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

                                    FORM 10-K

   [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE
         SECURITIES EXCHANGE ACT OF 1934
           FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998

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

                         COMMISSION FILE NO. 0-15443

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

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

      5325 Oakbrook Parkway
       Norcross, Georgia                              30093
(Address of principal executive offices)            (Zip Code)

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

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

                                              Name of each exchange on
  Title of each class                              which registered
- - - - - - - - - - - - - - -               - - - - - - - - - - - - - -

Common stock, $.01 par value,                New York Stock Exchange
Together with associated Common
Stock Purchase Rights

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


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

  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.

  As of March 29, 1999 the  aggregate  market  value of the common  stock of the
registrant held by non-affiliates of the registrant,  as determined by reference
to the  closing  price of the  Common  Stock as  reported  on the New York Stock
Exchange, was $152,239,682.

  As of March 29,  1999 the  number of shares of common  stock,  $.01 par value,
outstanding was 29,435,018.

  Documents incorporated by reference: Proxy Statement for the registrant's 1999
Annual  Meeting of  Stockholders,  to be filed with the  Securities and Exchange
Commission not later than 120 days after December 31, 1998, is  incorporated  by
reference in Part III herein.


<PAGE>


Part I

Item 1.  BUSINESS

General

  Theragenics  Corporation  ("Theragenics"  or the "Company") is a leader in the
production  and sales of  implantable  radiation  devices  ("seeds") used in the
treatment of cancer.  The Company  produces and sells  TheraSeed(R),  which is a
U.S.  Food  and  Drug  Administration   (FDA)  licensed  device,  based  on  the
radioactive  isotope palladium 103 (Pd-103).  The Company received FDA clearance
to market TheraSeed(R) in 1986 and commenced  commercial  production and product
sales in 1987.  Currently,  TheraSeed(R)  is used  primarily in the treatment of
early stage  prostate  cancer.  In the  treatment,  TheraSeeds(R)  are implanted
("seeding") into the prostate in a one-time,  minimally invasive procedure.  The
radiation emitted by the seeds is contained within the immediate  prostate area,
killing the cancerous tumor while sparing  surrounding  healthy cells and organs
from  any  significant  dose  of  radiation.  TheraSeed(R)  has  been  shown  in
independent  clinical  studies to offer success rates that are  comparable to or
better than conventional  therapies for the treatment of prostate cancer,  while
being associated with a reduced incidence of adverse side effects.  In addition,
TheraSeed(R) offers significant quality of life and cost advantages. Since 1987,
TheraSeed(R)  has been used in over 650  centers  across the United  States.  In
1998, the Company received regulatory approval for the marketing of TheraSeed(R)
throughout  the member  countries of the European Union by obtaining CE Marking.
Sales of  TheraSeed(R)  in  Europe  were not  significant  in 1998,  and are not
expected to be significant in 1999. TheraSeed(R) has also been used on a limited
basis in the  treatment  of cancers of the  pancreas,  lung,  head,  neck,  oral
cavity, brain and eye.

  Prior to 1993, the Company relied  exclusively on reactor produced Pd-103.  In
order to increase control over the timeliness,  availability and cost of Pd-103,
the Company  converted from reactor  produced Pd-103 to an alternative  means of
producing  Pd-103 using  Company-owned  cyclotrons.  The first cyclotron  became
operational  in 1993 and as of December 31, 1998,  seven  cyclotrons  were fully
operational.  Currently,  all Pd-103  utilized  by the  Company is  produced  by
Company-owned cyclotrons.



<PAGE>


Industry Overview

Prostate Cancer

    Excluding  skin cancer,  prostate  cancer is the most common form of cancer,
and the second leading cause of cancer  deaths,  in men. Based on industry data,
the Company  estimates that in 1995 the cost of all methods of treating prostate
cancer  exceeded $3.0 billion in the United States.  The American Cancer Society
estimates  there will be 179,300 new cases of prostate  cancer and an  estimated
37,000  deaths  associated  with the  disease  in 1999.  Between  1989 and 1992,
prostate  cancer  incidence rates  increased  dramatically,  probably due to the
increasing use of  prostate-specific  antigen (PSA) blood test  screenings.  The
rate declined 6.3 percent  overall from 1991 to 1995.  According to the National
Cancer  Institute,   the  incidence  rate  for  white  men  peaked  in  1992  at
approximately  186 new cases per  100,000  men before  declining  27% to 135 new
cases per 100,000 in 1994.  Incidence in African  American men peaked in 1993 at
approximately  265 cases per 100,000 before declining 12% to  approximately  234
cases per 100,000 in 1994.  The  prostate  cancer death rate for white men began
dropping in 1992 and for black men in 1994.

  Prostate cancer incidence and mortality increase with age. More than eight out
of ten men  diagnosed  with  prostate  cancer  are over the age of 65.  Prostate
cancer  accounts  for about 13% of male  cancer-related  deaths.  Men survive at
least five years in 89% of the diagnosed prostate cancer cases. According to the
American Cancer  Society,  approximately  58% of all prostate  cancers are found
while they are still localized (confined to the prostate), and a 5-year relative
survival rate for men with  localized  prostate  cancer is 100%. 31% of prostate
cancers have spread to tissues near the prostate when diagnosed,  and the 5-year
survival  rate for these men is 94%. The  remaining  11% of those men  diagnosed
have prostate cancer that has spread to distant parts of the body. About 31% are
expected to survive at least five years. These survival statistics, according to
the American  Cancer  Society,  include all  diagnosed  prostate  cancer  cases,
regardless of the treatment. The Company estimates that in 1998, its U.S. market
share  in  the  treatment  of  early  stage   localized   prostate   cancer  was
approximately 8%.

    The prostate is a walnut-sized  gland surrounding the male urethra,  located
below the bladder and adjacent to the rectum.  The two most  prevalent  prostate
diseases are benign prostatic hyperplasia ("BPH") and prostate cancer. BPH is a


<PAGE>

non-cancerous enlargement of the innermost part of the prostate. Prostate cancer
is a malignant  tumor that begins most often in the  periphery of the gland and,
like other forms of cancer, may spread beyond the prostate to other parts of the
body. If left  untreated,  prostate  cancer can metastasize to the lung or bone,
resulting in death.

    Staging is the process of  determining  how far the cancer has  spread.  The
treatment and recovery outlook depend on the stage of the cancer. The TNM system
is the staging  process used most often.  The TNM system for staging gives three
key pieces of information:

    T refers to the size of the Tumor which is measured in centimeters (cm). One
cm is about  one-half  inch. N describes how far the cancer has spread to nearby
lymph  Nodes.  M shows  whether  the cancer has spread  (Metastasized)  to other
organs of the body. In addition,  the TNM  descriptions  can be grouped together
with  stages  labeled 0 through IV (0-4).  The higher the  number,  the more the
cancer has spread. The following table summarizes the various stages of prostate
cancer.

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


    The Gleason system is typically  used for "grading" or determining  how fast
the tumor is growing.  Some  prostate  cancers grow more quickly than others.  A
Gleason  grade,  which  ranges  from 2 to 10,  usually is used to  indicate  the
tumor's  growth rate after it is taken during a biopsy.  Higher  Gleason  grades
such as 8-10 means cancer cells are likely to grow more quickly.  Most localized
cancers of the prostate are an intermediate grade, Gleason grades 4, 5, or 6.

    Approximately  58% of new  prostate  cancer  diagnoses  are defined as being
localized (that is,  confined to the prostate) and the 5-year relative  survival
rate for men with  localized  prostate  cancer is 100%.  The lack of early-stage
symptoms makes  diagnosis  difficult.  Until the mid 1980's,  the best method of
routine   examination  had  been  the  digital  rectal  exam,  an  uncomfortable
subjective  determination.  The diagnostic test currently used most often is the
PSA blood test, which determines the amount of prostate specific antigen ("PSA")
present in the blood. PSA is found in a protein secreted by the prostate, and

<PAGE>


elevated levels of PSA can be associated with either prostatitis (a noncancerous
inflammatory  condition) or a proliferation of cancer cells in the prostate.  As
stated  earlier,   the  number  of  new  prostate  cancers  diagnosed  increased
significantly  from 1989 to 1993,  probably as a result of an improvement in the
ability to diagnose  prostate  cancer through  physicians'  use of the PSA test.
Industry studies have shown that the PSA test can detect prostate cancer as many
as five years  earlier than the digital  rectal exam.  The PSA test is currently
part of the  routine  medical  check-up  for  prostate  assessment.  Transrectal
ultrasound tests and biopsies are typically  performed on patients with elevated
PSA readings to confirm the existence of cancer.

Treatment Options

    In  addition  to  seeding,  prostate  cancer  can be  treated  with  radical
prostatectomy ("RP"), transurethral resection of the prostate ("TURP"), external
beam radiation therapy ("EBRT"), cryosurgery,  hormone therapy, chemotherapy and
watchful  waiting.  Some of these  therapies may be combined in special cases to
address a specific cancer stage or patient need. For example,  TheraSeed(R)  has
been used in  combination  with EBRT to treat  some  locally  advanced  cases of
prostate  cancer.  The treatments  that have been most successful are those that
remove or kill all of the cancerous  tissue while avoiding  excessive  damage to
the  surrounding  healthy  tissue.  When the cancerous  tissue is not completely
eliminated,  the  cancer  typically  returns  to the  primary  site,  often with
metastases to other areas.  The following is a summary of treatment  options for
prostate cancer other than seeding.

 Radical  Prostatectomy and transurethral  resection of the prostate are the two
most common surgical  procedures.  Radical  Prostatectomy  involves the complete
removal of the prostate  gland.  This  procedure has been used for over 30 years
and  is  considered  to be  the  standard  medical  treatment  for  early-stage,
localized tumors. RP typically  requires a three-day average hospital stay and a
lengthy recovery period  (generally three to five weeks).  Possible side effects
include  impotence  and  incontinence.  The cost of RP ranges  from  $19,000  to
$25,000 per procedure,  excluding  treatment for side effects and  postoperative
complications.  Approximately  120,000  men  underwent  RP in  1995,  and  it is
estimated that 120,000 men will undergo RP in the year 2000.

  Transurethral  resection  of the  prostate  (TURP) is used for men who are not
able to have a radical  prostatectomy because of advanced age or serious illness
in addition  to the  prostate  cancer.  It is not done to cure the disease or to
remove all of the cancer, but rather as a relief of the symptoms from the

<PAGE>

disease before other treatments begin. The procedure is actually used more often
to relieve symptoms of non-cancerous prostate enlargement. The procedure usually
requires a hospital  stay of one to two days and the  patient may return to work
in one to two weeks.  Possible side effects include some bleeding into the urine
after surgery,  possibility of infections and the risks associated with the type
of anesthesia used.

    External Beam Radiation  Therapy  involves  directing a beam of radiation at
the prostate gland to destroy  tumorous  tissue and has been a common  technique
for  treating  many kinds of cancer  since the 1950s.  EBRT has  typically  been
reserved for  early-stage  prostate  cancer in locally  advanced cases where the
patient is an  inappropriate  surgical risk.  Patients are usually  treated five
days per week in an  outpatient  center  over a  period  of six to seven  weeks.
Rectal  complications  resulting  from  damage to the rectal  wall caused by the
radiation  beam as it travels to the prostate are the most common side  effects.
Other possible side effects also include  incontinence and impotence,  but these
side effects generally occur with less frequency than they do following RP. EBRT
is  estimated  to cost  between  $13,000 to $17,000 per  patient.  Approximately
35,000 men underwent EBRT in 1995, and it is estimated that approximately 65,000
EBRT  procedures  will be  performed  in the  year  2000  for the  treatment  of
localized prostate cancer.

    Cryosurgery  involves  placing a small metal tool into the tumor and killing
the cancer by  freezing  the entire  prostate.  Patients  usually  remain in the
hospital  for one to two days.  There will be some  bruising and soreness of the
area where the probe was  inserted.  Side  effects of  cryosurgery  may  include
damage to nerves near the prostate that may cause  impotence  and  incontinence,
damage to bladder and intestines,  and a fistula (an abnormal  opening)  between
the rectum and bladder.  This option is considered most appropriate for men with
serious medical  conditions that make them unable to endure surgery or radiation
therapy.

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

<PAGE>

nausea, hair loss and fatigue.  Drug therapy and chemotherapy require long-term,
repeated administration of medication on an outpatient basis.

    Watchful Waiting is recommended by some physicians in certain  circumstances
based on the severity and growth rate of the disease,  as well as on the age and
life  expectancy of the patient.  The aim of watchful  waiting is to monitor the
patient,  treat some of the attendant  symptoms and  determine  when more active
intervention is required.  Watchful  waiting has gained  popularity  among those
patients  refusing  treatment  due  to  side  effects  associated  with  radical
prostatectomy.  Watchful  waiting  requires  periodic  physician  visits and PSA
monitoring.

    In  addition  to the  treatment  options  described  above,  other  forms of
treatment  as well as  prevention  are being  developed  and tested in  clinical
settings.

The Theragenics Solution

    Theragenics  produces  TheraSeed(R),  an FDA-cleared device for treatment of
all solid  localized  tumors and currently  used  principally in seeding for the
treatment of prostate cancer.  In the prostate  application,  TheraSeeds(R)  are
implanted  throughout  the  prostate  gland  in a  minimally  invasive  surgical
technique  under  ultrasound  guidance.  The  radiation  emitted by the seeds is
contained  within the immediate  prostate area,  killing the tumor while sparing
surrounding organs of significant radiation exposure.  The seeds, whose capsules
are biocompatible, remain in the prostate after delivering their radiation dose.
TheraSeed(R)  is  best  suited  for  solid  localized  tumors  and is  typically
classified as a treatment for early-stage disease.

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

    TheraSeed(R) is a radioactive "seed"  approximately 4.5 millimeters long and

<PAGE>

0.8 millimeters wide, or roughly the size of a grain of rice. Each seed consists
of a biocompatible  titanium outer capsule containing the radioactive  substance
Pd-103.  The  half-life  of Pd-103,  or the time  required to reduce the emitted
radiation  to  one-half  of  its  initial  level,  is  17  days.  The  half-life
characteristics result in the loss of almost all radioactivity in less than four
months.

Treatment Protocol

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

  Once the implant  model has been  constructed,  the procedure is scheduled and
the seeds are ordered.  The number of seeds implanted normally ranges from 40 to
100,  with the  number  of seeds  varying  with  the size of the  prostate.  The
procedure is usually performed under local anesthesia in an outpatient  setting.
An ultrasound  probe is first positioned in the rectum to guide needle placement
and seed  location.  Correct needle  placement is facilitated by a template,  or
grid,  that covers the perineum (the area between the scrotum and rectum through
which the needles are  inserted).  This  template is attached to the  ultrasound
probe.  Implant  needles  loaded  with  seeds are  assigned  to the  appropriate
template holes as indicated in the treatment plan. Each needle is guided through
the template and then through the perineum to its predetermined  position within
the prostate under direct ultrasound  visualization.  The seeds are implanted as
the needle is withdrawn  from the prostate.  When all seeds have been  inserted,
the ultrasound image is again reviewed to verify seed placement.  An experienced
practitioner typically performs the procedure in approximately 60 to 90 minutes,
with the patient often returning home at day's end.

  Seeding  has been used as a  treatment  for  prostate  cancer  since the early
1980s, when seeds containing the radioactive  isotope Iodine-125  ("I-125") were
implanted in prostate  tumors under open surgery.  However,  this technique fell
into disfavor  because the seeds were often  haphazardly  arranged  resulting in
radiation not reaching all of the targeted cancerous prostate.  Compounding this
was that often an unintended radiation dose was delivered to healthy surrounding
tissues, particularly the urethra and rectum. Clinical results indicate that the
computer  modeling,  advanced imaging and other techniques used in seeding today
have significantly ameliorated these drawbacks.

