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 for the fiscal year
ended November 30, 1997.

( ) Transition Report pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934 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
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(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

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 [_]
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, 1998:
$2,023,933. As of March 31, 1998, there were 40,718,762
shares of common stock 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_

EXTEN INDUSTRIES, INC.
FORM 10-KSB

INDEX
Page
PART I

Item 1. DESCRIPTION OF BUSINESS 3
Background of the Company 3
Factors Which May Affect Future Results 3
Business of Exten Industries, Inc. 7
Business of Xenogenex, Inc. 7
Business of Xenogenics, Corporation 8
Patents & Proprietary Technology 8
Intense Competition 8
Government Regulation 8
Therapeutic Products 8
Prior Agreements for SYBIOLR Development 9
St. Louis University Health Sciences Center 9
China Joint Venture 9
Possible Acquisitions & Merger Transactions 10
Employees 13
Item 2. DESCRIPTION OF PROPERTY 13
Item 3. LEGAL PROCEEDINGS 14
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS 14

PART II

Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED STOCKHOLDER MATTERS 14
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATIONS 15
Results of Operations 15
Liquidity and Capital Resources 17
Item 7. FINANCIAL STATEMENTS 18
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE 18

PART III

Item 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS;REGISTRANT COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT 19
Item 10. EXECUTIVE COMPENSATION 20
Non-Cash Compensation 20
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT 21
Stock Options Outstanding 22
Item 12. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS 22
Item 13. EXHIBITS,FINANCIAL STATEMENTS, SCHEDULES AND
REPORTS ON FORM 8-K 23
Reports on Form 8-K 23

CONSOLIDATED FINANCIAL STATEMENTS F-1

SIGNATURES 24
<PAGE 2>

PART I

Item 1. DESCRIPTION OF BUSINESS

This Report on Form 10-KSB contains forward-looking
statements that involve risks and uncertainties. The
Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors
that might cause such a difference include, but are not
limited to, those discussed in Item 1a the section entitled
"Factors Which May Affect Future Results."

Forward-Looking Information - General

This report 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.

BACKGROUND OF THE COMPANY

Between 1985 and 1990 Exten Industries, Inc. (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 receiving these
services. The Company distributed shares of common stock in
these companies to its shareholders as dividends in kind. In
October of 1990, due to the difficulty of raising capital
for its small business merchant banking clients, the
Company's Board of Directors decided to change its business
emphasis. The merchant banking business would be combined on
a smaller scale with more substantial companies. The
Company's merchant banking experience would be directed to
the acquisition of varied business for the Company.

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 (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.

During the year ending November 30, 1997 the Company formed
a new Subsidiaries, Xenogenics Corporation, a Nevada
corporation, ('Xenogenics') for the express purpose of
holding and developing the Sybiol technology.

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 1997, the
Company's most recent fiscal year, the Company's losses were

($104,834) compared to losses of ($950,222)incurred during
fiscal 1996. The Company faces all the risks inherent in a
new business. The Company's Xenogenics subsidiaries 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 might 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, 1997
and 1996 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 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, 1997, the Company had $515,266 in current
debts and other obligations that are due and payable on or
before November 30, 1998. Included in the amounts due by
November 30, 1998 is $160,072 in notes payable currently in
default together with other current liabilities of $355,194.
Further, as of November 30, 1997, the Company had over 22
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, 1997, the Company had Total Current Liabilities
of $515,266 and Total Current Assets of $22,915 with the
result that the Company had negative working capital of
($492,351) as Total Current Liabilities exceeded Total
Current Assets by that amount. While the Company's
management continues to seek 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 1996 and 1997 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 stock-holders. During
1997, the Company issued 7,374,210 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 totaling $150,000 (as of
November 30, 1997) with a former officer of the Company,
Robert H. Goldsmith, and certain attorneys for past
services. In addition, the Company had over $365,266 in
other 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 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.

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 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.

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, 1997,
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 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.

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 the registration and sale
of shares on an on-going basis.

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 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.

18. 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.

Business of Exten Industries, Inc.

As of November 30, 1997, the Company's only active business
is the proposed research and development activities of
SYBIOLR artificial liver technology.

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 at that time 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, SYBIOLR developed for Xenogenex under
contract with Cedars-Sinai Medical Center.

In July of 1996, Xenogenex transferred all assets and rights
to the Sybiol synthetic bio-liver technology to Exten
Industries, Inc., in exchange for the assumption of certain
of its debts.

Business of Xenogenics Corporation

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 new Xenogenics Corporation, a wholly owned subsidiaries.

A patent application is presently pending on the process
utilized by the SYBIOLR artificial liver device. The Company
has received notice that the Sybiol trademark (US Trademark
Application Serial No. 74/522,603) has been registered by
the United States Patent and Trademark Office.

Xenogenics is in the process of selling up to 20% of its
Common Stock to raise up to $1,000,000 in venture capital
financing. If Xenogenics were successful in raising this
additional capital, the Company's ownership interests would
be reduced accordingly.

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 US 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 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.

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.

