<PAGE>

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

                                    FORM 10-Q

/x/   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002

                                       OR

/ /   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934 for the transition period ended ___________________

                         Commission File Number 0-23553

                           PHOTOGEN TECHNOLOGIES, INC.
             (Exact name of registrant as specified in its charter)

             NEVADA                                36-4010347
(State or other jurisdiction of         (I.R.S. Employer Identification No.)
 incorporation or organization)

                             140 Union Square Drive
                          New Hope, Pennsylvania 18938
               (Address of principal executive offices)(Zip Code)

                                  215/862-6860
               (Registrant's telephone number including area code)

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days:

                                YES: /x/ NO: / /

     Indicate the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 38,842,298 SHARES OF COMMON
STOCK, $.001 PAR VALUE PER SHARE, ISSUED AND OUTSTANDING AT MAY 10, 2002
================================================================================

<PAGE>

                                      INDEX

<TABLE>
<CAPTION>
                                                                                 Page
<S>                                                                               <C>
Part I.  Financial Information                                                    1

         Item 1.  Financial Statements                                            1
         Item 2.  Management's Discussion and Analysis of Financial Condition
                  and Results of Operations                                       9
         Item 3.  Quantitative and Qualitative Disclosures about Market Risk     15

Part II. Other Information                                                       15

         Item 1.  Legal Proceedings                                              15
         Item 4.  Submission of Matters to a Vote of Security Holders            15
         Item 5.  Other Information                                              15
         Item 6.  Exhibits and Reports on Form 8-K                               22
</TABLE>













                                       i
<PAGE>

                          PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                           Photogen Technologies, Inc.
                          (A Development Stage Company)
                      Consolidated Condensed Balance Sheets
                                All amounts in $

<TABLE>
<CAPTION>
                                                                                    March 31,                  December 31,
                                                                                      2002                        2001
                                                                                   (Unaudited)                 (Audited)
                                                                                ------------------        -------------------
<S>                                                                            <C>                         <C>
                                   ASSETS
CURRENT ASSETS
     Cash and cash equivalents                                                 $       316,801              $     1,352,904
     Restricted cash                                                                   150,000                            -
     Prepaid expenses                                                                   14,887                       29,775
     Deposit                                                                           328,847                      474,580
                                                                                ---------------             ---------------

TOTAL CURRENT ASSETS                                                                   810,535                    1,857,259

EQUIPMENT AND LEASEHOLD IMPROVEMENTS, less accumulated
     depreciation of $1,155,422 and $1,059,997, respectively                           786,795                      882,220


PATENT COSTS, net of amortization of $111,109 and $100,693, respectively               388,891                      399,307

DEPOSITS                                                                                14,383                       69,173

INVESTMENT IN AND ADVANCES TO AFFILIATE                                             10,602,577                   10,994,680
                                                                                ---------------             ---------------


              TOTAL ASSETS                                                     $    12,603,181              $    14,202,639
                                                                                ===============             ===============

                    LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
     Accounts payable                                                          $       470,965              $      373,774
     Accrued expenses                                                                  557,044                     394,242
     Accrued restructuring                                                             625,000                     173,932
     Accrued equipment lease                                                           393,312                     374,580
                                                                                ---------------             --------------

TOTAL CURRENT LIABILITIES                                                            2,046,321                   1,316,528
</TABLE>


                                       1
<PAGE>


<TABLE>
<CAPTION>

<S>                                                                            <C>                  <C>
ACCRUED EQUIPMENT LEASE                                                                   721,037               749,160

LONG-TERM DEBT                                                                          2,314,005             2,314,005
                                                                                ------------------   -------------------

TOTAL LIABILITIES                                                                       5,081,363             4,379,693
                                                                                ------------------   ---------------------

SHAREHOLDERS' EQUITY
     Preferred stock; par value $.01 per share; 5,000,000 shares authorized
         including:

         Series A Preferred Stock; 13,788 and 12,856 shares authorized, issued
              and outstanding at March 31, 2002 and December 31, 2001,
              respectively, liquidation preference $1,000 per share (in
              aggregate $13,788,000 at March 31, 2002 and
              $12,856,000 at December 31, 2001)                                               137                   128

         Series B Preferred Stock; 402,000 shares authorized; 378,716 and
              357,280 shares issued and outstanding, at March 31, 2002 and
              December 31, 2001, respectively, liquidation preference $16.88 per
              share (in aggregate $6,392,726 at March 31, 2002 and $6,030,886
              at December 31, 2001)                                                         3,786                 3,572


     Common stock; par value $.001 per share; 150,000,000 shares
         authorized;  38,842,298 shares issued and outstanding                             38,843                38,843
     Additional paid-in capital                                                        38,888,060            38,873,716
     Deficit accumulated during the development stage                                 (31,409,008)          (29,093,313)
                                                                                ------------------   -------------------

TOTAL SHAREHOLDERS' EQUITY                                                              7,521,818             9,822,946
                                                                                ------------------   -------------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                      $      12,603,181    $       14,202,639
                                                                                ==================   ===================
</TABLE>

                                       2
<PAGE>


                           Photogen Technologies, Inc.
                          (A Development Stage Company)
                 Consolidated Condensed Statements of Operations
                                   (Unaudited)
                                All amounts in $

<TABLE>
<CAPTION>
                                                                                           Cumulative
                                                    Three Months      Three Months            Amounts
                                                           Ended             Ended               From
                                                       March 31,         March 31,        November 3,
                                                            2002              2001   1996 (Inception)
                                                 ----------------  ---------------- ------------------
<S>                                             <C>               <C>              <C>
OPERATING EXPENSES
     Research and development                   $        689,113  $        789,788 $       13,000,524
     General and administrative                          616,725         1,124,902         13,282,593
     Restructuring charges                               451,068                 -          1,048,093
     Provision for future lease payments                       -           696,070          1,264,208
                                                 ----------------  ---------------- ------------------

TOTAL OPERATING EXPENSES                               1,756,906         2,610,760         28,595,418

INCOME (LOSS) FROM JOINT VENTURE                        (560,114)         (472,553)        (4,022,293)

INVESTMENT INCOME                                          1,325            56,201          1,208,703
                                                 ----------------  ---------------- ------------------

NET LOSS                                        $     (2,315,695)  $    (3,027,112) $     (31,409,008)
                                                                                    ==================

DIVIDENDS ON PREFERRED STOCK                            (334,463)         (731,702)
                                                 ----------------  ----------------