<PAGE>


Clinical Results

  Strong Efficacy  Results.  Clinical data indicates that seeding offers success
rates for early-stage prostate cancer treatment that are comparable to or better
than those of RP or EBRT.  The vast majority of published  studies on the use of
seeding in the treatment of early-stage prostate cancer have been very positive.
In a study  published in Urology Times in September  1994,  Drs. John Blasko and
Haakon Ragde of the Northwest Tumor Institute in Seattle, Washington, in a study
of 298 men with early-stage  prostate  cancer,  found an actuarial local control
rate of 96% after  treatment  with either Pd-103 or I-125 seed  implantation.  A
study  published in 1995 by Drs. Blasko and Ragde found 100% of the 111 patients
treated with  TheraSeed(R) for localized  early-stage  prostate cancer showed no
localized  prostate cancer after treatment  follow-up ranging from 12-73 months,
with a median  follow-up of 32 months.  The  actuarial  disease-free  rate at 54
months was 89%. Updating their previous study on patients treated with Pd-103 or
I-125 for a paper  published for the Seminars in Surgical  Oncology  1997,  Drs.
Blasko, Ragde, Grimm, et al. found a seven-year actuarial local (confined to the
prostate) and distal  (outside the prostate)  disease-free  rate of 97% and 95%,
respectively for 320 patients treated for localized early-stage prostate cancer.
Because of Dr. Blasko's extensive experience in the treatment of cancer and
brachytherapy, the company retained him as a medical and cancer advisor in 1998.

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

    Reduced Incidence of Side Effects.  Because  TheraSeed(R)  delivers a highly
concentrated  and confined dose of radiation  directly to the prostate,  healthy
surrounding  tissues and organs are spared excessive  radiation  exposure.  This
results in  significantly  fewer and less severe side effects and  complications
than are incurred with other conventional  therapies.  RP generally results in a
65-90% impotence rate and a 2-35%  incontinence rate, and EBRT generally results
in  impotence  and  incontinence  rates of 40-60%  and 8-18%,  respectively.  In
contrast, according to the 1995 study by the Northwest Tumor Institute described
above,  it was reported that 85% of seed therapy  patients under 70 years of age
who were potent before the procedure remained so. In addition,  patients who had
not  had a  previous  transurethral  prostate  resection  ("TURP")  suffered  no
incontinence.  Patients having a previous TURP have  compromised  urinary tracts
and can experience higher rates of incontinence.  Patients receiving seeding can
expect some urethra  irritation  and urinary  urgency  post-implantation  as the
Pd-103 delivers its radiation dose.

    Lower Treatment Cost. The total cost of seeding is approximately $15,000 per
procedure.  This is  approximately  two-thirds the cost of RP, which ranges from
$19,000 to $25,000,  excluding  treatment  for side  effects and  post-operative
complications. Seeding cost is comparable to the cost of EBRT, which ranges from
$13,000 to $17,000 for a six-to-seven week course of treatment.

    Management  believes  TheraSeed(R)  represents  the best  available  form of
seeding. Another radioactive isotope, Iodine-125 ("I-125"), is also commercially
available  as a  permanent  implant.  TheraSeed(R)  was the  first  commercially
available  alternative isotope to I-125 since I-125's introduction in the 1970s.
Management believes that I-125 and Pd-103 are used in approximately 60% and 40%,
respectively, of all prostate cancer seeding procedures. Another technique known
as  "temporary   seeding,"   which  involves  the  temporary   placement  of  an
Iridium-based  source in or near a tumor, is used in a very small  percentage of
cases.  Management believes Pd-103 has the following  advantages over I-125: (i)
Pd-103  delivers  three  times the initial  dose rate of I-125,  which can yield
advantages  in  treating  aggressive  cancers,  (ii)  Pd-103  has  approximately
one-third the half-life of I-125,  which shortens the duration of some radiation
induced side effects by  two-thirds  and reduces  radiation  exposure to medical
personnel in treatment follow-up; and (iii) unlike I-125, Pd-103 is nontoxic and
non-volatile  as it  decays.  Management  is not aware of any  clinical  studies
directly comparing the efficacy of Pd-103 versus I-125.
<PAGE>

Strategy

  In  an  effort  to  enhance  market  penetration  and  maintain  technological
leadership,  the  Company  signed a sales and  marketing  agreement  with Indigo
Medical,  Inc., a Johnson & Johnson company,  in 1997.  Management believes that
over time this agreement  provides an opportunity  for Theragenics and Indigo to
take  the  seeding  treatment  of  prostate  cancer  to  levels  of  penetration
previously unseen by leveraging the marketing, health care organization network,
training capacity and international capabilities of Johnson & Johnson.

  In  1998  the  Company  received  regulatory  approval  for the  marketing  of
TheraSeed(R)  throughout the member countries of the European Union by obtaining
CE Marking,  and a limited number of  TheraSeed(R)  procedures were performed in
Italy and Germany. Management does not expect sales of TheraSeed(R) in Europe to
be significant in 1999.

Production

    The production of TheraSeed(R) is dependent upon the availability of Pd-103,
as well as  Rhodium-103  ("Rh-103"),  titanium,  graphite  and  lead.  With  the
exception of Pd-103,  all of these raw materials are relatively  inexpensive and
readily available from third party suppliers.

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

    To increase its control over timely,  consistent and continuing availability
and  cost  of  Pd-103,  the  Company  turned  away  from  reactor-based  neutron
bombardment of Pd-102 and to the  cyclotron-based  proton  bombardment method of
producing  Pd-103.  To accomplish  this  alternative  method of production,  the
Company  contracted  in 1992  for  the  purchase  of a  cyclotron  for  in-house
production of Pd-103.  After the cyclotron was delivered and reliable production
of Pd-103 was proven,  the Company  discontinued its reliance on outside vendors
for irradiation services.

    The Company  currently has eight  cyclotrons in production  and is currently
installing a ninth,  which is scheduled to become  operational during the second
<PAGE>

quarter of 1999.  The Company  has  ordered  five  additional  cyclotrons  to be
installed in fiscal 1999,  though the last of these five will not be operational
until early 2000. The Company's  cyclotrons are designed,  built,  installed and
tested by a company specializing in the construction of such equipment.

    Due to the highly  sophisticated and technical nature of the equipment,  the
Company has in the past encountered delays and difficulties in the construction,
installation  and testing of its cyclotrons.  Management  cannot be certain that
such problems will not occur in connection with the  construction,  installation
and testing of the cyclotrons to be installed in 1999 and 2000.

    Cyclotron  operations  constitute  only one  component  of the  TheraSeed(R)
manufacturing  process.   Because  the  production  of  TheraSeed(R)  is  highly
sensitive and labor intensive,  management is focusing significant attention and
effort on  automating  and  otherwise  improving  all  aspects of the  Company's
manufacturing  process.  Certain portions of the Company's  production processes
were automated  during 1998.  Although the  automation  process is difficult and
time consuming, and has been subject to significant delays,  management believes
it can continue to improve  efficiency,  further  reduce  radiation  exposure to
personnel and provide additional production capacity for TheraSeed(R).

  During  1997,  the Company  received  certification  that its quality  control
system  meets  all  the  requirements  of  the  International  Organization  for
Standards' ISO 9001/EN46001 Quality System Standard.

Marketing

    Strategic Alliance.  In 1997, the Company entered into a sales and marketing
agreement with Indigo Medical,  Inc., a Johnson & Johnson  Company,  granting to
Indigo the exclusive  worldwide  right to market and sell  TheraSeed(R)  for the
treatment  of  prostate  cancer.  Indigo  has  assumed  responsibility  for  the
education and training of urologists,  radiation oncologists and other personnel
involved in the use of TheraSeed(R) for the treatment of prostate cancer.

  Management  believes that upon full implementation of Indigo's marketing 
efforts directed to patients and medical professionals, the alliance with Indigo
will provide the opportunity  for long-term sales growth and international 
expansion while allowing the Company to focus its resources on maintaining its 


<PAGE>
leadership in the production of Pd-103 for prostate cancer  treatment 
and other potential  applications.  By leveraging the extensive  worldwide  
marketing  capability of Indigo and Johnson & Johnson, the Company eliminates
the need to develop an extensive,  vertically  integrated sales,  marketing  
and  education  and  training  network for the  marketing  of
TheraSeed(R) for prostate cancer.

Management does not anticipate having the ability to generate  significant sales
in other cancer areas in the coming year.

TheraSphere(R)

    Theragenics has also  participated in the development of  TheraSphere(R),  a
microscopic radioactive glass sphere designed for the treatment of liver cancer.
The Company holds a worldwide  exclusive license from the University of Missouri
for the use of the technology  required to produce  TheraSphere(R).  The Company
has granted to Nordion  International,  Inc.  ("Nordion") an exclusive worldwide
sublicense  to  manufacture,   distribute  and  sell   TheraSphere(R)   for  any
application.  TheraSphere(R)  has been approved for distribution in Canada,  but
has not been approved by the FDA for  distribution  in the United States.  Under
the  terms of the  sublicense,  Nordion  has  agreed  to  obtain  the  necessary
regulatory approvals for distribution of TheraSphere(R) in the United States and
other countries.  Timing for commercial  development and regulatory  approval of
TheraSphere(R)  in the United States and elsewhere is uncertain,  and management
does  not  anticipate   significant  revenues  from  TheraSphere(R)  within  the
foreseeable future.

    A  TheraSphere(R)   treatment  dose  contains   approximately  five  million
yttrium-90  glass  spheres  that are each  approximately  half the diameter of a
human hair. In the treatment of liver cancer,  a radiation  dose is delivered to
the tumor by  introducing  TheraSphere(R)  by catheter into the hepatic  artery,
which  carries  arterial  blood to the liver.  Because of greater  blood flow to
tumors  compared to healthy liver tissue,  the  microspheres  concentrate in the
capillaries  feeding the tumor.  The  concentration  of  microspheres in healthy
tissue is much  lower.  Because  of the  ability  to place and  concentrate  the
radiation  source in such  close  proximity  to the  tumor,  TheraSphere(R)  can
deliver a  radiation  dose to the tumor cells five times as strong as that which
can be delivered via external beam radiation. 

<PAGE>

Patents and Licenses; Trade Secrets

    The Company  holds  United  States  patents  directed to Pd-103 based on its
production  using both  cyclotrons  and nuclear  reactors.  The Company also has
corresponding  patents in Canada,  South Africa,  Japan and the countries of the
European  patent  convention,  and a PCT patent  application  on file for Japan,
Australia,  New Zealand, Canada, and Europe (representing 16 European countries)
as well as a direct  filing in Mexico.  The Company may file  additional  patent
applications from time to time and considers the ownership of patents important,
but not  necessarily  essential,  to its  operations.  The  Company  also uses a
strategy of  confidentiality  agreements  and trade secret  treatment to provide
primary  protection  to a number  of  proprietary  design  modifications  in the
cyclotrons, as well as various production processes.

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

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

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

Seasonality

  The  Company has not  historically  identified  seasonality  in the demand for
TheraSeed(R). The Company's rapid sales growth together with production capacity
constraints  experienced  prior to the  fourth  quarter  of 1998  prevented  any
meaningful  ability to detect  seasonality.  The fourth  quarter of 1998 was the
first quarter in which production capacity exceeded demand.  Management believes
that a variety of  factors  may have  combined  to create  these  circumstances,
including the annual occurrence of three holidays and a major medical convention
in the  fourth  quarter,  together  with the fact that the  transition  of sales
responsibility to Indigo was  substantially  completed during the fourth quarter
of 1998. As a result of the combined effect of the foregoing factors, the impact
of  seasonality  on the  Company's  future  sales  is  uncertain  at this  time.
Accordingly,  no assurances can be given that seasonality will not be identified
in future periods.

Research and Development

  Research and  development  (R&D)  expenses  were  $448,000 in 1998 compared to
$55,000 in 1997.  The  increase  in R&D was a result of  development  efforts to
improve the Company's proprietary production processes.

Competition

  The Company competes in a market  characterized  by technological  innovation,
extensive research efforts and significant competition. In general, TheraSeed(R)
competes with conventional  methods of treating localized cancer, such as RP and
EBRT, as well as competing  permanent implant devices.  RP currently  represents
the standard medical  treatment for early-stage,  localized  prostate cancer. RP
has a long history of favorable clinical results and physicians have developed a
high degree of  familiarity  and  comfort  with this  procedure.  EBRT is also a
well-established  method of treatment and is widely accepted for patients who do
not represent a good surgical risk or whose prostate  cancer has advanced beyond
the stage for which surgical treatment is indicated. Management believes that if
general  conversion  from  these  treatment  options  (or other  established  or
conventional  procedures) to TheraSeed(R)  treatment does occur, such conversion
will be the result of a combination  of equivalent or better  efficacy,  reduced
incidence of side effects and  complications,  lower cost, other quality of life
issues and pressure by health care providers and patients.

  Iodine-125  (I-125) is  commercially  available  as a  permanent  implant  and

<PAGE>

competes with TheraSeed(R). At least three companies are currently producing and
distributing  I-125  seeds  and a  number  of  companies  have  announced  their
intentions  to do so.  Management  believes  that  I-125 and  Pd-103 are used in
approximately  60%  and  40%,  respectively,  of  all  prostate  cancer  seeding
procedures. The dose rate of I-125 is approximately one-third of Pd-103, and the
half-life of I-125 is approximately  three times longer than Pd-103.  Management
believes that Pd-103 enjoys a competitive  advantage  over I-125 based on: (i) a
higher dose rate,  which can yield  advantages in treating  aggressive  cancers;
(ii) a shorter half-life,  which shortens the duration of some radiation induced
side effects by two-thirds and reduces  radiation  exposure to medical personnel
in  treatment  follow-up;  and  (iii)  unlike  I-125,  Pd-103  is non  toxic and
non-volatile as it decays.

  A small  number of patients in the United  States have  recently  been treated
with Pd-103 seeds  produced  and  distributed  by at least two other  companies,
which compete directly with  TheraSeed(R).  These companies have announced their
intentions  to produce  Pd-103 seeds in commercial  quantities  in 1999.  One of
these companies also produces I-125 seeds. A number of other companies have also
announced  their  intentions to produce Pd-103 seeds.  Management  believes that
Theragenics has competitive  advantages over these companies including:  (i) its
proprietary production processes that have been developed and patented; (ii) its
record of reliability and safety in its manufacturing operations; (iii) the time
and resources  required for competitors'  production  capabilities to ramp up to
commercial  production  on a scale  comparable  to  Theragenics';  and  (iv) the
resources  and  world-wide  marketing  capabilities  of its  marketing  partner,
Indigo, a Johnson and Johnson company.

  One of the  companies  that has  produced  Pd-103  consists of certain  former
employees  of  Theragenics.  Theragenics  initiated  legal  action  against this
company in 1997 for  misappropriation  of trade secrets.  The Company's  lawsuit
against the former  employees'  company is on going, and management is currently
unable to predict the ultimate outcome of the litigation.

    In addition to the  competition  from the  procedures  and  companies  noted
above,  many  companies,  both  public  and  private,  are  researching  new and
innovative  methods  of  preventing  and  treating  cancer.  In  addition,  many
companies,  including many large, well-known pharmaceutical,  medical device and
chemical  companies  that have  significant  resources  available  to them,  are
engaged in radiological pharmaceutical and device research. These companies are
located  in the United  States,  Europe and  throughout  the world.  Significant

<PAGE>

developments by any of these  companies could have a material  adverse effect on
the demand for Theragenics' products.

