<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB/A

               [ X ]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                      For the Year Ended December 31, 1999

              [ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

          For the Transition Period From ____________ to _____________

                           Commission File No. 0-23553

                           PHOTOGEN TECHNOLOGIES, INC.
                 (Name of Small Business Issuer in its Charter)

                                     NEVADA
                         (State or other jurisdiction of
                         incorporation or organization)

                                   36-4010347
                                (I.R.S. Employer
                               Identification No.)

                         7327 OAK RIDGE HIGHWAY, SUITE B
                               KNOXVILLE, TN 37931
               (Address of principal executive offices) (Zip Code)

                                 (865) 769-4011
                (Issuer's telephone number, including area code)

           Securities registered under Section 12(b) of the Act: None

              Securities registered under Section 12(g) of the Act:

                     Common Stock, par value $.001 per share

Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 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 / /

Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. /X/

Issuer's revenues for its most recent fiscal year:  $179,795

The approximate aggregate market value of voting stock held by non-affiliates
computed as of March 7, 2000, based upon the last sale price of the Common
Stock reported on the Nasdaq SmallCap Market was approximately $89,698,631.
For purposes of this calculation only, the registrant has assumed that its
directors and executive officers, and any person who has filed a Schedule
13D, are affiliates.

The number of shares outstanding of each of the registrant's classes of
common stock, as of March 7, 2000: 37,383,386

Documents Incorporated By Reference:  Portions of the registrant's definitive
proxy statement for its 2000 annual meeting of stockholders are incorporated
by reference into Part III.

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                                     PART I.

         Photogen Technologies, Inc. and its wholly-owned subsidiary
Photogen, Inc. and its 80.1% owned subsidiary Sentigen Ltd., are collectively
referred to as "Photogen," the "Company," "we," or "us." Portions of the
discussion in this Form 10-KSB contain forward-looking statements and are
subject to the Risk Factors described below in Item 1.

ITEM 1.           DESCRIPTION OF BUSINESS.

INTRODUCTION

         Photogen Technologies, Inc. is an emerging development-stage
biotechnology company focused on developing minimally invasive products for the
treatment and diagnosis of disease. These products would be based on several
related families of core technologies, which include multi-photon excitation,
certain photoactive agents or diagnostic agents, and other related technologies.

         We have discovered new methods and apparatus for using energy from
lasers, X-rays or other sources to selectively activate photoactive agents
within tissue sufficient to produce a range of beneficial therapeutic and
diagnostic outcomes. These discoveries include methods, materials and devices
that are used to produce light or other energy and photoactive agents for the
purpose of destroying diseased cells, removing tissue or identifying and
diagnosing disease. Our core technologies are proprietary, and are either
protected by issued U.S. and foreign patents or are subject to patent
applications pending in the U.S. and other foreign jurisdictions.

         An important example of using energy to activate photoactive agents is
photodynamic therapy ("PDT"). Photodynamic therapy is the treatment of diseased
tissue by combining a photoactive agent with the appropriate activating energy.
Photo-diagnosis involves a similar process, in which the outcome is a diagnostic
signal or image of tissue. Photoactive or diagnostic agents are drugs, or
compounds naturally present in tissue, that react with energy to create a
desired therapeutic reaction or diagnostic signal.

         Our technological capabilities should allow us to pursue a development
strategy different from other companies in our field. We expect our technologies
to allow:

                  -        Use of a number of different photoactive agents, even
                           those that may not be suitable for use by our
                           competition.

                  -        Use of a wider variety of energy sources, such as
                           X-ray, green light and near infrared light, rather
                           than being limited to red or blue light.

                  -        Use of multiple drug delivery methods including IV
                           injection, direct tumoral injection, oral
                           administration or topical application.

         Our approach is not limited to the use of one light source or one line
of drugs; instead, we are actively exploring many families of photoactive drugs
and a variety of light sources, including X-rays, visible green light and
ultrafast pulsed and near infrared lasers. We believe that this broad-based
approach should yield non-invasive or minimally invasive treatments and
diagnostics for a wide variety of conditions deep within the body, as well as on
or near the surface. This strategy led us to work toward

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therapeutic solutions designed to accommodate the specific characteristics of
the disease, the needs of patients, and physicians' preferred methods of
application.

         Our platform of proposed products allows us to select among multiple
drug and energy combinations in order to optimize treatment efficacy and safety.
We believe that tailoring the technology to fit the problem and the market
should result in safer, more effective and more widely accepted therapeutic and
diagnostic products. Our proposed products have the potential to replace
numerous surgical and similar invasive treatments and diagnostics, reduce side
effects (including those resulting from chemotherapy), improve treatment
efficacy, and lower the overall cost of care in markets such as oncology,
dermatology and ophthalmology.

         To date, we have concentrated our development activity on three
product applications: psoriasis, lymphography and prostate cancer. We
selected these applications because of our belief that each represents
promising opportunities, competitive treatments are less effective, and each
application may lead to follow-on applications. We expect this approach to
allow us to leverage our technology and resources more effectively and offer
shorter time frames to bring these and other potential products into the
marketplace. For example, our work in psoriasis may lead to techniques for
treatments for conditions requiring very shallow light penetration.
Similarly, our prostate cancer research could lead to treatments for breast,
lung, head and neck cancer.

         We have no therapeutic or diagnostic products or operating revenues at
this time. However, our business model for producing and selling our proposed
products accounts for the start-up nature of our company, the high capital needs
of new drug development and the existing resources available for both
manufacturing and product distribution. Our goal is to leverage our cash,
technology and human resources in a manner that accelerates product development
and sales revenues, and minimizes equity dilution.

         We plan to sell our proposed products through a variety of means
determined by the specific market characteristics. We anticipate using a variety
of relationships that range from outright licenses to distribution and supply
relationships. The specific method chosen will be consistent with our desire to
leverage our internal capabilities and the goal of generating early product
revenues.

         We have fifteen employees, fourteen of whom are full-time and one who
is part-time. A majority of our employees hold Ph.D.'s and other advanced
degrees. Our scientific research team is located at our corporate headquarters
in Knoxville, Tennessee (nine employees), with the clinical development team
working in Westborough, Massachusetts (six employees). Our core team of
scientists includes specialists in molecular biology, non-linear laser physics,
interventional radiology, spectroscopy, bioengineering and photochemistry. We
recently hired additional personnel with expertise in clinical development,
clinical trial design, regulatory approval processes and the use of imaging
technologies in clinical trials.

         Photogen Technologies, Inc. is a Nevada corporation that is the
successor by merger to Bemax Corporation, a California corporation incorporated
in 1984 to develop and market dot matrix computer printer products. Bemax
Corporation ceased operations in 1988. In 1994, Theodore Tannebaum, Robert J.
Weinstein, M.D. and another investor acquired control of Bemax Corporation; and,
in March 1995, Bemax merged into its wholly-owned Nevada subsidiary named M T
Financial Group, Inc. (organized in 1994) ("M T Financial"). M T Financial was
the surviving corporation and Bemax Corporation thereby

                                       -2-


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changed its state of incorporation from California to Nevada. From 1988 through
May 1997, we and our predecessors had no business operations and our activities
were limited to evaluating possible acquisition candidates. In May 1997, M T
Financial acquired Photogen, Inc. through a merger. As a result, Photogen, Inc.
became a wholly-owned subsidiary of M T Financial, M T Financial changed its
name to Photogen Technologies, Inc. and Mr. Tannebaum, Dr. Weinstein and certain
other persons invested additional funds in the Company.

CORE TECHNOLOGIES

         Over the last two years, as a result of our research into new
technologies, and acquisitions or licensing from other third parties, we have
developed a platform of core technologies which we believe will support multiple
products and applications. Our technology portfolio now includes the following:

         MULTI-PHOTON EXCITATION

         We have developed a method of activating photosensitive drugs and other
compounds using an ultrafast, pulsed laser based on our proprietary simultaneous
two-photon and multi-photon excitation technologies. (We refer to simultaneous
two-photon and multi-photon excitation collectively as "multi-photon
excitation" to distinguish them from traditional single-photon activation.) Our
simultaneous multi-photon excitation technologies are covered by three issued
U.S. patents (two for therapy and another for diagnostics) and are subject to
additional pending patent applications in the U.S. and other foreign
jurisdictions. This technology provides us with the following capabilities:

                  -        Spatial control of an activation area to more
                           selectively deliver a therapeutic effect:
                           Multi-photon activation limits the field of
                           activation to the focus of the laser beam. This focus
                           can be made exceedingly small, providing fine control
                           over where the photodynamic effect is produced.

                  -        Use of many photoactive agents: Our multi-photon
                           technology uses a broader range of energy levels,
                           which we may use to activate photoactive agents that
                           otherwise could not be used, including those of our
                           competitors and even those that are not compatible
                           with our competitors' activation systems.

                  -        Deeper penetration: Multi-photon activation uses
                           longer wavelength light that delivers activating
                           energy more deeply within tissue.

                  -        Delivery of large amounts of energy while minimizing
                           damaging photothermal effects.

         PHOTOCHEMISTRY

         We have identified a promising compound we call PH-10 that offers a
wide variety of uses. We discovered that PH-10 selectively accumulates in
diseased tissue (such as tumors), remains in diseased tissue for many days, and
when activated with low-dosage X-ray, or with green light or ultrafast, pulsed,
near infrared light, reacts to effectively destroy those diseased cells. Our
preclinical animal tests to date lead us to believe that PH-10, when combined
with particular light or radiation sources, has the potential to treat cancer
and certain dermatological conditions virtually anywhere in the body. For
example, when

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PH-10 is used with X-rays it enhances the killing effect of the X-rays, allowing
the destruction of cancerous tissue deep within the body (using markedly lower
levels of X-ray energy than required in conventional therapy). Treatment at
these reduced energy levels means that the photochemical effect (in this case,
cell destruction) will tend to be limited to the diseased tissue with less
damage to the healthy tissue. This feature alone holds the potential to
significantly improve current methods and apparatus for radiation therapy. We
have patent applications pending for the use of PH-10 in combination with
visible light and with X-ray energy to treat and diagnose diseased tissue (the
diagnostic properties of PH-10 are discussed below).

         PH-10, when used with green light, results in a potential treatment
that is very depth limited. Green light is strongly absorbed by skin and can
only achieve a treatment depth of 3-5 millimeters. Although this might seem like
a shortcoming, this feature is especially important and useful for surface
applications where serious damage can result from deeper treatment. We hope to
exploit this capability in the treatment of psoriasis and other surface
conditions such as actinic keratosis.

         Another exciting property of PH-10 is its relatively long history of
safe use and the FDA's approval of this compound for a prior injectable
application. Commercial use, the absence of any adverse side effects
presently known to us, and the documented safety of the compound means that
we may be able to shorten the initial phases of drug safety testing and move
more quickly to the later stages of conducting human clinical trials. We
believe this will give us the ability to bring new products with multiple
applications based on PH-10 to market faster and at a lower cost than would
ordinarily be possible.

         NON-INVASIVE DIAGNOSTICS

         LYMPHOGRAPHY. Lymphography is a procedure used to determine if a
patient's cancer has spread to the lymph nodes. The presence or absence of
cancer in the sentinel lymph node -- the first lymph node to receive lymphatic
drainage from a tumor -- is an important indication of whether the disease has
spread from the original tumor, the seriousness of the disease, and the
prognosis for successful treatment. Under current treatment protocols, a
malignant node or a node that is suspected of containing cancerous cells must be
surgically removed.

         In 1999, we entered into an exclusive license for a special group of
proprietary contrast materials, including one that has completed Phase I
clinical trials and is ready to begin Phase II/III human clinical trials. These
materials are covered by patent applications filed in the U.S. and elsewhere. We
also acquired patented methods for performing minimally invasive lymphography
using X-ray, computed tomography ("CT") or magnetic resonance
imaging ("MRI").

         The purpose of these technology acquisitions is to develop products
that precisely locate sentinel nodes following injection of a small amount of
our proprietary contrast materials in the vicinity of the tumor. Due to the
particular properties of these materials, they travel through the lymph system
to the lymph nodes most likely to be affected if the cancer has spread. In most
cases, we expect that the image may provide enough information to determine the
position of nodes and the presence of cancer. A further benefit of these
minimally invasive procedures is that they can be used multiple times and
therefore provide a means to monitor the results of cancer treatment and detect
recurrence.

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         MULTI-PHOTON EXCITATION. One of our issued patents on simultaneous
two-photon excitation and a patent application on multi-photon excitation
describes the use of that technology for detecting diseased tissue. A laser
system, coupled with flourescent diagnostic agents targeted to concentrate in
diseased tissue, and signal processing technology described in one of our
patents, has the potential to cause diseased tissue to emit light that can be
converted into images. This could supplement current X-ray, mammography and MRI
techniques to detect suspicious masses.

TARGET THERAPEUTIC AND DIAGNOSTIC APPLICATIONS -- OUR CLINICAL PIPELINE

         We are currently working to develop products incorporating our
technologies in three application areas:

<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------------
CURRENT                 TECHNOLOGY/POTENTIAL         CLINICAL STATUS                 POTENTIAL FOLLOW-ON
INDICATION              PRODUCT                                                      APPLICATION
----------------------  ---------------------------  ------------------------------- ---------------------------------
<S>                        <C>
Psoriasis               PH-10 as a cream or          Clinical pilot study            Actinic keratosis,
                        spray with green light       planned to start second         squamous and basal cell
                                                     quarter 2000                    carcinoma, wound healing
                                                                                     and Barretts esophagus

                        Light source device          Equivalent device
                                                     approved for other
                                                     medical applications

Lymphography            Nanoparticulate              Phase I complete;               Other diagnostic and
                        imaging agent                Phase II planned to start       imaging applications
                                                     fourth quarter 2000 or
                                                     early 2001

Prostate cancer         PH-10 with X-ray             Preclinical expected to         Breast, lung, head and neck
                                                     be completed third              cancer
                                                     quarter 2000 and animal
                                                     study planned to start
                                                     fourth quarter 2000
----------------------------------------------------------------------------------------------------------------------
</TABLE>


         All of the dates listed above for completion of preclinical work, and
for commencement of pilot studies and Phase II human clinical trials, are goals
and projections based upon current objectives and information currently
available to us. Our ability to meet these goals is subject to numerous
contingencies, including the availability of testing facilities, availability of
required materials or equipment, regulatory approvals, insurance, adequate
capital and other factors described in "Risk Factors," below. The various stages
of preclinical testing, pilot studies and human clinical trials are discussed
below at "Government Regulations."

         DERMATOLOGY - PSORIASIS

         Dermatology is a market where we believe our planned products will
offer much improved treatments over those currently available. We believe that
we can create dermatology products that will meet the needs of this often
overlooked market. With human pilot studies for psoriasis scheduled to

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begin in 2000, we believe that we will be able to effectively treat this disease
of the skin without serious side effects. Additionally, we plan to use our
proprietary resources to develop applications in other areas of dermatology,
such as actinic keratosis, hair removal and wound healing.

         Our initial focus in dermatology is on psoriasis. Psoriasis is a common
chronic disorder of the skin characterized by dry scaling patches, for which
current treatments are few and those that are available have potentially serious
side effects. Of the more than seven million people in the United States alone
who suffer from psoriasis (there are estimated to be between 160,000 and 250,000
new psoriasis cases each year in the United States), more than 65% are treated
with topical steroids that can have unpleasant side effects. None of the other
treatments for moderate cases of psoriasis have proven completely effective and
there is no cure for the disease at this time. The 25-30% of patients who suffer
from more severe cases are candidates for PUVA (Psoralen with ultraviolet A
light) and more intensive drug therapies. While PUVA treatment is one of the
more effective treatments, patients undergoing such therapy experience a
significantly increased risk of skin cancer.

         In the treatment we are currently evaluating, PH-10 is applied as a
topical cream to the psoriatic plaque and illuminated with green light. We
believe this treatment process will be superior to other PDT procedures because
our combination of the drug and light source are expected to result in selective
destruction of psoriasis cells with minimal damage to healthy tissue. Other
potential advantages may include that the treatment could be completed in a
small number of patient visits, and with reduced pain and post-treatment
sensitivity to light.

         We have approved a grant to study the effectiveness of activating PH-10
with green light (delivered by a laser) to treat psoriasis. This study is
expected to take place in Denmark on approximately 14 human subjects, beginning
in mid-2000. Given the safety profile of the drug and the history of safe use in
other indications, we anticipate a relatively short pathway from the pilot study
to human clinical trials and eventual FDA approval.

         DIAGNOSTICS - LYMPHOGRAPHY

         The ability to diagnose certain diseases, including cancer, is an area
we believe our technologies could offer improvement. It is generally accepted
that breast cancer and melanoma are spread by way of the lymph system.
Furthermore, effective and successful treatment of these cancers is aided by an
early assessment of the presence or absence of disease in the lymph nodes. In
addition, cancers of the lung, breast, prostate and many other cancers spread
via the local lymph system. Products and procedures have been developed that
enable surgeons to locate the sentinel node(s) (the first node to receive
lymphatic drainage from a tumor), facilitate the excisional biopsy, and perform
a pathological exam on the excised node. This procedure is costly due to the
time it takes to locate the node and have the pathologist analyze a sample. If
the node contains cancer, then surgical removal of all the regional lymph nodes
may be performed. In some of these diseases, nodal diagnosis is not possible
because their location is difficult to access.

         Patients who are thought to have cancer are currently subjected to
injections of blue dye and radioactive particles that track the materials to the
general area of the sentinel node. In the case of breast cancer, conservative
doctors may biopsy and remove 15-30 underarm lymph nodes. Additional treatment
will be required if cancer is discovered. Unfortunately, approximately 80% of
the patients diagnosed with breast cancer or melanoma who undergo these painful
procedures are found to have no

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sign of disease in their nodes. Indeed, doctors are now questioning the safety
of removing the lymph nodes.

         For patients who have been diagnosed with or treated for many types of
cancer, reevaluation of their lymph nodes to determine whether their cancer has
returned would guide therapy for those who need it and provide welcome
reassurance for those who do not. Based on estimates of the number of patients
diagnosed with or recovering from breast or prostate cancer alone, the amount of
procedures conducted annually is potentially in the millions. The lymphography
market is in dire need of a non-invasive, improved procedure that can diagnose
and stage cancer without infringing upon patients' quality of life. Our
procedure and imaging agent could make it possible to diagnose and determine the
extent of the cancer and assess these nodes.

         Preparing to meet this market need, we are in the process of developing
an advanced lymphography technology through a joint venture with affiliates of
Elan Corporation, plc. Sentigen Ltd., the joint venture entity, is working to
develop and commercialize nanoparticulate diagnostic imaging agents for the
detection and treatment of cancer in patients' lymph nodes. Our goal with this
joint venture is to develop a minimally invasive diagnostic imaging procedure
based on CT that would precisely locate the sentinel nodes and provide a means
to determine if cancer was present in those nodes. We anticipate that
nanoparticulate imaging agents will be well suited to enter the lymph system and
flow to the sentinel nodes. A sensitive imaging device, such as a CT device,
scans the nodes to determine the structure of the node and whether cancer is
present. The difference in contrast created by the presence or absence of the
imaging agent serves as the basis to judge presence or absence of disease. We
expect nanoparticulate imaging agents to remain in the node to allow for an
effective imaging procedure with a good safety profile and acceptable clearance
times.

         Data from the American Cancer Society indicates that there are
approximately 660,000 or more new cases of breast, prostate, lung, melanoma,
uterine and head and neck cancer diagnosed annually. Those new cases could be
eligible for a diagnostic test of the type we are working on, based on
applicability to a variety of cancers. The data further indicates that there are
currently in excess of approximately three million patients who already have had
cancer and may be eligible for such a diagnostic test. Because our proposed
procedure will be minimally invasive and with what we believe will be minor side
effects, it could be used as a monitoring diagnostic to help assess treatment
success and to monitor the progression of the disease. This promises to be a
less painful and complicated procedure that could be administered in an
outpatient setting, which thereby may facilitate wider use. In most cases, we
believe the images may provide enough information to determine the advancement
of cancer and potentially may be used to monitor the results of post-cancer
treatment and to detect recurrence.

