<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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 September 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
SEPTEMBER 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
PAGE
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 . . . . . . . . . . . . . . . . . . . . . . . . 11
ITEM 5. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. . . . . . . . . . . . 14
i
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PHOTOGEN TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED CONDENSED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30, 1998 December 31,
(Unaudited) 1997
------------------ -------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 443,578 $ 82,631
Interest receivable -0- 21,402
prepaid expenses 100,125 8,164
Marketable securities - 409,238
------------ ------------
TOTAL CURRENT ASSETS 543,703 521,435
UNITED STATES TREASURY NOTES, TOTAL
FACE VALUE $6,550,000 and $1,538,000 6,759,978 1,531,413
EQUIPMENT AND LEASEHOLD IMPROVEMENTS 427,651 194,252
PATENTS COSTS 123,621 37,273
------------ ------------
TOTAL ASSETS $ 7,854,953 $ 2,284,373
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 32,647 $ 118,233
Current portion of obligations under
capital leases 19,861 18,626
------------ ------------
TOTAL CURRENT LIABILITIES $ 52,508 $ 136,859
------------ ------------
OBLIGATION UNDER CAPITAL LEASES 43,357 60,469
------------ ------------
------------ ------------
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; 36,875,001 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
development stage after
recapitalization (1,884,438) (556,481)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 7,759,088 2,087,045
------------ ------------
$ 7,854,953 $ 2,284,373
------------ ------------
------------ ------------
</TABLE>
1
<PAGE>
PHOTOGEN TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Three Months Nine Months Nine Months Cumulative
Ended Ended September Ended Ended Amounts
September 30, 30, 1997 September 30, September From
1998 1998 30, 1997 November 3,
1996
<S> <C> <C> <C> <C> <C>
REVENUES
Investment Income $ 126,297 $ 48,292 $ 276,479 $ 84,395 $ 383,612
EXPENSES
General and administrative 703,612 237,938 1,604,436 309,675 2,268,050
------------ ------------- ------------- ------------ -------------
NET INCOME (LOSS) $ (577,315) $ (189,646) $ (1,327,957) $ (225,280) $ (1,884,438)
------------ ------------- ------------- ------------ -------------
------------ ------------- ------------- ------------ -------------
NET INCOME (LOSS)
PER COMMON SHARE $ (.02) $ - $ (.04) $ (.01)
------------ ------------- ------------- ------------
------------ ------------- ------------- ------------
WEIGHTED AVERAGE
NUMBER OF COMMON
SHARES OUTSTANDING 36,875,001 36,000,000 36,875,001 32,878,269
------------ ------------- ------------- ------------
------------ ------------- ------------- ------------
</TABLE>
2
<PAGE>
PHOTOGEN TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW
(UNAUDITED)
<TABLE>
<CAPTION>
Cumulative
Nine Months Ended Nine Months Ended Amounts From
September 30, 1998 September 30, 1997 November 3, 1996
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $(1,327,957) (225,280) $(1,884,438)
Depreciation 57,369 2,605 74,883
Realized gain on United States
Treasury Notes -- (18,599) (29,737)
Loss on Securities 9,238 1,048 18,503
Changes in operating assets and liabilities:
Prepaid expense (91,961) (11,329) (100,125)
Interest receivable 21,402 (47,697) -
Accounts payable (85,586) 29,944 32,649
----------- ------------- ------------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES $(1,417,495) (269,308) (1,888,265)
----------- ------------- ------------
----------- ------------- ------------
INVESTING ACTIVITIES
Sale of marketable securities 400,000 1,204,464 2,164,464
Purchase of marketable securities -- (2,222,247) (2,182,967)
Purchase of United States Treasury Notes (7,795,816) (1,406,212) (9,840,692)
Sale of United States Treasury Notes 2,567,249 1,300,780 4,207,099
Purchase of capital assets (290,766) (72,046) (419,933)
Patent cost (86,348) (14,400) (123,683)
----------- ------------- ------------
NET CASH PROVIDED (USED)
BY INVESTING ACTIVITIES (5,205,681) (1,209,661) (6,195,712)
----------- ------------- ------------
----------- ------------- ------------
FINANCING ACTIVITIES
Proceeds from issuance of common stock 7,000,000 6,313 7,006,313
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 (15,877) - (19,321)
----------- ------------- ------------
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES 6,984,123 1,553,514 8,527,555
----------- ------------- ------------
----------- ------------- ------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 360,947 74,545 443,578
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 82,631 - -
----------- ------------- ------------
CASH AND CASH
EQUIVALENTS
AT END OF PERIOD 443,578 74,545 443,578
----------- ------------- ------------
----------- ------------- ------------
</TABLE>
3
<PAGE>
PHOTOGEN TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
Common Stock Additional During The
Members Paid-In Development
Shares Amount Capital Capital Stage Total
------ ------ ------- ------- ----- -----
<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 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 STOCK
FOR CASH 875,001 875 - 6,999,125 - 7,000,000
NET LOSS FOR NINE
MONTHS ENDED
SEPTEMBER 30, 1998 - - - - (1,327,957) (1,327,957)
----------- ----------- --------- ----------- ----------- -----------
BALANCE AT
SEPTEMBER 30, 1998 36,875,001 $ 36,875 - $ 9,606,651 ($1,884,438) $ 7,759,088
----------- ----------- --------- ----------- ----------- -----------
----------- ----------- --------- ----------- ----------- -----------
</TABLE>
4
<PAGE>
PHOTOGEN TECHNOLOGIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
September 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 nine months ended September 30, 1998 and are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1998.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF
OPERATION
UNCERTAINTIES RELATING TO COMPANY. Since acquiring Photogen, Inc. in
May 1997, Photogen Technologies, Inc. (which, together with its wholly-owned
subsidiary Photogen, Inc., are collectively referred to as the "Company") has
been principally engaged in the research and development of drugs and medical
device products and processes for use in photodynamic therapy and imaging
technology. 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 nine month period ended
September 30, 1998, was $1,327,957, compared to a loss of $225,280 for the
nine month period ended September 30, 1997. The Company's net loss for the
three month period ended September 30, 1998 was $577,315, compared to a loss
of $189,646 for the three months ended September 30, 1997. The losses are
attributable primarily to expenses related to pursuing patent protection for
the Company's technology, conducting animal studies 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 in the
manufacture and/or sale of any products that the Company may develop. In
particular, the Company is presently a party to four research contracts with
various third parties that will require an expenditure of a total of $509,000
over the remaining terms of those contracts (see "Plan of Operation," below).
The Company's revenue for the nine month period ended September 30, 1998
was $276,479, compared to $84,325 of revenue for the nine month period ended
September 30, 1997. The Company's revenue for the three month period ended
September 30, 1998 was $126,297, compared to $48,292 of revenue during the
three months ended September 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. The Company has used, and expects over
the next 12 to 18 months to use, the gross proceeds from the March 13, 1998
private placement and from the sale of stock in the Company's 1997
restructuring for corporate overhead and operating expenses, animal 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
8
<PAGE>
in various foreign jurisdictions. In November of 1998, U.S. Patent Number
5,829,444 issued to the Company containing 68 claims for Photogen's treatment
application. 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. In addition, the Company recently filed
three additional United States patent applications. 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. A preliminary report has been received at the international level,
indicating the novelty, inventive step and industrial applicability of the
claims of each PCT application. The national stages of the PCT applications
have been entered into in Australia and Canada, with other countries to
follow.
