SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
(X) Annual Report pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934 for the fiscal year ended November 30, 1998
( ) 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.
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(Exact name of registrant as specified in its charter)
DELAWARE 52-1412493
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(State or other jurisdiction of (IRS Employer ID No.)
incorporation or organization)
9625 BLACK MOUNTAIN ROAD, SUITE 218
SAN DIEGO, CALIFORNIA 92126
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(Address of principal executive offices)
(619) 578-9784
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock $0.01 per share
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Securities registered pursuant to Section 12(g) of the Act:
None
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Check whether the issuer: (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or such
shorter period that the registrant was required to be file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure
will be contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-KSB or any amendment to this Form 10-KSB [X]
State issuer's revenues for its most recent fiscal year: $ 0.
State the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at which
the common equity was, or the average bid and asked prices of such common
equity, as of a specified date within the past 60 days. (See definition of
affiliate in Rule 12b-2 of the Exchange Act). As of March 31, 1999:
$1,602,513. As of March 31, 1999, there were 48,349,669 Shares outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly describe
them and identify the part of the Form 10-KSB into which the document is
incorporated: (1) any annual report to security holders; (2) any proxy or
information statement; and (3) any prospectus filed pursuant to Rule 424(b)
or (c) of the Securities Act of 1933 (the "securities Act"). The listed
documents should be clearly described for identification purposes. None.
Transitional Small Business Disclosure Format (check one): Yes No _X_
<PAGE 01>
EXTEN INDUSTRIES, INC.
FORM 10-KSB
INDEX
PART I
Item 1. DESCRIPTION OF BUSINESS 3
Business of Exten Industries, Inc. 3
Business of Xenogenics Corporation 3
Background of the Company 3
Item 1a. FACTORS WHICH MAY AFFECT FUTURE RESULTS 4
Research Agreements for SYBIOL (R) Development 9
Loyola University 9
University of Padova 9
Item 2. DESCRIPTION OF PROPERTY 9
Item 3. LEGAL PROCEEDINGS 9
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 9
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED STOCKHOLDER MATTERS 10
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS 11
Results of Operations 11
Liquidity and Capital Resources 12
Year 2000 Compliance 12
Item 7. FINANCIAL STATEMENTS 13
Item 8. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE 13
PART III
Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS 13
Item 10. EXECUTIVE COMPENSATION 14
Summary Compensation Table 15
Non-cash Compensation 15
1. Stock Compensation 15
2. Other Non-Cash Compensation 15
3. Stock Option Grants 15
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT 16
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 17
Item 13. EXHIBITS AND REPORTS ON FORM 8-K 17
Reports on Form 8-K 17
CONSOLIDATED FINANCIAL STATEMENTS F1-14
SIGNATURES 32
<PAGE 02>
PART I
Item 1. DESCRIPTION OF BUSINESS
BUSINESS OF EXTEN INDUSTRIES, INC.
As of November 30, 1998, the Company's only active business is the management
of its subsidiary and its proposed research and development activities of
SYBIOL (R) synthetic bio-liver or artificial liver technology.
BUSINESS OF XENOGENICS CORPORATION, SUBSIDIARY OF EXTEN INDUSTRIES, INC.
Xenogenics Corp. ("Xenogenics") was incorporated in Nevada on April 30, 1997
for the purpose of funding and conducting biotech research. In June 1997,
Exten Industries, Inc. transferred all assets and rights to the Sybiol
synthetic bio-liver technology to the majority-owned subsidiary, Xenogenics
Corporation. The Company's only active business is the proposed research
and development activities of SYBIOL (R) synthetic bio-liver or artificial
liver technology.
EMPLOYEES
EXTEN. As of February 28, 1999, Exten had 2 full-time officers and one part
time person. Its officers and directors manage the Company.
XENOGENICS. As of February 28, 1999, Xenogenics had one full time officer.
Its officers and directors manage the Company.
BACKGROUND OF THE COMPANY
The predecessor of Exten Industries, Inc., Exten Ventures, provided merchant
banking services between 1985 and 1990.
In September of 1991 the Company acquired all of the outstanding stock of
Xenogenex, Inc., a California corporation, ("Xenogenex"), formerly known as
Ascot Close Research Institute, Ltd. At that time Xenogenex was funding
research on xenogeneic transplants and the development of an artificial
liver or synthetic bio-liver with a major West Coast medical center.
Xenogenex had the rights to the commercial development of the research work
being performed by that medical center. In July 1996 all right, title and
interest in the artificial liver technology was transferred to the Company,
Exten.
During 1997 the Company formed a new subsidiary, Xenogenics Corporation,
a Nevada corporation, (Xenogenics) for the express purpose of holding and
developing the Sybiol technology. This subsidiary holds all rights to the
extracorporeal artificial liver technology, which has been improved by the
Company compared to the model first acquired. The company is currently
conducting pre-clinical research at Loyola University Medical Center in
Chicago, Illinois and at University of Padova in Padova, Italy.
During 1998 Xenogenics Corp. sold shares to accredited investors through
a private placement.
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Item 1a. FACTORS WHICH MAY AFFECT FUTURE RESULTS
FORWARD-LOOKING INFORMATION
This report on Form 10-KSB contains a number of forward-looking statements,
which reflect the Company's current views with respect to future events and
financial performance including statements regarding the Company's strategy,
product under development and plans for operations. These forward-looking
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from historical results or those
anticipated. In this report, the words "anticipates," "believes," "expects,"
"intends," "future," "plans," "targets" and similar expressions identify
forward-looking statements. Readers are cautioned to consider the risk
factors described below under the heading "Factors Which May Affect Future
Results," and not to place undue reliance on the forward-looking statements
contained herein, which speak only as of the date hereof. The Company
undertakes no obligation to publicly revise these forward-looking statements,
to reflect events or circumstances that may arise after the date hereof.
Additionally, these statements are based on certain assumptions that may
prove to be erroneous and are subject to certain risks including, but not
limited to, the Company's ability to introduce new products, the Company's
ability to manage its expected growth, its limited protection of technology
and trademarks, the Company's dependence on limited cash resources, and its
dependence on certain key personnel within the Company. Accordingly, actual
results may differ, possibly materially, from the predictions contained
herein.
1. SIGNIFICANT AND REPEATED LOSSES. During fiscal 1998, the Company's
most recent fiscal year, the Company's losses were ($997,333) compared to
losses of ($104,834) incurred during fiscal 1997. The Company faces all the
risks inherent in a new business. The Company's Xenogenics 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, so shareholders might lose all or substantially all of their
investment. Fiscal 1998 research and development costs were $286,518;
theCompany did not incur any research and development costs during Fiscal
1997. The increase in R&D costs during Fiscal 1998 reflected the Company's
beginning its pre-clinical trials of the Sybiol technology. The Company will
continue its research and development during Fiscal 1999.
2. QUALIFIED OPINION. The Company's independent public accountants issued
aqualified opinion on the Company's financial statements for the years ended
November 30, 1998 and 1997 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 currently generates 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 shareholders could incur further substantial
dilution and loss in the value of their investment.
