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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10–Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2002

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)

Registrant’s telephone number, including area code:(770) 271–0233

     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   

     As of November 14, 2002 the number of shares of $.01 par value common stock outstanding was 29,760,058.

THERAGENICS CORPORATION

TABLE OF CONTENTS

THERAGENICS CORPORATION
BALANCE SHEETS
(UNAUDITED)
(Amounts in thousands, except per share data)

THERAGENICS CORPORATION
BALANCE SHEETS
(UNAUDITED)
(Amounts in thousands, except per share data)

The accompanying notes are an integral part of these statements.

THERAGENICS CORPORATION
STATEMENTS OF EARNINGS
(UNAUDITED)
(Amounts in thousands, except per share data)

The accompanying notes are an integral part of these statements.

THERAGENICS CORPORATION
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Amounts in thousands, except per share data)

THERAGENICS CORPORATION
STATEMENT OF SHAREHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2002
(UNAUDITED)
(Amounts in thousands, except per share data)

The accompanying notes are an integral part of these statements.

THERAGENICS CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(Unaudited)

NOTE A – BASIS OF PRESENTATION

The interim financial statements included herein have been prepared by the Company without audit. These statements reflect all adjustments which are, in the opinion of management, necessary to present fairly the financial position, results of operations, cash flows and changes in stockholders’ equity for the periods presented. All such adjustments are of a normal recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America. The Company believes that the financial statements and disclosures are adequate to make the information not misleading. It is suggested that these financial statements and notes be read in conjunction with the audited financial statements and notes for the year ended December 31, 2001, included in the Form 10-K filed by the Company.

NOTE B – DISTRIBUTION AGREEMENTS AND MAJOR CUSTOMERS

The Company sells its TheraSeed® device product directly to health care providers and to third party distributors. Currently, the Company has non-exclusive distribution agreements in place with four companies. Sales to non-exclusive distributors represented approximately 84% and 81% of product revenue, for the quarter and nine months ended September 30, 2002, respectively, with sales to three of the four non-exclusive distributors exceeding 10% of total revenue for each period. During the same periods in 2001, sales to three of the four non-exclusive distributors represented approximately 65% and 57% of product revenue for the quarter and nine months, respectively, with sales to each of the three non-exclusive distributors exceeding 10% of total revenue for each period. Accounts receivable from the four non-exclusive distributors represented 84% of accounts receivable at September 30, 2002, with three of the four non-exclusive distributors exceeding 10% of total accounts receivable. Accounts receivable from three of the four non-exclusive distributors represented approximately 57% accounts receivable at September 30, 2001, with each non-exclusive distributor exceeding 10% of total accounts receivable.

NOTE C - CONSTRUCTION IN PROGRESS AND PURCHASE COMMITMENTS

The U.S. Department of Energy (DOE) has granted Theragenics™ access to unique DOE technology for use in production of isotopes, including Palladium-103 (Pd-103). This technology venture represents part of a DOE initiative to redirect Cold War assets to peacetime use and cushion the economic impact of U.S. Defense Department cutbacks. 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 Pd-103, using this DOE technology. Construction, testing and pre-operational activities for a significant portion of the facilities and equipment were substantially completed and included in operations during the third quarter. As of September 30, 2002, facility and equipment costs incurred were approximately $26.6 million.

NOTES TO FINANCIAL STATEMENTS – CONTINUED

SEPTEMBER 30, 2002

(Unaudited)

NOTE D - CONTINGENCIES

From time to time, the Company may be a party to legal proceedings in the ordinary course of its business. In the opinion of the Company, there are no such proceedings which, individually or in the aggregate would be expected to have a material adverse affect on the Company’s financial position or results of operations.

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 discovery is underway. Management believes these charges are without merit and intends to oppose the litigation vigorously; however, given the nature and early 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.

NOTE E – RECENTLY ISSUED ACCOUNTING STANDARD

In June 2001, the Financial Accounting Standards Board (FASB) issued Statement on Financial Accounting Standards (SFAS) No. 143, Accounting for Asset Retirement Obligations, which will be effective for the Company’s 2003 fiscal year. SFAS No. 143 provides accounting requirements for the recognition and measurement of liabilities for obligations associated with the retirement of tangible long-lived assets resulting from the acquisition, construction, development, and operation of a long-lived asset. Under the standard, these liabilities will be recognized at fair value as incurred and capitalized as part of the cost of the related tangible long-lived asset. This additional asset cost will be amortized over the related asset’s useful life. Accretion expense related to the liability due to the passage of time will also be recorded. SFAS No. 143 requires that expense amounts related to periods prior to adoption of SFAS No. 143 be recorded as a cumulative effect adjustment in the year of adoption. Management estimates that the adoption of this standard will result in an increase in its liabilities of approximately $625,000, and a cumulative effect expense of approximately $310,000 before income taxes, and $195,000 after income taxes. Annual amortization of the increased asset costs and accretion expense charged to operations is expected to be less than $100,000 before income taxes and $63,000 after income taxes.