Government Regulation

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

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

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

  The Company's  handling of  radioactive  materials is governed by the State of
Georgia in agreement with the Nuclear Regulatory  Commission (NRC). The users of
TheraSeed(R)  are also required to possess  licenses issued either by the states
in which  they  reside or the NRC  (depending  upon the state  involved  and the
production  process used). The Company's  expansion plans require the Company to
secure additional  permits and licenses from a number of  environmental,  health
and safety regulatory agencies. The Company believes, but cannot assure, that it
will be able to acquire  the  permits  and  licenses  necessary  for its planned
expansion of its  manufacturing  capacity in accordance  with its timetable.  To
date, the Company has not experienced  delays in licensing any of its facilities
or cyclotrons.

  The Company is required under its  radioactive  materials  license to maintain
radiation  control and radiation  safety  personnel,  procedures,  equipment and
processes, and to monitor its facilities and its employees and contractors.  The
Company is also required to provide  financial  assurance that adequate  funding
will exist for end-of-life radiological decommissioning of its cyclotrons and

<PAGE>

other radioactive areas of its property that contain radioactive materials.  The
Company's  decommissioning  obligations will increase as its production capacity
is expanded.

  The Company  disposes of low level  radioactive  waste to licensed  commercial
radioactive  waste  treatment or disposal  facilities for  incineration  or land
disposal.  Management  believes the Company is in compliance  with all state and
federal regulations in this regard. The Company provides training and monitoring
of its personnel to facilitate the proper handling of all materials.

Employees

    As of December 31, 1998, the Company had 190 full time employees  (including
full time temporary employees and executive personnel).  Of this total, 156 were
engaged  in the  development  and  production  of the  Company's  products.  The
remainder  were  engaged in  marketing  and general  corporate  activities.  The
Company's  employees are not  represented by a union or a collective  bargaining
agreement, and management considers employee relations to be good.

Item 2.  Properties

  The Company owns two manufacturing facilities located in Buford, Georgia. One,
completed and placed into service during 1998, houses  cyclotrons,  raw material
processing,  assembly and shipping  operations.  The second  facility,  which is
adjacent to the first  facility,  houses  cyclotrons.  The  Company  also leases
warehouse space and office space in two buildings located in Norcross, Georgia.

    Upon completion of the expansion projects currently underway,  approximately
15 acres will be  available  for future  development  adjacent to the  Company's
current  Buford  location.  Management  intends  to use this  land for long term
expansion of its manufacturing and support operations.

Item 3.  Legal Proceedings

    Subsequent  to December 31, 1998,  the Company and certain of its officers 
and  directors  were named as  defendants in twelve (12) separate securities 
actions, alleging violations of the federal securities laws, including Sections 
10(b), 20(a) and Rule 10b-5 of the  Securities  and Exchange Act of 1934, as 
amended.  As of this time,  eleven of the actions are pending in the U.S.  
District Court for the Northern  District of Georgia;  a twelfth action is 
presently  pending in the Central District of California and is expected to

<PAGE>

be  dismissed in the near future (1). The complaints,  which are  substantially
similar in nature,  purport to represent a class of investors  who  purchased  
or sold securities during the time period from January 29, 1998 to January 11,
1999.  The  complaints generally  allege that the defendants made certain  
misrepresentations  and omissions in connection with the performance of the 
Company during the class period.  The  complaints  seek  unspecified  damages.  
No answer or otherwise  responsive  papers are yet due from the defendants.  
Management  believes these charges are without merit and intends to vigorously 
oppose the litigation,  however,  given the nature and early stage of the 
proceedings,  the ultimate outcome of the litigation cannot be determined at 
this time.  Accordingly, no provision for any liability that might result from 
this  litigation  has been made. The Company and its officers and directors  
maintain  insurance for claims of this general nature.


(1)      A complete list of the pending actions follows:

o        MCV SALES INC. PROFIT SHARING PLAN & TRUST DTD 6/16/75,  on behalf of 
         itself and all others similarly  situated v. THERAGENICS
         CORP., M. CHRISTINE JACOBS and BRUCE W. SMITH; Civil Action 
         No.1:99-CV 0141 TWT
o        SIDNEY FELDON, on behalf of himself and all others similarly situated 
         v. THERAGENICS  CORP., M. CHRISTINE JACOBS and BRUCE W.
         SMITH; Civil Action No. 1 99-CV-0175 TWT
o        DANIEL KURSMAN, on behalf of himself and all others similarly situated 
         v.  THERAGENICS  CORP., M. CHRISTINE JACOBS and BRUCE W. SMITH; Civil 
         Action No. 1 99-CV-0201 TWT
o        BRUCE B. BERNSTEIN,  on behalf of himself and all others similarly  
         situated v.  THERAGENICS  CORP., M. CHRISTINE  JACOBS and
         BRUCE W. SMITH; Civil Action No. 1 99-CV-0205 TWT
o        GERALDINE  BYERS, on behalf of herself and all others similarly  
         situated v. THERAGENICS  CORP., M. CHRISTINE JACOBS and BRUCE W. SMITH;
         Civil Action No. 1 99-CV-0253 TWT
o        HOWARD B. MARKS, on behalf of himself and all others similarly situated
         v.  THERAGENICS  CORP., M. CHRISTINE JACOBS and BRUCE W. SMITH; Civil 
         Action No. 1 99-CV-0271 TWT
o        ALEXANDER T. KOWALSKI,  on behalf of himself and all others similarly  
         situated v. THERAGENICS  CORP., M. CHRISTINE JACOBS and
         BRUCE W. SMITH; Civil Action No. 1 99-CV-0354 TWT
o        SARA CHEESEMAN,  on behalf of herself and all others similarly situated
         v.  THERAGENICS  CORP., M. CHRISTINE JACOBS and BRUCE W. SMITH; Civil 
         Action No. 1 99-CV-0407
o        JERRY L. JENSEN, on behalf of himself and all others similarly situated
         v. THERAGENICS  CORP., M. CHRISTINE JACOBS and BRUCE W. SMITH; Civil 
         Action No. 1 99-CV-0425
o        JOSEPH S. BUTLER, on behalf of himself and all others similarly 
         situated v. THERAGENICS  CORP., M. CHRISTINE JACOBS and BRUCE W. SMITH;
         Civil Action No. 1 99-CV-0443
o        ROBERT L. THOMAS,  JR., on behalf of himself and all others similarly  
         situated v. THERAGENICS  CORP., M. CHRISTINE JACOBS and
         BRUCE W. SMITH; Civil Action No. 1 99-CV-0488; and
o        In the United States  District Court,  Central  District of California:
         GABRIEL  BERCZI, on behalf of himself and all others similarly situated
         v. THERAGENICS CORP., BRUCE W. SMITH, CHARLES KLIMKOWSKI,  CHRISTINE 
         JACOBS, PETER SAUNDERS,  and ORWIN CARTER; Civil Action No. 99-00533 
         CBM (RZX)



<PAGE>



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

  The Company did not submit any matter to a vote of its security holders during
the fourth quarter of calendar 1998.



PART II

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

  The Company's common stock, $.01 par value,  ("Common Stock") is traded on the
New York  Stock  Exchange  (NYSE)  under the symbol  "TGX".  Trading on the NYSE
commenced on August 6, 1998.  Prior to that date, the Company's Common Stock was
traded on the Nasdaq National Market.  The high and low prices for the Company's
Common  Stock as reported on the NYSE and,  prior to August 6, 1998,  on NASDAQ,
for each quarterly period in 1997 and 1998 are as follows:

                                      High       Low
1997
First Quarter........................$13.75     $7.87
Second Quarter....................... 12.69      7.52
Third Quarter.........................25.00     11.12
Fourth Quarter........................27.00     16.50

1998
First Quarter.........................35.37     17.81
Second Quarter........................34.62     22.25
Third Quarter.........................24.75      9.25
Fourth Quarter........................21.75     10.81

    As of March 29, 1999,  the closing price of the  Company's  Common Stock was
$6.75 per share.  Also, as of that date, there were approximately 811 holders of
record of the  Company's  Common  Stock.  The number of record  holders does not
reflect the number of beneficial  owners of the Company's  Common Stock for whom
shares are held by depositary trust companies, brokerage firms and others.

  In February 1997 the Company's Board of Directors adopted a Stockholder Rights
Plan (the "Rights  Plan").  The Rights Plan  contains  provisions to protect the

<PAGE>

Company's  stockholders  in the event of an  unsolicited  offer to  acquire  the
Company,  including  offers  that do not treat  all  stockholders  equally,  the
acquisition in the open market of shares  constituting  control without offering
fair  value to all  stockholders,  and  other  coercive,  unfair  or  inadequate
takeover  bids and  practices  that  could  impair  the  ability of the Board of
Directors to represent  stockholders'  interests  fully.  Pursuant to the Rights
Plan,  each share of the Company's  Common Stock contains a share purchase right
(a "Right").  The Rights expire in February 2007, and do not become  exercisable
unless certain events occur,  including the acquisition of, or commencement of a
tender  offer for, 15% or more of the  outstanding  Common  Stock.  In the event
certain triggering events occur, including the acquisition of 20% or more of the
outstanding  Common  Stock,  each  Right  that  is not  held  by the 20% or more
stockholder  will  entitle  its holder to purchase  additional  shares of Common
Stock at a substantial  discount to then current  market  prices.  These effects
could  adversely  effect the market price of the  Company's  Common  Stock.  The
Rights  Plan  and the  terms  of the  Rights,  which  are set  forth in a Rights
Agreement between the Company and SunTrust Bank, Atlanta, as Rights Agent, could
add substantially to the cost of acquiring the Company,  and consequently  could
delay or prevent a change in control of the Company.

Dividend Policy

    The Company has never  declared or paid a cash dividend on its Common Stock.
It is the present  policy of the Board of  Directors  to retain all  earnings to
support  operations  and  to  finance  expansion.  Consequently,  the  Board  of
Directors does not  anticipate  declaring or paying cash dividends on the Common
Stock in the foreseeable future. The Company's current credit facility restricts
the Company's  ability to pay  dividends if such dividend  payment would cause a
default under any of the credit facility's financial covenants. Decisions on the
payment  and  amount of any  dividends  on the Common  Stock will  depend on the
Company's results of operations,  capital  requirements and financial  condition
and other relevant factors as determined by the Board of Directors.

Stock Split

   On March 16, 1998, the Board of Directors approved a two-for-one Common Stock
split,  effected in the form of a 100% stock dividend,  which was distributed on
April 15, 1998 to  stockholders  of record on March 31, 1998.  All references to
shares  outstanding and per share amounts contained herein have been restated to
reflect the stock split.

<PAGE>

Item 6.  Selected Financial Data

  The selected  financial  data set forth below as of December 31, 1997 and 1998
and for each of the three years in the period ended  December 31, 1998 have been
derived from the financial  statements of the Company included elsewhere herein,
which have been audited by Grant  Thornton  LLP,  independent  certified  public
accountants.  The selected financial data as of December 31, 1994, 1995 and 1996
and for each of the two years in the period  ended  December  31, 1995 have been
derived from the financial statements of the Company, which have been audited by
Grant Thornton LLP but are not included herein.  The selected financial data set
forth below should be read in conjunction  with the financial  statements of the
Company and related notes thereto and  "Management's  Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere herein.


<TABLE>
<CAPTION>

                                                               Year Ended December 31,
                                                   1994           1995         1996          1997          1998
                                                   ----           ----         ----          ----          ----
                                                  (Dollars and shares in thousands, except per share data)
Statement of Earnings Data:                                          
<S>                                             <C>             <C>          <C>           <C>           <C>    
Product sales - affiliate.....................  $   --          $  --        $   --        $12,287       $37,775
Product sales.................................   4,723           7,782        12,257        12,170            83
Licensing fees................................      --              85           100           100           100
                                                ------           -----         -----        ------        ------  
                                                 4,723           7,867        12,357        24,557        37,958

Cost of product sales.........................   1,791           2,645         3,736         6,141        10,869
Selling, general and administrative..........    1,844           2,396         3,198         4,819         6,000
Research and development.....................       15              18             7            55           448
                                                ------          ------         -----        ------        ------
                                                 3,650           5,059         6,941        11,015        17,317
Other income.................................      110              64            36         1,306         1,262
                                                ------          ------        ------        ------        ------

Net earnings before income taxes.............    1,183           2,872         5,452        14,848        21,903
Income tax expense...........................      453           1,100         2,067         5,350         7,880
                                                ------          ------        ------         -----        ------
Net earnings.................................     $730          $1,772        $3,385        $9,498       $14,023
                                                ======          ======        ======        ======        ======

Earnings per common share                                                                                                    
  Basic......................................   $ 0.03          $ 0.08        $ 0.15        $ 0.35        $ 0.48
    Diluted..................................   $ 0.03          $ 0.07        $ 0.14        $ 0.33        $ 0.46

Weighted average common shares
    Basic....................................   21,870          22,206        23,250        27,526        29,259
    Diluted..................................   23,176          23,696        24,582        28,617        30,315

</TABLE>


<PAGE>

<TABLE>
<CAPTION>


                                                                                 December 31,
                                                                                 ------------

                                                            1994         1995           1996           1997          1998
                                                            ----         ----           ----           ----          ----
                                                                                   (In thousands)
Balance Sheet Data:
<S>                                                       <C>           <C>            <C>          <C>            <C>    
Cash and short-term investments..................         $2,317        $3,266         $2,986       $30,162        $19,542
Marketable securities............................             50             -              -         8,392          6,830
Property, plant and equipment, net...............          8,458        10,073         17,586        28,986         53,258
Total assets.....................................         14,169        16,878         23,689        71,200         88,273
Long-term debt, including current 
installments.....................................          1,989         1,519          3,458            --             --
Shareholders' equity.............................         11,810        14,769         19,385        67,033         84,385

</TABLE>


<PAGE>



         Item 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS
                            OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

         Overview

           Theragenics  operates  in  one  business  segment;  the  development,
         manufacture and sale of  radiological  devices used in the treatment of
         cancer. In 1986, the Company received  clearance from the U.S. Food and
         Drug Administration (FDA) for commercial  distribution of TheraSeed(R),
         a rice-sized device,  for use in any solid localized tumor.  Currently,
         Theraseed(R) is the Company's  principal  product and is used primarily
         in the treatment of early-stage prostate cancer. Physicians,  hospitals
         and other healthcare providers, located primarily in the United States,
         utilize  the  TheraSeed(R)   product.  In  1998  the  Company  received
         regulatory  approval for the marketing of  TheraSeed(R)  throughout the
         member  countries of the European Union by obtaining CE Marking.  Sales
         of TheraSeed(R) in Europe were not significant in 1998.
           
           Under a Sales  and  Marketing  agreement  executed  in May 1997  with
         Indigo Medical,  Inc.  ("Indigo"),  a Johnson & Johnson  company,  (the
         "Indigo  Agreement")  Indigo obtained the exclusive  worldwide right to
         market and sell  TheraSeed(R)  for the  treatment  of prostate  cancer.
         Under the terms of the Indigo Agreement,  Indigo has responsibility for
         the education and training of  urologists,  radiation  oncologists  and
         other  personnel  involved in the use of  TheraSeed(R),  as well as all
         other  sales and  marketing  activities.  The Company  continues  to be
         responsible for all manufacturing and distribution of TheraSeed(R).

