10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)

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

For the fiscal year ended December 31, 2005

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 number: 000-50802

RADIATION THERAPY SERVICES, INC.

(Exact Name of Registrant as Specified in its Charter)

Florida	65-0768951
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
2234 Colonial Boulevard Fort Myers, Florida	33907 (Zip Code)
(Address Of Principal Executive Offices)

(239) 931-7275

(Registrant’s Telephone Number, Including Area Code)

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

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

Common Stock, par value $.0001 per share

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨     No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.    Yes  ¨     No  x

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ¨                        Accelerated filer  x                        Non-accelerated filer  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The aggregate market value of the shares of common stock of Radiation Therapy Services, Inc. held by non-affiliates based upon the closing price on June 30, 2005, was approximately $297.6 million.

As of February 1, 2006, the number of outstanding shares of common stock of Radiation Therapy Services, Inc. was 22,921,176.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive proxy statement for our annual meeting of shareholders, which we expect to file with the Securities and Exchange Commission within 120 days after December 31, 2005, are incorporated by reference into Part III of this report.

TABLE OF CONTENTS

PART I
Item 1. Business	3
Item 1A. Risk Factors	25
Item 1B. Unresolved Staff Comments	36
Item 2. Properties	36
Item 3. Legal Proceedings	37
Item 4. Submission of Matters to a Vote of Security Holders	37
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	38
Item 6. Selected Financial Data	40
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	42
Item 7A. Quantitative and Qualitative Disclosures about Market Risk	61
Item 8. Financial Statements and Supplementary Data	62
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	62
Item 9A. Controls and Procedures	62
Item 9B. Other Information	64
PART III
Item 10. Directors and Executive Officers of the Registrant	65
Item 11. Executive Compensation	65
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	65
Item 13. Certain Relationships and Related Party Transactions	65
Item 14. Principal Accountant Fees and Services	65
PART IV
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K	66
Report of Independent Registered Public Accounting Firm	F-2
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME	F-3
CONSOLIDATED BALANCE SHEETS	F-4
CONSOLIDATED STATEMENTS OF CASH FLOWS	F-5
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY	F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2005	F-8
SIGNATURES
EXHIBIT INDEX

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PART I

Item 1. Business

Overview

We are a provider of radiation therapy services to cancer patients. We own, operate and manage treatment centers focused principally on providing comprehensive radiation treatment alternatives ranging from conventional external beam radiation to newer, technologically-advanced options. We believe we are the largest company in the United States focused principally on providing radiation therapy. We opened our first radiation treatment center in 1983 and as of December 31, 2005, we provided radiation therapy in 56 freestanding and 12 hospital-based treatment centers. Our treatment centers are clustered into 22 local markets in 14 states, including Alabama, Arizona, California, Delaware, Florida, Kentucky, Maryland, Massachusetts, Nevada, New Jersey, New York, North Carolina, Rhode Island and West Virginia. In our 23 years of operation, we have developed a standardized operating model that enables our treatment centers to deliver high-quality, cost-effective patient care. We have a highly experienced management team and a number of our senior radiation oncologists are nationally recognized by the American College of Radiation Oncology for excellence and leadership in the field of radiation oncology. We have recently expanded our affiliations with physicians specializing in other areas including gynecology and gynecoloical and surgical oncology and urology in a limited number of our markets to strengthen our clinical working relationships.

We completed our initial public offering in June 2004. Our principal executive office is located at 2234 Colonial Boulevard, Fort Myers, Florida and our telephone number is (239) 931-7275. We conduct much of our business under the name of our wholly-owned subsidiary, 21^st Century Oncology, Inc. Our corporate website is www.rtsx.com and we make available copies of our filings with the Securities and Exchange Commission on our website under the heading “Investor Relations” as soon as reasonably practicable after their filing. Our filings are also available on the Securities and Exchange Commission’s EDGAR database at www.sec.gov.

Industry Overview

Cancer is the second leading cause of death in the United States, exceeded only by heart disease. In 2005, the American Cancer Society estimates there will be 1.4 million new cancer cases diagnosed in the United States and that cancer will account for one in every four deaths.

Treatment Options. There are many types of cancer, each of which is unique in how it grows and how it responds to treatment. A physician may choose which treatment or combination of treatments is most appropriate. Individuals diagnosed with cancer have four general treatment options:

• radiation therapy (treatment with radiation to eliminate cancer cells);

• surgery (to remove a tumor);

• chemotherapy (treatment with anticancer drugs); and

• biological therapy (treatment to stimulate or restore the ability of the immune system to fight infection and disease).

We focus principally on radiation therapy, which may be used alone or in combination with surgery, chemotherapy or biological therapy.

Radiation Therapy. According to the American Society for Therapeutic Radiology and Oncology, approximately 50% to 60% of patients diagnosed with cancer receive radiation therapy. Radiation therapy is used to treat the most common types of cancer, including prostate, breast, lung and colorectal cancer, and involves exposing the patient to an external or internal source of radiation. Radiation therapy can be used to cure cancer by destroying cancer cells and, when curing cancer is not possible, to shrink tumors and reduce pressure, pain and relieve other symptoms of the cancer to enhance a patient’s quality of life.

Radiation Therapy Technology. The radiation utilized by a radiation oncologist for external beam treatments is produced by a machine known as a linear accelerator. A normal course of external beam radiation therapy ranges from 20 to 40 total treatments, given daily over a four to eight week period. Recent research has produced new, advanced methods for performing radiation treatments. These advanced methods result in more effective treatments that minimize the harm to healthy tissues that surround the tumor and therefore result in fewer side effects.

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Radiation Therapy Market. According to the American Society for Therapeutic Radiology and Oncology, it is estimated that there are over 4,300 radiation oncologists in the United States and approximately 2,000 hospital and freestanding radiation therapy centers. We believe that growth in the radiation therapy market will be driven by the following trends:

• aging of the population in the United States, as 77% of all cancers are diagnosed in people over age 55;

• earlier detection and diagnosis of cancer;

• increased knowledge of and demand for advanced treatments by patients;

• growing utilization of advanced treatment technologies; and

• discovery of new and innovative means of delivering radiation therapy for the treatment of cancer.

We believe most of our competitors are not in a position to take full advantage of the opportunities within the market due to barriers to entry, such as significant capital requirements, limited size of operations, lack of depth in important areas such as technology, limited number and experience of physicians, availability of resources and lack of management experience.

Our Operating Strategy

Our goal is to provide cancer patients with radiation therapy treatments to maximize clinical outcomes. We focus principally on providing a broad spectrum of radiation therapy in both a patient-friendly environment and cost-effective manner. Our model is designed to maximize our relationships with patients and referring physicians, as well as attract and retain radiation oncologists. We believe that our operating strategy enables us to maximize patient service, quality of care and financial performance. The key elements of our operating strategy are to:

Emphasize Patient Service. We focus on providing our patients with an environment that minimizes the stress and uncertainty of being diagnosed with and treated for cancer. Our goal is to see patients within 24 hours of a referral and typically begin treatment within several days thereafter. Our radiation oncologist discusses the proposed treatment, the possible side effects and the expected results of treatment with the patient and is available to respond to questions or concerns at any time. Other services we provide include nutritional counseling and assistance with reimbursement from third-party payors. We believe that our focus on patient service enhances the quality of care provided and differentiates us from other radiation therapy providers.

Provide Advanced Radiation Treatment Alternatives. Within our local markets, we are a leader in providing the most advanced radiation therapy alternatives. The advanced radiation treatment alternatives we provide are designed to deliver more effective radiation directly to the tumor while minimizing harm to surrounding tissues and therefore reducing side effects. We have directly benefited from the increasing awareness of cancer patients to these advanced radiation treatment alternatives.

Establish and Maintain Strong Clinical Relationships with Referring Physicians. Our team of radiation oncologists seeks to develop and maintain strong working clinical relationships with referring physicians by:

• establishing a presence in the medical community and receiving referrals for radiation therapy based on our reputation for providing a high standard of quality patient care;

• providing excellent patient service and involving the referring physician in the care of the patient;

• educating our existing and potential referring physicians on new methods of radiation therapy; and

• strengthening clinical relationships by fully integrating with key physicians through group practices in selected markets.

Recruit and Retain Leading Radiation Oncologists. We recruit radiation oncologists with excellent academic and clinical backgrounds who we believe have potential for professional growth. Our more senior oncologists are members of numerous professional organizations and have developed national reputations for excellence. We attract and retain radiation oncologists by:

• offering them the opportunity to join an established team of leaders in the field of radiation oncology;

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• providing them greater access to advanced technologies;

• offering them the opportunity to develop expertise in advanced treatment procedures;

• enabling them to conduct research and encouraging them to publish their results; and

• providing them with the opportunity to earn above the national average compensation for radiation oncologists.

Cluster Our Treatment Centers In Local Markets. We cluster treatment centers in our local markets, which enables us to offer our patients a wide array of radiation therapy services in a cost-effective manner. By concentrating our treatment centers within a given geography, we are able to leverage our investment in advanced treatment technologies and our clinical and operational expertise across a larger patient population. Treatment centers in each of our clusters also share support services, such as physics, which leads to lower operating costs per treatment center. We are also able to better leverage our relationships with managed care payors due to the number of patients treated within our local markets.

Continually Enhance Operational Efficiencies. During our 23 years of operations, we have developed a standardized operating model that enables our treatment centers to cost-effectively deliver high-quality patient care. We continue to enhance our operating performance through the use of established protocols and procedures in our clinical operations. Furthermore, we have a centralized approach to business functions such as accounting, administration, billing, collection, marketing and purchasing, which we believe results in significant economies of scale and operating efficiencies.

Our Growth Strategy

Our growth strategy is to further increase our market share within our established local markets and selectively expand into new local markets. The key elements of our growth strategy are to:

Increase Revenue and Profitability of Our Existing Treatment Centers

We plan to increase revenue and profitability at our treatment centers within established local markets by:

• increasing clinical referrals from physicians;

• expanding our offering of advanced treatment services;

• focusing on the continued implementation of standardized treatment protocols;

• adding additional radiation oncologists; and

• entering into additional payor relationships.

Develop New Treatment Centers Within Our Existing Local markets

We plan to develop treatment centers to expand our existing local markets. We have experience in the design and construction of radiation treatment centers, having developed 22 treatment centers located in California, Florida, Maryland, Nevada and Rhode Island. Our newly-developed treatment centers typically achieve positive cash flow within six to twelve months after opening.

Selectively Enter New Local Markets

We plan to selectively expand into new local markets through acquisition, new treatment center development and strategic alliances and joint ventures. We evaluate potential expansion into new local markets based on:

• demographic characteristics, including the number and concentration of Medicare recipients, population trends and historical and projected patient population growth and radiation treatment volumes;

• the extent to which we may have any pre-existing relationships with physicians or hospitals;

• the current competitive landscape of existing freestanding or hospital-based radiation treatment centers;

• the payor environment; and

• the regulatory environment.

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Expand Through Acquisitions. We plan to enter new local markets through the acquisition of established treatment centers that provide us the opportunity to leverage our current infrastructure. We seek to acquire treatment centers with leading radiation oncologists, strong clinical referral sources and substantial prospects for growth. We believe that significant opportunity exists to add value to acquired treatment centers by providing advanced radiation therapy technology and services and by implementing our proven operating model, which includes our standardized operating systems. We have entered 10 local markets through acquisitions and have acquired 34 treatment centers to date.

Expand Through New Treatment Center Development. Where desirable, we plan to enter new local markets by internally developing new radiation treatment centers. We have established 22 treatment centers in 9 local markets located in California, Florida, Maryland, Nevada and Rhode Island by internally developing new radiation treatment centers. We currently plan to develop new treatment centers in our new local markets in Palm Springs, California and Scottsdale, Arizona, as well as add centers to our existing markets in southwest Florida.

Expand Through Strategic Alliances and Joint Ventures. We also plan to enter new local markets through strategic alliances and joint ventures. To date, we have entered 3 local markets through strategic alliances. These strategic alliances and joint ventures vary by market and can include the provision of administrative services, technology services and professional services or any combination thereof. To date, we have established these arrangements primarily with hospitals seeking our expertise in providing high-quality, cost-effective radiation therapy. Our desire and ability to enter into strategic alliances and joint venture arrangements depends on the regulatory and competitive environment and other economic factors. We have experience in effectively structuring these arrangements in a manner designed to meet the needs of multiple constituencies, including the physicians, the hospitals and regulatory authorities. Strategic alliances and joint ventures provide us with alternative methods to enter attractive new markets.

Expand Through Affiliations with Other Oncologists and Specialists. Healthcare is delivered locally, and in certain local markets, it may be advantageous to fully integrate with key physicians with medical specialties other than radiation oncology. As the practice of oncology and radiation oncology has become increasingly sophisticated, there has been a need to integrate other medical specialties in our operations. High precision radiation therapy requires close cooperation with other physicians, often from the surgical fields, to be able to target and treat tumors. In these instances, we believe we can further strengthen both our clinical working relationships and our standing in the local oncology field. We currently operate as a group practice in a limited number of our markets, principally with other oncologists, including gynecological and surgical oncologists, and beginning in December 2005 in one local market with urologists. We plan to continue to seek affiliations with physicians having specialties other than radiation oncology where desirable.

Operations

We have 23 years of experience operating radiation treatment centers. We have developed an integrated operating model, which is comprised of the following key elements:

Treatment Center Operations. Our treatment centers are designed specifically to deliver high-quality radiation therapy in a patient-friendly environment. A treatment center typically has one or two linear accelerators, with additional rooms for simulators, computed tomography (CT) scans, physician offices, film processing and physics functions. In addition, treatment centers include a patient waiting room, dressing rooms, exam rooms and hospitality rooms, all of which are designed to minimize patient stress.

Cancer patients referred to one of our radiation oncologists are provided with an initial consultation, which includes an evaluation of the patient’s condition to determine if radiation therapy is appropriate, followed by a discussion of the effects of the therapy. If radiation therapy is selected as a method of treatment, the medical staff engages in clinical treatment planning. Clinical treatment planning utilizes x-rays, CT imaging, ultrasound, positron emission tomography (PET) imaging and, in many cases, advanced computerized 3-D conformal imaging programs, in order to locate the tumor, determine the best treatment modality and the treatment’s optimal radiation dosage, and select the appropriate treatment regimen.

Our radiation treatment centers typically range from 5,000 to 12,000 square feet, have a radiation oncologist and a staff ranging between 10 and 25 people, depending on treatment center capacity and patient volume. The typical treatment center staff includes: radiation therapists, who deliver the radiation therapy, medical assistants or medical technicians, an office financial manager, receptionist, transcriptionist, block cutter, file clerk and van driver. In markets where we have more than one treatment center, we can more efficiently provide certain specialists to each treatment center, such as physicists, dosimetrists and engineers who service the treatment centers within that local market.

Standardized Operating Procedures. We have developed standardized operating procedures for our treatment centers in order to ensure that our professionals are able to operate uniformly and efficiently. Our manuals, policies and procedures

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are refined and modified as needed to increase productivity and efficiency and to provide for the safety of our employees and patients. We believe that our standard operating procedures facilitate the interaction of physicians, physicists, dosimetrists and radiation therapists and permit the interchange of employees among our treatment centers. In addition, standardized procedures facilitate the training of new employees.

Coding and Billing. Coding involves the translation of data from a patient’s medical chart to our billing system for submission to third-party payors. Our treatment centers provide radiation therapy services under approximately 60 different professional and technical codes, which determine reimbursement. Our Medical Director along with our certified professional coders work together to establish coding and billing rules and procedures to be utilized at our radiation treatment centers providing consistency across centers. In each radiation treatment center, our office financial manager is in charge of executing these rules and procedures with the trained personnel located at each treatment center. To provide an external check on the integrity of the coding process, we have retained the services of a third-party consultant to review and assess our coding procedures and processes on a periodic basis. Billing and collection functions are centrally performed by a staff at our executive offices.

Management Information Systems. We utilize centralized management information systems to closely monitor data related to each treatment center’s operations and financial performance. Our management information systems are used to track patient data, physician productivity and coding, as well as billing functions. Our management information systems also provide monthly budget analyses, financial comparisons to prior periods and comparisons among treatment centers, thus enabling management to evaluate the individual and collective performance of our treatment centers. We developed a proprietary image and text retrieval system referred to as the Oncology Wide-Area Network, which facilitates the storage and review of patient medical charts and films. We periodically review our management information systems for possible refinements and upgrading. Our management information systems personnel install and maintain our system hardware, develop and maintain specialized software and are able to integrate the systems of the practices we acquire.

Engineering and Physics Departments. We have established engineering and physics departments which implement standardized procedures for the acquisition, installation, calibration, use, maintenance and replacement of our linear accelerators, simulators and related equipment, as well as to the overall operation of our treatment centers. Our engineers perform preventive maintenance, repairs and installations of our linear accelerators. This enables our treatment centers to maximize equipment productivity and to minimize downtime. In addition, the engineering department maintains a warehouse of linear accelerator parts in order to provide equipment backup. Our physicists monitor and test the accuracy and integrity of each of our linear accelerators on a regular basis to ensure the safety and effectiveness of patient treatment. This testing also helps ensure that the linear accelerators are uniformly and properly calibrated.

Total Quality Management Program. We strive to achieve total quality management throughout our organization. Our treatment centers, either directly or in cooperation with the appropriate professional corporation or hospital, have a standardized total quality management program consisting of programs to monitor the design of the individual treatment of the patient via the evaluation of charts by radiation oncologists, physicists, dosimetrists and radiation therapists and for the ongoing validation of radiation therapy equipment. Each of our new radiation oncologists is assigned to a senior radiation oncologist who reviews each patient’s course of treatment through the patient’s medical chart using our Oncology Wide-Area Network. Furthermore, the data in our patient database is used to evaluate patient outcomes and to modify treatment patterns as necessary to improve patient care. We also utilize patient questionnaires to monitor patient satisfaction with the radiation therapy they receive.

Clinical Research. We believe that a well-managed clinical research program enhances the reputation of our radiation oncologists and our ability to recruit new radiation oncologists. Our treatment centers participate in national cooperative group trials and we have a full-time, in-house research staff to assure compliance with such trials and to perform related outcome analyses. We maintain a proprietary database of information on over 72,000 patients. The data collected includes tumor characteristics such as stage, histology and grade, radiation treatment parameters, other treatments delivered, complications and information on disease recurrences. In addition, follow-up data on disease status and patient survival rates are collected. This data can be used by the radiation oncologists to conduct research and improve patient care. We also assist the radiation oncologists with research in the form of outcome studies. These studies often are presented at international conferences and published in trade journals. To date, our radiation oncologists have published more than 210 articles in peer reviewed journals and related periodicals.

School of Radiation Therapy. In 1989, we founded The Radiation Therapy School for Radiation Therapy Technology, which is accredited by the Joint Review Committee on Education in Radiologic Technology. The school trains individuals to become radiation therapists. Upon graduation, students become eligible to take the national registry examination administered by the American Registry of Radiologic Technologists. Radiation therapists are responsible for administering treatments prescribed by radiation oncologists and monitoring patients while under treatment. Since opening in 1989, the school has produced 86 graduates, 38 of whom are currently employed by us.

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Privacy of Medical Information. We focus on being compliant with regulations under the Health Insurance Portability and Accountability Act of 1996, or HIPAA, regarding privacy, security and transmission of health information. We have implemented such regulations into our existing systems, standards and policies to ensure compliance.

Compliance Program. We have a compliance program that is consistent with guidelines issued by the Office of Inspector General of the Department of Health and Human Services. As part of this compliance program, we adopted a code of ethics and have a full-time compliance officer at the corporate level. Our program includes an anonymous hotline reporting system, compliance training programs, auditing and monitoring programs and a disciplinary system to enforce our code of ethics and other compliance policies. It also includes a process for screening all employees through applicable federal and state databases of sanctioned individuals. Auditing and monitoring activities include claims preparation and submission and also cover issues such as coding, billing, and financial arrangements with physicians. These areas are also the focus of our specialized training programs.

Service and Treatment Offerings

We believe our radiation treatment centers are distinguishable from those of many of our competitors because we are able to offer patients a full spectrum of radiation therapy alternatives, including conventional external beam radiation therapy and advanced services such as image guided radiation therapy, intensity modulated radiation therapy, 3-D conformal treatment planning, brachytherapy (including prostate seed implants and high dose rate remote after-loading of radioactive sources) and stereotactic radiosurgery. Radiation therapy is given in one of two ways: externally or internally, with some cancers treated with both internal and external radiation therapy. Most people undergoing radiation therapy for cancer are treated with external beam radiation therapy. Radiation therapy is used to treat the most common types of cancers including: prostate, breast, lung and colorectal.

External Beam Therapy. External beam radiation therapy involves exposing the patient to an external source of radiation through the use of a machine that directs radiation at the cancer. Machines utilized for external beam radiation therapy vary as some are better for treating cancers near the surface of the skin and others are better for treating cancers deeper in the body. A linear accelerator, the most common type of machine used for external beam radiation therapy, can create both high-energy and low-energy radiation. High-energy radiation is used to treat many types of cancer while low-energy radiation is used to treat some forms of skin cancer. A course of external beam radiation therapy normally ranges from 20 to 40 treatments. Treatments generally are given to a patient once each day with each session lasting for 10 to 20 minutes.

Internal Radiation Therapy. Internal radiation therapy also called brachytherapy, involves the placement of the radiation source inside the body. The source of the radiation (such as radioactive iodine) is sealed in a small holder called an implant and is introduced through the aid of thin wires or plastic tubes. Internal radiation therapy places the radiation source as close as possible to the cancer cells and delivers a higher dose of radiation in a shorter time than is possible with external beam treatments. Internal radiation therapy is typically used for cancers of the lung, esophagus, breast, uterus, thyroid, cervix and prostate. Implants may be removed after a short time or left in place permanently (with the radioactivity of the implant dissipating over a short time frame). Temporary implants may be either low-dose rate or high-dose rate. Low-dose rate implants are left in place for several days; high-dose rate implants are removed after a few minutes.

Since all of our treatment centers are clustered into local markets, our treatment centers are distinguished from those of many of our competitors by our ability to offer advanced radiation therapy services. Our advanced radiation treatment services include: image guided radiation therapy, intensity modulated radiation therapy, 3-D conformal treatment planning, stereotactic radiosurgery and high-dose and low-dose rate brachytherapy.

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The following table sets forth the forms of radiation therapy services and treatments that we offer:

Technologies:	Description:
Image Guided Radiation Therapy (IGRT)	Enables radiation oncologists to utilize imaging at time of treatment to localize tumors and to accurately mirror the contour of a tumor from any angle.
Intensity Modulated Radiation Therapy (IMRT)	Enables radiation oncologist to adjust the intensity of radiation levels delivered to more effectively treat certain cancers.
Respiratory Gating	Enables radiation oncologist to treat cancers in the lung and upper abdomen with a noninvasive technique that accounts for respiratory motion allowing more accurate treatment.
3-D Conformal Treatment Planning	Enables radiation oncologist to utilize three dimensional images of tumors to more accurately and effectively plan radiation treatments.
Stereotactic Radiosurgery	Enables delivery of very high doses of radiation treatment to certain lesions such as brain cancers.
High-Dose Rate Remote Brachytherapy	Enables radiation oncologist to treat cancer by internally delivering higher doses of radiation directly to the cancer for a few minutes.
Low-Dose Rate Brachytherapy	Enables radiation oncologist to treat cancer by internally delivering lower doses of radiation directly to the cancer over an extended period of time (e.g., prostate seed implants).

Image Guided Radiation Therapy. This technology provides the radiation oncologist with a mechanism to achieve increased precision in radiation therapy targeting. The technique utilizes high-resolution x-rays or ultrasound imaging to pinpoint internal tumor sites before treatment and overcomes the limitations of conventional skin marking traditionally used for patient positioning. IGRT represents the convergence of medical imaging and high precision external beam therapy. We implemented a pilot program using kV x-rays in one of its centers in 2004 and with expanded reimbursement for the technology available January 1, 2006, will accelerate the implementation of this new technology across our local markets.

Intensity Modulated Radiation Therapy. With IMRT, radiation can be focused at thousands of pinpoints and delivered by varying levels of beam intensity directly to a tumor. Because IMRT uses variable intensity beams, it can be used to treat tumors to higher doses and better spare normal tissue. IMRT technology can be programmed to actually wrap and angle beams of radiation around normal tissue and organs, protecting “good cells” as it destroys the tumor. As such, IMRT patients typically experience fewer side effects, which helps them to maintain their strength and lead more normal lifestyles during treatment.

Respiratory gating. This noninvasive technique allows radiation targeting and delivery to account for respiratory motion in the treatment of cancers in the lung and upper abdomen, protecting healthy structures while directing higher doses of radiation to the tumor. Respiratory gating matches radiation treatment to a patient’s respiratory pattern. When a person breathes, the chest wall moves in and out, and any structures inside the chest and upper abdomen also move. In the past, when radiation beams were aimed at a target inside those areas of the body, movement had to be accounted for by planning a large treatment area. With respiratory gating, radiation treatment is timed to an individual’s breathing pattern with the beam delivered only when the tumor is in the targeted area.

3-D Conformal Treatment Planning. 3-D conformal treatment planning and computer simulation produces an accurate image of the tumor and surrounding organs so that multiple radiation beams can be shaped exactly to the contour of the treatment area. Because the radiation beams are precisely focused, nearby normal tissue is spared from radiation. In 3-D conformal treatment planning, state-of-the-art radiation therapy immobilization devices and computerized dosimetric software are utilized so that CT scans can be directly incorporated into the radiation therapy plan.

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Stereotactic Radiosurgery. Stereotactic radiosurgery involves a single intense high-dose beam of radiation to a small area. This form of therapy typically is used to treat tumors of the brain that cannot be treated by other means, such as surgery or chemotherapy. Precise calculations for radiation delivery are required. Treatment also requires extensive clinical planning and is provided in conjunction with the referring surgeon and under the direct supervision of a radiation oncologist and a physicist. Stereotactic radiosurgery often involves immobilization of the head through the use of a neurosurgical frame to assure precise immobilization for the delivery of radiation therapy. With recent advances in imaging technologies, stereotactic radiosurgery can now be used to treat extra-cranial cancers to a higher dose with target localization and image verifications. These advances broaden the types of cancers that can be successfully treated with stereotactic radiosurgery.

Brachytherapy. Brachytherapy involves the use of surgical and fiberoptic procedures to place high-dose rate or low-dose rate sources of radiation in the patient’s body. This technique is used for implantation of sources into the prostate, intraluminal therapy within the esophagus and endobronchial therapy within the lungs. Prostate seed implants involve the permanent placement of radioactive pellets within the prostate gland.

High-Dose Rate Remote Brachytherapy. In high-dose rate remote brachytherapy, a computer sends the radioactive source through a tube to a catheter or catheters that have been placed near the tumor by the specialist working with the radiation oncologist. The radioactivity remains at the tumor for only a few minutes. In some cases, several remote treatments may be required, and the catheters may stay in place between treatments. High-dose rate remote brachytherapy is available in most of our local markets and patients receiving this treatment are able to return home after each treatment. This form of brachytherapy has been used to treat cancers of the cervix, breast, lung, biliary tree, prostate and esophagus. MammoSite^® Radiation Therapy is used for partial breast irradiation and works by delivering radiation from inside the lumpectomy cavity directly to the tissue where the cancer is most likely to recur.

Low-Dose Rate Brachytherapy. We are actively involved in radioactive seed implantation for prostate cancer, the most frequent application of low-dose rate brachytherapy. There are several advantages to low-dose rate brachytherapy in the treatment of prostate cancer, including convenience to the patient as the patient generally can resume normal daily activities within hours after the procedure. This procedure is performed by a team of physicians and staff with nearly a decade of experience in prostate brachytherapy. During the procedure, radioactive sources or “seeds” are inserted directly into the prostate, minimizing radiation exposure to surrounding tissues while permitting an escalation of the dose concentrated in the area of the cancer.

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All of our markets provide external beam treatments and following is a list of the advanced services and treatments that we offer within each of our 22 local markets as of December 31, 2005:

						Stereotactic		Brachytherapy
Local market	Year Established	Number of Centers	IMRT	3-D	IGRT	Cranial	Extra- Cranial	High Dose	Low Dose
Lee County—Florida	1983	5	ü	ü	ü	ü	ü	ü	ü
Charlotte/ DeSoto Counties—Florida	1986	2	ü	ü				ü	ü
Sarasota/ Manatee Counties—Florida	1992	4	ü	ü		ü		ü	ü
Collier County—Florida	1993	2	ü	ü		ü		ü	ü
Broward County—Florida	1993	4	ü	ü		ü		ü	ü
Dade County—Florida	1996	2	ü	ü					ü
Las Vegas, Nevada	1997	9	ü	ü	ü	ü	ü	ü	ü
Westchester/ Bronx—New York	1997	5	ü	ü	ü	ü	ü	ü	ü
Mohawk Valley, New York	1998	3	ü	ü		ü		ü	ü
Delmarva Peninsula	1998	3	ü	ü				ü	ü
Northwest Florida	2001	3	ü	ü				ü	ü
Western North Carolina	2002	7	ü	ü				ü	ü
Palm Beach County—Florida	2002	1	ü	ü				ü	ü
Central Kentucky	2003	3	ü	ü				ü	ü
Florida Keys	2003	1	ü	ü					ü
Southeastern Alabama	2003	1	ü	ü					ü
Western Maryland	2003	4	ü	ü					ü
South New Jersey	2004	3	ü	ü					ü
Rhode Island	2004	3	ü	ü		ü		ü	ü
Scottsdale, Arizona	2005	1	ü	ü				ü	ü
Holyoke, Massachusetts	2005	1		ü				ü	ü
Palm Springs, California	2005	1	ü	ü	ü	ü	ü	ü	ü

In addition to the above, IGRT capability and extra-cranial radiosurgery systems are being installed in the Charlotte/Desoto, Sarasota/Manatee and Collier County markets as of December 31, 2005.

Treatment Centers

As of December 31, 2005, we owned, operated and managed 56 freestanding and 12 hospital-based treatment centers in our 22 local markets of which:

• 22 were internally developed;

• 34 were acquired; and

• 12 are hospital-based.

Three of our 68 treatment centers were operated as physician office practices in the states of California, Alabama and Massachusetts.

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Internally Developed. As of December 31, 2005, we operated 22 internally developed treatment centers located in California, Florida, Maryland, Nevada and Rhode Island and we plan to continue developing new treatment centers within our local markets. Our team is experienced in the design and construction of radiation treatment centers, having developed 7 treatment centers in the past three years. Our newly-developed treatment centers typically achieve positive cash flow within six to twelve months after opening. The following table sets forth the locations and other information regarding each of our internally developed radiation treatment centers in our local markets as of December 31, 2005:

Treatment Center	Year	Owned/Managed
Lee County—Florida
Broadway	1983	Owned
Cape Coral	1984	Owned
Lakes Park	1987	Owned
Bonita Springs	2002	Owned
Lehigh Acres	2003	Owned
Charlotte/ DeSoto Counties—Florida
Port Charlotte	1986	Owned
Arcadia	1993	Owned
Sarasota/ Manatee Counties—Florida
Englewood	1992	Owned
Sarasota	1996	Owned
Venice	1998	Owned
Bradenton	2002	Owned
Collier County—Florida
South Naples	1993	Owned
North Naples	1999	Owned
Northwest Florida
Destin	2004	Owned
Crestview	2004	Owned
Palm Beach County—Florida
West Palm Beach (1)	2002	Owned
Las Vegas, Nevada
Henderson	2000	Managed
Lake Mead	2000	Managed
Western Maryland
Owings Mills (2)	2003	Owned
Rhode Island
Woonsocket (3)	2004	Owned
South County (4)	2005	Owned
Southern California
Palm Springs	2005	Managed

(1) We own a 50.0% ownership interest in the limited liability company (LLC) that provides radiation oncologists and operates the treatment center; we also provide physics and dosimetry services to the LLC.

(2) We have a 90.0% ownership interest in this treatment center.

(3) We have a 62.0% ownership interest in this treatment center.

(4) We have a 63.5% ownership interest in this treatment center.

Acquired Treatment Centers. As of December 31, 2005, we operated 34 acquired treatment centers located in Alabama, Arizona, Florida, Kentucky, Maryland, Massachusetts, Nevada, New Jersey, New York, North Carolina, and West Virginia. Over the past three years, we have acquired 19 treatment centers. We plan to continue to enter new markets through the acquisition of established treatment centers that provide us the opportunity to leverage our current infrastructure. As part of our ongoing acquisition strategy, we continually evaluate potential acquisition opportunities.

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The following table sets forth the locations and other information regarding each of the acquired radiation treatment centers in our local markets as of December 31, 2005:

Treatment Center	Year	Owned/Managed
Broward County—Florida
Plantation	1993	Owned
Deerfield Beach	1994	Owned
Coral Springs	1994	Owned
Tamarac	1999	Owned
Northwest Florida
Fort Walton Beach	2001	Owned
Florida Keys
Key West	2003	Owned
Las Vegas, Nevada
Las Vegas (2 locations)	1997	Managed
Las Vegas (5 locations)	2005	Managed
Westchester/ Bronx—New York
Riverhill	1998	Managed
Delmarva Peninsula
Berlin, Maryland (1)	1998	Owned
Western North Carolina
Asheville	2002	Managed
Clyde	2002	Managed
Brevard	2002	Managed
Franklin	2002	Managed
Marion	2002	Managed
Rutherford	2002	Managed
Park Ridge	2003	Managed
Central Kentucky
Danville	2003	Owned
Louisville (2)	2003	Owned
Frankfort	2003	Owned
Southeastern Alabama
Dothan	2003	Managed
New Jersey
Woodbury	2004	Owned
Voorhees	2004	Owned
Willingboro	2004	Owned
Western Maryland
Martinsburg, West Virginia (3)	2005	Managed
Greenbelt, Maryland	2005	Managed
Belcamp, Maryland	2005	Managed
Arizona
Scottsdale	2005	Owned
Massachusetts
Holyoke	2005	Managed

(1) We have a 50.1% ownership interest in this treatment center

(2) We have a 90.0% ownership interest in this treatment center.

(3) We have a 60.0% ownership interest in this treatment center.

Hospital-Based Treatment Centers. As of December 31, 2005, we operated 12 hospital-based treatment centers. We provide services at all of our hospital-based treatment centers pursuant to written agreements with the hospitals. At the Florida treatment centers, we provide the services of our radiation oncologists to the hospital and receive the professional fees charged for such services. We also provide physics and dosimetry services on a fee-for-service basis. In 1998, we entered into a joint venture arrangement with a hospital in Mohawk Valley—New York. We have a 37% interest in the joint venture, which provides equipment for the three treatment centers that provide service in the Mohawk Valley local market. We also manage these treatment centers pursuant to an agreement with the hospital. On May 15, 2002, we executed an

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administrative services agreement with a hospital in Bronx, New York to provide administrative services and do so for a monthly fixed fee. In addition, effective January 1, 2003, we executed an administrative services agreement with a hospital in Salisbury, Maryland to provide administrative services for a three-year term for a monthly fixed fee. A professional corporation owned by certain of our shareholders provides the radiation oncologists for this treatment center and the treatment centers in Mohawk Valley—New York. In connection with our hospital-based treatment center services, we provide technical and administrative services. Professional services in New York are provided by physicians employed by a professional corporation owned by certain of our officers, directors and principal shareholders. Professional services consist of services provided by radiation oncologists to patients. Technical services consist of the non-professional services provided by us in connection with radiation treatments administered to patients. Administrative services consist of services provided by us to the hospital-based center. The contracts under which the hospital based treatment centers are provided service are generally three to seven years with terms for renewal. The following table sets forth the locations and other information regarding each of our hospital-based radiation treatment centers in our local markets as of December 31, 2005:

		Services Provided
Treatment Center	Year	Professional	Technical	Administrative
Dade County—Florida
Hialeah	1996	ü
Aventura	1999	ü	ü
Westchester/ Bronx—New York
Bronx	2002		ü	ü
Bronx	2002		ü	ü
Bronx (1)	2003		ü	ü
Northern Westchester (1)	2005		ü	ü
Mohawk Valley—New York
Utica (1)	1998		ü	ü
Rome (1)	1999		ü	ü
Herkimer (1)	1999		ü	ü
Delmarva Peninsula
Salisbury, Maryland (2)	2003		ü	ü
Seaford, Delaware (2)	2003		ü	ü
Rhode Island
Providence (3)	2005		ü	ü

(1) Professional services are provided by physicians employed by a professional corporation owned by certain of our officers and directors. Our wholly-owned New York subsidiary contracts with the hospital through an administrative services agreement for the provision of technical and administrative services.

(2) Professional services are provided by physicians employed by a professional corporation owned by certain of our officers and directors. Our wholly-owned Maryland subsidiary contracts with the hospital through an administrative services agreement for the provision of technical and administrative services.

(3) Professional services are provided by physicians employed by a professional corporation owned by certain of our officers and directors. Our wholly-owned Massachusetts subsidiary contracts with the hospital through an administrative services agreement for the provision of technical and administrative services.

Treatment Center Structure

Arizona, Florida, Kentucky, Maryland, New Jersey, and Rhode Island Treatment Centers. In Arizona, Florida, Kentucky, Maryland, New Jersey, and Rhode Island we employ or contract with radiation oncologists and other healthcare professionals. Substantially all of our Florida, Kentucky, Maryland, New Jersey and Rhode Island radiation oncologists have employment agreements with us. While we exercise legal control over radiation oncologists we employ, we do not exercise control over, or otherwise influence, their medical judgment or professional decisions. Such radiation oncologists typically receive a base salary, fringe benefits and may be eligible for an incentive performance bonus. In addition to compensation, we provide our radiation oncologists with uniform benefit plans, such as disability, retirement, life and group health insurance and medical malpractice insurance. The radiation oncologists are required to hold a valid license to practice medicine in the jurisdiction in which they practice and, with respect to inpatient or hospital services, to become a member of the medical staff at the contracting hospital with privileges in radiation oncology. We are responsible for billing patients, hospitals and third-party payors for services rendered by our radiation oncologists. Most of our employment agreements prohibit the physician from competing with us within a defined geographic area and prohibit solicitation of our radiation oncologists, other employees or patients for a period of one to two years after termination of employment.

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Alabama, California, Delaware, Massachusetts, Nevada, NewYork, North Carolina, and West Virginia Treatment Centers. Many states, including Alabama, California, Delaware, Massachusetts, Nevada, New York, North Carolina, and West Virginia prohibit us from employing radiation oncologists. As a result, we operate our treatment centers in such states pursuant to administrative services agreements between professional corporations and our wholly-owned subsidiaries. In the states of Alabama, California and Massachusetts, our treatment centers are operated as physician office practices. We typically provide technical services to these treatment centers in addition to our administrative services. For the years ended December 31, 2004, and 2005 approximately 28.0% and 28.6% of our net patient service revenue, respectively, was generated by professional corporations with which we have administrative services agreements. The professional corporations with which we have administrative services agreements in California, Delaware, Massachusetts, Nevada, New York, North Carolina and West Virginia are owned by certain of our executive officers, directors and shareholders, who are licensed to practice medicine in the respective state. In Alabama, the professional corporation with which we have an administrative services agreement is owned by a radiation oncologist licensed to practice medicine in Alabama.

Our administrative services agreements generally obligate us to provide certain treatment centers with equipment, staffing, accounting services, billing and collection services, management, technical and administrative personnel, assistance in managed care contracting and assistance in marketing. Our administrative services agreements typically provide for the professional corporations to pay us a fixed monthly service fee, which represents the fair market value of our services. It also provides for the parties to meet annually to reevaluate the value of our services and establish the fair market value. In Alabama, we are paid a fee based upon a fixed percentage of global revenue. The terms of our administrative services agreements with professional corporations range from 20 to 25 years and typically renew automatically for additional five-year periods. Under related agreements in certain states, we have the right to designate purchases of shares held by the physician owners of the professional corporations to qualified individuals under certain circumstances.

Our administrative services agreements contain restrictive covenants that preclude the professional corporations from hiring another management services organization for some period after termination. The professional corporations are parties to employment agreements with the radiation oncologists. The terms of these employment agreements typically range from three to five years depending on the physician’s experience. The employment agreements also typically require the radiation oncologists to use their best efforts to network with referring physicians and otherwise contain covenants not to compete.

Marketing

Our radiation oncologists are primarily referred patients by: primary care physicians, medical oncologists, surgical oncologists, urologists, pulmonologists, neurosurgeons and other physicians within the medical community. Our radiation oncologists are expected to actively develop their referral base by establishing strong clinical relationships with referring physicians. Our radiation oncologists develop these relationships by describing the variety and advanced nature of the therapies offered at our treatment centers, by providing seminars on advanced treatment procedures and by involving the referring physicians in those advanced treatment procedures. Patient referrals to our radiation oncologists also are influenced by managed care organizations with which we actively pursue contractual agreements.

We create standardized educational and informational materials for our treatment centers. In addition, we advertise our treatment centers and radiation oncologists in select markets.

Employees

As of December 31, 2005, we employed approximately 980 persons. As of December 31, 2005, we were affiliated with 69 radiation oncologists of which 40 are employed by us. We do not employ any radiation oncologists in Alabama, California, Delaware, Massachusetts, Nevada, New York, North Carolina or West Virginia. None of our employees is a party to a collective bargaining agreement and we consider our relationship with our employees to be good. There currently is a nationwide shortage of radiation oncologists, medical technicians and other medical support personnel, which makes recruiting and retaining these employees difficult. We provide competitive wages and benefits and offer our employees a professional work environment that we believe helps us recruit and retain the staff we need to operate and manage our treatment centers. In addition to our radiation oncologists we currently employ 10 gynecologic oncologists, 5 surgical oncologists and 8 urologists whose practices complement our business in three markets in south Florida.

Seasonality

Our results of operations historically have fluctuated on a quarterly basis and can be expected to continue to fluctuate. Many of the patients of our Florida treatment centers are part-time residents in Florida during the winter months. Hence, these treatment centers have historically experienced higher utilization rates during the winter months than during the remainder of the year. In addition, referrals are typically lower in the summer months due to traditional vacation periods.

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Insurance

We are subject to claims and legal actions in the ordinary course of business. To cover these claims, we maintain professional malpractice liability insurance and general liability insurance in amounts we believe are sufficient for our operations. We maintain professional malpractice liability insurance that provides primary coverage on a claims-made basis per incident and in annual aggregate amounts. Our professional malpractice liability insurance coverage is provided by Lexington Insurance Company and in turn reinsured by an insurance company owned by certain of our officers and directors. This insurance company is managed by Aon Corporation. The malpractice insurance provided by this insurance company varies in coverage limits for individual physicians. The insurance company also carries excess claims-made coverage through Lloyd’s of London in the aggregate amount of $15.0 million.

In addition, we currently maintain multiple layers of umbrella coverage through our general liability insurance policies in the aggregate amount of $10.0 million. We maintain Directors and Officers liability insurance in the aggregate amount of $25.0 million.

Hazardous Materials

We are subject to various federal, state and local laws and regulations governing the use, discharge and disposal of hazardous materials, including medical waste products. We believe that all of our treatment centers comply with these laws and regulations and we do not anticipate that any of these laws will have a material adverse effect on our operations.

Although our linear accelerators and certain other equipment do not use radioactive or other hazardous materials, our treatment centers do provide specialized treatment involving the implantation of radioactive material in the prostate and other organs. The radioactive sources generally are obtained from, and returned to, the suppliers, which have the ultimate responsibility for their proper disposal. We, however, remain subject to state and federal laws regulating the protection of employees who may be exposed to hazardous material and the proper handling, storage and disposal of that material.

Competition

The radiation therapy market is highly fragmented and our business is highly competitive. Competition may result from other radiation oncology practices, solo practitioners, companies in other healthcare industry segments, large physician group practices or radiation oncology physician practice management companies, hospitals and other operators of other radiation treatment centers, some of which may have greater financial and other resources than us.

Intellectual Property

We have not registered our service marks or any of our logos with the United States Patent and Trademark Office. However, some of our service marks and logos may be subject to other common law intellectual property rights. To date, we have not relied heavily on patents or other intellectual property in operating our business. Nevertheless, some of the information technology purchased or used by us may be patented or subject to other intellectual property rights. As a result, we may be found to be, or actions may be brought against us alleging that we are, infringing on the trademark, patent or other intellectual property rights of others, which could give rise to substantial claims against us. In the future, we may wish to obtain or develop trademarks, patents or other intellectual property. However, other practices and public entities, including universities, may have filed applications for (or have been issued) trademarks or patents that may be the same as or similar to those developed or otherwise obtained by us or that we may need in the development of our own intellectual property. The scope and validity of such trademark, patent and other intellectual property rights, the extent to which we may wish or need to acquire such rights and the cost or availability of such rights are presently unknown. In addition, we cannot provide assurance that others will not obtain access to our intellectual property or independently develop the same or similar intellectual property to that developed or otherwise obtained by us.

Government Regulations

The healthcare industry is highly regulated and the federal and state laws that affect our business are significant. Federal law and regulations are based primarily upon the Medicare and Medicaid programs, each of which is financed, at least in part, with federal money. State jurisdiction is based upon the state’s authority to license certain categories of healthcare professionals and providers and the state’s interest in regulating the quality of healthcare in the state, regardless of the source of payment. The significant areas of federal and state regulatory laws that could affect our ability to conduct our business include those regarding:

• false and other improper claims;

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• the Health Insurance Portability and Accountability Act of 1996, or HIPAA;

• civil and monetary penalties law;

• privacy, security and code set regulations;

• anti-kickback laws;

• the Stark Laws and other self-referral and financial inducement laws;

• fee-splitting;

• corporate practice of medicine;

• anti-trust;

• licensing; and

• certificate of need.

A violation of these laws could result in civil and criminal penalties, the refund of monies paid by government and/or private payors, exclusion of the physician, the practice or us from participation in Medicare and Medicaid programs and/or the loss of a physician’s license to practice medicine. We believe we exercise care in our efforts to structure our arrangements and our practices to comply with applicable federal and state laws. We have a Medicare Compliance Committee that periodically reviews our procedures and a Corporate Compliance Program in place to review our practices. Although we believe we are in material compliance with all applicable laws, these laws are complex and a review of our practices by a court, or law enforcement or regulatory authority could result in an adverse determination that could harm our business. Furthermore, the laws applicable to us are subject to change, interpretation and amendment, which could adversely affect our ability to conduct our business.

We estimate that approximately 55%, 53% and 50% of our net patient service revenue for 2003, 2004 and 2005, respectively, consisted of reimbursements from Medicaid and Medicare government programs. In order to be certified to participate in the Medicare and Medicaid programs, each provider must meet applicable regulations of the Department of Health and Human Services (HHS) relating to, among other things, the type of facility, operating policies and procedures, maintenance equipment, personnel, standards of medical care and compliance with applicable state and local laws. Our radiation treatment centers are certified to participate in the Medicare and Medicaid programs.

Federal Law

The federal healthcare laws apply in any case in which we are providing an item or service that is reimbursable under Medicare or Medicaid. The principal federal laws that affect our business include those that prohibit the filing of false or improper claims with the Medicare or Medicaid programs, those that prohibit unlawful inducements for the referral of business reimbursable under Medicare or Medicaid and those that prohibit the provision of certain services by a provider to a patient if the patient was referred by a physician with which the provider has certain types of financial relationships.

False and Other Improper Claims. Under the federal False Claims Act, the government may fine us if we knowingly submit, or participate in submitting, any claims for payment to the federal government that are false or fraudulent, or that contain false or misleading information. A provider can be found liable not only for submitting false claims with actual knowledge, but also for doing so with reckless disregard or deliberate ignorance of such falseness. In addition, knowingly making or using a false record or statement to receive payment from the federal government is also a violation. If we are ever found to have violated the False Claims Act, we could be required to make significant payments to the government (including damages and penalties in addition to the reimbursements previously collected) and could be excluded from participating in Medicare, Medicaid and other federal healthcare programs. Many states have similar false claims statutes. Healthcare fraud is a priority of the United States Department of Justice, Office of Inspector General and the Federal Bureau of Investigation (“FBI”). They have devoted a significant amount of resources to investigating healthcare fraud.

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While the criminal statutes generally are reserved for instances evidencing fraudulent intent, the civil and administrative penalty statutes are being applied by the federal government in an increasingly broad range of circumstances. Examples of the type of activity giving rise to liability for filing false claims include billing for services not rendered, misrepresenting services rendered (i.e., mis-coding) and application for duplicate reimbursement. Additionally, the federal government takes the position that a pattern of claiming reimbursement for unnecessary services violates these statutes if the claimant should have known that the services were unnecessary. The federal government also takes the position that claiming reimbursement for services that are substandard is a violation of these statutes if the claimant should have known that the care was substandard. Criminal penalties also are available in the case of claims filed with private insurers if the federal government shows that the claims constitute mail fraud or wire fraud or violate a number of federal criminal healthcare fraud statutes.

State Medicaid agencies also have certain fraud and abuse authority. In addition, private insurers may bring actions under state false claim laws. In certain circumstances, federal and some state laws authorize private whistleblowers to bring false claim or “qui tam” suits on behalf of the government against providers and reward the whistleblower with a portion of any final recovery. In addition, the federal government has engaged a number of nongovernmental-audit organizations to assist it in tracking and recovering false claims for healthcare services.

Governmental investigations and whistleblower “qui tam” suits against healthcare companies have increased significantly in recent years and have resulted in substantial penalties and fines.

We submit thousands of reimbursement claims to Medicare and Medicaid each year and there can be no assurance that there are no errors. We believe our billing and documentation practices comply with applicable laws and regulations in all material respects. Although we monitor our billing practices for compliance with applicable laws, such laws are very complex and we might not have sufficient regulation guidance to assist us in our interpretation of these laws.

HIPAA Criminal Penalties. The Health Insurance Portability and Accountability Act of 1996, or HIPAA, created criminal provisions, which impose criminal penalties for fraud against any healthcare benefit program for theft or embezzlement involving healthcare and for false statements in connection with the payment of any health benefits. HIPAA also provided for broad prosecutorial subpoena authority and authorized property forfeiture upon conviction of a federal healthcare offense. Significantly, the HIPAA provisions apply not only to federal programs, but also to private health benefit programs. HIPAA also broadened the authority of the Office of Inspector General (OIG) to exclude participants from federal healthcare programs. Because of the uncertainties as to how the HIPAA provisions will be enforced, we currently are unable to predict their ultimate impact on us. If the government were to seek any substantial penalties against us, this could have a material adverse effect on us.

HIPAA Civil Penalties. HIPAA broadened the scope of certain fraud and abuse laws by adding several civil statutes that apply to all healthcare services, whether or not they are reimbursed under a federal healthcare program. HIPAA established civil monetary penalties for certain conduct, including upcoding and billing for medically unnecessary goods or services.

HIPAA Administrative Simplifications. HIPAA includes statutory provisions which have authorized the Department of Health and Human Services, or HHS to issue regulations and standards for electronic transactions regarding the privacy and security of healthcare information which apply to us and our treatment centers.

The HIPAA regulations include:

• privacy regulations that protect individual privacy by limiting the uses and disclosures of individually identifiable health information and creating various privacy rights for individuals;

• security regulations that require covered entities to implement administrative, physical and technological safeguards to ensure the confidentiality, integrity and availability of individually identifiable health information in electronic form; and

• transaction standards and regulations that prescribe specific transaction formats and data code sets for specified electronic healthcare transactions.

If we fail to comply with the HIPAA regulations, we may be subject to civil monetary penalties enforced by HHS and, in certain circumstances, criminal penalties enforced by the Department of Justice. Under HIPAA, covered entities may be subject to civil monetary penalties in the amount of $100 per violation, capped at a maximum of $25,000 per year for

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violation of any particular standard. However, civil monetary penalties may not be assessed if a covered entity’s failure to comply is based on reasonable cause and not willful neglect, and the failure to comply is remedied within 30 days, or a longer period determined to be appropriate by HHS. On April 17, 2003, HHS published an interim final rule regarding civil monetary penalties. The rule largely deals with procedural issues regarding imposition of penalties, and does not address substantive issues regarding what violations will result in the imposition of a civil monetary penalty and what factors will be taken into account in determining the amount of a penalty. The U.S. Department of Justice may seek to impose criminal penalties for intentional violations of HIPAA. Criminal penalties under HIPAA vary depending upon the nature of the violation but could include fines of up to $250,000 and/or imprisonment.

The HIPAA regulations related to privacy establish comprehensive federal standards relating to the use and disclosure of individually identifiable health information or protected health information. The privacy regulations establish limits on the use and disclosure of protected health information, provide for patients’ rights, including rights to access, request amendment of, and receive an accounting of certain disclosures of protected health information, and require certain safeguards to protect protected health information. In general, the privacy regulations do not supersede state laws that are more stringent or grant greater privacy rights to individuals. Thus, we must reconcile the privacy regulations and other state privacy laws. Our operations that are regulated by HIPAA were required to be in compliance with the privacy regulations by April 14, 2003. We believe our operations are in material compliance with the privacy regulations, but there can be no assurance that the federal government would determine that we are in compliance.

The HIPAA security regulations establish detailed requirements for safeguarding protected health information that is electronically transmitted or electronically stored. We were required to comply with the security regulations by April 21, 2005. Some of the security regulations are technical in nature, while others may be addressed through policies and procedures. The technical regulations required us to incur significant costs in ensuring that our systems and facilities have in place all of the administrative, technical and physical safeguards to meet all of the implementation specifications. We believe our operations are in material compliance with the security regulations, but there can be no assurance that the federal government would determine that we are in compliance.

The HIPAA transaction standards regulations are intended to simplify the electronic claims process and other healthcare transactions by encouraging electronic transmission rather than paper submission. These regulations provide for uniform standards for data reporting, formatting and coding that we must use in certain transactions with health plans. Our compliance date for these regulations was October 16, 2003 and we implemented or upgraded our computer and information systems as we believed necessary to comply with the new regulations.

Although we believe that we are in material compliance with these HIPAA regulations with which compliance is currently required, the HIPAA regulations are expected to continue to impact us operationally and financially and will pose increased regulatory risk.

Anti-Kickback Law. Federal law commonly known as the “Anti-kickback Statute” prohibits the knowing and willful offer, solicitation, payment or receipt of anything of value (direct or indirect, overt or covert, in cash or in kind) which is intended to induce:

• the referral of an individual for a service for which payment may be made by Medicare and Medicaid or certain other federal healthcare programs; or

• the ordering, purchasing, leasing, or arranging for, or recommending the purchase, lease or order of, any service or item for which payment may be made by Medicare, Medicaid or certain other federal healthcare programs.

The law has been broadly interpreted by a number of courts to prohibit remuneration which is offered or paid for otherwise legitimate purposes if the circumstances show that one purpose of the arrangement is to induce referrals. Even bona fide investment interests in a healthcare provider may be questioned under the Anti-kickback Statute if the government concludes that the opportunity to invest was offered as an inducement for referrals. The penalties for violations of this law include criminal sanctions including fines and/or imprisonment and exclusion from federal healthcare programs.

The federal government has published regulations that provide “safe-harbors” that protect from prosecution under the Anti-kickback Statute business transactions that meet certain requirements. Failure to meet the requirements of a safe harbor, however, does not necessarily mean a transaction violates the Anti-kickback Statute. There are several aspects of our relationships with physicians to which the Anti-kickback Statute may be relevant. We claim reimbursement from Medicare or Medicaid for services that are ordered, in some cases, by our radiation oncologists who hold shares, or options to purchase shares, of our common stock. In addition, other physicians who are investors in us may refer patients to us for those services. Although neither the existing nor potential investments in us by physicians qualify for protection under the safe harbor

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regulations, we do not believe that these activities fall within the type of activities the Anti-kickback Statute was intended to prohibit. We also claim reimbursement from Medicare and Medicaid for services referred from other healthcare providers with whom we have financial arrangements. While we believe that these arrangements generally fall within applicable safe harbors or otherwise do not violate the law, there can be no assurance that the government will agree, in which event we could be harmed.

