EXTEN INDUSTRIES INC, 10KSB, 1997-09-19

EXTEN INDUSTRIES INC
10KSB, 1997-09-19
FINANCE SERVICES

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-KSB

(X) Annual Report Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934 (Fee Required)
For the fiscal year ended November 30, 1996

( ) Transition Report Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934 (No Fee Required)
For the transition period from ___________ to __________

Commission File Number 0-16354

EXTEN INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)

DELAWARE 52-1412493
(State or other jurisdiction of (IRS Employer ID No.)
incorporation or organization)

9625 BLACK MOUNTAIN ROAD, SUITE 218
SAN DIEGO, CALIFORNIA 92126
(Address of principal executive offices)

(619) 578-9784
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Common Stock $0.01 per share

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

Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 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 requirement
for the past 90 days. YES X NO _____

Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K(229.405 of this chapter) is
not contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. ( )

Issuer's revenues for its most recent fiscal year: $0. State the
aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or
the average bid and asked prices of such stock, as of a specified
date within the past 60 days. (See definition of affiliate in Rule
12b-2 of the Exchange Act). As of May 27, 1997: $1,785,500. As of
May 29, 1997, there were 29,762,432 Shares outstanding.

Documents Incorporated by Reference:
None

EXTEN INDUSTRIES, INC.
FORM 10-KSB

INDEX
PART I

Item 1. DESCRIPTION OF BUSINESS . . . . . . . . . . . . . . . . 4
Background of the Company. . . . . . . . . . . . . 4
Factors Which May Affect Future Results . . . . . 5
Business of Exten.. . . . . . . . . . . . . . . . 8
Business of Xenogenex, Inc.. . . . . . . . . . 8
Patents & Proprietary Technology . . . . . . . 9
Intense Competition. . . . . . . . . .. . . . . 9
Government Regulations . . . . . . . . . . . . 9
Therapeutic Products . . . . . . . . . . . . . 9
Agreements for SYBIOLR Artificial
Liver Development . . . . . . . . . . . . . 10
St. Louis University Health Sciences Center. . .10

Employees . . . . . . . . . . . . . . . . . . . . .11

Item 2. DESCRIPTION OF PROPERTY . . . . . . . . . . . . . . . . .11

Item 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . .12

Item 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITIES STOCKHOLDERS . . . .. . . . . . . . . . . .12
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED STOCKHOLDER MATTERS . . . . . . . . . . . . .12

Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
Results of Operations . . . . . . . . . . . . . . .18
Liquidity and Capital Resources. . . . . . . . .. .20
Xenogenex, Inc. . . . . . . . . . . . . . . . . . .20

Item 7. FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . .21

Item 8. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE. . . . . . . . . . . . . . . . . . . . . . . 21

PART III
Item 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; REGISTRANT COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE
ACT . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Item 10. EXECUTIVE COMPENSATION. . . . . . . . . . . . . . . . . .22
Non-Cash Compensation . . . . . . . . . . . . . . . . . .23

Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT . . . . . . . . . . . . . . . . . .24
Stock Options Outstanding . . . . . . . . . . . . .24

Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . 25

Item 13. EXHIBITS AND REPORTS ON FORM 8-K. . . . . . . . . . . . .29
Reports on Form 8-K. . . . . . . . . . . . . . .29

CONSOLIDATED FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . .30

SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

PART I

Item 1. DESCRIPTION OF BUSINESS

Background of the Company

Between 1985 and 1990 the Company provided merchant banking
services for small businesses. As compensation for these services
the Company received both cash and common stock in the companies.
The Company distributed shares of stock in some of these companies
to its shareholders as dividends in kind. The Company distributed
stocks in Import International, Inc., Olympus Technology
Corporation, Inc., Multiphonics Corporation, Dionne, Inc., Sun
Harbor Financial Resources, Inc., U.S. Environmental, SDI Holdings,
Inc. and Access HealthNet.

In October of 1990 the Company's Board of Directors decided
on a major change in the Company's business. Due to the difficulty
of raising capital for its small business merchant banking clients,
the Company decided to change its business emphasis to that of
becoming a diversified company. The merchant banking would be
combined on a smaller scale with more substantial companies. The
Company's merchant banking experience would be primarily directed
to the acquisition of varied business for the Company.

In November 1990, the Company acquired all of the capital
stock of ADC Industries Corporation, Inc. ("ADC"), a precision
product machining house specializing in the custom manufacture of
storage tank valves. The acquisition of ADC was accounted for as
a pooling of interest. On September 30, 1993, ADC ceased
operations. The Company sold its interests in ADC and on November
29, 1993 ADC filed for liquidation under Chapter 7 of the U.S.
Bankruptcy Code.

In September of 1991 the Company acquired all of the
outstanding stock of Xenogenex, Inc. ("Xenogenex"), formerly known
as Ascot Close Research Institute, Ltd. At that time Xenogenex was
funding research on xenogeneic transplants with a major West Coast
medical center. Xenogenex had the rights to the commercial
development of the research work.

In 1992, the Company acquired the rights to a hydraulic
control technology with primary applications to computer control of
hydraulic machine tools and to the control of helicopter rotor
blades. The machine control is marketed under the name "Navigator
360"; the rotor control, in the early conceptual stage, is named
the "Smart Head". In 1992, the Navigator 360 technology was sold
to a company of which Malcolm D. Campbell is an officer.

On February 24, 1992 Exten purchased all rights to the
technology for an innovative helicopter flight control system from
the inventors. The concept, which involves loop hydraulic control
of blade pitch, is known as the "Smart Head".

On May 19, 1992 Exten entered into a joint venture agreement
with Navmatic Corporation for development of the Smart Head.
Navmatic Corporation, which manufactures an unique electronic and
mechanical interface for computer numerical control of hydraulic
machine tools, and which employs the Smart Head inventors as
consultants, has the technical ability and the business posture to
pursue development of the concept. The Company has no plans to
develop this technology. Under the joint venture agreement, a
mechanical model to demonstrate the feasibility of the basic
hydraulic control mechanisms proposed has been constructed and
successfully operated.

In 1993, the Company divested itself of ADC Industries, Inc.,
leaving development of the synthetic bio-liver ("SYBIOL") through
its subsidiary Xenogenex, Inc. as the Company's only proposed
business.

Item 1a. 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 Form 10-KSB, prospective investors should
carefully consider the following risk factors:

1. Significant and Repeated Losses. During fiscal 1996, the
Company's most recent fiscal year, the Company's losses were
($950,222) compared to losses of ($3,580,087) in fiscal 1995. In
addition, during fiscal 1992, 1993, and 1994 the Company lost
($880,844), ($1,355,531), and ($1,351,477) respectively. 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 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 independent public accountants
issued a qualified opinion on the Company's financial statements
for the years ended November 30, 1996, 1995 and 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 is the
research and development activities 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 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 & Default. As of
November 30, 1996, the Company had $994,361 in current debts and
other obligations that are due and payable on or before November
30, 1997. Included in the amounts due by November 30, 1997 is
$343,072 in notes payable currently in default together with other
current liabilities. Further, as of November 30, 1996, the Company
had over 38 times as many current liabilities as it had current
assets. In the event that the Company is not able to generate
sufficient cash resources to pay these and other current
liabilities on or before their due date, 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 & Negative Cash Flow. As of November
30, 1996, the Company had Total Current Liabilities of $994,361 and
Total Current Assets of $25,579 with the result that the Company
had negative working capital of ($968,782) as Total Current
Liabilities exceeded Total Current Assets by that amount. 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 for the 1992, 1993, 1994, 1995 and
1996 fiscal years.

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. During 1996, the Company issued
6,300,227 additional shares of its common stock in connection with
its operations while incurring continuing and ever-increasing
financial losses. 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 will incur substantial dilution.

8. Default on Indebtedness. The Company was in default on its
repayment of a certain loan totalling $343,072 (as of November 30,
1996) (the "Loan") with Union Bank and a former officer of the
Company, Robert H. Goldsmith, asserts that the Company has
defaulted on approximately $388,000 in promissory notes. While
Union Bank has sued the Company and has aggressively sought
repayment of the Loan, together with interest, and fees due with
the result that Union Bank has obtained a judgement against the
Company, the Company's management has attempted, without success to
negotiate an acceptable payment program with Union Bank and there
is no guarantee that the Company will be able to pay the monies
required to settle this matter. In addition, the Company had over
$994,361 in liabilities all due and payable on or before November
30, 1997. In the event that the Company is not able to generate
additional cash from the sale of the Company's securities or
otherwise obtain funds on some other basis, the Company will remain
in default on its obligations and likely default on obligations to
other creditors with the result that any investor in the Company's
common stock will lose all or substantially all of their
investment.

9. Government Regulation and Product Approvals. The Company's
research, testing, preclinical development, clinical trials,
manufacturing, and marketing of its proposed therapeutic products
is 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
describes statutory or regulatory provisions, it is qualified in
its entirety 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.

10. 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.

11. Costs of Litigation. The Company is involved in a fee dispute
in connection with a law firm that previously represented the
Company. While the Company seeks to resolve this dispute 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. Limited Management. The Company currently has only one full
time officer and one full-time employee. 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 the research and development work.

13. 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.

14. 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.

15. Valuations & Prior Asset Acquisitions. The Company's current
management has determined that the values accorded certain assets
acquired in prior years be revalued to reflect lower carrying
values in light of current market circumstances. While management
believes that current carrying values for these assets more
accurately reflect likely recovery values, there can be no
assurance that the Company will not later revalue the Company's
assets further.

16. Possible Rule 144 Stock Sales. As of November 30, 1996, the
Company had 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 one year 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.

17. 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 on Form S-8. The shares issued under
Regulation S become freely-tradeable 41 days after issuance. The
shares registered on Form S-8 are immediately freely-tradeable. 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 Company's Common
Stock will likely be depressed by the registration and sale of
shares on an on-going basis.

18. 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 in the Common 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 $1,000,000
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.

The Commission has recently adopted regulations under such
Act which define a penny stock to be any 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 statements 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
than 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.

Business of Exten

As of November 30, 1996, the Company's only active business
is the proposed research and development activities of SYBIOL
Technology.

Xenogenex, Inc.

Business of Xenogenex, Inc.

Xenogenex, Inc. ("Xenogenex") was incorporated in California
on July 30, 1991 for the purpose of funding biotech research. On
September 11, 1991 the Company signed a research contract with
Cedars-Sinai Medical Center in Los Angeles, California. The
research contract was for the genetic manipulation of human to pig
target antigens and xenogeneic transplants. Xenogeneic transplants
involve the use of donor organs from species other than humans.
The major objective of the research was to discover a way to
transplant organs (heart, liver, lung and kidney) from a pig into
a human.

In March of 1993 Xenogenex received all the rights to a
synthetic bio-liver ("SYBIOL") developed for Xenogenex under
contract with Cedars-Sinai Medical Center. A patent application is
presently pending on the process utilized by the SYBIOL device and
the Company has applied for trademark protection for the SYBIOL
tradename. In July 1996, the Company acquired all of the assets of
Xenogenex; and, as as result, as of November 30, 1996, the Company
owned all assets of Xenogenex.

