8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K/A

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report (Date of earliest event reported): October 13, 2006 (August 2, 2006)

THERAGENICS CORPORATION^®

(Exact name of Registrant as specified in its charter)

Delaware	000-15443	58-1528626
(State of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

5203 Bristol Industrial Way

Buford, Georgia 30518

(Address of principal executive offices / Zip Code)

(770) 271-0233

(Company’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Company under any of the following provisions:

 o Written communications pursuant to Rule 425 under the Securities Act.

 o Soliciting material pursuant to Rule 14a-12 under the Exchange Act.

 o Pre-commencement communications pursuant to Rule 14d—2(b) under the Exchange Act.

 o Pre-commencement communications pursuant to Rule 13e—4(c) under the Exchange Act.

This Current Report on Form 8-K/A is filed as an amendment (Amendment No. 1) to the Current Report on Form 8-K filed by Theragenics Corporation on August 8, 2006 (the “Original Form 8-K”) to provide the historical and pro forma financial information required pursuant to Item 9.01 of Form 8-K. All other items of the Original Form 8-K are unchanged and are incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits.

(a) Financial Statements of Businesses Acquired.

The audited financial statements and the unaudited interim financial statements of Galt Medical Corp. required to be filed pursuant to Item 9.01(a) of Form 8-K are included as Exhibit 99.1 and Exhibit 99.2, respectively, of this Current Report on Form 8-K/A.

(b) Pro Forma Financial Information.

The pro forma financial information required to be filed pursuant to Item 9.01(b) of Form 8-K is included as Exhibit 99.3 of this Current Report on Form 8-K/A.

(d) Exhibits.

Exhibit No.	Description
23.1	Consent of Hartman Leito & Bolt, LLP
99.1	Audited financial statements of Galt Medical Corp. as of and for the year ended December 31, 2005
99.2	Unaudited condensed consolidated financial statements of Galt Medical Corp. as of June 30, 2006 and December 31, 2005 and for the three and six month periods ended June 30, 2006 and 2005
99.3	Unaudited pro forma condensed consolidated financial data

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

THERAGENICS CORPORATION (Registrant)
By:	/s/ M. Christine Jacobs
	M. Christine Jacobs
	Chief Executive Officer

Date: October 13, 2006

Exhibit No.	Description
23.1	Consent of Hartman Leito & Bolt, LLP
99.1	Audited financial statements of Galt Medical Corp. as of and for the year ended December 31, 2005
99.2	Unaudited condensed financial statements of Galt Medical Corp. as of June 30, 2006 and December 31, 2005 and for the three and six month periods ended June 30, 2006 and 2005
99.3	Unaudited pro forma condensed consolidated financial data

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-127551) and Form S-8 (No. 33-48136, 333-15313, 333-40653, 333-64801 and 333-136640) of Theragenics Corporation, of our report dated January 30, 2006 relating to the financial statements of Galt Medical Corp. which appear in the Current Report on Form 8-K/A of Theragenics Corporation dated October 13, 2006.

/s/ Hartman, Leito & Bolt, LLP

Fort Worth, Texas

October 13, 2006

EX-99.1

EXHIBIT 99.1

GALT MEDICAL CORP

Financial Statements

For the Year Ended December 31, 2005

(With Independent Auditors’ Report Thereon)

1

TABLE OF CONTENTS

	Page
Independent Auditors’ Report	3
Financial Statements:
Balance Sheet	4
Statement of Operations	5
Statement of Stockholders’ Equity	6
Statement of Cash Flows	7
Notes to Financial Statements	8

2

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors

Galt Medical Corp

We have audited the accompanying balance sheet of Galt Medical Corp (the “Company”) as of December 31, 2005 and the related statements of operations, changes in stockholders’ equity and cash flows for the year then ended. 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 audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purposes of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Galt Medical Corp as of December 31, 2005 and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/ Hartman Leito & Bolt LLP

January 30, 2006

Fort Worth, Texas

3

GALT MEDICAL CORP

Balance Sheet

December 31, 2005

ASSETS

CURRENT ASSETS
Cash	$	1,362,923
Accounts receivable		848,318
Inventory		1,145,990
Prepaid expenses		25,012
Total current assets		3,382,243
PROPERTY AND EQUIPMENT, NET		627,831
OTHER ASSETS		17,723
TOTAL ASSETS	$	4,027,797

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Accounts payable	$	69,255
Accrued liabilities		24,949
Income taxes payable		323,310
Franchise taxes payable		73,847
Total current liabilities		491,361
Deferred income taxes		101,000
STOCKHOLDERS’ EQUITY
Common stock, $.10 par (10,000,000 shares authorized, 3,293,393 shares issued and outstanding)		329,339
Additional paid-in capital		2,282,011
Retained earnings		824,086
Total stockholders’ equity		3,435,436
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	4,027,797

The accompanying notes are an integral part of these financial statements.