NET LOSS APPLICABLE TO COMMON SHAREHOLDERS      $     (2,650,158)  $    (3,758,814)
                                                 ================  ================

BASIC AND DILUTED LOSS PER COMMON SHARE         $           (.07)  $          (.10)
                                                 ================  ================

WEIGHTED AVERAGE NUMBER OF COMMON
     SHARES OUTSTANDING - BASIC AND DILUTED           38,842,298        37,420,980
                                                 ================  ================
</TABLE>


                                       3
<PAGE>

                           Photogen Technologies, Inc.
                          (A Development Stage Company)
            Consolidated Condensed Statements of Shareholders' Equity
                                   (Unaudited)
                                All amounts in $

<TABLE>
<CAPTION>

                                                  Preferred Stock        Preferred Stock
                                                      Series A               Series B                Common Stock
                                                   Shares      Amount     Shares     Amount       Shares          Amount
---------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>     <C>            <C>    <C>         <C>          <C>
Contribution of capital                                 -  $        -          - $        -            -   $           -
Net loss for the period ended December 31, 1996         -           -          -          -            -               -
---------------------------------------------------------------------------------------------------------------------------
BALANCE, at December 31, 1996                           -           -          -          -            -               -
     Net loss and capital contributions 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 and capital contributions 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>

                                       4
<PAGE>

<TABLE>
<CAPTION>
                                                    Preferred Stock       Preferred Stock
                                                      Series A               Series B               Common Stock
                                                    Shares      Amount    Shares     Amount      Shares         Amount
----------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>     <C>            <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

     Stock option compensation                           -           -         -          -           -              -
     Issuance of warrants and options                    -           -         -          -           -              -
     Issuance of preferred stock dividend              841           8         -          -           -              -
     Issuance of preferred stock                         -           -   337,056      3,370           -              -
     Net loss for the year ended December 31,
         2000                                            -           -         -          -           -              -
----------------------------------------------------------------------------------------------------------------------------

BALANCE, at December 31, 2000                       12,856         128   337,056      3,370  37,383,386         37,384

     Stock option compensation                           -           -         -          -           -              -
     Issuance of common stock for cash                   -           -         -          -     695,486            696
     Issuance of common stock in satisfaction
         of anti-dilution provision                                                             763,426            763
     Issuance of preferred stock dividend                -           -    20,224        202           -              -
     Net loss for the year ended December 31,
         2001                                            -           -         -          -           -              -
----------------------------------------------------------------------------------------------------------------------------

BALANCE, at December 31, 2001                       12,856  $      128   357,280  $   3,572  38,842,298    $    38,843

     Stock option compensation                           -           -         -          -           -              -
     Issuance of preferred stock dividend              932           9    21,436        214           -              -
     Net loss for the three months ended March
          31, 2002                                       -           -         -          -           -              -
----------------------------------------------------------------------------------------------------------------------------

BALANCE, at March 31, 2002                          13,788  $      137   378,716  $   3,786  38,842,298    $    38,843
----------------------------------------------------------------------------------------------------------------------------
<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

     Stock option compensation                            -         125,020                -         125,020
     Issuance of warrants and options                     -       1,366,050                -       1,366,050
     Issuance of preferred stock dividend                 -              (8)               -               -
     Issuance of preferred stock                          -       5,272,970                -       5,276,340
     Net loss for the year ended December 31,
         2000                                             -               -      (10,787,062)    (10,787,062)
-------------------------------------------------------------------------------------------------------------

BALANCE, at December 31, 2000                             -      37,741,925      (19,370,297)     18,412,510

     Stock option compensation                            -          64,729                -          64,729
     Issuance of common stock for cash                    -       1,068,027                -       1,068,723
     Issuance of common stock in satisfaction
         of anti-dilution provision                                    (763)
     Issuance of preferred stock dividend                 -            (202)               -               -
     Net loss for the year ended December 31,
         2001                                             -               -       (9,723,016)     (9,723,016)
-------------------------------------------------------------------------------------------------------------




BALANCE, at December 31, 2001                             -   $  38,873,716    $ (29,093,313)    $ 9,822,946

     Stock option compensation                            -          14,567                -          14,567
     Issuance of preferred stock dividend                 -            (223)               -               -
     Net loss for the three months ended March
          31, 2002                                        -               -       (2,315,695)     (2,315,695)
-------------------------------------------------------------------------------------------------------------

BALANCE, at March 31, 2002                               --   $  38,888,060    $ (31,409,008)    $ 7,521,818
-------------------------------------------------------------------------------------------------------------
</TABLE>
                                       5
<PAGE>

                           Photogen Technologies, Inc.
                          (A Development Stage Company)
                 Consolidated Condensed Statements of Cash Flows
                                   (Unaudited)
                                All amounts in $

<TABLE>
<CAPTION>
                                                      Three Months       Three Months     Cumulative Amounts
                                                             Ended              Ended                   From
                                                         March 31,          March 31,       November 3, 1996
                                                              2002               2001             (Inception)
                                                    --------------    ---------------   --------------------
<S>                                                <C>                <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES
     Net loss                                      $    (2,315,695)    $   (3,027,112)   $       (31,409,008)
     Depreciation and amortization                         105,841            116,505              1,412,426

     Loss on disposal of fixed assets                            -              2,714                 38,424
     Gain on sale of marketable securities                       -                  -                (18,503)
     United States Treasury Notes
         amortization                                            -             (1,536)                12,586
     Stock option compensation                              14,567            330,569                631,083
     Issuance of warrants in exchange for
         services rendered                                       -                  -              3,995,091
     Loss from investment in affiliate                     560,114            472,553              4,022,293
     Changes in operating assets and liabilities:
         Restricted cash                                  (150,000)                 -               (150,000)
         Prepaid expenses                                   14,888            137,665                (14,887)
         Interest receivable                                     -             18,833                      -
         Accounts payable                                   97,191           (271,229)               470,965
         Accrued expenses                                  162,802                  -                557,044
         Accrued equipment lease                            (9,391)           696,070              1,114,349
         Accrued restructuring                             451,068           (103,856)               625,000
                                                    ---------------    ---------------   --------------------

Net cash used in operating activities                   (1,068,615)        (1,628,824)           (18,713,137)
                                                    ---------------    ---------------   --------------------

CASH FLOWS FROM INVESTING ACTIVITIES
     Sale of marketable securities                               -                  -              2,164,464
     Purchases of marketable securities                          -                  -             (2,182,967)
     Purchases of United States Treasury
         Notes                                                   -         (1,320,000)           (38,656,973)
     Sales of United States Treasury Notes                       -          3,208,000             39,778,548

