**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10–Q**

 

**ý        QUARTERLY REPORT PURSUANT TO SECTION 13OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

** **

**For the QuarterlyPeriod Ended September 30, 2001**

** **

**or**

** **

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

** **

**For the transitionperiod ended __________**

** **

**Commission File Number 0–23553**

 

**PHOTOGEN TECHNOLOGIES, INC.**

(Exactname 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 reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days:

 

YES:  ý     NO: o

 

            Indicate the number of shares outstanding of each of the issuer'sclasses of common equity, as of the latest practicable date: 38,842,298 SHARESOF COMMON STOCK, $.001 PAR VALUE PER SHARE, ISSUED AND OUTSTANDING AS NOVEMBER9, 2001

 

 

# ** **

#  

# **INDEX**

 

Part I.      Financial Information

 

                Item 1.    Financial Statements

                Item2.    Management’sDiscussion and Analysis of Financial Condition andResults of Operations

                Item 3.    Quantitative andQualitative Disclosures about Market Risk

 

Part II.    Other Information

 

                Item 1.    Legal Proceedings

                Item4.    Submissionof Matters to a Vote of Security Holders

                Item 5.    Other Information

                Item 6.    Exhibits and Reports onForm 8-K

**PART I.FINANCIAL INFORMATION**

 

## **ITEM1.**  FINANCIAL STATEMENTS

 

PhotogenTechnologies, Inc.

(ADevelopment Stage Company)

ConsolidatedCondensed Balance Sheets

Allamounts in $

 
|                                                                                                                                                                                                                                                                                               |   | **September 30, 2001 (Unaudited)** |       | **December  31, 2000 (Audited)** |       |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|------------|----------------------------------|------------|
|                                                                                                                                                                                                                                                                                               |   |                               |       |                             |       |
| **Assets**                                                                                                                                                                                                                                                                                         |   |                               | ** ** |                             | ** ** |
|                                                                                                                                                                                                                                                                                               |   |                               | ** ** |                             | ** ** |
| **Current Assets**                                                                                                                                                                                                                                                                                 |   |                               | ** ** |                             | ** ** |
| Cash  and cash equivalents                                                                                                                                                                                                                                                                         |   | $                                  | 1,828,839  |                             | $          | 622,795 |   |
| United  States Treasury Notes, total face value $800,000 and $4,945,000, respectively                                                                                                                                                                                                              |   | 798,207                            |       | 4,943,971                        |       |
| Interest  receivable                                                                                                                                                                                                                                                                               |   | -                                  |       | 93,219                           |       |
| Prepaid  consulting expense                                                                                                                                                                                                                                                                        |   | -                                  |       | 760,363                          |       |
| Prepaid  expenses                                                                                                                                                                                                                                                                                  |   | 44,662                             |       | 182,115                          |       |
| Deposit                                                                                                                                                                                                                                                                                            |   | 100,000                            |       | 100,000                          |       |
|                                                                                                                                                                                                                                                                                               |   |                               | ** ** |                             | ** ** |
| **Total Current Assets**                                                                                                                                                                                                                                                                           |   | 2,771,708                          |       | 6,702,463                        |       |
|                                                                                                                                                                                                                                                                                               |   |                               | ** ** |                             | ** ** |
| **Equipment  and Leasehold Improvements,**  less accumulated depreciation of $964,572 and $761,425, respectively                                                                                                                                                                                   |   | 977,645                            |       | 1,377,741                        |       |
|                                                                                                                                                                                                                                                                                               |   |                               | ** ** |                             | ** ** |
| **Patent  Costs,** net of amortization  of $90,277 and $59,027, respectively                                                                                                                                                                                                                       |   | 409,723                            |       | 440,973                          |       |
|                                                                                                                                                                                                                                                                                               |   |                               | ** ** |                             | ** ** |
| **Deposits**                                                                                                                                                                                                                                                                                       |   | 443,753                            |       | 429,370                          |       |
|                                                                                                                                                                                                                                                                                               |   |                               | ** ** |                             | ** ** |
| **Investment in and Advances to Affiliate**                                                                                                                                                                                                                                                        |   | 11,150,235                         |       | 10,701,490                       |       |
|                                                                                                                                                                                                                                                                                               |   |                               | ** ** |                             | ** ** |
| **Total  Assets**                                                                                                                                                                                                                                                                                  |   | $                                  | 15,753,064 |                             | $          | 19,652,037 |   |
|                                                                                                                                                                                                                                                                                               |   |                               | ** ** |                             | ** ** |
| **Liabilities and Stockholders’ Equity**                                                                                                                                                                                                                                                      |   |                               | ** ** |                             | ** ** |
|                                                                                                                                                                                                                                                                                               |   |                               | ** ** |                             | ** ** |
| **Current Liabilities**                                                                                                                                                                                                                                                                            |   |                               | ** ** |                             | ** ** |
| Accounts  payable                                                                                                                                                                                                                                                                                  |   | $                                  | 578,824    |                             | $          | 891,171 |   |
| Accrued  restructuring                                                                                                                                                                                                                                                                             |   | 174,190                            |       | 330,000                          |       |
| Accrued  equipment lease                                                                                                                                                                                                                                                                           |   | 187,290                            |       | -                                |       |
| Current  portion of obligation under capital leases                                                                                                                                                                                                                                                |   | 4,544                              |       | 16,802                           |       |
|                                                                                                                                                                                                                                                                                               |   |                               | ** ** |                             | ** ** |
| **Total Current Liabilities**                                                                                                                                                                                                                                                                      |   | 944,848                            |       | 1,237,973                        |       |
|                                                                                                                                                                                                                                                                                               |   |                               | ** ** |                             | ** ** |
| **Obligation  Under Capital Leases**                                                                                                                                                                                                                                                               |   | -                                  |       | 1,554                            |       |
|                                                                                                                                                                                                                                                                                               |   |                               | ** ** |                             | ** ** |
| **Accrued  Equipment Lease**                                                                                                                                                                                                                                                                       |   | 415,135                            |       | -                                |       |
|                                                                                                                                                                                                                                                                                               |   |                               | ** ** |                             | ** ** |
| **Long-Term  Debt**                                                                                                                                                                                                                                                                                |   | 1,967,785                          |       | -                                |       |
|                                                                                                                                                                                                                                                                                               |   |                               | ** ** |                             | ** ** |
| **Total  Liabilities**                                                                                                                                                                                                                                                                             |   | 3,327,768                          |       | 1,239,527                        |       |
|                                                                                                                                                                                                                                                                                               |   |                               | ** ** |                             | ** ** |
| **Shareholders’  Equity**                                                                                                                                                                                                                                                                     |   |                               | ** ** |                             | ** ** |
| Preferred  stock; par value $.01 per share; 5,000,000 shares authorized including:                                                                                                                                                                                                                 |   |                               | ** ** |                             | ** ** |
| Series  A Preferred Stock; 12,856 shares authorized, issued and outstanding at  September 30, 2001 and December 31, 2000, liquidation preference $1,000 per  share (in aggregate $12,856,000)                                                                                                      |   | 128                                |       | 128                              |       |
| Series  B Preferred Stock; 402,000 shares authorized; 357,279 and 337,056 shares  issued and outstanding, at September 30, 2001 and December 31, 2000,  respectively, liquidation preference $16.88 per share (in aggregate  $6,030,870 at September 30, 2001 and $5,689,505 at December 31, 2000) |   | 3,572                              |       | 3,370                            |       |
| Common  stock; par value $.001 per share; 150,000,000 sharesauthorized; 38,842,298  and 37,383,386 shares issued andoutstanding at September 30, 2001 and  December 31, 2000, respectively                                                                                                         |   | 38,843                             |       | 37,384                           |       |
| Additional  paid-in capital                                                                                                                                                                                                                                                                        |   | 38,857,534                         |       | 37,741,925                       |       |
| Deficit  accumulated during the development stage                                                                                                                                                                                                                                                  |   | (26,474,781                        | )          | (19,370,297                      | )          |
|                                                                                                                                                                                                                                                                                               |   |                               | ** ** |                             | ** ** |
| **Total Shareholders’ Equity**                                                                                                                                                                                                                                                                |   | 12,425,296                         |       | 18,412,510                       |       |
|                                                                                                                                                                                                                                                                                               |   |                               | ** ** |                             | ** ** |
| **Total Liabilities and Shareholders’ Equity**                                                                                                                                                                                                                                                |   | $                                  | 15,753,064 |                             | $          | 19,652,037 |   |

 

 

PhotogenTechnologies, Inc.

