<PAGE>

                      U.S. SECURITIES AND EXCHANGE COMMISSION
                               WASHINGTON, DC 20549

                                    FORM 10-QSB

(Mark One)
 X   Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
     of 1934

     For the quarterly period ended March 31, 1998

     Transition report under Section 13 or 15(d) of the Exchange Act
     For the transition period from __________________ to _________________


                         Commission file number    000-20731
                                                   ---------

                                PHOTRAN CORPORATION
         (Exact Name of Small Business Issuer as Specified in Its Charter)


          MINNESOTA                                     41-1697628
(State or Other Jurisdiction of           (I.R.S. Employer Identification No.)
 Incorporation or Organization)


                                21875 GRENADA AVENUE
                                LAKEVILLE, MN 55044
                      (Address of Principal Executive Offices)


                                   (612) 469-4880
                  (Issuer's Telephone Number, Including Area Code)



     (Former Name, Former Address and Former Fiscal Year, if Changed Since Last
                                      Report)

     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 for 
such shorter period that the registrant was required to file such reports), 
and (2) has been subject to such filing requirements for the past 90 days.

Yes     X       No         .
   -----------    ---------


The number of the registrant's common shares outstanding as of May 15, 1998 
was 5,356,024

     Transitional Small Business Disclosure Format (check one):

Yes             No    X    .
   -----------    ---------


<PAGE>



                                PHOTRAN CORPORATION 

                                    FORM 10-QSB

                                 TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                          PAGE
                                                                                          ----
<S>              <C>                                                                      <C>
PART I           FINANCIAL INFORMATION 

Item 1.          Financial Statements (unaudited)

                    Balance Sheets                                                           2

                    Statements of Operations                                                 3

                    Statements of Cash Flows                                                 4

                    Notes to Financial Statements                                            5

Item 2.          Management's Discussion and Analysis of Financial Condition and
                 Results of Operations                                                       9

PART II          OTHER INFORMATION

Item 1.          Legal Proceedings                                                          15

Item 3.          Defaults Upon Senior Securities                                            16

Item 6.          Exhibits and Reports on Form 8-K                                           16

Signature page                                                                              17

Exhibit Index                                                                               18

</TABLE>







                                      1


<PAGE>

PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

                                PHOTRAN CORPORATION
                             BALANCE SHEETS (Unaudited)

<TABLE>
<CAPTION>
                                                               MARCH 31,      DECEMBER 31,
                                                                 1998             1997
                                                             ------------   ---------------
<S>                                                          <C>            <C>
ASSETS

CURRENT ASSETS:
 Cash and cash equivalents                                   $     41,531   $     46,107
 Accounts receivable                                              589,118        722,113
 Inventory                                                        632,685        387,000
 Prepaid expense                                                  107,380         37,814
 Marketable securities, restricted                                             2,250,000
                                                             ------------   ------------
   Total current assets                                         1,370,714      3,443,034

PROPERTY AND EQUIPMENT, net                                    18,675,641     18,535,149
                                                             ------------   ------------
                                                             $ 20,046,355   $ 21,978,183
                                                             ------------   ------------
                                                             ------------   ------------
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
 Current portion of long term debt,
  notes payable, and capital lease obligations               $  3,552,252   $  5,613,143
 Borrowings under line of credit                                  561,490
 Accounts payable                                               1,601,263      1,804,846
 Accrued expenses                                                 645,972        713,893
 Customer advances and arbitration settlement payable           1,578,006      2,724,538
                                                             ------------   ------------
  Total current liabilities                                     7,938,983     10,856,420

LONG TERM DEBT, NOTES PAYABLE AND CAPITAL LEASE
 OBLIGATIONS, less current portion                              1,464,707      1,023,653
LITGATION SETTLEMENT ACCRUAL (Note 5)                           2,000,000

COMMITMENTS AND CONTINGENCIES (Notes 5 and 6)

SHAREHOLDERS' EQUITY:
 Undesignated stock, no par value, 6,000,000 shares
  authorized, no shares issued
 Common stock, no par value, 24,000,000 shares authorized,
  5,356,024 and 5,230,303 shares issued and outstanding,
  respectively                                                 25,179,092     24,824,175
 Common stock issuable under arbitration settlement               925,000
 Accumulated deficit                                          (17,461,427)   (14,726,065)
                                                             ------------   ------------
    Total shareholders' equity                                  8,642,665     10,098,110
                                                             ------------   ------------
                                                             $ 20,046,355   $ 21,978,183
                                                             ------------   ------------
                                                             ------------   ------------

</TABLE>
                                  See notes to financial statements.


                                                  2

<PAGE>
                             PHOTRAN CORPORATION
                    STATEMENTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>
                                                                    THREE MONTHS ENDED
                                                                         MARCH 31,
                                                            -------------------------------
                                                                   1998             1997
                                                            ---------------   -------------
<S>                                                         <C>               <C>
REVENUES                                                        $ 1,949,542    $   567,951
COST OF SALES                                                     1,668,351        917,732
                                                            ---------------   -------------
     Gross profit (loss)                                            281,191       (349,781)

OPERATING EXPENSES:
 Process and product development and engineering                    303,891        147,725
 General and administrative                                         492,192        276,618
 Selling and marketing                                              102,654        156,567
 Other nonrecurring charges                                                        198,710
                                                            ---------------   ------------- 
  Total operating expenses                                         898,737        779,620
                                                            ---------------   -------------
LOSS FROM OPERATIONS                                               (617,546)    (1,129,401)

INTEREST EXPENSE (INCOME), net                                       19,904         (1,938)
LITIGATION SETTLEMENT EXPENSE (Note 5)                            2,100,000
OTHER INCOME, net                                                    (2,088)        (3,785)
                                                            ---------------   -------------
NET LOSS                                                        $(2,735,362)   $(1,123,678)
                                                            ---------------   -------------
                                                            ---------------   -------------

BASIC AND DILUTED LOSS PER
 COMMON SHARE                                                   $     (0.52)   $     (0.22)
                                                            ---------------   -------------
                                                            ---------------   -------------

WEIGHTED AVERAGE NUMBER OF COMMON
 SHARES OUTSTANDING                                               5,278,382      5,155,770
                                                            ---------------   -------------
                                                            ---------------   -------------

</TABLE>




                         See notes to financial statements.