We believe our operations are in material compliance with applicable Medicare and Medicaid and fraud and abuse laws and seek to structure arrangements to comply with applicable safe harbors where reasonably possible. There is a risk however, that the federal government might investigate such arrangements and conclude they violate the Anti-kickback Statute. If our arrangements were found to be illegal, we, the physician groups and/or the individual physicians would be subject to civil and criminal penalties, including exclusion from the participation in government reimbursement programs, and our arrangements would not be legally enforceable, which could materially adversely affect us.

Additionally, the OIG issues advisory opinions that provide advice on whether proposed business arrangements violate the anti-kickback law. In Advisory Opinion 98-4, the OIG addressed physician practice management arrangements. In Advisory Opinion 98-4, the OIG found that administrative services fees based on a percentage of practice revenue may violate the Anti-kickback Statute. This Advisory Opinion suggests that OIG might challenge certain prices below Medicare reimbursement rates or arrangements based on a percentage of revenue. We believe that the fees we charge for our services under the administrative services agreements are commensurate with the fair market value of the services. While we believe our arrangements are in material compliance with applicable law and regulations, OIG’s advisory opinion suggests there is a risk of an adverse OIG finding relating to practices reviewed in the advisory opinion. Any such finding could have a material adverse impact on us.

The Stark Self-Referral Law. We are also subject to federal and state statutes banning payments for referral of patients and referrals by physicians to healthcare providers with whom the physicians have a financial relationship. The Stark Self-Referral Law (Stark II) prohibits a physician from referring a patient to a healthcare provider for certain designated health services reimbursable by Medicare or Medicaid if the physician has a financial relationship with that provider, including an investment interest, a loan or debt relationship or a compensation relationship. The designated services covered by the law include radiology services, infusion therapy, radiation therapy and supplies, outpatient prescription drugs and hospital services, among others. In addition to the conduct directly prohibited by the law, the statute also prohibits “circumvention schemes”, that are designed to obtain referrals indirectly that cannot be made directly. The penalties for violating the law include:

• a refund of any Medicare or Medicaid payments for services that resulted from an unlawful referral;

• civil fines; and

• exclusion from the Medicare and Medicaid programs.

Stark II contains exceptions applicable to our operations. For example, Stark II exempts any referrals of radiation oncologists for radiation therapy if (1) the request is part of a consultation initiated by another physician; and (2) the tests or services are furnished by or under the supervision of the radiation oncologist. We believe the services rendered by our radiation oncologists will comply with this exception.

Some physicians who are not radiation oncologists are employed by companies owned by us or by professional corporations owned by certain of our directors, officers and principal shareholders with which we have administrative services agreements. To the extent these professional corporations employ such physicians, and they are deemed to have made referrals for radiation therapy, their referrals will be permissible under Stark II if they meet a separate exception for employees. The employment exception requires, among other things, that the compensation be consistent with the fair market value of the services provided, and that it not take into account (directly or indirectly) the volume or value of any referrals by the referring physician.

When physician employees who are not radiation oncologists have ownership interests in our company, additional Stark II exceptions may be applied, including the exception for in-office ancillary services. Another potentially applicable Stark II exception is one for physician’s ownership of publicly traded securities in a corporation with shareholders’ equity exceeding $75 million as of the end of the most recent fiscal year.

We believe that our current operations comply in all material respects with Stark II, due to, among other things, various exceptions stated in Stark II and regulations that exempt either the referral or the financial relationship involved. Nevertheless, to the extent physicians affiliated with us make referrals to us and a financial relationship exists between the referring physicians and us, the government might take the position that the arrangement does not comply with Stark II. Any such finding could have a material adverse impact on us.

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State Law

State Anti-Kickback Laws. Many states in which we operate have laws that prohibit the payment of kickbacks in return for the referral of patients. Some of these laws apply only to services reimbursable under the state Medicaid program. However, a number of these laws apply to all healthcare services in the state, regardless of the source of payment for the service. Although we believe that these laws prohibit payments to referral sources only where a principal purpose for the payment is for the referral, the laws in most states regarding kickbacks have been subjected to limited judicial and regulatory interpretation and, therefore, no assurances can be given that our activities will be found to be in compliance. Noncompliance with such laws could have a material adverse effect upon us and subject us and the physicians involved to penalties and sanctions.

State Self-Referral Laws. A number of states in which we operate, such as Florida, have enacted self-referral laws that are similar in purpose to Stark II. However, each state law is unique. The state laws and regulations vary significantly from state to state, are often vague and, in many cases, have not been widely interpreted by courts or regulatory agencies. For example, some states only prohibit referrals where the physician’s financial relationship with a healthcare provider is based upon an investment interest. Other state laws apply only to a limited number of designated health services. Finally, some states do not prohibit referrals, but merely require that a patient be informed of the financial relationship before the referral is made.

These statutes and regulations generally apply to services reimbursed by both governmental and private payors. Violations of these laws may result in prohibition of payment for services rendered, loss of licenses as well as fines and criminal penalties. State statutes and regulations affecting the referral of patients to healthcare providers range from statutes and regulations that are substantially the same as the federal laws and safe harbor regulations to a simple requirement that physicians or other healthcare professionals disclose to patients any financial relationship the physicians or healthcare professionals have with a healthcare provider that is being recommended to the patients. We believe that we are in compliance with the self-referral law of each state in which we have a financial relationship with a physician. However, adverse judicial or administrative interpretations of any of these laws could have a material adverse effect on our operating results and financial condition. In addition, expansion of our operations into new jurisdictions, or new interpretations of laws in existing jurisdictions, could require structural and organizational modifications of our relationships with physicians to comply with that jurisdiction’s laws. Such structural and organizational modifications could have a material adverse effect on our operating results and financial condition.

Fee-Splitting Laws. Many states in which we operate prohibit the splitting or sharing of fees between physicians and non-physicians. These laws vary from state to state and are enforced by courts and regulatory agencies, each with broad discretion. Most of the states with fee-splitting laws only prohibit a physician from sharing fees with a referral source. However, some states have a broader prohibition against any splitting of a physician’s fees, regardless of whether the other party is a referral source. Some states have interpreted management agreements between entities and physicians as unlawful fee-splitting. In most cases, it is not considered to be fee-splitting when the payment made by the physician is reasonable reimbursement for services rendered on the physician’s behalf.

In certain states, we receive fees from professional corporations owned by certain of our shareholders under administrative services agreements. We believe we structured these fee provisions to comply with applicable state laws relating to fee-splitting. However, there can be no certainty that, if challenged, either us or the professional corporations will be found to be in compliance with each state’s fee-splitting laws, and, if challenged successfully, this could have a material adverse effect upon us.

We believe our arrangements with physicians comply in all material respects with the fee-splitting laws of the states in which we operate. Nevertheless, it is possible regulatory authorities or other parties could claim we are engaged in fee-splitting. If such a claim were successfully asserted in any jurisdiction, our radiation oncologists could be subject to civil and criminal penalties, professional discipline and we could be required to restructure our contractual and other arrangements. Any restructuring of our contractual and other arrangements with physician practices could result in lower revenue from such practices, increased expenses in the operation of such practices and reduced influence over the business decisions of such practices. Alternatively, some of our existing contracts could be found to be illegal and unenforceable, which could result in the termination of those contracts and an associated loss of revenue. In addition, expansion of our operations to other states with fee-splitting prohibitions may require structural and organizational modification to the form of relationships that we currently have with physicians, affiliated practices and hospitals. Any modifications could result in less profitable relationships with physicians, affiliated practices and hospitals, less influence over the business decisions of physicians and affiliated practices and failure to achieve our growth objectives.

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Corporate Practice of Medicine. We are not licensed to practice medicine. The practice of medicine is conducted solely by our licensed radiation oncologists and other licensed physicians. The manner in which licensed physicians can be organized to perform and bill for medical services is governed by the laws of the state in which medical services are provided and by the medical boards or other entities authorized by such states to oversee the practice of medicine. Most states prohibit any person or entity other than a licensed professional from holding him, her or itself out as a provider of diagnoses, treatment or care of patients. Many states extend this prohibition to bar companies not wholly-owned by licensed physicians from employing physicians, a practice commonly referred to as the “Corporate Practice of Medicine”, to maintain physician independence and clinical judgment.

Business corporations are generally not permitted under certain state laws to exercise control over the medical judgments or decisions of physicians, or engage in certain practices such as fee-splitting with physicians. In states where we are not permitted to own a medical practice, we perform only non-medical and administrative and support services, do not represent to the public or clients that we offer professional medical services and do not exercise influence or control over the practice of medicine.

Corporate Practice of Medicine laws vary widely regarding the extent to which a licensed physician can affiliate with corporate entities for the delivery of medical services. Florida is an example of a state that requires all practicing physicians to meet requirements for safe practice, but it has no provisions setting forth how physicians can be organized. In Florida, it is not uncommon for business corporations to own medical practices. New York, by contrast, prohibits physicians from sharing revenue received in connection with the furnishing of medical care, other than with a partner, employee or associate in a professional corporation, subcontractor or physician consultant relationship. We have developed arrangements which we believe are in compliance with the Corporate Practice of Medicine laws in the states in which we operate.

We believe our operations and contractual arrangements as currently conducted are in material compliance with existing applicable laws. However, we cannot assure you that we will be successful if our existing organization and our contractual arrangements with the professional corporations are challenged as constituting the unlicensed practice of medicine. In addition, we might not be able to enforce certain of our arrangements, including non-competition agreements and transition and stock pledge agreements. While the precise penalties for violation of state laws relating to the corporate practice of medicine vary from state to state, violations could lead to fines, injunctive relief dissolving a corporate offender or criminal felony charges. There can be no assurance that review of our business and the professional corporations by courts or regulatory authorities will not result in a determination that could adversely affect their operations or that the healthcare regulatory environment will not change so as to restrict existing operations or their expansion. In the event of action by any regulatory authority limiting or prohibiting us or any affiliate from carrying on our business or from expanding our operations and our affiliates to certain jurisdictions, structural and organizational modifications of us may be required, which could adversely affect our ability to conduct our business.

Antitrust Laws. In connection with the Corporate Practice of Medicine laws referred to above, certain of the physician practices with which we are affiliated are necessarily organized as separate legal entities. As such, the physician practice entities may be deemed to be persons separate both from us and from each other under the antitrust laws and, accordingly, subject to a wide range of laws that prohibit anticompetitive conduct among separate legal entities. These laws may limit our ability to enter into agreements with separate practices that compete with one another. In addition, where we also are seeking to acquire or affiliate with established and reputable practices in our target geographic markets and any market concentration could lead to antitrust claims.

We believe we are in material compliance with federal and state antitrust laws and intend to comply with any state and federal laws that may affect the development of our business. There can be no assurance, however, that a review of our business by courts or regulatory authorities would not adversely affect the operations of us and our affiliated physician practice entities.

State Licensing. As a provider of radiation therapy services in the states in which we operate, we must maintain current occupational and use licenses for our treatment centers as healthcare facilities and machine registrations for our linear accelerators and simulators. Additionally, we must maintain radioactive material licenses for each of our treatment centers which utilize radioactive sources. We believe that we possess or have applied for all requisite state and local licenses and are in material compliance with all state and local licensing requirements.

Certificate of Need. Many states in which we operate have Certificate of Need (CON) laws that require physicians or health care facilities seeking to initiate or expand services to submit an application to the state. In some states, approval must be obtained before initiating projects requiring capital expenditures above a certain dollar amount, introducing new services and/or expanding services. The CON program is intended to prevent unnecessary duplication of services and can be a competitive process whereby only one proposal among competing applicants who wish to provide a particular health service is chosen or a proposal by one applicant is challenged by another provider who may prevail in getting the state to deny the addition of the service.

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In certain states these CON statutes and regulations apply to our related physician corporations and in others it applies to hospitals where we have management agreements or joint venture relationships.

We believe that we have applied for all requisite state CON approvals or notified state authorities as required by statute and are in material compliance with state requirements. There can be no assurance, however, that a review of our business or proposed new practices by regulatory authorities would not adversely affect the operations of us and our affiliated physician practice entities.

Reimbursement and Cost Containment

Reimbursement. We provide a full range of both professional and technical services. Those services include the initial consultation, clinical treatment planning, simulation, medical radiation physics, dosimetry, treatment devices, special services and clinical treatment management procedures.

The initial consultation is charged as a professional fee for evaluation of the patient prior to the decision to treat the patient with radiation therapy. The clinical treatment planning also is reimbursed as a technical and professional component. Simulation of the patient prior to treatment involves both a technical and a professional component, as the treatment plan is verified with the use of a simulator accompanied by the physician’s approval of the plan. The medical radiation physics, dosimetry, treatment devices and special services also include both professional and technical components. The basic dosimetry calculation is accomplished, treatment devices are specified and approved, and the physicist consults with the radiation oncologist, all as professional and technical components of the charge. Special blocks, wedges, shields, or casts are fabricated, all as a technical and professional component.

The delivery of the radiation treatment from the linear accelerator is a technical charge. The clinical treatment administrative services fee is the professional fee charged weekly for the physician’s management of the patient’s treatment. Global fees containing both professional and technical components also are charged for specialized treatment such as hyperthermia, clinical intracavitary hyperthermia, clinical brachytherapy, interstitial radioelement applications, and remote after-loading of radioactive sources.

Coding and billing for radiation therapy is complex. We maintain a staff of coding professionals responsible for interpreting the services documented on the patients’ charts to determine the appropriate coding of services for billing of third-party payors. This staff provides coding and billing services for all of our treatment centers except for four treatment centers in New York. In addition, we do not provide coding and billing services to hospitals where we are providing only the professional component of radiation treatment services. We provide training for our coding staff and believe that our coding and billing expertise result in appropriate and timely reimbursement.

Cost Containment. We derived approximately 55%, 53% and 50% of our net patient service revenue for the years ended December 31, 2003, 2004 and 2005, respectively, from payments made by government sponsored healthcare programs, principally Medicare. These programs are subject to substantial regulation by the federal and state governments. Any change in payment regulations, policies, practices, interpretations or statutes that place limitations on reimbursement amounts, or changes in reimbursement coding, or practices could materially and adversely affect our financial condition and results of operations.

In recent years, the federal government has sought to constrain the growth of spending in the Medicare and Medicaid programs. Through the Medicare program, the federal government has implemented a resource-based relative value scale (RBRVS) payment methodology for physician services. RBRVS is a fee schedule that, except for certain geographical and other adjustments, pays similarly situated physicians the same amount for the same services. The RBRVS is adjusted each year and is subject to increases or decreases at the discretion of Congress. Changes in the RBRVS may result in reductions in payment rates for procedures provided by the Company. RBRVS-type payment systems also have been adopted by certain private third-party payors and may become a predominant payment methodology. Broader implementation of such programs could reduce payments by private third-party payors and could indirectly reduce our operating margins to the extent that the cost of providing management services related to such procedures could not be proportionately reduced. To the extent our costs increase, we may not be able to recover such cost increases from government reimbursement programs. In addition, because of cost containment measures and market changes in non-governmental insurance plans, we may not be able to shift cost increases to non-governmental payors. Changes in the RBRVS could result in a reduction from historical levels in per patient Medicare revenue received by us; however, we do not believe such reductions would, if implemented, result in a material adverse effect on us.

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In addition to current governmental regulation, both federal and state governments periodically propose legislation for comprehensive reforms affecting the payment for and availability of healthcare services. Aspects of certain of such healthcare proposals, such as reductions in Medicare and Medicaid payments, if adopted, could adversely affect us. Other aspects of such proposals, such as universal health insurance coverage and coverage of certain previously uncovered services, could have a positive impact on our business. It is not possible at this time to predict what, if any, reforms will be adopted by Congress or state legislatures, or when such reforms would be adopted and implemented. As healthcare reform progresses and the regulatory environment accommodates reform, it is likely that changes in state and federal regulations will necessitate modifications to our agreements and operations. While we believe we will be able to restructure in accordance with applicable laws and regulations, we cannot assure that such restructuring in all cases will be possible or profitable.

Although governmental payment reductions have not materially affected us in the past, it is possible that such changes in the future could have a material adverse effect on our financial condition and results of operations. In addition, Medicare, Medicaid and other government sponsored healthcare programs are increasingly shifting to some form of managed care. Additionally, funds received under all healthcare reimbursement programs are subject to audit with respect to the proper billing for physician services. Retroactive adjustments of revenue from these programs could occur. We expect that there will continue to be proposals to reduce or limit Medicare and Medicaid payment for services.

Rates paid by private third-party payors, including those that provide Medicare supplemental insurance, are based on established physician, clinic and hospital charges and are generally higher than Medicare payment rates. Changes in the mix of our patients between non-governmental payors and government sponsored healthcare programs, and among different types of non-government payor sources, could have a material adverse effect on us.

Reevaluations and Examination of Billing. Payors periodically reevaluate the services they cover. In some cases, government payors such as Medicare and Medicaid also may seek to recoup payments previously made for services determined not to be covered. Any such action by payors would have an adverse affect on our revenue and earnings.

Due to the uncertain nature of coding for radiation therapy services, we could be required to change coding practices or repay amounts paid for incorrect practices either of which could have a materially adverse effect on our operating results and financial condition.

Other Regulations. In addition, we are subject to licensing and regulation under federal, state and local laws relating to the collecting, storing, handling and disposal of infectious and hazardous waste and radioactive materials as well as the safety and health of laboratory employees. We believe our operations are in material compliance with applicable federal and state laws and regulations relating to the collection, storage, handling, treatment and disposal of all infectious and hazardous waste and radioactive materials. Nevertheless, there can be no assurance that our current or past operations would be deemed to be in compliance with applicable laws and regulations, and any noncompliance could result in a material adverse effect on us. We utilize licensed vendors for the disposal of such specimen and waste.

In addition to our comprehensive regulation of safety in the workplace, the federal Occupational Safety and Health Administration (OSHA) has established extensive requirements relating to workplace safety for healthcare employees, whose workers may be exposed to blood-borne pathogens, such as HIV and the hepatitis B virus. These regulations require work practice controls, protective clothing and equipment, training, medical follow-up, vaccinations and other measures designed to minimize exposure to, and transmission of, blood-borne pathogens.

Healthcare reform. The healthcare industry continues to attract much legislative interest and public attention. In recent years, an increasing number of legislative proposals have been introduced or proposed in Congress and in some state legislatures that would effect major changes in the healthcare system. Proposals that have been considered include changes in Medicare, Medicaid and other programs, cost controls on hospitals and mandatory health insurance coverage for employees. The costs of implementing some of these proposals would be financed, in part, by reduction in payments to healthcare providers under Medicare, Medicaid, and other government programs. We cannot predict the course of future healthcare legislation or other changes in the administration or interpretation of governmental healthcare programs and the effect that any legislation, interpretation, or change may have on us.

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Item 1A. Risk Factors

Investing in our common stock involves risk. You should carefully consider the following risks, as well as the other information contained in this 10-K, including our consolidated financial statements and the related notes, before investing in our common stock.

Risks Related to Our Business

We depend on payments from government Medicare and Medicaid programs for a significant amount of our revenue and our business could be materially harmed by any changes that result in reimbursement reductions.

Our payor mix is highly focused toward Medicare patients due to the high proportion of cancer patients over the age of 65. We estimate that approximately 55%, 53% and 50% of our net patient service revenue for 2003, 2004 and 2005, respectively, consisted of payments from Medicare and Medicaid. These government programs generally reimburse us on a fee-for-service basis based on predetermined government reimbursement rate schedules. As a result of these reimbursement schedules, we are limited in the amount we can record as revenue for our services from these government programs. If our operating costs increase, we will not be able to recover these costs from government payors. Medicare reimbursement rates are determined by a formula which takes into account an industry wide conversion factor (CF) which may change on an annual basis. In 2003, the CF increased by 1.6%; in 2004, it increased by 1.5%; and in 2005, the rate increased an additional 1.5% and in 2006 the CF will not change from the 2005 level. The net result of these changes in the conversion factor in the past several years has not had a significant impact on our business. There can be no assurance that increases will continue, scheduled increases will materialize or decreases will not occur in the future. Changes in the Medicare, Medicaid or similar government programs that limit or reduce the amounts paid to us for any of our services or specific procedures could cause our revenue and profitability to decline.

If payments by managed care organizations and other commercial payors decrease, our revenue and profitability could be adversely affected.

We estimate that approximately 43%, 46% and 47% of our net patient service revenue for 2003, 2004 and 2005, respectively, was derived from commercial payors such as managed care organizations and private health insurance programs. These commercial payors generally pay us for the services rendered to an insured patient based upon predetermined rates. Managed care organizations typically pay at lower rates than private health insurance programs. While commercial payor rates are generally higher than government program reimbursement rates, commercial payor rates are based in part on Medicare reimbursement rates and when Medicare rates are lowered, commercial rates are often lowered as well. If managed care organizations and other private insurers reduce their rates or we experience a significant shift in our revenue mix toward additional managed care payors or Medicare or Medicaid reimbursements, then our revenue and profitability will decline and our operating margins will be reduced. Any inability to maintain suitable financial arrangements with commercial payors could have a material adverse impact on our business.

We have potential conflicts of interest relating to our related party transactions which could harm our business.

We have potential conflicts of interest relating to existing agreements we have with certain of our directors, officers, principal shareholders, shareholders and employees. In 2003, 2004 and 2005 we paid an aggregate of $6.0 million, $8.1 million and $7.3 million, respectively under our related party agreements and we received $21.8 million, $26.7 million and $24.8 million, respectively pursuant to our administrative service agreements with related parties. Potential conflicts of interest can exist if a related party director or officer has to make a decision that has different implications for us and the related party.

If a dispute arises in connection with any of these agreements, if not resolved satisfactorily to us, our business could be harmed. These agreements include our:

• administrative services agreements with professional corporations that are owned by certain of our directors, officers and principal shareholders;

• leases we have entered into with entities owned by certain of our directors, officers, and principal shareholders; and

• medical malpractice insurance which we acquire from an entity owned by certain of our directors, officers, and principal shareholders.

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In Maryland, Massachusetts, Nevada, New York and North Carolina, we have administrative services agreements with professional corporations that are owned by certain of our directors, officers and principal shareholders. Michael J. Katin, M.D., a director, is a licensed physician in the states of Nevada and North Carolina and we have administrative services agreements with his professional corporations in these states. In the state of New York, our Chairman, Howard M. Sheridan, M.D., our Chief Executive Officer and President, Daniel E. Dosoretz, M.D., our Medical Director, James H. Rubenstein, M.D. and Dr. Katin, are licensed physicians and we have administrative services agreements with their professional corporation. Additionally, Dr. Katin, a principal shareholder, is a licensed physician in the state of Maryland and we have an administrative services agreement with his professional corporation in this state. While we have transition agreements in place in all states except New York that provide us with the ability to designate qualified successor physician owners of the shares held by the physician owners of these professional corporations upon the occurrence of certain events, there can be no assurance that we will be able to enforce them under the laws of the respective states or that they will not be challenged by regulatory agencies. Potential conflicts of interest may arise in connection with the administrative services agreements that may have materially different implications for us and the professional corporations and there can be no assurance that it will not harm us. For example, we are generally paid a fixed annual fee on a monthly basis by the professional corporations for our services, which are generally subject to renegotiation on an annual basis. We may be unable to renegotiate acceptable fees, in which event many of the administrative services agreements provide for binding arbitration. If we are unsuccessful in renegotiations or arbitration this could negatively impact our operating margins or result in the termination of our administrative services agreements.

Additionally, we lease 13 of our properties from ownership groups that consist of certain of our directors, officers, principal shareholders, shareholders and employees. Our lease for the Broadway office in Fort Myers, Florida is on a month-to-month basis and there can be no assurance that it will continue in the future. We may be unable to renegotiate these leases when they come up for renewal on terms acceptable to us, if at all.

In October 2003, we replaced our existing third-party medical malpractice insurance coverage with coverage we obtained from a newly-formed insurance entity, which is owned by physicians including Drs. Katin, Dosoretz, Rubenstein and Sheridan. We renewed this coverage in October 2004 and in October 2005 which was approved by the audit committee. We may be unable to renegotiate this coverage at acceptable rates and comparable coverage may not be available from third-party insurance companies. If we are unsuccessful in renewing our malpractice insurance coverage, we may not be able to continue to operate without being exposed to substantial risks of claims being made against us for damage awards we are unable to pay.

All transactions between us and any related party after our June 2004 initial public offering are subject to approval by the audit committee and disputes will be handled by the audit committee. There can be no assurance that the above or any future conflicts of interest will be resolved in our favor. If not resolved, such conflicts could harm our business.

In certain states we depend on administrative services agreements with professional corporations, including related party professional corporations, and if we are unable to continue to enter into them or they are terminated, we could be materially harmed.

Certain states, including Alabama, California, Maryland, Massachusetts, Nevada, New York and North Carolina, have laws prohibiting business corporations from employing physicians. Our treatment centers in Alabama, Massachusetts, Nevada, New York and North Carolina, operate through administrative services agreements with professional corporations that employ the radiation oncologists who provide professional services at the treatment centers in those states. In 2003, 2004 and 2005, $35.1 million, $45.8 million and $62.2 million, respectively, of our net patient service revenue was derived from administrative services agreements, as opposed to $96.0 million, $117.9 million and $155.4 million from all of our other centers. The professional corporations in these states are currently owned by certain of our directors, officers and principal shareholders, who are licensed to practice medicine in those states. As we enter into new states that will require an administrative services agreement, there can be no assurance that a related party professional corporation, or any professional corporation, will be willing or able to enter into an administrative services agreement. Furthermore, if we enter into an administrative services agreement with an unrelated party there could be an increased risk of differences arising or future termination. We cannot assure you that a professional corporation will not seek to terminate an agreement with us on the basis that it violates the applicable state laws prohibiting the corporate practice of medicine or any other basis nor can we assure you that governmental authorities in those states will not seek termination of these arrangements on the same basis. While we have not been subject to such proceedings in the past, nor are we currently aware of any other corporations that are subject to such proceedings, we could be materially harmed if any state governmental authorities or the professional corporations with which we have an administrative services agreement were to succeed in such a termination.

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We depend on recruiting and retaining radiation oncologists and other qualified healthcare professionals for our success and our ability to enforce the non-competition covenants with radiation oncologists.

Our success is dependent upon our continuing ability to recruit, train and retain or affiliate with radiation oncologists, physicists, dosimetrists, radiation therapists and medical technicians. While there is currently a national shortage of these healthcare professionals, we have not experienced significant problems attracting and retaining key personnel and professionals in the recent past. We face competition for such personnel from other healthcare providers, research and academic institutions, government entities and other organizations. In the event we are unable to recruit and retain these professionals, such shortages could have a material adverse effect on our ability to grow. Additionally, many of our senior radiation oncologists, due to their reputations and experience, are very important in the recruitment and education of radiation oncologists. The loss of any such senior radiation oncologists could negatively impact us.

All of our radiation oncologists except eight are employed under employment agreements which, among other provisions, provide that the radiation oncologists will not compete with us (or the professional corporations contracting with us) for a period of time after employment terminates. Such covenants not to compete are enforced to varying degrees from state to state. In most states, a covenant not to compete will be enforced only to the extent that it is necessary to protect the legitimate business interest of the party seeking enforcement, that it does not unreasonably restrain the party against whom enforcement is sought and that it is not contrary to the public interest. This determination is made based upon all the facts and circumstances of the specific case at the time enforcement is sought. It is unclear whether our interests under our administrative services agreements will be viewed by courts as the type of protected business interest that would permit us or the professional corporations to enforce a non-competition covenant against the radiation oncologists. Since our success depends in substantial part on our ability to preserve the business of our radiation oncologists, a determination that these provisions will not be enforced could have a material adverse effect on us.

We depend on our senior management and we may be materially harmed if we lose any member of our senior management.

We are dependent upon the services of our senior management, especially Dr. Dosoretz, our Chief Executive Officer and President, and Dr. Rubenstein, our Medical Director. We have entered into executive employment agreements with Drs. Dosoretz and Rubenstein. The initial term of the employment agreements is three years and they renew automatically for successive two year terms unless 120 days prior notice is given by either party. Because these members of our senior management team have been with us for over 15 years and have contributed greatly to our growth, their services would be very difficult, time consuming and costly to replace. We carry key-man life insurance on these individuals. The loss of key management personnel or our inability to attract and retain qualified management personnel could have a material adverse effect on us. A decision by any of these individuals to leave our employ, to compete with us or to reduce his involvement on our behalf or as to any professional corporation they have an interest in and to which we provide administrative services, would have a material adverse effect on our business.

A significant number of our treatment centers are concentrated in certain states, particularly Florida, which makes us particularly sensitive to regulatory, economic and other conditions in those states.

Our Florida treatment centers accounted for approximately 68%, 64% and 57% of our total revenues during 2003, 2004 and 2005, respectively. Our treatment centers are also concentrated in the states of Nevada, New York and North Carolina, none of which individually currently account for more than 15% of our total revenues, but in the aggregate accounted for approximately 26%, 23% and 23% of our total revenues in 2003, 2004 and 2005, respectively. If our treatment centers in these states are adversely affected by changes in regulatory, economic and other conditions, our revenue and profitability may decline. In particular, we employ radiation oncologists and other physicians at our Florida treatment centers and if we are restricted or prohibited from doing so in the future it could significantly harm our business.

Our growth strategy depends in part on our ability to acquire and develop additional treatment centers on favorable terms. If we are unable to do so, our future growth could be limited and our operating results could be adversely affected.

We may be unable to identify, negotiate and complete suitable acquisition and development opportunities on reasonable terms. We began operating our first radiation treatment center in 1983, and have grown to provide radiation therapy at 68 treatment centers. We expect to continue to add additional treatment centers in our existing and new local markets. Our growth, however, will depend on several factors, including:

• our ability to obtain desirable locations for treatment centers in suitable markets;

• our ability to identify, recruit and retain or affiliate with a sufficient number of radiation oncologists and other healthcare professionals;

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• our ability to obtain adequate financing to fund our growth strategy; and

• our ability to successfully operate under applicable government regulations.

If our growth strategy does not succeed, our business could be harmed.

We may not be able to grow our business effectively or successfully implement our growth plans if we are unable to recruit additional management and other personnel.

Our ability to continue to grow our business effectively and successfully implement our growth strategy is highly dependent upon our ability to attract and retain qualified management employees and other key employees. We believe there are a limited number of qualified people in our business and the industry in which we compete. As such, there can be no assurance that we will be able to identify and retain the key personnel that may be necessary to grow our business effectively or successfully implement our growth strategy. If we are unable to attract and retain talented personnel it could limit our ability to grow our business.

We may encounter numerous business risks in acquiring and developing additional treatment centers, and may have difficulty operating and integrating those treatment centers.

If we acquire or develop additional treatment centers, we may:

• be unable to successfully operate the treatment centers;

• have difficulty integrating their operations and personnel;

• be unable to retain radiation oncologists or key management personnel;

• be unable to collect the accounts receivable of an acquired treatment center;

• acquire treatment centers with unknown or contingent liabilities, including liabilities for failure to comply with healthcare laws and regulations;

• be unable to contract with third-party payors or attract patients to our treatment centers; or

• experience losses and lower gross revenues and operating margins during the initial periods of operating our newly-developed treatment centers.

Furthermore, integrating a new treatment center could be expensive and time consuming, and could disrupt our ongoing business and distract our management and other key personnel.

We currently plan to develop new treatment centers in existing and new local markets. We may not be able to structure economically beneficial arrangements in new states as a result of these respective healthcare laws or otherwise. If these plans change for any reason or the anticipated schedules for opening and costs of development are revised by us, we may be negatively impacted. We may not be able to integrate and staff these new treatment centers. There can be no assurance that these planned treatment centers will be completed or that, if developed, will achieve sufficient patient volume to generate positive operating margins. If we are unable to timely and efficiently integrate an acquired or newly-developed treatment center, our business could suffer.

We may be subject to actions for false claims if we do not comply with government coding and billing rules which could harm our business.

If we fail to comply with federal and state documentation, coding and billing rules, we could be subject to criminal and/or civil penalties, loss of licenses and exclusion from the Medicare and Medicaid programs, which could harm us. We estimate that approximately 55%, 53% and 50% of our net patient service revenue for 2003, 2004 and 2005, respectively, consisted of payments from Medicare and Medicaid programs. In billing for our services to third-party payors, we must follow complex documentation, coding and billing rules. These rules are based on federal and state laws, rules and regulations, various government pronouncements, and on industry practice. Failure to follow these rules could result in potential criminal or civil liability under the federal False Claims Act, under which extensive financial penalties can be imposed. It could further result in criminal liability under various federal and state criminal statutes. We submit thousands of claims for Medicare and other payments and there can be no assurance that there have been no errors. While we carefully and regularly review our documentation, coding and billing practices as part of our compliance program, the rules are frequently vague and confusing and we cannot assure that governmental investigators, private insurers or private whistleblowers will not challenge our practices. Such a challenge could result in a material adverse effect on our business.

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State law limitations and prohibitions on the corporate practice of medicine may materially harm our business and limit how we can operate.

State governmental authorities regulate the medical industry and medical practices extensively. Many states have corporate practice of medicine laws which prohibit us from:

• employing physicians;

• practicing medicine, which, in some states, includes managing or operating a radiation treatment center;

• certain types of fee arrangements with physicians;

• owning or controlling equipment used in a medical practice;

• setting fees charged for physician services;

• maintaining a physician’s patient records; or

• controlling the content of physician advertisements.

In addition, many states impose limits on the tasks a physician may delegate to other staff members. We have administrative services agreements in states that prohibit the corporate practice of medicine such as Alabama, California, Maryland, Massachusetts, Nevada, New York and North Carolina. Corporate practice of medicine laws and their interpretation vary from state to state, and regulatory authorities enforce them with broad discretion. If we are in violation of these laws, we could be required to restructure our agreements which could materially harm our business and limit how we operate. In the event the corporate practice of medicine laws of other states would adversely limit our ability to operate, it could prevent us from expanding into the particular state and impact our growth strategy.

If we fail to comply with the laws and regulations applicable to our treatment center operations, we could suffer penalties or be required to make significant changes to our operations.

Our treatment center operations are subject to many laws and regulations at the federal, state and local government levels. These laws and regulations require that our treatment centers meet various licensing, certification and other requirements, including those relating to:

• qualification of medical and support persons;

• pricing of services by healthcare providers;

• the adequacy of medical care, equipment, personnel, operating policies and procedures;

• clinic licensure and certificates of need;

• maintenance and protection of records; or

• environmental protection, health and safety.

While we attempt to comply with all applicable laws and regulations some of which can be complex and subject to interpretation, our treatment centers may fail to comply with all applicable laws and regulations. If we fail or have failed to comply with applicable laws and regulations, we could suffer civil or criminal penalties, including becoming the subject of cease and desist orders, rejection of the payment of our claims, the loss of our licenses to operate and our ability to participate in government or private healthcare programs.

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If we fail to comply with the federal anti-kickback statute, we could be subject to criminal and civil penalties, loss of licenses and exclusion from the Medicare and Medicaid programs, which could materially harm us.

A provision of the Social Security Act, commonly referred to as the federal anti-kickback statute, prohibits the offer, payment, solicitation or receipt of any form of remuneration in return for referring, ordering, leasing, purchasing or arranging for or recommending the ordering, purchasing or leasing of items or services payable by Medicare, Medicaid or any other federally funded healthcare program. The federal anti-kickback statute is very broad in scope and many of its provisions have not been uniformly or definitively interpreted by existing case law or regulations. All of our financial relationships with healthcare providers are potentially implicated by this statute to the extent Medicare or Medicaid referrals are implicated. Financial relationships covered by this statute can include any relationship where remuneration is provided for referrals including payments not commensurate with fair market value, whether in the form of space, equipment leases, professional or technical services or anything else of value. Violations of the federal anti-kickback statute may result in substantial civil or criminal penalties, including criminal fines of up to $25,000, imprisonment of up to five years, civil penalties under the Civil Monetary Penalties Law of up to $50,000 for each violation, plus three times the remuneration involved, civil penalties under the False Claims Act of up to $11,000 for each claim submitted, plus three times the amounts paid for such claims and exclusion from participation in the Medicare and Medicaid programs. The exclusion, if applied to us or one or more of our subsidiaries or affiliate personnel, could result in significant reductions in our revenues and could have a material adverse effect on our business. In addition, most of the states in which we operate, including Florida, have also adopted laws, similar to the federal anti-kickback statute, that prohibit payments to physicians in exchange for referrals, some of which apply regardless of the source of payment for care. These statutes typically impose criminal and civil penalties as well as loss of licenses.

If we fail to comply with the provision of the Civil Monetary Penalties Law relating to inducements provided to patients, we could be subject to civil penalties and exclusion from the Medicare and Medicaid programs, which could materially harm us.

Under a provision of the federal Civil Monetary Penalties Law, civil monetary penalties (and exclusion) may be imposed on any person who offers or transfers remuneration to any patient who is a Medicare or Medicaid beneficiary, when the person knows or should know that the remuneration is likely to induce the patient to receive medical services from a particular provider. This broad provision applies to many kinds of inducements or benefits provided to patients, including complimentary items, services or transportation that are of more than a nominal value. We have reviewed our practices of providing services to our patients, and have structured those services in a manner that we believe complies with the Law and its interpretation by government authorities. We cannot provide assurances, however, that government authorities will not take a contrary view and impose civil monetary penalties and exclude us for past or present practices.

Our business could be materially harmed by future interpretation or implementation of state laws regarding prohibitions on fee-splitting.

Many states, including Florida where 24 of our 68 treatment centers are located, prohibit the splitting or sharing of fees between physicians and non-physicians. These laws vary from state to state and are enforced by courts and regulatory agencies, each with broad discretion. Some states have interpreted certain types of fee arrangements in practice management agreements between entities and physicians as unlawful fee-splitting. We believe our arrangements with physicians comply in all material respects with the fee-splitting laws of the states in which we operate. Nevertheless, it is possible regulatory authorities or other parties could claim we are engaged in fee-splitting. If such a claim were successfully asserted in any jurisdiction, we and our radiation oncologists could be subject to civil and criminal penalties and we could be required to restructure our contractual and other arrangements. Any restructuring of our contractual and other arrangements with physician practices could result in lower revenue from such practices and reduced influence over the business decisions of such practices. Alternatively, some of our existing contracts could be found to be illegal and unenforceable, which could result in the termination of those contracts and an associated loss of revenue. In addition, expansion of our operations to other states with certain types of fee-splitting prohibitions may require structural and organizational modification to the form of relationships that we currently have with physicians, professional corporations and hospitals.

If our operations in New York are found not to be in compliance with New York law, we may be unable to continue or expand our operations in New York.

We estimate that approximately 11%, 9% and 7% of total revenues for 2003, 2004 and 2005, respectively, was derived from our New York operations. New York law prohibits a business corporation such as us from practicing medicine in the state. As a result, we do not employ radiation oncologists or any other physician or licensed health care provider to provide professional services in New York. We do provide certain management and administrative services to health care providers, including physicians. These services and the payments received for them are regulated by New York law. We believe we

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have structured our services arrangements with health care providers to comply with these laws. New York also prohibits for-profit corporations from owning a licensed healthcare facility. We do not own any interests in any licensed New York health care facilities. New York additionally has regulations concerning the administration of radiation and rules governing financial and referral relationships with physicians who provide radiation therapy services. Although we believe our operations and relationships in New York are in material compliance with these laws, if New York regulatory authorities or a third party asserts a contrary position, our New York operations could be harmed and we may be unable to continue or expand our operations in New York.

If a federal or state agency asserts a different position or enacts new laws or regulations regarding illegal payments under the Medicare, Medicaid or other governmental programs, we may be subject to civil and criminal penalties, experience a significant reduction in our revenue or be excluded from participation in the Medicare, Medicaid or other governmental programs.

Any change in interpretations or enforcement of existing or new laws and regulations could subject our current business practices to allegations of impropriety or illegality, or could require us to make changes in our treatment centers, equipment, personnel, services, pricing or capital expenditure programs, which could increase our operating expenses and have a material adverse effect on our operations or reduce the demand for or profitability of our services.

Additionally, new federal or state laws may be enacted that would cause our relationships with our radiation oncologists to become illegal or result in the imposition of penalties against us or our treatment centers. If any of our business arrangements with our radiation oncologists or other physicians in a position to make referrals of radiation therapy services were deemed to violate the federal anti-kickback statute or similar laws, or if new federal or state laws were enacted rendering these arrangements illegal, our business would be adversely affected.

If we fail to comply with physician self-referral laws as they are currently interpreted or may be interpreted in the future, or if other legislative restrictions are issued, we could incur a significant loss of reimbursement revenue.

We are subject to federal and state statutes and regulations banning payments for referrals of patients and referrals by physicians to healthcare providers with whom the physicians have a financial relationship and billing for services provided pursuant to such referrals if any occur. The federal Stark Law applies to Medicare and Medicaid and prohibits a physician from referring patients for certain services, including radiation therapy, radiology and laboratory services, to an entity with which the physician has a financial relationship. Financial relationship includes both investment interests in an entity and compensation arrangements with an entity. The state laws and regulations vary significantly from state to state, are often vague and, in many cases, have not been interpreted by courts or regulatory agencies. These state laws and regulations generally apply to services reimbursed by both governmental and private payors. Violation of these federal and state laws and regulations may result in prohibition of payment for services rendered, loss of licenses, fines, criminal penalties and exclusion from Medicare and Medicaid programs.

We have financial relationships with our physicians, as defined by the federal Stark Law, in the form of compensation arrangements and ownership of our common stock issued by us in connection with acquisitions. We also have financial arrangements with physicians who refer Medicare and Medicaid patients to us, which relationships are also subject to the Stark Law. We rely on certain exceptions to self-referral laws including an exception for radiation oncologists referrals of radiation therapy services, as well as employee, group practice and in-office ancillary services exceptions, that we believe are applicable to our arrangements. In a limited number of markets we have relationships with non-radiation oncology physicians such as surgical and gynecological oncologists and urologists that are members of a group practice with our radiation oncologists and we rely on the group practice exception to self-referral laws with respect to such relationships. While we believe that our financial relationships with physicians and referral practices are in material compliance with applicable laws and regulations, government authorities might take a contrary position or prohibited referrals may occur. We cannot be certain that physicians who own our common stock or hold promissory notes will not violate these laws or that we will have knowledge of the identity of all beneficial owners of our common stock. If our financial relationships with physicians were found to be illegal, or if prohibited referrals were found to have been made, we could be subject to civil and criminal penalties, including fines, exclusion from participation in government and private payor programs and requirements to refund amounts previously received from government and private payors. In addition, expansion of our operations to new jurisdictions, or new interpretations of laws in our existing jurisdictions, could require structural and organizational modifications of our relationships with physicians to comply with that jurisdiction’s laws. Such structural and organizational modifications could result in lower profitability and failure to achieve our growth objectives.

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Our costs and potential risks have increased as a result of the regulations relating to privacy and security of patient information.

There are numerous federal and state regulations addressing patient information privacy and security concerns. In particular, the federal regulations issued under the Health Insurance Portability and Accountability Act of 1996, or HIPAA, contain provisions that:

• protect individual privacy by limiting the uses and disclosures of patient information;

• require the implementation of security safeguards to ensure the confidentiality, integrity and availability of individually identifiable health information in electronic form; and

• prescribe specific transaction formats and data code sets for certain electronic healthcare transactions.

Compliance with these regulations requires us to spend money and our management to spend substantial time and resources. We believe that we are in material compliance with the HIPAA regulations with which we are currently required to comply. The HIPAA regulations expose us to increased regulatory risk if we fail to comply. If we fail to comply with the new regulations, we could suffer civil penalties up to $100 per violation with a maximum penalty of $25,000 per each requirement violated per calendar year and criminal penalties with fines up to $250,000 per violation, and our business could be harmed.

Efforts to regulate the construction, acquisition or expansion of healthcare treatment centers could prevent us from developing or acquiring additional treatment centers or other facilities or renovating our existing treatment centers.

Many states have enacted certificate of need laws which require prior approval for the construction, acquisition or expansion of healthcare treatment centers. In giving approval, these states consider the need for additional or expanded healthcare treatment centers or services. In the states of Kentucky, North Carolina and Rhode Island in which we currently operate, certificates of need must be obtained for capital expenditures exceeding a prescribed amount, changes in capacity or services offered and various other matters. Other states in which we now or may in the future operate may also require certificates of need under certain circumstances not currently applicable to us. We cannot assure you that we will be able to obtain the certificates of need or other required approvals for additional or expanded treatment centers or services in the future. In addition, at the time we acquire a treatment center, we may agree to replace or expand the acquired treatment center. If we are unable to obtain required approvals, we may not be able to acquire additional treatment centers or other facilities, expand the healthcare services we provide at these treatment centers or replace or expand acquired treatment centers.

Our business may be harmed by technological and therapeutic changes.

The treatment of cancer patients is subject to potentially revolutionary technological and therapeutic changes. Future technological developments could render our equipment obsolete. We may incur significant costs in replacing or modifying equipment in which we have already made a substantial investment prior to the end of its anticipated useful life. In addition, there may be significant advances in other cancer treatment methods, such as chemotherapy, surgery, biological therapy, or in cancer prevention techniques, which could reduce demand or even eliminate the need for the radiation therapy services we provide.

We maintain a significant amount of debt to further our business or growth strategies.

As of December 31, 2005, we had outstanding debt of $123.5 million. Approximately $189.7 million is available for borrowing in the future under our fourth amended and restated senior secured credit facility. Our significant indebtedness could have adverse consequences and could limit our business as follows:

• a substantial portion our cash flows from operations may go to repayment of principal and interest on our indebtedness and we would have less funds available for our operations;

• our senior credit facility contains numerous financial and other restrictive covenants, including restrictions on purchasing assets, selling assets, paying dividends to our shareholders and incurring additional indebtedness;

• as a result of our debt we may be vulnerable to adverse general economic and industry conditions and we may have less flexibility in reacting to changes in these conditions; or

• competitors with greater access to capital could have a significant advantage over us.

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We may need to raise additional capital, which may be difficult to obtain at attractive prices and which may cause us to engage in financing transactions that adversely affect our stock price.

We may need capital for growth, acquisitions, development, integration of operations and technology and equipment in the future. Any additional capital would be raised through public or private offerings of equity securities or debt financings. Our issuance of additional equity securities could cause dilution to holders of our common stock and may adversely affect the market price of our common stock. The incurrence of additional debt could increase our interest expense and other debt service obligations and could result in the imposition of covenants that restrict our operational and financial flexibility. Additional capital may not be available to us on commercially reasonable terms or at all. The failure to raise additional needed capital could impede the implementation of our operating and growth strategies.

Our information systems are critical to our business and a failure of those systems could materially harm us.

We depend on our ability to store, retrieve, process and manage a significant amount of information, and to provide our radiation treatment centers with efficient and effective accounting and scheduling systems. If our information systems fail to perform as expected, or if we suffer an interruption, malfunction or loss of information processing capabilities, it could have a material adverse effect on our business.

Our financial results could be adversely affected by the increasing costs of professional liability insurance and by successful malpractice claims.

We are exposed to the risk of professional liability and other claims against us and our radiation oncologists and other physicians and professionals arising out of patient medical treatment at our treatment centers. Our risk exposure as it relates to our non-radiation oncology physicians could be greater than with our radiation oncologists to the extent such non-radiation oncology physicians are engaged in diagnostic activities. Malpractice claims, if successful, could result in substantial damage awards which might exceed the limits of any applicable insurance coverage. Insurance against losses of this type can be expensive and insurance premiums are expected to increase significantly in the near future. Insurance rates vary from state to state, by physician specialty and other factors. The rising costs of insurance premiums, as well as successful malpractice claims against us or one of our physicians, could have a material adverse effect on our financial position and results of operations.

It is also possible that our excess liability and other insurance coverage will not continue to be available at acceptable costs or on favorable terms. In addition, our insurance does not cover all potential liabilities arising from governmental fines and penalties, indemnification agreements and certain other uninsurable losses. For example, from time to time we agree to indemnify third parties, such as hospitals and clinical laboratories, for various claims that may not be covered by insurance. As a result, we may become responsible for substantial damage awards that are uninsured.

The radiation therapy market is highly competitive.

Radiation therapy is a highly competitive business in each market in which we operate. Our treatment centers face competition from hospitals, other medical practitioners and other operators of radiation treatment centers. There is a growing trend of physicians in specialties other than radiation oncology, such as urology, entering the radiation treatment business including medical specialties that would otherwise be sources of referrals. If this trend continues it could harm our referrals and our business. Certain of our competitors have longer operating histories and significantly greater financial and other resources than us. Competitors with greater access to financial resources may enter our markets and compete with us. In the event that we are not able to compete successfully, our business may be adversely affected and competition may make it more difficult for us to affiliate with additional radiation oncologists on terms that are favorable to us.

Our financial results may suffer if we have to write-off goodwill or other intangible assets.

A portion of our total assets consist of goodwill and other intangible assets. Goodwill and other intangible assets, net of accumulated amortization, accounted for 22% and 28% of the total assets on our balance sheet as of December 31, 2004 and 2005, respectively. We may not realize the value of our goodwill or other intangible assets. We expect to engage in additional transactions that will result in our recognition of additional goodwill or other intangible assets. We evaluate on a regular basis whether events and circumstances have occurred that indicate that all or a portion of the carrying amount of goodwill or other intangible assets may no longer be recoverable, and is therefore impaired. Under current accounting rules, any determination that impairment has occurred would require us to write-off the impaired portion of our goodwill or the unamortized portion of our intangible assets, resulting in a charge to our earnings. Such a write-off could have a material adverse effect on our financial condition and results of operations.

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Our failure to comply with laws related to hazardous materials could materially harm us.

Our treatment centers provide specialized treatment involving the use of radioactive material in the treatment of the lungs, prostate, breasts, cervix and other organs. The materials are obtained from, and, if not permanently placed in a patient or used up, returned to, a third-party provider of supplies to hospitals and other radiation therapy practices, which has the ultimate responsibility for its proper disposal. We, however, remain subject to state and federal laws regulating the protection of employees who may be exposed to hazardous material and regulating the proper handling, storage and disposal of that material. Although we believe we are in compliance with all applicable laws, a violation of such laws, or the future enactment of more stringent laws or regulations, could subject us to liability, or require us to incur costs that would have a material adverse effect on us.

Because our principal shareholders and management own a large percentage of our common stock, they will collectively be able to determine the outcome of all matters submitted to shareholders for approval regardless of the preferences of our other shareholders.

As of February 1, 2006 certain of our officers beneficially owned approximately 46.5% of our outstanding common stock and serve on our board of directors. As a result, these persons have a significant influence over the outcome of matters requiring shareholder approval including the power to:

• elect our entire board of directors;

• control our management and policies;

• agree to mergers, consolidations and the sale of all or substantially all of our assets;

• prevent or cause a change in control; and

• amend our amended and restated articles of incorporation and bylaws at any time.

Our stock price may fluctuate and you may not be able to resell your shares of our common stock at or above the price you paid.

We became a public company on June 18, 2004 and there can be no assurance that we will be able to maintain an active market for our stock. A number of factors could cause the market price of our common stock be volatile. Some of the factors that could cause our stock price to fluctuate significantly, include:

• variations in our financial performance;

• changes in recommendations or financial estimates by securities analysts, or our failure to meet or exceed estimates;

• announcements by us or our competitors of material events;

• future sales of our common stock;

• investor perceptions of us and the healthcare industry;

• announcements regarding purported class action lawsuits by plaintiff lawfirms; and

• general economic trends and market conditions.

As a result, you may not be able to resell your shares at or above the price you paid.

Sales of substantial amounts of our common stock, by our senior management shareholders could adversely affect our stock price and limit our ability to raise capital.

As of February 1, 2006, our senior management shareholders beneficially owned approximately 47.0% of our common stock. The market price of our common stock could decline as a result of sales by senior management of substantial amounts of our common stock in the public market or the perception that substantial sales could occur. These sales also may make it more difficult for us to sell common stock in the future to raise capital.

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Florida law and certain anti-takeover provisions of our corporate documents and our executive employment agreements could entrench our management or delay or prevent a third party from acquiring us or a change in control even if it would benefit our shareholders.

Our amended and restated articles of incorporation and bylaws and our executive employment agreements contain a number of provisions that may delay, deter or inhibit a future acquisition or change in control that is not first approved by our board of directors. This could occur even if our shareholders receive an attractive offer for their shares or if a substantial number or even a majority of our shareholders believe the takeover may be in their best interest. These provisions are intended to encourage any person interested in acquiring us to negotiate with and obtain approval from our board of directors prior to pursuing a transaction. Provisions that could delay, deter or inhibit a future acquisition or change in control include the following:

• 10,000,000 shares of blank check preferred stock that may be issued by our board of directors without shareholder approval and that may be substantially dilutive or contain preferences or rights objectionable to an acquiror;

• a classified board of directors with staggered, three-year terms so that only a portion of our directors are subject to election at each annual meeting;

• the ability of our board of directors to amend our bylaws without shareholder approval;

• special meetings of shareholders cannot be called by a shareholder;

• obligations to make certain payments under executive employment agreements in the event of a change in control; and

• Florida statutes which restrict or prohibit “control share acquisitions” and certain transactions with affiliated parties and permit the adoption of “poison pills” without shareholder approval.

These provisions could also discourage bids for our common stock at a premium and cause the market price of our common stock to decline. In addition, these provisions may also entrench our management by preventing or frustrating any attempt by our shareholders to replace or remove our current management.

Other than S Corporation distributions and our special distribution, we have not paid dividends and do not expect to in the future, which means that the value of our shares cannot be realized except through sale.

Other than S Corporation distributions to our shareholders, including our special distribution in April 2004 prior to our initial public offering, we have never declared or paid cash dividends. We currently expect to retain earnings for our business and do not anticipate paying dividends on our common stock at any time in the foreseeable future. Because we do not anticipate paying dividends in the future, it is likely that the only opportunity to realize the value of our common stock will be through a sale of those shares. The decision whether to pay dividends on common stock will be made by the board of directors from time to time in the exercise of its business judgment. Furthermore, we are currently restricted from paying dividends by the terms of our senior secured credit facility.

If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results which could subject us to regulatory sanctions, harm our business and operating results and cause the trading price of our stock to decline.

We are required under Section 404 of the Sarbanes-Oxley Act of 2002 to evaluate our internal controls for effectiveness. Effective internal controls are necessary for us to provide reliable financial reports. If we cannot provide reliable financial reports, our business, reputation and operating results could be harmed. We have in the past discovered, and may in the future discover, areas of our internal controls that need improvement. For example, in early May 2005 we identified a material weakness related to our controls over lease accounting, which caused us to restate our prior financial statements. While we have since remediated the material weakness to ensure proper lease accounting in the future and believe that we currently have adequate internal controls, there can be no assurance that we will be able to implement and maintain adequate controls in the future. We cannot be certain that these measures will ensure that we implement and maintain adequate controls over our financial processes and reporting in the future. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could subject us to regulatory sanctions, harm our business and operating results or cause us to fail to meet our reporting obligations. Inferior internal controls could also harm our reputation and cause investors to lose confidence in our reported financial information, which could have a negative impact on the trading price of our stock.

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We have treatment centers in Florida and other areas that could be disrupted or damaged by hurricanes.

Florida is susceptible to hurricanes and we currently have 24 radiation treatment centers located in Florida. Our Florida centers accounted for approximately 57% of our total revenues during 2005. Recently 21 of our treatment centers in South Florida were disrupted by Hurricane Wilma which required us to close all of these centers for a business day. Although none of these treatment centers suffered structural damage as a result of the hurricane, their utility services were disrupted. Our patients and employees were also affected by Hurricane Wilma. While we do not anticipate that Hurricane Wilma will have any long-term impact on our business, our Florida treatment centers and any of our other treatment centers located in other areas that are in the path of a hurricane could be subject to significant hurricane-related disruptions and/or damage in the future. If our treatment centers suffer any significant hurricane-related disruptions and/or damage in the future it could have an adverse affect on our business and financial results. We carry property damage and business interruption insurance on our facilities, but there can be no assurance that it would be adequate to cover all of our hurricane-related losses.