Item 2. Management’s’ Discussion and Analysis of Financial Condition and Results
             of Operations

Results of Operations

Revenues for the third quarter of 2002 were $9.8 million, compared to $11.9 million for the third quarter of 2001, a decrease of $2.1 million, or 17.6%. Revenues for the nine months ended September 30, 2002 were $32.5 million, compared to $38.6 million for the same period in 2001, a decrease of $6.1 million, or 15.8%. During the third quarter of 2002, unit sales of the TheraSeed® device product decreased approximately 14.9% from the third quarter of 2001 and decreased approximately 9.9% during the first nine months of 2002 compared to the same period in 2001. The change in distribution mix also contributed to the decrease in revenues. Theragenics™ sold approximately 16.1% of the total unit sales directly to customers, compared to approximately 27.4% in the same quarter of 2001 and, as a result, the average selling price of TheraSeed® device decreased.

The Company believes that the decrease in unit sales is a result of several factors including customer concern over the potential impact of the Center for Medicare and Medicaid (CMS) proposed rules for 2003 Medicare reimbursement (See “Medicare Developments” below), and disappointing sales by the Company’s non-exclusive distribution partners. The change in distribution mix and the resultant decrease in average unit selling price reflected the following factors. In January 2001 a distribution agreement with Indigo Medical Inc. (Indigo), a Johnson and Johnson Company, terminated, and the Company initially increased its number of direct sales and sales through its other non-exclusive distributors. However, Theragenics™ sold to a significant portion of these former Indigo customers while publicly stating that it expected its share of TheraSeed® device sales to decline as its other non-exclusive distributors began to market aggressively to the former Indigo customers. As expected, the percentage of direct-to-customer sales for Theragenics™ has declined from 2001 as the non-exclusive distributors began aggressively marketing to the former Indigo customers.

Cost of sales was $3.3 million during the third quarter of 2002, resulting in a gross profit margin of 66.8%, compared with cost of sales of $3.6 million and a gross profit margin of 69.8% during the third quarter of 2001. For the nine months of 2002, cost of sales was $10.6 million, resulting in a gross profit margin of 67.4%, compared with cost of sales of $11.2 million and a gross profit margin of 70.9% during the same period of 2001. The increase in cost of sales as a percentage of revenues is largely due to the considerable fixed cost component of Theragenics’ operations, partially offset by the transfer of material and resources to support the research and development initiatives.

Selling, general and administrative (SG&A) expenses were $3.0 million, or 30% of revenue, during the third quarter of 2002, compared to $2.7 million, or 22.5% of revenue, during the third quarter of 2001, an increase of $0.3 million or 10.2%. For the first nine months of 2002, SG&A expenses were $9.6 million, or 29.5% of revenue, compared to $7.8 million, or 20.0% of revenue, an increase of $1.8 million, or 24.0%. The increases in the 2002 periods were primarily due to an increase in advertising and marketing activities related to the Company’s direct-to-consumer advertising campaign and an increase in professional fees related to, among other things, advocacy activities supporting adequate reimbursement for TheraSeed® device. Additionally, compensation and benefits, and start up expenses associated with the Company’s PSP project (see “Liquidity and Capital Resources” below), also increased during the 2002 periods.

The Company expects to continue its marketing activities for the remainder of 2002 in an effort to support its brand, increase patient awareness of the TheraSeed® device treatment alternative for prostate cancer and increase the demand for the TheraSeed® device. The TheraSeed® device brand advertising targets consumers and physicians and includes clinical studies aimed at illustrating the superiority of TheraSeed® device in the treatment of prostate cancer. Additional marketing activities include changes in selling strategies incorporating a renewed focus on direct sales. Although brand advertising expenses were previously anticipated to reach as high as $5 million by year-end, Management now expects that in 2002 brand advertising will amount to approximately $3.5 million.