           Palladium-103  (Pd-103) is the radioactive  isotope that supplies the
         therapeutic  radiation  of  TheraSeed(R).  Prior to 1993,  the  Company
         relied  exclusively on reactor  produced  Pd-103.  In order to increase
         control  over the  timeliness,  availability  and cost of  Pd-103,  the
         Company  converted from reactor produced Pd-103 to an alternative means
         of  producing  Pd-103  using a cyclotron.  The first  cyclotron  became
         operational in 1993 and as of December 31, 1998,  seven cyclotrons were
         fully  operational.  Currently,  all Pd-103  utilized by the Company is
         produced by Company-owned cyclotrons.

           The Company's  first  cyclotron was installed in 1993,  one cyclotron
         was added annually in 1995, 1996 and 1997, and three cyclotrons  became
         operational  during 1998.  Six  additional  cyclotrons are scheduled to
         become  operational  in 1999 and one more in 2000.  Because a cyclotron
         does not become  operational until  approximately 18 months after it is
<PAGE>


         ordered, the accuracy of the Company's long-term projections related to
         delivery  of  cyclotrons  and market  conditions,  such as demand,  can
         significantly  affect  its  results  of  operations.  The  delivery  of
         cyclotrons  prior to a commensurate  increase in demand could adversely
         impact  gross  margins,  while  inadequate  capacity  could  limit  the
         Company's  ability to meet demand and  achieve  maximum  sales  growth.
         Also,  due to the  highly  sophisticated  and  technical  nature of the
         equipment,   the  Company  has  in  the  past  encountered  delays  and
         difficulties  in the  construction,  installation  and  testing  of its
         cyclotrons.  Management  cannot be certain that such  problems will not
         occur in connection with the construction,  installation and testing of
         the cyclotrons to be installed in 1999 and 2000.

         In addition to adding three  cyclotrons in 1998, the Company  completed
         the construction of its new production facilities. Additional expansion
         plans  currently  underway  and  expected to be  completed  during 1999
         include the addition of seven  cyclotrons  and  supporting  facilities,
         although one of the cyclotrons is not expected to be operational  until
         early 2000.  As of December 31, 1998,  approximately  $16.0 million has
         been incurred in connection  with these  expansion plans and completion
         of the expansion is expected to cost an additional $17.0 million.


         RESULTS OF OPERATIONS

         Year Ended December 31, 1998 Compared to Year Ended December 31, 1997

           Revenues  were $38.0  million in 1998  compared  to $24.6  million in
         1997,  an  increase  of $13.4  million  or  54.5%.  This  increase  was
         attributable to the Company's ability to increase  production and sales
         volume of TheraSeed(R) with additional cyclotron and assembly capacity,
         including the addition of three  cyclotrons in 1998.  Although 1998 was
         another year of record  revenue for  Theragenics,  sales for the fourth
         quarter of 1998 declined as compared to the third quarter of 1998. This
         was  the  first  full  quarter  in  which  the   transition   of  sales
         responsibility  for  TheraSeed(R) to Indigo under the Indigo  Agreement
         was substantially  complete,  as well as the first quarter in which the
         Company  had more  capacity  than  current  demand.  During 1998 Indigo
         focused  its  marketing  efforts on  physician  training  and  building
         physician relationships,  rather than efforts directed at patients. The
         Company  believes that the results of Indigo's 1998  marketing  efforts
         have confirmed  Theragenics'  experience  that in addition to marketing
         TheraSeed(R)  to  physicians  and  other  health  care   professionals,
         substantial  attention and  resources  must be devoted to educating the
         ultimate  consumer  regarding  the  benefits  of  seeding  therapy.  In

<PAGE>

         recognition of the potential  value added by consumer  marketing and in
         an effort to build  sales  growth  momentum,  Indigo  has  advised  the
         Company  that  it has  made  adjustments  to its  sales  and  marketing
         strategy  to  increase  the  focus on  marketing  efforts  directed  to
         patients. Theragenics' management is working closely with Indigo in the
         development of these marketing efforts.

           Looking  forward,  the full impact of marketing  efforts  directed to
         patients  may not be  realized  for several  months  since a patient is
         typically  not  treated  until six weeks to three  months or more after
         being  diagnosed  with  prostate  cancer.   Therefore,   there  are  no
         assurances  that sales for the first  quarter of 1999 will  increase or
         even remain flat versus the fourth quarter of 1998. Management believes
         that Indigo's  patient  directed  marketing focus could have a positive
         impact  on  sales  in the  second  half of 1999,  though  there  are no
         assurances that these efforts will not take longer to have an impact on
         revenue,  if any.  Actual  results  may  differ  materially  from those
         anticipated  based on  certain  risks  and  uncertainties,  such as the
         impact  of  Indigo's   marketing   efforts  to  consumers  and  medical
         professionals.  Management is confident in Indigo's  commitment of both
         talent  and  resources  to its  objective  of making  TheraSeed(R)  the
         treatment of choice for prostate cancer.

           Licensing  fees  represent  royalty  payments  with  respect  to  the
         Company's  licensed  TheraSphere(R)  technology.  Management  does  not
         expect  such  licensing  fees to  become  material  in the  foreseeable
         future. See Note G to the financial statements.

           Cost of product  sales  increased  to 28.7% of product  sales in 1998
         from  25.1% of  product  sales  revenue  in  1997.  This  increase  was
         attributable  to an  increase in the  manufacturing  fixed cost base as
         depreciation  and  other  fixed  expenses  associated  with  additional
         cyclotrons and new manufacturing  facilities were incurred during 1998.
         As  additional  cyclotrons  come on  line,  margins  generally  decline
         because  each  machine  represents  excess  capacity for a period while
         carrying its full  component of fixed  costs,  including  depreciation.
         With  cyclotrons  8 through 13  expected to be brought on line in 1999,
         cost of product sales are expected to continue to increase as a percent
         of revenue to the extent that  additional  cyclotrons  create  capacity
         more rapidly than the growth in demand. During 1998 the Company also
         increased the number of manufacturing employees and enhanced employee  
         compensation and benefits in an effort to continue to attract and 
         retain qualified employees. Fiscal 1998 also included moving, training,
         testing and other start-up expenses associated with its new 
         manufacturing facilities, which were placed in
         
         <PAGE>
         service in the third quarter, and testing and start-up expenses related
         to three cyclotrons.  Only one cyclotron was added in 1997. 
         
           The increase in cost of sales as a percentage of revenue over 1997 is
         also attributable to the fact that during the first half of 1997, prior
         to the execution of the Indigo Agreement, the Company sold and marketed
         TheraSeed(R)  with internal  resources and accordingly,  charged higher
         unit prices than it has charged to Indigo.  Fiscal 1998 reflects a full
         year of these  reduced unit prices,  while the Indigo  Agreement was in
         effect  for only the last half of 1997.  Under the terms of the  Indigo
         Agreement,  Indigo bears the selling and  marketing  expenses  directly
         associated  with   TheraSeed(R)  for  prostate   cancer.   Accordingly,
         management  does  not  expect  Indigo's  marketing  efforts  to  have a
         significant impact on the Company's SG&A expenses in 1999.

           Selling, general and administrative (SG&A) expenses were $6.0 million
         in 1998  compared to $4.8  million in 1997,  reflecting  an increase of
         $1.2  million or 25.0%.  However,  SG&A  expenses  as a  percentage  of
         revenue  declined to 15.8% in 1998 from 19.6% in 1997.  The increase in
         SG&A expenses  during 1998 was primarily  attributable  to increases in
         professional fees and compensation and benefits. Legal and professional
         fees increased  primarily due to fees in connection  with the Company's
         on-going  efforts to protect its trade  secrets  and other  proprietary
         information,  including litigation against parties the Company believes
         have violated or threaten to violate the Company's rights. Compensation
         and benefits  increased as the Company  continued to add  employees and
         build infrastructure to support its increasing operations. 

           The increase in SG&A expenses in 1998 over 1997 were partially offset
         by a reduction in selling expenses as a result of the Indigo Agreement.
         Under the Indigo  Agreement,  Indigo  bears the cost of the selling and
         marketing  efforts related to  TheraSeed(R)  for prostate  cancer.  The
         decreases in these selling expenses contributed to the decrease in SG&A
         expenses as a percentage of revenue in 1998 from 1997.  Additionally,  
         SG&A expenses incurred to support increasing  operations did not 
         increase at the same rate as the growth in revenue. Selling and
         marketing  related  expenses  are not  expected  to continue to decline
         however,  since the Indigo  Agreement became effective during the third
         quarter of 1997.

           Research  and  development  (R&D)  expenses  were  $448,000  in  1998
         compared  to  $55,000  in 1997.  The  increase  in R&D was a result  of
         development  efforts to improve the  Company's  proprietary  production
         processes.  In  connection  with the  Company's  efforts to enhance its
         production  processes  and its objective to expand the  application  of

<PAGE>

         Pd-103 and TheraSeed(R) to other oncological and non-oncological  uses,
         management  plans to  significantly  increase efforts and investment in
         research and  development in 1999 with the  possibility of expenditures
         in  this  area  more  than  tripling.  R&D  spending  is  dependent  on
         appropriate  opportunities  arising so no assurances  can be made as to
         spending amounts. As a result, R&D expenses may fluctuate significantly
         from period to period.

           Other income was  approximately  $1.3 million for both 1998 and 1997,
         comprised  primarily of interest  income  generated  from the Company's
         short-term  investments  and high quality  municipal bond  investments.
         These  investments  were made utilizing the proceeds from the Company's
         secondary  stock  offering  in April  1997.  These  funds have and will
         continue to be utilized for the Company's  current and future expansion
         programs.  As  funds  continue  to  be  used  for  expansion  programs,
         management expects other income to decline accordingly.

           Income tax expense was $7.9 million in 1998 and $5.4 million in 1997.
         The increase  was due to the  increase in pretax  earnings in 1998 over
         1997. The effective income tax rate was 36.0% for 1998 and 1997.


         Year Ended December 31, 1997 Compared to Year Ended December 31, 1996

           Product sales were $24.6 million in 1997 compared to $12.4 million in
         1996,an increase of $12.2 million,  or 98.4%.  Market acceptance of the
         Company's  TheraSeed(R)  treatment alternative for prostate cancer grew
         during 1997.  Concurrently,  the Company was able to reliably  increase
         production  from its  cyclotron-based  manufacturing  and thereby  take
         advantage of increased demand.  Sales also reflect that the Company had
         four cyclotrons  available  during much of 1997 to meet sales demand as
         compared to only two cyclotrons throughout 1996.

           Licensing  fees  represent  royalty  payments  with  respect  to  the
         Company's  licensed  TheraSphere(R)  technology.  Management  does  not
         expect licensing fees to become material in the foreseeable future. See
         Note G of Notes to Financial Statements.

           Cost of  product  sales was $6.1  million  in 1997  compared  to $3.7
         million in 1996, an increase of $2.4 million,  or 64.9%.  This increase
         was due primarily to incremental  staffing and cyclotron related costs.
         Staffing  increases were  necessary to respond to and anticipate  sales
         growth.  Cyclotron  operating costs and  depreciation  increased as all
<PAGE>


         four of the Company's cyclotrons were in service by February,  1997. As
         additional  cyclotrons come on-line,  margins generally decline because
         each machine represents excess capacity for a period while carrying its
         full component of fixed costs, including depreciation.  As a percentage
         of product sales, cost of product sales decreased from 30.5% in 1996 to
         25.1% in 1997. This decrease resulted from economies of scale.

           Selling,  general and administrative expense was $4.8 million in 1997
         compared  to $3.2  million in 1996,  an increase  of $1.6  million,  or
         50.0%.   Primary   contributors   to  this   increase  were  legal  and
         professional  fees and  compensation  and  related  expense.  Legal and
         professional  expense  fees  increased  as the  Company  completed  the
         Theragenics/Indigo  Sales and Marketing  Agreement and initiated  legal
         action   against  a  small   company   founded  by  former   employees.
         Compensation  and  related  expenses  rose as the  number of  employees
         increased and salaries were  increased  reflecting  the larger scope of
         the Company's  operations and the need to attract and retain  qualified
         employees.  There were also  higher  expenditures  in a number of areas
         representing support for higher sales levels.  Despite these increases,
         selling,  general and  administrative  expense as a  percentage  of net
         sales decreased from 25.9% in 1996 to 19.6% in 1997 due to economies of
         scale.

           The Company had no ongoing research  function in 1996 and 1997. As in
         the past, much of the development component of research and development
         of product and processes is incorporated in the manufacturing  area and
         therefore is included in the cost of goods sold category.

           Other  income   (expense)  during  the  periods   presented   consist
         principally of interest  income,  interest expense and the write-off of
         unamortized loan costs as a result of loan refinancing. Interest income
         jumped dramatically in 1997, reflecting interest on funds received as a
         result of the secondary stock offering  completed in April, 1997. Since
         these  funds  will  largely  be used to fund  the  Company's  expansion
         program in 1998 and 1999,  management expects other income to return to
         levels consistent with historical amounts.

           The Company's  effective income tax rate was  approximately  38% in 
         1996 and  approximately  36% in 1997. The decline in the
         effective tax rate was due to tax-exempt interest earned in 1997.



<PAGE>



         Liquidity and Capital Resources

           The Company's  principal  cash needs  related to capital  spending to
         increase  manufacturing  capacity.  The  Company has funded its capital
         expansion programs with cash generated from operations and the proceeds
         of a secondary stock offering that was completed in April 1997.

           The Company had cash and  short-term  investments of $19.5 million at
         December 31, 1998,  compared to $30.2 million at December 31, 1997. The
         decrease in cash and short-term  investments  was a result of cash used
         for  capital  expenditures,  partially  offset by cash  generated  from
         operations.  Working  capital was $33.0  million at December  31, 1998,
         compared to $39.0 million at December 31, 1997. The decrease in working
         capital was  primarily  a result of the decline in cash and  short-term
         investments, partially offset by an increase in accounts receivable.

           Cash  provided by  operations  was $13.6 million and $14.2 million in
         1998 and 1997, respectively. Cash generated from operations consists of
         net earnings  plus  non-cash  expenses  such as  depreciation,  and the
         effects of cash  either  absorbed  or  generated  by changes in working
         capital. Cash provided by operations declined in 1998 from 1997 as cash
         generated from the increase in net earnings was offset  primarily by an
         increase in accounts receivable and decrease in accounts payable.

           Cash used by investing activities was $24.7 million and $21.3 million
         in 1998 and 1997, respectively. Capital expenditures were $26.2 million
         and $12.9 million in 1998 and 1997,  respectively,  and are expected to
         significantly  increase in 1999. These expenditures relate primarily to
         capital expansion projects including the addition of cyclotrons and new
         manufacturing and support facilities.  Capital expenditures during 1997
         primarily  represented  Phase I of an  expansion  project  to add  four
         cyclotrons and new manufacturing and support  facilities.  During 1998,
         the Company  completed the  construction of the new  manufacturing  and
         support  facilities  and three of the  cyclotrons  became  operational,
         bringing the total number of fully operational cyclotrons to seven. The
         Phase I expansion was  completed  during the first quarter of 1999 with
         the addition of cyclotron number eight.  Additional  expansion projects
         currently  underway include  purchase  agreements to add six additional
         cyclotrons and supporting facilities during 1999, although one of these
         cyclotrons  will not be fully  installed  and  operational  until early
         2000.  Costs incurred  through December 31, 1998 on these projects were
         approximately  $16.0  million.  These  projects  are  expected  to cost

<PAGE>

         approximately  $33.0 million and be completed in various  stages during
         1999. Upon  completion of these  projects,  the Company expects to have
         fourteen fully operational cyclotrons with supporting facilities.