Forward looking statements. Some of the information set forth in this report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. We may make other written and oral communications from time to time that contain such statements. Forward-looking statements, including statements as to industry trends, future expectations and other matters that do not relate strictly to historical facts are based on certain assumptions by management. These statement are often identified by the use of words such as “may,” “will,” “expect,” “plans,” “believe,” “ anticipate,” “intend,” “could,” “estimate,” or “continue” and similar expressions or variations, and are based on the beliefs and assumptions of our management based on information then currently available to management. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Important factors that could cause actual results to differ materially from the forward-looking statements include, among others, the risks discussed herein under the heading “Risk Factors.” We caution readers to carefully consider such factors. Further, such forward-looking statements speak only as of the date on which such statements are made and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date of such statements.

Item 1B. Unresolved Staff Comments

None

Item 2. Properties

Our executive and administrative offices are located in Fort Myers, Florida. These offices contain approximately 30,000 square feet of space and we are expanding to add 3,000 square feet of space, which is expected to be completed in July 2006. In December 2005, we entered into a lease for additional administrative office space in Florence, Kentucky for approximately 5,600 square feet. While upon completion of expansion, these offices will be adequate for our current primary needs, we also believe that we will require significant additional space to meet our future needs and such future expansion is in the preliminary stages.

Our radiation treatment centers typically range in size from 5,000 to 12,000 square feet. We currently operate 68 radiation treatment centers in Alabama, Arizona, California, Delaware, Florida, Kentucky, Maryland, Massachusetts, Nevada, New Jersey, New York, North Carolina, Rhode Island and West Virginia. We own the real estate on which 14 of our treatment centers are located. We lease land and space at 42 treatment center locations, of which in 13 of these locations, certain of our directors, officers, principal shareholders, shareholders and employees have an ownership interest. These leases expire at various dates between 2006 and 2027. 21 of these leases have one or two renewal options of five or 10 years. Also, 12 of our treatment center locations are in hospital-based facilities. We consider all of our offices and treatment centers to be well-suited to our present requirements. However, as we expand to additional treatment centers, or where additional capacity is necessary in a treatment center, additional space will be obtained where feasible.

Information with respect to our treatment centers and our other properties can be found in Item 1 of this report under the caption, “Business—Treatment Centers.”

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Item 3. Legal Proceedings

As previously disclosed, on April 13, 2005, we were served with a shareholder derivative lawsuit filed by Steven Scheye, derivatively on behalf of nominal defendant, Radiation Therapy Services, Inc., against certain officers, all of the members of our Board of Directors and us as nominal defendant (Circuit Court for the Twentieth Judicial Circuit, Lee County, Florida; Case No. 05-CA-001103). The complaint alleges breach of fiduciary duties and states that this action is brought for the benefit of Radiation Therapy Services, Inc. against the members of our Board of Directors. The complaint contains allegations substantially the same as those raised in the purported class action lawsuit filed by the Kissel Family Trust in September 2004 in the United States District Court, Middle District of Florida that was voluntarily dismissed without prejudice. The complaint alleges breach of fiduciary duties of loyalty and good faith as a result of entering into related party transactions and agreements and seeks to recover unspecified damages in our favor, appropriate equitable relief and an award to plaintiff of the costs and disbursements of the action including reasonable attorney’s fees. Based on our review of the complaint, we believe that the derivative lawsuit is without merit and have moved for dismissal of the complaint. The court has not yet ruled on our motion to dismiss the complaint. We are obligated to provide indemnification to our officers and directors in this matter to the fullest extent permitted by law. Since by its inherent nature a derivative suit seeks to recover alleged damages on behalf of the company involved, we do not expect the ultimate resolution of this derivative suit to have a material adverse effect on our results of operations, financial position or cash flows.

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

No matters were submitted to a vote of the stockholders during the fourth quarter ended December 31, 2005.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is quoted on the NASDAQ National Market under the symbol “RTSX.” The high and low common stock sale prices per share were as follows:

	High		Low
2004
Second Quarter	$	14.45	$	14.00
Third Quarter	$	14.76	$	11.34
Fourth Quarter	$	17.00	$	9.74
2005
First Quarter	$	19.84	$	14.31
Second Quarter	$	27.46	$	19.05
Third Quarter	$	31.86	$	25.08
Fourth Quarter	$	38.93	$	28.09
2006
First Quarter (through February 1, 2006)	$	35.03	$	29.87

On February 1, 2006, the last reported sales price for our common stock on the NASDAQ National Market was $30.00 per share. As of February 1, 2006, there were 22,921,176 shares of our common stock held by approximately 3,000 beneficial owners and 56 holders of record as reported by our transfer agent.

We have never declared or paid dividends on our common stock since becoming a public company in June 2004. We intend to retain future earnings to finance the growth and development of our business and, accordingly, do not currently intend to declare or pay any dividends on our common stock. Our board of directors will evaluate our future earnings, results of operations, financial condition and capital requirements in determining whether to declare or pay cash dividends. In addition, our credit facilities impose restrictions on our ability to pay dividends. Please refer to the “Liquidity and Capital Resources” section in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in this report for more information.

Equity Compensation Plan Information

Equity Compensation Table

We have outstanding stock options and restricted stock shares under our 1997 stock option plan and our 2004 stock incentive plan each of which was adopted by our board of directors and approved by our shareholders prior to our initial public offering. We do not have any equity compensation plans that have not been approved by our shareholders. The following table sets forth information as of December 31, 2005, with respect to our equity compensation plans.

Plan Category	Number of Shares of Common Stock to be Issued Upon Vesting of Restrictions	Number of Shares of Common Stock to be Issued Upon Exercise of Outstanding Options and Rights	Weighted-Average Exercise Price of Outstanding Options		Number of Shares of Common Stock Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Shares Reflected in the First and Second Column)
Equity Compensation Plans Approved by Shareholders 1997 and 2004 stock incentive plans	7,500	2,160,896	$	10.80	2,382,812	(1)(2)
Equity Compensation Plans Not Approved by Shareholders	N/A	N/A		N/A	N/A

(1) In addition to the shares reserved for issuance under our 2004 stock incentive plan, such plan also includes annual increases in the number of shares available for issuance under the 2004 stock incentive plan on the first day of each fiscal year beginning with our fiscal year beginning in 2005 and ending after our fiscal year beginning in 2014, equal to the lesser of:

• 5% of the outstanding shares of common stock on the first day of our fiscal year;

• 1,000,000 shares; or

• an amount our board may determine.

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(2) This number was increased by 1,000,000 shares on January 1, 2006 pursuant to the automatic increase formula described in footnote (1).

We did not sell unregistered securities during fiscal 2005 except as previously disclosed in our quarterly reports on Form 10-Q. We did not repurchase any of our equity securities during the fourth quarter of fiscal 2005.

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Item 6. Selected Financial Data

The historical consolidated statements of income data for the years ended December 31, 2001, 2002, 2003, 2004 and 2005 and the related historical consolidated balance sheet data as of December 31, 2001, 2002, 2003, 2004 and 2005 are derived from our audited consolidated financial statements.

The historical results presented below are not necessarily indicative of the results to be expected for any future period. You should read the information set forth below in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included elsewhere in this Form 10-K.

	Year Ended December 31,
(Dollars in thousands, except per share amounts):	2001			2002			2003			2004		2005
Consolidated Statements of Income Data:
Revenues:
Net patient service revenue	$	75,402		$	106,252		$	131,147		$	163,719	$	217,590
Other revenue		2,896			4,868			7,533			7,654		9,660
Total revenues		78,298			111,120			138,680			171,373		227,250
Expenses:
Salaries and benefits		41,680			57,248			72,146			87,059		116,300
Medical supplies		1,273			2,312			2,226			3,608		5,678
Facility rent expenses		2,145			3,744			4,656			5,347		7,720
Other operating expenses		4,414			7,194			8,690			7,561		9,748
General and administrative expenses		6,854			10,475			16,400			19,671		23,538
Depreciation and amortization		4,064			4,283			5,202			6,860		10,837
Provision for doubtful accounts		2,018			3,365			3,375			5,852		6,792
Interest expense, net		3,980			2,615			2,053			3,435		5,290
Impairment loss		—			—			284			—		1,226
Total expenses		66,428			91,236			115,032			139,393		187,129
Income before minority interests		11,870			19,884			23,648			31,980		40,121
Minority interests in net losses (earnings) of consolidated entities		1			23			(7	)		55		480
Income before cumulative effect of change in accounting principle and income taxes		11,871			19,907			23,641			32,035		40,601
Cumulative effect of change in accounting principle		(408	)		(963	)		—			—		—
Income before income taxes		11,463			18,944			23,641			32,035		40,601
Income tax expense		—			—			—			22,847		15,631
Net income	$	11,463		$	18,944		$	23,641		$	9,188	$	24,970
Earnings per common share
Basic	$	0.70		$	1.14		$	1.39		$	0.45	$	1.10
Diluted	$	0.65		$	1.04		$	1.28		$	0.44	$	1.05
Pro forma income data:
Income before provision for income taxes, as reported	$	11,463		$	18,944		$	23,641		$	32,035
Pro forma provision for income taxes (1)		4,720			7,966			9,456			12,814
Pro forma net income	$	6,743		$	10,978		$	14,185		$	19,221
Pro forma earnings per common share (1)
Basic	$	0.41		$	0.66		$	0.84		$	0.95
Diluted	$	0.38		$	0.60		$	0.77		$	0.91
Weighted average common shares outstanding:
Basic		16,364,574			16,653,542			16,974,471			20,292,117		22,725,819
Diluted		17,743,638			18,265,182			18,470,880			21,031,968		23,703,653

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	As of December 31,
(In thousands):	2001		2002		2003		2004		2005
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	1,698	$	4,294	$	2,606	$	5,019	$	8,980
Total assets		78,210		102,783		128,036		168,177		263,345
Total debt		40,411		51,342		59,811		66,103		123,463
Total shareholders’ equity		27,840		37,208		49,578		66,321		95,383

(1) Reflects combined federal and state income taxes on a pro forma basis, as if we had been taxed as a C Corporation. See the consolidated statements of income and comprehensive income and note 18 “Pro forma disclosure” of the notes to the consolidated financial statements.

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

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the “Selected Financial Data “ and the consolidated financial statements and related notes included elsewhere in this Form 10-K. This section of the Form 10-K contains forward-looking statements that involve substantial risks and uncertainties, such as statements about our plans, objectives, expectations and intentions. We use words such as “expect”, “anticipate”, “plan”, “believe”, “seek”, “estimate”, “intend”, “future” and similar expressions to identify forward-looking statements. In particular, statements that we make in this section relating to the sufficiency of anticipated sources of capital to meet our cash requirements are forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including as a result of some of the factors described below and in the section titled “Risk Factors”. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Form 10-K.

Overview

We own, operate and manage treatment centers focused principally on providing radiation treatment alternatives ranging from conventional external beam radiation to newer, technologically-advanced options. We believe we are the largest company in the United States focused principally on providing radiation therapy. We opened our first radiation treatment center in 1983 and as of December 31, 2005 we provided radiation therapy services in 68 treatment centers. Our treatment centers are clustered into 22 local markets in 14 states, including Alabama, Arizona, California, Delaware, Florida, Kentucky, Maryland, Massachusetts, Nevada, New Jersey, New York, North Carolina, Rhode Island, and West Virginia. Of these 68 treatment centers, 22 treatment centers were internally developed, 34 were acquired and 12 involve hospital-based treatment centers. We have recently expanded our affiliation with physician specialties in other areas including gynecological and surgical oncology and urology in a limited number of our local markets to strengthen our clinical working relationships.

We use a number of metrics to assist management in evaluating financial condition and operating performance, and the most important follow:

• The number of treatments delivered per day in our freestanding centers

• The average revenue per treatment in our freestanding centers

• The ratio of funded debt to earnings before interest, taxes, depreciation and amortization (leverage ratio)

The principal costs of operating a treatment center are (1) the salary and benefits of the physician and technical staff, and (2) equipment and facility costs. The capacity of each physician and technical position is limited to a number of delivered treatments while equipment and facility costs for a treatment center are generally fixed. These capacity factors cause profitability to be very sensitive to treatment volume. Profitability will tend to increase as the available staff and equipment capacities are utilized.

The average revenue per treatment is sensitive to the mix of services used in treating a patient’s tumor. The reimbursement rates set by Medicare and commercial payers tend to be higher for the more advanced treatment technologies, reflecting their higher complexity. This metric is used by management to evaluate the utilization of newer technologies to improve outcomes for patients. A key part of our business strategy is to implement advanced technologies once supporting economics are available. For example, we implemented a pilot image-guided radiation therapy program using kV x-rays in one of our centers in 2004 and with expanded reimbursement for the technology available January 1, 2006, we will accelerate the implementation of this new technology across our local markets.

The reimbursement for radiation therapy services includes a professional component for the physician’s service and a technical component to cover the costs of the machine, facility and services provided by the technical staff. In our freestanding centers we provide both services while in a hospital-based center the hospital, rather than us, provides the technical services. Fees that we receive from the hospital for services they purchase from us are included in other revenue in our consolidated statements of income and comprehensive income. Net patient service revenue in our consolidated statements of income and comprehensive income is derived from our freestanding centers and from the professional services provided by our doctors in hospital-based centers and by our non-radiation oncologists in their practice offices.

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For the year ended December 31, 2005, our total revenues and net income / pro forma net income grew by 32.6% and 29.9%, respectively, over the prior year. For the year ended December 31, 2005, we had total revenues of $227.3 million and net income of $25.0 million.

Our results of operations historically have fluctuated on a quarterly basis and can be expected to continue to fluctuate. Many of the patients of our Florida treatment centers are part-time residents in Florida during the winter months. Hence, these treatment centers have historically experienced higher utilization rates during the winter months than during the remainder of the year. In addition, referrals are typically lower in the summer months due to traditional vacation periods.

The following table summarizes our growth in treatment centers and the local markets in which we operate:

	Year Ended December 31,
	2003	2004		2005
Treatment centers at beginning of period	40	51		56
Internally developed	2	3		2
Internally (consolidated)	—	—		(2	)
Acquired	6	3		10
Hospital-based	3	(1	)	2
Treatment centers at period end	51	56		68
Local markets at period end	17	19		22

During the first quarter of 2005, we incurred an impairment loss of $1.2 million related to the consolidation of two Yonkers, New York based treatment centers within our Westchester/Bronx local market. During the second quarter of 2005, we incurred expenses of approximately $0.3 million associated with the transition of an internally developed freestanding center to a hospital-based radiation treatment center at Northern Westchester Hospital within our Westchester/Bronx local market.

The following table summarizes key operating statistics of our results of operations for the periods presented:

	Three Months Ended December 31,						Year Ended December 31,
	2005		2004		% Change		2005		2004		% Change
Number of treatment days	63		63				255		255
Total treatments – freestanding centers	83,713		68,719		21.8	%	325,723		271,045		20.2	%
Treatments per day – freestanding centers	1,329		1,091		21.8	%	1,278		1,063		20.2	%
Percentage change in revenue per treatment – freestanding centers – same practice basis	18.2	%	19.5	%			12.1	%	13.7	%
Percentage change in treatments per day – freestanding centers – same practice basis	2.1	%	3.1	%			1.6	%	1.5	%
Local markets at period end	22		19		15.8	%
Treatment centers - freestanding	56		46		21.7	%
Treatment centers - hospital	12		10		20.0	%
	68		56		21.4	%
Days sales outstanding for the quarter	54		53
Percentage change in total revenues – same practice basis	16.8	%	21.6	%			15.2	%	14.0	%

Our revenue growth is primarily driven by entering new markets, increasing the utilization at our existing centers and by benefiting from demographic and population trends in most of our local markets. New centers are added to existing markets based on capacity, convenience, and competitive considerations. Our net income growth is primarily driven by revenue growth and the leveraging of our technical and administrative infrastructures.

For the year ended December 31, 2005, net patient service revenue comprised 95.7% of our total revenues. In a state where we can employ radiation oncologists, we derive our net patient service revenue through fees earned for the provision

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of the professional and technical component fee of radiation therapy services. In states where we do not employ radiation oncologists, we derive our administrative services fees principally from administrative services agreements with professional corporations. In 35 of our radiation treatment centers we employ the physicians, and in 33 we operate pursuant to administrative services agreements. In accordance with Financial Accounting Standards Board revised Interpretation No. 46R (FIN No. 46R), we consolidate the operating results of certain of the professional corporations for which we provide administrative services into our own operating results. In 2005, 28.6% of our net patient service revenue was generated by professional corporations with which we have administrative services agreements.

In states which prohibit us from employing physicians, we have long-term administrative services agreements with professional corporations owned by certain of our directors, officers and principal shareholders, who are licensed to practice medicine in such states. We have entered into these administrative services agreements in order to comply with the laws of such states, and in three states we operate our treatment centers as physician office practices. Our administrative services agreements generally obligate us to provide treatment center facilities, staff and equipment, accounting services, billing and collection services, management and administrative personnel, assistance in managed care contracting and assistance in marketing services. We receive a monthly fixed fee for our services and the fees are set at the beginning of each year on the basis of the estimated cost of these services plus a profit margin. We engaged an independent consultant to complete a fair market value review of the fees paid by related party professional service corporations to the Company under the terms of these agreements. The consulting firm completed a review of 2005 fees under these agreements and determined that the fees are at fair market value. Independent consultants are utilized by the Company’s audit committee in determining fair market fees upon any renewal or for new administrative services agreements with affiliates.

In our net patient service revenue for the years ended December 31, 2005 and 2004, revenue from the professional-only component of radiation therapy and revenue from the practices of medical specialties other than radiation oncology, comprised approximately 6.9% and 5.5%, respectively of our total revenues.

For the year ended December 31, 2005, other revenue comprised approximately 4.3% of our total revenues. Other revenue is primarily derived from management services provided to hospital radiation therapy departments, technical services provided to hospital radiation therapy departments, billing services provided to non-affiliated physicians and income for equipment leased by joint venture entities.

Medicare is a major funding source for the services we provide and government reimbursement developments can have a material effect on operating performance. These developments include the reimbursement amount for each CPT service (current procedural terminology) that we provide and the specific CPT services covered by Medicare. The Centers for Medicare and Medicaid Services (CMS), the government agency responsible for administering the Medicare program, administers an annual process for considering changes in reimbursement rates and covered services. We have played and will continue to play a role in that process both directly and through the radiation oncology professional societies. Effective January 1, 2005, Medicare began reimbursing hospital and hospital based facilities for kV x-rays used in delivering image-guided radiation therapy and this service will be reimbursed in the freestanding setting as of January 1, 2006.

Other material factors that we believe will also impact our future financial performance include:

• Continued advances in technology and the related capital requirements.

• Increased costs associated with being a new public company including compliance with Sarbanes-Oxley Section 404 reporting on internal control.

• Increased costs associated with changes in the accounting for stock compensation.

• Proposed changes in accounting for business combinations requiring that all acquisition-related costs be expensed as incurred.

Acquisitions and Developments

We expect to continue to acquire and develop treatment centers in connection with the implementation of our growth strategy. Over the past three years, we have acquired 19 treatment centers and internally developed 7 treatment centers.

In 2003, we acquired six treatment centers for total consideration of $11.1 million, we opened two internally developed treatment centers and we signed agreements to provide services to three hospital-based treatment centers. Of these 11 treatment centers, six were located in four new local markets and five were located in existing markets.

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On June 23, 2004 we acquired the assets of Devoto Construction, Inc., which was owned by certain of our directors and officers for approximately $3,528,000 with the issuance of 271,385 shares of our common stock. Devoto Construction, Inc. performs remodeling and real property improvements at our medical facilities and specializes in the construction of radiation medical facilities.

In 2004, we acquired three treatment centers in the state of New Jersey for a total consideration of $10.6 million, and we opened three internally developed treatment centers. One of these internally developed treatment centers replaced services we had previously provided through a hospital-based center.

On April 1, 2005, we sold a 49.9% interest in a joint venture that was formed to operate a treatment center located in Berlin, Maryland. The interest was sold to a healthcare enterprise operating in the area for $1.8 million. We realized a gain of approximately $982,000 on the sale of the interest.

On April 1, 2005, we acquired a 60% interest in a single radiation therapy treatment center located in Martinsburg, West Virginia for approximately $0.7 million. We will operate the facility as part of our Western Maryland local market. Under the terms of the agreement, we will partner with a university hospital system and manage the facility. We are implementing an intensity modulated radiation therapy (IMRT) program and other advanced technologies at the facility.

In May 2005, we acquired five radiation treatment centers located in Clark County, Nevada from Associated Radiation Oncologists, Inc. for $25.9 million, plus a three-year contingent earn-out. We plan to expand the availability of advanced radiation therapy treatment modalities in the service area. This acquisition expanded our presence in Nevada where we operated four centers before the acquisition.

In June 2005, we acquired four radiation treatment centers located in the markets of Scottsdale, Arizona, Holyoke, Massachusetts, and two centers in Maryland for approximately $16.2 million. This acquisition provided our first entrance into two new local markets in Arizona and Massachusetts. The two centers purchased in Maryland will further expand our presence in our Western Maryland local market. We plan to expand the availability of advanced radiation therapy treatment modalities in the service areas.

During the second quarter of 2005 we were awarded a contract to develop a state of the art radiation center at the prestigious Roger Williams Hospital in Providence, Rhode Island. As of June 1, 2005 we were providing professional services, and we are planning for a joint venture freestanding radiation therapy center with the hospital.

In September 2005, we opened for business our South County, Rhode Island treatment center and began treating patients at the facility. The center is our third center opened in our Rhode Island local market.

In November 2005, we opened for business our Palm Springs, California treatment center and began treating patients at the facility. The center is our 68^th treatment center in operation and our entrance into our 22^nd local market.

In December 2005, the Company acquired the assets of a urology practice with four office locations in southwest Florida for approximately $348,000. The urology practice provides additional service and treatment protocols to our patients with prostate cancer and other urological diseases.

The operations of the foregoing acquisitions have been included in the accompanying consolidated statements of income and comprehensive income from the respective dates of each acquisition. When we acquire a treatment center, the purchase price is allocated to the assets acquired and liabilities assumed based upon their respective fair values.

In October 2005, we announced that we will install seven stereotactic radiosurgery systems with image guided radiation therapy (IGRT) capabilities at treatment centers in four of our Southwest Florida local markets and our Las Vegas, Nevada local market. The installation of the systems will be completed as a pilot program, giving us the opportunity to utilize new technologies and develop protocols for future technology integration. The aggregate cost of the systems is $16.1 million and will be funded by our cash from operations and our lease and revolving lines of credit.

The stereotactic systems will allow us to treat extra-cranial cancers to a higher dose with target localization and image verification. All of the systems include image guided radiation therapy (IGRT) capabilities using both cone-beam computed tomography (CT) and high-quality kV X-ray imaging.

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The systems are capable of delivering stereotactic radiosurgery by increasing the maximum dose delivery rate and by fine-tuning the focal point of the beams to a one millimeter diameter sphere. Additionally, the focal point is moveable by remote control, which speeds treatment time while maximizing the number of beam angles that can be used to optimize delivery in a single treatment. The systems can also be used for stereotactic radiotherapy, which is delivered over several days, and intensity modulated, conventional and conformal radiation therapy, which is delivered in small daily doses over a period of weeks.

While the Company’s operations at 21 of its treatment centers in South Florida were recently disrupted by Hurricane Wilma, the centers did not suffer any structural damage because of the hurricane. The centers were closed on Monday, October 24, 2005 in anticipation of the hurricane and all of the centers were fully operational by the end of October as electrical power was restored. The Company’s fourth quarter 2005 financial results were affected by the hurricane.

In January 2006 we acquired the assets of a radiation treatment center located in Opp, Alabama for approximately $1.75 million. The center purchased in Alabama will further expand our presence in its Southeastern Alabama local market. We plan to expand the availability of advanced radiation therapy treatment modalities in this service area.

Sources of Revenue By Payor

We receive payments for our services rendered to patients from the government Medicare and Medicaid programs, commercial insurers, managed care organizations and our patients directly. Generally, our revenue is determined by a number of factors, including the payor mix, the number and nature of procedures performed and the rate of payment for the procedures. The following table sets forth the percentage of our net patient service revenue we earned by category of payor in our last three fiscal years.

	Years Ended December 31,
Payor	2003		2004		2005
Medicare and Medicaid	55.4	%	53.0	%	50.4	%
Commercial	43.2		45.5		47.3
Self pay	1.4		1.5		2.3
Total net patient service revenue	100.0	%	100.0	%	100.0	%

Medicare and Medicaid

Since cancer disproportionately affects elderly people, a significant portion of our net patient service revenue is derived from the Medicare program as well as related co-payments. Medicare reimbursement rates are determined by the Centers for Medicare and Medicaid Services (CMS) and are lower than our normal charges. Medicaid reimbursement rates are typically lower than Medicare rates; Medicaid payments represent less than 2% of our net patient service revenue.

Medicare reimbursement rates are determined by a formula which takes into account an industry wide conversion factor (CF) multiplied by relative values determined on a per procedure basis (RVUs). The CF and RVUs may change on an annual basis. In 2003, the CF increased by 1.6%; in 2004, it increased by 1.5%; and in 2005, the rate increased an additional 1.5% and in 2006 the CF will not change from the 2005 level. The net result of changes to the CF and RVUs of the changes over the last several years has not had a significant impact on our business, but it is difficult to forecast the future impact of any changes. We depend on payments from government sources and any changes in Medicare or Medicaid programs could result in a decrease in our total revenues and net income.

Commercial

Commercial sources include private health insurance as well as related payments for co-insurance and co-payments. We enter into contracts with private health insurance and other health benefit groups by granting discounts to such organizations in return for the patient volume they provide.

Most of our commercial revenue is from managed care business and is attributable to contracts where a set fee is negotiated relative to services provided by our treatment centers. We do not have any contracts that individually represent over 10% of our total net patient service revenue. We receive our managed care contracted revenue under two primary

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arrangements. Approximately 98% of our managed care business is attributable to contracts where a fee schedule is negotiated for services provided at our treatment centers. Approximately 2% of our net patient service revenue is attributable to contracts where we bear utilization risk. Although the terms and conditions of our managed care contracts vary considerably, they are typically for a one-year term and provide for automatic renewals. If payments by managed care organizations and other private third-party payors decrease, then our total revenues and net income could decrease.

Self Pay

Self pay consists of payments for treatments by patients not otherwise covered by third-party payors, such as government or commercial sources. Because the incidence of cancer is much higher in those over the age of 65, most of our patients have access to Medicare or other insurance and therefore the self pay portion of our business is not significant.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. We continuously evaluate our critical accounting policies and estimates. We base our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions.

Our accounting policies are described in note 2 of the notes to our consolidated financial statements. We believe the following critical accounting policies are important to the portrayal of our financial condition and results of operations and require our management’s subjective or complex judgment because of the sensitivity of the methods, assumptions and estimates used in the preparation of our consolidated financial statements.

Principles of Consolidation. Financial Accounting Standards Board revised Interpretation No. 46R (FIN No. 46R), Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51, requires a company to consolidate variable interest entities if the company is the primary beneficiary of the activities of those entities. Certain of our radiation oncology practices are variable interest entities as defined by FIN No. 46R, and we have a variable interest in each of these practices through our administrative services agreements. Through our variable interests in these practices, we would absorb a majority of the net losses of these practices, should they occur. Based on these determinations, we have included the radiation oncology practices in our consolidated financial statements for all periods presented. All of our significant intercompany accounts and transactions have been eliminated.

Net Patient Service Revenue and Allowances for Contractual Discounts. We have agreements with third-party payors that provide us payments at amounts different from our established rates. Net patient service revenue is reported at the estimated net realizable amounts due from patients, third-party payors and others for services rendered. Net patient service revenue is recognized as services are provided. Medicare and other governmental programs reimburse physicians based on fee schedules, which are determined by the related government agency. We also have agreements with managed care organizations to provide physician services based on negotiated fee schedules. Accordingly, the revenues reported in our consolidated financial statements are recorded at the amount that is expected to be received.

We derive a significant portion of our revenues from Medicare, Medicaid and other payors that receive discounts from our standard charges. We must estimate the total amount of these discounts to prepare our consolidated financial statements. The Medicare and Medicaid regulations and various managed care contracts under which these discounts must be calculated are complex and subject to interpretation and adjustment. The development of the estimate of contractual allowances is based on historical cash collections related to gross charges developed by facility and payor in order to calculate average collection percentages by facility and payor. The development of the collection percentages are applied to gross accounts receivable in determining an estimate of contractual allowances at the end of a reporting period.

The estimate for contractual allowances is also based on our interpretation of the applicable regulations or contract terms. These interpretations sometimes result in payments that differ from our original estimates. Additionally, updated regulations and contract renegotiations occur frequently, necessitating regular review and reassessment of the estimation process. Changes in estimates related to the allowance for contractual discounts affect revenues reported in our consolidated statements of income and comprehensive income.

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During 2003, 2004 and 2005, approximately 55%, 53%, and 50%, respectively, of net patient service revenue related to services rendered under the Medicare and Medicaid programs. In the ordinary course of business, we are potentially subject to a review by regulatory agencies concerning the accuracy of billings and sufficiency of supporting documentation of procedures performed. Laws and regulations governing the Medicare and Medicaid programs are extremely complex and subject to interpretation. As a result, there is at least a reasonable possibility that estimates will change by a material amount in the near term.

Accounts Receivable and Allowances for Uncollectible Accounts. Accounts receivable are reported net of estimated allowances for uncollectible accounts and contractual adjustments. Accounts receivable are uncollateralized and primarily consist of amounts due from third-party payors and patients. To provide for accounts receivable that could become uncollectible in the future, we establish an allowance for uncollectible accounts to reduce the carrying amount of such receivables to their estimated net realizable value. The credit risk for other concentrations (other than Medicare) of receivables is limited due to the large number of insurance companies and other payors that provide payments for our services. We do not believe that there are any other significant concentrations of receivables from any particular payor that would subject us to any significant credit risk in the collection of our accounts receivables.

The amount of the provision for doubtful accounts is based upon our assessment of historical and expected net collections, business and economic conditions, trends in Federal and state governmental healthcare coverage and other collection indicators. The primary tool used in our assessment is an annual, detailed review of historical collections and write-offs of accounts receivable. The results of our detailed review of historical collections and write-offs, adjusted for changes in trends and conditions, are used to evaluate the allowance amount for the current period. Accounts receivable are written-off after collection efforts have been followed in accordance with our policies.

Goodwill and Other Intangible Assets. Goodwill represents the excess purchase price over the estimated fair market value of net assets we have acquired in business combinations. On June 29, 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets, which changed the accounting for goodwill and intangible assets. Under SFAS No. 142, goodwill and indefinite lived intangible assets are no longer amortized but are reviewed annually, or more frequently if impairment indicators arise, for impairment. Prior to the adoption of SFAS No. 142, goodwill had been amortized on a straight-line basis over 25 years through December 31, 2001. We adopted SFAS No. 142 effective January 1, 2002.

We completed our transitional impairment test under SFAS No. 142 as of January 1, 2002, based on projected cash flows of the business. Due to an increase in competition and the presence of capitation arrangements with third-party payors, operating profits and cash flows were lower than expected for certain locations. Based on the earnings forecast for these markets, a goodwill impairment loss of $963,293 was recognized. The impairment loss resulting from the transitional impairment test was recorded as a cumulative effect of a change in accounting principle for the year ended December 31, 2002. Subsequent impairment losses, if any, will be reflected in income before minority interests. For the year ended December 31, 2003, we recorded an impairment loss of $284,491 due to increased competition related to a specific treatment center within one of our local markets. No goodwill impairment was recognized for the years ended December 31, 2004 and 2005.

Intangible assets consist of noncompete agreements and licenses and are amortized over the life of the agreements (which typically range from 1.5 to 10 years) using the straight-line method.

Impairment of Long-Lived Assets. In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, we review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be fully recoverable. Assessment of possible impairment of a particular asset is based on our ability to recover the carrying value of such asset based on our estimate of its undiscounted future cash flows. If these estimated future cash flows are less than the carrying value of such asset, an impairment charge is recognized for the amount by which the asset’s carrying value exceeds its estimated fair value. During the third quarter of 2004, we recorded a charge of $1.2 million for the write down to fair value of certain of our analog linear accelerators and treatment simulators. The adjustment to machine inventories was precipitated by the decision to discontinue the installation of this type of equipment in favor of digital machines with migration capability and combination CT-simulators. This amount is included in general and administrative expenses in the statement of income and comprehensive income for the year ended December 31, 2004. During the first quarter of 2005, we incurred an impairment loss of $1.2 million related to the consolidation of two Yonkers, New York based treatment centers within our Westchester/Bronx local market.

Stock Based Compensation We grant stock options for a fixed number of shares to employees in accordance with Accounting Principles Board Opinion No. 25 (APB 25), Accounting for Stock Issued to Employees, and accordingly,

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recognize no compensation expense for the stock option grants to employees provided that the exercise price is not less than the fair market value of the underlying stock on the date of grant. The values of options issued to non-employees have been determined in accordance with Statement of Financial Accounting Standards No. 123, Accounting for Stock Based Compensation, and Emerging Issues Task Force Issue No. 96-18, Accounting for Equity Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling, Goods and Services, and are periodically remeasured as the services are performed and recognize the expense ratably over the service period.

On November 3, 2005, our Board of Directors, upon the recommendation of our Compensation Committee consisting solely of independent directors, approved the acceleration of vesting of all nonqualified outstanding nonvested stock options previously granted under our equity compensation plans. As a result of the acceleration of the nonqualified nonvested stock options to purchase an aggregate of 1.2 million shares of our common stock, which would otherwise have vested over periods of two to four years, will become immediately exercisable. The affected stock options have an exercise price of $13.00 per share.

The primary purpose of the acceleration of the nonqualified nonvested stock options is to enable us to avoid recognizing compensation expense associated with these stock options in future periods in our statement of income and comprehensive income, upon adoption of FASB Statement of Financial Accounting Standards No. 123R “Share-Based Payment” (“SFAS No. 123R”). SFAS No. 123R is effective for us beginning in the first quarter of 2006, and will require that compensation expense associated with stock options be recognized in the statement of income and comprehensive income, rather than as a footnote disclosure in our consolidated financial statements. Under SFAS No. 123R the compensation expense associated with these accelerated options that would have been recognized in our statement of income and comprehensive income commencing with the implementation of SFAS 123R and continuing through 2009 is approximately $2.4 million.

Income Taxes We make estimates in recording our provision for income taxes, including determination of deferred tax assets and deferred tax liabilities and any valuation allowances that might be required against the deferred tax assets. We believe that future income will enable us to realize these benefits; therefore, we have not recorded any valuation allowance against our deferred tax asset.

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Results of Operations

The following table presents summaries of results of operations for the three months ended December 31, 2004 and 2005 (dollars in thousands).

	Three Months Ended December 31,
	2004				2005
Revenues:
Net patient service revenue	$	43,491	95.3	%	$	62,137		96.5	%
Other revenue		2,126	4.7			2,236		3.5
Total revenues		45,617	100.0	%		64,373		100.0	%
Expenses:
Salaries and benefits		23,513	51.5			34,485		53.6
Medical supplies		1,049	2.3			1,382		2.1
Facility rent expenses		1,286	2.8			2,148		3.3
Other operating expenses		1,959	4.3			2,728		4.2
General and administrative expenses		5,159	11.3			6,808		10.6
Depreciation and amortization		1,963	4.3			3,173		4.9
Provision for doubtful accounts		1,673	3.7			1,009		1.6
Interest expense, net		793	1.7			1,726		2.7
Total expenses		37,395	81.9			53,459		83.0
Income before minority interests		8,222	18.1			10,914		17.0
Minority interests in net losses (earnings) of consolidated entities		50	0.1			(144	)	(0.2	)
Income before income taxes		8,272	18.2			10,770		16.8
Income tax expense		3,301	7.2			4,116		6.4
Net income	$	4,971	11.0	%	$	6,654		10.4	%

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The following table presents summaries of results of operations for the years ended December 31, 2003, 2004 and 2005 (dollars in thousands). This information has been derived from the consolidated statements of income and comprehensive income included elsewhere in this Form 10-K.

	Year Ended December 31,
	2003					2004				2005
Revenues:
Net patient service revenue	$	131,147		94.6	%	$	163,719	95.5	%	$	217,590	95.7	%
Other revenue		7,533		5.4			7,654	4.5			9,660	4.3
Total revenues		138,680		100.0			171,373	100.0			227,250	100.0
Expenses:
Salaries and benefits		72,146		52.0			87,059	50.8			116,300	51.2
Medical supplies		2,226		1.6			3,608	2.1			5,678	2.5
Facility rent expenses		4,656		3.4			5,347	3.1			7,720	3.4
Other operating expenses		8,690		6.3			7,561	4.4			9,748	4.3
General and administrative expenses		16,400		11.8			19,671	11.5			23,538	10.4
Depreciation and amortization		5,202		3.8			6,860	4.0			10,837	4.8
Provision for doubtful accounts		3,375		2.4			5,852	3.4			6,792	3.0
Interest expense, net		2,053		1.5			3,435	2.0			5,290	2.3
Impairment loss		284		0.2			—	0.0			1,226	0.5
Total expenses		115,032		83.0			139,393	81.3			187,129	82.4
Income before minority interests		23,648		17.0			31,980	18.7			40,121	17.6
Minority interests in net (earnings) losses of consolidated entities		(7	)	0.0			55	0.0			480	0.2
Income before income taxes		23,641		17.0			32,035	18.7			40,601	17.8
Income tax expense		—		0.0			22,847	13.3			15,631	6.9
Net income	$	23,641		17.0	%	$	9,188	5.4	%	$	24,970	10.9	%
Pro forma income data:
Income before provision for income taxes, as reported	$	23,641		17.0	%	$	32,035	18.7	%
Pro forma income taxes		9,456		6.8			12,814	7.5
Pro forma net income	$	14,185		10.2	%	$	19,221	11.2	%

Comparison of the Three Months Ended December 31, 2004 and 2005

Total revenues. Total revenues increased by $18.8 million, or 41.1%, from $45.6 million for the three months ended December 31, 2004 to $64.4 million for the three months ended December 31, 2005. Approximately $11.1 million of this increase resulted from our expansion into new local markets during the latter part of 2004 and in 2005 through the acquisition of 10 new treatment centers and the opening of 2 new de novo centers. We acquired one treatment center in Martinsburg, West Virginia in April 2005, five new treatment centers in Clark County, Nevada in May 2005, and four new treatment centers in Arizona, Massachusetts and Western Maryland and opened a de novo center in Woonsocket, Rhode Island in November 2004 and another de novo center in South County, Rhode Island in September 2005. Approximately $7.7 million of this increase was driven by service mix improvements, volume growth and pricing in our existing local markets.

Salaries and benefits. Salaries and benefits increased by $11.0 million, or 46.7%, from $23.5 million for the three months ended December 31, 2004 to $34.5 million for the three months ended December 31, 2005. Salaries and benefits as a percentage of total revenues increased from 51.5% for the three months ended December 31, 2004 to 53.6% for the three months ended December 31, 2005. Salaries and benefits consist of all compensation and benefits paid, including the costs of employing our physicians, medical physicists, dosimetrists, radiation therapists, engineers, corporate administration and other treatment center support staff. Additional staffing of personnel and physicians due to our expansion into new local markets during the fourth quarter of 2004 and new treatment centers acquired in 2005 contributed to a $6.4 million increase in salaries and benefits. Within our existing local markets, salaries and benefits increased $4.6 million due to increases in additional staff and increases in the cost of our health insurance benefits.

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Medical supplies. Medical supplies increased by $0.3 million, or 31.7%, from $1.1 million for the three months ended December 31, 2004 to $1.4 million for the three months ended December 31, 2005. Medical supplies as a percentage of total revenues decreased from 2.3% for the three months ended December 31, 2004 to 2.1% for the three months ended December 31, 2005. Medical supplies consist of patient positioning devices, radioactive seed supplies, supplies used for other brachytherapy services and pharmaceuticals used in the delivery of radiation therapy treatments and chemotherapy medical supplies. Approximately $0.2 million of the increase in medical supplies was primarily due to the increased utilization of pharmaceuticals used in connection with the delivery of radiation therapy treatments and chemotherapy medical supplies. These pharmaceuticals and chemotherapy medical supplies are principally reimbursable by third-party payors.

Facility rent expenses. Facility rent expenses increased by $0.8 million, or 67.0%, from $1.3 million for the three months ended December 31, 2004 to $2.1 million for the three months ended December 31, 2005. Facility rent expenses as a percentage of total revenues increased from 2.8% for the three months ended December 31, 2004 to 3.3% for the three months ended December 31, 2005. Facility rent expenses consist of rent expense associated with our treatment center locations. Approximately $0.5 million of the increase related to the expansion into new local markets in Rhode Island, West Virginia, Arizona and Massachusetts and the acquisition of new treatment centers in existing local markets in Western Maryland and Las Vegas, Nevada.

Other operating expenses. Other operating expenses increased by $0.7 million or 39.3%, from $2.0 million for the three months ended December 31, 2004 to $2.7 million for the three months ended December 31, 2005. Other operating expenses as a percentage of total revenues decreased from 4.3% for the three months ended December 31, 2004 to 4.2% for the three months ended December 31, 2005. Other operating expenses consist of repairs and maintenance of equipment, equipment rental and contract labor. The increase of $0.7 million was primarily related to the expansion into new local markets in Rhode Island, West Virginia, Arizona and Massachusetts and the acquisition of new treatment centers in existing local markets in Western Maryland and Las Vegas, Nevada

General and administrative expenses. General and administrative expenses increased by $1.6 million or 32.0%, from $5.2 million for the three months ended December 31, 2004 to $6.8 million for the three months ended December 31, 2005. General and administrative expenses principally consist of professional service fees, office supplies and expenses, insurance and travel costs. General and administrative expenses as a percentage of total revenues decreased from 11.3% for the three months ended December 31, 2004 to 10.6% for the three months ended December 31, 2005. The increase in general and administrative expenses was due to an increase of approximately $0.4 million in expenses associated with operating as a public company. These expenses included legal fees, professional service fees including Sarbanes-Oxley compliance costs, accounting fees and increased directors and officers insurance premiums, public relations and board expenses. Additional increases in general and administrative expenses included approximately $0.6 million relating to the growth in the number of our local markets, and approximately $0.5 million in our existing local markets. During the fourth quarter, we wrote off approximately $0.1 million of deferred financing costs as a result of our refinancing under the fourth amended and restated senior credit facility.

Depreciation and amortization. Depreciation and amortization increased by $1.2 million, or 61.6%, from $2.0 million for the three months ended December 31, 2004 to $3.2 million for the three months ended December 31, 2005. Depreciation and amortization expense as a percentage of total revenues increased from 4.3% for the three months ended December 31, 2004 to 4.9% for the three months ended December 31, 2005. An increase in capital expenditures related to our investment in advanced radiation treatment technologies in certain local markets increased our depreciation and amortization by approximately $0.3 million. Approximately $0.8 million of the increase was attributable to the expansion into new local markets in Rhode Island, West Virginia, Arizona and Massachusetts and the acquisition of new treatment centers in existing local markets in Western Maryland and Las Vegas, Nevada. The remaining portion of the increase was attributable to growth in our existing markets.

Provision for doubtful accounts. Provision for doubtful accounts decreased by $0.7 million, or 39.7%, from $1.7 million for the three months ended December 31, 2004 to $1.0 million for the three months ended December 31, 2005. Provision for doubtful accounts as a percentage of total revenues decreased from 3.7% for the three months ended December 31, 2004 to 1.6% for the three months ended December 31, 2005. The decrease in the provision for doubtful accounts was due to our annual update to the development of collection factors and review of our account balances greater than 120 days.

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Interest expense, net. Interest expense, net increased by $0.9 million, or 117.7%, from $0.8 million for the three months ended December 31, 2004 to $1.7 million for the three months ended December 31, 2005. Interest expense as a percentage of total revenues increased from 1.7% in 2004 to 2.7% in 2005. Included in interest expense, net is an insignificant amount of interest income. The increase is primarily attributable to increased borrowings under our fourth amended and restated senior credit facility for our expansion into new markets during 2005 and borrowings under capital lease financing arrangements of approximately $14.7 million for our investment in advanced radiation treatment technologies in certain local markets.

Net income. Net income increased by $1.7 million, or 33.9%, from $5.0 million in net income for the three months ended December 31, 2004 to $6.7 million for the three months ended December 31, 2005. Net income represents 11.0% of total revenues for the three months ended December 31, 2004 and 10.4% for the three months ended December 31 2005.

Comparison of the Years Ended December 31, 2004 and 2005

Total revenues. Total revenues increased by $55.9 million, or 32.6%, from $171.4 million in 2004 to $227.3 million in 2005. Approximately $29.8 million of this increase resulted from our expansion into new local markets during the latter part of 2004 and in 2005. We acquired three new treatment centers in New Jersey in September 2004, one treatment center in Martinsburg, West Virginia in April 2005, five new treatment centers in Las Vegas, Nevada in May 2005, and four new treatment centers in Arizona, Massachusetts and Western Maryland and opened a de novo center in Woonsocket, Rhode Island in November 2004 and another de novo center in South County, Rhode Island in September 2005. Approximately $25.1 million of this increase was driven by service mix improvements, volume growth and pricing in our existing local markets. Total revenues in 2005 also included a gain of approximately $1.0 million from the sale of a 49.9% interest in a joint venture that was formed to operate a treatment center located in Berlin, Maryland. In 2005 our professional component fees comprised $15.7 million of our total revenue.

Salaries and benefits. Salaries and benefits increased by $29.2 million, or 33.6%, from $87.1 million in 2004 to $116.3 million in 2005. Salaries and benefits as a percentage of total revenue increased from 50.8% in 2004 to 51.2% in 2005. Additional staffing of personnel and physicians due to our expansion into new local markets during the fourth quarter of 2004 and the acquisitions of new treatment centers acquired in 2005 contributed to a $13.4 million increase in salaries and benefits. Within our existing local markets, salaries and benefits increased $15.8 million due to increases in staffing, pay rates and the cost of our health insurance benefits.

Medical supplies. Medical supplies increased by $2.1 million, or 57.4%, from $3.6 million in 2004 to $5.7 million in 2005. Medical supplies as a percentage of total revenues increased from 2.1% in 2004 to 2.5% in 2005. Medical supplies consist of patient positioning devices, radioactive seed supplies, supplies used for other brachytherapy services and pharmaceuticals used in the delivery of radiation therapy treatments and chemotherapy medical supplies. Approximately $1.3 million of the increase in medical supplies was primarily due to the increased utilization of pharmaceuticals used in connection with the delivery of radiation therapy treatments and chemotherapy medical supplies. These pharmaceuticals and chemotherapy medical supplies are principally reimbursable by third-party payors.

Facility rent expenses. Facility rent expenses increased by $2.3 million, or 44.4%, from $5.4 million in 2004 to $7.7 million in 2005. Facility rent expenses as a percentage of total revenues increased from 3.1% in 2004 to 3.4% in 2005. Approximately $1.5 million of the increase related to the expansion into new local markets in New Jersey, Rhode Island, West Virginia, Arizona and Massachusetts and the acquisition of new treatment centers in existing local markets in Western Maryland and Las Vegas, Nevada. Approximately $0.3 million relates to costs for the re-location of our Briarcliff Manor operations to a hospital in our Westchester/Bronx local market.

Other operating expenses. Other operating expenses increased by $2.1 million or 28.9%, from $7.6 million in 2004 to $9.7 million in 2005. Other operating expenses as a percentage of total revenues decreased from 4.4% in 2004 to 4.3% in 2005. Approximately $1.7 million of the increase related to the expansion into new local markets in New Jersey, Rhode Island, West Virginia, Arizona and Massachusetts and the acquisition of new treatment centers in existing local markets in Western Maryland and Las Vegas, Nevada. Within our existing local markets, other operating expenses increased $0.4 million due to increases in the cost of repairs and maintenance of equipment.

General and administrative expenses. General and administrative expenses increased by $3.8 million, or 19.7%, from $19.7 million in 2004 to $23.5 million in 2005. General and administrative expenses principally consist of professional

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service fees, office supplies and expenses, insurance and travel costs. General and administrative expenses as a percentage of total revenues decreased from 11.5% in 2004 to 10.4% in 2005. Approximately $2.3 million of the increase incurred was associated with operating as a public company. These expenses included legal fees, professional service fees including Sarbanes-Oxley compliance costs, accounting fees and increased directors and officers insurance premiums, public relations and board expenses. Additional increases in general and administrative expenses included approximately $1.4 million relating to the growth in the number of our local markets, and $0.9 million in our existing local markets offset by a one time charge of $1.2 million for the write down of certain of our analog Linac and simulator inventory during the third quarter of 2004. We incurred approximately $0.4 million in additional write off of deferred financing costs throughout 2005 from refinancings and amendments to our senior credit facility.

Depreciation and amortization. Depreciation and amortization increased by $4.0 million, or 58.0%, from $6.9 million in 2004 to $10.8 million in 2005. Depreciation and amortization expense as a percentage of total revenues increased from 4.0% in 2004 to 4.8% in 2005. An increase in capital expenditures related to our investment in advanced radiation treatment technologies in certain local markets increased our depreciation and amortization by approximately $1.2 million. Approximately $2.4 million of the increase was attributable to the expansion into new local markets in New Jersey, Rhode Island, West Virginia, Arizona and Massachusetts and the acquisition of new treatment centers in existing local markets in Western Maryland and Las Vegas, Nevada. The remaining portion of the increase was attributable to growth in our existing markets.

Provision for doubtful accounts. Provision for doubtful accounts increased by $0.9 million, or 16.1%, from $5.9 million in 2004 to $6.8 million in 2005. Provision for doubtful accounts as a percentage of total revenues decreased from 3.4% in 2004 to 3.0% in 2005. The increase of $0.9 million in the provision for doubtful accounts was primarily related to the expansion into new local markets in New Jersey, Rhode Island, West Virginia, Arizona and Massachusetts and the acquisition of new treatment centers in existing local markets in Western Maryland and Las Vegas, Nevada.

Interest expense, net. Interest expense, net increased by $1.9 million, or 54.0%, from $3.4 million in 2004 to $5.3 million in 2005. Interest expense as a percentage of total revenues increased from 2.0% in 2004 to 2.3% in 2005. Included in interest expense, net is an insignificant amount of interest income. Approximately $1.6 million of the increase is as a result of the increased borrowings for our expansion into new markets. Approximately $0.4 million of the increase is as a result of an increase in rates and the remainder of the increase is due to interest on additional capital leases entered into in late 2004 and 2005 of approximately $0.5 million, offset by the interest cost savings on the Term B loan of approximately $0.5 million paid off in June 2004.

Impairment loss. During the first quarter of 2005, we incurred an impairment loss of $1.2 million related to the consolidation of two Yonkers, New York based treatment centers within our Westchester/Bronx local market.

Net income and pro forma net income. Net income increased by $5.8 million, or 29.9%, from $19.2 million in pro forma net income in 2004 to $25.0 million in 2005. Net income and pro forma net income represent 10.9% and 11.2% of total revenues in 2005 and 2004, respectively. Net income is discussed on a pro forma basis due to a provision for income taxes to reflect the estimated corporate income tax expense based on the assumption the Company was a C corporation at the beginning of 2004 and provides for income taxes utilizing an effective rate of approximately 40.0%.

Comparison of the Years Ended December 31, 2003 and 2004

Total revenues. Total revenues increased by $32.7 million, or 23.6%, from $138.7 million in 2003 to $171.4 million in 2004. Approximately $14.2 million of this increase resulted from our expansion into new local markets in 2003 and 2004. We acquired new treatment centers in Key West, Florida in August 2003, Kentucky in September 2003, Alabama in December 2003 and New Jersey in September 2004. We also added a new local market in Baltimore, Maryland in March 2003, expanded our professional service arrangements in the Delmarva Peninsula market and added a new local market in Woonsocket, Rhode Island in November 2004. Approximately $15.4 million of this increase was driven by volume growth, service mix improvements, and pricing in our existing local markets and approximately $2.1 million related to a reimbursement policy change by a significant commercial payor to reimburse for services not previously covered. The remaining increase was primarily attributable to the addition of advanced radiation therapy equipment in our treatment centers and the increased utilization of our technologies due to the increased acceptance by payors to reimburse for a wider range of radiation treatments.

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Salaries and benefits. Salaries and benefits increased by $14.9 million, or 20.7%, from $72.1 million in 2003 to $87.0 million in 2004. Salaries and benefits as a percentage of total revenues decreased from 52.0% in 2003 to 50.8% in 2004. Additional staffing of personnel and physicians due to our expansion into new local markets during the third and fourth quarters of 2003 and 2004 contributed to a $10.8 million increase in salaries and benefits. Within our existing local markets, salaries and benefits increased $4.1 million due to replacement of contract labor with employed staff and increases in the cost of our health insurance benefits.

Medical supplies. Medical supplies increased by $1.4 million, or 62.1%, from $2.2 million in 2003 to $3.6 million in 2004. Medical supplies as a percentage of total revenues increased from 1.6% in 2003 to 2.1% in 2004. Medical supplies consist of patient positioning devices, radioactive seed supplies, supplies used for other brachytherapy services and pharmaceuticals used in the delivery of radiation therapy treatments. The increase in medical supplies as a percentage of total revenues was primarily due to the increased utilization of pharmaceuticals used in connection with the delivery of radiation therapy treatments. These pharmaceuticals are principally reimbursable by third-party payors.

Facility rent expenses. Facility rent expenses increased by $0.6 million, or 14.8%, from $4.7 million in 2003 to $5.3 million in 2004. Facility rent expenses as a percentage of total revenues decreased from 3.4% in 2003 to 3.1% in 2004. Approximately $0.5 million related to the expansion into new local markets in Key West, Florida, Kentucky, Alabama, New Jersey and Rhode Island. The remaining increase related to our existing local markets.

Other operating expenses. Other operating expenses decreased by $1.1 million, or 13.0%, from $8.7 million in 2003 to $7.6 million in 2004. Other operating expenses as a percentage of total revenues decreased from 6.3% in 2003 to 4.4% in 2004. The decrease was primarily attributable to a decrease in contract labor of approximately $1.8 million, offset by an increase in the cost of repairs and maintenance of equipment of approximately $0.7 million.

General and administrative expenses. General and administrative expenses increased by $3.3 million, or 19.9%, from $16.4 million in 2003 to $19.7 million in 2004. General and administrative expenses as a percentage of total revenues decreased from 11.8% to 11.5%. The increase of $3.3 million in general and administrative expenses was due to the write-off of $0.3 million of deferred financing costs due to the refinancing of our senior secured credit facility in March 2004. During the third quarter of 2004, we recorded a charge of $1.2 million for the write down to fair value of certain of our analog Linac and simulator inventory. The adjustment to machine inventories was precipitated by the decision to discontinue the installation of this type of equipment in favor of digital machines with migration capability and combination CT-simulators. Additional increases in general and administrative expenses included approximately $0.4 million in compensation fees for legislative efforts in healthcare reimbursement, $1.1 million in general and administrative expenses relating to the growth in the number of our local markets, $0.5 million relating to our public offering for directors and officers insurance, public relations expenses and board expenses offset by a decrease of approximately $0.2 million in our existing local markets.

Depreciation and amortization. Depreciation and amortization increased by $1.7 million, or 31.9%, from $5.2 million in 2003 to $6.9 million in 2004. Depreciation and amortization expenses as a percentage of total revenues increased from 3.8% in 2003 to 4.0% in 2004. An increase in capital expenditures related to our investment in advanced radiation treatment technologies in certain local markets increased our depreciation and amortization by approximately $0.8 million. The remaining portion of the increase was attributable to the acquisition of radiation center assets during the third and fourth quarters of 2003 and 2004 in expanded local markets in Key West, Florida, Kentucky, Alabama, New Jersey and Rhode Island.

Provision for doubtful accounts. Provision for doubtful accounts increased by $2.5 million, or 73.4%, from $3.4 million in 2003 to $5.9 million in 2004. Provision for doubtful accounts as a percentage of total revenues increased from 2.4% in 2003 to 3.4% in 2004. Approximately $1.3 million of the increase was primarily due to an increase in service to uninsured patients within one of our existing local markets, $0.5 million due to the expanded local markets in Key West, Florida, Kentucky, Alabama, New Jersey and Rhode Island and $0.7 million within our remaining existing local markets.

