trading market develops.
15. POSSIBLE STOCK SALES - REGULATION S & FORM S-8 REGISTRATION STATEMENT. The
Company has periodically issued shares to non-U.S. citizens under Regulation S.
In addition, the Company has utilized the services of consultants and, in this
connection, the Company has issued shares of the Company's Common Stock and
registered these shares for sale of Form S-8. The shares issued under
Regulation S become freely-tradable 41 days after issuance. The shares
registered on Form S-8 are immediately freely- tradable. As a result, the
Company's issuance of shares pursuant to Regulation S and Form S-8 likely
depresses the market price of the Company's Common Stock. While the Company's
management intends to carefully evaluate the need to issue shares of the
Company's Common Stock on this basis, the Company's meager financial resources
will likely prevent the Company from limiting its use of Regulation S and Form
S-8, with the result that the market price of the Company's Common Stock will
likely be depressed by the registration and sale of shares on an on-going basis.
16. RISKS OF LOW PRICED STOCKS. Trading in the Company's Common Stock is
limited. Consequently, a shareholder may find it more difficult to dispose of,
or to obtain accurate quotations as to the price of the Company's securities.
In the absence of a security being quoted on NASDAQ, or the company having
$2,000,000 in net tangible assets, trading the Company Stock is covered by Rule
3a51-1 promulgated under the Securities Exchange Act of 1934 for non-NASDAQ and
non-exchange listed securities.
Under such rules, broker/dealers who recommend such securities to persons
other than established customers and accredited investors (generally
institutions with assets in excess of $5,000,000 or individuals with net worth
in excess of $l,000,000 or an annual income exceeding $200,000 or $300,000
jointly with their spouse) must make a special written suitability determination
for the purchaser and receive the purchaser's written agreement to a transaction
prior to sale. Securities are also exempt from this rule if the market price is
at least $5.00 per share, or for warrants, if the warrants have an exercise
price of at least $5.00 per share. The Securities Enforcement and Penny Stock
Reform Act of 1990 requires additional disclosure related to the market for
penny stocks and for trades in any stock defined as a penny stock.
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The Commission recently adopted regulations under such Act which define a
penny stock to be NASDAQ or non-NASDAQ equity security that has a market price
or exercise price of less than $5.00 per share and allow for the enforcement
against violators of the proposed rules. In addition, unless exempt, the
rules require the delivery, prior to any transaction involving a penny stock, of
a disclosure schedule prepared by the Commission explaining important concepts
involving a penny stock market, the nature of such market, terms used in such
market, the broker/dealer's duties to the customer, a toll-free telephone number
for inquiries about the broker dealer's disciplinary history, and the customer's
rights and remedies in case of fraud or abuse in the sale
Disclosure also must be made about commissions payable to both the
broker/dealer and the registered representative, current quotations for the
securities and, if the broker/dealer is the sole market-maker, the broker/dealer
must disclose this fact and its control over the market.
Monthly statement must be sent disclosing recent price information for the
penny stock held in the account and information on the limited market in penny
stocks. While many NASDAQ stocks are covered by the proposed definition of
penny stock, transactions in NASDAQ stock are exempt from all but the sole
market-maker provision for (i) issuers who have $2,000,000 in tangible assets
($5,000,000 if the issuer has not been in continuous operation for three years),
(ii) transactions in which the customer is an institutional accredited investor
and (iii) transactions that are not recommended by the broker/dealer. In
addition, transactions in a NASDAQ security directly with the NASDAQ market-
maker for such securities are subject only to the sole market-maker disclosure
and the disclosure with regard to commissions to be paid to the broker/dealer
and the registered representatives.
Finally, all NASDAQ securities are exempt if NASDAQ raised its requirements
for continued listing so that any issuer with less than $2,000,000 in net
tangible assets or stockholder's equity would be subject to delisting. These
criteria are more stringent that the proposed increase in NASDAQ's maintenance
requirements. The Company's securities are subject to the above rules on penny
stocks and the market liquidity for the Company's securities could be SEVERELY
AFFECTED by limiting the ability of broker/dealers to sell the Company's
securities.