4

GALT MEDICAL CORP

Statement of Operations

For the Year Ended December 31, 2005

NET SALES	$	7,101,928
COST OF GOODS SOLD		2,437,473
Gross profit		4,664,455
OPERATING EXPENSES:
Selling, general and administrative		1,632,908
Research and development		32,152
Total operating expenses		1,665,060
INCOME FROM OPERATIONS		2,999,395
OTHER INCOME (EXPENSE):
Interest expense		(65,987	)
Interest income		12,021
NET INCOME BEFORE TAX		2,945,429
INCOME TAX EXPENSE:
Current		305,682
Deferred		101,000
		406,682
NET INCOME	$	2,538,747

The accompanying notes are an integral part of these financial statements.

5

GALT MEDICAL CORP

Statement of Changes in Stockholders’ Equity

For the Year Ended December 31, 2005

	Common Stock
	Shares		Amount		Additional Paid-In Capital		Retained Earnings (Deficit)			Total
Balance at January 1, 2005		2,793,393	$	279,339	$	2,282,011	$	(1,714,661	)	$	846,689
Net income		-		-		-		2,538,747			2,538,747
Issuance of common stock		500,000		50,000		-		-			50,000
Balance at December 31, 2005		3,293,393	$	329,339	$	2,282,011	$	824,086		$	3,435,436

 

The accompanying notes are an integral part of these financial statements.

6

GALT MEDICAL CORP

Statement of Cash Flows

For the Year Ended December 31, 2005

CASH FLOW FROM OPERATING ACTIVITIES:
Net income	$	2,538,747
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		200,860
Deferred income taxes		101,000
Non cash reduction in accrued legal fees		(20,864	)
Changes in operating assets and liabilities:
Increase in accounts receivable		(68,542	)
Increase in inventory		(503,486	)
Decrease in prepaid expenses		1,336,527
Decrease in accounts payable		(75,993	)
Decrease in accrued liabilities		(1,096,734	)
Increase in income taxes payable		323,310
Increase in franchise taxes payable		73,847
Net cash provided by operating activities		2,808,672
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment		(283,475	)
CASH FLOWS FROM FINANCING ACTIVITIES
Debt repayments		(1,490,000	)
Proceeds from issuance of common stock		50,000
Net cash used in financing activities		(1,440,000	)
NET INCREASE IN CASH		1,085,197
CASH, beginning of year		277,726
CASH, end of year	$	1,362,923
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest	$	65,987

The accompanying notes are an integral part of these financial statements.

7

GALT MEDICAL CORP

Notes to Financial Statements

For the Year Ended December 31, 2005

1. ORGANIZATION

Galt Medical Corp (the “Company”) was incorporated under the laws of the State of Texas in 1991 to engage in the development, manufacture and marketing of disposable medical devices. The primary focus is products for vascular access that are utilized by interventional radiologists and interventional cardiologists. The Company’s products are sold to other manufacturers on a bulk, non-sterile basis and under private label as sterile products. Additionally, the Company sells Galt labeled products sterile to stocking distributors and direct to hospitals. The Company sells to customers throughout the United States and several countries in Europe.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Cash and Cash Equivalents

The Company considers cash and all highly liquid investments with maturities equal to or less than 90 days from purchase to be cash equivalents.

(b) Accounts Receivable

The Company extends unsecured credit in the normal course of business to qualifying customers and receivables are stated at the amount management expects to collect. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. Management considers the following factors among other things when determining the collectibility of specific customer accounts: customer credit-worthiness, past transaction history with the customer, current economic industry trends, and changes in customer payment terms. If the financial condition of the Company’s customers were to deteriorate, adversely affecting their ability to make payments, additional allowance will be required. Based on management’s assessments, the Company provides for estimated uncollectible amounts through a charge to earnings and a credit to an allowance for doubtful accounts. Balances that remain outstanding after the Company has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. At December 31, 2005, the Company considers all accounts receivable to be valid and collectible and has not recorded an allowance for doubtful accounts.