     Purchase of capital assets                                  -            (13,731)            (1,943,553)
     Proceeds from sale of equipment                             -                  -                145,551
     Costs to acquire patent                                     -                  -               (237,335)
     Investment in and advances to affiliate              (168,011)          (249,197)           (14,624,870)
     Decrease (increase) in deposit                        200,523            (14,383)              (343,230)
                                                    ---------------    ---------------   --------------------

Net cash provided by (used in) investing activities         32,512          1,610,689            (15,900,365)
                                                    ---------------    ---------------   --------------------
</TABLE>


                                       6
<PAGE>

<TABLE>
<CAPTION>
                                                      Three Months       Three Months     Cumulative Amounts
                                                             Ended              Ended                   From
                                                         March 31,          March 31,       November 3, 1996
                                                              2002               2001             (Inception)
                                                    --------------    ---------------   --------------------
<S>                                                <C>                <C>               <C>
CASH FLOWS FROM FINANCING ACTIVITIES
     Principal payments on capital leases          $              -   $         (5,305)    $        (291,704)
     Net proceeds from issuance of equity                         -            375,000            31,367,439
     Proceeds from capital contributions by
         shareholders                                             -                  -             1,911,674
     Proceeds from issuance of debt                               -                  -             2,314,005
     Cost of recapitalization                                     -                  -              (371,111)
                                                    ----------------   ----------------     -----------------

Net cash provided by financing activities                         -            369,695            34,930,303
                                                    ----------------   ----------------     -----------------


INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS         (1,036,103)           351,560               316,801

CASH AND CASH EQUIVALENTS, at beginning
     of period                                            1,352,904            622,795                     -
                                                    ----------------   ----------------     -----------------

CASH AND CASH EQUIVALENTS, at end of period        $        316,801   $        974,355     $         316,801
                                                    ================   ================     =================
</TABLE>



                                       7
<PAGE>

                           Photogen Technologies, Inc.
                          (A Development Stage Company)
                     Notes To Condensed Financial Statements
                                   (Unaudited)

                                 March 31, 2002

1.   BASIS OF PRESENTATION

     The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information pursuant to Regulation S-K. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three months ended March 31, 2002 are not necessarily indicative of the results
that may be expected for the year ended December 31, 2002.

2.   JOINT VENTURE/INVESTMENT IN AFFILIATE

     The following is summarized financial information for the joint venture
     Sentigen, Ltd. at March 31, 2002 and 2001.

      March 31,                                 2002              2001
     ---------------------------------------------------------------------

         License purchased from Elan,
            net of amortization of
            $1,467,395 in 2002 and
            $489,131 in 2001                 $  13,532,605   $ 14,510,869
     ---------------------------------------------------------------------

     Total assets                            $  13,532,605   $ 14,510,869
     =====================================================================

     Due to affiliates                       $     665,299   $  1,985,243

     Total shareholders' equity                 12,867,306     12,525,626
     ---------------------------------------------------------------------

     Total liabilities and equity            $  13,532,605   $ 14,510,869
     =====================================================================

     Research and development expense        $     445,310   $    345,389
     General and administrative expense             18,739        -
     Amortization of license                       244,566        244,565
     ---------------------------------------------------------------------

     Net loss                                $     708,615   $    589,954
     =====================================================================

3.   BASIC AND DILUTED LOSS PER COMMON SHARE

     Basic and diluted loss per common share is computed based on the weighted
average number of common shares outstanding. Loss per share excludes the impact
of outstanding options and warrants, preferred stock and convertible debt as
they are antidilutive. Potential common shares excluded from the

                                       8
<PAGE>

calculation at March 31, 2002 are 6,519,000 options, 1,149,724 warrants,
1,199,312 shares issuable upon the conversion of Series A and B Preferred Stock
and 132,706 shares issuable upon conversion of the Elan line of credit.

4.   RESTRUCTURING

     In 2000, the Company recorded a restructuring charge of $597,025, included
in operating expenses, relating to the closure of its operations in Westborough,
Massachusetts. The restructuring charge includes accruals related to estimated
lease termination costs and accruals related to employee severance and related
expenses in connection with their termination. All employees at the Westborough
facility were terminated. In 2002, the Company recorded an additional
restructuring charge related to termination costs for one of the Westborough
employees. The restructuring charge is summarized as follows:

<TABLE>
<CAPTION>
                                                  Balance at                  Balance at                 Balance at
                     Charged in  Utilized in    December 31,  Utilized in   December 31,    Charged in    March 31,
                           2000         2000            2000         2001           2001          2002         2002
   -----------------------------------------------------------------------------------------------------------------
<S>                    <C>           <C>           <C>           <C>            <C>           <C>          <C>
   Employee
   costs               $ 95,233      $65,223       $ 330,000     $156,068       $173,932      $451,068     $625,000

   Lease costs          201,802      201,802               -            -              -             -            -
   -----------------------------------------------------------------------------------------------------------------

   Total               $597,025     $267,025        $330,000     $156,068       $173,932      $451,068     $625,000
   =================================================================================================================
</TABLE>


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

     Portions of the discussion in this item contain forward-looking statements
and are subject to the Risk Factors described below.

     We are an emerging, development-stage biopharmaceutical company focused on
developing a novel contrast agent with potential applications in the imaging of
the cardiovascular system and cancer metastasizing into the lymphatic system. We
also have in development products to treat psoriasis and other topical diseases
and cancer. Our principal product is an X-ray contrast agent we call PH-50, when
referring to cardiovascular applications, and N1177 when referring to
lymphography. The lymphography application is being developed in a joint venture
with units of Elan Corporation plc. We have or own the rights for all other
applications. In December 2001, we announced positive preclinical results of
PH-50. Based on these studies, the extensive preclinical toxicology and other
study work, including the product's use in over 120 patients for lymphography,
we shifted the strategic direction of Photogen to focus on the cardiovascular
and lymphography applications. We plan to focus our efforts on these high value
opportunities and to license or co-develop our other products. We have not
completed development of any diagnostic or therapeutic product or process at
this time and have no revenue from operations.

     As of April 8, 2002, we entered into a credit facility that will provide us
with a $2,500,000 revolving line of credit, bearing interest at 4.65%, for a
period of five years. The loan is secured by a lien on all of our assets.