           Investing activities also included cash generated from net maturities
         of marketable  securities of $1.5 million in 1998,  and the purchase of
         marketable  securities of $8.4 million in 1997.  Marketable  securities
         consist  primarily of high-credit  quality  municipal debt  obligations
         purchased in accordance with the Company's investment policies.

           Cash  provided  by  financing   activities   was  $462,000  in  1998,
         consisting  of cash  proceeds  from the  exercise of stock  options and
         warrants.  During 1997, cash provided by financing activities was $34.2
         million,  consisting  primarily of $32.0 million in net proceeds from a
         secondary stock offering and $5.0 million from the sale of common stock
         to Johnson and Johnson  Development  Company,  an  affiliate of Indigo.
         Financing  activities  in 1997  also  included  the  repayment  of $3.5
         million of long-term debt and $644,000 in proceeds from the exercise of
         stock options and warrants.

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


         Foreign Currency and Geographic Information

           As previously  noted, the Company expects that its capital  expansion
         projects currently underway will cost approximately  $33.0 million,  of
         which  approximately $16.0 million has been incurred as of December 31,
         1998.  Of the $17.0  million  in  purchase  commitments  related to the
         completion of these projects, approximately $9.7 million is denominated
         in Belgian  Francs,  based on the year-end  exchange rate. This exposes
         the Company to foreign  currency risk as it relates to movements in the
         exchange  rate  between  the U.S.  dollar and the  Belgian  Franc.  The
         Company  manages this risk by  frequently  reviewing  the status of the
         purchase   commitments  and  entering  into  foreign  exchange  forward
         contracts  to hedge the  foreign  currency  risks when  believed  it is
         appropriate  to  do  so.  Such  forward   contracts   typically  mature
         concurrently  with  payments  required  under  the  equipment  purchase
         contracts. The Company does not hold foreign exchange forward contracts


<PAGE>

         for trading or speculative  purposes. At December 31, 1998, the Company
         did not hold any  foreign  exchange  forward  contracts.  Additionally,
         management  does not  expect the  introduction  of the Euro to have any
         effect on its purchase  commitments  denominated in Belgian Francs. The
         terms of the purchase  agreements  allow for all payments to be made in
         Belgian Francs.

           All balance sheet  accounts  denominated  in foreign  currencies  are
         translated  into U.S.  dollars at the year-end  rate of exchange.  Such
         balance  sheet  accounts,  which were not  significant  at December 31,
         1998,  included a cash account maintained in Belgium and denominated in
         Belgian  Francs.  Additionally,  there were no  statements  of earnings
         items or any foreign currency transaction gains or losses during any of
         the three years in the period ended December 31, 1998.

           Included  in  construction  in  progress  at  December  31,  1998 are
         progress  payments  totaling  approximately  $9.4  million  related  to
         equipment   being   constructed   in  Belgium.   Upon   completion   of
         construction,  the equipment  will be  transported to the United States
         and installed in the Company's U.S. manufacturing facilities.


         Impact of the Year 2000 Issue

         Introduction

           Many computer  systems used today were  designed and developed  using
         two digits, rather than four, to specify the year.  Consequently,  such
         systems may  recognize  a date of "00" as the year 1900  instead of the
         year  2000.  Other  problems  may  also  be  encountered,  such  as the
         inability to recognize  special  codes that make use of the date field.
         These and other  problems  may exist in primary  software  products and
         embedded systems such as microcontrollers. This may cause many computer
         systems to fail or create inaccurate results unless corrective measures
         are taken.  Additionally,  a company may be  affected  by the  computer
         systems of their  customers  and  vendors,  even though that  company's
         internal computer systems may be Year 2000 (Y2K) compliant.

         State of Readiness

           The Company  began to assess the status of its Y2K  readiness  during
         1997 and developed a plan intended to make its  information  technology
         assets,  including embedded  microcontrollers ("IT assets"),  year 2000

<PAGE>

         ready.  The plan  covers the  following  phases:  (i)  inventory  of IT
         assets,  (ii)  assessment  of  repair  requirements  (iii)  repair  and
         testing,  and (iv)  creation of  contingency  plans in the event of Y2K
         related  failures.  The  inventory  and  assessment  phases  have  been
         completed  for all critical IT assets.  Repairs and testing of critical
         IT assets is  currently  in process and is scheduled to be completed in
         the second quarter of 1999.

           The  Company's  Y2K  compliance  also depends upon the  compliance of
         others.   The  Company  has  contacted   its  critical   suppliers  and
         significant  customer  to  evaluate  their  Y2K  programs  and state of
         readiness,  and to evaluate  whether a Y2K related  disruption at these
         entities  would  have  a  material  adverse  effect  on  the  Company's
         operations  as the year  2000  approaches.  At the  current  date,  the
         Company has received  responses from  approximately 73% of the entities
         contacted,  none of  which  have  indicated  that a year  2000  related
         business  interruption  is  anticipated.  However,  while  the  Company
         believes it is taking reasonable action in this regard,  Theragenics is
         not in a position to  guarantee  the  performance  of others or predict
         whether any  assurances and  representations  received from others will
         ultimately  prove to be accurate.  Additionally,  the Y2K compliance of
         the Company's critical suppliers and significant  customer also depends
         upon the Y2K compliance of their critical suppliers and customers.  The
         Company  also  relies  on  governmental  agencies,  utility  companies,
         telecommunication  service providers,  financial institutions and other
         service  providers  outside  of  the  Company's  control.  There  is no
         assurance  that any of these  entities will not  experience a year 2000
         related failure and business  interruption.  Such failures could have a
         material adverse effect on the Company's financial position and results
         of operations.

         Costs to Address the Year 2000 Issue

           The Company has incurred costs of approximately $60,000 in addressing
         the Y2K issue,  consisting  primarily  of replacing IT assets that were
         not Y2K compliant.  Remaining costs of Y2K remediation are not expected
         to be material.

         Risks of the Company's Year 2000 Issues

           The Company has not currently identified any critical IT assets under
         its control that present a material  risk of not being Y2K compliant in
         a timely  manner,  or for  which an  acceptable  alternative  cannot be
         implemented.  As testing  continues  however,  it is  possible  that IT
         assets  could be  identified  that  present  a  material  risk of a Y2K

<PAGE>

         interruption,  and that  such an  interruption  could  have a  material
         adverse  effect on the  Company's  financial  position  and  results of
         operations.

           The Company  does not  possess  the  ability to control its  critical
         suppliers,  significant  customer  or the health  care  providers  that
         utilize its product.  Y2K related  disruptions  at these entities could
         result in  delays in the  supply  of goods  and  services  and  capital
         equipment from the Company's vendors, delays in receiving payments from
         the  Company's  significant  customer,  and delays in the  ordering  of
         product and  scheduling of  TheraSeed(R)  procedures by the health care
         providers,  among other  things.  Such  potential  delays could be of a
         short-term  nature or could be more  significant and  longer-term.  The
         failure of any of these  entities to properly  address  their year 2000
         issues  could  have  a  materially  adverse  effect  on  the  Company's
         financial position and results of operations. Additionally, the failure
         of the  Company's  primary  equipment  vendor to deliver  cyclotrons in
         accordance  with  the  terms of the  purchase  contracts  could  have a
         materially  adverse  effect on the  Company's  ability to increase  its
         production capacity.

         Contingency Plans

           Contingency   plans  for  critical  IT  assets  are  currently  being
         developed.   These  contingency  plans  are  in  the  early  stages  of
         development  and  will  be  modified  as the  risks  of  potential  Y2K
         interruptions continue to be assessed.


         Forward Looking Statements

           This document contains certain forward-looking information within the
         meaning  of the  Private  Securities  Litigation  Reform  Act  of  1995
         including,  without limitation,  statements regarding possible benefits
         associated with the Indigo Agreement, the timing of the possible impact
         of Indigo's  sales and marketing  efforts,  future costs of sales,  R&D
         expenses,  SG&A expenses,  expansion  plans,  possible  electronic data
         processing problems related to the year 2000 and the sufficiency of the
         Company's  liquidity  and  capital  resources.  From time to time,  the
         Company may also make other forward-looking statements relating to such
         matters  as  well  as  anticipated  financial   performance,   business
         prospects,   technological   developments,   research  and  development
         activities and similar matters.  These  forward-looking  statements are
         subject to certain risks,  uncertainties  and other factors which could
         cause  actual  results to differ  materially  from  those  anticipated,
         including  risks  associated  with the management of growth,  year 2000
         issues,   research  and  development   activities,   effectiveness  and
         execution  of  Indigo's   marketing  and  sales  programs,   government

<PAGE>

         regulation of the therapeutic  radiological  pharmaceutical  and device
         business, dependence on health care professionals, and competition from
         other  brachytherapy  products  and  conventional  and newly  developed
         methods of treating localized cancer.



<PAGE>

              Quarterly Results

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

<TABLE>
<CAPTION>

                               1997                                               1998
                               ----                                               ----
                               First        Second       Third      Fourth        First      Second       Third      Fourth
                                Qtr          Qtr          Qtr         Qtr          Qtr         Qtr          Qtr        Qtr
                                ---          ---          ---         ---          ---         ---        ---         ---
                                                   (Dollars and shares in thousands, except per share data)

<S>                           <C>           <C>          <C>        <C>           <C>         <C>        <C>         <C>   
Total revenues                $4,107        $6,172       $7,018     $7,260        $8,281      $8,714     $11,129     $9,834
                              ------        ------       ------     ------        ------      ------     -------     ------
Cost of product sales          1,145         1,559        1,580      1,856         2,188       2,414       3,184      3,083
Selling,
general and                   
administrative                 1,185         1,391        1,180      1,063         1,337       1,307       1,644      1,711

Research and Development           4            30           11         10            41          49         262         96
Other income                      16           328          499        462           443         297         260        261
                              ------        ------       ------     ------        ------      ------     -------     ------
Net earnings before income
taxes                          1,789          3,520       4,746      4,793         5,158       5,241       6,299      5,205
Income tax expense               680          1,338       1,803      1,529         1,857       1,908       2,267      1,848
                               -----         ------      ------     ------        ------      ------     -------     ------

Net earnings                  $1,109         $2,182      $2,943     $3,264        $3,301      $3,333      $4,032     $3,357
                              ======         ======      ======     ======        ======      ======      ======     ======
Earnings per common
share:
  Basic                        $0.05          $0.08       $0.10      $0.11         $0.11       $0.11       $0.14      $0.11
  Diluted                      $0.04          $0.07       $0.10      $0.11         $0.11       $0.11       $0.13      $0.11
Weighted average shares
outstanding:
  Basic:                      23,672         28,459      28,898     29,074        29,088      29,191      29,364     29,396
  Diluted                     24,763         29,459      30,060     30,188        30,353      30,479      30,160     30,166

</TABLE>

<PAGE>

Inflation

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

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

See Item 7,  "Management's  Discussion  and Analysis of Financial  Condition and
Results of Operations; Foreign Currency and Geographic Information".

Item 8.  Financial Statements and Supplementary Data

           See Index to Financial Statements (Page 45) and following pages.

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

           Not Applicable


PART III

Item 10. Directors and Officers of Registrant*

Item 11. Executive Compensation*

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

Item 13. Certain Relationships and Related Transactions*
------------------------------
     *The information called for by Items 10, 11, 12 and 13 is omitted from this
      Report and is incorporated by reference to the definitive Proxy Statement
      to be filed by the  Company  not later than 120 days after  December  31,
      1998, the close of its fiscal year.

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
<PAGE>

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

          1. Financial Statements
             See index to financial statements on page 45

          2. Financial Schedules
             See the index to financial schedules on page 45

          3. Exhibits

              3.1  -    Certificate of Incorporation as amended through July 
                        29, 1998 (16)
              3.2  -    By-Laws (1)
              4.1  -    See Exhibits 3.1 - 3.2 for provisions in
                        the Company's  Certificate of Incorporation  and By-Laws
                        defining the rights of holders of the  Company's  Common
                        Stock.
              4.2  -    Warrant  Agreement  dated  May 8,  1993  between  the
                        Company and James Devas (6)
             10.1  -    License Agreement with University of
                        Missouri, as amended (1)
             10.2  -    Agreement with Atomic Energy of Canada, Ltd. (1)
             10.3  -    Reassignment and Release Agreement among the Company, 
                        John L. Russell, Jr., and Georgia Tech Research 
                        Institute (1)
             10.4  -    1986 Incentive and Non-Incentive Stock
                        Option Plan (1)
             10.5  -    Letter of  Agreement  between the Company and Yale-New
                        Haven Hospital (2)
             10.6  -    1990 Incentive and Non-Incentive Stock
                        Option Plan (3)*
             10.7  -    Purchase Agreement between Theragenics
                        Corporation and Production Equipment
                        Manufacturer (4)
             10.8  -    Purchase Agreement between Theragenics
                        Corporation and Production Equipment
                        Manufacturer (5)
             10.9  -    Amendment to Purchase Agreement between
                        Theragenics Corporation and Production
                        Equipment Manufacturer (6)
             10.10 -    Employment Agreement of M. Christine Jacobs* (9)
             10.11 -    Agreement with Nordion International Inc.(7)
<PAGE>


             10.12 -    Purchase Agreements between Theragenics
                        Corporation and Production Equipment
                        Manufacturer (8)
             10.13(a)   Purchase Agreement dated December 27, 1996 between 
                        Theragenics Corporation and Ion Beam Applications s.a.
                        (10)
             10.13(b)   Purchase Agreement dated December 27, 1996 between 
                        Theragenics Corporation and Ion Beam  Applications s.a. 
                        (10)
             10.13(c)   Purchase Agreement dated December 27, 1996 between 
                        Theragenics Corporation and Ion Beam Applications s.a. 
                        (10)
             10.13(d)   Purchase Agreement dated December 27, 1996 between 
                        Theragenics Corporation and Ion Beam Applications s.a. 
                        (10)
             10.14 -    Second Amended and Restated Loan and Security Agreement 
                        by and between Theragenics Corporation and NationsBank,
                        N.A. (South), Dated as of December 9, 1996 (10)
             10.15 -    First modification of Second Amended and Restated Loan 
                        and SecuritY Agreement between Theragenics Corporation 
                        and NationsBank, N.A., Dated September 30, 1997. (15)
             10.16 -    Second Modification of Second Amended and Restated Loan 
                        and security Agreement between Theragenics Corporation 
                        and NationsBank, N.A., Dated November 26, 1997. (15)
             10.17 -    Rights Agreement dated as of February 17, 1997 between 
                        the Company and SunTrust Bank, Atlanta (11)
             10.18 -    Theragenics  Corporation  1995 Stock Option Plan
                        (12)* 
             10.19 -    1997 Stock  Incentive  Plan (13)*  
             10.20 -    Marketing and Sales Agreement by and between the Company
                        and Indigo Medical, Inc. dated May 30, 1997 (14)
             10.21 -    Theragenics Corporation Employee Stock Purchase Plan
                        (17)
             10.22 -    Employment agreement of Bruce W. Smith*
             24.1  -    Consent of Independent Public Accountants
                        for Incorporation by Reference of Audit
                        Report into Registration Statements
             27.1  -    Financial Data Schedule for the years ended December 31,
                        1998 and 1997 (for SEC use only)
<PAGE>

*    Management contract or compensatory plan or arrangement identified pursuant
     to Item 14(a)(3) of Form 10-K

(1)  Incorporated  by  reference  to  the  exhibits  filed  with  the  Company's
     registration  statement on Form S-1, File No. 33-7097,  and  post-effective
     amendments thereto.
(2)  Incorporated  by  reference  to the exhibits to the report on Form 10-K for
     the period ended December 31, 1988.
(3)  Incorporated  by  reference  to the exhibits to the report on Form 10-K for
     the period ended December 31, 1990.
(4)  Incorporated  by  reference  to the exhibits to the report on Form 10-K for
     the period ended December 31, 1991.
(5)  Incorporated  by  reference  to the exhibits to the report on Form 10-Q for
     the quarterly period ended June 30, 1993.
(6)  Incorporated  by  reference  to the exhibits to the report on Form 10-K for
     the period ended December 31, 1993.
(7)  Incorporated  by  reference to the exhibits to the report on Form 8-K dated
     March 23, 1995.
(8)  Incorporated  by  reference to the exhibits to the report on Form 8-K dated
     June 29, 1995.
(9)  Incorporated by reference to the exhibits to the report on Form 10-K for 
     the period ended December 31, 1996.  
(10) Incorporated by reference to the exhibits to the report on
     Form 8-K dated January 13, 1997.
(11) Incorporated by reference to the exhibits to the Company's registration 
     statement on Form 8-A filed February 27, 1997.
(12) Incorporated by reference to the exhibits to the
     Common Stock Registration Statement on form S-8, file #333- 15313.
(13) Incorporated  by  reference  to  appendix  B  to  the  Company's  proxy
     statement for its 1997 Annual Meeting of Stockholders filed on schedule
     14A.
(14) Incorporated  by  reference to the exhibits to the report on Form 10-Q for
     the quarterly period ended September 30, 1997. 
(15) Incorporated by reference to the exhibits to the report on Form 10-K for 
     the period ended  December 31, 1997.
(16) Incorporated  by  reference to the exhibits to the report on Form 10-Q for
     the quarterly  period ended June 30, 1998 
(17) Incorporated by reference to the Common Stock Registration Statement on 
     form S-8, file #333-64801.