The Company is continuing its animal studies to examine the efficacy of
photodynamic therapy utilizing its proprietary simultaneous two-photon
excitation technology in a variety of applications. The Company has research
contracts with the University of Tennessee School of Veterinary Medicine and
the Thomson Cancer Survival Center; and the Company recently announced that
it signed two research agreements with teaching affiliates of Harvard Medical
School: the first agreement is with Massachusetts General Hospital's Center
for Imaging and Pharmaceutical Research ("CIPR") for the study of possible
treatment of lung and prostate cancer; the other is with the Massachusetts
Eye and Ear Infirmary ("MEEI") for the study of possible treatments for
age-related macular degeneration. Copies of the CIPR and MEEI Research
Agreements are attached hereto as Exhibits 10.1 and 10.2.
The Company, primarily in its own laboratories, has been working on
research pursuant to a Phase 1 Small Business Innovation Research ("SBIR")
Project grant of $99,927 from the National Institutes of Health National
Cancer Institute. During the course of the SBIR project, the Company
demonstrated successful multiphoton activation of an FDA approved photoactive
drug in a living organism. That study also indicated that the Company's
simultaneous two-photon laser beam could be directed at a target area in a
mouse liver with little or no collateral damage to other tissues outside the
target area. In contrast, conventional single-photon excitation produced
damage on the laser beam line of flight and in some cases severely damaged
non-targeted organs.
The Company is also conducting research assessing the use of ultrafast
light to activate melanin and its precursors to kill melanoma cells.
Preliminary results of that research were announced in September, 1998.
Tumors produced in mice were treated by scanning the affected area with light
from an ultrafast pulsed laser. Tumors ranging in size from 6 to 10 mm in
diameter and up to 3 mm deep, when treated with ultrafast pulsed laser light,
produced a visible "blanching" effect, resulting from the interaction between
melanin and the light. After treatment, tumor volume was reduced by 100
percent with little or no scarring. Tumors treated with conventional,
continuous wave, laser light produced only a minimal response. Results of a
single treatment showed that mice with tumors 6 to 10 mm in diameter and 3 mm
deep showed no evidence of tumor recurrence after three weeks. Tumors 5 to 7
mm deep have shown some recurrence three weeks after treatment. However,
Photogen's multiphoton process is very precisely confined to the confocal
(concentrated region of light) area of the laser beam, which reaches a depth
of approximately 3-5 mm. Therefore, the deeper parts of very large tumors
under testing conditions described above were not exposed to the confocal
region and not actually treated. Recurrent tumors were eliminated upon
subsequent treatment. The Company will continue to evaluate the effects of
multiple treatments for recurrent tumors as well as methods to insure that
all areas of large tumors can be treated.
9
<PAGE>
In September, 1998 the Company announced the formation of its
Scientific Advisory Council. The Council was organized to provide scientific
advice and counsel to the Board of Directors and Company management team. It
is charged with providing guidance and recommendations to help the Company
pursue commercially important applications, benefit from the latest
developments in chemistry, biochemistry, laser design and photochemistry,
avoid investing Company resources in unprofitable areas, benefit fully from
the Company's proprietary technologies, become properly staffed and equipped,
and advance its interests by facilitating the development of licenses and
collaborative agreements. In addition to the Company's President, Dr. Daniel
Tosteson (former dean of the Harvard Medical School and an accomplished
contributor to the fields of molecular biology and medical education)
currently serves on the Council.
PLAN OF OPERATION. During the next twelve months, the Company will
continue with animal studies and evaluation of its proprietary photoactive
agent candidates, pursuing patent protection and seeking potential research
and development and collaboration candidates. During the nine months ended
September 30, 1998, the Company spent approximately $290,766 to acquire the
laboratory instruments necessary to support animal clinical trials, and on
development of its proprietary photoactive agent and targeting systems.
During the third quarter of 1998, the Company purchased $92,750 of equipment
associated with continuing development of photodynamic therapy procedures,
(specifically melanoma, barretts esophagus and psoriasis) and equipment for
the collection and assessment of imaging procedures technology. The Company
anticipates increased spending during the fourth quarter for clinical
equipment and clinical work provided by third-party researchers. During the
next twelve months the Company expects to spend approximately $750,000 to
$1,000,000 to acquire laser systems and related hardware required to support
new clinical activities at well known clinical research centers. The four
research contracts to which the Company is currently a party, in the
aggregate, will require the Company to spend $850,000 during the next twelve
months for the projects presently contemplated under those agreements.
Additional projects may be undertaken with those institutions with
compensation to be agreed upon at that time.
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 and acquisition of space and equipment until the
final results of the animal testing are known. The Company has hired two
full-time employees and one part-time employee during the last six months to
provide personnel for administrative functions and laboratory assistance.
The Company is also planning to engage a consultant for FDA and related
regulatory matters. The Company intends to structure its research and
development and collaborative arrangements to make the fullest possible 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 current commitments during the next 12 to 18 months and will not be
required to raise additional funds. However, as the Company progresses
toward human clinical trials, its use of capital will increase and will
continue to do so at an accelerating pace. Greater capital resources would
enable the Company to quicken and expand its research and development
activities over that 12- to 18-month period; and failure to raise additional
capital will (absent a suitable collaborative agreement providing for a third
party to take over these functions) significantly impair the Company's
ability
10
<PAGE>
to conduct further research and development activities beyond those currently
contracted for as well as its ability to seek regulatory approval for any
possible product resulting from that research. 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.
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.
11
<PAGE>
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.
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.
12
<PAGE>
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 September 30, 1998, the
Company's officers, directors and principal stockholders beneficially owned
approximately 86.40% 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 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 companies generally in the
biotechnology and similar scientific fields, has fluctuated significantly
recently and is likely to fluctuate in the future. The market for securities
of such 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
13
<PAGE>
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:
EXHIBIT DESCRIPTION
------- -----------
10.1 Research Agreement dated as of October 1, 1998 by and between
Photogen, Inc. and Massachusetts General Hospital (relating to
the Center for Imaging and Pharmaceutical Research).
10.2 Research Agreement dated as of October 1, 1998 by and between
Photogen, Inc. and The Massachusetts Eye and Ear Infirmary
(relating to age-related macular degeneration research).
27 Financial Data Schedule of Photogen Technologies, Inc.
(b) Reports on Form 8-K.
The following reports on Form 8-K were filed in the three month period
ended September 30, 1998:
1. Report on Form 8-K dated July 14, 1998, announcing U.S. Patent and
Trademark Office notice of allowance regarding imaging patent
application.
2. Report on Form 8-K dated September 3, 1998 disclosing the Company's
announcement of preliminary results of research regarding melanoma
treatment.
3. Report on Form 8-K dated September 24, 1998 disclosing the Company's
announcement that Daniel Tosteson, M.D., the retired dean of Harvard
Medical School, joined the Photogen Scientific Advisory Council.
14
<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: November 13, 1998 John T. Smolik, President
15
<PAGE>
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
- ------- -----------
10.1 Research Agreement dated as of October 1, 1998 by and between
Photogen, Inc. and Massachusetts General Hospital (relating to the
Center for Imaging and Pharmaceutical Research).
10.2 Research Agreement dated as of October 1, 1998 by and between
Photogen, Inc. and The Massachusetts Eye and Ear Infirmary (relating
to age-related macular degeneration research).
27 Financial Data Schedule of Photogen Technologies, Inc.
16
<PAGE>
EXHIBIT 10.1
RESEARCH AGREEMENT
THIS RESEARCH AGREEMENT ("Agreement") is made effective as of October 1,
1998 by and between Photogen, Inc., a Tennessee corporation with offices in
Knoxville, Tennessee (hereinafter referred to as "Sponsor"), and the Center for
Imaging and Pharmaceutical Research ("CIPR") of The General Hospital
Corporation, a Massachusetts corporation (doing business as "Massachusetts
General Hospital"), with offices on Fruit St. in Boston, Massachusetts 02114
(hereinafter collectively referred to as "General") and joined into by each
person engaged by General as an Investigator to the extent indicated in Section
20 of this Agreement. Sponsor and General are collectively referred to as the
"Parties."