Prior Agreements for SYBIOL Development

A. St. Louis University Health Sciences Center

The Company, through its Xenogenex subsidiaries, 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. During the period of the
sponsored research agreement, the Company spent
approximately $452,000 on research and laboratory equipment.

B. 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. Prior to the close of the 1997 fiscal year and
after discussions with counsel, the Company terminated the
License Agreement with TECA for non-performance.

The Company 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.

Possible Acquisitions & Merger Transactions

In addition to the Company's plans for Xenogenics, the
Company continues to seek a possible merger or acquisition
with comparable business entities. The Company has not
identified any business entity for acquisition or merger and
does not intend to limit potential acquisition candidates to
any particular field or industry, but does retain the right
to limit various acquisition or merger candidates, if it so
chooses, to a particular field or industry. The Company's
plans are in the conceptual stage only.

Plan of Operation - General

While the Company seeks financing for its subsidiary,
Xenogenex, the Company is currently seeking potential
candidates to acquire via a merger. The Company will not
restrict its search to any specific business, industry or
geographical location, and the Company may participate in
a business venture of virtually any kind or nature. The
discussion of the proposed business under this caption and
throughout this Form 10-KSB is purposefully general and is
not meant to be restrictive of the Company's virtually
unlimited discretion to search for and enter into potential
business opportunities.

The Company intends to obtain funds in one or more private
placements to finance the operation of any acquired
business. Persons purchasing securities in these placements
and other shareholders will likely not have the opportunity
to participate in the decision relating to any acquisition.
Consequently, the Company's potential success is heavily
dependent on the Company's management, which will have
virtually unlimited discretion in searching for and entering
into a business opportunity. The officers and directors of
the Company may not have any experience in the proposed
business of the Company. There can be no assurance that
the Company will be able to raise any funds in any private
placements.

Management anticipates that it will participate in only a
few potential business ventures. This lack of
diversification should be considered a substantial risk in
investing in the Company because it will not permit the
Company to offset potential losses from one venture against
gains from another.

The Company may seek a business opportunity with a firm
which only recently commenced operations, or a developing
company in need of additional funds for expansion into new
products or markets, or seeking to develop a new product or
service, or an established business which may be
experiencing financial or operating difficulties and is in
the need for additional capital which is perceived to be
easier to raise by a public company. In some instances, a
business opportunity may involve the acquisition or merger
with a corporation which does not need substantial
additional cash but which desires to establish a public
trading market for its common stock. The Company may
purchase assets and establish wholly owned subsidiaries in
various businesses or purchase existing businesses as
subsidiaries.

The Company anticipates that the selection of a business
opportunity in which to participate will be complex and
extremely risky. Because of general economic conditions,
rapid technological advances being made in some industries,
and shortages of available capital, management believes that
there are numerous firms seeking the benefits of a publicly
traded corporation. Such perceived benefits of a publicly
traded corporation may include facilitating or improving the
terms on which additional equity financing may be sought,
providing liquidity for the principals of a business,
creating a means for providing incentive stock options or
similar benefits to key employees, providing liquidity

(subject to restrictions of applicable statutes) for all
shareholders, and other factors. Potentially available
business opportunities may occur in many different
industries and at various stages of development, all of
which will make the task of comparative investigation
and analysis of such business opportunities extremely
difficult and complex.

As is customary in the industry, the Company may pay a
finder's fee for locating an acquisition prospect. If any
such fee is paid, it will be approved by the Company's Board
of Directors and will be in accordance with the industry
standards. Such fees are customarily between 1% and 10% of
the size of the transaction, based upon a sliding scale of
the amount involved. Management has adopted a policy that
such a finder's fee or real estate brokerage fee could, in
certain circumstances, be paid to any employee, officer,
director or 5% shareholder of the Company.

The Company has, and may continue to have, insufficient
capital with which to provide the owners of business
opportunities with any significant cash or other assets.
However, management believes the Company may offer owners of
business opportunities the opportunity to acquire a
controlling ownership interest in a public company at
substantially less cost than is required to conduct an
initial public offering. The owners of the business
opportunities will, however, incur significant post-merger
or acquisition registration costs in the event they wish to
register a portion of their shares for subsequent sale. The
Company will also incur significant legal and accounting
costs in connection with the acquisition of a business
opportunity including the costs of preparing post-effective
amendments, Forms 8-K, agreements and related reports and
documents, nevertheless, the officers and directors of
the Company have not conducted market research and are not
aware of statistical data which would support the perceived
benefits of a merger or acquisition transaction for the
owners of a business opportunity.

The Company does not intend to make any loans to any
prospective merger or acquisition candidates or to
unaffiliated third parties.