<PAGE>



(b) Reports on Form 8-K

           No reports on Form 8-K were filed by 
           the Company during the last quarter of 
           the most recent fiscal year.



<PAGE>


                                                          SIGNATURES

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

                                  By:/s/ M. Christine Jacobs 
                                  ---------------------------
                                     M. Christine Jacobs
                                     Chief Executive Officer
Dated: March 31, 1999
       Norcross, Georgia

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

Name                        Title                             Date


/s/ M. Christine Jacobs     Chief Executive Officer          3/31/99
-----------------------     (Principal Executive Officer);
M. Christine Jacobs         Director, Chairman




/s/ Bruce W. Smith          Chief Financial Officer,         3/31/99
-----------------------     Treasurer (Principal 
Bruce W. Smith              Financial and Accounting
                            Officer) and Secretary




/s/ Otis W. Brawley         Director                         3/31/99
----------------------
Otis W. Brawley



/s/ Orwin L. Carter         Director                         3/31/99
----------------------
Orwin L. Carter



/s/  Patrick L. Flinn       Director                         3/31/99
----------------------
Patrick L. Flinn

<PAGE>


/s/ John V. Herndon         Director                         3/31/99
----------------------
John V. Herndon



/s/ Charles R. Klimkowski   Director                         3/31/99
-------------------------
Charles R. Klimkowski



/s/ Peter A.A. Saunders     Director                         3/31/99
-----------------------
Peter A.A. Saunders




<PAGE>


THERAGENICS CORPORATION

TABLE OF CONTENTS


                                                                    Page

    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ...................     46
    (For the periods ended December 31, 1996, 1997 and 1998)

    FINANCIAL STATEMENTS

    Balance Sheets - December 31, 1997 and 1998 ................     47

    Statements of Earnings for each of the three years in
       the period ended December 31, 1998  .....................     49

       Statements of Shareholders' Equity for each of the three
       in the period ended December 31, 1998....................     50

       Statements of Cash Flows for each of the three
       in the period ended December 31, 1998....................     52

    NOTES TO FINANCIAL STATEMENTS ..............................     54


<PAGE>

               Report of Independent Certified Public Accountants
               --------------------------------------------------



Board of Directors
Theragenics Corporation

         We have  audited  the  balance  sheets of  Theragenics  Corporation  (a
Delaware  corporation)  as of  December  31,  1997  and  1998,  and the  related
statements  of earnings,  shareholders'  equity,  and cash flows for each of the
three years in the period ended December 31, 1998.  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 generally  accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe our audits provide a reasonable basis for our opinion.

         In our opinion,  the  financial  statements  referred to above  present
fairly,  in  all  material  respects,  the  financial  position  of  Theragenics
Corporation  as of December 31, 1997 and 1998, and the results of its operations
and its cash flows for each of the three years in the period ended  December 31,
1998, in conformity with generally accepted accounting principles.


/s/ GRANT THORNTON LLP
----------------------
GRANT THRONTON LLP

Atlanta, Georgia
January 11, 1999

<PAGE>


                             Theragenics Corporation

                                 BALANCE SHEETS

                                  December 31,



                                     ASSETS
<TABLE>
<CAPTION>


                                                                 1997             1998    
                                                            ---------------   --------------

CURRENT ASSETS
<S>                                                        <C>              <C>           
   Cash and short-term investments                         $   30,161,614   $   19,541,662
   Marketable securities                                        8,391,807        6,830,266
   Trade accounts receivable, less allowance of
     $65,446 in 1997 and $53,773 in 1998                        2,807,381        7,000,446
   Inventories                                                    433,873          780,825
   Deferred income tax asset                                       60,000          210,000
   Prepaid expenses and other current assets                      278,629          579,132
                                                              -------------    -------------

           Total current assets                                42,133,304       34,942,331

PROPERTY, PLANT AND EQUIPMENT - AT COST
   Buildings and improvements                                   3,333,728       17,425,990
   Leasehold improvements                                         138,978          154,234
   Machinery and equipment                                     14,698,623       25,570,513
   Office furniture and equipment                                  66,464          333,816
                                                              -------------    -------------
                                                               18,237,793       43,484,553
   Less accumulated depreciation                                4,695,669        7,031,902
                                                              -------------    -------------
                                                               13,542,124       36,452,651
   Land and improvements                                          525,754          848,359
   Construction in progress                                    14,917,788       15,957,453
                                                              -------------    -------------
                                                               28,985,666       53,258,463

OTHER ASSETS                                                       81,339           71,782
                                                              -------------    -------------

                                                           $   71,200,309   $   88,272,576
                                                              =============    =============


</TABLE>


The accompanying notes are an integral part of these statements.


<PAGE>




                      LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>

                                                                  1997             1998    
                                                            ---------------   --------------
<S>                                                        <C>              <C>  
CURRENT LIABILITIES
   Accounts payable   
     Trade                                                 $  1,435,154     $      627,679
     Construction                                                     -            359,339
   Accrued salaries, wages and payroll taxes                    689,610            498,863
   Income taxes payable                                         845,364            165,182
   Other current liabilities                                    137,097            316,161
                                                            -------------      -------------

         Total current liabilities                            3,107,225          1,967,224

DEFERRED INCOME TAXES                                         1,060,000          1,920,000

COMMITMENTS AND CONTINGENCIES                                         -                  -

SHAREHOLDERS' EQUITY
   Common stock - authorized 100,000,000 shares
     of $.01 par value; issued and outstanding,
     29,075,682 in 1997 and 29,405,571 in 1998                  290,756            294,056
   Additional paid-in capital                                55,594,988         58,921,414
   Retained earnings                                         11,147,340         25,169,882
                                                            -------------      -------------
                                                             67,033,084         84,385,352



                                                           $ 71,200,309     $   88,272,576
                                                            =============      =============

</TABLE>




<PAGE>



                                                        Theragenics Corporation

                                                        STATEMENTS OF EARNINGS

                                                        Year ended December 31,
<TABLE>
<CAPTION>


                                                                    1996                 1997             1998     
                                                                ------------        ------------     --------------
<S>                                                            <C>                <C>               <C>    
Revenue
   Product sales - affiliate                                   $           -       $  12,287,650    $    37,775,222
   Product sales                                                  12,257,165          12,169,724             83,030
   Licensing fees                                                    100,000             100,000            100,000
                                                                ------------        ------------     --------------
                                                                  12,357,165          24,557,374         37,958,252
                                                                ------------        ------------     --------------

Costs and expenses
   Cost of product sales                                           3,735,669           6,141,330         10,869,520
   Selling, general and administrative                             3,198,663           4,818,650          6,000,533
   Research and development                                            6,952              55,390            447,680
                                                                ------------        ------------     --------------
                                                                   6,941,284          11,015,370         17,317,733
                                                                ------------        ------------     --------------

Other income (expense)
   Interest income                                                   126,953           1,361,890          1,318,171
   Interest and financing costs                                      (84,517)            (21,095)           (56,480)
   Other                                                              (6,311)            (35,268)               332              
                                                                ------------        ------------     --------------   
                                                                      36,125           1,305,527          1,262,023
                                                                ------------        ------------     --------------

         Net earnings before income taxes                          5,452,006          14,847,531         21,902,542

Income tax expense                                                 2,067,500           5,350,000          7,880,000
                                                                ------------        ------------     --------------

         Net earnings                                          $   3,384,506       $   9,497,531    $    14,022,542
                                                                ============        ============     ==============

Net earnings per common share
   Basic                                                       $         .15       $         .35    $           .48
                                                                ============        ============     ==============
   Diluted                                                     $         .14       $         .33    $           .46
                                                                ============        ============     ==============

</TABLE>



The accompanying notes are an integral part of these statements.


<PAGE>


                                               Theragenics Corporation

                                          STATEMENTS OF SHAREHOLDERS' EQUITY

                                    For the three years ended December 31, 1998

<TABLE>
<CAPTION>
                                                                                                        Retained
                                                            Common stock           Additional           earnings
                                                            ------------
                                                    Number of         Par value      paid-in          (accumulated
                                                       shares          $.01          capital             deficit)          Total   
                                                   ------------    -------------  -------------    ---------------      -----------
<S>                                                <C>             <C>            <C>              <C>               <C>           
Balance, December 31, 1995                          11,394,785      $ 113,948     $ 16,390,170     $    (1,734,697)  $   14,769,421

Two for one stock split                             11,394,785        113,948         (113,948)                  -                -

Exercise of stock options and warrants,
   net of 23,446 common shares redeemed                838,986          8,390          693,568                   -          701,958

Income tax benefit from stock options exercised              -              -          528,627                   -          528,627

Net earnings for the year                                    -              -                -           3,384,506        3,384,506
                                                   -----------     ----------     ------------      --------------    -------------
Balance, December 31, 1996                          23,628,556        236,286       17,498,417           1,649,809       19,384,512

Issuance of common stock in secondary public
  offering, net of offering costs of $2,482,701      4,600,000         46,000       31,971,299                   -       32,017,299

Issuance of common stock to Johnson & Johnson
  Development Corporation                              508,906          5,088        4,994,912                   -        5,000,000


</TABLE>





<PAGE>



                                           Theragenics Corporation

                               STATEMENTS OF SHAREHOLDERS' EQUITY - CONTINUED

                                 For the three years ended December 31, 1998
<TABLE>
<CAPTION>

                                                                                                        Retained
                                                            Common stock           Additional           earnings
                                                            ------------
                                                    Number of         Par value      paid-in          (accumulated
                                                       shares          $.01          capital             deficit)          Total   
                                                   ------------    -------------  -------------    ---------------      -----------


<S>                                             <C>              <C>             <C>               <C>                  <C>  
Exercise of stock options and warrants,
  net of 2,000 common shares redeemed               338,220            3,382          640,724                   -          644,106

Income tax benefit from stock options exercised           -                -          489,636                   -          489,636

Net earnings for the year                                 -                -                -           9,497,531        9,497,531
                                                -------------    -------------   --------------     ---------------     -----------

Balance, December 31, 1997                       29,075,682          290,756        55,594,988         11,147,340       67,033,084

Exercise of stock options and warrants,
  net of 791 common shares redeemed                 329,889            3,300           458,571                  -          461,871

Stock-based compensation                                  -                -           163,734                  -          163,734

Income tax benefit from stock options exercised           -                -         2,704,121                  -        2,704,121

Net earnings for the year                                 -                -                 -         14,022,542       14,022,542
                                                -------------   --------------   --------------    ----------------    ------------

Balance, December 31, 1998                        29,405,571    $    294,056     $  58,921,414     $   25,169,882       84,385,352
                                                =============   ==============   ==============    ================    ============
</TABLE>

The accompanying notes are an integral part of these statements.



<PAGE>


                                                        Theragenics Corporation

                                                       STATEMENTS OF CASH FLOWS

                                                        Year ended December 31,
<TABLE>
<CAPTION>


                                                                        1996            1997                 1998   
                                                                  --------------- ---------------     -------------

<S>                                                           <C>                 <C>              <C>    
Cash flows from operating activities:
   Net earnings                                               $    3,384,506      $   9,497,531    $     14,022,542
   Adjustments to reconcile net earnings to net
     cash provided by operating activities:
       Deferred income taxes                                       1,972,000          1,850,000             710,000
       Depreciation and amortization                               1,114,919          1,466,834           2,366,197
       Stock-based compensation                                            -                  -             163,734
       Provision for doubtful accounts receivable                          -             65,446                   -
       Change in assets and liabilities:
         Accounts receivable                                        (923,291)          (731,900)         (4,193,065)
         Inventories                                                 (62,343)          (204,575)           (346,952)
         Prepaid expenses and other current assets                   (66,104)           (26,995)           (300,503)
         Other assets                                                      -             45,680                 707
         Trade accounts payable                                      (17,816)         1,104,779            (807,475)
         Accrued salaries, wages and payroll taxes                   234,283            230,189            (190,747)
         Other current liabilities                                    47,369             80,056             179,064
         Income taxes payable                                              -            845,364           2,023,939
                                                                ------------      -------------     ---------------

             Net cash provided by operating activities             5,683,523         14,222,409          13,627,441
                                                                ------------      -------------     ---------------

Cash flows from investing activities:
   Purchase and construction of property and equipment            (8,555,876)       (12,858,080)        (26,249,691)
   Purchase of marketable securities                                       -         (8,391,807)         (2,609,573)
   Maturities of marketable securities                                     -                  -           4,150,000
                                                                ------------      -------------     ---------------

              Net cash used by investing activities               (8,555,876)       (21,249,887)        (24,709,264)
                                                                ------------      -------------     ---------------


</TABLE>



<PAGE>


                                           Theragenics Corporation

                                    STATEMENTS OF CASH FLOWS - CONTINUED

                                             Year ended December 31,
<TABLE>
<CAPTION>



                                                                     1996            1997                 1998   
                                                                  --------------- ---------------     -------------
<S>                                                           <C>                <C>               <C>       
Cash flows from financing activities:
   Proceeds from long-term debt                                    2,450,225                  -                   -
   Repayment of long-term debt                                      (511,286)        (3,458,436)                  -
   Proceeds from issuance of common stock, net                             -         37,017,299                   -
   Proceeds from exercise of stock options and
     warrants                                                        701,958            644,106             461,871
   Debt issue costs                                                  (48,759)                 -                   -
                                                               -------------      -------------     ---------------

         Net cash provided by
           financing activities                                    2,592,138         34,202,969             461,871
                                                               -------------      -------------     ---------------
Net increase (decrease) in cash and
   short-term investments                                           (280,215)        27,175,491         (10,619,952)

Cash and short-term investments
   at beginning of year                                            3,266,338          2,986,123          30,161,614
                                                               -------------      -------------     ---------------
Cash and short-term investments
   at end of year                                             $    2,986,123     $   30,161,614    $     19,541,662
                                                               =============      =============     ===============

Supplementary Cash Flow Disclosure
----------------------------------

   Interest paid, net of amounts capitalized                  $       82,000     $       29,000    $         56,000

   Income taxes paid                                          $       99,000     $    2,655,000    $      5,650,000
</TABLE>


             Supplemental Schedule of Non Cash Financing Activities

   During 1996,  1997 and 1998, the Company  realized an income tax benefit from
   the exercise of certain stock options of approximately $529,000, $490,000 and
   $2,704,000, respectively.



