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

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                        OF THE SECURITIES EXCHANGE ACT OF 1934
                               FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003

OR

[ ] TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d)OF THE 
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION
PERIOD FROM _________ TO ________

COMMISSION FILE NO.
0-15443

THERAGENICS
CORPORATION®(Exact name of registrant as specified in its charter)

Delaware             
                  
                 58-1528626
                        
    (State of incorporation)     
                  
 (I.R.S. Employer Identification Number)

    5203 Bristol Industrial Way                
                      
      Buford, Georgia              
                     
         30518
(Address of principal executive offices)          
          (Zip Code)

Registrants
telephone number, including area code:(770) 271-0233

Securities
registered pursuant to Section 12(b) of the Act:

|                                                                                   |                                         
|---------------------------------------------------------------------------------- | ----------------------------------------
|Title of each class                                                                | Name of each exchange onwhich registered
|Common stock, $.01 par value,Together with associated Common Stock Purchase Rights

Securities registered pursuant
to Section 12(g) of the Act: None

Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. YES X No _

Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of registrants
knowledge, in definitive Proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this form 10-K. [X]

Indicate
by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of
the Act) Yes X No _

The
aggregate market value of the common stock of the registrant held by non-affiliates of the
registrant, as determined by reference to the closing price of the Common Stock as
reported on the New York Stock Exchange on June 30, 2003, the last business day of the
registrants most recently completed second fiscal quarter, was $126,783,058.

As
of March 3, 2004 the number of shares of Common Stock, $.01 par value, outstanding was
29,966,575.

Documents
incorporated by reference: Proxy Statement for the registrants 2004 Annual Meeting
of Stockholders, to be filed with the Securities and Exchange Commission not later than
120 days after December 31, 2003, is incorporated by reference in Part III herein.

Part I

Item 1.      BUSINESS

General

Theragenics
Corporation® (Theragenics or the Company), incorporated
under Delaware law in 1981, is the manufacturer of TheraSeed®, a rice-sized,
FDA-cleared device used to treat solid localized tumors, primarily prostate cancer, with a
one-time, minimally invasive procedure. Theragenics is the worlds largest
producer of palladium-103, the radioactive isotope that supplies the therapeutic radiation
for its TheraSeed® device. Physicians, hospitals and other healthcare providers,
primarily located in the United States, utilize the TheraSeed® device. The
TheraSeed® device has also been approved for marketing throughout the member countries
of the European Union by obtaining its CE Mark. Sales of the TheraSeed® device in
Europe have not been significant. The majority of sales are channeled through third-party
distributors. The Company also sells its TheraSeed® devices directly to physicians.

The
Companys website address is www.theragenics.com. The Companys annual
report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all
amendments to those reports are available free of charge through its website by clicking
on the Investor Relations page and selecting SEC Filings. These
reports will be available as soon as reasonably practicable after such material has been
electronically filed with, or furnished to, the SEC. These reports are also available
through the SECs website at www.sec.gov. The information on these websites
and the information contained therein or connected thereto are not intended to be
incorporated by reference into this Form 10-K.

Early
in 2003 the Company diversified its product line with the purchase of the U.S. iodine-125
prostate brachytherapy business of BEBIG Isotopen-und Medizintechnik GmbH (BEBIG),
formerly distributed by Isotope Products Laboratories (both subsidiaries of a publicly
traded German company, Eckert & Ziegler AG). The purchase gives Theragenics
exclusive U.S. manufacturing and distribution rights to an FDA-cleared iodine-125-based
medical device for the treatment of prostate cancer. Theragenics began distribution
of the iodine-125-based medical device early in 2003, and subsequently began to produce
I-Seed (the Theragenics iodine-125-based medical device) early in 2004, utilizing
the automated production equipment procured in the business acquisition. The Company sells
the I-Seed device directly to physicians, hospitals and other healthcare providers. The
non-exclusive distributors of the TheraSeed® device have no distribution rights for
the I-Seed device. Non-exclusive rights to distribute the TheraSeed® device in Europe
were granted to BEBIG as part of the transaction. The Company believes that the ability to
provide both TheraSeed® and I-Seed devices will enhance the Companys ability to
market to direct customers who seek a single source for both palladium-103 and iodine-125
brachytherapy seeds. The product line and equipment purchase will not affect the
Companys existing non-exclusive distribution agreements for the TheraSeed®
device.

From
May 1997 to August 2000, substantially all TheraSeed® devices were sold through an
exclusive distributor. Notice of termination of that exclusive distribution agreement was
received in August 2000, ending Theragenics contractual requirement to use an
exclusive distributor. The contract was subsequently terminated in January 2001. The
Company currently sells its TheraSeed® devices directly to physicians and
non-exclusive third party distributors.

In
1998 the Company received regulatory approval for the marketing of the TheraSeed®
device throughout the member countries of the European Union by obtaining its CE Mark.
Sales of the TheraSeed® device in Europe were not significant in any of the three
years in the period ended December 31, 2003.

The
Company constructed a facility in the Oak Ridge, Tennessee area initially intended to
expand the Companys production capacity for palladium-103, using unique plasma
separation process (PSP) technology being leased from the U.S. Department of Energy (DOE).
PSP technology is a method of separating relatively large quantities of specific
non-radioactive isotopes from specific elements.

In
connection with the Companys ongoing program targeted at diversifying its future
revenue stream, the Company continues to explore new applications for the PSP technology.
Among other things, the PSP technology enables the Company to conduct feasibility runs
designed to validate isotope usage in various diverse markets and industries.

In
July 2002 Theragenics agreed to produce test quantities of certain gadolinium
isotopes for purchase by an international nuclear services company using the PSP
technology. The gadolinium for the international nuclear services company was intended for
a non-medical application and was delivered during the second quarter of 2003. Further, in
2003 the Company performed feasibility runs to validate the PSPs capabilities to
produce specific isotopes of certain elements in the rare earth group of elements for
UT-Battelle, LLC (Battelle), a partnership between the University of Tennessee and
Battelle, which manages the Oak Ridge National Laboratory for the U.S. Department of
Energy.

In
addition to feasibility runs and isotope production, the PSP is capable of supplying
palladium raw material. PSP operations are underway to enrich palladium-102 with the PSP
to ensure ample supply of material. The Companys palladium-103 material can be used
either to support seed production or the Companys ongoing research and development
(R&D) initiatives. The Companys diversification program includes the clinical
trial that utilizes a palladium-103 device, called the TheraSource® Intravascular
Brachytherapy System, designed to prevent restenosis or renarrowing of arteries following
treatment of peripheral vascular disease by percutaneous transluminal angioplasty.

Following
the approval of the Investigational Device Exemption granted by the U.S. Food and Drug
Administration (FDA) in August 2002 to initiate the TheraP clinical trial,
Theragenics began a clinical trial using a palladium-103 device (patent pending)
early in 2003. The trial was initiated at the Fuqua Heart Center at Piedmont Hospital and
St. Josephs Hospital, both in Atlanta. Two additional centers, Northeast Georgia
Medical Center in Gainesville, Georgia and Brigham & Womens Hospital in Boston,
Massachusetts, signed on and opened enrollment in the trial in the fourth quarter of 2003.
To date, 19 patients have been treated. Information and data gathered from the study will
enable the Company to determine the safety, feasibility and marketing capabilities of the
device. Preliminary indications from the study are encouraging, although the study is
ongoing and conclusions cannot yet be reached. The Company will continue to refine the
device to go into areas of the vasculature that may provide the most attractive market
opportunities for the Company.

Additionally,
an animal pilot study using palladium-103 in a prototype device designed for the treatment
of age-related macular degeneration (AMD), a disease that leads to loss of eyesight and in
some cases complete blindness, was completed early in 2002. Progress has been made in the
development of a marketable device for the treatment of AMD. A patent is pending for the
TheraSight device and the Company is analyzing various differing trial designs,
while mindful of the emerging potential competition in this market. Plans continue toward
commencement of a human clinical safety trial of the TheraSight device possibly in
2004.

The
Company has also identified potential opportunities, utilizing its cyclotrons, for
production of radiochemical products, which are typically used in medical nuclear imaging
procedures. Although this opportunity is in an early stage, the Company may devote
additional resources to this project in 2004 with a view to developing future new
products, although they could, if pursued, increase research and development expenses.

The
Company is also searching for, reviewing and evaluating external opportunities for
diversification in the form of joint ventures, partnerships, and/or acquisitions of
technologies, products and companies.

Industry Overview

Prostate Cancer

Excluding
skin cancer, prostate cancer is the most common form of cancer, and the second leading
cause of cancer deaths, in men. The American Cancer Society estimates there will be about
230,900 new cases of prostate cancer diagnosed and an estimated 29,900 deaths associated
with the disease in the United States during 2004.

Prostate
cancer incidence and mortality increase with age. Prostate cancer is found most often in
men who are over the age of 50. More than seven out of ten men diagnosed with prostate
cancer are over the age of 65. At the age of 70, the chance of having prostate cancer is
12 times greater than at age 50. According to the American Cancer Society, prostate cancer
incidence rates increased between 1988 and 1992 due to earlier diagnosis in men who
otherwise had no sign of symptoms. Consequently, early screening has fostered a decline in
the prostate cancer death rate since 1990.

Weak
or interrupted urine flow, an inability to urinate, frequent urination and pain during
urination can all be signs of prostate cancer. Additional symptoms can include blood in
the urine, continual lower back pain in the pelvis or pain in the upper thighs. However,
it should be noted that these symptoms are nonspecific and can be caused from
non-malignant conditions.

According
to the American Cancer Society, approximately 70% of all prostate cancers are found while
they are localized (confined to the prostate), and at least 85% have not spread beyond the
surrounding tissues or lymph nodes. The 5-year survival rate for men with localized
prostate cancer is 100%. According to the American Cancer Society, the survival rate for
all stages of prostate cancer combined has increased from 67% to 97% over the past 20
years. Longer follow-up suggests that relative survival continues to increase after a
diagnosis. Recent data indicates that the relative 10-year survival rate is 79%, and
15-year survival rate is 57%.

In
addition to age, other risk factors are linked to prostate cancer, such as genetics. Men
who have relatives that have been affected, especially if the relatives were young at
diagnosis, have an even higher risk of contracting the disease. Researchers have
discovered changes in certain genes, influenced by DNA mutations inherited from a parent,
may cause some men to be more inclined to develop prostate cancer. It has also been
suggested that environmental factors such as exposure to cancer-causing chemicals or
radiation may cause DNA mutations in many organs, but this theory has not been confirmed.

Another
factor that may contribute to prostate cancer is diet. A diet high in fat may play a part
in causing prostate cancer. The American Cancer Society suggests that Lycopenes, found in
vegetables and certain fruits such as tomatoes, grapefruit and watermelon, and the mineral
selenium found in fish, meat, poultry, cereals and vegetables such as mushrooms and
asparagus, seem to lower prostate cancer risk. An increase in prostate cancer may also be
related to a diet high in calcium and low in fructose (fruit sugar).

The
prostate is a walnut-sized gland surrounding the male urethra, located below the bladder
and adjacent to the rectum. The two most prevalent prostate diseases are benign prostatic
hyperplasia (BPH) and prostate cancer. BPH is a non-cancerous enlargement of the innermost
part of the prostate. Prostate cancer is a malignant tumor that begins most often in the
periphery of the gland and, like other forms of cancer, may spread beyond the prostate to
other parts of the body.

The
American Cancer Society recommends that men without symptoms, risk factors and who have a
life expectancy of at least ten years, should begin regular annual medical exams at the
age of 50, and believes that health care providers should offer as part of the exam the
prostate-specific antigen (PSA) blood test and a digital rectal examination (DRE). The PSA
blood test determines the amount of prostate specific antigen present in the blood. PSA is
found in a protein secreted by the prostate, and elevated levels of PSA can be associated
with either prostatitis (a noncancerous inflammatory condition) or a proliferation of
cancer cells in the prostate. Industry studies have shown that the PSA test can detect
prostate cancer as many as five years earlier than the digital rectal exam. Transrectal
ultrasound tests and biopsies are typically performed on patients with elevated PSA
readings to confirm the existence of cancer.

A
tumor found by a prostate biopsy is usually assigned a grade by a pathologist. The most
common prostate cancer grading system is called the Gleason grading system. A Gleason
score, which ranges from 2 to 10, usually is used to estimate the tumors growth
rate. Typically, the lower the score, the slower the cancer grows. Most localized cancers
of the prostate gland are associated with an intermediate score ranging from Gleason
scores 4 through 6.

Staging
is the process of determining how far the cancer has spread. The treatment and recovery
outlook depend on the stage of the cancer. The TNM system is the staging process used most
often. The TNM system describes the extent of the primary tumor (T stage), whether the
cancer has spread to nearby lymph nodes (N stage), and the absence or presence of distant
metastasis (M stage). The TNM descriptions can be grouped together with stages labeled 0
through IV (0-4). The higher the number, the further the cancer has spread. The following
table summarizes the various stages of prostate cancer.

|         |                                   
|-------- | ----------------------------------
|Stages   | Characteristics of prostate cancer
|T1 or T2 | Localized in the prostate         
|T3 or T4 | Locally advanced                  
|N+ or M+ | Spread to pelvic lymph nodes (N+) 
|         | or distant organs (M+)            

Treatment Options

In
addition to seeding, localized prostate cancer is most commonly treated with radical
prostatectomy (RP), external beam radiation therapy (EBRT) which includes intensity
modulated radiation therapy (IMRT), cryosurgery, hormone therapy, watchful waiting, and
finasteride, a drug commonly prescribed to treat benign enlargement of the prostate and
male baldness. Some of these therapies may be combined in special cases to address a
specific cancer stage or patient need. For example, the TheraSeed® device has been
used in combination with EBRT to treat some locally advanced cases of prostate cancer.
When the cancerous tissue is not completely eliminated, the cancer typically returns to
the primary site, often with metastases to other areas. The following is a summary of
treatment options for prostate cancer other than seeding.

Radical
Prostatectomy is the most common surgical procedure. Radical Prostatectomy involves the
complete removal of the prostate gland and has been used for over 30 years in treating
early-stage, localized tumors. RP typically requires a three-day average hospital stay and
a lengthy recovery period (generally three to five weeks). Possible side effects include
impotence and incontinence. The cost of RP typically ranges from $19,000 to $25,000 per
procedure, excluding treatment for side effects and postoperative complications.

External
Beam Radiation Therapy involves directing a beam of radiation at the prostate gland from
outside the body to destroy tumorous tissue and has been a common technique for treating
many kinds of cancer since the 1950s. EBRT has typically been reserved for early-stage
prostate cancer in locally advanced cases where the patient is an inappropriate surgical
risk. Patients are usually treated five days per week in an outpatient center over a
period of six to seven weeks. Rectal complications resulting from damage to the rectal
wall caused by the radiation beam as it travels to the prostate are the most common side
effects. Other possible side effects also include incontinence and impotence, but these
side effects generally occur with less frequency than they do following RP. EBRT is
estimated to cost between $13,000 to $17,000 per patient.

Newer
forms of external beam radiation include three-dimensional conformal radiation therapy
(3DCRT), Intensity Modulated Radiation Therapy (IMRT) and conformal proton beam radiation.
Three-dimensional conformal radiation utilizes computerized mapping and a fitted plastic
body mold to keep the patient still so the radiation can be aimed more accurately at the
prostate. The objective of 3DCRT is to minimize the risk of damage to healthy tissue
caused by radiation. However, long-term results are needed to confirm this theory.
Intensity Modulated Radiation Therapy (IMRT) is an advanced form of 3D therapy. In
addition to aiming beams from several directions, the intensity (or strength) of the beams
can be adjusted to decrease the dose of radiation reaching the sensitive normal tissues
while delivering a uniformly high dose to the cancer. Conformal proton radiation therapy
uses a similar approach, but instead of using x-rays, this technique focuses proton beams
on the cancer. Protons typically cause little damage to tissues and may be able to deliver
more radiation to the prostate. While preliminary results are promising, proton beam
radiation is expensive and there are very few proton beam devices in the U.S. at this
time.

Cryosurgery
involves placing a small metal tool into the tumor and killing the cancer by freezing the
entire prostate. Patients usually remain in the hospital for one to two days. There will
be some bruising and soreness of the area where the probe was inserted. Side effects of
cryosurgery may include damage to nerves near the prostate that may cause impotence and
incontinence, damage to bladder and intestines, and a fistula (an abnormal opening)
between the rectum and bladder.

Ancillary
Therapies, primarily consisting of hormone therapy and chemotherapy, are used to slow the
growth of cancer and reduce tumor size, but are generally not intended to be curative.
Ancillary therapies are often used during advanced stages of the disease to extend life
and relieve symptoms. Side effects of hormonal drug therapy include increased development
of breasts, impotence and decreased libido. In addition, many hormone pharmaceuticals
artificially lower PSA levels in patients, which can interfere with staging the disease
and monitoring its progress. Side effects of chemotherapy include nausea, hair loss and
fatigue. Drug therapy and chemotherapy require long-term, repeated administration of
medication on an outpatient basis.

Watchful
Waiting is recommended by some physicians in certain circumstances based on the severity
and growth rate of the disease, as well as on the age and life expectancy of the patient.
The aim of watchful waiting is to monitor the patient, treat some of the attendant
symptoms and determine when more active intervention is required. Watchful waiting
requires periodic physician visits and PSA monitoring.

Finasteride.
          A trial study was recently completed to determine the efficacy of the drug
          finasteride. The drug inhibits male hormones called androgens that are known to
          be important in the growth of normal and cancerous prostate cells and may be
          important in the promotion of prostate cancer. The study, conducted on a total
          of 9,060 men, concluded that giving men the drug finasteride will lower their
          chance of developing prostate cancer by 25%. However, significant side effects
          were also reported from men taking finasteride; these included erectile
          dysfunction and reduced libido.