4. SIGNIFICANT AND INCREASING CURRENT LIABILITIES & DEFAULT. As of
November 30, 1998, the Company had $1,076,533 in current debts and other
obligations that are due and payable on or before November 30, 1999.
Included in the amounts due by November 30, 1999 is $382,617 in notes
payable together with other current liabilities of $693,916. Further,
as of November 30, 1998, the Company had over 75 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, which may result in shareholders losing all or
substantially all of their investment.
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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 shareholders.
6. NEGATIVE WORKING CAPITAL & NEGATIVE CASH FLOW. As of November 30,
1998, the Company had Total Current Liabilities of $1,076,533 and Total
Current Assets of $14,310 with the result that the Company had negative
working capital of ($1,062,223) as Total Current Liabilities exceeded
Total Current Assets by that amount. While the Company's management
continues to seek additional financing for the Company and its subsidiary
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 1997 and
1998 fiscal years.
7. POTENTIAL DILUTION. Funding of the Company's proposed business plan
would result in substantial and on-going dilution of the Company's existing
stockholders. During 1998, the Company issued 11,213,027 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. INDEBTEDNESS. The Company's previous indebtedness of $150,000 to a
former officer of the Company, Robert H. Goldsmith, was partially exchanged
for equity as of October 1998. In addition, the Company had over $1,076,533
in other liabilities all due and payable on or before November 30, 1999. 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, the Company may
default on obligations to creditors with the result that shareholders may
lose all or substantially all of their investment. (See Item 12 CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS.)
9. GOVERNMENT REGULATION. The Company's present and proposed activities
are subject to regulation by numerous governmental authorities in the United
States and other countries. Any change in applicable law or regulation may
have a material effect on the business and prospects of the Company. 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
authoritiesin the United States and other countries. Clinical trials,
manufacturing, and marketing of products in the US will be subject to the
rigorous testing and approval processes of the US 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 might 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.
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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. LIMITED MANAGEMENT. The Company currently has three full time
officersand one part-time person. The Company's limited cash flow and
financial resources do not allow the Company to increase or add to the
Company's 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.
12. LACK OF DIVIDENDS. The Company has never paid any cash dividends on
its common stock. The Company's board of directors intends to retain profits,
if any, to finance the Company's business.
13. LIMITED MARKET FOR COMMON STOCK. The Company's Common Stock, traded on
the Electronic Bulletin Board (OTC), has experienced significant price
fluctuations and will likely remain highly volatile in the future. There can
be no assurance that a meaningful trading market for the Company's Common
Stock will be established, or, if established that it can be maintained for
any significant period.
14. 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.
15. POSSIBLE RULE 144 STOCK SALES. As of November 30, 1998, the Company
had 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 one year 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.
16. POSSIBLE STOCK SALES - REGULATION S & FORM S-8 REGISTRATION STATEMENT.
The Company has periodically issued shares to non-US. 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 tradable one year after
issuance. The shares registered on Form S-8 are immediately freely tradable.
As a result, the Company's issuance of shares pursuant to Regulation S and
Form S-8 likely depresses the market price of the Company's Common Stock.
While the Company's management intends to carefully evaluate the need to
issue shares of the Company's Common Stock on this basis, the Company's
meager financial resources will likely prevent the Company from limiting its
use of Regulation S and Form S-8, with the result that the market price of
Company's Common Stock will likely be depressed by registration and sale of
shares on an on-going basis.
<PAGE 06>
17. 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
marketprice 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.
18. COMPETITION. The Company is engaged in businesses characterized by
extensive research efforts, rapid technological change, and intense
competition. Vitagen, Hemocleanse, Excorp and one German firm are the 4
most noteworthy of the competitors in various stages of development. However
there is no live-cell artificial liver device available on the US market. The
Company believes it has significant advantages in methodology and mechanical
structure which provide significant cost and other advantages over
competitive technologies. The Company's device will be among those, which
most closely replicate human liver functions, not just a blood-cleaning
device. 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
<PAGE 07>
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. There are established companies and firms which have
significantly greater financial and personnel resources, technical expertise
and experience than the Company. In view of the Company's limited financial
resources and management availability, the Company may continue to be at
significant competitive disadvantage vis-a-vis the Company's competitors.
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.
19. Patents and Proprietary Technology. Any proprietary protection that
the Company can obtain and maintain will be important to its proposed
business. A patent application is presently pending on the process utilized
by the SYBIOL (R) artificial liver device under the Patent Cooperative Treaty
Protection in 15 countries. The SYBIOL (R) mark is registered in the United
States Patent and Trademark Office, number 2,048,080. 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.
20. Therapeutic Products. The Company's products will be subject to
regulation in the US 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.
<PAGE 08>
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.
RESEARCH AGREEMENTS FOR SYBIOL (R) DEVELOPMENT
A. LOYOLA UNIVERSITY MEDICAL CENTER, CHICAGO
US research on the efficacy of the SYBIOL (R) device is being conducted at
Loyola University Medical Center, Chicago, IL, by a team of bioartificial
liver researchers including John. Brems, MD, FACS, Chairman of Xenogenics'
Scientific Advisory Board, James Filkins, Ph.D., and Professor David Van
Thiel, MD, FACP, also Xenogenics Scientific Advisory Board members and
noted hepatological experts. Dr. Filkins is a full time contract employee
of the company's Xenogenics Corporation subsidiary and is the Chief
Scientist.
B. UNIVERSITY OF PADOVA, PADOVA ITALY
Giovanni Ambrosino, MD, Head of the Bioartificial Liver Program of the
First Department of Surgery and Liver Transplant Unit of the University
of Padova, Italy, in cooperation with Loyola is conducting animal testing
in Italy of Xenogenics' SYBIOL (R) bioartificial liver support technology.
This research is under the auspices of the Xenogenics Scientific Advisory
Board. Research in Padova, will include cell life extension and other
research arenas complementary to the US efforts and is expected to progress
swiftly from animal trials to human trials.
Item 2. DESCRIPTION OF PROPERTY
EXTEN
SAN DIEGO LEASE. Exten leases approximately 1,237 square feet of
space, at $1052 per month, in an office building at 9625 Black Mountain
Road, Suite 218 in San Diego, CA. Exten's lease continues to run from
month to month. The Company believes these facilities are adequate for
the near future.
ARIZONA. As of November 30, 1998, the Company owned 236 undeveloped
lots in the Grand Canyon Development in Valle, Arizona, approximately 70
miles south of the Grand Canyon. This property is currently for sale.
XENOGENICS
During the fiscal year ending November 30, 1998, Xenogenics was provided
offices and clerical services by its parent, Exten, and did not have
separate offices.
In April 1997, the Company contributed all of the Sybiol assets and liver
technology in exchange for the Xenogenics assumption of certain of the
outstanding debt of the Company, cash and 1.5 million shares of Common
Stock.
Item 3. LEGAL PROCEEDINGS
February 9, 1998 the law firm of Meisenheimer and Herron filed a lawsuit
against the Company to recover $4,519.16 in legal fees. The Company
contested these fees via the San Diego County Bar Association fee
arbitration procedure and lost.
