<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the quarterly period ended June 30, 1998
Commission File Number 0-23553
PHOTOGEN TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
NEVADA 36-4010347
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
7327 OAK RIDGE HIGHWAY, SUITE B
KNOXVILLE, TN 37931
(Address of principal executive offices)(Zip Code)
(423) 769-4012
(Registrant's telephone number including area code)
Check whether the issuer (1) has filed all reports required to be filed
by section 13 or 15(d) of the Securities Exchange Act of 1934 during the past
12 months (or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing requirements for
the past 90 days:
YES: /x/ NO: / /
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 36,875,001 SHARES OF
COMMON STOCK, $.001 PAR VALUE PER SHARE, ISSUED AND OUTSTANDING AS OF JUNE
30, 1998. NO SHARES OF PREFERRED STOCK, $.01 PAR VALUE PER SHARE, WERE ISSUED
OR OUTSTANDING AS OF THAT DATE.
Transitional Small Business Disclosure Format:
YES: / / NO: /x/
==============================================================================
<PAGE>
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED). . . . . . . . . . . . . . . . . . .1
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR
PLAN OF OPERATION . . . . . . . . . . . . . . . . . . . . . . . . . .8
PART II - OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ITEM 5. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. . . . . . . . . . . . . . . . . . 13
</TABLE>
i
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PHOTOGEN TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
(UNAUDITED) (AUDITED)
--------- -------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 147,105 $ 82,631
Interest receivable 10,227 21,402
Prepaid expenses - 8,164
Marketable securities - 409,238
---------- ----------
TOTAL CURRENT ASSETS
157,332 521,435
UNITED STATES TREASURY
NOTES, TOTAL FACE VALUE
$7,725,000 and $1,538,000 7,820,177 1,531,413
EQUIPMENT AND LEASEHOLD
IMPROVEMENTS 372,894 194,252
PATENT COSTS 85,641 37,273
---------- ----------
TOTAL ASSETS $8,436,044 $2,284,373
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 30,315 $ 118,233
Current portion of
obligations under capital
leases 17,944 18,626
---------- ----------
TOTAL CURRENT LIABILITIES 48,259 136,859
---------- ----------
OBLIGATION UNDER CAPITAL
LEASES 51,382 60,469
---------- ----------
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS.
1
<PAGE>
SHAREHOLDERS' EQUITY
Preferred stock; par value
$.01 per share; 5,000,000
shares authorized; none
issued - -
Common stock; par value
$.001 per share;
150,000,000 shares
authorized; 36,875,000
and 36,000,000 shares
issued and outstanding 36,875 36,000
Additional paid-in capital 9,606,651 2,607,526
Deficit accumulated during
the development stage
after recapitalization (1,307,123) (556,481)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 8,336,403 2,087,045
---------- ----------
$8,436,044 $2,284,373
---------- ----------
---------- ----------
</TABLE>
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
2
<PAGE>
PHOTOGEN TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE THREE SIX SIX CUMULATIVE
MONTHS MONTHS MONTHS MONTHS AMOUNTS
ENDED ENDED ENDED ENDED FROM
JUNE 30, JUNE 30, JUNE 30, JUNE 30, NOVEMBER 3,
1998 1997 1998 1997 1996
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
REVENUES
Investment Income $ 94,611 $ 36,103 $ 150,182 $ 36,103 $ 257,315
EXPENSES
General and administrative 476,391 68,226 900,824 71,737 1,564,438
----------- ----------- ----------- ----------- -----------
NET INCOME (LOSS) $ (381,780) $ (32,123) $ (750,642) $ (35,634) $(1,307,123)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
NET INCOME (LOSS)
PER COMMON SHARE $ (.01) $ 0 $ (.02) -
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING $36,531,768 $36,642,815 $36,531,768 $30,936,481
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
3
<PAGE>
PHOTOGEN TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
CUMULATIVE
SIX MONTHS SIX MONTHS AMOUNTS
ENDED ENDED FROM
JUNE 30, JUNE 30, NOVEMBER 3,
1998 1997 1996
(UNAUDITED) (UNAUDITED) (UNAUDITED)
--------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (750,642) $ (35,634) $(1,307,123)
Depreciation 12,699 - 30,215
Realized gain on United
States Treasury Notes - (18,599) (29,737)
Loss on securities 9,238 - 18,503
Changes in operating
assets and liabilities:
Prepaid expense 8,164 (16,329) -
Interest receivable 11,175 (54,249) (10,227)
Accounts payable (87,918) 224 30,315
----------- ----------- -----------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES (797,284) (124,587) (1,268,054)
----------- ----------- -----------
INVESTING ACTIVITIES
Sale of marketable
securities 400,000 - 2,164,464
Purchase of marketable
securities - (2,222,247) (2,182,967)
Purchase of United
States Treasury Notes (7,795,816) - (9,840,692)
Sale of United States
Treasury Notes 1,507,052 1,101,343 3,146,902
Purchase of capital