Evaluation of Opportunities

The analysis of new business opportunities will be
undertaken by or under the supervision of the officers and
directors of the Company. Management intends to concentrate
on identifying prospective business opportunities which may
be brought to its attention through present associations
with management. In analyzing prospective business
opportunities, management will consider such matters as the
available technical, financial and managerial resources;
working capital and other financial requirements; history of
operation, if any; prospects for the future; present and
expected competition; the quality and experience of
management services which may be available and the depth
of that management; the potential for further research,
development or exploration; specific risk factors not now
foreseeable but which then may be anticipated to impact the
proposed activities of the Company; the potential for growth
or expansion; the potential for profit; the perceived public
recognition or acceptance of products, services or trades;
name identification; and other relevant factors. Officers
and directors of each Company will meet personally with
management and key personnel of the firm sponsoring the
business opportunity as part of their investigation. To the
extent possible, the Company intends to utilize written
reports and personal investigation to evaluate the above
factors. The Company will not acquire or merge with any
company for which audited financial statements cannot be
obtained.

It may be anticipated that any opportunity in which the
Company participates will present certain risks. Many of
these risks cannot be adequately identified prior to
selection of the specific opportunity, and the Company's
shareholders must, therefore, depend on the ability of
management to identify and evaluate such risk. In the case
of some of the opportunities available to the Company, it
may be anticipated that the promoters thereof have been
unable to develop a going concern or that such business

is in its development stage in that it has not generated
significant revenues from its principal business activities
prior to the Company's participation. There is a risk, even
after the Company's participation in the activity and the
related expenditure of the Company's funds, that the
combined enterprises will still be unable to become a going
concern or advance beyond the development stage. Many of the
opportunities may involve new and untested products,
processes, or market strategies that may not succeed. Such
risks will be assumed by the Company and, therefore, its
shareholders.

The Company will not restrict its search for any specific
kind of business, but may acquire a venture which is in its
preliminary or development stage, which is already in
operation, or in essentially any stage of its corporate
life. It is currently impossible to predict the status of
any business in which the Company may become engaged, in
that such business may need additional capital, may merely
desire to have its shares publicly traded, or may seek
other perceived advantages which the Company may offer.

Acquisition of Opportunities

In implementing a structure for a particular business
acquisition, the Company may become a party to a merger,
consolidation, reorganization, joint venture, franchise or
licensing agreement with another corporation or entity. It
may also purchase stock or assets of an existing business.
On the consummation of a transaction, it is possible that
the present management and shareholders of the Company will
not be in control of the Company. In addition, a majority or
all of the Company's officers and directors may, as part of
the terms of the acquisition transaction, resign and be
replaced by new officers and directors without a vote of
the Company's shareholders.

It is anticipated that any securities issued in any such
reorganization would be issued in reliance on exemptions
from registration under applicable federal and state
securities laws. In some circumstances, however, as a
negotiated element of this transaction, the Company may
agree to register such securities at the time the
transaction is consummated, under certain conditions or at a
specified time thereafter. The issuance of substantial
additional securities and their potential sale into any
trading market that may develop in the Company's Common
Stock may have a depressive effect on such market. While
the actual terms of a transaction to which the Company
may be a party cannot be predicted, it may be expected that
the parties to the business transaction will find it
desirable to avoid the creation of a taxable event and
thereby structure the acquisition in a so called "tax free"
reorganization under Sections 368(a)(1) or 351 of the
Internal Revenue Code of 1986, as amended (the "Code"). In
order to obtain tax-free treatment under the Code, it may be
necessary for the owners of the acquired business to own 80%
or more of the voting stock of the surviving entity. In such
event, the shareholders of the Company, including investors
in this offering, would retain less than 20% of the issued
and outstanding shares of the surviving entity, which could
result in significant dilution in the equity of such
shareholders.

As part of the Company's investigation, officers and
directors of the Company will meet personally with
management and key personnel, may visit and inspect material
facilities, obtain independent analysis or verification of
certain information provided, check reference of management
and key personnel, and take other reasonable investigative
measures, to the extent of the Company's limited financial
resources and management expertise.

The manner in which each Company participates in an
opportunity will depend on the nature of the opportunity,
the respective needs and desires of the Company and other
parties, the management of the opportunity, and the relative
negotiating strength of the Company and such other
management.

With respect to any mergers or acquisitions, negotiations
with target company management will be expected to focus on
the percentage of the Company which target company
shareholders would acquire in exchange for their
shareholdings in the target company. Depending upon, among
other things, the target company's assets and liabilities,
the Company's shareholders will in all likelihood hold a
lesser percentage ownership interest in the Company
following any merger or acquisition. The percentage

ownership may be subject to significant reduction in the
event the Company acquires a target company with substantial
assets. Any merger or acquisition effected by the Company
can be expected to have a significant dilative effect on the
percentage of shares held by the Company's then
shareholders, including purchasers of the Company's Common
Stock.

The Company will not have sufficient funds (unless it is
able to raise funds in a private placement) to undertake
any significant development, marketing and manufacturing
of any products which may be acquired. Accordingly,
following the acquisition of any such product, the Company
will, in all likelihood be required to either seek debt or
equity financing or obtain funding from third parties, in
exchange for which the Company would probably be required
to give up a substantial portion of its interest in any
acquired product. There is no assurance that the Company
will be able either to obtain additional financing or
interest third parties in providing funding for the further
development, marketing and manufacturing of any products
acquired.