                                         3

<PAGE>

                                PHOTRAN CORPORATION
                        STATEMENTS OF CASH FLOWS (UNAUDITED)

<TABLE>
<CAPTION>
                                                                       THREE MONTHS ENDED
                                                                            MARCH 31,
                                                                -------------------------------
                                                                       1998           1997
                                                                ---------------  --------------
<S>                                                             <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net loss                                                         $(2,735,362)   $(1,123,678)
   Adjustments to reconcile net loss to cash
     used in operating activities:
       Depreciation and amortization - property and
         equipment                                                      292,472        178,682
       Non-cash litigation settlement expense                         2,000,000
   Changes in assets and liabilities that provided (used) cash:
      Accounts receivable                                              (170,365)       (29,025)
      Inventory                                                        (245,685)       167,217
      Equipment held for sale                                                         (545,722)
      Prepaid expenses                                                  (69,566)       (51,694)
      Accounts payable                                                 (203,583)        52,372
      Accrued expenses                                                   13,907       (460,363)
                                                                ----------------  -------------
         Cash used in operating activities                           (1,118,182)    (1,812,211)

CASH FLOWS FROM INVESTING ACTIVITIES
   Property additions                                                  (305,049)      (803,092)
   Purchases of investments                                                         (2,250,000)
                                                                ----------------  -------------
     Cash used in investing activities                                 (305,049)    (3,053,092)

CASH FLOWS FROM FINANCING ACTIVITIES
   Proceeds from notes payable and long-term debt                       700,000      4,500,000
   Payments of notes payable and long-term debt                        (101,627)       (57,825)
   Borrowings under line of credit, net                                 561,490
   Common stock issued                                                  258,792          4,000
                                                                ----------------  -------------
     Cash provided by financing activities                            1,418,655      4,446,175
                                                                ----------------  -------------

DECREASE IN CASH                                                         (4,576)      (419,128)

CASH AT BEGINNING OF PERIOD                                              46,107      2,038,955
                                                                ----------------  -------------

CASH AT END OF PERIOD                                               $    41,531    $ 1,619,827
                                                                ----------------  -------------
                                                                ----------------  -------------

</TABLE>



                         See notes to financial statements.


                                          4

<PAGE>

                                PHOTRAN CORPORATION
                     NOTES TO FINANCIAL STATEMENTS (UNAUDITED)



1.   BASIS OF PRESENTATION

     The accompanying financial statements are unaudited and reflect all 
     adjustments consisting of normal recurring adjustments (except the 
     litigation settlement accrual), which are, in the opinion of management, 
     necessary for a fair presentation.  Operating results for the 
     three-month period ended March 31, 1998 are not necessarily indicative 
     of the results that may be expected for the year ending December 31, 
     1998.  Certain reclassifications have been made to the 1997 financial 
     statements to conform to the 1998 presentation. These reclassifications 
     had no effect on net loss or shareholders' equity as previously reported.

     These financial statements should be read in conjunction with the financial
     statements and notes thereto for the year ended December 31, 1997, filed
     with the SEC as part of the Company's Annual Report on Form 10-KSB.

     The accompanying financial statements have been prepared on a going concern
     basis, which contemplates the realization of assets and the satisfaction of
     liabilities in the normal course of business.  The Company has incurred
     cumulative losses aggregating $17,461,427 since its inception, and incurred
     negative cash flows from operating activities of $1,118,182 for the quarter
     ended March 31, 1998. In addition, at March 31, 1998, the Company had a
     working capital deficiency of $6,568,269. These factors, among others,
     indicate the Company may be unable to continue as a going concern for a
     reasonable period of time. 

     The financial statements do not include any adjustments relating to the
     recoverability and classification of recorded asset amounts or the amounts
     and classification of liabilities that might be necessary should the
     Company be unable to continue as a going concern. As described in Note 3,
     at March 31, 1998, the Company was not in compliance with the terms of two
     lease agreements and has been unable to cure or obtain waivers for the
     defaults. Accordingly, the balance of these lease obligations
     (approximately $3,100,000) has been classified as a current liability. In
     addition, as described in Notes 5 and 6, the Company is currently under
     investigation by the Securities and Exchange Commission (SEC), and is the
     defendant in a number of legal actions which have been tentatively settled
     as of the filing date of this report. However, significant management time
     and financial resources could be required to completely resolve these
     matters. 

     The Company's continuation as a going concern is dependent on its ability
     to generate sufficient cash flow to meet its obligations including, legal
     defense costs which could be significant, on a timely basis, to comply with
     the terms and conditions of its financing agreements, to obtain additional
     financing or refinancing as may be required, to achieve acceptable
     resolutions of the defaulted lease obligations, the SEC investigation and
     the various other legal actions, and ultimately attain sales and operating
     levels sufficient to support its cost structure.  

     Management is continuing its efforts to obtain additional financing so the
     Company can meet its obligations and sustain its operations. As of March
     31, 1998, the Company's principal sources of liquidity included cash and
     cash equivalents of $41,531 and net accounts receivable of $589,118, as
     well as an $833,000 transaction-specific working capital line of credit
     against which there were borrowings of $561,490 outstanding as of March 31,
     1998.  Subsequent to March 31, 1998, the Company received advances totaling
     approximately $2,300,000 from a $3,500,000 first quarter 1998 private debt
     placement under which the Company received $700,000 in the first quarter of
     1998 (see Note 3). These advances were used primarily to fund the
     $1,500,000 settlement with the Company's former Chinese joint venture
     partner. The Company believes that its existing sources of liquidity and
     anticipated funds from operations, combined with the remaining $500,000 net
     proceeds to be received from the private debt placement, will be
     insufficient to satisfy the Company's projected working capital and capital
     expansion requirements for 1998, and the Company will need to seek
     additional


                                        5

<PAGE>

                                PHOTRAN CORPORATION
               NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)


     debt or equity financing. The Company will also require additional debt 
     or equity financing to resolve the defaults on certain of its leases. As 
     discussed in Note 3, the Company is attempting to secure additional debt 
     or equity financing to meet its cash flow needs, including the defaulted 
     lease obligations. There can be no assurance that the necessary 
     financing will be available or be available on terms acceptable to the 
     Company. 