WITNESSETH:
WHEREAS, the research project contemplated by this Agreement is of mutual
interest and benefit to the Sponsor and General, and will further the
instructional, medical, and research objectives of General and the research and
development objectives of the Sponsor.
NOW THEREFORE, in consideration of the mutual covenants contained herein,
the Parties hereto agree as follows:
1. THE PROJECT. General, through the Principal Investigator (as defined
below) agrees to use its best efforts to perform in a timely and
expeditious manner one or more research projects pursuant and limited to
one or more protocols agreed to between the Parties (the "Project"). The
first phase of the Project will consist of research pursuant to the terms
of the protocol dated October 1, 1998 entitled "Combination of Two-Photon
Excitation Photodynamic Therapy (TPE-PDT) with Advanced Tumor Imaging
Technology for the Treatment of Lung and Prostate Cancer" between the
Sponsor and General which has been separately delivered and acknowledged by
the Parties ("Protocol-1"). Additional phases of the Project will be
conducted pursuant to mutually agreed upon protocols which shall be subject
in all respects to this Agreement and shall be designated by consecutive
numbers (e.g., Protocol-2, Protocol-3, etc.). Revised budgets shall be
mutually agreed for such additional protocols and shall form the basis for
an amendment to this Agreement The Project will be conducted under the
direction of Gerald L. Wolf, Ph.D., M.D. ("Principal Investigator").
General shall provide personnel, working under the Principal Investigator's
supervision, (who, together with the
1
<PAGE>
Principal Investigator, are referred to as the "Investigators"),
facilities, and resources as required to accomplish the work necessary
to complete the Project in accordance with Protocol-1 and any subsequent
protocols agreed to between the Parties.
2. TERM. The term of this Agreement and the Project shall be from October 1,
1998 through September 30, 2003, unless sooner terminated in accordance
with the terms hereof.
3. PAYMENT. The total cost to the Sponsor for the work described in
Protocol-1 will not exceed $225,000. The cost for subsequent work pursuant
to other protocols will be agreed upon by the Parties. Payments during the
first year shall be made to General by the Sponsor according to the
following schedule:
<TABLE>
<CAPTION>
Amount Date
------ ----
<S> <C>
$50,000 October 1, 1998
$50,000 By December 1, 1998
$50,000 By March 1, 1999
$74,008 By June 1, 1999
</TABLE>
Checks shall be made payable to "The General Hospital Corporation" and
shall be mailed to the following address:
Financial Director, Grants and Contracts
Research Finance
Massachusetts General Hospital
Thirteenth Street, Building 149, Suite 1115
Charlestown, MA 02129
All funds provided by Sponsor under this Agreement may be used at the
discretion of General in support of the work for the Project. Any changes
to the above payment schedule must be agreed to in writing by the Parties.
2
<PAGE>
4. TERMINATION. This Agreement and the Project may be terminated as set forth
below, in which case Sponsor's payment obligations will be adjusted through
the date of termination:
a. In the event that either Party defaults in the due performance of its
respective obligations under this Agreement, or in the event that any
representation or warranty by either Party in this Agreement or in the
documentation or data produced through the Project proves to be
materially false or misleading, and such default or breach is not
cured within thirty (30) days after written notice by the other Party,
then the non-defaulting Party may elect to terminate the Project and
this Agreement by giving written notice to the defaulting Party, and
this Agreement shall terminate upon the defaulting Party's receipt of
said notice.
b. General shall promptly advise Sponsor if for any reason Dr. Wolf
cannot be available as the Principal Investigator. If the Parties
cannot agree on a qualified scientist as a replacement, Sponsor may
terminate the Project and this Agreement on the 30th day after
delivery of written notice to General.
c. Notwithstanding anything in this Agreement to the contrary, either
Party may terminate this Agreement, with or without cause and without
liability, on 90 days' prior written notice to the other Party; in
which event this Agreement and the Project shall terminate on the 90th
day after delivery of such notice. In the event of such termination,
Sponsor shall have an obligation to continue for up to four (4) months
beyond such written notification, salary support at the pretermination
level of all Ph.D. or M.D. personnel who have been committed to the
Project on half-time or greater basis, provided General uses
reasonable efforts to reduce such costs to Sponsor.
d. The Parties recognize that the results of any particular research
project cannot be guaranteed even through the use of General's best
efforts; therefore, it is specifically agreed that the failure of
General to achieve specific research results or to reach specific
research milestones shall not constitute a default or breach of this
Agreement. Further, the Parties agree that obligations under Sections
5, 6, 7, 9, 10, 12, 13, 14 and 19 survive any termination of this
Agreement or the Project.
3
<PAGE>
5. EQUIPMENT. Title to any equipment purchased or manufactured by General in
the course of the research conducted under this Agreement or with the use
of funds provided by Sponsor shall vest in General.
6. PROPRIETARY INFORMATION OF THE PARTIES.
a. General and Sponsor recognize that the conduct of the Project may
involve the exchange and/or development or discovery of proprietary
information, including Inventions (as defined in Section 13.a below)
and other confidential business, technical and scientific information
or Trade Secrets (defined below). Accordingly, it is agreed that each
Party shall use reasonable efforts, no less than those used for its
own information of similar nature, to retain in confidence all
proprietary information of the other Party identified as confidential
at the time of disclosure and not disclose such information to any
other person or entity, nor use such information without written
permission of the Party owning such information, except in accordance
with the terms of this Agreement. The obligations of this paragraph
shall be binding upon the parties for a period of 5 years from the
Effective Date of this Agreement.
b. The term "proprietary information" as used herein shall not include
any information which the recipient clearly shows by appropriate
documentation:
(1) Was at the time of receipt both lawfully and independently known
to the receiving Party, its agents, or employees;
(2) Without breach of this Agreement by the receiving Party has been
published or is otherwise within the public knowledge or is
generally known to the public at the time of disclosure;
(3) Becomes known or available to the receiving Party without
restriction from a source other than the disclosing Party,
provided that such source has an unqualified right to disclose
such information without restriction;
(4) Becomes a part of the public domain after disclosure without
breach of this Agreement by the receiving Party; or
4
<PAGE>
(5) Is required by law to be disclosed, in which case the receiving
Party will give the disclosing Party prompt written notice of the
required disclosure. The disclosing Party may, in good faith and
at its own expense, contest disclosure or seek confidential
treatment and the receiving Party shall cooperate with the
disclosing Party in all reasonable respects.
7. PUBLICATION.
a. The Project studies may be worthy of written or oral publication in
scholarly journals or at meetings. Such presentation or publication
shall be jointly authored by the Principal Investigator and Sponsor's
scientists in accordance with their respective scientific
contributions to the Project, if applicable (otherwise, by the
originating person). Prior to publication, each Party will give the
other the opportunity to review and comment on any intended public
disclosure covering the Project, but in no event shall publication be
permitted without the express written approval of the Party from which
the results originated in accordance with prevailing academic
practice.
b. In order to give Sponsor an opportunity to protect against loss of
confidentiality or patent rights as a result of publication, the
Principal Investigator and/or General shall submit copies of drafts of
any article, abstract or presentation on the research conducted in the
Project written by any Investigator to Sponsor for review and comment
at least thirty (30) days prior to the anticipated date of submission
for publication or presentation. In the absence of Sponsor's notice
to the contrary, General shall be free to submit such drafts for
publication or presentation. If Sponsor notifies General in writing
within such 30 day period that it needs additional time to seek patent
protection for the information, then General and the Investigators, as
the case may be, agree to defer the submission for publication until
such patent application has been filed, or an additional 60 days,
whichever is sooner. The person seeking to publish the material shall
make appropriate changes in such material to reflect the Parties'
reasonable comments concerning patent protection and non-disclosure of
Sponsor's Trade Secrets (defined below).