                                       9
<PAGE>

     Absent additional funding from the sale of debt or equity securities or the
sale or licensing of any of our products in development, we expect to sustain
operations through the next twelve months. Our ability to conduct operations
beyond that date is entirely dependent on our ability to obtain additional
capital, and we are aggressively seeking such capital. See "Risk Factors - We
must raise additional financing in the future and our ability to do so could
prevent us from implementing our business plan," below.

     We operate with a small staff of researchers and senior level managers to
conduct basic research, oversee and direct third party contractors and perform
administrative functions. We contract with third party consultants having
expertise in clinical development and regulatory matters to supplement our
internal capabilities. We contract with third party research laboratories,
contract research organizations and manufacturers for clinical material supplies
and the management of clinical trials. We also contract with academic and other
institutions to conduct specified research projects.

     We expect that our quarterly and annual results of operations will
fluctuate based on several factors including, the timing and amount of expenses
involved in conducting our research programs, particularly the conduct of
clinical trials, the cost of clinical material used in those trials and required
for compliance with FDA regulations and the amount, if any, of fees, milestone
payments and research support payments received from potential strategic
partners.

     We consider our investment in the joint venture with affiliates of Elan to
be our only asset subject to a significant estimate. The carrying value of our
80.1% equity interest in Sentigen, Ltd., the joint venture entity, at March 31,
2002 was $10,602,577. At year end 2001, we reviewed the financial projections of
Sentigen and the underlying assumptions and have concluded that there has been
no degradation to the carrying value of our investment. The assumptions
underlying the financial forecasts were based on currently available
information, including estimates of development costs, pricing, operating
expenses and market sizes and penetration. These estimates may change and any
such changes may impact our future estimates of appropriate carrying values. At
March 31, 2002, no changes had occurred in such estimates.

CORE PRODUCT AREA

     Our core product is PH-50/N1177, a novel contrast agent that may have
multiple applications in vascular and cardiac imaging and lymphography.

CARDIOVASCULAR IMAGING - PH-50 may have application as a novel technique to
image the cardiovascular system using standard CT scanners. In animal model
studies, encouraging results have been demonstrated to image the heart, liver
and other organs. PH-50 could allow the imaging of the cardiovascular system
(angiography) and other organs without the need for catheters and high-speed
cameras. Over two million angiography procedures are conducted annually in the
U.S. Preclinical studies also suggest that PH-50 can be used to detect coronary
vulnerable plaque a condition believed to be a precursor to heart attacks and
sudden cardiac failure.

LYMPHOGRAPHY -- Through a joint venture with Elan Corporation, we are developing
N1177, a proprietary material to precisely locate and diagnose the spread of
cancer (micro-metastases) when administered into a patient's lymphatic system.
This novel nanoparticulate (a very small particle designed to travel through the
lymphatic system) X-ray contrast agent, when used with a standard computed
tomography (CT) scanner (a technology called "lymphography"), is being developed
to enable imaging and detection of cancer in lymph nodes prior to surgery. Phase
1 studies have been completed. Phase 2 studies are planned to commence in 2002.

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<PAGE>

OTHER PRODUCTS

     We are in discussions with the founders of Photogen, L.L.C., about the
possibility of transferring to an entity they control certain of our therapeutic
products and technologies (primarily PH-10 and laser technologies) in exchange
for the Company's stock beneficially owned by the founders (approximately
20,548,435 shares of common stock). The consummation of such a transaction would
depend upon the resolution of numerous contingencies, including negotiating a
structure for the transaction, resolution of any potential tax and accounting
issues, execution of definitive agreements, receipt of appropriate fairness and
other opinions, and board and stockholder approval. There can be no assurance
that such a transaction can ultimately be consummated.

Products and technology that would be transferred to the founders include
applications for:

PSORIASIS -- We have completed a Phase 1 clinical study of PH-10 as a treatment
for plaque psoriasis, the most common form of the disease afflicting
approximately 7 million people in the U.S. Data from this study is currently
being analyzed. Applied topically and activated with green laser light, PH-10 is
a promising treatment for psoriasis, particularly in areas such as knees, elbows
and facial areas. A clinical study conducted in Denmark demonstrated a 58%
reduction in the skin thickness of psoriatic plaque with a single treatment of
PH-10. This statistically significant result (p = 0.01) lasted for the 90-day
duration of the study. Reduction in plaque thickness is generally regarded as a
precursor to other clinical indications of efficacy.

ACTINIC KERATOSIS -- We have completed a Phase 1 clinical study of PH-10 to
treat actinic keratosis, a skin disease resulting from over-exposure to sunlight
afflicting 5 million people in the U.S. Actinic keratosis is widely believed to
be a precursor to squamous cell cancer, the second leading cause of death due to
skin cancer. Clinical data from this study is currently being analyzed.

SOLID TUMOR CANCERS -- PH-10, in an injectable formulation, shows promise to
enhance the effect of radiation therapy in the treatment of solid tumors, which
represent 70% of all cancers initially diagnosed. This includes breast,
prostate, lung, melanoma, cervical and uterine cancers. The American Cancer
Society estimates that approximately 660,000 new cases of such cancers are
diagnosed annually. In pre-clinical studies of several radiation resistant tumor
models, PH-10 applied intratumorally consistently resulted in reduction of tumor
mass, while tumors in control models increased. We are working to develop a
systemic application of PH-10. If successful, we could commence human clinical
studies to treat either glioblastoma (brain cancer) or hepatic and colon
cancers.

MULTIPHOTON TECHNOLOGY -- Our proprietary laser technology uses ultrashort,
pulsed bursts of long wavelength light to activate photoactive agents and other
compounds that react with light to destroy diseased tissue. This technology can
also be used to create images of tissue for diagnostic purposes.

     Our senior executive and clinical development organization operates from
our corporate headquarters in New Hope, Pennsylvania. We have on staff personnel
with expertise in clinical development, clinical trial design and regulatory
approval processes. We also work closely with consultants experienced in drug
development and regulatory requirements. Our scientific research team, located
in Knoxville, Tennessee includes specialists in molecular biology, non-linear
laser physics, interventional radiology, spectroscopy, bioengineering and
photochemistry.

                                       11
<PAGE>

RESULTS OF OPERATIONS

     Our efforts have been focused on the development and clinical testing of
diagnostic and therapeutic products. To date, we have not generated revenues
from the sale of any proposed diagnostic or therapeutic products or other
operations.

     Research and development costs for the three month period ended March 31,
2002 decreased 13 percent to $689,113 from $789,788 for the comparable three
month period ended March 31, 2001. The reduction was due principally to lower
expense levels for our FDA consultants, partially offset by clinical trial
expenses and other costs incurred as our products undergo human clinical
testing.