Interest expense, net. Interest expense, net increased by $1.3 million, or 67.3%, from $2.1 million in 2003 to $3.4 million in 2004. Interest expense as a percentage of total revenues increased from 1.5% in 2003 to 2.0% in 2004. Approximately $0.5 million of the increase in interest expense was primarily due to an increase in the borrowing of funds under our senior secured credit facility on the $40 million Term B loan borrowed on March 31, 2004. Approximately $0.6 million of the increase is as a result of the borrowing relating to the acquisitions made in Kentucky and Alabama during the third and fourth quarters of 2003 and the acquisition of the New Jersey treatment centers during the third quarter of 2004. The remaining balance of approximately $0.2 million is due to interest on capital leases entered into during 2004.

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Pro forma net income Pro forma net income increased by $5.0 million, or 35.5%, from $14.2 million in 2003 to $19.2 million in 2004. Pro forma net income represents 10.2% and 11.2% of total revenues in 2003 and 2004, respectively. Net income is discussed on a pro forma basis due to a provision for income taxes to reflect the estimated corporate income tax expense based on the assumption the Company was a C corporation at the beginning of each period presented, and provides for income taxes utilizing an effective rate of 40.0%.

Liquidity and Capital Resources

Our principal capital requirements are for working capital, acquisitions, medical equipment replacement and expansion and de novo treatment center development. We fund acquisitions through draws on our revolving credit facility. Working capital and medical equipment are funded through cash from operations, supplemented, as needed, by five-year fixed rate lease lines of credit. Borrowings under these lease lines of credit are recorded on the balance sheets. The construction of de novo treatment centers are funded directly by third parties and then leased by us.

Prior to our initial public offering, we used real estate entities owned by members of the board of directors and executive management, and by employees to finance the construction of certain of our treatment centers and the development of our corporate headquarters. The rents were determined on the basis of the debt service incurred by the entities and a return on the equity component of the project’s funding. Prior to completing our initial public offering in June 2004, we engaged an independent consultant to complete a fair market rent analysis for the real estate leases with these entities. The consultant determined that, with one exception, the rents are at fair market value. We negotiated a rent reduction for the one exception to bring it to fair market value as determined by the consultant. Since becoming a public company, an independent consultant has been utilized to assist the Company’s audit committee in determining fair market rental for any renewal or new rental arrangements with any affiliated party.

Cash Flows From Operating Activities

Net cash provided by operating activities for the years ended December 31, 2003, 2004 and 2005 was $27.3 million, $28.2 million and $22.3 million, respectively.

Net cash provided by operating activities increased by $0.9 million from $27.3 million in 2003 to $28.2 million in 2004. The increase of $0.9 million was affected by the first time payment of approximately $6.0 million of income taxes as a result of our change in tax status from an S corporation to a C Corporation. Provision for bad debts increased $2.5 million due primarily to an increase in service to uninsured patients within one of our existing local markets and the expansion into new local markets in Key West, Florida, Kentucky, Alabama, New Jersey and Rhode Island. Accounts receivable increased by $8.9 million due primarily to our expansion into new local markets in Key West Florida, Kentucky, Alabama, New Jersey and Rhode Island and in existing local markets in Florida, New York and Nevada. Accrued expenses decreased by $2.4 million due primarily to a $3.2 million decrease in accrued liabilities related to liabilities due to third-party payors, a decrease in accrued interest of $0.7 million offset by a $1.4 million increase in the year-end bonus and payroll accruals, and $0.1 million increase in deferred income.

Net cash provided by operating activities decreased by $5.9 million from $28.2 million in 2004 to $22.3 million in 2005. The decrease of $5.9 million was affected by income tax payments made in 2005 of approximately $17.6 million, as compared to tax payments of approximately $6.0 million made in 2004, offset by an increase in our net income. Accounts receivable increased by $21.6 million from the prior year due primarily to our expansion into new local markets in New Jersey, Rhode Island, West Virginia, Arizona, and Massachusetts and in existing local markets in Florida, Maryland and Nevada.

Cash Flows From Investing Activities

Net cash used in investing activities for 2003, 2004, and 2005 was $20.7 million, $25.2 million, and $63.3 million, respectively.

Net cash used in investing activities increased by $4.5 million from $20.7 million in 2003 to $25.2 million in 2004. This increase was primarily attributable to a $6.3 million increase in purchases of property and equipment related to new equipment and equipment upgrades, purchase of medical equipment of approximately $0.8 million for sale to a hospital, receipt of payments from shareholder notes receivable of $0.7 million, offset by proceeds from the sale of a medical facility of $1.5 in 2003 and $0.9 million in 2004 for the sale of medical equipment to a hospital. Increase in investing activities was also due to purchases of marketable securities in 2004 of approximately $2.4 million for investments in municipal bonds and preferred stock. Acquisition of radiation center assets decreased by $4.0 million.

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Net cash used in investing activities increased by $38.1 million from $25.2 million in 2004 to $63.3 million in 2005. Net cash used in investing activities was impacted by approximately $43.2 million from the acquisitions of radiation center assets during the second quarter of 2005 and approximately $19.8 million in additional purchases of property and equipment related to new equipment and equipment upgrades. In addition, approximately $3.1 million of purchases of marketable securities for investments in municipal bonds and preferred stock during 2005 and proceeds of approximately $1.8 million from the sale of an equity interest in a joint venture contributed to the change in our investing activities.

Historically, our capital expenditures have been primarily for equipment, leasehold improvements and information technology equipment. Total capital expenditures, inclusive of amounts financed through capital lease arrangements and exclusive of the purchase of radiation treatment centers, were $14.8 million, $23.2 million and $34.6 million in 2003, 2004 and 2005, respectively. Historically, we have funded our capital expenditures with cash flows from operations, borrowings under the senior credit facility and borrowings under our lease line of credit. Over the next 12 to 18 months, we estimate $45 to $50 million in capital spending focused on expanding existing local markets and updating the technology in our centers acquired in 2005. To the extent that we acquire or internally develop new radiation treatment centers, we may need to increase our expected capital expenditures on a proportionate basis.

Cash From Financing Activities

Net cash used in financing activities for the years ended December 31, 2003 and 2004 was $8.2 million and $0.5 million, respectively. Net cash provided by financing activities for the year ended December 31, 2005 was $45.0 million.

Net cash used in financing activities decreased by $7.7 million from $8.2 million in 2003 to $0.5 million in 2004. The decrease was impacted from the borrowing of approximately $59.1 million under our senior secured credit facility, offset by distributions to shareholders of approximately $46.4 million in 2004, which included a one-time distribution of $40.0 million. We incurred approximately $1.6 million in fees as a result of entering into our third amended and restated senior secured credit facility on March 31, 2004. We received net proceeds of approximately $46.8 million from the completion of an initial public offering of our common stock on June 23, 2004. Repayments of debt of approximately $61.3 million included the application of approximately $44.0 of the net proceeds used to repay outstanding indebtedness under our senior secured credit facility and approximately $2.8 million of the net proceeds used to repay outstanding indebtedness to certain of our directors, officers and related parties. The receipt of $2.3 million from the exercise of stock options, the receipt of $0.9 million from payments of notes receivable from shareholders and payments of $1.9 million in loan costs relating to our senior secured credit facility also impacted cash flow from financing activities during 2004.

In the first quarter of 2004, we borrowed approximately $40.0 million under our senior credit facility, for a planned one-time distribution to our shareholders in April 2004 and we borrowed approximately $7.7 million for the acquisition of the two New Jersey centers in the third quarter of 2004 and other borrowings of approximately $11.4 million.

In 2005, we borrowed approximately $50.6 million under our senior secured credit facility, of which $43.2 million was for the acquisition of radiation center assets during the second quarter of 2005. Net cash provided by financing activities was also impacted by approximately $53.2 million reduction in repayments of debt as a result of our receipt of proceeds of approximately $46.8 million in June 2004 from our initial public offering of common stock, which was utilized to repay indebtedness in 2004. Costs relating to the refinancing of the senior secured credit facility were approximately $1.5 million in 2005 as compared to $1.9 million in 2004. The receipt of $2.7 million from the exercise of stock options and the receipt of $1.3 million from payments of notes receivable from shareholders also impacted cash flow from financing activities during 2005. Distributions to shareholders were approximately $46.4 million in 2004; no distributions have been made since our initial public offering in June 2004.

Credit Facility and Available Lease Lines

On July 31, 2003, we amended our second amended and restated senior secured credit facility to revise certain covenants. In December 2003, we again amended our second amended and restated senior secured credit facility. This later amendment to our second amended and restated senior secured credit facility provided, subject to our compliance with covenants and customary conditions, for $95.0 million in availability consisting of a $25.0 million term loan and the ability to make up to $70.0 million of revolving credit borrowings. Additionally, it provided for the issuance of letters of credit although the amount of borrowings available would be reduced to the extent of any outstanding letters of credit. The amendment also extended the maturity of our senior secured credit facility to April 15, 2007.

On March 31, 2004, we entered into a third amended and restated senior secured credit facility principally to fund a special distribution to shareholders. Our third amended and restated senior secured credit facility provides, subject to our compliance with covenants and customary conditions, for $135.0 million in borrowings consisting of a $25.0 million term

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loan (designated Term A), a $70.0 million revolver and a new add-on term loan facility (designated Term B) in the amount of $40.0 million. On April 9, 2004, the proceeds from borrowings against the new add-on term loan facility were used to make a special distribution to our shareholders, in the aggregate amount of $40.0 million.

On October 8, 2004 we amended our third amended and restated senior secured credit facility principally to pay off the remaining balance of the designated Term B portion and increase our revolving credit commitment from $70 million to $80 million. The transaction included paying off the $22.8 million remaining on the designated Term B portion by increasing the Term A loan to $25 million and drawing on the revolver. Per the amendment, the interest rate spreads on the Term A loan and on the revolver were reduced overall by 25 basis points. The amendment modified the mandatory quarterly principal payments on the Term A loan from $1.25 million to $1.75 million.

On March 18, 2005 we amended our third amended and restated senior secured credit facility principally to increase the Term A loan to $35 million and increase our revolving credit commitment from $80 million to $140 million. Per the amendment, the interest rate spreads on the Term A loan and on the revolver were reduced overall by 25 basis points. The amendment extended the maturity date of the Term A loan and the revolver to March 15, 2010.

On April 26, 2005 we amended our third amended and restated senior secured credit facility principally to increase the aggregate amount of permitted acquisitions from $25 million to $45 million and to obtain consent on the purchase of five radiation treatment centers located in Clark County, Nevada from Associated Radiation Oncologists, Inc. As a result of our refinancing in March and April 2005, we wrote-off approximately $579,000 of financing costs capitalized in connection with our previous credit facility.

On December 16, 2005, we entered into a fourth amended and restated senior secured credit facility principally to provide for a $100 million Term B loan. Our fourth amended and restated senior secured credit facility provides, subject to our compliance with covenants and customary conditions, for $290.0 million in borrowings consisting of: (i) a $100 million Term B loan, (ii) a $50 million accordion feature, which allows the us to increase the aggregate principal amount of the Term B loan to $150 million, and (iii) a $140 million revolver. We used the proceeds of the $100 million Term B loan to pay off our pre-existing Term A loan as well as the borrowings drawn on our $140 million revolver.

The Term B loan requires quarterly payments of $250,000 and matures on December 16, 2012. The Term B loan initially bears interest either at LIBOR plus a spread of 200 basis points or a specified base rate plus a spread of 50 basis points, with the opportunity to permanently reduce the spread by 25 basis points on LIBOR and base rate loans after six months, provided our leverage ratio is below 2.00 to 1.00.

The revolver’s maturity date was unchanged and will mature on March 15, 2010. The revolver bears interest either at LIBOR plus a spread ranging from 125 to 250 basis points or a specified base rate plus a spread ranging from 0 to 100 basis points, with the exact spread determined upon the basis of our leverage ratio, as defined. We are required to pay a quarterly unused commitment fee at a rate ranging from 25 to 50 basis points on our revolving line of credit determined upon the basis of our leverage ratio, as defined.

Our fourth amended and restated senior secured credit facility:

• is secured by a pledge of substantially all of our tangible and intangible assets, including accounts receivable, inventory and capital stock of our existing and future subsidiaries, and requires that borrowings and other amounts due under it will be guaranteed by our existing and future domestic subsidiaries;

• requires us to make mandatory prepayments of outstanding borrowings, with a corresponding reduction in the maximum amount of borrowings available under the senior secured credit facility, with net proceeds from insurance recoveries and asset sales, and with the net proceeds from the issuance of equity or debt securities, subject to specified exceptions;

• includes a number of restrictive covenants including, among other things, limitations on our leverage, capital and acquisitions expenditures, and requirements that we maintain minimum ratios of cash flow to fixed charges and of cash flow to interest;

• limits our ability to pay dividends on our capital stock; and

• contains customary events of default, including an event of default upon a change in our control.

In connection with entering into our fourth amended and restated senior secured credit facility, we incurred fees and expenses of approximately $860,000, which have been capitalized as deferred financing costs and are being amortized over the term of the related debt instruments. Additionally, we wrote-off approximately $124,000 of financing costs capitalized in connection with our previous credit facility.

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The revolving credit facility requires that we comply with certain financial covenants, including:

	Requirement	Level at December 31, 2005
Maximum permitted consolidated leverage ratio	<3.50 to 1.00	1.99 to 1.00
Minimum permitted consolidated fixed charge coverage ratio	>1.50 to 1.00	2.38 to 1.00
Minimum permitted consolidated interest coverage ratio	>3.75 to 1.00	10.31 to 1.00

The maximum permitted consolidated leverage ratio required is <3.50 to 1.00 through September 30, 2006, <3.25 to 1.00 from October 1, 2006 through December 31, 2007 and <3.00 to 1.00 thereafter.

The revolving credit facility also requires that we comply with various other covenants, including, but not limited to, restrictions on new indebtedness, the ability to merge or consolidate, asset sales, capital expenditures, acquisitions and dividends, with which we were in compliance as of December 31, 2005.

The following table sets forth the amounts outstanding under our revolving credit facility and Term B loan, the effective interest rates on such outstanding amounts for the quarter and amounts available for additional borrowing hereunder, as of December 31, 2005:

Senior Secured Credit Facility	Effective Interest Rate		Letters of Credit		Amount Outstanding		Amount Available for Additional Borrowing
					(Dollars in thousands)
Revolving credit facility	N/A		$	350	$	—	$	139,650
Term B loan	6.5	%		—		100,000		50,000
Total			$	350	$	100,000	$	189,650

As of December 31, 2005, we had $123.5 million of outstanding debt, $6.5 million of which was classified as current. Of the $123.5 million of outstanding debt, $100.0 million was outstanding to lenders under our fourth amended and restated senior secured credit facility, and $23.5 million was outstanding under capital leases and other miscellaneous indebtedness. As of December 31, 2005, of the outstanding borrowings under our fourth amended and restated senior secured credit facility, $1.0 million was classified as current.

We currently maintain two lease lines of credit with two financial institutions for the purpose of leasing medical equipment in the total commitment amount of $21.0 million. As of December 31, 2005 we had $1.0 million available under one of the lease lines of credit. The second lease line was entered into in January 2006, providing for an additional $10.0 million in availability.

Effective November 2004, we entered into a lease line of credit with a financial institution for the purpose of arranging a sale/leaseback of our medical facilities in the commitment amount of $25 million. This arrangement provides us the availability to sell future medical facilities that are constructed by our construction company and leased back with lease terms of 15 to 20 years with four consecutive renewal options of five years each.

We believe available borrowings under our current credit facility and lease lines, together with our cash flows from operations, will be sufficient to fund our requirements for at least the next twelve months. After such time period, to the extent available borrowings and cash flows from operations are insufficient to fund future requirements, we will need to seek additional financing through additional increases in our credit facility, negotiate credit facilities with other lenders or institutions or seek additional capital through private placements or public offerings of equity or debt securities. No assurances can be given that we will be able to extend or increase the existing credit facility, secure additional bank borrowings or complete additional debt or equity financings on terms favorable to us or at all. Any such financing may be dilutive in ownership, preferences, rights, or privileges to our shareholders. If we are unable to obtain funds when needed or on acceptable terms, we will be required to curtail our acquisition and development program. Our ability to meet our funding needs could be adversely affected if we suffer adverse results of operations, or if we violate the covenants and restrictions to which we are subject under our current credit facility.

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Reimbursement, Legislative And Regulatory Changes

Legislative and regulatory action has resulted in continuing changes in reimbursement under the Medicare and Medicaid programs that will continue to limit payments we receive under these programs.

Within the statutory framework of the Medicare and Medicaid programs, there are substantial areas subject to legislative and regulatory changes, administrative rulings, interpretations, and discretion which may further affect payments made under those programs, and the federal and state governments may, in the future, reduce the funds available under those programs or require more stringent utilization and quality reviews of our treatment centers or require other changes in our operations. Additionally, there may be a continued rise in managed care programs and future restructuring of the financing and delivery of healthcare in the United States. These events could have an adverse effect on our future financial results.

Inflation

While inflation was not a material factor in either revenue or operating expenses during the periods presented, the healthcare industry is labor-intensive. Wages and other expenses increase during periods of inflation and labor shortages, such as the nationwide shortage of dosimetrists and radiation therapists. In addition, suppliers pass along rising costs to us in the form of higher prices. We have implemented cost control measures to curb increases in operating costs and expenses. We have to date offset increases in operating costs by increasing reimbursement or expanding services. However, we cannot predict our ability to cover, or offset, future cost increases.

Commitments

The following table discloses aggregate information about our contractual obligations and the periods in which payments are due as of December 31, 2005:

	Payments Due by Period
Contractual Cash Obligations	Total		Less Than 1 Year		2-3 Years		4-5 Years		After 5 Years
	(In thousands)
Long-term debt	$	100,000	$	1,000	$	2,000	$	2,000	$	95,000
Capital lease obligations		23,465		5,506		10,998		6,747		214
Interest on fixed portion of Senior Credit Facility (1)		3,896		974		1,948		974		—
Interest on capital lease obligations (2)		5,754		1,349		2,596		1,754		55
Operating leases		112,619		10,905		18,494		17,413		65,807
Total contractual cash obligations	$	245,734	$	19,734	$	36,036	$	28,888	$	161,076

(1) $20 million of the Term B loan is fixed through an interest rate swap agreement at 4.87% plus an applicable margin through December 31, 2009

(2) Interest on capital lease obligations is at fixed rates ranging from 3.9% to 11.4%

Off Balance Sheet Arrangements

We do not currently have any off-balance sheet arrangements with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. In addition, we do not engage in trading activities involving non-exchange traded contracts. As such, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these relationships.

Seasonality

Our results of operations historically have fluctuated on a quarterly basis and can be expected to continue to fluctuate. Many of the patients of our Florida treatment centers are part-time residents in Florida during the winter months. Hence, these treatment centers have historically experienced higher utilization rates during the winter months than during the remainder of the year. In addition, referrals are typically lower in the summer months due to traditional vacation periods.

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Recently Issued Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board (the “FASB”) issued SFAS No. 123R, “Share-Based Payments” (“SFAS No. 123R”), a revision of SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”), which addresses financial accounting and reporting for costs associated with stock-based compensation. SFAS No. 123R addresses all forms of share-based payment awards, including shares issued under employee stock purchase plans, stock options and restricted stock. As originally issued by the FASB, SFAS No. 123R would have required the Company to recognize compensation expense beginning July 1, 2005, in an amount equal to the fair value of share-based payments related to unvested share-based payment awards over the applicable vesting period. On April 14, 2005, the United States Securities and Exchange Commission (the “SEC”) announced it would permit most registrants subject to its oversight additional time to implement the requirements in SFAS No. 123R. As announced, the SEC will permit companies to implement SFAS No. 123R at the beginning of their next fiscal year (instead of their next reporting period) that begins after June 15, 2005. The Company is evaluating the requirements of SFAS No. 123R and expects that the adoption of SFAS No. 123R, effective January 1, 2006, will have an impact on its consolidated results of operations and earnings per share. As permitted by Statement 123, the Company currently accounts for share-based payments using APB 25’s intrinsic value method and, as such, generally recognizes no compensation cost for employee stock options.

On March 29, 2005, the United States Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. 107, “Share-Based Payment” (“SAB 107”). Although not altering any conclusions reached in SFAS 123R, SAB 107 provides the views of the Staff regarding the interaction between SFAS 123R and certain SEC rules and regulations and, among other things, provide the Staff’s views regarding the valuation of share-based payment arrangements for public companies. The Company intends to follow the interpretative guidance on share-based payment set forth in SAB 107 during the Company’s adoption of SFAS 123R.

In December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets - An Amendment of APB Opinion No. 29” (“SFAS 153”). SFAS 153 amends APB Opinion No. 29, “Accounting for Nonmonetary Transactions” (“Opinion 29”). The amendments made by SFAS 153 are based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. Further, the amendments eliminate the exception for nonmonetary exchanges of similar productive assets and replace it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. The provisions in SFAS 153 are effective for nonmonetary asset exchanges occurring in fiscal periods beginning after December 15, 2005. Early application of SFAS 153 is permitted. The provisions of this Statement shall be applied prospectively. The Company does not expect the adoption of SFAS 153 to have a material effect on the Company’s financial statements or its results of operations.

In June 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections” (“SFAS 154”). SFAS 154 replaces APB Opinion No. 20, “Accounting Changes” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements”. SFAS 154 requires that a voluntary change in accounting principle be applied retrospectively with all prior period financial statements presented on the new accounting principle. SFAS 154 also requires that a change in method of depreciating or amortizing a long-lived nonfinancial asset be accounted for prospectively as a change in estimate, and correction of errors in previously issued financial statements should be termed a “restatement”. SFAS 154 is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. The implementation of SFAS 154 is not expected to have a material impact on the Company’s consolidated financial statements.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Sensitivity. We are exposed to various market risks as a part of our operations, and we anticipate that this exposure will increase as a result of our planned growth. In an effort to mitigate losses associated with these risks, we may at times enter into derivative financial instruments. These derivative financial instruments may take the form of forward sales contracts, option contracts, and interest rate swaps. We have not and do not intend to engage in the practice of trading derivative securities for profit.

Interest Rate Swap. On April 1, 2005, and August 31, 2005, we entered into interest rate swap agreements with notional amounts of $5.0 million and $11.0 million, respectively. These interest rate swap agreements were terminated on December 16, 2005, as a result of the refinancing of the fourth amended and restated senior credit facility.

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On December 30, 2005, we entered into an interest rate swap agreement with a notional amount of $20 million. This interest rate swap transaction involves the exchange of floating for fixed rate interest payments over the life of the agreement without the exchange of the underlying principal amounts. The differential to be paid or received is accrued and is recognized as an adjustment to interest expense. These agreements are indexed to 90 day LIBOR. The following table summarizes the terms of the swap:

Notional Amount	Fixed Rate	Term in Months	Maturity
$20.0 million	4.87% (plus a margin)	48	December 31, 2009

The fixed rate does not include the margin, which is currently 200 basis points. In addition, further changes in interest rates by the Federal Reserve may increase or decrease our interest cost on the outstanding balance of the credit facility not subject to interest rate protection. Our swap transaction involves the exchange of floating for fixed rate interest payments over the life of the agreement without the exchange of the underlying principal amounts. The differential to be paid or received is accrued and is recognized as an adjustment to interest expense. We use derivative financial instruments to reduce interest rate volatility and associated risks arising from the floating rate structure of our senior credit facility and do not hold or issue them for trading purposes.

Interest Rates. As of December 31, 2005, we have interest rate exposure on $80.0 million of our senior secured credit facility. Our debt obligations subject to floating rates at December 31, 2005 include $80.0 million of variable rate debt at an approximate average interest rate of 6.5% as of December 31, 2005. A 100 basis point change in interest rates on our variable rate debt would have resulted in interest expense fluctuating approximately $0.8 million on a calendar year basis.

Item 8. Financial Statements and Supplementary Data

Information with respect to this Item is contained in our consolidated financial statements beginning with the Index on Page F-1 of this report which is incorporated herein by reference.

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

None.

Item 9A. Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures. We carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Exchange Act Rule 13a-15. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control Over Financial Reporting. There has been no change in our internal control over financial reporting during the fourth quarter of 2005 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Management’s Annual Report on Internal Control Over Financial Reporting.

Our management is responsible for establishing and maintaining effective internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Our internal control system was designed under the supervision of our President and Chief Executive Officer and Executive Vice President and Chief Financial Officer and with the participation of management in order to provide reasonable assurance regarding the reliability of our financial reporting and our preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

All internal control systems, no matter how well designed and tested, have inherent limitations, including among other things, the possibility of human error, circumvention or disregard. Therefore, even those systems of internal control that have been determined to be effective can provide only reasonable assurance that the objectives of the internal control system are met and may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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Under the supervision of our President and Chief Executive Officer and Executive Vice President and Chief Financial Officer and with the participation of management, we conducted an assessment of the effectiveness of our internal control over financial reporting based on the criteria set forth in “Internal Control - Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on an assessment of such criteria, management concluded that, as of December 31, 2005, we maintained effective internal control over financial reporting.

During the year ended December 31, 2005, we acquired ten radiation therapy centers: one each in Martinsburg, West Virginia, Holyoke, Massachusetts, Greenbelt, Maryland, Belcamp, Maryland, Scottsdale, Arizona and five in Las Vegas, Nevada. We excluded these centers from our assessment of the effectiveness of our internal control over financial reporting. For such year, these centers contributed approximately $19.6 million to our total revenue and, as of December 31, 2005, accounted for approximately $22.6 million of our total assets, excluding $31.1 million of goodwill that was recorded by us in connection with such acquisitions.

Management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2005 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included elsewhere herein.

Attestation Report of the Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of

Radiation Therapy Services, Inc. and Subsidiaries

We have audited management’s assessment, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting, that Radiation Therapy Services, Inc. and subsidiaries (the Company) maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As indicated in the accompanying Management’s Annual Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include

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the internal controls of the ten radiation treatment centers acquired during 2005 located in Martinsburg, West Virginia; Holyoke, Massachusetts; Greenbelt, Maryland; Belcamp, Maryland; Scottsdale, Arizona; and Las Vegas, Nevada which are included in the December 31, 2005 consolidated financial statements of the Company and constituted $22.6 million and $19.8 million of total assets, and net assets, excluding goodwill of $31.1 million, respectively as of December 31, 2005, and $19.6 million of total revenue for the year then ended. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of the 2005 acquired radiation treatment centers.

In our opinion, management’s assessment that Radiation Therapy Services, Inc. and subsidiaries maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, Radiation Therapy Services, Inc. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Radiation Therapy Services, Inc. and subsidiaries as of December 31, 2005 and 2004, and the related consolidated statements of income and comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2005 and our report dated February 13, 2 006 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Certified Public Accountants

Tampa, Florida

February 13, 2006

Item 9B. Other Information

None

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PART III

Item 10. Directors and Executive Officers of the Registrant

Executive Officers

Information with respect to our executive officers is incorporated by reference to the information contained under the caption “Executive Compensation—Executive Officers of the Company” included in our proxy statement relating to our annual meeting of shareholders, which we expect to file with the Securities and Exchange Commission within 120 days after December 31, 2005.

Our board of directors expects its members, as well as our officers and employees, to act ethically at all times and to acknowledge in writing their adherence to the policies comprising our Code of Conduct and as applicable, in our Code of Ethics for Senior Financial Officers and Chief Executive Officer (“Code of Ethics”). The Code of Ethics is posted on our website located at www.rtsx.com under the heading “Corporate Governance.” We intend to disclose any amendments to our Code of Ethics and any waiver from a provision of such code, as required by the SEC, on our website within five business days following such amendment or waiver.

Directors

Information with respect to our directors is incorporated by reference to the information contained under the caption “Election of Directors” included in our proxy statement relating to our annual meeting of shareholders, which we expect to file with the Securities and Exchange Commission within 120 days after December 31, 2005.

Compliance with Section 16(a) of the Exchange Act

Information with respect to compliance with Section 16(a) of the Securities Exchange Act of 1934 is incorporated by reference to the information contained under the caption “Section 16(a) Beneficial Ownership Reporting Compliance” included in our proxy statement relating to our annual meeting of shareholders, which we expect to file with the Securities and Exchange Commission within 120 days after December 31, 2005.

Item 11. Executive Compensation

This information is incorporated by reference to the information contained under the captions “Election of Directors—Information Regarding the Board of Directors—Compensation of Directors,” “Executive Compensation,” “Compensation Committee Report on Executive Compensation” and “Comparative Performance” included in our proxy statement relating to our annual meeting of shareholders, which we expect to file with the Securities and Exchange Commission within 120 days after December 31, 2005.

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

This information is incorporated by reference to the information contained under the caption “Principal Shareholders and Security Ownership of Management” and “Executive Compensation—Equity Compensation Plan Information” included in our proxy statement relating to our annual meeting of shareholders, which we expect to file with the Securities and Exchange Commission within 120 days after December 31, 2005.

Item 13. Certain Relationships and Related Party Transactions

This information is incorporated by reference to the information contained under the caption “Certain Relationships and Related Party Transactions” included in our proxy statement relating to our annual meeting of shareholders, which we expect to file with the Securities and Exchange Commission within 120 days after December 31, 2005.

Item 14. Principal Accountant Fees and Services

This information is incorporated by reference to the information contained under the caption “Ratification of Independent Registered Public Accounting Firm” included in our proxy statement relating to our annual meeting of shareholders, which we expect to file with the Securities and Exchange Commission within 120 days after December 31, 2005.

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PART IV

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

(a) Index to Consolidated Financial Statements, Financial Statement Schedules and Exhibits:

(1) Consolidated Financial Statements:

See Item 8 in this report.

The consolidated financial statements required to be included in Part II, Item 8, are indexed on Page F-1 and submitted as a separate section of this report.

(2) Consolidated Financial Statement Schedules:

All schedules are omitted because they are not applicable or not required, or because the required information is included in the consolidated financial statements or notes in this report.

(3) Exhibits

The Exhibits are incorporated by reference to the Exhibit Index following this Annual Report on from 10-K.

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Financial Statements:
Consolidated Statements of Income and Comprehensive Income for the Years Ended December 31, 2003, 2004 and 2005	F-3
Consolidated Balance Sheets at December 31, 2004 and 2005	F-4
Consolidated Statements of Cash Flows for the Years Ended December 31, 2003, 2004 and 2005	F-5
Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2003, 2004 and 2005	F-7
Notes to Consolidated Financial Statements	F-8

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of Radiation Therapy Services, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of Radiation Therapy Services, Inc. and subsidiaries as of December 31, 2004 and 2005, and the related consolidated statements of income and comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Radiation Therapy Services, Inc. and subsidiaries at December 31, 2004 and 2005, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Radiation Therapy Services, Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 13, 2006 expressed an unqualified opinion thereon.

/S/ ERNST & YOUNG LLP

Certified Public Accountants

Tampa, Florida

February 13, 2006

F-2

RADIATION THERAPY SERVICES, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

	Year Ended December 31
	2003			2004		2005
Net patient service revenue	$	131,147,497		$	163,719,027	$	217,590,469
Other revenue		7,532,837			7,654,283		9,659,844
Total revenues		138,680,334			171,373,310		227,250,313
Salaries and benefits		72,145,654			87,059,350		116,299,899
Medical supplies		2,226,288			3,608,467		5,678,516
Facility rent expenses		4,655,882			5,346,745		7,720,023
Other operating expenses		8,689,514			7,560,469		9,748,650
General and administrative expenses		16,400,267			19,671,484		23,537,783
Depreciation and amortization		5,202,543			6,859,570		10,836,880
Provision for doubtful accounts		3,374,587			5,852,325		6,792,402
Interest expense, net		2,052,712			3,435,121		5,290,034
Impairment loss		284,491			—		1,225,853
Total expenses		115,031,938			139,393,531		187,130,040
Income before minority interests		23,648,396			31,979,779		40,120,273
Minority interests in net (earnings) losses of consolidated entities		(7,266	)		55,123		480,212
Income before income taxes		23,641,130			32,034,902		40,600,485
Income tax expense		—			22,846,460		15,631,187
Net income		23,641,130			9,188,442		24,969,298
Other comprehensive (loss) income:
Unrealized (loss) gain on derivative interest rate swap agreements		(37,058	)		45,748		4,629
Comprehensive income	$	23,604,072		$	9,234,190	$	24,973,927
Net income per common share outstanding—basic	$	1.39		$	0.45	$	1.10
Net income per common share outstanding—diluted	$	1.28		$	0.44	$	1.05
Weighted average shares outstanding:
Basic		16,974,471			20,292,117		22,725,819
Diluted		18,470,880			21,031,968		23,703,653
Unaudited Pro forma income data:
Income before income taxes, as reported	$	23,641,130		$	32,034,902
Pro forma income taxes		9,456,452			12,813,961
Pro forma net income	$	14,184,678		$	19,220,941
Pro forma net income per common share outstanding—basic	$	0.84		$	0.95
Pro forma net income per common share outstanding—diluted	$	0.77		$	0.91

The accompanying notes are an integral part of the Consolidated Financial Statements.

F-3

RADIATION THERAPY SERVICES, INC.

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	December 31,
	2004			2005
ASSETS
Current assets:
Cash and cash equivalents	$	5,018,608		$	8,979,994
Marketable securities, at market		2,400,000			5,450,000
Accounts receivable, less allowances for uncollectible accounts of $8,985,710 and $12,490,077 at December 31, 2004 and 2005, respectively		25,834,381			40,301,195
Income taxes receivable		425,763			2,560,007
Prepaid expenses		2,881,956			3,152,555
Current portion of lease receivable		653,175			647,013
Inventories		1,064,516			1,280,208
Deferred income taxes		—			2,144,431
Other		679,703			1,199,881
Total current assets		38,958,102			65,715,284
Lease receivable, less current portion		1,230,069			580,728
Equity investments in joint ventures		1,421,900			803,151
Property and equipment, net		82,999,816			113,397,349
Goodwill, net		35,442,050			66,537,332
Intangible assets, net		1,328,426			6,773,910
Other assets		6,796,870			9,538,020
Total assets	$	168,177,233		$	263,345,774
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,954,935		$	5,676,418
Accrued expenses		9,482,549			11,433,668
Deferred income taxes		1,728,513			—
Current portion of long-term debt		9,620,333			6,506,254
Total current liabilities		23,786,330			23,616,340
Long-term debt, less current portion		56,482,552			116,956,991
Other long-term liabilities		2,004,957			2,284,341
Deferred income taxes		15,478,954			18,489,169
Minority interest in consolidated entities		4,104,171			6,616,190
Total liabilities		101,856,964			167,963,031
Shareholders’ equity:
Preferred stock, $0.0001 par value, 10,000,000 shares authorized, none issued or outstanding		—			—
Common stock, $0.0001 par value, 75,000,000 shares authorized, 22,489,314 and 22,831,481 shares issued and outstanding at December 31, 2004 and 2005, respectively		2,249			2,283
Additional paid-in capital		69,686,507			72,730,328
Unearned compensation on nonvested stock		—			(241,715	)
Retained (deficit) earnings		(1,609,646	)		23,359,652
Notes receivable from shareholders		(1,767,531	)		(481,124	)
Accumulated other comprehensive income, net of tax		8,690			13,319
Total shareholders’ equity		66,320,269			95,382,743
Total liabilities and shareholders’ equity	$	168,177,233		$	263,345,774

The accompanying notes are an integral part of the Consolidated Financial Statements.

F-4

RADIATION THERAPY SERVICES, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended December 31,
	2003			2004			2005
Cash flows from operating activities
Net income	$	23,641,130		$	9,188,442		$	24,969,298
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		5,048,328			6,606,314			9,876,475
Amortization		154,215			253,256			960,405
Deferred rent expense		177,162			149,214			282,844
Write down of machine parts inventory		—			1,222,745			—
Deferred income tax provision		—			17,207,467			(862,729	)
Stock based compensation		—			407,918			118,722
Impairment loss		284,491			—			1,225,853
Provision for doubtful accounts		3,374,587			5,852,325			6,792,402
Loss on the sale of property and equipment		16,178			91,807			120,281
Gain on sale of equity interest in joint venture		—			—			(982,182	)
Minority interest in net earnings (losses) of consolidated entities		7,266			(55,123	)		(480,212	)
Write off of loan costs		—			335,734			703,061
Equity interest in net (income) loss of joint ventures		(8,943	)		(193,014	)		467,872
Changes in operating assets and liabilities:
Accounts receivable		(8,043,956	)		(8,871,018	)		(21,620,091	)
Income taxes receivable		—			(425,763	)		(2,134,244	)
Inventories		14,631			(262,489	)		(134,096	)
Prepaid expenses		(1,396,381	)		30,234			(273,725	)
Accounts payable		1,467,268			(992,972	)		1,292,220
Accrued expenses		2,550,623			(2,345,910	)		1,930,787
Net cash provided by operating activities		27,286,599			28,199,167			22,252,941
Cash flows from investing activities
Purchases of property and equipment		(9,790,934	)		(16,917,861	)		(19,826,056	)
Acquisition of radiation centers		(12,078,122	)		(8,069,302	)		(43,229,546	)
Proceeds from sale of property and equipment		1,458,807			951,010			29,931
Proceeds from the sale of equity interest in joint venture		—			—			1,813,979
(Issuance) receipts of principal payments on notes receivable from shareholders		(662,168	)		662,168			—
Purchases of marketable securities, net		—			(2,400,000	)		(3,050,000	)
(Loans to) repayments from employees		(198,341	)		(466,237	)		340,265
Contribution of capital to joint venture entities		—			—			(84,124	)
Distribution received from joint venture		—			—			235,000
Change in lease receivable		454,647			597,112			655,503
Change in other assets		74,438			409,563			(147,175	)
Net cash used in investing activities		(20,741,673	)		(25,233,547	)		(63,262,223	)
Cash flows from financing activities
Proceeds from issuance of debt		13,700,000			59,100,000			50,617,000
Principal repayments of debt		(10,857,033	)		(61,331,299	)		(8,093,418	)
Proceeds from public offering of common stock, net of expenses		—			46,781,061			—
Proceeds from issuance of common stock		50,202			37,905			—
Proceeds from exercise of stock options		1,008,715			2,316,346			2,683,418
Payments of notes receivable from shareholders		358,769			877,630			1,286,407
Minority interest in partnership distribution		—			—			(70,000	)
Distributions to shareholders		(12,130,000	)		(46,441,155	)		—
Payments of loan costs		(363,711	)		(1,893,778	)		(1,452,739	)
Net cash (used in) provided by financing activities		(8,233,058	)		(553,290	)		44,970,668
Net (decrease) increase in cash and cash equivalents		(1,688,132	)		2,412,330			3,961,386
Cash and cash equivalents, beginning of year		4,294,410			2,606,278			5,018,608
Cash and cash equivalents, end of year	$	2,606,278		$	5,018,608		$	8,979,994

- Continued on next page -

F-5

RADIATION THERAPY SERVICES, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended December 31,
	2003		2004		2005
Supplemental disclosure of cash flow information
Interest paid	$	2,473,162	$	3,994,528	$	5,284,254
Income taxes paid, net	$	—	$	5,975,000	$	17,585,942
Supplemental disclosure of non-cash transactions
Recorded capital lease obligations related to the acquisition of equipment	$	5,014,097	$	6,297,222	$	14,739,263
Recorded earn-out accrual related to the acquisition of radiation center assets	$	—	$	—	$	1,317,085
Recorded non-cash contribution of capital by minority interest holder	$	—	$	2,598,249	$	2,831,079
Recorded capital lease obligations related to the acquisition of radiation center assets	$	—	$	2,225,775	$	47,514
Recorded obligation related to the acquisition of radiation center assets	$	—	$	273,600	$	137,139
Issuance of nonvested stock	$	—	$	—	$	250,050
Issuance of common stock for the acquisition of Devoto Construction, Inc.	$	—	$	3,528,000	$	—
Recorded related party payable relating to construction in process and building improvement costs	$	—	$	310,058	$	—
Recorded lease receivable related to assets under capital lease	$	85,000	$	—	$	—
Issuance of a promissory note plus accrued interest for purchase of shares	$	521,285	$	—	$	—
Cancellation of notes receivable from shareholder for purchase of treasury stock	$	709,800	$	—	$	—

The accompanying notes are an integral part of the Consolidated Financial Statements.

F-6

RADIATION THERAPY SERVICES, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

	Common Stock					Additional Paid-In Capital			Unearned Compensation on Nonvested Stock			Retained Earnings (Deficit)			Notes Receivable from Shareholders			Accumulated Other Comprehensive Income (Loss)			Treasury Stock					Total Shareholders’ Equity
	Shares		Amount																		Shares		Amount
Balance, January 1, 2003	16,896,514		$	1,689		$	15,970,215		$	—		$	24,653,157		$	(3,417,160	)	$	—		—		$	—		$	37,207,901
Net income	—			—			—			—			23,641,130			—			—		—			—			23,641,130
Distributions to shareholders	—			—			—			—			(12,130,000	)		—			—		—			—			(12,130,000	)
Issuance of common stock	5,984			1			50,201			—			—			—			—		—			—			50,202
Payment of notes receivable from shareholders	—			—			—			—			—			358,769			—		—			—			358,769
Unrealized loss on interest rate swap agreement	—			—			—			—			—			—			(37,058	)	—			—			(37,058	)
Purchase of treasury stock, at cost	—			—			—			—			—			709,800			—		(70,000	)		(1,231,085	)		(521,285	)
Exercise of stock options	507,522			51			1,305,234			—			—			(296,570	)		—		—			—			1,008,715
Retirement of treasury stock	(128,100	)		(13	)		(709,852	)		—			(521,220	)		—			—		70,000			1,231,085			—
Balance, December 31, 2003	17,281,920			1,728			16,615,798			—			35,643,067			(2,645,161	)		(37,058	)	—			—			49,578,374
Net income	—			—			—			—			9,188,442			—			—		—			—			9,188,442
Distributions to shareholders	—			—			—			—			(46,441,155	)		—			—		—			—			(46,441,155	)
Issuance of common stock	3,303			1			37,904			—			—			—			—		—			—			37,905
Payment of notes receivable from shareholders	—			—			—			—			—			877,630			—		—			—			877,630
Unrealized gain on interest rate swap agreement	—			—			—			—			—			—			45,748		—			—			45,748
Exercise of stock options	932,706			93			2,316,253			—			—			—			—		—			—			2,316,346
Issuance of common stock in initial public offering, net of expenses	4,000,000			400			46,780,661			—			—			—			—		—			—			46,781,061
Compensation to outside consultants	—			—			407,918			—			—			—			—		—			—			407,918
Issuance of common stock in connection with the acquisition of Devoto Construction, Inc.	271,385			27			3,527,973			—			—			—			—		—			—			3,528,000
Balance, December 31, 2004	22,489,314		$	2,249		$	69,686,507		$	—		$	(1,609,646	)	$	(1,767,531	)	$	8,690		—		$	—		$	66,320,269
Net income	—			—			—			—			24,969,298			—			—		—			—			24,969,298
Payment of notes receivable from shareholders	—			—			—			—			—			1,286,407			—		—			—			1,286,407
Unrealized gain on interest rate swap agreement, net	—			—			—			—			—			—			4,629		—			—			4,629
Exercise of stock options	334,667			33			2,683,385			—			—			—			—		—			—			2,683,418
Nonvested stock issued to key employee	7,500			1			250,049			(250,050	)		—			—			—		—			—			—
Amortization of nonvested stock grant	—			—			—			8,335			—			—			—		—			—			8,335
Compensation to outside consultants	—			—			110,387			—			—			—			—		—			—			110,387
Balance, December 31, 2005	22,831,481		$	2,283		$	72,730,328		$	(241,715	)	$	23,359,652		$	(481,124	)	$	13,319		—		$	—		$	95,382,743

The accompanying notes are an integral part of the Consolidated Financial Statements.

F-7

RADIATION THERAPY SERVICES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2005

1. Organization

Radiation Therapy Services, Inc. and its consolidated subsidiaries (the Company) develop and operate radiation therapy centers that provide radiation treatment to cancer patients in Alabama, Arizona, California, Delaware, Florida, Kentucky, Maryland, Massachusetts, Nevada, New Jersey, New York, North Carolina, Rhode Island and West Virginia.

2. Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and all subsidiaries and entities controlled by the Company through the Company’s direct or indirect ownership of a majority interest and exclusive rights granted to the Company as the general partner of such entities.

Financial Accounting Standards Board (“FASB”) revised Interpretation No. 46R (FIN No. 46R), Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51, requires a company to consolidate variable interest entities if the company is the primary beneficiary of the activities of those entities. Certain of the Company’s radiation oncology practices are variable interest entities as defined by FIN No. 46R, and the Company has a variable interest in each of these practices through its administrative services agreements. The Company, through its variable interests in these practices, would absorb a majority of the net losses of these practices, should they occur. Based on these determinations, the Company has included the radiation oncology practices in its consolidated financial statements for all periods presented. All significant intercompany accounts and transactions have been eliminated.

Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation. Such reclassifications had no impact on net income as previously reported.

Pro forma statements of income data

Effective June 15, 2004, the Company elected, by the consent of the shareholders, to revoke its status as an S corporation and became subject to taxation as a C corporation. The Company is now subject to federal and state income taxes at prevailing corporate rates. The impact of this change resulted in an income tax expense of approximately $17.6 million during the year ended December 31, 2004. Pro forma net income and pro forma net income per share are based on the assumption that the Company was a C corporation at the beginning of each period presented, and provides for income taxes utilizing an effective rate of 40%.

Public offering of common stock and recapitalization

On June 23, 2004, the Company successfully completed an initial public offering of 5.5 million shares of common stock at a price of $13.00 per share. Of the shares offered, 4.0 million shares were sold by the Company and 1.5 million were offered by selling shareholders. In addition, the underwriters for the Company exercised their over-allotment option by purchasing an additional 825,000 shares at $13.00 per share from selling shareholders. Of the net proceeds to the Company of approximately $46.8 million, approximately $44.0 million was used to repay outstanding indebtedness under the Company’s senior secured credit facility, and approximately $2.8 million was used to repay outstanding indebtedness to certain directors, officers and related parties.

On May 28, 2004 the Board of Directors declared a 1.83 for 1 forward common stock split for shareholders of record on that date. In addition, the Board of Directors approved an increase in the authorized shares of the Company’s common stock to 75,000,000 shares, $0.0001 par value, and 10,000,000 shares of preferred stock, $0.0001 par value. All stock related data in the consolidated financial statements reflect the stock split for all periods presented.

Net Patient Service Revenue and Allowances for Contractual Discounts

The Company has agreements with third-party payors that provide for payments to the Company at amounts different from its established rates. Net patient service revenue is reported at the estimated net realizable amounts due from patients, third-party payors and others for services rendered. Net patient service revenue is recognized as services are provided.

F-8

Medicare and other governmental programs reimburse physicians based on fee schedules, which are determined by the related government agency. The Company also has agreements with managed care organizations to provide physician services based on negotiated fee schedules. Accordingly, the revenues reported in the Company’s consolidated financial statements are recorded at the amount that is expected to be received.

The Company derives a significant portion of its revenues from Medicare, Medicaid, and other payors that receive discounts from its standard charges. The Company must estimate the total amount of these discounts to prepare its consolidated financial statements. The Medicare and Medicaid regulations and various managed care contracts under which these discounts must be calculated are complex and subject to interpretation and adjustment. The Company estimates the allowance for contractual discounts on a payor-specific basis given its interpretation of the applicable regulations or contract terms. These interpretations sometimes result in payments that differ from the Company’s estimates. Additionally, updated regulations and contract renegotiations occur frequently necessitating regular review and assessment of the estimation process by management.

During 2003, 2004, and 2005, approximately 55%, 53%, and 50% respectively, of net patient service revenue related to services rendered under the Medicare and Medicaid programs. In the ordinary course of business, the Company is potentially subject to a review by regulatory agencies concerning the accuracy of billings and sufficiency of supporting documentation of procedures performed. Laws and regulations governing the Medicare and Medicaid programs are extremely complex and subject to interpretation. As a result, there is at least a reasonable possibility that estimates will change by a material amount in the near term.

Cost of Revenues

The cost of revenues for each of the years ended December 31, 2003, 2004 and 2005, are approximately $80,121,000, $95,032,000, and $127,385,000, respectively.

Marketable Securities

Marketable securities are classified as available-for-sale and are carried at fair value, with the unrealized holding gains and losses, net of income taxes, reflected as a separate component of shareholders’ equity until realized. For the purposes of computing realized and unrealized gains and losses, cost is determined on a specific identification basis.

Accounts Receivable and Allowances for Uncollectible Accounts

Accounts receivable in the accompanying consolidated balance sheets are reported net of estimated allowances for uncollectible accounts and contractual adjustments. Accounts receivable are uncollateralized and primarily consist of amounts due from third-party payors and patients. To provide for accounts receivable that could become uncollectible in the future, the Company establishes an allowance for uncollectible accounts to reduce the carrying value of such receivables to their estimated net realizable value. Approximately $10,000,000 and $13,700,000 of accounts receivable were due from the Medicare and Medicaid programs at December 31, 2004 and 2005, respectively. The credit risk for other concentrations of receivables is limited due to the large number of insurance companies and other payors that provide payments for services. Management does not believe that there are any other significant concentrations of revenues from any particular payor that would subject the Company to any significant credit risk in the collection of its accounts receivable.

The amount of the provision for doubtful accounts is based upon management’s assessment of historical and expected net collections, business and economic conditions, trends in Federal and state governmental healthcare coverage and other collection indicators. The primary tool used in management’s assessment is an annual, detailed review of historical collections and write-offs of accounts receivable. The results of the detailed review of historical collections and write-off experience, adjusted for changes in trends and conditions, are used to evaluate the allowance amount for the current period. Accounts receivable are written off after collection efforts have been followed in accordance with the Company’s policies.

A summary of the activity in the allowance for uncollectible accounts is as follows:

	Year Ended December 31,
	2003			2004			2005
Balance, beginning of year	$	6,864,807		$	6,983,290		$	8,985,710
Additions charged to provision for bad debts		3,374,587			5,852,325			6,792,402
Accounts receivable written off (net of recoveries)		(3,256,104	)		(3,849,905	)		(3,288,035	)
Balance, end of year	$	6,983,290		$	8,985,710		$	12,490,077

F-9

Goodwill and Other Intangible Assets

Goodwill represents the excess purchase price over the estimated fair market value of net assets acquired by the Company in business combinations. On June 29, 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 142, which changed the accounting for goodwill and intangible assets. Under SFAS No. 142, goodwill and indefinite lived intangible assets are no longer amortized but are reviewed annually, or more frequently if impairment indicators arise, for impairment. Prior to the adoption of SFAS No. 142, goodwill had been amortized on a straight-line basis over 25 years through December 31, 2001. The Company adopted SFAS No. 142 effective January 1, 2002.

The Company completed its transitional impairment test under SFAS No. 142 and for the year ended December 31, 2003, the Company recorded an impairment loss of $284,491 due to increased competition in a specific practice within a local market. No goodwill impairment loss was recognized for the years ended December 31, 2004 and 2005.

Intangible assets consist of noncompete agreements and licenses and are amortized over the life of the agreement (which typically ranges from 1.5 to 10 years) using the straight-line method.

Interest Rate Swap Agreements

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133 requires the Company to recognize all derivatives on the consolidated balance sheets at fair value. The accounting for changes in the fair value (i.e. gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship based on its effectiveness in hedging against the exposure. Derivatives that are not hedges must be adjusted to fair value through operating results. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives are either offset against the change in fair value of assets, liabilities, or firm commitments through operating results or recognized in other comprehensive income until the hedged item is recognized in operating results. The ineffective portion of a derivative’s change in fair value will be immediately recognized in earnings.

The Company enters into interest rate swap agreements to reduce the impact of changes in interest rates on its floating rate Senior Credit Facility (see Note 12). The interest rate swap agreements are contracts to exchange floating rate interest payments for fixed interest payments over the life of the agreements without the exchange of the underlying notional amounts. The notional amount of interest rate swap agreements are used to measure interest to be paid or received and do not represent the amount of exposure to credit loss. The differential paid or received on interest rate swap agreements is recognized in interest expense in the consolidated statements of income and comprehensive income. The related accrued receivable or payable is included in other assets or accrued expenses.

On April 1, 2005 and August 31, 2005, the Company entered into interest rate swap agreements to hedge the effect of changes in interest rates on a portion of its floating rate Senior Credit Facility. These interest rate swap agreements were terminated on December 16, 2005, as a result of the refinancing of the fourth amended and restated senior credit facility.

On December 30, 2005, the Company entered into an interest rate swap agreement for its fourth amended and restated senior credit facility. The Company has designated this derivative financial instrument as a cash flow hedge (i.e., the interest rate swap agreement hedges the exposure to variability in expected future cash flows that is attributable to a particular risk). The notional amount of the swap agreement is $20.0 million. The effect of this agreement is to fix the interest rate exposure to 4.87% plus a margin on $20.0 million of the Company’s Senior Credit Facility. The interest rate swap agreement expires on December 31, 2009. The fair value of the interest rate swap agreement is the estimated amount that the Company would receive or pay to terminate the agreement at the reporting date, taking into account current interest rates and the current credit worthiness of the counter parties. At December 31, 2004, and 2005 the fair value of the Company’s interest rate swap agreements is an asset of $8,690 and $13,319, respectively, which is included in other current assets in the accompanying consolidated balance sheets. There were no amounts recorded in the income statement related to the interest rate swap agreement due to hedge ineffectiveness.

Professional and General Liability Claims

The Company is subject to claims and legal actions in the ordinary course of business, including claims relating to patient treatment, employment practices and personal injuries. To cover these types of claims, the Company maintains general liability and professional liability insurance in excess of self-insured retentions through commercial insurance carriers in amounts that the Company believes to be sufficient for its operations, although, potentially, some claims may exceed the

F-10

scope of coverage in effect. The Company expenses an estimate of the costs it expects to incur under the self-insured retention exposure for general and professional liability claims. Prior to October 2003, the Company maintained insurance for individual malpractice claims up to $3 million and aggregate claims up to $5 million on a claims made basis. Effective October 2003, the Company maintained insurance for the majority of its physicians up to $1 million on individual malpractice claims and $3 million on aggregate claims on a claims made basis. Effective October 2003, the Company purchased medical malpractice insurance from an insurance company owned by certain of the Company’s shareholders. The Company’s reserves for professional and general liability claims are based upon independent actuarial calculations, which consider historical claims data, demographic considerations, severity factors, industry trends and other actuarial assumptions in determination of reserve estimates.

Actuarial calculations include a large number of variables that may significantly impact the estimate of ultimate losses that are recorded during a reporting period. Professional judgment is used by the actuary in determining the loss estimate, by selecting factors that are considered appropriate by the actuary for the Company’s specific circumstances. Changes in assumptions used by the Company’s actuary with respect to demographics, industry trends and judgmental selection of factors may impact the Company’s recorded reserve levels.

The reserve for professional and general liability claims as of the balance sheet dates reflects the current estimates of all outstanding losses, including incurred but not reported losses, based upon actuarial calculations. The loss estimates included in the actuarial calculations may change in the future based upon updated facts and circumstances. The reserve for professional liability claims was $1,215,000 at December 31, 2004 and $930,000 at December 31, 2005.

Minority Interest in Consolidated Entities

The Company currently maintains a 90% equity interest in two treatment center facilities in Northwest Baltimore, Maryland and Louisville, Kentucky, a 62% equity interest in a treatment center facility in Woonsocket, Rhode Island, a 63.5% equity interest a treatment center facility in Providence, Rhode Island, a 60% equity interest in a treatment center facility in Martinsburg, West Virginia and a 50.1% equity interest in a treatment center facility in Berlin, Maryland. Since the Company controls more than 50% of the voting interest in these facilities, the Company consolidates the treatment centers. The minority interest represents the equity interests of outside investors in the equity and results of operations of the consolidated entities.

In addition, in accordance with FIN No. 46R, the Company consolidates certain radiation oncology practices where the Company provides administrative services pursuant to long-term management agreements. The minority interests in these entities represent the interests of the physician owners of the oncology practices in the equity and results of operations of the consolidated entities.