There was no other pending legal proceedings involving the Company.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No meeting of the Company's shareholders was held and no matters were
submitted to a vote of the shareholders during the 1998 fiscal year.
<PAGE 09>
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED STOCKHOLDER MATTERS
From June 14, 1994 to the present, the Company's Common Stock has traded
OTC on the Electronic Bulletin Board.
The table below shows closing sales prices for Exten Common Stock.
CALENDAR YEAR ENDED DECEMBER 31, HIGH LOW
1997
First quarter .06 .04
Second quarter .06 .04
Third quarter .06 .04
Fourth quarter .12 .04
1998
First quarter .08 .04
Second quarter .14 .05
Third quarter .06 .03
Fourth quarter .06 .03
The quotations reflect inter-dealer prices, without retail mark-ups, markdown
or commission and may not represent actual transactions or a liquid trading
market.
No cash dividends have been paid on Exten Common Stock for the 1998 and 1997
fiscal years and no change of this policy is under consideration by the
Board of Directors.
The payment of cash dividends in the future will be determined by the Board
of Directors in light of conditions then existing, including the Company's
earnings, financial requirements, and condition, opportunities for
reinvesting earnings, business conditions, and other factors. The number of
shareholders of the Company's Common Stock on November 30, 1998 was
approximately 3,000. There are otherwise no restrictions on the payment of
dividends.
The following Securities were sold by the Company without registering the
securities under the Securities Act of 1933 under the claim of exemption
stated within the previous twenty-four months.
On December 1, 1996, the Company issued 1,000,000 shares of its Common Stock
($.001 par value) (the "Shares") on a private placement basis. These shares
were sold to a 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 $50,000 in gross proceeds before legal, accounting and related
offering costs.
On June 15, 1998, the Company issued 400,000 shares of its common Stock
($.001 par value) (the "Shares") in a private transaction pursuant to an
exemption from registration available under section 4(a) of the Securities
Act of 1933. These shares were sold to a former officer of the Company in
connection with the settlement of a previous dispute involving non-payment of
a note issued by the Company. 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 no proceeds before
legal, accounting and related offering costs; however the company did
receive the benefit of debt relief in the amount of $24,000.
<PAGE 10>
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
GENERAL
The Company's only business in Fiscal 1998 was the research and
development of the proprietary liver support technology. Dr. John Brems,
Chairman of the Company's Scientific Advisory Board, oversees Loyola
University's liver transplant program and has established an artificial
liver research program focusing on the Company's technology. He has
recruited a team of many of the world's foremost liver doctors and
scientists to Loyola. The Scientific Advisory Board members added in
1998 include Dr. Donald Cramer, BS, DVM, and Ph.D., director of the
Transplantation Biology Research Laboratory at St. Vincent Medical Center
in Los Angeles; and Dr. Jim Filkins, Professor Emeritus of Physiology and
Surgery at Loyola University Stritch School of Medicine in Chicago, a
noted researcher in hepatic TNF production and cellular and molecular
physiology and author of hundreds of articles and abstracts. Dr. David
Van Thiel, MD Director of Liver Transplantation at Loyola; Amy Friedman,
MD, Chief, Liver Transplantation, Yale-New Haven Hospital; and Kurt
Gehlsen, Ph. D., former CEO of Trauma Products, also serve on the
Scientific Advisory Board. Previous members Dr. Daniel Salomon and Dr.
Ishitani left the board due to career changes and possible conflict of
interest.
OUTLOOK
The Company continues to seek financing for its subsidiary,
Xenogenics Corporation. In order to resolve its continuing financing
difficulties, the Company is exploring various opportunities to obtain
additional means of financing, including mergers, acquisitions or other
business combinations and alliances.
The Company has identified several business entities, which present
possibilities for alliance, acquisition or merger. The Company's plans
are in the preliminary discussion stage; the company currently has no
immediate projects and is not engaged in negotiations with respect to
any such alliance or acquisition.
RESULTS OF OPERATIONS
FISCAL 1998 VERSUS FISCAL 1997
During the years ended November 30, 1998 ("Fiscal 1998") and
November 30, 1997 ("Fiscal 1997") the Company recorded no revenues.
The Company does not anticipate generating any significant revenues
in the near future.
During Fiscal 1998, the Company incurred $223,879 in Consulting
Fees, due to the Company's continued use of professional services from
outside the Company. This amount compares to $115,232 in Consulting
Fees incurred in Fiscal 1997. The Company increased its use of outside
consultants significantly during Fiscal 1998 for services ranging from
financing to administrative functions.
During Fiscal 1998, the Company also incurred $461,879 in General
and Administrative Expenses. This amount compares to $226,154 incurred
in Fiscal 1997. The Company's management continues its efforts to control
costs, however the activities of the subsidiary require additional costs
to conduct its business.
Fiscal 1998 research and development costs were $286,518 while the
Company did not incur any research and development costs during Fiscal
1997. The increase in research and development costs during Fiscal 1998
reflected the Company's beginning its pre-clinical trials with respect to
the Sybiol technology. The Company will continue its research and
development with Loyola during Fiscal 1999.
As a result, Operating Expenses in Fiscal 1998 were $972,459
compared to Operating Expenses of $376,600 in Fiscal 1997. This
resulted in the Company recording a Loss from Operations of ($972,459)
in Fiscal 1998 compared to a Loss from Operations of ($376,600) in
Fiscal 1997.
For Fiscal 1998, the Company recorded interest expense of $24,254
compared to $31,234 during Fiscal 1997.
In Fiscal 1997, the Company recorded an extraordinary gain of
$303,000 in connection with the satisfaction of certain indebtedness.
This compares to ($620) in extraordinary losses recognized in Fiscal
1998 resulting from similar reductions of certain indebtedness.
As a result, the Company recorded a Net Loss of ($997,333) in
Fiscal 1998 compared to a Net Loss of ($104,834) in Fiscal 1997, a
decrease of nearly 951%. Fiscal 1998 Basic Loss Per Common Share
was ($0.02) compared to ($0.00) for the same period during Fiscal 1997.
<PAGE 11>
LIQUIDITY AND CAPITAL RESOURCES - THE COMPANY
The Company continues to effect transactions that reduce its
liabilities and cash requirements, and raise capital. The Company has
negotiated with certain vendors and creditors to settle its liabilities.
During Fiscal 1997 and 1998, the Company took additional steps to control
expenses and in October of 1998 settled a debt to a former officer,
Robert H. Goldsmith by a debt to equity exchange for shares of restricted
stock, 400,000 up front and additional shares to be issued. This served
to reduce prior debt and otherwise permit management to focus its energies
on the Company's proposed business.
While the Company continues to seek additional financing through the
offering and sale of the Company's securities, joint ventures, and other
efforts, the Company has not received any indication that it will be
successful in these efforts. The Company may consider forming an alliance
or completing a merger with one or more other entities. There can be no
assurances that the Company will be successful in obtaining any additional
financing or in otherwise completing any joint venture, alliance, merger,
or other transaction or, if the Company is successful in completing any
such transaction, that it can be completed on terms that are reasonable
in view of the Company's current circumstances.
The Company continues to pay directors fees, 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.