It is anticipated that the investigation of specific
business opportunities and the negotiation, drafting and
execution of relevant agreements, disclosure documents and
other instruments will require substantial management time
and attention and substantial costs for accountants,
attorneys and others. If a decision were made not to
participate in a specific business opportunity, the costs
therefore incurred in the related investigation would not
be recoverable. Furthermore, even if an agreement is
reached for the participation in a specific business
opportunity, the failure to consummate that transaction
may result in the loss of the Company of the related
costs incurred.

Competition

The Company is an insignificant participant among firms
which engage in business combinations with, or financing of,
development stage enterprises. There are many established
management and financial consulting companies and venture
capital 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 will
continue to be at significant competitive disadvantage
vis-a-vis the Company's competitors.

Employees

Exten. As of March 31, 1998, Exten had no employees. Its
officers and directors manage the Company.

Xenogenics. As of March 31, 1998, Xenogenics had no
employees. Its officers and directors manage the Company.

Item 2. DESCRIPTION OF PROPERTY

Exten

Lease. Exten leases approximately 1,494 square feet of
space, at $1195 per month, in a modern office building.
Exten's lease continues to run from month to month. The
Company believes these facilities are adequate for the near
future.

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. In 1994
the Company sold four of these lots to pay property taxes.
As of November 30, 1997, the Company owned 236 of these
lots. The Company is seeking to sell the Arizona property.

Xenogenics

During the fiscal year ending November 30, 1997, 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 Xenogenic's
assumption of certain of the outstanding debt of the
Company, cash and 1.5 million shares of Common Stock.

Item 3. LEGAL PROCEEDINGS

On 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 had contested these fees through
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 in 1997.

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 (Electronic Bulletin Board).

The table below shows closing sales price for Exten Common
Stock as reported by the exchange.

Calendar Year ended December 31, High Low
------------------------------- ---- ----
1996
First quarter .12 .06
Second quarter .08 .04
Third quarter .13 .06
Fourth quarter .09 .03

1997
First quarter .06 .04
Second quarter .06 .04
Third quarter .06 .04
Fourth quarter .12 .04

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, 1997 was approximately 3,000.

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 November 12, 1997, the Company issued 120,000 shares of
its Common Stock ($.001 par value) (the "Shares") on a
private placement basis pursuant to the exemption allowed
under Section 4(2) of the Securities Act of 1933. These
Shares were sold to an investor by the Company without
the assistance of any underwriter or broker-dealer at a
price of five cents ($.05) each which resulted in the
Company receiving $6,000 gross proceeds before legal,
accounting and related offering costs.

On March 14, 1997, The Company issued 1,000,000 shares of
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 issued in exchange for $50,000 of debt owed to a former
officer and director of the Company as part of a Settlement
Agreement.

On December 10, 1997, The Company issued 750,000 shares of
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 issued as part of a Settlement Agreement with a law
firm.

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

During 1997 the Company formed a new subsidiary, Xenogenics
Corporation. With the formation of the subsidiary the
Company contributed the SYBIOL technology and certain debts
so as to continue the focus on the research with the
artificial liver technology.

Results of Operations

Fiscal 1997 versus Fiscal 1996

During the years ended November 30, 1997 ("Fiscal 1997") and
November 30, 1996 ("Fiscal 1996") the Company recorded no
revenues. The Company does not anticipate generating any
significant revenues in the near future.

However, during Fiscal 1997, the Company incurred $115,232
in Consulting Fees, which were incurred due to the Company's
continued use and reliance on professional services from
outside the Company. This amount compares to $386,292 in
Consulting Fees incurred in Fiscal 1996.

During Fiscal 1997, the Company also incurred $226,154 in
General and Administrative Expenses. This decreased by
nearly 42% from Fiscal 1996's level of $390,561. The
decline was primarily due to decreased administrative,
legal and accounting and other regulatory expenses. The

Company's current management has continued its efforts to
control costs for the future as well as currently.

As a result, Operating Expenses in Fiscal 1997 were $376,600
compared to Operating Expenses of $793,179 in Fiscal 1996.
This resulted in the Company recording a Loss from
Operations of ($376,600) in Fiscal 1997 compared to a Loss
from Operations of ($793,179) in Fiscal 1996, a decrease of
53% from the year before.

For Fiscal 1997, the Company recorded interest expense of
$31,234 compared to $273 during Fiscal 1996. During Fiscal
1996, the Company also recorded $110,288 in losses on
disposition of assets. This loss was the result of the
Company's sale of certain assets below their acquisition
cost. The Company also recorded a $60,000 loss on the
recission of a technology license to GroupMed International
during 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 1997, the Company recorded an
extraordinary gain of $303,000 in connection with the
satisfaction of certain indebtedness. This compares to
$147,188 in extraordinary gains recognized in Fiscal 1996
resulting from similar re-negotiations and reductions of
certain indebtedness.