(c) Inventory

Inventory is stated at the lower of cost (weighted average basis) or market on a first in first out basis.

8

GALT MEDICAL CORP

Notes to Financial Statements

For the Year Ended December 31, 2005

(d) Property and Equipment

Property and equipment are stated at cost. Depreciation of property and equipment is calculated using the straight-line method over the estimated useful lives of the assets, ranging from three to seven years. Maintenance and repairs are charged to operations when incurred. Betterments and renewals are capitalized. Leasehold improvements are amortized over the life of the respective leases. Depreciation expense related to property and equipment was $199,722 for the year ended December 31, 2005.

(e) Long-Lived Assets

The Company periodically evaluates its long-lived assets, including property and equipment, to determine whether events or changes in circumstances have occurred which indicate that the remaining asset balance may not be fully recoverable. If such assets are considered to be impaired, an impairment charge is recognized in the amount by which the carrying value of the asset exceeds its fair value. No such losses were recognized during the year ended December 31, 2005.

(f) Revenue Recognition

The Company recognizes revenue when title to the product passes to the customer which is generally on the day of shipment.

(g) Advertising Costs

Advertising costs are expensed as incurred. Products are primarily sold by original equipment manufacturers and salespersons. Advertising costs for the year ended December 31, 2005 approximated $20,000.

(h) Income Taxes

The Company provides deferred taxes for the tax consequences of temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. The temporary differences result primarily from differences in accounting for depreciation and inventory. A valuation allowance is provided for deferred tax assets when it is more likely than not that the asset will not be realized.

9

GALT MEDICAL CORP

Notes to Financial Statements

For the Year Ended December 31, 2005

(i) Concentrations

The Company has cash deposits in financial institutions in excess of the amounts insured by the Federal Depository Insurance Corporation (FDIC). The risk is managed by maintaining all deposits in high quality financial institutions.

(j) Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the Untied States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ form those estimates.

(k) Research and Development

Research and development costs are expensed as incurred.

3. RELATED PARTY TRANSACTIONS

During 2004, the President of the Company advanced $355,000 to the Company, and KIAM Interest, Ltd., a family limited partnership, advanced $1,085,000 to the Company. The President of the Company is the managing general partner in KIAM Interests, Ltd. The notes to the President and KIAM Interest, Ltd. were paid in full during 2005. Sondra Eddings, ex-wife of the President advanced $50,000 to the Company in 2000, which was paid in full in 2005. Interest was paid and expensed monthly on each of these notes prior to their repayment and totaled approximately $66,000 for the year ended December 31, 2005.

In connection with the $355,000 note to the President of the Company, the Company granted the President warrants to purchase 200,000 shares of common stock of the Company at $0.10 per share. In addition, in connection with the $1,085,000 note to KIAM Interest, Ltd., the Company granted warrants to purchase 300,000 shares of common stock of the Company at $0.10 per share. These warrants were fully assignable. A portion of these warrants were transferred to others during 2005. All warrants were exercised prior to December 31, 2005. The fair value of the warrants at issuance, estimated using the Black Sholes option pricing model, was immaterial.

10

GALT MEDICAL CORP

Notes to Financial Statements

For the Year Ended December 31, 2005

4. INVENTORY

At December 31, 2005, inventory is comprised of the following:

Raw materials	$	398,183
Work In Process		561,519
Finished Goods		186,288
	$	1,145,990

5. PROPERTY AND EQUIPMENT

At December 31, 2005 property and equipment consists of the following:

Leasehold Improvements	$	97,966
Machinery, Equipment and Furniture		1,652,344
Computers and Equipment		46,182
		1,796,492
Less: accumulated depreciation		(1,168,661	)
	$	627,831

6. COMMITMENTS

The Company leases various buildings and office equipment under operating leases which expire at various dates through 2012. Rental expense related to operating leases for the buildings and office equipment was $108,903 and $4,392, respectively. Future minimum payments are as follows:

2006	$	141,777
2007		172,682
2008		177,339
2009		181,996
2010		186,652
Thereafter		469,733
	$	1,330,179

11

GALT MEDICAL CORP

Notes to Financial Statements

For the Year Ended December 31, 2005

7. INCOME TAXES

The actual federal income tax provision differs form the amount computed by applying the federal corporate income tax rate of 34% to income before federal income taxes as follows:

Computed “expected” tax expense	$	1,038,541
Expenses not deducted for federal income tax purposes		8,649
Decrease in deferred tax asset valuation allowance		(601,777	)
General business credits		(38,731	)
Income tax expense	$	406,682

Deferred tax assets and liabilities on December 31, 2005 are comprised of the following:

Assets and liabilities - non-current:
Depreciation	$	(101,000	)
Net assets (liability)	$	(101,000	)

Deferred taxes result primarily from temporary differences in reporting depreciation expense for tax and financial reporting purposes. The Company has utilized its net operating loss of approximately $725,229 and general business credits of approximately $72,888 during the year ended December 31, 2005. Due to complete usage of the remaining net operating losses, the beginning valuation allowance of $601,776 was fully reversed during 2005.

8. CONTINGENT LIABILITIES

On November 4, 2005, a former customer of the Company was sued by a third party for patent infringement related to products purchased from the Company. The supply agreement between the Company and its customer states that the Company will indemnify its customer in any such case. The Company is unable to estimate the probability or amount of liability, if any, at this time. Therefore, no liability for this case has been recorded in the accompanying financial statements.

9. STOCK OPTIONS

At December 31, 2005, there were 200,000 stock options outstanding. These options, which became fully vested in 2001, have an exercise price of $1 per share, which was at least equal to 100% of the estimated fair value of the underlying common stock at the date of grant.

10. MAJOR CUSTOMERS

One customer totaled 15% of sales for 2005 and three customers represented 50% of accounts receivable at December 31, 2005.

12

EX-99.2

EXHIBIT 99.2

GALT MEDICAL CORP.

BALANCE SHEETS

(Amounts in thousands)

ASSETS
	June 30, 2006 (Unaudited)		December 31, 2005
CURRENT ASSETS
Cash and short-term investments	$	2,024	$	1,363
Trade accounts receivable		1,220		848
Inventories		1,325		1,146
Prepaid expenses		31		25
TOTAL CURRENT ASSETS		4,600		3,382
PROPERTY AND EQUIPMENT, NET		1,445		628
OTHER ASSETS
Deferred income tax asset		351		-
Other		17		18
TOTAL ASSETS	$	6,413	$	4,028

The accompanying notes are an integral part of these statements.

GALT MEDICAL CORP.

BALANCE SHEETS - Continued

(Amounts in thousands)

LIABILITIES & SHAREHOLDERS’ EQUITY
	June 30, 2006 (Unaudited)		December 31, 2005
CURRENT LIABILITIES
Trade accounts payable	$	202	$	69
Accrued salaries, wages and payroll taxes		149		-
Income taxes payable		794		398
Share based compensation liability		900		-
Other current liabilities		196		25
TOTAL CURRENT LIABILITIES		2,241		492
DEFERRED INCOME TAX LIABILITY		-		101
SHAREHOLDERS’ EQUITY
Common stock		329		329
Additional paid-in capital		2,282		2,282
Retained earnings		1,561		824
TOTAL SHAREHOLDERS’ EQUITY		4,172		3,435
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	6,413	$	4,028

 

The accompanying notes are an integral part of these statements.

2

GALT MEDICAL CORP.

STATEMENTS OF OPERATIONS

(UNAUDITED)

(Amounts in thousands)

	Three Months Ended June 30,					Six Months Ended June 30,
	2006		2005			2006		2005
NET PRODUCT SALES	$	2,743	$	1,698		$	5,251	$	2,885
COST OF SALES		1,107		663			2,915		1,171
GROSS PROFIT		1,636		1,035			2,336		1,714
SELLING, GENERAL AND ADMINISTRATIVE		700		242			1,293		530
EARNINGS FROM OPERATIONS		936		793			1,043		1,184
OTHER INCOME/(EXPENSE)
Interest income		15		-			28		-
Interest expense		-		(23	)		-		(43	)
		15		(23	)		28		(43	)
Earnings before income taxes		951		770			1,071		1,141
Income tax expense		342		106			334		157
NET EARNINGS	$	609	$	664		$	737	$	984

 

The accompanying notes are an integral part of these statements.

