##### Table of Contents



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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549




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FORM 10-K/A

Amendment No. 1




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(Mark One)

x
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934


For the fiscal year ended September 30, 2003

or

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


Commission File Number: 000-49867



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CTI Molecular Imaging, Inc.

(Exact Name of Registrant as Specified in Its Charter)


Delaware
    
    62-1377363(State of Incorporation)
    
    (I.R.S. Employer Identification No.)810 Innovation Drive, Knoxville, Tennessee
    
    37932(Address of Principal Executive Offices)
    
    (Zip Code)


Registrants Telephone Number, Including Area Code: (865) 218-2000

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

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

Common Stock, $0.01 par value

Series C Junior Participating Preferred Stock Purchase Rights

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 o

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 Exchange Act Rule 12b-2). Yes x No o

The aggregate market value of common stock held by non-affiliates of the
registrant was $468,191,923 as of March 31, 2003, based upon the last sale
price of such stock as reported on the Nasdaq National Market on that day
(assuming for purposes of this calculation, without conceding, that all
executive officers and directors are affiliates).

There were 45,294,142 shares of common stock outstanding at January 14,
2003.



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TABLE OF CONTENTS



|                                              |                                                                                                          |  |  |  |  |  |  | 
|--------------------------------------------- | -------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|EXPLANATORY NOTE                             
|PART III                                     
|                                              | Item 10. Directors and Executive Officers of the Registrant.                                            
|                                              | Item 11. Executive Compensation.                                                                        
|                                              | Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
|                                              | Item 13. Certain Relationships and Related Transactions.                                                
|                                              | Item 14. Principal Accountant Fees and Services.                                                        
|PART IV                                      
|                                              | Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K                               
|SIGNATURES                                   
|EXHIBIT INDEX                                
|Ex-23.1 Consent of PricewaterhouseCoopers LLP
|Ex-31.1 Section 302 Certification of the CEO 
|Ex-31.2 Section 302 Certification of the CFO 



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##### Table of Contents



CTI MOLECULAR IMAGING, INC.

FORM 10-K/A


TABLE OF CONTENTS

EXPLANATORY NOTE
    
    
    A-1PART IIIItem 10.
    
    Directors and Executive Officers of the Registrant
    
    
    A-2Item 11.
    
    Executive Compensation
    
    
    A-6Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    A-10Item 13.
    
    Certain Relationships and Related Transactions
    
    
    A-12Item 14.
    
    Principal Accountant Fees and Services
    
    
    A-14PART IVItem 15.
    
    Exhibits, Financial Statement Schedules, and Reports on Form 8-K
    
    
    A-16SIGNATURES
    
    
    A-17





EXPLANATORY NOTE

This amendment on Form 10-K/A is being filed in order to amend the
Companys Annual Report on Form 10-K for the fiscal year ended September 30,
2003, as originally filed with the Securities and Exchange Commission (SEC) on
December 23, 2003, in the following respects:



| | 1. |  | Including the information required by Items 10, 11, 12, and
13 in Part III of the Annual Report on Form 10-K, which originally
was intended to be incorporated by reference to the information to
be included in the Companys proxy statement for its 2004 Annual
Meeting of Stockholders;
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. |  | Including, on a voluntary basis, information under Item 14 of
Part III; and
| | -- |  | ---------------------------------------------------------------------------



| | 3. |  | Redesignating Item 14 in Part IV as Item 15 and amending the
Exhibit Index in that Item to reflect the inclusion of updated
certifications of certain executive officers and an updated consent
letter from PricewaterhouseCoopers LLP (PwC).
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Except as expressly set forth herein, all information contained in this
amendment is as of September 30, 2003, or as of December 23, 2003, the filing
date of the Companys original Annual Report on Form 10-K for the fiscal year
ended September 30, 2003. Only certain portions of the Companys Annual Report
on Form 10-K are being amended by this Form 10-K/A, and the amended report does
not reflect events occurring after the filing of the Companys original Form
10-K, or modify or update those disclosures in any way. The filing of this
Form 10-K/A shall not be deemed an admission that the original Form 10-K, when
filed, knowingly included any untrue statement of a material fact or omitted to
state a material fact necessary to make a statement not misleading.

A-1



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##### Table of Contents






PART III




Item 10.Directors and Executive Officers of the Registrant.

Board of Directors

The Companys Certificate of Incorporation provides that the Board of
Directors of the Company will consist of not less than six nor more than nine
directors, as determined from time to time by resolution of the Board of
Directors. The size of the Board of Directors is currently fixed at nine.

The Companys Certificate of Incorporation also divides the Board of
Directors into three classes. Directors in each class serve staggered
three-year terms, so that approximately one third of the terms of the directors
expire each year. The current classes of directors and their terms of office
are:

CLASS I
    
    CLASS II
    
    CLASS IIITerm expiring in 2006
    
    Term expiring in 2004
    
    Term expiring in 2005Terry D. Douglass, Ph.D.
    
    Bernd Haetzel
    
    James R. Heath, Ph.D.Roy Doumani
    
    Hamilton Jordan
    
    Leroy M. Hood, M.D., Ph.D.William W. McInnes
    
    Michael E. Phelps, Ph.D.
    
    Ronald Nutt, Ph.D.


Class I Directors  Terms expiring 2006:

Terry D. Douglass, Ph.D., 61, Chairman of the Board of Directors.Dr.
Douglass is one of our founders and has served as the Chairman of the Board of
the Company since 1983. From our founding in 1983 until October 2003, Dr.
Douglass also served as the Companys President and Chief Executive Officer.
Before founding the Company, he spent 15 years in various management positions
with EG&G in Oak Ridge, Tennessee (EG&G), resigning as its President in 1983 to
found the Company. Dr. Douglass led the group at EG&G that worked with Dr.
Michael E. Phelps of UCLA to develop the first commercial PET scanner in 1976.
He holds several patents and has authored several publications in nuclear
electronics and PET. He holds a Bachelor of Science degree in electrical
engineering, a Master of Science degree in electrical engineering, and a Ph.D.
in electrical engineering from the University of Tennessee at Knoxville.

Roy Doumani, 68.Mr. Doumani has been a director of the Company since
April 2003. He also is a member of the Board of Directors of the California
NanoSystems Institute, and presently is serving as the Institutes Chief
Operating Officer. Mr. Doumani currently holds an equity position in and
serves as vice chairman of Xiamen International Bank (XIB), the first joint
venture bank in the Peoples Republic of China. He was a founder and director
of First Los Angeles Bank; a shareholder and chairman of First Interstate Bank
of Hawaii; a shareholder and director of HonFed Bank; and a shareholder and
chairman of World Trade Bank in Los Angeles. Mr. Doumani has been involved in
the start-up of and has served as a board member for and advisor to a number of
companies in the United States, Asia, and Europe. In addition to his business
interests, he serves as a member of the advisory boards of both RANDs Center
for Middle East Public Policy and its Center for Asia Pacific Policy. Mr.
Doumani holds a Bachelor of Arts degree in business and finance from the
University of California at Los Angeles and a law degree from the University of
Southern California.

William W. McInnes, 55.Mr. McInnes has served as a director of the
Company since May 2002. Since his retirement from Hospital Corporation of
America in 1993, Mr. McInnes has worked as a private investor. From 1978
through 1993, Mr. McInnes worked for Hospital Corporation of America during
which time he served as the Vice President  Finance and Treasurer. Mr.
McInnes was a founder of Tennessee Commerce Bank, located in Nashville,
Tennessee, and has served as one of its directors since its inception in 1999.
Mr. McInnes was also a founder of Diversified Trust Company, located in
Memphis, Tennessee, and has served on its board of directors since 1993. Mr.
McInnes holds a Bachelor of Arts degree in philosophy from Vanderbilt University
and an M.B.A. degree from the Harvard Business School.