Research and development (R&D) expenses increased to $2.4 million, or 24.7% of revenue, in the third quarter of 2002, from $506,000, or approximately 4.2% of revenue, in the third quarter of 2001. R&D expenses also increased during the first nine months of 2002, to $4.6 million, or approximately 14.2% of revenue in 2002 from $2.1 million, or 5.3% of revenue, in 2001. The increases in R&D expenses for the quarter and year-to-date were the result of the Company’s diversification efforts, including treatments for peripheral vascular disease and macular degeneration². R&D expenses included costs of materials that would otherwise have been included in cost of sales ($1.6 million and $2.4 million for the three months and nine months ending September 30, 2002 compared to $0.3 million and $0.8 million for the same periods in 2001).

The Company was granted in August of this year an Investigation Device Exemption (IDE) approval from the U.S. Food and Drug Administration to initiate its TheraP clinical trial. The TheraP trial is a nonrandomized trial utilizing the Company’s Palladium-103 device, TheraSource™, to treat restenosis¹ in peripheral vessels. The trial will investigate the safety and feasibility of the TheraSource™ Intravascular Brachytherapy System for preventing restenosis and will include long diffuse lesions in the superficial femoral and popliteal arteries. The Company expects to enroll up to 30 patients in three sites and the trial is expected to commence during the fourth quarter of 2002 or early in 2003.

Another diversification effort includes the use of Pd-103 in treating the wet form of age-related macular degeneration. Earlier this year, the Company completed an animal pilot study using its prototype device. The results of this study were favorable and in line with expectations. Upon recommendations of external advisors during the third quarter, management is investigating requirements necessary to proceed toward the implementation of human clinical trials. The Company also maintains an active research and development program centered on isotopes and their usage. Theragenics will continue these efforts and additional research and development expenditures could occur based upon these opportunities.

Management plans to continue its efforts in research and development as its initiatives to diversify move forward. R&D spending is dependent on the complex scheduling of research and development activities in progress as well as the pursuit of other appropriate opportunities as they arise. Accordingly, R&D expenses may fluctuate from period to period.

1.  Restenosis is the renarrowing of blood vessels following procedures that are done to open blocked or stenosed blood vessels.

2.  Macular degeneration is a disease that can lead to loss of eyesight and in some cases complete blindness

Other income, comprising interest income and non-operating expenses, amount to $229,000 in the third quarter of 2002 compared to $330,000 during the third quarter of 2001. For the first nine months of the year, other income was $684,000, compared to $1.2 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 policy. While additional funds were invested during 2002, the lower interest rate environment in 2001 and continuing through 2002 has reduced the effective returns on a significant portion of the Company’s investments. Funds available for investment have and will continue to be utilized for the Company’s current and future expansion programs, diversification efforts, and research and development activities. 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 37% for the three and nine months ended September 30, 2002, compared to approximately 37% and 36% for the three months and nine months ended in 2001. The year over year increase is a result of a reduction in tax credits generated by the Company’s investments in its expansion projects during 2002. The Company’s income tax rate in each period is lower than the statutory rate primarily due to the recognition of tax credits generated by the Company’s investments in research activities and tax-exempt interest income.

Critical Accounting Policies

The SEC has encouraged companies to identify “critical accounting policies.” Critical accounting policies are those that are most important to the portrayal of a company’s financial condition and results, and that require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. In response to the SEC statements, management has identified the following critical accounting policies used in the preparation of our financial statements and accompanying notes. These polices have been reviewed with the Audit Committee of the Company’s Board of Directors.

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

Allowance for doubtful accounts. Management judgments and estimates are made and used in connection with establishing an allowance for the possibility that portions of the Company’s accounts receivable balances may become uncollectable. Specifically, management analyzes accounts in relation to current economic trends and changes in our customer payment history in establishing this allowance. Accounts receivable are reduced by this allowance. The Company’s accounts receivable balance, net of the provision for this trade accounts receivables allowance of $204,000, was approximately $6.8 million as of September 30, 2002.

Property, Plant and Equipment. Property, plant and equipment are recorded at cost and are 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. The cyclotrons incorporate a number of proprietary design modifications that render the cyclotrons unique to commercial applications. Management’s estimate of the useful life of these cyclotrons is based on the Company’s experience to date with these cyclotrons. Management will continue to periodically examine estimates used for depreciation for reasonableness in relation to the cyclotrons. If the Company determines 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).