2.   INVENTORIES

     Inventories consist of the following:

<TABLE>
<CAPTION>
                                                  March 31,     December 31,
                                                     1998           1997
                                               -------------   ---------------
     <S>                                       <C>             <C>
     Raw materials and supplies at cost          $  695,448       $  562,254
     Finished goods                                 165,050           65,355
                                               -------------   ---------------
                                                    860,498          627,609
     Less obsolescence reserve                      227,813          240,609
                                               -------------   ---------------
                                                 $  632,685       $  387,000
                                               -------------   ---------------
                                               -------------   ---------------

</TABLE>

3.   LONG-TERM DEBT AND CAPITAL LEASES

     In February 1998, the Company issued a $3,500,000 convertible note in a 
     private financing transaction. As of March 31, 1998, $700,000 in 
     proceeds had been received by the Company. Additional advances totalling 
     approximately $2,300,000 were received subsequent to March 31, 1998, and 
     were used primarily to fund the $1,500,000 settlement with the Company's 
     former Chinese joint venture partner. The remaining $500,000 will be 
     advanced by the lender as needed by the Company to sustain its 
     operations and to complete the construction and installation of the 
     Company's P-2 and P-3 production lines. The note bears interest at 10 
     percent per annum and matures in August 1999. All principal and accrued 
     interest are payable at maturity, but may be prepaid at any time without 
     penalty. The note and all accrued interest are convertible into shares 
     of common stock of the Company at the option of the lender at any time 
     up to 30 days following maturity, at a rate of $4.00 per share. The note 
     is secured by an interest in substantially all of the fixed assets of 
     the Company, except the P-3 production line which is the subject of a 
     sale-leaseback transaction. In connection with this transaction, the 
     Company issued to the lender five-year warrants which vest in proportion 
     to the funds advanced to purchase a total of 1,225,000 shares of common 
     stock of the Company at $4.00 per share. Original issue discount of 
     approximately $90,000 has been recorded as interest in the first quarter 
     and has been capitalized to construction in progress.

     In October 1997, the Company was unable to continue to make payments on
     certain of its lease obligations. As of December 31, 1997, the Company was
     in default on two leases which aggregated approximately $5,400,000,
     including the sale-lease back transaction on the Company's P-3 line. The
     Company has not yet resolved the defaults on these transactions. Under the
     terms of the leases, in the event of a default, the Company can be required
     to immediately pay all future lease payments under the lease. During the
     first quarter of 1998, the lessor demanded payment of such amounts and
     requested the trustee holding the $2,250,000 in marketable securities which
     were being held as a compensating balance to liquidate the account and
     forward the proceeds to the lessor in partial payment of amounts owed by
     the Company. The Company is attempting to negotiate a settlement of these
     lease obligations at amounts less than the recorded amounts. Settlement of
     the lease defaults will require new financing. The Company is in
     discussions with prospective lenders to provide the new credit facility to
     fund the settlement of the defaulted lease obligations. Management expects
     to complete the settlement negotiations and obtain new financing
     arrangements during the second quarter of 1998. However, no assurance can
     be given that management will be able to negotiate an acceptable settlement
     or, if the Company is successful in negotiating an acceptable settlement,
     that the financing necessary to extinguish the obligations will be
     available, or be available on terms acceptable to the


                                       6

<PAGE>

                                PHOTRAN CORPORATION
               NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)


     Company. The remaining gross lease payments, including past due 
     payments, under these leases of approximately $3,100,000 have been 
     classified as current liabilities at March 31, 1998.

     In the third and fourth quarters of 1997, the Company obtained a loan from
     a shareholder who is also a director in the amount of $1,100,000. In
     connection with the loan, the Company issued to the shareholder warrants
     for the purchase of 110,000 shares of the Company's common stock at a price
     of $4.00 per share. The warrants are exercisable between September 1998 and
     September 2007. In February 1998, as consideration for extension of the
     $1,100,000 loan and modification of the security agreement collateralizing
     the loan, the Company issued a warrant to the shareholder to purchase
     100,000 shares of common stock of the Company at $4.25 per share. The
     warrant is exercisable from February 1999 to September 2007. The estimated
     fair value of the warrant, as determined by a third party, is not material.

4.   CUSTOMER ADVANCES AND ARBITRATION SETTLEMENT PAYABLE

     The Company and its former Chinese joint venture partner, Shenzhen WABO
     Group Company Limited (WABO) finalized a negotiated settlement in January
     1998 which was approved by the Chinese arbitration board in February 1998. 
     Under the terms of the settlement, the Company was required to pay WABO
     $1,500,000 in cash and issue 200,000 shares of common stock to settle all
     claims in connection with the joint venture contract, the equipment
     contract, and related agreements.  The cash portion of this settlement is
     recorded as a current liability as of March 31, 1998. The value of the
     stock issuable under the settlement is recorded in stockholders' equity as
     of March 31, 1998. The cash (see Note 3) and common stock were delivered to
     WABO subsequent to March 31, 1998.

5.   LITIGATION SETTLEMENT ACCRUAL

     In May of 1997 the Company was served with two separate lawsuits against
     the Company, certain officers and directors of the Company, and the
     Company's former president. These lawsuits were filed by certain purchasers
     of the Company's common stock alleging that the Company's actions with
     respect to the financial and accounting irregularities announced by the
     Company in March of 1997 artificially inflated its stock price between May
     29, 1996 and March 24, 1997. The plaintiffs in these actions are seeking
     class certification. Both suits were filed in the United States District
     Court for the District of Minnesota. In July 1997, the court consolidated
     these lawsuits into a single action captioned IN RE PHOTRAN CORPORATION
     SECURITIES LITIGATION. 

     In April 1998, all parties to the lawsuit participated in a mediation, and
     a tentative settlement was reached, subject to approval by the court. Under
     the terms of this tentative settlement, the Company has agreed to pay
     $50,000 in cash, issue five-year warrants valued at up to $500,000 (based
     on a Black-Scholes valuation) to purchase common stock of the Company for
     $4.00 per share, and issue shares of common stock worth $1,725,000 less the
     value of shares of the Company's stock being contributed by another
     defendant. The Company's estimated liability under this settlement, based
     on the market price of the Company's common stock as of the date of the
     mediation, is $2,050,000. This estimate is subject to change based on
     fluctuations in the market price of the Company's common stock between the
     date of the tentative settlement and final approval by the court. The
     settlement is also contingent upon the Company's common stock becoming
     listed on a stock exchange and the registration of the common stock and the
     common stock issuable upon exercise of the warrants within a six-month
     period following the date of the tentative settlement. 

6.   COMMITMENTS AND CONTINGENCIES

     In connection with the coating equipment that the Company was building for
     sale to its former Chinese joint venture, the Company entered into a
     contract with a third party to design and build power supplies to be sold
     under the equipment contract, as well as for the Company's own use. The
     Company terminated the contract in March 1997. In June 1997, the third
     party formally brought an action against the Company in Dakota County
     District Court. The third party's demand for damages was $1,300,000.