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Class II Directors  Terms expiring 2004:

Bernd Haetzel, 37.Mr. Haetzel has served as a director of the Company
since February 2002. Since August 2000, he has served as the Vice President of
Finance and Administration for the Oncology Care Systems Group of Siemens
Medical Solutions USA, Inc. From 1996 to 2000, Mr. Haetzel served as the Vice
President of Operations of the Systems Engineering Plant for Siemens
Automation & Controls Group in Chemnitz, Germany. From 1993 to 1996, he served
in various financial positions for Siemens Energy & Automation, Inc. Mr.
Haetzel holds a degree in finance and business administration from
Berufsakademie in Stuttgart, Germany. Mr. Haetzel was nominated for election
to the Board of Directors as a nominee of Siemens pursuant to the terms of the
joint venture agreement between the Company, Siemens and certain of the
Companys other stockholders, directors and executive officers with respect to
the formation of CTI PET Systems. Our relationship with Siemens is discussed
in more detail under the heading BusinessOur Relationship with Siemens in
our Annual Report on Form 10-K for the fiscal year ended September 30, 2003, as
originally filed with the SEC on December 23, 2003.

Hamilton Jordan, 59.Mr. Jordan is former White House Chief of Staff to
President Jimmy Carter and for the past twenty years has written two
best-selling books, successfully battled three different cancers, organized two
professional sports teams, including a National Football League franchise, and
been involved as an investor and board member in the start-up of successful
companies and projects in both the public and private sectors, focused on
health and biotechnology generally and oncology specifically. He is founder of
The Georgia Cancer Coalition, a $1 billion public-private effort to make
Georgia a cancer research center, serves at the request of President Bush on
the National Dialogue for Cancer, and led a group of scientists in a successful
effort to double the National Institutes of Health and National Cancer
Institute budgets. Currently, Mr. Jordan is an investor and board member of
several different biotech organizations. He holds a Bachelor of Arts degree in
history from the University of Georgia.

Michael E. Phelps, Ph.D., 64.Dr. Phelps has served as a director of the
Company since 1983. He has been on the faculty of the University of California
since 1976, and currently is the Norton Simon Professor and Chair of the
Department of Molecular and Medical Pharmacology of the University of
California at Los Angeles (UCLA). In addition to serving as the Departmental
Chairman and holding an endowed professorship, he also is the Director of the
Crump Institute for Molecular Imaging, Professor of Biomathematics, the
Associate Director of the Laboratory of Structural Biology and Molecular
Medicine and the Chief of Nuclear Medicine. Dr. Phelps has received numerous
awards and honors, including the George Von Hevesy Prize (won twice) from the
Von Hevesy Foundation in Zurich, the 1983 Paul Aebersold Award from the Society
of Nuclear Medicine, the chairmanship of the 1983 Nobel Symposium, the 1984
Sarah L. Poiley Memorial Award from the New York Academy of Sciences, the 1984
Ernest O. Lawrence Presidential Award, election to the Institute of Medicine of
the National Academy of Sciences in 1985, the 1987 Rosenthal Foundation Award
of the American College of Physicians, the 1992 Pasarow Foundation Award, the
1998 Enrico Fermi Presidential Award, and election to the National Academy of
Sciences in 1999. He has published over 500 scientific papers and books
dealing with such diverse topics as development of PET, molecular imaging
probes for assays from metabolism to gene expression, brain mapping of normal
cerebral function and brain development, seizure disorders in infants and
children, diagnosing and staging of numerous types of cancers, the differential
diagnosis of Alzheimers disease and the relationship between genetic defects
and metabolic abnormalities in the brain. Dr. Phelps also is the current
president of the Academy of Molecular Imaging. He holds a Bachelor of Science
degree in chemistry and mathematics from Western Washington State University
and a Ph.D. in chemistry from Washington University in St. Louis.

Class III Directors  Terms expiring 2005:

James R. Heath, Ph.D., 42.Dr. Heath has been a director of the Company since April 2003. He is the
Elizabeth W. Gilloon Professor of Chemistry at the California Institute of
Technology (Caltech), and Professor of Molecular & Medical Pharmacology at
UCLA. While studying at Rice University, he was the principal graduate student
involved in the discovery of C60 and the class of all carbon molecules known as
the fullerenes; his graduate advisor shared the 1996 Nobel Prize in Chemistry
for this discovery. From 1988 to 1991, Dr. Heath was a Miller Postdoctoral
Fellow at the University of California at Berkeley. He was a member of the
technical staff at IBMs Watson Labs from 1991 to 1994. In 1994, Dr. Heath
joined the faculty of UCLA as an Assistant Professor, and was promoted to
tenure in 1996 and to Professor in 1997. His primary scientific research over
the past 10 years has been in the area of nanoscience. Dr. Heaths work on
molecular electronics circuitry was cited by the journal Science as
Breakthrough of the Year 2000. He has received several scientific awards,
including the 2000 Julius Springer Award for Applied Physics, the 2000 Feynman
Prize in Nanotechnology, and the 2001 Raymond and Beverly

A-3



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Sackler Prize in the
Physical Sciences, and a 2002 commendation from Scientific American as one of
the top 50 technologists in the U.S. Dr. Heath has published approximately 110
papers in reviewed scientific journals and holds seven issued patents. He is a
co-founder of NanoSys, Inc. and a previous member of the Defense Science Board.
Dr. Heath holds a Bachelor of Science degree in chemistry from Baylor
University and a Ph.D. in chemistry from Rice University.

Leroy M. Hood, M.D., Ph.D., 65.Dr. Hood has been a director of the
Company since June 2002. Since 1999, Dr. Hood has served as the founder,
president and director of the Institute for Systems Biology in Seattle,
Washington, which is an organization engaged in developing systems approaches
to biology and medicine. From 1992 to 1999, Dr. Hood was a professor at the
University of Washington where he founded and chaired the Department of
Molecular Biotechnology. From 1970 through 1992 he was a professor in biology
at the California Institute of Technology and from 1967 to 1970, Dr. Hood was a
Senior Investigator at the National Cancer Institute. Dr. Hood currently serves
on the board of directors of Lynx Therapeutics, Inc. and Paradigm Genetics,
Inc. Dr. Hood has co-authored more than 500 peer-reviewed papers and has
co-authored textbooks in biochemistry, immunology, molecular biology and
genetics. Dr. Hood has received numerous scientific and academic awards,
including the Albert Lasker Medical Research Award in 1987. Dr. Hood holds a
Bachelor of Science degree in biology from the California Institute of
Technology, an M.D. degree from The Johns Hopkins University, and a Ph.D. in
biochemistry from the California Institute of Technology.

Ronald Nutt, Ph.D., 65.Dr. Nutt is one of our founders and has served on
the Companys Board of Directors since 1983. He has been President and Chief
Executive Officer of the Company since October 2003; before assuming these
posts, he was the President of CTI PET Systems, now CPS Innovations, from
September 2001 to October 2003, and was the Senior Vice President and Technical
Director of the Company from its founding in 1983 until September 2001. Dr.
Nutt has more than 30 years experience in various aspects of research and
development, having been a pioneer in the development of nuclear instruments at
the Oak Ridge National Laboratory and EG&G. He holds several patents and has
authored numerous publications regarding nuclear electronics and PET. Dr. Nutt
is a member of the Board of Directors of CPS Innovations and the Institute of
Molecular Technology of the Academy of Molecular Imaging. He is a fellow of
the Institute of Electrical and Electronics Engineers and received the Nathan
Daugherty Award, the University of Tennessees highest award in engineering, in
1997. In addition, Dr. Nutt was recognized as the Outstanding Engineer in the
southeastern U.S. in 1996 and received the Distinguished Scientist Award from
the Academy of Molecular Imaging in 2000. Dr. Nutt holds a Bachelor of Science
degree in electrical engineering, a Master of Science degree in electrical
engineering, and a Ph.D. in electrical engineering from the University of
Tennessee at Knoxville.