In
addition to the treatment options described above, other forms of treatment and prevention
may be developed and tested in clinical settings.

The Theragenics
Solution

Theragenics
produces TheraSeed®, an FDA-cleared device for treatment of all solid localized tumors
and currently used principally for the treatment of prostate cancer. In the prostate
application, TheraSeed® devices are implanted throughout the prostate gland in a
minimally invasive surgical technique, with transrectal ultrasound guidance. The radiation
emitted by the seeds is contained within the immediate prostate area for the purpose of
killing the tumor while attempting to spare surrounding organs of significant radiation
exposure. The seeds, whose capsules are biocompatible, remain in the prostate after
delivering their radiation dose. The TheraSeed® device is best suited for solid
localized tumors.

Management
believes the TheraSeed® device offers significant advantages over RP and EBRT. Recent
multi-year clinical studies indicate that seeding offers success rates for early-stage
prostate cancer that are comparable to or better than those of RP or EBRT and is
associated with reduced complication rates. In addition, the TheraSeed® treatment is a
one-time outpatient procedure with a typical two to three day recovery period. By
comparison, RP is an inpatient procedure typically accompanied by an average three day
hospital stay and a three to five week recovery period, and EBRT involves six to seven
weeks of daily radiation treatments. The Company estimates that treatment with the
TheraSeed® device generally costs $13,000 to $17,000 per procedure, which is lower
than the cost of RP and comparable to the cost of EBRT.

The
TheraSeed® device is a radioactive seed approximately 4.5 millimeters long
and 0.8 millimeters wide, or roughly the size of a grain of rice. Each seed consists of
biocompatible titanium that encapsulates the radioactive substance palladium-103. The
half-life of palladium-103, or the time required to reduce the emitted radiation to
one-half of its initial level, is 17 days. The half-life characteristics result in the
loss of almost all radioactivity in less than four months.

The
Company also offers the I-Seed device. This iodine-based device was acquired as part of
the purchase of the U.S. iodine-125 prostate brachytherapy business from BEBIG during
2003. While Management believes that palladium-103 continues to have certain advantages
over iodine-125, including (i) higher dose rates; (ii) a shorter half life, which shortens
the duration of some radiation induced side effects by two-thirds; and (iii) reduced
radiation exposure to medical personnel in treatment follow-up, the purchase of the iodine
product line enables the Company to compete more effectively for those direct customers
who prefer to buy both seeds from a single source. The non-exclusive distributors of the
Theraseed® device have no distribution rights for the I-Seed device.

Treatment Protocol

Prostate
cancer patients electing seed therapy first undergo a transrectal ultrasound test or CT
scan, which generates a two-dimensional image of the prostate. With the assistance of a
computer program, a three-dimensional treatment plan is created that calculates the number
and placement of the seeds required for the best possible distribution of radiation to the
prostate.

Once
the implant model has been constructed, the procedure is scheduled and the seeds are
ordered. The number of seeds implanted normally ranges from 50 to 150, with the number of
seeds varying with the size of the prostate. The procedure is usually performed under
local anesthesia in an outpatient setting. A transrectal ultrasound probe is first
positioned in the rectum to guide needle placement and seed location. Correct needle
placement is facilitated by a template, or grid, that covers the perineum (the area
between the scrotum and rectum through which the needles are inserted). This template is
attached to the transrectal ultrasound probe. Implant needles loaded with seeds are
assigned to the appropriate template holes as indicated in the treatment plan. Each needle
is guided through the template and then through the perineum to its predetermined position
within the prostate under direct transrectal ultrasound visualization. The seeds are
implanted as the needle is withdrawn from the prostate. When all seeds have been inserted,
seed placement is verified through a transrectal ultrasound image, CT scan, fluoroscope or
MRI. An experienced practitioner typically performs the procedure in approximately 45
minutes, with the patient often returning home the same day.

Seeding
has been used as a treatment for prostate cancer for more than 20 years. Twenty years ago,
seeds containing the radioactive isotope iodine-125 were implanted in prostate tumors
under open surgery. However, this technique fell into disfavor because the seeds were
often haphazardly arranged resulting in radiation not reaching all of the targeted
cancerous prostate tissue. Compounding this was the fact that often an unintended
radiation dose was delivered to healthy surrounding tissues, particularly the urethra and
rectum. Clinical results indicate that the computer modeling, advanced imaging and other
techniques used in seeding today have significantly ameliorated these drawbacks.

Clinical
Results

Strong
Efficacy Results. Clinical data indicates that seeding offers success rates for
early-stage prostate cancer treatment that are comparable to or better than those of
radical prostatectomy (RP) or external beam radiation therapy (EBRT). A number of
published studies on the use of seeding in the treatment of early-stage prostate cancer
have been very positive. A nine-year clinical study published in the March 2000 issue of
International Journal of Radiation Oncology, Biology and Physics, reported that 83.5% of
the patients treated with the TheraSeed® device were cancer-free at nine years. The
study was conducted by Dr. John Blasko of the Seattle Prostate Institute and included 230
patients with clinical stage T1 and T2 prostate cancer. Only 3% experienced cancer
recurrence in the prostate. Because of Dr. Blaskos extensive experience in the
treatment of cancer and brachytherapy, the Company retained him as a medical and cancer
advisor in 1998. In the June 2002 issue of Current Science, Inc., a study by Dr. Jerrold
Sharkey, Dr. Alan Cantor et al. compared the effectiveness of brachytherapy and radical
prostatectomy in 1,305 men with stage T1 and T2 prostate cancer. From 1993 to 2002, data
from the treated patients were reviewed and classified by initial PSA level and Gleason
scores. According to the publication, The results failed to show any superiority of
prostatectomy over brachytherapy with palladium-103 (the TheraSeed® device) with
respect to time until relapse indicated by PSA level increase. In fact, any differences
between treatments favor brachytherapy, particularly for intermediate and high-risk
groups.

Seeding
treatment in combination with EBRT has also recorded impressive results in the treatment
of higher risk prostate cancer patients. In their paper published for the Seminars in
Surgical Oncology 1997, Drs. Blasko, Ragde, Grimm, et al. presented an eight-year
actuarial local and distal disease-free rate of 91% and 83%, respectively for 231 patients
who were considered to represent higher risks of locally advanced prostate cancer and were
treated with a combination of palladium-103 or iodine-125 seeding and a modified dose of
EBRT. A study by Dr. Michael Dattoli of University Community Hospital, Tampa, Florida, and
Dr. Kent Wallner of Memorial Sloan-Kettering Cancer Center, New York, New York, published
in the International Journal of Radiation Oncology, Biology and Physics in July 1996 found
a three-year actuarial freedom from biochemical failure (based on PSA scores) of 79% among
73 patients with clinically localized, high risk prostate cancer who were treated with
EBRT in combination with palladium-103. This compares favorably to results reported for
patients treated with conventional dose EBRT alone. These locally advanced cases are
significant because typical RP protocols would not classify them as suitable for surgical
treatment.

Recent
results from a 10-year study conducted by Dr. Datolli and Dr. Wallner published in the
International Journal of Radiation Oncology, Biology and Physics in September 2002, were
presented at the October 2002 American Society of Therapeutic Radiology and Oncology
(ASTRO) conference confirming the effectiveness of the TheraSeed® device in patients
with aggressive cancer who previously were considered poor candidates for seeding. The
10-year study was comprised of 175 patients with Stage T2a-T3 prostate cancer treated from
1991 through 1995. Of these patients 79 percent remained completely free of cancer without
the use of hormonal therapy or chemotherapy.

Reduced
Incidence of Side Effects. Because the TheraSeed® device delivers a highly
concentrated and confined dose of radiation directly to the prostate, healthy surrounding
tissues and organs are typically spared excessive radiation exposure. This results in
fewer and less severe side effects and complications than may be incurred with other
conventional therapies. RP generally results in a 50% to 90% impotence rate and an
incidence rate as high as 65% for incontinence, and EBRT generally results in impotence
and incontinence rates of 40% to 60% and 8% to 18%, respectively. Conversely,
brachytherapy patients characteristically experience 5% to 15% erectile dysfunction while
there is close to zero incidence of incontinence according to Wessels, Arnold, and
Henderson Industry Data. According to a 1995 study by the Northwest Tumor Institute
described above, it was reported that 85% of seed therapy patients under 70 years of age
who were potent before the procedure remained so. In addition, patients who had not had a
previous transurethral prostate resection (TURP) suffered no incontinence. Patients having
a previous TURP have compromised urinary tracts and can experience higher rates of
incontinence. Patients receiving seeding can expect some urethral irritation and urinary
urgency post-implantation as the palladium-103 delivers its radiation dose.

A
five-year study, using either palladium-103 or iodine-125 seed devices, published in the
August 2001 edition ofInternational Journal of Radiation Oncology, Biology and Physics
promotes brachytherapy treatment for early-stage prostate cancer in men under 65 while
indicating lower incidence of side effects such as incontinence and impotence. According
to Dr. Gregory Merrick of Schiffler Cancer Center in Wheeling, West Virginia, the findings
from the study involving 76 patients ranging in ages between 48 and 62 years who received
seed implants between the period of 1995 to 1999 are encouraging because it shows
younger men that they can survive cancer with a significantly lower incidence of side
effects.

Doctors
Gregory S. Merrick, Kent E. Wallner and Wayne M. Butler, in their paper Permanent
Interstitial Brachytherapy for the Management of Carcinoma of the Prostate Gland,
published in the Journal of Urology in May 2003, summarized the permanent prostate
brachytherapy literature, including biochemical outcomes, quality of life parameters and
areas of controversy. The result of this study included the statement that Using
various planning and intraoperative techniques the majority of the brachytherapy
literature demonstrates durable biochemical outcomes for patients with low, intermediate
and high risk features. The paper concluded that continued refinements in
brachytherapy planning and implementation techniques, postimplantation evaluation and
continued elucidation of the etiology of urinary, bowel and sexual dysfunction should
result in further improvements in biochemical and quality of life outcomes.

Lower
Treatment Cost. The total one-time cost of seeding ranges from $13,000 to $17,000 per procedure.
This is approximately two-thirds the cost of RP, which ranges from $19,000 to $25,000,
excluding treatment for side effects and post-operative complications. Seeding cost is
comparable to the cost of EBRT, which ranges from $13,000 to $17,000 for a six-to-seven
week course of treatment.

Production

With
the exception of rhodium-103 (Rh-103), all raw materials used in the production of the
TheraSeed® and I-Seed devices are relatively inexpensive and readily available from
third party suppliers. Rhodium-103 is readily available on the open market.

Palladium-103
is a radioactive isotope that can be produced by neutron bombardment of palladium-102 in a
nuclear reactor, or by proton bombardment of Rh-103 in a cyclotron. Following the
production of palladium-103 from Rh-103 in the cyclotron, the palladium-103 is harvested
from the cyclotron and moved through a number of proprietary production processes until it
reaches its final seed form.

The
Company has produced palladium-103 using Company-owned cyclotrons since 1993. The Company
currently has fourteen cyclotrons in production, and has no current plans to purchase
additional cyclotrons. The Companys cyclotrons were designed, built, installed and
tested by a company specializing in the construction of such equipment.

Cyclotron
operations constitute only one component of the TheraSeed® device manufacturing
process. Because the production of the TheraSeed® device is highly sensitive and labor
intensive, Management has been focusing attention and effort on automating and otherwise
improving aspects of the Companys manufacturing process. Certain portions of the
Companys production processes were automated during the past six years. Through
automation, Management believes it can continue to improve efficiency, further reduce
radiation exposure to personnel and provide additional production capacity for the
TheraSeed® and I-Seed devices.

The
Company began production of the I-Seed product early in 2004. The automated production
equipment was acquired as part of the purchase of the U.S. iodine-125 prostate
brachytherapy business from BEBIG during 2003.

Since
1997, the Companys quality control system has been certified as meeting all the
requirements of the International Organization for Standards ISO 9001/EN46001
Quality System Standard.

The
Company constructed a facility in the Oak Ridge, Tennessee area to house the equipment,
infrastructure and work force necessary to support the production of isotopes, including
palladium-103, using unique plasma separation process (PSP) technology being leased from
the U.S. Department of Energy. PSP technology is a method of separating relatively large
quantities of specific non-radioactive isotopes from specific elements.  The PSP technology enables current and future
feasibility runs designed to validate isotope usage in various diverse markets and
industries. Although the PSP technology was initially acquired to allow for increased
manufacturing capacity of palladium-103, the technology may allow for expanded use of
palladium-103 or other isotopes in other applications.

Marketing

From
May 1997 until August 2000, Indigo Medical, Inc. (Indigo), a Johnson and Johnson Company,
held the exclusive worldwide rights to market and sell the TheraSeed® device for
prostate cancer under a Sales and Marketing Agreement with Theragenics (the
Agreement). Under the Agreement, Indigo had the responsibility for the
exclusive marketing and training related to the TheraSeed® device. In August 2000
Indigo exercised its option and gave notice of termination of the Agreement. As a result
of Indigos notice of termination, Theragenics regained the right to directly market
and distribute its TheraSeed® device for the treatment of prostate cancer to
physicians and third-party distributors. Subsequent to Indigos notice of
termination, the Company executed non-exclusive distribution agreements with four
companies for the distribution of the TheraSeed® device. The non-exclusive
distribution agreements for the distribution of the TheraSeed® device gave each
distributor the right to distribute the TheraSeed® device in the U.S., Canada and
Puerto Rico for the treatment of prostate cancer and other solid localized cancerous
tumors. Two of these non-exclusive agreements gave the distributors the option to
distribute the TheraSeed® device internationally.

Currently,
the Company has non-exclusive distribution agreements in place with two companies for the
distribution of the TheraSeed® device, a reduction from the four distributors in place
at the beginning of 2003. During 2003, one of the non-exclusive distributors of the
TheraSeed® device acquired two of the other three non-exclusive distributors of the
TheraSeed® device. Sales to the two existing and the two previous non-exclusive
distributors represented approximately 81% and 83% of product revenue for the years ended
December 31, 2003 and 2002, respectively, with sales to two of the four non-exclusive
distributors each exceeding 10% of total revenue for each year. Sales to the four
non-exclusive distributors represented approximately 66% of product revenue for the year
ended December 31, 2001 with sales to three of the four non-exclusive distributors each
exceeding 10% of total revenue for each year.

Beginning
in 2002, the Company engaged marketing and advertising specialists with experience in
healthcare and direct-to-consumer marketing, and expects direct-to-consumer activity to
continue during 2004. The Company also expects to continue other activities in an attempt
to support its brand name and increase demand for the TheraSeed® device, including
advertising to physicians, clinical studies aimed at showing the advantages of the
TheraSeed® device in the treatment of prostate cancer, technical field support to
TheraSeed® customers, and other customer service and patient information activities.
During 2002, a small direct sales force comprising brachytherapy specialists was formed to
promote and support the TheraSeed® brand. This sales force was expanded during 2003
and will continue to be increased during the first half of 2004.

Patents and Licenses;
Trade Secrets

The
Company holds eight United States patents directed to palladium and iodine delivery
devices for therapeutic uses and processes for making such devices. The Company also has
corresponding patents in Canada, South Africa, Japan and the countries of the European
Patent Convention, and a PCT patent application on file for Japan, Australia, New Zealand,
Canada, and Europe (representing 16 European countries) as well as a direct filing in
Mexico. The Company may file additional patent applications from time to time in
connection with its existing business and research and development activities. The Company
considers the ownership of patents important, but not necessarily essential, to its
operations. The Company also uses a strategy of confidentiality agreements and trade
secret treatment to provide primary protection to a number of proprietary design
modifications in the cyclotrons, as well as various production processes.

The
Company also holds a worldwide exclusive license from the University of Missouri for the
use of technology required for producing the TheraSphere® device. Theragenics
holds the rights to all improvements developed by the University of Missouri on this
technology. The Company, in turn, sublicenses exclusive worldwide rights to this
technology and all improvements to Nordion. Pursuant to its licensing agreement with the
University of Missouri, the Company is obligated to pay the University the greater of a
fixed annual amount or a percentage of the gross sales amount derived from sales of the
TheraSphere® device.

Theragenics
holds patents for technology concerning methods for delivery of the TheraSphere®
device in several countries, including the United States, Canada, Australia, Argentina,
South Africa and the countries of the European Patent Convention, and has patent
applications on file in other countries, including Japan. The Company exclusively licenses
this technology to Nordion for worldwide use.

The
Company also relies to a significant degree on trade secrets, proprietary know-how and
technological advances that are either not patentable or which the Company chooses not to
patent. In particular, the Company has designed certain modifications to its cyclotrons as
well as various production processes that it deems to be proprietary. The Company seeks to
protect non-patented proprietary information, in part, by confidentiality agreements with
suppliers, employees and consultants.

Seasonality

Although
effects from seasonality cannot be identified in relation to a specific quarter or
quarters, Management believes that holidays, major medical conventions and vacations taken
by physicians, patients and patients families, as well as general economic
conditions, may have a seasonal impact on sales for the TheraSeed® device.

Research and Development

Research
and development (R&D) expenses were $7.5 million, $6.5 million, and $2.7 million in
2003, 2002 and 2001, respectively. R&D expenses have related primarily to the
peripheral vascular and macular degeneration programs, as well as development efforts to
improve the Companys proprietary production processes (see Item 7 
 Managements Discussion and Analysis of Financial Condition and Results of
Operations, 2003 compared to 2002 and 2002 compared to 2001).

Competition

The
Company competes in a market characterized by technological innovation, extensive research
efforts and significant competition. In general, the TheraSeed® and I-Seed devices
compete with conventional methods of treating localized cancer, including, but not limited
to, radical prostatectomy (RP) and external beam radiation therapy (EBRT) which includes
intensity modulated radiation therapy (IMRT), as well as competing permanent devices. RP
currently represents the most common medical treatment for early-stage, localized prostate
cancer. EBRT is also a well-established method of treatment and is widely accepted for
patients who represent a poor surgical risk or whose prostate cancer has advanced beyond
the stage for which surgical treatment is indicated. Management believes that if general
conversion from these treatment options (or other established or conventional procedures)
to TheraSeed® treatment does occur, such conversion will likely be the result of a
combination of equivalent or better efficacy, reduced incidence of side effects and
complications, lower cost, other quality of life issues and pressure by health care
providers and patients.