                                       7

<PAGE>

                                PHOTRAN CORPORATION
               NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)


     Subsequent to March 31, 1998, the Company reached a settlement with the
     vendor whereby the Company will give the vendor cash and equipment in
     exchange for a promissory note payable to the Company. The impact of this
     settlement on the quarter ended March 31, 1998 was a charge of $50,000,
     which has been recorded as litigation settlement expense.

     In April 1997, the Securities and Exchange Commission (SEC) informed the
     Company that it was conducting a formal investigation with respect to
     certain financial and accounting irregularities announced by the Company in
     March 1997 relating to fiscal 1996. The Company has submitted documents to
     the SEC pursuant to requests from the SEC as part of the investigation. The
     SEC has also interviewed current and former employees of the Company. In
     the fourth quarter of 1997, the Company was informed by the SEC that is has
     expanded its investigation to include certain accounting and financial
     reporting irregularities prior to 1996 which the Company announced in
     October 1997. The investigation is in the preliminary stages and it is not
     possible to determine what impact, if any, the investigation will have on
     the Company's financial condition or results of operations. 

     In August 1997, the Company was served with a lawsuit by its former
     president, David E. Stevenson, demanding the return of certain stock
     certificates registered in his name which are currently in the possession
     of the Company. In October 1997, the Company filed a counterclaim alleging
     that Stevenson had committed fraud and had damaged the Company and that his
     shares should be awarded to the Company. The Company further alleged that
     Stevenson did not provide adequate consideration for such shares and that
     therefore they are not properly issued. In connection with the tentative
     settlement reached in the shareholder class action lawsuit discussed in
     Note 5 above, the Company and Mr. Stevenson have agreed to dismiss all
     claims against each other upon the closing of the settlement of the
     shareholder case.

7.   ADOPTION OF NEW ACCOUNTING STANDARDS

     In June 1997, the Financial Accounting Standards Board issued Statement of
     Financial Accounting Standards (SFAS) No. 130, REPORTING COMPREHENSIVE
     INCOME, which became effective for the Company on January 1, 1998. This
     Statement establishes standards for reporting and display of comprehensive
     income and its components (revenues, expenses, gains, and losses) in a full
     set of general-purpose financial statements. Comprehensive loss for the
     three months ended March 31, 1998 and 1997 was $2,735,362 and $1,123,678,
     respectively.
     
     In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
     DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION, which
     became effective for the Company on January 1, 1998. SFAS No. 131 redefines
     how operating segments are determined and requires disclosures about a
     company's operating segments. The Company anticipates the adoption of SFAS
     No. 131 will not significantly impact the current level of segment
     disclosures made by the Company.




                                       8

<PAGE>

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

The interim financial statements of the Company included within this report 
have been prepared on a going concern basis which contemplates the 
realization of assets and the satisfaction of liabilities in the normal 
course of business. The accompanying financial statements do not include any 
adjustments relating to the recoverability and classification of recorded 
asset amounts or the amounts and classification of liabilities that might be 
necessary should the Company be unable to continue as a going concern. See 
further discussion at "Liquidity and Capital Resources."

RESULTS OF OPERATIONS

REVENUES

     For the quarter ended March 31, 1998, net sales increased to $1,949,542 
from $567,951 for the quarter ended March 31, 1997.  Revenues consisted 
primarily of gross sales of TN grade ITO coated glass.  The increase in 
revenue is due to a combination of an 80 percent increase in unit sales and a 
per unit selling price increase due to a change in customer mix. During the 
first quarter of 1997, the Company's principal customer accounted for 93 
percent of the Company's revenues and was supplying the raw glass, paying 
only for the coating applied by the Company.  In the first quarter of 1998, 
this customer accounted for 33 percent of the Company's revenues. Two other 
customers who accounted for 34 percent and 27 percent, respectively, of the 
Company's revenues, did not supply their own glass and prices charged these 
customers were therefore higher. The increase in unit sales is due primarily 
to a 50 percent increase in production output from the Company's P-1 
production line and in part to the Company's P-2 production line, which began 
operating at approximately 30 percent capacity in March 1998.

     The Company expects the market price for TN grade ITO coated glass will 
remain stable for the foreseeable future. The Company expects to expand its 
productive capacity in 1998 with the completion of its P-3 production line, 
and is actively pursuing additional selling agents and new customers to 
obtain orders to fill this capacity once the line becomes operational.  Based 
on recent discussions with its Asian selling agents and current customers, 
however, management expects a decrease in revenues during the second quarter 
of 1998 compared to the first quarter of 1998 due to a slowdown in deliveries 
to its current customers. Based on these discussions, management believes 
this slowdown is temporary and expects deliveries to existing customers to 
resume their previous levels in the third quarter of 1998. In addition, 
management anticipates further growth in revenue from the sale of ITO coated 
glass in the second half of 1998 following the addition of productive 
capacity.

GROSS PROFIT (LOSS)

     Gross profit was $281,191 for the quarter ended March 31, 1998, compared 
to gross loss of $349,781 for the quarter ended March 31, 1997.  The 
improvement in margins was due primarily to the change in customer mix 
discussed above, as the Company realized profit on the cost of the glass sold 
as well as the cost of the coating. In addition, increased production levels 
in 1998 resulted in manufacturing efficiencies which reduced per unit coating 
costs by approximately 7 percent.  Cost of sales consists of substrate costs, 
target material costs, labor and overhead related to the Company's 
manufacturing operations. 

PROCESS AND PRODUCT DEVELOPMENT

     Process and product development and engineering expenses increased to 
$303,891 in the first quarter of 1998 from $147,725 in the first quarter of 
1997. These expenses consist of personnel costs, consulting, testing, 
supplies, facilities and depreciation expenses. The increase in 1998 was due 
primarily to increased personnel and facilities expenses incurred while the 
Company undertook the installation and manufacturing process development on 
its P-2 line. During the first quarter of 1997, certain of the indirect costs 
associated with such equipment were capitalized as a cost of equipment being 
manufactured for sale. During the second quarter of 1997, the equipment sale 
contract was cancelled, and the P-2 line was installed in the Company's 
facility. Costs incurred during 1998 related to the installation and 
manufacturing process development were expensed. The Company anticipates that 
product and process development and


                                       9

<PAGE>

engineering expenses will continue at approximately current levels in the 
future as the Company adds productive capacity and develops its manufacturing 
processes for new equipment and new products.