3

GALT MEDICAL CORP.

STATEMENTS OF CASH FLOWS

(UNAUDITED)

(Amounts in thousands)

	Six Months Ended June 30,
	2006			2005
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings	$	737		$	984
Adjustments to reconcile net earnings to net cash provided by operating activities
Deferred income tax benefit		(452	)		-
Depreciation and amortization		107			37
Share based compensation		900			-
Changes in assets and liabilities:
Accounts receivable		(372	)		(90	)
Inventories		(179	)		(244	)
Prepaid expenses		(6	)		-
Supercedes bond		-			1,356
Lawsuit judgment payable		-			(1,130	)
Trade accounts payable		133			(56	)
Accrued salaries, wages and payroll taxes		149			-
Income taxes payable		396			158
Other current liabilities		171			(13	)
Net cash provided by operating activities		1,584			1,002
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment		(923	)		(153	)
Net cash used by investing activities		(923	)		(153	)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments under notes payable		-			(340	)
Net cash used by financing activities		-			(340	)
NET INCREASE IN CASH	$	661		$	509
CASH AT BEGINNING OF PERIOD		1,363			278
CASH AT END OF PERIOD	$	2,024		$	787

 

The accompanying footnotes are an integral part of these statements.

4

GALT MEDICAL CORP.

STATEMENTS OF CASH FLOWS - CONTINUED

(UNAUDITED)

(Amounts in thousands)

	Six Months Ended June 30,
	2006		2005
Supplementary cash flow disclosure:
Interest paid	$	-	$	43
Taxes paid	$	390	$	—

 

The accompanying footnotes are an integral part of these statements.

5

GALT MEDICAL CORP.

NOTES TO FINANCIAL STATEMENTS

June 30, 2006

(Unaudited)

NOTE A - BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS

The unaudited interim financial statements included herein reflect the operations of Galt Medical Corp. (“Galt”). These statements reflect all adjustments that are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the periods presented. All such adjustments are of a normal recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These unaudited financial statements and notes should be read in conjunction with the audited financial statements and notes for the year ended December 31, 2005, included in this Form 8-K/A. The results of operations for the six months ended June 30, 2006 are not necessarily indicative of the results to be expected for a full year.

Galt develops, manufactures and markets disposable medical devices utilized for vascular access, primarily serving the interventional radiology and interventional cardiology markets. Galt’s current products include guidewires, micro-introducer kits and tear-away introducer sets and kits, and hemostasis valved introducer kits and sets.

NOTE B - CONTINGENCIES

In November 2005 a former customer of Galt was sued by a third party for patent infringement related to products purchased from the Company. The supply agreement between the Company and its former customer provided that Galt would indemnify the former customer under such circumstances. A reserve for losses related to this claim in the amount of $150,000 was recorded in 2006.

NOTE C - SHARE-BASED COMPENSATION

Stock Options

At June 30, 2006 the Company had 200,000 stock options outstanding. These options, which became fully vested in 2001, have an exercise price of $1 per share which was at least equal to 100% of the estimated fair value of the underlying common stock at the date of grant. These options were exercised on August 2, 2006, immediately preceding the acquisition of Galt (see Note E).

Phantom Share Awards

In 2006 the Company issued 95,000 phantom share awards. Each phantom share award was immediately vested and provides that the holder receive consideration equal to the fair value of Galt’s common stock upon a change in control. Under Statement of Financial Accounting Standards No. 123R, “Share-Based Payment”, these phantom share awards are classified as liabilities, and the grant date fair value of $900,000, plus related payroll taxes, was recorded as compensation expense in the first quarter of 2006, including $756,000 in cost of sales and $144,000 in selling, general and administrative expenses.  In connection with the acquisition of Galt (see Note E), these phantom share awards were paid in full from the purchase consideration and all awards were cancelled.

NOTE D - MAJOR CUSTOMERS

The Company had three customers that comprised 41% and 38% of sales for the three and six months ended June 30, 2006, respectively, with each customer comprising more than 10% of sales. The Company had two customers that comprised 28% and 29% of sales for the three and six months ended June 30, 2005, respectively, with each customer comprising more than 10% of sales.