Use of Estimates

The preparation of these consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements. Estimates also affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents include highly liquid investments with original maturities of three months or less when purchased.

Inventories

Inventories consist of parts and supplies used for repairs and maintenance of equipment owned or leased by the Company. Inventories are valued at the lower of cost or market. The cost of parts and supplies is determined using the first-in, first-out method.

Property and Equipment

Property and equipment are recorded at historical cost less accumulated depreciation and are depreciated over their estimated useful lives utilizing the straight-line method. Leasehold improvements are amortized over the lesser of the estimated useful life of the improvement or the life of the lease. Amortization of leased assets is included in depreciation and amortization in the accompanying consolidated statements of income and comprehensive income. Expenditures for repairs and maintenance are charged to operating expense as incurred, while equipment replacement and betterments are capitalized.

F-11

Major asset classifications and useful lives are as follows:

Buildings and leasehold improvements	10-39 years
Office, computer and telephone equipment	5-10 years
Medical and medical testing equipment	5-10 years
Automobiles and vans	5 years

The weighted average useful life of medical and medical testing equipment is 8.6 years.

The Company evaluates its long-lived assets for possible impairment whenever circumstances indicate that the carrying amount of the asset, or related group of assets, may not be recoverable from estimated future cash flows, in accordance with SFAS No. 144, Accounting for Impairment or Disposal of Long-Lived Assets. Fair value estimates are derived from independent appraisals, established market values of comparable assets, or internal calculations of estimated future net cash flows. The Company’s estimates of future cash flows are based on assumptions and projections it believes to be reasonable and supportable. The Company’s assumptions take into account revenue and expense growth rates, patient volumes, changes in payor mix, changes in legislation and other payor payment patterns. These assumptions vary by type of facility.

During the third quarter of 2004, the Company recorded a charge of $1.2 million for the write down to fair value of certain of the Company’s analog linear accelerators and treatment simulators. The adjustment to machine inventories was precipitated by the decision to discontinue the installation of this type of equipment in favor of digital machines with migration capability and combination CT-simulators. This amount is included in general and administrative expenses in the statement of income and comprehensive income for the year ended December 31, 2004.

During the first quarter of 2005, the Company incurred an impairment loss of $1.2 million for the write down of leasehold improvements in connection with the consolidation of two Yonkers, New York based treatment centers within the Westchester/Bronx local market.

New Pronouncements

In December 2004, the Financial Accounting Standards Board (the “FASB”) issued SFAS No. 123R, “Share-Based Payments” (“SFAS No. 123R”), a revision of SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”), which addresses financial accounting and reporting for costs associated with stock-based compensation. SFAS No. 123R addresses all forms of share-based payment awards, including shares issued under employee stock purchase plans, stock options and restricted stock. SFAS No. 123R will require the Company to recognize compensation expense beginning January 1, 2006, in an amount equal to the fair value of share-based payments related to unvested share-based payment awards over the applicable vesting period. On November 3, 2005, the Board of Directors of the Company, upon the recommendation of the Compensation Committee consisting solely of independent directors, approved the acceleration of vesting of all nonqualified outstanding nonvested stock options previously granted under the Company’s equity compensation plans. The primary purpose of the acceleration of the nonqualified nonvested stock options is to enable the Company to avoid recognizing compensation expense associated with these stock options in future periods in its statement of income and comprehensive income, upon adoption of FASB Statement of Financial Accounting Standards No. 123R “Share-Based Payment” (“SFAS No. 123R”).

On March 29, 2005, the United States Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. 107, “Share-Based Payment” (“SAB 107”). Although not altering any conclusions reached in SFAS No. 123R, SAB 107 provides the views of the Staff regarding the interaction between SFAS No. 123R and certain SEC rules and regulations and, among other things, provides the Staff’s views regarding the valuation of share-based payment arrangements for public companies. The Company intends to follow the interpretative guidance on share-based payment set forth in SAB 107 during the Company’s adoption of SFAS No. 123R.

In December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets - An Amendment of APB Opinion No. 29” (“SFAS 153”). SFAS 153 amends APB Opinion No. 29, “Accounting for Nonmonetary Transactions” (“Opinion 29”). The amendments made by SFAS 153 are based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. Further, the amendments eliminate the exception for nonmonetary exchanges of similar productive assets and replace it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. The provisions in SFAS 153 are effective for nonmonetary asset exchanges occurring in fiscal periods beginning after December 15, 2005. Early application of SFAS 153 is permitted. The provisions of this Statement shall be applied prospectively. The Company does not expect the adoption of SFAS 153 to have a material effect on the Company’s financial statements or its results of operations.

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In June 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections” (“SFAS 154”). SFAS 154 replaces APB Opinion No. 20, “Accounting Changes” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements”. SFAS 154 requires that a voluntary change in accounting principle be applied retrospectively with all prior period financial statements presented on the new accounting principle. SFAS 154 also requires that a change in method of depreciating or amortizing a long-lived nonfinancial asset be accounted for prospectively as a change in estimate, and correction of errors in previously issued financial statements should be termed a “restatement”. SFAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The implementation of SFAS 154 is not expected to have a material impact on the Company’s consolidated financial statements.

Comprehensive Income

Comprehensive income consists of two components, net income and other comprehensive income (loss). Other comprehensive income / loss refers to revenue, expenses, gains and losses that under accounting principles generally accepted in the United Sates are recorded as an element of shareholders’ equity but are excluded from net income. The Company’s other comprehensive income / loss is composed of unrealized gains and losses on interest rate swap agreements accounted for as cash flow hedges. This income increased shareholders’ equity on a consolidated basis by $45,748 during the year ended December 31, 2004 and increased shareholders’ equity by $4,629 during the year ended December 31, 2005.

Income Taxes

Effective June 15, 2004, the Company elected, by the consent of the shareholders, to revoke its status as an S corporation and become subject to taxation as a C corporation. Under the S corporation provisions of the Internal Revenue Code, the individual shareholders included their pro rata portion of the Company’s taxable income in their personal income tax returns. Accordingly, through June 14, 2004, the Company was not subject to federal and certain state corporate income taxes. The Company is now subject to federal and state income taxes at prevailing corporate rates.

Stock-Based Compensation

The Company maintains a Stock Option Plan (the Plan), which is described more fully in Note 16. The Company has elected to follow Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”) and related interpretations. Under APB 25, because the exercise price of employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized. Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148, Accounting for Stock-Based Compensation- Transition and Disclosure requires pro forma disclosure of net income and earnings per share for the effect of compensation had the fair value method of accounting for stock options been adopted. For purposes of this disclosure, the fair value of each option grant has been calculated using the Black-Scholes valuation model.

The Company follows SFAS 123 and EITF Issue No. 96-18, Accounting for Equity Investments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling, Goods and Services, for our stock option grants to non-employees. As such, the Company measures compensation expense as the services are performed and recognize the expense ratably over the service period. Prior to vesting, the Company recognizes expense using the fair value of the option at the end of the reporting period. Additional expense due to increases in the value of our options prior to the vesting date will be recognized in the period of the option value increase.

On November 3, 2005, the Board of Directors of the Company, upon the recommendation of the Compensation Committee consisting solely of independent directors, approved the acceleration of vesting of all nonqualified outstanding nonvested stock options previously granted under the Company’s equity compensation plans. As a result of the acceleration of the nonqualified nonvested stock options to purchase an aggregate of 1.2 million shares of the Company’s common stock, which would otherwise have vested over periods of two to four years, will become immediately exercisable. The affected stock options have an exercise price of $13.00 per share.

The primary purpose of the acceleration of the nonqualified nonvested stock options is to enable the Company to avoid recognizing compensation expense associated with these stock options in future periods in its statement of operations, upon adoption of FASB Statement of Financial Accounting Standards No. 123R “Share-Based Payment” (“SFAS No. 123R”). SFAS No. 123R is effective for the Company beginning in the first quarter of 2006, and will require that compensation expense associated with stock options be recognized in the statement of operations, rather than as a footnote disclosure in the Company’s consolidated financial statements. Under SFAS No. 123R the compensation expense associated with these accelerated options that would have been recognized in the Company’s income statement commencing with the implementation of SFAS 123R and continuing through 2009 is approximately $2.4 million.

F-13

For purpose of pro forma disclosures, the estimated fair value of the options is amortized to expense over their vesting periods. Our pro forma information is as follows:

	Year Ended December 31,
	2003			2004			2005
Pro forma net income as reported	$	14,184,678		$	19,220,941		$	24,969,298
Deduct: total stock-based employee compensation expense determined under a fair value based method for all awards, net of related tax effects		(153,596	)		(1,436,678	)		(3,653,821	)
Adjusted pro forma net income	$	14,031,082		$	17,784,263		$	21,315,477
Adjusted net income or pro forma net income per share:
Basic—pro forma as reported	$	0.84		$	0.95		$	1.10
Basic—adjusted pro forma	$	0.83		$	0.88		$	0.94
Diluted—pro forma as reported	$	0.77		$	0.91		$	1.05
Diluted—adjusted pro forma	$	0.76		$	0.85		$	0.91
Adjusted pro forma weighted average common shares outstanding—basic		16,974,471			20,292,117			22,725,819
Adjusted pro forma weighted average common and common equivalent shares outstanding—diluted		18,424,224			20,830,244			23,390,429
Weighted average fair value of option grants	$	—		$	4.77		$	—

No options were granted in 2003 or 2005. For 2004, the fair value of each option grant was estimated on the date of grant using the Black Scholes Model with the following assumptions: risk free interest rate of 4.02%, no dividend yield; expected life of 5.0 years, and volatility of 30%.

Fair Value of Financial Instruments

The carrying values of the Company’s financial instruments, which include cash, marketable securities, accounts receivable and accounts payable, approximate their fair values due to the short-term maturity of these instruments.

The majority of the Company’s long-term debt has a floating interest rate and, therefore, the carrying amount approximates fair value at December 31, 2004 and 2005.

Segments

The Company’s business of providing healthcare services to patients comprises a single reportable operating segment under SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information.

3. Earnings per share

Diluted earnings per common and common equivalent share have been computed by dividing net income by the weighted average common and common equivalent shares outstanding during the respective periods. The weighted average common and common equivalent shares outstanding have been adjusted to include the number of shares that would have been outstanding if vested “in the money” stock options had been exercised, at the average market price for the period, with the proceeds being used to buy back shares (i.e., the treasury stock method). Basic earnings per common share was computed by dividing net income by the weighted average number of shares of common stock outstanding during the year. The following is a reconciliation of the denominator of basic and diluted earnings per share (EPS) computations shown on the face of the accompanying consolidated financial statements:

	December 31,
	2003	2004	2005
Weighted average common shares outstanding—basic	16,974,471	20,292,117	22,725,819
Effect of dilutive securities	1,496,409	739,851	977,834
Weighted average common and common equivalent shares outstanding—diluted	18,470,880	21,031,968	23,703,653

F-14

4. Marketable Securities

Marketable securities classified as available-for-sale consisted of the following:

	December 31,
	2004		2005
Auction rate securities, cost	$	2,200,000	$	5,450,000
Auction rate securities, fair value		2,200,000		5,450,000
Unrealized gain (loss)		—		—
Preferred stock, cost		200,000		—
Preferred stock, fair value		200,000		—
Unrealized gain (loss)		—		—
Net unrealized gain (loss)	$	—	$	—

At December 31, 2005, all of the company’s auction rate securities are invested in obligations of individual states and political subdivisions. Approximately 9% of the Company’s auction rate securities mature within one year, and the remainder have maturities greater than ten years and have a weighted average interest reset date of approximately 16 days.

5. Property and Equipment

Property and equipment consist of the following:

	December 31,
	2004			2005
Land	$	5,423,504		$	5,423,504
Buildings and leasehold improvements		35,229,140			37,487,736
Office, computer and telephone equipment		10,619,229			14,518,889
Medical and medical testing equipment		63,502,775			95,600,555
Automobiles and vans		1,530,301			1,715,149
		116,304,949			154,745,833
Less accumulated depreciation		(34,934,527	)		(43,152,233	)
		81,370,422			111,593,600
Construction in progress		1,629,394			1,803,749
	$	82,999,816		$	113,397,349

6. Capital Lease Arrangements

The Company is the lessor of medical equipment under various capital lease arrangements. The lease terms are for seven years, at which time the lessee can purchase the equipment at an agreed upon amount.

The components of the investment in sales-type leases are as follows:

	December 31,
	2004			2005
Minimum lease receivable	$	2,137,830		$	1,344,623
Less unearned interest income		(254,586	)		(116,882	)
Net investment in sales-type leases		1,883,244			1,227,741
Less current portion		(653,175	)		(647,013	)
	$	1,230,069		$	580,728

F-15

The aggregate amount of scheduled receipts on lease receivables consist of the following at December 31, 2005:

2006	$	727,640
2007		456,894
2008		134,849
2009		15,144
2010		10,096
	$	1,344,623

The Company leases certain equipment under agreements, which are classified as capital leases. These leases have bargain purchase options at the end of the original lease terms. Capital leased assets included in property and equipment are as follows:

	December 31,
	2004			2005
Equipment	$	14,023,342		$	28,762,605
Less: accumulated amortization		(1,327,859	)		(3,157,211	)
	$	12,695,483		$	25,605,394

Amortization expense relating to capital leased equipment was approximately $364,000, $925,000 and $1,829,000 for the years ended December 31, 2003, 2004 and 2005, respectively and is included in depreciation expense in the consolidated statements of income and comprehensive income.

7. Goodwill and Intangible Assets

Intangible assets consist of the following:

	December 31, 2004
Intangible assets subject to amortization (definite-lived)	Gross		Accumulated Amortization			Net
Noncompete agreements	$	1,722,550	$	(575,348	)	$	1,147,202
Other licenses		35,000		(2,500	)		32,500
		1,757,550		(577,848	)		1,179,702
Intangible assets not subject to amortization (indefinite-lived)
Certificate of need licenses		148,724		—			148,724
	$	1,906,274	$	(577,848	)	$	1,328,426
	December 31, 2005
Intangible assets subject to amortization (definite-lived)	Gross		Accumulated Amortization			Net
Noncompete agreements	$	7,974,934	$	(1,530,753	)	$	6,444,181
Other licenses		35,000		(7,500	)		27,500
		8,009,934		(1,538,253	)		6,471,681
Intangible assets not subject to amortization (indefinite-lived)
Certificate of need licenses		302,229		—			302,229
	$	8,312,163	$	(1,538,253	)	$	6,773,910

F-16

Amortization expense relating to intangible assets was approximately $154,000, $253,000 and $960,000 for the years ended December 31, 2003, 2004 and 2005, respectively. The weighted-average amortization period is approximately 6.5 years.

Estimated future amortization expense is as follows at December 31, 2005:

For year ended December 31, 2006	$	1,417,592
For year ended December 31, 2007		1,212,592
For year ended December 31, 2008		1,086,161
For year ended December 31, 2009		939,238
For year ended December 31, 2010		911,483

The changes in the carrying amount of goodwill are as follows:

	Year Ended December 31,
	2003			2004		2005
Balance, beginning of year	$	16,956,232		$	24,915,162	$	35,442,050
Goodwill recorded during the year		8,243,421			10,526,888		31,095,282
Impairment losses		(284,491	)		—		—
Balance, end of year	$	24,915,162		$	35,442,050	$	66,537,332

8. Acquisitions

Effective July 2003, the Company acquired the assets of a radiation therapy center in western North Carolina. The purchase price was approximately $1,200,000 and was paid in cash. The purchase price was allocated to tangible assets of $225,000, and goodwill of $975,000. In January 2003, the Company paid a deferred purchase price on the original six radiation therapy centers that were acquired in January 2002, resulting in an increase to goodwill of $1,000,000.

Effective August 2003, the Company acquired the operations and assets of a radiation therapy center in Key West, Florida. The purchase price was approximately $285,000 and was paid in cash. The purchase price was allocated to tangible assets of $45,000, and $240,000 as a non-compete amortized over five years.

Effective September 2003, the Company acquired the operations and assets of two radiation therapy centers and purchased a 90% investment interest in a third radiation therapy center in Kentucky. The Company determined that the purchases of the three radiation therapy centers provided an entry into the Midwest with the potential to add value in providing advanced treatment services to the community. The purchase price was approximately $6,358,000 and was paid in cash. The purchase price was allocated to tangible assets of $2,775,000 and goodwill of $3,583,000.

Effective December 2003, the Company acquired the operations and assets of a radiation therapy center in Dothan, Alabama. The Company determined that the Alabama market is a favorable marketplace due to the existing laws in the state, which require a certificate of need (“CON”) in order to provide healthcare services. The CON provides a level of protection from new competitors entering the marketplace. The purchase price was approximately $3,236,000 and was paid in cash. The purchase price was allocated to tangible assets of $551,000 and goodwill of $2,685,000.

On June 23, 2004 the Company acquired the assets of Devoto Construction, Inc., which was owned by certain directors and officers for approximately $3,528,000 through the issuance of 271,385 shares of the Company’s common stock. Devoto Construction, Inc. performs remodeling and real property improvements at the Company’s medical facilities and specializes in the construction of radiation medical facilities. The purchase of Devoto Construction, Inc. was a strategic fit for the Company as it continues to expand its operations into new markets. The purchase price was allocated to net tangible assets of $4,000, an intangible asset of $35,000 amortized over 7 years and goodwill of $3,489,000.

On September 21, 2004 the Company acquired the operations and medical and office equipment of two radiation centers in New Jersey. The Company determined that the purchase provided an entry into the state of New Jersey with the potential to add value in providing advanced treatment services to the community. The Company also completed the purchase of a third center in Willingboro, New Jersey, on October 18, 2004, completing the acquisitions of the planned three centers in that state. The fair value of the assets acquired, including intangible assets, was approximately $10,569,000. The purchase price was allocated to tangible assets of $2,851,000; $680,000 as a non-compete amortized over eighteen to twenty four months and goodwill of $7,038,000. The consideration given for the acquisition included $7,909,000 cash, payments of direct costs relating to due diligence of $160,000, the assumption of capital lease financing of $2,226,000, and the assumption of $100,000 in liability for assuming a physician employment contract and other liabilities of $174,000. In addition, the

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purchase of the third center includes a deferred purchase price contingent on maintaining a certain level of earnings before interest, taxes, depreciation and amortization and providing for payment of a certain percentage over the base level annually during the following three fiscal years. During 2005, the amount paid for the deferred purchase price contingency was approximately $36,000, which was recorded as additional goodwill.

On April 1, 2005, the Company sold a 49.9% interest in a joint venture that was formed to operate a treatment center located in Berlin, Maryland. The interest was sold to a healthcare enterprise operating in the area for $1,814,000. The Company realized a gain of approximately $982,000 on the sale of the interest.

In April 2005, the Company acquired a 60% interest in a single radiation therapy treatment center located in Martinsburg, West Virginia for approximately $662,000. The Company operates the facility as part of its Western Maryland local market. Under the terms of the agreement, the Company partners with a university hospital system and manages the facility. The Company determined that the purchase of the radiation therapy center would provide an expansion into the Western Maryland local market and add value in providing advanced treatment services to the community. The allocation of the purchase price was to tangible assets of $369,000, certificate of need license of $163,000, goodwill of $324,000 and assumed liabilities and minority interest of $194,000.

In May 2005, the Company acquired five radiation treatment centers located in Clark County, Nevada from Associated Radiation Oncologists, Inc. for approximately $25,969,000, plus a three-year contingent earn-out. This acquisition will position the Company as the largest operator of radiation oncology treatment centers in the state of Nevada. The Company plans to expand the availability of advanced radiation therapy treatment modalities in the service area. The allocation of the purchase price was to tangible assets of $5,442,000, non-compete agreements of $3,294,000, amortized over six years, and goodwill of $17,233,000. At December 31, 2005, the Company accrued approximately $1,317,000 in earn-out payments and recorded the amount as additional goodwill.

In June 2005, the Company acquired four radiation treatment centers located in the markets of Scottsdale, Arizona, Holyoke, Massachusetts, and two centers in Maryland for approximately $16,215,000. This acquisition provides the Company its first entrance into two new local markets in Arizona and Massachusetts. The two centers purchased in Maryland will further expand the Company’s presence in its Western Maryland local market. The Company plans to expand the availability of advanced radiation therapy treatment modalities in the service areas. The allocation of the purchase price was to tangible assets of $1,072,000, non-compete agreements of $2,958,000, amortized over periods ranging from 1.5 years to 10 years, and goodwill of $12,185,000.

In December 2005, the Company acquired the assets of a urology practice with four office locations in southwest Florida for approximately $348,000. The urology practices provide additional service and treatment protocols to our patients with prostate cancer and other urological diseases. The total purchase price was allocated to tangible assets.

Allocation of Purchase Price

The purchase prices of these transactions were allocated to the assets acquired and liabilities assumed based upon their respective fair values. The operations of the foregoing acquisitions have been included in the accompanying consolidated statements of income and comprehensive income from the respective dates of acquisition. The following table summarizes the allocations of the aggregate purchase price of the acquisitions, including assumed liabilities and direct transaction costs.

	2003			2004		2005
Fair value of assets acquired excluding cash:
Accounts receivable, net	$	444,000		$	—	$	305,000
Inventories		15,000			—		82,000
Other current assets		35,000			—		1,000
Other non-current assets		120,000			201,000		81,000
Property and equipment		3,256,000			2,654,000		6,762,000
Intangible assets		240,000			715,000		6,415,000
Goodwill		7,243,000			10,527,000		31,095,000
Current liabilities		(100,000	)		—		(185,000	)
Minority interest		(174,000	)		—		(9,000	)
	$	11,079,000		$	14,097,000	$	44,547,000

F-18

9. Impairment Loss

During the first quarter of 2005, the Company incurred an impairment loss of $1.2 million for the write down of leasehold improvements in connection with the consolidation of two Yonkers, New York based treatment centers within the Westchester/Bronx local market.

10. Purchase Commitment

The Company entered into a binding contract to purchase a total of seven stereotactic radiosurgery systems for approximately $16.1 million. The Company paid for four of the systems delivered in the fourth quarter of 2005 (totaling approximately $8.9 million) upon completion of installation and will pay for the remainder of the systems upon their installation in 2006.

11. Income Taxes

Significant components of the income tax provision for the year ended December 31, 2004 and 2005 are as follows:

	Year Ended December 31,
	2004		2005
Current provision:
Federal	$	5,112,875	$	14,994,469
State		526,118		1,499,447
Deferred provision:
Federal		15,602,010		(784,299	)
State		1,605,457		(78,430	)
Total income tax provision	$	22,846,460	$	15,631,187

A reconciliation of the statutory federal income tax rate to the Company’s effective income tax rate on income before income taxes for the years ended December 31, 2004 and 2005 are as follows follows:

	Year Ended December 31,
	2004		2005
Federal statutory rate	35.0	%	35.0	%
State income taxes, net of federal income tax benefit	3.4		2.9
Income tax effect attributable to portion of year the Company was recognized as an S-Corporation for federal income tax purposes	(20.0	)	—
Income tax effect of conversion from an S-Corporation to a C-Corporation	52.7		—
Other	0.2		0.6
Total income tax provision	71.3	%	38.5	%

The Company provides for income taxes using the liability method in accordance with Financial Accounting Standards Board Statement No. 109, Accounting for Income Taxes. Deferred income taxes arise from the temporary differences in the recognition of income and expenses for tax purposes. Deferred tax assets and liabilities are comprised of the following at December 31, 2004 and 2005:

	2004			2005
Deferred income tax assets:
Provision for doubtful accounts	$	2,114,098		$	3,009,035
State net operating loss carryforwards		227,933			115,510
Deferred rent liability		470,863			593,839
Intangible assets		889,699			717,840
Management fee receivable allowance		—			3,333,591
Other		1,077,544			1,232,216
		4,780,137			9,002,031
Less: Valuation allowance		—			—
Net deferred income tax assets	$	4,780,137		$	9,002,031
Deferred income tax liabilities:
Property and equipment	$	(12,879,003	)	$	(14,555,970	)
Intangible assets		(2,278,408	)		(3,236,382	)
Income tax effect of conversion from an S-Corporation to a C-Corporation		(4,256,161	)		(3,876,611	)
Prepaid expense		(735,062	)		(787,176	)
Partnership interests		(1,838,970	)		(2,781,738	)
Other		—			(108,892	)
Total deferred tax liabilities		(21,987,604	)		(25,346,769	)
Net deferred income tax liabilities	$	(17,207,467	)	$	(16,344,738	)

F-19

At December 31, 2004, and 2005, state net operating loss carryforwards, primarily in Florida and Kentucky expiring in years 2011 through 2025, available to offset future taxable income approximated $2.4 million and $2.6 million, respectively. Utilization of net operating loss carryforwards in any one year may be limited.

12. Long-Term Debt

The Company is obligated under long-term debt agreements as follows:

	December 31,
	2004			2005
$290,000,000 Senior Credit Facility with interest rates at LIBOR or prime plus applicable margin, collateralized by substantially all of the Company’s assets. At December 31, 2004 and 2005, interest rates were at LIBOR and prime plus applicable margin, ranging from 4.31% to 5.50% and 6.53% to 7.75%, respectively, due at various maturity dates through December 2012	$	54,016,000		$	100,000,000
Capital leases payable with various monthly payments plus interest at rates ranging from 3.9% to 11.4%, due at various maturity dates through September 2011 and collateralized by leasehold improvements and medical equipment with a net book value of $12,695,483 and $25,605,394 at December 31, 2004 and 2005, respectively		12,086,885			23,463,245
		66,102,885			123,463,245
Less current portion		(9,620,333	)		(6,506,254	)
	$	56,482,552		$	116,956,991

Maturities under the obligations described above are as follows at December 31, 2005:

2006	$	6,506,254
2007		6,576,615
2008		6,421,199
2009		5,137,934
2010		3,608,657
Thereafter		95,212,586
	$	123,463,245

At December 31, 2004 and 2005, the prime interest rate was 5.25% and 7.25%, respectively.

On March 31, 2004, the Company entered into a third amended and restated senior secured credit facility principally to fund a special distribution to shareholders. The third amended and restated senior secured credit facility provides, subject to compliance with covenants and customary conditions, for $135.0 million in borrowings consisting of a $25.0 million term loan (designated Term A), a $70.0 million revolver and a new add-on term loan facility (designated Term B) in the amount of $40.0 million. On April 9, 2004, the proceeds from borrowings against the new add-on term loan facility were used to make a special distribution to the Company’s shareholders, in the aggregate amount of $40.0 million.

On October 8, 2004 the Company amended its third amended and restated senior secured credit facility principally to pay off the remaining balance of the designated Term B portion and increase the revolving credit commitment from $70 million to $80 million. The transaction included paying off the $22.8 million remaining on the designated Term B portion by increasing the Term A loan to $25 million and drawing on the revolver. Per the amendment, the interest rate spreads on the Term A loan and on the revolver were reduced overall by 25 basis points. The amendment modified the mandatory quarterly principal payments on the Term A loan from $1.25 million to $1.75 million.

F-20

On March 18, 2005 the Company amended its third amended and restated senior secured credit facility principally to increase the Term A loan to $35 million and increase its revolving credit commitment from $80 million to $140 million. Per the amendment, the interest rate spreads on the Term A loan and on the revolver were reduced overall by 25 basis points. The amendment extended the maturity date of the Term A loan and the revolver to March 15, 2010.

On April 26, 2005 the Company amended its third amended and restated senior secured credit facility principally to increase the aggregate amount of permitted acquisitions from $25 million to $45 million and to obtain consent on the purchase of five radiation treatment centers located in Clark County, Nevada from Associated Radiation Oncologists, Inc. As a result of its refinancing in March and April 2005, the Company wrote-off approximately $579,000 of financing costs capitalized in connection with its previous credit facility.

On December 16, 2005, the Company entered into a fourth amended and restated senior secured credit facility principally to provide for a $100 million Term B loan. The fourth amended and restated senior secured credit facility provides, subject to compliance with covenants and customary conditions, for $290 million in borrowings consisting of: (i) a $100 million Term B loan, (ii) a $50 million accordion feature, which allows the Company to increase the aggregate principal amount of the Term B loan to $150 million, and (iii) a $140 million revolver. The Company used the proceeds of the $100 million Term B loan to pay off its pre-existing Term A loan as well as the borrowings drawn on its $140 million revolver.

The Term B loan requires quarterly payments of $250,000 and matures on December 16, 2012. The Term B loan initially bears interest either at LIBOR plus a spread of 200 basis points or a specified base rate plus a spread of 50 basis points, with the opportunity to permanently reduce the spread by 25 basis points on LIBOR and base rate loans after six months, provided the Company’s leverage ratio is below 2.00 to 1.00.

The revolver’s maturity date was unchanged and will mature on March 15, 2010. The revolver bears interest either at LIBOR plus a spread ranging from 125 to 250 basis points or a specified base rate plus a spread ranging from 0 to 100 basis points, with the exact spread determined upon the basis of the Company’s leverage ratio, as defined. The Company is required to pay a quarterly unused commitment fee at a rate ranging from 25 to 50 basis points on its revolving line of credit determined upon the basis of its leverage ratio, as defined.

The fourth amended and restated senior secured credit facility is secured by a pledge of substantially all of the Company’s tangible and intangible assets and includes a number of restrictive covenants including limitations on leverage, capital and acquisitions expenditures and requirements to maintain minimum ratios of cash flow to fixed charges and cash flow to interest. Under the terms of the Company’s fourth amended and restated senior secured credit facility, borrowings under its revolver are based on minimum incremental amounts of not less than $500,000 for BASE rate loans and not less than $1,000,000 for LIBOR rate loans. Unused amounts under the revolver portion of the senior secured credit facility incurs a commitment fee charge based on the Company’s leverage ratio ranging from 25 basis points to 50 basis points.

13. Joint Ventures

In June 1998, the Company entered into a joint venture with a hospital for the ownership of assets used for the delivery of radiation oncology services. The Company currently owns 37% of the joint venture entity and provides certain administrative and technical services to the hospital which operates the radiation therapy program. The hospital owns 55.5% of the joint venture entity.

In June 2001, the Company entered into a joint venture with a freestanding center. The Company owns 50% of the joint venture entity and provides certain administrative and technical services to the center.

The Company utilizes the equity method to account for its investments in the joint ventures. At December 31, 2004 and 2005, the Company’s investments in the joint ventures were approximately $1.4 million and $0.8 million, respectively.

F-21

The condensed financial position and results of operations of the joint venture entities are as follows:

	December 31,
	2004		2005
Total assets	$	5,410,395	$	3,716,684
Liabilities	$	2,607,875	$	1,651,678
Shareholders’ equity		2,802,520		2,065,006
Total liabilities and shareholders’ equity	$	5,410,395	$	3,716,684

	Year Ended December 31,
	2003		2004		2005
Revenues	$	3,081,333	$	3,289,998	$	2,846,491
Expenses		3,063,447		2,903,971		3,999,229
Net income (loss)	$	17,886	$	386,027	$	(1,152,738	)

During 2005, one of the joint ventures sold a redundant facility for approximately $0.5 million realizing a loss of approximately $0.9 million. A cash distribution was made from the proceeds of the sale.

A summary of the changes in the equity investment in the joint ventures is as follows:

Balance at January 1, 2003	$	1,219,943
Equity interest in net income of joint ventures		8,943
Balance at December 31, 2003		1,228,886
Equity interest in net income of joint ventures		193,014
Balance at December 31, 2004		1,421,900
Capital contributions in joint venture		84,124
Distributions from joint venture		(235,000	)
Equity interest in net loss of joint ventures		(467,872	)
Balance at December 31, 2005	$	803,151

14. Commitments and Contingencies

Letters of Credit

The Company issued to the lessor of one of its treatment centers an unconditional and irrevocable letter of credit in the amount of $300,000 to serve as security for the performance of the assignees’ obligations under the lease and issued to a State Agency for construction licensing a letter of credit in the amount of $50,000.

Lease Commitments

The Company is obligated under various operating leases for office space and medical equipment. Total lease expense incurred under these leases was approximately $6,355,000, $7,163,000, and $10,115,000 for the years ended December 31, 2003, 2004 and 2005, respectively.

Future fixed minimum annual lease commitments are as follows at December 31, 2005:

	Commitments		Less Sublease Rentals		Net Rental Commitments
2006	$	10,904,920	$	581,417	$	10,323,503
2007		9,591,334		598,860		8,992,474
2008		8,902,716		616,825		8,285,891
2009		9,065,145		635,330		8,429,815
2010		8,347,823		654,390		7,693,433
Thereafter		65,807,152		2,245,725		63,561,427
	$	112,619,090	$	5,332,547	$	107,286,543

The Company leases land and space at its treatment centers under operating lease arrangements expiring in various years through 2027. The majority of the Company’s leases provide for fixed rent escalation clauses, ranging from 2% to 5%, or escalation clauses tied to the Consumer Price Index. The rent expense for leases containing fixed rent escalation clauses or rent holidays is recognized by the Company on a straight-line basis over the lease term. Leasehold improvements made by a lessee that are funded by landlord incentives or allowances are recorded as leasehold improvements and amortized over the lease term. Lease incentives are recorded as deferred rent and amortized as reductions to lease expense over the lease term.

F-22

Concentrations of Credit Risk

Financial instruments, which subject the Company to concentrations of credit risk, consist principally of cash and accounts receivable. The Company maintains its cash in bank accounts with highly rated financial institutions. These accounts may, at times, exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company grants credit, without collateral, to its patients, most of whom are local residents. Concentrations of credit risk with respect to accounts receivable relate principally to third-party payors, including managed care contracts, whose ability to pay for services rendered is dependent on their financial condition.

Legal Proceedings

The Company is involved in certain legal actions and claims arising in the ordinary course of its business. It is the opinion of management, based on advice of legal counsel, that such litigation and claims will be resolved without material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

On April 13, 2005, the Company was served with a shareholder derivative lawsuit filed by Steven Scheye, derivatively on behalf of nominal defendant, Radiation Therapy Services, Inc., against certain officers of the Company, all of the members of its Board of Directors and the Company as nominal defendant (Circuit Court for the Twentieth Judicial Circuit, Lee County, Florida; Case No. 05-CA-001103). The complaint alleges breach of fiduciary duties and states that this action is brought for the benefit of Radiation Therapy Services, Inc. (the Company) against the members of its Board of Directors. The complaint contains allegations substantially the same as those raised in the purported class action lawsuit filed by the Kissel Family Trust in September 2004 in the United States District Court, Middle District of Florida that was voluntarily dismissed without prejudice. The complaint alleges breach of fiduciary duties of loyalty and good faith as a result of entering into related party transactions and agreements and seeks to recover unspecified damages in favor of the Company, appropriate equitable relief and an award to plaintiff of the costs and disbursements of the action including reasonable attorney’s fees. Based on its review of the complaint, the Company believes that the derivative lawsuit is without merit and has moved for dismissal of the complaint. The court has not yet ruled on the Company’s motion to dismiss the complaint. The Company is obligated to provide indemnification to its officers and directors in this matter to the fullest extent permitted by law. Since by its inherent nature a derivative suit seeks to recover alleged damages on behalf of the company involved, the Company does not expect the ultimate resolution of this derivative suit to have a material adverse effect on its results of operations, financial position or cash flows.

Acquisitions

The Company has acquired and plans to continue acquiring businesses with prior operating histories. Acquired companies may have unknown or contingent liabilities, including liabilities for failure to comply with healthcare laws and regulations, such as billing and reimbursement, fraud and abuse and similar anti-referral laws. Although the Company institutes policies designed to conform practices to its standards following completion of acquisitions, there can be no assurance that the Company will not become liable for past activities that may later be asserted to be improper by private plaintiffs or government agencies. Although the Company generally seeks to obtain indemnification from prospective sellers covering such matters, there can be no assurance that any such matter will be covered by indemnification, or if covered, that such indemnification will be adequate to cover potential losses and fines.

Employment Agreements

The Company is party to employment agreements with several of its employees that provide for annual base salaries, targeted bonus levels, severance pay under certain conditions and certain other benefits.

Tax Indemnification Agreements

Prior to the consummation of the Company’s initial public offering (“the Offering”), the Company entered into S Corporation Tax Allocation and Indemnification Agreements (the Tax Agreements) with its then current shareholders relating to their respective income tax liabilities. Because the Company is fully subject to corporate income taxation after the consummation of the Offering, the reallocation of income and deductions between the periods during which the Company was treated as an S corporation and the periods during which the Company is subject to corporate income taxation may increase the taxable income of one party while decreasing that of another party. Accordingly, the Tax Agreements are intended to include provisions such that taxes are borne by the Company, on the one hand, and the shareholder, on the other, only to the extent that such parties were required to report the related income for tax purposes.

F-23

15. Retirement Plan

The Company has a defined contribution retirement plan under Section 401(a) of the Internal Revenue Code (the Retirement Plan). The Retirement Plan allows all full-time employees after one year of service to defer a portion of their compensation on a pre-tax basis through contributions to the Retirement Plan. The Company matches a portion of these contributions based upon the employee’s length of service. The Company’s matching contribution for the years ended December 31, 2003, 2004 and 2005 was $400,000, $415,000, and $530,000, respectively.

16. Stock Purchase, Option Plans and Restricted Stock Grants

Stock Purchase Agreements

The Company periodically enters into stock purchase agreements with certain employees. During 2002, the Company issued 256,200 shares of common stock and received notes in the amount of $1,419,600 due at various dates through April 15, 2010. During 2003, the Company issued 86,010 shares of common stock for the exercise of an employee’s stock options and received a note in the amount of $296,570 due January 5, 2007. During 2004 and 2005, no shares of common stock were issued in receipt of a note. The notes are full recourse notes and are presented in the shareholders’ equity section of the consolidated balance sheets as a reduction in shareholders’ equity.

Stock Option Plan

In August 1997, the Board of Directors approved and adopted the 1997 Stock Option Plan (the 1997 Plan). The 1997 Plan, as amended in July 1998, authorizes the issuance of options to purchase up to 3,660,000 shares of the Company’s common stock. Under the 1997 Plan, options to purchase common stock may be granted until August 2007. Options generally are granted at the fair market value of the common stock at the date of grant, are exercisable in installments beginning one year from the date of grant, vest on average over five years and expire ten years after the date of grant. The 1997 Plan provides for acceleration of exercisability of the options upon the occurrence of certain events relating to a change of control, merger, sale of assets or liquidation of the Company. The 1997 Plan permits the issuance of either Incentive Stock Options or Nonqualified Stock Options.

In April 2004, our Board of Directors adopted the 2004 Stock Incentive Plan (2004 Option Plan) under which the Company has authorized the issuance of equity-based awards for up to 2,000,000 shares of common stock to provide additional incentive to employees, officers, directors and consultants. In addition to the shares reserved for issuance under our 2004 stock incentive plan, such plan also includes (i) 1,141,922 shares that were reserved but unissued under the 1997 Plan (ii) shares subject to grants under the 1997 Plan that may again become available as a result of the termination of options or the repurchase of shares issued under the 1997 Plan, and (iii) annual increases in the number of shares available for issuance under the 2004 stock incentive plan on the first day of each fiscal year beginning with our fiscal year beginning in 2005 and ending after our fiscal year beginning in 2014, equal to the lesser of:

• 5% of the outstanding shares of common stock on the first day of our fiscal year;

• 1,000,000 shares; or

• an amount our board may determine.

Pursuant to the 2004 Option Plan, the Company can grant either incentive or non-qualified stock options. Options to purchase common stock under the 2004 Option Plan have been granted to Company employees at the fair market value of the underlying shares on the date of grant.

Options generally are granted at the fair market value of the common stock at the date of grant, are exercisable in installments beginning one year from the date of grant, vest on average over three to five years and expire ten years after the date of grant.

In June 2004, options were granted to consultants to provide services for healthcare reimbursement efforts and to an independent contractor to provide advice with respect to business opportunities in the state of New York. The Company recognized compensation expense on these options of $408,000 and $110,000 for the years ended December 31, 2004 and 2005, respectively. Compensation expense is measured as the services are performed and the expense is recognized over the service period. The Company recognizes expense on these options based on the fair value of the option at the end of each reporting period. Compensation accrued during the service period is adjusted in subsequent periods up to the measurement date for changes, either increases or decreases, in the quoted market value of the shares covered by the grant. In February 2005, the consultants became employees of the Company. As a result, of the change, compensation expense on the options is no longer recorded.

F-24

Incentive Stock Options may be granted to key employees, including officers, directors and other selected employees. The exercise price of each option must be 100% of the fair market value of the common stock on the date of grant (110% in the case of shareholders that own 10% or more of the outstanding common stock). Nonqualified Stock Options may be granted under the 2004 Option Plan or otherwise to officers, directors, consultants, advisors and key employees. The exercise price of each option must be at least 85% of the fair market value of the common stock on the date of grant.

On November 3, 2005, the Board of Directors of the Company, upon the recommendation of the Compensation Committee consisting solely of independent directors, approved the acceleration of vesting of all nonqualified outstanding nonvested stock options previously granted under the Company’s equity compensation plans. As a result of the acceleration of the nonqualified nonvested stock options to purchase an aggregate of 1.2 million shares of the Company’s common stock, which would otherwise have vested over periods of two to four years, will become immediately exercisable. The affected stock options have an exercise price of $13.00 per share.

The primary purpose of the acceleration of the nonqualified nonvested stock options is to enable the Company to avoid recognizing compensation expense associated with these stock options in future periods in its statements of operations and comprehensive income, upon adoption of FASB Statement of Financial Accounting Standards No. 123R “Share-Based Payment” (“SFAS No. 123R”). SFAS No. 123R is effective for the Company beginning in the first quarter of 2006, and will require that compensation expense associated with stock options be recognized in the statements of operations and comprehensive income, rather than as a footnote disclosure in the Company’s consolidated financial statements. Under SFAS No. 123R the compensation expense associated with these accelerated options that would have been recognized in the Company’s statements of operations and comprehensive income commencing with the implementation of SFAS 123R and continuing through 2009 is approximately $2.4 million.

At December 31, 2005, the number of options outstanding were 1,675,000 for Nonqualified Stock Options and 485,896 for Incentive Stock Options. Under the 2004 Option Plan, there were 2,382,812 shares of common stock reserved for future grants as of December 31, 2005.

Transactions are summarized as follows:

	Number of Stock Options		Weighted Average Exercise Price
Outstanding at January 1, 2003	2,285,240		$	2.71
Exercised	(514,131	)		2.57
Forfeited	(60,390	)		3.45
Outstanding at December 31, 2003	1,710,719			2.72
Granted	1,745,000			13.00
Exercised	(932,706	)		2.39
Forfeited	(27,450	)		5.54
Outstanding at December 31, 2004	2,495,563			10.00
Exercised	(334,667	)		4.88
Outstanding at December 31, 2005	2,160,896		$	10.80
Options exercisable at December 31, 2003	1,211,182		$	2.57
Options exercisable at December 31, 2004	430,051		$	3.19
Options exercisable at December 31, 2005	1,939,557		$	11.71

F-25

Exercise prices for options outstanding as of December 31, 2005 ranged from $1.91 to $13.00. The following table provides certain information with respect to stock options outstanding at December 31, 2005:

Range of Exercise Prices	Stock Options Outstanding	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life
$1.91 - $2.80	197,706	$	2.80	1.6
$3.01	256,200		3.01	4.1
$5.54 - $13.00	1,706,990		12.89	8.5
	2,160,896	$	10.80	7.3

The following table provides certain information with respect to stock options exercisable at December 31, 2005:

Range of Exercise Prices	Stock Options Exercisable	Weighted Average Exercise Price
$1.91 - $2.80	—	$	2.80
$3.01	232,567		3.01
$5.54 - $13.00	1,706,990		12.89
	1,939,557	$	11.71

Nonvested Stock Grant

On November 3, 2005, the Company’s compensation committee approved the issuance of 7,500 shares of nonvested stock to a key employee. The restricted shares vest ratably over a 5-year period.

17. Related Party Transactions

The Company purchased nuclear medical and pharmacological supplies from a company which was majority-owned by certain of the Company’s shareholders until June 2004. Purchases by the Company from this company were approximately $671,000, and $627,000, for the years ended December 31, 2003 and 2004, respectively. In June 2004, the Company’s shareholders sold their majority interest in the nuclear and pharmacological supply company.

The Company leases certain of its treatment centers and other properties from partnerships which are majority-owned by certain of the Company’s shareholders. These related party leases have expiration dates through February 28, 2020 and they provide for annual lease payments ranging from approximately $27,500 to $499,000. The aggregate lease payments the Company made to the entities owned by these related parties were approximately $2,325,000, $2,672,000, and $3,173,000 in 2003, 2004 and 2005, respectively.

In October 1999, the Company entered into a sublease arrangement with a partnership which is owned by certain of the Company’s shareholders to lease space to the partnership for an MRI center in Mount Kisco, New York. Sublease rentals paid by the partnership to the landlord were approximately $569,000, $528,000, and $571,000 during 2003, 2004 and 2005, respectively.

The Company provided funds to an MRI entity, which is owned by certain of the Company’s shareholders. The funds were for start-up costs and monthly charges for the allocated costs of certain staff who perform services on behalf of the MRI entity. The balance due from the MRI entity was approximately $87,000 and $18,000 at December 31, 2003 and 2004, respectively. No further funding was provided in 2005. The Company also provides billing and collection services to the MRI entity. The fees received by the Company for the billing and collection services were approximately $185,000, $258,000, and $194,000 in 2003, 2004 and 2005, respectively.

The Company is a participating provider in an oncology network, which is partially owned by one of the Company’s shareholders. The Company provides oncology services to members of the network. Annual payments received by the Company for the services were $150,000, $419,000, and $384,000 during 2003, 2004 and 2005, respectively.

At December 31, 2003, the Company had uncollateralized notes receivable totaling $662,168 from related parties, with quarterly payments plus interest at prime due November 15, 2008. The notes receivable were prepaid by the related parties in April 2004.

F-26

The Company provided medical equipment to radiation treatment centers in Argentina, Costa Rica and Guatemala, which are owned by a family member of one of the Company’s shareholders. The Company discontinued sales to these centers in June 2004. Sales of medical equipment to these radiation centers were approximately $267,000, and $93,000 in 2003 and 2004, respectively. Gain on the sale of the medical equipment was approximately $24,000, and $8,000 in 2003 and 2004, respectively. Balances in accounts receivable were approximately $211,000 at December 31, 2003. All remaining accounts receivable balances were paid in July 2004. In August 2000, the Company financed the purchase of a Nucletron high dose remote after loader by the Costa Rican operation. A $288,000 note, including an effective interest rate of 16.075% was taken in exchange for the equipment. The principal and accrued interest outstanding under the note were approximately $149,000 at December 31, 2003. All remaining balances on the note were paid in July 2004.

The Company contracted with a radiology group, which was partly owned by a shareholder, to provide PET scans to our patients. The shareholders’ interest in the group terminated in May 2004. The Company reimbursed for services, supplies, equipment and personnel provided by the radiology group. Purchases by the Company were approximately $530,000 and $240,000 for the years ended December 31, 2003 and 2004, respectively.

The Company provides funds to certain land partnerships and a general contractor, which are owned by certain of the Company’s shareholders. The funds are for start-up costs and monthly charges for the allocated costs. The balances due from these entities were approximately $6,000, and $140,000 at December 31, 2003, and 2004 respectively. The Company received services from a general contractor, which is owned by certain of the Company’s shareholders for remodeling and real property improvements at its facilities. Payments made by the Company to the general contractor were approximately $771,000, and $258,000 for the years ended December 31, 2003 and 2004, respectively. In June 2004, the Company purchased the assets of the general contractor with the issuance of shares for approximately $3.5 million.

At December 31, 2004, the Company had approximately $310,000 payable to certain land partnerships owned by certain of the Company’s shareholders for construction in process and building improvement costs relating to the construction of a medical facility. These costs were reimbursed to the land partnerships in 2005.

Effective October 2003, the Company purchased medical malpractice insurance from an insurance company owned by certain of the Company’s shareholders. The period of coverage runs from October to September. The premium payments made by the Company in 2003, 2004 and 2005 were approximately $1,721,000, $3,375,000, and $4,096,000, respectively.

In Maryland, Massachusetts, Nevada, New York, and North Carolina, the Company maintains administrative services agreements with professional corporations owned by certain of the Company’s shareholders, who are licensed to practice medicine in such states. The Company entered into these administrative services agreements in order to comply with the laws of such states which prohibit the Company from employing physicians. The administrative services agreements generally obligate the Company to provide treatment center facilities, staff, equipment, accounting services, billing and collection services, management and administrative personnel, assistance in managed care contracting and assistance in marketing services. Fees paid to the Company by such professional corporations under the administrative services agreements were approximately $21,795,000, $26,702,000, and $24,753,000 in 2003, 2004 and 2005 respectively. These amounts have been eliminated in consolidation.

18. Pro Forma Disclosure (Unaudited)

Pro forma taxes: The Company had elected to be taxed as an S corporation under the provisions of the Internal Revenue Code. In connection with the closing of the Company’s initial public offering in June, 2004 the S corporation election was terminated and, accordingly, the Company became subject to U.S. federal and state income taxes. Upon termination of the S corporation election, current and deferred income taxes reflecting the tax effects of temporary differences between the Company’s consolidated financial statement and tax basis of certain assets and liabilities became liabilities of the Company. These liabilities are reflected on the consolidated balance sheets with a corresponding expense in the consolidated statements of income and comprehensive income. See note 11 “Income Taxes.” The 2003 and 2004 proforma net income includes pro forma income taxes as if the Company were subject to tax during the respective period using an effective rate of approximately 40%.

F-27

Note 19. Unaudited Quarterly Financial Information

The quarterly interim financial information shown below has been prepared by the Company’s management and is unaudited. It should be read in conjunction with the audited consolidated financial statements appearing herein. The pro forma net income represents net income adjusted to assume a 40% effective income tax rate for comparability of quarterly earnings and per share data.

	2004
	First		Second		Third		Fourth
Total Revenues	$	42,948,664	$	42,133,301	$	40,674,138	$	45,617,207
Pro forma net income		6,124,969		5,256,902		2,875,631		4,963,439
Earnings per share:
Basic	$	0.35	$	0.28	$	0.13	$	0.22
Diluted	$	0.33	$	0.27	$	0.12	$	0.22
	2005
	First		Second		Third		Fourth
Total Revenues	$	52,419,468	$	54,443,727	$	56,014,269	$	64,372,849
Net income		6,297,217		7,491,788		4,527,149		6,653,144
Earnings per share:
Basic	$	0.28	$	0.33	$	0.20	$	0.29
Diluted	$	0.27	$	0.32	$	0.19	$	0.28

Note 20. Subsequent Event

In January 2006, the Company acquired the assets of a radiation treatment center located in Opp, Alabama for approximately $1,750,000. The center purchased in Alabama will further expand the Company’s presence in its Southeastern Alabama local market. The Company plans to expand the availability of advanced radiation therapy treatment modalities in this service area. The allocation of the purchase price is to tangible assets of $304,000, non-compete agreements of $230,000, amortized over 2 years, and goodwill of $1,216,000.

F-28

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, in the City of Fort Myers, State of Florida, on February 17, 2006.

RADIATION THERAPY SERVICES INC.
By:	/S/ DANIEL E. DOSORETZ, M.D.
	Daniel E. Dosoretz, M.D. President, Chief Executive Officer and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the date indicated.