     General and administrative expenses declined 45 percent to $616,725 in the
three month period ended March 31, 2002 from $1,124,902 in the comparable 2001
period. The decline is primarily attributable to the reduction in the
amortization of the cost of certain warrants that had been granted to a
consultant, the absence of recruiting costs as well as lower legal expenses
partially offset by costs of our New Hope, PA office.

     In 1999, we entered into a joint venture with affiliates of Elan
Corporation for the development of N1177, a potential product to identify and
diagnose lymph nodes for the presence of cancer. We own 80.1% of the joint
venture entity, Sentigen, Ltd., with the balance owned by Elan. During the first
quarter of 2001 and 2002, we recorded losses from the joint venture of $472,553
and $560,114, respectively. These losses resulted from our share of development
expenses incurred in the joint venture by the two participants, including
personnel expenses and costs associated with developing a manufacturing process,
including the purchase of drug substance and other materials.

     In September 2000, we initiated a restructuring of our clinical development
operations. We closed our Westborough, Massachusetts office and delivered
notices of material breaches and/or dissatisfaction pursuant to the employment
agreements with three employees who worked there at that time. Clinical
development activities formerly carried on in Westborough were assumed by
outside consultants and other company employees. We took a charge against
earnings at that time of $597,025 for termination of our office lease and
associated expenses and termination costs associated with certain of the
employees at that location.

     We had reached termination agreements with two of these employees. During
the first quarter 2002 we increased the provision by $451,068 to $625,000, to
provide for a potential settlement with the third Westborough employee. We
cannot estimate at this time additional costs or obligations (if any) related to
any litigation arising from the office closing. See Item 3 "Legal Proceedings"
of our Form 10-K at December 31, 2001 for additional information concerning this
restructuring.

     During the three months ended March 31, 2002, we had no capital
expenditures. During the next twelve months we expect capital expenditures to be
less than $100,000. During 2001, as a result of the closing of the Westborough
facility and the shift in the research priorities, we determined that certain
equipment we were leasing would no longer be useful in our research.
Accordingly, in the first quarter of 2001 we recorded a provision for future
lease payments of $696,070. In the fourth quarter of 2001 we increased the
accrual to a total of $1,264,208 representing the remaining lease obligations.
While we will pursue opportunities to sublease or otherwise mitigate these
obligations, there can be no assurance of any success in this regard.

     For the three months ended March 31, 2002, our investment income decreased
to $1,325 from $56,201 in the three months ended March 31, 2001. The decrease in
investment income resulted primarily from lower average balances of securities
in our investment portfolio. We expect our

                                       12
<PAGE>

investment income to fluctuate both as our capital decreases or increases and as
the rates of interest earned by our portfolio vary due to shifts in short term
interest rates.

     We recorded dividends on preferred stock of $334,463 in the three months of
2002 compared to $731,702 for the comparable period in 2001. This decrease is
due to the absence of the cost of certain beneficial conversion provisions
payable under Series B Preferred Stock originally issued in February 2000. Under
the applicable Certificate of Designations the holder of Series A Preferred is
entitled to a mandatory payment-in-kind dividend equal to 7% (i.e., 0.07
additional shares of Series A Preferred) which is cumulative, compounds on a
semi-annual basis and is payable twice a year. Similarly, under the applicable
Certificate of Designation the holders of Series B Preferred are entitled to a
payment-in-kind dividend equal to 6% (i.e., 0.06 additional shares of Series B
Preferred), which is cumulative and payable annually.

     As a result of the above factors, our net loss of $2,315,695 for the three
months ended March 31, 2002, decreased by 24% from $3,027,112 reported for the
three months ended March 31, 2001. Our cumulative losses since inception are
approximately $31,409,008. Our net loss attributable to common shareholders
(including "in kind" preferred dividends) for the three months ended March 31,
2002, decreased to $2,650,158, or $0.07 per share from $3,758,814, or $0.10 per
share for the three months ended March 31, 2001.

LIQUIDITY; CAPITAL RESOURCES

     At March 31, 2002 we had cash and cash equivalents totaling approximately
$316,801.

     We have a $4.8 million credit line available from Elan under which we may
borrow to fund our portion of the losses incurred by the joint venture. At
March 31, 2002 we had borrowed $2,314,005 under this credit line to fund our
capital obligations to Sentigen, a portion of which was in turn used by Sentigen
to reimburse us for expenses we had incurred on behalf of the joint venture. Our
current and any future borrowings under this facility bear interest at 8% per
annum, and are either repayable in 2005 or convertible, at Elan's election, into
our common stock at a conversion price of $18.15 per share. We have an effective
shelf registration statement pursuant to which we may issue up to $40 million,
of which we have issued $1,068,723, of our common stock.

     On April 8, 2002, we entered into a credit facility that will provide us
with a $2,500,000 revolving line of credit, bearing interest at 4.65%, for a
period of five years. The loan is secured by a lien on all of our assets. At
March 31, 2002, we had not borrowed any amounts on this line of credit.

     Absent additional funding from the sale of debt or equity securities or the
sale or licensing of any of our products in development, we expect to sustain
operations for the next twelve months. Our ability to conduct operations beyond
that date is entirely dependent on our ability to obtain additional capital, and
we are aggressively seeking such capital. We have and continue to take actions
to minimize our spending until we raise additional capital through the sale of
securities or the sale/licensing of certain assets, and we are aggressively
seeking additional capital. If additional funds are raised by issuing equity
securities, substantial dilution to existing stockholders may result. However,
there can be no assurance that such capital will be available under acceptable
terms, if at all. See "Risk Factors -- We must raise additional financing in the
future and our inability to do so could prevent us from implementing our
business development plan," below.

     We have access to certain additional capital through borrowings under our
credit line with Elan to reimburse our development costs of N1177 and borrowings
under our revolving line of credit. In addition,

                                       13
<PAGE>

at our option, our registration statement gives us the ability to sell from time
to time up to a remaining $39 million of our common stock. See "Risk Factors --
We must raise additional financing in the future and our ability to do so could
prevent us from implementing our business plan".