Several
companies have obtained regulatory approval to produce and distribute palladium-103 and
iodine-125 seeds, which compete directly with the TheraSeed® and I-Seed devices.
Management believes that Theragenics has competitive advantages over these companies
including, but not limited to: (i) its proprietary production processes that have been
developed and patented; (ii) its record of reliability and safety in its manufacturing
operations; (iii) the time and resources required for competitors production
capabilities to ramp up to commercial production on a scale comparable to
Theragenics; (iv) outsourcing of the Companys cancer information center to
healthcare specialist, Telerx, a subsidiary of Merck Pharmaceutical and (v) its direct
sales force, as well as the non-exclusive distribution agreements that the Company
currently has in place, which allow it to leverage multiple distribution channels and
access multiple marketing approaches and philosophies.

At
any point in time, Management of Theragenics and/or its non-exclusive distributors
may change their respective pricing policies for the TheraSeed® device in order to
take advantage of market opportunities or respond to competitive situations. Responding to
market opportunities and competitive situations could have an adverse effect on the prices
of the TheraSeed® device and/or could have a favorable effect on market share and
volumes, while failure to do so could adversely affect market share and volumes although
per unit pricing could possibly be maintained.

In
addition to the competition from the procedures and companies noted above, many companies,
both public and private, are researching new and innovative methods of preventing and
treating cancer. In addition, many companies, including many large, well-known
pharmaceutical, medical device and chemical companies that have significant resources
available to them, are engaged in radiological pharmaceutical and device research. These
companies are located in the United States, Europe and throughout the world. Significant
developments by any of these companies could have a material adverse effect on the demand
for Theragenics products.

Government Regulation

The
Companys present and future intended activities in the development, manufacture and
sale of cancer therapy products are subject to extensive laws, regulations, regulatory
approvals and guidelines. Within the United States, the Companys therapeutic
radiological devices must comply with the U.S. Federal Food, Drug and Cosmetic Act, which
is enforced by the FDA. As a result of receiving its CE Mark during 1998, the Company must
also comply with the regulations of the Competent Authorities of the European Union for
any TheraSeed® device sold in the member nations of the European Union.

The
Company is also required to adhere to applicable FDA regulations for Good Manufacturing
Practices, including extensive record keeping and periodic inspections of manufacturing
facilities.

The
Company obtained FDA 510(k) clearance in 1986 to market the TheraSeed® device for, in
general, the treatment of localized solid tumors. A new 510(k) clearance would be required
for any modifications in the device or its labeling that could significantly affect the
safety or effectiveness of the original product.

The
Companys handling of radioactive materials is governed by the State of Georgia in
agreement with the Nuclear Regulatory Commission (NRC). The users of the TheraSeed®
device are also required to possess licenses issued either by the states in which they
reside or the NRC (depending upon the state involved and the production process used). The
Companys expansion plans required the Company to secure additional permits and
licenses from a number of environmental, health and safety regulatory agencies. To date,
the Company has not experienced delays in licensing any of its facilities or cyclotrons.

The
Company is required under its radioactive materials license to maintain radiation control
and radiation safety personnel, procedures, equipment and processes, and to monitor its
facilities and its employees and contractors. The Company is also required to provide
financial assurance that adequate funding will exist for end-of-life radiological
decommissioning of its cyclotrons and other radioactive areas of its property that contain
radioactive materials. The Companys decommissioning obligations will increase as its
production capacity is expanded. The Company is also subject to federal, state and local
regulations relating to the discharge of materials into the environment generally. During
2003, the Company became aware of the need for an Industrial Process Water Permit from the
city of Buford, Georgia. The Company has taken all the required steps to obtain this
permit and expects to obtain the permit during 2004.

The
Company disposes low-level radioactive waste to licensed commercial radioactive waste
treatment or disposal facilities for incineration or land disposal. The Company provides
training and monitoring of its personnel to facilitate the proper handling of all
materials.

The
U.S. Department of Energy has granted Theragenics access to unique DOE technology,
known as the PSP, for use in production of isotopes. U.S. Government Export Control Laws
and Regulations govern the exporting of certain products which can be produced in the PSP
and the exporting of technology associated with the PSP.

Employees

As
of December 31, 2003, the Company had 177 full time employees (including full time
temporary employees and executive personnel). Of this total, 135 were engaged in the
development and production of the Companys products. The remainder of the employees
were engaged in sales, marketing and general corporate activities. The Companys
employees are not represented by a union or a collective bargaining agreement, and
Management considers employee relations to be good.

Item 2.      Properties

The
Company owns two manufacturing facilities located in Buford, Georgia. One facility houses
cyclotrons, raw material processing, assembly and shipping operations. The second
facility, which is adjacent to the first facility, houses additional cyclotrons as well as
research and development activities of the Company. The Company also owns an
administrative facility adjacent to its production facilities in Buford.

The
Company owns approximately 30 acres in Buford Georgia on which its two manufacturing
facilities and administration facilities are located. Land remains available for future
development adjacent to its current Buford location. Management intends to use this land
for long term expansion of its manufacturing and support operations, if such expansion is
required.

The
Company leases 21 acres of land in the Oak Ridge, Tennessee area, on which it has
constructed a facility to house the equipment, infrastructure and workforce necessary to
support operations using technology leased from the U.S. Department of Energy (see Item 7
 Managements Discussion and Analysis of Financial Condition and Results
of Operations).

Item 3.      Legal Proceedings

| | In
January 1999, the Company and certain of its officers and directors were named as
defendants in certain securities actions alleging violations of the federal securities
laws, including Sections 10(b), 20(a) and Rule 10b-5 of the Securities and Exchange Act of
1934, as amended. These actions have been consolidated into a single action pending in the
U.S. District Court for the Northern District of Georgia. The complaint, as amended,
purports to represent a class of investors who purchased or sold securities during the
time period from January 29, 1998 to January 11, 1999. The amended complaint generally
alleges that the defendants made certain misrepresentations and omissions in connection
with the performance of the Company during the class period and seeks unspecified damages.
On May 14, 1999 a stockholder of the Company filed a derivative complaint in the Delaware
Court of Chancery purportedly on behalf of the Company, alleging that certain directors
breached their fiduciary duties by engaging in the conduct that is alleged in the
consolidated federal class action complaint. The derivative action has been stayed by the
agreement of the parties. On July 19, 2000, the Court granted the Companys motion to
dismiss the consolidated federal class action complaint for failure to state a claim
against the Company, and granted the plaintiffs leave to amend their complaint. On August
21, 2000, the plaintiffs filed a second amended complaint and on March 30, 2001, the Court
denied the defendants motion to dismiss the plaintiffs second amended
complaint. The Court also denied the Companys motion for reconsideration.
Subsequently, the Court certified the class and the parties commenced discovery. Discovery
in the case is now complete. The Company filed a motion for summary judgment on September
30, 2003 in which it asks the Court to find that there is no genuine issue as to any
material fact in the case, and therefore, the case must be dismissed. The plaintiffs have
filed a brief in opposition, and the motion is currently pending before the Court.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Management
continues to believe that these charges are without merit and is opposing the litigation
vigorously; however, given the nature and stage of the proceedings, the ultimate outcome
of the litigation cannot be determined at this time. Accordingly, no provision for any
liability that might result from this litigation has been made. The Company maintains
insurance for claims of this general nature.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | From
time to time the Company may be a party to claims that arise in the ordinary course of
business, none of which, in the view of Management, is expected to have a material adverse
effect on the consolidated financial position or results of operations of the Company.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Item 4.      
Submission of Matters to a Vote of Security Holders

The
Company did not submit any matter to a vote of its security holders during the fourth
quarter of calendar year 2003.

PART II

Item 5.     Market for Registrant's Common Equity and Related
              
    Stockholder Matters

The
Companys Common Stock, $.01 par value, (Common Stock) is traded on the New York
Stock Exchange (NYSE) under the symbol TGX. The high and low prices for the
Companys Common Stock as reported on the NYSE for each quarterly period in 2003 and
2002 are as follows:

|2003                                                                                              | High |  | Low
|------------------------------------------------------------------------------------------------- | ---- |  | ---
|First Quarter.................................................................................... |      |  | $4 
|Second Quarter...............................................................................     |      |  | 4  
|Third Quarter..................................................................................   |      |  | 6  
|Fourth Quarter................................................................................    |      |  | 6  

|2002                                                                                              |  | 
|------------------------------------------------------------------------------------------------- |  | 
|First Quarter.................................................................................... |  | 
|Second Quarter...............................................................................     |  | 
|Third Quarter..................................................................................   |  | 
|Fourth Quarter................................................................................    |  | 

As
of March 2, 2004, the closing price of the Companys Common Stock was $5.59 per
share. Also, as of that date, there were approximately 592 holders of record of the
Companys Common Stock. The number of record holders does not reflect the number of
beneficial owners of the Companys Common Stock for whom shares are held by
depositary trust companies, brokerage firms and others.

The
Company has a Stockholder Rights Plan (the Rights Plan), which contains
provisions designed to protect the Companys stockholders. Pursuant to the Rights
Plan, each share of the Companys Common Stock contains a share purchase right (a
Right). The Rights expire in February 2007, and do not become exercisable
unless certain events occur; including, the acquisition of, or commencement of a tender
offer for, 15% or more of the outstanding Common Stock. In the event certain triggering
events occur, including the acquisition of 20% or more of the outstanding Common Stock,
each Right that is not held by the 20% or more stockholders will entitle its holder to
purchase additional shares of Common Stock at a substantial discount to then current
market prices. The Rights Plan and the terms of the Rights, which are set forth in a
Rights Agreement between the Company and SunTrust Bank, Atlanta, as Rights Agent, could
add substantially to the cost of acquiring the Company, and consequently could delay or
prevent a change in control of the Company.

Dividend Policy

The
Company has never declared or paid a cash dividend on its Common Stock. It is the present
policy of the Board of Directors to retain all earnings to support operations and to
finance expansion. Consequently, the Board of Directors does not anticipate declaring or
paying cash dividends on the Common Stock in the foreseeable future. In addition, the
Companys current credit facility prohibits the payment of dividends.

Item 6.      Selected
Financial Data

The
selected financial data set forth below as of December 31, 2003 and 2002 and for each of
the three years in the period ended December 31, 2003, have been derived from the
financial statements of the Company included elsewhere herein, which have been audited by
Grant Thornton LLP, independent certified public accountants. The selected financial data
as of December 31, 2001, 2000 and 1999, and for each of the two years in the period ended
December 31, 2000, have been derived from the financial statements of the Company, which
have been audited by Grant Thornton LLP but are not included herein. The selected
financial data set forth below should be read in conjunction with the financial statements
of the Company and related notes thereto and Managements Discussion and
Analysis of Financial Condition and Results of Operations included elsewhere herein.

|                                                                           | Year Ended December 31,
|-------------------------------------------------------------------------- | -----------------------
|
|
|Product sales                                                              |                        
|Licensing fees                                                             |                        
|                                                                           |                        
|Total revenue                                                              |                        
|Cost of product sales                                                      |                        
|                                                                           |                        
|Gross profit                                                               |                        
|Selling, general and administrative                                        |                        
|Research and development                                                   |                        
|                                                                           |                        
|Operating profit (loss)                                                    |                        
|Other income (expense)                                                     |                        
|                                                                           |                        
|Net earnings (loss) before income tax and cumulative                       |                        
|effect of change in accounting principle                                   |                        
|Income tax expense (benefit)                                               |                        
|                                                                           |                        
|Earnings (loss) before cumulative effect of change in accounting principle |                        
|Cumulative effect of change in accounting principle                        |                        
|                                                                           |                        
|Net earnings (loss)                                                        |                        
|                                                                           |                        
|Earnings (loss) per common share                                           |                        
|Basic:                                                                     |                        
|Earnings (loss) before cumulative effect of change in accounting principle |                        
|Cumulative effect of change in accounting principle                        |                        
|                                                                           |                        
|Net earnings (loss)                                                        |                        
|                                                                           |                        
|Diluted:                                                                   |                        
|Earnings (loss) before cumulative effect of change in accounting principle |                        
|Cumulative effect of change in accounting principle                        |                        
|                                                                           |                        
|Net earnings (loss)                                                        |                        
|                                                                           |                        
|Weighted average common shares                                             |                        
|Basic                                                                      |                        
|Diluted                                                                    |                        

|                                               | December 31,
|---------------------------------------------- | ------------
|
|
|Cash and short-term investments                |             
|Marketable securities                          |             
|Property, plant and equipment, net             |             
|Total assets                                   |             
|Long-term debt, including current installments |             
|Shareholders' equity                           |             

THERAGENICS
CORPORATION®

Item 7.     Management's Discussion and Analysis of Financial Condition and
               Results of Operations

Overview

Theragenics Corporation® is the
manufacturer of TheraSeed®, a rice-sized, FDA-cleared device used to treat solid
localized tumors, primarily prostate cancer, with a one-time, minimally invasive
procedure. Theragenics is the worlds largest producer of palladium-103, the
radioactive isotope that supplies the therapeutic radiation for its TheraSeed® device.
Physicians, hospitals and other healthcare providers, primarily located in the United
States, utilize the TheraSeed® device. The TheraSeed® device has also been
approved for marketing throughout the member countries of the European Union by obtaining
its CE Mark. Sales of the TheraSeed® device in Europe have not been significant.
The majority of sales are channeled through third-party distributors. The Company also
sells its TheraSeed® devices directly to physicians.

Early in 2003 the Company diversified
its product line with the purchase of the U.S. iodine-125 prostate brachytherapy business
of BEBIG Isotopen-und Medizintechnik GmbH (BEBIG), formerly distributed by Isotope
Products Laboratories (both subsidiaries of a publicly traded German company, Eckert &
Ziegler AG). The purchase gives Theragenics exclusive U.S. manufacturing and
distribution rights to an FDA-cleared iodine-125-based medical device for the treatment of
prostate cancer. Theragenics began distribution of the iodine-125-based medical
device early in 2003, and subsequently began to produce I-Seed (the Theragenics
iodine-125-based medical device) early in 2004, utilizing the automated production
equipment procured in the business acquisition. The Company sells the I-Seed device
directly to physicians, hospitals and other healthcare providers. The non-exclusive
distributors of the TheraSeed® device have no distribution rights for the I-Seed
device. Non-exclusive rights to distribute the TheraSeed® device in Europe were
granted to BEBIG as part of the transaction. The Company believes that the ability to
provide both TheraSeed® and I-Seed devices will enhance the Companys ability to
market to direct customers who seek a single source for both palladium-103 and iodine-125
brachytherapy seeds. The product line and equipment purchase will not affect the
Companys existing non-exclusive distribution agreements for the TheraSeed®
device.

The Company constructed a facility in
the Oak Ridge, Tennessee area initially intended to expand the Companys production
capacity for palladium-103, using unique plasma separation process (PSP) technology being
leased from the U.S. Department of Energy (DOE). PSP technology is a method of separating
relatively large quantities of specific non-radioactive isotopes from specific elements.

In connection with the Companys
ongoing program targeted at diversifying its future revenue stream, the Company continues
to explore new applications for PSP technology. Among other things, the PSP technology
enables the Company to conduct feasibility runs designed to validate isotope usage in
various diverse markets and industries.

In July 2002 Theragenics agreed
to produce test quantities of certain gadolinium isotopes for purchase by an international
nuclear services company using the PSP technology. The gadolinium for the international
nuclear services company was intended for a non-medical application and was delivered
during the second quarter of 2003. The revenue, recognized in the second quarter of 2003,
was immaterial to total revenue and represents the end of work under this agreement.
Further, in 2003 the Company performed feasibility runs to validate the PSPs
capabilities to produce specific isotopes of certain elements in the rare earth group of
elements for UT-Battelle, LLC (Battelle), a partnership between the University of
Tennessee and Battelle, which manages the Oak Ridge National Laboratory for the U.S.
Department of Energy. These agreements, which are now completed, did not have a material
impact on revenue or earnings.

In addition to feasibility runs and
isotope production, the PSP is capable of supplying palladium raw material. PSP operations
are underway to enrich palladium-102 with the PSP to ensure ample supply of material. The
Companys palladium-103 material can be used either to support seed production or the
Companys ongoing research and development (R&D) initiatives. The Companys
diversification program includes the clinical trial that utilizes a palladium-103 device,
called the TheraSource® Intravascular Brachytherapy System, designed to prevent
restenosis or renarrowing of arteries following treatment of peripheral vascular disease
by percutaneous transluminal angioplasty.

Following the approval of the
Investigational Device Exemption granted by the U. S. Food and Drug Administration (FDA)
in August 2002 to initiate the TheraP clinical trial, Theragenics began a clinical
trial using a palladium-103 device (patent pending) early in 2003. The trial was initiated
at the Fuqua Heart Center at Piedmont Hospital and St. Josephs Hospital, both in
Atlanta. Two additional centers, Northeast Georgia Medical Center in Gainesville, Georgia
and Brigham & Womens Hospital in Boston, Massachusetts, signed on and opened
enrollment in the trial in the fourth quarter of 2003. To date, 19 patients have been
treated. Information and data gathered from the study will enable the Company to determine
the safety, feasibility and marketing capabilities of the device. Preliminary indications
from the study are encouraging, although the study is ongoing and conclusions cannot yet
be reached. The Company will continue to refine the device to go into areas of the
vasculature that may provide the most attractive market opportunities for the Company.