Recently Issued Accounting Standard. Theragenics™ has identified retirement obligations associated with the decommissioning of its cyclotrons and related facilities. Management expects the adoption of SFAS No. 143 (see “Notes to the Financial Statements,” above) in 2003 will result in an increase to its liabilities of approximately $625,000, and a cumulative effect expense of approximately $310,000 before income taxes, and $195,000 after income taxes. Annual amortization of the increased asset costs and accretion expense charged to operations is expected to be less than $100,000 before income taxes and $63,000 after income taxes.

Management is required to use estimates in determining the potential impact of SFAS No.143 on its financial statements. Factors including the regulatory environment, inflation, alternative uses of the cyclotrons, and new or alternative technologies, among other things, used in determining these estimates may change over time. Therefore, changes in these factors will require the Company to reexamine and adjust the anticipated effect of asset retirement obligations accordingly. The Company will implement SFAS No. 143 in 2003.

Commitments and Other Contractual Obligations

The Company leases land, space and office equipment under noncancelable leases that expire at various date through April 2020 as follows. Approximate minimum lease payments under the leases are as follows:

Liquidity and Capital Resources

The Company had cash, short-term investments and marketable securities of $65.6 million at September 30, 2002, compared to $56.2 million at December 31, 2001. Marketable securities consist primarily of short-term cash investments and high-credit quality municipal obligations, in accordance with the Company’s investment policy. 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 increase in cash, short-term investments and marketable securities was primarily a result of cash generated by operations offset primarily by capital expenditures. Working capital was $72.8 million at September 30, 2002, compared to $65.3 million at December 31, 2001. The Company also has an Unsecured Credit Agreement with a financial institution that provides for maximum borrowings of $40.0 million under two lines of credit, and an additional uncommitted $10.0 million line of credit. No borrowings were outstanding under the Unsecured Credit Agreement as of September 30, 2002. Letters of credit totaling $809,068 were outstanding under this agreement as of September 30, 2002. 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 $11.8 million and $14.0 million during the first nine months of 2002 and 2001, respectively. Cash generated from operations consists of net earnings 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. Cash from operations increased over the first nine months of 2002 primarily because payment of an approximate $2.0 million prior period income tax liability was made in the first nine months of 2001 while no similar liability existed in 2002 and approximately $0.9 million more of 2001‘s year-to-date income was in the form of accounts receivable rather than cash, as the Company’s accounts receivable base changed as a result of its direct to customer sales and non-exclusive distribution agreements. The slight increase in depreciation and amortization in the first nine months of 2002 was due to the building and equipment placed in service at the Oak Ridge facility during the third quarter of 2002. These primary sources of cash from operations were partially offset by the year-over-year decrease in net income.

Capital expenditures totaled $2.7 million and $5.6 million during the first nine months of 2002 and 2001, respectively. This spending related primarily to the Company’s PSP project (see below).

The Company has constructed a facility in the Oak Ridge, Tennessee area to house the equipment, infrastructure and work force intended to support the production of isotopes, including Pd-103, using DOE technology. Construction costs of approximately $26.6 million have been incurred on the PSP project through September 30, 2002. Construction, testing and preoperational activities were substantially completed for a significant portion of the PSP project during the third quarter, and the Company expects the total cost of the PSP project to be less than $30.0 million as it is fully completed during the year.

In addition to using cash to fund the PSP project in 2002, the Company expects that R&D spending will continue to increase (see “Results of Operations”, above). The Company expects that R&D expense spending may total approximately 15% of revenue in 2002, but could vary depending on the scheduling and progress of R&D activities as well as the pursuit of currently unforeseen opportunities. Cash could also be used in 2002 for marketing and TheraSeed® device support activities (see “Results of Operations”, above), and in the pursuit of diversification efforts such as the purchase of technologies, products or companies.

Cash provided by financing activities was $291,000 and $244,000 in the first nine months of 2002 and 2001, 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.

In July 2002, the Company entered into a Market Development and Distribution Agreement for stable isotopes with Trace Sciences International, Inc. (“Trace Sciences”). The Agreement provides a framework under which Trace Sciences, an international supplier of enriched stable metal isotopes, will perform global market development and limited sales activities to cultivate the PSP’s unique capabilities. Also in July 2002, the Company announced an agreement for the first sale of stable isotopes to be produced by the PSP. Under this agreement, the Company expects to provide test quantities of certain gadolinium isotopes to a customer to determine their effectiveness as a fuel life extender in nuclear power generation. While this agreement will not have a significant impact on the Company’s revenue or earnings, management believes it demonstrates the potential for the PSP to create new opportunities for the Company.