         We are presently contemplating that Phase II trials to test the imaging
agents will begin in the fourth quarter of 2000 or early 2001 and will be
conducted in two, 60-patient studies intended to confirm the degree and number
of side effects. If the testing in the 120 patients validates Phase II results,
we expect to convert the trials to a pivotal Phase III study. We then anticipate
recruiting approximately 400 patients for the Phase III study.

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         ONCOLOGY

         The development of cancer treatments is another area where we believe
our potential products could offer improvement over currently available
treatments. More than 8.4 million Americans live with cancer and more than one
million new cases of cancer are expected to be diagnosed in 2000. Today's cancer
therapies for deep tissue cancers, such as lung, prostate and breast cancers,
are harsh because they involve chemotherapy, intense radiation, and/or radical
surgeries. These treatments, while strong enough to destroy diseased tissue, may
fail to discriminate between healthy and diseased tissue and can traumatize the
body, leaving the patient weak and suffering from side effects for months and
even years after being treated. Surgical disfigurement, illness, hair loss,
weakness, nausea, burns and follow-on tumors are just a few of the side effects
of conventional cancer therapy.

         We believe our planned products could potentially improve treatment of
a wide variety of cancers using non-invasive or minimally invasive techniques
that may spare the patient additional trauma brought on by side effects. The
challenge in cancer therapy still remains treating the disease without damaging
healthy tissue. Conventional treatments generally do not offer this level of
selectivity. Even many of the new biotechnology products may fall short of the
hoped for selectivity and produce serious side effects.

         It is currently estimated that 70% of newly diagnosed cancers are focal
(they present as a solid tumor still confined to its tissue of origin). We have
demonstrated in mice and rabbits that our photoactive drug, when combined with
low dose radiation in a focal tumor, results in the destruction of tumor cells.
We have shown that the drug PH-10 has a selective affinity for many types of
tumor tissue and that high levels of the drug are selectively retained within
the tumor for days. When tumors in mice were injected with PH-10 and given a low
dose of radiation, we observed a 90% reduction in tumor cells after two days.
Histological analysis showed that when the low-dose treatment was delivered to
cells containing the drug PH-10 there was no significant damage to healthy cells
surrounding the tumor. These results hold the promise of a new, minimally
invasive, radiation-based cancer therapy applicable to many focal tumors without
limitation due to the tumor's location in the body. This potential treatment
could be delivered in an outpatient setting, avoiding the side effects of
traditional therapies and offering the chance to control or possibly eliminate
cancerous tumors.

         Through a research agreement with Tufts University School of Veterinary
Medicine, we are working to develop new cancer treatments using low dose X-rays
to activate PH-10. At Tufts, the team can treat animals with naturally occurring
cancer, which we hope will accelerate product development to benefit both humans
and animals. With more than 179,000 new cases diagnosed each year, we are
initially concentrating on treatments for prostate cancer. We hope our research
findings will lead to development of treatments for cancers of the lung, breast,
head and neck.

RESEARCH PIPELINE

         One of the benefits of our flexible approach and core technologies is
the possibility that research in one application could lead to treatments in
other applications. The following table shows possible follow-on applications
from our current projects and other research projects underway or under
consideration.

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<TABLE>
<CAPTION>


------------------------------------------------------------------------------------------------------------------
MARKET AREA                   FOLLOW-ON                     TECHNOLOGY/POTENTIAL          STATUS
                              APPLICATION                   PRODUCT
------------------------------------------------------------------------------------------------------------------
<S>                           <C>                           <C>                           <C>
DERMATOLOGY                   Actinic keratosis             PH-10 and green light         Ready to begin human
                                                                                          pilot study

                              Squamous and basal            PH-10 and green light         Ready to begin human
                              cell carcinoma                                              pilot study

                              Wound healing                 PH-10 and green light         Ready to begin human
                                                                                          pilot study

                              Hair removal                  Ultrafast, pulsed laser       Ready to begin human
                                                                                          pilot study

                              Cutaneous melanoma            Ultrafast, pulsed laser       Preclinical studies
                                                                                          complete
------------------------------------------------------------------------------------------------------------------
ONCOLOGY                      Barretts esophagus            PH-10 and green light         Ready to begin human
                                                                                          pilot study

                              Ocular melanoma               Ultrafast, pulsed laser       Preclinical studies
                                                                                          ongoing

                              Breast, lung, head and        PH-10 with X-ray              Ready to begin
                              neck cancer                                                 preclinical studies
------------------------------------------------------------------------------------------------------------------
DIAGNOSTICS                   Lymphography                  Other diagnostic and          Research under
                                                            imaging applications          consideration

                              Two-photon                    Signal processing             Ready to license to
                              microscopy                    technologies                  third parties
------------------------------------------------------------------------------------------------------------------
</TABLE>


         ACTINIC KERATOSIS. Actinic keratosis (also called solar keratosis or
senile keratosis) is the most common pre-cancerous skin lesion among
fair-skinned people. In the U.S., it has been estimated that nearly half of the
approximately five million cases of skin cancer initiated as actinic keratosis.
Early stages of this disease have proven responsive to PDT. We are researching
possible use of PH-10 with green light activation for treatment of these early
stages, and for potential treatment of more advanced stages of the disease. We
plan to consider human pilot studies of this therapy depending on the results of
our other dermatological studies.

         SQUAMOUS AND BASAL CELL CARCINOMA. More than one million new cases of
squamous and basal cancer -- common surface cancers that appear on the skin,
lips, inside the mouth, throat or esophagus -- are expected to be diagnosed in
2000 and its occurrence is increasing in the fair-skinned population of

                                       -9-


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the United States, Europe and Australia. Treating basal cell and squamous cell
cancers and other surface cancers poses its own set of problems, with ugly
scarring and recurrence of the cancer if some of the cancerous cells fail to be
removed. We are currently researching use of PH-10 combined with green light
activation for potential treatment of squamous and basal cell cancer. We plan to
consider human pilot studies of this therapy depending on the results of our
other dermatological studies.

         WOUND HEALING. We are researching a technique that would promote the
healing of persistent skin lesions, such as those found in diabetes patients.
This PDT technique would use PH-10 in a cream that becomes activated using green
light. We plan to consider human pilot studies of our technology as a treatment
for wound healing pending the results of our other dermatological studies.

         HAIR REMOVAL. We are investigating the application of long wavelength,
ultrafast, pulsed laser light to remove blond and red hair, using a melanin
precursor present in the hair follicle as the photoactive agent to destroy the
hair follicle. Our approach, if successful, may yield an improvement over
current hair removal technologies by removing light colored hair and by removing
hair without generating heat or requiring cooling for the skin. This approach is
ready for a pilot study in humans. It has been estimated that there will be
approximately 1.5 million hair removal procedures in 2000, growing to three
million procedures in 2003. If we can demonstrate through our pilot studies and
later clinical trials that our procedure is effective, painless and works on all
skin types and hair colors, we would anticipate capturing a portion of that
market.

         OCULAR MELANOMA. We are conducting research on ocular melanoma with the
Massachusetts Eye and Ear Infirmary (a teaching affiliate of Harvard Medical
School) for an alternative photodynamic therapy treatment that may offer
advantages over current painful radiotherapy or surgical treatment options.
While ocular melanoma is rare (approximately 2,000 U.S. cases annually) the most
exciting aspect of the study is that it may pave the way for treatment of
primary melanomas of the skin and for metastatic melanoma in the lungs and
liver. Treatment of ocular melanoma using multi-photon excitation in a rabbit
model has resulted in eliminating tumors in over 80% of the animals with one
treatment session. We are currently conducting light dosimetry and other
refinement studies. We believe that this application is nearly ready for human
pilot studies.

         CUTANEOUS MELANOMA. In our laboratory, we performed research assessing
the use of ultrafast, pulsed light to directly activate melanin and its
precursors to kill cutaneous melanoma tumors. We announced preliminary results
of that research in September 1998. Tumors produced in mice were treated by
scanning the affected area with light from an ultrafast, pulsed laser. Tumors
ranging in size from 6 to 10 millimeters in diameter and up to 5 millimeters
thick, when treated with ultrafast, pulsed laser light using multiphoton
excitation, produced an immediately marked "blanching" effect, resulting from
the interaction between melanin and the light. After treatment, tumor volume was
reduced by 100% with little or no scarring. Further research on this indication
is being deferred pending the completion and results of our ocular melanoma
preclinical research described above.

         BARRETTS ESOPHAGUS. Barretts esophagus is a pre-cancerous condition in
which the lining of the esophagus changes tissue type as a result of
long-standing acid reflux. It has been estimated that there is a 10% chance that
the Barretts tissue will advance to esophageal cancer if not properly treated.
We are researching whether PH-10, when topically applied to esophageal tissue
and treated with the proper light source, could selectively target and treat
diseased tissue. The research may lead to reduction in treatment costs and
improved safety over today's methods of treating Barretts esophagus. Problems
that have been

                                      -10-


<PAGE>

noted with conventional PDT have included deep-tissue damage creating
post-treatment strictures and perforation of the esophageal wall. In our
laboratory, we demonstrated that murine esophageal tissue could be selectively
targeted and treated with a topical application of PH-10 and green light. We
began preclinical trials in canines in July 1999 through our research agreement
with the University of Tennessee School of Veterinary Medicine. We have
completed 30 treatments, the results of which were consistent with our belief
that our selective targeting approach would lead to improved safety.

         BREAST, LUNG, HEAD AND NECK CANCER. Through our research agreement
with Tufts University School of Veterinary Medicine, we plan to begin
preclinical work on animals to determine whether our work on developing
treatment for prostate cancer can be extended to treatment for cancers of the
breast, lung, head and neck. We believe the properties of PH-10 activated
with X-rays may have potential in these follow-on applications.

         TWO-PHOTON MICROSCOPY. We have evaluated a portion of this technology
by incorporating our designs into a conventional two-photon microscope located
at Vanderbilt University. Our technology for signal processing can potentially
improve the diagnostic signal over background noise, which should improve image
clarity and diagnostic sensitivity. This technology is now ready to license to
third parties for use in microscopy or clinical diagnostic applications.

         BIOTECHNOLOGY. In the course of our many research projects, we have
developed intellectual property that falls within the area of traditional
biotechnology. These technologies involve methods to improve the development and
production of vaccines, and the discovery of unknown viruses. To further pursue
these discoveries, we may create a joint venture subsidiary that would focus on
this area, although we are not actively pursuing this type of joint venture for
our biotechnology developments at this time.

         VETERINARY APPLICATIONS. In our work at Tufts University School of
Veterinary Medicine, we are sponsoring research in treatments for animals with
naturally occurring tumors. We are also working to begin laboratory evaluation
of PH-10 together with green light to treat surface tumors in horses. Our equine
tumor research will be conducted through a research agreement being negotiated
with the University of Tennessee School of Veterinary Medicine.

DEVELOPMENT AND COMMERCIALIZATION STRATEGY

         Our overall strategy is to leverage our proprietary technologies
through contractual collaborations with third-parties. In particular, we plan
to:

         -        Address product development by demonstrating basic technical
                  feasibility in animal models internally and then, using
                  third-party clinicians experienced in the specific indication,
                  to conduct formal preclinical trials. We intend to use the
                  expertise of the third party clinicians to collect data
                  necessary to obtain IND's (an Investigational New Drug
                  Application with the FDA) or IDE's (an Investigational Device
                  Exemption from the FDA) required to begin human trials.

         -        Utilize our clinical development team and contractual
                  collaborative arrangements with third parties to access the
                  skills and resources required to design, test, obtain
                  regulatory

                                      -11-


<PAGE>



                  approval, and manufacture photoactive agents, treatment
                  regimens, diagnostic products and laser devices.

         -        Market potential products through strategic or distribution
                  collaborations as determined by the specific characteristics
                  of each product application.

         -        Consider opportunities in related fields for technological
                  licensing when those opportunities could lead to faster
                  development of products and FDA approval. This includes
                  obtaining technology through licenses from others and
                  licensing our own technology to third-parties.

         We do not expect to generate material revenues from operations in the
near future. Our first revenues, if any, are expected to derive from licensing
fees and royalties from collaborative relationships and from sales of certain
products related to our expertise in PDT (which currently includes computer
software we developed and our two-photon imaging patent). If we develop a
saleable therapeutic or diagnostic method, device or drug, we expect to generate
revenues from product sales or licensing fees.

         Our ability to successfully develop and manufacture any product is
subject to numerous contingencies and uncertainties, including certain Risk
Factors described below. Our objectives, business strategy and product
development efforts are subject to change based on numerous factors, including
the results of preclinical and clinical testing, the availability of suitable
collaborative relationships, the nature of competition, regulatory requirements
and the availability of capital. The description of our business strategy
contains "forward-looking statements" that should be read in conjunction with
the Risk Factors, described below.

         Currently, we have not developed any therapeutic or diagnostic products
that are available to manufacture and sell to the public or a pricing structure
for any potential products. However, we developed a software program for
ultrafast, pulsed lasers called PulseView(TM) that is being distributed through
Coherent, Inc. (which currently includes computer software and a hardware
computer interface).

         Some of our research agreements provide generally that inventions
developed during the course of research by the institution's investigators,
alone or jointly with us, will be owned by the institution and subject to a
right of first refusal that we can exercise for a stated period allowing us to
enter into an exclusive license for that invention. Our agreements presently in
effect with Tufts University School of Veterinary Medicine, Massachusetts Eye
and Ear Infirmary and our recently completed agreement with Massachusetts
General Hospital's Center for Imaging and Pharmaceutical Research each contain
provisions of this type. In some cases the key terms of the license are stated
in the research agreement, with other terms to be negotiated at the time we
exercise the right of first refusal (if we choose to exercise it).

         ELAN JOINT VENTURE

         We implemented a major component of our business strategy in October of
1999 when we entered into a joint venture with affiliates of Elan Corporation,
plc (collectively, "Elan"). Elan is a multi-national, billion dollar
pharmaceutical company. The joint venture -- called Sentigen Ltd. ("Sentigen")
-- will work towards developing and commercializing lymphography agents. We
licensed to Sentigen certain methods we acquired from Alliance Pharmaceutical
Corp. and certain other

                                      -12-


<PAGE>

proprietary technology for use in lymphography, and we sub-licensed proprietary
compounds we licensed from Massachusetts General Hospital and Nycomed Imaging
AS. Elan, through its drug delivery division, Elan Pharmaceutical Technologies,
licensed to Sentigen its NanoCrystal(TM) stabilized nanoparticulate formulation
technology to develop the diagnostic imaging agents.

         In addition to the technology we gained access to through the Sentigen
joint venture, Elan provided us with a $4.8 million credit facility we can draw
on to fund our share of the anticipated development costs of the joint venture.
Elan may convert borrowings under that credit facility into our Common Stock at
a price of $18.15 per share. Also as part of that transaction, Elan purchased
461,538 shares of our Common Stock at $13.00 per share for a total purchase
price of $6 million.

         We also issued 12,015 shares of Series A Exchangeable Convertible
Preferred Stock ("Series A Preferred") to Elan for $1,000 per share. The terms
of the Series A Preferred are described in more detail in "Market for
Registrant's Common Equity and Related Shareholder Matters -- Series A
Convertible Preferred Stock" below. We used the $12,015,000 proceeds from the
sale of our Series A Preferred to purchase 80.1% of the equity of Sentigen. Elan
purchased the other 19.9% of Sentigen's equity for $2,985,000 (Elan may in the
future increase its ownership to 50%). Sentigen used the entire $15 million it
received from us and Elan to pay Elan for Sentigen's license fee for the use of
intellectual property licensed to Sentigen by Elan.

         Our agreement with Elan provides that Elan has the right to nominate a
member to our Board of Directors until October 2004 or as long as Elan owns 10%
of our Common Stock. The Elan Board nominee will be on the management slate of
directors at our 2000 annual meeting of shareholders. Elan also has a preemptive
right to participate in our future equity offerings to maintain its pro rata
interest in Photogen. In addition, if we issue Common Stock or Common Stock
equivalents in our next bona fide offering at less than $13 per share, we must
issue additional shares of Common Stock to Elan so that the average price per
share paid by Elan for its aggregate ownership of our Common Stock will equal
the effective price in that offering.

         AKORN AGREEMENTS

         In November 1999, we announced that we had entered into agreements
with Akorn Inc., a diagnostic and therapeutic pharmaceutical manufacturer, in
which Akorn agreed to develop certain formulations of PH-10 and supply us
with sample quantities for our use in experimental oncology and dermatology
treatments. Akorn will also provide us with necessary background information
for meeting regulatory requirements for FDA approval of PH-10. Akorn will
develop and document raw materials, production and testing procedures and
specifications necessary for us to use when we have new drug applications
("NDA") to file with the FDA for PH-10. Akorn also agreed to negotiate in
good faith with us to enter into a supply contract for PH-10.

         COHERENT AGREEMENT

         In January 2000, we entered into an exclusive distribution agreement
with Coherent, Inc., in which Coherent will market and sell our PulseView(TM)
software package and computer interface. PulseView(TM) is our first product to
reach commercial distribution. The PulseView(TM) package provides a simple,
rapid means for characterization and validation of the performance of ultrafast,
pulsed lasers.

                                      -13-


<PAGE>

Currently these advanced lasers are primarily used for scientific research. We
do not expect our revenues from this product to exceed $200,000 for the next two
years.

         PATENTS

         We are continuing to pursue patent protection for our proprietary
technologies with the U. S. Patent and Trademark Office, and in various foreign
jurisdictions. We plan to prosecute, assert and defend our patent rights
whenever appropriate. However, securing patent protection does not necessarily
assure us of competitive success. See "Risk Factors -- Loss of patent and other
intellectual property protection would have a material adverse effect on our
business, results of operations and financial condition," below. We are
currently the owner of five patents issued by the U.S. Patent and Trademark
Office of which two are set to expire in 2010 and three in 2016.

         In November 1998, we were issued a United States patent with claims
directed to methods for the treatment of plant or animal tissue with
simultaneous two-photon excitation of at least one photoactive molecular agent.
Other methods claimed in the patent include the treatment of cancerous tissue
using simultaneous two-photon excitation. Further, some claims are directed to a
method for using two-photon excitation at a confocal region substantially below
the tissue surface. In December 1999, we were issued a divisional of this patent
relating to methods for producing at least one photo-activated molecular agent
in a particular volume of material using simultaneous two photon excitation or
promoting two photon excitation at a confocal region including those
substantially below a material surface. In November 1998, we were issued a
United States patent directed to our methods for improving selectivity in
photoactivation and detecting molecular diagnostic agents and the imaging of
tissue containing photoactive molecular agents using simultaneous two photon
excitation. This process causes the photoactive agent to emit energy that can be
detected to produce a signal or alternatively, image deep tissue. The patent
also includes a method for imaging of a particular volume of material containing
photoactive molecular agents using two photon excitation at a confocal region
including those regions in deep tissue.

         We have also filed patent applications, corresponding to the two
initial patents issued in the United States, under the Patent Cooperation
Treaty ("PCT") covering a number of foreign countries. A preliminary
examination report has been received at the international level, indicating
the novelty, inventive step and industrial applicability of the claims of
each PCT application. The European Patent Office ("EPO") regional phases of
the PCT applications have been entered into along with the national phases
for applications in Australia, Canada, China, India, Israel, Korea, New
Zealand, Singapore, and certain other countries, including Taiwan.

         We recently acquired from Alliance Pharmaceutical Corp. certain
patented technology that describes methods for using certain particulate
contrast materials in lymphography, and we have sub-licensed another group of
nanoparticulate contrast materials through Massachusetts General Hospital.
Together, these lymphography methods and compounds involve four U.S. patents
with additional patents in certain foreign jurisdictions and a U.S. patent
application and corresponding foreign applications.

         We are continuing to pursue patent protection for our other proprietary
technologies with the U.S. Patent and Trademark Office, the PCT and in various
foreign jurisdictions. In addition to our issued

                                      -14-

<PAGE>

patents and applications discussed above, we have filed another 12 U.S. patent
applications relating to inventions in the following areas:

                  -        Multi-photon activation technology

                  -        Methods and apparatus for imaging and treating tissue
                           using photodynamic
                           therapies

                  -        Additional photodynamic therapy methods and apparatus
                           for topical treatment of
                           disease

                  -        Methods and apparatus for treatment of tissue
                           containing an endogenous pigment (for example,
                           melanoma destruction)

                  -        Radiocontrast (X-ray contrast) agents and methods for
                           treating tissue using those
                           agents

                  -        Radiosensitizer (radiation sensitizer) agents and
                           methods for treating tissue using those agents

                  -        Methods for enhanced production of cell lines.