Executive Officers

Ronald Nutt, Ph.D., 65, Chief Executive Officer and President.A
biography of Dr. Nutt is set forth above under the heading Board of
Directors.

David N. Gill, 48, Senior Vice President and Chief Financial Officer.Mr. Gill has served as our Senior Vice President and Chief Financial
Officer since January 2002. He served from February 2000 to March 2001 as
Chief Financial Officer and Director, and from January 2001 to August 2001 as
President, Chief Operating Officer, and Director, of Interland, Inc., a
publicly traded telecom-related company, prior to its sale. Mr. Gill served
from July 1996 to February 2000 as Chief Financial Officer and from February
1997 to February 2000 as Chief Operating Office of Novoste Corporation, a
publicly traded medical device company. From August 1995 to June 1996, he
served as Chief Financial Officer of SPEA Software AG, prior to its sale. From
1992 to 1995, Mr. Gill served as President and Director of Dornier Medical
Systems, Inc., a medical capital equipment company and a member of the
Daimler-Benz Group, and from 1990 to 1992 he served as its Vice President of
Finance. He holds a Bachelor of Science degree in accounting from Wake Forest
University and an M.B.A. degree from Emory University, and formerly was a
certified public accountant.

Thomas J. Hook, 41, Senior Vice President and President of CTI Solutions.
Mr. Hook has served as a Senior Vice President of the Company since July 2002
and as President of CTI Solutions since we combined our PETNet Pharmaceuticals,
Inc. and CTI Services, Inc. subsidiaries into our CTI Solutions division
effective October 1, 2003. Previously, he had served as President of CTI
Services, Inc. since July 2002 and as President of PETNet Pharmaceuticals, Inc.
since March 2003. Prior to joining us, Mr. Hook served as General Manager of
Global Functional and Molecular Imaging with GE Medical Systems from 2000 to
2002. In 1997 he founded, and from

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1997 to 2000 he served as President and
Chief Operating Officer of, VanOwen Group Acquisition Company in Dallas, Texas.
From 1991 to 1997, Mr. Hook served as Manufacturing Manager for Duracell USA,
Inc. prior to its acquisition by The Gillette Company. From 1987 to 1991, he
was a Lieutenant in the United States Navy, where he served as a nuclear
engineer on the U.S.S. Abraham Lincoln. Mr. Hook holds a Bachelor of Science
degree in chemistry and mathematics from St. Bonaventure University, a Master
of Science degree in chemistry from the State University of New York at
Buffalo, and an M.B.A. degree from Vanderbilt University. He completed his
nuclear engineering training at the U.S. Navy Nuclear Power School.

R. Gregory Brophy, 44, President of CPS Innovations.Mr. Brophy has
served as President of CPS Innovations since October 2003. Prior to assuming
this post, he served as our Senior Vice President for Business Development and
General Counsel from November 2002 to October 2003. From 1989 to 2002, Mr.
Brophy practiced law with Alston & Bird LLP in Atlanta, Georgia, where he was a
partner from 1995 until joining the Company. While at Alston & Bird, Mr.
Brophy focused his practice on corporate finance matters, with an emphasis on
mergers and acquisitions, public and private equity offerings, venture capital
financing, and the formation of strategic alliances. Mr. Brophy holds a
Bachelor of Science degree in electrical engineering from the University of
Notre Dame and a law degree from the University of Georgia School of Law.

Cliffreda W. Gilreath, 49, Senior Vice President of Operations.Ms.
Gilreath has been Senior Vice President of the Company since October 2003.
Prior to that, she served as Vice President of Operations for CPS Innovations
(CTI PET Systems, Inc.). In this position, she directed the development and
manufacturing of the detectors for PET tomographs and had overall
responsibility for tomograph manufacturing. Since joining the Company in
December 1988, Ms. Gilreath has served in several management roles, including
as General Manager of our Cyclotron Systems business. She was responsible for
relocating the cyclotron business from Berkeley, California, to our
headquarters in Knoxville, Tennessee. Before joining the Company, Ms. Gilreath
served as Director of Professional Services at Hospital Corporation of
Americas Park West Hospital in Knoxville. Ms. Gilreath holds a Bachelor of
Science degree in organizational management from Tusculum College.

Audit Committee

The Company has established a separately designated standing audit
committee in accordance with Section 3(a)(58)(A) of the Securities Exchange Act
of 1934, as amended (the Exchange Act). The Audit Committee consists of Mr.
McInnes, who chairs the committee, Mr. Doumani, and Dr. Heath. The Board of
Directors has determined that Mr. McInnes is a financial expert, as that term
is defined by the SEC, and that all members of the audit committee are
independent, as that term is defined in Rule 4200(a)(15) of the listing
standards of the National Association of Securities Dealers (the NASD), which operates the Nasdaq
Stock Market on which the Companys common stock is traded.

Section 16(a) Beneficial Ownership Reporting Compliance

The federal securities laws require our directors and executive officers
and persons who beneficially own more than 10% of a registered class of our
equity securities to file initial reports of ownership and reports of changes
in ownership of our securities with the SEC. The SEC also requires that
persons required to file these forms furnish the Company with copies of the
forms they file. Based solely on our review of the copies of these forms
received by us and representations from certain reporting persons that no other
reports were required to be filed, we believe that all of our directors and
executive officers complied with the SECs beneficial ownership reporting
requirements for the Companys fiscal year ended September 30, 2003.

Code of Ethics

We have adopted the Code of Business Conduct and Ethics of CTI Molecular
Imaging, Inc., a code of ethics that applies to all of our employees, officers,
and directors, including our principal executive officer and our principal
financial officer (principal accounting officer). The Code of Business Conduct
and Ethics has been filed with the SEC as Exhibit 10.49 to our Annual Report on
Form 10-K for the fiscal year ended September 30, 2003, as originally filed
with the SEC on December 23, 2003.

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##### Table of Contents






Item 11.Executive Compensation.

Summary Compensation Table

In the table below, we summarize the annual, long-term and other
compensation for services in all capacities to the Company and its subsidiaries
paid during the fiscal years ended September 30, 2003, 2002, and 2001 to our
Chief Executive Officer and our other four most highly compensated executive
officers of the Company during the year ended September 30, 2003 (we refer to
these five officers as our named executive officers):

Annual Compensation
    
    Long-Term CompensationOther Annual
    
    
    
    
    
    Securities
    
    All OtherName and Principal
    
    
    
    
    
    
    
    
    
    
    
    
    
    Compensation ($)
    
    Restricted Stock
    
    Underlying Options
    
    Compensation ($)Position (1)
    
    Fiscal Year
    
    Salary ($)
    
    Bonus ($)
    
    (2)
    
    Award(s) ($) (3)
    
    (#)
    
    (4)Terry D. Douglass, Ph.D.
    
    
    2003
    
    
    $
    275,000
    
    
    $
    107,250
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    15,250President, Chief
    
    
    2002
    
    
    
    276,923
    
    
    
    133,413
    
    
    
    
    
    
    
    
    
    
    
    320,000
    
    
    
    13,562Executive Officer and
    
    
    2001
    
    
    
    231,152
    
    
    
    146,250
    
    
    
    
    
    
    
    
    
    
    
    41,870
    
    
    
    12,822ChairmanRonald Nutt, Ph.D.
    
    
    2003
    
    
    $
    269,958
    
    
    $
    187,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    13,033President of CTI PET
    
    
    2002
    
    
    
    268,629
    
    
    
    125,000
    
    
    
    
    
    
    
    
    
    
    
    240,000
    
    
    
    9,433Systems, Inc.
    