5
<PAGE>
8. INDEPENDENT CONTRACTOR. The Parties' relationship to one another in the
performance of this Agreement is that of independent contractors. The
Parties are not employees or agents of one another. Neither Party shall
have the authority to bind or incur liability for the other except as may
be expressly authorized in writing.
9. INDEMNIFICATION.
a. Sponsor shall be responsible and shall hold General harmless for any
injury to persons or damage to property to the extent that such injury
or damage is caused by the negligence or willful misconduct of
Sponsor, its employees or staff in carrying out the Project. Sponsor
will defend, indemnify, and hold harmless General and its trustees,
employees and staff against any and all actions, suits, claims,
demands or prosecutions that may be brought or instituted against
General and/or its trustees, employees and staff based on or arising
out of the manufacture, use, sale or other distribution of any product
of Sponsor (or its affiliates or licensees) resulting from the
Project, except to the extent any such action, suit, claim, demand or
prosecution is based on the negligence or willful misconduct of
General and/or its trustees, employees or staff.
b. General will defend, indemnify and hold harmless Sponsor and its
directors, employees and representatives from and against all actions,
suits, claims, demands or prosecutions that may be brought or
instituted against any of them to the extent based on the negligence
or willful misconduct of General and/or its trustees, employees or
staff.
10. NEGATION OF WARRANTIES BY GENERAL. Although General will use its best
efforts in connection with the Project as set forth in Section 1 of this
Agreement, General makes no warranties, either expressed or implied, as to
the result of such research or the merchantability or fitness for a
particular purpose of the research or any product arising out of the
Project. General shall not be liable for any direct, consequential, or
other damages suffered by the Sponsor or others which may result from the
use of any product arising out of the Project (except to the extent set
forth in Section 9, above).
6
<PAGE>
11. KEY PERSONNEL. Gerald L. Wolf, Ph.D., M.D., Principal Investigator, is
considered to be essential to the Project. Substitutions for or
substantial changes in his level effort or participation will not be made
without the prior written approval of Sponsor. Each Party will obtain
agreements from those of its employees, independent contractors,
consultants and similar persons involved in the Project (in the case of
General, all Investigators) causing such third parties to be bound by the
provisions of Sections 6, 7, 12 and 13 hereof.
12. INTELLECTUAL PROPERTY RIGHTS OF THE PARTIES. Neither Party shall have any
claim by virtue of this Agreement or the Project to any right, title or
interest in any Invention, Trade Secret or Patent Rights (defined below) or
any other intellectual property rights (a) issued to, owned or controlled
by the other Party prior to the date hereof, or (b) after the date hereof
except any new Inventions, Trade Secrets or Patent Rights conceived and
reduced to practice, constructively or actually in the performance of the
Project and as specifically set forth in Section 13 below.
13. INVENTIONS AND PATENT RIGHTS.
a. The term "Invention" means a patentable discovery or invention
conceived and reduced to practice, constructively or actually in the
performance of the Project, including any novel process, method,
formula, machine, manufacture, composition of matter and technology.
The term "Sponsor Trade Secret" means non-patented know-how,
compositions, protocols, formulas, processes and techniques,
discoveries, machines, ideas, compilations of information, computer
programs (including software and data used in all such programs),
drawings, specifications and technical information owned or developed
by Sponsor or its employees. The term "Patent Rights" means patent
applications and patent disclosures claiming an Invention, together
with all letters patent, reissuances, continuations, divisionals,
those claims in any continuations-in-part of any patent application
which claim an Invention described in said patent application,
revisions, extensions, and reexaminations thereof.
b. Inventions, Patent Rights and Sponsor Trade Secrets arising out of
the Project during the term of this Agreement and for a period of 12
months thereafter shall be owned as follows:
7
<PAGE>
(1) General will own all such Inventions it, the Principal
Investigator or any other General Investigator independently
conceives (a "General Invention") and all corresponding Patent
Rights, subject to the license if Sponsor exercises its option
described in paragraph 13.f below;
(2) General and Sponsor will jointly own all such Inventions jointly
conceived by General, the Principal Investigator or any other
Investigator together with Sponsor (a "Joint Invention") and all
corresponding Patent Rights, subject to the license if Sponsor
exercises its option described in paragraph 13.f below; and
(3) Sponsor will own all Inventions and Sponsor Trade Secrets Sponsor
independently conceives or owns and all corresponding Patent
Rights.
c. With respect to General Inventions, General will use reasonable
efforts, consistent with the practices of the Office of Technology
Affairs to cause all Investigators to report such Invention and assign
all of their right, title and interest therein to General; and with
respect to Joint Inventions, the Sponsor will cause its personnel and
General will use reasonable efforts to cause each Investigator to
report such Invention and assign all of their right, title and
interest therein to Sponsor and General jointly. Sponsor and General
shall promptly advise the other in writing of each General Invention
or Joint Invention and shall cause their Investigators and personnel,
as applicable, to maintain current and reasonably detailed records (in
accordance with customary academic research practice) as to possible
General and Joint Inventions, which shall be open to inspection by the
other Party with reasonable advance notice. The Parties shall discuss
for up to 90 days after the date an Invention is disclosed by one
Party to the other Party whether patent applications pertaining to
such General or Joint Invention should be filed and in which
countries. All of the foregoing shall constitute proprietary
information subject to Section 6, above.
d. If both Parties agree that patent applications should be filed, patent
applications relating to General Inventions shall be filed by General
and patent applications relating to Joint Inventions shall be filed as
agreed by the Parties. If within such 90-day period one Party states
in writing that it
8
<PAGE>
is not interested in filing patent applications on either a General
Invention or a Joint Invention (a "declining Party") and the other
Party (a "prosecuting Party") is interested in filing such
applications, the prosecuting Party shall be free, at its own
expense, to file such applications in the name(s) of the parties to
whom the Inventors would be obliged to assign and the declining
Party shall render the prosecuting party, at the prosecuting
Party's expense, all necessary assistance in order to facilitate
filing of such Joint Inventions.. All prosecution costs pertaining
to patent applications covering a General or Joint Invention that
are filed by mutual agreement of the Parties (including
preparation, filing, prosecution, issuance and maintenance costs)
shall be borne by Sponsor. General shall select counsel for such
General or Joint Inventions, subject to the approval of the
Sponsor, which approval shall not be unreasonably withheld. General
agrees to cause Patent counsel selected by it to promptly provide
Sponsor with copies of all documents relating to the patent
application, to be available to Sponsor for consultation and
suggestions and for Sponsor to be otherwise fully informed
regarding all matters relating to the patent application and its
prosecution.
e. The Parties agree to cooperate and work together in good faith to
effect the provisions of this Section 13. Each Party agrees to
execute and deliver (or cause to be executed and delivered) all
assignments and other instruments of transfer necessary to effect the
provisions of this Section 13.
f. As to all Patent Rights relating to a General Invention or a Joint
Invention, General hereby grants Sponsor for the twelve (12) months
next following the first filing of patent applications in any
jurisdiction relating to such Invention the irrevocable first option
to obtain a license granting Sponsor the following rights and
containing the following terms:
(1) Sponsor shall for the life of all patent rights, unless sooner
terminated by either party in accordance with the terms of such a
license agreement, have a world-wide, exclusive (subject only to
paragraph (h) below), royalty-bearing license granting Sponsor
the right to use the Invention, to design, make, have made,
market lease, offer for sale, sell and/or distribute products
embodying or produced through the use of the Invention, itself or
through third parties by way of sublicense, and in all other
respects to use, sublicense, and commercialize the Invention and
any such product
9
<PAGE>
under all Patent Rights. Pursuant to such license, Sponsor
shall use reasonable efforts to commercialize such products in
accordance with time limits and objectives consistent with the
market potential of the Invention and the capacity and
resources of the Sponsor. Sponsor will be free to design the
products, and select pricing and marketing methods in its
discretion.