(ADevelopment Stage Company)

ConsolidatedCondensed Statements of Operations

(Unaudited)

Allamounts in $

 
|                                                                               |   | **Three  Months Ended September 30, 2001** |       | **Three  Months Ended September 30, 2000** |   | **Nine  Months Ended September 30, 2001** |   | **Nine  Months Ended September 30, 2000** |       | **Cumulative  Amounts From November 3, 1996 (Inception)** |   |
|------------------------------------------------------------------------------------|--------|--------------------------------------------|------------|--------------------------------------------|--------|-------------------------------------------|--------|-------------------------------------------|------------|-----------------------------------------------------------|--------|
|                                                                               |   |                                       |       |                                       |   |                                      |   |                                      |       |                                                      |   |
| **Operating  Expenses**                                                            |   |                                       |       |                                       |   |                                      |   |                                      |       |                                                      |   |
| Research and development                                                           |   | $                                          | 1,056,338  |                                       | $      | 1,914,861                                 |   | $                                         | 2,301,793  |                                                      | $      | 3,362,718 |   | $ | 11,265,426 |   |
| General and administrative                                                         |   | 613,512                                    |       | 1,070,029                                  |   | 2,695,167                                 |   | 3,784,016                                 |       | 12,092,022                                                |   |
| Restructuring charges                                                              |   | -                                          |       | 202,000                                    |   | -                                         |   | 202,000                                   |       | 597,025                                                   |   |
| Provision for future lease payments                                                |   | -                                          |       | -                                          |   | 696,070                                   |   | -                                         |       | 696,070                                                   |   |
|                                                                               |   |                                       |       |                                       |   |                                      |   |                                      |       |                                                      |   |
| **Total Operating Expenses**                                                       |   | 1,669,850                                  |       | 3,186,890                                  |   | 5,693,030                                 |   | 7,348,734                                 |       | 24,650,543                                                |   |
|                                                                               |   |                                       |       |                                       |   |                                      |   |                                      |       |                                                      |   |
| **Income (Loss) from Joint Venture**                                               |   | (352,236                                   | )          | 395,013                                    |   | (1,514,080                                | )      | (673,096                                  | )          | (3,023,501                                                | )      |
|                                                                               |   |                                       |       |                                       |   |                                      |   |                                      |       |                                                      |   |
| **Investment Income**                                                              |   | 18,711                                     |       | 95,378                                     |   | 102,626                                   |   | 338,186                                   |       | 1,199,263                                                 |   |
|                                                                               |   |                                       |       |                                       |   |                                      |   |                                      |       |                                                      |   |
| **Net Loss**                                                                       |   | $                                          | (2,003,375 | )                                          | $      | (2,696,499                                | )      | $                                         | (7,104,484 | )                                                         | $      | (7,683,644 | ) | $ | (26,474,781 | ) |
|                                                                               |   |                                       |       |                                       |   |                                      |   |                                      |       |                                                      |   |
| **Dividends on Preferred Stock**                                                   |   | (758,493                                   | )          | (659,820                                   | )      | (2,243,832                                | )      | (1,757,391                                | )          |                                                      |   |
|                                                                               |   |                                       |       |                                       |   |                                      |   |                                      |       |                                                      |   |
| **Net Loss Applicable to Common Shareholders**                                     |   | $                                          | (2,761,868 | )                                          | $      | (3,356,319                                | )      | $                                         | (9,348,316 | )                                                         | $      | (9,441,035 | ) |   |   |
|                                                                               |   |                                       |       |                                       |   |                                      |   |                                      |       |                                                      |   |
| **Basic and Diluted Loss per Common Share**                                        |   | $                                          | (.07       | )                                          | $      | (.09                                      | )      | $                                         | (.25       | )                                                         | $      | (.25 | ) |   |   |
|                                                                               |   |                                       |       |                                       |   |                                      |   |                                      |       |                                                      |   |
| **Weighted Average Number of Common Shares Outstanding –  Basic and Diluted** |   | 38,104,320                                 |       | 37,383,386                                 |   | 37,761,446                                |   | 37,383,386                                |       |                                                      |   |

 

 

PhotogenTechnologies, Inc.

(ADevelopment Stage Company)

ConsolidatedCondensed Statements of Shareholders’ Equity

(Unaudited)

Allamounts in $

 
|                                                                               |   | Preferred Stock |   | Preferred Stock |   |         |   |          |   |       |   | Additional  |   | Deficit

Accumulated During the |   |      |   |
|------------------------------------------------------------------------------------|--------|-----------------|--------|-----------------|--------|--------------|--------|---------------|--------|------------|--------|-------------|--------|---------------------------------|--------|-----------|--------|
|                                                                               |   | Series A        |   | Series B        |   | Common Stock |   | Members’ |   | Paid-in    |   | Development |   |                            |   |
|                                                                               |   | Shares          |   | Amount          |   | Shares       |   | Amount        |   | Shares     |   | Amount      |   | **Capital**                     |   | Capital   |   | Stage |   | Total |   |
|                                                                               |   |            |   |            |   |         |   |          |   |       |   |        |   |                            |   |      |   |   |   |   |   |
| 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                                                          |   | -               |   | -               |   | -            |   | -             |   | 6,312,833  |   | 6,313       |   | -                               |   | 1,797,137 |   | - |   | 1,803,450 |   |
| Effect  of recapitalization and merger                                             |   | -               |   | -               |   | -            |   | -             |   | 29,687,167 |   | 29,687      |   | (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                                                 |   | -               |   | -               |   | -            |   | -             |   | 36,000,000 |   | 36,000      |   | -                               |   | 2,607,526 |   | (556,481 | ) | 2,087,045 |   |
|                                                                               |   |            |   |            |   |         |   |          |   |       |   |        |   |                            |   |      |   |   |   |   |   |
| Issuance  of common stock                                                          |   | -               |   | -               |   | -            |   | -             |   | 875,020    |   | 875         |   | -                               |   | 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 | ) |
|                                                                                    |        |                 |        |                 |        |              |        |               |        |            |        |             |        |                                 |        |           |        |  |  |  |  |  |  |  |  |  |  |  |  |