         Like other entities whose research is sponsored in any manner by the
United States Government, certain patents that we own or license are subject to
Confirmatory Licenses in favor of the United States Government, as required by
applicable federal regulations. These regulations require us or the patent owner
to agree to convey to the Government, upon the Government's request, rights in
the technology if we decide not to continue prosecution of the patent
applications or if the patent owner does not wish to retain title to the
inventions covered in the patents. The Government also retains certain "march-in
rights" that permit the Government to use the technology under certain
circumstances, including if that action is necessary because we or the patent
owner have not taken or are not expected to take effective steps to achieve
practical application of the inventions; it is necessary to alleviate health or
safety needs not being met by us or the patent owner; or to meet the
requirements for public use specified in certain federal regulations and those
requirements are not being met us or the patent owner. We intend to prosecute
patent applications and in other respects develop patents we own so that the
Government will not exercise its rights under these confirmatory licenses.

         "Photogen," the "ray of light" logo and "PulseView" are trademarks of
Photogen. All other trademarks or trade names used in this Form 10-KSB are
trademarks or trade names of their respective owners.

         SCIENTIFIC ADVISORY COUNCIL

         Our Scientific Advisory Council was formed in September 1998 to provide
scientific advice and counsel to the Board of Directors and Company management
team. It is charged with providing guidance and recommendations to help us
pursue commercially important applications; benefit from the latest developments
in chemistry, biochemistry, laser design and photochemistry; avoid investing our
resources in unprofitable areas; benefit fully from our proprietary
technologies; become properly staffed and equipped; and advance our interests by
facilitating the development of licenses and collaborative agreements. The
Council met twice during 1999 and focused its efforts on clinical trial designs.

                                      -15-


<PAGE>

         In addition to our President, the following persons serve on the
Council:

         -        Daniel Tosteson, M.D. - Former Dean of the Faculty of Medicine
                  of Harvard Medical School and an accomplished contributor in
                  the fields of molecular biology and medical education

         -        Harry Morrison, Ph.D. - Dean of Purdue School of Science and
                  specialist in the fields of photochemistry and photobiology

         -        Merrill Biel, M.D., Ph.D. - Practicing physician specializing
                  in head and neck concerns and president of Ear, Nose & Throat
                  Specialty Care of Minnesota.

         Each member of the Council (other than the Company's President) has
entered into a consulting agreement with us providing for the confidentiality of
our proprietary information, and also entered into an award agreement providing
for the grant of non-qualified stock options (vesting over five years) under our
1998 Long Term Incentive Compensation Plan.

         GOVERNMENT REGULATIONS

         All of the therapeutic and diagnostic products we currently contemplate
developing will require approval by the United States Food and Drug
Administration ("FDA") prior to sales being made within the United States and by
comparable foreign agencies prior to sales being made outside the United States.
The FDA and comparable regulatory agencies impose substantial requirements on
the manufacturing and marketing of pharmaceutical products and medical devices.
These agencies and other entities extensively regulate, among other things,
research and development activities and the testing, manufacturing, quality
control, safety, effectiveness, labeling, storage, record keeping, approval,
advertising and promotion of our proposed products.

         One of our contemplated products, based on nanoparticulate compounds we
obtained through a license, has been through a Phase I trial. However, we have
not submitted any information to the FDA regarding any of our other proposed
products. See "Risk Factors -- Our proposed products are subject to extensive
testing and government regulation and approval, including by the Food and Drug
Administration," below.

         The regulatory process required by the FDA through which our drug or
device products must successfully pass before they may be marketed in the U.S.
generally involves the following:

         -        Significant and periodic communication, including meetings,
                  with the FDA;
         -        Preclinical laboratory and animal testing;
         -        Submission of an application that must become effective before
                  clinical trials may begin;
         -        Adequate and well-controlled human clinical trials to
                  establish the safety and efficacy of
                  the product for its intended indication; and
         -        FDA approval of the application to market a given product for
                  a given indication.

         For pharmaceutical products, preclinical tests include laboratory
evaluation of the product, its chemistry, formulation and stability, as well as
animal studies to assess the potential safety and efficacy of the product. Where
appropriate (for example, for human disease indications for which there exist

                                      -16-


<PAGE>

inadequate animal models), we will attempt to obtain preliminary data concerning
safety and efficacy of proposed products using carefully designed human pilot
studies. Pilot studies will, in general, be sponsored using grants to leading
physician-investigators. Sponsored work will be conducted in compliance with
pertinent local and international regulatory requirements, including those
providing for Institutional Review Board approval and national governing agency
approval and patient informed consent, using protocols consistent with ethical
principles stated in the "Declaration of Helsinki" and other internationally
recognized standards. We expect any pilot studies to be conducted outside the
United States; but if any are conducted in the United States, they will comply
with applicable FDA regulations. Data obtained through pilot studies will allow
us to make more informed decisions concerning possible expansion into
traditional FDA-regulated clinical trials.

         If the FDA is satisfied with the results and data from preclinical
tests, it will authorize human clinical trials. Human clinical trials are
typically conducted in three sequential phases which may overlap. Each of the
three phases involves testing and study of specific aspects of the effects of
the pharmaceutical on human subjects, including testing for safety, dosage
tolerance, side effects, absorption, metabolism, distribution, excretion and
clinical efficacy.

         Historically, obtaining FDA approval for photodynamic therapies has
been a significant challenge. Not only must the photoactive agent be approved as
a drug, but the laser activation system must also be approved as a medical
device. The FDA is gaining experience with lasers by virtue of having reviewed
and acted upon many 510(k) and premarket approval filings submitted to it for
non-photodynamic therapy laser applications. Applicable medical devices can be
cleared for commercial distribution through a notification to the FDA under
Section 510(k) of the applicable statute. The 510(k) notification must
demonstrate to the FDA that the device is as safe and effective and
substantially equivalent to a legally marketed or classified device that is
currently in interstate commerce. Such devices may not require detailed testing.
Certain high-risk devices that sustain human life, are of substantial importance
in preventing impairment of human health, or that present a potential
unreasonable risk of illness or injury, are subject to an FDA approval process
initiated by filing a premarket approval ("PMA") application.

         We have established a core clinical development team and have been
working with outside FDA consultants to assist us in developing product-specific
approval strategies, preparing the required submittals, guiding us through the
regulatory process, and providing input to the design and site selection of
human pilot and clinical studies. We prefer to select products and to address
indications that have no other effective treatments available, that involve only
a laser device, or that utilize a photoactive drug already approved for other
human applications. We believe this approach will allow the FDA to make the best
use of its existing experience with medical lasers, while allowing us to
introduce the FDA reviewers to the benefits of our photodynamic therapy
applications. The goal of this strategy is to obtain more rapid approval for a
few lead products, and accelerate approvals of other products that will require
more time to review.

         The testing and approval process requires substantial time, effort, and
financial resources, and we may not obtain FDA approval on a timely basis, if at
all. Success in preclinical or early-stage clinical trials does not assure
success in later stage clinical trials. The FDA or the research institution
sponsoring the trials may suspend clinical trials or may not permit trials to
advance from one phase to another at any time on various grounds, including a
finding that the subjects or patients are being exposed to an unacceptable
health risk. Once issued, the FDA may withdraw a product approval if we do not
comply

                                      -17-


<PAGE>

with pertinent regulatory requirements and standards or if problems occur after
the product reaches the market. If the FDA grants approval of a product, the
approval may impose limitations, including limits on the indicated uses for
which we may market a product. In addition, the FDA may require additional
testing and surveillance programs to monitor the safety and/or effectiveness of
approved products that have been commercialized, and the agency has the power to
prevent or limit further marketing of a product based on the results of these
post-marketing programs. Further, later discovery of previously unknown problems
with a product may result in restrictions on the product, including its
withdrawal from the market. Marketing our products abroad will require similar
regulatory approvals and is subject to similar risks.

         In the ordinary course of business, we must also comply with a variety
of other federal and state governmental regulations. These regulations impose,
among other things, standards of conduct, recordkeeping, labeling and reporting.
Specific regulations affecting our current and proposed operations include:
environmental-type discharge requirements, good laboratory practices governing
animal testing, good manufacturing practices regarding the manufacture of drugs
and other FDA- regulated products, animal care and use regulations, laws and
regulations relating to labor and the use of lasers, and required general
business practices. We do not currently anticipate that the cost of compliance
in these areas, other than obtaining FDA approval, will present a major obstacle
to achieving our goals.

         Another area of regulation that will impact our business is the recent
developments in health care reimbursement and delivery practices as a means to
better control health care costs. See "Risk Factors -- We cannot predict the
effect of changes in health care reimbursement and legislative reform on our
business," below. We believe that changes in health care reimbursement practices
by health insurers and third party payors may lead to an increased interest in
alternative medical procedures and methods such as photodynamic therapy and
lymphography which may generally be less complicated and costly than traditional
procedures. For these reasons, we believe that it may be possible for our
potential products to become attractive alternatives for health insurers and
third party payors.

         COMPETITION

         The industry in which we operate is intensely competitive, and there is
rapid change with respect to technology for the diagnosis and treatment of
disease. Existing or future pharmaceutical and device companies, government
entities and universities may create developments that accomplish similar
functions to our technologies in ways that are less expensive, receive faster
regulatory approval, or receive greater market acceptance than our potential
products. See "Risk Factors -- Our potential markets are extremely competitive,"
below.

         Our competitors have, in general, been in existence for considerably
longer than we have, and thus generally have greater capital resources and
access to capital; greater internal resources for activities in research and
development, clinical testing and trials, production and distribution; existing
collaborative relationships with third parties; and have made greater progress
in the preclinical and clinical testing of their products. In addition, our
competitors may be disinclined to form collaborative relationships with us
directly, or to permit their collaborative partners to work with us. See "Risk
Factors -- Because we do not have, and do not intend to develop, internal
research, manufacturing or clinical testing facilities or marketing resources
for our proposed products, we will have to rely on third parties and
collaborative relationships," below.

                                      -18-


<PAGE>

         We are aware of one competitor, QLT PhotoTherapeutics, Inc. that has
already received FDA approval for use of its proprietary photoactive agent,
Photofrin(R), in the treatment of esophageal cancer and non-small cell lung
cancer. In conjunction with CIBA Vision, QLT PhotoTherapeutics, Inc. is expected
to soon have a second product, "Visudyne(R)," approved for photodynamic
treatment of certain forms of macular degeneration. Another competitor, Dusa
Pharmaceuticals, has recently received FDA approval for use of its proprietary
photodynamic product, Levulan(R) Kerastik(TM), for treatment of actinic
keratosis. Other competitors, namely Miravant Medical Technologies, Inc. and
Pharmacyclics, Inc., have advanced their proprietary photoactive agents to Phase
II/III clinical trials. Laser manufacturers are also making progress in using
laser technologies to treat certain indications. For example, Indigo Medical,
Inc., a subsidiary of Johnson & Johnson, uses a laser to treat prostate cancer.
In addition, there have been many dramatic developments in treatments for cancer
and other diseases that do not involve photodynamic therapy. These treatments
include new chemotherapy agents or other drugs, vaccines, hyperthermic
treatments, and ultrasound. All of these alternatives potentially compete with
products we may offer because they provide alternative methods and treatments
for certain indications.

         We believe that our unique technologies may offset to some extent the
disadvantages from our competitive position. One or more of these technologies,
for example, may change the traditional emphasis in photodynamic therapy from
the drug to the light delivery source. We believe this may enable our technology
to add value to existing and future products of drug manufacturers. In addition,
the unique properties of our laser activation process may give it a competitive
advantage over other light delivery methods that require invasive procedures.

         RISK FACTORS

         This Form 10-KSB contains "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements involve risks, uncertainties and other factors that may cause our
actual results or performance to differ materially from any results or
performance expressed or implied by those statements. Examples of
forward-looking statements include predictive statements, statements that depend
on or refer to future events or conditions, which include words such as
"expects," "anticipates," "intends," "plans," "believes," "estimates," "should,"
"may" or similar expressions, or statements that involve hypothetical events.

         The following are some of the key risk factors that may affect our
future results:

WE ARE A DEVELOPMENT STAGE COMPANY, WE HAVE CONDUCTED ONLY LIMITED STUDIES ON
OUR TECHNOLOGIES AND WE DO NOT HAVE ANY PRODUCTS OR REVENUES FROM SALES.

                  Our Company and our technology are in an early stage of
         development. We have not generated revenues from sales or operations,
         and we do not expect to generate any significant revenues for at least
         several years.

                  Use of our technology has been limited primarily to laboratory
         experiments or animal testing and only one compound has completed Phase
         I clinical trials in humans. We have therefore not yet conducted
         substantive studies on the effectiveness of any compound on human
         subjects. The drug and device products we currently contemplate
         developing will require significant additional research and
         development, preclinical and clinical testing and regulatory approval
         before they can be manufactured and sold. We cannot assure that we will
         be able to

                                      -19-


<PAGE>

         develop our technology into marketable products or that the technology
         will be effective for diagnosis or treatment of human diseases. As a
         result of changing economic considerations, market, clinical or
         regulatory conditions, or clinical trial results, we may shift our
         focus or determine not to continue one or more of the projects we are
         currently pursuing.

WE HAVE A HISTORY OF LOSSES AND MAY NOT ACHIEVE OR MAINTAIN FUTURE PROFITS OR
PAYMENT OF DIVIDENDS.

                  We have incurred losses since the beginning of our operations.
         As of December 31, 1999, we have incurred total losses of approximately
         $8,583,235. We expect our losses to increase in the future as our
         financial resources are used for research and development, preclinical
         and clinical testing, regulatory activities, manufacturing, marketing
         and other related expenses. We may not be able to achieve or maintain
         profitability in the future. We have never declared or paid any cash
         dividends to stockholders, and do not expect to do so in the
         foreseeable future.

WE MUST OBTAIN SIGNIFICANT ADDITIONAL FINANCING.

                  Under the present circumstances, we may exhaust our available
         capital by approximately August, 2001 (depending on the pace of our
         spending for preclinical and clinical trials). We will need substantial
         additional financing for our research, clinical testing, product
         development and marketing programs. We cannot accurately estimate the
         amount of additional financing required; however, the amount could be
         an additional $30 - 50 million or more. Depending on market conditions,
         we will attempt to raise additional capital through stock and debt
         offerings, collaborative relationships and other available sources.
         Additional funds may not be available on acceptable terms, if at all,
         and existing stockholders may be diluted as a result of those
         offerings.

                  If we sell additional equity, Elan has a preemptive right
         until October 2003 to participate in that offering. If in our next
         third-party financing we sell Common Stock at a price less than $13 per
         share, we must issue additional shares to Elan so that Elan's overall
         price for its Common Stock equals the effective price in that other
         offering.

OUR PROPOSED PRODUCTS ARE SUBJECT TO EXTENSIVE TESTING AND GOVERNMENT REGULATION
AND APPROVAL, INCLUDING BY THE FOOD AND DRUG ADMINISTRATION ("FDA").

                  Most of our proposed drug and device products have not begun,
         and none has completed, the FDA's extensive approval process which must
         be completed before proposed products can be sold in interstate
         commerce. This process includes preclinical and clinical testing for
         effective use and safety in animals and humans and it can be extremely
         costly. The time frame necessary to perform these tasks for any
         individual product is long and uncertain, and we may encounter problems
         or delays which we cannot predict at this time. Even if clinical trials
         are successful, our proposed products may not demonstrate sufficient
         effectiveness or safety to warrant approval by the FDA or other
         regulatory authorities. Any regulatory approval may not cover the
         clinical symptoms or indications that we may seek. Marketing our
         products in other countries will require seeking and obtaining
         regulatory approvals comparable to those required in the U.S.

                                      -20-


<PAGE>

LOSS OF PATENT AND OTHER INTELLECTUAL PROPERTY PROTECTION WOULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

                  One factor which may bear on our success is our ability to
         obtain, assert and defend our patents, protect trade secrets and
         operate without infringing the intellectual property of others.

         Among the important risks in this area are that:

         -        Our patent applications may not result in issued patents.
                  Moreover, any issued patents may not provide us with adequate
                  protection of our intellectual property or competitive
                  advantages.

         -        Various countries limit the subject matter that can be
                  patented and also the ability to enforce patents in the
                  medical field, which may limit our ability to obtain or
                  utilize such patents against third parties.

         -        Our inventions may be "reverse engineered" by our competitors,
                  and third parties may challenge our existing patents and seek
                  to hold them invalid or unenforceable.

         -        Existing or future patents or patent applications (and the
                  products or methods they cover) of our competitors (or others,
                  such as research institutions or universities) may interfere,
                  invalidate, conflict with or infringe our patents or patent
                  applications. Similarly, our use of the methods or
                  technologies contained in our patents and other intellectual
                  property may conflict or infringe the rights of others.

         -        If an advance is made that qualifies as a joint invention, the
                  joint inventor or his or her employer may have rights in the
                  invention.

                  Litigation over patents and other intellectual property rights
         occurs frequently in our industry, and there is a risk that we may not
         prevail if we become involved in such litigation. Further, interference
         may occur over the rights to certain inventions and there is a risk
         that we may not prevail in such an interference. Those disputes can be
         expensive and time consuming, even if we win. Intellectual property
         disputes are often settled through licensing arrangements that could be
         costly to us. In any intellectual property litigation, it is possible
         that licenses necessary to settle the dispute would not be available,
         or that we would not be able to redesign our technologies to avoid any
         claimed infringement.

                  Confidentiality agreements covering our intellectual property
         may be violated and we may not have adequate remedies for any
         violation. Also, our intellectual property may in other ways become
         known or be independently discovered by competitors.

                  To the extent we use intellectual property through licenses or
         sub-licenses (as is the case for some of our lymphography technology),
         our rights are subject to us performing the terms of the license or
         sub-license agreement with third parties. Our rights are also subject
         to the actions of third parties we may not be able to control, such as
         our sub-licensor complying with the terms of its license with the
         patent owner and the patent owner maintaining the patent.

                                      -21-


<PAGE>

                  In some cases where U.S. Government funding was used to
         support a project, certain intellectual property is subject to the
         Government's "march in" rights which include a royalty-free license
         under certain circumstances pursuant to 35 U.S.C. Section 202(c).

WE ARE HIGHLY DEPENDENT UPON A SMALL NUMBER OF EMPLOYEES AND CONSULTANTS WHO
PROVIDE SCIENTIFIC AND MANAGEMENT EXPERTISE.

                  These individuals have entered into employment or consulting
         agreements, confidentiality and/or non-competition agreements with us.
         We could suffer competitive disadvantage, loss of intellectual property
         rights or other material adverse effects on our business and results of
         operations if any employee or consultant violates or terminates these
         agreements or terminates their association with us. Our growth and
         future success also depends upon the continued involvement and
         contribution from these individuals, as well as our ability to attract
         and retain highly qualified personnel now and in the future.

BECAUSE WE DO NOT HAVE, AND DO NOT INTEND TO DEVELOP, INTERNAL RESEARCH,
MANUFACTURING OR CLINICAL TESTING FACILITIES OR MARKETING RESOURCES FOR OUR
PROPOSED PRODUCTS, WE WILL HAVE TO RELY ON THIRD PARTIES AND COLLABORATIVE
RELATIONSHIPS.

                  We must continue to enter into collaborative relationships
         with third parties for research and development, preclinical and
         clinical testing, manufacturing, marketing and distribution of our
         proposed products. We will also be dependent on third parties for the
         supply of activation hardware (E.G., lasers and X-ray devices) and for
         supplies of photodynamic drugs and other therapeutic and diagnostic
         agents. We have several research and supply agreements with third
         parties. However, we may not be able to negotiate other acceptable
         collaborative and supply arrangements in the future.

                  Collaborative relationships may limit or restrict our
         operations or may not result in an adequate supply of necessary
         resources. Our collaborative partners could also pursue alternative
         technologies as a means of developing or marketing products for the
         diseases targeted by our collaborative programs. If a third party we
         are collaborating with fails to perform under its agreement or fails to
         meet regulatory standards, this could delay or prematurely terminate
         clinical testing of our proposed products.