On August 31, 1995, the Company entered into a license
agreement (the "GMI License") with GroupMed International, Inc.
("GMI"). Under the terms of the GMI License, the Company granted
GMI the exclusive right and license to manufacture, market, and
sell the technology and patents held by Xenogenex in Mexico,
Central America, and South America. Subsequently, the Company
terminated the GMI License due to lack of consideration.

In addition to the other information contained in this Form
10-KSB, prospective investors should carefully consider the
following risk factors:

1. Patents and Proprietary Technology. Any proprietary protection
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 bio-pharmaceutical and biotechnology patents or whether the
Company will have the financial resources to aggressively protect
its rights.

2. Intense Competition. Competition 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 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 be required for
the Company's processes or products would be available on
reasonable terms, if at all. The Company 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 the Company's trade secrets or disclose
such technology, or that the Company can meaningfully protect its
rights to its unpatented trade secrets.

3. Government Regulation. The Company'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 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 prospects of the Company.

4. Therapeutic Products. The Company'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 a product license
application ("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.

Agreements for SYBIOL Development

St. Louis University Health Sciences Center

The Company, through its Xenogenex subsidiary, entered into
a sponsored research agreement with the St. Louis University Health
Sciences Center to direct and document the research and development
of its synthetic bio-liver, SYBIOL, into a clinical system.

Dr. Li was the Director of the Surgical Research Institute
at St. Louis University and an internationally renowned expert in
liver cell biology, toxicology and drug metabolism. Prior to
joining SLU, he headed the Liver Biology Department at Monsanto
Company in St. Louis. Dr. Li also served as Chief Scientific
Officer of Xenogenex. St. Louis University Health Sciences Center
is known for its excellence in providing medical care and medical
research, especially in organ transplantation and artificial
internal organ research. The medical center is one of the few
institutions with a research institute dedicated to surgical
research.

On November 30, 1995, the Company terminated its agreement
with the St. Louis University Health Sciences Center (the "Center")
and Dr. Albert Li and currently the Company is seeking the return
of all documents and laboratory equipment. During the period of
the sponsored research agreement, the Company spent approximately
$452,000 on research and laboratory equipment. The Company has
continued with its dialogue with the Center and has not furthered
the Company's progress in obtaining the return of documents and
laboratory equipment held by the Center. Therefore, the Company
has written down the equipment held at the Center to a net value of
$0.

China Joint Venture

The Company and a Hong Kong business group formed a Hong Kong
corporation, TECA International, Ltd. ("TECA") under a joint
venture agreement. TECA, which at the time was 40% owned by the
Company, was required to provide funding for the next five years.
TECA was licensed to produce and sell Xenogenex's synthetic bio-
liver in Asia, Australia, and New Zealand.

TECA has arranged, through a joint venture, for the
manufacturing and distribution SYBIOL in China. A SYBIOL unit has
been shipped to Number 301 Military Hospital in Beijing, China.
The Company is not able to predict whether the venture in China
will generate any revenues for the Company or whether it will be
commercially viable. And although the Company believes the
incidence of liver disease in Asia is far greater than in the
United States, the Company has not conducted or received any third
party research or evaluation of this market and there can be no
assurance that the Company will gain any commercially profitable
opportunities at any time in the near future.

Prior to the close of the 1996 fiscal year and after
discussions with counsel, the Company and TECA determined that the
viability of the project and the realization of any further studies
and efforts were going to be minimal with respect to the SYBIOL
technology and has written off the equity in the joint venture and
the costs and other associated expenditures with TECA in the amount
of $133,670.

Competition

The Company is engaged in businesses characterized by
extensive research efforts, rapid technological change, and intense
competition. Competition can be expected to increase as
technological advances are made and commercial applications
broaden. The industries in which the Company seeks to compete are
characterized by substantial competition involving biotechnology
and major bio-pharmaceutical, chemical and biological testing
companies. Many of the Company's existing and potential
competitors have substantially greater financial, research and
development, clinical, regulatory, marketing and production
resources than those of the Company and may be better equipped than
the Company to develop, manufacture and market competitive
therapeutic products or testing services. These companies may
develop and introduce products and services competitive with,
superior to, or less costly than those of the Company, thereby
rendering some of the Company's technologies and products and
services under development less competitive or obsolete.

Employees

Exten. As of May 29, 1997, Exten had no employees. The
Company is managed by its officers and directors.

Xenogenex. As of May 29, 1997, Xenogenex had no employees.
The Company is managed by its officers and directors.

General. All of the above companies consider their relations
with their employees to be excellent and none are subject to any
union contracts.

Item 2. DESCRIPTION OF PROPERTY
Exten

Lease. Exten leases approximately 1,700 square feet of
space, at $500 per month, in a modern office building. Exten's
lease ends on August 31, 1997.

Arizona. On February 28, 1992 the Company exchanged 170,000
shares of common stock and 170 shares of preferred stock,
convertible into 170,000 shares of common stock, for real estate in
Arizona comprised of 240 undeveloped lots approximately 70 miles
south of the Grand Canyon. This property is pledged to secure a
$250,000 loan to Xenogenex, Inc., a subsidiary of the Company. In
1994 the Company sold four of these lots to pay property taxes. As
a result and as of November 30, 1996, the Company owned 236 of
these lots.

The Company is seeking to sell the Arizona property as part
of an agreement with its creditors. However, there can be no
assurance that the Company will successfully settle its creditors'
claims or, if it is successful, that any settlement will be
achieved on terms that are reasonable in light of the Company's
current circumstances.

Xenogenex

During the fiscal year ending November 30, 1996, Xenogenex was
provided offices and clerical services by its parent, Exten and did
not have separate offices.

On July 15, 1996, the Company acquired all of the assets of
Xenogenex, Inc. in exchange for the Company's assumption of certain
of the outstanding debt of Xenogenex.

Item 3. LEGAL PROCEEDINGS

As of May 29, 1997, there were no pending legal proceedings
involving the Company which, in the opinion of management, after
discussion with legal counsel, were of a material nature except the
following:

1. Zampi & Associates Litigation

(1) San Diego County Superior Court, State of California
(2) October 16, 1996.
(3) Zampi & Associates as plaintiff. Exten Industries,
Inc. as a defendant.
(4) Lawsuit to collect legal fees.
(5) Relief Sought: Monetary payment.

2. Steven A. Lyman Litigation

(1) San Diego County Superior Court, State of California
(2) December 12, 1996.
(3) Steven A. Lyman as plaintiff. Exten Industries, Inc.
as a defendant.
(4) Lawsuit to recover monies from purchase of stock.
(5) Relief sought: Monetary judgement.

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

No meeting of the Company's shareholders was held in 1996.

PART II

Item 5. MARKET FOR THE REGISTRANTS COMMON STOCK AND
RELATED STOCKHOLDER MATTERS

The Company's Common Stock was traded on the Philadelphia
Stock Exchange ("Exchange") from May 5, 1989 to June 14, 1994.
From June 14, 1994 to the present, the Company's Common Stock has
traded OTC (Electronic Bulletin Board).

At the Annual Meeting of Shareholders held on July 11, 1990
the shareholders approved a reverse split of the Common Stock. The
shareholders voted to exchange 7 old shares for 1 new share. The
reverse split was effective midnight, August 31, 1990. The Company
had a subsequent reverse split of 1 for 2 effective August 10,
1991, and a 1 for 10 reverse split effective November 30, 1992.

The table below shows the closing sales prices for Exten
Common Stock as reported by the Exchange. All prices have been
adjusted to reflect a 1 for 7 reverse split of Exten's outstanding
Common Stock on August 31, 1990 and the 1 for 2 reverse split on
August 10, 1991 and the 1 for 10 reverse split on November 30,
1992.

Prices are not adjusted for six percent (6%) stock dividends
for shareholders of record November 30, 1991 and November 30, 1992.

<TABLE>
<S> <C> <C>
Calendar Year ended December 31, High Low

1994
First Quarter 1.56 .75
Second Quarter 1.19 .375
Third Quarter .44 .0625
Fourth Quarter .31 .1875

1995
First Quarter .33 .07
Second Quarter .27 .15
Third Quarter .25 .09
Fourth Quarter .1 .07

1996
First Quarter .12 .06
Second Quarter .08 .04
Third Quarter .13 .06
Fourth Quarter .09 .03
</TABLE>

No cash dividends have been paid on Exten Common Stock
and no change of this policy is under consideration by the Board of
Directors.

The payment of cash dividends in the future will be
determined by the Board of Directors in light of conditions then
existing, including the Company's earnings, financial requirements,
and condition, opportunities for reinvesting earnings, business
conditions, and other factors. The number of shareholders of the
Company's Common Stock on November 30, 1996 was approximately
2,300.

The following Securities were sold by the Company without
registering the securities under the Securities Act of 1933 under
the claim of exemption stated.

On February 17, 1995, the Company issued 1,000,000 shares
of its Common Stock ($.001 par value) (the "Shares") on a private
placement basis. These Shares were sold to an corporation domiciled
in Canada pursuant to the exemption allowed under Regulation S of
the Securities Act of 1933. These Shares were sold by the Company
without the assistance of any underwriter or broker-dealer at a
price of nine cents ($.09) each which resulted in the Company
receiving $90,000 in gross proceeds before legal, accounting and
related offering costs.

On March 15, 1995, the Company issued 500,000 shares of
its Common Stock ($.001 par value) (the "Shares") on a private
placement basis. These Shares were sold to an corporation domiciled
in Bermuda pursuant to the exemption allowed under Regulation S of
the Securities Act of 1933. These Shares were sold by the Company
without the assistance of any underwriter or broker-dealer at a
price of twelve and one-half cents ($.125) each which resulted in
the Company receiving $62,500 in gross proceeds before legal,
accounting and related offering costs.

On September 18, 1995, the Company issued 1,000,000
shares of its Common Stock ($.001 par value) (the "Shares") on a
private placement basis. These Shares were sold to an corporation
domiciled in Bermuda pursuant to the exemption allowed under
Regulation S of the Securities Act of 1933. These Shares were sold
by the Company without the assistance of any underwriter or
broker-dealer at a price of nine cents ($.09) each which resulted
in the Company receiving $90,000 in gross proceeds before legal,
accounting and related offering costs.

On March 15, 1995, the Company issued 1,000,000 shares of
its Common Stock ($.001 par value) (the "Shares") on a private
placement basis. These Shares were sold to an corporation domiciled
in Canada pursuant to the exemption allowed under Regulation S of
the Securities Act of 1933. These Shares were sold by the Company
without the assistance of any underwriter or broker-dealer at a
price of nine cents ($.09) each which resulted in the Company
receiving $90,000 in gross proceeds before legal, accounting and
related offering costs.

On July 13, 1995, the Company issued 500,000 shares of
its Common Stock ($.001 par value) (the "Shares") on a private
placement basis. These Shares were sold to an corporation domiciled
in Canada pursuant to the exemption allowed under Regulation S of
the Securities Act of 1933. These Shares were sold by the Company
without the assistance of any underwriter or broker-dealer at a
price of six cents ($.06) each which resulted in the Company
receiving $30,000 in gross proceeds before legal, accounting and
related offering costs.