    
    2001
    
    
    
    178,563
    
    
    
    112,500
    
    
    
    
    
    
    
    
    
    
    
    27,336
    
    
    
    10,714David N. Gill (5)
    
    
    2003
    
    
    $
    225,000
    
    
    $
    87,750
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    12,721Senior Vice President
    
    
    2002
    
    
    
    132,619
    
    
    
    86,062
    
    
    
    
    
    
    
    
    
    
    
    320,000
    
    
    
    107,132and Chief Financial
    
    
    2001
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    OfficerThomas J. Hook (6)
    
    
    2003
    
    
    $
    250,000
    
    
    $
    97,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    7,500Senior Vice President
    
    
    2002
    
    
    
    38,462
    
    
    
    69,231
    
    
    
    
    
    
    $
    2,000,000
    
    
    
    600,000
    
    
    
    and President of CTI
    
    
    2001
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Services and PETNET
PharmaceuticalsR. Gregory Brophy (7)
    
    
    2003
    
    
    $
    195,577
    
    
    $
    137,750
    
    
    $
    141,753
    
    
    
    
    
    
    
    
    
    
    $
    140,699Senior Vice President
    
    
    2002
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,500,000
    
    
    
    324,089
    
    
    
    for Business
    
    
    2001
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Development, General
Counsel, and Secretary




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|(1) |  | The principal position for each named executive officer is given as of
September 30, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | For Mr. Brophy, the amount reflected in this column for the fiscal year
ended September 30, 2003 includes a bonus in the amount of $131,138 paid
pursuant to a guarantee by the Company to compensate Mr. Brophy if the
value of the restricted stock awarded to him in the fiscal year ended
September 30, 2002 decreased in value from the grant date to the
anniversary of the grant date. For all other named executive officers
identified in the table, the aggregate amount of perquisites and other
personal benefits provided to the officer is less than the lesser of 10%
of his or her total annual salary and bonus or $50,000.
|   
|(3) |  | We have made the following awards of restricted stock to our named
executive officers:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

Number of
    
    Value at Date
    Value at SeptemberName
    
    Date of Grant
    
    Shares (#)
    
    of Grant ($)
    
    30, 2003 ($) (i)Mr. Hook (ii)
    
    
    7/22/2002
    
    
    
    128,617
    
    
    $
    2,000,000
    
    
    $
    1,899,673Mr. Brophy (iii)
    
    
    8/6/2002
    
    
    
    75,911
    
    
    
    1,500,000
    
    
    
    1,121,205







| | (i) |  | Based on $14.77 per share, the closing price of our common stock on
September 30, 2003.
| | --- |  | ---------------------------------------------------------------------------------------



| | (ii) |  | The restricted stock award granted to Mr. Hook vests annually in
25% increments, starting on July 22, 2003. Value at Date of Grant is
based on $15.55 per share, the fair market value of our stock on the
date of the grant to Mr. Hook.
| | ---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) |  | The restricted stock award granted to Mr. Brophy vests annually in
25% increments, starting August 18, 2003. Value at Date of Grant is
based on $19.76 per share, the fair market value of our stock on the
date of the grant to Mr. Brophy.
| | ----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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##### Table of Contents





| |  |  | The following table summarizes the total value, as of September 30, 2003, of
all restricted stock awards we have made and of the number of shares that
have vested under those awards:
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

All Restricted Stock Awards
    
    All Vested Shares of Restricted StockAggregate Value
    
    
    
    
    
    Aggregate ValueAggregate Number of
    
    at September 30,
    
    Aggregate Number of
    
    at September 30,Shares ($)
    
    2003 ($) (x)
    
    Shares ($)
    
    2003 ($) (x)All awards to named
executive officers
    
    
    204,528
    
    
    $
    3,020,878
    
    
    
    51,131
    
    
    $
    755,205All awards to other employees
    
    
    39,455
    
    
    
    582,751
    
    
    
    21,956
    
    
    
    324,290Total
    
    
    243,983
    
    
    
    3,603,629
    
    
    
    73,087
    
    
    
    1,079,495


(x) Based on $14.77 per share, the closing price of our common stock on
September 30, 2003.Before vesting, the recipients of restricted stock awards have the right to
vote the as to all shares of restricted stock. The Company has not paid
dividends on any shares of common stock in the past, and does not expect to
do so in the future, but if the Company begins payment of dividends on
common stock, then recipients of restricted stock awards will have the right
to receive dividends on the unvested shares of restricted stock.




|(4) |  | The amounts set forth in this column represent contributions to the
Companys 401(k) plan on behalf of Drs. Douglass and Nutt and Messrs.
Gill, Hook, and Brophy. For the fiscal year ended September 30, 2002, the
amount set forth for Mr. Gill also includes the value of 21,440 shares of
our common stock that were issued to him when he joined the Company.
These shares were valued at $4.69 per share, which was the fair market
value of our common stock on the date the shares were issued. For the
fiscal year ended September 30, 2003, the amount set forth for Mr. Brophy
also includes $128,894 paid to Mr. Brophy as a taxable fringe benefit to
offset non-deductible moving expenses he incurred when he relocated to
Knoxville to begin his employment with the Company.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(5) |  | Mr. Gill was not employed by the Company during the fiscal year ended
September 30, 2001. He began full employment in January 2002, and
therefore the compensation shown for the fiscal year ended September 30,
2002 is for a partial year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|(6) |  | Mr. Hook was not employed by the Company during the fiscal year ended
September 30, 2001. He began full employment in July 2002, and therefore
the compensation shown for the fiscal year ended September 30, 2002 is for
a partial year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|(7) |  | Mr. Brophy was not employed by the Company during the fiscal year ended
September 30, 2001. He began full employment in November 2002, and
therefore the compensation shown for the fiscal year ended September 30,
2003 is for a partial year. However, the stock options and restricted
stock awarded to Mr. Brophy when he commenced employment were approved by
the Board of Directors in August 2002, and have been accounted for in the
fiscal year ended September 30, 2002.                                                                                                                                                                                                                                                                                                          

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##### Table of Contents



Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values

In the table below, we summarize selected information regarding stock
options exercised by the named executive officers during the fiscal year ended
September 30, 2003 and the value of unexercised stock options as of September
30, 2003:

Number of Securities
    
    Value of UnexercisedUnderlying Unexercised
    
    In-The-Money Options atOptions at Fiscal Year End (#)
    
    Fiscal Year End ($) (2)Shares Acquired on
    
    Value RealizedName
    
    Exercise (#)
    
    ($) (1)
    
    Exercisable
    
    Unexercisable
    
    Exercisable
    
    UnexercisableTerry D. Douglass, Ph.D.
    
    
    32,000
    
    
    $
    420,038
    
    
    
    130,246
    
    
    
    
    
    
    $
    1,439,842
    
    
    
    Ronald Nutt, Ph.D.
    
    
    
    
    
    
    
    
    
    
    96,192
    
    
    
    
    
    
    
    1,050,581
    
    
    
    David N. Gill
    
    
    
    
    
    
    
    
    
    
    128,000
    
    
    
    128,000
    
    
    
    1,267,968
    
    
    $
    1,267,968Thomas J. Hook
    
    
    
    
    
    
    
    
    
    
    300,000
    
    
    
    300,000
    
    
    
    
    
    
    
    R. Gregory Brophy
    
    
    
    
    
    
    
    
    
    
    162,044
    
    
    
    162,045
    
    
    
    
    
    
    
    




---

|(1) |  | Amount based on the difference between the fair market value of our
common stock on the date of exercise and the exercise price of the option.   
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Amount based on the difference between $14.77, the closing price of our
common stock on September 30, 2003, and the exercise price of the option.