At June 30, 2006, two customers comprised 32% of accounts receivable, with each customer exceeding 10%. At June 30, 2005, one customer comprised 15% of accounts receivable.

NOTE E - SUBSEQUENT EVENT

On August 2, 2006, Theragenics Corporation acquired all of the outstanding common stock and phantom share awards of Galt. Shareholders and phantom share award holders of Galt received $34.0 million, including approximately $30.9 million in cash and 978,065 common shares of Theragenics valued at approximately $3.1 million.

6

EX-99.3

EXHIBIT 99.3

Unaudited Pro Forma Condensed Consolidated Financial Data

The unaudited pro forma condensed consolidated financial data set forth below are based on the historical consolidated financial statements of Theragenics Corporation and Subsidiary (“Theragenics”) and the historical financial statements of Galt Medical Corp. (“Galt”), and adjustments described in the accompanying notes to the unaudited pro forma financial data. The unaudited pro forma condensed consolidated financial data is presented to give effect to Theragenics’ acquisition of Galt (the “Acquisition”).

The unaudited pro forma condensed consolidated balance sheet combines the historical consolidated balance sheet of Theragenics as of July 2, 2006 and the historical balance sheet of Galt as of June 30, 2006, giving effect to the Acquisition as if it occurred on July 2, 2006. The unaudited pro forma condensed consolidated statements of operations combine the historical consolidated statement of operations of Theragenics for the year ended December 31, 2005 and the six months ended July 2, 2006 with the historical financial statements of Galt for the year ended December 31, 2005 and the six months ended June 30, 2006, giving effect to the Acquisition as if it occurred on January 1, 2005.

The pro forma condensed consolidated statements of operations reflect only pro forma adjustments expected to have a continuing impact on the combined results beyond 12 months from the consummation of the Acquisition, and do not reflect any changes in operations that may occur.

The unaudited pro forma condensed consolidated financial data are for illustrative purposes only, are hypothetical in nature and do not purport to represent what our results of operations, balance sheet or other financial information would have been if the Acquisition had occurred as of the dates indicated or what such results will be for any future periods. The unaudited pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable, including an allocation of the purchase price based on an estimate of fair value, and exclude certain non-recurring charges as disclosed. These estimates are preliminary and are based on information currently available and could change significantly. The unaudited pro forma condensed consolidated financial data and accompanying notes should be read in conjunction with the historical consolidated financial statements, including the related notes, of Theragenics included in our annual report on Form 10-K for the year ended December 31, 2005 and our quarterly report on Form 10-Q for the quarterly period ended July 2, 2006 and of Galt included in Exhibits 99.1 and 99.2 to this current report on Form 8-K/A.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

(amounts in thousands)

						Pro Forma
	Theragenics July 2, 2006			Galt June 30, 2006		Adjustments				Total
Assets						(Note 3)
Current assets
Cash	$	13,869		$	2,024	$	200		(a)	$	9,371
							(6,722	)	(b)
Marketable securities		34,342			-		(17,538	)	(b)		16,804
Accounts receivable		7,411			1,220						8,631
Inventories		5,337			1,325		352		(d)		7,014
Prepaid expenses and other current assets		3,250			31						3,281
Asset held for sale		3,400			-						3,400
Total current assets		67,609			4,600		(23,708	)			48,501
Property and equipment, net		30,972			1,445						32,417
Goodwill		18,370			-		20,506		(e)		38,876
Other intangible assets, net		5,996			17		8,753		(e)		14,766
Deferred income tax asset		-			351		(312	)	(n)		-
							(39	)	(f)
Other		269			-		(181	)	(b)		88
Total assets	$	123,216		$	6,413	$	5,019			$	134,648
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable	$	1,143		$	202	$	-			$	1,345
Accrued salaries, wages and payroll taxes		1,415			149						1,564
Income taxes payable		-			794		(794	)	(n)		-
Share based compensation liability		-			900		(900	)	(h)		-
Other current liabilities		1,288			196						1,484
Total current liabilities		3,846			2,241		(1,694	)			4,393
Long term debt		-			-		7,500		(b)		7,500
Deferred income taxes		260			-		333		(f)		593
Decommissioning retirement liability		537			-						537
Contract termination liability		1,526			-						1,526
Shareholders’ equity
Common stock		321			329		20		(a)		331
							10		(c)
							(349	)	(g)
Additional paid in capital		68,889			2,282		180		(a)		71,931
							3,042		(c)
							(2,462	)	(g)
Retained earnings		48,132			1,561		(1,561	)	(g)		48,132
Accumulated other comprehensive loss		(295	)		-						(295	)
Total shareholders’ equity		117,047			4,172		(1,120	)			120,099
Total liabilities and shareholders’ equity	$	123,216		$	6,413	$	5,019			$	134,648