On October 16, 1995, the Company issued 1,000,000 shares
of its Common Stock ($.001 par value) (the "Shares") on a private
placement basis. These Shares were sold to an corporation domiciled
in Canada pursuant to the exemption allowed under Regulation S of
the Securities Act of 1933. These Shares were sold by the Company
without the assistance of any underwriter or broker-dealer at a
price of six cents ($.06) each which resulted in the Company
receiving $60,000 in gross proceeds before legal, accounting and
related offering costs.

On November 13, 1996, the Company issued 1,000,000 shares
of its Common Stock ($.001 par value) (the "Shares") on a private
placement basis. These Shares were sold to an corporation domiciled
in Canada pursuant to the exemption allowed under Regulation S of
the Securities Act of 1933. These Shares were sold by the Company
without the assistance of any underwriter or broker-dealer at a
price of seven and one-half cents ($.075) each which resulted in
the Company receiving $75,000 in gross proceeds before legal,
accounting and related offering costs.

On December 1, 1996, the Company issued 1,000,000 shares
of its Common Stock ($.001 par value) (the "Shares") on a private
placement basis. These Shares were sold to an corporation domiciled
in the Bahamas pursuant to the exemption allowed under Regulation
S of the Securities Act of 1933. These Shares were sold by the
Company without the assistance of any underwriter or broker-dealer
at a price of five cents ($.05) each which resulted in the Company
receiving $50,000 in gross proceeds before legal, accounting and
related offering costs.

On August 14, 1995, the Company issued 200,000 shares of
its Common Stock ($.001 par value) (the "Shares") on a private
placement basis pursuant to the exemption allowed under Section
4(2) of the Securities Act of 1933. (representing the exercise of
a stock option previously granted). These Shares were sold to an
investors by the Company without the assistance of any underwriter
or broker-dealer at a price of twelve cents ($.12) each which
resulted in the Company receiving $24,000 in gross proceeds before
legal, accounting and related offering costs.

On September 18, 1995, the Company issued 27,500 shares
of its Common Stock ($.001 par value) (the "Shares") on a private
placement basis pursuant to the exemption allowed under Section
4(2) of the Securities Act of 1933. These Shares were sold to an
investors by the Company without the assistance of any underwriter
or broker-dealer at a price of twelve cents ($.12) each which
resulted in the Company receiving $3,300 gross proceeds before
legal, accounting and related offering costs.

On September 6, 1995, the Company issued 450,000 shares
of its Common Stock ($.001 par value) (the "Shares") on a private
placement basis pursuant to the exemption allowed under Section
4(2) of the Securities Act of 1933. The Shares were sold to an
investors by the Company without the assistance of any underwriter
or broker-dealer at a price of twelve cents ($.12) each which
resulted in the Company receiving $54,000 gross proceeds before
legal, accounting and related offering costs.

On September 6, 1995, the Company issued 100,000 shares
of its Common Stock ($.001 par value) (the "Shares") on a private
placement basis pursuant to the exemption allowed under Section
4(2) of the Securities Act of 1933. These Shares were sold to an
investors by the Company without the assistance of any underwriter
or broker-dealer at a price of twelve cents ($.12) each which
resulted in the Company receiving $12,000 gross proceeds before
legal, accounting and related offering costs.

On January 10, 1995, the Company issued 710,000 shares
of its Common Stock ($.001 par value) (the "Shares") on a private
placement basis. These Shares were issued as payment for
consulting services by an investor domiciled in Canada pursuant to
the exemption allowed under Regulation S of the Securities Act of
1933. These Shares were sold by the Company without the assistance
of any underwriter or broker-dealer at a price of ten cents ($.10)
each which resulted in the Company receiving $71,000 in gross
proceeds before legal, accounting and related offering costs.

On April 7, 1995, the Company issued 300,000 shares of
its Common Stock ($.001 par value) (the "Shares") on a private
placement basis. These Shares were issued as payment for
consulting services by an investor domiciled in Canada pursuant to
the exemption allowed under Regulation S of the Securities Act of
1933. These Shares were sold by the Company without the assistance
of any underwriter or broker-dealer at a price of fifteen cents
($.15) each which resulted in the Company receiving $45,000 in
gross proceeds before legal, accounting and related offering costs.

On August 17, 1995, the Company issued 720,000 shares of
its Common Stock ($.001 par value) (the "Shares") on a private
placement basis. These Shares were issued as payment for consulting
services by an investor domiciled in Canada pursuant to the
exemption allowed under Regulation S of the Securities Act of 1933.
These Shares were sold by the Company without the assistance of any
underwriter or broker-dealer at a price of twelve and one-half
cents ($.125) each which resulted in the Company receiving $90,000
in gross proceeds before legal, accounting and related offering
costs.

On March 2, 1995, the Company issued 40,000 shares of
its Common Stock ($.001 par value) (the "Shares") on a private
placement basis. These Shares were issued as payment for consulting
services by an investor domiciled in Canada pursuant to the
exemption allowed under Regulation S of the Securities Act of 1933.
These Shares were sold by the Company without the assistance of any
underwriter or broker-dealer at a price of eight cents ($.080) each
which resulted in the Company receiving $3,200 in gross proceeds
before legal, accounting and related offering costs.

On February 20, 1995, the Company issued 23,000 shares
of its Common Stock ($.001 par value) (the "Shares") on a private
placement basis. These Shares were issued as payment for
consulting services by an investor domiciled in Canada pursuant to
the exemption allowed under Regulation S of the Securities Act of
1933. These Shares were sold by the Company without the assistance
of any underwriter or broker-dealer at a price of eight cents
($.080) each which resulted in the Company receiving $1,840 in
gross proceeds before legal, accounting and related offering costs.

On February 20, 1995, the Company issued 10,000 shares
of its Common Stock ($.001 par value) (the "Shares") on a private
placement basis. These Shares were issued as payment for
consulting services by an investor domiciled in Canada pursuant to
the exemption allowed under Regulation S of the Securities Act of
1933. These Shares were sold by the Company without the assistance
of any underwriter or broker-dealer at a price of eight cents
($.08) each which resulted in the Company receiving $800 in gross
proceeds before legal, accounting and related offering costs.

On February 20, 1995, the Company issued 20,000 shares
of its Common Stock ($.001 par value) (the "Shares") on a private
placement basis. These Shares were issued as payment for
consulting services by an investor domiciled in Canada pursuant to
the exemption allowed under Regulation S of the Securities Act of
1933. These Shares were sold by the Company without the assistance
of any underwriter or broker-dealer at a price of eight cents
($.08) each which resulted in the Company receiving $1,600 in gross
proceeds before legal, accounting and related offering costs.

On February 20, 1995, the Company issued 10,000 shares
of its Common Stock ($.001 par value) (the "Shares") on a private
placement basis. These Shares were issued as payment for consulting
services by an investor domiciled in Canada pursuant to the
exemption allowed under Regulation S of the Securities Act of 1933.
These Shares were sold by the Company without the assistance of any
underwriter or broker-dealer at a price of eight cents ($.08) each
which resulted in the Company receiving $800 in gross proceeds
before legal, accounting and related offering costs.

On February 20, 1995, the Company issued 60,000 shares
of its Common Stock ($.001 par value) (the "Shares") on a private
placement basis. These Shares were issued as payment for consulting
services by an investor domiciled in Canada pursuant to the
exemption allowed under Regulation S of the Securities Act of 1933.
These Shares were sold by the Company without the assistance of any
underwriter or broker-dealer at a price of eight cents ($.08) each
which resulted in the Company receiving $4,800 in gross proceeds
before legal, accounting and related offering costs.

On May 2, 1995, the Company issued 129,000 shares of its
Common Stock ($.001 par value) (the "Shares") on a private
placement basis. These Shares were sold to an corporation domiciled
in Bermuda pursuant to the exemption allowed under Regulation S of
the Securities Act of 1933. These Shares were sold by the Company
without the assistance of any underwriter or broker-dealer at a
price of fifteen cents ($.15) each which resulted in the Company
receiving $19,350 in gross proceeds before legal, accounting and
related offering costs.

On September 6, 1995, the Company issued 500,000 shares
of its Common Stock ($.001 par value) (the "Shares") on a private
placement basis. These Shares were issued to acquire a 20% equity
interest in Onstar Industries, Inc., a Hong Kong corporation
domiciled in Canada pursuant to the exemption allowed under Section
4(2) of the Securities Act of 1933. These Shares were sold by the
Company without the assistance of any underwriter or broker-dealer
at a price of twelve and one-half cents ($.125) each which resulted
in the Company receiving $62,500 in gross proceeds before legal,
accounting and related offering costs.

On November 12, 1996, the Company issued 1,000,000 shares
of its Common Stock ($.001 par value) (the "Shares") on a private
placement basis pursuant to the exemption allowed under Section
4(2) of the Securities Act of 1933. (Settlement of amounts
owed)These Shares were sold to investors by the Company without the
assistance of any underwriter or broker-dealer at a price of five
cents ($.05) each which resulted in the Company receiving $50,000
gross proceeds before legal, accounting and related offering costs.

On June 29, 1994, the Company issued 25,000 shares of its
Common Stock ($.001 par value) (the "Shares") on a private
placement basis pursuant to the exemption allowed under Section
4(2) of the Securities Act of 1933. These Shares were sold to
investors by the Company without the assistance of any underwriter
or broker-dealer at a price of forty cents ($.40) each which
resulted in the Company receiving $10,000 gross proceeds before
legal, accounting and related offering costs.

On April 4, 1994, the Company issued 30,000 shares of
its Common Stock ($.001 par value) (the "Shares") on a private
placement basis. These Shares were issued as payment for consulting
services by an investor domiciled in Canada pursuant to the
exemption allowed under Regulation S of the Securities Act of 1933.
These Shares were sold by the Company without the assistance of any
underwriter or broker-dealer at a price of fifty one and six-tenths
cents ($.516) each which resulted in the Company receiving $15,469
in gross proceeds before legal, accounting and related offering
costs.

On April 7, 1994, the Company issued 23,000 shares of
its Common Stock ($.001 par value) (the "Shares") on a private
placement basis. These Shares were issued as payment for
consulting services by an investor domiciled in Canada pursuant to
the exemption allowed under Regulation S of the Securities Act of
1933. These Shares were sold by the Company without the assistance
of any underwriter or broker-dealer at a price of fifty six and
three-tenth cents ($.563) each which resulted in the Company
receiving $12,938 in gross proceeds before legal, accounting and
related offering costs.

On April 7, 1994, the Company issued 10,000 shares of
its Common Stock ($.001 par value) (the "Shares") on a private
placement basis. These Shares were issued as payment for
consulting services by an investor domiciled in Canada pursuant to
the exemption allowed under Regulation S of the Securities Act of
1933. These Shares were sold by the Company without the assistance
of any underwriter or broker-dealer at a price fifty six and three
tenth cents ($.563) each which resulted in the Company receiving
$5,625 in gross proceeds before legal, accounting and related
offering costs.