assets (191,341) (8,981) (320,508)
Patent costs (48,368) (9,564) (85,703)
----------- ----------- -----------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES (6,128,473) (1,139,449) (7,118,504)
----------- ----------- -----------
FINANCING ACTIVITIES
Proceeds from issuance
of common stock 7,000,000 6,313 7,006,313
4
<PAGE>
CUMULATIVE
SIX MONTHS SIX MONTHS AMOUNTS
ENDED ENDED FROM
JUNE 30, JUNE 30, NOVEMBER 3,
1998 1997 1996
(UNAUDITED) (UNAUDITED) (UNAUDITED)
--------- --------- ---------
Proceeds from capital
contributions by
stockholders - 1,918,312 1,911,674
Cost of recapitalization - (371,111) (371,111)
Principal payments on
capital lease
obligations (9,769) - (13,213)
----------- ----------- -----------
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES 6,990,231 1,553,514 8,533,663
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH 64,474 289,478 147,105
AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS 82,631 - -
AT BEGINNING OF PERIOD ----------- ----------- -----------
CASH AND CASH EQUIVALENTS $ 147,105 $ 289,478 $ 147,105
AT END OF PERIOD ----------- ----------- -----------
----------- ----------- -----------
</TABLE>
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
5
<PAGE>
PHOTOGEN TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
Additional During The
Common Stock Members' Paid-In Development Total
Shares Amount Capital Capital Stage -----
------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT
JANUARY 1, 1997 - $ - $5,489 $ - $ - $ 5,489
NET LOSS AND CAPITAL
CONTRIBUTIONS FOR
THE PERIOD
JANUARY 1, 1997
TO MAY 15, 1997 - - 3,511 - (3,511) -
---------- ------- ------ ---------- --------- ----------
BALANCE AT
MAY 15, 1997 - - 9,000 - (3,511) 5,489
ISSUANCE OF STOCK
FOR CASH 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 SEPTEMBER
30, 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 Stock
for cash 875,000 875 - 6,999,125 - 7,000,000
Net Loss for Six
Months Ended
June 30, 1998 - - - - (750,642) (750,642)
---------- ------- ------ ---------- --------- ----------
Balance at
June 30, 1998 36,875,000 $36,875 - $9,606,651 $(1,307,123) $8,336,403
---------- ------- ------ ---------- --------- ----------
</TABLE>
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
6
<PAGE>
PHOTOGEN TECHNOLOGIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1998
1. BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information pursuant to Regulation S-B. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the six months ended June 30, 1998 and are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1998.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN
OF OPERATION
UNCERTAINTIES RELATING TO COMPANY. Since the Company acquired Photogen,
Inc. in May 1997, the Company has been principally engaged in the research
and development of drugs and medical device products and processes for use in
photodynamic therapy. The Company has not completed development of any
product or process at this time and has no revenues from operations.
Portions of the discussion in this Item 2 contain forward-looking statements
and are subject to the Risk Factors described in Item 5 below.
RESULTS OF OPERATIONS. The Company has not generated revenues from the
sale of any proposed products or other operations, and has continued to
experience losses. The Company's net loss for the six month period ended
June 30, 1998, was $750,642, compared to a loss of $35,634 for the six month
period ended June 30, 1997. The Company's net loss for the three month
period ended June 30, 1998 was $381,780, compared to a loss of $32,123 for
the three months ended June 30, 1997. The losses are attributable primarily
to expenses related to pursuing patent protection for the Company's
technology, conducting animal studies, expenses incurred in the Company's
recent private offering and other general and administrative costs. The
Company expects to continue to incur increasing losses for at least the next
several years as it intensifies its research and development, clinical
testing, regulatory approval activities and engages the manufacture and/or
sale of any products that the Company may develop.
The Company's revenue for the six month period ended June 30, 1998
was $150,182, compared to $36,103 of revenue for the six month period ended
June 30, 1997. The Company's revenue for the three month period ended June
30, 1998 was $94,611, compared to $36,103 of revenue during the three months
ended June 30, 1997. The revenue resulted primarily from investment income
on the proceeds from the sale of common stock in the Company's 1997
restructuring and its 1998 private placement. The proceeds of the sales of
the Company's common stock are invested primarily in United States Government
obligations. Because the Company has no revenues from operations at this
time, investment of such funds in that manner is necessary to enable the
Company to avoid becoming subject to the Investment Company Act of 1940.