Additionally, an animal pilot study
using palladium-103 in a prototype device designed for the treatment of age-related
macular degeneration (AMD), a disease that leads to loss of eyesight and in some cases
complete blindness, was completed early in 2002. Progress has been made in the development
of a marketable device for the treatment of AMD. A patent is pending for the
TheraSight device and the Company is analyzing various differing trial designs,
while mindful of the emerging potential competition in this market. Plans continue toward
commencement of a human clinical safety trial of the TheraSight device possibly in
2004. The increases in research and development expenditures may continue as these
initiatives are pursued.

The Company has also identified
potential opportunities, utilizing its cyclotrons, for production of radiochemical
products, which are typically used in medical nuclear imaging procedures. Although this
opportunity is in an early stage, the Company may devote additional resources to this
project in 2004 with a view to developing future new products, although they could, if
pursued, increase research and development expenses. However, any such radiochemical
product sale is not expected to have a material impact on revenue in 2004.

The Company is also searching for,
reviewing and evaluating external opportunities for diversification in the form of joint
ventures, partnerships, and/or acquisitions of technologies, products and companies.

Results of Operations

Year Ended December 31,
2003, Compared to Year Ended December 31, 2002

Revenues were $35.6 million in 2003
compared to $41.9 million in 2002, a decrease of $6.3 million, or 15.0%. The decline in
revenue was primarily due to a 17% decrease in unit sales of the TheraSeed® device.
TheraSeed® sales direct to customers and to third party distributors remained
comparable as a percentage of total TheraSeed® sales in 2003 and 2002. Although the
average selling price of TheraSeed® remained steady in 2003 when compared to 2002, the
overall decrease in revenues is the direct result of the decrease in total unit sales,
both direct and to third-party distributors.

Currently, the Company has
non-exclusive distribution agreements in place with two companies for the distribution of
the TheraSeed® device, a reduction from the four distributors in place at the
beginning of 2003. During 2003, one of the non-exclusive distributors of the
TheraSeed® device acquired two of the other three non-exclusive distributors of the
TheraSeed® device. Sales to this acquiring distributor, combined
with sales to the distributors it acquired, decreased approximately 24% in 2003 as
compared to 2002.

The Company believes that the
decrease in unit sales throughout the year was a combination of several factors including
disappointing sales by the Companys non-exclusive distribution partners;
consolidation and ownership changes in the brachytherapy market; continued deep
discounting in the market by many competitors, including iodine seeds throughout the year
and palladium seeds in the latter part of the year; and uncertainty related to changing
rules for Medicare reimbursement (see Medicare Developments below).

The Company diversified its product
line in 2003 with the introduction of I-Seed, an iodine-based brachytherapy device (see
Overview above). The Company believes the ability to provide both devices,
i.e., TheraSeed® and I-Seed, will allow access to direct customers otherwise not
available. I-Seed sales represented approximately 4% of total brachytherapy product sales
during 2003. The non-exclusive distributors of the TheraSeed® device have no
distribution rights for the I-Seed device.

The Companys licensing fees
revenue represents licensing payments received for the Companys TheraSphere®
technology. Such licensing fees are not expected to become material in the foreseeable
future.

At any point in time,
Theragenics and/or its non-exclusive distributors may change their respective
pricing policies for the TheraSeed® device in order to take advantage of market
opportunities or to respond to competitive situations. Responding to market opportunities
and competitive situations could have an adverse effect on the prices of the
TheraSeed® device and could have a favorable effect or prevent an unfavorable effect
on market share and volumes. Failure to respond to market opportunities and competitive
situations in order to maintain per unit pricing could adversely affect current or
potential market share and volumes and/or result in a decrease in margins.

Cost of sales was $15.6 million
during 2003 compared to $14.7 million in 2002. Gross profit was approximately 56.1% of
revenue in 2003, compared to 64.9% in 2002. The decrease in gross profit percentage in
2003 compared to 2002 was largely due to the considerable fixed cost component of
Theragenics operations, partially offset by the transfer of material and
resources to support research and development initiatives and the completion of
depreciation, early in 2003, of the first cyclotron placed in service. Approximately $3.6
million of operating expenses related to the PSP facility, including approximately $1.2
million of depreciation, were recognized in cost of sales during 2003 compared to $2.0
million during the second half of 2002. In addition, as a result of the purchase of the
U.S. iodine-125 prostate brachytherapy business of BEBIG early in 2003 (see
Overview above), approximately $860,000 of operating expenses were included in
cost of sales during 2003 for direct costs related to the I-Seed device. The I-Seed
production line at the Companys Buford facility became operational early in 2004. As
a result, depreciation and costs incurred to support this production line will be included
in cost of sales during 2004.

Selling, general and administrative
(SG&A) expenses were $13.8 million in 2003, compared to $12.8 million in 2002, an
increase of $1.0 million, or 7.8%. The increase in 2003, compared to 2002, was due
primarily to an increase in headcount and expenses associated with the direct sales force
as a result of hiring brachytherapy specialists to promote the TheraSeed® brand.
SG&A expenses were also higher during 2003 as a result of outsourcing the
Companys cancer information center to healthcare specialist, Telerx, a subsidiary of
Merck Pharmaceutical, and a significant increase in Directors and Officers liability
insurance premiums. These increases were partially offset by a reduction in the start-up
expenses related to the PSP facility, which became operational in the second half of 2002.
(see Overview above and Liquidity and Capital Resources below).

R&D expenses increased to $7.5
million, or 21.0% of revenue in 2003, from $6.5 million, or 15.6% of revenue in 2002. The
increase in R&D expenses in 2003 was a result of the Companys diversification
initiatives geared to expand the application of palladium-103 to other oncological and
non-oncological uses, and to explore options for using the Companys expertise and
capabilities in other areas. The bulk of these expenses were associated with the
Companys peripheral vascular and macular degeneration programs (see
Overview above).

Other income, primarily comprising
interest income, was $894,000 in 2003 compared to $897,000 in 2002. The Companys
investments consist primarily of short-term cash investments and high-credit quality
municipal obligations, in accordance with the Companys investment policies. Funds
available for investment have been and will continue to be utilized for the Companys
current and future expansion programs and R&D activities, and may be used for the
acquisition of technologies, products or companies consistent with the goals of
Theragenics. As funds continue to be used for these programs and activities, and as
interest rates continue to change, Management expects other income to fluctuate
accordingly.

The Companys effective income
tax rate was a benefit of 78% in 2003, primarily due to permanent differences related to
tax-exempt interest income on municipal and government securities, compared to an expense
of 36% in 2002. The Companys income tax rate in each period differed from statutory
rates primarily due to the recognition of tax credits generated by the Companys
investments in its expansion projects, research activities, and tax-exempt interest
income.

Year Ended December 31,
2002, Compared to Year Ended December 31, 2001

Revenues were $41.9 million in 2002
compared to $50.0 million in 2001, a decrease of $8.1 million, or 16.3%. During 2002, unit
sales of the TheraSeed® device decreased approximately 13%, while unit sales directly
to customers decreased to 13% of total unit sales in 2002 from approximately 26% in 2001.
The average selling price of the TheraSeed® device decreased from 2001 to 2002, which
contributed to the overall decrease in revenues because direct-to-consumer sales are made
at higher prices than sales to third-party distributors. The Company believes that the
decrease in unit sales throughout the year was a combination of several factors including
disappointing sales by the Companys non-exclusive distribution partners and
uncertainty related to changing rules for Medicare reimbursement (see Medicare
Developments below).

The change in the distribution mix,
which led to a decrease in the average selling price, was a result of several factors
beginning with the termination of the distribution agreement with Indigo Medical Inc.
(Indigo), a Johnson and Johnson Company, in January 2001. After the termination of the
agreement, Theragenics increased its number of direct sales and began sales through
other non-exclusive distributors. However, Theragenics sold to a significant number
of former Indigo customers while publicly stating that it expected its share of direct
TheraSeed® device sales to decline as its other non-exclusive distributors began to
market aggressively to the former Indigo customers. The percentage of direct-to-customer
sales for Theragenics declined from 2001 as the non-exclusive distributors began
aggressively marketing to former Indigo customers.

The Companys licensing fees
revenue represents licensing payments received for the Companys TheraSphere®
technology.

Cost of sales was $14.7 million
during 2002 compared to $14.6 million in 2001. Gross profit was 64.9% of revenue in 2002,
compared to 70.7% in 2001. The decrease in gross profit percentage in 2002 compared to
2001 was largely due to the considerable fixed cost component of Theragenics
operations, partially offset by the transfer of material and resources to support research
and development initiatives. In addition, the PSP facility commenced operations in the
second half of 2002 and the related operating expenses were included in cost of sales,
including approximately $500,000 of depreciation.

Selling, general and administrative
(SG&A) expenses were $12.8 million in 2002, compared to $10.4 million in 2001, an
increase of $2.4 million, or 22.9%. This increase was primarily due to an increase in
general advertising of approximately $2.5 million in 2002 compared to 2001. Additionally,
Theragenics incurred higher expenses from increased premiums related to insurance
coverage, primarily for Directors and Officers liability insurance when policies were
renewed late in 2002. These increases were partially offset by a decrease in consulting
costs compared to 2001.

R&D
expenses increased to $6.5 million, or 15.6% of revenue in 2002, from $2.7 million, or
5.3% of revenue in 2001. The Companys research and development initiatives are
intended to expand the application of palladium-103 to other oncological and
non-oncological uses, and to explore options for using the Companys expertise and
capabilities in other areas. The Companys R&D initiatives during 2002 and 2001
were related primarily to peripheral vascular and age-related macular degeneration
programs. During 2002 Theragenics was granted an Investigational Device Exemption
from the U.S. Food and Drug Administration to initiate its TheraP (TheraSource®
palladium-103 for the prevention of restenosis) clinical trial.

Other
income, primarily comprising interest income, was $897,000 in 2002 compared to $1.4
million in 2001. The Companys investments consist primarily of short-term cash
investments and high-credit quality municipal obligations, in accordance with the
Companys investment policies. While additional funds were available for investment
during 2002, the interest rate environment during 2002 reduced the effective returns on a
significant portion of the Companys investments. Funds available for investment have
been and will continue to be utilized for the Companys current and future expansion
programs and R&D activities, and may be used for the acquisition of technologies,
products or companies consistent with the goals of Theragenics. As funds continue to
be used for these programs and activities, and as interest rates continue to change,
Management expects other income to fluctuate accordingly.

The Companys effective income
tax rate was approximately 36% for both 2002 and 2001. The Companys income tax rate
in each period was lower than statutory rates primarily due to the recognition of tax
credits generated by the Companys investments in its expansion projects, research
activities, and tax-exempt interest income.

Critical Accounting
Policies

The financial statements of
Theragenics Corporation® are prepared in conformity with accounting principles
generally accepted in the United States of America. Management is required to make certain
estimates, judgments and assumptions that we believe are reasonable based upon the
information available. These estimates and assumptions affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the periods presented. The significant accounting policies
which we believe are the most critical to aid in fully understanding and evaluating our
reported financial results include the following:

Property, plant, equipment and
goodwill. Property, plant and equipment are recorded at cost and depreciated on a
straight-line basis over the estimated useful lives of such assets. The Companys
estimates can result in differences from the actual useful lives of certain assets. The
Company currently owns and operates 14 cyclotrons, the first of which entered service in
1993. Each of the Companys cyclotrons is depreciated using an estimated 10-year
life. Managements estimate of the useful life of these cyclotrons is based on the
Companys experience to date with these cyclotrons. Based on experience gained
relative to the operation, refurbishment, and maintenance of the cyclotrons, Management
believes there is a substantive basis for the current depreciable lives of the cyclotrons.
Although the older cyclotrons require increased maintenance, all the cyclotrons remain in
service, including fully depreciated cyclotrons because the material produced by each
machine is required for ongoing operations and the Companys current research and
development initiatives.

The PSP equipment was placed in
service during the second half of 2002 and is depreciated using an estimated 15-year life.
The PSP equipment utilizes specialized, unique technology.

Early in 2003 the Company entered
into an agreement to purchase the brachytherapy business of BEBIG Isotopen-und
Medizintechnik GmbH (BEBIG), a subsidiary company of Eckert & Ziegler AG. A total of
approximately $5.3 million in progress payments and professional fees had been paid
through December 31, 2003. An additional payment in the amount of $1.0 million was made
subsequent to year-end 2003. The payments made through December 31, 2003 were allocated
between the market value of the assets in the amount of $3.7 million and $1.6 million to
goodwill. The equipment became operational in 2004. The Company has determined that the
production line will be amortized over a fifteen-year life.

In accordance with Statement of
Financial Accounting Standards No. 142 (SFAS 142), Goodwill
and Other Intangible Assets, goodwill and intangible assets with indefinite lives
are annually evaluated for impairment. The Company will review the recoverability of the
carrying value of identified intangibles and other long-lived assets on an annual basis or
whenever events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Recoverability of these assets is determined based upon the
forecast of discounted future net cash flows from the operations to which the assets
relate, utilizing our best estimates, appropriate assumptions and projections at the time.
These projected future cash flows may vary significantly over time as a result of
increased competition, changes in technology, fluctuations in demand, consolidation of our
customers and reductions in average selling prices. If the carrying value is determined
not to be recoverable from future operating cash flows, the asset is deemed impaired and
an impairment loss is recognized to the extent the carrying value exceeds the estimated
fair market value of the asset. Intangible assets with definite lives are being amortized
and this amortization is included in the accompanying Statements of Operations.

Management will continue to
periodically examine estimates used for depreciation for reasonableness. If the Company
should determine that the useful life of property, plant or equipment should be shortened
or lengthened, depreciation expense would be adjusted accordingly for the remaining useful
life (lives) of the identified asset(s).

Allowance for doubtful accounts.
Management judgments and estimates are made and used in connection with establishing an
allowance for the possibility that portions of our accounts receivable balances may become
uncollectable. Accounts receivable are reduced by this allowance. Specifically, Management
analyzes accounts receivable in relation to current economic trends and changes in our
customer payment history in establishing this allowance. Approximately $135,000 was
recognized as uncollectable in 2003. The accounts receivable balance, net of the provision
for trade accounts receivables allowance of $118,000, was approximately $3.8 million as of
December 31, 2003.

Commitments and Other
Contractual Obligations Operating Leases

The principle commitments of the
Company include land leases, rental space and office equipment under operating,
non-cancelable leases that expire at various dates through April 2029, and asset purchase
obligations. Approximate minimum payments of these obligations are as follows:

|Obligation               | Payments due by period
|------------------------ | ----------------------
|
|Land lease (1)           |                       
|Equipment and automobile |                       
|Purchase obligations (2) |                       
|                         |                       
|Total                    |                       
|                         |                       
|                         |                       

|(1) |  | Land lease payments are subject to adjustments for increases in the Consumer
                    Price Index, January 1, 2005 and every five years thereafter.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | The Company had one remaining payment obligation of $1.0 million in connection
                    with the iodine-based product line purchase from BEBIG at December 31, 2003. All
                    payment obligations in connection with the business acquisition were completed
                    after year-end.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
December 2003 the Company entered into an asset purchase agreement with a contractor for
the design and manufacture of certain equipment. The capital asset purchase agreement in
the amount of $1.2 million is expected to be completed in late 2004. At year-end 2003,
progress payments in the amount of approximately $400,000 had been paid in relation to the
purchase agreement.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Guarantees Under Letters
of Credit

The Company has issued standby
letters of credit from time to time as security for certain liabilities. At December 31,
2003, total outstanding letters of credit, under the Credit Agreement, approximated
$933,000. These letters of credit are related to asset retirement liabilities of
long-lived assets, as well as a utility deposit to the City of Oak Ridge.

Liquidity and Capital
Resources

The Company had cash, short-term
investments and marketable securities of $66.4 million at December 31, 2003, compared to
$68.3 million at December 31, 2002. Marketable securities consist primarily of short-term
cash investments and high-credit quality municipal obligations, in accordance with the
Companys investment policy. Working capital was $74.0 million at December 31, 2003,
compared to $74.7 million at December 31, 2002. The Company also has a Credit Agreement
with a financial institution that provides for revolving borrowings of up to $40.0
million, including a $5.0 million sub-limit for letters of credit, through a credit
facility with a three-year term. No borrowings were outstanding under the Credit Agreement
as of December 31, 2003. Letters of credit totaling $933,000 were outstanding under the
Credit Agreement as of December 31, 2003. These letters of credit represent decommission
funding required by the Georgia Department of Natural Resources and a utility deposit to
the City of Oak Ridge, Tennessee in connection with the PSP facility.

Cash generated by operations was $5.4
million and $15.3 million in 2003 and 2002, respectively. Cash generated from operations
consists of net earnings (loss) plus non-cash expenses such as depreciation, amortization,
deferred income tax expense and changes in balance sheet items such as accounts
receivable, inventories, prepaid expenses and payables. The decrease in cash generated by
operations during 2003 is due primarily to the net loss of $312,000 during 2003 compared
to net income of $5.6 million during 2002. Depreciation and amortization increased to
approximately $6.6 million in 2003 from $6.3 million in 2002, largely due to the
depreciation of the building and equipment placed in service at the Oak Ridge facility
during the latter half of 2002. The increase in depreciation and amortization contributed
by the Oak Ridge facility and equipment was partially offset by the completion of the
depreciable life of one cyclotron mid-way through the first quarter of 2003. Inventories
increased approximately $790,000 during 2003 primarily due to a purchase of palladium
metal at a cost of approximately $500,000 to support ongoing and future R&D
initiatives (see Overview and Results of Operations above). The
raw material, purchased from a U.S. mining company, is being processed using PSP
technology housed in the Oak Ridge facility. Inventory also increased in 2003 as raw
material, components and shipping supplies inventory increased to accommodate the I-Seed
product line. Prepaid expenses and other current assets increased as payments representing
repairs and spare parts for cyclotrons and equipment increased in 2003 compared to the
same period in 2002.