On April 4, 1994, the Company issued 20,000 shares of
its Common Stock ($.001 par value) (the "Shares") on a private
placement basis. These Shares were issued as payment for
consulting services by an investor domiciled in Canada pursuant to
the exemption allowed under Regulation S of the Securities Act of
1933. These Shares were sold by the Company without the assistance
of any underwriter or broker-dealer at a price of fifty six and
three-tenth cents ($.563) each which resulted in the Company
receiving $11,250 in gross proceeds before legal, accounting and
related offering costs.

On April 1, 1994, the Company issued 10,000 shares of
its Common Stock ($.001 par value) (the "Shares") on a private
placement basis. These Shares were issued as payment for
consulting services by an investor domiciled in Canada pursuant to
the exemption allowed under Regulation S of the Securities Act of
1933. These Shares were sold by the Company without the assistance
of any underwriter or broker-dealer at a price of fifty one and
six-tenth cents ($.516) each which resulted in the Company
receiving $5,156 in gross proceeds before legal, accounting and
related offering costs.

On April 11, 1994, the Company issued 60,000 shares of
its Common Stock ($.001 par value) (the "Shares") on a private
placement basis. These Shares were issued as payment for consulting
services by an investor domiciled in Canada pursuant to the
exemption allowed under Regulation S of the Securities Act of 1933.
These Shares were sold by the Company without the assistance of any
underwriter or broker-dealer at a price of fifty one and six-tenth
cents ($.516) each which resulted in the Company receiving $30,938
in gross proceeds before legal, accounting and related offering
costs.

On April 5, 1994, the Company issued 10,000 shares of
its Common Stock ($.001 par value) (the "Shares") on a private
placement basis. These Shares were issued as payment for
consulting services by an investor domiciled in Canada pursuant to
the exemption allowed under Regulation S of the Securities Act of
1933. These Shares were sold by the Company without the assistance
of any underwriter or broker-dealer at a price of fifty one and
six-tenths cents ($.516) each which resulted in the Company
receiving $15,469 in gross proceeds before legal, accounting and
related offering costs.

Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

During the latter part of 1990 the Company revised its
business plan and began its conversion from a merchant banker into
a diversified company. In November of 1990 the Company acquired
ADC Industries, Inc. a manufacturer of valves for storage tanks.
In June of 1991 the Company acquired a 21% interest in Pacific
International Indemnity, Ltd., on off-shore surplus line writer
("Pacific"). This transaction was rescinded in March 1992. During
September of 1991 the Company acquired Xenogenex, Inc., a bio-
medical research and development company. In 1992, the Company
acquired hydraulic technology applicable to machine and helicopter
rotor control. In 1992, the Company divested itself of the machine
control technology. In 1993, the Company divested itself of its
helicopter technology and sold its subsidiary, ADC Industries. The
Company intends to focus its resources on further research and
development efforts to be conducted on its SYBIOLR artificial liver
technology.

Results of Operations

Fiscal 1996 versus Fiscal 1995

During the year ended November 30, 1996 ("Fiscal 1996")
the Company recorded total revenues of $0 compared to $6,654 in
revenues earned during the fiscal year ended November 30, 1995
("Fiscal 1995"). Fiscal 1995's revenues were composed of $96 in
royalties, $5,388 in rents in rental revenues from real estate, and
$1,170 in sales revenue.

During Fiscal 1996, the Company incurred $386,292 in
Consulting Fees which were incurred primarily due to the Company's
continued use and reliance on professional services from outside
the Company.

In Fiscal 1996, the Company also incurred $390,561 in
General and Administrative Expenses. This decreased by nearly 63%
from Fiscal 1995's level of $1,044,403 primarily due to decreased
administrative staff and consulting expenses.

Fiscal 1996 research and development costs declined to $0
from $169,658 in Fiscal 1995 while depreciation and amortization
expenses were $16,326 in Fiscal 1996 compared to $21,064 in Fiscal
1995. The decline in research and development costs during Fiscal
1996 reflected the Company's limited financial resources.

As a result, Total Operating Expenses in Fiscal 1996 were
$793,179 compared to Total Operating Expenses of $1,844,704 in
Fiscal 1995. This resulted in the Company recording a Loss from
Operations of ($793,179) in Fiscal 1996 compared to a Loss from
Operations of ($1,838,050) in Fiscal 1995.

For Fiscal 1996, the Company recorded interest expense
of $273 compared to $22,438 during Fiscal 1995. During Fiscal
1996, the Company also recorded $110,288 in losses on disposition
of assets compared to $214,167 in losses recorded upon disposition
of assets during Fiscal 1995. The Company also recorded a $60,000
loss on the recission of a technology license to GroupMed
International in Fiscal 1996 after previously recording a $60,000
asset in connection with the sale of the license to them in Fiscal
1995. The Company also wrote off its investment in TECA with a
$133,670 charge to operations. The Company's Fiscal 1996
operations were greatly impacted by certain Other Income and
Expenses. In Fiscal 1996, the Company recorded an extraordinary
gain of $147,188 in connection with the re-negotiation of certain
indebtedness. This compares to $49,348 in extraordinary gains
recognized in Fiscal 1995 resulting from similar re-negotiations
and reductions of certain indebtedness.

As a result, the Company recorded a Net Loss of
($950,222) in Fiscal 1996 compared to a Net Loss of ($3,580,087) in
Fiscal 1995, a decrease of nearly 74%. Fiscal 1996 Losses Per
Common Share (computed with Common Stock Equivalents and fully
diluted) were ($0.03) compared to ($0.23) for the same period
during Fiscal 1995.

Fiscal 1995 versus Fiscal 1994

During the year ended November 30, 1995 ("Fiscal 1995")
the Company recorded total revenues of $6,654 primarily from rental
revenues on certain real estate compared to $90,594 in revenues
earned during the fiscal year ended November 30, 1994 ("Fiscal
1994"). Fiscal 1994's revenues were composed of $63,483 in
royalties, $25,123 in rents in rental revenues from real estate,
and $1,988 in sales revenue.

During Fiscal 1995, the Company incurred $609,579 in
Consulting Fees which were incurred primarily due to the Company's
continued use and reliance on professional services from outside
the Company.

In Fiscal 1995, the Company also incurred $1,044,403 in
General and Administrative Expenses. This increased by nearly 59%
in Fiscal 1994's level of $656,628 primarily due to increased
administrative and consulting expenses.

Fiscal 1995 research and development costs increased by
nearly 21% from $140,755 in Fiscal 1994 to $169,658 while
depreciation and amortization expenses were $21,064 in Fiscal 1995
compared to $22,596 in Fiscal 1994. The decline in research and
development costs during Fiscal 1995 reflected the Company's
limited financial resources.

As a result, Total Operating Expenses in Fiscal 1995 were
$1,844,704 compared to Total Operating Expenses of $1,403,671 in
Fiscal 1994. This resulted in the Company recording a Loss from
Operations of ($1,838,050) in Fiscal 1995 compared to a Loss from
Operations of ($1,313,077) in Fiscal 1994.

For Fiscal 1995, the Company recorded an extraordinary
gain of $49,348 in connection with a liquidation of certain
indebtedness compared to a similar extraordinary gain of $83,027 in
Fiscal 1994. Interest Expense declined by over 33% from $33,798
in Fiscal 1994 to $22,438 in Fiscal 1995.

The Company's Fiscal 1995 operations were greatly
impacted by certain Other Income and Expenses. In Fiscal 1995, the
Company's management re-evaluated the carrying value of the
Company's real estate in Arizona given declining market trends in
the market area and changing land use in surrounding real estate
market adjoining the real estate parcels held by the Company. The
Company plans to sell the Arizona real estate in connection with a
contemplated settlement agreement with the Company's creditors.
On this basis, the Company reduced the carrying value of the real
estate from $1,654,000 to $47,200.

In addition, the Company reduced the carrying value of
certain shares of GroupMed International, Inc. ("GMI") it received
from GMI to reflect the limited liquidity and the current market
value of the GMI stock it received in payment under a licensing
agreement with GMI.

The Company also determined that the wrap notes and
associated equity purchased during 1992 have an undeterminable
value. The Company established a valuation allowance of $356,741
for the entire amounts relative to the wrap notes receivable and
payable balances associated with the wrap notes in the amount of
$356,741 for the year ended November 30, 1995. This increase for
reserves of $356,741 has been reflected within general and
administrative expenses for Fiscal 1995.

The Company also reduced the carrying value of its prior
investment in helicopter control technology from $187,500 at the
close of Fiscal 1994 to $0 at the close of Fiscal 1995. The
Company has no plans to develop this technology. The Company also
reduced the value of a timeshare investment from $9,000 at the
close of Fiscal 1994 to $0 at the close of Fiscal 1995.

As a result of these re-evaluations of the carrying value
of the Company's investments, the Company recorded an aggregate
Loss on Disposition and Impairment of Assets of $1,820,967 during
Fiscal 1995 compared to a Loss on Disposition of Assets of $63,359
in Fiscal 1994. The Company also recorded a $60,000 gain from the
sale of the License to GMI.

Other Income and Expenses resulted in the Company
recording $1,791,385 in Total Other Expenses (net of other income)
in Fiscal 1995 from Fiscal 1994's Total Other Expenses (net of
other income) of $37,600.

As a result, the Company recorded a Net Loss of
$3,580,087 in Fiscal 1995 or an increase of nearly 165% from the
Net Loss of $1,351,477 recorded during Fiscal 1994. Fiscal 1995
Loss Per Common Share (computed with Common Stock Equivalents and
fully diluted) was ($0.23) compared to ($0.23) for the same period
during Fiscal 1994.

Liquidity and Capital Resources - the Company

Several steps have been taken by the Company to reduce
its liabilities, reduce cash requirements, and raise capital. The
Company has been negotiating with the bank and its vendor creditors
to settle its liabilities. Exten is also negotiating with
investment bankers for raising of additional capital. The Company
is also considering a merger with other entities. No assurances
can be given that any such activity will prove successful.

During Fiscal 1996, the Company took steps to control
expenses and to reduce and re-negotiate outstanding indebtedness,
particularly debts to a former officer, Robert H. Goldsmith, Union
Bank, and over $100,000 in taxes owed to the U.S. Internal Revenue
Service.

The Company has also continued to pay salaries,
consulting fees, and in some cases, legal fees through the issuance
of the Company's Common Stock with the subsequent registration of
the shares so issued on Form S-8. The Company has been forced to
take these steps to conserve the Company's cash and liquid
resources.

Xenogenex, Inc.

Xenogenex is in the development stage and produces no
revenue. However, Xenogenex incurred consulting and administrative
costs in the last fiscal year. The SYBIOLTM artificial liver
technology will require substantial additional capital to continue
development of the synthetic bio-liver.

Item 7. FINANCIAL STATEMENTS

The full text of the Company's audited consolidated
financial statements for the fiscal years ended November 30, 1996
and 1995 begins on page 30 of this Report.

Item 8. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE

Within the 24-month period prior to November 30, 1996,
there was a change of accountants and on February 9, 1997 the
Company changed its accountants from Harland & Boettger to J.H.
Cohn LLP, as its independent auditors. During this period, there
has been no reported disagreement with accountants on any matter
of accounting principles or practices or financial statement
disclosure.