Compensation of Directors

During the fiscal year ended September 30, 2003, the Companys director
compensation policy entitled directors who neither were employed by the Company
nor had a contractual right to a seat on the board to the following
compensation:



| |  |  | a fee of $3,000 for each meeting attended in person and $1,000 for
each meeting attended telephonically;
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | a fee of $1,500 for each committee meeting attended in person and
$1,000 for each committee meeting attended telephonically;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------



| |  |  | an annual retainer of $5,000 for service as chair of a committee;
| | - |  | -----------------------------------------------------------------



| |  |  | an initial grant of options to purchase shares valued at $375,000
upon election to the board of directors having an exercise price equal
to fair market value of such shares on the date of election; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an annual grant of options to purchase shares valued at $75,000
having an exercise price equal to the fair market value of such shares
on the date of grant.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------

Beginning in December 2003, the Company has revised its director
compensation policy. Directors who neither are employed by the Company nor
have a contractual right to a seat on the board will receive the following
compensation:



| |  |  | a fee of $3,000 for each meeting attended, either in person or telephonically;
| | - |  | ------------------------------------------------------------------------------



| |  |  | a fee of $2,000 for each committee meeting attended, either in person or telephonically;
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | an annual cash retainer of $30,000;
| | - |  | -----------------------------------



| |  |  | an annual retainer of $5,000 for service as chair of a committee;
| | - |  | -----------------------------------------------------------------



| |  |  | an initial grant of options to purchase shares valued at $375,000
upon election to the Board of Directors having an exercise price equal
to fair market value of such shares on the date of election; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an annual grant of options to purchase shares valued at $75,000
having an exercise price equal to the fair market value of such shares
on the date of grant.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------

The Company also reimburses its directors for reasonable expenses in
connection with attending Company board and committee meetings.

A-8



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##### Table of Contents



Stock options granted to directors in the past have been fully vested upon
grant and generally expire 10 years after grant. The Company expects that
stock options granted to directors in the future generally will have similar
terms.

Employment and Change in Control Agreements

The Company has entered into employment letters with Mr. Gill, Mr. Hook
and Mr. Brophy. Base compensation under the employment letters for each of
these executives is subject to adjustment by the Board of Directors on an
annual basis. In addition, Mr. Gill, Mr. Hook and Mr. Brophy are entitled to
receive incentive compensation based upon the Companys achievement of certain
operating and financial goals, with an annual target bonus range of 50% to 150%
of their then-current base salary.

The Company can terminate Mr. Gills, Mr. Hooks and Mr. Brophys
employment at any time and for any reason. If the Company terminates the
employment of Mr. Gill, Mr. Hook or Mr. Brophy without cause, the employment
letters obligate the Company to pay them their base compensation for a period
of time following termination: twelve months for Mr. Gill and Mr. Brophy, and
six months for Mr. Hook. In addition, upon termination without cause, a
portion of Mr. Gills, Mr. Hooks and Mr. Brophys options will vest, with the
amount of the vesting depending on the timing of the termination. Mr. Gills,
Mr. Hooks and Mr. Brophys options will become fully vested upon a change of
control of the Company.

The Company has entered into Change in Control Agreements with Dr. Nutt,
Dr. Douglass, Mr. Gill, Mr. Brophy, Mr. Hook, and Ms. Gilreath. Each Change in
Control Agreement is designed to be a springing employment agreement that
becomes effective only upon a change of control (as defined in the
agreements) that occurs during the term of the Change in Control Agreements,
which is three years with automatic one-year extensions. Upon a change of
control, the parties to these Change in Control Agreements begin a two-year
employment period, during which each of them will be entitled to his or her
pre-change of control position, authority, duties, office location, salary,
bonus and benefits. If one of the Companys officers who is a party to a
Change in Control Agreement is terminated without cause or resigns for good
reason (as defined in the agreements) during this two-year period, he or she
will receive certain severance benefits. The severance benefit for Dr. Nutt
and Dr. Douglass includes an amount equal to three times his salary and target
bonus for the year of termination. Dr. Nutts current annual base salary is
$350,000, and Dr. Douglasss current annual base salary is $200,000. The
severance benefit for Mr. Gill, Mr. Hook, Mr. Brophy, and Ms. Gilreath includes
an amount equal to two times his or her salary and target bonus for the year of
termination. The current annual base salaries for Mr. Gill, Mr. Hook, Mr.
Brophy, and Ms. Gilreath are $285,000, $300,000, $285,000, and $285,000,
respectively. In addition, the officer will continue to receive health and
welfare insurance coverage for a period of one to three years and his or her
outstanding options and other equity awards will become fully vested. If the
officer resigns other than for good reason between one and two years after the
change in control, he or she will receive pro rataseverance benefits and
insurance coverage based on the number of months then remaining in the original
24-month employment period, but his or her resignation will not result in
acceleration of vesting of his or her equity awards.

Compensation Committee Interlocks and Insider Participation

During the fiscal year ended September 30, 2003, Dr. Hood and Messrs.
Doumani and McInnes served as members of the Compensation Committee of the
Board of Directors. Dr. Hood resigned from the Compensation Committee on May
1, 2003; Mr. Doumani was appointed to that committee on the same date. Mr.
Doumani serves as the chairman of the Compensation Committee. Neither any
member of the Board of Directors nor any of the Companys executive officers
serves as a member of the board of directors or compensation committee of any
entity that has one or more executive officers serving as a member of the
Companys Board of Directors or Compensation Committee.

A-9



---



##### Table of Contents






Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters.

Stock Ownership

In the table below, we show the amount of common stock of the Company
beneficially owned as of January 14, 2004 by each of the following:



| | 1. |  | Each of our directors and executive officers;
| | -- |  | ---------------------------------------------



| | 2. |  | Each person whom we believe beneficially owns more than 5% of
our outstanding voting stock; and
| | -- |  | -----------------------------------------------------------------------------------------------



| | 3. |  | All executive officers and directors as a group.
| | -- |  | ------------------------------------------------

In accordance with the SECs rules, beneficial ownership as disclosed in
the table includes shares currently owned as well as shares which the named
person has the right to acquire beneficial ownership of within 60 days, through
the exercise of options, warrants or other rights.

Amount and Nature
    
    Percentageof Beneficial
    
    of SharesName and Address (1)
    
    Ownership (2)
    
    Outstanding (3)Terry D. Douglass, Ph.D.
    
    
    7,322,154
    (4)
    
    
    16.1
    %Ronald Nutt, Ph.D.
    
    
    3,591,801
    (5)
    
    
    7.9David N. Gill
    
    
    189,400
    (6)
    
    
    *Thomas J. Hook
    
    
    428,617
    (7)
    
    
    *R. Gregory Brophy
    
    
    237,955
    (8)
    
    
    *Cliffreda Gilreath
    
    
    100,236
    (9)
    
    
    *Roy Doumani
    
    
    19,737
    (10)
    
    
    *Bernd Haetzel
    
    
    0
    (11)
    
    
    James R. Heath, Ph.D.
    
    
    19,737
    (12)
    
    
    *Leroy M. Hood, M.D., Ph.D.
    
    
    26,313
    (13)
    
    
    *Hamilton Jordan
    
    
    93,739
    (14)
    
    
    *William W. McInnes
    
    
    26,450
    (15)
    
    
    *Michael E. Phelps, Ph.D.
    
    
    2,795,700
    (16)
    
    
    6.1Wasatch Advisors, Inc.
    
    
    2,899,881
    (17)
    
    
    6.4Michael Crabtree
    
    
    2,329,687
    (18)
    
    
    5.1All directors and executive officers as a group (13 persons)
    
    
    14,871,742
    (19)
    
    
    31.8




---

|*   |  | Less than one percent of the outstanding shares of our common stock.                                                                                                                                                                                                                                                                                                                                                                                           
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(1) |  | If no address is given, the named individual is an executive officer or
director of CTI Molecular Imaging, Inc., whose business address is 810
Innovation Drive, Knoxville, TN 37932.                                                                                                                                                                                                                                                                          
|   
|(2) |  | Shares of common stock that a person has the right to acquire within 60
days of January 28, 2004 are deemed outstanding for computing the
percentage ownership of the person having the right to acquire such
shares, but are not deemed outstanding for computing the percentage
ownership of any other person. Except as indicated by a note, each
stockholder listed in the table has sole voting and investment power as to
the shares held by that person.