LIQUIDITY; CAPITAL RESOURCES. On March 13, 1998, the Company completed
a private placement of 875,000 shares of common stock for $8.00 a share to a
number of accredited investors. The Company received $7,000,000 in gross
proceeds from this offering. The Company has used, and expects over the next
18 to 24 months to use, the gross proceeds from the sale of the common stock
for corporate overhead and operating expenses, animal and clinical trials,
the purchase or lease of scientific and laboratory equipment and related
facilities, legal and regulatory consulting fees and for other working
capital purposes, assuming the Company has no revenues during that period.
PATENT AND OPERATIONAL MATTERS. The Company is continuing to pursue
patent protection for its proprietary technologies with the U. S. Patent and
Trademark Office, and in various foreign jurisdictions. In November of 1997,
the Company received a Notice of Allowance from the U.S. Patent and
8
<PAGE>
Trademark Office allowing over 60 claims for Photogen's treatment
application. Likewise, in June of 1998, the Company received a Notice of
Allowance from the U.S. Patent and Trademark Office allowing over 70 claims
for Photogen's imaging application. At the United States level, divisional
patent applications are pending. The Company has also filed patent
applications under the Patent Cooperation Treaty ("PCT") covering a number of
foreign countries, as well as a patent application in India. No official
actions have yet been received at the international level, nor have the
national stages of the PCT applications been entered in any particular
country. In addition, the Company recently filed three additional United
States patent applications.
The Company is continuing its animal studies to examine the
efficacy of activating PHOTOPHRIN (R) in laboratory mice using the Company's
proprietary simultaneous two photon activation technology. (PHOTOFRIN(R) is
a photoactive agent produced by QLT PhotoTherapeutics, Inc.) The Company
recently announced that the preliminary results of the animal studies
demonstrated that the Company achieved noninvasive activation of
PHOTOPHRIN(R) by using light at 730 nm. In addition, the Company was
recently awarded a Phase 1 Small Business Innovation Research Project grant
of $98,000 from the National Institutes of Health National Cancer Institute
to evaluate the capability of the Company's proprietary simultaneous
two-photon excitation technology to achieve reductions in cancerous tumor
size using porphyrins and psoralen derivatives.
The Company has withdrawn its application for listing with the
NASDAQ Small Cap market. Following discussions with representatives of that
exchange, the Company determined that it could not meet the listing criteria
at this time. The Company's withdrawal is without prejudice to resubmit the
application in the future, which management intends to do when it determines
that the Company is better postured for listing. The Company is also
exploring listing on one or more regional exchanges. In the meantime, the
Company's common stock continues to be traded from time to time on the NASDAQ
over-the-counter bulleting board market under the symbol "PHGN."
PLAN OF OPERATION. During the next twelve months, the Company will
continue with animal trials and evaluation of its proprietary photoactive
agent candidates, pursuing patent protection and seeking potential
collaboration candidates. During the six months ended June 30, 1998, the
Company spent approximately $191,000 to acquire the laboratory instruments
necessary to support animal clinical trials, and on development of its
proprietary photoactive agent and targeting systems. The Company anticipates
increased spending during the fourth quarter for clinical equipment and
clinical work provided by third-party researchers. The Company intends to
concentrate its research and development activities initially on applications
in the treatment of advanced macular degeneration and lung and prostate
cancers, and on imaging. The Company's efforts to develop collaborative
arrangements with third parties for research and testing will concentrate on
these areas as well. During the next six months the Company expects to spend
approximately $615,000 to acquire laser systems and related hardware required
to support new clinical activities at well known clinical research centers.
The Company is evaluating its future needs for laboratory and office
space and for scientific, managerial and support personnel. See "Risk
Factors" in Item 5, below. The Company presently anticipates slowly adding
additional personnel to support its current activities, while deferring any
substantial growth in hiring
9
<PAGE>
and acquisition of space and equipment until the final results of the animal
testing are known. The Company intends to structure its collaborative
arrangements during its research and development phase to make use of
personnel and facilities provided by the parties with whom the Company may
contract.
For these reasons, the Company believes it has enough cash
resources for its currently anticipated needs during the next 18 to 24 months
and will not be required to raise additional funds. However, greater capital
resources would enable the Company to accelerate and intensify its research
and development activities over that 18- to 24-month period. In any event,
complete development and commercialization of the Company's technology will
require substantial additional funds. Accordingly, the Company is
continuously evaluating capital formation activities and opportunities,
either as part of its collaborative arrangements with third parties or
through offerings of equity or debt unrelated to collaborations. See "Risk
Factors" in Item 5, below.