YEAR 2000 COMPLIANCE; YEAR 2000 READINESS DISCLOSURE
To the fullest extent permitted by law, the following discussion
is a "Year 2000 Readiness Disclosure" within the meaning of the Year
2000 Information and Readiness Disclosure Act 105 P.L. 271.
BACKGROUND
Many of the world's computer systems and programs currently record
years in a two-digit format. Such computer systems or programs that have
date-sensitive software or hardware may recognize a date using "00" as the
year 1900 rather than the year 2000, and therefore, may be unable to
recognize, interpret or use dates in and beyond the year 1999 correctly.
Because the activities of many businesses are affected by dates or are
date-related, the inability of these systems or programs to use such
date information correctly could result in system failures or disruptions
and lead to disruptions of business operations in the United States and
internationally (the "Year 2000 Problem").
ASSESSING THE IMPACT OF THE YEAR 2000 PROBLEM ON THE COMPANY'S
OPERATIONS
The Company does not rely heavily on computers and computing
operations in its business. There are no computers or date-sensitive
components in the Company's devices. Based on a review of its computer
systems and programs, the Company has determined that they are in
compliance with the requirements of the Year 2000. In addition, the
Company's key vendors, including Continental Stock Transfer, our transfer
agent; as well as our Accountant and Legal Counsel, have indicated to us
that they are Year 2000 compliant. The Year 2000 problem, however, is
pervasive and complex, as virtually every computer operation will be
affected in some way by the rollover of the two-digit year to 00.
Failure of any of the Company's vendors to adequately address this
issue could result in a substantial interruption of the Company's
normal plan of operation and business affairs, and could result in
significant losses from operations. Although the Company could incur
substantial costs in connection with the failure of third-party computing
systems and software, such costs are not sufficiently certain to estimate
at this time.
CONTINGENCY PLANNING
The Company has not developed any plan to address potential
contingencies arising from the inability of its present or future vendors to
become Year 2000 compliant in a timely manner. Consequently, no assurance can
be given that the potential failure of third-party systems will not increase
the Company's operating costs or create uncertainties that may have an
adverse effect on the Company's operating results or financial condition.
<PAGE 12>
Item 7. FINANCIAL STATEMENTS
The full text of the Company's audited consolidated financial statements for
the fiscal years ended November 30, 1998 and 1997 begins on page F-1 of this
Report.
Item 8. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
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 as of November 30, 1998
were:
Name Age Position Date elected
- ---- --- -------- ------------
W. Gerald Newmin 61 Chairman, CEO, Secretary & Director 12-01-95
Jerry G. Simek 55 President & Director 03-20-98
Farrest Loper 61 Director 06-16-98
MR. W. GERALD NEWMIN was retained as a consultant to the Board of
Directors of the Company in June 1995. Mr. Newmin was elected Acting
Secretary of the Corporation on July 13, 1995. 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 defense
systems company in San Diego, California (OTC) on the Electronic Bulletin
Board. In October 1998, Mr. Newmin was elected CEO of SYS. Mr. Newmin is past
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 130 Board members from California companies. From 1984 to
1987, Mr. Newmin was President of HealthAmerica Corporation, at the time the
nation's largest publicly held HMO management company. From 1977 to 1984,
Newmin was President of International Silver Company, a diversified multi-
national manufacturing company that he restructured. From 1973 to 1977, Mr.
Newmin was Vice President and Western Regional Director for American
Medicorp, Inc., responsible for the management of 23 acute care hospitals
located throughout the Western United States. From 1962 to 1973, Mr. Newmin
was instrumental in Whittaker Corporation's entry into both the United States
and International health care markets. At Whittaker, Mr. Newmin held various
senior executive positions, including 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.
<PAGE 13>
MR. JERRY SIMEK was elected to the Board of Directors on March 20,1998.
He was appointed President, COO and Treasurer of Exten Industries Inc. on
June 16, 1998. Mr. Simek has been President of JGS Management Group since
1984, specializing in strategic planning, financial management, business/
corporate development and international business. He has successfully
directed and implemented company reorganizations, refinancing programs,
company turnarounds, plus market development, acquisition and divestiture
programs. Simek was recently President of a San Diego public medical
electronics manufacturing company and facilitated its turnaround and
funding. Simek has over thirty years of management experience with
major multinational companies in the medical, energy, electronics and
aerospace industries including Baxter and Johnson & Johnson. He has
facilitated raising capital in public, private and start-up ventures;
has identified and established joint venture transatlantic manufacturing,
trading company and joint licensing programs; plus established and
implemented multimillion dollar project management and manufacturing
expansion programs. Mr. Simek has been a Director and/or Management
Advisor for other public and private companies in both the US and UK.
He has a BS from Illinois Institute of Technology and MBA from
Pepperdine University.
MR. FARREST LOPER was elected to the Board of Directors June 1998.
For the past eight years Mr. Loper has been President of Loper & Associates,
a firm providing executive strategic management services to distribution,
manufacturing and service firms, specializing in turnarounds and growth
acceleration. The firm also consults to capital-providing firms, providing
business valuation and due diligence services. As President of Loper &
Associates, Mr. Loper has served as President and CEO of T-Systems
International, Stripping Technologies, and Ponsor Corporation. In the
early 90's, Mr. Loper was Vice President/GM of Wavetek's San Diego
Operations, and President of AiResearch Tucson, an Allied Signal aerospace
company. For the prior fourteen years he held senior executive engineering,
manufacturing and marketing posts with Honeywell, during which he was
involved with developing bio-medical instrumentation such as cardiac
catheterization and patient monitoring systems. Mr. Loper's education
includes an MBA update at Harvard Business School and a Master of Science
in Engineering Administration from the University of South Florida. He has
served on non-profit and corporate boards in the US. Mexico, Europe and
Australia. He is an adjunct professor for MBA courses in Strategic
Management at National University and the University of Phoenix.
MR. WILLIAM R. HOELSCHER, who was elected a Director on October 25,
1994, passed away in June of 1998.
<PAGE 14>
Item 10. EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation
received for the fiscal years ended November 30, 1998, 1997 and 1996 for
services rendered to the Company in all capacities by the Company's Chief
Executive Officers and other highly compensated executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
Annual Cash Compensation Long Term Compensation
--------------------------- -------------------------------
Awards Payouts
---------------------- -------
Restricted Securities
Other Annual Stock Underlying LTIP All Other
Name and principal Salary Bonus Compensation Award(s) Options/ Payouts Compensation
position Year ($) ($) ($) ($) SARs (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
W. Gerald Newmin, 1998 0 0 0 0 0 0 $187,351 (2)
Chairman, CEO, 1997 0 0 0 0 0 0 $ 52,000 (2)
Secretary and 1996 0 0 $162,500 (1) 0 0 0 0
Director
- ----------------------------------------------------------------------------------------------------
Jerry Simek, 1998 0 0 0 0 0 0 $ 54,840 (2)
President, COO, 1997 0 0 0 0 0 0 0
Treasurer and 1996 0 0 0 0 0 0 0
Director
- ----------------------------------------------------------------------------------------------------
James Considine, 1998 0 0 0 0 0 0 $ 59,500 (2)
President of 1997 0 0 0 0 0 0 0
Xenogenics 1996 0 0 0 0 0 0 0
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1) The Company issued a $162,500 secured promissory note (the "Note") to
Mr. Newmin for services rendered as the Company's President during the
fiscal year ending November 30, 1996 and as a prepayment (of $12,500) for
services to be rendered in the month of December 1996. That note was replaced
in 1997 by a new note in the amount of $168,545 (including principal and
accrued interest), that was issued by Xenogenics. The new note carries an
interest rate at the Wall Street Journal prime rate, matures on June 1, 1999
and is convertible into 168,545 shares of Xenogenics common stock. The note
is secured by Xenogenics patent applications, licenses, technologies,
agreements, inventory, machines, office furniture, and all other Company
assets.