OUR POTENTIAL MARKETS ARE EXTREMELY COMPETITIVE.

                  We face substantial competition from competitors with greater
         financial, technical and human resources and with greater experience in
         developing products, conducting preclinical or clinical testing,
         obtaining regulatory approvals, manufacturing and marketing. Our
         competitors include firms in the field of photodynamic therapy as well
         as other fields generally relating to the diagnosis and treatment of
         disease using different technologies or scientific and medical
         approaches. Examples of those technologies are novel chemotherapy or
         other drugs, and hyperthermic and ultrasound procedures. Some of these
         firms have drugs or devices that have completed or are in advanced
         stages of clinical trials and regulatory approvals.

                  Our competitors may develop technologies and obtain patent
         protection that could render our technologies or products obsolete or
         less competitive or our patents invalid or unenforceable.

                                      -22-


<PAGE>

         Due to the inherent risk of failure associated with the testing,
         development and production of new and innovative technologies, our
         technologies and products may be found to be ineffective, have
         unanticipated limitations or otherwise be unsuccessful in the
         marketplace. Also, although we believe our estimates of the possible
         size of markets for our potential products are based on information we
         consider reliable (including data from the American Cancer Society and
         similar sources in the public domain), that data or our analysis of the
         data could prove incorrect.

WE CANNOT PREDICT THE EFFECT OF CHANGES IN HEALTH CARE REIMBURSEMENT AND
LEGISLATIVE REFORM ON OUR BUSINESS.

                  Our success will depend, in part, on the extent to which
         health insurers, managed care entities and similar organizations,
         provide coverage or reimbursement for the medical procedures and
         devices we plan to develop. These third-party payors are increasingly
         challenging the price of medical procedures and services and
         establishing guidelines that may limit physicians' selections of
         innovative products and procedures. We also cannot predict the effect
         of any current or future legislation or regulations relating to
         third-party coverage or reimbursement on our business. We may not be
         able to achieve market acceptance of our proposed products or maintain
         price levels sufficient to achieve or maintain any profits on our
         proposed products if adequate reimbursement coverage is not available.

A SMALL GROUP OF STOCKHOLDERS CONTROLS PHOTOGEN.

                  A small group of our officers, directors and others control
         approximately 85% of our outstanding Common Stock. Several of our
         principal stockholders are also parties to a Voting Agreement
         concerning the election of certain designees to the Board of Directors
         of Photogen Technologies, Inc. and Photogen, Inc. This group of
         stockholders can significantly influence Photogen and the direction of
         our business and affairs. This concentration of ownership may delay or
         prevent a change in control of Photogen, and may also result in a small
         supply of shares available for purchase in the public securities
         markets. These factors may affect the market and the market price for
         our Common Stock in ways that do not reflect the intrinsic value of the
         stock.

OUR STOCK PRICE IS VOLATILE.

                  The price and trading volume of our Common Stock has
         fluctuated and is likely to continue to fluctuate significantly for
         reasons that may not have any relationship to our operating performance
         or other factors that traditionally determine a company's value. The
         following factors may have an impact on the price of our stock:

                  -        Announcements by us or others regarding scientific
                           discoveries, technological innovations, commercial
                           products, patents or proprietary rights;
                  -        The progress of preclinical or clinical trials;
                  -        Changes in government regulation;
                  -        Public concern about the safety of devices or drugs;
                  -        Limited coverage by securities analysts;
                  -        Changes in our financial performance from period to
                           period; securities analysts' reports; and general
                           market conditions.

                                      -23-


<PAGE>

OUR COMMON STOCK COULD BE DELISTED FROM THE NASDAQ SMALLCAP MARKET WHICH WOULD
MAKE TRADING IN OUR STOCK MORE DIFFICULT.

                  Since November 1999, our Common Stock has been quoted in the
         Nasdaq SmallCap Market. Our shares could be subsequently delisted if we
         failed to maintain the listing requirements of the Nasdaq SmallCap
         Market, which would force us to list our shares on the OTC Bulletin
         Board or some other quotation medium, such as "pink sheets," depending
         upon our ability to meet the specific listing requirements of those
         quotation systems. As a result, an investor might find it more
         difficult to dispose of, or to obtain accurate price quotations for,
         our shares. Delisting might also reduce the visibility, liquidity, and
         price of our Common Stock.

                  If our Common Stock were delisted from the Nasdaq SmallCap
         Market and is not traded on another national securities exchange, we
         could become subject to "penny stock" regulations that impose
         additional sales practice disclosure and market making requirements on
         broker-dealers who sell or make a market in our stock. If that were to
         occur, the rules of the SEC would generally define "penny stock" to be
         common stock that has a market price of less than $5.00 per share. If
         our stock became subject to penny stock regulations, it would adversely
         affect the ability and willingness of broker-dealers who sell or make a
         market in our Common Stock and of investors to sell our stock in the
         secondary market.

ITEM 2.           DESCRIPTION OF PROPERTY.

         We are occupying approximately 4,000 square feet of office and
laboratory space in Knoxville, Tennessee. We negotiated a new lease agreement
beginning July 1999, with a term expiring May 2001, for this space at a monthly
rental of $2,700 the facility (including certain scientific equipment located at
this facility) plus charges for utilities and similar items. We have two options
to renew the lease agreement for additional terms of three years each and an
option to purchase the facility at any time during the term of the lease or any
renewal.

         We currently have a five year lease agreement for approximately 3,127
square feet of office space located in Westborough, Massachusetts being used for
our clinical development group for an initial rental of $4,300 per month. In
April 2000, we will expand offices in Westborough and begin occupying a total of
approximately 7,821 square feet for an initial rental of $10,754 per month
(increasing to $12,546 per month in the fifth year of the lease).

         To our knowledge, the property and equipment in our Knoxville and
Westborough locations are in good condition. In the opinion of management, our
interest in these facilities is adequately covered by insurance.

ITEM 3.           LEGAL PROCEEDINGS.

         We are not currently a party to any material litigation or proceeding
and are not aware of any material litigation or proceeding against us.

                                      -24-


<PAGE>

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

          During the fourth quarter of the 1999 fiscal year, the sole
shareholder of Series A Preferred Stock voted to amend and restate the
Certificate of Designations, Preferences, and Rights of Series A Preferred
Stock. No matters were submitted to our Common Stockholders for a vote during
the fourth quarter of the 1999 fiscal year.

                                    PART II.

ITEM 5.           MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
                  STOCKHOLDER MATTERS.

         We maintain no active trading market for our common stock. However,
during most of 1999 the Common Stock was traded in the over-the-counter
"bulletin board" market and, after November 29, 1999, in the Nasdaq SmallCap
Market from time to time under the symbol "PHGN."

         COMMON STOCK

         As of March 7, 2000 there were 37,383,386 shares of our Common Stock
outstanding held of record by approximately 339 stockholders, which includes
shares held in street name. Holders of our Common Stock are entitled to receive
such dividends as may be declared by the Board of Directors. We have not
declared or paid dividends on our Common Stock, and we do not anticipate paying
any dividends in the foreseeable future.

         The high and low trading prices for the our Common Stock during each
quarter of the last two fiscal years are set forth below.

<TABLE>
<CAPTION>

                               YEAR ENDED                     YEAR ENDED
                            DECEMBER 31, 1998              DECEMBER 31, 1999

                                             (Amounts in $)

                           HIGH           LOW             HIGH           LOW
                           ----           ---             ----           ---

     <S>                  <C>            <C>             <C>             <C>
     1st Quarter          18.75          10.75           13.50           8.00
     2nd Quarter          28.00          17.75           10.75           8.50
     3rd Quarter          20.75          10.00           14.50           8.50
     4th Quarter          19.00          10.25           18.75          12.25

</TABLE>


         For the period January 1, 2000 through March 7, 2000, the high and low
trading prices for our Common Stock were $19.00 and $14.25 respectively.
Aggregate trading volume for the period January 1, 2000 through March 7, 2000
was approximately 580,807 shares. The foregoing information was obtained from
the National Association of Securities Dealers as reported in the
over-the-counter bulletin board and the Nasdaq SmallCap Market. The quotations
generally reflect inter-dealer prices, without

                                      -25-

<PAGE>

retail mark-up, mark-down or commission and may not represent actual
transactions. The foregoing information for 1998 and 1999, however, reflects
trade prices, and not bid or ask prices, because the small number of trades
through market makers for our stock historically has not yielded meaningful bid
and ask prices. See "Risk Factors -- A small group of stockholders control
Photogen" and "-- Our stock price is volatile" above, regarding the possible
effects of the concentrated ownership of our stock on the market and price of
the stock.

         In 1999, we granted qualified and non-qualified stock options pursuant
to our 1998 Long Term Incentive Plan to purchase an aggregate of 1,117,500
shares of Common Stock. The options have vesting requirements ranging from three
to five years from the date of the grant and some have performance-based vesting
requirements. Exercise prices range from $9.375 to $19.375.

         We also issued warrants in 1999 to purchase 500,000 shares of Common
Stock at $9.45, 100,000 shares at $21.17, and 2,000 shares at $16.62 per share.
In 2000, we issued warrants to a consultant (covering 15,000 shares of Common
Stock with an exercise price of $15.625 per share) and to the placement agent
for services rendered in connection with our Series B Preferred Stock offering
covering 32,724 shares of our Common Stock at $16.88 per share.

         We are subject to eight sets of registration rights agreements. All of
the agreements contain piggyback registration rights and three contain demand
registration rights upon the occurrence of certain events and subject to various
terms and conditions.

         -        Under the first agreement, if we register any Common Stock
                  before May 26, 2000 we must offer one shareholder piggyback
                  registration for 316,665 shares of Common Stock he owns.

         -        Under the second and third agreements, we granted certain
                  piggyback registration rights to the holders of warrants
                  covering an aggregate of 260,000 shares of our Common Stock
                  owned by two shareholders; which warrants are exercisable
                  before May 15, 2002.

         -        Under a fourth agreement, the holder of warrants covering
                  1,000,000 shares of our Common Stock may demand registration
                  for those shares in the event that holders of 50% or more of
                  those warrants make a request covered by at least 100,000
                  shares (in addition to certain piggyback registration rights).
                  Demand registration, however, is subject to Board approval.
                  These warrants are subject to vesting restrictions, and only
                  warrants for 500,000 shares have vested to date.

         -        Under the fifth agreement, if we register any Common Stock
                  before August 10, 2000, we must offer one shareholder
                  piggyback registration for 42,328 shares of Common Stock it
                  owns.

         -        Under the sixth agreement, we granted demand and piggyback
                  registration rights with respect to Common Stock resulting
                  from conversion of our Series A Preferred and also with
                  respect to 461,538 shares of our Common Stock held by Elan.

         -        Under the seventh and eighth agreements, we granted demand and
                  piggyback registration rights to the holders of Series B
                  Preferred Stock, covering Common Stock resulting from
                  conversions of Series B Preferred Stock. These agreements
                  provide that

                                      -26-


<PAGE>

                  "initiating holders" who collectively purchased a minimum of
                  $1 million worth of Series B Preferred may demand two
                  registrations of Common Stock issued upon conversion of Series
                  B Preferred if the registration is for an aggregate price to
                  the public, net of underwriting discounts and commissions, of
                  at least $2 million. Holders of Series B Preferred who own a
                  minimum of $250,000 worth of Series B Preferred are considered
                  "eligible holders" and may participate in those two demand
                  registrations.

         Mr. Smolik and Drs. Dees, Fisher, Scott and Wachter, who as of
March 7, 2000, collectively hold approximately 22,558,435 shares of our Common
Stock, have agreed not to sell or otherwise dispose of those shares for a
period ending August 2001, without the prior consent of Theodore Tannebaum.
Until December 31, 2000, Mr. Tannebaum must consult with the placement agent
for our private placement of Series B Preferred concerning any proposed
disposition by those five individuals.

         Approximately 28,359,469 shares of our Common Stock are "restricted
stock" or are beneficially owned by persons who as of December 31, 1999 were
affiliates of the Company as defined in Rule 144 under the Securities Act. A
portion of those shares would be eligible for resale by Company affiliates and
others who have satisfied the requisite holding periods, subject to the volume
limitations and other provisions of Rule 144 and applicable law. As of March
13, 2000, 875,000 shares of Common Stock that we sold in our March 13, 1998
Private Placement are no longer restricted stock or subejct to Rule 144
because two years have now passed.

         SERIES A CONVERTIBLE PREFERRED STOCK

         On October 20, 1999, we issued 12,015 shares of Series A Preferred
Stock to Elan International Services, Ltd. ("EIS"), an affiliate of Elan, in
conjunction with the formation of Sentigen Ltd., our joint venture with Elan.
Under the Amended and Restated Certificate of Designations, Preferences and
Rights of Series A Preferred Stock, the holder of Series A Preferred has a
liquidation preference entitling it to the first $12,015,000 of funds available
for distribution to stockholders upon liquidation of the Company and has the
right to convert shares of Series A Preferred into Common Stock at any time
after October 20, 2001 at a conversion price of $21.17 per share. Alternatively,
the holder of Series A Preferred may exchange shares of Series A Preferred for
common shares of Sentigen so that the holder of Series A Preferred owns 50% of
the equity of Sentigen. Each share of Series A Preferred will be paid a
mandatory payment-in-kind dividend equal to 7% (I.E., 0.07 additional shares of
Series A Preferred). The payment-in-kind dividend is cumulative, compounds on a
semi-annual basis and is payable twice a year, beginning April 2000. The holder
of Series A Preferred is only entitled to vote on matters that adversely affect
or change the rights of holders of Series A Preferred Stock. The holder of
Series A Preferred does not have the right to vote on the election of directors
of the Company.

         SERIES B CONVERTIBLE PREFERRED STOCK

         On February 11, 2000, we filed a Certificate of Designation, Rights and
Preferences of Series B Convertible Preferred Stock which authorized up to
402,000 shares of Series B Convertible Preferred Stock ("Series B Preferred").
We issued 327,240 shares of Series B Preferred to 32 accredited investors in a
private placement, for a purchase price of $16.88 per share and 9,816 shares to
the placement agent in connection with services rendered in our private
placement of Series B Preferred.

         Each share of Series B Preferred is entitled to a payment-in-kind
dividend payable in additional shares of Series B Preferred, at a rate of 6%
(I.E., 0.06 additional shares of Series B Preferred).

                                      -27-

<PAGE>

Dividends will be payable on January 15 of each year, beginning January 15, 2001
and will accrue from the date of such share's issuance. We may not make
dividends or distributions on Common Stock unless we also pay a dividend on the
Series B Preferred equal to the amount a holder of Series B Preferred would have
received on conversion of Series B Preferred into Common Stock.

         Each share of Series B Preferred is entitled to a liquidation
preference equal to $16.88 per share, before any amounts are paid on the Common
Stock on liquidation, but subject to the senior preference of our Series A
Preferred and the liquidation preference of any senior or PARI PASSU securities
we create in the future with the requisite consent of the holders of Series B
Preferred. After payment of the Series B Preferred liquidation preference, we
will distribute our remaining assets pro rata among the holders of the Common
Stock and Series A Preferred and Series B Preferred (subject to the rights of
any senior securities). If we are acquired by another entity or sell all or
substantially all of our assets, and if we pay an amount equal to the
liquidation preference of the Series A Preferred and any other senior security,
holders of Series B Preferred will be entitled to receive the liquidation
preference unless our stockholders prior to the transaction hold at least 50% of
the voting power of the surviving or acquiring entity or if the holders of a
majority of Series B Preferred agree by vote or written consent to exclude the
acquisition or sale from this provision.

         Each share of Series B Preferred will have the number of votes equal to
the number of shares of Common Stock into which the share of Series B Preferred
would be convertible, and will be entitled to vote together with the Common
Stock. Certain matters, such as an amendment to the terms of the Series B
Preferred Certificate of Designation or a change in the preferences or any
relative or other rights of the Series B Preferred, may have to be approved by a
majority of the holders of Series B Preferred voting as a separate class.

         A holder of Series B Preferred may convert shares of Series B Preferred
into Common Stock at any time, according the following formula:

<TABLE>
<CAPTION>

------------------------------------------------------------------------------
IF THE CONVERSION TAKES PLACE: EACH SHARE OF SERIES B PREFERRED CONVERTS INTO:
------------------------------------------------------------------------------
<S>                                    <C>
ON OR BEFORE 12/31/00                  1.0 SHARES OF COMMON STOCK
-----------------------------------------------------------------
1/1/01 - 12/31/01                      1.2 SHARES OF COMMON STOCK
-----------------------------------------------------------------
1/1/02 AND THEREAFTER                  1.4 SHARES OF COMMON STOCK
-----------------------------------------------------------------
</TABLE>


The conversion ratio is subject to adjustment for certain dilutive events,
including issuance of Common Stock or equivalent securities at less than
$16.88 per share. We may require holders of series b preferred to convert
their shares into Common Stock (at the same ratios that would apply for a
voluntary conversion, except as described in the second and third bullet
points below) in connection with any of the following events:

                  -        If the holders of a majority of the Series B
                           Preferred approve a mandatory conversion;

                  -        Immediately prior to a firm commitment, underwritten
                           public offering of our Common Stock in which we
                           receive $20 million or more in gross proceeds

                                      -28-

<PAGE>

                           (however, if a public offering occurs before December
                           31, 2000, the conversion ratio will be the ratio in
                           effect for the year 2001);

                  -        If the holders of a majority of Series B Preferred do
                           not approve any transaction to issue a security
                           senior or PARI PASSU to the Series B Preferred in a
                           transaction involving any vendor, licensor or joint
                           venturer or other commercial transaction (a "special
                           senior security"), the purpose of which is not solely
                           to provide financing, and which the Board has
                           approved and recommended (however, if this occurs
                           before December 31, 2000, the conversion ratio will
                           be the ratio in effect for the year 2001); or

                  -        At any time after January 1, 2005.

         We must obtain the approval of a majority of the then outstanding
shares of Series B Preferred if we seek to amend our Restated Articles of
Incorporation in a way that adversely affects the shares of Series B preferred
(except for issuance of a special senior security), create certain senior or
PARI PASSU securities, or if we change the rights of Series B Preferred in the
Certificate of Designation in any other material respect. this right is subject
to our ability to require mandatory conversion of Series B Preferred if a
"special senior security" is not approved.

         RECENT SALES OF UNREGISTERED SECURITIES

         During 1999, we made the following sales of stock without registration
under the Securities Act of 1933 (the "Securities Act"):

         -        In December 1999, two employees exercised options to purchase
                  a total of 4,500 shares of our Common Stock under the
                  Company's 1998 Long Term Incentive Compensation Plan at an
                  exercise price of $11.125.

         -        On December 1, 1999, we issued warrants to acquire a total of
                  2,000 shares of Common Stock to Aqua Partners, LLC, as partial
                  consideration for consulting services Aqua agreed to perform
                  for us. The warrants are exercisable at any time before
                  December 1, 2004 for an exercise price of $16.62 per share.

         -        On October 20, 1999, we issued the following securities to
                  Elan International Services, Ltd.:

                  -        461,538 shares of Common Stock for a total purchase
                           price of $6,000,000 paid in cash.
                  -        12,015 shares of Series A Convertible Exchangeable
                           Preferred Stock for a total purchase price of
                           $12,015,000 paid in cash.
                  -        Warrants to acquire a total of 100,000 shares of
                           Common Stock exercisable at any time on or before
                           October 20, 2004 for an exercise price of $21.17 per
                           share.
                  -        A Convertible Promissory Note in the principal amount
                           of $4,806,000 bearing interest at 8% per annum. We
                           must use borrowings under the Note (if any) to fund
                           our portion of Sentigen Ltd.'s development costs;
                           borrowings are

                                      -29-
<PAGE>


                           convertible at Elan's election into our Common Stock
                           at a conversion price of $18.15 per share.

         -        On September 22, 1999, we issued 42,328 shares of Common Stock
                  to Alliance Pharmaceutical Corp. as partial consideration for
                  Alliance assigning patents and patent applications in the U.S.
                  and elsewhere to us relating to lymphography methods.

         -        On August 9, 1999, we issued warrants to acquire a total of
                  500,000 shares of Common Stock to Farcap Group, LLC as
                  consideration for consulting services Farcap agreed to perform
                  for us. the warrants are exercisable at any time before August
                  9, 2004 for an exercise price of $9.45 per share.