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---



##### Table of Contents





|(3)  |  | As of January 14, 2004, there were 45,294,142 shares of common stock
issued and outstanding.                                                                                                                                                                                                                                                                                                                                                                                                                  
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|(4)  |  | Dr. Douglasss beneficial ownership includes 932,010 shares of common
stock held by the Douglass Revocable Charitable Trust, 453,294 shares held
by the Grantor Retained Annuity Trust for Terry D. Douglass, 4,950,000
shares held by Vision Investments, LLC, and 130,246 shares subject to
options exercisable within 60 days. Dr. Douglass is the managing member
of Vision Investments, LLC, and in this capacity he has the authority to
vote and dispose of the shares held by Vision Investments, LLC.
|    
|(5)  |  | Dr. Nutts beneficial ownership includes 117,902 shares of common stock
held by the Nutt Family Trust, 671,774 shares held by the Grantor Retained
Annuity Trust for Ronald Nutt, 1,360,000 shares held by RN Investments,
LLC, and 96,192 shares subject to options exercisable within 60 days. Dr.
Nutt is the managing member of RN Investments, LLC, and in this capacity
he has the authority to vote and dispose of the shares held by RN
Investments, LLC.                                             
|    
|(6)  |  | Mr. Gills beneficial ownership includes 3,200 shares of common stock
held by his daughter, 3,200 shares held by his son, and 128,000 shares
subject to options exercisable within 60 days.                                                                                                                                                                                                                                                                                                                   
|    
|(7)  |  | Mr. Hooks beneficial ownership includes 96,463 shares issued as
restricted stock pursuant to our 2002 Long-Term Incentive Plan that have
not vested and 300,000 shares of common stock subject to options
exercisable within 60 days.                                                                                                                                                                                                                                                                        
|    
|(8)  |  | Mr. Brophys beneficial ownership includes 56,933 shares issued as
restricted stock pursuant to our 2002 Long-Term Incentive Plan that have
not vested and 162,044 shares of common stock subject to options which are
exercisable within 60 days.                                                                                                                                                                                                                                                            
|    
|(9)  |  | Ms. Gilreaths beneficial ownership includes 42,118 shares of common
stock subject to options which are exercisable within 60 days.                                                                                                                                                                                                                                                                                                                                                                           
|    
|(10) |  | Mr. Doumanis beneficial ownership consists of 19,737 shares of common
stock subject to options exercisable within 60 days.                                                                                                                                                                                                                                                                                                                                                                                   
|    
|(11) |  | Mr. Haetzel is the Vice President of Finance and Administration for the
Oncology Care Systems Group of Siemens Medical Solutions USA, Inc., which
owns 894,906 shares of our common stock. Mr. Haetzel disclaims beneficial
ownership of the shares held by Siemens Medical Solutions USA, Inc. Mr.
Haetzels business address is 4040 Nelson Avenue, Concord, CA 94520.                                                                                                                                      
|    
|(12) |  | Dr. Heaths beneficial ownership consists of 19,737 shares of common
stock subject to options exercisable within 60 days.                                                                                                                                                                                                                                                                                                                                                                                     
|    
|(13) |  | Dr. Hoods beneficial ownership consists of 26,313 shares of common stock
subject to options exercisable within 60 days.                                                                                                                                                                                                                                                                                                                                                                                      
|    
|(14) |  | Mr. Jordans beneficial ownership includes 21,739 shares of common stock
subject to options exercisable within 60 days and 72,000 shares subject to
warrants held by Jordan-Davis Partners, LLC exercisable within 60 days.
Mr. Jordan is a member of Jordan-Davis Partners, and disclaims beneficial
ownership in the shares held by that entity except to the extent of his
pecuniary interest.                                                                                                             
|    
|(15) |  | Mr. McInness beneficial ownership consists of 26,450 shares of common
stock subject to options exercisable within 60 days.                                                                                                                                                                                                                                                                                                                                                                                   
|    
|(16) |  | Dr. Phelpss beneficial ownership includes 30,577 shares of common stock
held by his wife, 129,423 shares held by the Grantor Retained Annuity
Trust for Michael Phelps, 129,423 shares held by the Grantor Retained
Annuity Trust for Patricia Phelps, and 320,681 shares subject to options
exercisable within 60 days.                                                                                                                                                                                     
|    
|(17) |  | This information was received from the Nasdaq Stock Market, and is dated
as of September 30, 2003.                                                                                                                                                                                                                                                                                                                                                                                                            
|    
|(18) |  | Mr. Crabtrees beneficial ownership includes 2,234,486 shares of common
stock held by Crabtree Ventures, LLC. Mr. Crabtree is the managing member
of Crabtree Ventures, LLC, and in this capacity he has the                                                                                                                                                                                                                                                                                                  

A-11



---



##### Table of Contents





|     |  | authority to vote and dispose of the shares held by Crabtree Ventures, LLC.
Mr. Crabtree served as a director of the Company from our inception through
May 2002. Mr. Crabtrees business address is IdleAire Technologies
Corporation, 410 North Cedar Bluff Road, Suite 200, Knoxville, TN 37923.                                                                            
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|(19) |  | Beneficial ownership for all directors and officers includes 153,396
shares issued as restricted stock pursuant to our 2002 Long-Term Incentive
Plan that have not vested, 1,293,958 shares of common stock subject to
options which are exercisable within 60 days, and 72,000 shares of common
stock issuable upon exercise of warrants which are exercisable within 30
days.

Securities Authorized for Issuance under Equity Compensation Plans

In the table below, we summarize certain information regarding shares
available as of September 30, 2003 for issuance under our equity compensation
plans:

(a)
    
    (b)
    
    (c)Number ofsecuritiesremaining forNumber of
    
    
    
    future issuancesecurities to be
    
    
    
    under equityissued upon
    
    Weighted-average
    
    compensation plansexercise of
    
    exercise price of
    
    (excludingoutstanding
    
    outstanding
    
    securitiesoptions, warrants
    
    options, warrants
    
    reflected in columnCategory
    
    and rights
    
    and rights
    
    (a))Equity compensation
plans approved by
security holders
    
    
    3,501,781
    
    
    $
    9.70
    
    
    
    1,381,089
    (1)Equity compensation
plans not approved
by security holders
    
    
    450,506
    (2)
    
    $
    5.12
    
    
    
    Total
    
    
    3,952,287
    
    
    $
    9.18
    
    
    
    1,381,089




---

|(1) |  | Includes up to 5,928 shares that may be granted as awards of restricted
stock, performance shares or unrestricted stock under the 2002 Long-Term
Incentive Plan.                                                                                                                                                                                                                                                                                                                                                                            
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Includes warrants to acquire 76,000 shares issued in connection with the
execution of a consulting agreement and 374,506 options issued outside of
our 1998 Amended and Restated Incentive Stock Option Plan to certain
non-employee advisors and consultants. See Stock Options, Warrants and
Restricted Stock in note 9 of the notes to our consolidated financial
statements, which can be found in our Annual Report on Form 10-K for the
fiscal year ended September 30, 2003, as originally filed with the SEC on
December 23, 2003.




Item 13.Certain Relationships and Related Transactions.