GENERAL AND ADMINISTRATIVE EXPENSES

     General and administrative expenses increased to $492,192 for the 
quarter ended March 31, 1998 from $276,618 for the quarter ended March 31, 
1997.  These expenses consist primarily of compensation expenses for 
administration, finance, and general management personnel, as well as office 
supplies, depreciation, bad debt and professional fees.  The increase is 
primarily a result of increased professional fees related to various legal 
matters in which the Company is involved. Most of these issues have been 
settled, although some only tentatively, and the Company expects future legal 
fees to be less than they were during the first quarter of 1998. See further 
discussion these matters in Part II, Item 1. Legal Proceedings.

SELLING AND MARKETING

     Selling and marketing expenses decreased to $102,654 for the quarter 
ended March 31, 1998 from $156,567 for the quarter ended March 31, 1997.  
These expenses consisted principally of compensation costs for sales 
personnel, commissions, travel expenses, trade show expenses, and freight out 
costs.  The change is due to decreases in salaries, trade shows and 
consulting fees, offset partially by increases in sales commissions to 
independent sales agents. Because sales commissions are the most significant 
component of this category, the Company expects selling expenses to increase 
as revenues increase during the remainder of 1998. The Company also plans to 
increase staffing in its sales and marketing department later in 1998 to 
better analyze the market demand for the various new products it is planning 
to introduce in the future.

OTHER NONRECURRING CHARGES

     In the fourth quarter of 1996, the Company's Chinese joint venture 
partner notified the Company of its intention to cancel the joint venture 
agreement and a related equipment purchase contract with the Company.  In 
connection with the cancellation of the equipment purchase contract, the 
Company determined that certain equipment which was to have been sold to the 
joint venture and equipment that was under development for the Company's use 
was no longer economically feasible or did not fit the Company's current 
manufacturing needs.  This equipment, which the Company determined had no 
foreseeable future value, was deemed to be impaired and costs of $110,788 
relating to this equipment that were incurred during the quarter ended March 
31, 1997 were written off.

     In addition, the Company determined that as a result of refocusing its 
operations, a facility it had been leasing was no longer necessary.  
Leasehold improvements of $34,270 were written off in connection with the 
termination of the lease agreement.  Equipment which was determined to have 
future value to the Company at March 31, 1997 has been written down to its 
fair value, resulting in an impairment charge of $53,652.

 NET INTEREST EXPENSE

      For the quarter ended March 31, 1998, the Company had net interest 
expense of $19,904 compared to net interest income of $1,938 for the quarter 
ended March 31, 1997. The increase in net expense is due largely to the 
interest the Company is incurring on borrowings under the working capital 
line of credit which the Company obtained in December 1997. Interest on long 
term debt being used to finance capital expansion is capitalized into 
construction in progress. The Company anticipates that net interest expense 
will increase in the future as long-term borrowings increase and as 
construction projects become completed and such interest amounts can no 
longer be capitalized.

LITIGATION SETTLEMENT EXPENSE

  In May of 1997 two separate lawsuits were commenced against the Company, 
certain officers and directors of the Company, and the Company's former 
president. These lawsuits were filed by certain purchasers of the Company's 
common stock alleging that the Company's actions with respect to the


                                      10

<PAGE>

financial and accounting irregularities announced by the Company in March of 
1997 artificially inflated its stock price between May 29, 1996 and March 24, 
1997. The plaintiffs in these actions are seeking class certification. Both 
suits were filed in the United States District Court for the District of 
Minnesota. In July 1997, the court consolidated these lawsuits into a single 
action captioned IN RE PHOTRAN CORPORATION SECURITIES LITIGATION. 

  In April 1998, all parties to the lawsuit participated in a mediation, and 
a tentative settlement was reached, subject to approval by the court. Under 
the terms of this tentative settlement, the Company has agreed to pay $50,000 
in cash, issue five-year warrants valued at up to $500,000 (based on a 
Black-Scholes valuation) to purchase common stock of the Company for $4.00 
per share, and issue shares of common stock worth $1,725,000 less the value 
of shares of the Company's stock being contributed by another defendant. The 
Company's estimated liability under this settlement, based on the market 
price of the Company's common stock as of the date of the mediation, is 
$2,050,000. This estimate is subject to change based on fluctuations in the 
market price of the Company's common stock between the date of the tentative 
settlement and final approval by the court.  The settlement is also 
contingent upon the Company's common stock becoming listed on a stock 
exchange and the registration of the common stock and the common stock 
issuable upon exercise of the warrants within a six-month period following 
the date of the tentative settlement. 

  In connection with the coating equipment that the Company was building for 
sale to its former Chinese joint venture, the Company entered into a contract 
with a third party to design and build power supplies to be sold under the 
equipment contract, as well as for the Company's own use. The Company 
terminated the contract in March 1997. In June 1997, the third party formally 
brought an action against the Company in Dakota County District Court. The 
third party's demand for damages was $1,300,000. Subsequent to March 31, 
1998, the Company reached a settlement with the vendor whereby the Company 
will give the vendor cash and equipment in exchange for a promissory note 
payable to the Company. The impact of this settlement on the quarter ended 
March 31, 1998 was a charge of $50,000, which has been recorded as litigation 
settlement expense.


NET OPERATING LOSS CARRYFORWARDS

      In accordance with Section 382 of the Internal Revenue Code of 1986, as 
amended (the Code), a change in ownership of greater than 50 percent of the 
Company within a three year period results in an annual limitation on the 
Company's ability to utilize its net operating loss (NOL) carryforwards which 
accrued during the tax periods prior to the change in ownership. As of 
December 31, 1997, the Company had an NOL carryforward of approximately 
$11,900,000 which expires in 2006 through 2012. Due to certain ownership 
changes which occurred during the year ended December 31, 1993, the NOL 
carryforwards of $700,000 incurred through February 1993, which can be 
utilized by the Company on an annual basis, are limited to approximately 
$50,000. The annual limitation may be increased for any built-in gains 
recognized within five years of the date of the ownership change. Utilization 
of the approximately $11,200,000 of NOL carryforwards incurred after February 
1993 is not limited under Section 382 of the Code. However, the Company's 
ability to use its NOL carryforwards may be further limited by subsequent 
issuances of common stock.