(2) Represents the fair market value of stock paid in lieu of cash based on
the closing market price on the date of receipt.
2. OTHER NON-CASH COMPENSATION
Directors of the Company who are also employees do not receive cash
compensation for their services as directors or members of committees of
the Board of Directors, but may be reimbursed for their reasonable expenses
incurred in connections with attending meetings of the Board of Directors or
management committees.
3. STOCK OPTION GRANTS
The following table sets forth information concerning stock options
granted to date in 1998 to each member of the Board of Directors and
Executive Officers, and members of the Company's Scientific Advisory Board:
INDIVIDUAL GRANTS
Percent of Exercise
Number of Total Options Price or
Securities Granted to Base
Underlying Employees Price Exercise
Name Options During the Year (S/Share) Date
- ---------------------- ---------- --------------- --------- ---------
Jim Filkins, MD 60,000 50% $0.10 01-25-01
David H. Van Thiel, MD 60,000 50% $0.10 12-23-01
<PAGE 15>
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of February 26, 1999, 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.
Name Title Common Shares % Class (1)
- ----------------------------------------------------------------------------
W. Gerald Newmin (2) President, CEO,
Chairman & Secretary 6,075,114 12.56%
William R. Hoelscher (3) Director & Treasurer
(now deceased) 2,493,000 5.16%
Jerry G. Simek Director and COO 1,337,250 2.77%
Farrest Loper Director 24,000 0.05%
James Considine Pres. of Xenogenics 1,608,548 3.33%
- ----------------------------------------------------------------------------
All Officers and
Directors as a Group (5 persons) 11,537,912 23.87%
Footnotes:
(1) Based on 48,349,669 shares of the Company's Common Stock outstanding as
of March 1, 1999, and stock option shares currently executable by officers,
directors, and affiliates within 60 days of March 1, 1999, without including
the effect of any other stock options.
(2) Includes 959,011 shares beneficially controlled by Mr. Gerald Newmin.
(3) Includes 172,000 shares and 1,600,000 shares underlying options granted
Electrical & Technical Consulting, a company partially owned by the estate of
William R. Hoelscher, a deceased Director of the Company. Options to purchase
800,000 shares are exercisable at $.10 per share, and options to exercise the
remaining 800,000 are exercisable as $.06 per share. All options expire on
11-13-00. There is no provision in the grant for any extension of the
exercise period beyond the expiration date shown above.
<PAGE 16>
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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. On June 1, 1997, a new note in the amount of $168,545, including
principal and accrued interest, was issued by the Company's Xenogenics
subsidiary to replace the above note. The new note carries an interest
rate at the Wall Street prime rate, matures June 1, 1999 and is convertible
into 168,545 shares of Xenogenics common stock. Xenogenics patent applic-
ations, licenses, technologies, agreements, inventory, machines, office
furniture, and all other Company assets secure the Note.
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.
In connection with the formation and private placement of the company's
subsidiary, Xenogenics Corp., the following transpired: Xenogenics assumed a
promissory note in the amount of $162,500, plus accrued interest of $6,045
owing to Mr. Newmin in connection with the transfer of the SYBIOL (R)
patents, trademarks, licenses and assets from Exten. This note matured
November 30, 1997 and was payable interest only at 7% per annum until
maturity and was convertible into common stock of Xenogenics at $1.00 per
share over its term. In addition, the holder was granted an option to
purchase additional 162,500 shares of common stock at $1.00 per share over a
three-year period. The note was secured by a security interest in the Sybiol
patents, trademarks, tech-nology and assets. This note was replaced by a new
note dated June 1, 1997 which contains similar terms and conditions, and
matures on June 1, 1999.
An unrelated party loaned Xenogenics $145,000 under a two year
promissory note in June 1997, that is payable interest only and is
convertible into common stock under a formula ranging from $2.00 to
$3.00 per share. In addition, the unrelated party was granted an option
to purchase 145,000 shares of common stock of Xenogenics at $1.00 per
share over a three-year period. The note is also secured by a security
interest. During the year ending November 30, 1998, the same unrelated party
loaned Xenogenics an additional $50,000, for which an additional note with
the same terms and conditions was issued to said party. Additionally, two
directors of Xenogenics were granted stock options in June, 1997, to
purchase 50,000 shares of Xenogenics common stock at $1.00 per share over a
five-year period.
The Company entered into a Settlement and Mutual Release Agreement with
the former President of the Company on September 7, 1998. Under the terms of
this agreement the company issued 400,000 shares of its Common Stock and
agreed to issue additional shares should the price not achieve certain levels
during the period December 1, 1998 to January 31, 1999. Since the price of
the Company's Common Stock did not achieve the agreed upon price levels, the
Company is obligated to issue up to an additional 3.6 million shares of its
Common Stock.
Item 13. EXHIBITS AND REPORTS ON FORM 8-K
REPORTS ON FORM 8-K Item Reported
1.) On March 21, 1998, the Company filed Form 8-K to report the Company's
agreement with Loyola University to provide research activities with its
subsidiary, Xenogenics, Inc.
2) June 30, 1998 the Company filed Form 8-K to report the election of Farrest
Loper to the Board of Directors and the election of Jerry G. Simek to
President and COO of the Company.
EXHIBITS
None
<PAGE 17>
EXTEN INDUSTRIES, INC. AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS F - 2
CONSOLIDATED BALANCE SHEET
NOVEMBER 30, 1998 F - 3
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED NOVEMBER 30, 1998 AND 1997 F - 4
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
YEARS ENDED NOVEMBER 30, 1998 AND 1997 F - 5
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED NOVEMBER 30, 1998 AND 1997 F - 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F - 7/14
* * *
<PAGE F - 01>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
Exten Industries, Inc.
We have audited the accompanying consolidated balance sheet of Exten
Industries, Inc. and Subsidiary as of November 30, 1998, and the related
consolidated statements of operations, stockholders' deficiency and cash flows
for the years ended November 30, 1998 and 1997. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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 audits provide a reasonable basis
for our opinion.
In our opinion, the 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, 1998, and their results of
operations and cash flows for the years ended November 30, 1998 and 1997, in
conformity with generally accepted accounting principles.