Cash used in investing activities
totaled $17.2 million and $4.6 million during 2003 and 2002, respectively. This spending
related primarily to purchases of marketable securities according to the Companys
investment policy. Also, the Companys purchase of the U.S. iodine-125 prostate
brachytherapy business of BEBIG (see Overview above) contributed to capital
spending in 2003. The Company procured an automated production line as part of the
agreement that became operational early in 2004. All progress payments, representing
completion of pre-defined milestones, have been made to BEBIG. A total of approximately
$5.3 million in progress payments and capitalized professional fees were paid through
December 31, 2003. The progress payments were allocated to the fair value of the product
line and goodwill in the amount of approximately $3.7 million and $1.6 million,
respectively. The additional progress payment in the amount of $1.0 million, paid in 2004,
will be recognized as goodwill.

The Company expects that R&D
spending will continue at the current level or will increase (see Results of
Operations, above). Routine capital expenditures and the purchase of the equipment
and facility renovations related to the iodine-125 line, totaled approximately $8.1
million during 2003. Cash was also used in 2003 for increased marketing and TheraSeed®
support activities (see Results of Operations above), and in the pursuit of
diversification efforts, including, but not limited to, ongoing work in peripheral
vascular and macular degeneration programs. The Company expects that spending will
continue in the pursuit of diversification efforts discussed above as well as,
potentially, the purchase of technologies, products or companies.

Cash provided by financing activities
was $505,000 and $307,000 in 2003 and 2002, respectively, consisting of cash proceeds from
the exercise of stock options and the Companys Employee Stock Purchase Plan.

The Company believes that current
cash and investment balances, cash from future operations and credit facilities, will be
sufficient to meet its currently anticipated working capital and capital expenditure
requirements. In the event additional financing becomes necessary, Management may choose
to raise those funds through other means of financing, as appropriate.

During the fourth quarter of 2003,
the Company executed a Credit Agreement with a financial institution. The Credit
Agreement, which expires October 29, 2006 (subject to earlier termination by the lender
upon the occurrence of certain events of default), provides for revolving borrowings of up
to $40.0 million at any time outstanding, including a $5.0 million sub-limit for letters
of credit. Interest on outstanding borrowings is payable at the rate of interest
periodically designated by the financial institution as its base rate, or, at the option
of the Company, interest may accrue at a LIBOR based rate, plus an applicable margin which
is subject to quarterly adjustment. Interest on base rate loans is payable monthly, while
interest on LIBOR loans is payable on the last day of the applicable one, two or three
month interest period. As of December 31, 2003 no borrowings were outstanding under the
Credit Agreement. We have issued standby letters of credit from time to time as security
for certain liabilities. At December 31, 2003, total outstanding letters of credit, under
the Credit Agreement, approximated $933,000. These letters of credit are related to asset
retirement liabilities of long-lived assets, as well as a utility deposit to the City of
Oak Ridge.

The Credit Agreement is unsecured,
but provides for a springing lien to be established on substantially all of
the assets of the Company (subject to certain exceptions) in the event certain events of
default occur under the Credit Agreement. The Credit Agreement contains representations
and warranties, as well as affirmative, reporting and negative covenants, customary for
financings of this type. Among other things, certain provisions of the Credit Agreement
limit the incurrence of additional debt and require the maintenance of certain financial
ratios.

The Credit Agreement replaced the
August 1999 unsecured credit agreement with the Companys previous lender, which
would have expired on October 31, 2003. The prior unsecured credit agreement provided
for a $40.0 million revolving loan and letter of credit commitment, and an additional
uncommitted $10.0 million line of credit.

Medicare Developments

Previously, Theragenics
TheraSeed® device and other brachytherapy seeds fell within various transitional
pass-through codes, which were separate from the procedure payment codes that
comprise much of Medicares Outpatient Prospective Payment System (OPPS). On April 1,
2002, the Centers for Medicare and Medicaid Services (CMS) implemented changes in hospital
payments for brachytherapy and other services provided under Medicares OPPS for the
remainder of 2002. Through December 31, 2002, CMS bundled a portion of pass-through
reimbursement for all brachytherapy seeds and other devices with the associated procedure
codes, thereby effectively sheltering seeds from pro rata reductions that
would otherwise have applied under Medicare Law. To the extent that these pass-through
device costs exceeded the bundled amount, the remaining cost was subject to a 63.6%
pro-rated reduction in reimbursement.

During 2003, CMS further revised its
policies by bundling the costs of the prostate brachytherapy procedure, as well as the
costs for catheters, needles and all seeds, into two new codes for prostate brachytherapy
(one for palladium-103 and one for iodine-125). By creating two codes and setting separate
reimbursement amounts for palladium-103 seed brachytherapy (including the TheraSeed®
device) and iodine-125 seed brachytherapy (including the I-Seed device), CMS made an
important, positive change in its final rule for 2003 compared to its initial proposal
published on August 9, 2002. Specifically, the per-patient reimbursement amount under
the 2003 final rule for palladium-103 prostate brachytherapy exceeded the original payment
amount proposed in August 2002 for both palladium-103 and iodine-125. The final 2003
per-patient amount for palladium-103 prostate brachytherapy also exceeded the 2003 payment
amount for iodine-125 prostate brachytherapy. To the extent that the brachytherapy costs
for an individual patient exceeded the bundled payment amount during 2003, the remaining
costs could not be submitted for additional reimbursement.

On December 8, 2003, the President
signed new Medicare legislation into law that provides for improved reimbursement and
coding policies in 2004 and beyond for brachytherapy seeds/sources under Medicares
OPPS. To reflect the changes in the statute, CMS revised its November 7, 2003 final rule
by publishing a new interim final rule for 2004 on January 6, 2004.

The brachytherapy provisions in the
new legislation, which went into effect on January 1, 2004, require Medicare to unbundle
the cost of the seeds from the costs of the brachytherapy procedure, catheters and needles
under the OPPS. More specifically, the new legislation requires Medicare to reimburse
hospitals for each brachytherapy seed/source furnished between January 1, 2004 to December
31, 2006 based on the hospitals costs for each patient (calculated from the
hospitals charges adjusted by the hospitals specific cost-to-charge ratio).
This means that hospital reimbursement is no longer limited to or dictated by the
reimbursement amounts assigned to the brachytherapy codes, which CMS used in 2003.

With respect
to coding, the legislation requires the Medicare program to create and use coding that classifies
brachytherapy seeds/sources separately from all the other services and items reimbursed
under the OPPS. These separate codes for brachytherapy seeds/sources must be used in a
manner that reflects the type of radioactive isotope (for example, palladium-103), the
radioactive intensity and the number of brachytherapy seeds/sources used to treat each
patient.

Depending on the number of seeds
needed to treat each prostate patient, the total reimbursement (for the combination of the
unbundled procedure codes and seeds) for the payment methodology in place until at least
December 31, 2006 may be higher than the 2003 bundled payment amounts. The legislation
enacted in 2003 also directs the U.S. General Accounting Office (GAO) to conduct a study
examining future payment policies for brachytherapy seeds.

The Company believes its efforts in
assisting policymakers in formulating and revising Medicare policies to recognize the
unique aspects of classification and reimbursement that apply to brachytherapy devices
such as TheraSeed® were pivotal to the enactment of this new, improved Medicare
legislation for brachytherapy seeds/sources. The Company plans to continue working to
assist policymakers regarding these important issues in the future.

The Company believes that the
significant number of proposed and actual changes in Medicare coding and reimbursement
policy in the years preceding and during 2003, created confusion for hospitals and
doctors, which may have had a detrimental impact on sales in 2003 (see Results of
Operations above). In addition, due to the fact that the Medicare rules governing
coding of brachytherapy seeds/sources have undergone significant change during the past
few years, the Company believes that Medicare reimbursement may continue to create
confusion for hospitals and doctors going forward. In that regard, Management continues to
closely monitor any effects of the reimbursement structure on the brachytherapy market as
it continues to evaluate pricing, marketing and distribution strategies. The Company
continues to engage a consulting firm specializing in reimbursement practices to help
communicate brachytherapy reimbursement guidelines to customers.

Forward Looking and
Cautionary Statements

This document contains certain
forward-looking statements within the meaning of the Private Securities Litigation Reform
Act of 1995 including, without limitation, statements regarding sales, marketing and
distribution efforts, the Companys direct sales organization, including, but not
limited to, its growth and effectiveness, third-party reimbursement, CMS policy, sales
mix, effectiveness of non-exclusive distribution agreements, pricing for the
TheraSeed® and I-Seed devices, future cost of sales, R&D efforts and expenses,
inventory investment, SG&A expenses, other income, timing and ultimate outcome of the
Companys activities in peripheral vascular and macular degeneration programs and
other diversification efforts, potential new products and opportunities, the PSP-related
operations, the development of new markets and technologies, the capabilities of the PSP
to produce enriched isotopes, opportunities for isotopes produced by Theragenics,
including, but not limited to, radiochemical products, the identification and development
of new markets and applications for isotopes, Theragenics plans and strategies
for diversification, and the sufficiency of the Companys liquidity and capital
resources. From time to time, the Company may also make other forward-looking statements
relating to such matters as well as statements relating to anticipated financial
performance, business prospects, technological developments, other research and
development activities and similar matters. These forward-looking statements are subject
to certain risks, uncertainties and other factors which could cause actual results to
differ materially from those anticipated, including risks associated with research and
development activities, including animal studies and clinical trials related to new
products, risks associated with new product development cycles, effectiveness and
execution of marketing and sales programs of Theragenics and its non-exclusive
distributors, risks associated with customer distribution concentration and consolidation
among non-exclusive distributors, potential costs and delays in capacity expansion and
start-up, potential costs and delays in PSP-related operations, the iodine-125 product
line, potential changes in product pricing and competitive conditions, continued
acceptance of TheraSeed® or the I-Seed devices by the market, management of growth,
acceptance and efficacy of palladium-103 for other applications, adverse changes in
governmental program priorities and budgetary funding by the relevant governmental
authorities, continuing access to unique DOE technology, government regulation of the
therapeutic radiological pharmaceutical and device business, potential changes in
third-party reimbursement, risks associated with market development activities, inability
of the PSP to produce isotopes suited for a particular application, potential inability to
produce selected isotopes at costs competitive to other options, risks associated with
governmental regulations and related export controls and security requirements for PSP
technology and products. All forward looking statements and cautionary statements included
in this document are made as of the date hereby based on information available to the
Company as of the date hereof, and the Company assumes no obligation to update any forward
looking statement or cautionary statement.

Quarterly Results

The following table sets forth
certain statement of operations data for each of the Companys last eight quarters.
This unaudited quarterly information has been prepared on the same basis as the annual
audited information presented elsewhere in this Form 10-K, reflects all adjustments
(consisting only of normal, recurring adjustments) which are, in Managements
opinion, necessary for a fair presentation of the information for the periods covered and
should be read in conjunction with the financial statements and notes thereto. The
operating results for any quarter are not necessarily indicative of results for any future
period. Quarterly data presented may not reconcile to totals or full year results due to
rounding.

|                                    | 2003 | 2002
|----------------------------------- | ---- | ----
|
|
|Total revenues                      |      |     
|Cost of product sales               |      |     
|                                    |      |     
|Gross profit                        |      |     
|Selling, general and administrative |      |     
|Research and development            |      |     
|                                    |      |     
|Other income                        |      |     
|                                    |      |     
|Net earnings (loss) before          |      |     
|income taxes and cumulative         |      |     
|effect of change in accounting      |      |     
|principle                           |      |     
|Income tax expense (benefit)        |      |     
|                                    |      |     
|Net earnings (loss) before          |      |     
|cumulative effect of change in      |      |     
|accounting principle                |      |     
|Cumulative effect of change in      |      |     
|accounting principle                |      |     
|                                    |      |     
|Net earnings (loss)                 |      |     
|                                    |      |     
|Earnings per common share:          |      |     
|Basic                               |      |     
|Net earnings (loss) before          |      |     
|cumulative effect of change in      |      |     
|accounting principle                |      |     
|Cumulative effect of change in      |      |     
|accounting principle                |      |     
|                                    |      |     
|Net earnings (loss)                 |      |     
|                                    |      |     
|Diluted                             |      |     
|Net earnings (loss) before          |      |     
|cumulative effect of change in      |      |     
|accounting principle                |      |     
|Cumulative effect of change in      |      |     
|accounting principle                |      |     
|                                    |      |     
|Net earnings (loss)                 |      |     
|                                    |      |     
|Weighted average shares             |      |     
|outstanding:                        |      |     
|Basic:                              |      |     
|Diluted                             |      |     

Inflation

Management does not believe that the
relatively moderate levels of inflation, which have been experienced in the United State
in recent years, have had a significant effect on the Companys net sales or
profitability.

Item
7A.      Quantitative and Qualitative Disclosure About Market Risk

| | The
Companys market risk exposure, related to market risk sensitive financial
instruments, is not material. Letters of credit totaling approximately $933,000 were
outstanding under the terms of the Credit Agreement as of December 31, 2003. No borrowings
were outstanding under the Credit Agreement as of December 31, 2003. (See Liquidity and
Capital Resources above).
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Item
8.         Financial Statements and Supplementary Data

| | See
index to Financial Statements (Page 39) and following pages.
| | ----------------------------------------------------------------

Item
9.         Changes in and Disagreements on Accounting and Financial Disclosure

| | None
| | ----

Item
9A.      Controls and Procedures

| | The
Company carried out an evaluation, under the supervision and with the participation of the
Companys Management, including the Companys President and Chief Executive
Officer and its Chief Financial Officer, of the effectiveness of the design and operation
of the Companys disclosure controls and procedures pursuant to Exchange Act Rule
13a-15 as of the end of the period covered by this report. Based upon that evaluation, (1)
the Companys Management concluded that the Companys disclosure controls and
procedures were effective as of the end of the period covered by this report and (2) no
changes in the Companys internal control over financial reporting were identified in
the prior fiscal quarter that have materially affected, or are reasonably likely to
materially affect, the Companys internal control over financial reporting.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

PART III

Item 10.  Directors and Officers of Registrant*

The
Company has adopted a Code of Ethics for the Chief Executive Officer and Senior Financial
Officers and a Code of Conduct for all employees. The Company expects these codes to be
available shortly on its website at  www.theragenics.com. These codes are available
without charge upon request directed to Investor Relations, Theragenics Corporation®,
5203 Bristol Industrial Way, Buford, Georgia 30518. The Company intends to disclose
amendments or waivers of these codes with respect to the Chief Executive Officer, Senior
Financial Officers or Directors required to be disclosed by posting such information on
its website.

Item 11.         Executive
Compensation*

Item 12.         Security Ownership of Certain Beneficial Owners and Management*

Item 13.          Certain Relationships and Related Transactions*

Item 14.          Principal Accounting Fees and Services*

| | * |  | Except as set forth above, the information called for by Items 10,11,12, 13 and 14 is
omitted from this Report and is incorporated by reference to the definitive Proxy
Statement to be filed by the Company not later than 120 days after December 31, 2003, the
close of its fiscal year.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

PART IV

a)    
          The following documents are filed as part of this Report.

1.    Financial Statements

See
index to financial statements on page 39.

2.    Financial Schedules

See
index to financial statements on page 39.