See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

2

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(amounts in thousands, except per share data)

	Six Months Ended					Pro Forma
	Theragenics July 2, 2006			Galt June 30, 2006		Adjustments				Total
						(Note 3)
Product sales	$	24,680		$	5,251	$	-			$	29,931
Licensing fees		304			-						304
Total revenue		24,984			5,251		-				30,235
Cost of sales		12,535			2,915		(815	)	(h)		14,622
							(13	)	(i)
Gross profit		12,449			2,336		828				15,613
Selling, general and administrative		10,725			1,293		(155	)	(h)		11,862
							(1	)	(i)
Research and development		418			-						418
Purchased intangibles amortization		375			-		597		(j)		972
Restructuring		369			-						369
Gain on sale of assets		(201	)		-						(201	)
Earnings from operations		763			1,043		387				2,193
Interest income		869			28		(412	)	(k)		485
Interest expense		(134	)		-		229		(l)		(363	)
Other		(20	)		-						(20	)
Earnings before income taxes		1,478			1,071		(254	)			2,295
Income tax expense		270			334		334		(m)		270
Net earnings	$	1,208		$	737	$	80			$	2,025
Earnings per share
Basic	$	0.04								$	0.06
Diluted	$	0.04								$	0.06
Weighted average shares outstanding
Basic		32,064					978		(o)		33,042
Diluted		32,114					978		(o)		33,092

See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

3

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(amounts in thousands, except per share data)

	Year Ended December 31, 2005						Pro Forma
	Theragenics			Galt			Adjustments				Total
							(Note 3)
Product sales	$	43,693		$	7,102		$	-			$	50,795
Licensing fees		577			-							577
Total revenue		44,270			7,102			-				51,372
Cost of sales		23,763			2,437			(68	)	(i)		26,132
Gross profit		20,507			4,665			68				25,240
Selling, general and administrative		19,652			1,633			(8	)	(i)		21,277
Research and development		3,632			32							3,664
Purchased intangibles amortization		500			-			1,194		(j)		1,694
Restructuring		33,390			-							33,390
Earnings (loss) from operations		(36,667	)		3,000			(1,118	)			(34,785	)
Interest income		1,429			12			(591	)	(k)		850
Interest expense		(160	)		(66	)		356		(l)		(582	)
Other		(2	)		-							(2	)
Earnings (loss) before income taxes		(35,400	)		2,946			(2,065	)			(34,519	)
Income tax expense (benefit)		(6,394	)		407			(407	)	(m)		(6,394	)
Net earnings (loss)	$	(29,006	)	$	2,539		$	(1,658	)		$	(28,125	)
Loss per share
Basic and diluted	$	(0.93	)								$	(0.87	)
Weighted average shares outstanding
Basic and diluted		31,273						978		(o)		32,251

 

See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

4

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. On August 2, 2006, Theragenics acquired all of the outstanding common stock and other equity interests of Galt. The total purchase price, including transaction costs, was $32.8  million, (net of cash acquired of $2.2 million). The purchase price paid was $29.7 million in cash and the issuance of 978,065 shares of Theragenics common stock valued at $3.1 million. The per share value of the common stock was based upon the closing price of the stock on the date of acquisition. Theragenics financed a portion of the purchase price with $7.5 million of borrowings under its $40.0 million credit facility. Under the purchase method of accounting, the assets and liabilities of Galt will be recorded at their fair values as of the acquisition date and added to those of Theragenics. The reported financial condition and results of operations of Theragenics subsequent to the acquisition will reflect these values, but will not be restated retroactively to reflect historical financial position or results of operations of Galt.