LIQUIDITY AND CAPITAL RESOURCES

   The Company has incurred cumulative losses aggregating $17,461,427 since 
its inception, and incurred negative cash flows from operating activities of 
$1,118,182 for the quarter ended March 31, 1998. In addition, at March 31, 
1998, the Company had a working capital deficiency of $6,568,269. These 
factors, among others, indicate the Company may be unable to continue as a 
going concern for a reasonable period of time. The financial statements do 
not include any adjustments relating to the recoverability and classification 
of recorded asset amounts or the amounts and classification of liabilities 
that might be necessary should the Company be unable to continue as a going 
concern. 

   At March 31, 1998, the Company was not in compliance with the terms of two 
lease agreements and has been unable to cure or obtain waivers for the 
defaults. The Company has not yet resolved the defaults


                                      11

<PAGE>

on the lease transactions. Under the terms of the leases, in the event of a 
default, the Company can be required to immediately pay all future lease 
payments under the lease. During the first quarter of 1998, the lessor 
demanded payment of such amounts and requested the trustee holding the 
$2,250,000 in marketable securities which had been held as a compensating 
balance to liquidate the account and forward the proceeds to the lessor in 
partial payment of amounts owed by the Company. The Company is attempting to 
negotiate a settlement of these lease obligations at amounts less than the 
recorded amounts. Settlement of the lease defaults will require new 
financing. The Company is in discussions with prospective lenders to provide 
the new credit facility to fund the settlement of the defaulted lease 
obligations. Management expects to complete the settlement negotiations and 
obtain new financing arrangements during the second quarter of 1998. However, 
no assurance can be given that management will be able to negotiate an 
acceptable settlement or, if the Company is successful in negotiating an 
acceptable settlement, that the financing necessary to extinguish the 
obligations will be available, or be available on terms acceptable to the 
Company. 

   Management is continuing its efforts to obtain additional funds so the 
Company can meet its obligations and sustain its operations. As of March 31, 
1998, the Company's principal sources of liquidity included cash and cash 
equivalents of $41,531 and net accounts receivable of $589,118, as well as an 
$833,000 transaction-specific working capital line of credit against which 
there were borrowings of $561,490 outstanding as of March 31, 1998.  
Subsequent to March 31, 1998, the Company received advances totaling 
approximately $2,300,000 from a $3,500,000 first quarter 1998 private debt 
placement (see below). These advances were used primarily to fund the 
$1,500,000 settlement with the Company's former Chinese joint venture 
partner. The Company believes that its existing sources of liquidity and 
anticipated funds from operations, combined with the remaining $500,000 net 
proceeds to be received from the private debt placement, will be insufficient 
to satisfy the Company's projected working capital and capital expansion 
requirements for 1998, and the Company will need to seek additional debt or 
equity financing. The Company will also require additional debt or equity 
financing to resolve the defaults on certain of its leases. There can be no 
assurance that the necessary financing will be available or be available on 
terms acceptable to the Company. 

  The net cash used in operating activities for quarter ended March 31, 1998 
was $1,118,182 due principally to the net loss for the period which was 
partially offset by non-cash charges for depreciation and litigation 
settlement expenses. Increases in accounts receivable and inventory and 
decreases in accounts payable also used approximately $600,000 in cash during 
the first quarter of 1998. The net cash used in operating activities for the 
quarter ended March 31, 1997 was $1,812,211 due principally to the net loss 
for the period which was partially offset by non-cash charges for 
depreciation expense. Expenditures for equipment held for sale and decreases 
in accrued expenses also used approximately $1,000,000 in cash during the 
first quarter of 1997.

      Cash used in investing activities was $305,049 for the quarter ended 
March 31, 1998 compared to $3,053,092 for the quarter ended March 31, 1997.  
In both periods, this cash was used for the purchase of equipment and 
leasehold improvements.  In the quarter ended March 31, 1997, $2,250,000 was 
used to purchase investments in connection with the Company's $4,500,000 
sale-leaseback of the P-3 line.

      Cash provided by financing activities was $1,418,655 during the quarter 
ended March 31, 1998, and consisted primarily of borrowings under the 
Company's working capital line of credit, and receipt of $700,000 of the 
proceeds under a $3,500,000 private debt placement. In February 1998, the 
Company issued a $3,500,000 convertible note in a private financing 
transaction. As of March 31, 1998, $700,000 in proceeds had been received by 
the Company. Additional advances totaling approximately $2,300,000 were 
received subsequent to March 31, 1998, and were used primarily to fund the 
$1,500,000 settlement with the Company's former Chinese joint venture 
partner. The remaining $500,000 will be advanced by the lender as needed by 
the Company to sustain its operations and to complete the construction and 
installation of the Company's P-2 and P-3 lines. The note bears interest at 
10 percent per annum and matures in August 1999. All principal and accrued 
interest are payable at maturity, but may be prepaid at any time without 
penalty. The note and all accrued interest are convertible into shares of 
common stock of the Company at the option of the lender at any time up to 30 
days following maturity, at a rate of $4.00 per share. The note is secured by 
an interest in substantially all of the fixed assets of the Company, except 
the P-3 production line which is the subject of a sale-leaseback transaction. 
In connection with this transaction, the Company


                                      12

<PAGE>

issued to the lender five-year warrants which vest in proportion to the funds 
advanced to purchase a total of 1,225,000 shares of common stock of the 
Company at $4.00 per share.

   Cash provided by financing activities of $4,446,175 for quarter ended 
March 31, 1997 consisted primarily of $4,500,000 in proceeds from the 
Company's sale-leaseback of the P-3 line.  Under the terms of the agreement, 
the Company received proceeds of $4,500,000 of which $2,250,000 was 
restricted and $2,250,000 was available to the Company. 


OUTLOOK

  During 1997 the Company installed a new management team consisting of its 
new President and new Vice Presidents for Finance, Technology, and 
Manufacturing.  The new management team, together with the Company's Board of 
Directors, has taken several steps to refocus the Company's efforts. The 
Company terminated several engineering projects that did not directly relate 
to the installation of additional coating equipment at the Company's 
facilities. In an effort to focus all of the Company's personnel on 
manufacturing activities and the development and refinement of core 
deposition technologies, in March of 1997 the Company also terminated 21 
employees, and reassigned several others. In addition, restructuring of 
manufacturing shifts and process modifications made to the P-1 line have 
resulted in a significant increase in production output. Moreover, the 
Company has expanded its customer base and reduced its dependence on a single 
customer. The Company's customer base remains limited, however, and 
management is aggressively pursuing additional customers and new product 
lines to reduce its exposure to fluctuations in the demand from any one 
customer or product.