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
RISK FACTORS
The Company cannot provide assurances that it will successfully achieve
its goals or the commercial development of its technology in the foreseeable
future. The Company's success in this regard must at this time be deemed
speculative. This Form 10-QSB and other announcements and documents of the
Company contain forward-looking statements which involve risks, uncertainties
and other factors that may cause the Company's actual results or performance
to differ materially from any results or performance expressed or implied by
such forward-looking statements. The statements under the caption "Risk
Factors" are intended to serve as cautionary statements within the meaning of
the Private Securities Litigation Reform Act of 1995 and should be read in
conjunction with the forward-looking statements in this Report and statements
presented elsewhere by management of the Company. Factors that could cause
or contribute to those differences include the following:
DEVELOPMENT STAGE COMPANY; NO PRODUCTS. The Company and its technology
are in an early stage of development. The Company does not have any products
for sale and has not generated revenues from sales. The Company does not
expect to achieve revenues for at least several years. The products
currently contemplated for development by the Company will require
significant additional research and development, preclinical and clinical
testing and regulatory approval prior to commercialization. There can be no
assurances that the Company's research or product development efforts will be
successfully completed, or that any resulting products will be successfully
transformed into marketable products, that required regulatory approvals can
be obtained, that products can be manufactured at an acceptable cost and with
appropriate quality, that any approved products can be successfully marketed,
or that any products will be favorably accepted in the market.
10
<PAGE>
HISTORY OF LOSSES; NO ASSURANCE OF FUTURE PROFITS; NO DIVIDENDS. The
Company and its predecessors have not declared or paid any cash dividends to
stockholders, and the Company does not expect to do so in the foreseeable
future. The Company expects to incur substantial and increasing losses for
at least the next several years as its financial resources are used for
research and development, preclinical and clinical testing and regulatory
activities, manufacturing, marketing and related expenses. The Company
cannot provide assurances that it will be able to achieve profitability in
the future.
UNPROVEN SAFETY AND EFFICACY; NO CLINICAL TRIALS. None of the Company's
proposed drug and device products have completed the extensive preclinical
and clinical testing for efficacy and safety in animals and humans required
for regulatory approval prior to commercial use. This process may take at
least several years, and the Company may encounter problems or delays. If
clinical trials are successful, there can be no assurances that the Company's
proposed products will demonstrate sufficient safety or efficacy to warrant
approval by the Food and Drug Administration or other domestic or foreign
regulatory authorities or that any approvals will cover the clinical
indications for which the Company may seek approval.
RELIANCE ON THIRD PARTIES, COLLABORATIVE RELATIONSHIPS AND EMPLOYEES.
The Company does not have manufacturing or clinical testing facilities for
its proposed products. The Company intends to enter into collaborative
relationships with third parties in connection with the research and
development, preclinical and clinical testing, manufacturing, marketing and
distribution of its proposed products. The Company initially will also be
dependent on third parties for supply of laser products and for supplies of
photodynamic drugs. There can be no assurances that the Company will be able
to negotiate acceptable collaborative and supply arrangements or that
collaborative arrangements will result in marketable products. In addition,
there can be no assurances that collaborative relationships will not limit or
restrict the Company or give the Company an adequate supply of necessary
resources. Further, there can be no assurances that the Company's
collaborative partners will not develop or pursue alternative technologies
either on their own or with others, including the Company's competitors, as a
means of developing or marketing products for the diseases targeted by the
collaborative programs and the Company's proposed products. The Company is
also highly dependent upon six employees for scientific and management
expertise.
SUBSTANTIAL ADDITIONAL FINANCING REQUIRED. The Company has incurred
negative cash flows from operations since its inception and will expend
substantial funds in connection with its research and development programs.
The Company will require substantial additional funding (the amount of which
cannot be accurately estimated at this time; however, the amount could be at
least $50 million) to continue or undertake its research and development
activities, clinical testing and manufacturing, marketing, sales,
distribution and administrative activities. Depending on market conditions,
the Company will attempt to raise additional capital through equity and debt
offerings, collaborative relationships and other available sources. No
assurances can be given that additional funds will be available on acceptable
terms (if at all) or the extent of dilution to existing stockholders that may
result from such offerings.
11
<PAGE>
SUBSTANTIAL COMPETITION. Many of the Company's competitors have
substantially greater financial, technical and human resources than the
Company and, alone or with collaborative partnerships, have substantially
greater experience in developing products, conducting preclinical or clinical
testing, obtaining regulatory approvals and manufacturing and marketing. The
Company's competitors include firms in the field of photodymanic therapy as
well as firms in other fields generally relating to the diagnosis and
treatment of disease but which use different technologies or scientific and
medical approaches. Some of these firms have drugs or devices that are in
advanced stages of clinical trials and regulatory approvals. Examples of
such technologies are novel anti-tumor drugs, focused ultra-sound and focused
microwave procedures.