PART III

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

The Directors and Executive Officers of the Company were
as of November 30, 1996:
<TABLE>
<S> <C> <C> <C>
Name Age Position Date Elected

W. Gerald Newmin 59 President, CEO, Chairman
Secretary & Director 12-01-95

William R. Hoelscher 59 Vice President
& Director 10-25-94

Robert L. Cashman 65 Director 11-30-96

</TABLE>

W. Gerald Newmin was retained as a consultant to the
Board of Directors of the Company in June 1995. As an
accommodation to the Board, Mr. Newmin was elected Acting Secretary
of the Corporation on July 13, 1995, and had signature authority on
checks in the absence of an officer or director. On December 1,
1995, Mr. Newmin was elected Chairman, Chief Executive Officer, and
President of the Company. Mr. Newmin is a principal of Newmin
Associates, specializing in mergers and acquisitions and the
operational management of troubled companies. Mr. Newmin currently
serves on the Board of Directors and is an investor in four
companies, one of which, SYS, is a publicly-traded (OTC) on the
Electronic Bulletin Board.

Mr. Newmin is currently Chairman of the Board of the
International Forum of Corporate Directors, a non-profit
organization which promotes corporate governance, and which is
composed of over 120 Board members from companies in San Diego and
all over California. From 1991 to present. Mr. Newmin has been a
consultant, investor, and a director of Greene International West,
Inc., an industrial manufacturing company located in Oceanside,
California. From 1993 to present, Mr. Newmin has been an investor
and director of Occu-Med, Inc., a managed healthcare company
located in Denver, Colorado. Since 1994, Mr. Newmin has been an
investor and director of SYS, a defense systems company in San
Diego, California. From 1984 to 1987, Mr. Newmin was President of
HealthAmerica Corporation, which was the nation's largest publicly-
held HMO management company at the time. From 1977 to 1984,, Mr.
Newmin was President of International Silver Company,a diversified
multi-national manufacturing company which he restructured.

From 1973 to 1977, Mr. Newmin was Vice President and
Western Regional Director for American Medicorp, Inc. In this
capacity, he was responsible for the management of 23 acute care
hospitals located throughout the Western United States. From 1962
to 1973, Mr. Newmin was employed by Whittaker Corporation. Mr.
Newmin was instrumental in Whittaker's entry into both the United
States and International healthcare markets. At Whittaker, Mr.
Newmin held various senior executive positions, including those of
Chief Executive Officer of Whittaker's Production Steel Company,
Whittaker Textiles Corporation, Bertram Yacht Corporation, Narmco
Materials Corporation, and Anson Automotive Corporation. Mr.
Newmin holds a Bachelor's degree in Accounting from Michigan State
University.

William R. Hoelscher was elected a Director on
October 25, 1994. From August 1984 to the present, Mr. Hoelscher
has been the owner of Hoelscher Engineering ("HEC"). HEC provides
technical support to U.S. Elevator, other elevator companies, and
consulting services to legal counsel in connection with elevator
litigation matters. Mr. Hoelscher also is part-time consultant to
Cubic Corp and provides training seminars for Cubic's U.S. Elevator
division in connection with elevator design.

From July 1991 to the present, Mr. Hoelscher has
been President of ETC Corp, a company involved in developing ideas
and inventions. From August 1984 to July 1991, Mr. Hoelscher was
Vice President, Secretary, and Treasurer of Tec-Matic Corp. - a
company involved in building computer interface equipment for
hydraulic milling machinery; and Mr. Hoelscher was also President
of Photovoltaic Energy Development, Inc. - a company involved in
the development of power inverters and other accessories for use in
the conversion of solar and other natural energy. During this
period Mr. Hoelscher was also President of Hypec Corp. - a company
involved in the design and development of a thermal to electrical
energy conversion unit. In July 1984 Mr. Hoelscher retired as
Director of Research and Development at U.S. Elevator Corp. Mr.
Hoelscher holds a B.S. Degree in Physics from San Diego State
University (1959).

Mr. Robert L. Cashman was elected a Director on
November 30, 1996. From 1975 to the present, Mr. Cashman has been
President and founder of Pacific Envelope Company of Orange,
California From 1988 to the present, Mr. Cashman has been
President of Crown National Corporation, a metal fabricating
company of Southgate, California. Pacific Envelope Company was
named by Inc. magazine as one of the fastest growing companies in
the United States for five successive years (1982, 1983, 1984,
1985, and 1986) - one of only six companies to achieve this honor.
Mr. Cashman is and has actively contributed to various civic
organizations, including the Boy Scouts of America, the Los Angeles
Olympic Organizing Committee, and the Anaheim Museum. Mr. Cashman
received his B.S. Degree in Business Administration from the
University of California at Los Angeles (February 1956).

As per item 405 of SEC Regulation SB it should be
noted that during the fiscal year ended November 30, 1996, the
Company has no record of the timely filing of Statements of Changes
in Beneficial Ownership of Securities forms (Form 3 and Form 4) on
one or more occasions by the following: none

Item 10. EXECUTIVE COMPENSATION

During fiscal 1996, the Company paid the following
compensation to the Company's Officers and Directors:
<TABLE>
<S> <C>
Cash Compensation:

Fiscal 1996

W. Gerald Newmin $0
William R. Hoelscher $0
Robert L. Cashman $0

</TABLE>
Non-Cash Compensation:
1. Stock Compensation
[S] [C] [C]
Officer Date of Issue Number of Shares
William R. Hoelscher 08-17-96 36,000

2. Other Non-Cash Compensation

In lieu of other compensation, the Company issued a $162,500
secured promissory note (the "Note") to the Company's President, W.
Gerald Newmin for services rendered during the fiscal year ending
November 30, 1996 and as a prepayment (of $12,500) for the month of
December 1996. The Note carries an interest rate of 7%, matures on
demand or before November 30, 1997. The Note is secured by the
Company's patent applications, licenses, technologies, agreements,
inventory, machines, office furniture, and all other Company
assets.

Stock Option Compensation

In addition to the cash and stock compensation reported above,
the Company's Board of Directors voted to issue options to purchase
shares of the Company's Common Stock (par value $0.01) to the
following Officers and Directors of the Company in lieu of cash
compensation during fiscal 1996:

Name of Officer/Director No. of Exercise Expiration
Shares Under Price Date
Option

Electrical & Technical
Consulting, Inc.(1) 800,000 $0.10 11-13-00
Electrical & Technical
Consulting, Inc.(1) 800,000 $0.06 08-16-98
</TABLE>

Footnote:
(1) Electrical & Technical Consulting, Inc. is a company partially
owned by William R. Hoelscher, a Director of the Company.

The Company also granted stock options to the following
individuals who were named to the Company's informal scientific
advisory board:
<TABLE>
<S> <C> <C> <C>

Name of Individual No. of Shares Exercise Expiration
Under Option Price Date

John Brems, M.D. 100,000 $0.10 01-25-01
Amy Friedman, M.D. 50,000 $0.10 01-25-01
Kurt Gehlsen, Ph.D. 50,000 $0.10 01-25-01
</TABLE>

Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT

As of May 10, 1997, the Company's Directors, Officers
and over 5% shareholders held beneficially the following shares of
Common Stock or of beneficial interest. Numbers of shares have been
adjusted for 1:7 reverse split effective August 31, 1990 and the
reverse split of 1:2 August 10, 1991 and a reverse split of 1:10 on
November 30, 1992.

<TABLE>
<S> <C> <C> <C>
Name Title Common %
Shares Class
W. Gerald Newmin(2) President, CEO,
Chairman & Secretary 586,000 1.97%
William R. Helscher(3) Director & Treasurer 1,772,000 5.95%
Robert L. Cashman Director 0 0%
All Officers and
Directors as a Group
(3 persons) 2,358,000 7.92%

</TABLE>

Footnotes:
(1) Based on 29,762,432 shares of the Company's Common Stock
outstanding as of May 29, 1997, and stock option shares currently
executable by officers, directors, and affiliates within 60 days of
May 29, 1997, without including the effect of any other stock
options.

(2) Includes shares held by Newmin & Associates, an entity owned by
W. Gerald Newmin, the Company's President, CEO, Chairman and
Secretary.

(3) Includes 172,000 shares and 1,600,000 shares underlying
1,600,000 options granted Electrical & Technical Consulting, a
company partially owned by William R. Hoelscher, a Director of the
Company.

Stock Options Outstanding:
<TABLE>
<S> <C> <C> <C> <C>
Name Position Amount of Exercise Expiration
Stock Price Date
Option

Malcolm D. Campbell Past CFO &
Secretary 300,000 $0.50 8-26-03

Electrical & Technical
Consulting, Inc.(1) 800,000 $0.10 11-13-00

Electrical & Technical
Consulting, Inc.(1) 800,000 $0.06 08-16-98
</TABLE>

1. Does not include options granted to other holders, totalling an
additional 1,840,000 shares at exercise prices ranging from $0.10
to $0.50 per share. Electrical & Technical Consulting, Inc. is a
company partially owned by William R. Hoelscher, a Director of the
Company.

All of the options expire on the date shown, and there is no
provision in the grant for any extension of the exercise period
beyond the expiration date shown above.

Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

All share numbers in this section have been adjusted for
the 1 for 7 reverse split effective August 31, 1990 and the 1 for
2 reverse split effective August 10, 1991 and the 1:10 reverse
split effective November 30, 1992.

On February 24, 1992 the Company purchased certain
helicopter technology from Electrical & Technical Consulting, Inc.
("ETC") for 50,000 shares of the Company's common stock. Mr.
Arnold Hunsberger, who became a Company Director on November 25,
1992 is a part owner of ETC with William R. Hoelscher, a current
Director of the Company. The shares were valued at $5.00 per
share.

On February 28, 1992, the Company exchanged 170,000
shares of common stock and 170 shares of preferred stock,
convertible into 170,000 shares of common stock, for real estate in
Arizona comprised of 240 buildable lots. The Company purchased the
land from entities controlled by Mr. Louis Redondo. On April 30,
1992 Mr. Redondo became a member of the Company's Board of
Directors. The shares were valued at an aggregate of $1,700,000.

The Company's Board of Directors on May 19, 1992 voted to
issue to members of the Board of Directors options to purchase a
total of 431,036 shares at $0.10 per share. These options may be
exercised at any time prior to May 19, 1997.

On July 29, 1992 the Board of Directors voted to issue
options to members of the Board to purchase a total of 3,600 shares
of Xenogenex owned by the Company. The options are valid for five
years from the time that Xenogenex is first publicly traded. The
option price to be fifty percent (50%) of the initial public
offering price. The Company valued these options at $0.75 per
share.

On July 30, 1992 the Company sold 106,000 shares of
common stock for $1.30 per share to St. Louis Fire and Marine. St.
Louis Fire and Marine signed a note for $130,000 payable at $15,000
per month starting November 24, 1992. St. Louis Fire and Marine is
controlled by Louis Redondo a past Company director.

On September 25, 1992 the Board of Directors voted to
transfer a total of 125,000 shares of Xenogenex stock owned by the
Company to members of the Company's Board of Directors as
additional compensation. These shares were valued at $0.49 per
share.

On January 12, 1993 the Board of Directors issued 25,000
shares of the Company's common stock to Carmine J. Bua, Esq., for
legal services valued at $100,000.