         In each of the transactions described above:

         -        We did not use any underwriters or brokers and we paid no
                  commissions or underwriting discounts.

         -        Wherever we received cash consideration, we used the proceeds
                  for working capital and other general corporate purposes.

         -        These transactions were exempt from registration under the
                  Securities Act pursuant to Section 4(2) of that Act, on the
                  basis of one or more of the following factors: we made the
                  offers and sales to a limited number of "accredited investors"
                  within the meaning of Rule 501 of Regulation D under the
                  Securities Act, without public advertising or solicitation;
                  each investor had access to material information about the
                  Company and the opportunity to obtain further information;
                  each investor acquired the securities for investment and not
                  with a view to resale or distribution thereof; and the
                  certificates representing the shares bear a legend
                  restricting their transfer except in compliance with
                  applicable securities laws.

         During 1999, we also awarded 1,117,500 options to acquire our Common
Stock pursuant to our 1998 Long Term Incentive Compensation Plan. Those options
are exercisable at prices ranging from $9.375 to $19.375 and are subject to
various vesting criteria.

ITEM 6.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                  CONDITION OR PLAN OF OPERATION.

         UNCERTAINTIES RELATING TO COMPANY. We are principally engaged in the
research and development of drugs and medical device products for use in
human therapeutic and diagnostic applications. We have not completed
development of any diagnostic or therapeutic product or process at this time
and have no revenue from operations. Portions of the discussion in this item
contain forward-looking statements and are subject to the Risk Factors
described above.

         RESULTS OF OPERATIONS. We have not generated revenues from the sale of
any proposed diagnostic or therapeutic products or other operations, and
continue to experience losses. Our net loss increased from $1,973,913 in 1998 to
$6,052,841 in 1999. Our research and development costs

                                      -30-

<PAGE>

increased from $1,258,000 in 1998 to $2,824,000 in 1999. The increase in losses
are attributable primarily to expenses related to pursuing patent protection for
our technology, designing and acquiring equipment and engaging in animal studies
and other research, research and development expenses, and other general and
administrative costs. We expect to continue to incur increasing losses for at
least the next several years as we intensify our research and development,
preclinical and clinical testing, regulatory approval activities and engage in
or provide for the manufacture and/or sale of any products that we may develop.

         Our investment income decreased from $392,599 in 1998 to $179,795 in
1999. Our income in 1999 was investment income on the proceeds from the sale of
our Common Stock and Series A Preferred in 1997, 1998 and 1999. As we used
capital in 1999, it was no longer available to generate investment income which
resulted in lower income. The proceeds from the sales of our Common Stock are
invested primarily in United States Government obligations. Because we have no
revenues from operations at this time, investment of such funds in that manner
is necessary to enable us to avoid becoming subject to the Investment Company
Act of 1940.

         LIQUIDITY; CAPITAL RESOURCES. In October 1999, we closed the sale of $6
million of our Common Stock to Elan as part of the formation of the Sentigen
Ltd. joint venture. We may use the proceeds from the sale of that stock for any
corporate purposes. In February 2000, we closed a private placement of our
Series B Convertible Preferred Stock ("Series B Preferred") which resulted in
net proceeds to us of $5,335,520. (The terms of the Series B Preferred are
discussed above at Item 5, "Market for Registrant's Common Equity and Related
Stockholder Matters -- Series B Convertible Preferred Stock".) We plan to use
the proceeds of our Series B Preferred offering for research and development
(including preclinical and clinical trials), the purchase or lease of scientific
and laboratory equipment, legal and regulatory consulting fees, corporate
overhead, general operating expenses and other working capital purposes.

         We have used, and expect over the next 12 months to use, the proceeds
from our fourth quarter sale of Common Stock to Elan, the proceeds from our sale
in 2000 of Series B Preferred, and the proceeds remaining from our March 13,
1998 private placement of Common Stock for corporate overhead and operating
expenses, preclinical and clinical trials, the purchase or lease of scientific
and laboratory equipment and related facilities, legal and regulatory consulting
fees and for other working capital purposes, assuming we have no revenues during
that period. We expect our use of capital to increase significantly as we move
toward initiating human clinical trials.

         We have a $4.8 million credit facility from Elan to fund a portion
of the operations of the Sentigen joint venture. We have also received a
binding commitment from one of our principal shareholders, Mr. Tannebaum, to
make a one million dollar credit facility available to us. If we utilize Mr.
Tannebaum's credit facility, borrowings will bear interest at 6% per year and
interest only will be paid annually, with the principal due in five years.
The loan would be secured by a lien on all of our assets.

         Our use of cash and capital resources for the 1999 fiscal year averaged
about $425,440 per month. Our use of cash and capital resources is presently
about $700,000 per month. As of March 7, 2000 we had approximately $11,042,000
available to meet our operating expenses. At the current rate of spending, we
will exhaust our funds by approximately July, 2001. We can adjust our use of
cash and capital by not renewing or by seeking to modify research or other
contracts; or by seeking alternative methods of paying for portions of the
research and other contract obligations, such as issuing stock rather

                                      -31-

<PAGE>

than paying in cash (which may dilute stockholders). We expect to consider
additional financing transactions in the future. See "Risk Factors -- We must
obtain significant additional financing," above.

         PATENT AND OPERATIONAL MATTERS. We are continuing to pursue patent
protection for our proprietary technologies with the U. S. Patent and Trademark
Office, and in various foreign jurisdictions. See "Patents and Status" and "Risk
Factors -- Loss of patent and other intellectual property protection would have
a material adverse effect on our business, results of operations and financial
condition," above. We recently filed patent applications covering inventions in
the following areas:

                  -        Multi-photon activation technology
                  -        Additional photodynamic therapy methods for topical
                           treatment of disease
                  -        Melanoma destruction
                  -        Radiocontrast agents and methods
                  -        Radiosensitizer agents and methods
                  -        Enhanced production of cell lines

         We continue to pursue development of proprietary technologies as a
result of our research in chemistry, photochemistry, and biochemistry. However,
we cannot guarantee that we will develop new, patentable technology, or that
commercial products will be developed from those technologies and successfully
sold.

         We recently renewed our research agreement with the University of
Tennessee School of Veterinary Medicine which in the current phase of research
is focusing on preclinical research on photodynamic therapy for Barretts
esophagus. We plan to continue to pursue preclinical and clinical testing of
proposed products, but we cannot assure investors that we will be able to
successfully develop and obtain proprietary protection for new technologies or
that we can develop products from these technologies that can be commercialized.

         We occupy approximately 4,000 square feet of office and laboratory
space in Knoxville, Tennessee. We pay a monthly rental of $2,700 for this
facility (including certain equipment) plus charges for utilities and similar
items. We also currently occupy 3,127 square feet of office space in
Westborough, Massachusetts and pay a monthly rental or $4,300 per month. In
April 2000, we will increase our rental space in Westborough to a total of 7,821
square feet and pay an initial monthly rental of $10,754 for this facility
(increasing to $12,546 per month in the fifth year of the lease). We increased
our investment in office and laboratory equipment from approximately $846,114 in
1998 to $1,555,530 in 1999. We expect to spend an additional $1,114,000 during
the 2000 fiscal year to acquire the instruments necessary to support animal
preclinical and human clinical trials, and development of proprietary
photoactive agent and targeting systems.

         In conjunction with Dr. Gerald Wolf's appointment as our Medical
Director and the research agreement we entered into with Tufts University School
of Veterinary Medicine to develop new cancer treatments, we are leasing and
providing to Tufts a new $1.2 million Picker CT scanner with highly
sophisticated imaging capabilities. We pay approximately $17,703 monthly for the
lease and service of the scanner, increasing to $28,748 next year.

         We hired five employees during the 1999 fiscal year. This increased our
compensation expense to a total of $98,750 per month (excluding the value of
stock options). Compensation charged to operations in connection with
employee stock options was $225,000 in 1999. Grants and awards of stock

                                      -32-

<PAGE>

options and warrants to consultants represented compensation expense of $1.2
million during 1999. Each of the five new employees work out of our Westborough
office in the areas of clinical development, regulatory approval processes, and
the use of CT imaging technologies.

         PLAN OF OPERATION. During the next twelve months, we will focus our
efforts on completing preclinical studies, beginning human trial and human pilot
studies on selected indications, preparing for the design and assembly of laser
and other treatment devices, preparing to manufacture clinical quantities of our
drug formulations and preparation of required filings to FDA and foreign
regulatory bodies. We will also continue with animal studies and evaluation of
proprietary photoactive agent candidates, pursuing patent protection and seeking
potential research and development and collaboration candidates.

         During the 12 months ended December 31, 1999, we spent approximately
$709,416 to acquire equipment necessary to support animal preclinical and human
clinical trials, and on development of photoactive agents and targeting systems.
We anticipate increased spending during fiscal 2000 for clinical equipment and
clinical work provided by third-party researchers. During the next twelve months
we expect to spend approximately $1,114,000 to obtain new equipment. The
research contracts to which we are currently a party in the aggregate will
require us to spend $454,107 during the next twelve months for the projects
presently contemplated under those agreements. Additional projects may be
undertaken with those institutions for compensation to be agreed upon at that
time.

         Any profits we realize under our product distribution agreement with
Coherent, Inc. for the sale, marketing and distribution of our PulseView-TM-
software will be recognized if and when we sell the software to Coherent. We
expect profits from this software to be less than $50,000 over the two year term
of the agreement, which expires in January 2002.

         Expenses related to research and development increased approximately
$1,566,000 in 1999. We spent the majority of this increase (over $1.1 million)
on preclinical trials and drug development efforts. The other $400,000 relate to
compensation for consultants and employees working on research and development,
depreciation of equipment used in research and development and legal fees
associated with obtaining and prosecuting patents on our technologies.

         Our administrative expenses increased in 1999 compared to 1998 by
approximately $2,300,000. The significant administrative expenses for 1999
relate to our grant of warrants covering 500,000 shares of our Common Stock to a
consultant in exchange for services relating to financing opportunities.
Additionally we spent $867,551 on legal fees; we incurred a $309,029 loss on our
joint venture, Sentigen; and we spent $224,417 on payroll and benefits and
$213,011 for public and investor relations.

         We do not presently anticipate adding a significant number of
additional personnel to work in either the Westborough or the Knoxville offices.
We will consider faster growth if that would present opportunities to increase
our product pipeline, or opportunities for more rapid FDA approval or to attain
licensing revenues. We intend to structure our research and development and
collaborative arrangements to make the fullest possible use of personnel and
facilities provided by the parties with whom we may contract.

         With the funds we received from our financings in 1999 and in the first
quarter of 2000, plus the credit available from Elan (to fund a portion of the
anticipated development costs of Sentigen) and from Mr. Tannebaum, we believe we
will have enough cash resources for our current commitments during the next 12
months. However, as we progress toward and into human clinical trials, our use
of capital will increase and will continue to do so at an accelerating pace.
Greater capital resources would enable us to quicken and expand our research and
development activities over that 12-month period; and our failure to raise
additional capital will (absent a suitable collaborative agreement providing for
a third party to take over these functions) significantly impair our ability to
conduct further research and development activities beyond those currently
contracted for and our ability to seek regulatory approval for any possible
product resulting from that research. In any event, complete development and
commercialization of our technology will require substantial additional funds.
See "Risk Factors -- We must obtain significant additional financing," above.
Accordingly, we are continuously evaluating capital formation activities and
opportunities, either as part of collaborative arrangements with third parties
or through offerings of equity or debt unrelated to collaborations.

                                      -33-

<PAGE>

ITEM 7.    FINANCIAL STATEMENTS.











                                      -34-

<PAGE>

INDEPENDENT AUDITORS' REPORT

Board of Directors
Photogen Technologies, Inc.
Knoxville, Tennessee

We have audited the accompanying consolidated balance sheets of Photogen
Technologies, Inc., a development stage company, as of December 31, 1998 and
1999, and the related consolidated statements of operations, shareholders'
equity and cash flows for the period from November 3, 1996 (inception) to
December 31, 1999 and the years ended December 31, 1998 and 1999. 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 audits 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 Photogen
Technologies, Inc. at December 31, 1998 and 1999, and the results of its
operations and its cash flows for the period from November 3, 1996 (inception)
to December 31, 1999 and the years ended December 31, 1998 and 1999, in
conformity with generally accepted accounting principles.

                                            /s/ BDO Seidman, LLP

Chicago, Illinois
February 25, 2000



                                      -35-
<PAGE>


                            CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>


DECEMBER 31,                                                                               1998             1999
------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>              <C>
ASSETS

CURRENT ASSETS
     Cash and cash equivalents                                                  $       652,226  $     1,681,773
     Restricted cash (Note 5(b))                                                              -          100,000
     United States Treasury Notes, total face value $5,660,000 and
         $5,470,000, respectively                                                     5,682,105        5,472,564
     Interest receivable                                                                121,471           84,327
     Prepaid consulting expense (Note 5(a))                                                   -        1,585,575
     Prepaid expenses                                                                   435,395          531,710
     Deferred offering costs (Note 9)                                                         -           59,000
------------------------------------------------------------------------------------------------------------------

TOTAL CURRENT ASSETS                                                                  6,891,197        9,514,949
------------------------------------------------------------------------------------------------------------------

EQUIPMENT AND LEASEHOLD IMPROVEMENTS, less accumulated
     depreciation of $129,004 and $393,692, respectively (Note 4(a))                  1,169,388        1,279,441

PATENT COSTS, net of amortization of $17,361                                                  -          482,639

DEPOSIT                                                                                       -           29,370

INVESTMENT IN AND ADVANCES TO AFFILIATE (Notes 3 and 8)                                       -       11,998,430
------------------------------------------------------------------------------------------------------------------



                                                                                $     8,060,585  $    23,304,829
==================================================================================================================

</TABLE>


                                      -36-
<PAGE>


                                                     CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

DECEMBER 31,                                                                               1998              1999
--------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>                <C>
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
     Accounts payable                                                           $       804,248    $      833,163
     Current portion of obligation under capital leases (Note 4(a))                     111,769            21,148
--------------------------------------------------------------------------------------------------------------------

TOTAL CURRENT LIABILITIES                                                               916,017           854,311

OBLIGATION UNDER CAPITAL LEASES (Note 4(a))                                              35,990            18,356
--------------------------------------------------------------------------------------------------------------------

COMMITMENTS (Note 4)

SHAREHOLDERS' EQUITY (Notes 2, 3, 5 and 6)
     Preferred stock; par value $.01 per share; 5,000,000 shares
         authorized including:
           Series A preferred stock; 12,015 shares authorized
              and outstanding, liquidation preference $1,000 per
              share ($12,015,000 in aggregate)                                                -               120
     Common stock; par value $.001 per share; 150,000,000 shares
         authorized; 36,875,020 and 37,383,386 shares issued and
         outstanding                                                                     36,875            37,384
     Additional paid-in capital                                                       9,602,097        30,977,893
     Deficit accumulated during the development stage                                (2,530,394)       (8,583,235)
--------------------------------------------------------------------------------------------------------------------

TOTAL SHAREHOLDERS' EQUITY                                                            7,108,578        22,432,162
--------------------------------------------------------------------------------------------------------------------

                                                                                $     8,060,585    $   23,304,829
====================================================================================================================

</TABLE>


                                      -37-
<PAGE>


                                           CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>


                                                                                                           Cumulative
                                                                                                              Amounts
                                                                                                                 From
                                                                                                          November 3,
                                                                                                                 1996
                                                                Year Ended            YEAR ENDED       (Inception) to
                                                              December 31,          DECEMBER 31,         December 31,
                                                                      1998                  1999                 1999
------------------------------------------------------------------------------------------------------------------------
<S>                                                     <C>                   <C>                   <C>
OTHER INCOME
     Investment income                                  $          392,599    $          179,795    $         679,527

EXPENSES
     Operating (Notes 3, 4, 5 and 7)                             2,366,512             6,232,636            9,262,762
------------------------------------------------------------------------------------------------------------------------

NET LOSS                                                        (1,973,913)           (6,052,841)          (8,583,235)

DIVIDENDS ON PREFERRED STOCK (Note 3)                                    -              (220,677)
--------------------------------------------------------------------------------------------------

NET LOSS APPLICABLE TO COMMON SHAREHOLDERS                      (1,973,913)           (6,273,518)
==================================================================================================

BASIC AND DILUTED LOSS PER COMMON SHARE                 $             (.05)   $             (.17)
==================================================================================================

WEIGHTED AVERAGE NUMBER OF COMMON
     SHARES OUTSTANDING - BASIC AND DILUTED                     36,692,708            36,983,707
==================================================================================================
</TABLE>

                                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

                                      -38-
<PAGE>

                                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                                   Preferred Stock               Common Stock
                                              --------------------------  --------------------------
                                                   Shares      Amount       Shares          Amount
----------------------------------------------------------------------------------------------------
<S>                                           <C>         <C>             <C>          <C>
Contribution of capital                                 - $         -            -   $           -
Net loss for the period ended
     December 31, 1996                                  -           -            -               -
----------------------------------------------------------------------------------------------------

BALANCE, at December 31, 1996                           -           -            -               -

     Net loss for the Period January 1, 1997 to
         May 15, 1997                                   -           -            -               -
     Capital contribution                               -           -            -               -
----------------------------------------------------------------------------------------------------

BALANCE, at May 15, 1997                                -           -            -               -

     Issuance of common stock                           -           -    6,312,833           6,313
     Effect of recapitalization and merger              -           -   29,687,167          29,687
     Cost associated with recapitalization
         and Merger                                     -           -            -               -
     Net loss for the period May 16, 1997
         to December 31, 1997                           -           -            -               -
----------------------------------------------------------------------------------------------------

BALANCE, at December 31, 1997                           -           -   36,000,000          36,000

     Issuance of common stock                           -           -      875,020             875
     Costs associated with common stock
         Issuance                                       -           -            -               -
     Options issued to consultants                      -           -            -               -
     Net loss for the year ended
         December 31, 1998                              -           -            -               -
----------------------------------------------------------------------------------------------------

<CAPTION>

                                                                                     Deficit
                                                                                 Accumulated
                                                                 Additional       During the
                                                 Members'           Paid-in      Development
                                                  Capital           Capital            Stage          Total
-------------------------------------------------------------------------------------------------------------
<S>                                          <C>              <C>             <C>              <C>
Contribution of capital                      $      7,268     $           -   $            -   $      7,268
Net loss for the period ended
     December 31, 1996                             (1,779)                -                -         (1,779)
-------------------------------------------------------------------------------------------------------------

BALANCE, at December 31, 1996                       5,489                 -                -          5,489

     Net loss for the Period January 1, 1997 to
         May 15, 1997                                   -                 -           (3,511)        (3,511)
     Capital contribution                           3,511                 -                -          3,511
-------------------------------------------------------------------------------------------------------------

BALANCE, at May 15, 1997                            9,000                 -           (3,511)         5,489

     Issuance of common stock                           -         1,797,137                -      1,803,450
     Effect of recapitalization and merger         (9,000)        1,181,500            1,732      1,203,919
     Cost associated with recapitalization
         and Merger                                     -          (371,111)               -       (371,111)
     Net loss for the period May 16, 1997
         to December 31, 1997                           -                 -         (554,702)      (554,702)
-------------------------------------------------------------------------------------------------------------

BALANCE, at December 31, 1997                           -         2,607,526         (556,481)     2,087,045

     Issuance of common stock                           -         6,999,125                -      7,000,000
     Costs associated with common stock
         Issuance                                       -           (50,000)               -        (50,000)
     Options issued to consultants                      -            45,446                -         45,446
     Net loss for the year ended
         December 31, 1998                              -                 -       (1,973,913)    (1,973,913)
-------------------------------------------------------------------------------------------------------------
</TABLE>

                                      -39-

<PAGE>

                      CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>




                                                  Preferred Stock             Common Stock
                                              ------------------------ ---------------------------
                                                    Shares     Amount      Shares         Amount
--------------------------------------------------------------------------------------------------
<S>                                                 <C>    <C>         <C>          <C>
BALANCE, at December 31, 1998                            - $        -  36,875,020   $     36,875