The accompanying 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 has sustained recurring
losses and negative cash flows for several years and it had a working capital
deficiency and was in default under the terms of one of its loan agreements at
November 30, 1998. 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
March 2, 1999
<PAGE F - 02>
CONSOLIDATED BALANCE SHEET
NOVEMBER 30, 1998
ASSETS
Current assets - cash $ 14,310
Real estate held for sale 47,200
Patent costs and other intangibles 38,667
Equipment, net of accumulated depreciation of $183 1,650
------------
Total assets $ 101,827
============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Accounts payable $ 64,870
Accrued expenses to be satisfied by
the issuance of common stock 177,720
Other accrued expenses 413,337
Advances from stockholder 37,989
Notes payable 382,617
------------
Total current liabilities 1,076,533
Noncurrent notes payable 15,000
------------
Total liabilities 1,091,533
------------
Minority interest in subsidiary 863
------------
Stockholders' deficiency:
Common stock, par value $.01 per share; 50,000,000 shares
authorized; 48,349,669 shares issued and outstanding 483,496
Additional paid-in capital 9,612,087
Accumulated deficit (11,086,152)
------------
Total stockholders' deficiency (990,569)
------------
Total liabilities and stockholders' deficiency $ 101,827
============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE F - 03>
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED NOVEMBER 30, 1998 AND 1997
1998 1997
---------- ----------
Operating expenses:
Consulting fees $ 223,879 $ 115,232
Research costs 286,518 -
General and administrative 461,879 226,154
Depreciation and amortization 183 35,214
---------- ----------
Totals 972,459 376,600
---------- ----------
Loss from operations (972,459) (376,600)
Other expenses - interest (24,254) (31,234)
---------- ----------
Loss before extraordinary item (996,713) (407,834)
Extraordinary item - net gain (loss)
on extinguishments of debt (620) 303,000
---------- ----------
Net loss $ (997,333) $ (104,834)
========== ==========
Basic net income (loss) per common share:
Loss before extraordinary item $ (.02) $ (.01)
Extraordinary item - .01
---------- ----------
Net loss $ (.02) $ -
========== ==========
Weighted average number of common shares
outstanding 41,549,599 31,846,403
========== ==========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE F - 04>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
YEARS ENDED NOVEMBER 30, 1998 AND 1997
<TABLE>
Common Stock Additional Receivable Stock-
----------------------- Paid-in from Sales Accumulated holders'
Shares Amount Capital of Stock Deficit Deficiency
---------- ---------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 1, 1996 29,762,432 $ 297,624 $ 8,799,993 $ (9,983,985) $ (886,368)
Issuance of stock 120,000 1,200 4,800 6,000
Issuance of stock for services 4,003,988 40,040 163,692 203,732
Issuance of stock under agreement for
settlement of accounts payable 750,000 7,500 22,500 30,000
Issuance of stock to officer for which
payment was receivable at end of year 2,500,222 25,002 115,038 $ (140,040)
Net loss (104,834) (104,834)
---------- ---------- ----------- ----------- ------------ -----------
Balance, November 30, 1997 37,136,642 371,366 9,106,023 (140,040) (10,088,819) (751,470)
Issuance of stock 625,000 6,250 18,750 25,000
Issuance of stock for services 10,040,027 100,400 410,777 511,177
Issuance of stock for settlements of
accounts payable 48,000 480 2,400 2,880
Issuance of stock for settlements of
notes payable 500,000 5,000 25,000 30,000
Effect of issuance of stock by
subsidiary for consideration in excess
of underlying book value 49,137 49,137
Services provided by officer to extinguish
receivable from sale of stock 140,040 140,040
Net loss (997,333) (997,333)
---------- ---------- ----------- ----------- ------------ -----------
Balance, November 30, 1998 48,349,669 $483,496 $ 9,612,087 $ - $(11,086,152) $ (990,569)
========== ========== =========== =========== ============ ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE F - 05>
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED NOVEMBER 30, 1998 AND 1997
1998 1997
--------- ---------
Operating activities:
Net loss $(997,333) $(104,834)
Adjustments to reconcile net loss to net cash
used in operating activities:
Common stock issued for services 511,177 203,732
Note payable issued for compensation - 15,133
Depreciation and amortization 183 35,214
Gain (loss) on extinguishment of debt 620 (303,000)
Changes in operating assets and liabilities:
Other current assets - 25,000
Accounts payable 3,094 (29,240)
Other accrued expenses 301,540 98,956
--------- ---------
Net cash used in operating activities (180,719) (59,039)
--------- ---------
Investing activities:
Patent costs (1,441) (37,226)
Purchases of equipment (1,833) -
Advances from stockholder 37,989 -
--------- ---------
Net cash provided by (used in)
investing activities 34,715 (37,226)
--------- ---------
Financing activities:
Proceeds from notes and loans payable 80,000 145,000
Payments of notes and loans payable - (50,000)
Proceeds from sales of stock 25,000 6,000
Proceeds from sales of stock by subsidiary 32,399 -
Proceeds from subscriptions for purchase of
common stock of subsidiary - 17,601
--------- ---------
Net cash provided by financing activities 137,399 118,601
--------- ---------
Net increase (decrease) in cash (8,605) 22,336
Cash at beginning of year 22,915 579
--------- ---------
Cash at end of year $ 14,310 $ 22,915
========= =========
Supplementary disclosure of cash flow data:
Interest paid $ 10,749 $ 14,496
========= =========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE F - 06>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Business and summary of significant accounting policies:
BUSINESS:
Exten Industries, Inc. ("Exten") is a holding company that is in the business
of developing, through its subsidiary, Xenogenics Corporation ("Xenogenics"),
a synthetic bio-liver ("SYBIOL") technology. In 1993, the Company acquired all
of the rights to the SYBIOL technology that had been developed under its
contract with Cedars-Sinai Medical Center. The rights to the technology were
transferred to Xenogenics when it was formed in 1997. A patent application
was pending as of November 30, 1998 on the process utilized by the Company's
SYBIOL device. The Company has applied for trademark protection for the SYBIOL
trade name.
BASIS OF CONSOLIDATION:
The consolidated financial statements include the accounts of Exten and its
subsidiary (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.
IMPAIRMENT OF LONG-LIVED ASSETS:
In accordance with Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of ("SFAS 121"), impairment losses on real estate and other
long-lived assets are recognized when events or changes in circumstances
indicate that the undiscounted cash flows estimated to be generated by such
assets are less than their carrying value and, accordingly, all or a portion
of such carrying value may not be recoverable. Impairment losses are then
measured by comparing the fair value of assets to their carrying amounts.
The Company's real estate held for sale was determined to be impaired prior to
1996 and, accordingly, it is stated at fair value, in accordance with SFAS
121, based upon management's estimate of the amount that will be recovered
from the ultimate sale of the real estate.
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.
<PAGE F - 07>
EARNINGS (LOSS) PER SHARE:
Effective November 30, 1998, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 128, Earnings per Share ("SFAS 128"),
which replaced the presentation of "primary" and "fully-diluted" earnings
(loss) per common share required under previously promulgated accounting
standards with the presentation of "basic" and "diluted" earnings (loss) per
common share.