(2) Sponsor shall pay General a reasonable royalty of an amount
equal to the greater of $10,000 per year or up to 5% of
Sponsor's annual net sales revenues for such Invention (gross
revenues actually received by Sponsor from sales of the specific
product which results from the General or Joint Invention, net of
customary cash and trade discounts, returns and allowances);
provided, that Sponsor will pay the minimum $10,000 annual
royalty beginning in the fifth year after the license is executed
or sooner if Sponsor has net sales revenues before the fifth
year. The applicable royalty rate shall be agreed upon by the
parties within 30 days of Sponsor's exercise of the option.
(3) Sponsor will use all reasonable efforts to defend all challenges
to Patent Rights, including alleged infringements, and General
will cooperate with Sponsor in that regard.
(4) Sponsor may abandon the license at any time by express written
notice to General, in which case all rights will revert back to
General and all license and royalty obligations on Sponsor shall
terminate.
(5) Product liability indemnification and insurance requirements
which are reasonably acceptable to General's liability insurance
carrier.
(6) In addition to the foregoing, any other commercially reasonable
terms standard for agreements between universities and industry
not inconsistent with the foregoing.
Sponsor may exercise this option by giving written notice of exercise
to General during said twelve-month period. Thereafter, General and
Sponsor each agree to negotiate in good faith and to enter into a
license agreement incorporating the foregoing terms within six (6)
months after
10
<PAGE>
notice of exercise. If Sponsor elects not to give written notice
of exercise during such 12-month period, General may grant a
license to such Invention and Patent Rights to any other person or
entity.
g. General represents and warrants to Sponsor that, to the best of its
knowledge, based on a diligent review of its documents, as of the
effective date hereof, General is not prohibited or prevented from
granting such a license to Sponsor. General agrees, during the term
of the Project hereunder, not to enter into an agreement with any
third party to fund Principal Investigator to conduct the Project and
to use reasonable care not to enter into an agreement with a third
party under terms that will prevent General from granting to the
Sponsor the license contemplated under subsection (f) above. General
will monitor the activities of the Principal Investigator in order to
avoid conflicting activities that would prevent General from granting
such a License.
h. It is understood that General will reserve the right to use any
General Invention or Joint Invention only for research, clinical and
educational purposes, and that if federal funding supports the
Invention, Sponsor's license will be subject to the rights, conditions
and limitations imposed by U.S. law including without limitation the
royalty-free non-exclusive license granted to the U.S. government (see
35 USC sec. 202 et. seq. and regulations pertaining thereto). General
represents, warrants and agrees with Sponsor that no federal funds
will be used to support the Project as of the date of this Agreement
and, if any such funds will be used in the future, General will give
Sponsor at least 120 days' prior written notice of General's
acceptance of federal funds..
14. DATA. The original data generated as a result of the Project shall be
provided to Sponsor promptly, and Sponsor may use such data as it deems
advisable, including for purposes of publication, presentation to the
scientific community, seeking regulatory approvals or for any other
purposes, except to the extent that such use infringes a patent owned or
controlled by General not licensed to Sponsor. However, this provision
shall not be interpreted to restrict General's publication rights under
Section 7 of this Agreement. The Principal Investigator shall report to
the Sponsor every 90 days on the status and results of the Project. The
Principal Investigator shall keep reasonable and customary records of the
Project and related data sufficient for Sponsor's regulatory approval
activities and shall make such records available to Sponsor on reasonable
request.
11
<PAGE>
15. PUBLICITY. Neither Party shall use the name of the other Party or of any
Investigator in any advertising or promotional material without the prior
written approval of the other Party. The foregoing notwithstanding, (a)
General and the Principal Investigator shall acknowledge Sponsor's support
of the Project in their respective reports and publications, (b) Sponsor
may disclose the existence and describe the terms of, and may file a copy
of this Agreement (redacted to the extent Sponsor deems appropriate to
ensure confidentiality) as an exhibit to its press releases, reports and
governmental filings, including reports and filings with the U.S.
Securities and Exchange Commission and relevant foreign government
authorities; and (c) Sponsor may make reference to technical publications
by the Principal Investigator or his co-authors. Any publicity or
governmental filings of this Agreement pursuant to this Section 15 shall
describe the relationship of the Parties accurately and appropriately,
including the fact that CIPR is a division of Massachusetts General
Hospital and the same are affiliated with Harvard Medical School.
16. APPROVALS. General represents and warrants to Sponsor that this Agreement
and the Project have received the required approvals within Massachusetts
General Hospital and that no other approvals are required to authorize the
execution and effectiveness of this Agreement. Sponsor represents and
warrants to General that this Agreement and the Project have been approved
by its Board of Directors.
17. MODIFICATION. This Agreement and the Protocol constitute the sole, full,
and complete agreement by and between the Parties concerning the subject
matter hereof and supersedes and replaces all prior agreements, discussions
and representations (including the July 9, 1998 and July 10, 1998
correspondence between the Parties and the Memorandum of Understanding
referred to therein). No amendments of any provision of this Agreement
shall be valid unless reduced in writing and signed by the Parties and all
waivers must be in writing and signed by the Party against which the waiver
is to be enforced.
18. NOTICES AND OTHER COMMUNICATIONS. With the exception of Sponsor's payments
under Section 3, all notices and other communications between the Parties
in connection with this Agreement shall be in writing and deemed
sufficiently given when delivered by messenger or overnight courier
providing for receipted delivery, transmitted by fax with confirmation of
12
<PAGE>
transmission or sent by prepaid United States mail or other recognized
carrier, addressed as follows:
a. If to Sponsor:
John Smolik
President, CEO
Photogen, Inc.
7327 Oak Ridge highway
Knoxville, TN 37931
Fax number: (423) 769-4013
b. If to General:
Director, Office of Technology Affairs
Massachusetts General Hospital
13th Street, Building 149
Suite 1101
Charleston, MA 02129
Fax number: (617) 726-1668
Either Party may change its address by written notice given to the other
Party. It is specifically provided that this notice provision shall not be
construed in such a manner as to abrogate the provisions of Section 16
regarding modification of this Agreement.
19. GOVERNING LAW; CHOICE OF FORUM. This Agreement is made and entered into the
State of Massachusetts and its validity and interpretation and the legal
relations of the Parties shall be governed by the internal laws of the
State of Massachusetts without regard to its provisions on conflict of
laws. Each Party submits to the exclusive jurisdiction of any state or
federal court sitting in Chicago, Illinois in any action or proceeding
relating to this Agreement and each Party agrees that all claims in respect
of the action or proceeding may be heard and determined only in any such
court. Each of such Parties waives any defense of inconvenient forum to
the maintenance of any action or proceeding so brought and waives any bond,
surety, or other security that might be required of any other Party with
respect thereto.
13
<PAGE>
20. INVESTIGATORS JOIN INTO AGREEMENT. Each person engaged by General as an
Investigator hereby joins into this Agreement and agrees to become bound to
all terms applicable to him or her and in particular, Sections as 1, 7(b)
and 13.
THIS AGREEMENT shall not be considered accepted, approved, or otherwise
effective until the signature of each Party is affixed in the space provided
below.