** **

** **
|                                                   |   | Preferred Stock |   | Preferred Stock |   |         |    |     |   |       |   | Additional |   | Deficit Accumulated During the |   |       |   |
|--------------------------------------------------------|--------|-----------------|--------|-----------------|--------|--------------|---------|----------|--------|------------|--------|------------|--------|--------------------------------|--------|------------|--------|
|                                                   |   | Series A        |   | Series B        |   | Common Stock |    | Members' |   | Paid-in    |   | Delopment  |   |                           |   |
|                                                   |   | Shares          |   | Amount          |   | Shares       |    | Amount   |   | Shares     |   | Amount     |   | Capital                        |   | Capital    |   | Stage |   | Total |   |
|                                                   |   |            |   |            |   |         |    |     |   |       |   |       |   |                           |   |       |   |   |   |   |   |
| Balance,  at December 31, 1998                         |   | -               |   | $               | -      |         | -       |     | $      | -          |   | 36,875,020 |   | $                              | 36,875 |       | -      |   | $ | 9,602,097 |   | $ | (2,530,394 | ) | $ | 7,108,578 |   |
|                                                   |   |            |   |            |   |         |    |     |   |       |   |       |   |                           |   |       |   |   |   |   |   |
| Exercise  of stock options                             |   | -               |   | -               |   | -            |    | -        |   | 4,500      |   | 5          |   | -                              |   | 50,058     |   | - |   | 50,063 |   |
| Issuance  of warrants and options                      |   | -               |   | -               |   | -            |    | -        |   | -          |   | -          |   | -                              |   | 3,664,749  |   | - |   | 3,664,749 |   |
| Issuance  of common stock                              |   | -               |   | -               |   | -            |    | -        |   | 503,866    |   | 504        |   | -                              |   | 6,082,150  |   | - |   | 6,082,654 |   |
| Issuance  of preferred stock                           |   | 12,015          |   | 120             |   | -            |    | -        |   | -          |   | -          |   | -                              |   | 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                      |   | 12,015          |   | 120             |   | -            |    | -        |   | 37,383,386 |   | 37,384     |   | -                              |   | 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                  |   | 841             |   | 8               |   | -            |    | -        |   | -          |   | -          |   | -                              |   | (8         | )      | - |   | - |   |
| Issuance  of preferred stock                           |   | -               |   | -               |   | 337,056      |    | 3,370    |   | -          |   | -          |   | -                              |   | 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                      |   | 12,856          |   | 128             |   | 337,056      |    | 3,370    |   | 37,383,386 |   | 37,384     |   | -                              |   | 37,741,925 |   | (19,370,297 | ) | 18,412,510 |   |
|                                                   |   |            |   |            |   |         |    |     |   |       |   |       |   |                           |   |       |   |   |   |   |   |
| Stock  option compensation                             |   | -               |   | -               |   | -            |    | -        |   | -          |   | -          |   | -                              |   | 48,547     |   | - |   | 48,547 |   |
|                                                   |   |            |   |            |   |         |    |     |   |       |   |       |   |                           |   |       |   |   |   |   |   |
| Issuance  of common stock                              |   | -               |   | -               |   | -            |    | -        |   | 1,458,912  |   | 1,459      |   | -                              |   | 1,067,264  |   | - |   | 1,068,723 |   |
|                                                   |   |            |   |            |   |         |    |     |   |       |   |       |   |                           |   |       |   |   |   |   |   |
| Issuance  of preferred stock dividend                  |   | -               |   | -               |   | 20,223       |    | 202      |   | -          |   | -          |   | -                              |   | (202       | )      | - |   | - |   |
| Net  loss for the nine months ended September 30, 2001 |   | -               |   | -               |   | -            |    | -        |   | -          |   | -          |   | -                              |   | -          |   | (7,104,484 | ) | (7,104,484 | ) |
|                                                   |   |            |   |            |   |         |    |     |   |       |   |       |   |                           |   |       |   |   |   |   |   |
| **Balance**, at September 30, 2001                     |   | 12,856          |   | $               | 128    |         | 357,279 |     | $      | 3,572      |   | 38,842,298 |   | $                              | 38,843 |       | -      |   | $ | 38,857,534 |   | $ | (26,474,781 | ) | $ | 12,425,296 |   |
|                                                        |        |                 |        |                 |        |              |         |          |        |            |        |            |        |                                |        |            |        |  |  |  |  |  |  |  |  |  |  |  |

 

 

PhotogenTechnologies, Inc.

(ADevelopment Stage Company)

ConsolidatedCondensed Statements of Operations

(Unaudited)

Allamounts in $

 
|                                                    |   | **Nine  Months Ended September 30, 2001** |       | **Nine  Months Ended September 30, 2000** |   | **Cumulative  Amounts From November 3, 1996 (Inception)** |   |
|---------------------------------------------------------|--------|-------------------------------------------|------------|-------------------------------------------|--------|-----------------------------------------------------------|--------|
|                                                    |   |                                      |       |                                      |   |                                                      |   |
| **Cash  Flows From Operating Activities**               |   |                                      |       |                                      |   |                                                      |   |
| Net loss                                                |   | $                                         | (7,104,484 | )                                         | $      | (7,683,644                                                | )      | $ | (26,474,781 | ) |
| Depreciation and  amortization                          |   | 336,349                                   |       | 322,194                                   |   | 1,200,743                                                 |   |
| (Gain) loss on  disposal of fixed assets                |   | (4,242                                    | )          | -                                         |   | 38,799                                                    |   |
| Loss (gain) on sale of  marketable securities           |   | -                                         |       | -                                         |   | (18,503                                                   | )      |
| United States Treasury  Notes amortization              |   | 764                                       |       | 7,112                                     |   | 14,379                                                    |   |
| Write-off of equipment  lease                           |   | 696,070                                   |       | -                                         |   | 696,070                                                   |   |
| Stock option compensation                               |   | 48,547                                    |       | 68,741                                    |   | 600,334                                                   |   |
| Issuance of warrants  in exchange for services rendered |   | -                                         |       | 1,905,825                                 |   | 3,234,728                                                 |   |
| Loss from investment  in affiliate                      |   | 1,514,080                                 |       | 673,095                                   |   | 3,023,501                                                 |   |
| Changes in operating  assets and liabilities:           |   |                                      |       |                                      |   |                                                      |   |
| Prepaid  consulting expense                             |   | 760,363                                   |       | -                                         |   | 760,363                                                   |   |
| Prepaid  expenses                                       |   | 137,453                                   |       | 453,910                                   |   | (44,662                                                   | )      |
| Interest  receivable                                    |   | 93,219                                    |       | (16,670                                   | )      | -                                                         |   |
| Accounts  payable                                       |   | (312,347                                  | )          | (485,509                                  | )      | 578,824                                                   |   |
| Accrued  equipment lease                                |   | (93,645                                   | )          | -                                         |   | (93,645                                                   | )      |
| Accrued  restructuring                                  |   | (155,810                                  | )          | 202,000                                   |   | 174,190                                                   |   |
|                                                    |   |                                      |       |                                      |   |                                                      |   |
| Net cash used in  operating activities                  |   | (4,083,683                                | )          | (4,552,946                                | )      | (16,309,660                                               | )      |
|                                                    |   |                                      |       |                                      |   |                                                      |   |
| **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              |   | (4,770,000                                | )          | (11,045,000                               | )      | (38,556,973                                               | )      |
| Sales  of United States Treasury Notes                  |   | 8,915,000                                 |       | 9,820,000                                 |   | 38,878,548                                                |   |
| Purchase  of capital assets                             |   | (45,938                                   | )          | (444,208                                  | )      | (1,943,553                                                | )      |
| Proceeds  from sale of equipment                        |   | 145,177                                   |       | -                                         |   | 145,177                                                   |   |
| Costs  to acquire patent                                |   | -                                         |       | (50,000                                   | )      | (237,335                                                  | )      |
| Investment  in and advances to affiliate                |   | (1,962,825                                | )          | 93,548                                    |   | (14,173,736                                               | )      |
| Decrease  in restricted cash                            |   | -                                         |       | 100,000                                   |   | -                                                         |   |
| Increase  in deposit                                    |   | (14,383                                   | )          | (500,000                                  | )      | (543,753                                                  | )      |
|                                                    |   |                                      |       |                                      |   |                                                      |   |
| Net cash provided by  (used in) investing activities    |   | 2,267,031                                 |       | (2,025,660                                | )      | (16,450,128                                               | )      |
|                                                         |        |                                           |            |                                           |        |                                                           |        |  |  |  |

 

 
|                                                    |   | **Nine  Months**

**Ended**

**September 30,**

**2001** |      | **Nine Months Ended September 30, 2000** |   | **Cumulative Amounts From November 3, 1996 (Inception)** |   |
|---------------------------------------------------------|--------|----------------------------------------------------------|-----------|------------------------------------------|--------|----------------------------------------------------------|--------|
|                                                    |   |                                                     |      |                                     |   |                                                     |   |
| **Cash  Flows From Financing Activities**               |   |                                                     |      |                                     |   |                                                     |   |
| Principal  payments on capital leases                   |   | $                                                        | (13,812   | )                                        | $      | (18,590                                                  | )      | $ | (287,160 | ) |
| Net  proceeds from issuance of equity                   |   | 1,068,723                                                |      | 5,276,340                                |   | 31,367,439                                               |   |
| Proceeds  from capital contributions by shareholders    |   | -                                                        |      | -                                        |   | 1,911,674                                                |   |
| Proceeds  from issuance of debt                         |   | 1,967,785                                                |      | -                                        |   | 1,967,785                                                |   |
| Cost  of recapitalization                               |   | -                                                        |      | -                                        |   | (371,111                                                 | )      |
|                                                    |   |                                                     |      |                                     |   |                                                     |   |
| Net cash provided by  financing activities              |   | 3,022,696                                                |      | 5,257,750                                |   | 34,588,627                                               |   |
| **Increase (decrease) in Cash and Cash Equivalents**    |   | 1,206,044                                                |      | (1,320,856                               | )      | 1,828,839                                                |   |
|                                                    |   |                                                     |      |                                     |   |                                                     |   |
| **Cash  and Cash Equivalents**, at beginning of  period |   | 622,795                                                  |      | 1,681,773                                |   | -                                                        |   |
|                                                    |   |                                                     |      |                                     |   |                                                     |   |
| **Cash  and Cash Equivalents,**at end of period         |   | $                                                        | 1,828,839 |                                     | $      | 360,917                                                  |   | $ | 1,828,839 |   |

 

 

PhotogenTechnologies, Inc.