On March 8, 1993 the Board issued to Malcolm D. Campbell,
its president, 50,000 shares of the Company's common stock in lieu
of salary. The shares were valued at $0.50 per share.

On April 20, 1993 the Board issued to Carmine J. Bua,
Esq. 5,000 shares of its common stock for legal services. The
shares were valued at $3.00 per share.

In May 7, 1993 the Company issued to Carmine J. Bua,
Esq., 50,000 shares of the Company's common stock for legal
services. The shares were valued at $1.75 per share.

On May 24, 1993 the Board issued to Malcolm D. Campbell,
its president, 50,000 shares of the Company's common stock in lieu
of salary. The shares were valued at $1.75 per share.

On August 26, 1993 Exten's Board of Directors awarded an
option to its president, Malcolm D. Campbell, for the purchase of
300,000 of the Company's common shares exercisable at $0.50 until
August 26, 1998.

On August 26, 1993 the Board issued to Carmine J. Bua,
Esq., its then vice president, 100,000 shares of common stock for
legal services. The shares were valued at $0.75 per share.

On September 23, 1993 the Board issued to Carmine J. Bua,
Esq., its then vice president, 563,000 of the Company's common
stock for legal services. The shares were valued at $0.50 per
share.

On January 4, 1994, the Company's Board of Directors
approved a loan of $250,000 to the Company's subsidiary, Xenogenex,
Inc. by the Company's then President and CEO, Robert H. Goldsmith,
through the R. H. Goldsmith Living Trust. The Board also approved
a Consulting Agreement with Goldsmith providing for the issuance of
288,333 shares of the Company's Common Stock for consulting
services. These shares were valued at $0.875 per share with
144,167 shares to be issued on January 1, 1996 and 144,166 to be
issued on January 1, 1997. All of these shares were valued at
$0.875 per share.

On March 1, 1994, the Company's Board of Directors
approved the issuance of: (i.) 94,476 shares of the Company's
common stock to Malcolm D. Campbell, then an officer and director
of the Company, in lieu of payment of $62,000 in cash salary
payments; and (ii.) 38,095 shares of the Company's Common Stock to
Robert H. Goldsmith, the Company's then President, in lieu of cash
salary payments. All of these shares were valued at $0.65 per
share.

On June 14, 1994, the Company's Board of Directors
authorized the issuance of 160,000 shares of the Company's Common
Stock to Carmine J. Bua, Esq., then, an officer of the Company, in
exchange for legal services. The legal services were valued at
$80,000.

On July 29, 1994, the Company's Board of Directors
authorized the issuance of 10,000 shares of the Company's Common
Stock to Arnold Hunsberger, then an officer and Director of the
Company, and 6,667 shares of the Company's Common Stock to Ken
Krul, then a Director of the Company. The shares issued to Mr.
Hunsberger were valued at $1,250 and the shares issued to Mr. Krul
were valued at $8,333.

On October 25, 1994, the Company's Board of Directors
approved an employment agreement with the Company's then President,
Kevin G. Smith. Under the terms of the agreement, Mr. Smith
receives 40,000 shares of the Company's Common Stock for each
month of his employment for a period of up to twelve months from
and after November 1, 1994. In addition, the Company also granted
Mr. Smith the right to receive 250,000 Shares of the Company's
common stock upon the Company's acceptance of the first three
months of Mr. Smith's employment from November 1, 1994 and an
additional 250,000 shares of the Company's Common Stock for an
additional three months of employment from March 1, 1995. The
Company is obligated to register (on Form S-8) all shares issued to
Mr. Smith so as to ensure that the shares are freely-tradeable.
All of the shares issued to Mr. Smith are valued at $0.10 per
share.

On January 10, 1995, the Company's Board of Directors
voted to: (i.) issue 500,000 shares of the Company's Common Stock
to Kevin G. Smith, the Company's then President, in exchange for
services rendered to the Company; and (ii.) 710,000 shares of the
Company's Common Stock to Margaret Rawlinson for consulting
services rendered. All of these shares were valued at $0.10 per
share and the Company registered Mr. Smith's Shares on Form S-8 and
Ms. Rawlinson's shares pursuant to Regulation S. In addition, the
Company's Board of Directors voted to issue 350,000 shares of the
Company's Common Stock to William E. Daniel in exchange for
services rendered to the Company. These shares were valued at
$0.10 per share and the Company registered the Shares on Form S-8.

On February 7, 1994, the Company's Board of Director's
granted Robert H. Goldsmith, then President of the Company, an
option to purchase a total of 1,000,000 shares of common stock at
a price of eighty-one and one-quarter cents ($.8125) per share
exercisable for the period beginning February 8, 1994 and ending
February 7, 2004 for cash payment or a promissory note payable
within ninety (90) days. On April 1, 1994 the option was exercised
and one million (1,000,000) shares of the Company's common stock
was issued. The shares were not paid for within the ninety (90)
days set forth in the option agreement. As a result, the Company
established a receivable for the amount due the Company for this
exercised option.

On February 7, 1994 the Board also approved the issuance
of 1,000,000 shares of the Company's Common Stock to Mr. Goldsmith
subject to Mr. Goldsmith earning these shares for future services
to be rendered to the Company and certain other conditions. These
shares were valued at $0.8125 per share.

On April 7, 1995, the Company's Board of Directors voted
to issue the following shares for services rendered to the Company:
(i.) 200,000 shares to the Company's then President, Kevin G.
Smith; (ii.) 150,000 shares to William E. Daniel; (iii.) 56,250
shares to Arnold Hunsberger, a then Director of the Company; and
(iv.) 112,500 shares to William R. Hoelscher, a Director of the
Company. All of these shares were valued at $0.15 per share.
Subsequently, on August 17, 1995, Mr. Hunsberger and Mr. Hoelscher
returned 56,250 and 112,500 shares respectively, in exchange for
the grant an option to each of them, by the Company's Board of
Directors on August 17, 1996.

On April 24, 1995, the Company's Board of Directors voted
to issue the following shares for services rendered to the Company:
(i.) 480,000 shares to the Company's then President, Kevin G.
Smith; (ii.) 90,000 shares to Steven Broderson; (iii.) 180,000
shares to William E. Daniel; and (iv.) 75,000 shares to Craig J.
Shaber, Esq. for legal services. All of these shares were valued
at $0.19 per share.

On July 13, 1995, the Company's Board of Directors voted
to issue 200,000 shares of the Company's Common Stock to Newmin
Associates, an entity owned by the Company's President, for
consulting services. These shares were valued at $0.109 per share.

On July 24, 1995, the Company's Board of Directors took
the following actions:

(i.) granted Edward F. Myers, a former officer and
director, an option to purchase 400,000 shares of the
Company's Common Stock at an exercise price of $0.10 per
share upon shipment of the second SYBIOL unit to China
and upon satisfaction of other terms of a consulting
agreement with the Company;

(ii.) granted Edward F. Myers, a former officer and
director, an option to purchase 400,000 shares of the
Company's Common Stock at an exercise price of $0.06 per
share in payment of all monies past due and owing to Mr.
Myers;

(iii.) issued 240,000 shares of the Company's Common
Stock (valued at $0.10 per share) to Edward F. Myers, a
former officer and director, in exchange for services
rendered;

(iv.) issued 250,000 shares of the Company's Common Stock
to Malcolm D. Campbell, a former officer and director, in
exchange for $30,936.15 owed to him;

On August 17, 1995, the Company's Board of Directors took
the following actions:

(i.) issued 236,000 shares of the Company's Common Stock
to W. Gerald Newmin, the Company's President, CEO,
Chairman, and Secretary in exchange for services valued
at $28,910;

(ii.) issued 52,000 shares of the Company's Common Stock
to Arnold Hunsberger, a director of the Company in
exchange for services valued at $6,370;

(iii.) issued 36,000 shares of the Company's Common Stock
to William R. Hoelscher, a director of the Company in
exchange for services valued at $4,410;

(iv.) granted William R. Hoelscher, a Director of the
Company, an option to purchase 400,000 shares of the
Company's Common Stock at an exercise price of $0.06 per
share at any time for a period of three years in exchange
for Mr. Hoelscher's return of 412,500 shares of the
Company's Common Stock to the Company (this option was
later assigned in December 1996 to Electrical & Technical
Consulting, Inc. a company owned in part by William R.
Hoelscher);

(v.) granted Arnold Hunsberger, then a Director of the
Company, an option to purchase 400,000 shares of the
Company's Common Stock an exercise price of $0.06 per
share at any time for a period of three years in exchange
for Mr. Hunsberger's return of 465,000 shares of the
Company's Common Stock to the Company (this option was
later assigned in December 1996 to Electrical & Technical
Consulting, Inc. a company owned in part by William R.
Hoelscher); and

(vi.) issued 720,000 shares of the Company's Common Stock
to Margaret Rawlinson in exchange for consulting services
valued at $0.14 per share.

On September 18, 1995, the Company's Board of Directors
took the following actions:

(i.) issued 1,000,000 shares of the Company's Common
Stock to Ben Johnson in exchange for investment banking
services valued at $120,000;

(ii.) granted Edward F. Myers, a former officer and
director, an option to purchase 300,000 shares of the
Company's Common Stock an exercise price of $0.10 per
share at any time for a period of three years;

(iii.) issued 136,000 shares of the Company's Common
Stock to W. Gerald Newmin, subsequently the Company's
Chairman and President, in exchange for services
rendered; and

(iv.) issued 100,000 shares of the Company's Common Stock
to Carmine J. Bua, Esq., in exchange for legal services.

The shares issued to Mr. Newmin and Mr. Bua were valued
at $0.14 per share.

On November 13, 1995, the Company's Board of Directors
voted to issue the following shares of the Company's Common Stock
in payment for services rendered to the Company: 225,000 shares to
W. Gerald Newmin and 100,000 shares to Electrical and Technical
Consulting, Inc. ("ETC"), the latter, a company partially owned by
William R. Hoelscher, a Director of the Company. These shares were
valued at $0.12 per share. The Company's Board of Directors also
granted William Hoelscher and a former Director, Arnold Hunsberger,
each an option to purchase up to 400,000 shares of the Company's
Common Stock at an exercise price of $0.10 per share. Both options
expire on November 13, 2000. (These options were later assigned in
December 1996 to ETC, a company partially owned by William R.
Hoelscher.)

On November 30, 1996, the Company's Board of Directors
approved the issuance of a $162,500 secured promissory note (the
"Note") to the Company's President, W. Gerald Newmin, in lieu of
any other compensation for services rendered during the fiscal year
ending November 30, 1996 and as a prepayment (of $12,500) for the
month of December 1996. The Note carries an interest rate of 7%,
matures on demand or before November 30, 1997. The Note is secured
by the Company's patent applications, licenses, technologies,
agreements, inventory, machines, office furniture, and all other
Company assets.

No current Officer or Director of the Company has been
indebted to the Company or any of its subsidiaries in an amount in
excess of $60,000.

Item 13. EXHIBITS AND REPORTS ON FORM 8-K

Reports On Form 8-K Item Reported

1.) On December 6, 1995, the Company filed Form 8-K to report the
election of W. Gerald Newmin as the Company's Chief Executive
Officer and Chairman of the Company's Board of Directors.