     In 1997 the Company's management and board spent a significant portion 
of its time and efforts investigating financial and accounting irregularities 
allegedly perpetrated by its former president, restating its financial 
statements, and addressing matters relevant to the joint venture arbitration, 
the SEC investigation, the securities class action litigation, and the 
litigation with its former president.  The Company has completed the very 
detailed and exhaustive investigation and previously restated its financial 
statements to reflect the results of the investigation.  In addition, the 
Company has reached a favorable settlement with its former joint venture 
partner and obtained the resources to fund that settlement.  In 1998, the 
Company reached tentative settlements with the plaintiffs in the other 
litigation matters (see Part II, Item 1 - Legal Proceedings). However, it is 
possible that Company management may need to continue to devote time and 
resources to obtain the final resolution of such legal matters.  

    Based on discussions with customers, independent sales representatives 
and glass suppliers, the Company believes that the strong demand for its ITO 
coated glass will continue in 1998.  The Company has experienced some delays 
in delivery schedules at the request of its customers during the second 
quarter, which has negatively impacted the Company's cash flows in the short 
term. Based on discussions with its customers, the Company believes this 
slowdown is short-term, and that delivery schedules will resume their 
previous levels in the third quarter.  The Company has made some cutbacks in 
its production staff in an attempt to minimize the impact of the short-term 
slowdown, but has determined that the Company will need additional financing 
to maintain its timeline for the completion of the P-3 production line. The 
Company is currently pursuing such financing with potential investors, but 
there can be no assurance that such financing will be available or be 
available on terms acceptable to the Company. The Company also is continuing 
to work on the development of additional products for introduction in 1998, 
however, management expects that TN grade ITO coated glass sales will 
continue to generate the majority of the Company's revenues in 1998.


OTHER FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS

       The Company's future operating results may fluctuate significantly due 
to factors such as the timing of new product announcements and introductions 
by the Company, its major customer and its competitors, market acceptance of 
new or enhanced versions of the Company's products, changes in the product or 
customer mix, changes in the level of operating expenses, inventory 
obsolescence and asset impairments, competitive pricing pressures, the gain 
or loss of significant customers, increased product and process development 
costs associated with new product introductions, the timely completion of 
construction and


                                      13

<PAGE>

installation of new manufacturing equipment, the impact of pending litigation 
and general economic conditions.  All of the above factors are difficult for 
the Company to forecast, and these and other factors may materially adversely 
affect the Company's business and operating results for one quarter or a 
series of quarters. The Company's current expense levels are based in part on 
its expectations regarding future revenues and in the short term are fixed to 
a large extent.  Therefore, the Company may be unable to adjust spending in a 
timely manner to compensate for any unexpected revenue shortfall. 
Accordingly, any significant decline in demand relative to the Company's 
expectations or any material delay of customer orders would have a material 
adverse effect on the Company's financial condition and operating results.

FORWARD LOOKING STATEMENTS

THIS FORM 10-QSB CONTAINS FORWARD-LOOKING STATEMENTS AS DEFINED IN SECTION 
21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.  THESE 
FORWARD-LOOKING STATEMENTS INVOLVE A NUMBER OF RISKS AND UNCERTAINTIES, 
INCLUDING DEMAND FROM MAJOR CUSTOMERS, EFFECTS OF COMPETITION, CHANGES IN THE 
PRODUCT OR CUSTOMER MIX OR REVENUES AND IN THE LEVEL OF OPERATING EXPENSES, 
RAPIDLY CHANGING TECHNOLOGIES AND THE COMPANY'S ABILITY TO RESPOND THERETO, 
THE IMPACT OF COMPETITIVE PRODUCTS AND PRICING, THE TIMELY COMPLETION OF 
CONSTRUCTION AND INSTALLATION, AND THE ACTUAL PERFORMANCE OF NEW 
MANUFACTURING EQUIPMENT, THE TIMELY DEVELOPMENT AND ACCEPTANCE OF NEW 
PRODUCTS, THE IMPACT OF PENDING AND THREATENED LITIGATION, INADEQUATE WORKING 
CAPITAL, CURRENT DEFAULT UNDER CAPITAL LEASES AND OTHER FACTORS DISCLOSED 
THROUGHOUT THIS FORM 10-QSB.  THE ACTUAL RESULTS THAT THE COMPANY ACHIEVES 
MAY DIFFER MATERIALLY FROM ANY FORWARD-LOOKING STATEMENTS DUE TO SUCH RISKS 
AND UNCERTAINTIES.  THE COMPANY UNDERTAKES NO OBLIGATION TO REVISE ANY 
FORWARD-LOOKING STATEMENTS IN ORDER TO REFLECT EVENTS OR CIRCUMSTANCES THAT 
MAY ARISE AFTER THE DATE OF THIS REPORT.  READERS ARE URGED TO CAREFULLY 
REVIEW AND CONSIDER THE VARIOUS DISCLOSURES MADE BY THE COMPANY IN THIS 
REPORT, INCLUDING THE DISCUSSION SET FORTH IN THE SECTION TITLED 
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF 
OPERATIONS -- OTHER FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS," AND 
IN THE COMPANY'S OTHER REGISTRATION STATEMENTS AND REPORTS FILED WITH THE 
SECURITIES AND EXCHANGE COMMISSION FROM TIME TO TIME THAT ATTEMPT TO ADVISE 
INTERESTED PARTIES OF THE RISKS AND FACTORS THAT MAY AFFECT THE COMPANY'S 
BUSINESS AND RESULTS OF OPERATIONS.





                                      14

<PAGE>

PART II.  OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS

   During the quarter ended December 31, 1996, the Company was informed by 
its Chinese joint venture partner, Shenzhen WABO Group Company Limited 
(WABO), of their intention to dissolve the joint venture agreement and cancel 
the related equipment purchase contract. In April 1997, the Company received 
notice that arbitration proceedings have been commenced against it by WABO in 
Shenzhen, China claiming approximately $4.4 million plus legal fees and 
costs.  The Company and WABO finalized a negotiated settlement in January 
1998 which was approved by the Chinese arbitration board in February 1998.  
Under the terms of the settlement, the Company paid WABO $1,500,000 in cash 
and issued 200,000 shares of common stock to settle all claims in connection 
with the joint venture contract, the equipment contract, and related 
agreements.  The total value of this settlement is approximately $2,425,000 
based on the market value of the Company's common stock as of January 13, 
1998. The cash and common stock were delivered to WABO subsequent to March 
31, 1998.