     We have used, and if additional capital is secured, expect over the next 12
months to use the capital available in our lines of credit as well as potential
proceeds from sales of common stock under our shelf registration statement or
from other issuances of debt or other equity securities, for general corporate
purposes, including activities related to preparing for and conducting clinical
trials, purchase and preparation of clinical material, conduct of preclinical
studies, administrative expenses to support our research and development
activities, capital expenditures and to meet working capital needs. If our
financial condition permits, we expect to evaluate from time to time the
acquisition or license of businesses, technologies or products. The purchase of
any such licenses or technologies would be funded by a portion of any net
proceeds of future offerings or the issuance of debt or equity securities
specifically for that purpose; at this time we have no plan or commitments for
any acquisition or license. We expect our use of capital to increase as we
conduct further clinical trials.

PLAN OF OPERATION

     During the next twelve months we will focus our efforts on the development
of PH-50 and N1177 reflecting the strategic shift in the direction of the
company. Specifically we expect to conduct preclinical and human clinical
studies, prepare required filings to the FDA, and as required to foreign
regulatory bodies and acquire quantities of clinical grade drug formulations of
these products. We are in discussions to split off our therapeutic technologies
to the founders of Photogen L.L.C. Should that splitoff not occur, we would seek
to otherwise license, co-develop or sell those technologies to other third
parties. We would not expect to continue further development activities for
these products without obtaining sufficient financing to fund the associated
development costs. If we obtained sufficient funds to finance further
development of our dermatology and cancer therapy products, we would conduct
similar development activities for those indications as we plan for PH-50/N1177.
We expect to continue to incur increasing losses for at least the next three
years as we intensify research and development, preclinical and clinical testing
and associated regulatory approval activities and engage in or provide for the
manufacture and/or sale of any products that we may develop.

     As we progress further into human clinical trials, our use of capital will
increase. We expect to continue to incur increasing losses for at least the next
several years as we intensify research and development, preclinical and clinical
testing and associated regulatory approval activities and engage in or provide
for the manufacture and/or sale of any products that we may develop. Greater
capital resources would enable us to quicken and expand our research and
development activities, 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 or curtail our ability to conduct further
research and development activities 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 raise additional financing in the
future and our inability to do so could prevent us from implementing our
business plan," below. Accordingly, we are aggressively pursuing capital
formation opportunities, either through offerings of equity or debt or as part
of collaborative arrangements with third parties.


                                       14
<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

     The primary market risk that could impact us is the fluctuation in interest
rates related to our investments in Government bonds. As our investments all
have short-term maturities, the investment return will reflect the current
market rates. To date, we have not engaged in any derivative or hedging
activities.

                           PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     In conjunction with the restructuring of our clinical development office in
Westborough, Massachusetts, we filed a lawsuit captioned Photogen, Inc. v.
Gerald L. Wolf (Case No. 00C 5841), in the United States District Court for the
Northern District of Illinois. That litigation is described in our Form 10-K for
the year ended December 31, 2001. The parties to the litigation signed a term
sheet listing key terms for the confidential setttlement of that litigation.
The term sheet contemplates, among various terms, the dismissal of all parties'
claims and mutual releases, and certain payments to Dr. Wolf and MGH. The
settlement is subject to execution of definitive documentation and approval of
Photogen's Board.

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

     None.

ITEM 5. OTHER INFORMATION

RISK FACTORS

     This Form 10-Q contains (and press releases and other public statements we
may issue from time to time may contain) a number of forward-looking statements
regarding our business and operations. Statements in this document that are not
historical facts are forward-looking statements. Such forward-looking statements
include those relating to:

o    our current business and product development plans,

o    our future business and product development plans,

o    the timing and results of regulatory approval for proposed products, and

o    projected capital needs, working capital, liquidity, revenues, interest
     costs and income.

     Examples of forward-looking statements include predictive statements,
statements that depend on or refer to future events or conditions, and
statements that may include words such as "expects," "anticipates," "intends,"
"plans," "believes," "estimates," "should," "may," or similar expressions, or
statements that imply uncertainty or involve hypothetical events.

     Forward-looking statements involve known and unknown risks and
uncertainties that may cause our actual results in future periods to differ
materially from what is currently anticipated. We make cautionary statements in
certain sections of this Form 10-Q, including under "Risk Factors." You should
read these cautionary statements as being applicable to all related
forward-looking statements wherever they appear in this Form 10-Q, in the
materials referred to in this Form 10-Q, in the materials incorporated by
reference into this Form 10-Q, or in our press releases or other public
statements. In

                                       15
<PAGE>

light of these risks, uncertainties and assumptions, the forward-looking events
discussed in this Form 10-Q or other documents incorporated by reference might
not occur. No forward-looking statement is a guarantee of future performance and
you should not place undue reliance on any forward-looking statement.

     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 PRODUCTS IN DEVELOPMENT AND WE DO NOT HAVE ANY REVENUES FROM SALES.

     Our Company and our technologies are in early stages of development. We
began our business as a biopharmaceutical company in 1997. We have not generated
revenues from sales or operations, and we do not expect to generate sufficient
revenues to enable us to be profitable for at least several years.

     Our proposed technologies and products generally must complete preclinical
tests in animals and three phases of tests (also called clinical trials) in
humans before we can market them for use. Use of our technology has been limited
primarily to laboratory experiments, animal testing or human pilot studies and
only one compound has completed Phase 1 clinical trials. We have therefore not
yet conducted substantive studies on the effectiveness of our compounds on human
subjects. The drug products we currently contemplate developing will require
costly and time-consuming research and development, preclinical and clinical
testing and regulatory approval before they can be commercially sold. We may not
be able to develop our technology into marketable products or develop our
technology so it is 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 WE MAY NOT ACHIEVE OR MAINTAIN PROFITABILITY IN
THE FUTURE OR PAY CASH DIVIDENDS.

     We have incurred losses since the beginning of our operations. As of March
31, 2002, we have incurred cumulative net losses (before dividends on preferred
stock) of approximately $31,409,008. 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 RAISE ADDITIONAL FINANCING IN THE FUTURE AND OUR INABILITY TO DO SO WILL
PREVENT US FROM IMPLEMENTING OUR BUSINESS DEVELOPMENT PLAN.

     We believe that through the use of our cash and lines of credit, we will
have cash resources for our current commitments over the next twelve months
(depending on the pace of our spending for preclinical and clinical testing and
other commitments, which, to an extent, we can adjust to preserve cash). 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 million or more over the next several years. We are aggressively
seeking 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. The pricing of our common stock, or
other security convertible into common stock, in any such transaction may also
result in an

                                       16
<PAGE>

increase in the number of shares of common stock issuable upon conversion of
Series B preferred stock or exercise of warrants in accordance with the
anti-dilution provisions in the instruments governing those securities.