(ADevelopment Stage Company)

NotesTo Condensed Financial Statements

(Unaudited)

 

September30, 2001

 

1.             BASIS OFPRESENTATION

 

The accompanyingunaudited condensed financial statements have been prepared in accordance withgenerally accepted accounting principles for interim financial informationpursuant to Regulation S–K. Accordingly, they do not include all of the information and footnotesrequired by generally accepted accounting principles for complete financialstatements.  In the opinion ofmanagement, all adjustments (consisting of normal recurring accruals)considered necessary for a fair presentation have been included.  Operating results for the nine months endedSeptember 30, 2001 are not necessarily indicative of the results that may beexpected for the year ended December 31, 2001.

 

2.             JOINTVENTURE/INVESTMENT IN AFFILIATE

 

**                   **Thefollowing is summarized financial information for the joint venture Sentigen,Ltd. at September 30, 2001 and 2000. 

** **
|                                                                  |   | **September 30,** |       |
|-----------------------------------------------------------------------|--------|-------------------|------------|
|                                                                  |   | **2001**          |       | **2000** |   |
|                                                                  |   |              | ** ** |   | ** ** |
| License  purchased from Elan, net of amortization of $978,263 in 2001 |   | $                 | 14,021,737 |   | $ | 15,000,000 |   |
|                                                                  |   |              | ** ** |   | ** ** |
| Total  assets                                                         |   | $                 | 14,021,737 |   | $ | 15,000,000 |   |
|                                                                  |   |              | ** ** |   | ** ** |
| Due  to affiliates                                                    |   | $                 | 339,733    |   | $ | 1,222,377 |   |
|                                                                  |   |              | ** ** |   | ** ** |
| Total  shareholders’ equity                                      |   | 13,682,004        |       | 13,777,623 |   |
|                                                                  |   |              | ** ** |   | ** ** |
| Total  liabilities and equity                                         |   | $                 | 14,021,737 |   | $ | 15,000,000 |   |
|                                                                  |   |              | ** ** |   | ** ** |
| Research  and development expense                                     |   | $                 | 1,890,237  |   | $ | 840,337 |   |
|                                                                  |   |              | ** ** |   | ** ** |
| Net  loss                                                             |   | $                 | 1,890,237  |   | $ | 840,337 |   |

 

3.             BASICAND DILUTED LOSS PER COMMON SHARE

 

Basicand diluted loss per common share is computed based on the weighted averagenumber 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 thecalculation at September 30, 2001 are 6,294,000 options, 1,149,724 warrants,1,037,630 shares issuable upon the conversion of Series A and B Preferred Stockand 108,418 shares issuable upon conversion of the Elan line of credit.

 

4.             EQUITY

 

# **(a)           OnFebruary 9, 2001, the Company’s shelf registration on Form S-3 was declaredeffective.  Under the shelfregistration, the Company may issue up to $40,000,000 of common stock.  As of September 30, 2001, 695,486 shareshave been issued under the shelf registration for cash proceeds, net of relatedexpenses, of $1,068,723.**

 

(b)           Duringthe first quarter 2001, the Company issued 400,000 stock options to an employeeunder the 2000 Long Term Incentive Compensation Plan and 250,000 stock optionsto employees under the 1998 Long Term Incentive Compensation Plan.  The options were issued at exercise pricesranging from $1.91 to $5.31 per share. The exercise price was the closing price quoted on the NASDAQ SmallCapMarket on the date of the grant.

 

(c)           The Series B Preferred containsbeneficial conversion features. Emerging Issues Task Force Issue 98-5, “Accounting for ConvertibleSecurities with Beneficial Conversion Features or Contingently AdjustableConversion Ratios,” requires the issuer to assume that the holder will notconvert the instrument until the time of the most beneficial conversion. Usingthe conversion ratio at January 1, 2002 and the stock price at the date ofissuance, the maximum beneficial conversion amount is $2,412,350.  This amount will be recorded as additionalpreferred stock dividends over the period from issuance until January 1,2002.  Through September 30, 2001,$2,016,900 has been recorded as additional dividends.

 

(d)           The Company is required to issueadditional shares to Elan so that the weighted average price for common stockpurchased by Elan equals the effective price of the Company’s first offeringafter Elan’s purchase.  During the thirdquarter 2001, the Company issued 763,426 shares of common stock to satisfy thisrequirement.

 

5.             RESTRUCTURING

 

                In 2000, theCompany recorded a restructuring charge of $597,025, included in operatingexpenses, relating to the closure of its operations in Westborough, Massachusetts.The restructuring charge includes accruals related to estimated leasetermination costs and accruals related to employee severance and relatedexpenses in connection with their termination. All employees at the Westborough facility were terminated. Theactivities previously performed at the Westborough facility will continue atother company locations or with outside consultants.  The restructuring charge is summarized as follows:

 
|           |   | ** Charged  in 2000** |   | **Utilized in 2000** |   | **Balance at December 31, 2000** |   | **Utilized in 2001** |   | **Balance at September 30,**** 2001** |   |
|----------------|--------|----------------------------|--------|----------------------|--------|----------------------------------|--------|----------------------|--------|--------------------------------------------|--------|
|           |   |                       |   |                 |   |                             |   |                 |   |                                       |   |
| Employee costs |   | 395,233                    |   | 65,223               |   | 330,000                          |   | 155,810              |   | 174,190                                    |   |
| Lease costs    |   | 201,802                    |   | 201,802              |   | -                                |   | -                    |   | -                                          |   |
|           |   |                       |   |                 |   |                             |   |                 |   |                                       |   |
| Total          |   | 597,025                    |   | 267,025              |   | 330,000                          |   | 155,810              |   | 174,190                                    |   |

 

 

6.             PROVISION FORFUTURE LEASE PAYMENTS

 

# **Duringthe first quarter of 2001, the Company determined that equipment leased by theCompany under an operating lease would no longer be used by the Company in itsresearch.  As a result, at September 30,2001, the Company recorded an accrual for future lease payments of$602,425.  This accrual represents thefuture lease payments less any costs the Company believes it can recover fromthird parties for use of the equipment.**

 

7.             LONG-TERMDEBT

 

The Company has a$4,806,000 credit facility with Elan to be used by the Company to fund itsportion of Sentigen’s research and development.  Principal and interest under the line of credit become due in2005 or, at the option of Elan, can be converted into the Company’s common stockat $18.15 per share.  Borrowings bearinterest at 8%.  In the third quarter of2001, the Company borrowed $1,967,785 under this line of credit.

 

8.             RECENT ACCOUNTING PRONOUNCEMENTS

 

In June 2001, theFinancial Accounting Standards Board finalized FASB Statements No. 142, *Goodwill and Other Intangible Assets* (SFAS142)*.  *SFAS 142 requires, among other things, that companies nolonger amortize goodwill, but instead test goodwill for impairment at leastannually. In addition, SFAS 142 requires that the Company identify reportingunits for the purposes of assessing potential future impairments of goodwill,reassess the useful lives of other existing recognized intangible assets, andcease amortization of intangible assets with an indefinite useful life. An intangibleasset with an indefinite useful life should be tested for impairment inaccordance with the guidance in SFAS 142. SFAS 142 is required to be applied infiscal years beginning after December 15, 2001 to all goodwill and otherintangible assets recognized at that date, regardless of when those assets wereinitially recognized. SFAS 142 requires the Company to complete a transitionalgoodwill impairment test six months from the date of adoption. The Company isalso required to reassess the useful lives of other intangible assets withinthe first interim quarter after adoption of SFAS 142.  The Company is currently assessing but has not yet determined howthe adoption of SFAS 142 will impact its financial position and results ofoperations.