IN WITNESS WHEREOF, signifying their acceptance of and agreement to be bound by
the terms and conditions of this Agreement, the signatures of the Parties are
affixed hereto:
PHOTOGEN, INC. THE GENERAL HOSPITAL CORPORATION,
doing business as MASSACHUSETTS
GENERAL HOSPITAL
By: /s/John Smolik By: /s/David J. Glass
---------------------- ---------------------
John Smolik David J. Glass, Ph.D.
President, CEO Associate Director for Patents
Photogen, Inc. Office of Technology Affairs
Date: 10/12/98 Date: 10/6/98
-------------------- --------------------
JOINED INTO BY THE FOLLOWING INVESTIGATORS:
Name(s)
Date: 10/7/98 Gerald L. Wolf
----------------------- --------------------------------
Date:
----------------------- --------------------------------
Date:
----------------------- --------------------------------
<PAGE>
EXHIBIT 10.2
RESEARCH AGREEMENT
THIS RESEARCH AGREEMENT ("Agreement") is made effective as of October 1,
1998 by and between Photogen, Inc., a Tennessee corporation with offices in
Knoxville, Tennessee (hereinafter referred to as "Sponsor"), and The
Massachusetts Eye and Ear Infirmary, with offices at 243 Charles St. in Boston,
Massachusetts 02114 (hereinafter referred to as "MEEI"). Sponsor and MEEI are
collectively referred to as the "Parties."
WITNESSETH:
WHEREAS, the research project contemplated by this Agreement is of mutual
interest and benefit to the Sponsor and MEEI, and will further the
instructional, medical, and research objectives of MEEI and the research and
development objectives of the Sponsor.
NOW THEREFORE, in consideration of the mutual covenants contained herein,
the Parties hereto agree as follows:
1. THE PROJECT. MEEI agrees to use its best efforts to perform in a timely
and expeditious manner the research project entitled "Evaluation of
two-photon excitation (TPE) PDT using rose bengal and BPD-MA as a treatment
for AMD" (the "Project"). The Project will be conducted under the
direction of Joan W. Miller, M.D. ("Principal Investigator") pursuant to
the terms of the protocol dated October 1, 1998 between the Sponsor and
MEEI which has been separately delivered and acknowledged by the Parties
(the "Protocol"). MEEI shall provide personnel (who, together with the
Principal Investigator, are referred to as the "Investigators"),
facilities, and resources as required to accomplish the work necessary to
complete the Project in accordance with the Protocol. The Project shall be
limited to the scope described in the Protocol.
2. TERM. The term of this Agreement and the Project shall be from October 1,
1998 through June 30, 1999, or, as extended by mutual written agreement,
unless sooner terminated in accordance with the terms hereof.
3. PAYMENT. The total cost to the Sponsor for the Project will not exceed
$160,000 for the work described in the Protocol. The cost for subsequent
work pursuant to other protocols or consulting, including but not limited
to, the design of clinical trials and work with regulatory agencies will be
agreed upon by the
1
<PAGE>
Parties and covered by a separate agreement. Delays caused by third
party actions may alter the following payment schedule as mutually
agreed upon in writing by the Parties. Payments during the Project
shall be made to MEEI by the Sponsor according to the following schedule:
AMOUNT DATE
------- ---------------
$40,000 October 1, 1998
$40,000 By January 1, 1999
$40,000 By March 1, 1999
$40,000 By June 1, 1999
Checks shall be made payable to:
Massachusetts Eye and Ear Infirmary
and shall be mailed to the following address:
Director, Research Administration
Massachusetts Eye and Ear Infirmary
243 Charles Street
Boston, MA 02114
All funds provided by Sponsor under this Agreement may be used at the
discretion of MEEI in support of the work for the Project. Any changes to
the above payment schedule must be agreed to in writing by the Parties.
4. TERMINATION. This Agreement and the Project may be terminated as set forth
below, in which case Sponsor's payment obligations will be adjusted through
the date of termination:
a. In the event that either Party defaults in the due performance of its
respective obligations under this Agreement, or in the event that any
representation or warranty by either Party in this Agreement or in the
documentation or data produced through the Project proves to be
materially false or misleading, and such default or breach is not
cured within thirty (30) days after written notice by the other Party,
then the non-defaulting Party may elect to terminate the Project and
this Agreement by
2
<PAGE>
giving written notice to the defaulting Party, and this Agreement
shall terminate upon the defaulting Party's receipt of said notice.
b. MEEI shall promptly advise Sponsor if for any reason Dr. Miller cannot
be available as the Principal Investigator. If the Parties cannot
agree on a qualified scientist as a replacement, Sponsor may terminate
the Project and this Agreement on the 30th (thirtieth) day after
delivery of written notice to MEEI.
c. Notwithstanding anything in this Agreement to the contrary, either
Party may terminate this Agreement, with or without cause and without
liability, on 90 (ninety) days' prior written notice to the other
Party; in which event this Agreement and the Project shall terminate
on the 90th (ninetieth) day after delivery of such notice. The
payment schedule shall be adjusted to reflect work completed up to the
termination date.
d. The Parties recognize that the results of any particular research
project cannot be guaranteed even through the use of MEEI's best
efforts. Further, MEEI shall not be held responsible for delays due
to third party suppliers. Therefore, it is specifically agreed that
the failure of MEEI to achieve specific research results shall not
constitute a default or breach of this Agreement. Further, the
Parties agree that obligations under Sections 5, 6, 7, 9, 10, 12, 13,
14 and 19 survive any termination of this Agreement or the Project.
5. EQUIPMENT. Title to any equipment purchased or manufactured by MEEI in the
course of the research conducted under this Agreement or with the use of
funds provided by Sponsor shall vest in MEEI.
6. PROPRIETARY INFORMATION OF THE PARTIES.
a. MEEI and Sponsor recognize that the conduct of the Project may require
the exchange of proprietary information, identified as such in
writing, including Inventions (as defined in Section 13.a below) and
other confidential business, technical and scientific information,
between the Parties. Accordingly, it is agreed that each receiving
Party shall retain in confidence all proprietary information of the
other Party and shall not disclose such information to any other
person or entity, nor use such information without written permission
of the Party owning such information, except in accordance with the
terms of this Agreement.
3
<PAGE>
b. The term "proprietary information" as used herein shall not include
any information which the recipient clearly shows by appropriate
documentation:
(1) Was at the time of receipt both lawfully and independently known
to the receiving Party, its agents, or employees;
(2) Without breach of this Agreement by the receiving Party has been
published or is otherwise within the public knowledge or is
generally known to the public at the time of disclosure;
(3) Becomes known or available to the receiving Party without
restriction from a source other than the disclosing Party,
provided that such source has an unqualified right to disclose
such information without restriction;
(4) Becomes a part of the public domain after disclosure without
breach of this Agreement by the receiving Party; or
(5) Is required by law to be disclosed, in which case the receiving
Party will give the disclosing Party prompt written notice of the
required disclosure. The disclosing Party may, in good faith and
at its own expense, contest disclosure or seek confidential
treatment and the receiving Party shall cooperate with the
disclosing Party in all reasonable respects.
7. PUBLICATION.
a. The Project studies may be worthy of written or oral publication in
scholarly journals or at meetings. Such presentation or publication
shall be jointly authored by the Principal Investigator and Sponsor's
scientists in accordance with their respective scientific
contributions to the Project, if applicable (otherwise, by the
originating person). Prior to publication, each Party will give the
other the opportunity to review and comment on any intended public
disclosure covering the Project, but in no event shall such
publication be permitted without the express written approval of the
Party from which the results originated.