Basic earnings (loss) per common share is calculated by dividing net income or
loss by the weighted average number of common shares outstanding during the
period. The calculation of diluted earnings (loss) per common share is similar
to that of basic earnings (loss) per common share, except that the numerator
and denominator are adjusted to reflect the decrease in earnings per share or
the increase in loss per share that could occur if securities or other
contracts to issue common stock, such as stock options and convertible notes,
were exercised or converted into common stock that then shared in the
Company's earnings or loss.
The Company was required to compute primary and diluted loss per share amounts
for 1998 and 1997 pursuant to SFAS 128. Since the Company and its subsidiary
had losses applicable to common stock in 1998 and 1997, the assumed effects of
the exercise of outstanding stock options and conversion of notes were anti-
dilutive and, accordingly, dilutive per share amounts have not been presented
in the accompanying consolidated statement of operations. In addition, the
basic per share and weighted average share amounts presented in the
accompanying 1997 consolidated statement of operations which were computed in
accordance with SFAS 128 do not differ from those computed under previously
promulgated accounting standards.
OTHER RECENT ACCOUNTING PRONOUNCEMENTS:
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income ("SFAS
130") and Statement of Financial Accounting Standards No. 131, Disclosures
about Segments of an Enterprise and Related Information ("SFAS 131"), which
could require the Company to make additional disclosures in its financial
statements no later than for the year ending November 30, 1999. SFAS 130
defines comprehensive income, which includes items in addition to those
reported in the statement of operations and requires disclosures about its
components. SFAS 131 requires disclosures for each segment of a business and
the determination of segments based on its internal management structure.
Management believes that the adoption of SFAS 130 and SFAS 131 will not have a
material impact on the Company's disclosures.
<PAGE F - 08>
The FASB had issued certain other pronouncements as of November 30, 1998 that
will become effective in subsequent periods; however, management does not
believe that any of those pronouncements will affect any financial accounting
measurements or disclosures the Company will be required to make.
Note 2 - Going concern matters:
The Company has incurred net losses for several years, including net losses of
$997,333 in 1998 and $104,834 in 1997. Management does not expect the Company
to generate significant revenues in the near future. At November 30, 1998, the
Company's accumulated deficit and stockholders' deficiency were $11,086,152
and $990,569, respectively, and its current liabilities exceeded its current
assets by $1,062,223. Additionally, even though the Company has been able to
satisfy obligations for certain operating expenses by issuing shares of the
Company's common stock, operating activities still generated negative cash
flows aggregating $180,719 in 1998 and $59,039 in 1997. Furthermore,
judgments and claims against the Company relating to loan guarantees, and
amounts owed current and former suppliers continue to accumulate and it was in
default under the terms of one of its loan agreements (see Note 5). These
factors, among others, raise substantial doubt about the Company's ability to
continue as a going concern.
In order to continue as a going concern, develop and commercialize its
technology and, ultimately, achieve a profitable level of operations, the
Company will need, among other things, additional capital resources.
Management's plans to obtain such resources for the Company 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) continuing to use common
stock to pay for consulting and professional services; (3) negotiating
reductions in existing liabilities; and (4) selling nonproductive assets. In
addition, management is continually seeking other potential joint venture
partners or merger candidates that would provide financial, technical and/or
marketing resources to enable the Company to realize the potential value of
its technology. 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.
<PAGE F - 09>
Note 3 - Extinguishments of debt :
During 1998 and 1997, the Company extinguished debts that had carrying values
more or less than the fair value of the consideration transferred to the
creditors and realized gains and losses as shown below, which were classified,
in accordance with generally accepted accounting principles, as extraordinary
items in the accompanying consolidated statements of operations:
1998 1997
---------- ----------
Settlement of account payable (A) $ 30,000 $ 20,000
Settlement of note payable (B) (30,620) -
Settlement of judgment (C) 283,000
---------- ----------
Totals $ (620) $ 303,000
========== ==========
(A) On October 21, 1997, the Company entered into an agreement with a
creditor to settle an account payable with a balance of approximately
$100,000 for total initial consideration of $50,000, comprised of a cash
payment of $20,000, and the issuance of 750,000 shares of the Company's
common stock with a market value of $30,000 or $.04 per share (see Note
7). If the market value of the Company's common stock had not been at
least $ .10 per share at any time during the period from October 27, 1997
through December 10, 1998, the creditor would have been entitled to file,
without notification or objection from the Company, a stipulated judgment
for a cash payment (the "Contingent Payment") equal to the lesser of (i)
the excess of $75,000 over the market value of 750,000 shares as of that
date, or (ii) $45,000. Accordingly, at November 30, 1997, the Company
accrued a liability of $30,000 for the Contingent Payment equal to the
excess of $75,000 over the market value of the 750,000 shares which was
$45,000; it also recognized the extraordinary gain of $20,000 based on
the excess of the balance of the account payable over the total of the
initial consideration paid and the value of the Contingent Payment at
year end. Since the market value of the Company's common stock reached
$ .10 per share prior to November 30, 1998, the Company was not obligated
to make any additional payments to the creditor. Accordingly, the
Company reversed the Contingent Payment it had accrued as of November 30,
1997 and recognized an additional extraordinary gain of $30,000 in 1998.
(B) Pursuant to an agreement dated September 7, 1998, the Company
extinguished a note payable and accrued interest thereon with an
aggregate carrying value of $171,100 by agreeing to issue a total of
3,590,664 shares of common stock to the creditor with a total fair value
of $201,720. Accordingly, the Company recognized a loss on the
extinguishment of debt of $30,620 in 1998. The Company issued 400,000
shares to the creditor in 1998 and, accordingly, the accompanying 1998
consolidated statement of stockholders' equity reflects a credit of
$24,000 for the fair value of those shares. The Company will issue
3,190,664 shares to the creditor in 1999 and, accordingly, the
accompanying consolidated balance sheet at November 30, 1998 reflects a
liability of $177,720 for the fair value of those shares.
<PAGE F - 10>
The Company also issued 100,000 shares with a fair value of $6,000 to
another creditor during 1998 as a settlement of a portion of a note
payable with an equivalent carrying value and, accordingly, the Company
did not recognize any gain or loss. The accompanying 1998 consolidated
statement of stockholders' equity also reflects a credit of $6,000 for
the fair value of those shares.
(C) In 1997, a judgment payable by the Company to a bank of $333,000,
which arose from a prior settlement of a note payable, was settled and
released through a cash payment of $50,000.
Note 4 - Real estate held for sale:
Real estate held for sale as of November 30, 1998 consisted of a parcel of
undeveloped land near the Grand Canyon. The land was originally purchased in
February 1992 for $1,654,000 and written down to its estimated fair market
value of $47,200 in 1995.
Note 5 - Notes payable:
Notes payable at November 30, 1998 consisted of the following:
Note payable to attorneys for professional services (A) $ 4,072
Note payable to officer, with interest at the prime rate
(8% at November 30, 1998), due on May 31, 1999 (B) (C) 168,545
Notes payable to an unrelated party, with interest at the
prime rate (8% at November 30, 1998),
due on March 7, 1999 (D) 195,000
Notes payable to unrelated parties (E):
With interest at 10%, due on April 17, 1999 15,000
With interest at 8%, due on November 10, 2000 15,000
----------
Total 397,617
Less current portion 382,617
----------
Noncurrent portion $ 15,000
==========
(A) In default at November 30, 1998.