 

In October 2001, theFinancial Accounting Standards Board issued SFAS 144 "Accounting for theImpairment or Disposal of Long-Lived Assets" ("FAS 144"). ThisStatement addresses financial accounting and reporting for the impairment ordisposal of long-lived assets.  ThisStatement supersedes FASB Statement No. 121, Accounting for the Impairment ofLong-Lived Assets and for Long-Lived Assets to Be Disposed Of, and theaccounting and reporting provisions of APB Opinion No. 30, Reporting theResults of Operations -- Reporting the Effects of Disposal of a Segment of aBusiness, and Extraordinary, Unusual and Infrequently Occurring Events andTransactions, for the disposal of a segment of a business. The provisions ofFAS 144 will be effective for fiscal years beginning after December 15, 2001.The Company is currently evaluating the implications of adoption of FAS 144 andanticipates adopting its provisions in fiscal year 2002.

 

**ITEM2.  MANAGEMENT'S DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

 

We are an emerging,development-stage biopharmaceutical company focused on developing minimallyinvasive products to treat and diagnose cancer, pre-cancerous conditions,cardiovascular diseases, psoriasis and other topical diseases.  We have assembled a platform of coretechnologies protected by issued and pending patents, which we believe willaddress large markets (psoriasis, cancer, cardiovascular screening) with thepotential to replace currently applied invasive treatments and diagnosticprocedures, reduce side effects (such as those resulting from chemo- orradiation therapy), improve treatment efficacy and lower the overall cost ofcare. We are currently conducting a Phase 1 clinical trial to evaluate thesafety of PH-10 (a photoactive agent or compound that reacts with light energyto produce a therapeutic effect) activated with green light as a treatment forpsoriasis and a comparable Phase 1 clinical trial to treat actinic keratosis.In the coming months, we expect to commence Phase 1 / 2 clinical studies totreat psoriasis, a Phase 1 clinical study of PH-10 as a radiosensitizer (acompound that reacts with ionizing radiation) to treat solid tumor cancers,Phase 1 / 2 studies of our diagnostic product N1177 (a compound of extremelysmall particles called nanoparticulates) in cardiovascular imaging and to begina Phase 2 clinical study of N1177 in lymphography (the diagnosis and/ortreatment of cancers metastasizing into the lymphatic system).

 

We are pursuingdevelopment of products in the following areas:

 

###### **Cancer Therapeutics andDiagnostics:**

 

***Lymphography***-- Through a jointventure with Elan Corporation, we are developing N1177, a proprietary materialto precisely locate and diagnose the spread of cancer (micro-metastases) whenadministered into a patient's lymphatic system.  This novel nanoparticulate (a very small particle designed totravel through the lymphatic system) X-ray contrast agent, when used with astandard computed tomography (CT) scanner (a technology called “lymphography”),is being developed to enable imaging and detection of cancer in lymph nodesprior to surgery.  Phase 1 studies havebeen completed.  Phase 2 studies areplanned to commence in 2002.

 

***Solid Tumor Cancers*****--**PH-10, in an injectableformulation, shows promise to enhance the effect of radiation therapy in thetreatment of solid tumors, which represent 70% of all cancers initiallydiagnosed.  This includes breast,prostate, lung, melanoma, cervical and uterine cancers.  The American Cancer Society estimates thatapproximately 660,000 new cases of such cancers are diagnosed annually.**   **Inpre-clinical studies of several radiation resistant tumor models, PH-10 appliedintratumorally consistently resulted in reduction of tumor mass, while tumorsin control models increased.  We areworking to develop a systemic application of PH-10.  If successful, we expect to commence human clinical studies in2002 to treat either glioblastoma (brain cancer) or hepatic and colon cancers.

 

###### **Imaging**

 

***Cardiovascular Imaging***-- N1177 may have application as a novel technique to image the cardiovascularsystem using standard CT scanners.  Inan animal model, encouraging results have been demonstrated to image the heart,liver and other organs.  N1177 couldallow the imaging of the cardiovascular system (angiography) and other organswithout the need for catheters and high-speed cameras.  Over two million angiography procedures areconducted annually in the U.S.  Preclinicalstudies are also planned to determine if N1177 can be used to detect coronaryvulnerable plaque as a precursor for heart attacks and sudden cardiac failure.

 

###### **Topical Therapeutics**

 

***Psoriasis***-- We are preparing to enter Phase 1 / 2 studies of PH-10 as a treatment forplaque psoriasis, the most common form of the disease afflicting approximately7 million people in the U.S.  Appliedtopically and activated with green laser light, PH-10 is a promising treatmentfor psoriasis, particularly in areas such as knees, elbows and facial areas.    A clinical study conducted in Denmarkdemonstrated a 58% reduction in the skin thickness of psoriatic plaque with asingle treatment of PH-10.  Thisstatistically significant result (p = 0.01) result lasted for the 90-dayduration of the study.  Reduction inplaque thickness is generally regarded as a precursor to other clinicalindications of efficacy.  A U.S.  Phase 1 study, testing for safety, isnearing completion.

 

***Actinic Keratosis*****--**We are conducting aPhase 1 clinical study of PH-10 to treat actinic keratosis, a skin diseaseresulting from over-exposure to sunlight afflicting 5 million people in theU.S.  Actinic keratosis is widelybelieved to be a precursor to squamous cell cancer, the second leading cause ofdeath due to skin cancer.

 

***Multiphoton Technology*****--**Ourproprietary laser technology uses ultrashort, pulsed bursts of long wavelengthlight to activate photoactive agents and other compounds that react with lightto destroy diseased tissue.  Thistechnology can also be used to create images of tissue for diagnosticpurposes.  We plan to continuedevelopment of this technology in partnership with a third party.

 

Our senior executive andclinical development organization operates from our corporate headquarters inNew Hope, Pennsylvania. We have on staff personnel with expertise in clinicaldevelopment, clinical trial design and regulatory approval processes. We alsowork closely with consultants experienced in drug development and regulatoryrequirements.  Our scientific researchteam, located in Knoxville, Tennessee includes specialists in molecularbiology, non–linear laser physics, interventional radiology,spectroscopy, bioengineering and photochemistry.

 

FINANCIAL CONDITION AND RESULTS OFOPERATIONS

 

                Wehave not generated revenues from the sale of any proposed therapeutic ordiagnostic products or other operations. For the nine months ended September 30, 2001, our investment incomedecreased to $102,626 from $338,186 in the nine months ended September 30,2000.  The decrease in investment incomeresulted primarily from lower average balances of securities in our investmentportfolio.  We expect our investmentincome to fluctuate both as our capital decreases or increases and as the ratesof interest earned by our portfolio vary due to shifts in short term interestrates.  Our investment portfolio iscomposed primarily of United States Government obligations.

 

                Researchand development costs for the nine-month period ended September 30, 2001,decreased 32 percent to $2,301,793 from $3,362,718 for the comparablenine-month period ended September 30, 2000.  The reduction was due principally to lower expense levels following theclosing of our Westborough, MA facility, including a one-time credit in 2000 of$810,000 to Sentigen, our joint venture with Elan, partially offset by clinicaltrial expenses and other costs incurred as our products undergo human clinicaltesting.

 

                Generaland administrative expenses declined 29 percent to $2,695,167 in the nine monthperiod ended September 30, 2001 from $3,784,016 in the comparable 2000 period.  The decline is primarily attributable to thereduction in the amortization of the cost of certain warrants that had beengranted to a consultant as well as lower legal expenses partially offset byadditional salary costs of senior executive staff and associated costs of ourNew Hope, PA office.

 

                Photogen’sshare of losses associated with its joint venture with a division of Elanincreased to $1,514,080 in the nine-month 2001 period from $673,096 in theprior year period.  These losses are dueto expenditures made by the partners in the development of N1177 andamortization, in the 2001 period, of patents acquired by the joint venture atits inception.