As a result, the Company recorded a Net Loss of ($104,834)
in Fiscal 1997 compared to a Net Loss of ($950,222) in
Fiscal 1996, a decrease of nearly 89%. Fiscal 1997 Losses
Per Common Share (computed with Common Stock Equivalents
and fully diluted) were ($0.00) compared to ($0.03) for the
same period during Fiscal 1996.

During 1997, the Company filed patent applications in 15
countries to protect its patent rights in the Sybiol
artificial liver technology. During 1997, Dr. John Brems,
Chairman of the Company's Scientific Advisory Board, left
Scripps Clinic and Research Foundation in La Jolla,
California to head up a new program at Loyola University
in Chicago, Illinois. Dr. Brems will continue as Chairman
of the Scientific Advisory Board. In addition to overseeing
this institution's liver transplant program, Dr. Brems
intends to establish a new program to develop an artificial
liver. In this regard, Dr. Brems has recruited a team of the
world's foremost liver doctors and scientists to Loyola. The
scientific advisory board added four new members, Dr. Donald
Cramer, BS, DVM, and Ph.D., director of the Transplantation
Biology Research Laboratory at St. Vincent Medical Center
in Los Angeles; Dr. Michael Ishitani, MD, FACS, of
Cleveland; Dr. Daniel Salomon, MD, Director of
Transplantation Research at the Scripps Clinic; and Dr.
David Van Thiel, MD Director of Liver Transplantation at
Loyola. They will augment the other existing advisory
board members: Jim Considine, MD, who was appointed
President of Xenogenics Corporation in 1997, Amy Friedman,
MD of Yale University, and Kurt Gehlsen, Ph. D., former CEO
of Trauma Products.

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.

Liquidity and Capital Resources - the Company

The Company completed several steps to reduce its
liabilities, reduce cash requirements, and raise capital
during Fiscal 1997. The Company has successfully negotiated
with a bank, vendors and certain creditors to settle its
liabilities and certain litigation the Company had with a
former officer and other litigation with a bank. This
served reduce prior debt and otherwise permit management to
focus its energies on the Company's proposed business.

And 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.

During Fiscal 1996 and 1997, the Company also took steps to
control expenses and to reduce and re-negotiate outstanding
indebtedness, particularly debts to a former officer,
Robert H. Goldsmith.

The Company has also continued 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.

Item 7. FINANCIAL STATEMENTS

The full text of the Company's audited consolidated
financial statements for the fiscal years ended November 30,
1997 and 1996 begins on PAGE F-1 of this Report.

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

Within the 24-month period prior to November 30, 1997, there
was a change of accountants and on February 9, 1997 the
Company changed its accountants from Harlan & 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, 1997:
Date
Name of Person Age Position elected
- -------------------- ---- ------------------- --------
W. Gerald Newmin 60 President, CEO,
Chairman Secretary
& Director 12-01-95
William R. Hoelscher 60 Vice President
& Director 10-25-94

Mr. 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 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 Health-America 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. In this capacity, he was responsible for the
management of 23 acute care hospitals located throughout the
Western United States. From 1962 to 1973, Whittaker
Corporation employed Mr. Newmin, who 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.

Mr. 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 US 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 elevator design training seminars for Cubic's US
Elevator division.

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 US Elevator Corp. Mr. Hoelscher holds a B.Sc.
Degree in Physics from San Diego State University (1959).

As per item 405 of SEC Regulation SB it should be noted that
during the fiscal year ended November 30, 1997, 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 1997, the Company paid the following
compensation to the Company's Officers and Directors:

Cash Compensation: Amount
----------------- ------
Fiscal 1997

W. Gerald Newmin $0
William R. Hoelscher $0
-----
Total (all Directors and
Officers, as a group,
two persons) $0
=====

Non-Cash Compensation:

1. Stock Compensation

Officer Date of Issue Number of Shares
---------------- ------------- ------------------
W. Gerald Newmin 08-17-97 680,000

William R. Hoelscher 08-17-97 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 Company's patent applications,
licenses, technologies, agreements, inventory, machines,
office furniture, and all other Company assets secure the
Note.

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 Journal prime rate, matures on June 1, 1999 and is
convertible into 168,545 shares of Xenogenics common stock.
Xenogenic's patent applications, licenses, technologies,
agreements, inventory, machines, office furniture, and all
other Company assets secure the Note.

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:

No. Of Shares Exercise Expiration
Name of Officer/Director Under Option Price Date
- ------------------------ ------------- -------- ----------
Electrical & Technical
Consulting, Inc. (1) 800,000 $0.10 11-13-00

Electrical & Technical
Consulting, Inc. (1) 800,000 $0.06 08-16-98
____________________________________________________________
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:

No. Of Shares Exercise Expiration
Name of Officer/Director Under Option Price Date
- ------------------------ ------------- -------- ---------
John Brems, M.D. 100,000 $0.10 01-25-01
Amy Friedman, M.D. 60,000 $0.10 01-25-01
Kurt Gehlsen, Ph.D. 60,000 $0.10 01-25-01

Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT

As of March 30, 1998, 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
- --------------------- ------------------- ------------- -------

W. Gerald Newmin (2) President, CEO,
Chairman & Secretary 4,661,547 11.45%
William R. Hoelscher (3) Director & Treasurer 2,325,000 5.71%
------------- -------
All Officers and Directors
as a Group (2 persons) 6,986,547 17.16%
============= =======

Footnotes:

(1) Based on 40,718,762 shares of the Company's Common Stock
outstanding as of March 30, 1998, and stock option shares
currently executable by officers, directors, and affiliates
within 60 days of March 30, 1998, without including the
effect of any other stock options.