(B) Interest on loans to related parties totaled
$15,407 and $7,311 in 1998 and 1997, respectively.
(C) Convertible into common shares of Xenogenics at
$1.00 per share.
(D) Convertible into common shares of Xenogenics at prices,
based on a formula, ranging from $2.00 to $3.00 per share.
(E) Convertible into common shares of Xenogenics at
$1.875 per share.
Advances from stockholder of $37,989 at November 30, 1998 were
noninterest bearing and due on demand.
<PAGE F - 11>
Note 6 - Income taxes:
As of November 30, 1998, the Company had net operating loss carryforwards and
other temporary differences arising primarily from the write-down of real
estate totaling more than $10,000,000. The net operating loss carryforwards,
before any limitations, expire on various dates through 2012. Due to the
uncertainties related to, among other things, the extent and timing of its
future taxable income, the Company has offset the deferred tax assets
attributable to the potential benefits from the net operating loss
carryforwards and the other temporary differences by an equivalent valuation
allowance at November 30, 1998 as shown below:
Deferred tax assets $4,897,000
Valuation allowance (4,897,000)
----------
Net deferred tax asset $ -
==========
Note 7 - Common stock:
NONCASH STOCK ISSUANCES BY THE COMPANY:
During 1997, the Company issued shares of common stock, which were valued at
their fair market value at the date of issuance, in the following noncash
transactions:
* 4,003,988 shares, valued at $203,732, were issued for consulting
services and directors' fees.
* 750,000 shares, initially valued at $30,000, were issued in
connection with an agreement for the settlement of an account payable
(see Note 3).
* 2,500,222 shares were issued to an officer for $140,040, all of which
was receivable as of November 30, 1997.
During 1998, the Company issued shares of common stock, which were valued at
their fair market value at the date of issuance, in the following noncash
transactions:
* 10,040,027 shares, valued at $511,177, were issued for consulting
services and directors' fees.
* 500,000 shares, valued at $30,000, were issued in connection with
agreements for the settlement of notes payable (see Note 3).
* 48,000 shares, valued at $2,880, were issued in connection with an
agreement for the settlement of an account payable.
The receivable of $140,040 from the sale of shares to an officer in 1997 was
extinguished through the provision of services with equivalent fair value
which was a noncash transaction in 1998.
<PAGE F - 12>
STOCK OPTIONS GRANTED BY THE COMPANY:
The Company has granted options to purchase common stock to various
individuals, officers and directors of the Company in return for various
services rendered to the Company. Since the Company has adopted the
disclosure-only provisions of Statement of Financial Accounting Standards No.
123, Accounting for Stock-Based Compensation ("SFAS 123") and the exercise
price of all of the options granted in 1998 and 1997 was equal to or greater
than fair value, no earned or unearned compensation cost was recognized in the
accompanying consolidated financial statements for stock options granted by
the Company or its subsidiary in 1998 and 1997. However, even if compensation
cost had been computed based on the fair value at the grant date for all
awards in 1998 and 1997 consistent with the provisions of SFAS 123 and
recognized in the financial statements, the Company's net loss in 1998 and
1997, and the related per share amounts, would not have been materially
different from the amounts reported in the accompanying 1998 and 1997
consolidated statement of operations.
Changes during the years ended November 30, 1998 and 1997 in common stock
options outstanding for the Company were as follows:
1998 1997
-------------------- --------------------
Weighted Weighted
Shares Average Shares Average
or Price Exercise or Price Exercise
Per Share Price Per Share Price
--------- --------- --------- ---------
Options outstanding at
beginning of year 2,420,000 $ .25 4,340,000 $ .26
Options granted 37,500 $ .04 - -
Options granted 920,000 $ .10 - -
Options cancelled or expired (1,400,000) $ .35 (1,920,000) $ .15
--------- ---------
Options outstanding at
end of year 1,977,500 $ .10 2,420,000 $ 25
========= =========
Options price range
at end of year $.04 - $1.00 $.06 - $1.00
=========== ===========
Exercisable at end of year 1,830,833 2,273,333
========= =========
<PAGE F - 13>
The following table summarizes information about stock options outstanding
at November 30, 1998, all of which are at fixed prices:
Number of Contractual Number of
Exercise Options Life of Options Options
Price Outstanding Outstanding Exercisable
-------- --------- ---------- -----------
$ .10 800,000 .9 years 800,000
$ .06 800,000 .9 years 800,000
$ .10 220,000 2.2 years 73,333
$ .10 60,000 2.2 years 60,000
$ .10 60,000 3.1 years 60,000
$ .04 37,500 1.9 years 37,500
--------- -----------
1,977,500 1,830,833
========= ===========
COMMON STOCK OF SUBSIDIARY:
Prior to 1998, Xenogenics had been a wholly-owned subsidiary of Exten. As of
November 30, 1998, Xenogenics was authorized to issue up to 50,000,000 shares
of common stock and Exten owned 1,500,000 (98.7%) of the 1,520,000 shares that
were outstanding. The 20,000 shares held by the minority stockholders were
purchased pursuant to the terms of a private placement memorandum for $50,000,
or $2.50 per share, during 1998. The proceeds of the sale exceeded Exten's
proportionate interest in Xenogenics by $49,137 which the Company recorded as
an increase in additional paid-in capital and the balance of $863 was recorded
as minority interest.
During 1997, the Company's subsidiary, Xenogenics, granted options to acquire
407,500 shares of its common stock at $1.00 per share to various individuals,
officers and directors of Xenogenics in return for services rendered. No
options were granted, exercised or cancelled during 1998.
As of November 30, 1998, Xenogenics also had a maximum of 282,045 shares of
common stock reserved for the possible conversion of notes payable(see Note
5).
Note 8 - Lease commitments:
The Company leases its office space under an operating lease that is renewable
annually. Rent expense was $13,198 in 1998 and $8,486 in 1997.
<PAGE F - 14>
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 9th day of
March 1999.
EXTEN INDUSTRIES, INC.
(Registrant)
/s/ W. Gerald Newmin
--------------------
W. Gerald Newmin
Chairman & CEO
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
/s/ W. Gerald Newmin Chairman ,CEO,
W. Gerald Newmin and Secretary 03/09/99
/s/Jerry G. Simek President, COO 03/09/99
Jerry G. Simek and Treasurer
/s/ Farrest Loper Director 03/09/99
Farrest Loper
<PAGE 32>
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<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-END> NOV-30-1998
<CASH> 606,100
<SECURITIES> 0
<RECEIVABLES> 262,100
<ALLOWANCES> 0
<INVENTORY> 412,200
<CURRENT-ASSETS> 1,309,400
<PP&E> 1,696,200
<DEPRECIATION> 1,647,800
<TOTAL-ASSETS> 1,410,300
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<BONDS> 1,212,300
<COMMON> 38,400
0
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<TOTAL-LIABILITY-AND-EQUITY> 1,410,300
<SALES> 1,943,700
<TOTAL-REVENUES> 1,943,700
<CGS> 1,297,900
<TOTAL-COSTS> 1,678,900
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