4
<PAGE>
b. In order to give Sponsor an opportunity to protect against loss of
confidentiality or patent rights as a result of publication, the
Principal Investigator and/or MEEI shall submit copies of drafts of
any article, or presentation on the research written by any
Investigator resulting from work on this Project to Sponsor for review
and comment at least thirty (30) days and in the case of abstracts
seven (7) business days prior to the anticipated date of submission
for publication or presentation. If Sponsor, in its reasonable
judgment, determines that it needs additional time to seek patent
protection for the information, then MEEI and the Investigators, as
the case may be, agree to defer the submission for publication for an
additional period as determined by written advice of Sponsor's patent
counsel; provided that MEEI's patent counsel agrees, which agreement
shall not be unreasonably withheld. The person seeking to publish the
material shall make appropriate changes in such material to reflect
the Parties' reasonable comments concerning patent protection and
non-disclosure of Trade Secrets (defined below).
8. INDEPENDENT CONTRACTOR. The Parties' relationship to one another in the
performance of this Agreement is that of independent contractors. The
Parties are not employees or agents of one another. Neither Party shall
have the authority to bind or incur liability for the other except as may
be expressly authorized in writing.
9. INDEMNIFICATION.
a. Sponsor will defend, indemnify, and hold harmless MEEI and its
trustees, employees and staff against any and all actions, suits,
claims, demands or prosecutions that may be brought or instituted
against MEEI and/or its trustees, employees and staff based on or
arising out of the manufacture, use, sale or other distribution of any
product of Sponsor (or its affiliates or licensees) resulting from the
Project, except to the extent any such action, suit, claim, demand or
prosecution is based on the negligence or willful misconduct of MEEI
and/or its trustees, employees or staff.
b. MEEI will defend, indemnify and hold harmless Sponsor and its
directors, employees and representatives from and against all actions,
suits, claims, demands or prosecutions that may be brought or
instituted against any of them based on the negligence or willful
misconduct of MEEI and/or its trustees, employees or staff.
5
<PAGE>
10. NEGATION OF WARRANTIES BY MEEI. Although MEEI will use its best efforts in
connection with the Project as set forth in Section 1 of this Agreement,
MEEI makes no warranties, either expressed or implied, as to the result of
such research or the merchantability or fitness for a particular purpose of
the research or any product arising out of the Project. MEEI shall not be
liable for any direct, consequential, or other damages suffered by the
Sponsor or others which may result from the use of any product arising out
of the Project (except to the extent set forth in Section 9, above).
11. KEY PERSONNEL. Joan W. Miller, M.D., Principal Investigator, is considered
to be essential to the Project. Substitutions for or substantial changes
in her level effort or participation will not be made without the prior
written approval of Sponsor. Each Party will obtain agreements from its
employees, independent contractors, consultants and similar persons causing
such third parties to be bound by the provisions of Sections 6, 7, 12 and
13 hereof.
12. INTELLECTUAL PROPERTY RIGHTS OF THE PARTIES. Neither Party shall have any
claim by virtue of this Agreement or the Project to any right, title or
interest in any Invention, Trade Secret or Patent Rights (defined below) or
any other intellectual property rights issued to, owned or controlled by
the other Party (a) prior to the date hereof, or (b) after the date hereof
except a New Invention, Trade Secrets or Patent Rights arising out of the
Project and as specifically set forth in Section 13 below.
13. INVENTIONS AND PATENT RIGHTS.
a. The term "Invention" means a patentable discovery or invention,
including processes, methods, formulas and technologies. The term
"Trade Secret" means non-patented trade secrets, know-how,
compositions, protocols, processes and techniques, discoveries,
machines, ideas, computer programs (including software and data used
in all such programs), drawings, specifications and technical
information. The term "Patent Rights" means patent applications and
patent disclosures related to an Invention, together with all letters
patent, reissuances, continuations, continuations-in-part, revisions,
extensions, and reexaminations thereof.
b. Inventions, related Patent Rights and Trade Secrets arising directly
from work on this Project during the term of this Agreement and for a
period of 12 months thereafter shall be owned as follows:
6
<PAGE>
(1) MEEI will own all such Inventions or Trade Secrets it, the
Principal Investigator or any other Investigator independently
conceives (a "MEEI Invention") and all related Patent Rights,
subject to the license if Sponsor exercises its option described
in paragraph 13.f below;
(2) MEEI and Sponsor will jointly own all such Inventions jointly
conceived by MEEI, or the Principal Investigator or any other
Investigator together with Sponsor (a "Joint Invention") and all
related Patent Rights, subject to the license if Sponsor
exercises its option described in paragraph 13.f below; and
(3) Sponsor will own (A) all Inventions and Trade Secrets Sponsor
independently conceives and all related Patent Rights, and (B)
all MEEI or Joint Inventions and related Patent Rights, described
in the foregoing clauses (1) or (2), as to which MEEI declines to
prosecute a patent application in accordance with paragraph (d),
below (collectively, a "Sponsor Invention").
(4) All Trade Secrets, arising from work on this Project, related to
a MEEI Invention or a Joint Invention shall be subject to the
license if Sponsor exercises its option described in paragraph
13.f below.
c. With respect to MEEI Inventions and related Trade Secrets, MEEI will
cause all Investigators to report such Invention and related Trade
Secrets and assign all of their right, title and interest therein to
MEEI; with respect to Joint Inventions and related Trade Secrets, the
Sponsor will cause its personnel and MEEI will cause each Investigator
to report such Invention and related Trade Secrets and assign all of
their right, title and interest therein to Sponsor and MEEI jointly;
and with respect to Sponsor Inventions and related Trade Secrets, all
Investigators shall report such Invention and related Trade Secrets
and assign all of their right, title and interest therein (if any) to
Sponsor. Sponsor and MEEI shall promptly advise the other in writing
of each MEEI Invention or Joint Invention and related Trade Secrets
and shall cause their Investigators and personnel, as applicable, to
maintain current and reasonably detailed records as to possible MEEI
and Joint Inventions and Trade Secrets, which shall be open to
inspection by the other Party. The Parties shall discuss for up to 90
days whether patent applications pertaining to such MEEI or Joint
Invention should be filed and in which countries. All of the
foregoing shall constitute proprietary information subject to
Section 6, above.
7
<PAGE>
d. If either Party determines that patent applications should be filed,
patent applications relating to MEEI Inventions shall be filed by MEEI
and patent applications relating to Joint Inventions shall be filed as
agreed upon by the Parties. If within 90 days after the date on which
such an Invention was disclosed by one Party to the other Party, one
Party states in writing that it is not interested in filing patent
applications on either an MEEI Invention or a Joint Invention or fails
to state in writing that it desires to file patent applications (a
"declining Party") and the other Party (a "prosecuting Party") is
interested in filing such applications, the declining Party, if the
Sponsor, shall assign all of its Patent Rights in such Invention to
the prosecuting Party and the prosecuting Party shall be free to file
and prosecute, all Patent Rights in the Invention in the name of the
appropriate inventor, for its own account (including the right to
license the same to any third party) and at its own expense. If the
declining Party is MEEI, then MEEI agrees to file and prosecute at
Sponsor expense, all patent rights in the Invention in the name of the
appropriate Inventor for its own account, subject, however, to
providing Sponsor with the option to obtain a license as contemplated
in Section 13.f below. All prosecution costs pertaining to patent
applications covering an MEEI or Joint Invention that are filed by
mutual agreement of the Parties or by MEEI when it is the declining
Party (including preparation, filing, prosecution, issuance and
maintenance costs) shall be borne by Sponsor, and Sponsor shall have
the right to select patent counsel.
e. The Parties agree to cooperate and work together in good faith to
effect the provisions of this Section 13. Each Party agrees to take
such actions as may be necessary to effect the provisions of this
Section 13.
f. As to all Patent Rights relating to a MEEI Invention or a Joint
Invention, MEEI hereby grants Sponsor for the twelve (12) months next
following the first filing of patent applications in any jurisdiction
relating to such Invention the irrevocable first option to obtain a
license. Upon exercise of this option, the parties shall negotiate in
good faith a license agreement containing terms that are commercially
reasonable, such license to include, but not be limited to the
following:
(1) Sponsor shall have a world-wide, exclusive (subject only to
paragraph (h) below), royalty-bearing license granting Sponsor
the right to use the Invention, to design, make, have made,
market lease, offer for sale, sell and/or distribute products
embodying or
8
<PAGE>
produced through the use of the Invention, itself or
through third parties by way of sublicense, and in all other
respects to use, sublicense, and commercialize the Invention and
any such product under all Patent Rights. Pursuant to such
license, Sponsor shall use reasonable efforts to commercialize
such products and will be free to design the products, and select
pricing and marketing methods in its discretion; but Sponsor
makes no representation, warranty or covenant as to whether any
such product can be developed, manufactured or sold, or as to the
revenues, if any, resulting from sales.