 

                Duringthe nine months ended September 30, 2001, we spent approximately $45,938 forleasehold improvements and office equipment. During the next twelve months we expect such capital expenditures to beless than $100,000.  In 2001, wedetermined that certain equipment we were leasing would no longer be useful inour research.  Accordingly, at September30, 2001, we have recorded an accrual of $602,425 representing future leasepayments less any costs that we believe can be recovered from third parties foruse of the equipment.

 

                Werecorded dividends on preferred stock of $2,243,832 in the nine-months of 2001compared to $1,757,391 for the comparable period in 2000.  This increase is due to the impact ofdividends, including the impact of certain beneficial conversion provisions,payable under Series B Preferred Stock originally issued in February 2000.  Under the applicable Certificate ofDesignations the holder of Series A Preferred is entitled to a mandatorypayment–in–kind dividend equal to 7% (i.e., 0.07 additional sharesof Series A Preferred) which is cumulative, compounds on a semi–annualbasis and is payable twice a year. Similarly, under the applicable Certificate of Designation the holdersof Series B Preferred are entitled to a payment–in–kind dividendequal to 6% (i.e., 0.06 additional shares of Series B Preferred), which iscumulative and payable annually commencing in January 2001.

 

                Asa result of the above factors, our net loss attributable to common shareholdersfor the nine months ended September 30, 2001, decreased to $9,348,316, or $0.25per share from $9,441,035, or $0.25 per share for the nine months endedSeptember 30, 2000.

 

LIQUIDITY; CAPITAL RESOURCES

 

                We have used, and expect to use, the capitalavailable in our investment portfolio as well as proceeds and potentialproceeds from any sales of debt or equity securities including sales of commonstock under the registration statement declared effective in February, 2001 forup to $40 million of common stock, for general corporate purposes, includingactivities related to preparing for and conducting clinical trials, purchaseand preparation of clinical material, conduct of preclinical studies,administrative expenses to support our research and development activities,capital expenditures and to meet other working capital needs.  Weexpect to evaluate from time to time the acquisition or license of businesses,technologies or products for which a portion of this capital may be used;however we have no present plan or commitments for any acquisition orlicense.  We expect ouruse of capital to increase as we move toward initiating Phase 2 clinicaltrials.

 

**               **We have a $4.8 millioncredit facility from Elan to fund a portion of the operations of the Sentigenjoint venture.  In the third quarter of2001, we drew $1,967,785 under this line of credit to fund our capital obligationsto Sentigen, a portion of which was in turn used by Sentigen to reimburse usfor expenses we had incurred on behalf of the joint venture.  Our current and any future borrowings underthis facility bear interest at 8% per annum, and are either repayable in 2005or convertible, at Elan's election, into our common stock at a conversion priceof $18.15 per share.

 

On September 22, 2000,we filed a shelf registration statement with the SEC to enable us to issue upto $40 million of our common stock. This shelf registration was declared effective by the SEC in February2001 and will permit us to issue common stock from time to time at ouroption.  Through September 30, 2001, wesold 695,486 shares of common stock pursuant to this registration statement toinstitutional investors at prices ranging from approximately $4.89 to $1.12 forcash proceeds, net of related expenses of $1,068,723.

 

                Asof September 30, 2001 we had U.S. Treasury notes available for sale, cash andinterest receivable totaling approximately $2,627,046.  Maturity dates of these securities rangefrom October 1, 2001 to November 30, 2001. Yields range from 2.0% to 5.625%. At the current rate of spending, we will exhaust these particularresources by approximately January 2002. We have access to additional capital through borrowing funds from ourcredit line with Elan for development costs of N1177.  In addition, at our option, the remaining capacity in ourregistration statement gives us the ability to sell from time to time up toapproximately $39 million of additional common stock.  We are seeking to raise additional equity financing required tofund the continued development of our technologies.  If additional funds are raised by issuing equity securities,substantial dilution to existing stockholders may result. We continueaggressively to seek additional capital; however there can be no assurance thatour financing efforts will be successful. See "Risk Factors -- We must raise additional financing in thefuture and our inability to do so could prevent us from implementing ourbusiness development plan," below.

 

PLAN OF OPERATION

 

            During the foreseeable future, we will focus our effortson conducting human clinical studies on selected indications, acquiringquantities of clinical grade drug formulations of our proposed products,completing preclinical studies and preparing required filings to the FDA andforeign regulatory bodies.  We intend todevote a significant majority of our financial and other resources to preparingfor and conducting clinical trials of PH-10 for the treatment of psoriasis andactinic keratosis and the treatment of focal tumors (a tumor that is confinedto a specific area of the body), and continuing the clinical development ofN1177 for both cardiovascular imaging and lymphography applications.  We expect to complete Phase 1 human clinicalstudies on PH-10, both as a topical treatment for psoriasis and actinickeratosis.  If pre-clinical studies ofPH-10 to treat solid tumors demonstrate positive results and we obtainnecessary regulatory approvals, we plan to commence a Phase 1 clinical trial totreat certain cancers in the coming months. Similarly, if pre-clinical studies of N1177 as a cardiovascular imagingagent are successful, we expect to commence a Phase 1 clinical trial for thatuse in 2002.  We also plan to beginPhase 2 clinical trials of N1177 in 2002 in lymphography.

 

            As we progress further into human clinical trials, ouruse of capital will increase.  We expectto continue to incur increasing losses for at least the next several years aswe intensify research and development, preclinical and clinical testing andassociated regulatory approval activities and engage in or provide for themanufacture and/or sale of any products that we may develop.  Greater capital resources would enable us toquicken and expand our research and development activities, and our failure toraise additional capital will (absent a suitable collaborative agreementproviding for a third party to take over or finance the development of theseprograms) significantly impair our ability to conduct further research anddevelopment activities beyond those currently contracted for and our ability toseek regulatory approval for any possible product resulting from that research.  In any event, complete development andcommercialization of our technology will require substantial additionalfunds.  See "Risk Factors -- Wemust raise additional financing in the future and our inability to do so couldprevent us from implementing our business development plan," below.  Accordingly, we are continuously evaluatingcapital formation activities and opportunities, either as part of collaborativearrangements with third parties or through other offerings of equity or debt.

 

 

**ITEM3**.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

                The primary market risk thatcould impact us is the fluctuation in interest rates related to our investmentsin Government bonds.  As our investmentsall have short-term maturities, the investment return will reflect the currentmarket rates.  To date, we have notengaged in any derivative or hedging activities.

 

**PART II.  OTHERINFORMATION**

 

**ITEM 1.  LEGAL PROCEEDINGS**

 

In conjunction with therestructuring 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 StatesDistrict Court for the Northern District of Illinois.  That litigation is described in our Form 10-K for the year endedDecember 31, 2000.

 

**ITEM 4.  SUBMISSIONOF MATTERS TO A VOTE OF SECURITY HOLDERS.**

 

None.

 

### **ITEM 5.  OTHER INFORMATION**

 

## **RISK FACTORS**

 

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

 

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

 

**WE ARE A DEVELOPMENT STAGE COMPANY, WE HAVE CONDUCTED ONLYLIMITED STUDIES ON OUR PRODUCTS IN DEVELOPMENT AND WE DO NOT HAVE ANY REVENUESFROM SALES.**

 

 

Our company and ourtechnologies are in early stages of development.  We began our business as a biopharmaceutical company in1997.  We have not generated revenuesfrom sales or operations, and we do not expect to generate sufficient revenuesto enable us to be profitable for at least several years.

 

Our proposedtechnologies and products generally must complete preclinical tests in animalsand three phases of tests (also called clinical trials) in humans before we canmarket them for use.  Use of ourtechnology has been limited primarily to laboratory experiments, animal testingor human pilot studies and only one compound has completed Phase 1 clinicaltrials.  We have therefore not yetconducted substantive studies on the effectiveness of our compounds on humansubjects.  The drug products wecurrently contemplate developing will require costly and time-consumingresearch and development, preclinical and clinical testing and regulatoryapproval before they can be commercially sold. We may not be able to develop our technology into marketable products ordevelop our technology so it is effective for diagnosis or treatment of humandiseases.  As a result of changingeconomic considerations, market, clinical or regulatory conditions, or clinicaltrial results, we may shift our focus or determine not to continue one or moreof the projects we are currently pursuing.