OUR PROPOSED PRODUCTS ARE SUBJECT TO EXTENSIVE TESTING AND GOVERNMENT APPROVAL,
AND WE MAY NOT OBTAIN THE APPROVALS NECESSARY TO SELL OUR PROPOSED PRODUCTS.

     None of our proposed imaging, drug and device products has received the
Food and Drug Administration's approval. An extensive series of clinical trials
and other associated requirements must be completed before our proposed products
can be approved and sold in the United States or other countries. Requirements
for FDA approval of a product include preclinical and clinical testing for
effective use and safety in animals and humans; that testing 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 that we
cannot predict at this time. Even if testing is 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 United States.

IF WE DO NOT OBTAIN AND MAINTAIN PATENT OR OTHER PROTECTION OF OUR CORE
TECHNOLOGIES (NAMELY PH-50 FOR CARDIOVASCULAR IMAGING, N1177 AND OUR OTHER
LYMPHOGRAPHY MATERIALS AND METHODS, PH-10 AND OUR LASER TECHNOLOGIES), WE MAY
HAVE DIFFICULTY COMMERCIALIZING PRODUCTS USING THESE TECHNOLOGIES.

     Our success depends in part on 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:

     o 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, and the law on the scope of patent coverage
is continually changing.

     o   Various countries limit the subject matter that can be patented and
limit the ability of a patent owner to enforce patents in the medical field.
This may limit our ability to obtain or utilize those patents internationally.

     o   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, the use of the methods or
technologies contained in our patents, patent applications and other
intellectual property may conflict with or infringe the rights of others.

     o   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. We are
currently in litigation with our former Medical Director and his former
employer, Massachusetts General Hospital, concerning his claims of joint
inventorship of some of our PH-10 inventions.

     We will be able to protect our proprietary rights from unauthorized use by
third parties only to the extent that these rights are covered by valid and
enforceable patents or effectively maintained as trade

                                       17
<PAGE>

secrets. We own seven patents in the U.S., and eleven other patents in foreign
countries including Taiwan, Australia, Singapore, Japan and New Zealand. We are
also the exclusive licensee to a group of patented proprietary compounds known
as nanoparticulates from Massachusetts General Hospital and Nycomed Imaging AS.
We have filed patent applications under the Patent Cooperation Treaty covering a
number of foreign countries. These patents and the patent applications relate to
the use of PH-50 as a cardiovascular imaging agent, laser and ionizing radiation
technology, photoactive agents and methods, methods for enhanced cell production
and methods for performing lymphography.

     The patent position of biopharmaceutical companies involves complex legal
and factual questions, and therefore we cannot assure the enforceability of
these patents. Litigation over patents and other intellectual property rights
occurs frequently in our industry, and there is a risk that we may not prevail
in disputes over the ownership of intellectual property. Further, interference
may occur over the rights to certain inventions, and there is a risk that we may
not prevail in an interference. Those disputes can be expensive and time
consuming, even if we prevail. 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. Third parties
may challenge our existing patents and seek to hold them invalid or
unenforceable. 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.

     Where intellectual property results from a research project supported by
U.S. Government funding, the Government has limited rights to use the
intellectual property without paying us a royalty.

WE ARE HIGHLY DEPENDENT UPON A SMALL NUMBER OF EMPLOYEES AND CONSULTANTS WHO
PROVIDE SCIENTIFIC AND MANAGEMENT EXPERTISE, AND IT MAY BE DIFFICULT TO
IMPLEMENT OUR BUSINESS DEVELOPMENT PLANS WITHOUT THIS 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 or other material
adverse effects on our business and results of operations if any employee or
consultant violates or terminates these agreements or terminates his or her
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.

     We currently employ three senior scientists (Drs. Dees, Scott and Wachter)
and three senior executive officers, including Dr. Williams (our CEO), Mr.
Boveroux (our CFO) and Dr. Reinhard Koenig (Senior Vice President of Medical and
Regulatory Affairs). We also have retained consultants to advise us in
regulatory affairs and product development matters. If we lost the services of
our executive officers or outside consultants, we could experience a delay in
the implementation of our business plan until we arranged for another individual
or firm to fulfill the role. The loss of one of our scientists could cause delay
in implementing our business plan and also jeopardize development of new
technologies.

                                       18
<PAGE>

WE HAVE TO RELY ON THIRD PARTIES AND COLLABORATIVE RELATIONSHIPS FOR THE
MANUFACTURE, CLINICAL TESTING AND MARKETING OF OUR PROPOSED PRODUCTS, AND IT MAY
BE DIFFICULT TO IMPLEMENT OUR BUSINESS DEVELOPMENT PLANS WITHOUT THESE
COLLABORATIONS.

     We are currently involved in a joint venture with affiliates of Elan
Corporation, plc, called Sentigen Ltd., to develop and commercialize materials
in the field of lymphography. We have had and expect to continue in the future
to have a variety of research agreements with universities and other research
institutions to investigate specific protocols. We also contract and expect to
continue to contract with research organizations and other third parties to
manage clinical trials of our proposed products in development. We must continue
to enter into collaborative relationships with third parties for additional
research and development, preclinical and clinical testing, marketing and
distribution of our proposed products.

     We are also dependent on third parties for the manufacture of supplies of
our products and for the supply of lasers and radiotherapy devices and similar
hardware in physicians' offices and hospitals. 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 partner
could also pursue alternative technologies as a means of developing or marketing
products for the diseases targeted by our collaborative program. 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, AND MANY OF OUR COMPETITORS
HAVE GREATER RESOURCES AND HAVE PRODUCTS THAT ARE IN MORE ADVANCED STAGES OF
DEVELOPMENT.

     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. We understand that the existing market
for radiopaque contrast agents is estimated to be approximately $3.4 billion
worldwide. The dominant uses of media are those employed in conjunction with CT
or X-ray scans. Approximately half of the usage is in the U.S. Omnipaque(R),
marketed by a unit of Amersham is estimated to be the leading agent utilized in
coronary angiography. Other companies marketing contrast agents include
Mallinckrodt, Inc. (a unit of Tyco International Ltd.), Bristol-Myers Squibb
Medical Imaging (a unit of Bristol-Myers Squibb Company), Berlex Laboratories,
Inc., Abbott Laboratories and Bracco.

     More broadly defined, other modalities, such as magnetic resonance imaging
and ultrasound, are also used by physicians to image internal vasculature and
organs. These modalities, including CT imaging, each have particular attributes
that may make their use applicable to any particular situation.