(2) Sponsor shall pay MEEI a reasonable licensing fee, and a
reasonable royalty of an amount not less than $10,000 per year.
(3) Sponsor will defend all challenges to Patent Rights and MEEI will
cooperate with Sponsor in that regard.
(4) Sponsor may abandon the license at any time by express written
notice to MEEI, in which case all rights will revert back to MEEI
and all license and royalty obligations on Sponsor shall
terminate.
(5) Product liability indemnification and insurance requirements
which are reasonably acceptable to MEEI's liability insurance
carrier.
(6) In addition to the foregoing, any other commercially reasonable
terms standard for agreements between universities and industry
not inconsistent with the foregoing.
Sponsor may exercise this option by giving written notice of exercise
to MEEI during said twelve-month period. Thereafter, MEEI and Sponsor
each agree to negotiate in good faith and to enter into a license
agreement incorporating the foregoing terms within six (6) months
after notice of exercise. If Sponsor elects not to give written
notice of exercise during such 12-month period (but not otherwise),
MEEI may grant a license to such Invention and Patent Rights to any
other person or entity.
g. MEEI represents and warrants that MEEI is not now and will not in the
future be prohibited or prevented from granting such a license to
Sponsor pursuant to the terms of Section 13.f above.
9
<PAGE>
h. It is understood that MEEI will reserve the right beyond rights
described above in Sections 13.a to and including 13.g to use any MEEI
Invention or Joint Invention only for research, clinical and
educational purposes, and that if federal funding supports the
Invention, Sponsor's license will be subject to the rights, conditions
and limitations imposed by U.S. law including without limitation the
royalty-free non-exclusive license granted to the U.S. government (see
35 USC sec. 202 et. seq. and regulations pertaining thereto). MEEI
represents, warrants and agrees with Sponsor that no federal funds
will be used to support the Project without providing Sponsor with one
hundred twenty (120) days prior written notice.
14. DATA. The original data generated as a result of the Project shall be
retained or under the control of MEEI; however, copies shall be provided to
Sponsor promptly, and Sponsor may use such data as it deems advisable,
including for purposes of publication, presentation to the scientific
community, seeking regulatory approvals or for any other purposes. However,
this provision shall not be interpreted to restrict MEEI's publication
rights under Section 7 of this Agreement. The Principal Investigator shall
report to the Sponsor every 90 days on the status and results of the
Project. The Principal Investigator shall keep reasonable and customary
records of the Project and related data sufficient for Sponsor's regulatory
approval activities and shall make such records available to Sponsor on
reasonable request.
15. PUBLICITY. Neither Party shall use the name of the other Party or of any
Investigator in any advertising or promotional material without the prior
written approval of the other Party. The foregoing notwithstanding, (a)
MEEI and the Principal Investigator shall acknowledge Sponsor's support of
the Project in their respective reports and publications, (b) Sponsor may
disclose the existence and describe the terms of, and may file a copy of
this Agreement (redacted to the extent Sponsor deems appropriate to ensure
confidentiality) as an exhibit to its press releases, reports and
governmental filings, including reports and filings with the U.S.
Securities and Exchange Commission and relevant foreign government
authorities; and (c) Sponsor may make reference to technical publications
by the Principal Investigator or his co-authors. Any publicity or
governmental filings of this Agreement pursuant to this Section 15 shall
describe the relationship of the Parties accurately and appropriately,
including the fact that MEEI is affiliated with Harvard Medical School.
10
<PAGE>
16. APPROVALS. MEEI represents and warrants to Sponsor that this Agreement and
the Project have been approved by the proper governing authorities of MEEI.
Sponsor represents and warrants to MEEI that this Agreement and the Project
have been approved by its Board of Directors.
17. MODIFICATION. This Agreement and the Protocol constitute the sole, full,
and complete agreement by and between the Parties concerning the subject
matter hereof and supersedes and replaces all prior agreements, discussions
and representations between the Parties. No amendments of any provision of
this Agreement shall be valid unless reduced in writing and signed by the
Parties and all waivers must be in writing and signed by the Party against
which the waiver is to be enforced.
18. NOTICES AND OTHER COMMUNICATIONS. With the exception of Sponsor's payments
under Section 3, all notices and other communications between the Parties
in connection with this Agreement shall be in writing and deemed
sufficiently given when delivered by messenger or overnight courier
providing for receipted delivery, transmitted by fax with confirmation of
transmission or sent by prepaid United States mail or other recognized
carrier, addressed as follows:
a. If to Sponsor:
John Smolik
President, CEO
PHOTOGEN, Inc.
7327 Oak Ridge highway
Knoxville, TN 37931
Fax number: (423) 769-4013
b. If to MEEI:
F. Curtis Smith, President
The Massachusetts Eye and Ear Infirmary
243 Charles Street
Boston, MA 02114
Fax number: 617-573-3091
11
<PAGE>
Either Party may change its address by written notice given to the other
Party. It is specifically provided that this notice provision shall not be
construed in such a manner as to abrogate the provisions of Section 16
regarding modification of this Agreement.
19. GOVERNING LAW; CHOICE OF FORUM. This Agreement is made and entered into the
State of Tennessee and its validity and interpretation and the legal
relations of the Parties shall be governed by the internal laws of the
State of Tennessee without regard to its provisions on conflict of laws.
Each Party submits to the exclusive jurisdiction of any state or federal
court sitting in Chicago, Illinois in any action or proceeding relating to
this Agreement and each Party agrees that all claims in respect of the
action or proceeding may be heard and determined only in any such court.
Each of such Parties waives any defense of inconvenient forum to the
maintenance of any action or proceeding so brought and waives any bond,
surety, or other security that might be required of any other Party with
respect thereto.
THIS AGREEMENT shall not be considered accepted, approved, or otherwise
effective until the signature of each Party is affixed in the space provided
below.
IN WITNESS WHEREOF, signifying their acceptance of and agreement to be bound by
the terms and conditions of this Agreement, the signatures of the Parties are
affixed hereto:
PHOTOGEN, INC. MASSACHUSETTS EYE
AND EAR INFIRMARY
By: /s/John Smolik By: /s/F. Curtis Smith
----------------------- --------------------------
John Smolik F. Curtis Smith
President, CEO President
Date: 10/6/98 Date: 10/2/98
---------------------- ------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-QSB
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 443,578
<SECURITIES> 6,759,978
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 543,703
<PP&E> 551,272
<DEPRECIATION> 0
<TOTAL-ASSETS> 7,854,953
<CURRENT-LIABILITIES> 52,508
<BONDS> 43,357
0
0
<COMMON> 36,875
<OTHER-SE> 7,722,213
<TOTAL-LIABILITY-AND-EQUITY> 7,854,953
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 703,612
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,327,957)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,327,957)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,327,957)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