 

**WE HAVE A HISTORY OF LOSSES AND WE MAY NOT ACHIEVE ORMAINTAIN PROFITABILITY IN THE FUTURE OR PAY CASH DIVIDENDS.**

 

We have incurred lossessince the beginning of our operations. As of September 30, 2001, we have incurred cumulative losses ofapproximately $26,474,781.  We expectour losses to increase in the future as our financial resources are used forresearch and development, preclinical and clinical testing, regulatoryactivities, manufacturing, marketing and other related expenses.  We may not be able to achieve or maintainprofitability in the future.  We havenever declared or paid any cash dividends to stockholders, and do not expect todo so in the foreseeable future.

 

**WE MUST RAISE ADDITIONAL FINANCING IN THE FUTURE AND OURINABILITY TO DO SO COULD PREVENT US FROM IMPLEMENTING OUR BUSINESS DEVELOPMENTPLAN.**

 

Webelieve that through the use of our cash, U.S. Treasury notes, line of creditand anticipated sales of our common stock, we will have sufficient cashresources for our current commitments through the next six months (depending onthe pace of our spending for preclinical and clinical testing and othercommitments, which, to an extent, we can adjust to preserve cash).  We will need substantial additionalfinancing for our research, clinical testing, product development and marketingprograms.  We cannot accurately estimatethe amount of additional financing required; however, the amount could be anadditional $50 million or more over the next several years.  Depending on market conditions, we willattempt to raise additional capital through stock and debt offerings,collaborative relationships and other available sources.  Additional funds may not be available onacceptable terms, if at all, and existing stockholders may be diluted as aresult of those offerings.  The pricingof our common stock in sales made pursuant to our shelf registration will alsoresult in an increase in the number of shares of common stock issuable uponconversion of Series A and Series B preferred stock in accordance with theanti-dilution provisions in the respective Certificates of Designation forthose series.

 

 

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

** **

None of our proposed drug and deviceproducts has received the Food and Drug Administration's approval.  An extensive series of clinical trials andother associated requirements must be completed before our proposed productscan be approved and sold in the United States or other countries.  Requirements for FDA approval of a productinclude preclinical and clinical testing for effective use and safety inanimals and humans, and that testing can be extremely costly. The time framenecessary to perform these tasks for any individual product is long anduncertain, and we may encounter problems or delays that we cannot predict atthis time.  Even if testing is successful,our proposed products may not demonstrate sufficient effectiveness or safety towarrant approval by the FDA or other regulatory authorities.  Any regulatory approval may not cover theclinical symptoms or indications that we may seek.  Marketing our products in other countries will require seekingand obtaining regulatory approvals comparable to those required in the UnitedStates.

 

**IF WEDO NOT OBTAIN AND MAINTAIN PATENT OR OTHER PROTECTION OF OUR CORE TECHNOLOGIES(NAMELY PH-10, N1177 AND OUR OTHER LYMPHOGRAPHY MATERIALS AND METHODS, N1177FOR CARDIOVASCULAR IMAGING AND OUR LASER TECHNOLOGIES), WE MAY HAVE DIFFICULTYCOMMERCIALIZING PRODUCTS USING THESE TECHNOLOGIES.**

 

Our success depends inpart on our ability to obtain, assert and defend our patents, protect tradesecrets and operate without infringing the intellectual property ofothers.  Among the important risks inthis 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, and the  law on the scope of patent coverage is continually changing.                                                                                                                                                                                           |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| • |   | 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.                                                                                                                                                                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| • |   | 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. |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| • |   | 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.                                                                                                            |

 

                        Wewill be able to protect our proprietary rights from unauthorized use by thirdparties only to the extent that these rights are covered by valid andenforceable patents or effectively maintained as trade secrets.  We own six patents in the U.S., and tenother patents in foreign countries including Taiwan, Australia, Singapore,Japan and New Zealand. We have filed patent applications under the PatentCooperation Treaty covering a number of foreign countries.  These patents and the patent applicationsrelate to laser and ionizing radiation technology, photoactive agents and methods,methods for enhanced cell production and methods for performing lymphographyand cardiovascular imaging. We are also the exclusive licensee to a group ofpatented proprietary compounds known as nanoparticulates from MassachusettsGeneral Hospital and Nycomed Imaging AS.

 

 

The patent position ofbiopharmaceutical companies involves complex legal and factual questions, andtherefore we cannot assure the enforceability of these patents. Litigation overpatents and other intellectual property rights occurs frequently in ourindustry, and there is a risk that we may not prevail in disputes over theownership 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 timeconsuming, even if we prevail. Intellectual property disputes are often settled through licensingarrangements that could be costly to us. In any intellectual property litigation, it is possible that licensesnecessary to settle the dispute would not be available, or that we would not beable to redesign our technologies to avoid any claimed infringement.

 

Confidentialityagreements covering our intellectual property may be violated and we may nothave adequate remedies for any violation.  Third parties may challenge our existing patents and seek to holdthem invalid or unenforceable.  Also,our intellectual property may in other ways become known or be independentlydiscovered by competitors.

 

To the extent we useintellectual property through licenses or sub-licenses (as is the case for someof our lymphography technology), our rights are subject to us performing theterms of the license or sub-license agreement with third parties.  Our rights are also subject to the actionsof third parties we may not be able to control, such as our sub-licensorcomplying with the terms of its license with the patent owner and the patentowner maintaining the patent.

 

Where intellectualproperty results from a research project supported by U.S. Government funding,the Government has limited rights to use the intellectual property withoutpaying us a royalty.

 

**WE AREHIGHLY DEPENDENT UPON A SMALL NUMBER OF EMPLOYEES AND CONSULTANTS WHO PROVIDESCIENTIFIC AND MANAGEMENT EXPERTISE, AND IT MAY BE DIFFICULT TO IMPLEMENT OURBUSINESS DEVELOPMENT PLANS WITHOUT THIS EXPERTISE.**

 

These individuals haveentered into employment or consulting agreements, confidentiality and/ornon-competition agreements with us.  Wecould suffer competitive disadvantage, loss of intellectual property or othermaterial adverse effects on our business and results of operations if anyemployee or consultant violates or terminates these agreements or terminateshis or her association with us.  Ourgrowth and future success also depends upon the continued involvement andcontribution from these individuals, as well as our ability to attract andretain highly qualified personnel now and in the future.

 

We currently employ foursenior scientists (Drs. Dees, Fisher, Scott and Wachter) and three seniorexecutive officers, including Dr. Williams (our CEO), Mr. Boveroux (our CFO)and Dr. Reinhard Koenig (Senior Vice President of Medical and RegulatoryAffairs).  We also have retainedconsultants to advise us in regulatory affairs and product developmentmatters.  If we lost the services of ourexecutive officers or outside consultants, we could experience a delay in theimplementation of our business plan until we arranged for another individual orfirm to fulfill the role.  The loss ofone of our scientists could cause delay in implementing our business plan andalso jeopardize development of new technologies.

 

**WE HAVE TO RELY ON THIRD PARTIES AND COLLABORATIVERELATIONSHIPS FOR THE MANUFACTURE, CLINICAL TESTING AND MARKETING OF OURPROPOSED PRODUCTS, AND IT MAY BE DIFFICULT TO IMPLEMENT OUR BUSINESSDEVELOPMENT PLANS WITHOUT THESE COLLABORATIONS.**

 

We are currentlyinvolved in a joint venture with affiliates of Elan Corporation, plc. calledSentigen Ltd., to develop and commercialize lymphography materials.  We have had and expect to continue in thefuture to have a variety of research agreements with universities and otherresearch institutions to investigate specific protocols. We also contract andexpect to continue to contract with research organizations and other thirdparties to manage clinical trials of our proposed products in development.  We must continue to enter into collaborativerelationships with third parties for additional research and development,preclinical and clinical testing, marketing and distribution of our proposedproducts.

 

We are also dependent onthird parties for the manufacture of supplies of our products and for thesupply of lasers and radiotherapy devices and similar hardware in physicians’offices and hospitals.  We have severalresearch and supply agreements with third parties.  However, we may not be able to negotiate other acceptablecollaborative and supply arrangements in the future.