Name	Title	Date
/S/ HOWARD M. SHERIDAN, M.D Howard M. Sheridan, M.D.	Chairman of the Board	February 17, 2006
/S/ DANIEL E. DOSORETZ, M.D. Daniel E. Dosoretz, M.D.	President, Chief Executive Officer and Director (Principal Executive Officer)	February 17, 2006
/S/ DAVID M. KOENINGER David M. Koeninger	Executive Vice President and Chief Financial Officer (Principal Financial Officer)	February 17, 2006
/S/ JOSEPH BISCARDI Joseph Biscardi	Corporate Controller and Chief Accounting Officer (Principal Accounting Officer)	February 17, 2006
/S/ JAMES H. RUBENSTEIN, M.D. James H. Rubenstein, M.D.	Medical Director, Secretary and Director	February 17, 2006
/S/ MICHAEL J. KATIN, M.D. Michael J. Katin, M.D.	Director	February 17, 2006
/S/ HERBERT F. DORSETT Herbert F. Dorsett	Director	February 17, 2006
/S/ RONALD E. INGE Ronald E. Inge	Director	February 17, 2006
/S/ JAMES C. WEEKS James C. Weeks	Director	February 17, 2006
/S/ LEO DOERR Leo Doerr	Director	February 17, 2006
/S/ SOLOMON AGIN, D.D. Solomon Agin, D.D.	Director	February 17, 2006

EXHIBIT INDEX

		Incorporated by Reference				Filed Herewith
Exhibit Number	Exhibit Description	Form	File No	Exhibit	Filing Date
2.1	Asset Purchase Agreement dated April 5, 2005 between and among Nevada Radiation Therapy Services, Inc., Radiation Therapy Services, Inc., Associated Radiation Oncologists, Inc., Radiation Oncology Leasing Company, Ltd., Gregory Dean, M.D., Ritchie Stevens, M.D., Beau James Toy, M.D. and Judy Jackson, M.D.	10-Q	000-50802	2.1	5/16/05
2.2	Asset Purchase Agreement dated June 1, 2005 between and among Dolphin Medical of Scottsdale LLC, The Oncology Center at Riverside, LLC, Greenbelt Cancer Center LLC, The Valley Cancer Center of Holyoke, LLC, Arizona Radiation Therapy Management Services, Inc., Maryland Radiation Therapy Management Services, Inc. and New England Radiation Therapy Management Services, Inc.	10-Q	000-50802	2.1	8/5/05
3.1	Amended and Restated Articles of Incorporation of Radiation Therapy Services, Inc.	S-1/A	333-114603	3.3	6/15/04
3.2	Amended and Restated Bylaws of Radiation Therapy Services, Inc.	S-1/A	333-114603	3.4	6/15/04
4.1	Form of Radiation Therapy Services, Inc. common stock certificate	S-1/A	333-114603	4.1	5/21/04
4.2	Fourth Amended and Restated Credit Agreement among the Company, Bank of America, N.A., as Administrative Agent, Swing Line Lender and Issuing Lender, Wachovia Bank, National Association, as Syndication Agent, the other lenders party thereto, Banc of America Securities, LLC and Wachovia Securities, Inc. as joint lead arrangers and Joint Book Managers, dated as of December 16, 2005	8-K	000-50802	10.1	12/21/05
10.1	Lease Agreement effective July 1, 1987, between Kyle, Sheridan & Thorn Associates and Katin, Dosoretz Radiation Therapy Associates, P.A. for premises in Ft. Myers, Florida. Effective July 31, 1997, Katin, Dosoretz Radiation Therapy Associates, P.A. changed its name to 21st Century Oncology, Inc.	S-1	333-114603	10.1	4/19/04
10.2	Lease Agreement dated May 1, 1999 between Colonial Radiation Associates and Radiation Therapy Services, Inc. for premises in Ft. Myers, Florida	S-1	333-114603	10.2	4/19/04

		Incorporated by Reference				Filed Herewith
Exhibit Number	Exhibit Description	Form	File No	Exhibit	Filing Date
10.3	Lease dated December 3, 1999 between Henderson Radiation Associates and Nevada Radiation Therapy Management Services, Inc. for premises in Henderson, Nevada	S-1	333-114603	10.3	4/19/04
10.4	Lease dated December 31, 1999 between Tamarac Radiation Associates and 21st Century Oncology, Inc. for premises in Tamarac, Florida	S-1	333-114603	10.4	4/19/04
10.5	Lease dated January 1, 2001 between Bonita Radiation Associates and 21st Century Oncology, Inc. for premises in Bonita Springs, Florida	S-1	333-114603	10.5	4/19/04
10.6	Lease dated October 25, 2000 between North Naples Extension and 21st Century Oncology, Inc. for premises in Naples, Florida	S-1	333-114603	10.6	4/19/04
10.7	Lease Agreement dated May 21, 2001 between Fort Walton Radiation Associates, LLP and 21st Century Oncology, Inc. for premises in Fort Walton Beach, Florida	S-1	333-114603	10.7	4/19/04
10.8	Lease Agreement dated November 13, 2000 between West Palm Radiation Associates, LLC and Palms West Radiation Associates, LLC for premises in Palm Beach County, Florida	S-1	333-114603	10.8	4/19/04
10.9	Lease dated May 1, 2002 between Bradenton Radiation Associates and 21st Century Oncology, Inc. for premises in Bradenton, Florida	S-1	333-114603	10.9	4/19/04
10.10	Lease Agreement dated October 1, 2002 between 21st Century Oncology, Inc. and Plantation Radiation Associates for premises in Plantation, Florida	S-1	333-114603	10.10	4/19/04
10.11	Lease Agreement dated January 21, 2003 between Yonkers Radiation Enterprises, LLC and New York Radiation Therapy Management Services, Incorporated for premises in Yonkers, New York	S-1	333-114603	10.11	4/19/04
10.12	Lease dated February 1, 2003 between Lehigh Radiation Associates and 21st Century Oncology, Inc. for premises in Lehigh Acres, Florida	S-1	333-114603	10.12	4/19/04
10.13	Lease dated November 19, 2003 between Destin Radiation Enterprises, LLC and 21st Century Oncology, Inc. for premises in Santa Rosa Beach, Florida	S-1	333-114603	10.13	4/19/04
10.14	Sublease agreement dated October 21, 1999 between Radiation Therapy Services, Inc. and Westchester MRI Specialists, P.C.	S-1/A	333-114603	10.14	5/21/04
10.15	Lease dated June 1, 2005 between Arizona Radiation Enterprises, LLC and Arizona Radiation Therapy Management Services, Inc.	10-Q	000-50802	10.2	8/5/05

		Incorporated by Reference				Filed Herewith
Exhibit Number	Exhibit Description	Form	File No	Exhibit	Filing Date
10.16	Administrative Services Agreement dated January 1, 1999 between New York Radiation Therapy Management Services, Incorporated and Yonkers Radiation Medical Practice, P.A.; Addendum dated January 1, 2000 for Yonkers; Addendum dated January 1, 2001; Addendum dated January 1, 2002; Addendum dated January 1, 2003; Addendum dated January 1, 2004.	S-1/A	333-114603	10.15	5/21/04
10.17	Addendum dated January 1, 2005.	10-K	000-50802	10.16	2/18/05
10.18	Addendum dated January 1, 2006.					X
10.19	Administrative Services Agreement dated January 1, 2002 between North Carolina Radiation Therapy Management Services, Inc. and Radiation Therapy Associates of Western North Carolina, P.A.; Addendum dated January 1, 2002; Addendum dated January 1, 2003; Addendum dated January 1, 2004.	S-1	333-114603	10.16	4/19/04
10.20	Addendum dated January 1, 2005.	10-K	000-50802	10.18	2/18/05
10.21	Addendum dated January 1, 2006.					X
10.22	Administrative Services Agreement dated January 9, 1998 between Nevada Radiation Therapy Management Services, Incorporated and Michael J. Katin, M.D., Prof. Corp.; Addendum dated January 1, 1999; Addendum dated January 1, 2000; Addendum dated January 1, 2001; Addendum dated January 1, 2002; Addendum dated January 1, 2003; Addendum dated January 1, 2004.	S-1	333-114603	10.17	4/19/04
10.23	Addendum dated January 1, 2005.	10-K	000-50802	10.20	2/18/05
10.24	Addendum dated January 1, 2006					X
10.25	Administrative Services Agreement dated October 31, 1998 between Maryland Radiation Therapy Management Services, Inc. and Katin Radiation Therapy, P.A.; Addendum dated January 1, 2000; Addendum dated January 1, 2001; Addendum dated January 1, 2002; Addendum dated January 1, 2003; Addendum dated January 1, 2004.	S-1	333-114603	10.18	4/19/04
	Addendum dated January 1, 2005.	10-Q	000-50802	10.22	2/18/05
10.26	Amendment to Administrative Services Agreement effective April 1, 2005 between Maryland Radiation Therapy Management Services, Inc. and Katin Radiation Therapy, P.A.	10-Q	000-50802	10.1	8/5/05
10.27	Addendum dated January 1, 2006.					X
10.28	Independent Contractor Agreement between Katin Radiation Therapy, P.A. and Ambergers, LLC dated October 18, 2005	10-Q	000-50802	10.2	11/7/05

		Incorporated by Reference				Filed Herewith
Exhibit Number	Exhibit Description	Form	File No	Exhibit	Filing Date
10.29	Administrative Services Agreement between California Radiation Therapy Management Services, Inc. and 21st Century Oncology of California, a Medical Corporation dated August 1, 2003 Addendum dated January 1, 2004; Addendum dated January 1, 2005.	10.K	000-50802	10.23	2/18/05
10.30	Addendum dated January 1, 2006.					X
10.31	Administrative Services Agreement between New England Radiation Therapy Management Services, Inc. and Massachusetts Oncology Services PC	10-Q	000-50802	10.3	8/5/05
10.32	Addendum dated January 1, 2006.					X
10.33 +	Second Amended and Restated 1997 Stock Option Plan	S-1	333-114603	10.19	4/19/04
10.34 +	Radiation Therapy Services, Inc. 2004 Stock Incentive Plan	S-1/A	333-114603	10.20	6/2/04
10.35 +	Performance Based Bonus Plan as of April 2004	S-1/A	333-114603	10.21	5/21/04
10.36 +	Executive Employment Agreement of Daniel E. Dosoretz, M.D.	S-1/A	333-114603	10.22	5/21/04
10.37 +	Physician Employment Agreement between Daniel E. Dosoretz, M.D. and 21st Century Oncology, Inc.	S-1/A	333-114603	10.23	5/21/04
10.38 +	Physician Employment Agreement between Michael J. Katin, M.D. and 21st Century Oncology, Inc.	S-1/A	333-114603	10.25	6/2/04
10.39+	Executive Employment Agreement of James H. Rubenstein, M.D.	S-1/A	333-114603	10.26	5/21/04
10.40 +	Physician Employment Agreement between James H. Rubenstein, M.D. and 21st Century Oncology, Inc.	S-1/A	333-114603	10.27	5/21/04
10.41 +	Executive Employment Agreement of David M. Koeninger	S-1/A	333-114603	10.28	5/21/04
10.42 +	Executive Employment Agreement of Joseph Biscardi	S-1/A	333-114603	10.29	5/21/04
10.43	Form of Transition Agreement and Stock Pledge	S-1	333-114603	10.30	4/19/04
10.44	Fourth Amended and Restated Credit Agreement among the Company, Bank of America, N.A., as Administrative Agent, Swing Line Lender and Issuing Lender, Wachovia Bank, National Association, as Syndication Agent, the other lenders party thereto, Banc of America Securities, LLC and Wachovia Securities, Inc. as joint lead arrangers and Joint Book Managers, dated as of December 16, 2005 (contained in Exhibit 4.2)	8-K	000-50802	10.1	12/21/05
10.45	Insurance Policy issued by Batan Insurance Company SPC, LTD to Radiation Therapy Services, Inc.	S-1/A	333-114603	10.42	5/21/04

		Incorporated by Reference				Filed Herewith
Exhibit Number	Exhibit Description	Form	File No	Exhibit	Filing Date
10.46	Asset Purchase Agreement dated April 15, 2004 for acquisition of Devoto Construction, Inc.	S-1	333-114603	10.43	4/19/04
10.47	S Corporation Tax Allocation and Indemnification Agreements	S-1/A	333-114603	10.44	6/2/04
10.48 +	Employment Agreement of Howard M. Sheridan, M.D.	S-1/A	333-114603	10.49	5/21/04
10.49 +	Form of Indemnification Agreement (Directors and/or Officers)	S-1/A	333-114603	10.50	5/21/04
10.50	Management Services Agreement dated May 1, 2001 between Riverhill MRI Specialists, P.C. d/b/a Rivermed Imaging and Financial Services of Southwest Florida, Inc.	S-1/A	333-114603	10.53	6/2/04
10.51	Positron Emission Tomography (PET) Services Office, Equipment and Personnel Lease Agreement dated June 1, 2002 between Radiation Regional Center, P.A. and 21st Century Oncology, Inc.; Amendment 1 dated September 2003	S-1/A	333-114603	10.54	6/2/04
10.52	Positron Emission Tomography (PET) Services Office, Equipment and Personnel Lease Agreement dated October 1, 2001 between Radiology Regional Center, P.A. and 21st Century Oncology, Inc.; Amendment 2 dated September 2003	S-1	333-114603	10.55	6/2/04
10.53	Development Agreement between Palm Springs Radiation Enterprises, LLC and California Radiation Therapy Management Services, Inc. dated effective as of December 16, 2004.	10-K	000-50802	10.46	2/18/05
10.54	Purchasing Agreement between Palm Springs Radiation Enterprises, LLC and DeVoto Construction of Southwest Florida, Inc. dated effective as of December 16, 2004.	10-K	000-50802	10.47	2/18/05
10.55	Lease dated January 30, 2003 between Crestview Radiation Enterprises, LLC and 21st Century Oncology, Inc. for premises in Crestview, Florida lease effective February 20, 2004.	10-K	000-50802	10.48	2/18/05
10.56	Physician Sharing Agreement between 21st Century Oncology, Inc. and Radiation Therapy Associates of Western North Carolina, P.A. effective August 1, 2003	10-K	000-50802	10.49	2/18/05
10.57	Personal and Services Agreement between Imaging Initiatives, Inc and 21st Century Oncology, Inc. effective December 1, 2004	10-K	000-50802	10.50	2/18/05
10.58	Purchase Agreements for Stereotactic Radiosurgery Systems					X
10.59	Lease dated October 2005 between Palm Springs Radiation Enterprises, LLC and California Radiation Therapy Management Services, Inc.					X

		Incorporated by Reference				Filed Herewith
Exhibit Number	Exhibit Description	Form	File No	Exhibit	Filing Date
21.1	List of Subsidiaries					X
23.1	Consent of Ernst & Young LLP					X
31.1	Certification of the Chief Executive Officer of Radiation Therapy Services, Inc. pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					X
31.2	Certification of the Chief Financial Officer of Radiation Therapy Services, Inc. pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					X
32.1	Certification of the Chief Executive Officer of Radiation Therapy Services, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002					X
32.2	Certification of the Chief Financial Officer of Radiation Therapy Services, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002					X

+ Denotes management contracts and compensatory plans and arrangements required to be filed as exhibits to this report.

EX-10.18

Exhibit 10.18

ADDENDUM TO ADMINISTRATIVE SERVICES AGREEMENT

This Addendum (the “Addendum”) is entered into as of January 1, 2006, by and among NEW YORK RADIATION THERAPY MANAGEMENT SERVICES, INC., a New York corporation (“MANAGEMENT SERVICES”) and YONKERS RADIATION MEDICAL PRACTICE, P.C., a New York professional corporation (the “PC”). This Addendum amends Section 3.1 of the Administrative Services Agreement dated January 1, 1999 between the parties (the “Agreement”) to adjust the monthly Service Fee of $605,650.00 paid in 2005 to a monthly Service Fee of $583,150.00, and replaces the Addendum of that same Section dated January 1, 2005. From and after the date hereof, Section 3.1 shall read as follows:

3.1. Service Fee. For the services to be provided hereunder by MANAGEMENT SERVICES, the PC shall pay to MANAGEMENT SERVICES a monthly Service Fee of $583,150.00. The parties agree that the Service Fee represents the fair market value of the services provided by MANAGEMENT SERVICES hereunder and that the parties shall meet annually to reevaluate the value of services provided by MANAGEMENT SERVICES and shall establish the fair market value thereof for purposes of this Section 3.1.

Accepted:	NEW YORK RADIATION THERAPY MANAGEMENT SERVICES, INC.
	By:	/s/ David Koeninger
		David Koeninger
		Vice President and CFO
Accepted:	YONKERS RADIATION MEDICAL PRACTICE, P.C.
	By:	/s/ Daniel E. Dosoretz, M.D.
		Daniel E. Dosoretz, M.D.
		President

EX-10.21

Exhibit 10.21

ADDENDUM TO ADMINISTRATIVE SERVICES AGREEMENT

This Addendum (the “Addendum”) is entered into effective as of January 1, 2006, by and between NORTH CAROLINA RADIATION THERAPY MANAGEMENT SERVICES, INC., a North Carolina corporation (“MANAGEMENT SERVICES”) and RADIATION THERAPY ASSOCIATES OF WESTERN NORTH CAROLINA, P.A., a North Carolina professional corporation (the “PA”). This Addendum amends Section 3.1 of the Administrative Services Agreement dated January 1, 2002 between the parties (the “Agreement”) to adjust the monthly Service Fee of $766,000.00 paid in 2005 to a monthly Service Fee of $749,333.33, and replaces the Addendum of that same Section dated January 1, 2005.

From and after the date hereof, Section 3.1 shall read as follows:

3.1. Service Fee. For the services to be provided hereunder by MANAGEMENT SERVICES, the PC shall pay to MANAGEMENT SERVICES a monthly Service Fee of $749,333.33. The parties agree that the Service Fee represents the fair market value of the services provided by MANAGEMENT SERVICES hereunder and that the parties shall meet annually to reevaluate the value of services provided by MANAGEMENT SERVICES and shall establish the fair market value thereof for purposes of this Section 3.1.

Accepted:	NORTH CAROLINA RADIATION THERAPY MANAGEMENT SERVICES, INC.
	By:	/s/ David Koeninger
		David Koeninger
		Vice President and CFO
Accepted:	RADIATION THERAPY ASSOCIATES OF WESTERN NORTH CAROLINA, P.A.
	By:	/s/ Daniel E. Dosoretz, M.D.
		Daniel E. Dosoretz, M.D.
		Vice President

EX-10.24

Exhibit 10.24

ADDENDUM TO ADMINISTRATIVE SERVICES AGREEMENT

This Addendum (the “Addendum”) is entered into effective as of January 1, 2006, by and between NEVADA RADIATION THERAPY MANAGEMENT SERVICES, INC., a Nevada corporation (“MANAGEMENT SERVICES”) and MICHAEL J. KATIN, M.D., PROF. CORP, a Nevada professional corporation (the “PA”). This Addendum amends Section 3.1 of the Administrative Services Agreement dated January 1, 2002 between the parties (the “Agreement”) to adjust the monthly Service Fee of $570,683.33 paid in 2005 to a monthly Service Fee of $595,683.33, and replaces the Addendum of that same Section dated January 1, 2005. From and after the date hereof, Section 3.1 shall read as follows:

3.1. Service Fee. For the services to be provided hereunder by MANAGEMENT SERVICES, the PC shall pay to MANAGEMENT SERVICES a monthly Service Fee of $595,683.33. The parties agree that the Service Fee represents the fair market value of the services provided by MANAGEMENT SERVICES hereunder and that the parties shall meet annually to reevaluate the value of services provided by MANAGEMENT SERVICES and shall establish the fair market value thereof for purposes of this Section 3.1.

Accepted:	NEVADA RADIATION THERAPY MANAGEMENT SERVICES, INC.
	By:	/s/ David Koeninger
		David Koeninger
		Vice President and CFO
Accepted:	MICHAEL J. KATIN, M.D., PROF. CORP.
	By:	/s/ Daniel E. Dosoretz, M.D.
		Daniel E. Dosoretz, M.D.
		Vice President

EX-10.27

Exhibit 10.27

ADDENDUM TO ADMINISTRATIVE SERVICES AGREEMENT

This Addendum (the “Addendum”) is entered into as of January 1, 2006, by and among MARYLAND RADIATION THERAPY MANAGEMENT SERVICES, INC., a Maryland corporation (“MANAGEMENT SERVICES”) and KATIN RADIATION THERAPY, P.A., a Maryland professional corporation (the “PA”). This Addendum amends Section 3.1 of the Administrative Services Agreement dated October 31, 1998 between the parties (the “Agreement”) to adjust the monthly Service Fee of $9,585.00 paid in 2005 to a monthly Service Fee of $12,500.00, and replaces the Addendum of that same Section dated April 1, 2005. From and after the date hereof, Section 3.1 shall read as follows:

3.1. Service Fee. For the services to be provided hereunder by MANAGEMENT SERVICES, the PA shall pay to MANAGEMENT SERVICES a monthly Service Fee of $12,500.00. The parties agree that the Service Fee represents the fair market value of the services provided by MANAGEMENT SERVICES hereunder and that the parties shall meet annually to reevaluate the value of services provided by MANAGEMENT SERVICES and shall establish the fair market value thereof for purposes of this Section 3.1.

Accepted:	MARYLAND RADIATION THERAPY MANAGEMENT SERVICES, INC.
	By:	/s/ David Koeninger
		David Koeninger
		Vice President & CFO
Accepted:	KATIN RADIATION THERAPY, P.A.
	By:	/s/ Daniel E. Dosoretz, M.D.
		Daniel E. Dosoretz, M.D.
		Vice President

EX-10.30

Exhibit 10.30

ADDENDUM TO ADMINISTRATIVE SERVICES AGREEMENT

This Addendum (the “Addendum”) is entered into as of January 1, 2006, by and between CALIFORNIA RADIATION THERAPY MANAGEMENT SERVICES, INC., a California corporation (“MANAGEMENT SERVICES”) and 21^st CENTURY ONCOLOGY OF CALIFORNIA, A MEDICAL CORPORATION, a California medical corporation (the “PC”). This Addendum amends Section 3.1 of the Administrative Services Agreement dated August 1, 2003 between the parties (the “Agreement”) to adjust the monthly Service Fee of $39,583.33 paid in 2005 to a monthly Service Fee of $184,000.00 and replaces the Addendum of that same Section dated January 1, 2005. From and after the date hereof, Section 3.1 shall read as follows:

3.1. Service Fee. For the services to be provided hereunder by MANAGEMENT SERVICES, the PC shall pay to MANAGEMENT SERVICES a monthly Service Fee of $184,000.00. The parties agree that the Service Fee represents the fair market value of the services provided by MANAGEMENT SERVICES hereunder and that the parties shall meet annually to reevaluate the value of services provided by MANAGEMENT SERVICES and shall establish the fair market value thereof for purposes of this Section 3.1.

Accepted:	CALIFORNIA RADIATION THERAPY MANAGEMENT SERVICES, INC.
	By:	/s/ David Koeninger
		David Koeninger
		Vice President and CFO
Accepted:	21st CENTURY ONCOLOGY OF CALIFORNIA, A MEDICAL CORPORATION
	By:	/s/ Daniel E. Dosoretz, M.D.
		Daniel E. Dosoretz, M.D.
		Vice President

EX-10.32

Exhibit 10.32

ADDENDUM TO ADMINISTRATIVE SERVICES AGREEMENT

This Addendum (the “Addendum”) is entered into as of January 1, 2006, by and between NEW ENGLAND RADIATION THERAPY MANAGEMENT SERVICES, INC., a Massachusetts corporation (”MANAGEMENT SERVICES”) and MASSACHUSETTS ONCOLOGY SERVICES, P.C., a Massachusetts professional corporation (the “PC”). This Addendum amends Section 3.1 of the Administrative Services Agreement dated June 1, 2005 between the parties (the “Agreement”) to adjust the monthly Service Fee of $89,166.67 paid in 2005 to a monthly Service Fee of $133,333.33. From and after the date hereof, Section 3.1 shall read as follows:

3.1. Service Fee. For the services to be provided hereunder by MANAGEMENT SERVICES, the PC shall pay to MANAGEMENT SERVICES a monthly Service Fee of $133,33.33. The parties agree that the Service Fee represents the fair market value of the services provided by MANAGEMENT SERVICES hereunder and that the parties shall meet annually to reevaluate the value of services provided by MANAGEMENT SERVICES and shall establish the fair market value thereof for purposes of this Section 3.1.

Accepted:	NEW ENGLAND RADIATION THERAPY MANAGEMENT SERVICES, INC.
	By:	/s/ David Koeninger
		David Koeninger
		Vice President and CFO
Accepted:	MASSACHUSETTS ONCOLOGY SERVICES, P.C.
	By:	/s/ Daniel E. Dosoretz, M.D.
		Daniel E. Dosoretz, M.D.
		President

EX-10.58

Exhibit 10.58

	Quotation
	GRB20050926-001A	Page: 1

Quotation For:	Please address inquiries and replies to:
Daniel Galmarini 21st Century Oncology - Corp. Headquarters & Administr. 2234 Colonial Blvd. Fort Myers, FL 33907 (239) 931 - 7333 FAX: (239) 931 - 7380	Glenn R. Barrow Varian Medical Systems 2250 Newmarket Parkway Suite 120 Marietta, GA 30067 (770) 955 - 1367 FAX: (678) 255 - 3850

Your Reference:		Quotation Firm Until:	September 30, 2005
FOB Point:	ORIGIN	Shipping Allocation:	45 DAYS ARO
Payment Terms:	2%/88%/10%	Varian Terms and Conditions of Sale 1652R Attached

Port Charlotte (6 and 10MV)

South Naples (6 and 15MV)

Cape Coral (6 and 18MV)

Three Trilogy Stereotactic Systems

21st Century Oncology - Corp. Headquarters & Administr.				Varian Medical Systems
Accepted by:
Signature:	/s/ David M. Koeninger			Submitted by:
Name:	David M. Koeninger
Title:	Executive Vice President - Chief Financial Officer Radiation Therapy Services, Inc.			(Signature)
Date:				Name:	Glenn R. Barrow
For this purchase, we designate “NONE” as our Institution’s Primary Group Purchasing Organization Affiliation. Any change will be Indicated below:				Title:	District Sales Manager
¨ AmeriNet	¨ Aptium	¨ Broadlane	¨ Consorta	Date:	September 26, 2005
¨ Direct Med	¨ HPG	¨ KP Select	¨ Magnet
¨ Matrix	¨ MedAssets	¨ Novation	¨ Premier
¨ ROI	¨ Sutter	¨ UHS	¨ US Cancer
¨ USO	¨ VA Gov		¨ None

This document is confidential and intended solely for the information and benefit of the immediate recipient and Varian

	Quotation
	GRB20050926-001A	Page: 2
	21st Century Oncology - Corp. Headquarters & Administr., Fort

Item	Qty	Product Description	Offer Price
Section 1 Three Trilogy Stereotactic Systems.
		Trilogy
1.01	3	Trilogy Stereotactic System The Trilogy Stereotactic System is a comprehensive package that includes: •      Trilogy for stereotactic radiosurgery, intensity-modulated radiation therapy (IMRT) and 3D conformal radiation therapy •      Tools for patient setup and target localization, including cone-beam CT •      Tools for treatment verification and quality assurance •      Marketing Kit for the purpose of promoting the Trilogy System to referring physicians, patients and the media.
		Stereotactic treatment planning, localization hardware and quality assurance tools may be added to the package.
		System prerequisites include: •      VARIS Vision v7 or a comparable third-party information system •      52” base frame is required to achieve an accelerator isocenter specification of 0.75mm radius for gantry, collimator and couch axes, and full functionality of remote couch motion
1.02	3	Trilogy Trilogy is a highly-accurate, high dose rate medical linear accelerator system that includes 3 photon beams and 6 electron beams.
		Trilogy accelerator highlights Isocenter •      0.5mm radius for gantry and collimator axes 0.75mm radius for gantry, collimator and couch axes Two photon beams for IMRT and 3DCRT •      Energies selected below •      Maximum dose rate 600MU/min Maximum field size 40cm x 40cm One photon beam for SRS and SRT •      Energy 6MV •      Dose rate 1000MU/min •      Maximum field size 15cm x 15cm Six electron beams •      Energies selected below Maximum dose rate 1000MU/min Remote couch motion including translations in x, y and z, and rotation
		Prerequisites: •      52” base frame is required to achieve the isocenter specification above and full functionality of remote couch motion.
		Included with the Trilogy accelerator: •      Command Console with a single QWERTY keyboard and mouse •      In-room monitor

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	Quotation
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	21st Century Oncology - Corp. Headquarters & Administr., Fort

Item	Qty	Product Description	Offer Price
		•      Port-film graticule •      Laser Back pointer •      Laserjet printer for accelerator console •      Basic marketing materials (e.g., images, press releases, PowerPoint presentation)
1.03	6	INCLUDED EDUCATION: Clinac Operations or Clinac Support For High Energy Clinac
		The choice of one of the following Education Courses is included with the purchase of a Clinac.
		•      Includes Tuition and Materials for ONE person. •      Travel and Living is responsibility of the customer unless otherwise stated. •      Course is non-refundable and non-transferable. •      Offer is valid for 18 months after installation.
		EDUCATION: Clinac Operations:
		Clinac Operations is a course designed for those personnel responsible for the routine operation and/or supervision of the daily clinical use of the Clinac. It is directed primarily towards Radiation Therapists and Radiation Oncologists. It is recommended that students attend the Clinac Operations course shortly before clinical use and patient’s treatments commence.
		Course provides a general overview of the machine concepts, familiarity with controls and features and an understanding of the interlock matrix. The emphasis throughout the course is to present the subject matter from a clinical use perspective, however the primary emphasis is not on the day-to-day console programming, but rather an overall understanding of the Clinac function and operation. Extensive hands-on laboratory exercises are included.
		Prerequisites: None
		Length & Location: 4 days Varian Education Center, Milpitas, CA
		OR
		EDUCATION: Clinac Support:
		Clinac Support is a course designed for those personnel responsible for the equipment maintenance. It is directed primarily towards Physicists and Biomedical Engineers, however it may be appropriate for Dosimetrists and/or Radiation Therapists who have a background in electronics.
		Course acquaints and familiarizes the student with the general accelerator function, operation and routine support. Provides a basic understanding of the machine concepts and day-to-day maintenance while also providing a working vocabulary for communication with service personnel.

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	Quotation
	GRB20050926-001A	Page: 4
	21st Century Oncology - Corp. Headquarters & Administr., Fort

Item	Qty	Product Description	Offer Price
		Prerequisites: None
		Length & Location: 3 days Varian Education Center, Milpitas, CA
		For detailed course information and on-line registration, visit the Varian website at http://www.varian.com/otrn/index.html.
1.04	3	INCLUDED APPLICATIONS TRAINING: Clinac IX Operations
		•      On-site applications training for up to (8) users. •      Training is non-refundable and non-transferable. •      Offer is valid for 18 months after installation of product.
		Clinac IX Operations includes up to a 2-day clinical training at the customer’s facility focusing on operations of the Clinac, Exact Couch and Millennium MLC, PortalVision image acquisition (See Note 1) and treatment methodologies to promote safe clinical operation of the Clinac. For larger facilities with more than 8 users, additional training days may be necessary to meet specific facility training objectives. Additional training days are available for purchase in increments of up to 8 users, to be delivered in conjunction with the included training.
		1) Actual number of on-site days will depend on selection of Clinac IX options including MLC and PortalVision. Offer is for ONE site visit by a Varian Clinical Support Specialist for up to 2 days consecutively.
		Prerequisites: none
		Length & Location: Up to 2 days at Customer Facility
		For detailed course information visit the Varian website at http://www.varlan.com/otrn/index.html
1.05	3	Dual Photon Energy: 6/23 MV Two Photon Energies as defined by BJR 17
1.06	3	Display of Photon Energy: BJR17 Photon energies are displayed as defined by BJR 17.
1.07	3	Photon Dose Rate: 600 MU/Min Photon dose rate (6-25MV): 100, 200, 300, 400, 500 and 600MU/min
1.08	3	6 Electron Energies: Group 1 4, 6, 9, 12, 15 and 18 MeV
1.09	3	Electron Dose Rate: 1000 MU/Min Maximum Electron Dose Rate (4-22MeV): 100, 200, 300, 400, 500, 600 and 1000MU/min

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	Quotation
	GRB20050926-001A	Page: 5
	21st Century Oncology - Corp. Headquarters & Administr., Fort

Item	Qty	Product Description	Offer Price
1.10	3	Size of Electron Applicators: 6cm x 6cm Size of electron applicators (cm): 6x6, 10x10, 15x15, 20x20, 25x25
1.11	3	Bi-directional Wedge: 30cm x 40cm Field Size 15, 30, and 45 degree wedges with a maximum field size of 20 cm x 40 cm, 60 degree wedge with a maximum field size of 15 cm x 40 cm.
1.12	3	Energy of Special Electron Procedures: 6MeV
1.13	3	Target-to-Tray Distance: 65.4cm
1.14	3	Scale Convention: IEC601 Scale convention per IEC Publication 601-2-1, 1981
1.15	3	Counterweight
1.16	3	Three Piece Breakdown
1.17	3	New Universal Baseframe with 52” Fixed Floor Turntable
1.18	3	Exact Couch Exact Couch with Indexed Immobilization treatment table
		Exact Couch treatment table with carbon fiber couch top, two universal accessory clamps, two removable accessory rails, patient straps, and two universal pendants.
		Millennium Multileaf Collimator
1.19	3	Millennium Multlleaf Collimator, 120 Leaf 120 Leaf Millennium Multileaf Collimator System includes: Controller MLC workstation (Note: Provided only if purchased separately from 4D integrated Treatment Console) Millennium MLC 3rd Party RV Interface (Note: The 3rd Party RV Vendor is responsible for the installation and configuration of the interface.) Multileaf Collimator Accessory System (Provided in lieu of non-MLC Accessory System) including Accessory Mount (65.4cm Source to Tray Distance Only) Compensator Mount, ONE (1) Upper compensator tray Mechanical front pointer (holder and 4 rods) Electron applicators, one of each: 6x6 or 6x10, 10x10, 15x15, 20x20, 25x25 Electron beam shaping kit (per RAD 2045) TEN (10) Lower Compensator trays TEN (10) Drilled Star trays (0.635 cm thick) Upper & Lower Bi-directional Wedge Sets (20 cm or 30cm) OTHER: MLC Standard Spare Parts Kit Product Manuals Installation

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	Quotation
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	21st Century Oncology - Corp. Headquarters & Administr., Fort

Item	Qty	Product Description	Offer Price
		ONE (1) year full warranty
1.20	3	MLC Communication System: With Shaper
1.21	3	For Removable mMLC: No
		PortalVision
1.22	3	PortalVision: aS1000 aS1000 for 4D Integrated Treatment Console
		PortalVision aS1000 uses amorphous silicon imaging technology to offer ultra performance, high resolution, high contrast images with the MV treatment beam using less dose to the patient. This aids in immediate and confident setup verification for both simple and complex treatments including IMRT. High-resolution images with better definition of small structures allow the treatment field edges and included anatomy and surrogate targets to be more easily viewed. Systematic errors may be calculated and later eliminated or reduced, which in turn helps to speed the delivery and improve the accuracy of conformal and IMRT treatment delivery. PortalVision may also be used for pre-treatment QA of IMRT plans using optional software. The aS1000 imaging system, used for IMRT integrated imaging, can be used at higher dose rates with greater resistance to saturation than the aS500 imaging system.
		PortalVision aS1000 for 4D Integrated Treatment Console Description PortalVision is a hardware and software package designed to provide the linear accelerator with Electronic Portal Imaging capabilities. The package includes the image acquisition hardware and robotic arm to position imager, Image Acquisition and Vision review applications software including Match and Review capabilities.
		Features Image acquisition task includes: image acquisition before, during, or after treatment beam; image review with manual matching software, and RT Chart access •      Review software provides image enhancement and analysis tools for PortalVision images; automated matching tools for treatment setup verification; image approval; archive/restore and system administration capabilities •      Compatible with VARIS Vision database •      Hardware IAS3 High performance Image Acquisition H/W •      Image detector unit: •      1024 x 768 Amorphous Silicon detector •      400 x 300 mm active imaging area •      Amplifier, switching and console electronics •      Retractable robotic arm with motorized vertical, longitudinal, and lateral movements to hold and position detector; IR hand pendant controller
		License 1.      PortalVision acquisition and review capability for 4D Integrated Treatment Console 2.      Vision Image Manager license for ONE (1) concurrent user

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	Quotation
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	21st Century Oncology - Corp. Headquarters & Administr., Fort

Item	Qty	Product Description	Offer Price
		Notes 1.      Includes 90 day software warranty; 2.      ONE (1) year hardware warranty beginning on day of acceptance 3.      Includes 2 days applications training up to 8 users; 4.      PortalVision software is limited to ONE control workstation; Vision Image Manager software may float within Vision network 5.      VARIS Vision hardware and software is sold separate from PortalVision 6.      PortalVision is compatible with a full VARIS Vision system (requires additional hardware and software licenses).
1.23	3	PortalVision Configuration: Vision Network 6.5 or Higher
1.24	3	Laser Backpointer for PortalVision Arm
		On-Board Imager
		On-Board Imager
1.25	3	On-Board Imager Provides high-quality kV images in the treatment room for target localization, patient positioning and motion management. The following clinical capabilities and hardware are included:
		A.     Online setup correction based on two kV radiographs, a kV and a MV radiograph or two gated kV radiographs B.     Automated and manual alignment of a pair of radiographs to their reference images C.     Online setup correction based on radio-opaque markers D.     Pre-treatment verification of gated treatment portals using kV fluoroscopy E.     Two motorized Exact robotic arms to hold and position the kV source and kV imager, with infrared hand pendant control F.      X-Ray source, 40-150 kVp G.     Image Detector, amorphous silicon device with 400 x 300mm active imaging area H.     On-Board Imager workstation and dedicated keyboard
		Prerequisites: A.     PortalVision with Exact Arm B.     VARIS Vision information System or compatible 3rd-party information system C.     RPM Respiratory Gating System (for gated image applications) D.     SomaVision Treatment Planning (for Marker Match application) E.     Remote Couch Motion
1.26	6	INCLUDED EDUCATION: On-Board Imaging Clinical Implementation
		•      Includes Tuition and Materials for ONE person. •      Travel and Living not included unless otherwise stated •      Course is non-refundable and non-transferable. •      Offer is valid for 18 months after installation.

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	Quotation
	GRB20050926-001A	Page: 8
	21st Century Oncology - Corp. Headquarters & Administr., Fort

Item	Qty	Product Description	Offer Price
		The On-Board Imaging (OBI) Clinical Implementation course provides the initial training for the individual who is responsible for the implementation and the departmental training of the OBI system, typically a Physicist or senior Therapist. The course will provide an overview of how the OBI system communicates with the Clinac and the verification system, basic OBI maintenance procedures, and hands-on training for customer acceptance and quality assurance procedures.
		The OBI course will also provide hands-on training on how to prepare the plan for treatment utilizing the OBI system, how to acquire kV and MV images, acquisition and evaluation of Cone-Beam CT and how to perform a marker match utilizing 3D image sets from Eclipse.
		An additional half-day of training is offered to experienced users of RPM Respiratory Gating. The additional half-day of training is geared towards users that will be implementing the OBI system as part of their established RPM treatment protocol. The half-day training will cover a basic review of the OBI System and RPM integration in the clinical environment. It is highly recommend that all users intending to participate in the additional half-day of training to have previously attended the RPM course. The training is an extension to the RPM Respiratory Gating course and is not an acceptable replacement for RPM product training.
		Prerequisites: •      Experience users of Varian Clinac Linear Accelerator •      VARIS Vision, version 6.5 or 7.0 or Treatment RV for OBI •      PortalVision •      Working knowledge of Eclipse for OBI Marker Match •      RPM Respiratory Gating Education course (if applicable)
		Length & Location: 3.5 Days, plus optional  1/2 day for RPM Respiratory Gating Varian Education Center, Las Vegas, NV
		For detailed course information and on-line registration, visit the Varian website at http://www.varian.com/otrn/index.html.
1.27	3	INCLUDED APPLICATIONS TRAINING: OBI
		•      On-site applications training for up to (4) users. •      Training is non-refundable and non-transferable. •      Offer is valid for 18 months after installation of product.
		The OBI purchase includes a 2-day clinical training at the customer’s facility focusing on OBI functionality to promote safe clinical practices. On-site training supplements the OBI Clinical Implementation course. For larger facilities with more than 4 users, additional training days may be necessary to meet specific facility training objectives. Additional training days are available for purchase and will be delivered in conjunction with the included training.
		Prerequisites: •      Attend OBI Clinical Implementation Course: same participant must be present for the on-site training component.

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	Quotation
	GRB20050926-001A	Page: 9
	21st Century Oncology - Corp. Headquarters & Administr., Fort

Item	Qty	Product Description	Offer Price
		Length & Location: 2 days at Customer Facility
		For detailed Information visit the Varian website at http://www.varian.com/otrn/index.html.
1.28	3	Cone Beam CT for On-Board Imager FEATURES: Cone-beam CT acquires a volumetric CT dataset, while the patient is on the treatment couch, and allows the patient to be repositioned - by comparing the locations of soft-tiisue and bony anatomy visible in the cone-beam CT images with the locations of the same anatomy in the planning (reference) CT images.
		INCLUDED: Hardware and software to acquire and reconstruct 3D volumetric datasets and match these with reference 3D CT Images.
		PRE-REQUISITES: On-Board Imager hardware, with software version 1.0.15 or later.
		Stereotactic Component Packages
1.29	3	Stereotactlc Component Package: Varian/ZMED Components With FastPlan and Eclipse Stereotactic Component Package: Varian/ZMED Components With FastPlan and Eclipse
		1.      Collimators: Set of 13 conical collimators (5mm to 35mm) and mounting tray 2.      Head ring system for single-fraction stereotactic radiosurgery: CT couch mount, CT localizer, optical fiducial array, couch mount, calibration jig, film holder and graticules, isocenter pointer, zero pointer 3.      Frameless system for multi-fraction stereotactic radiotherapy: 6 bite trays, 3 fiducial arrays, 2 head cushions, U-frame, dental caulk, verification frame, probe with fiducials, tilt and spin correcting couch mount, CT couch mount, 2 thermoplastic masks 4.      Optical guidance system: workstation with 18” touch screen monitor, optical tracking camera and digitizer system, mobile cart, camera calibration jig 5.      Stereotactic Treatment Planning System: a.      Eclipse with IMRT option (for targets 2cm and above) includes workstation, contouring tools, image fusion tools, photon planning for the 120MLC (multiple static fields, conformal arc and IMRS), BEV, DVH, plan comparison tools, Lexmark Color Printer. b.      FastPlan includes workstation, contouring tools, ImMerge image fusion tools, AutoPilot automated planning, photon planning for cone-based treatments, supports CT or MR-based planning, DVH, ZScape RS software with 2 remote viewing and MR contouring licenses 6.      Warranty: 1 year warranty on all of the above

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	Quotation
	GRB20050926-001A	Page: 10
	21st Century Oncology - Corp. Headquarters & Administr., Fort

Item	Qty	Product Description	Offer Price
1.30	3	INCLUDED EDUCATION: Eclipse Administration and Physics
		•      Includes Tuition and Materials for ONE person. •      Includes Travel and Living for ONE person. •      Training is non-refundable and non-transferable. •      Offer is valid for 18 months after installation of product.
		The Eclipse Administration and Physics course provides training for Physicists, Dosimetrists and others responsible for initial system configuration and routine administration of Eclipse.
		The administration component of the course will focus on networking, system structure, management of user accounts and routine data backup. Physics part of the course will cover beam data measurement, transfer, configuration and validation for the Eclipse treatment planning system. It will also include sections on photon and electron beam algorithms. This part also covers configuration of BrachyTherapy workspace. Portion of the instruction time will be devoted to an overview of basic operation of Eclipse external beam planning workspace.
		Prerequisites: •      New user
		Length & Location: 5 days Varian Education Center, Las Vegas, NV
		For detailed course information and on-line registration, visit the Varian website at http://www.varian.com/otrn/index.html./index.html.Vegas, NV.html.
1.31	3	INCLUDED EDUCATION: Eclipse Operations
		•      Includes Tuition and Materials for ONE person. •      Includes Travel and Living for ONE person. •      Training is non-refundable and non-transferable. •      Offer is valid for 18 months after installation of product.
		The Eclipse Operations course is offered to provide an initial training for the individual who is responsible for daily use of the treatment planning system in the clinical environment. The course will provide an overview of Eclipse structure, important files and graphical user interface, including different workspaces and tasks. Course designed for the Physicist and Dosimetrist.
		The Operations course will focus on planning with standard techniques utilizing test cases such as Head & Neck, Breast, Prostate, etc. An emphasis is placed on CT image imports, beam placement, beam weighting and normalization, hardcopy review and customization as well as recommended archival procedures. Other topics include: 3D display, plan comparison, IRREG program, and interfacing to R&V system.
		Prerequisites: •      New user

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	Quotation
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	21st Century Oncology - Corp. Headquarters & Administr., Fort

Item	Qty	Product Description	Offer Price
		Length & Location: 5 days Varian Education Center, Las Vegas, NV
		For detailed course information and on-line registration, visit the Varian website at http://www.varian.com/otrn/index.html.
1.32	3	INCLUDED EDUCATION: Eclipse IMRT Administration and Physics
		•      includes Tuition and Materials for ONE person. •      includes Travel and Living for ONE person •      Course is non-refundable and non-transferable. •      Offer is valid for 18 months after installation.
		The course will cover IMRT planning with the Eclipse System and the delivery of IMRT using Varian dMLC. The Varian IMRT solution will be presented during the course, including the integration into the VARIS Vision system. Course designed for the Physicist.
		Part ONE will cover the use of the Eclipse IMRT software encompassing the full treatment planning process with typical clinical case demonstration. Topics include IMRT planning algorithms, interfacing with other devices, definition of optimization parameters, QA procedures, and system commissioning. Part of the training course is reserved for hands-on training to covers typical clinical cases. A guest speaker will present on the use of IMRT planning in the clinical environment, clinical outcomes of IMRT, and radiobiological considerations (DVH, partial DVH, dose volume constraints).
		Part TWO covers delivery methods. Topics covered include a detailed description of the MLC hardware, the MLC and Clinac control systems for dynamic dose delivery, dMLC QA issues, and patient related QA procedures.
		Prerequisites: •      Attendance of Eclipse Administration and Physics Course and/or Eclipse Operations Course; •      2-3 month routine clinical use of Eclipse recommended
		Length & Location: 5 days Varian Education Center, Las Vegas, NV
		For detailed course information and on-line registration, visit the Varian website at http://www.varian.com/otrn/lndex.html. Course is ASRT approved for Category “A” and MDCB continuing education credits.

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	Quotation
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	21st Century Oncology - Corp. Headquarters & Administr., Fort

Item	Qty	Product Description	Offer Price
1.33	3	INCLUDED EDUCATION: Eclipse IMRT Operations
		•      Includes Tuition and Materials for ONE person. •      Includes Travel and Living for ONE person •      Course is non-refundable and non-transferable. •      Offer is valid for 18 months after installation.
		The IMRT course will cover inverse treatment planning with the Eclipse System. The Varian IMRT solution will be presented during the course, including the integration into the VARIS Vision system. Course designed for the Physicist and Dosimetrist.
		The entire treatment planning process is covered and demonstrated on typical clinical cases such as prostate, head and neck, brain, etc. Other topics covered are verification plan, data export, and contouring for IMRT. Part of the training course is reserved for hands-on training.
		Prerequisites: •      Attendance of Eclipse Operations Course; •      Recommend 2-3 month routine clinical use of Eclipse prior to course attendance.
		Length & Location: 4 days Varian Education Center, Las Vegas, NV
		For detailed course information and on-line registration, visit the Varian website at www.varian.com/onc/trn154a.html. Course is ASRT approved for Category “A” and MDCB continuing education credits.
1.34	3	INCLUDED EDUCATION: SRS/SRT Training Program
		•      Includes Tuition and Materials for ONE person. •      Includes Travel and Living •      Course is non-refundable and non-transferable. •      Offer is valid for 18 months after installation.
		The SRS/SRT training program covers stereotactic radiosurgery and/or stereotactic radiotherapy for treatment of Intracranial tumors and/or lesions. The course will utilize both lecture and a hands-on lab environment covering topics such as SRS clinical considerations and patient immobilization with optical positioning and pre-treatment QA of SRS. Students will participate in a hands-on lab session for both the QA of optical guidance and the pre-treatment QA. In addition, students will have the opportunity to observe 1 to 2 clinical SRS/SRT cases, including immobilization, imaging, treatment planning, pre-treatment QA and treatment delivery.
		The education course has two segments: 1)      Classroom education 2)      On-Site training at partner facility

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	Quotation
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	21st Century Oncology - Corp. Headquarters & Administr., Fort

Item	Qty	Product Description	Offer Price
		Varian will coordinate the travel arrangements between the classroom education and on-site training.
		Recommended Participants: Neurosurgeon, Radiation Oncologist, Medical Physicist
		Prerequisites: none
		Length & Location: Segment 1: Varian Education Facility, Atlanta, GA (2 days) Segment 2: Providence Hospital, Mobile, AL (2 days)
1.35	6	INCLUDED APPLICATIONS TRAINING: TPS
		•      On-site applications training for up to (2) users. •      Training is non-refundable and non-transferable. •      Offer is valid for 18 months after installation of product.
		The TPS purchase includes 1 day of clinical training at the customer’s facility focusing on TPS operations to promote safe clinical practices. For larger facilities with more than 2 users, additional training days may be necessary to meet specific facility training objectives. Additional training days are available for purchase in increments of up to 2 users, to be delivered in conjunction with the Included training.
		Prerequisites: none
		Length & Location: 1 day at Customer Facility
		For detailed Information visit the Varian website at http://www.varian.com/otrn/lndex.html.
		Dynamic Treatment Procedures
1.36	3	Enhanced Dynamic Wedge Delivers wedged dose distributions by varying the Independent collimators during the photon treatment. Seven wedge angles (10, 15, 20, 25, 30, 45, and 60 degrees), asymmetric field sizes, and up to 30 cm field width are provided.
		Automation
1.37	3	Remote Couch Motion Control of couch motion at the treatment console for: Corrective motions: small couch translations (in x, y, and z) and small rotations of the couch to fine tune patient set-up. Planned motions: large rotations of the couch to sequence between non-coplanar fields and arcs
		Prerequisites: Universal baseframe with a 52 inch turntable for full functionality Baseframe with a 36 inch turntable supported for translational motion ONLY.

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	Quotation
	GRB20050926-001A	Page: 14
	21st Century Oncology - Corp. Headquarters & Administr., Fort

Item	Qty	Product Description	Offer Price
1.38	3	Auto Field Sequencing Automates set up of all mechanical axes and beam parameters for each treatment field when used with a compatible record-and-verify system, such as VARIS Vision.
		Requires Extended Clinac Interface (EXCI)
		Dynamic MLC Techniques
1.39	3	Advanced Dynamic MLC Includes Arc Dynamic MLC, Dose Dynamic MLC per RAD 5610
		Verification
1.40	3	EXCI Interface to R&V System
1.41	3	4D Integrated Treatment Console gX 4D Integrated Treatment Console gX
		DESCRIPTION: Varian’s 4D Integrated Treatment Console gX provides a streamlined front end to the treatment delivery process. The 4D Console gX Integrates the user controls of the linear accelerator, multi-leaf collimator (MLC), and electronic portal imager into one application on a single workstation and provides the imaging control to manage advanced treatment processes such as 3D CRT, IMRT, and Dynamic Targeting™ IGRT. The 4D Console gX is required for On Board Imaging.
		FEATURES: 1.      Treatment delivery functionality including setup and record & verify 2.      Treatment delivery, Multi-leaf Collimator (MLC) setup and portal image acquisition from single application 3.      Supports auto field sequencing for uninterrupted treatment delivery 4.      Provides support for IMRT treatment techniques including sliding window, step-and-shoot and dynamic arc 5.      Supports 4-slot accessories for complex treatment techniques 6.      Supports Imaging of setup fields for pre-treatment plan verification 7.      Supports Image only sessions keeping treatment sessions in synch with fractionation pattern 8.      Supports Imaging of treated fields, before, during or after the treatment beam, for treatment verification needs 9.      Photos, activity and patient note display on treatment queue 10.    Interface hardware and software for C-Series Clinac (if not already installed).
		HARDWARE INCLUDED: 1.      ONE (1) dedicated 4D Integrated Treatment Console gX workstation; 2.      ONE (1) 20”LCD Monitor for Treatment workstation; and 3.      ONE (1) Verification Interface computer and cables.
		LICENSE: 4D Integrated Treatment Console gX license for ONE (1) C-Series Clinac.

This document is confidential and intended solely for the information and benefit of the immediate recipient and Varian

	Quotation
	GRB20050926-001A	Page: 15
	21st Century Oncology - Corp. Headquarters & Administr., Fort

Item	Qty	Product Description	Offer Price
		PREREQUISITES: 1.      Clinac C-Series Software version 6.x; 2.      Extended Clinac Interface (EXCI); 3.      In-room monitor; 4.      Millennium MLC 6.4 software, or later; 5.      Mark Series MLC 5.0 software, or later; 6.      Mark Series MLC Controller must be minimum Pentium architecture; 7.      Computer replacement must be purchased through Varian Medical Systems.
		NOTE (S):
		1.      Includes First Year Software Support Agreement covering software and hardware purchased from Varian; 2.      No third party software may be installed on the 4D Console gX by the user; 3.      Anti-Virus software SHOULD NOT be installed on VI, AVI, or EVI computers; and 4.      Anti-Virus software can be installed on the 4D Console gX but cannot be set to run in real-time mode.
1.42	3	4D ITC gX Configuration: VARIS Vision Network 6.5 or Higher
		Optional Treatment Procedures
1.43	3	Electron Arc Therapy: TBI, TBE and HDTSE A portfolio of special treatment procedures, including Total Skin Electron Treatment, Total Body Electron Irradiation, Total Body Photon Irradiation, and Electron Arc Treatment.
		Electron beam for high dose total skin electron (HDTSE) mode and total body electron (TBE) mode as selected in Energy for Special Electron Procedures.
1.44	3	Stereotactic Option 6MV SRS photon beam for stereotactic treatments Fixed or arc treatments 60 MU/degree Maximum field size of 15cm x 15cm
1.45	3	Stereotactic Option: 1000 MU/Min
1.46	3	Stereotactic Motion Disable for Exact Couch Includes mechanical couch locks and motion disable for stereotactic treatments. The couch locks prevent movement of the couch and support rails for enhanced patient positioning stability. Up to eight motor motions may be disabled
		Portal Dosimetry
1.47	3	Portal Dosimetry Portal Dosimetry Package:
		Provides capability to perform pre-treatment IMRT QA. Provides the ability to generate dose prediction images with the Eclipse planning system, to acquire dose images with the PortalVision electronic imager, and the

This document is confidential and intended solely for the information and benefit of the immediate recipient and Varian

	Quotation
	GRB20050926-001A	Page: 16
	21st Century Oncology - Corp. Headquarters & Administr., Fort

Item	Qty	Product Description	Offer Price
		ability to view and evaluate the correlation between images.
		Includes: •      One (1) Portal Dosimetry license (Dose Image Acquisition at one PortalVision, and one Vision Dosimetry Review license) •      One (1) Eclipse Portal Dose Calculation license •      Additional Eclipse Dose Calculation and Vision Dosimetry Review licenses can be purchased separately.
		Pre-Requisites: •      Eclipse 3D Treatment Planning System (not including SV) •      PortalVision amorphous silicon imaging system, or LC250 liquid ion imaging system •      Compatible version of VARIS Vision Information Management system, or •      Compatible version of Vision Image Management system •      Dedicated Vision image management server hardware.
1.48	3	INCLUDED EDUCATION: Portal Dosimetry
		•      Includes Tuition and Materials for ONE person. •      Travel and Living is responsibility of the customer unless otherwise stated. •      Course is non-refundable and non-transferable. •      Offer is valid for 18 months after installation.
		The Portal Dosimetry course will cover commissioning, calibration and operation of Portal Dosimetry system. Course intended for the Physicist.
		Among covered topics are: introduction to Portal Dosimetry system covering hardware and software, Portal Dosimetry calibration, acquisition of conventional portal images, acquisition of portal dose images for dynamic delivery, analysis of portal dose images, recommended QA tests. Data transfer to and from non-Varian equipment will be discussed. Course curriculum includes practical exercises with live beam using aS1500 Portal imager.
		Prerequisites: •      User of Varian PortalVision system, basic knowledge of Vision system
		Length & Location: 2 Days Varian Education Center, Las Vegas, NV
		For detailed course information and on-line registration, visit the Varian website at http://www.varian.com/otrn/index.html.
		Argus
1.49	3	Argus Base System Argus Base System
		The Argus Base System is the core system for an Argus quality assurance information management system. It includes a software license for up to three

This document is confidential and intended solely for the information and benefit of the immediate recipient and Varian

	Quotation
	GRB20050926-001A	Page: 17
	21st Century Oncology - Corp. Headquarters & Administr., Fort

Item	Qty	Product Description	Offer Price
		machines to be covered by Argus, unlimited instrument interfaces for supported test and measurement devices (see below), and a network license for up to 5 concurrent users.
		Machines that can be covered by Argus Include: •      Linear Accelerators (Varian or non-Varian) Including IMRT •      Simulators (including necessary Film Processor tests) •      CT Simulators •      HDR Brachytherapy Units •      Mammography Units (MQSA 1999 - including necessary Film Processor tests) •      CT Scanners •      R&F Unit (including necessary Film Processor tests)
		Argus interfaces to a wide variety of test and measurement devices. The complete list of devices may be found at:
		http://www.varian.com/argusinterfaces Features: A centralized quality assurance data repository with tools for automation of data acquisition, data analysis, tools for tracking, trending, graphing and reporting of QA data. Administrative tools for scheduling, oversight and communications are also included.
		Linear Accelerator QA includes tests specific to IMRT QA, including static and dynamic MLC QA. Also included are tests for analysis of fields and plans through use of DynaLog files (limited to Varian accelerators and MLCs) On-site Installation of the Argus software at the licensed facility. On-site Training: Two days of User training and configuration support
1.50	3	LINAC Module
1.51	3	CTSIM Module
1.52	3	INCLUDED APPLICATIONS TRAINING: Argus
		•      On-site applications training for up to (2) users. •      Training is non-refundable and non-transferable. •      Offer is valid for 18 months after installation of product.
		The Argus Base System purchase includes clinical training at the customer’s facility focusing on Argus functionality to promote safe clinical practices. For larger facilities with more than 2 users, additional training days may be necessary to meet specific facility training objectives. Additional training days are available for purchase to be delivered in conjunction with the included training.
		Prerequisites: Argus Base System
		Length & Location: 2 days at Customer Facility
		For detailed information visit the Varian website at http://www.varian.com/otrn/index.html.