The accompanying notes are an integral part of these statements.


<PAGE>


                             Theragenics Corporation

                          NOTES TO FINANCIAL STATEMENTS

                           December 31, 1997 and 1998



NOTE A - ORGANIZATION AND DESCRIPTION OF BUSINESS

   Theragenics Corporation (the "Company") was organized to develop, manufacture
   and market radiological  pharmaceuticals and devices used in the treatment of
   cancer.   Currently,   the  Company   manufactures  and  sells  one  product,
   TheraSeed(R),  which is an implantable radiation device used primarily in the
   treatment  of  prostate  cancer.   TheraSeed(R)  is  a  U.S.  Food  and  Drug
   Administration  (FDA) licensed device based on Pd-103, a radioactive isotope.
   Under a Sales  and  Marketing  Agreement  executed  in May 1997  with  Indigo
   Medical,  Inc.  (Indigo), a Johnson  &  Johnson Company,  all  TheraSeed(R)
   products  used in the  treatment  of  prostate  cancer  are  sold to  Indigo.
   Physicians,  hospitals and other healthcare  providers,  located primarily in
   the United  States,  utilize the  TheraSeed(R)  product.  In 1998 the Company
   received  regulatory  approval for the marketing of TheraSeed(R) throughout 
   the member countries of the European Union  by obtaining CE Marking.  Sales 
   of TheraSeed(R) in Europe were not significant in 1998.

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


NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

   1.  Use of Estimates
       ----------------
   In preparing  financial  statements in  conformity  with  generally  accepted
   accounting  principles  ("GAAP"),  management  is  required  to make  certain
   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  revenues  and  expenses  during  the
   reporting period. Actual results could differ from those estimates.



<PAGE>


                             Theragenics Corporation

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1997 and 1998

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

   2.  Revenue Recognition
       -------------------

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

   3.  Cash and Short-Term Investments
       --------------------------------

   For purposes of reporting cash flows, cash and short-term investments include
   cash on hand,  cash in banks and variable  rate demand  notes and  commercial
   paper with original maturities of less than 90 days.

   4.  Marketable Securities
       ----------------------

   Marketable  securities consist primarily of high-credit quality  municipality
   obligations in accordance with the Company's  investment  policy.  Marketable
   securities  are  classified  as  available  for sale and are reported at fair
   value,  based upon  quoted  market  prices at the  balance  sheet  date.  The
   amortized cost of marketable securities approximated their fair value at both
   December 31, 1997 and 1998. The estimated fair value of marketable securities
   by contractual maturity at December 31, 1998 is as follows:

         Due in one year or less                 $     3,044,937
         Due after one year through five years         2,285,329
         Due after five years through six years        1,500,000

   5.  Inventories
       ------------

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

   6.  Property, Equipment, Depreciation and Amortization
       --------------------------------------------------

   Property and  equipment  are recorded at  historical  cost.  Depreciation  is
   provided for in amounts  sufficient to relate the cost of depreciable  assets
   to operations over their estimated  services lives on a straight-line  basis.
   Depreciation  and  amortization  expense  related to property  and  equipment
   charged to operations was approximately $1,044,000, $1,458,000 and $2,336,000
   for  1996,  1997 and  1998,  respectively.  Estimated  services  lives are as
   follows:

                  Buildings and improvements               30 years
                  Machinery and equipment, furniture     3-10 years
                  Leasehold improvements                  1-5 years


<PAGE>


                             Theragenics Corporation

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1997 and 1998


NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

   6.  Property, Equipment, Depreciation and Amortization - Continued
       --------------------------------------------------------------

   A significant portion of the Company's depreciable assets are utilized in the
   production   of  its   product.   Management   periodically   evaluates   the
   realizability  of its  depreciable  assets in light of its  current  industry
   environment.  Management  believes that no impairment of  depreciable  assets
   exists at December  31,  1998.  It is possible,  however,  that  management's
   estimates  concerning the realizability of the Company's  depreciable  assets
   could  change  in the  near  term due to  changes  in the  technological  and
   regulatory environment.

   The primary machinery and equipment  utilized in the Company's  manufacturing
   process has been acquired from one vendor located in Belgium.  Currently, the
   Company  has  contracts  for  additional  manufacturing  equipment  with this
   vendor.  Management  believes  that the vendor has the ability to continue to
   deliver the  equipment in  accordance  with the terms of the  contracts.  Any
   inability of the vendor to meet its obligations for delivery of the equipment
   could  have an  adverse  affect on the  Company's  ability  to  increase  its
   production capacity.

   7.  Income Taxes
       ------------

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


   8.  Research and Development Costs
       ------------------------------

   Research and development costs are expensed when incurred.

   9.  Advertising
       -----------

   The Company expenses the cost of advertising as incurred. Advertising expense
   was not  significant for each of the three years in the period ended December
   31, 1998.

<PAGE>


                             Theragenics Corporation

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1997 and 1998



NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

   10. Earnings Per Share and Common Stock
       -----------------------------------

   The Company adopted Statement of Financial Accounting Standards No. 128 (SFAS
   128),  Earnings Per Share, in the fourth quarter of 1997.  Basic net earnings
   per common share is based upon the weighted  average  number of common shares
   outstanding during the period. Diluted net earnings per common share is based
   upon the weighted  average number of common shares  outstanding plus dilutive
   potential common shares,  including options and warrants  outstanding  during
   the  period.  All  comparative  earnings  per share  data for  prior  periods
   presented has been restated.

   On March 16, 1998, the board of directors approved a two-for-one common stock
   split,  effected in the form of a 100% stock dividend,  which was distributed
   on April 15,  1998 to  shareholders  of record on March 31,  1998.  The stock
   split has been  recognized by  reclassifying  the par value of the additional
   shares  resulting  from the stock  split from  additional  paid in capital to
   common stock. All references to shares outstanding and per share amounts have
   been restated to reflect the stock split.

   On June 12,  1998,  the  shareholders  approved  an increase in the number of
   authorized common shares from 50,000,000 to 100,000,000.

   11. Stock Based Compensation
       ------------------------

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

   12. Fair Value of Financial Instruments
       -----------------------------------

   The Company's  financial  instruments  include  cash,  cash  equivalents  and
   marketable  securities.  The  carrying  value of cash  and  cash  equivalents
   approximates fair value due to the relatively short period to maturity of the
   instruments.  Marketable  securities are classified as available for sale and
   are reported at fair value.


<PAGE>


                             Theragenics Corporation

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1997 and 1998




NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

   13. Foreign Currency
       ----------------

   All balance sheet accounts  denominated in foreign  currencies are translated
   into U.S.  dollars at the  year-end  rate of  exchange.  Such  balance  sheet
   accounts,  which were not  significant at December 31, 1998,  included a cash
   account   maintained   in  Belgium  and   denominated   in  Belgian   Francs.
   Additionally,  there were no  statements  of  earnings  items or any  foreign
   currency  transaction  gains or losses  during any of the three  years in the
   period ended December 31, 1998.

   The Company  periodically  enters into foreign exchange forward  contracts to
   hedge  the  price  risks  associated  with  equipment  purchase   commitments
   denominated in foreign  currencies.  The forward  contracts  typically mature
   concurrently with payments required under the equipment  purchase  contracts.
   The Company does not hold foreign exchange  forward  contracts for trading or
   speculative purposes. Gains and losses are deferred and accounted for as part
   of the  underlying  transactions.  At December 31, 1998,  the Company did not
   hold any foreign exchange forward contracts.

   14. Reclassifications
       -----------------

   Certain amounts in the 1997  balance  sheet have been  reclassified  to
   conform to the 1998 presentation.  Such  reclassifications were
   not significant.


NOTE C - CONSTRUCTION IN PROGRESS AND PURCHASE COMMITMENTS

   Construction in progress consists primarily of payments made for construction
   of  manufacturing  equipment and  facilities  expansion.  Total cost of these
   projects is expected to be approximately  $33.0 million, consisting primarily
   of equipment and related costs, and the projects are expected to be completed
   in various  stages through 1999.  Total  outstanding purchase  commitments  
   related to these  projects  were  approximately  $17.0 million at December  
   31,  1998,  $9.7  million of which was  denominated  in Belgium  Francs,  
   based on the  year  end  exchange  rate. Construction  of equipment and  
   facilities  totaling  approximately  $3.0  million  and $23.9
   million  were   completed  and  placed  in  service  during  1997  and  1998,
   respectively.  

   Included in  construction in progress at December 31, 1998 are
   progress  payments totaling  approximately  $9.4 million related to equipment
   being constructed in Belgium. Upon completion of construction,  the equipment
   will be transported to the United States and installed in the Company's U.S.
   manufacturing facilities.




<PAGE>


                                       Theragenics Corporation

                              NOTES TO FINANCIAL STATEMENTS - CONTINUED

                                     December 31, 1997 and 1998



NOTE D - INCOME TAXES

   The income tax provision consisted of the following:
<TABLE>
<CAPTION>

                                                               1996               1997             1998            
                                                           -------------     ------------     -------------
      <S>                                                  <C>               <C>              <C>       
       Current:

         Federal                                           $      95,500     $  3,300,000     $   6,570,000
         State                                                         -          200,000           600,000
                                                            ------------      -----------      ------------
                                                                  95,500        3,500,000         7,170,000
                                                            ------------      -----------      ------------

       Deferred:
         Federal                                               1,862,000        1,750,000           655,000
         State                                                   110,000          100,000            55,000
                                                            ------------      -----------      ------------
                                                               1,972,000        1,850,000           710,000
                                                            ------------      -----------      ------------

                                                           $   2,067,500     $  5,350,000     $   7,880,000
                                                            ============        =========      ============
</TABLE>

   The Company's temporary differences result in a deferred income tax liability
at December 31, 1997 and 1998, summarized as follows:

<TABLE>
<CAPTION>
                                                                                   December 31,           
                                                                        ----------------------------------
                                                                            1997                 1998     
        <S>                                                            <C>                   <C>   


         Nondeductible accruals and allowances                         $      60,000         $     210,000
         Other                                                                     -                70,000
                                                                        -------------         -------------

           Gross deferred tax assets                                          60,000               280,000
                                                                        -------------         -------------

         Deferred tax liabilities:
          Depreciation                                                    (1,060,000)           (1,990,000)
                                                                        -------------         -------------

           Net deferred tax liability                                  $  (1,000,000)        $  (1,710,000)
                                                                        =============         =============
</TABLE>

   The net deferred tax  liability is  classified  in the  accompanying  balance
sheets as follows:
<TABLE>

<S>                                                                    <C>                   <C>          
    Current deferred tax asset                                         $     (60,000)        $   (210,000)
       Long-term deferred tax liability                                    1,060,000             1,920,000
                                                                        -------------         -------------

           Net deferred tax liability                                  $   1,000,000         $   1,710,000
                                                                        =============         =============

</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                                        Theragenics Corporation

                                               NOTES TO FINANCIAL STATEMENTS - CONTINUED

                                                      December 31, 1997 and 1998


NOTE D - INCOME TAXES - Continued

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

                                                                   1996           1997             1998                 
                                                               ------------   -------------    -----------        

        <S>                                                      <C>             <C>             <C>  
         Tax at applicable federal rates                         34.0%           35.0%           35.0%
         Effect of surtax exemption                               -              (0.7)            -
         State tax, net of federal income tax                     3.8             1.7             1.9
         Tax exempt interest                                      -              (0.3)           (1.1)
         Other                                                    0.1             0.3             0.2
                                                                  ---             ---             ---

                                                                 37.9%           36.0%           36.0%
                                                                 ====            ====            ====

</TABLE>

NOTE E - NOTES PAYABLE
   The Company  has  entered  into an amended  and  restated  loan and  security
   agreement  (the "loan  agreement")  with a bank.  The loan  agreement,  which
   expires in November 2000,  provides for a revolving  credit facility of up to
   $15,000,000.  Interest on  outstanding  borrowings is payable  monthly at the
   prime rate or at a LIBOR based rate.

   The LIBOR  based  rate  ranges  from LIBOR plus 1.5% to LIBOR plus 2%, and is
   determined by the Company's debt service  coverage  ratio,  as defined in the
   loan  agreement.  No amounts  were  outstanding  under the  revolving  credit
   agreement at December 31, 1997 or 1998.

   The Company has a letter of credit  outstanding  under the loan agreement for
   approximately $315,000 relating to regulatory requirements. The letter of 
   credit is subject to terms identical to those of borrowings under the loan 
   agreement.

   Outstanding  borrowings  under  the  loan  agreement  are  collateralized  by
   substantially all of the Company's  assets.  Provisions of the loan agreement
   limit the  incurrence  of  additional  debt and  require the  maintenance  of
   certain  minimum  financial  ratios,  among other things.  As of December 31,
   1998,  the  Company  was in  compliance  with  the  provisions  of  the  loan
   agreement.


<PAGE>


                             Theragenics Corporation

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1997 and 1998



NOTE F - MARKETING AND SALES AGREEMENT AND MAJOR CUSTOMER

   In May 1997,  the  Company  executed  a Sales and  Marketing  Agreement  (the
   Agreement)  with Indigo  Medical,  Inc.  (Indigo),  a subsidiary of Johnson &
   Johnson  Development  Corporation  (Johnson & Johnson),  granting  Indigo the
   exclusive  worldwide right to market and sell  TheraSeed(R) for the treatment
   of  prostate  cancer  for a  period  of  seven  years  with a  provision  for
   successive  three  year  renewals.  In  accordance  with the  Agreement,  all
   TheraSeed(R)  products used for the treatment of prostate  cancer are sold to
   Indigo.  The  terms of the  Agreement  require  Indigo  to  purchase  minimum
   quantities of  TheraSeed(R) on an annual basis.  The minimum  quantities have
   been exceeded in 1997 and 1998.

   As a result  of the  Indigo  Agreement,  substantially  all sales in 1998 and
   approximately   50%  of  sales  in  1997   were  to   Indigo.   Additionally,
   approximately 86% and 99% of accounts receivable were from Indigo at December
   31,  1997 and 1998,  respectively.  In 1996,  there  were no  customers  that
   comprised ten percent or more of sales.

   Concurrent  with the execution of the Agreement, Johnson & Johnson purchased 
   508,906  shares of the  Company's  common stock for $5,000,000 in cash.


NOTE G - COMMITMENTS AND CONTINGENCIES

   Licensing Agreement
   -------------------

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

   The  Company  has  granted  certain  of its  geographical  rights  under  the
   licensing agreement with the University of Missouri to Nordion International,
   Inc.,  a Canadian  company  which is a  producer,  marketer  and  supplier of
   radioisotope products and related equipment. Under the Nordion agreement, the
   Company  will  receive  a  licensing  fee for each  geographic  area in which
   Nordian  receives new drug  approval.  The Company will also be entitled to a
   percentage  of future  revenues  earned by  Nordian  as  royalties  under the
   agreement. Royalties from this agreement were not significant for each of the
   three years in the period ended December 31, 1998.