(2) Includes 4,081,704 shares held by the Company's legal
counsel subject to release for services rendered by the
Compensation Committee of the Company's board of directors.

(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:

Amount of Exercise Expiration
Name Position Stock Option Price Date
- ------------------- ------------- ------------ -------- ----------

Malcolm D. Campbell Past CFO &
Secretary 300,000 $0.50 08-26-98

Edward F. Myers Past President
& Director 300,000 $1.00 11-30-98

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

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

Footnotes:

(1) Does not include options granted to other holders,
totaling 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

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.

In connection with the formation and private placement of
the company's wholly owned 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 an officer of the company in connection
with the transfer of the SybiolR 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 an 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, technology
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. Subsequent to year end, the same unrelated party
loaned Xenogenics an additional $25,000, 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.

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 & Boettger, 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.

5.) 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, Xenogenex, Inc.

Exhibits

None

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 Subsidiaries as of
November 30, 1997, and the related consolidated statements
of operations, stockholders' deficiency and cash flows for
the years ended November 30, 1997 and 1996. 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
Subsidiaries as of November 30, 1997, and their results
of operations and cash flows for the years ended
November 30, 1997 and 1996, 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, negative cash flows and decreases in working capital
and is in default under the terms of certain loan
agreements. 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.

/S/J. H. COHN LLP

San Diego, California
February 9, 1998

<PAGE F-1>
EXTEN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
NOVEMBER 30, 1997

ASSETS
Current assets - cash (including
restricted cash of $17,601) $ 22,915
Real estate held for sale 47,200
Patent costs 37,226
-------
Total $107,341
=======

LIABILITIES AND STOCKHOLDERS' DEFICIENCY

Current liabilities:
Accounts payable $ 61,776
Accrued expenses 275,817
Refunds payable to stock subscribers 17,601
Notes payable in default 160,072
-------
Total current liabilities 515,266
-------
Estimated liability under settlement agreement 30,000
Notes payable 313,545
-------
Total liabilities 858,811
-------
Commitments and contingencies -

Stockholders' deficiency:
Common stock, par value $.01 per share;
50,000,000 shares authorized;
37,136,642 shares issued and outstanding 371,366
Additional paid-in capital 9,106,023
Receivable from sales of stock (140,040)
Accumulated deficit (10,088,819)
--------
Total stockholders' deficiency (751,470)
-------
Total $107,341
=======

See Notes to Consolidated Financial Statements.

<PAGE F-2>
EXTEN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED NOVEMBER 30, 1997 AND 1996

1997 1996
------- -------
Operating expenses:
Consulting fees $ 115,232 $ 386,292
General and administrative 226,154 390,561
Depreciation and amortization 35,214 16,326
------- -------
Totals 376,600 793,179
------- -------
Loss from operations (376,600) (793,179)
------- -------
Other expenses:
Interest expense (31,234) (273)
Loss on disposition of assets - (110,288)
Recision of technology license - (60,000)
Write-off of investment in and
receivables from equity investee - (133,670)
------- -------
Totals (31,234) (304,231)
------- -------
Loss before extraordinary item (407,834) (1,097,410)

Extraordinary item - gain on
extinguishment of debt 303,000 147,188
------- -------
Net loss $(104,834) $(950,222)
======= =======
Net loss per common share:
Loss before extraordinary item $ (.01) $ (.04)
Extraordinary item .01 .01
------- -------
Net loss $ - $ (.03)
======= =======
Weighted average number of common
shares outstanding 31,846,403 26,846,661
========== ==========

See Notes to Consolidated Financial Statements.

<PAGE F-3>
EXTEN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
YEARS ENDED NOVEMBER 30, 1997 AND 1996

Common Stock Additional Receivable Accum- Stock-
--------------------- Paid-in from Sales ulated holders'
Shares Amount Capital of Stock Deficit Deficiency
---------- --------- ---------- ---------- ----------- ----------

Balance, December 1, 1995 23,462,205 $ 234,622 $9,134,899 $(812,500) $(9,033,763) $ 476,742)

Return of common stock upon
cancellation of note
receivable (1,000,000) (10,000) (802,500) 812,500 - -

Issuance of stock 2,000,000 20,000 162,435 - - 182,435

Issuance of stock for
services 3,718,640 37,186 220,109 - - 257,295

Issuance of stock for
investment in subsidiary 581,587 5,816 45,050 - - 50,866

Issuance of stock for
settlement of note
payable 1,000,000 10,000 40,000 - - 50,000

Net loss - - - - (950,222) (950,222)
---------- --------- ---------- ---------- ----------- ----------

Balance, November 30, 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 for
receivable from
stockholder 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)
========== ========= ========== ========== =========== ==========

See Notes to Consolidated Financial Statements.