   In connection with the coating equipment that the Company was building for 
sale to its former Chinese joint venture, the Company entered into a contract 
with a third party to design and build power supplies to be sold under the 
equipment contract, as well as for the Company's own use. The Company 
terminated the contract in March 1997. In June 1997, the third party formally 
brought an action against the Company in Dakota County District Court. The 
third party's demand for damages was $1,300,000. Subsequent to March 31, 
1998, the Company reached a settlement with the vendor whereby the Company 
will provide the vendor cash and equipment in exchange for a promissory note 
payable to the Company. The impact of this settlement on the quarter ended 
March 31, 1998 was a charge of $50,000, which has been recorded as litigation 
settlement expense.

   In April 1997, the Securities and Exchange Commission (SEC) informed the 
Company that it was conducting an investigation with respect to certain 
financial and accounting irregularities announced by the Company in March 
1997 relating to fiscal 1996. The Company has submitted documents to the SEC 
pursuant to requests from the SEC as part of the investigation. The SEC has 
also interviewed current and former employees of the Company. In the fourth 
quarter of 1997, the Company was informed by the SEC that is has expanded its 
investigation to include certain accounting and financial reporting 
irregularities prior to 1996 which the Company announced in October 1997. The 
investigation is in the preliminary stages and it is not possible to 
determine what impact, if any, the investigation will have on the Company's 
financial condition or results of operations. 

   In May of 1997 two separate lawsuits were commenced against the Company, 
certain officers and directors of the Company, and the Company's former 
president. These lawsuits were filed by certain purchasers of the Company's 
common stock alleging that the Company's actions with respect to the 
financial and accounting irregularities announced by the Company in March of 
1997 artificially inflated its stock price between May 29, 1996 and March 24, 
1997. The plaintiffs in these actions are seeking class certification. Both 
suits were filed in the United States District Court for the District of 
Minnesota. In July 1997, the court consolidated these lawsuits into a single 
action captioned IN RE PHOTRAN CORPORATION SECURITIES LITIGATION. 

   In April 1998, all parties to the lawsuit participated in a mediation, and 
a tentative settlement was reached, subject to approval by the court. Under 
the terms of this tentative settlement, the Company  has agreed to pay 
$50,000 in cash, issue five-year warrants valued at up to $500,000 to 
purchase common stock of the Company for $4.00 per share, and issue shares of 
common stock worth $1,725,000 less the value of shares of the Company's stock 
being contributed by another defendant. The Company's estimated liability 
under this settlement, based on the market price of the Company's common 
stock as of the date of the mediation, is $2,050,000. This estimate is 
subject to change based on fluctuations in the market price of the Company's 
common stock between now and final approval by the court. The settlement is 
also contingent upon the Company's common stock becoming listed on a stock 
exchange and the registration of the common stock and the common stock 
issuable upon exercise of the warrants within a six-month period following 
the date of the tentative settlement. 


                                      15

<PAGE>

   In August 1997, the Company was served with a lawsuit by its former 
president, David E. Stevenson, demanding the return of certain stock 
certificates registered in his name which are currently in the possession of 
the Company. In October 1997, the Company filed a counterclaim alleging that 
Stevenson had committed fraud and had damaged the Company and that his shares 
should be awarded to the Company. The Company further alleged that Stevenson 
did not provide adequate consideration for such shares and that therefore 
they are not properly issued. In connection with the tentative settlement 
reached in the shareholder class action lawsuit discussed above, the Company 
and Mr. Stevenson have agreed to dismiss all claims against each other upon 
the closing of the settlement of the shareholder case.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

     In October of 1997, the Company became unable to continue making 
principal and interest payments on the $4,500,000 lease financing entered 
into in the first quarter of 1997.  The lender has exercised its rights under 
the terms of the lease and accelerated payment of all remaining lease 
payments. The Company is currently in default on this lease in the amount of 
approximately $3,100,000.

ITEM 6.

a.   Exhibits

<TABLE>
     <S>   <C>
     4.14  Amendment of Loan Agreement dated February 9, 1998 between Photran 
           Corporation and Steven King.
     4.15  Form of Stock Purchase Warrant for 100,000 shares of Common Stock, 
           dated February 9, 1998, granted to Steven King. Identical warrants 
           to purchase 110,000 shares of common stock at $4.00 per share were 
           also granted to Mr. King.
     4.16  Agreement for Purchase and Sale dated February 9, 1998, between 
           Photran Corporation and St. James Capital Partners, L.P.
     4.17  Convertible Promissory Note dated February 9, 1998, between 
           Photran Corporation and St. James Capital Partners, L.P.
     4.18  Form of Warrant for Purchase of 1,225,000 Shares of Common Stock, 
           dated February 9, 1998, granted to St. James Capital Partners, L.P.
     4.19  Registration Rights Agreement between Photran Corporation and St. 
           James Capital Partners, L.P. dated February 9, 1998.
     27    Financial Data Schedule
</TABLE>

b.   Reports on Form 8-K

          No reports on Form 8-K were filed during the quarter ended March 
     31, 1998.





                                      16

<PAGE>

SIGNATURES

Pursuant to the requirements 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.




                                        /s/ Paul T. Fink
Dated May 15, 1998                  ____________________________
                                        Paul T. Fink, 
                                        President, Chief Executive Officer

                                        /s/ Judith E. Tucker
                                     ____________________________
                                        Judith E. Tucker,
                                        Vice President for Finance and 
                                        Administration, Chief Financial Officer





                                      17

<PAGE>


                                EXHIBIT INDEX

<TABLE>
<CAPTION>
   EXHIBIT                                                                          PAGE
   NUMBER                                                                          NUMBER
   <C>      <S>                                                                    <C>
    4.14    Amendment of Loan Agreement dated February 9, 1998 between Photran
            Corporation and Steven King.                                                19
    4.15    Form of Stock Purchase Warrant for 100,000 shares of Common Stock,
            dated February 9, 1998, granted to Steven King.                             21
    4.16    Agreement for Purchase and Sale dated February 9, 1998, between
            Photran Corporation and St. James Capital Partners, L.P.                    28
    4.17    Convertible Promissory Note dated February 9, 1998, between Photran
            Corporation and St. James Capital Partners, L.P.                            43
    4.18    Form of Warrant for Purchase of 1,225,000 Shares of Common Stock,
            dated February 9, 1998, granted to St. James Capital Partners, L.P.         62
    4.19    Registration Rights Agreement between Photran Corporation and St.
            James Capital Partners, L.P. dated February 9, 1998.                        76
    27      Financial Data Schedule

</TABLE>


                                      18