17. PATENTS AND PROPRIETARY TECHNOLOGY. Any proprietary protection of
Xenogenex's technologies that the Company can obtain and maintain will be
important to its proposed business. The Company has exchanged its U.S. patent
application for a P.C.T. filing and has filed a patent application in China.
The patent positions of bio-pharmaceutical and biotechnology firms, as well as
academic and other research institutions, are uncertain and involve complex
legal and factual questions. Accordingly, no firm predictions can be made
regarding the biopharmaceutical and biotechnology patents or whether the Company
will have the financial resources to aggressively protect its rights.
18. INTENSE COMPETITION. Competition in Xenogenex's field from other
biotechnology and pharmaceutical companies and from research and academic
institutions is intense and is expected to increase. Competitors or potential
competitors of the Company have filed applications for, or have been issued,
certain patents, and may obtain additional patents and proprietary rights
relating to technologies competitive with those of the Company. Accordingly,
there can be no assurance that the Company's patent applications will result in
patents being issued or that, if issued, such patents will provide protection
against competitive technology that circumvents such patents or will be held
valid by a court of competent
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jurisdiction; nor can there be any assurance that others will not obtain patents
that the Company would need to license or circumvent. Furthermore, there can be
no assurance that licenses that might also be required for the Company's
processes or products would be available on reasonable terms, if at all.
Xenogenex also intends to rely upon unpatented trade secrets, know-how and
continuing technological innovation to develop and maintain its competitive
position. No assurance can be given that others will not independently develop
substantially equivalent proprietary information and technology, or otherwise
gain access to Xenogenex's trade secrets or disclose such technology, or that
Xenogenex can meaningfully protect its rights to its unpatented trade secrets.
19. GOVERNMENT REGULATION. Xenogenex's present and proposed activities are
subject to regulation by numerous governmental authorities in the United States
and other countries. To the extent that the following information describes
statutory or regulatory provisions, it is qualified in its entirety to reference
to the particular statutory and regulatory provisions currently in effect. Any
change in applicable law or regulation may have a material effect on the
business and prospects of Xenogenex.
20. THERAPEUTIC PRODUCTS. Xenogenex's products will be subject to regulation in
the U.S. by the Food and Drug Administration ("FDA") and by comparable
regulatory authorities in foreign jurisdictions. The products produced will be
classified as "biologics" regulated under the Public Health Service Act and the
Federal Food, Drug and Cosmetic Act. Development of a therapeutic product for
human use is a multi-step process. First, animal or IN VITRO testing must
establish the potential safety and efficacy of the experimental product in a
given disease. Once the product has been found to be reasonably safe and
potentially efficacious in animals, suggesting that human testing would be
appropriate, an Investigational New Drug ("IND") application is submitted to the
FDA. FDA approval is necessary before commencing clinical investigations. That
approval may, in some circumstances, involve substantial delays.
Clinical investigations typically involve three phases. Phase I is
conducted to evaluate the safety of the experimental product in humans, and if
possible, to gain early evidence of effectiveness. Phase I studies also
evaluate various routes, dosages and schedules of product administration. The
demonstration of therapeutic benefit is not required in order to complete Phase
I successfully. If acceptable product safety is demonstrated, the Phase II
studies are initiated. The Phase II trials are designed to evaluate the
effectiveness of the product in the treatment of a given disease and, typically,
are well-controlled, closely monitored studies in a relatively small number of
patients.
The optimal routes and schedules of administration are determined in these
studies. As Phase II trials are successfully completed, Phase III studies will
be commenced. Phase III studies are expanded, controlled and uncontrolled
trials which are intended to gather additional information about safety and
efficacy in order to evaluate the overall risk/benefit relationship of the
experimental product and provide an adequate basis for physician labeling.
These studies also may compare the safety and efficacy of the experimental
device with currently available products. It is not possible to estimate the
time in which Phase I, II and III studies will be completed with respect to a
given product, although the time period is often as long as several years.
Following the successful completion of these clinical investigations, the
preclinical and clinical evidence that has been accumulated is submitted to the
FDA as part of the product license application
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("PLA"). Approval of the PLA or IND is necessary before a company may market
the product. The approval process can be very lengthy and depends upon the time
it takes to review the submitted data and the FDA's comments on the application
and the time required to provide satisfactory answers or additional clinical
data when requested.