2.) On December 13, 1995, the Company filed Form 8-K to report
the expansion of its Board of Directors from three to five
members.

3.) On February 9, 1997, the Company filed Form 8-K to report the
appointment of J.H. Cohn LLP, as the Company's public accountant
to replace Harlan & Boetgger, CPAs.

4.) On July 15, 1997, the Company filed Form 8-K to report the
Company's acquisition of all the assets of its subsidiary,
Xenogenex, Inc.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of
Exten Industries, Inc.

We have audited the accompanying consolidated balance sheet of
Exten Industries, Inc. (a Delaware corporation) and Subsidiary as
of November 30, 1996, and the related consolidated statements of
operations, stockholders' equity (deficiency) and cash flows for
the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our
audit. The consolidated financial statements of Exten Industries,
Inc. and Subsidiary for the year ended November 30, 1995 were
audited by other auditors whose report, dated February 15, 1996, on
those statements included an explanatory paragraph relating to an
uncertainty about the Company's ability to continue as a going
concern. As discussed in Note 11, the Company has restated its
1995 consolidated financial statements during the current year to
correct certain errors in those statements. The other auditors
reported on the 1995 consolidated financial statements before the
restatement.

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

In our opinion, the 1996 consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Exten Industries, Inc. and Subsidiary as of November
30, 1996, and their results of operations and cash flows for the
year then ended, in conformity with generally accepted accounting
principles.

We also audited the adjustments described in Note 11 that were
applied to restate the 1995 consolidated financial statements. In
our opinion, such adjustments are appropriate and have been
properly applied.

The accompanying 1996 consolidated financial statements have been
prepared assuming that the Company will continue as a going
concern. As discussed in Note 2 to the consolidated financial
statements, the Company is in default on certain loan agreements,
has sustained recurring losses and negative cash flows and
resultant decreases in working capital. These conditions raise
substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to these matters are
also described in Note 2 to the consolidated financial statements.
The consolidated financial statements do not include any
adjustments relating to the recoverability and classification of
reported asset amounts or the amounts and classification of
liabilities that might result from the outcome of this uncertainty.

J.H. COHN LLP

San Diego, California
April 21, 1997

EXTEN INDUSTRIES, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET

NOVEMBER 30, 1996
<TABLE>
<S> <C>
ASSETS

Current Assets:
Cash $ 579
Other current assets 25,000
__________
Total current assets 25,579

Real estate held for sale 47,200
Goodwill, net 35,214
__________

Total $ 107,993
__________

LIABILITIES AND STOCKHOLDERS' DEFICIENCY

Current Liabilities:
Accounts payable $ 171,016
Accrued expenses 176,861
Notes payable, including
$343,072 in default 646,484
__________
Total liabilities 994,361
__________
Commitments and contingencies

Stockholders' Deficiency:
Preferred stock, par value
$0.01 per share; 1,000,000
shares authorized, 143
shares issued and outstanding 1
Common stock, par value $.01 per
share. 50,000,000 shares authorized;
29,762,432 shares issued and
outstanding 297,624
Additional paid - in capital 8,799,993
Accumulated deficit (9,983,986)
____________

Total Stockholders' Deficiency (886,368)
_____________
Total $ 107,993
=============
</TABLE>

The accompanying notes are an integral part of these consolidated
financial statements.

EXTEN INDUSTRIES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED NOVEMBER 30, 1996 AND 1995

<TABLE>
<S> <C> <C>
1996 1995

Revenue:
Sales $ 1,170
Royalties 96
Rents 5,388
___________
Total 6,654
___________
Operating expenses:
Consulting fees $386,292 609,579
General and administrative 390,561 1,044,403
Research and development costs 169,658
Depreciation and amortization 16,326 21,064
___________ _____________
Totals 793,179 1,844,704
__________ ____________

Loss from operations (793,179) (1,838,050)

Other income (expense):
Interest expense (273) (22,438)
Loss on disposition of assets (110,288) (214,167)
Loss arising from impairment
of long-lived assets (1,606,800)
Sale (recision) of technology
license (60,000) 60,000
Equity in loss of partnership (133,670) (7,980)
___________ ____________
Totals (304,231) (1,791,385)
____________ ____________
Loss before extraordinary item (1,097,410) (3,629,435)

Extraordinary item - gain on
extinguishment of debt 147,188 49,348
_____________ ____________
Net loss $ (950,222) $(3,580,087)
_____________ ____________

Net loss per common share:
Loss before extraordinary item $ (.04) $ (.23)
Extraordinary item .01 -
------------ ------------
Net Loss $ (.03) $ (.23)
______________ _____________

Weighted average number
of common shares outstanding 26,846,661 15,367,331
============== =============
</TABLE>

The accompanying notes are an integral part of these consolidated
financial statements.

EXTEN INDUSTRIES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
YEARS ENDED NOVEMBER 30, 1996 AND 1995
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Preferred Preferred Common Common Additional Receivable Total Stock-
stock stock stock stock Paid-in from holders'
Shares Amount Shares Amount Capital Related Accumulated Equity
Party Deficit (Deficiency)

Balance, December 1, 1994 143 $1 7,272,457 $72,725 $7,433,809 $(812,500) (5,453,677) $1,240,358
Issuance of stock 4,863,000 48,630 353,910 402,540
Subscribed stock 2,000,000
Less subscription receivable
of $165,000 (2,000,000)
Issuance of stock for services 13,177,248 131,772 1,386,015 1,517,787
Issuance of stock for investment
in partnership 500,000 5,000 57,500 62,500
Exercise of stock options 60,000 600 5,400 6,000
Issuance of compensatory stock
options 167,500 167,500
Return of common stock upon
recision of contracts for
services (2,410,500) (24,105) (269,235) (293,340)
Net loss (3,580,087) (3,580,087)
----------- ----------- ------------ --------- --------- ----------- ------------ -------------
Balance, Novembr 39, 1995 143 1 23,462,205 234,622 9,134,899 (812,500) (9,033,764) (476,742)
Return of common stock upon
cancellation of note receivable (1,000,000) (10,000) (802,500) 812,500
Issuance of stock
Issuance of stock for services 2,000,000 20,000 162,435 182,435
Issuance of stock for investment
in subsidiary 3,718,640 37,186 220,109 257,295
Issuance of stock for settlement
of note payable 581,587 5,816 45,050 50,866
Net loss 1,000,000 10,000 40,000 50,000
Balance, November 30, 1996 (950,222) (950,222)
----------- ------------ ------------ --------- ----------- --------- ------------ ------------
143 $1 29,762,432 $297,624 $8,799,993 $ - $(9,983,986) $(886,368)
=========== ============= ============ =========== ============ ========== ============= ============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.

EXTEN INDUSTRIES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED NOVEMBER 30, 1996 AND 1995

<TABLE>

<S> <C> <C>
1996 1995

Operating activities:
Net loss $ (950,222) $(3,580,087)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 16,326 21,064
Common stock issued for services 257,295 1,224,447
Note payable issued for salary 150,000
Issuance of compensatory stock options 167,500
Write-off of employee advances 92,538
Wrap-notes reserve 356,741
Other noncash expenses 38,500
Extinguishment of debt (147,188) (49,348)
Equity in loss of partnership 133,670 7,980
Loss on disposition and impairment of assets 110,288 1,820,967
(Sale) recision of technology license 60,000 (60,000)
Increase in note payable from mediated judgement 100,938
Changes inoperating assets and liabilities:
Other current assets 139,400 (152,374)
Other assets 3,296
Accounts payable (6,859) 40,203
Accrued expenses (31,646) (227,507)
__________ ___________
Net cash used in operating activities (176,398) (287,680)
__________ ___________

Investing Activities:
Advances to employee (13,578) (78,960)
Net cash used in investing activities (13,578) (78,960)
__________ ___________

Financing activities:
Proceeds from notes and loans payable 1,650 2,500
Payments on notes and loans payable (1,763) (36,167)
Net proceeds from sale of stock and exercise
of stock options 182,435 408,540
___________ ___________
Net cash provided by financing activities 182,322 374,873
___________ ____________

Net increase (decrease) in cash (7,654) 8,233

Cash at beginning of year 8,233 -
__________ ____________
Cash at end of year $ 579 $ 8,233
========== ============
Supplementary disclosure of cash flow date:
Interest paid $ 273 $ 14,752
========== =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.

EXTEN INDUSTRIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Business and summary of significant accounting policies:

Business

Exten Industries, Inc. was incorporated on December 1, 1970 in the
State of Delaware. Currently, the Company's only business is the
development of synthetic liver technology ("SYBIOL") by its
subsidiary, Xenogenex, Inc. ("Xenogenex"), which was incorporated
on July 30, 1991 in the State of California for the purpose
of funding biotechnology research. In March 1993, Xenogenex
received all of the rights to the SYBIOL technology developed for
Xenogenex under contract with Cedars-Sinai Medical Center. A
patent application is currently pending on the process
utilized by the SYBIOL device and the Company has applied for
trademark protection for the SYBIOL trade name.

Basis of Consolidation

The consolidated financial statements includes the accounts of
Exten Industries, Inc. and its wholly-owned subsidiary, Xenogenex,
Inc. (together the "Company") All significant intercompany
balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect certain reported amounts
and disclosures. Accordingly, actual results may differ from those
estimates.

Real Estate

Real estate held for sale has been considered impaired due to the
Company's inability to fully recover the original carrying value of
the asset. The basis of property has been reduced to the amount
management expects to recover from the ultimate sale of the real
estate.

In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Standards No. 121, "Accounting for the
Impairment of LongLived Assets and for Long Lived Assets to be
Disposed of, " ("SFAS 121") which requires that long-lived assets
and certain intangible assets be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. SFAS 121 is effective
for fiscal years beginning after December 15, 1995. Management
believes that the adoption of SFAS 121 will not have a material
impact on the Company's consolidated financial statements.

EXTEN INDUSTRIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Business and summary of significant accounting
policies (concluded):

Income Taxes

The Company accounts for income taxes pursuant to the asset and
liability method which requires deferred income tax assets and
liabilities to be computed annually for temporary differences
between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in
future periods based on enacted laws and rates applicable to the
periods in which the temporary differences are expected to affect
taxable income. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to
be realized. The income tax provision or credit is the tax payable
or refundable for the period plus or minus the change during
the period in deferred tax assets and liabilities.

Net income (loss) per common share

Net income (loss) per share is calculated using the weighted
average number of outstanding common shares. Common stock
equivalents, consisting of stock options outstanding, have not
been considered because the impact of such options is antidilutive.

Reclassifications

Certain balances in the 1995 consolidated financial statements have
been reclassified to conform to the 1996 presentation.