EXTEN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED NOVEMBER 30, 1997 AND 1996

1997 1996
------ ------
Operating activities:
Net loss $(104,834) $(950,222)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Common stock issued for services 203,732 257,295
Note payable issued for compensation 15,133 150,000
Write-off of employee advances - 92,538
Depreciation and amortization 35,214 16,326
Loss on disposition and
impairment of assets - 110,288
Recision of technology license - 60,000
Write-off of investment in and
receivable from equity investee - 133,670
Gain on extinguishment of debt (303,000) (147,188)
Changes in operating assets and
liabilities:
Other current assets 25,000 139,400
Accounts payable (29,240) (6,859)
Accrued expenses 98,956 (31,646)
------- -------
Net cash used in operating activities (59,039) (176,398)
------- -------
Investing activities:
Patent costs (37,226) -
Advances to employee - (13,578)
------- -------
Net cash used in investing activities (37,226) (13,578)
------- -------
Financing activities:
Proceeds from notes and loans payable 145,000 1,650
Payments of notes and loans payable (50,000) (1,763)
Proceeds from stock subscriptions 17,601 -
Net proceeds from sale of stock
and exercise of stock options 6,000 182,435
------- -------
Net cash provided by financing
activities 118,601 182,322
------- -------
Net increase (decrease) in cash 22,336 (7,654)
Cash at beginning of year 579 8,233
------- ------
Cash at end of year $ 22,915 $ 579
====== ======
Supplementary disclosure of
cash flow data:
Interest paid $ 14,496 $ 273
====== ======

EXTEN INDUSTRIES, INC. AND SUBSIDIARIES
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 one of its
wholly-owned subsidiaries, Xenogenics Corporation
("Xenogenics"), a synthetic bio-liver technology ("SYBIOL").
In 1993 ,the Company acquired all of the rights to the
SYBIOL technology 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 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 include the accounts
of Exten and its subsidiaries (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

EXTEN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (concluded):

Income taxes (concluded):
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 loss per common share:
Net 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 the assumed
exercise of such options is antidilutive.

In February 1997, the FASB issued Statement of Financial
Accounting Standards No. 128, "Earnings per Share,"
("SFAS 128") which replaces the presentation of primary
earnings per share required under previously promulgated
accounting standards with a presentation of basic and
diluted earnings per share on the face of the statement of
operations for all entities with complex capital structures
and provides guidance on other computational changes. SFAS
128 is effective for financial statements for both interim
and annual periods ending after December 15, 1997.
Management believes that the adoption of SFAS 128 will not
have a material impact on the Company's reported net loss
per share.

Other recent accounting pronouncements:
In June 1997, the FASB issued Statements of Financial
Accounting Standards No. 130, "Reporting Comprehensive
Income," ("SFAS 130") and 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 fiscal 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.

Reclassification:
Certain balances in the 1996 consolidated financial
statements have been reclassified to conform to the 1997
presentation.

EXTEN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - GOING CONCERN MATTERS:
In 1997 and 1996, the Company incurred net losses of
$104,834 and $950,222, respectively. Management does not
expect the Company to generate significant revenues in the
near future. At November 30, 1997, the Company's accumulated
deficit and stockholders' deficiency were $10,088,819 and
$751,470 respectively, and its current liabilities exceeded
its current assets by $492,351. 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 resulted in
negative cash flows aggregating $59,039 and $176,398 in 1997
and 1996, respectively. 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 certain 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 non-productive 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.

EXTEN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3 - Extinguishments of debt :
During 1997 and 1996, the Company extinguished debts that
had carrying values in excess of the fair value of the
consideration transferred to the creditors and realized
gains as shown below, which were classified, in accordance
with generally accepted accounting principles, as
extraordinary items in the accompanying consolidated
statements of operations:

1997 1996
-------- --------
Settlement of judgment (A) $283,000 -
Settlement of account payable (B) 20,000 -
Settlement of note payable (C) - $147,888
-------- --------
Totals $303,00 $147,888

(A) 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.

(B) 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 8). If the market value of the Company's
common stock at December 10, 1998 is less than $.10 per
share, the creditor will be 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.

(C)In 1996, liabilities payable to a former president with a
total carrying value of $397,188, comprised of a $388,000
note payable and accrued interest of $9,188, were settled
by the Company for total consideration of $250,000,
comprised of a cash payment of $50,000, the issuance of a
new note with a principal balance of $150,000 (see Note 5)
and the issuance of 1,000,000 shares of the Company's common
stock with a market value of $50,000 or $.05 per share (see
Note 8).