UNCERTAINTIES REGARDING REIMBURSEMENT AND HEALTH CARE REFORM. Third
party payors (including health insurers, managed care entities and similar
organizations) are increasingly challenging the price of medical procedures
and services and establishing protocols which may limit physicians'
selections of products and procedures. The extent to which third party
payors will provide reimbursement for health care procedures and services
(especially those using innovative technologies) is uncertain, and there can
be no assurances that adequate reimbursement coverage will be available to
enable the Company to achieve market acceptance of its proposed products or
to maintain price levels sufficient for realization of an appropriate return
on its proposed products.
UNCERTAINTIES REGARDING PATENT MATTERS. The Company's success will
depend, in part, on its ability to obtain, assert and defend its patents,
protect trade secrets and operate without infringing the proprietary rights
of others. There is a risk that some of the Company's patent applications
will not result in issued patents; and there is a risk that any issued
patents will not provide the Company with proprietary protection or
competitive advantages, will be designed around by others, will be challenged
by others and held to be invalid or unenforceable or that the patents of
others will have a material adverse effect on the Company. The Company's
current technology and any related patents are subject to two Confirmatory
Licenses in favor of the United States Government as required by applicable
regulations, in which the Company granted an irrevocable license to the
Government to use the technology under certain circumstances and granted
certain "march-in rights" (permitting the Department of Energy to make use of
the technology under certain circumstances). The Company also seeks to
protect its proprietary technology and processes in part by confidentiality
agreements; however, there can be no assurances that these agreements will
not be breached, that the Company will have adequate remedies for any breach,
or that the Company's trade secrets will not otherwise become known or be
independently discovered by competitors.
CONTROL BY EXISTING STOCKHOLDERS. As of June 30, 1998, the Company's
officers, directors and principal stockholders beneficially owned
approximately 86.13% of the outstanding common stock. Certain of the
Company's principal stockholders are also parties to a Voting Agreement
concerning the election of certain designees to the Board of Directors of the
Company and Photogen, Inc. These stockholders will be able to elect the
Company's directors and will have the ability to influence significantly the
Company and the direction of its business and affairs. Such concentration of
ownership may delay or prevent a change in control of the Company, and may
also result in the scarcity of outstanding shares currently available for
purchase on the open markets. These factors may affect the market and the
market
12
<PAGE>
price for the common stock in ways that do not necessarily reflect the
intrinsic value of the Company's stock (see "Possible Volatility of Stock
Price," below).
POSSIBLE VOLATILITY OF STOCK PRICE. The market price of the
Company's Common Stock, like that of the securities of other biotechnology
companies, has fluctuated significantly recently and is likely to fluctuate
in the future. The market for securities of biotechnology companies has
experienced significant price and volume fluctuations that are unrelated to
the operating performance of such companies. In addition, announcements by
the Company or others regarding scientific discoveries, technological
innovations, commercial products, patents or proprietary rights, the progress
of clinical trials or government regulation, public concern as to the safety
of devices or drugs, the issuance of securities analysts' reports and general
market conditions may all have a significant effect on the market price of
the Company's Common Stock. Fluctuations in financial performance from
period to period, and the availability of stock on the market compared to
demand (see "Control by Existing Stockholders"), may also have a significant
impact on the market price of the Common Stock.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The following exhibits are furnished with this Form 10-QSB:
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C>
27 Financial Data Schedule of Photogen Technologies, Inc.
</TABLE>
(b) Reports on Form 8-K.
The following reports on Form 8-K were filed in the three month period
ended June 30, 1998:
1. Report on Form 8-K dated June 17, 1998 disclosing that, at the 1998
Annual Meeting of Stockholders, the stockholders approved an
amendment to paragraph (b) of Article Fifth of the Company's
Restated Articles of Incorporation to increase the size of the Board
from five to six, elected six directors and approved the Photogen
Technologies, Inc. 1998 Long Term Incentive Compensation Plan.
13
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Photogen Technologies, Inc.
/s/ John T. Smolik
-------------------------------------------
Date: August 10, 1998 John T. Smolik, President
14
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<S> <C>
27 Financial Data Schedule of Photogen Technologies, Inc.
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-QSB
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 147,105
<SECURITIES> 7,820,177
<RECEIVABLES> 10,227
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0
0
<COMMON> 36,875
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<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