Note 2 - Going concern matters:

For the years ended November 30, 1996 and 1995, the Company
incurred net losses of $950,222 and $3,580,087, respectively. The
Company's accumulated deficit and stockholders' deficiency at
November 30, 1996 were $9,983,986 and $886,368, respectively. In
addition, at November 30, 1996, the Company's current liabilities
exceeded its current assets by $968,782. Additionally, even though
the Company has been able to satisfy certain operating expenses by
issuing shares of the Company's common stock, operating activities
have still resulted in negative cash flows aggregating $176,398 and
$287,680 for the years ended November 30, 1996 and 1995,
respectively. Furthermore, judgements and claims against the
Company relating to loan guarantees, claims of a former president
of the Company, and amounts owed current and former suppliers
continue to accumulate. These factors, among others, raise
substantial doubt about the Company's ability to continue as a
going concern.

EXTEN INDUSTRIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 2 - Going concern matters (concluded):

In order to continue as a going concern, management's plans include
(1) raising additional capital through sales of common stock, the
proceeds of which would be used to perfect the Company's patent
position in its SYBIOL technology and satisfy immediate operating
needs; (2) continue to use common stock to pay for consulting and
professional services; (3) negotiate reduced settlements of
existing liabilities; and (4) sell non-productive assets. In
addition, management is continually seeking other potential joint
venture partners or merger candidates that would allow
for the immediate recognition of the value of the SYBIOL technology
for creditors and stockholders. However, management cannot provide
any assurances that the Company will be successful in accomplishing
any of its plans.

The ability of the Company to continue as a going concern is
dependent upon its ability to successfully accomplish the plans
described in the preceding paragraph and eventually secure
other sources of financing and attain profitable operations. The
accompanying consolidated financial statements do not include any
adjustments that might be necessary should the Company be unable to
continue as a going concern.

Note 3 - Furniture, fixtures and equipment:

Furniture, fixtures and equipment as of November 30, 1996 consists
of the following:
<TABLE>
<S> <C>

Furniture and fixtures $14,706
Office and laboratory equipment 9,368
24,074
Less accumulated depreciation 24,074

Total $ -
==========
</TABLE>

Note 4 - Real estate held for sale:

Real estate as of November 30, 1996 consists of a parcel of
undeveloped land near the Grand Canyon.

The land was originally purchased in February 1992 for $1,654,000.
At November 30, 1995, management reduced the carrying value of this
land to its estimated fair market value of $47,200 by a charge to
operations of $1,606,800 (see Note 11).<PAGE>
EXTEN INDUSTRIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 5 - Equity in loss of partnership:

During January 1995, the Company issued 500,000 shares of common
stock valued at $62,500 ($.13 per share) for an 18.6% interest in
a joint venture (TECA) to manufacture, market and sell the
Xenogenex technology in Asia, Australia and New Zealand. The
Company had previously recorded a note receivable from TECA in
connection with an advance of $83,000 made during the year ended
November 30, 1994. During the year ended November 30, 1996,
management determined that the investment in TECA was worthless
and, accordingly, the investment and the note receivable were
written off by a charge to operations in the amount of $133,670.

Note 6 - Notes payable:

Notes payable at November 30, 1996 consist of the following:
<TABLE>
<S> <C>
Judgement payable to a bank, in settlement of
a note payable $333,000

Agreement payable to a former president of the
Company, with interest at prime plus 2% 150,000

Note payable to attorneys for professional
services, in default due to non compliance
with payment schedule 10,072

Note payable to officer, with interest at 7%,
due on demand 150,000

Notes payable to a related party, with
interest at 6%, due upon demand 3,412
_________
Total $646,484
=========
</TABLE>

As of November 30, 1996, the Company is in default on its note
payable to a bank. The bank received a judgement against the
Company for $333,000 and for fees associated with the
collection of the loans. The fees, estimated at $35,000, are
included in the accompanying consolidated balance sheet as an
accrued expense (see Note 12). <PAGE>
EXTEN INDUSTRIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 6 - Notes payable (concluded):

On October 29, 1996, the Company entered into an agreement with a
former president of the Company to settle a previously existing
note payable with a balance due of $388,000, plus accrued interest
of $9,188, for a cash payment of $50,000, a new note for $150,000
and 1,000,000 shares of restricted common stock of the Company at
a market price of $.05 per share (see Note 12). As of November 30,
1996, the cash payment had not been made and is included in the
accompanying consolidated balance sheet as an accrued expense. In
connection with the settlement, the Company recorded a gain on
extinguishment of debt in the amount of $147,188 in 1996.

Note 7 - Income taxes:

The Company's net deferred tax assets as of November 30, 1996
consist of the following:
<TABLE>

<S> <C>
Deferred tax assets $3,400,000
Valuation allowance (3,400,000)

Net deferred tax asset $ -
</TABLE>

As of November 30, 1996, the Company had net operating loss
carryforwards and other deferred tax items arising from write-down
of real estate and other valuation items totaling more than
$10,000,000. The net operating loss carryforwards, before any
limitations, expire on various dates through 2011. Due to
uncertainties concerning the ultimate utilization of the net
operating loss carryforwards and other matters, at November 30,
1996 the Company has recorded a valuation allowance to offset the
deferred tax assets.

Note 8 - Stockholders' equity (deficiency):

Stock issuances

During the year ended November 30, 1995, the Company authorized and
issued approximately 11,000,000 shares of common stock in exchange
for consulting and directors fees, payroll and other services
provided.

Approximately 1,600,000 shares authorized and issued during the
year ended November 30, 1995 were for future services to be
performed under contractual agreements.

EXTEN INDUSTRIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 8 - Stockholders' equity (deficiency) (continued):

Stock Issuances (concluded)

During the year ended November 30, 1996, the Company issued common
stock in the following transactions:

- 3,418,640 shares issued for consulting services,
directors' fees and legal services valued at $239,295,
which was equal to the fair market value of the shares
when issued. Approximately 400,000 shares issued during
the year ended November 30, 1996 are for future services
to be performed under contractual agreements. The value
of those shares, in the amount of $25,000, is included
as a prepaid expense as of November 30, 1996.

- 300,000 shares issued for employee bonus, valued at
$18,000.

- 581,587 shares issued to the minority stockholders of the
Company's subsidiary (see Note 10), valued at $50,866.

- 1,000,000 shares, valued at $50,000, issued in partial
settlement of a note payable (see Note 6).

Stock options

The Company has granted common stock options to
various individuals, officers and directors of the Company in
return for various services rendered to the Company.

Changes during the years ended November 30, 1996 and
1995 in common stock options outstanding were as follows:

<TABLE>
<S> <C> <C>
Shares Price Range
Outstanding at December 1, 1994 590,000 $.10-$.50
Granted 3,200,000 $.06-$.10
Exercised (200,000) $.06
____________
Outstanding at November 30, 1995 3,590,000 $.10-$.50
Granted 150,000 $.10
____________
Outstanding at November 30, 1996 3,740,000 $.10-$.50
_____________
</TABLE>

EXTEN INDUSTRIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 8 - Stockholders' equity (deficiency) (concluded):

Stock options (concluded)

In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Standards No. 123, "Accounting for Stock-Based
Compensation," ("SFAS 123") which requires that companies provide
information regarding the fair value of stock options granted. The
pronouncement is effective for years beginning after December 15, 1995.
Since the Company intends to adopt the disclosure only provisions of
SFAS 123, early application of that standard would not have had a material
effect on the accompanying consolidated financial statements.

Note 9 - Commitments and contingencies:

Leases

The Company leases its office space under an operating lease renewable
annually. Rent expense was $5,736 and $11,834 for the years ended
November 30, 1996 and 1995, respectively.

Litigation

The Company has been named as defendant in two legal proceedings
arising in the ordinary course of business. These proceedings are a result
of nonpayment of accounts and notes payable. In the opinion of management,
the outcome of such proceedings and litigation will not materially
affect the Company's consolidated results of operations or financial position.
Based upon the opinion of legal counsel, all amounts represented in the
legal proceedings and litigation have been reflected in accounts and
notes payable in the accompanying consolidated balance sheet as of
November 30, 1996.

Note 10 - Buyout of minority interest:

In June 1996, the Company entered into an agreement with the
minority stockholders of Xenogenex to exchange their shares of Xenogenex,
Inc. for shares of Exten Industries, Inc. As a result of this transaction,
the Company issued 581,587 shares of common stock and recorded goodwill in
the amount of $50,866 which is being amortized over 13 months. The net
carrying value of the goodwill at November 30, 1996 was $35,214.

EXTEN INDUSTRIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 11 - Prior period adjustments:

The Company has restated its consolidated financial statements for
the year ended November 30, 1995. This action was taken to correct
errors related to the minority stockholders' share of the subsidiary's
accumulated deficit, the value of land held as an investment and the
improper capitalization of research and development costs.

Prior to the restatement of the 1995 consolidated financial statements,
the Company recorded an asset equal to the minority stockholders'
10% share of the subsidiary's accumulated deficit. Since
the minority stockholders were under no obligation to repay this amount,
the restated 1995 consolidated financial statements reflect the write-
off of the minority interest in the amount of $99,149.

Prior to the restatement of the 1995 consolidated financial statements,
the Company had written-down its investment in land by $1,300,000
resulting in a recorded investment in land of $354,000.
The estimated fair market value of the land was determined to
be approximately $47,200. Consequently, the Company has recorded an
additional write-down in the value of the land in the amount of
$306,800 which is included in the accompanying 1995 consolidated
statement operations.

Prior to the restatement of the 1995 consolidated financial statements,
the Company recorded fixed assets in the amount of $97,600 related to the
cost of self-constructed SYBIOL machines. These machines are not
used in the operations and are not subject to depreciation.
The costs to develop and construct these machines are research
and development in nature. As a result, the accompanying 1995
consolidated statement of operations has been restated to include
this amount as additional research and development costs.

Note 12 - Subsequent events:

On March 7, 1997, the Company borrowed $125,000 from an unrelated
party. On March 18, 1997, this note was increased to $145,000
by an additional borrowing of $20,000. The terms of the note
require monthly interest payments of approximately $1,000 beginning
April 7, 1997. Interest will be charged at the published prime rate
which was 8.25% at March 7, 1997.

On March 18, 1997, the Company entered into an agreement with a bank
to settle a note payable in the amount of $333,000. As described
in Note 6, the Company is in default on the note and the bank has
received a judgement for the full amount of the note plus fees of
$35,000 associated with the collection of the note. As stipulated by
the agreement, the Company has made a cash payment in the amount of $50,000
in full settlement of the note and fees.

EXTEN INDUSTRIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 12 - Subsequent events (concluded)

As described in Note 6, the Company entered into an agreement with a
former president of the Company to settle a previously existing
note in the amount of $388,000. As part of that settlement, the Company
had agreed to a cash payment of $50,000 which was never made. On March 6,
1997, the Company settled that $50,000 obligation by issuing an additional
1,000,000 shares of stock with a market value of $.05 per share to
the former president of the Company.

<PAGE>
SIGNATURES

Pursuant to the requirements of Section 13 of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized, on the 22nd day of August 1997.

EXTEN INDUSTRIES, INC.
(Registrant)

8/22/97 W. Gerald Newmin
(Date) (Signature

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

Signature Title Date

W. Gerald Newmin President, CEO, Chairman & Secretary 08/22/97
(Signature) (Date)

William R. Hoelscher Director & Treasurer 08/22/97
(Signature) (Date)

Robert L. Cashman Director 08/22/97
(Signature) (Date)