     Exercise of stock options                           -          -       4,500              5
     Issuance of warrants and options                    -          -           -              -
     Issuance of common stock                            -          -     503,866            504
     Issuance of preferred stock                    12,015        120           -              -
     Net loss for the year ended December 31,
         1999                                            -          -           -              -
--------------------------------------------------------------------------------------------------

BALANCE, at December 31, 1999                       12,015 $      120  37,383,386   $     37,384
--------------------------------------------------------------------------------------------------

<CAPTION>

                                                                                          Deficit
                                                                                      Accumulated
                                                                    Additional         During the
                                                   Members'            Paid-in        Development
                                                    Capital            Capital              Stage           Total
-------------------------------------------------------------------------------------------------------------------
<S>                                            <C>               <C>             <C>                <C>
BALANCE, at December 31, 1998                  $          -      $   9,602,097   $     (2,530,394)  $   7,108,578

     Exercise of stock options                            -             50,058                  -          50,063
     Issuance of warrants and options                     -          3,664,749                  -       3,664,749
     Issuance of common stock                             -          6,082,150                  -       6,082,654
     Issuance of preferred stock                          -         11,578,839                  -      11,578,959
     Net loss for the year ended December 31,
         1999                                             -                  -         (6,052,841)     (6,052,841)
-------------------------------------------------------------------------------------------------------------------

BALANCE, at December 31, 1999                  $          -      $  30,977,893   $     (8,583,235)  $  22,432,162
-------------------------------------------------------------------------------------------------------------------

</TABLE>

                                  SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS



                                      -40-
<PAGE>


                                           CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                                                       Cumulative
                                                                                                          Amounts
                                                                                                             From
                                                                                                      November 3,
                                                                                                             1996
                                                           Year Ended            YEAR ENDED        (Inception) to
                                                         December 31,          DECEMBER 31,          December 31,
                                                                 1998                  1999                  1999
-------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>                   <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES
     Net loss                                       $      (1,973,913)    $      (6,052,841)   $       (8,583,235)
     Depreciation and amortization                            148,761               282,049               448,388
     Loss on sale of marketable securities                      9,238                     -               (18,503)
     United States Treasury Notes
         amortization                                          22,364                24,914                55,052
     Stock option compensation                                 45,446               381,321               426,767
     Issuance of warrants in exchange for
         services rendered                                          -             1,043,466             1,043,466
     Loss from investment in affiliate                              -               306,029               306,029
     Changes in operating assets and
         liabilities
         Prepaid expenses                                    (427,231)              (96,315)             (531,710)
         Interest receivable                                 (100,069)               37,144               (84,832)
         Accounts payable                                     686,015               (21,085)              783,163
-------------------------------------------------------------------------------------------------------------------

Net cash used in operating activities                      (1,589,389)           (4,095,318)           (6,155,415)
-------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
     Sale of marketable securities                            400,000                     -             2,164,464
     Purchases of marketable securities                             -                     -            (2,182,967)
     Purchases of United States Treasury
         Notes                                            (14,516,754)           (5,475,373)          (22,037,003)
     Sales of United States Treasury Notes                 10,343,698             5,660,000            17,643,548
     Purchase of equipment and leasehold
         improvements                                        (877,459)             (374,741)           (1,381,429)
     Costs to acquire patent                                        -              (150,000)             (187,335)
     Investment in and advances to affiliate                        -           (12,304,459)          (12,304,459)
     Increase in restricted cash                                    -              (100,000)             (100,000)
     Increase in deposit                                            -               (29,370)              (29,370)
-------------------------------------------------------------------------------------------------------------------

Net cash used in investing activities                      (4,650,515)          (12,773,943)          (18,414,551)
-------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      -41-

<PAGE>

                                           CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                                                       Cumulative
                                                                                                          Amounts
                                                                                                             From
                                                                                                      November 3,
                                                                                                             1996
                                                           Year Ended            YEAR ENDED        (Inception) to
                                                         December 31,          DECEMBER 31,          December 31,
                                                                 1998                  1999                  1999
-------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>                   <C>                  <C>
CASH FLOWS FROM FINANCING ACTIVITIES
     Principal payments on capital leases           $        (140,501)    $        (108,255)   $         (252,200)
     Net proceeds from issuance of equity                   6,950,000            18,066,063            25,022,376
     Increase in deferred offering costs                            -               (59,000)              (59,000)
     Proceeds from capital contributions by
         shareholders                                               -                     -             1,911,674
     Cost of recapitalization                                       -                     -              (371,111)
-------------------------------------------------------------------------------------------------------------------

Net cash provided by financing activities                   6,809,499            17,898,808            26,251,739
-------------------------------------------------------------------------------------------------------------------

NET INCREASE IN CASH AND CASH
     EQUIVALENTS                                              569,595             1,029,547             1,681,773

CASH AND CASH EQUIVALENTS, at beginning
     of year                                                   82,631               652,226                     -
-------------------------------------------------------------------------------------------------------------------

CASH AND CASH EQUIVALENTS, at end of year           $         652,226     $       1,681,773    $        1,681,773
===================================================================================================================
</TABLE>

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
     1999
       $300,000 of patent costs were paid through the issuance of common stock.
       Warrants issued in exchange for consulting services of $2,629,041.
     1998
       Equipment purchased under capital leases amounted to $209,165.

                   SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

                                      -42-
<PAGE>

                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.      ORGANIZATION AND
        SIGNIFICANT ACCOUNTING
        POLICIES

        NATURE OF OPERATIONS       Photogen Technologies, Inc. (the "Company"),
                                   through its subsidiary Photogen, Inc.,
                                   successor to Photogen, L.L.C., is a
                                   development stage biotechnology company that
                                   is focusing on developing minimally invasive
                                   products for treatment and diagnosis of
                                   disease. The Company's technologies involve
                                   methods, materials and devices that are
                                   intended to destroy diseased cells, remove
                                   tissue or identify and diagnose disease.

        PRINCIPLES OF              Intercompany balances and transactions have
        CONSOLIDATION              been eliminated in consolidation.

        ESTIMATES                  The financial statements include estimated
                                   amounts and disclosures based on management's
                                   assumptions about future events. Actual
                                   results may differ from those estimates.

        CASH EQUIVALENTS           Highly liquid investments with a maturity of
                                   three months or less when purchased are
                                   classified as cash equivalents.

        MARKETABLE SECURITIES      Marketable securities consisting of
                                   marketable debt securities are classified as
                                   held-to-maturity securities and all
                                   investments mature within one year.
                                   Held-to-maturity securities are stated at
                                   amortized cost which approximates market.

        EQUIPMENT AND LEASEHOLD    Equipment and leasehold improvements are
        IMPROVEMENTS               stated at cost. Depreciation and amortization
                                   of equipment are provided for using the
                                   straight-line method over the estimated
                                   useful lives of the assets. Computers and
                                   laboratory equipment is being depreciated
                                   over 5 years, furniture and fixtures is
                                   being depreciated over 7 years and
                                   leasehold improvements are being amortized
                                   over 5 years. Leasehold improvements are
                                   being amortized on a straight-line basis
                                   over the lives of the respective leases or
                                   the service lives of the improvements,
                                   whichever is shorter. Depreciation expense
                                   was $148,761 and $264,688 for 1998 and
                                   1999.

                                   The Company reviews the carrying values of
                                   its other long-lived assets for possible
                                   impairment whenever an event or change in
                                   circumstances indicates that the carrying
                                   amount of the assets may not be recoverable.
                                   Any long-lived assets held for disposal are
                                   reported at the lower of their carrying
                                   amounts or fair value less cost to sell.

                                      -43-
<PAGE>


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


       PATENT COSTS                Internal patent costs are expensed in the
                                   period incurred. Patents purchased are
                                   capitalized and amortized over the life of
                                   the patent.

       RESEARCH AND                Research and development costs are charged to
       DEVELOPMENT                 expense when incurred. Research and
                                   development costs were approximately
                                   $1,258,000 in 1998 and $2,824,000 in 1999.

       INCOME TAXES                The Company recognizes deferred tax assets
                                   and liabilities for the expected future tax
                                   consequences of temporary differences between
                                   the tax basis and financial reporting basis
                                   of certain assets and liabilities based upon
                                   currently enacted tax rates expected to be in
                                   effect when such amounts are realized or
                                   settled.

                                   The Company has not recorded an income tax
                                   benefit for losses incurred of approximately
                                   $7,939,000 primarily expiring in 2018 and
                                   2019. The Company is in the development stage
                                   and realization of the losses is not likely.
                                   An income tax valuation allowance has been
                                   provided for the losses realized to date.

       BASIC AND DILUTED LOSS      Basic and diluted loss per common share is
       PER COMMON SHARE            computed based on the weighted average number
                                   of common shares outstanding. Loss per share
                                   excludes the impact of outstanding options
                                   and warrants as they are antidilutive.
                                   Potential common shares excluded from the
                                   calculation are 1,205,000 options and
                                   602,000 warrants.


       RECENT ACCOUNTING           In June 1998,  the FASB  issued  Statement of
       PRONOUNCEMENTS              Financial Accounting Standards ("SFAS") No.
                                   133, "Accounting for Derivative Instruments
                                   and Hedging Activities," which establishes
                                   accounting and reporting standards for
                                   derivative instruments and hedging
                                   activities. SFAS 133 is effective for years
                                   beginning after June 15, 2000. It requires
                                   that an entity recognize all derivatives as
                                   either assets or liabilities in the statement
                                   of financial position and measure those
                                   instruments at fair value. The Company, to
                                   date, has not engaged in derivative and
                                   hedging activities.

        RECLASSIFICATIONS          Certain 1998 amounts have been reclassified
                                   to conform with the 1999 presentation.

                                      -44-

<PAGE>

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.      RECAPITALIZATION AND       On May 16, 1997, MT Financial Group, Inc. (an
        MERGER                     inactive public company), through its wholly
                                   owned subsidiary, effected a reverse merger
                                   with Photogen, Inc. ("Photogen"),
                                   successor to Photogen, L.L.C. Photogen,
                                   L.L.C. was incorporated on September 10,
                                   1996 and commenced operations November 3,
                                   1996. Photogen, L.L.C. was formed to
                                   develop proprietary laser-based
                                   technologies related to photodynamic
                                   therapy. Legally, Photogen is a wholly
                                   owned subsidiary of Photogen Technologies,
                                   Inc. (formerly known as MT Financial
                                   Group, Inc.)

                                   For financial reporting purposes, Photogen
                                   was deemed to be the acquiring entity. The
                                   transaction has been reflected in the
                                   accompanying financial statements as (1) a
                                   recapitalization of Photogen (consisting of a
                                   48,000-for-one stock split and change in par
                                   value) and (2) an issuance of shares by
                                   Photogen in exchange for all of the
                                   outstanding shares of MT Financial Group,
                                   Inc.

                                   As part of the recapitalization, the Company
                                   sold 6,312,833 shares of common stock for a
                                   total purchase price of approximately
                                   $1,803,456. Further, as consideration for the
                                   acquisition of Photogen, Inc., 24,000,000
                                   shares of common stock were issued. The
                                   founding shareholders have agreed not to
                                   sell these shares until August 2001
                                   without the prior consent of an investor.
                                   The shareholders currently hold
                                   approximately 22,600,000 shares.

                                   Legal and brokerage fees of approximately
                                   $371,000 were charged to additional paid-in
                                   capital as costs of the recapitalization and
                                   merger. Included in the paid-in capital is
                                   the net cash of approximately $109,000 from
                                   MT Financial Group, Inc.

                                   On March 13, 1998, the Company completed a
                                   private placement of 875,020 shares of common
                                   stock for $8.00 per share to a number of
                                   accredited investors. The Company received
                                   $7,000,000 in gross proceeds from this
                                   offering.

                                      -45-
<PAGE>

                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


3.      JOINT VENTURE/             On October 12, 1999, the Company formed a
        INVESTMENT IN              joint venture with Elan International
        AFFILIATE                  Services, Ltd. ("Elan") to develop and
                                   commercialize nanoparticulate diagnostic
                                   imaging agents for the detection and
                                   treatment of cancer through lymphography.

                                   Sentigen Ltd. ("Sentigen") was formed to hold
                                   the operations, assets and liabilities of the
                                   joint venture. Elan purchased 2,980 shares of
                                   Sentigen nonvoting convertible preferred
                                   stock for $2,985,000 representing a 19.9%
                                   ownership interest. Elan also purchased
                                   12,015 shares of the Company's Series A
                                   convertible exchangeable preferred stock for
                                   $12,015,000. In connection with the issuance
                                   of the preferred stock to Elan, the Company
                                   granted warrants to Elan to purchase 100,000
                                   shares of the Company's common stock at
                                   $21.17 per share which was valued at
                                   $678,000. As a result, a preferred stock
                                   dividend is being recorded for the accretion
                                   of the preferred stock to its face value of
                                   $12,015,000 over the period until it is first
                                   convertible.

                                   The Company purchased 12,000 shares of
                                   Sentigen's common stock for $12,015,000
                                   representing a 80.1% ownership interest.

                                   Sentigen used the $15,000,000 received from
                                   the Company and Elan to purchase from Elan a
                                   worldwide license to certain Elan technology
                                   related to the joint venture. Expenses
                                   incurred by the Company and Elan, which
                                   relate to the development of the diagnostic
                                   imaging agents, are charged to Sentigen.

                                   Elan granted the Company a line of credit of
                                   $4,806,000 to be used by the Company to fund
                                   its portion of Sentigen's research and
                                   development. The line of credit can be
                                   converted into the Company's common stock.
                                   Any borrowings under the line of credit would
                                   bear interest at 8%. There were no borrowings
                                   on this line of credit at December 31, 1999.

                                   In connection with the joint venture
                                   agreement, Elan also purchased 461,538 shares
                                   of the Company's common stock for $6,000,000.
                                   If the Company sells common stock in its next
                                   offering at less than $13 per share, Elan
                                   will receive additional shares of stock so
                                   that its price per share will equal the price
                                   in the offering.

                                   The total cash proceeds from the equity
                                   issuance to Elan of $18,015,000 were
                                   allocated to the common stock, preferred
                                   stock and the warrants.

                                      -46-
<PAGE>

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                   Elan has substantive participating rights in
                                   Sentigen, including the requirement for
                                   approval of the business plan and budgets
                                   and equal representation on the management
                                   committee which decides all day to day
                                   functions. As a result, the Company's
                                   investment in Sentigen is recorded under the
                                   equity method.

                                   Following is summarized financial information
                                   for Sentigen at December 31, 1999:

<TABLE>
<CAPTION>

                                                                                                           1999
                                  --------------------------------------------------------------------------------
<S>                                                                                           <C>
                                  License purchased from Elan                                 $      15,000,000

                                  Total assets                                                       15,000,000
                                  ================================================================================

                                  Due to affiliates                                                     382,040

                                  Total shareholders' equity                                         14,617,960
                                  --------------------------------------------------------------------------------

                                  Total liabilities and equity                                       15,000,000
                                  ================================================================================

                                  Research and development expense                                      382,040
                                  --------------------------------------------------------------------------------

                                  Net loss                                                    $         382,040
                                  ================================================================================

</TABLE>

4.      COMMITMENTS                (a)      The Company  leases  offices and a
                                            laboratory at two locations. One
                                            lease expires in 2001, and the other
                                            lease expires in 2004. As of
                                            December 31, 1999, the Company
                                            entered into an operating lease for
                                            laboratory equipment beginning
                                            January 1, 2000 and expiring in
                                            2004. Total rental expense charged
                                            to operations for the years ended
                                            December 31, 1999 and 1998
                                            aggregated approximately $28,000 and
                                            $44,000, respectively. Commitments
                                            for minimum rentals under
                                            noncancellable leases as of December
                                            31, 1999 are as follows.
                                            Additionally, the Company leases
                                            laboratory equipment under capital
                                            leases.


                                      -47-
<PAGE>


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


<TABLE>
<CAPTION>

                                                                                 Capitalized         Operating
                                  YEAR ENDING DECEMBER 31,                            Leases            Leases
                                  -------------------------------------------------------------------------------
<S>                               <C>                                        <C>                <C>
                                  2000                                       $        25,673    $      287,520
                                  2001                                                18,553           412,220
                                  2002                                                 1,574           405,380
                                  2003                                                     -           406,680
                                  2004                                                     -           397,560
                                  -------------------------------------------------------------------------------

                                  Total minimum lease payments                        45,800         1,909,360

                                  Less amount representing interest                   (6,296)                -
                                  -------------------------------------------------------------------------------

                                  Present value of net minimum lease
                                      payments                               $        39,504
                                  ============================================================

                                   The equipment which is leased under the
                                   capitalized lease agreements and classified
                                   as equipment has cost and accumulated
                                   amortization as follows. Lease amortization
                                   is included in depreciation and amortization
                                   expense.

<CAPTION>

                                  DECEMBER 31,                                          1998              1999
                                  -------------------------------------------------------------------------------
<S>                                                                          <C>                <C>
                                  Cost                                       $       316,561    $       82,539
                                  Accumulated amortization                            40,599            35,767
                                  -------------------------------------------------------------------------------

                                                                             $       275,962    $       46,772
                                  ===============================================================================

</TABLE>

                                   (b)      The Company has entered into
                                            employment agreements with certain
                                            officers and employees for initial
                                            terms ranging between three and five
                                            years expiring in 2002 and 2003.
                                            Under the terms of these agreements,
                                            the officers and employees are each
                                            entitled to initial annual salaries
                                            ranging between $85,000 and $190,000
                                            plus fringe benefits (subject to
                                            adjustments).


                                      -48-
<PAGE>


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


5.      EQUITY TRANSACTIONS        (a)      The Company applies the recognition
                                            provisions of Statement of
                                            Financial Accounting Standards
                                            ("SFAS") No. 123 "Accounting for
                                            Stock-Based Compensation" (SFAS
                                            123) in accounting for stock
                                            options issued to nonemployees.
                                            During 1999, the Company issued
                                            10,000 options and 502,000
                                            warrants for common stock in
                                            exchange for consulting services
                                            rendered. The warrants are
                                            immediately exerciseable and the
                                            options vest over five years. As
                                            the fair market value of these
                                            services was not readily
                                            determinable, these services were
                                            valued based on the fair market
                                            value for the options issued
                                            which ranged from $5.22 to $9.52.
                                            Fair market value was determined
                                            using the Black-Scholes option
                                            pricing model. Consulting costs
                                            charged to operations were
                                            approximately $45,000 in 1998 and
                                            $1,200,000 in 1999. $1,585,575
                                            has been classified as prepaid
                                            consulting expense as this amount
                                            represents payment for services to
                                            be provided through August of 2000.

                                   (b)      In August 1999, the Company
                                            purchased patents for $500,000 which
                                            were satisfied by the issuance of
                                            42,328 shares of the Company's
                                            common stock valued at $300,000 and
                                            cash of $200,000. $150,000 of the
                                            cash was paid in 1999 and $50,000 is
                                            to be paid in March 2000. In August,
                                            the Company placed $100,000 of cash
                                            in escrow as collateral for the
                                            future payments. This cash is
                                            recorded as restricted cash at
                                            December 31, 1999.

                                   (c)      In 1999, the Company issued 740,000
                                            variable stock options to
                                            employees which vest upon
                                            completion of performance
                                            milestones including filing for a
                                            new drug application, acquisition
                                            of a patent FDA approval act.
                                            Exercise prices range from $9.38
                                            to $18.13 and expire in 10 years.
                                            As of December 31, 1999, 75,000
                                            of these shares had vested.
                                            Compensation charged to
                                            operations was $225,000 in 1999.

                                      -49-
<PAGE>

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                   (d)      Series A Preferred  Stock - The
                                            Company designated 12,015 shares of
                                            preferred stock as Series A
                                            preferred stock ("Series A"). For
                                            the first six years from issuance,
                                            the preferred stock has a mandatory
                                            dividend of 7%. Such dividends shall
                                            be cumulative and shall compound on
                                            a semiannual basis and are payable
                                            semiannually solely by the issuance
                                            of additional preferred Series A
                                            stock. The Company has a deficit. As
                                            a result, the dividends have been
                                            recorded against paid-in capital.
                                            The Series A shall rank senior to
                                            any future series of preferred stock
                                            unless the majority of the Series A
                                            shareholders agree to rank pari
                                            passu with any future issuances. The
                                            liquidation preference is $1,000 per
                                            share. The Series A is convertible,
                                            after two years but before six years
                                            from issuance, into common stock of
                                            the Company with an initial
                                            conversion price of $21.17. The
                                            conversion price is subject to
                                            adjustment for certain dilutive
                                            events. Alternatively, the
                                            holders of the Series A can elect
                                            to exchange the Series A
                                            preferred shares for the number
                                            of shares in Sentigen which would
                                            allow the Series A holders to
                                            then own a total of 50% of
                                            Sentigen. The Series A holder is
                                            currently the minority
                                            shareholder in Sentigen. The
                                            exchange right is not available
                                            for any shares which have been
                                            converted to common stock. The
                                            exchange right terminates six
                                            years from the issuance of the
                                            Series A. The Series A stock was
                                            issued in October 1999.