     Competitors in the field of using light energy to treat and diagnose
disease include: Miravant Medical Technologies, Pharmacyclics, Inc., QLT Inc.,
Axcan Pharma Inc., Dusa Pharmaceuticals, Inc. and PhotoCure ASA. There are also
numerous companies developing other technologies to image the vascular system
and various body organs, and to treat and/or diagnose psoriasis, actinic
keratosis, cancer and other diseases. Examples of the technologies from those
other companies are the use of magnetic resonance imaging or ultrasound
techniques to create internal organ images, drug or genetic treatments,
procedures that use sound waves and procedures that destroy diseased tissue
using heat. Some of these

                                       19
<PAGE>

firms have drugs or devices that have completed or are in advanced stages of
clinical trials and regulatory approvals.

     Others may develop technologies and obtain patent protection that could
render our technologies or products obsolete or less competitive or our patents
invalid or unenforceable. 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
Heart Association, American Cancer Society and similar sources in the public
domain), that data or our analysis of the data could prove incorrect.

CHANGES IN HEALTH CARE REIMBURSEMENT POLICIES OR LEGISLATION MAY MAKE IT
DIFFICULT FOR PATIENTS TO USE OR RECEIVE REIMBURSEMENT FOR USING OUR PRODUCTS,
WHICH COULD REDUCE OUR REVENUES.

     Our success will depend, in part, on the extent to which health insurers,
managed care entities and similar organizations provide coverage or
reimbursement for using the medical procedures and devices we plan to develop.
These third-party payers 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.

THE CURRENT BOARD OF DIRECTORS CONTROLS PHOTOGEN, WHICH MAY MAKE IT DIFFICULT
FOR STOCKHOLDERS WHO ARE NOT IN THAT GROUP TO INFLUENCE MANAGEMENT.

     A small group of our officers, directors and others control approximately
83% of our outstanding common stock. Several of our principal stockholders are
also parties to an Amended and Restated Voting Agreement, dated as of September
4, 2001, concerning the election of certain designees to the Board of Directors
of Photogen Technologies, Inc. and Photogen, Inc. The Voting Agreement requires
these stockholders to vote their shares for the election of the current Board of
Directors or, in the case of a vacancy, for the person nominated by a majority
of the remaining Directors. This concentration of ownership and control 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.

THE PRICE AND TRADING VOLUME OF OUR COMMON STOCK FLUCTUATES SIGNIFICANTLY, WHICH
MAY MAKE IT DIFFICULT FOR US OR A STOCKHOLDER TO SELL OUR COMMON STOCK AT A
SUITABLE PRICE AND MAY CAUSE DILUTION FOR EXISTING STOCKHOLDERS WHEN WE ISSUE
ADDITIONAL SHARES.

     During the period from January 1, 2002 through March 31, 2002 our closing
stock price ranged from $0.65 to $1.51 per share. Daily trading volume ranged
from 0 (zero) shares to approximately 41,000 shares during that period.

     The following factors may have an impact on the price of our stock:


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<PAGE>


     o   Announcements by us or others regarding scientific discoveries,
         technological innovations, commercial products, patents or proprietary
         rights;

     o   Announcements by us concerning the licensing or other transactions of
         our products or technologies;

     o   The progress of preclinical or clinical testing;

     o   Changes in government regulation;

     o   Public concern about the safety of devices or drugs;

     o   Limited coverage by securities analysts;

     o   The occurrence of any of the risk factors described in this section;

     o   Sales of large blocks of stock by an individual or institution;

     o   Changes in our financial performance from period to period; securities
         analysts' reports; and general market conditions.

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 delisted if we fail to meet 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 were 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.
The rules of the SEC generally define "penny stock" to be common stock that has
a market price of less than $5.00 per share and is not traded on a national
exchange. If our stock became subject to penny stock regulations, it could
adversely affect the ability and willingness of broker/dealers who sell or make
a market in our common stock and of investors to purchase or sell our stock in
the secondary market.

IF STOCKHOLDERS HOLDING SUBSTANTIAL AMOUNTS OF OUR COMMON STOCK SHOULD SELL IN
THE PUBLIC MARKET, THE PRICE OF OUR STOCK COULD FALL OR IT MAY BE MORE COSTLY
FOR US TO RAISE CAPITAL.

     As of March 15, 2002, we had reserved 11,474,700 shares of common stock for
future issuance upon grants of options, or exercise or conversion of outstanding
options and warrants and convertible securities and notes. If these options and
warrants are all issued and exercised, investors may experience significant
dilution in the book value and earnings per share of their common stock.

                                       21
<PAGE>

     Approximately 6,798,765 shares of our common stock were eligible for sale
in the public market free of restrictions under the Securities Act of 1933.
Approximately 5,490,162 shares are currently subject to agreements requiring us
to permit the holders of the shares, under certain circumstances, to join a
public offering of our stock or to demand that we register their shares. On May
9, 2001, Drs. Dees, Wachter, Scott and Fisher and Mr. Smolik entered into a
lock-up agreement prohibiting them, without the company's approval, from selling
in the public markets 20,548,435 shares until May 9, 2004 (except for limited
sales by each of them of between 42,000 and 78,000 shares each year at prices
above $5.00 per share).

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     (a) Exhibits.

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

 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 May 17, 2000 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. (Amended and Restated as of
               May 17, 2000) (Filed as Exhibit 3.2 to the Company's Current
               Report on Form 8-K dated May 17, 2000 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
               3.3 to the Company's Current Report on Form 8-K dated May 17,
               2000 and incorporated herein by reference.)


                                       22
<PAGE>

 EXHIBIT NO.                         DESCRIPTION


     (b) Reports on Form 8-K.

     The following report on Form 8-K was filed during the three-month period
ended March 31, 2002:

     1. Report on Form 8-K dated February 26, 2002 disclosing that Photogen's
Chairman will not continue his duties and that Taffy Williams, Ph.D. will assume
the duties of that office.


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<PAGE>

                                   SIGNATURES

     In accordance with the requirements of the Exchange Act, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.

Date:  May 14, 2002                    Photogen Technologies, Inc.



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


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




                                       24
<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 May 17, 2000.)

     +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. (Amended and Restated as of
               May 17, 2000) (Filed as Exhibit 3.2 to the Company's Current
               Report on Form 8-K dated May 17, 2000.)

     +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
               3.3 to the Company's Current Report on Form 8-K dated May 17,
               2000.)


+ Incorporated by reference from the filing indicated.
* Filed herewith.

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