3.   
Exhibits

See index to exhibits on page 68

| | 3.1 | Certificate
of Incorporation as amended through July 29, 1998, (incorporated by reference
                         to Exhibit 3.1 of the Company's report on Form 10-Q for the
quarterly period ended June                          30, 1998)
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3.2 | By-Laws,
(incorporated by reference to Exhibit 3.4 of the Companys registration
                         statement on Form S-1, File No. 33-7097, and post-effective
amendments thereto)
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 4.1 | See
Exhibits 3.1 - 3.2 for provisions in the Company's Certificate of Incorporation and
                         By-Laws defining the rights of holders
                         of the Companys Common Stock.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.1 | License
Agreement with University of                          Missouri, as amended, (incorporated
by reference to Exhibit 10.3 of the Companys                          registration
statement on Form S-1, File No. 33-7097, and post-effective amendments
                         thereto)
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.2 | Reassignment
and Release Agreement among the Company, John L. Russell, Jr., and Georgia
                         Tech Research Institute, (incorporated by reference to Exhibit
10.8 of the Companys                          registration statement on Form S-1, File
No. 33-7097, and post-effective amendments                          thereto)
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.3 | 1986
Incentive and Non-Incentive Stock                          Option Plan*, (incorporated by
reference to Exhibit 10.11 of the Companys registration
                         statement on Form S-1, File No. 33-7097, and post-effective
amendments thereto)
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.4 | 1990
Incentive and Non-Incentive Stock                          Option Plan*, (incorporated by
reference to Exhibit 10.10 of the Companys report on Form                          10-K
for the year ended December 31, 1990)
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.5 | Agreement
with Nordion International Inc.,                          (incorporated by reference to
the Companys report on Form 8-K dated March 23, 1995)
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.6 | Rights
Agreement dated as of February 17, 1997 between the Company and SunTrust Bank,
                         Atlanta, (incorporated by reference to Exhibit 99.1 of the
Companys registration                          statement on Form 8-A filed February 27,
1997)
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.7 | Theragenics Corporation 1995 Stock Option     Plan*,
(incorporated by reference to                          Exhibit 10.1 of the Companys
common stock registration statement on Form S-8, file no.
                         333-15313)
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.8 | 1997
Stock Incentive Plan, (incorporated by reference to appendix B of the Companys
                         Proxy Statement for its 1997 Annual Meeting of Stockholders
filed on Schedule 14A)*
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.9 | Marketing
and Sales Agreement by and between the Company and Indigo Medical, Inc. dated
                         May 30, 1997 (incorporated by reference to Exhibit 10 of the
Companys report on Form                          10-Q for the quarterly period ended
September 30, 1997)
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.10 | Theragenics
Corporation® Employee Stock Purchase Plan*, (incorporated by reference to
                         appendix A of the Companys Proxy Statement for its 1998 Annual
Meeting of Stockholders                          filed on Schedule 14A)
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.11 | Employment
agreement of Bruce W. Smith*, (incorporated by reference to Exhibit 10.22 of
                         the Companys report on Form 10-K for the year ended December
31, 1998)
| | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.12 | Sublease
dated March 25, 1999 between Theragenics Corporation® and Community Reuse
                         Organization of East Tennessee, (incorporated by reference to
Exhibit 10.1 of the                          Companys report on Form 10-Q for the
quarterly period ended March 31, 1999)+
| | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.13 | Work
for Others Agreement dated March 25, 1999 between Theragenics Corporation® and
                         Lockheed Martin Energy Research Corporation, (incorporated by
reference to Exhibit 10.2                          of the Companys report on Form 10-Q
for the quarterly period ended March 31, 1999)+
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.14 | Credit
Agreement between Theragenics Corporation® and Wachovia Bank, National
                         Association, (incorporated by reference to Exhibit 10.1 of the
Companys report on Form                          10-Q for the quarterly period ended
September 30, 1999)
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.15 | Theragenics
Corporation® 2000 Stock Incentive Plan* (incorporated by reference to Exhibit
                         10.16 of the Companys report on Form 10-K for the year ended
December 31, 1999)
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.16 | Employment
Agreement of M. Christine Jacobs* (incorporated by reference to Exhibit 10.1
                         of the Companys report on Form 10-Q for the quarterly period
ended March 31, 2000)
| | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.17 | Employment Agreement of James A.
MacLennan* (incorporated by reference to Exhibit 10.1 of                          the
Companys report on Form 10-Q for the quarterly period ended September 30, 2002)
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.18 | Amendment
to Executive Employment Agreement for Bruce W. Smith* (incorporated by reference
                         to Exhibit 10.18 of the Companys report on Form 10-K for year
ended December 31, 2002).
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.19 | Second
Amendment to Executive Employment Agreement for Bruce W. Smith* (incorporated by
                         reference to Exhibit 10.19 of the Companys report on Form 10-K
for year ended December                          31, 2002).
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.20 | Third
Amendment to Executive Employment Agreement for Bruce W. Smith* (incorporated by
                         reference to Exhibit 10.20 of the Companys report on Form 10-K
for year ended December                          31, 2002).
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.21 | First
amendment to executive employment agreement for M. Christine Jacobs* (incorporated
                         by reference to Exhibit 10.1 of the Companys report on Form
10-Q for the quarterly                          period ended June 30, 2003).
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.22 | Fourth
amendment to executive employment agreement for Bruce W. Smith* (incorporated by
                         reference to Exhibit 10.2 of the Companys report on Form 10-Q
for the quarterly period                          ended June 30, 2003).
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.23 | Extension
of credit agreement dated August 30, 1999 between Theragenics Corporation® and
                         Wachovia Bank, National Association (incorporated by reference
Exhibit 10.3 of to the                          Companys report on Form 10-Q for the
quarterly period ended June 30, 2003).
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.24 | Credit
Agreement dated October 29, 2003 between Theragenics Corporation® and SouthTrust
                         Bank (incorporated by reference to Exhibit 10.1 of the Companys
report on Form 10-Q for                          the quarterly period ended September 30,
2003).
| | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.25 | Executive
Employment Agreement for Tracy M. Culver*
| | ----- | ---------------------------------------------------

| | 10.26 | Executive
Employment Agreement for Michael OBannon*
| | ----- | ----------------------------------------------------

| | 10.27 | Amendment
to Executive Employment Agreement for Michael OBannon*
| | ----- | -----------------------------------------------------------------

| | 10.28 | Form
of Directors and Officers Indemnification Agreement
| | ----- | --------------------------------------------------------

| | 24.1 | Consent
of Independent Public Accountants for Incorporation by Reference of Audit Report
                         into Registration Statements
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------

| | 31.1 | Certification
 of Chief Executive  Officer  pursuant to Section 302 of the  Sarbanes-Oxley
                         Act of 2002.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------

| | 31.2 | Certification
 of Chief Financial  Officer  pursuant to Section 302 of the  Sarbanes-Oxley
                         Act of 2002.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------

| | 32.1 | Certification
 of Chief Executive  Officer  Pursuant of Section 1350,  Chapter 63 of Title
                         18, United States Code, as Adopted to Section 906 of the
Sarbanes-Oxley Act of 2002.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 32.2 | Certification
 of Chief Financial  Officer  Pursuant to Section 1350,  Chapter 63 of Title
                         18, United States Code, as Adopted to Section 906 of the
Sarbanes-Oxley Act of 2002.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

*
Management contract or compensatory plan.                + Confidential
treatment has been requested for portions of this document.

(b)    
          Reports on Form 8-K

| | No
reports on Form 8-K were filed during the fourth quarter of 2003. A Form 8-K dated October
22, 2003, was furnished to the Securities and Exchange Commission under Item 9,
Regulation FD Disclosure (intended to be furnished under Item 12,
Results of Operations and Financial Condition) with the press release
regarding the financial results of Theragenics Corporation® for the quarter ended
September 30, 2003. Under the rules of the Securities and Exchange Commission, materials
furnished are not deemed filed for purposes of the federal securities laws.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

SIGNATURES

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

|THERAGENICS CORPORATION |                                                                         
|----------------------- | ------------------------------------------------------------------------
|(Registrant)            |                                                                         
|                       
|                        | By:   /s/ M. Christine Jacobs
M. Christine JacobsChief Executive Officer

| | Dated: March 15, 2004
Buford,
Georgia 
        Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Name                                                     | Title                                                                             | Date   
|-------------------------------------------------------- | --------------------------------------------------------------------------------- | -------
|                                                        
|/s/ M. Christine JacobsM. Christine Jacobs               | Chief Executive Officer(Principal Executive Officer),President, and Chairman      | 3/15/04
|                                                        
|/s/ James A. MacLennanJames A. MacLennan                 | Chief Financial Officer(Principal Financial and Accounting Officer) and Treasurer | 3/15/04
|                                                        
|/s/ Otis W. Brawley, M.D.Otis W. Brawley, M.D.           | Director                                                                          | 3/15/04
|                                                        
|/s/ Orwin L. CarterOrwin L. Carter                       | Director                                                                          | 3/15/04
|                                                        
|/s/ Earnest W. Deavenport, Jr.Earnest W. Deavenport, Jr. | Director                                                                          | 3/15/04
|                                                        
|/s/ Patrick L. FlinnPatrick L. Flinn                     | Director                                                                          | 3/15/04
|                                                        
|/s/ John V. HerndonJohn V. Herndon                       | Director                                                                          | 3/15/04
|                                                        
|/s/ Philip A. IncarnatiPhilip A. Incarnati               | Director                                                                          | 3/15/04
|                                                        
|/s/ Peter A. A. SaundersPeter A. A. Saunders             | Director                                                                          | 3/15/04

THERAGENICS
CORPORATION®

TABLE OF CONTENTS

Page





|                                                                                                                   |   
|------------------------------------------------------------------------------------------------------------------ | --
|                                                                                                                  
|REPORT OF INDEPENDENT PUBLIC ACCOUNTANTSON FINANCIAL STATEMENTS                                                    | 40
|                                                                                                                  
|FINANCIAL STATEMENTS                                                                                               |   
|                                                                                                                  
|Balance Sheets - December 31, 2003 and 2002                                                                        | 41
|                                                                                                                  
|Statements of Operations for each of the three years in the period ended December 31, 2003                         | 43
|                                                                                                                  
|Statements of Shareholders' Equity for each of the threeyears in the period ended December 31, 2003                | 45
|                                                                                                                  
|Statements of Cash Flows for each of the three yearsin the period ended December 31, 2003                          | 47
|                                                                                                                  
|NOTES TO FINANCIAL STATEMENTS                                                                                      | 49
|                                                                                                                  
|REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE                                                               | 66
|                                                                                                                  
|Schedule II - Valuation and Qualifying Accounts for  each of the three years in the period ended December 31, 2003 | 67

---

Report of
Independent Certified Public Accountants

Board of DirectorsTheragenics
Corporation®

We
have audited the balance sheets of Theragenics Corporation® (a Delaware corporation)
as of December 31, 2003 and 2002, and the related statements of operations, shareholders equity, and cash flows for each of the three years in the period ended
December 31, 2003. These financial statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these financial statements
based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the
United States of America. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe our audits provide a
reasonable basis for our opinion.

In
our opinion, the financial statements referred to above present fairly, in all material
respects, the financial position of Theragenics Corporation® as of December 31, 2003
and 2002, and the results of its operations and its cash flows for each of the three years
in the period ended December 31, 2003, in conformity with accounting principles generally
accepted in the United States of America.

As
discussed  in Note M to the  Financial  Statements,  Theragenics  Corporation®  adopted  Statement of Financial  Accounting
Standards No. 143, Accounting for Asset Retirement Obligations, effective January 1, 2003.



|                                                                            | 
|--------------------------------------------------------------------------- | 
|/s/ GRANT THORNTON LLP
GRANT THORNTON LLP
Atlanta, Georgia
January 16, 2004 | 

Theragenics
Corporation®

BALANCE SHEETS

December
31,

(Amounts in
thousands)

ASSETS

|                                             | 2003 | 2002
|-------------------------------------------- | ---- | ----
|
|CURRENT ASSETS                               |      |     
|Cash and short-term investments              |      |     
|Marketable securities                        |      |     
|Trade accounts receivable, less allowance of |      |     
|$118 in 2003 and $147 in 2002                |      |     
|Inventories                                  |      |     
|Deferred income tax asset                    |      |     
|Prepaid expenses and other current assets    |      |     
|                                             |      |     
|Total current assets                         |      |     

|                                        |  | 
|--------------------------------------- |  | 
|PROPERTY, PLANT AND EQUIPMENT - AT COST |  | 
|Buildings and improvements              |  | 
|Machinery and equipment                 |  | 
|Office furniture and equipment          |  | 
|                                        |  | 
|                                        |  | 
|Less accumulated depreciation           |  | 
|                                        |  | 
|                                        |  | 
|Land and improvements                   |  | 
|Construction in progress                |  | 
|                                        |  | 
|                                        |  | 
|OTHER ASSETS                            |  | 
|                                        |  | 
|Total Assets                            |  | 
|                                        |  | 

LIABILITIES AND
SHAREHOLDERS EQUITY

|                                                  | 2003 | 2002
|------------------------------------------------- | ---- | ----
|CURRENT LIABILITIES                               |      |     
|Accounts payable                                  |      |     
|Accrued salaries, wages and payroll taxes         |      |     
|Other current liabilities                         |      |     
|                                                  |      |     
|Total current liabilities                         |      |     
|LONG TERM LIABILITIES                             |      |     
|Deferred income taxes                             |      |     
|Decommissioning retirement                        |      |     
|Other liabilities                                 |      |     
|                                                  |      |     
|Total long term liabilities                       |      |     
|SHAREHOLDERS' EQUITY                              |      |     
|Common stock - authorized 100,000 shares of $.01  |      |     
|par value; issued and outstanding, 29,944 in 2003 |      |     
|and 29,760 in 2002                                |      |     
|Additional paid-in capital                        |      |     
|Retained earnings                                 |      |     
|Accumulated other comprehensive income            |      |     
|                                                  |      |     
|Total shareholders' equity                        |      |     
|                                                  |      |     
|                                                  |      |     
|                                                  |      |     

The
accompanying notes are an integral part of these statements.

Theragenics
Corporation®

STATEMENTS OF OPERATIONSYear ended December 31,(Amounts
in thousands, except per share data)

|                                            | 2003 | 2002 | 2001
|------------------------------------------- | ---- | ---- | ----
|Revenue                                     |      |      |     
|Product sales                               |      |      | $   
|Licensing fees                              |      |      |     
|                                            |      |      |     
|                                            |      |      |     
|Cost of sales                               |      |      |     
|                                            |      |      |     
|Gross profit                                |      |      |     
|Operating expenses                          |      |     
|Selling, general and administrative         |      |      |     
|Research and development                    |      |      |     
|                                            |      |      |     
|                                            |      |      |     
|                                            |      |      |     
|Earnings/(loss) from operations             |      |      |     
|Other income (expense)                      |      |     
|Interest income                             |      |      |     
|Interest and financing costs                |      |      |     
|Other                                       |      |      |     
|                                            |      |      |     
|                                            |      |      |     
|                                            |      |      |     
|Earnings/(loss) before income tax and       |      |     
|cumulative effect of change in accounting   |      |     
|principle                                   |      |      |     
|Income tax expense/(benefit)                |      |      |     
|                                            |      |      |     
|Earnings/(loss) before cumulative effect of |      |     
|change in accounting principle              |      |      |     
|Cumulative effect of change in accounting   |      |     
|principle, net of tax of $131               |      |      |     
|                                            |      |      |     
|NET EARNINGS/(LOSS)                         |      |      | $   
|                                            |      |      |     

|                                               |  |  |  
|---------------------------------------------- |  |  | -
|
|Basic:                                         |  |  |  
|Earnings before cumulative effect of change in |  | 
|accounting principle                           |  |  | $
|Cumulative effect of change in accounting      |  | 
|principle, net of tax                          |  |  |  
|                                               |  |  |  
|Net earnings/(loss) per common share (basic)   |  |  | $
|                                               |  |  |  
|Diluted:                                       |  | 
|Earnings before cumulative effect of change in |  | 
|accounting principle                           |  |  | $
|Cumulative effect of change in accounting      |  | 
|principle, net of tax                          |  |  |  
|                                               |  |  |  
|Net earnings/(loss) per common share (diluted) |  |  | $
|                                               |  |  |  
|WEIGHTED AVERAGE SHARES:                       |  | 
|Basic                                          |  |  |  
|Diluted                                        |  |  |  
|Net earnings/(loss)                            |  |  | $
|Comprehensive income/(loss)                    |  | 
|Unrealized gain/(loss) on securities           |  | 
|available for sale:                            |  |  |  
|                                               |  |  |  
|Total comprehensive income/(loss)              |  |  | $
|                                               |  |  |  

The accompanying notes are an
integral part of these statements.

Theragenics Corporation®

                                                    STATEMENTS OF SHAREHOLDERS' EQUITY

                                                For the three years ended December 31, 2003
                                               (Amounts in thousands)

|                                                | Common Stock | Additional |  | Accumulated
other | 
|----------------------------------------------- | ------------ | ---------- |  | ----------------- | 
|
|Balance, December 31, 2000                      |              |            |  | 29,579            | 
|Exercise of stock options                       |              |            |  | 99                | 
|Common stock issued under employee stock        |              |           
|purchase plan                                   |              |            |  | 12                | 
|Stock-based compensation                        |              |            |  |                   | 
|Income tax benefit from stock options and stock |              |           
|purchase plan                                   |              |            |  |                   | 
|Net earnings for the year                       |              |            |  |                   | 
|                                                |              |            |  |                   | 
|Balance, December 31, 2001                      |              |            |  | 29,690            | 
|Exercise of stock options                       |              |            |  | 60                | 
|Employee stock purchase plan                    |              |            |  | 10                | 

|                                                 |  |  |  |        | 
|------------------------------------------------ |  |  |  | ------ | 
|
|
|Stock-based compensation                         |  |  |  |        | 
|Unrealized gain on securities available-for-sale |  |  |  |        | 
|Income tax effect from stock options and stock   |  | 
|purchase plan                                    |  |  |  |        | 
|Net earnings for the year                        |  |  |  |        | 
|                                                 |  |  |  |        | 
|Balance, December 31, 2002                       |  |  |  | 29,760 | 
|Exercise of stock options                        |  |  |  | 162    | 
|Employee stock purchase plan                     |  |  |  | 22     | 
|Stock-based compensation                         |  |  |  |        | 
|Unrealized loss on securities available-for-sale |  |  |  |        | 
|Income tax effect from stock options and stock   |  | 
|purchase plan                                    |  |  |  |        | 
|Net loss for the year                            |  |  |  |        | 
|                                                 |  |  |  |        | 
|Balance, December 31, 2003                       |  |  |  | 29,944 | 
|                                                 |  |  |  |        | 

The accompanying notes are an
integral part of these statements.

Theragenics
Corporation®

STATEMENTS OF CASH FLOWS

Year ended December 31,(Amounts in thousands)

|                                                           | 2003 | 2002 | 2001
|---------------------------------------------------------- | ---- | ---- | ----
|Cash flows from operating activities:                      |      |      |     
|Net earnings/(loss)                                        |      |      | $   
|Adjustments to reconcile net earnings/(loss)to             |      |     
|net cash provided by operating activities:                 |      |     
|Cumulative effect of change in accounting principle,       |      |     
|net of tax                                                 |      |      |     
|Depreciation & amortization                                |      |      |     
|Deferred income taxes                                      |      |      |     
|Income tax effect from stock options                       |      |      |     
|Stock-based compensation                                   |      |      |     
|Deferred rent                                              |      |      |     
|Provision for allowances                                   |      |      |     
|Loss on disposal of equipment                              |      |      |     
|Changes in assets and liabilities:                         |      |     
|Accounts receivable                                        |      |      |     
|Inventories                                                |      |      |     
|Prepaid expenses and other current assets                  |      |      |     
|Other assets                                               |      |      |     
|Trade accounts payable                                     |      |      |     
|Accrued salaries, wages and payroll taxes                  |      |      |     
|Income taxes payable                                       |      |      |     
|Other current liabilities                                  |      |      |     
|                                                           |      |      |     
|Net cash provided by operating activities                  |      |      |     
|                                                           |      |     
|Cash flows from investing activities:                      |      |     
|Purchases and construction of property and equipment       |      |      |     
|Proceeds from disposal of plant and property               |      |      |     
|Cash paid for acquisition                                  |      |      |     
|Purchases of marketable securities                         |      |      |     
|Maturities of marketable securities                        |      |      |     
|                                                           |      |      |     
|Net cash used by investing activities                      |      |      |     
|                                                           |      |      |     
|Cash flows from financing activities:                      |      |     
|Proceeds from exercise of stock options and stock purchase |      |     
|plan                                                       |      |      |     
|                                                           |      |      |     
|Net cash provided by financing activities                  |      |      |     
|                                                           |      |      |     

|                                                           |  |  |  
|---------------------------------------------------------- |  |  | -
|Net increase/(decrease) in cash and short-term investments |  |  | $
|Cash and short-term investments at beginning of year       |  |  | $
|                                                           |  |  |  
|Cash and short-term investments at end of year             |  |  | $
|                                                           |  |  |  
|Supplementary Cash Flow Disclosure                         |  | 
|Interest paid, net of amounts capitalized                  |  |  | $
|Income taxes paid                                          |  |  | $

The accompanying notes are an integral part of these statements.