                                            The holder of Series A Preferred
                                            also has demand and piggyback
                                            registration rights with respect
                                            to Common Stock issuable to it
                                            upon conversion of its Series A
                                            Preferred. The holder of Series A
                                            Preferred is only entitled to
                                            vote on matters that adversely
                                            affect or change the rights of
                                            holders of Series A Preferred
                                            Stock and does not have the right
                                            to vote on the election of
                                            directors of the Company. The
                                            holder of Series A Preferred also
                                            has a preemptive right until
                                            October 2003 to participate in
                                            any offering of the Company. If
                                            in the Company's next third-party
                                            offering they sell common stock
                                            at a price less than $13 per
                                            share, the Company must issue
                                            additional shares to Elan so that
                                            Elan's overall price for its
                                            Common Stock equals the effective
                                            price in that other third-party
                                            offering.

                                   (e)      COMMON STOCK - The Company is
                                            subject to eight sets of
                                            registration rights agreements
                                            covering 1,692,546 shares of the
                                            Company's Common Stock, warrants
                                            that have vested covering the
                                            Company's Common Stock and Common
                                            Stock issuable upon conversion of
                                            the Company's Series A Preferred.
                                            All of the agreements contain
                                            piggyback registration rights and
                                            four contain demand registration
                                            rights upon the occurrence of
                                            certain events and subject to
                                            various terms and conditions. Of
                                            the 1,692,546 shares, 576,665
                                            shares are entitled to piggyback
                                            registration only and 1,115,881
                                            are entitled to both demand and
                                            piggyback registration. Warrants
                                            that have vested covering 500,000
                                            shares of the Company's Common
                                            Stock have weighted average
                                            anti-dilution rights.

6.      STOCK INCENTIVE PLANS      In May 1998, the shareholders approved the
        AND WARRANTS               1998 Long-Term Incentive Compensation Plan
                                   (the "Plan"), which provides for the granting
                                   of up to 2,000,000 stock options to key
                                   employees, directors and consultants. Options
                                   granted may be either "incentive stock
                                   options," within the meaning of Section 422A
                                   of the Internal Revenue Code, or nonqualified
                                   options.

                                   The stock options are exercisable over a
                                   period determined by the Board of Directors
                                   (through its Compensation Committee), but
                                   generally no longer than 10 years after the
                                   date they are granted. The vesting period
                                   ranges from 3 to 5 years.

                                      -50-

<PAGE>

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                   Information with respect to the Plan follows:

<TABLE>
<CAPTION>

                                  YEAR ENDED DECEMBER 31,                                1998              1999
                                  ------------------------------------------------------------------------------
                                  <S>                                        <C>               <C>
                                  Options outstanding at beginning of
                                      year                                                  -            92,500
                                  Options granted                                      92,500         1,117,500
                                  Options exercised                                         -            (4,500)
                                  --------------------------------------------------------------------------------

                                  Options outstanding at end of year                   92,500         1,205,500
                                  ================================================================================

                                  Options prices per share granted           $    11.13-15.06  $     9.38-19.38
                                  ================================================================================

                                  Weighted average exercise price
                                      Options granted                        $          12.24  $          11.83
                                      Options exercised                                     -             11.13
                                      Options outstanding at end of
                                           year                                         12.24             11.94
                                      Options exercisable at end of
                                           year                                             -              9.88

<CAPTION>

                                              Options Outstanding                     Options Exercisable
                                   --------------------------------------------------------------------------------
                                                                   Weighted                             Weighted
                                                                   Average                               Average
                                                     Number       Remaining                 Number       Remaining
                                       Range of  Outstanding at   Contractual  Range of  Outstanding at Contractual
                                       Exercise    December 31,      Life      Exercise    December 31,    Life
                                        Price         1999         (Years)      Price        1999         (Years)
                                   --------------------------------------------------------------------------------
                                   <S>            <C>             <C>         <C>        <C>            <C>
                                    $9.38-11.13       805,500        9.9       $9.38-11.13   81.000        9.9
                                   $12.75-19.38       400,000        9.9      $12.75-19.38   8.000         9.0
</TABLE>

                                   The Company applies APB Opinion 25 and
                                   related interpretations in accounting for
                                   stock options granted to employees and
                                   directors. Accordingly, no compensation cost
                                   has been recognized for the Plan as the
                                   exercise price of the options equaled the
                                   fair market value of the stock on the
                                   grant date.

                                      -51-

<PAGE>

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   The weighted-average, grant date fair value
                                   of stock options granted to employees and
                                   directors during the year, and the
                                   significant assumptions used to determine
                                   those fair values, using a modified
                                   Black-Scholes option pricing model, and the
                                   pro forma effect on earnings of the fair
                                   value accounting for stock options under
                                   Statement of Financial Accounting Standards
                                   No. 123, are as follows:

<TABLE>
<CAPTION>

                                                                                      1998                  1999
                                  -----------------------------------------------------------------------------------
                                  <S>                                     <C>                   <C>
                                  Weighted average fair value per
                                      options granted                     $           7.89      $          10.76

                                  Significant assumptions
                                      (weighted average)
                                      Risk-free interest rate at grant
                                           date                                        5.1%                  6.2%
                                      Expected stock price volatility                 60.0%                 88.0%
                                      Expected dividend payout                           -                     -
                                      Expected option life (years)                       7                     7

                                  Net loss
                                      As reported                         $     (1,973,913)     $     (6,052,841)
                                      Pro forma                           $     (2,042,238)     $     (6,511,604)

                                  Net loss applicable to common
                                      shares
                                      As reported                               (1,973,913)           (6,273,518)
                                      Pro forma                                 (2,042,238)           (6,732,281)

                                  Net loss per share - basic and
                                      diluted
                                      As reported                         $           (.05)     $           (.17)
                                      Pro forma                           $           (.06)     $           (.18)
</TABLE>

                                      -52-

<PAGE>

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   Information with respect to warrants follows:

<TABLE>
<CAPTION>

                                  YEAR ENDED DECEMBER 31,                               1998             1999
                                  -----------------------------------------------------------------------------
                                  <S>                                        <C>              <C>
                                  Warrants outstanding at beginning of
                                      year                                                 -                -
                                  Warrants granted                                         -          602,000
                                  -----------------------------------------------------------------------------

                                  Warrants outstanding at end of year                      -          602,000
                                  =============================================================================

                                  Warrants prices per share granted          $             -  $    9.45-21.17
                                  =============================================================================

                                  Weighted average exercise price
                                      Warrants granted                       $             -  $         11.42
</TABLE>

7.      GRANT                      Operating expenses for 1998 have been reduced
                                   by a grant in the amount of $99,927 received
                                   from the National Institutes of Health
                                   National Cancer Institute. The funds were
                                   granted for a project titled "Simultaneous
                                   Two-Photon-Induced Photodynamic Therapy."
                                   The grant was intended to offset expenses
                                   to be incurred. The funds are refundable
                                   only upon the National Institutes of
                                   Health's determination of a misuse of
                                   funds. The Company is under no future
                                   obligations under the grant agreement.

8.      RELATED PARTY
        TRANSACTIONS               In November 1999, an investor agreed to
                                   provide a credit facility of up to
                                   $1,000,000. Any borrowings under this
                                   facility will bear interest at 6%.
                                   Payments of interest only will be due
                                   annually, with the principal due in five
                                   years. The loan would be secured by a lien
                                   on all of the Company's assets. No borrowings
                                   were made under this credit facility.

                                   The Company performs work on behalf of its
                                   affiliate, Sentigen. Sentigen is billed
                                   for those services at an agreed upon rate.
                                   Total billings to Sentigen were
                                   approximately $289,000 during 1999.

9.      SUBSEQUENT EVENT           Subsequent to year end, the Company completed
                                   a private placement of its Series B
                                   convertible preferred stock. The Series B
                                   stock has an annual dividend rate of 6%, is
                                   subordinate to the Series A stock, is
                                   convertible into common stock and is
                                   redeemable at the Company's option after
                                   January 1, 2002. Net proceeds of $5,335,520
                                   were received. 1999 expenses for the private
                                   placement were recorded as deferred offering
                                   costs at December 31, 1999.

                                      -53-

<PAGE>

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

         None.

                                    PART III.

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

         The information required by Item 9 is incorporated by reference to the
information under the caption "Directors, Executive Officers, Promoters and
Control Persons; Compliance with Section 16(a) of the Exchange Act" in our
definitive proxy statement for the 2000 annual meeting of stockholders.

ITEM 10.   EXECUTIVE COMPENSATION.

         The information required by Item 10 is incorporated by reference to the
information under the caption "Executive Compensation" in our definitive proxy
statement for the 2000 annual meeting of stockholders.

ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         The information required by Item 11 is incorporated by reference to the
information under the caption "Security Ownership of Certain Beneficial Owners
and Management" in our definitive proxy statement for the 2000 annual meeting of
stockholders.

ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         The information required by Item 12 is incorporated by reference to the
information under the caption "Certain Relationships and Related Transactions"
in our definitive proxy statement for the 2000 annual meeting of stockholders.

ITEM 13.   EXHIBITS AND REPORTS ON FORM 8-K.

         EXHIBITS. The following is a list of exhibits filed as part of this
Form 10-KSB. Exhibits that were previously filed are incorporated by reference.
For exhibits incorporated by reference, the location of the exhibit in the
previous filings is indicated in parentheses.

                                      -54-

<PAGE>


      EXHIBIT NO.                                  DESCRIPTION

         3.1             Restated Articles of Incorporation of Photogen
                         Technologies, Inc. (Filed as exhibit 3.1 to the
                         Company's Current Report on Form 8-K dated June 17,
                         1998 and incorporated herein by reference.)

         3.2             Amended and Restated Certificate of Designations,
                         Preferences and Rights of Series A Preferred Stock.
                         (Filed as exhibit 3.5 to the Company's Quarterly Report
                         on Form 10-QSB for the quarter ended September 30, 1999
                         and incorporated herein by reference.)

         3.3             Certificate of Designation, Preferences and Rights of
                         Series B Convertible Preferred Stock. (Filed as exhibit
                         3 to the Company's Current Report on Form 8-K dated
                         February 18, 2000 and incorporated herein by
                         reference.)

         3.4             Bylaws of Photogen Technologies, Inc. (Filed as exhibit
                         3.2 to the Company's Registration Statement on Form
                         10-SB dated December 24, 1997 and incorporated herein
                         by reference.)

         3.5             Charter of Photogen, Inc. (Filed as exhibit 3.3 to the
                         Company's Registration Statement on Form 10-SB dated
                         December 24, 1997 and incorporated herein by
                         reference.)

         3.6             Amended and Restated Bylaws of Photogen, Inc. (Filed as
                         exhibit 3.4 to the Company's Annual Report on Form
                         10-KSB for the year ended December 31, 1998 and
                         incorporated herein by reference.)

         9.1             Amended and Restated Voting Agreement dated as of June
                         17, 1998 entered into by Eric A. Wachter, Ph.D., Craig
                         Dees, Ph.D., Walter G. Fisher, Ph.D., Tim Scott, Ph.D.,
                         John Smolik, and Robert J. Weinstein, M.D., and joined
                         into by the Company. (Filed as exhibit 9 to the
                         Company's Annual Report on Form 10-KSB for the year
                         ended December 31, 1998 and incorporated herein by
                         reference.)

        10.1             1998 Long Term Incentive Compensation Plan. (Filed as
                         Exhibit A to the Company's Schedule 14-A dated April
                         30, 1998 and incorporated herein by reference.)

        10.2             Lease Agreement entered into by the Company, P.C.
                         Powell and Wilma Powell dated July 1, 1999. (Filed
                         as exhibit 10.2 to the Company's Annual Report on
                         Form 10-KSB for the year ended December 31, 1999 and
                         incorporated herein by reference.)

        10.3             Lease Agreement entered into by the Company and
                         Westborough Mill, LLC dated November 1, 1999. (Filed
                         as exhibit 10.3 to the Company's Annual Report on
                         Form 10-KSB for the year ended December 31, 1999 and
                         incorporated herein by reference.)

        10.4             Lease Agreement entered into by the Company and
                         Westborough Mill, LLC dated March 1, 2000. (Filed as
                         exhibit 10.4 to the Company's Annual Report on Form
                         10-KSB for the year ended December 31, 1999 and
                         incorporated herein by reference.)

                                      -55-

<PAGE>

           EXHIBIT NO.                             DESCRIPTION

        10.5             Confirmatory License in favor of the U.S. Department of
                         Energy relating to the Company's Method for Improved
                         Selectivity in Photo-Activation and Detection of
                         Molecular Diagnostic Agents (Serial No. 08/741,370)
                         dated February 4, 1997. (Filed as exhibit 10.4 to the
                         Company's Registration Statement on Form 10-SB dated
                         December 24, 1997 and incorporated herein by
                         reference.)

        10.6             Confirmatory License in favor of the U.S. Department of
                         Energy relating to the Company's Method for Improved
                         Selectivity in Photo-Activation of Molecular Agents
                         (Serial No. 08/739,801) dated February 4, 1997. (Filed
                         as exhibit 10.5 to the Company's Registration Statement
                         on Form 10-SB dated December 24, 1997 and incorporated
                         herein by reference.)

        10.7             Form of Employment Agreements entered into by the
                         Company and each of John Smolik, Eric A. Wachter,
                         Ph.D., Walter G. Fisher, Ph.D., and Craig Dees, Ph.D.
                         dated May 16, 1997. (Filed as exhibit 10.6 to the
                         Company's Registration Statement on Form 10-SB dated
                         December 24, 1997 and incorporated herein by
                         reference.)

        10.8             Form of Non-competition/Non-disclosure Agreements
                         entered into by the Company and each of John Smolik,
                         Eric A. Wachter, Ph.D., Walter G. Fisher, Ph.D., Craig
                         Dees, Ph.D. and Timothy C. Scott dated May 16, 1997.
                         (Filed as exhibit 10.7 to the Company's Registration
                         Statement on Form 10-SB dated December 24, 1997 and
                         incorporated herein by reference.)

        10.9             Employment Agreement entered into by the Company and
                         Gerald Wolf, Ph.D., M.D. dated July 1, 1999. (Filed as
                         exhibit 10.2 to the Company's Quarterly Report for the
                         quarter ended September 30, 1999 and incorporated
                         herein by reference.) Confidential portions of this
                         exhibit were redacted.

        10.10            Employment Agreement entered into by the Company and
                         David D. Shaw, Ph.D. dated November 1, 1999. (Filed
                         as exhibit 10.10 to the Company's Annual Report on
                         Form 10-KSB for the year ended December 31, 1999 and
                         incorporated herein by reference.)

        10.11            Employment Agreement entered into by the Company and
                         Jay Zimmerman, M.Ed. dated November 15, 1999. (Filed
                         as exhibit 10.11 to the Company's Annual Report on
                         Form 10-KSB for the year ended December 31, 1999 and
                         incorporated herein by reference.)

        10.12            Form of Non-Qualified Stock Option Award Agreement
                         entered into by the Company and each of Lester
                         Mckeever, Jr., Daniel Tosteson, M.D., Mark Peterson,
                         Harry Morrison, Ph.D and Merrill Biel, M.D., Ph.D.
                         (Filed as exhibit 10.7 to the Company's Annual Report
                         for the year ended December 31, 1998 and incorporated
                         herein by reference.)

         10.13           Form of Incentive Stock Option Award Agreement entered
                         into by the Company and each of Jay Harkins, Dan
                         Hamilton, Karen Richmond and Verdene Smith. (Filed as
                         exhibit 10.8 to the Company's Annual Report for the
                         year ended December 31, 1998 and incorporated herein by
                         reference.)


                                      -56-


<PAGE>

        EXHIBIT NO.                                      DESCRIPTION

         10.14           Incentive Stock Option Award Agreement entered into by
                         the Company and Gerald Wolf Ph.D., M.D. dated July 23,
                         1999. (Filed as exhibit 10.14 to the Company's
                         Annual Report on Form 10-KSB for the year ended
                         December 31, 1999 and incorporated herein by
                         reference.)

         10.15           Incentive Stock Option Award Agreement entered into by
                         the Company and David D. Shaw, Ph.D. dated November 1,
                         1999. (Filed as exhibit 10.15 to the Company's Annual
                         Report on Form 10-KSB for the year ended December
                         31, 1999 and incorporated herein by reference.)

         10.16           Incentive Stock Option Award Agreement entered into by
                         the Company and David D. Shaw, Ph.D dated November 30,
                         1999. (Filed as exhibit 10.16 to the Company's Annual
                         Report on Form 10-KSB for the year ended December
                         31, 1999 and incorporated herein by reference.)

         10.17           Incentive Stock Option Award Agreement entered into by
                         the Company and Jay Zimmerman, M.Ed. dated November 30,
                         1999. (Filed as exhibit 10.17 to the Company's Annual
                         Report on Form 10-KSB for the year ended December
                         31, 1999 and incorporated herein by reference.)

         10.18           Form of Consulting Agreement entered into by the
                         Company and each of Daniel Tosteson, M.D. and Harry
                         Morrison, Ph.D. (Filed as exhibit 10.12 to the
                         Company's Annual Report for the year ended December 31,
                         1998 and incorporated herein by reference.)

         10.19           Research Agreement dated as of October 1, 1998 by and
                         between Photogen, Inc. and The Massachusetts Eye and
                         Ear Infirmary (relating to age-related macular
                         degeneration research). (Filed as exhibit 10.2 to the
                         Company's Quarterly Report on Form 10-QSB for the
                         quarter ended September 30, 1998 and incorporated
                         herein by reference.)

         10.20           Research Agreement dated as of November 6, 1998 by and
                         between Photogen, Inc. and the Massachusetts Eye and
                         Ear Infirmary (relating to ocular melanoma research).
                         (Filed as exhibit 10.11 to the Company's Annual Report
                         for the year ended December 31, 1998 and incorporated
                         herein by reference.)

         10.21           Tufts University Sponsored Research Agreement dated
                         August 1, 1999 by and between Photogen, Inc. and Tufts
                         University, a/k/a Trustees of Tufts College. (Filed as
                         exhibit 10.3 to the Company's Quarterly Report on Form
                         10-QSB for the quarter ended September 30, 1999 and
                         incorporated herein by reference.) Confidential
                         portions of this exhibit were redacted.

         10.22           Consulting Agreement by and between Photogen
                         Technologies, Inc. and Farcap Group LLC effective
                         August 9, 1999. (Filed as exhibit 10.4 to the Company's
                         Quarterly Report on Form 10-QSB for the quarter ended
                         September 30, 1999 and incorporated herein by
                         reference.)

         10.23           Warrant Agreement by and between Photogen Technologies,
                         Inc. and Farcap Group LLC effective August 9, 1999.
                         (Filed as exhibit 10.5 to the Company's Quarterly
                         Report on Form 10-QSB for the quarter ended September
                         30, 1999 and incorporated herein by reference.)

                                      -57-


<PAGE>

      EXHIBIT NO.                                    DESCRIPTION

         10.24           Agreement effective August 9, 1999 by and among
                         Alliance Pharmaceutical Corp., Photogen Technologies,
                         Inc. and Gerald Wolf, Ph.D, M.D. (Filed as exhibit 10.6
                         to the Company's Quarterly Report on Form 10-QSB for
                         the quarter ended September 30, 1999 and incorporated
                         herein by reference.) Confidential portions of this
                         exhibit were redacted.

         10.25           License Agreement effective as of September 30, 1999
                         between The General Hospital Corporation and Photogen,
                         Inc. (Filed as exhibit 10.7 to the Company's Quarterly
                         Report on Form 10-QSB for the quarter ended September
                         30, 1999 and incorporated herein by reference.)
                         Confidential portions of this exhibit were redacted.