Corridor Park Limited Partnership II

Since September 2000, the Company has entered into a series of lease
agreements with Corridor Park Limited Partnership II for office space located
at 830 Corridor Park Boulevard in Knoxville, Tennessee. Certain of the
Companys officers, directors and principal stockholders, including Terry
Douglass, Ronald Nutt, and Michael Crabtree, are partners of Corridor Park
Limited Partnership II. As of the date of this amendment on Form 10-K/A, the
Company is a party to two leases with Corridor Park Limited Partnership II
under which the Company leases approximately 25,300 square feet of office
space. One of these leases, covering approximately 21,700 square feet of
office space, has a three-year term ending July 15, 2006; the Company holds an
option to renew this lease for an additional three-year term. The other of
these leases, covering approximately 3,600 square feet of office space, has a
one-year term ending October 15, 2004; the Company holds an option to renew
this lease for an additional three-year term. Rent under both leases is $9.00
per square foot, plus a pro ratashare of maintenance, taxes, insurance and
other expenses. The Company also pays as additional rent the unamortized cost
of certain build-out construction that was completed at the Companys request.
Currently, the Company uses this property for administrative offices.

A-12



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##### Table of Contents



Concorde Microsystems, Inc.

The Company has entered into five agreements with Concorde Microsystems,
Inc. Ronald Nutts son, Robert E. Nutt, the President of Concorde, and Ronald
Nutts daughter in the aggregate own more than ten percent of Concordes
capital stock. In October 1999, the Company and CTI PET Systems, Inc. (CTI PET
Systems), a 50.1% owned subsidiary of the Company, entered into a MicroPET
Agreement with Concorde pursuant to which CTI PET Systems granted Concorde a
license to the rights of CTI PET Systems under the 1994 Collaboration Agreement
with UCLA to data and other results of research performed by UCLA related to
PET and nuclear medicine, including research related to high resolution (less
than 2mm) PET for animals. In the MicroPET Agreement, CTI PET Systems granted
Concorde a non-exclusive royalty-free license for the sole purpose of
production by Concorde of products for use in the high resolution animal PET
market. All technology developed by Concorde useful in the design, development
or production of PET scanners for humans belongs to CTI PET Systems. All
technology developed by Concorde that is useful in the development of PET
scanners for animal applications belongs to Concorde. For a period of five
years, CTI PET Systems agreed to sell to Concorde, equipment and components
needed to develop animal scanners and Concorde agreed to sell MicroPET scanners
and related equipment for resale by CTI PET Systems. Concorde purchases
equipment and component parts to develop PET scanners for animals from CTI PET
Systems at approximately the same price at which CTI PET Systems sells such
equipment and components to its third-party distributors for use as spare and
replacement parts. Concorde also acquires LSO from the Company at
substantially the same price at which the Company sells LSO to CTI PET Systems.
The MicroPET Agreement has a five-year term, but CTI PET Systems has retained
the right to begin developing PET scanners for animals upon 180 days notice to
Concorde.

As part of the transactions contemplated by the MicroPET Agreement, CTI
PET Systems entered into a Patent and Technology Sublicense Agreement.
Pursuant to this Sublicense, CTI PET Systems granted Concorde a non-exclusive,
royalty-free right to use the materials and methods covered by the LSO patents
in the field of detector systems for high resolution animal PET scanners. The
Patent and Technology Sublicense Agreement expires on the date that the
Companys license to use the LSO technology expires.

Effective October 1, 1999, CTI PET Systems and Concorde entered into a
Development and Exclusive Supply Agreement pursuant to which CTI PET Systems
engaged Concorde to develop, manufacture and supply application specific
integrated circuits used in the PET scanners manufactured by CTI PET Systems.
CTI PET Systems agreed to pay Concorde for its development costs, production
set-up costs and design maintenance procedures incurred in connection with the
development and production of these circuits. Pursuant to that agreement, CTI
PET Systems paid Concorde $554,000, $459,000 and $601,000 for the years ended
September 30, 2001, 2002, 2003 respectively. CTI PET Systems further agreed
that upon the successful development of the circuits, Concorde would be the
exclusive supplier of the circuits. Concorde completed the development of the
circuits in February 2002. CTI PET Systems agreed to acquire at least $50,000
worth of circuits from Concorde each year during the term of the
agreement. The actual amounts to be purchased by CTI PET Systems will vary
depending upon the demand for its PET scanners, subject to the $50,000 minimum
annual purchase commitment for five years. Concorde also will receive a
license fee for each circuit purchased by CTI PET Systems. All technology
developed by Concorde in the performance of the agreement belongs to CTI PET
Systems. Concorde agreed not to engage in or own an interest in a business
competitive with CTI PET Systems or to design circuits for any competitor of
CTI PET Systems for a period of five years after the new circuits are
developed. The agreement expires five years after the completion date of the
development phase of the circuits.

In September 2002, PETNET entered into an agreement with Concorde. Under
the terms of the agreement, PETNET was granted an exclusive, royalty-free
license to distribute Concorde products throughout the continental United
States and Canada. PETNET is responsible for sales, marketing and education
activities while Concorde is responsible for all product warranty,
installation, training, service and technical support. In the event the annual
orders do not exceed each previous years orders by 10%, distribution rights
can be made nonexclusive at the sole discretion of Concorde. During the year
ended September 30, 2003, total PETNET sales and cost of sales of Concorde
products under this distribution agreement were $5,436,000 and $5,061,000,
respectively. In addition, during 2003 PETNET purchases from Concorde were
$5,550, and accounts payable at September 30, 2003 included $3,206,000 in
payables to Concorde. There were no transactions under the agreement for the
year ended September 30, 2002.

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On September 5, 2002 the Company entered into an LSO Supply Agreement with
Concorde pursuant to which the Company agreed to provide Concorde with LSO.
This agreement expires upon the termination of the Companys license with
Schlumberger to use the LSO technology. In this agreement, the Company agreed
not to sell LSO to another third party engaged in the development or
manufacture of PET scanners for use in animal applications. During the year
ended September 30, 2003, LSO sales to Concorde were $1,371,000.

UCLA Relationship

The Companys director, Michael E. Phelps, is the chair of UCLAs
Department of Molecular and Medical Pharmacology. In February 1994 the
Company entered into a collaboration agreement with UCLA for the development of
new technologies for the PET and radiopharmaceutical equipment markets. In
this agreement, UCLA agreed to provide its facilities and research personnel to
assist in the development process. The Company agreed to provide UCLA PET and
radiopharmaceutical equipment at a price equal to the Companys production
cost, with the objective being that UCLA would have the state-of-the-art PET
equipment for use in the collaboration program. The Company has a first right
to obtain a license from UCLA for inventions developed solely by UCLA relating
to PET and radiopharmaceuticals technology, provided UCLA has no existing
licensing obligations to a third party sponsor of research. The Company also
has a right to license UCLAs undivided interest in any jointly developed
inventions. The royalties for any license are subject to the terms of a mutual
agreement between the Company and UCLA. The 1994 collaboration agreement had
an initial five-year term with the right of the parties to extend the agreement
for additional two year terms. The agreement was extended until January
2003.

In 2000, the Company entered into a second collaboration agreement with
UCLA to further enhance the Companys development efforts relating to
radiopharmaceuticals. Through this collaboration agreement, the Company
created the LA Tech Center. In the collaboration agreement, UCLAs Department
of Molecular and Medical Pharmacology agreed to conduct research activities and
specialized research services. The Company pays for all cost incurred in
connection with the prosecution of patent applications and maintenance of
issued patents directed to selected research results under this agreement. The
Company agreed to provide personnel at no cost to work in the LA Tech Center.
The Company also agreed to provide UCLA with PET and radiopharmaceutical
equipment and radiopharmaceutical probes at a price equal to the Companys
production cost. In consideration for the research services, the Company
agreed to pay UCLA a monthly research fee, specific research fees and an
incentive fee. The incentive fee is based on net revenues received by the
Company from the sale of products produced at the LA Tech Center. The Company
also pays UCLA royalties for technology it licenses from UCLA. The
collaboration agreement entered into during 2000 has a five-year term. UCLA
has granted the Company the first option to negotiate for an exclusive a
license to any UCLA inventions and jointly developed inventions under this
agreement for the purpose of commercial development.