Theragenics
Corporation®

NOTES TO FINANCIAL
STATEMENTS

December 31, 2003 and
2002

NOTE A 
ORGANIZATION AND DESCRIPTION OF BUSINESS

| | Theragenics Corporation® (the Company) is the manufacturer of TheraSeed®, a rice-sized, FDA-cleared device used to treat solid
localized tumors, primarily prostate cancer, with a one-time, minimally invasive procedure. Theragenics is the world ́s largest
producer of palladium-103, the radioactive isotope that supplies the therapeutic radiation for its TheraSeed® device. Physicians,
hospitals and other healthcare providers, primarily located in the United States, utilize the TheraSeed® device. The TheraSeed®
device has also been approved for marketing throughout the member countries of the European Union by obtaining its CE Mark. Sales of
the TheraSeed® device in Europe have not been significant. The majority of sales are channeled through third-party distributors.  The
Company also sells its TheraSeed® devices directly to physicians.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Early in 2003 the Company diversified its product line with the purchase of the U.S. iodine-125 prostate brachytherapy business of
BEBIG Isotopen-und Medizintechnik GmbH (BEBIG), formerly distributed by Isotope Products Laboratories (both subsidiaries of a
publicly traded German company, Eckert & Ziegler AG).  The purchase gives Theragenics exclusive U.S. manufacturing and distribution
rights to an FDA-cleared iodine-125-based medical device for the treatment of prostate cancer.   Theragenics began distribution of
the iodine-125-based medical device early in 2003, and subsequently began to produce I-Seed (the Theragenics iodine-125-based
medical device) early in 2004, utilizing the automated production equipment procured in the business acquisition.  The Company sells
the I-Seed device directly to physicians, hospitals and other healthcare providers. The non-exclusive distributors of the TheraSeed®
device have no distribution rights for the I-Seed device.  Non-exclusive rights to distribute the TheraSeed® device in Europe were
granted to BEBIG as part of the transaction.    The product line and equipment purchase will not affect the Company ́s existing
non-exclusive distribution agreements for the TheraSeed® device.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The Company constructed a facility in the Oak Ridge, Tennessee area initially intended to expand the Company ́s production capacity
for palladium-103, using unique plasma separation process (PSP) technology being leased from the U.S. Department of Energy (DOE). PSP
technology is a method of separating relatively large quantities of specific non-radioactive isotopes from specific elements.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In connection with the Company ́s ongoing program targeted at diversifying its future revenue stream, the Company continues to explore
new applications for PSP technology.  Among other things, the PSP technology enables the Company to conduct feasibility runs designed
to validate isotope usage in various diverse markets and industries.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In July 2002 Theragenics agreed to produce test quantities of certain gadolinium isotopes for purchase by an international nuclear
services company using the PSP technology.  The gadolinium for the international nuclear services company was intended for a
non-medical application and was delivered during the second quarter of 2003. Further, in 2003 the Company performed feasibility runs
to validate the PSP ́s capabilities to produce specific isotopes of certain elements in the rare earth group of elements for
UT-Battelle, LLC (Battelle), a partnership between the University of Tennessee and Battelle, which manages the Oak Ridge National
Laboratory for the U.S. Department of Energy.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The Company has an ongoing research and development program designed to utilize palladium-103 for other oncological and
non-oncological uses, and to explore options for using the Companys expertise and capabilities in other areas.  Following the
approval of the Investigational Device Exemption granted by the U. S. Food and Drug Administration (FDA) in August 2002, Theragenics
initiated the TheraP trial using a palladium-103 device, called the TheraSource® Intravascular Brachytherapy System, designed to
prevent restenosis or renarrowing of arteries following treatment of peripheral vascular disease by percutaneous transluminal
angioplasty.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Additionally, an animal pilot study using palladium-103 in a prototype device designed for the treatment of age-related macular
degeneration (AMD), a disease that leads to loss of eyesight and in some cases complete blindness, was completed early in 2002.
Progress has been made in the development of a  marketable device for the treatment of AMD.  A patent is pending for the TheraSight
device and the Company is analyzing various differing trial designs, while mindful of the emerging potential competition in this
market.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The Company competes in markets characterized by rapid technological innovation, significant research efforts and continual
scientific discoveries.  These markets are also subject to significant regulatory oversight at the federal, state and local levels.
The regulatory bodies include, among others, the FDA, the Nuclear Regulatory Commission, the DOE, various states' agencies such as
the Departments of Natural and Human Resources, and the Occupational Safety and Health  Administration, as well as the European
counterparts of these U.S. governmental units.  The Company is therefore directly affected by changes in technology and products, as
they may apply to cancer treatment, governmental regulations related to its industry and the well being of the healthcare industry.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE B  SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES

| | A
summary of the significant accounting policies consistently applied in the preparation of
the accompanying financial statements follows:
| | ------------------------------------------------------------------------------------------------------------------------------------------

1.  Use
of Estimates

| | In
preparing financial statements in conformity with accounting principles generally accepted
in the United States of America (GAAP), Management is required to make certain estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent liabilities, at the date of the balance sheet, and reported amounts of
revenues and expenses during the reporting period. Actual results could differ from those
estimates.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

2.  Revenue Recognition

Revenue
from product sales is recognized upon shipment. Licensing fees are recognized in the
period to which they relate.

3.  Cash
and Short-Term Investments

| | For
purposes of reporting cash flows, cash and short-term investments include cash on hand,
cash in banks, variable rate demand notes, treasury investments and U.S. obligations and
commercial paper with maturities equal to or less than 90 days from purchase.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

4.Marketable
Securities

| | Marketable
securities consist primarily of high-credit quality municipal obligations in accordance
with the Companys investment policies. Marketable securities are classified as
available-for-sale and are reported at fair value, based upon quoted market prices at the
balance sheet date. The estimated fair value of marketable securities by contractual
maturity at December 31, 2003, is as follows (amounts in thousands):
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                                      
| | -------------------------------------
| | Due in one year or less              
| | Due after one year through five years

5.  Inventories

| | Inventories
are stated at the lower of cost or market. Cost is determined using the first-in,
first-out (FIFO) method. Inventories consist primarily of raw material, shipping materials, components
and work in process.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

6.  Property,
Equipment, and Amortization

| | Property
and equipment are recorded at historical cost. Depreciation and amortization is provided
for in amounts sufficient to relate the cost of depreciable assets to operations over
their estimated service lives on a straight-line basis. Depreciation and amortization
expense related to property and equipment charged to operations was approximately
$6,545,000, $6,265,000 and $5,748,000 for 2003, 2002 and 2001, respectively. Estimated
service lives are 30 years for buildings and improvements, and 3 to 15 years for
machinery, equipment and furniture.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | A
significant portion of the Companys depreciable assets is utilized in the production
of its product. Management periodically evaluates the realizability of its depreciable
assets in light of its current industry environment. Management believes that no
impairment of depreciable assets exists as of December 31, 2003. It is possible, however,
that Managements estimates concerning the realizability of the Companys
depreciable assets could change in the near term due to changes in the technological and
regulatory environment.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

7.  Income
Taxes

| | The
Company accounts for income taxes using the asset and liability method. Under this method,
deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates applied to taxable income. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date. A valuation allowance is provided for deferred tax assets
when it is more likely than not that the asset will not be realized.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

8.  Research
and Development Costs

Research
and development (R&D) costs are expensed when incurred.

9.  Advertising

| | The
Company expenses the cost of advertising as incurred. Advertising expense was
approximately $2,291,000 and $2,956,000 for the years ended December 31, 2003 and 2002,
respectively. Advertising expense for the period ending December 31, 2001 was not
significant.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

10.  Earnings Per Share and Common Stock

| | Basic
net earnings per common share is based upon the weighted average number of common shares
outstanding during the period. Diluted net earnings per common share is based upon the
weighted average number of common shares outstanding plus dilutive potential common
shares, including options and warrants outstanding during the period.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

11.  Stock Based Compensation

| | Stock
options issued to employees are accounted for under the intrinsic value method in which
compensation expense is recognized for the amount, if any, that the fair value of the
underlying common stock exceeds the exercise price at the date of grant. Stock options and
other equity instruments issued in exchange for goods or services with non-employees are
accounted for based on the fair value of the consideration received or the fair value of
the equity instruments issued, whichever is more readily measurable.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

12.  Fair Value of Financial Instruments

| | The
Companys financial instruments include cash, cash equivalents and marketable
securities. The carrying value of cash and cash equivalents approximates fair value due to
the relatively short period to maturity of the instruments. Marketable securities are
classified as available-for-sale and are reported at fair value, with unrealized gains or
losses excluded from earnings and included in other comprehensive income, net of
applicable taxes.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Available-for-sale
securities consist of:

|                                      | 2003
|------------------------------------- | ----
|
|
|State and municipal securities        |     
|U.S. government and agency securities |     
|Corporate and other securities        |     
|                                      |     
|Total                                 |     
|                                      |     
|                                      |     

13.  Reclassifications

Certain
amounts included in the 2002 and 2001 financial statements have been reclassified to conform to the 2003
presentation.

NOTE C 
CONSTRUCTION IN PROGRESS AND PURCHASE COMMITMENTS

| | The U.S. Department of Energy (DOE)
has granted Theragenics access to unique DOE technology (plasma separation process
or PSP) for use in production of isotopes, including palladium-103. The
Company has constructed a facility in Oak Ridge, Tennessee to house the equipment,
infrastructure and work force necessary to support the production of isotopes, including
palladium-103, using this DOE technology. The building and the PSP became operational
during the latter half of 2002. Additional equipment in the amount of $1.7 million has not
yet been placed in service and is recorded as construction-in-progress on the accompanying
balance sheet as at December 31, 2003.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company diversified its product line in 2003 with the purchase of the U.S. iodine-125
prostate brachytherapy business of BEBIG Isotopen-und Medizintechnik GmbH (BEBIG),
formerly distributed by Isotope Products Laboratories (both subsidiaries of a publicly
traded German company, Eckert & Ziegler AG). The purchase gives Theragenics
exclusive U.S. manufacturing and distribution rights to an iodine-125-based medical device
for the treatment of prostate cancer. Theragenics also acquired BEBIGs assets
related to this operation. Non-exclusive rights to distribute the TheraSeed®device in
Europe were granted to BEBIG as part of the transaction. Progress payments were being made
to BEBIG based upon completion of pre-defined milestones.  A total of approximately $5.3 million in progress payments and professional
fees had been paid through December 31, 2003. The payments made through December 31, 2003
were allocated between the market value of the assets in the amount of $3.7 million and
$1.6 million to goodwill. The equipment became operational in 2004.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In December 2003 the Company  entered into an asset  purchase  agreement  with a contractor  for the design and  manufacture of certain
equipment.  The capital asset  purchase  agreement in the amount of $1.2 million  should be completed in late 2004.  At year-end  2003,
progress payments in the amount of approximately $400,000 had been paid in relation to the purchase agreement.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE D  MARKETING
AND SALES AGREEMENTS AND MAJOR CUSTOMERS

| | The
Company sells its TheraSeed® device directly to health care providers and to third
party distributors. Theragenics also distributes I-Seed, an iodine-125 based medical
device, directly to health care providers. During the first quarter of 2003, the
distribution agreement with one distributor was discontinued upon notification of the
acquisition of the distributor by another TheraSeed®
distributor. In addition, during the second quarter of 2003, Theragenics was
notified that this same distributor acquired another TheraSeed®
distributor. Currently, the Company has non-exclusive distribution agreements in place
with two companies for the distribution of the TheraSeed® device, C. R. Bard and
Medi-Physics, Inc. (formerly d/b/a/ Nycomed Amersham and now part of Oncura, a company
formed by a merger of the brachytherapy businesses of Amersham plc and Galil Medical
Ltd.). The five-year non-exclusive distribution agreements for the distribution of
the TheraSeed® device give each distributor the right to distribute the TheraSeed® device in the U.S.,
Canada and Puerto Rico for the treatment of prostate cancer and other solid localized
cancerous tumors. These non-exclusive agreements give the distributors the option to
distribute the TheraSeed® device internationally.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Sales
to the two existing and the two previous non-exclusive distributors represented
approximately 81% and 83% of product revenue for the years ended December 31, 2003 and
2002, respectively, with sales to two of the four non-exclusive distributors each
exceeding 10% of total revenue for each year. Sales to the four non-exclusive distributors
represented approximately 66% of product revenue for the year ended December 31, 2001 with
sales to three of the four non-exclusive distributors each exceeding 10% of total revenue
for each year. Accounts receivable from the four non-exclusive distributors represented
approximately 74% of accounts receivable at December 31, 2003, with two of the four
non-exclusive distributors exceeding 10% of total accounts receivable. Accounts receivable
from the existing non-exclusive distributors represented approximately 78% of accounts
receivable at December 31, 2002, with each of the two non-exclusive distributors exceeding
10% of total accounts receivable.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE E  INCOME TAXES

The
income tax provision consisted of the following (in thousands):

|         | 2003 | 2002 | 2001
|-------- | ---- | ---- | ----
|Current  |      |      |     
|Federal  |      |      | $   
|State    |      |      |     
|         |      |      |     
|         |      |      |     
|         |      |      |     
|Deferred |      |     
|Federal  |      |      |     
|State    |      |      |     
|         |      |      |     
|         |      |      |     
|         |      |      |     
|         |      |      | $   
|         |      |      |     

| | The
Companys temporary differences result in a deferred income tax liability at December
31, 2003 and 2002, summarized as follows (in thousands):
| | --------------------------------------------------------------------------------------------------------------------------------------------------

|                                       | December 31,
|-------------------------------------- | ------------
|
|Deferred tax assets:                   |             
|Non-deductible accruals and allowances |             
|Inventories                            |             
|Stock compensation                     |             
|Asset retirement obligation            |             
|Other                                  |             
|                                       |             
|Gross deferred tax assets              |             
|                                      
|Deferred tax liabilities:              |             
|Property and equipment                 |             
|Other                                  |             
|                                       |             
|Gross deferred tax liabilities         |             
|                                       |             
|Net deferred tax liability             |             
|                                       |             

The
net deferred tax liability is classified in the accompanying balance sheets as follows (in
thousands):

|                                 | December 31,
|-------------------------------- | ------------
|
|Current deferred tax asset       |             
|Long-term deferred tax liability |             
|                                 |             
|Net deferred tax liability       |             
|                                 |             

A
reconciliation of the statutory federal income tax rate and the effective tax rate
follows:

|                                     | 2003 | 2002 | 2001
|------------------------------------ | ---- | ---- | ----
|Tax at applicable federal rates      |      |      |     
|State tax, net of federal income tax |      |      |     
|Investment credits                   |      |      |     
|Tax exempt interest                  |      |      |     
|Other                                |      |      |     
|
|                                     |      |      |     
|

NOTE
F  CREDIT AGREEMENT

| | The
Company executed a Credit Agreement with a financial institution on October 29, 2003. The
Credit Agreement, which expires October 29, 2006 (subject to earlier termination by the
lender upon the occurrence of certain events of default), provides for revolving
borrowings of up to $40.0 million at any time outstanding, including a $5.0 million
sub-limit for letters of credit. Interest on outstanding borrowings is payable at the rate
of interest periodically designated by the financial institution as its base rate, or, at
the option of the Company, interest may accrue at a LIBOR based rate, plus an applicable
margin which is subject to quarterly adjustment. Interest on base rate loans is payable
monthly, while interest on LIBOR loans is payable on the last day of the applicable one,
two or three month interest period.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Credit Agreement is unsecured, but provides for a springing lien to be
established on certain assets of the Company (subject to certain exceptions) in the event
certain events of default occur under the Credit Agreement. The Credit Agreement contains
representations and warranties, as well as affirmative, reporting and negative covenants,
customary for financings of this type. Among other things, certain provisions of the
Credit Agreement limit the incurrence of additional debt and require the maintenance of
certain financial ratios. The Company was in compliance with these debt covenants at
December 31, 2003.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company has letters of credit outstanding under the Credit Agreement for approximately
$933,000. A significant portion of these letters of credit relates to potential future
decommissioning activities. The letters of credit are subject to terms identical to those
of borrowings under the Credit Agreement.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE G  COMMITMENTS
AND CONTINGENCIES

Licensing
Agreement

| | The
Company holds a worldwide exclusive license from the University of Missouri for the use of
technology, patented by the University, used in the Companys TheraSphere®
product. The licensing agreement provides for the payment of royalties based on the level
of sales and on lump sum payments received pursuant to a licensing agreement with Nordion
International, Inc. (see below).
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company has granted certain of its geographical rights under the licensing agreement with
the University of Missouri to Nordion International, Inc., a Canadian company that is a
producer, marketer and supplier of radioisotope products and related equipment. Under the
Nordion agreement, the Company is entitled to licensing fees for each geographic area in
which Nordion receives new drug approval. The Company will also be entitled to a
percentage of revenues earned by Nordion as royalties under the agreement. Royalties from
this agreement are recorded as Licensing fees in the accompanying statements
of operations.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Lease
Commitments

| | The
Company leases land, space and office equipment under non-cancelable leases that expire at
various dates through April 2029. Approximate minimum lease payments under the leases are
as follows: 2004, $170,000; 2005, $168,000; 2006, $145,000; 2007,
$137,000; 2008, $137,000; and $2,776,000 thereafter.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Rent
expense was approximately $289,000, $345,000 and $385,000 for the years ended December 31,
2003, 2002 and 2001, respectively.
| | ----------------------------------------------------------------------------------------------------------------------------------