In addition to the regulatory framework for product approvals, the Company
is and may be subject to regulation under state and federal law, including
requirements regarding occupational safety, laboratory practices, the use,
handling and disposition of radioactive materials, environmental protection and
hazardous substance control, and may be subject to other present and possible
future local, state, federal and foreign regulation, including future regulation
of the biotechnology field.
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Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
OVERVIEW
The Company's only active business in the operation of its subsidiary,
Xenogenex, Inc., which is engaged in biotech research. There is currently no
business activity associated with its helicopter technology.
RESULTS FROM OPERATIONS
Of the Selling, General and Administrative expenses, $84,041 is attributed to
Exten Industries, Inc. Operations, which represent 85% of all Selling, General &
Administrative expenses; and Xenogenex's portion is $14,952 (15%). Salaries and
wages are included in the Selling, General & Administrative costs for the
Company.
LIQUIDITY AND CAPITAL RESOURCES
The current ratio of assets to liabilities is .8 to 1. During the fiscal first
quarter of 1996, the Company's cash requirements were met by increasing debt and
sales of common stock. The Company is seeking working capital from various
sources but no assurance can be given that sufficient working capital will be
obtained for the Company to adequately fund its research and development and
other activities.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
A) Goldsmith litigation against Exten Industries, Inc.
1. San Diego County Superior Court, State of California.
2. January 24, 1995.
3. Robert H. Goldsmith, former president of Exten Industries, Inc.,
as plaintiff; Exten Industries, Inc., as defendant.
4. Lawsuit for breach of employment contract, fraud and enforcement
of security agreement.
5. Relief sought: Damages, declaration of rights and obligations,
punitive damage and costs of suit. The Company disputes the
facts and has filed a cross-complaint for conversion, fraud and
breach of fiduciary responsibility.
B) Goldsmith litigation against Xenogenex, Inc.
1. San Diego County Superior Court, State of California.
2. January 24, 1995.
3. Robert H. Goldsmith, former president of Exten Industries, Inc.,
as plaintiff; Xenogenex, Inc., as defendant.
4. Lawsuit for breach of promissory note.
5. Relief sought: Damages and specific performance. The Company
disputes the facts and has filed a cross-complaint against Mr.
Goldsmith for fraud and conversion.
C) Union Bank Litigation.
1. Los Angeles County Superior Court, State of California.
2. August 12, 1992.
3. Union Bank as plaintiff. Exten Industries, Inc., as a defendant.
4. Lawsuit to enforce a loan guarantee executed by Exten for a loan
to its subsidiary ADC Industries, Inc.
5. Relief sought: Monetary Payment. Judgement entered against Exten
Industries, Inc., on February 23, 1994 in the amount of
$300,000. There are four other guarantors on this loan. The
Company intends to aggressively pursue equitable
indemnification from these parties. On July 20, 1994, the
Company entered into a settlement with Union Bank that allows
the Company to pay Union Bank $150,000 in full by February 2,
1996. If the Company does not pay $150,000 to Union Bank by
February 2, 1996, then Union Bank is entitled to pursue the
Company for the full $300,000 plus interest and other costs
from the date of the February 23, 1994 judgement.
Item 2. Changes in the Rights of the
Company's Security Holders
NONE
Item 3. Defaults by the Company on its Senior Securities
NONE
Item 4. Results of Votes of Security Holders
NONE
Item 5. Other Information
NONE
Item 6(a). Exhibits
NONE
Item 6(b). Reports on Form 8-K
12/6/95 W. Gerald Newmin named CEO and Chairman of the Board.
12/13/95 Larry Bedard named a Director
2/9/96 Change of Principal Accountant to Harlan & Boettger, CPAs
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report be signed on its behalf by the
undersigned thereunto duly authorized.
EXTEN INDUSTRIES, INC.
Date: 7/29/96 By: /s/ W. Gerald Newmin
---------------------------------
W. Gerald Newmin
Chairman, Chief Executive Officer
Date: 7/29/96 By: /s/ William R. Hoelscher
---------------------------------
William R. Hoelscher
Director, Vice-President
Date: 7/29/96 By: /s/ Larry Bedard
---------------------------------
Larry Bedard
Director
17
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