The purchase price is determined as follows (in thousands):

Cash consideration paid	$	30,814
Theragenics’ commons shares issued		3,052
Transaction costs		1,127
Gross purchase price		34,993
Less cash acquired		(2,224	)
Total purchase price	$	32,769

For purposes of this pro forma presentation, the purchase price has been allocated on a preliminary basis to the acquired tangible and intangible assets and liabilities based on their estimated fair values as of June 30, 2006 as follows (in thousands):

Current assets	$	2,928
Property and equipment		1,445
Identifiable intangible assets		8,770
Current liabilities		(547	)
Deferred income tax liability		(333	)
Goodwill		20,506
	$	32,769

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The amount allocated to identifiable intangible assets and goodwill has been attributed to the following categories based on the preliminary valuation (in thousands):

	Estimated fair value		Estimated Useful life
Trade name	$	900		Indeterminate
Acquired technology		900		14 years
Customer relationships		5,100		7.5 years
Non-compete agreements		1,700		3-4 years
Backlog		170		Less than 1 year
Total Identifiable intangible assets	$	8,770
Goodwill	$	20,506		Indeterminate

In accordance with Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets”, intangible assets with indeterminate lives, including goodwill and trade name, will not be amortized. Amortization of all intangible assets identified above is not expected to be deductible for income tax purposes.

The purchase price allocation above, including the amounts allocated to identifiable intangible assets and goodwill, is presented for pro forma information only. The actual purchase price allocation will be based on the fair values of the assets acquired and liabilities assumed as of August 2, 2006, which may be materially different than the estimated fair values at June 30, 2006.

2. Theragenics recorded $32.9 million of restructuring charges in the third quarter of 2005 which resulted in, among other things, a net deferred income tax asset of $6.6 million. Due to the Company’s recent history of operating losses at that time, a valuation allowance for the full amount of the net deferred tax asset was recorded. Theragenics has been profitable for the six months ended July 2, 2006. However, management believes that a track record of quality earnings must be established prior to recognizing deferred tax assets that are dependent upon future taxable income. The acquisition of Galt is not expected to change management’s estimate related to the allowance for the net deferred tax asset at August 2, 2006. $2.9 million of deferred income tax liability arising from fair value adjustments in purchase accounting related to the Acquisition are expected to be recorded as a reduction of the allowance for the net deferred tax asset and a reduction in the goodwill arising from the transaction. Accordingly, the accompanying pro forma information reflects this treatment for all periods presented.

3. The following describes the pro forma adjustments related to the Acquisition made in the accompanying unaudited pro forma condensed consolidated balance sheet as of July 2, 2006 and the unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2005 and the six months ended July 2, 2006.

a. To record the exercise of non-qualified stock options at Galt immediately prior to the Acquisition.

b. To record the cash portion of the purchase price, including direct transaction costs paid prior to closing and borrowings under Theragenics’ credit facility utilized at closing.

6

c. To record the stock portion of the purchase price, consisting of 978,065 shares of Theragenics common stock.

d. To record the estimated fair value adjustment to the carrying value of Galt’s inventory balance in purchase accounting. The related amortization expense has not been included as an adjustment to cost of sales in the accompanying pro forma statements of operations because its impact is not expected to extend beyond the next twelve months.

e. To record the estimated fair values of the acquired identifiable intangible assets and goodwill. No pro forma expense has been included in the pro forma statements of operations for amortization of backlog because its impact is not expected to extend beyond the next twelve months.

f. To record deferred tax liabilities related to identifiable intangible assets with indeterminate lives in connection with fair value adjustments in purchase accounting.

g. To eliminate Galt’s historical shareholders’ equity account balances in purchase accounting.

h. To reverse share based compensation expense at Galt related to phantom share that terminates upon change in control.

i. To adjust depreciation expense for adjustments to depreciable lives of Galt property and equipment.

j. To record amortization expense related to the acquired identifiable intangible assets arising from the Acquisition.

k. To reduce interest income for reduction in cash used for the Acquisition.

l. To record interest expense on long term borrowings used for the Acquisition.

m. To reduce income tax expense attributable to Galt as a result of Theragenics’ allowance for its net deferred tax asset (see Note 2).

n. To adjust income taxes payable and deferred income tax asset for Galt results of operations for the period January 1, 2006 to date of Acquisition.

o. To record the weighted average shares issued for the Acquisition.

7