This document is confidential and intended solely for the information and benefit of the immediate recipient and Varian

	Quotation
	GRB20050926-001A	Page: 18
	21st Century Oncology - Corp. Headquarters & Administr., Fort

Item	Qty	Product Description	Offer Price
		Additional Options
1.53	3	Respiratory Gating for Clinac Respiratory Gating for Clinac
		The RPM Respiratory Gating System is an accessory to the Varian Clinac radiation therapy treatment system/ Device is to be used to characterize (in simulation) the patient’s respiratory patterns, and aid in the visualization of internal organ or lesion motion and then, in treatment, to trigger beam-hold and limit the beam-on time to those points in the respiratory cycle where the target volume is within acceptable motion limits.
		FEATURES: •      Accurate tumor tracking allows maximum dose to tumor and minimum dose to normal tissue •      Quick and easy set respiratory monitoring minimizes treatment time •      Lightweight marker ensures patient comfort •      Predictive filter automatically holds treatment delivery when respiration deviates from normal pattern •      Superior Clinac design eliminates dark current during gating •      Treatment beam gating integrated with dynamic MLC leaf motion
		NOTE: Customer is responsible for prepping the system as instructed in the Respiratory Gating Pre-lnstall Guide.
1.54	3	Configured for Trilogy
1.55	3	INCLUDED EDUCATION: RPM Respiratory Gating
		•      Includes Tuition and Materials for ONE person. •      Includes Travel and Living for ONE person. •      Course is non-refundable and non-transferable. •      Offer is valid for 18 months after Installation.
		RPM Respiratory Gating is course covering basic operations, physics and QA of respiratory gating systems. Practical training will cover use of RPM Respiratory Gating on a simulator and a linear accelerator, QA tests and basic system maintenance.
		The clinical course offered by Department of Radiation Oncology, Virginia Commonwealth University. The aim of this course is to give the participants sufficient theoretical and practical knowledge of the principles and practice of respiratory gating in radiation oncology.
		Prerequisites: •      Basic knowledge of linear accelerator function and clinical use.
		Length & Location: 2 days Virginia Commonwealth University Medical Center

This document is confidential and intended solely for the information and benefit of the immediate recipient and Varian

	Quotation
	GRB20050926-001A	Page: 19
	21st Century Oncology - Corp. Headquarters & Administr., Fort

Item	Qty	Product Description	Offer Price
		For detailed course information and on-line registration, visit the Varian website at http://www.varian.com/otrn/index.html.
1.56	3	Additional Respiratory Gating Additional Respiratory Gating System
		The Addtional RPM Respiratory Gating System is an attachment to the Varian Clinac radiation therapy treatment system or a Simulation System (Standard or Virtual.) Device is to be used to characterize (In simulation) the patient’s respiratory patterns and aid in the visualization of internal organ or lesion motion and then, in treatment, to trigger beam-hold and limit the beam-on time to those points in the respiratory cycle where the target volume is within acceptable motion limits. Clinac system includes breathing phantom assembly.
		FEATURES: •      Accurate tumor tracking allows maximum dose to tumor and minimum dose to normal tissue •      Quick and easy set respiratory monitoring minimizes treatment time •      Lightweight marker ensures patient comfort •      Predictive filter automatically holds treatment delivery when respiration deviates from normal pattern •      Superior Clinac design eliminates dark current during gating •      Treatment beam gating integrated with dynamic MLC leaf motion
		SPECIAL NOTE: RPM Respiratory Gating unit configured for a CT Simulator does not include the necessary hardware and software components required to make the CT Scanner Respiratory Gating-ready. Additional equipment purchases may be necessary from the CT vendor. Please contact your Varian Imaging Manager for more information.
		NOTE: Customer is responsible for prepping the system as instructed in the Respiratory Gating Pre-Install Guide.
1.57	3	INCLUDED EDUCATION: RPM Respiratory Gating
		•      Includes Tuition and Materials for ONE person. •      Travel and Living is not Included unless otherwise stated. •      Course is non-refundable and non-transferable. •      Offer is valid for 18 months after installation.
		The RPM Respiratory Gating course covers basic operations, physics and QA of respiratory gating systems. Practical training will cover use of RPM Respiratory Gating on a simulator and a linear accelerator, QA tests and basic system maintenance. The aim of this course is to give the participants sufficient theoretical and practical knowledge of the principles and practice of respiratory gating in radiation oncology.
		Prerequisites: •      Basic knowledge of linear accelerator function and clinical use.

This document is confidential and intended solely for the information and benefit of the immediate recipient and Varian

	Quotation
	GRB20050926-001A	Page: 20
	21st Century Oncology - Corp. Headquarters & Administr., Fort

Item	Qty	Product Description	Offer Price
		Length & Location: 2 days Varian Education Center, Las Vegas, NV
		For detailed course information and on-line registration, visit the Varian website at http://www.varian.com/otrn/index.html.
1.58	3	Configured for GE CT Simulation - Discovery LS / ST Configured for GE CT Simulation - Discovery LS / ST
		Includes video tracking and image analysis system, high performance workstation, Respiratory Gating software, patient marker blocks, and User Manual.
		The RPM Respiratory Gating system is designed to interface to a GE Medical Systems Discovery LS or Discovery ST CT Scanner equipped for respiration-synchronized image acquisition*.
		*RPM Respiratory Gating unit configured for Discovery LS / ST does not include the necessary hardware and software components required to make the CT Scanner Respiratory Gating-ready. Additional equipment purchases may be necessary from the CT vendor. Please contact your Varian Imaging Manager for more information.
1.59	3	Laserguard LaserGuard provides an additional level of safety to automated Clinac iX operation. This is accomplished by monitoring the proximity of the patient or couch and the collimator face during remote movements, stopping or inhibiting Clinac IX motions prior to a potential collision. LaserGuard provides an additional “set of eyes” to monitor the sequence of events during remote motion by minimizing risk.
		LaserGuard monitors the area around the Clinac iX collimator cover equipped with an MLC with a plane of infrared sensing light that emanates from a device located within the gantry. Any object that intrudes into this area called the protection zone will result in gantry motion being halted per IEC specifications.
		Additional features Include: 1.      Protection zone plane inclined at three degrees to maximize clearance and system usability. 2.      The protection zone plane includes a conformal notch contour. 3.      LaserGuard set to override state when the treatment door is open for ease of setup. 4.      Self-clearing manual override button(s) for uses with accessories other than upper wedges. 5.      Indicators at both Console and Gantry to alert operator if the system detects an intrusion into the protection zone or the protection zone is overridden. 6.      Diagnostic panel for error analysis located behind stand door.
		NOTE: LaserGuard is a secondary collision detection system. It does not replace existing safety systems or the vigilance of the clinician. The clinician is expected to verify all patient and equipment clearances before executing any remote motion sequence.

This document is confidential and intended solely for the information and benefit of the immediate recipient and Varian

	Quotation
	GRB20050926-001A	Page: 21
	21st Century Oncology - Corp. Headquarters & Administr., Fort

Item	Qty	Product Description	Offer Price
		Description per RAD Document Note: Call upgrades for correct & compatible configuration.
		Services
1.60	3	Remote Access (Smart Connect)
1.61	3	Factory Data Set Factory-provided representative physical wedge profiles, machine mechanical parameters, and representative beam scans from Clinac IX systems.
		Warranties
1.62	3	Millennium Warranty Three Year Warranty on Klystron, Electron Gun, Standing Wave Guide, Bend Magnet, and Solenoid Energy Switch, provided Varian is sole service provider.
1.63	3	Two Year Full Warranty
		Section Total $	7,200,000.00
Section 2
		Maintenance, Installation and Freight
2.01	3	Clinac iX Installation: 3 Piece Rigging INSTALLATION RESERVES: THESE PRICES ARE FOR GROUND LEVEL ACCESS ONLY. THE SHORING OF FLOORS, WIDENING OF DOORWAYS, AND ANY OTHER NON-STANDARD RIG-IN REQUIREMENTS ARE EXCLUDED AND WILL BE QUOTED SEPARATELY IF REQUIRED.
2.02	3	Clinac iX Installation: Utility Connection
2.03	3	Clinac iX Installation: Baseframe Rigging
2.04	3	Clinac iX Installation: Grouting
2.05	3	Clinac iX Freight & Insurance: Southeast
		Section Total $	0.00
		Quotation Total $	7,200,000.00

This document is confidential and intended solely for the information and benefit of the immediate recipient and Varian

	Quotation
	GRB20050926-001A	Page: 22
	21st Century Oncology - Corp. Headquarters & Administr., Fort

Item Qty
Product Description     Offer Price

Terms & Conditions of Sale

This offer is subject to credit approval and is exclusive of any applicable sales taxes or duties.

Three Trilogies will ship on or before September 30, 2005 to Varian authorized warehouse.

High Photon energies will be as follows:

Port Charlotte - 10MV

South Naples - 15MV

Cape Coral - 18MV

FINANCING AVAILABLE: For lease and finance plans, call Tony Susen, Director - Varian Customer Finance, at (508) 668-4609.

This document is confidential and intended solely for the information and benefit of the immediate recipient and Varian

VARIAN MEDICAL SYSTEMS, INC. | ONCOLOGY SYSTEMS & INDUSTRIAL EQUIPMENT 3100 Hansen Way, Palo Alto, CA 94304 (“Varian”)

Terms and Conditions of Sale

1. Applicable Terms and Conditions

These Terms and Conditions of Sale, including any exhibits, schedules, addenda, and other attachments (collectively, the “Agreement”), shall govern Varian’s furnishing of all products (“Products”), including hardware products manufactured by Varian (“Varian Hardware”) and software products created or licensed by Varian or provided to Customer by Varian under the terms of a Varian Support Schedule or agreement, if any (“Varian Software”), and services (“Services”) identified in the applicable Varian quotation (“Quotation”) issued to the customer identified in such Quotation (“Customer”). The Software Schedule, if applicable, shall govern all Varian Software other than firmware and operating system software loaded on Varian Hardware. The Support Schedule, if applicable, shall govern all Services. While Varian may acknowledge receipt of a purchase order issued by Customer by signing and returning it, any Customer terms and conditions in any specific order documentation, preprinted or otherwise, shall be inapplicable and shall not modify this Agreement.

2. Quotations and Prices

(a) A Quotation shall expire at the end of the period identified in the Quotation, or if none is stated in the Quotation, the Quotation shall expire sixty (60) days from the date of issuance. A Quotation to a non-U.S. customer shall be considered a solicitation for an offer to purchase, (b) Varian’s prices exclude, and Customer shall be responsible for, all ordinary and necessary charges incidental to the sale incurred by Varian and billed by Varian to Customer, including but not limited to charges for all taxes or levies of whatever nature arising out of or in connection with this Agreement, including the sale, delivery, ownership, or use of the Products or performance of the Services, but excluding taxes based on Varian’s net income. Customer shall reimburse Varian in full for any such taxes or levies that are paid in advance by Varian for Customer. If Customer asserts that any transaction under this Agreement is tax exempt, Customer shall provide to Varian a tax or levy exemption certificate acceptable to the taxing or levying authority. The total price to Customer shall be adjusted to include costs of transportation, special packing, and insurance incurred by Varian in accordance with agreed shipping and risk terms, (c) Varian’s acceptance of any order and Varian’s performance are expressly conditioned upon Customer’s compliance with all applicable codes, regulations, and recommendations of competent health or radiation-protection authorities affecting Products or installation and use of the Products, and Varian’s approval of Customer’s credit, (d) Customer shall disclose the dollar value of any discounts or reductions in price for the Products and Services furnished by Varian in Customer’s costs claimed or charges made to Medicare, Medicaid, and any other federal, state, or local program providing reimbursement to Customer.

3. Payment

The payment schedule and payment terms arc set forth in the Quotation or contract agreed to in writing and signed by an authorized representative of Varian, provided, however, that if installation is not completed until six (6) months after delivery of the Product pursuant to item (4) in Section 8, then all remaining unpaid balances shall become immediately due regardless of the payment schedule in such Quotation or contract. Varian may charge interest for past due balances up to the maximum amount permitted by applicable law. For partial shipments, Products will be billed when shipped. Varian may cancel or delay delivery of Products when Customer’s payments are late under any orders with Varian. Varian shall retain a purchase money security interest in all Products until Customer has made payment in full to Varian of all sums due, including late fees and collection costs. Customer agrees to execute any financing statements or other documents requested by Varian, which may be reasonably necessary to perfect such security interest. All down payments, if any, are non-refundable, and Varian shall retain them as damages for unauthorized termination or cancellation.

4. Transportation and Risk of loss

Except as otherwise provided in this Agreement, or in accordance with expressly agreed Incoterms 2000, all shipments are Ex Works (Incoterms 2000) Varian’s plant with Varian selecting the transportation company. Unless otherwise expressly agreed in writing, transportation to Customer’s site will be in “air ride” vans, and Varian may insure to full value of Products shipped at Customer’s expense or declare full value to the transportation company at time of shipment.

5. Architecture

Varian will have no approval or other responsibility for any matter affecting or related to the adequacy of Customer’s operating permit, architectural design, the radiation protection walls and barriers, patient viewing devices, compliance with all facility personnel safety devices and related inspections, utility service design and location, and other details pertaining to Customer’s site.

6. Installation

This Section applies only if Customer is purchasing linear accelerator or simulator products. Except as otherwise agreed, Customer will provide labor and rigging services to unload the subbase frame and the Product from the transport vehicle and move them to their final positions. Customer will be responsible for the setting and grouting of the subbase frame and the connection of the Product to the utilities, and Varian will notify Customer approximately ninety (90) days prior to scheduled Product shipment to allow Customer to provide for and coordinate rigging services, unloading, and final positioning. A Varian representative will monitor the movement, final positioning, and connection of the Product. Customer will be responsible for having the building, utilities, lighting, ventilation, air conditioning, mounting facilities, all necessary radiation shielding, and access to the room completed on the estimated delivery date and ready for installation of the Product. Where Varian supervises such work, Varian shall act solely as Customer’s agent and shall have no responsibility or liability of any kind for such work. If delays in completion of such work delay installation, Customer will reimburse Varian at Varian’s standard service rates for any extra time and/or travel by Varian made necessary by the delay. Varian shall have no obligation to operate Products to complete installation or testing unless Customer has provided adequate radiation shielding protection and other site preparations for the safety and protection of Customer’s and Varian’s personnel and Products. Upon

completion of installation, Varian’s representatives will demonstrate proper machine operation by performing Varian’s standard test procedures. Customer shall provide a representative who shall be present at all times during installation and be capable of assisting where necessary. When no representative is present or assistance from Customer is not available when required by Varian, Varian may discontinue installation and shall charge Customer for any additional costs incurred including Varian’s standard service rates. Should completion of installation be delayed due to union action or influence, Customer shall, as soon as possible, make such arrangements as may be necessary for Customer to carry out the work at Customer’s expense under the engineering supervision of Varian. Except as otherwise expressly provided by Varian in published Specifications or specific Varian offers, Customer shall be responsible for obtaining all permits and for meeting all requirements relating to applicable state and local codes, registrations, regulations, statutes, and ordinances affecting Products, including their uses and services.

7. Calibration and Radiation Surveys

For linear accelerator and simulator Products, Customer shall be responsible for all Product calibration. The dose rate and integrated dose measured by the accelerator transmission ionization chamber and dosimetry electronics must be calibrated by a qualified radiological physicist prior to use of the Product for patient treatment. Customer shall be responsible for testing and calibrating the Product on a regular basis. Customer also shall be responsible for any radiation surveys required by applicable law or regulation or necessary to establish that radiation does not exceed safe levels. For simulator Products, Varian’s obligation to calibrate shall be limited to that required by local law. In the United States calibration shall be limited to those certified components that arc required under 21 C.F.R. 1020.30(d) (U.S. Code of Federal Regulations) to be calibrated by the installer where Varian is the installer. Customer shall be responsible for all other calibrations of simulator Products.

8. Completion of Installation

Within three (3) days of delivery, Customer shall examine fully the Product delivered and make all applicable complaints and claims arising out of such delivery to the carrier in writing, and shall provide a copy to Varian. Where Varian Hardware installation is provided, completion of installation shall occur upon the earlier of (1) completion of Varian’s applicable standard test procedures, (2) Customer’s execution of Varian’s acceptance form, (3) use of any Product by Customer, its agents, employees, or licensees, for any purpose after its receipt, or (4) six (6) months after delivery of the Product. Prior to completion of installation, Varian may repair or, at its option, replace defective or nonconforming parts after receipt of notice of defect or nonconformity. After completion of installation, Customer’s remedies shall be solely as provided in the warranty. After six (6) months after delivery of the Product Varian shall no longer be required to provide installation services.

9. Cancellations and Modifications

No order accepted by Varian may be terminated, canceled or modified by Customer except by prior mutual agreement in writing. Where Customer breaches this clause, Customer agrees to pay to Varian all damages incurred by Varian, including a charge determined solely by Varian to cover the reasonable costs of processing, order handling, retesting, repackaging, lost profits, and other damages as determined in accordance with applicable law and this Agreement.

10. Use Restrictions

Customer shall not decompile, disassemble, or reverse engineer any part of Varian Hardware except to the extent such prohibition is void under applicable law.

11. Firmware and Operating Systems

The Product may contain internal system code that executes below the external user interface and which is integral to the operation of the Product (“Firmware”), as well as operating system software (“Operating Systems”). Varian, or its suppliers, own all Firmware and Operating Systems. Except where such Firmware or Operating System is owned by a third party which licenses it directly to Customer, Varian hereby grants Customer, only for so long as Customer shall own the Product, a limited, personal, non-transferable, non-exclusive license to use the applicable Firmware and Operating System as part of the normal operation and maintenance of the Product. Customer shall not otherwise copy, print, alter, decompile, disassemble, reverse engineer, decode, or translate Firmware or Operating System except to the extent such prohibition is void under applicable law. Customer agrees that these provisions shall also apply to any copies of Firmware and Operating Systems in Varian products that Customer acquires from third parties.

12. Third Party Products

Varian may resell or license third party Products. Where such Products are sold or licensed on a stand-alone basis or provided on a stand-alone basis as replacement parts, they may be delivered to Customer with such third party supplier’s usage guidelines and restrictions, software licenses, and/or warranties. In such situations Customer agrees that its use of such third party Products shall be subject to such guidelines, restrictions, and licenses. Third party supplier warranties shall be governed by Section 14 (Warranty).

13. Proprietary Notices and Confidentiality

Varian or Varian’s licensors own all right, title, and interest (including without limitation all intellectual property rights) in and to all drawings, designs, specifications, manuals, and software furnished by Varian to the Customer. All such materials and software are furnished in confidence to Customer, except as may be found in the public domain, and shall be held in strict confidence by Customer with the same degree of care with which Customer protects its own confidential information, but in no event less than reasonable care. Customer shall not remove, alter, or obscure any copyright, trademark, trade secret, government restricted rights, or other proprietary or confidentiality notices or legends from any copy of such materials and software that are (i) placed or embedded by Varian or its licensors in the software, (ii) are displayed when the software is run, or (iii) are applied to the Products, their packaging, labels, or any other materials provided under this Agreement.

14. Warranty

Warranty for Varian Hardware: Varian warrants that Varian Hardware and any Firmware and Operating System loaded on such Varian Hardware, except where such Firmware or Operating System is owned by a third party which licenses it directly to Customer, to be free from defects in material and workmanship and in substantial compliance with operational features of Varian’s published specifications for the applicable Product at the time of sale (“Specifications”). This warranty shall begin upon completion of installation and continue for a period of one year from such date, but not to exceed two (2) years from date of shipment from Varian to Customer. In lieu of the foregoing periods, specific components of Varian Hardware may have different warranty periods, prorated replacement credits, and return policies, as stated on the applicable Varian warranty forms supplied by Varian to Customer with this Agreement. Weights and dimensions in the Specifications are approximations. Clerical and typographical errors are subject to correction. Occasionally, Varian may substitute remanufactured parts and components that meet the same quality standards as

other materials and are covered by the same warranty. Parts for which Varian has provided replacements shall, at Varian’s option, become the property of Varian.

Warranty Remedies: Customer’s sole and exclusive remedy for any failure of Varian Hardware or Firmware or Operating System under this Section to perform shall be repair or, at Varian’s option, replacement of such defective Products in whole or in part during Varian’s normal business hours. If in Varian’s sole opinion such repair or replacement is not feasible, or if such remedy fails of its essential purpose, Varian may refund or credit a portion of any sums paid by Customer for the defective Product. In-warranty repair or replacement parts are warranted only for the unexpired portion of the original warranty period.

Warranty for Software and Services: Warranties for Varian Software, excluding Firmware and Operating Systems loaded on Varian Hardware, and Services, if any, shall be as set forth in the Software Schedule and Support Schedule, respectively.

Exclusions from Coverage: Any warranty or liability is excluded where the warranty claim, in Varian’s reasonable opinion, arises out of (1) accident or neglect, (2) use of the Products in a manner not authorized by Varian, (3) lack of routine care or maintenance as indicated in any Varian operating or maintenance instructions, (4) failure to use or take any proper precautions under the circumstances, or (5) user modification of any Product.

Other Supplier Warranties: Warranties given by other suppliers of equipment, accessories, components, or computer software not normally provided by Varian as part of its standard product offerings, which warranties are expressly made available by the supplier to be passed on to the Customer, shall be passed on by Varian as designated by the applicable supplier to Customer, subject to all limitations imposed on Varian by the supplier. In no event shall Varian have any liability with respect to such third party equipment, accessories, components, software, or warranties provided by such other suppliers, nor shall Varian have any liability for failure of such suppliers to perform on their warranties.

EXCLUSIONS OF IMPLIED WARRANTIES: THIS LIMITED WARRANTY IS EXPRESSLY IN LIEU OF AND EXCLUDES ALL OTHER EXPRESS OR IMPLIED WARRANTIES, REPRESENTATIONS, OR CONDITIONS, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY AND OF FITNESS FOR A PARTICULAR PURPOSE.

15. Intellectual Property Infringement

Varian shall defend, at its expense, any third party claim brought against Customer that the design or manufacture of any Varian Hardware or Varian Software furnished by Varian to Customer under this Agreement infringes any patents or other intellectual property rights of the country where Customer takes delivery of the Product (“Claim”), and shall pay any settlement and any damages, costs, and attorneys’ fees finally awarded against Customer arising out of a Claim; the foregoing is conditioned upon Customer notifying Varian immediately in writing of the Claim, giving Varian sole control of the defense, management, and settlement of the Claim, and, upon request, at Varian’s cost, reasonably cooperating with Varian in such defense. If (1) such Product’s use is enjoined as a result of any Claim, or (2) in Varian’s opinion, such Product is likely to become subject to a Claim, Varian shall, at its expense and sole option, (a) modify the Product so that it becomes non-infringing; (b) procure for Customer the right to continue to use the Product; (c) substitute for the infringing Product another product having a functionality equivalent to the Product; or (d) accept return of the Product and refund its purchase price, less reasonable depreciation. Varian EXPRESSLY EXCLUDES from liability and Customer shall indemnify and hold Varian harmless from: (1) settlements and their related costs and expenses where Customer settles Claims without Varian’s prior written consent; and (2) any Claims arising out of (i) use of the Product in a manner not authorized by Varian; (ii) modification of the Product except modifications performed by Varian or pursuant to Varian’s instructions; (iii) combination of the Product with any other equipment, apparatus, software, processes, or materials not furnished by Varian; or (iv) compliance by Varian with Customer’s designs, specifications, or instructions; where such infringement would not have occurred but for such use, modification, combination, or compliance. This Section states Varian’s entire liability for any claim based upon or related to any alleged infringement of any patent or other intellectual property rights.

16. Bodily Injury

With respect to bodily injury liability to third parties, Varian shall be responsible in such proportion as reflects its relative fault, and Customer shall be responsible for all other liability for damages arising from or in any way related to the use or operation of any Varian Hardware or Varian Software by Customer, its employees, agents, or other non-Varian personnel. Notwithstanding the foregoing and regardless of any fault or neglect attributable to Varian, Varian shall have no responsibility whatsoever for, and Customer shall indemnify, defend, and hold Varian harmless from, any and all damage or injury which arises from or relates to (1) any use, operation, or service of any Product by anyone other than Varian personnel prior to completion of applicable acceptance tests by Varian and the radiation survey by Customer, or (2) any use, operation, or service of any Product contrary to any written warning or instruction given by Varian with respect to such Product, including but not limited to unauthorized use and/or modification of any equipment, components, software, or accessories by any user, or their use on or with any explosive or incendiary materials, or (3) claims or damages associated with any non-Varian design, manufacture, or installation of any product or any custom design, manufacture, or installation by Varian that is performed pursuant to Customer’s specifications, designs, or plans. This Section states Varian’s entire liability for bodily injury.

17. LIMITATIONS OF LIABILITY

IN NO EVENT SHALL VARIAN OR ITS SUPPLIERS OR LICENSORS BE LIABLE UNDER CONTRACT, TORT, OR ANY OTHER LEGAL THEORY FOR INCIDENTAL, CONSEQUENTIAL, INDIRECT, PUNITIVE, OR SPECIAL LOSSES OR DAMAGES OF ANY KIND, INCLUDING BUT NOT LIMITED TO LOST BUSINESS, LOST PROFITS, LOSS OF USE, OR LOSS OF OR DAMAGE TO DATA, HOWEVER CAUSED, WHETHER FORESEEABLE OR NOT, EVEN IF VARIAN IS ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. VARIAN AND ITS SUPPLIERS AND LICENSORS’ TOTAL LIABILITY IN DAMAGES OR OTHERWISE SHALL NOT EXCEED THE PAYMENT, IF ANY, RECEIVED BY VARIAN FOR THE UNIT OF PRODUCT OR SERVICE FURNISHED OR TO BE FURNISHED RESULTING IN THE LOSS OR DAMAGE CLAIMED. THESE LIMITATIONS SHALL APPLY NOTWITHSTANDING THE FAILURE OF THE ESSENTIAL PURPOSE OF ANY LIMITED REMEDY. CUSTOMER ACKNOWLEDGES THAT THESE LIMITATIONS OF LIABILITY ARE MATERIAL PARTS OF THE BARGAIN BETWEEN THE PARTIES AND THAT PRICES FOR THE PRODUCTS WOULD BE HIGHER WITHOUT THEM. Liability to third parties for bodily injury, including death, resulting from Varian Hardware or Varian Software shall not be affected by the liability limitations stated above in this Section.

18. Export Compliance

Customer acknowledges and agrees that the Products and related technology subject to this Agreement are subject to the export control laws and regulations of the United States, and Customer agrees to comply with such laws and regulations. The obligations of this Section as to these laws shall survive any termination of this Agreement.

19. Force Majeure

Neither party shall be liable for any delay in performance which is due to causes beyond its control. Provided any such delay is neither material nor indefinite, performance shall be deemed suspended during the event causing such delay plus a reasonable period of time after such event, and the other party shall accept such delayed performance.

20. Disputes, Arbitration, and Applicable Law

Any dispute, controversy or claim of any kind arising out of or relating to this Agreement, including the jurisdiction of the arbitration panel and claims in tort, shall be settled by final and binding arbitration. For sales to U.S. customers, arbitration shall be in the state of Varian’s corporate domicile under the rules and procedures of the American Arbitration Association (“AAA”). For sales to non-U.S. customers, arbitration shall be in the place of Varian’s corporate domicile under the UNCITRAL Arbitration Rules in effect on the date of this contract, and the appointing authority shall be the AAA. The governing law of the substance of this contract shall be the commercial law of the state or country of Varian’s corporate domicile, and the United Nations Convention for the International Sale of Goods shall not apply. The procedural law shall be the law of the place where arbitration is conducted. Arbitral proceedings shall be conducted in English. The arbitration tribunal shall not award punitive damages. The expenses of the arbitration, including the arbitrator’s fees, expert witness fees, and attorney’s fees, may be apportioned between the parties in any manner deemed appropriate by the arbitrator; however, in the absence of any formal ruling by the arbitrator each party shall share equally in the payment of the arbitrator’s fees and bear its own costs, expert witness fees, and attorney’s fees. The arbitration award shall be final and binding, shall be the sole and exclusive remedy regarding any and all claims and counterclaims presented, and may not be reviewed by or appealed to any court except for enforcement. Nothing in this contract shall prohibit Varian from seeking to prevent any unauthorized copying, disclosure, use, retention or distribution of its intellectual or other property by injunctive relief or otherwise in a court of law. Varian shall have the exclusive right to bring legal action for failure to pay for Products or Services furnished in the courts of Varian’s corporate domicile or any other place.

21. Limitation of Claims

No claims, regardless of form, arising out of, or in any way connected with this Agreement or the Products or Services may be brought by Customer more than one year after the cause of action has accrued or performance under this Agreement has been completed or terminated, whichever is earlier.

22. Notices

Any notices required or permitted to be given pursuant to this Agreement shall be in writing, delivered (1) in person, (2) by international courier, (3) by first class certified mail, return receipt requested, or its international equivalent, or (4) by facsimile with confirmation of delivery and an extra copy mailed. All such notices shall be addressed to Varian at Legal Department, Varian Medical Systems, Inc., 3100 Hansen Way, M/S E-250, Palo Alto, CA 94304, fax 650-424-5998, and to Customer at the address and/or fax numbers set forth in the Quotation or to such other address as may be specified from time to time by notice in writing to the other party. Notice shall be deemed to have been given when received.

23. Headings

Headings used in this Agreement are for ease of reference only and will not be used to interpret any part of this Agreement.

24.Entire Agreement

This Agreement contains the complete and exclusive statement of the terms of agreement of the parties with respect to this subject matter, and supersedes all prior and contemporaneous understandings, representations, and warranties, written and oral. This Agreement may be amended or modified only in a writing signed by both parties. If a court or arbitrator holds any part of this Agreement to be illegal, unenforceable, or invalid in whole or in part for any reason, the validity or enforceability of the remaining provisions, or portions of them, will not be affected, and such provisions will be changed and interpreted so as to best accomplish the objectives of such enforceable or invalid provision within the limits of applicable law or court decisions.

25. Waiver

No term or provision of this Agreement shall be deemed waived by other party, and no breach excused by either party, unless the waiver or consent shall be in writing signed by an authorized representative of the party granting such waiver or consent.

26. Assignment

Customer may not assign its rights nor delegate its duties under this Agreement without the written consent of Varian, and any attempted assignment without such consent will be void. Varian may assign or otherwise transfer its rights or delegate its duties under this Agreement, in whole or in part, to a subsidiary or affiliate, or a purchaser or transferee of substantially all of the assets used by Varian in its business to which this Agreement relates without notice to, or obtaining the consent of, any other party.

27. Counterparts

This Agreement may be executed in two counterparts, each of which will be an original and together which will constitute one and the same instrument.

RAD 1652R	Copyright © 2004 Varian Medical Systems	Printed in U.S.A 4/04

	Quotation
	GRB20050531-001	Page: 1

Quotation For:	Please address inquiries and replics to:
Daniel Galmarini 21st Century Oncology - Corp. Headquarters & Administr. 2234 Colonial Blvd. Fort Myers, FL 33907 (239) 931 - 7333 FAX: (239) 931 - 7380	Glenn R. Barrow Varian Medical Systems 2250 Newmarket Parkway Suite 120 Marietta, GA 30067 (770) 955 - 1367 FAX: (678) 255 - 3850

Your Reference:		Quotation Firm Until:	June 30, 2005
FOB Point:	ORIGIN	Shipping Allocation:	08/10/2005
Payment Terms:	2%/88%/10%	Varian Terms and Conditions of Sale 1652R Attached

North Naples, FL Location

Special Stereotactic Configuration Clinac Upgrade

SonArray

Stereotactic System

21st Century Oncology - Corp. Headquarters & Administr.				Varian Medical Systems
Accepted by:
Signature:	/s/ David M. Koeninger			Submitted by:
Name:	David M. Koeninger
Title:	EVP/ CFO			(Signature)
Date:	6/30/05			Name:	Glenn R. Barrow
For this purchase, we designate “NONE” as our Institution’s Primary Group Purchasing Organization Affiliation Any change will be Indicated below:				Title:	District Sales Manager
¨ AmeriNet	¨ Broadlane	¨ Colisorta	¨ Direct Med	Date:	May 31, 2005
¨ HPG	¨ Magnet	¨ MedAssets	¨ Novation
¨ Premier	¨ Salich	¨ Sutter	¨ UHS
¨ US Cancer	¨ USO	¨ VA DPSC	¨ VA Gov
¨ None

This document is confidential and intended solely for the information and benefit of the immediate recipient and Varian

	Quotation
	GRB20050414-001	Page: 2
	21st Century Oncology - Corp. Headquarters & Administr., Fort

Item	Qty	Product Description	Offer Price
Section 1 Special Stereotactic Configuration Clinac Upgrade
		PortalVision
1.01	1	PortalVision: aS1000 aS1000 for 4D Integrated Treatment Console
		PortalVision aS1000 uses amorphous silicon imaging technology to offer ultra performance, high resolution, high contrast images with the MV treatment beam using less dose to the patient. This aids in immediate and confident setup verification for both simple and complex treatments including IMRT. High-resolution images with better definition of small structures allow the treatment field edges and included anatomy and surrogate targets to be more easily viewed. Systematic errors may be calculated and later eliminated or reduced, which in turn helps to speed the delivery and improve the accuracy of conformal and IMRT treatment delivery. PortalVision may also be used for pre-treatment QA of IMRT plans using optional software. The aS1000 Imaging system, used for IMRT integrated imaging, can be used at higher dose rates with greater resistance to saturation than the aS500 imaging system.
		PortalVision aS1000 for 4D Integrated Treatment Console Description PortalVision is a hardware and software package designed to provide the linear accelerator with Electronic Portal Imaging capabilities. The package includes the image acquisition hardware and robotic arm to position imager, Image Acquisition and Vision review applications software including Match and Review capabilities.
		Features Image acquisition task includes: image acquisition before, during, or after treatment beam; image review with manual matching software, and RT Chart access •       Review software provides Image enhancement and analysis tools for PortalVision Images; automated matching tools for treatment setup verification; image approval; archive/restore and system administration capabilities •       Compatible with VARiS Vision database •       Hardware IAS3 High performance Image Acquisition H/W •       Image detector unit: •       1024 x 768 Amorphous Silicon detector •       400 x 300 mm active Imaging area •       Amplifier, switching and console electronics •       Retractable robotic arm with motorized vertical, longitudinal, and lateral movements to hold and position detector; IR hand pendant controller
		License 1.      PortalVision acquisition and review capability for 4D Integrated Treatment Console 2.      Vision Image Manager license for ONE (1) concurrent user
		Notes 1.      Includes 90 day software warranty;

This document is confidential and intended solely for the information and benefit of the immediate recipient and Varian

	Quotation
	GRB20050414-001	Page: 3
	21st Century Oncology - Corp. Headquarters & Administr., Fort

Item	Qty	Product Description	Offer Price
		2.      ONE (1) year hardware warranty beginning on day of acceptance 3.      Includes 2 days applications training up to 8 users; 4.      PortalVision software is limited to ONE control workstation; Vision Image Manager software may float within Vision network 5.      VARIS Vision hardware and software is sold separate from PortalVision 6.      PortalVision is compatible with a full VARIS Vision system (requires additional hardware and software licenses).
1.02	1	PortalVision Configuration: Vision Network 6.5 or Higher
		On-Board Imager
1.03	1	On-Board Imager On-Board Imager Provides high-quality kV images in the treatment room for target localization, patient positioning and motion management. The following clinical capabilities and hardware are included:
		A.     Online setup correction based on two kV radiographs, a kV and a MV radiograph or two gated kV radiographs B.     Automated and manual alignment of a pair of radiographs to their reference images C.     Online setup correction based on radio-opaque markers D.     Pre-treatment verification of gated treatment portals using kV fluoroscopy E.     Two motorized Exact robotic arms to hold and position the kV source and kV imager, with Infrared hand pendant control F.      X-Ray source, 40-150 kVp G.     Image Detector, amorphous silicon device with 400 x 300mm active imaging area H.     On-Board Imager workstation and dedicated keyboard
		Prerequisites: A.     PortalVision with Exact Arm B.     VARIS Vision Information System or compatible 3rd-party information system C.     RPM Respiratory Gating System (for gated image applications) D.     SomaVision Treatment Planning (for Marker Match application) E.     Remote Couch Motion
1.04	2	INCLUDED EDUCATION: On-Board Imaging Clinical Implementation
		•      Includes Tuition and Materials for ONE person. •      Travel and Living is responsibility of the customer unless otherwise stated •      Course is non-refundable and non-transferable. •      Offer is valid for 18 months after installation.
		The On-Board Imaging (OBI) Clinical Implementation course provides the initial training for the individual who is responsible for the Implementation and the

This document is confidential and intended solely for the information and benefit of the immediate recipient and Varian

	Quotation
	GRB20050414-001	Page: 4
	21st Century Oncology - Corp. Headquarters & Administr., Fort

Item	Qty	Product Description	Offer Price
		departmental training of the OBI system. The course will provide an overview of how the OBI system communicates with the Clinac and the verification system, basic OBI maintenance procedures, and hands-on training for customer acceptance and quality assurance procedures. Course is designed for the Physicist or Senior Therapist.
		The OBI course will also provide hands-on training on how to prepare the plan for treatment utilizing the OBI system, how to acquire kV and MV images, and how to perform a marker match utilizing 3D image sets from Eclipse.
		An additional half-day of training is offered to the experienced users of RPM Respiratory Gating. The additional half-day of training is geared towards users that will be implementing the OBI system as part of their established RPM treatment protocol. The half-day training will cover a basic review of the OBI System and RPM integration in the clinical environment. It is highly recommend that all users intending to participate in the additional half-day of training to have previously attended the RPM course offered at Virginia Commonwealth University Hospital. The training is an extension to the RPM Respiratory Gating course and is not an acceptable replacement for RPM product training.
		Prerequisites: •      Experience users of Varian Clinac Linear Accelerator •      VARIS Vision, version 6.5 or 7.0 or Treatment RV for OBI •      PortalVision •      Working knowledge of Eclipse for OBI Marker Match
		Length & Location: 3 Days, plus optional 1/2 day for RPM Respiratory Gating (See Note 1) Varian Education Center, Las Vegas, NV
		1) For the additional 1/2 day RPM Respiratory Gating course session, it is recommended participant to have previously attended the Respiratory Gating course at Virginia Commonwealth University and/or be an active user of RPM Respiratory Gating.
		For detailed course information and on-line registration, visit the Varian website at http://www.varian.com/otrn/index.html.
1.05	1	INCLUDED APPLICATIONS TRAINING: OBI
		•      On-site applications training for up to (4) users. •      Training is non-refundable and non-transferable. •      Offer is valid for 18 months after installation of product.
		The OBI purchase Includes a 2-day clinical training1 at the customer’s facility focusing on OBI functionality to promote safe clinical practices. On-site training supplements the OBI Clinical Implementation course. For larger facilities with more than 4 users, additional training days may be necessary to meet specific facility training objectives. Additional training days are available for purchase to be delivered in conjunction with the Included training.

This document is confidential and intended solely for the information and benefit of the immediate recipient and Varian

	Quotation
	GRB20050414-001	Page: 5
	21st Century Oncology - Corp. Headquarters & Administr., Fort

Item	Qty	Product Description	Offer Price
		Prerequisites: •      Attend OBI Clinical Implementation Course: same participant must be present for the on-site training component.
		Length & Location: 2 days at Customer Facility1
		1 If OBI is purchased in conjunction with the Treatment RV for OBI Package - the on-site training component will extend 1-day to include Treatment RV follow-up training in conjunction with the OBI training. OBI on-site training will follow the Treatment RV on-site training by a minimum of 2 weeks.
		For detailed information visit the Varian website at http://www.varian.com/otrn/index.html.
1.06	1	Cone Beam CT for On-Board Imager FEATURES: Cone-beam CT acquires a volumetric CT dataset, while the patient is on the treatment couch, and allows the patient to be repositioned - by comparing the locations of soft-tissue and bony anatomy visible in the cone-beam CT images with the locations of the same anatomy in the planning (reference) CT images.
		INCLUDED: Hardware and software to acquire and reconstruct 3D volumetric datasets and match these with reference 3D CT images.
		PRE-REQUISITES: On-Board Imager hardware, with software version 1.0.15 or later.
1.07	1	Remote Couch Motion Control of couch motion at the treatment console for: Corrective motions: small couch translations (in x, y, and z) and small rotations of the couch to fine tune patient set-up. Planned motions: large rotations of the couch to sequence between non-coplanar fields and arcs
		Prerequisites: Universal baseframe with a 52 inch turntable for full functionality, Baseframe with a 36 inch turntable supported for translational motion ONLY.
		Optional Treatment Procedures
1.08	1	Stereotactic Motion Disable for Exact Couch Includes mechanical couch locks and motion disable for stereotactic treatments. The couch locks prevent movement of the couch and support rails for enhanced patient positioning stability. Up to eight motor motions may be disabled
		Beam Accuracy
1.09	1	Beam Isocenter Accuracy: Standard

This document is confidential and intended solely for the information and benefit of the immediate recipient and Varian

	Quotation
	GRB20050414-001	Page: 6
	21st Century Oncology - Corp. Headquarters & Administr., Fort

Item	Qty	Product Description	Offer Price
		Additional Options
1.10	1	Respiratory Gating for Clinac Respiratory Gating for Clinac
		The RPM Respiratory Gating System is an accessory to the Varian Clinac radiation therapy treatment system/ Device is to be used to characterize (in simulation) the patient’s respiratory patterns, and aid in the visualization of internal organ or lesion motion and then, in treatment, to trigger beam-hold and limit the beam-on time to those points in the respiratory cycle where the target volume is within acceptable motion limits.
		FEATURES: •      Accurate tumor tracking allows maximum dose to tumor and minimum dose to normal tissue •      Quick and easy set respiratory monitoring minimizes treatment time •      Lightweight marker ensures patient comfort •      Predictive filter automatically holds treatment delivery when respiration deviates from normal pattern •      Superior Clinac design eliminates dark current during gating •      Treatment beam gating integrated with dynamic MLC leaf motion
		NOTE: Customer is responsible for prepping the system as instructed in the Respiratory Gating Pre-lnstall Guide.
1.11	1	Configured for Clinac Includes video tracking and image analysis system, high performance workstation, respiratory gating interface to Clinac system, Respiratory Gating software, patient marker blocks, and User Manual.
		Compatible with C-series software version 5.4 and higher.
		Prerequisite for MLC-Equipped Systems: Advanced Dynamic MLC
1.12	1	INCLUDED EDUCATION: RPM Respiratory Gating •      Includes Tuition and Materials for ONE person. •      Includes Travel and Living for ONE person. •      Course is non-refundable and non-transferable. •      Offer is valid for 18 months after Installation.
		RPM Respiratory Gating is course covering basic operations, physics and QA of respiratory gating systems. Practical training will cover use of RPM Respiratory Gating on a simulator and a linear accelerator, QA tests and basic system maintenance.
		The clinical course offered by Department of Radiation Oncology, Virginia Commonwealth University. The aim of this course is to give the participants sufficient theoretical and practical knowledge of the principles and practice of respiratory gating in radiation oncology.

This document is confidential and intended solely for the information and benefit of the immediate recipient and Varian

	Quotation
	GRB20050414-001	Page: 7
	21st Century Oncology - Corp. Headquarters & Administr., Fort

Item	Qty	Product Description	Offer Price
		Prerequisites: •      Basic knowledge of linear accelerator function and clinical use.
		Length & Location: 2 days Virginia Commonwealth University Medical Center
		For detailed course information and on-line registration, visit the Varian website at http://www.varian.com/olrn/index.html.
Section 2 SonArray
		ZMED
2.01	1	SonArray Plus Ultrasound Guided System SonArray™ Plus Ultrasound Guided System
		Cameras Guidance Subsystem •      Linux Computer System with minimum Pentium 4 Processor, 512MB RAM, and 40GB Storage Disk •      18-inch High Resolution Touchscreen Monitor, Keyboard and Mouse •      Passive/Active Optical Tracking Camera and Digitizer System •      CD-ROM Rewriteable • •      Vault-located Mobile PLUS System Cart •      Camera Calibration Jig •      Cameras Guidance Software installed •      Cameras Guidance System User Manual •      External CPU Installation •      17” LCD auxilliary Monitor
		SonArray Ultrasound Guidance Components •      SonoSite Ultrasound Unit with Cart Stand •      SonoSite Ultrasound Probe with Optical Array and Camera Interface •      60 mm Broadband (5-2 MHz) Abdominal Ultrasound Probe with Optical Calibration Jig •      Table mounted Patiant Tracking arm with Fiducial Array
		SonArray Ultrasound Guidance RT Software •      User interface for ultrasound guidance •      Ultrasound calibration and acquisition modes •      Numerical and graphical target displacement reporting •      Post treatment web print report with images •      DICOM RT/RTOG Image and Structure Import •      Patient Archiving Software •      SonArray System User Manual •      Installation and Three day onsite training (2 days Initial training, 1 day follow-up)

This document is confidential and intended solely for the information and benefit of the immediate recipient and Varian

	Quotation
	GRB20050414-001	Page: 8
	21st Century Oncology - Corp. Headquarters & Administr., Fort

Item	Qty	Product Description	Offer Price
Section 3 Stereotactic System
		ZMED
3.01	1	Frameless Intracranial Module Frameless Intracranial Module
		Frameless Intracranial Localizing Module
		Frameless Intracranial Localizing Components •      6 Bite Trays: 3 Standard, 2 Large, 1 Pediatric •      3 Passive Fiducial Arrays •      2 Head Cushions and Thermoplastic Precut Sheets •      2 Dental Caulk Kits and Dispensers •      Replacement Fiducial Markers (1 set) •      Reseat Verification Frame and Passive Probe for QA •      3 DOF Couchmount Head Holder •      U-Frame Platform Mount for CT Simulator/lmaging
		Note: Cameras Guidance System Required
3.02	1	Stereotactic Radiosurgery Optical Localization & Collimator Set Stereotactic Radiosurgery Optical Localization and Collimator Set
		Stereo Head Ring/Collimation System for Use with Cameras Guidance System •      Stereotactic Head Ring with Posts and Pins •      CT Couch Bracket •      CT Localizer •      Optical Positioner Frame with Fiducial Array •      Tilt, Spin, and Height Adjusting Couch Mount Head Holder •      LINAC SRS Calibration Jig •      Film Holder, Film, and Graticules •      Isocenter Pointer •      Zero Pointer with Tips •      LINAC-specific Collimator Mount •      Set of 12 Cone Collimators •      5 mm Collimator •      10 mm Collimator •      12 mm Collimator •      14 mm Collimator •      16 mm Collimator •      20 mm Collimator •      22 mm Collimator •      24 mm Collimator

This document is confidential and intended solely for the information and benefit of the immediate recipient and Varian

	Quotation
	GRB20050414-001	Page: 9
	21st Century Oncology - Corp. Headquarters & Administr., Fort

Item	Qty	Product Description	Offer Price
		•      26 mm Collimator •      28 mm Collimator •      30 mm Collimator
		Note: Cameras Guidance System Required
3.03	1	FastPlan and ImMerge System FastPlan and ImMerge System
		FastPlan™ Stereotactic Radiosurgery and Radiotherapy Planning
		FastPlan Stereotactic Radiosurgery and Radiotherapy Planning Software AutoPilot Auto-Plan with Real-Time 3-D Image Processing and Visualization •      3-D Dynamic Object Modeling •      Multi-Image, Multi-Configuration Display Panel •      2-D and 3D Isodose Contours •      Orthogonal Views and 3-D Rendering •      CT and MR data input •      FASTPLAN computational technology •      Multiple isocenter calculation and optimization tool palette •      Interactive orthogonal and oblique display modes •      Auto-contouring of cranial surface •      Dose Volume Histograms and Analysis Tools
		ImMerge Image Correlation Software •      Image Correlation Software for merging MR +CT images •      Can be used to fuse any two 3-D image sets •      Four Point Rigid Body Fusion •      Semi-Automatic Registration with Reported Accuracy Level •      Multi-scale Image Display Option •      Multi-modal Correlation Verification •      Manual Fine Adjustments Tools •      Automatic Error Checking and Reporting
		Treatment Planning Computer System •      20” Flat Panel Monitor •      High Performance Graphics Computer, minimum 384MB RAM, 9GB Disk •      External Modem •      CD-ROM Rewriteable •      FastPlan Treatment Planning Software Manual •      Imaging Protocol Sheet •      Color Laser Printer
3.04	1	Cameras Guidance Subsystem Cameras Guidance Subsystem
		•      Linux Computer System with minimum Pentium 4 Processor, 512MB RAM, and 40GB Storage Disk •      18-Inch High Resolution Touchscreen Monitor, Keyboard and Mouse •      Passive/Active Optical Tracking Camera and Digitizer

This document is confidential and intended solely for the information and benefit of the immediate recipient and Varian

	Quotation
	GRB20050414-001	Page: 10
	21st Century Oncology - Corp. Headquarters & Administr., Fort

Item	Qty	Product Description	Offer Price
		System •      CD-ROM Rewriteable •      Vault-located Mobile PLUS System Cart •      Camera Calibration Jig •      Cameras Guidance Software Installed •      Cameras Guidance System User Manual •      External CPU Installation
		Quotation Total $	1,052,500.00
Terms & Conditions of Sale

This offer is subject to credit approval and is exclusive of any applicable sales taxes or duties.

Two Percent (2%) Down Payment with order, Eighty Eight Percent (88%) Upon Shipment from Factory, Ten Percent (10%) upon Acceptance.

This quotation does NOT include the second 6MV Beam at 800MU.

FINANCING AVAILABLE: For lease and finance plans, call Tony Susen, Director - Varian Customer Finance, at (508) 668-4609.

This document is confidential and intended solely for the information and benefit of the immediate recipient and Varian

EX-10.59

Exhibit 10.59

LEASE

THIS LEASE (“Lease”) is made and entered into as of the 12th day of December, 2005, by and between, Palm Springs Radiation Enterprises, LLC, whose business address is 2234 Colonial Boulevard, Fort Myers, FL 33907 (“Landlord”), and California Radiation Therapy Management Services, Inc. whose business address is 2234 Colonial Boulevard, Fort Myers, FL 33907 (“Tenant”).

W I T N E S S E T H :

ARTICLE 1

TERMS

1.1 Premises. Landlord hereby demises and leases to Tenant and Tenant hereby hires and rents from Landlord the premises located at 77 840 Flora Road, Palm Desert, California, (“Premises”) upon the terms, covenants and conditions set forth herein, which Premises has a floor area containing the approximate square footage of 6,963 square feet.

1.2 Use. The Premises are to be used for a medical office and radiation therapy center.

1.3 Commencement of Term. The commencement of the Term of this Lease under which Tenant shall be obligated to commence payment of Minimum Rent and Additional Rent shall be on or about the 11th day of October, 2005 (“Commencement Date”).

1.4 Length of the Term. The term of this lease period is for seven (7) years (“Term”). The starting date of this lease is the Commencement Date and, unless this Lease is renewed in accordance with Article 4 below, the ending date is on or about the 11th day of October, 2012 (“Expiration Date”).

ARTICLE 2

RENT

2.1 Rent. Minimum rent shall be four hundred ten thousand, five hundred fourteen dollars ($410,514) per year (“Minimum Rent”). Tenant shall pay to Landlord without previous demand thereof and without any abatement, reduction, setoff or deduction whatsoever, the Minimum Rent (together with any applicable sales tax and local taxes if the same are ever required by law), payable in equal monthly installments, in advance, on the first day of each and every calendar month throughout the Term of this Lease. The Minimum Rent shall commence to accrue on the Commencement Date. The first such monthly installments of Minimum Rent shall be due and payable to Landlord no later than the Commencement Date and each subsequent monthly installment shall be due and payable to Landlord on the first day of each and every month following the Commencement Date during the Term hereof. If the Commencement Date is a date other than the first day of the month, Minimum Rent and other charges for the period commencing with and including the Commencement Date through the first day of the following month shall be prorated at the rate of one-thirtieth (1/30) of the monthly Minimum Rent per day.

In addition, Tenant shall pay as Additional Rent monthly payments of applicable taxes, assessments and insurance on the property. This amount will be of 1/12 of the bill for real estate and assessment taxes and 1/12 of the bill on insurance. Estimated figures for taxes and insurance

monthly rate will be produced within ten (10) days after the signing of this Lease. Each year Landlord will produce any insurance, real estate tax and assessment bills to the Tenant to show how the estimated taxes and insurance were computed as Additional Rent.

2.1.1 There will be an increase in the Minimum Rent starting on the first anniversary of the lease if the Consumer Price Index increases. Minimum Rent specified in this lease shall be subject to increase in accordance with changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) as promulgated by the Bureau of Labor Statistics of the United States Department of Labor, using the year of the Commencement Date as a base of 100. On each anniversary date there will be a rent adjustment based on the percentage increase in the Consumer Price Index. If the Consumer Price Index goes down the rent will not change for that year. Consumer Price Index increases will apply on the anniversary date of each year of the Commencement Date. The percentage increase in the Consumer Price Index will increase the minimum rent for that year.

2.1.2 In the event that the Consumer Price Index ceases to incorporate significant number of items, or if a substantial change is made in the method of establishing such Consumer Price Index shall be adjusted to the figure that would have resulted had no change occurred in the manner of computing such Consumer Price Index, or a successor or substitute index, is not available, a reliable governmental or other nonpartisan publication, evaluating the information for use in determining the Consumer Price Index, shall be used in lieu of such Consumer Price Index.

2.2 Late Charge. Tenant shall pay to Landlord a late charge equal to five percent (5%) of the monthly payment of Minimum Rent, Additional Rent and any other payment or charge due hereunder if any such amount is received by Landlord more than five (5) days after the same shall be due, such amount being the agreed upon liquidated damages solely to defray the additional administrative expenses incurred by Landlord in processing such payment.

2.3 Interest on Past Due Rent. If Tenant shall fail to pay, when the same is due and payable, Minimum Rent, or Additional Rent, such unpaid amounts shall bear interest from the due date thereof to the date of payment, at the prime interest rate of the Chase Manhattan Bank, N.A. as of such due date, plus Five percent (5%) (“Default Date”).

2.4 Definition of Rent. The term “Rent” shall refer collectively to Minimum Rent and Additional Rent. The term “Additional Rent” is sometimes used herein to refer to any and all other sums payable by Tenant hereunder, including, but not limited to, parking charges and sums payable on account of default by Tenant. All Rent shall be paid by Tenant without offset, demand or other credit, and shall be payable only in lawful money of the United States of America which shall be legal tender in payment of all debts and dues, public and private, at the time of payment. All sums payable by Tenant hereunder by check shall be obtained against a financial institution located in the United States of America. The rent shall be paid by Tenant at 2234 Colonial Boulevard, Fort Myers, FL 33907.

2.5 Rent Taxes. In addition to Minimum Rent and Additional Rent, Tenant shall and hereby agrees to pay to Landlord each month a sum equal to any sales tax, tax on rentals and any other similar charges now existing or hereafter imposed, based upon the privilege of leasing the space leased hereunder or based upon the amount of rent collected therefore.

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ARTICLE 3

NET LEASE

3.1 Net Lease. This Lease shall be deemed and construed to be a triple net lease and, except as herein otherwise expressly provided, the Landlord shall receive the fixed Minimum Rent and Additional Rent and all other payments hereunder to be made by the Tenant absolutely free from any charges, assessments, imposition, expenses or deductions of any kind and every kind or nature whatsoever. Tenant is to pay for all real estate tax and assessments on any and all taxes of any We of nature. Tenant is to pay for all insurance and any and all costs for repairs, replacements, maintenance and improvements. Tenant will also pay any and all expenses for common areas, utilities, and association fees, if any. Tenant also is responsible for:

3.1.1 Parking lot repairs, maintenance and replacements.

3.1.2 Installation of outside and inside lighting for parking.

3.1.3 Any security, pest control or contrasts for air conditioner and cleaning services, etc.

ARTICLE 4

OPTION TO RENEW

4.1 Option to renew. Provided that Tenant is not, and at no time has been, in default during the Term under any of the covenants, terms, conditions, and provisions of this Lease, then Tenant shall have three (3) options to renew this Lease (each an “Option”) for consecutive five (5) year option periods, provided that, in order to exercise this Option, Tenant is required to give to Landlord written notice thereof not less than six (6) months before the date of expiration of the Term of this Lease or during any option period. Any renewal pursuant to this Option shall be on the same terms and conditions as are contained in this Lease.

ARTICLE 5

INSURANCE AND INDEMNITY

5.1 Liability Insurance. Tenant shall, during the entire term hereof, keep in full force and effect bodily injury and public liability insurance in an amount not less than FIVE HUNDERED THOUSAND DOLLARS ($500,000) / ONE MILLION DOLLARS ($1,000,000) per injury and accident, respectively; property damage insurance in an amount not less than ONE HUNDRED THOUSAND DOLLARS ($100,000).

5.2 Workers Compensation. Tenant shall, during the entire term hereof, keep in full force worker’s compensation insurance in the maximum amount permitted under California law.

Landlord may require such insurance coverage to be increased after the first five years of the term of this Lease, provided that such increase shall not cause the required limits of coverage to exceed those then commonly prevailing in the marketplace for similar situations. The policy(s) shall name Landlord, any person, firms or corporations designated by Landlord, and Tenant as insured, and shall contain a clause that the insurer will not cancel or change the insurance without first giving the Landlord twenty (20) days prior notice. The insurance shall be in an insurance company licensed by the State of California and a copy of the policy or a certificate of insurance shall be delivered to Landlord prior to the commencement of the term of

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this Lease. In no event shall the limits of said insurance policies be considered as limiting the liability of Tenant under this Lease. In the event that Tenant shall fail to obtain or maintain in full force and effect any insurance coverage required to be obtained by Tenant under this Lease, Landlord may procure same from insurance carriers as Landlord may deem proper, irrespective that a lesser premium for such insurance coverage may have been obtained from another insurance carrier, and Tenant shall pay as additional rent, upon demand of Landlord, any and all premiums, costs, charges and expenses incurred or expended by Landlord in obtaining such insurance. Notwithstanding shall procure insurance coverage required of Tenant hereunder, Landlord shall in no manner be liable to Tenant for any insufficiency or failure of coverage with regard to such insurance or any loss to Tenant occasioned thereby, and additionally, the procurement of such insurance by Landlord shall not relieve Tenant of its obligations under this Lease to maintain insurance coverage in the types and amounts herein specified, and Tenant shall nevertheless hold Landlord harmless from any loss or damage incurred or suffered by Landlord from Tenant’s failure to maintain such insurance.