Medicare Developments

Currently, Theragenics’™ TheraSeed® device and other brachytherapy seeds fall within various “transitional pass-through codes,” which are separate from the procedure payment codes that comprise much of Medicare’s Outpatient Prospective Payment System (OPPS). Effective 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 has bundled a portion of pass-through reimbursement for brachytherapy seeds and other pass-through devices with the associated procedure codes, thereby effectively sheltering seeds from “pro rata reductions” that would otherwise have applied under current Medicare Law. To the extent that these pass-through device costs exceed the bundled amount, the remaining cost is subject to a 63.6% pro rata reduction in reimbursement. Management does not anticipate any impact on the price of the TheraSeed® device product for the remainder of 2002 as a result of the current reimbursement structure.

On November 1, 2002, CMS issued its final rule for 2003 Medicare OPPS reimbursement. Under the final rule, CMS bundled the costs of the brachytherapy procedure, as well as the costs for the 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 in the final rule for palladium-103 seed brachytherapy (including TheraSeed® device) and iodine-125 seed brachytherapy, CMS made an important, positive change for our TheraSeed® device product from its initial proposal published on August 9, 2002. Specifically, the per patient amount under the final rule for palladium-103 prostate brachytherapy exceeds the original payment amount proposed in August 2002 for both palladium-103 and iodine-125. The 2003 per patient amount for palladium-103 prostate brachetherapy also exceeds the payment amount for iodine-125 prostate brachetherapy. To the extent that these pass-through device costs exceed the bundled amount, the remaining cost may no longer be submitted for reimbursement.

At this time, Management is unable to predict the impact of the final rules on future sales. However, Management will be closely monitoring any effects on the market for TheraSeed® device as it continues to evaluate pricing, marketing and distribution strategies.

Theragenics has been pursuing, and will continue to pursue avenues to attempt to address the reimbursement structure set forth by CMS. Specifically, Theragenics™ is continuing its efforts to assist policymakers in formulating and revising Medicare policies to recognize the unique aspects of classification and reimbursement that apply to the TheraSeed® device and recognize its superior characteristics compared to other avenues of treatment.

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, third-party reimbursement, sales mix, effectiveness of non-exclusive distribution agreements, pricing for TheraSeed® device, 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 restenosis, macular degeneration and other diversification efforts, potential new products and opportunities, the PSP project, the development of new markets and technologies, the capabilities of the PSP to produce enriched isotopes, opportunities for isotopes produced by Theragenics™, 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, potential costs and delays in capacity expansion and start-up, (especially as it relates to the PSP project), the actual start-up for the PSP project, potential changes in product pricing and competitive conditions, continued acceptance of TheraSeed® device by the market, management of growth, acceptance and efficacy of Pd-103 for other applications, adverse changes in governmental program priorities and budgetary funding by the relevant governmental authorities, 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 products. At any point in time, Theragenics™ and/or its non-exclusive distributors may change their respective pricing policies for 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 TheraSeed® device and could have a favorable effect or prevent an unfavorable effect on market share and volumes. Conversely, the Company and its non-exclusive distributors could individually and independently decide to maintain per unit pricing under certain competitive situations that could adversely affect current or potential market share and volumes. 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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company’s market risk exposure related to market risk sensitive financial instruments is not material. As of September 30, 2002, there were no outstanding borrowings under the Company’s Unsecured Credit Agreement.

Item 4. Controls and Procedures

Within 90 days prior to the date of this report, 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 the 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-14. Based upon that evaluation, the Company’s President and Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective in alerting them on a timely basis to material information relating to the Company that is required to be included in the Company’s periodic filings with the Securities and Exchange Commission. Furthermore, with regard to the Company’s internal controls, there have been no significant changes in the Company’s internal controls or to the Company’s knowledge in other factors that could significantly affect these internal controls subsequent to the date the Company carried out its evaluation.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

See Note D to the Company’s financial statements included in Item 1 of this report, which is incorporated by reference hereby.

Item 6. Exhibits and Reports on Form 8-K.

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.

Dated: November 14, 2001

Certification

I, M. Christine Jacobs, President and Chief Executive Officer, certify that:

Date: November 14, 2002

/s/ M. Christine Jacobs                           
M. Christine Jacobs                           
President and Chief Executive Officer

Certification

I, James A. MacLennan, Chief Financial Officer, certify that:

Date: November 14, 2002

/s/ James A. MacLennan     
James A. MacLennan     
Chief Financial Officer