<PAGE>


                             Theragenics Corporation

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1997 and 1998

NOTE G - COMMITMENTS AND CONTINGENCIES - Continued

   Lease Commitments
   -----------------

   The Company  leases space and office  equipment  under  noncancelable  leases
   which expire at various dates through August 2004.  Approximate minimum lease
   payments under the leases are as follows:  1999,  $288,000;  2000,  $156,000;
   2001, $160,000; 2002, $169,000; 2003, $178,000.

   Rent expense was approximately  $76,000,  $179,000 and $190,000 for the years
   ended December 31, 1996 , 1997 and 1998, respectively.

   Litigation
   ----------

   Subsequent to December 31, 1998,  the Company and certain of its officers and
   directors  were named as defendants in twelve  separate  securities  actions,
   alleging violations of the federal securities laws, including Sections 10(b),
   20(a) and Rule 10b-5 of the  Securities and Exchange Act of 1934, as amended.
   As of this time, eleven of the actions are pending in the U.S. District Court
   for the Northern  District of Georgia;  a twelfth action is presently pending
   in the Central  District of California and is expected to be dismissed in the
   near  future.  The  complaints,  which are  substantially  similar in nature,
   purport to represent a class of investors  who  purchased or sold  securities
   during the time  period  from  January  29,  1998 to January  11,  1999.  The
   complaints    generally    allege   that   the   defendants    made   certain
   misrepresentations  and omissions in connection  with the  performance of the
   Company during the class period. The complaints seek unspecified  damages. No
   answer  or  otherwise  responsive  papers  are yet due from  the  defendants.
   Management believes these charges are without merit and intends to vigorously
   oppose the  litigation,  however,  given the  nature  and early  stage of the
   proceedings,  the ultimate outcome of the litigation  cannot be determined at
   this time. Accordingly, no provision for any liability that might result from
   this  litigation  has been made.  The Company and its officers and  directors
   maintain insurance for claims of this general nature.


NOTE H - STOCK OPTIONS AND WARRANTS
   Stock Options
   -------------

   The  Company's  board of directors has approved four stock option plans which
   in aggregate cover up to 5,400,000  shares of common stock. The plans provide
   for the  expiration  of options ten years from the date of grant and requires
   the  exercise  price of the  options  granted to be at least equal to 100% of
   market value on the date granted.  Stock options generally become exercisable
   over a three to five year vesting period.  Stock option transactions for each
   of the three  years in the period  ended  December  31,  1998 are  summarized
   below:



<PAGE>



                                                Theragenics Corporation

                                       NOTES TO FINANCIAL STATEMENTS - CONTINUED

                                              December 31, 1997 and 1998


NOTE H - STOCK OPTIONS AND WARRANTS - Continued Stock Options - Continued
<TABLE>
<CAPTION>

                                                   1996                     1997                    1998      
                                         ---------------------   ---------------------    --------------------
                                                      Weighted                Weighted                Weighted
                                                      Average                 Average                 Average
                                                      Exercise                Exercise                Exercise
                                          Shares      Price       Shares      Price         Shares     Price  
                                          --------   -------   -----------   ---------   -----------  ---------

       <S>                               <C>          <C>       <C>           <C>         <C>          <C>  
       Outstanding, beginning of year    2,016,432     $1.54    1,674,000     $  3.57     1,887,780    $ 7.95
       Granted                             440,000      7.96      538,000       17.90       157,333     20.07
       Exercised                          (782,432)     1.11     (300,220)       1.80      (310,680)     1.30
       Forfeited                                 -         -      (24,000)       5.38             -         -
                                         ---------    ------    ----------     -------    ----------   -------

       Outstanding, end of year          1,674,000     $3.57    1,887,780     $  7.95     1,734,433    $10.24
                                         =========    ======    ==========     =======    ==========   =======
</TABLE>

   The following table summarizes information about stock options outstanding at
December 31, 1998:

<TABLE>
<CAPTION>
                                                Options Outstanding                         Options Exercisable 
                                                  Weighted
                                                  Average         Weighted                            Weighted
              Range of            Number           Remaining      Average            Number           Average
              Excise           Outstanding at    Contractual      Exercise       Exercisable at       Exercise
             Price            December 31, 1998  Life (Years)      Price         December 31, 1998      Price  
           -----------        -----------------  ------------  ------------      -----------------   ----------

            <S>                     <C>               <C>           <C>              <C>                 <C>  
            $.50 - $3.19              623,100         6.3           $ 2.66            536,060             $2.66
            $7.63 - $11.75            464,000         7.8             8.36            280,000              7.97
            $16.56 - 26.63            647,333         9.1            18.88             98,000             18.50
                                   ----------         ---            -----           --------             -----

                                    1,734,433         7.7           $10.24            914,060            $ 5.98
                                    =========         ===            =====            =======            ======
</TABLE>

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

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


<PAGE>
<TABLE>
<CAPTION>


                                                        Theragenics Corporation

                                               NOTES TO FINANCIAL STATEMENTS - CONTINUED

                                                      December 31, 1997 and 1998


NOTE H - STOCK OPTIONS AND WARRANTS - Continued

   Stock Options - Continued
   -------------------------


                                                                   1996                  1997           1998   
                                                              -------------         -------------    ----------

   <S>                                                        <C>                   <C>            <C>          
     Net earnings                   As reported               $  3,384,506          $  9,497,531   $  14,022,542
                                    Pro forma                    3,015,123             8,628,538      11,941,866

     Basic net earnings per
       common share                 As reported               $        .15          $        .35   $         .48
                                    Pro forma                          .13                   .31             .41

     Diluted net earnings per
       common share                 As reported               $        .14          $        .33   $         .46
                                    Pro forma                          .12                   .31             .40
</TABLE>

   The weighted  average fair value of the options granted during 1996, 1997 and
   1998  was  $6.36,  $9.38  and  $14.76,  respectively.  The fair  values  were
   estimated  using the Black Sholes  options-pricing  model with the  following
   weighted average assumptions:
<TABLE>
<CAPTION>

                                                                   1996                 1997            1998   
                                                              -------------         -------------    ----------

     <S>                                                           <C>                 <C>              <C> 
     Expected dividend yield                                        0.0%                0.0%             0.0%
     Expected stock price volatility                               70.0%               68.0%            65.0%
     Risk-free interest rate                                        6.3%                5.9%             5.0%
     Expected life of option (years)                                7.0                 3.7              5.0

</TABLE>

   Stock Options Issued to Non-Employees
   -------------------------------------

   During 1998,  the Company  issued  100,000 stock options to an individual for
   medical and cancer consulting  services.  The Company is recording consulting
   expenses  based on the estimated  fair value of the options at the grant date
   over the consulting term of five years.  Consulting  expenses related to this
   agreement were approximately $164,000 during 1998.


<PAGE>


                             Theragenics Corporation

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1997 and 1998



NOTE H - STOCK OPTIONS AND WARRANTS - Continued

   Warrants

   80,000  warrants were exercised  during 1996,  40,000 warrants were exercised
   during 1997 and 20,000  warrants  were  exercised  during 1998,  resulting in
   proceeds to the Company of $300,000, $150,000 and $75,000,  respectively.  At
   December 31, 1998, there are outstanding  warrants  covering 60,000 shares of
   common stock.  The warrants are exercisable at a price of $3.75 per share and
   expire in May 1999.


NOTE I - EARNINGS PER SHARE

   Earnings per common share was computed as follows:
<TABLE>
<CAPTION>

                                                                           Year ended December 31,              
                                                                   1996                 1997            1998   
<S>                                                         <C>                  <C>              <C>           
     Numerator for basic and diluted earnings
       per share - income available common
       shareholders                                         $    3,384,506       $    9,497,531   $   14,022,542
                                                             =============        =============    =============

     Denominator for basic earnings per share -
       weighted average shares                                  23,249,556           27,525,688       29,259,398
     Effect of dilutive stock options and warrants               1,332,924            1,091,752        1,055,222
                                                             -------------        -------------    -------------

     Denominator for diluted earnings per share -
       adjusted weighted average shares                         24,582,480           28,617,440       30,314,620
                                                             =============        =============    =============

     Basic earnings per share                               $          .15       $          .35   $          .48
                                                             =============        =============    =============

     Diluted earnings per share                             $          .14       $          .33   $          .46
                                                             =============        =============    =============

</TABLE>


<PAGE>



                             Theragenics Corporation

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1997 and 1998

NOTE J - EMPLOYEE BENEFIT PLAN

   401(k) Savings Plan

   The Company has a 401(k)  savings plan providing  retirement  benefits to all
   employees  with at least six months of service  and at lease 21 years of age.
   Commencing  in the  fourth  quarter  of  1998,  the  Company  makes  matching
   contributions  of 20%-60%  of each  participant's  contribution,  up to 6% of
   salary.  The percentage of matching  contributions are based on quarterly net
   earnings  and  are  made  in the  form  of  Company  common  stock.  Matching
   contributions  are charged to operating  expenses  and totaled  approximately
   $7,500  in  1998.   Additionally,   the   Company   may  make   discretionary
   contributions to the Plan that are allocated to each  participants'  account.
   Discretionary  contributions were approximately $14,000,  $35,000 and $30,000
   for 1996, 1997 and 1998, respectively.

   Employee Stock Purchase Plan

   In June 1998, the Company's stockholders approved the Theragenics Corporation
   Employee Stock Purchase Plan (the "ESPP"). The ESPP allows eligible employees
   the right to purchase  common stock on a quarterly  basis at the lower of 85%
   of the  market  price  at the  beginning  or end of each  quarterly  offering
   period.  As of December 31, 1998,  there were 200,000  shares of common stock
   reserved for the ESPP and no shares had been issued under the plan.


NOTE K - QUARTERLY FINANCIAL DATA (UNAUDITED)

The following summarizes certain quarterly results of operations (in thousands,
except per share amounts):
<TABLE>
<CAPTION>

                                                                         Quarters ended                      
                                                 ---------------------------------------------------------------
                                                  March 31       June 30         September 30        December 31
                                                  --------       -------         ------------        -----------

   Year ended December 31, 1998:
<S>                                             <C>           <C>              <C>                <C>           
   Net revenue                                  $    8,281    $    8,714       $       11,129     $        9,834
   Gross profit                                      6,093         6,299                7,945              6,752
   Net earnings                                      3,301         3,333                4,032              3,357
   Net earnings per common share
     Basic                                      $     .11     $      .11       $         .14      $          .11
     Diluted                                    $     .11     $      .11       $         .13      $          .11

</TABLE>
<PAGE>

<TABLE>
<CAPTION>



                                                        Theragenics Corporation

                                               NOTES TO FINANCIAL STATEMENTS - CONTINUED

                                                      December 31, 1997 and 1998


NOTE K - QUARTERLY FINANCIAL DATA (UNAUDITED) - Continued

                                                                         Quarters ended                      
                                                -----------------------------------------------------------------
                                                  March 31       June 30         September 30        December 31
                                                  --------       -------         ------------        -----------
   Year ended December 31, 1997:
<S>                                             <C>           <C>              <C>                <C>           
   Net revenue                                  $    4,107    $    6,172       $        7,018     $        7,260
   Gross profit                                      2,962         4,613                5,437              5,404
   Net earnings                                      1,109         2,182                2,943              3,264
   Net earnings per common share
     Basic                                      $     .05     $      .08       $         .10      $          .11
     Diluted                                    $     .04     $      .07       $         .10      $          .11
</TABLE>

NOTE L - NEW ACCOUNTING PRONOUNCEMENTS

   The Financial  Accounting  Standards Board (FASB) has issued the Statement of
   Financial  Accounting  Standards  (SFAS) No. 133,  Accounting  for Derivative
   Instruments and Hedging Activities,  in June 1998. SFAS 133 will be effective
   for the Company's  fiscal year beginning  January 1, 2000.  SFAS 133 requires
   that all  derivatives  be carried in the  balance  sheet at their fair value.
   Changes in fair value of  derivatives  will be either  recorded  in  earnings
   currently or in other comprehensive  income,  depending upon the intended use
   of the derivative.  Management does not currently expect the adoption of SFAS
   133 to have a  material  impact on the  Company's  results of  operations  or
   financial condition.

   In March 1998, the American Institute of Certified Public Accountants (AICPA)
   issued  Statement  of  Position  (SOP)  98-1,  "Accounting  for the  Costs of
   Computer Software  Developed or Obtained for Internal Use". SOP 98-1 provides
   guidance  on  accounting  for the costs of  computer  software  developed  or
   obtained for internal  use.  Also,  in June 1998,  the AICPA issued SOP 98-5,
   "Reporting on the Costs of Start-Up  Activities."  SOP 98-5 requires costs of
   start-up  activities and organizational  costs, as defined, to be expensed as
   incurred.  These  statements  are  effective  for the  Company's  fiscal year
   beginning  January 1, 1999.  Management does not expect either of these SOP's
   to have a material impact on the Company's results of operations or financial
   condition.


<PAGE>



         Report of Independent Certified Public Accountants on Schedule
         --------------------------------------------------------------






   Board of Directors
   Theragenics Corporation



   In  connection  with our audit of the financial statements of Theragenics
   Corporation referred to in our report dated January 11, 1999, which is
   included in the annual report to security holders and incorporated  by
   reference in Part II of this form, we have also audited  Schedule II for each
   of the three years in the period ended  December  31, 1998.  In our opinion ,
   the schedule presents fairly, in all material respects, the information
   required to be set forth therein.


   /s/ GRANT THORNTON LLP
   ----------------------
   GRANT THORNTON LLP

   Atlanta, Georgia
   January 11, 1999

<PAGE>


                                         Theragenics Corporation

                            SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

               For each of the three years in the period ended December 31, 1998
<TABLE>
<CAPTION>


                  Column A                Column B               Column C                Column D      Column E
---------------------------------------  ------------   ----------------------------    -----------    --------

                                                                Additions     
                                                        ----------------------------
                                                            (1)            (2)
                                          Balance at     Charged to     Charged to                    Balance at
                                         beginning of   costs and     other accounts   Deductions -   end of
                 Description               period         expense       describe       describe (a)   period    
 -------------------------------------   -------------  ------------   --------------  ------------   ----------
<S>                                       <C>            <C>            <C>             <C>            <C>      
Year ended December 31, 1998
   Allowance for doubtful
     accounts receivable                  $    65,446    $        -     $          -    $    11,673    $  53,773
   Allowance for doubtful inventory       $    77,024    $  267,584     $          -    $         -    $ 344,608

Year ended December 31, 1997
   Allowance for doubtful
     accounts receivable                  $         -    $   65,446     $          -    $         -    $  65,446
   Allowance for doubtful inventory       $    77,024    $        -     $          -    $         -    $  77,024

Year ended December 31, 1996
   Allowance for doubtful
     accounts receivable                  $         -    $        -     $          -    $         -    $       -
   Allowance for doubtful inventory       $    77,024    $        -     $          -    $         -    $  77,024


</TABLE>


(a) - write-offs of uncollectible accounts receivable.


<PAGE>

 

THERAGENICS CORPORATION

INDEX TO EXHIBITS


 Page No.

10.22 -  Employment Agreement between Theragenics             72
         Corporation and Bruce W. Smith


24.1  -  Consent of Independent Public Accountants            71
         for Incorporation by Reference of Audit
         Report into Registration Statements


<PAGE>





               CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



Board of Directors
Theragenics Corporation


We hereby consent to the incorporation by reference of our reports dated January
11,  1999,  appearing  in your  Annual  Report on Form  10-K for the year  ended
December 31, 1998,  in the Company's  Registration  Statements on Form S-8, file
numbers 333-15313, 333-40737, 333-40653, and 333-64801.



/s/ GRANT THORNTON LLP
----------------------
GRANT THRONTON LLP

Atlanta, Georgia
March 26, 1999