In January 2003, the Company entered into a third collaboration agreement
with UCLA, which substantially superseded the 1994 collaboration agreement.
Under the new collaboration agreement, the Company and UCLA have agreed to
focus their research efforts on the improvement of hardware and software for
PET and PET/CT medical imaging; the Company and UCLA cooperate from time to
time to focus this development effort. The Company has agreed to provide UCLA
with PET and nuclear medicine equipment at a price equal to the Companys
production cost, with the objective being that UCLA will continue to have the
state-of-the-art PET equipment for use in the collaboration program. The
Company has a right of first refusal to negotiate for an exclusive license to
inventions developed solely by UCLA, and to UCLAs rights in any inventions
jointly developed by UCLA and the Company, relating to PET and nuclear medicine
technology. The royalties for any license are subject to the terms of future
agreement by the Company and UCLA.




Item 14.Principal Accountant Fees and Services.

PricewaterhouseCoopers LLP (PwC) has audited our financial statements for
the fiscal years ended September 30, 2002 and September 30, 2003. The SEC has
begun requiring new disclosures regarding the fees public companies pay their
independent auditors for various services. We would not be required to make
these disclosures until after our fiscal year ending September 30, 2004;
however, we are complying with the requirements on a voluntary basis for the
fiscal year ended September 30, 2003.

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Audit Fees

During the fiscal years ended September 30, 2002 and September 30, 2003,
PwC billed us an aggregate of $1,312,940 for professional services rendered
for:



| |  |  | Audits of our annual financial statements included in our Annual
Reports on Form 10-K for those two fiscal years;
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | Review of our financial statements included in our Quarterly
Reports on Form 10-Q for those two fiscal years; and
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | Audit of our financial statements included in our Registration
Statement on Form S-1, and amendments thereto, filed in connection with
our initial public offering, which took place during the fiscal year
ended September 30, 2002.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Audit-Related Fees

During the fiscal years ended September 30, 2002 and September 30, 2003,
PwC billed us an aggregate of $40,041 for assurance and related services
reasonably related to the performance of the audits and reviews for those two
fiscal years, in addition to the fees described above under the heading Audit
Fees. These services include:



| |  |  | Accounting consultation on potential financing structures; and
| | - |  | --------------------------------------------------------------



| |  |  | Support and review services provided in connection with our acquisition of Mirada Solutions Limited.
| | - |  | ----------------------------------------------------------------------------------------------------

Tax Fees

During the fiscal years ended September 30, 2002 and September 30, 2003,
PwC billed us an aggregate of $407,876 for tax compliance, tax advice, and tax
planning services. These professional services consist of general consultation
from time to time regarding compliance with and planning for federal, state,
local, and international tax matters.

All Other Fees

During the fiscal years ended September 30, 2002 and September 30, 2003,
PwC billed us an aggregate of $0 for services rendered other than those
described above under the headings Audit Fees, Audit-Related Fees, and Tax
Fees.

Pre-Approval of Services

Since May 6, 2003, all services provided to the Company by PwC have been
required by SEC rules implementing the Sarbanes-Oxley Act of 2002 to be
approved by the Audit Committee prior to PwCs beginning to perform those
services. In preparation for these rules taking effect, the Audit Committee
established a policy setting forth procedures for PwC, in cooperation with our
management, to seek pre-approval to provide services to the Company. These
procedures divide potential services that might be provided by PwC into three
classifications:



| | 1. |  | Services that are permitted by the Audit Committee, including
audit and review of annual and quarterly financial statements and
related attestations, pension and benefit plan audits and similar
audit reports, financial and other due diligence on acquisitions,
and federal, state, and non-US tax services;
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. |  | Services that may be permitted by the Audit Committee,
subject to individual pre-approval, including compliance and
internal-control reviews, indirect tax services such as transfer
pricing and customs and duties, certain human resources services,
and forensic auditing; and
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. |  | Services which PwC, as the Companys independent auditor, may
not legally provide, such as bookkeeping, internal audit
outsourcing, and investment advising or investment banking.
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Many of PwCs services are pre-approved annually. PwC and our management
jointly prepare a schedule outlining all services that PwC could provide to the
Company during the year which the Company reasonably expects to need, and
categorizing them according to the classifications described above. Each
service identified on

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the schedule then is reviewed and approved or rejected by the Audit
Committee at its February meeting. The Audit Committees pre-approval of a
service identified on the schedule does not obligate the Company to use PwC to
provide the service; our management retains the discretion to obtain those
services from other providers. Our management also retains the responsibility
to negotiate with PwC regarding the terms on which any pre-approved service
will be provided.

Other services are pre-approved on a case-by-case basis. When the need
for a service not previously pre-approved becomes apparent, PwC and our
management jointly prepare a proposal for PwC to provide the services to the
Company. The proposal then is reviewed and approved or rejected by the Audit
Committee. The Audit Committee may designate a single member to approve or
reject these interim requests.

The Audit Committees policy strictly prohibits PwC from performing any
services in the third category for the Company.

No services provided by PwC were pre-approved by the Audit Committee
pursuant to paragraph (c)(7)(ii)(C) of Rule 2-01 of Regulation S-X.




PART IV




Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K



|(a) |  | (1) Financial Statements.
|--- |  | -------------------------



| |  |  | No financial statements are filed as part of this amendment on
Form 10-K/A. The consolidated financial statements of the Company
and the report of PricewaterhouseCoopers LLP were filed with the
Companys Annual Report on Form 10-K for the fiscal year ended
September 30, 2003, as originally filed with the SEC on December
23, 2003. No change to the Companys financial statements or to
the report of PricewaterhouseCoopers LLP is made by this
amendment.
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) |  | Financial Statement Schedule.
| | --- |  | -----------------------------



| |  |  | No financial statements are filed as part of this amendment on
Form 10-K/A. Schedule II. Valuation and Qualifying Accounts 
Years Ended September 30, 2003, 2002 and 2001 was filed with the
Companys Annual Report on Form 10-K for the fiscal year ended
September 30, 2003, as originally filed with the SEC on December
23, 2003. No change to the financial statement schedule is made
by this amendment.
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) |  | Exhibits.
| | --- |  | ---------



| |  |  | The exhibits filed as part of this amendment on Form 10-K are
listed on the attached Exhibit Index, which begins on page A-9 of
this amendment.
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------



|(b) |  | Reports on Form 8-K.
|--- |  | --------------------



| |  | The Company furnished one Current Report on Form 8-K during the
quarter ended September 30, 2003, such report being furnished to the
SEC on August 5, 2003, reporting under Items 9 and 12 the Companys
issuance of a press release announcing its financial results for the
quarter ended June 30, 2003.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(c) |  | Exhibits.
|--- |  | ---------



| |  | See Item 15(a)(3) above.
| |  | ------------------------



|(d) |  | Financial Statement Schedules.
|--- |  | ------------------------------



| |  | See Item 15(a)(2) above.
| |  | ------------------------

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Annual Report on Form
10-K/A to be signed on its behalf by the undersigned, thereunto duly
authorized, on the 28th day of January, 2004.

CTI MOLECULAR IMAGING, INC.By:
    
    /s/ David N. GillDavid N. GillSenior Vice President and Chief
Financial Officer


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EXHIBIT INDEX

ExhibitNumber
    
    Description23.1*
    
    Consent of PricewaterhouseCoopers LLP.31.1*
    
    Certification pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2*
    
    Certification pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002




---

|* |  | Filed with this Annual Report Amendment on Form 10-K/A.
|- |  | -------------------------------------------------------

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