         10.26           Securities Purchase Agreement dated as of October 20,
                         1999, among Photogen Technologies, Inc. and Elan
                         International Services, Ltd. (Filed as exhibit 10.8 to
                         the Company's Quarterly Report on Form 10-QSB for the
                         quarter ended September 30, 1999 and incorporated
                         herein by reference.) Confidential portions of this
                         exhibit were redacted.

         10.27           Warrant to Purchase Shares of Common Stock dated
                         October 20, 1999 between Photogen Technologies, Inc.
                         and Elan International Services, Ltd. (Filed as exhibit
                         10.9 to the Company's Quarterly Report on Form 10-QSB
                         for the quarter ended September 30, 1999 and
                         incorporated herein by reference.)

         10.28           Convertible Promissory Note dated October 20, 1999 from
                         Photogen Technologies, Inc. to Elan International
                         Services, Ltd. (Filed as exhibit 10.10 to the Company's
                         Quarterly Report on Form 10-QSB for the quarter ended
                         September 30, 1999 and incorporated herein by
                         reference.)

         10.29           Registration Rights Agreement dated October 20, 1999 by
                         and among Photogen Technologies, Inc. and Elan
                         International Services, Ltd. (Filed as exhibit 10.11 to
                         the Company's Quarterly Report on Form 10-QSB for the
                         quarter ended September 30, 1999 and incorporated
                         herein by reference.)

         10.30           Funding Agreement dated October 20, 1999 among Elan
                         Pharma International Limited and Photogen Technologies,
                         Inc. (Filed as exhibit 10.12 to the Company's Quarterly
                         Report on Form 10-QSB for the quarter ended September
                         30, 1999 and incorporated herein by reference.)

         10.31           License Agreement dated October 20, 1999 between
                         Photogen Technologies, Inc, Photogen Newco Ltd. and
                         Elan Pharma International Limited. (Filed as exhibit
                         10.13 to the Company's Quarterly Report on Form 10-QSB
                         for the quarter ended September 30, 1999 and
                         incorporated herein by reference.) Confidential
                         portions of this exhibit were redacted.


                                      -58-


<PAGE>

      EXHIBIT NO.                                                DESCRIPTION

         10.32           License Agreement dated October 20, 1999 between Elan
                         Pharma International Limited, Photogen Newco Ltd. and
                         Photogen Technologies, Inc. (Filed as exhibit 10.14 to
                         the Company's Quarterly Report on Form 10-QSB for the
                         quarter ended September 30, 1999 and incorporated
                         herein by reference.) Confidential portions of this
                         exhibit were redacted.

         10.33           Subscription, Joint Development and Operating Agreement
                         dated October 20, 1999 between Elan Pharma
                         International Limited, Elan International Services,
                         Ltd., Photogen Technologies, Inc. and Photogen Newco
                         Ltd. (Filed as exhibit 10.15 to the Company's Quarterly
                         Report on Form 10-QSB for the quarter ended September
                         30, 1999 and incorporated herein by reference.)
                         Confidential portions of this exhibit were redacted.

         10.34           Amended and Restated Standby Agreement dated November
                         9, 1999 among Theodore Tannebaum, John T. Smolik, Craig
                         Dees, Walter G. Fisher, Timothy Scott and Eric A.
                         Wachter. (Filed as exhibit 10.34 to the Company's
                         Annual Report on Form 10-KSB for the year ended
                         December 31, 1999 and incorporated herein by
                         reference.)

         10.35           Form of Registration Rights Agreement between the
                         Company and holders of Series B Convertible Preferred
                         Stock. (Filed as exhibit 10.35 to the Company's
                         Annual Report on Form 10-KSB for the year ended
                         December 31, 1999 and incorporated herein by
                         reference.)

         10.36           Coherent Software Distribution Agreement between
                         Photogen, Inc. and Laser Group of Coherent, Inc.
                         dated January 18, 2000. (Filed as exhibit 10.36 to
                         the Company's Annual Report on Form 10-KSB for the
                         year ended December 31, 1999 and incorporated herein
                         by reference.)

         10.37           Equipment Lease between Picker Financial Group,
                         L.L.C. and Photogen, Inc. dated October 25,
                         1999. (Filed as exhibit 10.37 to the Company's Annual
                         Report on Form 10-KSB for the year ended December
                         31, 1999 and incorporated herein by reference.)

         21              Subsidiaries of the registrant. (Filed as exhibit
                         21 to the Company's Annual Report on Form 10-KSB
                         for the year ended December 31, 1999 and
                         incorporated herein by reference.)

         27              Financial Data Schedule.


                                      -59-
<PAGE>

         REPORTS ON FORM 8-K. During the quarter ended December 31, 1999, we
filed reports on Form 8-K regarding the following:

         1. Our Press Release announcing that we acquired technology to advance
our lymphography programs (filed October 28, 1999).

         2. Our Press Release announcing that we formed a joint venture with
affiliates of Elan Corporation, plc (filed November 2, 1999).

         3. Our Press Release announcing that we signed an agreement with Akorn,
Inc. to develop PH-10 for our use in non-invasive oncology and dermatology
treatments (filed November 17, 1999).

         4. Our Press Release announcing that our common stock had been approved
for listing on the NASDAQ SmallCap Market (filed November 23, 1999).

         5. Our Press Release announcing the appointment of David D. Shaw, Ph.D.
as our Vice President of Clinical Research and Technology Development (filed
December 1, 1999).

         6. Our Press Release announcing that our research revealed an over
80% eradication rate of ocular melanoma tumors in animals using photodynamic
treatment (filed December 9, 1999).

         7. Our Press Release announcing that we were issued a notice of
allowance for two patent applications relating to advanced phototherapies (filed
December 16, 1999).

         8. Our Report stating that we intended to price and close our private
placement of Series B Convertible Preferred Stock in January, 2000 (filed
December 23, 1999).

                                      -60-

<PAGE>

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this amended
report to be signed on its behalf by the undersigned, thereunto duly
authorized.

DATE: JANUARY 8, 2001                   PHOTOGEN TECHNOLOGIES, INC.

                                        By:  /s/ Taffy J. Williams
                                           ------------------------------
                                             Taffy J. Williams, Ph.D.,
                                             President and Chief Executive
                                             Officer

                                        By:  /s/ Brooks Boveroux
                                           ------------------------------
                                             Brooks Boveroux, Senior Vice
                                             President-Finance and Chief
                                             Financial Officer (Principal
                                             Financial and Chief Accounting
                                             Officer)


                                      -61-
<PAGE>

                                  EXHIBIT INDEX

      EXHIBIT NO.                         DESCRIPTION

         +3.1            Restated Articles of Incorporation of Photogen
                         Technologies, Inc. (Filed as exhibit 3.1 to the
                         Company's Current Report on Form 8-K dated June 17,
                         1998.)

         +3.2            Amended and Restated Certificate of Designations,
                         Preferences and Rights of Series A Preferred Stock.
                         (Filed as exhibit 3.5 to the Company's Quarterly Report
                         on Form 10-QSB for the quarter ended September 30,
                         1999.)

         +3.3            Certificate of Designation, Preferences and Rights of
                         Series B Convertible Preferred Stock. (Filed as exhibit
                         3 to the Company's Current Report on Form
                         8-K dated February 18, 2000.)

         +3.4            Bylaws of Photogen Technologies, Inc. (Filed as exhibit
                         3.2 to the Company's Registration Statement on Form
                         10-SB dated December 24, 1997.)

         +3.5            Charter of Photogen, Inc. (Filed as exhibit 3.3 to the
                         Company's Registration Statement on Form 10-SB dated
                         December 24, 1997.)

         +3.6            Amended and Restated Bylaws of Photogen, Inc. (Filed as
                         exhibit 3.4 to the Company's Annual Report on Form
                         10-KSB for the year ended December 31, 1998.)

         +9.1            Amended and Restated Voting Agreement dated as of June
                         17, 1998 entered into by Eric A. Wachter, Ph.D., Craig
                         Dees, Ph.D., Walter G. Fisher, Ph.D., Tim Scott, Ph.D.,
                         John Smolik, and Robert J. Weinstein, M.D., and joined
                         into by the Company. (Filed as exhibit 9 to the
                         Company's Annual Report on Form 10-KSB for the year
                         ended December 31, 1998.)

         +10.1           1998 Long Term Incentive Compensation Plan. (Filed as
                         Exhibit A to the Company's Schedule 14-A dated April
                         30, 1998.)

         +10.2           Lease Agreement entered into by the Company, P.C.
                         Powell and Wilma Powell dated July 1, 1999. (Filed
                         as exhibit 10.2 to the Company's Annual Report on
                         Form 10-KSB for the year ended December 31, 1999.)

         +10.3           Lease Agreement entered into by the Company and
                         Westborough Mill, LLC dated November 1, 1999. (Filed
                         as exhibit 10.3 to the Company's Annual Report on
                         Form 10-KSB for the year ended December 31, 1999.)

         +10.4           Lease Agreement entered into by the Company and
                         Westborough Mill, LLC dated March 1, 2000. (Filed
                         as exhibit 10.4 to the Company's Annual Report on
                         Form 10-KSB for the year ended December 31, 1999.)

         +10.5           Confirmatory License in favor of the U.S. Department of
                         Energy relating to the Company's Method for Improved
                         Selectivity in Photo-Activation and Detection of
                         Molecular Diagnostic Agents (Serial No. 08/741,370)
                         dated February 4, 1997. (Filed as exhibit 10.4 to the
                         Company's Registration Statement on Form 10-SB dated
                         December 24, 1997.)

                                      -62-

<PAGE>

      EXHIBIT NO.                                 DESCRIPTION

        +10.6            Confirmatory License in favor of the U.S. Department of
                         Energy relating to the Company's Method for Improved
                         Selectivity in Photo-Activation of Molecular Agents
                         (Serial No. 08/739,801) dated February 4, 1997. (Filed
                         as exhibit 10.5 to the Company's Registration Statement
                         on Form 10-SB dated December 24, 1997.)

        +10.7            Form of Employment Agreements entered into by the
                         Company and each of John Smolik, Eric A. Wachter,
                         Ph.D., Walter G. Fisher, Ph.D., and Craig Dees,
                         Ph.D. dated May 16, 1997. (Filed as exhibit 10.6 to
                         the Company's Registration Statement on Form 10-SB
                         dated December 24, 1997.)

        +10.8            Form of Non-competition/Non-disclosure Agreements
                         entered into by the Company and each of John Smolik,
                         Eric A. Wachter, Ph.D., Walter G. Fisher, Ph.D., Craig
                         Dees, Ph.D. and Timothy C. Scott dated May 16, 1997.
                         (Filed as exhibit 10.7 to the Company's Registration
                         Statement on Form 10-SB dated December 24, 1997.)

        +10.9            Employment Agreement entered into by the Company and
                         Gerald Wolf, Ph.D., M.D. dated July 1, 1999. (Filed as
                         exhibit 10.2 to the Company's Quarterly Report for the
                         quarter ended September 30, 1999.) Confidential
                         portions of this exhibit were redacted.

        +10.10           Employment Agreement entered into by the Company and
                         David D. Shaw, Ph.D. dated November 1, 1999. (Filed
                         as exhibit 10.10 to the Company's Annual Report on
                         Form 10-KSB for the year ended December 31, 1999.)

        +10.11           Employment Agreement entered into by the Company and
                         Jay Zimmerman, M.Ed. dated November 15, 1999. (Filed
                         as exhibit 10.11 to the Company's Annual Report on
                         Form 10-KSB for the year ended December 31, 1999.)

        +10.12           Form of Non-Qualified Stock Option Award Agreement
                         entered into by the Company and each of Lester
                         McKeever, Jr., Daniel Tosteson, M.D., Mark Peterson,
                         Harry Morrison, Ph.D and Merrill Biel, M.D., Ph.D.
                         (Filed as exhibit 10.7 to the Company's Annual Report
                         for the year ended December 31, 1998.)

        +10.13           Form of Incentive Stock Option Award Agreement entered
                         into by the Company and each of Jay Harkins, Dan
                         Hamilton, Karen Richmond and Verdene Smith. (Filed as
                         exhibit 10.8 to the Company's Annual Report for the
                         year ended December 31, 1998.)

        +10.14           Incentive Stock Option Award Agreement entered into by
                         the Company and Gerald Wolf Ph.D., M.D. dated July 23,
                         1999. (Filed as exhibit 10.14 to the Company's Annual
                         Report on Form 10-KSB for the year ended December 31,
                         1999.)

        +10.15           Incentive Stock Option Award Agreement entered into
                         by othe Company and David D. Shaw, Ph.D. dated
                         November 1, 1999. (Filed as exhibit 10.15 to the
                         Company's Annual Report on Form 10-KSB for the year
                         ended December 31, 1999.)

        +10.16           Incentive Stock Option Award Agreement entered into
                         by he Company and David D. Shaw, Ph.D. dated November
                         30, 1999. (Filed as exhibit 10.16 to the Company's
                         Annual Report on Form 10-KSB for the year ended
                         December 31, 1999.)


                                      -63-
<PAGE>

      EXHIBIT NO.                                 DESCRIPTION

        +10.17           Incentive Stock Option Award Agreement entered into by
                         the Company and Jay Zimmerman, M.Ed. dated November 30,
                         1999. (Filed as exhibit 10.17 to the Company's Annual
                         Report on Form 10-KSB for the year ended December 31,
                         1999.)

        +10.18           Form of Consulting Agreement entered into by the
                         Company and each of Daniel Tosteson, M.D. and Harry
                         Morrison, Ph.D. (Filed as exhibit 10.12 to the
                         Company's Annual Report for the year ended December 31,
                         1998.)

        +10.19           Research Agreement dated as of October 1, 1998 by and
                         between Photogen, Inc. and The Massachusetts Eye and
                         Ear Infirmary (relating to age-related macular
                         degeneration research). (Filed as exhibit 10.2 to the
                         Company's Quarterly Report on Form 10-QSB for the
                         quarter ended September 30, 1998.)

        +10.20           Research Agreement dated as of November 6, 1998 by and
                         between Photogen, Inc. and the Massachusetts Eye and
                         Ear Infirmary (relating to ocular melanoma research).
                         (Filed as exhibit 10.11 to the Company's Annual Report
                         for the year ended December 31, 1998.)

        +10.21           Tufts University Sponsored Research Agreement dated
                         August 1, 1999 by and between Photogen, Inc. and Tufts
                         University, a/k/a Trustees of Tufts College (Filed as
                         exhibit 10.3 to the Company's Quarterly Report on Form
                         10-QSB for the quarter ended September 30, 1999.)
                         Confidential portions of this exhibit were redacted.

        +10.22           Consulting Agreement by and between Photogen
                         Technologies, Inc. and Farcap Group LLC effective
                         August 9, 1999. (Filed as exhibit 10.4 to the Company's
                         Quarterly Report on Form 10-QSB for the quarter ended
                         September 30, 1999.)

        +10.23           Warrant Agreement by and between Photogen Technologies,
                         Inc. and Farcap Group LLC effective August 9, 1999.
                         (Filed as exhibit 10.5 to the Company's Quarterly
                         Report on Form 10-QSB for the quarter ended September
                         30, 1999.)

        +10.24           Agreement effective August 9, 1999 by and among
                         Alliance Pharmaceutical Corp., Photogen Technologies,
                         Inc. and Gerald Wolf, Ph.D, M.D. (Filed as exhibit 10.6
                         to the Company's Quarterly Report on Form 10-QSB for
                         the quarter ended September 30, 1999.) Confidential
                         portions of this exhibit were redacted.

        +10.25           License Agreement effective as of September 30, 1999
                         between The General Hospital Corporation and Photogen,
                         Inc. (Filed as exhibit 10.7 to the Company's Quarterly
                         Report on Form 10-QSB for the quarter ended September
                         30, 1999.) Confidential portions of this exhibit were
                         redacted.

        +10.26           Securities Purchase Agreement dated as of October 20,
                         1999, among Photogen Technologies, Inc. and Elan
                         International Services, Ltd. (Filed as exhibit 10.8 to
                         the Company's Quarterly Report on Form 10-QSB for the
                         quarter ended September 30, 1999.) Confidential
                         portions of this exhibit were redacted.

                                      -64-

<PAGE>

      EXHIBIT NO.                           DESCRIPTION

        +10.27           Warrant to Purchase Shares of Common Stock dated
                         October 20, 1999 between Photogen Technologies, Inc.
                         and Elan International Services, Ltd. (Filed as exhibit
                         10.9 to the Company's Quarterly Report on Form 10-QSB
                         for the quarter ended September 30, 1999.)

        +10.28           Convertible Promissory Note dated October 20, 1999 from
                         Photogen Technologies, Inc. to Elan International
                         Services, Ltd. (Filed as exhibit 10.10 to the Company's
                         Quarterly Report on Form 10-QSB for the quarter ended
                         September 30, 1999.)

        +10.29           Registration Rights Agreement dated October 20, 1999 by
                         and among Photogen Technologies, Inc. and Elan
                         International Services, Ltd. (Filed as exhibit 10.11 to
                         the Company's Quarterly Report on Form 10-QSB for the
                         quarter ended September 30, 1999.)


        +10.30           Funding Agreement dated October 20, 1999 among Elan
                         Pharma International Limited and Photogen
                         Technologies, Inc. (Filed as exhibit 10.12 to the
                         Company's Quarterly Report on Form 10-QSB for the
                         quarter ended September 30, 1999.) Confidential
                         portions of this exhibit were redacted.

        +10.31           License Agreement dated October 20, 1999 between
                         Photogen Technologies, Inc, Photogen Newco Ltd. and
                         Elan Pharma International Limited. (Filed as exhibit
                         10.13 to the Company's Quarterly Report on Form 10-QSB
                         for the quarter ended September 30, 1999.) Confidential
                         portions of this exhibit were redacted.

        +10.32           License Agreement dated October 20, 1999 between Elan
                         Pharma International Limited, Photogen Newco Ltd. and
                         Photogen Technologies, Inc. (Filed as exhibit 10.14 to
                         the Company's Quarterly Report on Form 10-QSB for the
                         quarter ended September 30, 1999.) Confidential
                         portions of this exhibit were redacted.

        +10.33           Subscription, Joint Development and Operating Agreement
                         dated October 20, 1999 between Elan Pharma
                         International Limited, Elan International Services,
                         Ltd., Photogen Technologies, Inc. and Photogen Newco
                         Ltd. (Filed as exhibit 10.15 to the Company's Quarterly
                         Report on Form 10-QSB for the quarter ended September
                         30, 1999.) Confidential portions of this exhibit were
                         redacted.

        +10.34           Amended and Restated Standby Agreement dated November
                         9, 1999 among Theodore Tannebaum, John T. Smolik, Craig
                         Dees, Walter G. Fisher, Timothy Scott and Eric A.
                         Wachter. (Filed as exhibit 10.34 to the Company's
                         Annual Report on Form 10-KSB for the year ended
                         December 31, 1999.)

        +10.35           Form of Registration Rights Agreement between the
                         Company and holders of Series B Convertible Preferred
                         Stock dated as of February 18, 2000. (Filed
                         as exhibit 10.35 to the Company's Annual Report on
                         Form 10-KSB for the year ended December 31, 1999.)

        +10.36           Coherent Software Distribution Agreement between
                         Photogen, Inc. and Laser Group of Coherent, Inc.
                         dated January 18, 2000. (Filed as exhibit 10.36 to
                         the Company's Annual Report on Form 10-KSB for the
                         year ended December 31, 1999.)

        +10.37           Equipment Lease between Picker Financial Group,
                         L.L.C. and Photogen, Inc. dated October 25, 1999.
                         (Filed as exhibit 10.37 to the Company's Annual Report
                         on Form 10-KSB for the year ended December 31, 1999.)


                                      -65-
<PAGE>

      EXHIBIT NO.                               DESCRIPTION

         +21             Subsidiaries of the registrant. (Filed as exhibit 21
                         to the Company's Annual Report on Form 10-KSB for the
                         year ended December 31, 1999.)

         *27             Financial Data Schedule.

+        Incorporated herein by reference from the filing indicated.

*        Filed herewith.


                                      -66-