 

Collaborativerelationships may limit or restrict our operations or may not result in anadequate supply of necessary resources. Our collaborative partner could also pursue alternative technologies asa means of developing or marketing products for the diseases targeted by ourcollaborative program.  If a third partywe are collaborating with fails to perform under its agreement or fails to meetregulatory standards, this could delay or prematurely terminate clinicaltesting of our proposed products.

 

**OUR POTENTIAL MARKETS ARE EXTREMELY COMPETITIVE, AND MANY OFOUR COMPETITORS HAVE GREATER RESOURCES AND HAVE PRODUCTS THAT ARE IN MOREADVANCED STAGES OF DEVELOPMENT.**

 

We face substantialcompetition from competitors with greater financial, technical and humanresources and with greater experience in developing products, conductingpreclinical or clinical testing, obtaining regulatory approvals, manufacturingand marketing.  Our competitors includethe following firms in the field of using light energy to treat and diagnosedisease: Miravant Medical Technologies, Pharmacyclics, Inc., QLT Inc., AxcanPharma Inc. Dusa Pharmaceuticals, Inc. and PhotoCure ASA.  There are also numerous companies developingother technologies to treat and/or diagnose psoriasis, actinic keratosis,cancer and other diseases.  Examples ofthe technologies from those other companies are drug or genetic treatments,procedures that use sound waves and procedures that destroy diseased tissueusing heat.  Some of these firms havedrugs or devices that have completed or are in advanced stages of clinicaltrials and regulatory approvals.

 

Others may developtechnologies and obtain patent protection that could render our technologies orproducts obsolete or less competitive or our patents invalid orunenforceable.  Due to the inherent riskof failure associated with the testing, development and production of new andinnovative technologies, our technologies and products may be found to beineffective, have unanticipated limitations or otherwise be unsuccessful in themarketplace.  Also, although we believeour estimates of the possible size of markets for our potential products arebased on information we consider reliable (including data from the AmericanCancer Society and similar sources in the public domain), that data or ouranalysis of the data could prove incorrect.

 

 

**CHANGES IN HEALTH CARE REIMBURSEMENT POLICIES OR LEGISLATIONMAY MAKE IT DIFFICULT FOR PATIENTS TO USE OR RECEIVE REIMBURSEMENT FOR USINGOUR PRODUCTS, WHICH COULD REDUCE OUR REVENUES.**

 

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

 

**THE CURRENT BOARD OF DIRECTORS CONTROLS PHOTOGEN, WHICH MAYMAKE IT DIFFICULT FOR STOCKHOLDERS WHO ARE NOT IN THAT GROUP TO INFLUENCEMANAGEMENT.**

 

A small group of ourofficers, directors and others control approximately 72% of our outstandingcommon stock.  Several of our principalstockholders are also parties to a Voting Agreement concerning the election ofcertain designees to the Board of Directors of Photogen Technologies, Inc. andPhotogen, Inc. The Voting Agreement requires these stockholders to vote theirshares for the election of the current Board of Directors or, in the case of avacancy, for the person nominated by a majority of the remainingDirectors.   This concentration ofownership and control may delay or prevent a change in control of Photogen, andmay also result in a small supply of shares available for purchase in thepublic securities markets.  Thesefactors may affect the market and the market price for our common stock in waysthat do not reflect the intrinsic value of the stock.

 

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

 

During the period fromJuly 1, 2001 through September 30, 2001 our closing stock price ranged from$1.22 to $2.10 per share.  Daily tradingvolume ranged from 0 (zero) shares to 77,898 shares during that period.

 

The following factorsmay 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 testing;                                                                                                |
|   |   |                                                                                                                                             |
| • |   | Changes in government  regulation;                                                                                                               |
|   |   |                                                                                                                                             |
| • |   | Public concern about  the safety of devices or drugs;                                                                                            |
|   |   |                                                                                                                                             |
| • |   | Limited coverage by  securities analysts;                                                                                                        |
|   |   |                                                                                                                                             |
| • |   | The occurrence of any  of the risk factors described in this section;                                                                            |
|   |   |                                                                                                                                             |
| • |   | Sales of large blocks  of stock by an individual or institution;                                                                                 |
|   |   |                                                                                                                                             |
| • |   | 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 SMALLCAPMARKET, WHICH WOULD MAKE TRADING IN OUR STOCK MORE DIFFICULT.**

 

                Since November 1999, our commonstock has been quoted in the Nasdaq SmallCap Market.  Our shares could be delisted if we fail to meet the listingrequirements of the Nasdaq SmallCap Market, which would force us to list ourshares on the OTC Bulletin Board or some other quotation medium, such as pinksheets, depending upon our ability to meet the specific listing requirements ofthose quotation systems.  As a result,an investor might find it more difficult to dispose of, or to obtain accurateprice quotations for, our shares.  Delistingmight also reduce the visibility, liquidity, and price of our commonstock.  If our common stock weredelisted from the Nasdaq SmallCap Market and were not traded on anothernational securities exchange, we could become subject to penny stock regulationsthat impose additional sales practice disclosure and market making requirementson 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 stockregulations, it could adversely affect the ability and willingness ofbroker/dealers who sell or make a market in our common stock and of investorsto purchase or sell our stock in the secondary market.

 

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

 

                As of September 30, 2001 we had39,381,072 shares of common stock, convertible debt and preferred stockconvertible into common stock outstanding. Approximately 9,773,049 shares were eligible for sale in the publicmarket free of restrictions under the Securities Act of 1933, as amended,including restrictions under Rule 144. Approximately 7,221,662 shares are eligible for sale under Rule144.  Approximately 3,156,462 shares arecurrently subject to agreements requiring us to permit the holders of theshares, under certain circumstances, to join a public offering of our stock orto demand that we register their shares. Our obligation to register 1,896,462 of the shares subject to thoseagreements terminates when they become freely tradable under Rule 144 (thoseshares are included in the total number of shares eligible for sale under Rule144).  On May 9, 2001 our five foundersentered into a lock-up agreement prohibiting them, without the Company’sapproval, from selling in the public markets 20,558,435 shares until May 9, 2004(except for limited sales by each of them of between 42,000 and 78,000 shareseach year at prices above $5.00 per share).

 

As of September 30, 2001we had reserved 11,291,272 shares of common stock for future issuance upongrants of options, or exercise or conversion of outstanding options andwarrants and convertible securities and notes. If these options and warrants are all issued and exercised, investorsmay experience significant dilution in the book value and earnings per share oftheir common stock.

 

 

## **ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K**

 

                (a)           Exhibits.

 

The following is a listof exhibits filed as part of this Form 10–Q.  Exhibits that were previously filed are incorporated byreference.  For exhibits incorporated byreference, the location of the exhibit in the previous filing is indicated inparenthesis.

 
| **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.)

                                                                                                                                                                    |
| 9.1             | Amended  and Restated Voting Agreement entered into as of the 4th day of  September, 2001, by and among Eric A. Wachter, Ph.D., Craig Dees, Ph.D.,  Walter G. Fisher, Ph.D., Tim Scott, Ph.D., John Smolik, Robert J. Weinstein,  M.D., and Theodore Tannebaum, and joined into by Photogen Technologies, Inc.  as stockholder of Photogen, Inc.  |

 

                (b)           Reports on Form 8-K.

 

                                We did not fileany reports on Form 8-K during the three-month period ended September 30, 2001.

**Signatures**

 

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

 
| Date:  November 14, 2001 |   | 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) |

 

 

**ExhibitIndex**

 
| **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.)

                                                                                                                                                                                                    |
| *9.1            |   | Amended  and Restated Voting Agreement entered into as of the 4th day of  September, 2001, by and among Eric A. Wachter, Ph.D., Craig Dees, Ph.D.,  Walter G. Fisher, Ph.D., Tim Scott, Ph.D., John Smolik, Robert J. Weinstein,  M.D., and Theodore Tannebaum, and joined into by Photogen Technologies, Inc.  as stockholder of Photogen, Inc. |

----

+Incorporated by reference from the filing indicated.

* Filed herewith.