5.3 Plate Glass Insurance. The replacement of any plate glass damaged or broken from any cause whatsoever in and about the Premises shall be Tenant’s responsibility. Tenant shall, during the entire term hereof, keep in full force and effect a policy of plate glass insurance covering all the plate glass of the Premises, in amounts satisfactory to Landlord. The policy shall name Landlord as additional insured and shall contain a clause that the insurer will not cancel or change the insurance without first giving the Landlord twenty (20) days prior notice. A copy of the policy together with the declarations page therefore shall be delivered to Landlord prior to the commencement of the term of this Lease.

5.4 Increases in Fire Insurance Premium. Tenant agrees that it will not keep, use or sell in or upon the Premises any article, machinery or equipment which may be prohibited by the standard form of fire and extended risk insurance policy. Tenant agrees to pay any increase in premiums for fire and extended coverage insurance that may be charged during the term of this Lease on the amount of such insurance which may be carried by Landlord on the Premises or the building of which it is a part, resulting from the type of merchandise, machinery or equipment sold or kept by Tenant in the Premises or resulting from Tenant’s use of the Premises, whether or not Landlord has consented to the same.

5.5 Indemnification. Tenant shall indemnify, defend and save Landlord harmless from and against any and all claims, actions, damages, liability and expense in connection with loss of life, personal injury and/or damage to or destruction of property arising from or out of any occurrence in, upon or at the Premises, or any part thereof, or the occupancy or use by Tenant of the Premises or any part thereof, or occasioned wholly or in part by any act or omission of Tenant, its agents, contractors, employees, servants, lessees or concessionaires. Landlord shall indemnify, defend and save Tenant harmless from and against any and all claims, actions, damages, liability and expense in connection with loss of life, personal injury and/or damage to or destruction of property arising from or out of any occurrence in, upon or at the Premises occasioned in whole or in part by any negligent act or omission by Landlord, its agents, contractors, employees, servants or concessionaires. In case the indemnifying party shall be made a party to any litigation commenced by or against the other party, then such other party shall protect and hold the indemnified party harmless and pay all costs and attorney’s fees incurred by the indemnified party in connection with such litigation, and any appeals thereof. The defaulting party shall also pay all costs, expenses and reasonable attorney’s fees that may be incurred or paid by the other party in enforcing the covenants and agreements in this Lease.

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ARTICLE 6

UTILITIES

6.1 Utilities. Tenant shall be solely responsible for and shall promptly pay all charges for water, gas, electricity, garbage, and any other utility used and consumed in the Premises. In the event that such utilities charges, or any portion thereof shall be separately metered for the Premises, tenant shall pay such meter charges directly to the utility company supplying such service. In the event, however, that such utilities charges, or any portion thereof, shall not be separately metered for the Premises, tenant shall pay to Landlord its pro rata share of such non-metered charges. If any such charges are not paid when due, Landlord may, at its option pay the same, and any amount so paid by Landlord shall thereupon become due to Landlord from tenant as additional rent. In no event, however, shall Landlord be liable for an interruption or failure in the supply of any such utilities to the Premises.

ARTICLE 7

SUBORDINATION AND ATTORNMENT

7.1 Subordination. Tenant hereby subordinates its rights hereunder to the lien of any ground or underlying leases, any mortgage or mortgages, or the lien resulting from any other method of financing or refinancing, now or hereafter in force against the Premises and to all advances made or hereafter to be made upon the security thereof. This Section shall be self-operative and no further instrument of subordination shall be required by any mortgagee, but Tenant agrees upon request of Landlord, from time to time, to promptly execute and deliver any and all documents evidencing such subordination, and failure to do so shall constitute a default under this Lease.

7.2 Attornment. In the event any proceedings are brought for the foreclosure of, or in the event of exercise of the power of sale under, any mortgage covering the Premises or in the event a deed is given in lieu of foreclosure of any such mortgage, Tenant shall attorn to the purchaser, or grantee in lieu of foreclosure, upon any such foreclosure or sale and recognize such purchaser, or grantee in lieu of foreclosure, as the Landlord under this Lease.

7.3 Financing Agreements. Tenant shall not enter into, execute or deliver any financing agreement that can be considered as having priority to any mortgage or deed of trust that Landlord may have placed upon the Premises.

ARTICLE 8

ASSIGNMENT AND SUBLETTING

Tenant may not assign this lease in whole or in part, nor sublet all or any portion of the Premises, without the prior written consent of Landlord in each instance. The consent by Landlord to any assignment or subletting shall not constitute a waiver of the necessity for such consent to any subsequent assignment or subletting. It is understood that Landlord may refuse to grant consent to any assignment or subletting by Tenant with or without cause and without stating in its refusal to grant such consent the reasons for which it refuses to grant such consent and may not, under any circumstances, be required or compelled to grant such consent. No assignment, under letting, occupancy or collection shall be deemed acceptance of the assignee, subtenant or occupant as Tenant, or a release of Tenant from the further performance by Tenant of the covenants on the part of Tenant herein contained. This prohibition against any assignment or subleasing by operation of law, legal process, receivership, bankruptcy or otherwise, whether

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voluntary or involuntary and a prohibition against any encumbrance of all and any part of Tenant’s leasehold interest. Tenant shall remain fully liable on this Lease and shall not be released from performing any of the terms, covenants and conditions hereof or any rents or other sums to be paid hereunder. Tenant acknowledges and agrees that any and all right and interest of the Landlord in and to the Premises, and all right and interest of the Landlord in this Lease, may be conveyed, assigned or encumbered at the sole discretion of the Landlord at any time.

ARTICLE 9

FACILITIES

9.1 Control of Common Areas by Landlord. All automobile parking areas, driveways, entrances and exits thereto, and other facilities furnished by Landlord at or near the Premises, including employee parking areas, the truck way or ways, loading docks, package pick-up stations, pedestrian sidewalks and ramps, landscaped areas, exterior stairways, and other areas and improvements provided by Landlord for the general use, in common, of tenants, their officers, agents, employees and customers, shall at all times be subject to the exclusive control and management of Landlord, and Landlord shall have the right from time to time to establish, modify and enforce reasonable rules and regulations with respect to all facilities and areas mentioned in this Article. Landlord shall have the right to construct, maintain and operate lighting facilities on all said areas and improvements; from time to time to change the area, level, location and arrangement of parking areas and other facilities hereinabove referred to and to restrict parking by tenants, their officers, agents and employees to employee parking areas. Landlord shall not have any duty to police the traffic in the parking areas. Tenant is to maintain and repair parking and at tenant’s expense.

ARTICLE 10

TENANT’S FIXTURES AND IMPROVEMENTS

10.1 Alterations by Tenant. Tenant shall not make any alterations, renovations, improvements or other installations (collectively “Alterations”) in, on or to any part of the Premises (including, without limitation, any alterations of the front, signs, structural alterations, or any cutting or drilling into any part of the Premises or any securing of any fixture, apparatus, or equipment of any kind to any part of the Premises) unless and until Tenant shall have caused plans and specifications therefore to have been prepared, at Tenant’s expense, by an architect or other duly qualified person and shall have obtained Landlord’s approval thereof. Tenant shall submit to Landlord detailed drawings and plans of the proposed Alterations at the time Landlord’s approval is sought. If such approval is granted, Tenant shall cause the work described in such plans and specifications to be performed, at its expense, promptly, efficiently, competently and in a good and workmanlike manner by duly qualified and licensed persons or entities approved by Landlord, using first grade materials. All such work shall comply with all applicable codes, rules, regulations and ordinances. The Tenant shall at all times maintain fire insurance with extended coverage in an amount adequate to cover the cost of replacement of all alterations, decorations, additions or improvements to the Premises by Tenant in the event of fire or extended coverage loss. Tenant shall deliver to the Landlord certificates of such fire insurance policies, which shall contain a clause requiring the insurer to give the Landlord ten (10) days notice of cancellation of such policies.

10.2 Mechanic’s Liens. No work performed by Tenant pursuant to this Lease, whether in the nature of erection, construction, alteration or repair, shall be deemed to be for the

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immediate use and benefit of Landlord so that no mechanic’s or other lien shall be allowed against the estate of Landlord by reason of any consent given by Landlord to Tenant to improve the Premises. Tenant shall place such contractual provisions as Landlord may request in all contracts and subcontracts for Tenant’s improvements assuring Landlord that no mechanic’s liens will be asserted against Landlord’s interest in the Premises or the property of which the Premises are a part. Said contracts and subcontracts shall provide, among other things, the following: That notwithstanding anything in said contracts or subcontracts to the contrary, Tenant’s contractors, subcontractors, suppliers and materialmen (hereinafter collectively referred to as “Contractors”) will perform the work and/or furnish the required materials on the sole credit of Tenant; that no lien for labor or materials will be filed or claimed by the Contractors against Landlord’s interest in the Premises or the property of which the Premises are a part; that the Contractors will immediately discharge any such lien filed by any of the Contractor’s suppliers, laborers, materialmen or subcontractors; and that the Contractors will indemnify and save Landlord harmless from any and all costs and expenses, including reasonable attorney’s fees, suffered or incurred as a result of any such lien against Landlord’s interest that may be filed or claimed in connection with or arising out of work undertaken by the Contractors. Tenant shall pay promptly all persons furnishing labor or materials with respect to any work performed by Tenant or its Contractors on or about the Premises. If any mechanic’s or other liens shall at any time be filed against the Premises or the property of which the Premises are a part by reason of work, labor, services or materials performed of furnished, or alleged to have been performed or furnished, to Tenant or to anyone holding the Premises through or under Tenant, and regardless of whether any such lien is asserted against the interest of Landlord or Tenant, Tenant shall cause the same to be discharged of record or bonded to the satisfaction of Landlord within thirty (30) days of notice of such lien. If Tenant shall fail to cause such lien to be so discharged or bonded after being notified of the filing thereof, then, in addition to being an Event of Default and any other right or remedy of Landlord, Landlord may bond or discharge the same by paying the amount claimed to be due, and the amount so paid by Landlord, including reasonable attorneys’ fees incurred by Landlord either in defending against such lien or in procuring the bonding or discharge of such lien, together with interest thereon at the Default Rate, shall be due and payable by Tenant to Landlord as Additional Rent.

10.3 Tenant’s Leasehold Improvements and Trade Fixtures. All leasehold improvements (as distinguished from trade fixtures and apparatus) installed in the Premises at any time, whether by or on behalf of Tenant or by or on behalf of Landlord, shall not be removed from the Premises at any time, unless such removal is consented to in advance by Landlord; and at the expiration of this Lease (either on the Expiration Date or upon such earlier termination as provided in this Lease), all such leasehold improvements shall be deemed to be part of the Premises, shall not be removed by Tenant when it vacates the Premises, and title thereto shall vest solely in Landlord without payment of any nature to Tenant.

All trade fixtures and apparatus (as distinguished from leasehold improvements) owned by Tenant and installed in the Premises shall remain the property of Tenant and shall be removable at any time, including upon the expiration of the Term; provided Tenant shall not at such time be in default of any terms or covenants of this Lease, and provided further, that Tenant shall repair any damage to the Premises caused by the removal of said trade fixtures and apparatus and shall restore the Premises to substantially the same condition as existed prior to the installation of said trade fixtures and apparatus and shall restore the Premises to substantially the same condition as existed prior to the installation of said trade fixtures and apparatus.

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ARTICLE 11

MAINTENANCE AND REPAIR OF PREMISES

11.1 Maintenance by Tenant. Tenant shall at all times keep in good order, condition and repair (which shall include the providing of replacements where necessary) the entire Premises, including, without limitation, the roof, the exterior and all glass and show window moldings; and all partitions, doors, interior walls, fixtures, equipment and appurtenances thereto, including lighting, heating and plumbing fixtures and any air conditioning system and sprinkler system situated within and/or servicing the Premises. Said maintenance by Tenant shall include, without limitation, periodic painting as is reasonably necessary. All cutting and patching of the roof area required for any reason whatsoever shall be performed by the Landlord’s roofing subcontractor. In the event that Tenant causes such work to be performed by anyone other than the Landlord’s roofing subcontractor, Landlord will have the right, at Tenant’s sole cost and expense and without notice to Tenant, to cause said work and the roof area affected thereby to be inspected and/or repaired by Landlord’s roofing subcontractor. All repairs, replacements, or maintenance of any item or any type of the Premises is the responsibility of the Tenant and to be paid for by tenant.

ARTICLE 12

SIGNS

On or before the Commencement Date, Tenant will at its sole cost and expense purchase and cause to be installed upon the exterior of the Premises a sign which in all respects conforms to the criteria established by Landlord. However, Tenant will not install said sign without first obtaining Landlord’s written approval thereof. Thereafter, Tenant will not place or suffer to be placed or maintain on any portion of the exterior (including windows) of the Premises any sign, awning, canopy or advertising matter or other thing of any kind, without first obtaining Landlord’s written approval and consent. Without limitation as to the foregoing, Landlord specifically reserves the right at any time during the term of this Lease to require Tenant to remove from the Premises any sign(s) situated thereon and to replace same with a sign or signs which in all respects conform to a sign standard designated by Landlord, all of which will be performed at Tenant’s sole cost and expense. Tenant agrees to maintain any such sign, awning, canopy, decoration, lettering, advertising matter or other thing as may be approved in good condition and repair at all times and to repaint or replace such signs from time to time when reasonably necessary and to illuminate such signs in accordance with standards established by Landlord from time to time, including hours of illumination. All signs in addition must be conform to code and local ordinances rules, laws and regulations.

ARTICLE 13

WASTE AND GOVERNMENTAL REGULATIONS

13.1 Nuisance or Waste. Tenant shall not commit or suffer to be committed any waste upon the Premises or any nuisance or other act or thing which may disturb the quiet enjoyment of any other tenant in the building in which the Premises may be located.

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13.2 Compliance with Laws. Tenant, at its sole cost, will promptly comply with all applicable laws, guidelines, rules, regulations and requirements, whether of federal, state, or local origin, applicable to the Premises, including, but not limited to, the Americans with Disabilities Act, 42 U.S.C. § 12101 et seq., and those for the correction, prevention and abatement of nuisance, unsafe conditions, or other grievances arising from or pertaining to the use or occupancy of the Premises. Tenant at its sole cost and expense shall be solely responsible for taking any and all measures which are required to comply with the requirements of the ADA within the Premises. Any Alterations to the Premises made by or on behalf of Tenant for the purpose of complying with the ADA or which otherwise require compliance with the ADA shall be done in accordance with this Lease; provided, that Landlord’s consent to such Alterations shall not constitute either Landlord’s assumption, in whole or in part, of Tenant’s responsibility for compliance with the ADA, or representation or confirmation by Landlord that such Alterations comply with the provisions of the ADA.

13.3 Governmental Regulations. Tenant shall, at Tenant’s sole costs and expense, comply with all regulations of all county, municipal, state, federal and other applicable governmental authorities, not in force or which may hereafter be in force, pertaining to Tenant or its use of the Premises, and shall faithfully observe in the use of the Premises all municipal and county ordinances and state and federal statutes now in force or which may hereinafter be in force. Tenant shall indemnify, defend and save Landlord harmless from penalties, fines, costs, expenses suits, claims, or damages resulting from Tenant’s failure to perform its obligations in this Section.

13.4 Rules and Regulations. Landlord reserves the right from time to time to make reasonable rules and regulations, governing loading of supplies, trash collection, pest control, parking, noise, electrical overloads and similar issues of general concern to all tenants in the event that the need therefore should ever arise. Notice of such rules and regulations and amendments and supplements thereto, if any, shall be given to the Tenant.

ARTICLE 14

HAZARDOUS MATERIALS

14.1 Hazardous Materials. Tenant shall not use or allow the Premises to be used for the Release, storage, use, treatment, disposal or other handling of any Hazardous Materials, without the prior consent of Landlord. The term “Release” shall have the same meaning as is ascribed to it in the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9601 et seq., as amended, (“CERCLA”). The term “Hazardous Materials” means (i) any substance defined as a “hazardous substance” under CERCLA, (ii) petroleum, petroleum products, natural gas, natural gas liquids, liquefied natural gas, and synthetic gas, and (iii) any other substance or material deemed to be hazardous, dangerous, toxic, or a pollutant under any federal, state, or local law, code, ordinance or regulation (“Hazardous Materials Laws”).

Tenant shall: (a) give prior notice to Landlord of any activity or operation to be conducted by Tenant at the Premises which involves the Release, use, handling, generation, treatment, storage, or disposal of any Hazardous Materials (“Tenant’s Hazardous Materials Activity”), (b) comply with all federal, state, and local laws, codes, ordinances, regulations, permits and licensing conditions governing the Release, discharge, emission, or disposal of any Hazardous Materials and prescribing methods for or other limitations on storing, handling, or otherwise managing Hazardous Materials, (c) at its own expense, promptly contain and

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remediate any Release of Hazardous Materials arising from or related to Tenant’s Hazardous Materials Activity in the Premises and remediate and pay for any resultant damage to properly, persons, and/or the environment, (d) give prompt notice to Landlord, and all appropriate regulatory, authorities, of any Release of any Hazardous Materials in the Premises arising from or related to, Tenant’s Hazardous Materials Activity, which Release is not made pursuant to and in conformance with the terms of any permit or license duly issued by appropriate governmental authorities, any such notice to include a description of “measures taken or proposed to be taken by Tenant to contain and remediate the Release and any resultant damage to property, persons, or the environment, (e) at Landlord’s request, which shall not be more frequent than once per calendar year, retain an independent engineer or other qualified consultant or, expert acceptable to Landlord, to conduct, at Tenant’s expense, an environmental audit of the Premises and immediate surrounding areas, and the scope of work to be performed by such engineer, consultant, or expert shall be approved in advance by Landlord, and all of the engineer’s, consultant’s or expert’s work product shall be made available to Landlord, (f) at Landlord’s request from time to time, executed affidavits, representations and the like concerning Tenant’s best knowledge, and belief regarding the presence of Hazardous Materials in the Premises, (g) reimburse to Landlord, upon demand, the reasonable cost of any testing for the purpose of ascertaining if there has been any Release of Hazardous Materials in the Premises, if such testing is required by any governmental agency or Landlord’s Mortgagee, (h) upon expiration or termination of this Lease, surrender the Premises to Landlord free from the presence and contamination of any Hazardous Materials. Tenant shall indemnify, protect, defend (by counsel reasonably acceptable to Landlord), and hold Landlord and free and harmless from and against any and all claims, liabilities, penalties, forfeitures, losses and expenses (including attorneys’ fees) or death of or injury to any person or damage to any property whatsoever arising from or caused in whole or in part, directly or indirectly, by the presence in or about the Premises of any of Tenant’s Hazardous Materials Activity or by Tenant’s failure to comply with any Hazardous Materials Law regarding Tenant’s Hazardous Materials Activity or in connection with any removal, remediation, clean up, restoration and materials required hereunder to return the Premises and any other property of whatever nature to their condition existing prior to Tenant’s Hazardous Materials Activity.

14.2 Disclosure Warning and Notice Obligations. Tenant shall comply with all laws, ordinances and regulations in the State of California regarding the disclosure of the presence or danger of Tenant’s Hazardous Materials. Tenant acknowledges and agrees that all reporting and warning obligations required under the Hazardous Materials Laws with respect to Tenant’s Hazardous Materials Activity are the sole responsibility of Tenant, whether or not such Hazardous Materials Laws permit or require Landlord to provide such reporting or warnings, and Tenant shall be solely responsible for complying with such Hazardous Materials Laws regarding the disclosure of, the presence or danger of Tenant’s Hazardous Materials Activity. Tenant shall immediately notify Landlord, in writing, of any complaints, notices, warnings, reports or asserted violations of which Tenant becomes aware relating to Hazardous Materials on or about the Premises. Tenant shall also immediately notify Landlord if Tenant knows or has reason to believe Tenant’s Hazardous Materials have or will be released in or about the Premises.

14.3 Environmental Tests and Audits. Tenant shall not perform or cause to be performed, any Hazardous Materials surveys, studies, reports or inspection, relating to the Premises without obtaining Landlord’s advance written consent, which consent may be withheld in Landlord’s sole discretion. At any time prior to the expiration of the Term, Landlord shall have the right to enter upon the Premises in order to conduct appropriate tests and to deliver to Tenant the results of such tests to demonstrate that levels of any Hazardous Materials in excess of permissible levels has occurred as a result of Tenant’s use of the Premises.

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14.4 Survival/Tenant’s Obligations. The respective rights and obligations of Landlord and Tenant under this Article shall survive the expiration or termination of this Lease.

ARTICLE 15

DESTRUCTION OF PREMISES

15.1 Damage and Destruction. If all or any part of the Premises shall be damaged or destroyed by fire or other casualty, this Lease shall continue in full force and effect, unless terminated as hereinafter provided, and Landlord shall repair, restore or rebuild the Premises to the condition existing at the time of the occurrence of the loss; provided, however, Landlord shall not be obligated to commence such repair, restoration or rebuilding until insurance proceeds are received by Landlord, and Landlord’s obligation hereunder shall be limited to the proceeds actually received by Landlord under any insurance policy or policies, if any, less those amounts (i) which have been required to be applied towards the reduction of any indebtedness secured by a mortgage covering the Premises or any portion thereof, and (ii) which are used to reimburse Landlord for all costs and expenses, including but not limited to attorneys’ fees, incurred by Landlord to recover any such insurance proceeds.

Tenant agrees to notify Landlord in writing not less than thirty (30) days prior, to the date Tenant opens for business in the Premises of the actual cost of all permanent leasehold improvements and betterments installed or to be installed by Tenant in the Premises (whether same have been paid for entirely or partially by Tenant), but exclusive of Tenant’s personal property, movable trade fixtures and inventory. Similar notifications shall be given to Landlord not less than thirty (30) days prior to the commencement of any proposed alterations, additions or improvements to the Premises. If Tenant fails to comply, with the foregoing provisions, any loss or damage Landlord shall sustain by reason thereof shall be borne by Tenant and shall be paid immediately by Tenant upon receipt of a bill therefore and evidence of such loss, and in addition to any other rights or remedies reserved by Landlord under this Lease, Landlord’s obligations under this Article to repair, replace and/or rebuild the Premises shall be deemed inapplicable, and in lieu thereof, Landlord may, at its election, either restore or require Tenant to restore the Premises to the condition which existed prior to such loss, and in either case Tenant shall pay the cost of such restoration.

Tenant covenants and agrees to repair or replace Tenant’s fixtures, furniture, furnishings, floor coverings, equipment and stock in trade and reopen for business in the Premises within thirty (30) days after notice from Landlord that the Premises are ready for re-occupancy.

No damage or destruction to the Premises shall allow Tenant to surrender possession of the Premises nor affect Tenant’s liability for the payment of rents or charges or any other covenant herein contained, except as may be specifically provided in this Lease.

Notwithstanding anything to the contrary contained in this Section or elsewhere in this Lease, Landlord, at its option, may terminate this Lease by giving Tenant notice thereof within one hundred and eighty (180) days from the date of the casualty if:

(a) The Premises or the building in which the Premises are located shall be damaged or destroyed as a result of an occurrence which is not covered by Landlord’s insurance; or

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(b) The Premises shall be damaged or destroyed during the last two (2) years of the Term or any renewals thereof; or

(c) The Premises are damaged or destroyed to the extent of twenty five-percent (25%) or more of the replacement cost thereof, in which event Landlord will have the option of terminating this Lease or any renewal thereof by serving written notice upon Tenant and any prepaid Rent or Additional Rent will be prorated as of the date of destruction and the unearned portion of such Rent will be refunded to Tenant without interest.

If the Premises shall be damaged or destroyed and in the event that Landlord has elected to continue this Lease, Landlord and Tenant shall commence their respective obligations under this Article as soon as is reasonably possible and prosecute the same to completion with all due diligence.

Except where the damage or destruction results from the wrongful or negligent act or omission of Tenant, the Minimum Rent shall be abated proportionately with the degree to which Tenant’s use of the Premises is impaired during the period of any damage, repair or restoration provided for in this Article; provided further, that in the event Landlord elects to repair any damages as herein contemplated, any abatement of Minimum Rent shall end ten (10) days after notice by Landlord to Tenant that the Premises have been repaired. Tenant shall continue the operation of its business on the Premises during any such period to the extent reasonably practicable from the standpoint of prudent business management, and any obligation of Tenant under the Lease to apply charges reserved as Additional Rent shall remain in full force and nothing in the Section shall be construed to abate Additional Rent. Except for the abatement of Minimum Rent hereinabove provided, Tenant shall not be entitled to any compensation or damage for loss in the use of the whole or any part of the Premises and/or any inconvenience or annoyance occasioned by any damage, destruction, repair or restoration. If Minimum Rent is abated there shall be all corresponding and appropriate reduction made to the Minimum Annual Volume.

Unless this Lease is terminated by Landlord, Tenant shall repair, restore and re-fixture all parts of the Premises not insured under any insurance policies insuring Landlord in a manner and to a condition equal to that existing prior to its destruction or damage, including, without limitation, all exterior signs, trade fixtures, equipment, display cases, furniture, furnishings and other installations of personality of Tenant. The proceeds of all insurance carried by Tenant on its property and improvements shall be held in trust by Tenant for the purpose of said repair and replacement. Tenant shall give to Landlord prompt written notice of, any damage to or destruction of any portion of the Premises resulting from fire or other casualty.

ARTICLE 16

EMINENT DOMAIN

16.1 Total Condemnation of Premises. If the whole of the Premises shall be acquired or condemned by eminent domain for any public or quasi-public use or purpose, then the Term of this Lease shall cease and terminate as of the date of title vesting in such proceeding and all rentals shall be paid up to that date.

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16.2 Partial Condemnation of Premises.

16.2.1 If twenty (20%) percent or more of the Premises shall be acquired or condemned by eminent domain for any public or quasi-public use or purpose, then the Tenant shall have the option to cancel and terminate this Lease upon notice thereof given to the Landlord within ninety (90) days after the vesting of title in such proceeding.

16.2.2 In the event that less than ten (10%) percent of the Premises shall be acquired or condemned by eminent domain for any public or quasi-public use or purpose, or in the event ten (10%) percent or more of the Premises shall have been so taken, and Tenant shall not elect to terminate this Lease as set forth above, then the Landlord shall promptly restore the Premises to a condition reasonably comparable under the circumstances to its condition at the time of such condemnation, less the portion lost in the taking; and this Lease shall thereafter continue in full force and effect. In such event of a partial taking, described hereinabove, from the effective date that physical possession is taken by the condemning authority through the end of the term of this Lease, the annual Minimum Rent payable by Tenant to Landlord under this Lease shall be reduced by a fraction, the numerator of which shall be the gross area of the premises so taken by the condemning authority and the denominator of which shall be the gross area of the Premises on the date immediately prior to the effective date of such taking.

16.3 Total Condemnation of Parking. If the whole of the common parking areas at or near the Premises shall be acquired or condemned by eminent domain for any public or quasi-public use or purpose, then the term of this Lease shall cease and terminate as of the date of title vesting in such proceeding.

16.4 Partial Condemnation of Parking Area. If twenty (20%) percent or more of the common parking areas at or near the Premises shall be acquired or condemned by eminent domain for any public or quasi-public use or purpose, then the Tenant shall have the option to cancel and terminate this Lease upon notice thereof given to the Landlord within ninety (90) days after the vesting of title in such proceeding.

If less than twenty (20%) percent of the parking areas at or near the Premises shall be acquired or condemned by eminent domain for any public or quasi-public use or purpose, or if more than twenty (20%) percent of the parking areas shall be so acquired or condemned, but Tenant shall not elect to cancel and terminate this Lease, then the Landlord shall restore the parking areas to a condition reasonably comparable under the circumstances to its condition at the time of such condemnation, less the portion lost in the taking. In such event, this Lease shall be and remain in full force and effect and no reduction of Minimum Rent or any Additional Rent payable by Tenant under this Lease shall be allowed in such circumstances, but Tenant shall continue to pay the full Minimum Rent or any Additional Rent payable under this Lease for the balance of the term hereof.

ARTICLE 17

DEFAULTS

17.1 Events of Default By Tenant. If (1) Tenant vacates, abandons or surrenders all or any part of the Premises prior to the expiration of the Term of the Lease or (2) Tenant fails to fulfill any of the terms or conditions of this Lease or any other lease heretofore made by Tenant

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for space in the Premises or (3) the appointment of a trustee or a receiver to take possession of all or substantially all of Tenant’s assets occurs, or if the attachment, execution or other judicial seizure of all or substantially all of Tenant’s assets located at the Premises, or of Tenant’s interest in this Lease, occurs, or (4) Tenant or any of its successors or assigns or any guarantor of this Lease (“Guarantor”) should file any voluntary petition in bankruptcy, reorganization or arrangement, or an assignment for the benefit of creditors or for similar relief under any present or future statute, law or regulation relating to relief of debtors, or (5) Tenant or any of its successors or assigns or any Guarantor should be adjudicated bankrupt or have an involuntary petition in bankruptcy, reorganization or arrangement filed against it, or (6) Tenant shall permit, allow or suffer to exist any lien, judgment, writ, assessment, charge, attachment or execution upon Landlord’s or Tenant’s interest in this Lease or to the Premises, and/or the fixtures, improvements and furnishings located thereon; then, Tenant shall be in default hereunder.

17.2 Tenant’s Grace Periods. If (1) Tenant fails to pay Rent or Additional Rent within five (5) days after notice from Landlord of delinquency or (2) Tenant fails to cure any other default within ten (10) days after notice faith), then Landlord shall have such remedies as are provided under this Lease and/or under the laws of the State of Arizona.

17.3 Repeated Late Payment. Regardless of the number of times of Landlord’s prior acceptance of late payments and/or late charges, (i) if Landlord notifies Tenant twice in any 6-month period that Minimum Rent or any Additional Rent has not been paid when due, then any other late payment within such 6-month period shall automatically constitute a default hereunder without the necessity of notice and (ii) the mere acceptance by Landlord of late payments in the past shall not, regardless of any applicable laws to the contrary, thereafter be deemed to waive Landlord’s right to strictly enforce this Lease, including Tenant’s obligation to make payment of Rent on the exact day same is due, against Tenant.

17.4 Landlord’s Default. If Tenant asserts that Landlord has failed to meet any of its obligations under this Lease, Tenant shall provide written notice (“Notice of Default”) to Landlord specifying the alleged failure to perform, and Tenant shall send by certified mail, return receipt requested, a copy of such Notice of Default to any and all mortgage holders, provided that Tenant has been previously advised of the addresses) of such mortgage holder(s). Landlord shall have a thirty (30) day period after receipt of the Notice of Default in which to commence curing any non-performance by Landlord, and Landlord shall have as much time thereafter to complete such cure as is necessary so long as Landlord’s cure efforts are diligent and continuous. if Landlord has not begun the cure within thirty (30) days of receipt of the Notice of Default, or Landlord does not thereafter diligently and continuously attempt to cure, then Landlord shall be in default under this Lease. If Landlord is in default under this Lease, then the mortgage holder(s) shall have an additional thirty (30) days, after receipt of a second written notice from Tenant, within which to cure such default or, if such default cannot be cured within that time, then such additional time as may be necessary so long as their efforts are diligent and continuous.

ARTICLE 18

LANDLORD’S REMEDIES FOR TENANT’S DEFAULT.

18.1 Landlord’s Options. If Tenant is in default of this Lease, Landlord may, at its option, in addition to such other remedies as may be available under the law of the State of Arizona:

(a) Terminate this Lease and Tenant’s right of possession; or

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(b) Terminate Tenant’s right to possession but not the Lease and/or proceed in accordance with any and all provisions of Section 18.2 below.

18.2 Landlord’s Remedies. Landlord may without further notice reenter the Premises either by force or otherwise and dispossess Tenant by summary proceedings or otherwise, as well as the legal representatives) of Tenant and/or other occupants) of the Premises, and remove their effects and hold the Premises as if this Lease had not been made, and Tenant hereby waives the service of notice of intention to re-enter or to institute legal proceedings to that end; and/or at Landlord’s option.

All Rent for the balance of the Term will, at the election of Landlord, be accelerated and the present worth of same for the balance of the Term, net of amounts actually collected by Landlord, shall become immediately due thereupon and be paid, together with all expenses of every nature which Landlord may incur such as (by way of illustration and not limitation) those for attorneys’ fees, brokerage, advertising, and refurbishing the Premises in good order or preparing them for re-rental. For purposes of this clause (2), “present worth” shall be computed by discounting such amount to present worth at a discount rate equal to one percentage point above the discount rate then in effect at the Federal Reserve Bank nearest to the location of the Premises.

Landlord may re-let the Premises or any part thereof, either in the name of Landlord or otherwise, for a term or terms which may at Landlord’s option be less than or exceed the period which would otherwise have constituted the balance of the Term, and may grant concessions or free rent or charge a higher rental than that reserved in this Lease; and/or at Landlord’s option, Tenant or its legal representatives will also pay to Landlord as liquidated damages any deficiency between the Rent and all Additional Rent hereby reserved and/or agreed to be paid and the net amount, if any, of the rents collected on account of the lease or leases of the Premises for each month of the period which would otherwise have constituted the balance of the Term.

If Landlord exercises the remedy above, and provided that Tenant has paid Landlord the accelerated Rent as required by this Section, Landlord shall remit to Tenant on a monthly basis until the Expiration Date any amounts actually collected by Landlord as a result of are letting remaining after subtracting therefrom all reasonable costs paid by Landlord to secure a replacement tenant including reasonable marketing/leasing costs, fees and commissions, and costs of preparing improvements and refurbishment to the Premises for the replacement tenant. In no event shall the total amount paid to Tenant pursuant to the preceding sentence exceed the accelerated Rent paid by Tenant to Landlord. If this Lease is terminated, Landlord may re-let the Premises or any part thereof, alone or together with other premises, for such term or terms (which may be greater or less than the period which otherwise would have constituted the balance of the Term) and on such terms and conditions (which may include concessions or free rent and alterations of the Premises) as Landlord, in its sole discretion, may determine, but Landlord shall not be liable for nor shall Tenant’s obligations hereunder be diminished by reason of, any failure by Landlord to re-let the Premises or any failure by Landlord to collect any rent due upon such re-letting.

18.3 Waiver of Jury Trial. To the extent permitted by law, Tenant hereby waives: (a) jury trial in any action or proceeding regarding a monetary default by Tenant and/or Landlord’s

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right to possession of the Premises, and (b) in any action or proceeding by Landlord for eviction where Landlord has also filed a separate action for damages, Tenant waives the right to interpose any counterclaim in such eviction action. Moreover, Tenant agrees that it shall not interpose or maintain any counterclaim in such damages action unless it pays and continues to pay all Rent, as and when due, into the registry of the court in which the damages action is filed.

18.4 Waiver of Rights of Redemption. Tenant hereby expressly waives any and all rights of redemption granted by or under any present or future laws in the event of Tenant being evicted or dispossessed for any cause, or in the event of Landlord obtaining possession of the Premises, by reason of the violation by Tenant of any of the covenants or conditions of this Lease or otherwise.

ARTICLE 19

BANKRUPTCY PROVISIONS

19.1 Event of Bankruptcy. If this Lease is assigned to any person or entity pursuant to the provisions of the United States Bankruptcy Code, 11 U.S.C. Section 101 et seq. (the “Bankruptcy Code”), any and all monies or other consideration payable or otherwise to be delivered in connection with such assignment shall be paid or delivered to Landlord, shall be and remain the exclusive property of Landlord, and shall not constitute the property of Tenant or of the estate of Tenant within the meaning of the Bankruptcy Code. Any and all monies or other considerations constituting Landlord’s property under this Section not paid or delivered to Landlord shall be held in trust for the benefit of Landlord and shall be promptly paid or delivered to Landlord. Any person or entity to which this Lease is assigned pursuant to the provisions of the Bankruptcy Code shall be deemed without further act or deed to have assumed all of the obligations arising under this Lease on and after the date of such assignment.

19.2 Additional Remedies. In addition to any rights or remedies hereinbefore or hereinafter conferred upon Landlord under the terms of this Lease, the following remedies and provisions shall specifically apply in the event Tenant is in default of this Lease:

19.2.1 In all events, any receiver or trustee in bankruptcy shall either expressly assume or reject this Lease within sixty (60) days following the entry of an “Order for Relief’ or within such earlier time as may be provided by applicable law.

19.2.2 In the event of an assumption of this Lease by a debtor or by a trustee, such debtor or trustee shall within fifteen (15) days after such assumption (i) cure any default or provide adequate assurance that defaults will be promptly cured; (ii) compensate Landlord for actual pecuniary loss or provide adequate assurance that compensation will be made for actual monetary loss, including, but not limited to, all attorneys’ fees and costs incurred by Landlord resulting from any such proceedings; and (iii) provide adequate assurance of future performance.

19.2.3 Where a default exists under this Lease, the trustee or debtor assuming this Lease may not require Landlord to provide services or supplies incidental to this Lease before its assumption by such trustee or debtor, unless Landlord is compensated under the terms of this Lease for such services and supplies provided before the assumption of such Lease.

19.2.4 The debtor or trustee may only assign this Lease if (i) it is assumed and the assignee agrees to be bound by this Lease, (ii) adequate assurance of future performance by the assignee is provided, whether or not there has been a default under this Lease, and (iii) the debtor or trustee has

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received Landlord’s prior written consent pursuant to the provisions of this Lease. Any consideration paid by any assignee in excess of the rental reserved in this Lease shall be the sole property of, and paid to, Landlord.

19.2.5 Landlord shall be entitled to the fair market value for the Premises and the services provided by Landlord (but in no event less than the rental reserved in this Lease) subsequent to the commencement of a bankruptcy event.

19.2.6 Any security deposit given by Tenant to Landlord to secure the future performance by Tenant of all or any of the terms and conditions of this Lease shall be automatically transferred to Landlord upon the entry of an “Order of Relief.”

19.2.7 The parties agree that Landlord is entitled to adequate assurance of future performance of the terms and provisions of this Lease in the event of an assignment under the provisions of the Bankruptcy Code. For purposes of any such assumption or assignment of this Lease, the parties agree that the term “adequate assurance” shall include, without limitation, at least the following: (i) any proposed assignee must have, as demonstrated to Landlord’s satisfaction, a net worth (as defined in accordance with generally accepted accounting principles consistently applied) in an amount sufficient to assure that the proposed assignee will have the resources to meet the financial responsibilities under this Lease, including the payment of all Rent; the financial condition and resources of Tenant are material inducements to Landlord entering into this Lease; (ii) any proposed assignee must have engaged in the Use described in Section 1.2 for at least five (5) years prior to any such proposed assignment, the parties hereby acknowledging that in entering into this Lease, Landlord considered extensively Tenant’s permitted use and determined that such permitted business would add substantially to the tenant balance in the Premises, and were it not for Tenant’s agreement to operate only Tenant’s permitted business on the Premises, Landlord would not have entered into this Lease, and that Landlord’s operation of the Premises will be materially impaired if a trustee in bankruptcy or any assignee of this Lease operates any business other than Tenant’s permitted business; (iii) any assumption of this Lease by a proposed assignee shall not adversely affect Landlord’s relationship with any of the remaining tenants in the building in which the Premises are located, taking into consideration any and all other “use” clauses and/or “exclusivity” clauses which may then exist under their leases with Landlord; and (iv) any proposed assignee must not be engaged in any business or activity which it will conduct on the Premises and which will subject the Premises to contamination by any Hazardous Materials.

ARTICLE 20

LIMITATIONS OF LANDLORD’S LIABILITY

The term “Landlord” as used in this Lease, so far as covenants or obligations on the part of the Landlord are concerned shall be limited to mean and include only a ground lessee if the named Landlord herein is holding the premises under a ground lease for so long as the named Landlord is the holder of such ground lease interest or the owner or owners of the fee simple of the Premises; and in the event of transfer or transfers of either the ground leasehold interest to any other person or the transfer of title to the fee premises to any person, the Landlord herein named (and in the case of subsequent transfers or conveyances the then grantor or assignor), shall be automatically freed and relieved from and after the date of such transfer or conveyance or assignment of all liability as respects the performance of any covenant or obligation on the part of the Landlord contained in this Lease thereafter to be performed, it being the intention of the parties that the covenants and obligations to be observed and performed by the-Landlord

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shall be binding upon the Landlord only during and in respect of its period of ownership of either a leasehold interest, or a fee interest as the case may be. Anything in this Lease to the contrary notwithstanding, Tenant agrees that Tenant shall, subject to prior rights of any mortgagee of the Premises, look solely to the estate and property of Landlord in the Premises for the collection of any judgment (or other judicial process) requiring the payment of money by Landlord in the event of any default or breach by Landlord with respect to any of the terms, covenants and conditions of this Lease to be observed and/or performed by Landlord, and no other assets of Landlord or any principal of Landlord shall be subject to levy, execution or other procedures for the satisfaction of Tenant’s remedies.

ARTICLE 21

ACCESS BY LANDLORD

Landlord or Landlord’s agents shall have the right to enter the Premises at all times to examine the same and to show them to prospective purchasers of the building, and to make such repairs, alterations, improvements or additions as Landlord may deem necessary or desirable, and Landlord shall be allowed to take all material into and upon said premises that may be required therefore, without the same constituting an eviction of Tenant in whole or in part and the Rent reserved shall in no way abate while said repairs, alterations, improvements, or additions are being made, by reason of loss or interruption of business of Tenant, or otherwise. During the six (6) month period prior to the expiration of the term of this Lease or any renewal term, Landlord may exhibit the Premises to prospective tenants or purchasers, and place upon the premises the usual notices “To Let” or “For Sale” which notices Tenant shall permit to remain thereon without molestation. Nothing herein contained, however, shall be deemed or construed to impose upon Landlord any obligation, responsibility or liability whatsoever, for the care, maintenance, or repair of the Premises or any part thereof, except as otherwise herein specifically provided. Landlord to give Tenant reasonable notice during business hours prior to any entry.

ARTICLE 22

QUIET ENJOYMENT

22.1 Landlord’s Covenant. Upon payment by the Tenant of the rents and other charges herein provided, and upon the observance and performance of all the covenants, terms and conditions on Tenant’s part to be observed and performed, Tenant shall peaceably and quietly hold and enjoy the Premises for the term hereby demised without hindrance or interruption by Landlord or any other person or persons lawfully or equitably claiming by, through or under the Landlord, subject, nevertheless, to the terms and conditions of this Lease.

ARTICLE 23

MISCELLANEOUS

23.1 Accord and Satisfaction. No payment by Tenant or receipt by Landlord of a lesser amount than the rent herein stipulated to be paid shall be deemed to be other than on account of the earliest stipulated rent, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as rent be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord’s right to recover the balance of such rent or pursue any other remedy provided herein or by law.

23.2 Entire Agreement. This Lease constitutes all covenants, promises, agreements, conditions and understandings between Landlord and Tenant concerning the Premises and the

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Building and there are no covenants, promises, conditions or understandings, either oral or written, between them other than are herein set forth. Neither Landlord nor Landlord’s agents have made nor shall be bound to any representations with respect to the Premises or the Building except as herein expressly set forth, and all representations, either oral or written, shall be deemed to be merged into this Lease Agreement. Except as herein otherwise provided, no subsequent alteration change or addition to this lease shall be binding upon Landlord or Tenant unless reduced to writing and signed by them.

23.3 Notices.

23.3.1 Any notice by Tenant to Landlord must be served by certified mail return requested, addressed to Landlord at the address first hereinabove given or at such other address as Landlord may designate by written notice. Tenant shall also provide copies of any notice given to Landlord to such mortgagees, agents or attorneys of Landlord as Landlord may direct.

23.3.2 After commencement of the term hereof any notice by Landlord to Tenant shall be served by certified mail, return receipt requested addressed to Tenant at the Premises or at such other address as Tenant shall designate by written notice, or by delivery by Landlord to the Premises or to such other address.

Landlord:	Tenant:
Daniel Dosoretz	David Koeninger
2234 Colonial Blvd.	2234 Colonial Blvd.
Fort Myers, FL 33907	Fort Myers, FL 33907

23.3.3 All notices given hereunder shall be in writing, and shall be effective and deemed to have been given only upon receipt by the party to which notice is being given, said receipt being deemed to have occurred upon hand delivery or posting, or upon such date as the postal authorities shall show the notice to have been delivered, refused, or undeliverable, as evidenced by the return receipt. Notwithstanding any other provision hereof, Landlord shall also have the right to give notice to Tenant in any other manner provided by law.

23.4 Successors. All rights and liabilities herein given to, or imposed upon„ the respective parties hereto shall extend to and bind the several respective heirs, legal representatives, and permitted successors and assigns of the said parties; and if there shall be more than one person or party constituting the Tenant, they shall be bound jointly and severally by the terms, covenants and agreements herein. No rights, however, shall inure to the benefit of any assignee of Tenant unless the assignment to such has been approved by Landlord in writing as provided herein. Nothing contained in this Lease shall in any manner restrict Landlord’s right to assign or encumber this Lease and, in the event Landlord sells its interest in the Building and the purchaser assumes Landlord’s obligations and covenant, Landlord shall thereupon be relieved of all further obligations hereunder.

23.5 Captions and Section Numbers. The captions, section numbers, and article numbers appearing in this Lease are inserted only as a matter of convenience and in no way define, limit, construe, or describe the scope or intent of such sections or articles of this Lease nor in any way affect this Lease.

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23.6 Broker’s Commission. The Tenant represents and warrants to Landlord that it has dealt with no real estate broker, agent, salesperson or finder in connection with this Lease or the Premises. Notwithstanding the foregoing, Tenant agrees to indemnify, defend and save the Landlord harmless from all liabilities arising from claims by any real estate broker or agent claiming through Tenant. Such indemnity of Tenant shall include, without limitation, all of attorneys, fees incurred in connection therewith.

23.7 Partial Invalidity. If any term, covenant or condition of this Lease or the application thereof to any person or circumstances shall, to any extent, be invalid or unenforceable, the remainder of this Lease the application of such term, covenant or condition to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby and each term, covenant or condition of this Lease shall be valid and enforceable to the fullest extent permitted by law.

23.8 Estoppel Certificate. Landlord and Tenant agree that each will, at any time and from time to time, within ten (10) days following written notice by the other party hereto specifying that it is given pursuant to this Section, execute, acknowledge and deliver to the party who gave such notice, or its designate, a statement in writing certifying that this Lease is unmodified and in full force and effect (or if there have been modifications, that the same is in full force and effect and stating the modifications), and the date to which the annual rent and any other payments due hereunder from Tenant have been paid in advance, if any, and stating whether or not there are defenses or offsets claimed by the maker of the certificate and whether or not to the best of knowledge of the signer of such certificate the other party is in default in performance of any covenant agreement or condition contained in this Lease, and if so, Specifying each such default of which the maker may have knowledge and if requested, such financial information concerning Tenant and Tenant’s business operations (and the Guarantor of this Lease, if this Lease be guaranteed) as may be reasonably requested by any Mortgagee or prospective mortgagee or purchaser. The failure of either party to execute, acknowledge and deliver to the other a statement in accordance with the provisions of this Section within said ten (10) business day period shall constitute an acknowledgment, by the party given such notice, which may be relied on by any person holding or proposing to acquire an interest in the Building or any party thereof or the Premises or this Lease from or through the other party, that this Lease is unmodified and in full force and effect and that such rents have been duly and fully paid to an including the respective due dates immediately preceding the date of such notice and shall constitute, as to any person entitled as aforesaid to rely upon such statements, waiver of any defaults which may exist prior to the date of such notice; provided, however that nothing contained in the provision of this Section shall constitute waiver by Landlord of any default in payment of rent or other charges existing as of the date of such notice and, unless expressly consented to in writing by Landlord, and Tenant shall still remain liable for the same.

23.9 Liability of Landlord. Tenant shall look solely to the estate and property of the Landlord in the Premises for the collection of any judgment, or in connection with any other judicial process, requiring the payment of money by Landlord in the event of any default by Landlord with respect to any of the terms, covenants and conditions of this Lease to be observed and performed by Landlord, and no other property or estates of Landlord shall be subject to levy, execution or other enforcement procedures for the satisfaction of Tenant’s remedies and rights under this Lease. Both parties waive a jury trial if any litigation arises.

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23.10 Recordings. Tenant shall not record this Lease, or any memorandum or short form thereof, without the written consent and joinder of Landlord.

23.11 Time of Essence. Time is of the essence with respect to the performance of every provision of this Lease in which time of performance is a factor.

ARTICLE 24

TENANT’S PROPERTY

24.1 Taxes on Leasehold. Tenant shall be responsible for and shall pay before delinquency all municipal, county or state taxes assessed during the term of this Lease against any leasehold interest or personal property of any kind, owned by or placed in, upon or about the Premises by the Tenant.

24.2 Personal Property. Landlord shall not be liable for any damage to property of Tenant or of others located on the Premises, nor for the loss of or damage to any property of Tenant or of others by theft or otherwise. Landlord shall not be liable for any injury or damage to persons or property resulting from fire, explosion, falling plaster, steam, gas, electricity, water, rain, or snow or leaks from any part of the Premises or from the pipes, appliances or plumbing works or from the roof, street or subsurface or from any other place or by dampness or by any other cause of whatsoever nature. Landlord shall not be liable for any such damage caused by other tenants or persons in the Premises, occupants of adjacent property, or caused by operation in construction of any private, public or quasi-public work. All property of Tenant kept or stored on the Premises shall be so kept or stored at the sole risk of Tenant only.

24.3 Notice by Tenant. Tenant shall give immediate notice to Landlord in case of fire or accidents in the Premises or in the building of which the Premises are a part or of defects therein or in any fixtures or equipment.

ARTICLE 25

HOLDING OVER SUCCESSORS

25.1 Surrender of Premises. At the expiration of the tenancy hereby created, Tenant shall surrender the Premises in the same condition as the Premises were in upon the Commencement Date, reasonable wear and tear excepted, and damage by unavoidable casualty excepted, and shall surrender all keys for the Premises to Landlord at the place then fixed for the payment of rent and shall inform Landlord of all combinations on locks, safes and vaults, if any, in the Premises. Tenant shall remove all its trade fixtures before surrendering the premises as aforesaid and shall repair any damage to the Premises caused thereby. Tenant’s obligation to observe or perform this covenant shall survive the expiration or other termination of the term of this Lease.

ARTICLE 26

ATTORNEY FEES AND COSTS

26.1 Attorney Fees and Costs. In the event of a lawsuit or litigation concerning this Lease or enforcement of this Lease the prevailing party shall be entitled to reasonable attorney fees and costs. This will also cover appellant fees and appellant costs.

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ARTICLE 27

VENUE

27.1 Venue. In the event of a lawsuit, litigation or interpretation of this Lease Agreement parties shall be governed by the laws of the State of Florida.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal on 12th day of December, 2005.

Palm Springs Radiation Enterprises, LLC

LANDLORD:

/s/ Daniel Dosoretz

Daniel Dosoretz

California Radiation Therapy Management Services, Inc.

TENANT:

/s/ David Koeninger

David Koeninger

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EX-21.1

Exhibit 21.1

RADIATION THERAPY SERVICES, INC.

List of Subsidiaries

OWNER	SUBSIDIARY	STATE OF INCORPORATION	% OWNERSHIP
Radiation Therapy Services, Inc.	21st Century Oncology, Inc.	Florida	100%
Radiation Therapy Services, Inc.	California Radiation Therapy Management Services, Inc.	California	100%
Radiation Therapy Services, Inc.	North Carolina Radiation Therapy Management Services, Inc.	North Carolina	100%
Radiation Therapy Services, Inc.	Maryland Radiation Therapy Management Services, Inc.	Maryland	100%
Radiation Therapy Services, Inc.	New York Radiation Therapy Management Services, Inc.	New York	100%
Radiation Therapy Services, Inc.	Financial Services of Southwest Florida, LLC (surviving entity in merger with Financial Services of Southwest Florida, Inc.)	Florida	100%
Radiation Therapy Services, Inc.	Radiation Therapy School for Radiation Therapy Technology, Inc.	Florida	100%

1

Radiation Therapy Services, Inc.	21st Century Oncology of Kentucky, LLC	Kentucky	100%
Radiation Therapy Services, Inc.	21st Century Oncology of Alabama, Inc.	Alabama	100%
Radiation Therapy Services, Inc.	South County Radiation Therapy, LLC	Rhode Island	63.5%
Radiation Therapy Services, Inc.	Southern New England Regional Cancer Center, LLC	Rhode Island	62%
Radiation Therapy Services, Inc.	Devoto Construction of Southwest Florida, Inc.	Florida	100%
Radiation Therapy Services, Inc.	21st Century Oncology of New Jersey, Inc.	New Jersey	100%
Radiation Therapy Services, Inc.	New England Radiation Therapy Management Services, Inc.	Massachusetts	100%
Radiation Therapy Services, Inc.	Arizona Radiation Therapy Management Services, Inc.	Arizona	100%
Maryland Radiation Therapy Management Services, Inc.	Northwest Baltimore Radiation Therapy Regional Center, LLC	Maryland	90%
Maryland Radiation Therapy Management Services, Inc.	Berlin Radiation Therapy Treatment Center, LLC	Maryland	50.1%

2

Maryland Radiation Therapy Management Services, Inc.	Ambergris, LLC	West Virginia	60%
21st Century Oncology of Kentucky, LLC	Bluegrass Regional Cancer Center, LLP	Kentucky	90%
21st Century Oncology, Inc.	Nevada Radiation Therapy Management Services, Inc.	Nevada	100%
21st Century Oncology, Inc.	Palms West Radiation Therapy, LLC	Florida	50%
21st Century Oncology, Inc.	Palmetto Radiation Associates, LLC	Florida	50%
21st Century Oncology, Inc.	Naples PET, LLC	Florida	40%
New York Radiation Therapy Management Services, Inc.	Faxton Leasing, LLC	New York	37%

3

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-120213) pertaining to the Radiation Therapy Services, Inc. Second Amended and Restated 1997 Stock Option Plan and the Radiation Therapy Services, Inc. 2004 Stock Incentive Plan of our reports dated February 13, 2006, with respect to the consolidated financial statements of Radiation Therapy Services, Inc. and subsidiaries, Radiation Therapy Services, Inc. and subsidiaries managements’ assessment of the effectiveness of internal control over financial reporting, and the effectiveness of internal control over financial reporting of Radiation Therapy Services, Inc. and subsidiaries included in this Annual Report on Form 10-K for the year ended December 31, 2005.

/s/ Ernst & Young LLP

Certified Public Accountants

Tampa, Florida

February 13, 2006

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Daniel E. Dosoretz, M.D., certify that:

1. I have reviewed this annual report on Form 10-K of Radiation Therapy Services, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: February 17, 2006	By:	/s/ Daniel E. Dosoretz, M.D.
		Daniel E. Dosoretz, M.D.
		President and Chief Executive Officer (principal executive officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

I, David M. Koeninger, certify that:

1. I have reviewed this annual report on Form 10-K of Radiation Therapy Services, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: February 17, 2006	By:	/s/ David M. Koeninger
		David M. Koeninger
		Chief Financial Officer (principal financial officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Radiation Therapy Services, Inc. (the “Company”) on Form 10-K for the year ending December 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Daniel E. Dosoretz, M.D., Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written certification required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

/s/ DANIEL E. DOSORETZ, M.D.

Daniel E. Dosoretz, M.D.

President and Chief Executive Officer

(principal executive officer)

February 17, 2006

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Radiation Therapy Services, Inc. (the “Company”) on Form 10-K for the year ending December 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David M. Koeninger, Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written certification required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

/s/ DAVID M. KOENINGER

David M. Koeninger

Chief Financial Officer

(principal financial officer)

February 17, 2006