EXTEN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 - REAL ESTATE HELD FOR SALE:
Real estate as of November 30, 1997 consists 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 IN DEFAULT:
Notes payable in default at November 30, 1997 consist of the
following:

Agreement payable to a former
president of the Company, with
interest at 10% $150,000

Note payable to attorneys for
professional services 10,072
-------
Total $160,072
=======

NOTE 6 - NOTES PAYABLE:
Notes payable at November 30, 1997 consist of the following:

Note payable to officer, with interest
at 8.5%, due in full on May 31, 1999 $168,545

Notes payable to an unrelated party,
with interest at the prime rate
(8.5% at November 30, 1997), due in
full on March 7, 1999 145,000
-------
Total $313,545
=======

NOTE 7 - INCOME TAXES:
As of November 30, 1997, 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
2011. 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, 1997 as shown
below:

Deferred tax assets $3,900,000
Valuation allowance (3,900,000)
----------
Net deferred tax asset $ -
==========

EXTEN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - STOCKHOLDERS' DEFICIENCY:

Stock issuance's:

During 1996, 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:

3,718,640 shares, valued at $257,295, were issued for
employee compensation, consulting services, directors'
fees and legal services. Approximately 400,000 of the
shares issued were for future services to be provided
under contractual agreements and, accordingly, the
value of those shares was included in prepaid expense
as of November 30, 1996.

581,587 shares, valued at $50,866, were issued to the
minority stockholders of the Company's subsidiary
(see Note 9).

1,000,000 shares, valued at $50,000, were issued in
partial settlement of a note payable (see Note 3).

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 transactions:

4,003,988 shares, valued at $203,732, were issued for
consulting services, directors' fees and as
reimbursement of expenses paid by an officer.

750,000 shares, valued at $30,000, were issued in
connection with an agreement for the settlement of
accounts payable (see Note 3).

2,500,222 shares issued in exchange for an agreement
to pay $140,010 in 1998 to an officer.

Stock subscription:
During 1997, the Company initiated a private placement of
the common stock of Xenogenics, its subsidiary, for a
minimum of 60,000 shares and a maximum of 360,000 shares at
$2.50 per share. At November 30, 1997, Xenogenics was
authorized to issue up to 5,000,000 shares of common stock
and it had 1,500,000 shares outstanding. At November 30,
1997, the Company had received $17,500 for subscriptions to
purchase 7,000 shares. Since the minimum number of shares
had not been sold, the amount received was being held in
escrow and was included as restricted cash and a liability
in the accompanying 1997 consolidated balance sheet.

EXTEN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 8 - Stockholders' deficiency (continued):

Stock options:
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 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 1997.
However, even if compensation cost had been computed based
on the fair value at the grant date for all awards in 1997
consistent with the provisions of SFAS 123 and recognized
in the financial statements, the Company's net loss in 1997,
and the related per share amounts, would not have been
materially different from the amounts reported in the
accompanying 1997 consolidated statement of operations.

Changes during the years ended November 30, 1997 and 1996 in
common stock options outstanding for the Company were as
follows:

1997 Weighted 1996
or Price Exercise or Price
Per Share Price Per Share
---------- ------ ----------
- -
Options outstanding at
beginning of year 4,340,000 $.26 4,190,000
Options granted at $.10 150,000
Options canceled (1,920,000) $.15 -
--------- ---------
Options outstanding at
end of year 2,420,000 $.25 4,340,000
========= =========

Option price range at
end of year $.06-$1.00 $.06-$1.00

EXTEN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - STOCKHOLDERS' DEFICIENCY (concluded):
Stock options (concluded):

The following table summarizes information about stock
options outstanding at November 30, 1997, all of which are
at fixed prices:

Number of Contractual Number
Exercise Options Life of Options of Options
Price Outstanding Outstanding Exercisable
-------- ----------- --------------- -----------

$1.00 300,000 1.0 year 300,000
$.06 800,000 .7 year 800,000
$.10 800,000 3.0 years 800,000
$.10 220,000 3.2 years 73,333
$.50 300,000 5.7 years 300,000
------- -------
2,420,000 2,273,333
========= =========

During the year ended November 30, 1997, Xenogenics granted
options to acquire 387,500 shares at an exercise price of
$1.00 per share. All of the options granted during the year
were outstanding at November 30, 1997.

NOTE 9- BUYOUT OF MINORITY INTEREST:
In June 1996, the Company entered into an agreement with the
minority stockholders of Xenogenex (an inactive subsidiary)
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 was amortized over
15 months.

NOTE 10- EQUITY IN LOSS OF PARTNERSHIP:
During 1996, management determined that the investment in a
joint venture to manufacture and sell the Company's
technology was worthless. Accordingly, the investment in the
joint venture, which was accounted for by the equity method,
and a note receivable from the joint venture were written
off by a charge to operations in the amount of $133,670.

NOTE 11- LEASE COMMITMENTS:
The Company leases its office space under an operating lease
that is renewable annually. Rent expense was $8,486 and
$5,736 in 1997 and 1996, respectively.

<F-13>

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 4th day of April 1998.

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 President, CEO,
W. Gerald Newmin Chairman & Secretary 04/07/98

/s/ William R. Hoelscher Director & Treasurer 04/07/98
William R. Hoelscher