Contingencies

| | In
January 1999, the Company and certain of its officers and directors were named as
defendants in certain securities actions alleging violations of the federal securities
laws, including Sections 10(b), 20(a) and Rule 10b-5 of the Securities and Exchange Act of
1934, as amended. These actions have been consolidated into a single action pending in the
U.S. District Court for the Northern District of Georgia. The complaint, as amended,
purports to represent a class of investors who purchased or sold securities during the
time period from January 29, 1998 to January 11, 1999. The amended complaint generally
alleges that the defendants made certain misrepresentations and omissions in connection
with the performance of the Company during the class period and seeks unspecified damages.
On May 14, 1999 a stockholder of the Company filed a derivative complaint in the Delaware
Court of Chancery purportedly on behalf of the Company, alleging that certain directors
breached their fiduciary duties by engaging in the conduct that is alleged in the
consolidated federal class action complaint. The derivative action has been stayed by the
agreement of the parties. On July 19, 2000, the Court granted the Companys motion to
dismiss the consolidated federal class action complaint for failure to state a claim
against the Company, and granted the plaintiffs leave to amend their complaint. On August
21, 2000, the plaintiffs filed a second amended complaint and on March 30, 2001, the Court
denied the defendants motion to dismiss the plaintiffs second amended
complaint. The Court also denied the Companys motion for reconsideration.
Subsequently, the Court certified the class and the parties commenced discovery. Discovery
in the case is now complete. The Company filed a motion for summary judgment on September
30, 2003 in which it asks the Court to find that there is no genuine issue as to any
material fact in the case, and therefore, the case must be dismissed. The plaintiffs have
filed a brief in opposition, and the motion is currently pending before the Court.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Management
continues to believe that these charges are without merit and is opposing the litigation
vigorously; however, given the nature and stage of the proceedings, the ultimate outcome
of the litigation cannot be determined at this time. Accordingly, no provision for any
liability that might result from this litigation has been made. The Company maintains
insurance for claims of this general nature. From time to time the Company may be a party to claims that arise in the ordinary course of business, none of which, in the view of
Management, is expected to have a material adverse effect on the consolidated financial position or results of operations of the
Company.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE H  COMMON
STOCK AND STOCK OPTION PLANS

Stock
Options

| | The
Companys Board of Directors has approved four stock option plans, which in aggregate
cover up to five million shares of common stock. The plans provide for the expiration of
options ten years from the date of grant and require the exercise price of the options
granted to be at least equal to 100% of market value on the date granted. Stock options
become exercisable over a two to five-year vesting period.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Stock
option transactions for each of the three years in the period ended December 31, 2003, are
summarized below (shares in thousands):
| | ----------------------------------------------------------------------------------------------------------------------------------------

|                               | 2003 | 2002 | 2001
|------------------------------ | ---- | ---- | ----
|
|Outstanding, beginning of year |      |      |     
|Granted                        |      |      |     
|Exercised                      |      |      |     
|Forfeited                      |      |      |     
|                               |      |      |     
|Outstanding, end of year       |      |      |     
|                               |      |      |     

The
following table summarizes information about stock options outstanding at December 31,
2003 (shares in thousands):

|  | Options Outstanding | Options Exercisable
|- | ------------------- | -------------------
|
|$ | 1                   | .63 - $5.40        
|$ | 6                   | .88 - $11.75       
|$ | 16                  | .56 - $26.63       
|  |                     |                    
|  |                     |                    
|  |                     |                    

| | The
Company follows the practice of recording amounts received upon the exercise of certain
options by crediting common stock and additional paid-in capital. No charges are reflected
in the statements of operations as a result of the grant or exercise of options to or by
employees. The Company realizes an income tax benefit from the exercise of certain stock
options and the exercise and early disposition of the shares acquired via certain other
stock options. This benefit results in a reduction to income taxes payable and an increase
to additional paid-in capital.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company uses the intrinsic value method in accounting for stock options issued to
employees. In applying this method, no compensation cost has been recognized. Had
compensation cost for the Companys stock option plans been determined based on the
fair value at the grant dates for awards under those plans, the Companys net
earnings and earnings per share would have resulted in the pro forma amounts indicated
below (in thousands, except per share data):
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                             |  | 2003 | 2002        | 2001
|-------------------------------------------- |  | ---- | ----------- | ----
|Net earnings/(loss)                          |  |      | As reported |     
|                                             |  |      | Pro forma   |     
|Basic net earnings/(loss) per common share   |  |      | As reported |     
|                                             |  |      | Pro forma   |     
|Diluted net earnings/(loss) per common share |  |      | As reported |     
|                                             |  |      | Pro forma   |     

| | The
weighted average fair value of the options granted during 2003, 2002, and 2001 was $2.79,
$3.55 and $5.84, respectively. The fair values were estimated using the Black-Scholes
options-pricing model with the following weighted average assumptions:
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                | 2003 | 2002 | 2001
|------------------------------- | ---- | ---- | ----
|Expected dividend yield         |      |      |     
|Expected stock price volatility |      |      |     
|Risk-free interest rate         |      |      |     
|Expected life of option (years) |      |      |     
|                                |      |      |     

Stock
Options Issued to Non-Employees

| | During
1998, the Company issued 100,000 stock options to an individual for medical and cancer
consulting services. The Company is recording consulting expenses based on the estimated
fair value of the options at the grant date over the consulting term of five years.
Consulting expenses related to this agreement were approximately $42,000, $67,000 and
$123,000 during 2003, 2002 and 2001, respectively.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Restricted
Stock

| | The
Company has awarded shares of restricted stock to directors. The shares have restriction
periods tied primarily to service. The awards are recorded at market value on the date of
the grant as unearned compensation. The initial values of the grants are amortized over
the restriction period, net of forfeitures. The number of restricted stock shares and
annual expense information is as follows:
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                         | 2003
|------------------------ | ----
|Number of shares awarded |     
|Average market price     |     
|Shares outstanding       |     
|Annual expense, net      |     

There
were no restricted stock awards in 2002 or 2001.

NOTE I  EARNINGS
PER SHARE

Earnings
per common share was computed as follows (in thousands, except per share data):

|                                              | Year ended December 31,
|--------------------------------------------- | -----------------------
|
|Numerator for basic and diluted earnings      |                        
|Per share - income available common           |                        
|shareholders                                  |                        
|Denominator for basic earnings per share -    |                        
|Adjusted weighted average shares              |                        
|                                             
|Effect of dilutive stock options and warrants |                        
|                                              |                        
|Denominator for diluted earnings per share -  |                        
|Adjusted weighted average shares              |                        
|                                              |                        
|Basic earnings per share                      |                        
|                                              |                        
|Diluted earnings per share                    |                        
|                                              |                        

NOTE J  EMPLOYEE
BENEFIT PLAN

401(k)
Savings Plan

| | The
Company has a 401(k) savings plan providing retirement benefits to all employees at least
21 years of age. The Company makes matching contributions of 20%-60% of each
participants contribution, up to 6% of salary. The percentage of matching
contributions is based on net earnings and is made in the form of Company common stock.
Matching contributions are charged to operating expenses and totaled approximately
$49,000, $90,000 and $47,000 in 2003, 2002 and 2001, respectively.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Employee
Stock Purchase Plan

| | The
Theragenics Corporation® Employee Stock Purchase Plan (the ESPP) allows
eligible employees the right to purchase common stock on a quarterly basis at the lower of
85% of the market price at the beginning or end of each quarterly offering period. As of
December 31, 2003 and 2002, there were 131,000 and 152,000 shares of common stock reserved
and un-issued for the ESPP, respectively, and 69,000 and 48,000 shares had been issued under the plan,
respectively.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE K  RELATED
PARTY TRANSACTIONS

| | An
officer and director of the Company is a director of a vendor that provides radiation
measurement services to Theragenics. Theragenics paid this vendor
approximately $37,000, $29,000 and $24,000 during 2003, 2002 and 2001, respectively, for
these services. The same officer and director of the Company was a director of the
American Cardiovascular Research Institute (ACRI) for a portion of 2003. ACRI performed
animal studies related to the Companys research initiatives. Theragenics paid
ACRI approximately $60,000, $117,000 and $320,000 during 2003, 2002, and 2001,
respectively, for these animal studies.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
same officer is related to the principle of an outside consultant, Medical Equities that
provides real estate advisory services. Theragenics paid this consultant
approximately $5,000 in 2003 for these services.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE L  QUARTERLY
FINANCIAL DATA (UNAUDITED)

The following summarizes certain
quarterly results of operations (in thousands, except per share data):

---

|Year ended December 31, 2003                          | Quarter ended
|----------------------------------------------------- | -------------
|
|Net revenue                                           |              
|Gross profit                                          |              
|Earnings/(loss) before cumulative effect of change in |              
|accounting principle                                  |              
|Cumulative effect of change in accounting             |              
|principle                                             |              
|Net earnings/(loss)                                   |              
|Net earnings/(loss) per common share                  |              
|Basic:                                                |              
|Earnings/(loss) before cumulative effect of change in |              
|accounting principle                                  |              
|Cumulative effect of change in accounting             |              
|principle                                             |              
|Net earnings/(loss) per common share (basic)          |              
|                                                      |              
|Diluted:                                              |              
|Earnings/(loss) before cumulative effect of change in |              
|accounting principle                                  |              
|Cumulative effect of change in accounting             |              
|principle                                             |              
|                                                      |              
|                                                     
|Net earnings/(loss) per common share (diluted)        |              
|                                                      |              
|Year ended December 31, 2002                         
|                                                      |              
|Net revenue                                           |              
|Gross profit                                          |              
|Net earnings                                          |              
|Net earnings per common share:                        |              
|Basic                                                 |              
|Diluted                                               |              

NOTE M  ASSET
RETIREMENT OBLIGATIONS

| | In
September 2001, the FASB issued Statement of Financial Accounting Standards No. 143,
Accounting for Asset Retirement Obligations, which is effective for the
Companys 2003 fiscal year. Under Statement 143, a future retirement obligation
relating to future decommissioning costs of the Companys equipment and buildings is
recorded at present value by discounting the Companys estimated future asset
retirement obligation using the Companys estimated credit-adjusted borrowing rate.
The offset to the liability is capitalized as part of the carrying amount of the related
long-lived asset. The asset retirement obligation (ARO) has been recorded in the
accompanying balance sheet and will be adjusted to fair value over the estimated useful
lives of the assets as an accretion expense.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | At
January 1, 2003 the Company adopted Statement 143 and recognized an initial ARO of
approximately $478,000 and net capitalized costs of $126,000. The impact of adopting the
Statement was recognized as a cumulative effect of change in accounting principle in the
amount of $353,000 ($222,000 after taxes). The Company has recognized an increase in the
ARO of approximately $36,000 for the year ended December 31, 2003 representing the
accretion expense. Approximately $30,000 in amortization expense was recognized related to
the capitalized cost through the period ending December 31, 2003.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE N  RECENTLY
ISSUED ACCOUNTING STANDARDS

| | In
June 2001, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets
(SFAS 142). Under SFAS 142, companies are no longer required to amortize
goodwill and other intangible assets with indefinite lives but will be required to test
these assets periodically for impairment. SFAS 142 is effective for fiscal years beginning
after December 15, 2001. The Company adopted SFAS 142 effective January 1, 2002.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
June 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 143, Accounting for Asset Retirement Obligations,
which was effective for the Companys 2003 fiscal year (see Note M
above).
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
FASB issued Statement of Financial Accounting Standards No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets (SFAS 144), in August 2001.
SFAS 144 establishes a single accounting model for the impairment or disposal of
long-lived assets and new standards for reporting discontinued operations. SFAS 144
superseded Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, and APB
Opinion No. 30, Reporting the Results of OperationsReporting the Effects
of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions. The provisions of SFAS 144 are effective in
fiscal years beginning after December 15, 2001 and, in general, are to be applied
prospectively. The Company adopted SFAS 144 effective January 1, 2002 and such adoption
had no material impact on the financial statements.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
June 2002, the FASB issued Statement of Financial Accounting Standards No. 146,
Accounting for Costs Associated with Exit or Disposal Activities
(SFAS 146), which addresses financial accounting and reporting for costs
associated with exit or disposal activities and supersedes Emerging Issues Task Force
(EITF) Issue 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in
a Restructuring). SFAS 146 requires that a liability for a cost associated with an
exit or disposal activity be recognized when the liability is incurred. Under EITF Issue
94-3, a liability for an exit cost as defined in EITF Issue 94-3 was recognized at the
date of an entitys commitment to an exit plan. SFAS 146 also establishes that the
liability should initially be measured and recorded at fair value. SFAS 146 is effective
for exit and disposal activities initiated after December 31, 2002. The adoption of this
pronouncement did not have a material impact on the Companys financial statements.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
November 2002, the FASB issued FASB Interpretation No. 45 (FIN 45),
Guarantors Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees and Indebtedness of Others.FIN 45 elaborates on the
disclosures to be made by the guarantor in its interim and annual financial statements
about its obligations under certain guarantees that it has issued. It also requires that a
guarantor recognize, at the inception of a guarantee, a liability for the fair value of
the obligation undertaken in issuing the guarantee. The initial recognition and
measurement provisions of this interpretation are applicable on a prospective basis to
guarantees issued or modified after December 31, 2002; while the provisions of the
disclosure requirements are effective for financial statements of interim or annual
reports ending after December 15, 2002. The Company adopted the disclosure provisions of
FIN 45 during the fourth quarter of fiscal 2002 and such adoption had no material impact
on its financial statements.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
December 2002, the FASB issued Statement of Financial Accounting Standards No. 148,
Accounting for Stock-Based Compensation  Transition and Disclosure
(SFAS 148). SFAS 148 amends Statement No. 123, Accounting for
Stock-Based Compensation(SFAS 123), to provide alternative methods for
voluntary transition to SFAS 123s fair value method of accounting for stock-based
employee compensation. SFAS 148 also requires disclosure of the effects of an
entitys accounting policy with respect to stock-based employee compensation on
reported net earnings (loss) and earnings (loss) per share in annual and interim financial
statements. The provisions of SFAS 148 are effective in fiscal years beginning after
December 15, 2002. The Company has adopted the disclosure option of this pronouncement and
will continue to account for stock options under the intrinsic method.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 
| | 

| | In
January 2003, the FASB issued FASB Interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entities. In general, a variable interest entity
is a corporation, partnership, trust, or any other legal structure used for business
purposes that either (a) does not have equity investors with voting rights or (b) has
equity investors that do not provide sufficient financial resources for the entity to
support its activities. FIN 46 requires certain variable interest entities to be
consolidated by the primary beneficiary of the entity if the investors do not have the
characteristics of a controlling financial interest or do not have sufficient equity at
risk for the entity to finance its activities without additional subordinated financial
support from other parties. The Company expects that the provisions of FIN 46 will not
have a material impact on its financial statements upon adoption since the Company
currently has no variable interest entities.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Report
of Independent Certified Public Accountants on Schedule

Board of Directors
Theragenics Corporation®

In connection with our audit of the
financial statements of Theragenics Corporation® referred to in our report
dated January 16, 2004, which is included in the annual report to security holders and
incorporated by reference in Part II of this form, we have also audited Schedule II for
each of the three years in the period ended December 31, 2003. In our opinion, the
schedule presents fairly, in all material respects, the information required to be set
forth therein.

|                                                                             | 
|---------------------------------------------------------------------------- | 
|/s/ GRANT THORNTON LLP
GRANT THORNTON LLP.
Atlanta, Georgia
January 16, 2004 | 

Theragenics
Corporation®

SCHEDULE II 
VALUATION AND QUALIFYING ACCOUNTS

For each of the three years in the period ended December 31, 2003
(Amount in thousands)

|Column A - Description       | Column B | Column C - Additions | Column D | Column E
|---------------------------- | -------- | -------------------- | -------- | --------
|
|Year ended December 31, 2003 |          |                      |          |         
|Allowance for doubtful       |          |                     
|accounts receivable          |          |                      | $        | 147     
|Allowance for doubtful       |          |                     
|inventory                    |          |                      | $        | 65      
|Year ended December 31, 2002 |          |                      |          |         
|Allowance for doubtful       |          |                     
|accounts receivable          |          |                      | $        | 300     
|Allowance for doubtful       |          |                     
|inventory                    |          |                      | $        | 548     
|Year ended December 31, 2001 |          |                      |          |         
|Allowance for doubtful       |          |                     
|accounts receivable          |          |                      | $        | 21      
|Allowance for doubtful       |          |                     
|inventory                    |          |                      | $        | 300     

(a)  write-off of uncollectible amounts 
                
                
                       
     (b)  disposal of inventory

# THERAGENICS CORPORATION®

# INDEX TO EXHIBITS

10.25         Executive
Employment Agreement for Tracy M. Culver

10.26         Executive Employment
Agreement for Michael OBannon

10.27         Amendment to
Executive Employment Agreement for Michael OBannon

10.28         Form of Directors
and Officers Indemnification Agreement

24.1                   Consent of Independent Public Accountants for Incorporation by Reference of Audit
              Report into Registration Statements

31.1                   Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
                     Act of 2002.

31.2                   Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
              Act of 2002.

32.1          
Certification of Chief Executive Officer Pursuant to Section 1350, Chapter 63 of Title 18,
United States Code, as Adopted to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2           Certification of Chief Financial Officer Pursuant to Section 1350, Chapter 63 of Title 18,
United States Code, as Adopted to Section 906 of the Sarbanes-Oxley Act of 2002.