Table
          of Contents
 **UNITED
          STATES**
 **SECURITIES
          AND EXCHANGE COMMISSION**
 **WASHINGTON,
          D.C. 20549**
  **FORM
          10-Q**
  x QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934
  For
          the
          quarterly period ended April 1, 2007
  or
  o 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
                      or other jurisdiction of
                    incorporation
                      or organization)
                  (I.R.S.
                      Employer
                    Identification
                      Number)**5203
                      Bristol Industrial Way**
                    **Buford,
                      Georgia**
                  **30518**(Address
                      of principal executive offices)
                  (Zip
                      Code)
  **Registrant’s
          telephone number, including area code: (770) 271-0233**
  Indicate
          by check mark whether the registrant (1) has filed all reports required
          to be
          filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
          the
          preceding 12 months (or for such shorter period that the registrant was
          required
          to file such reports), and (2) has been subject to the filing requirements
          for
          at least the past 90 days. YES x NO o
  Indicate
          by check mark whether the registrant is a large accelerated filer, an
          accelerated filer, or a non-accelerated filer in Rule 12b-2 of the Exchange
          Act.
  Large
          Accelerated Filer o Accelerated
          Filer x Non
          Accelerated Filer o
  Indicate
          by check mark whether the registrant is a shell company (as defined in
          Rule
          12b-2 of the Exchange Act). YES o NO x
  As
          of May
          4, 2007 the number of shares of $0.01 par value common stock outstanding
          was
          33,260,560.


THERAGENICS
      CORPORATION





TABLEOF
      CONTENTS











Page
                No.PART
                I. FINANCIAL INFORMATIONITEM
                1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                (UNAUDITED)Condensed
                Consolidated Balance Sheets - April 1, 2007 and
                December 31, 2006
            3Condensed
                Consolidated Statements of Earnings and
                Comprehensive Income for the quarter ended April 1, 2007 and April
                2,
                2006
            5Condensed
                Consolidated Statements of Cash Flows for the
                quarter ended April 1, 2007 and April 2, 2006
            6Condensed
                Consolidated Statement of Shareholders’ Equity
                for the quarter ended April 1, 2007
            7Notes
                to Condensed Consolidated Financial
                Statements
            8ITEM
                2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
                CONDITION AND RESULTS OF OPERATIONS
            14ITEM
                3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
                ABOUT MARKET RISK
            21ITEM
                4. CONTROLS AND PROCEDURES
            21PART
                II. OTHER INFORMATIONITEM
                1. LEGAL PROCEEDINGS
            22ITEM
                1A. RISK FACTORS
            22ITEM
                6. EXHIBITS
            22SIGNATURES
            23









2


**PART
                I. FINANCIALINFORMATION**
              
              **Item
                1.****FinancialStatements**
              **THERAGENICSCORPORATION
                AND
                SUBSIDIARIES****CONDENSED
                CONSOLIDATED BALANCE SHEETS****(Amounts
                in thousands, except per share data)**




ASSETSApril
                1,
              2007
              (Unaudited)
            
            December
                31,
              2006CURRENT
                ASSETSCash
                and short-term investments
            
            $
            18,641
            
            $
            18,258Marketable
                securities
            
            
            16,911
            
            
            14,722Trade
                accounts receivable, less allowance of $538 in 2007 and $617 in
                2006
            
            
            8,376
            
            
            7,556Inventories
            
            
            6,643
            
            
            7,433Deferred
                income tax asset
            
            
            7,017
            
            
            7,798Prepaid
                expenses and other current assets
            
            
            3,495
            
            
            3,478Assets
                held for sale
            
            
            3,400
            
            
            3,400TOTAL
                CURRENT ASSETS
            
            
            64,483
            
            
            62,645PROPERTY
                AND EQUIPMENTBuildings
                and improvements
            
            
            22,389
            
            
            22,374Machinery
                and equipment
            
            
            36,906
            
            
            36,732Office
                furniture and equipment
            
            
            932
            
            
            92460,227
            
            
            60,030Less
                accumulated depreciation
            
            
            (31,252
            )
            
            (30,155
            )28,975
            
            
            29,875Land
            
            
            822
            
            
            822Construction
                in progress
            
            
            349
            
            
            204TOTAL
                PROPERTY AND EQUIPMENT
            
            
            30,146
            
            
            30,901Goodwill
            
            
            38,824
            
            
            38,824Other
                intangible assets, net
            
            
            13,293
            
            
            13,762Other
                assets
            
            
            112
            
            
            11252,229
            
            
            52,698TOTAL
                ASSETS
            
            $
            146,858
            
            $
            146,244




The
      accompanying notes are an integral part of these statements.




3




**THERAGENICS
                CORPORATION AND SUBSIDIARIES****CONDENSED
                CONSOLIDATED BALANCE SHEETS - Continued****(Amounts
                in thousands, except per share data)**






LIABILITIES
                & SHAREHOLDERS’ EQUITYApril
                1,
              2007
              (Unaudited)
            
            
            December
                31,
              2006CURRENT
                LIABILITIESTrade
                accounts payable
            
            $
            1,355
            
            $
            1,768Accrued
                salaries, wages and payroll taxes
            
            
            1,111
            
            
            1,512Other
                current liabilities
            
            
            1,139
            
            
            1,101TOTAL
                CURRENT LIABILITIES
            
            
            3,605
            
            
            4,381LONG-TERM
                LIABILITIESLong-term
                debt
            
            
            7,500
            
            
            7,500Deferred
                income taxes
            
            
            6,061
            
            
            6,148Contract
                termination liability
            
            
            1,507
            
            
            1,513Decommissioning
                retirement
            
            
            571
            
            
            561Other
            
            
            36
            
            
            -TOTAL
                LONG-TERM LIABILITIES
            
            
            15,675
            
            
            15,722SHAREHOLDERS’
                EQUITYCommon
                stock, authorized 100,000 shares of
              $0.01
                par value, issued and outstanding,33,242
                in 2007 and 33,096 in 2006
            
            
            332
            
            
            331Additional
                paid-in capital
            
            
            72,362
            
            
            72,103Retained
                earnings
            
            
            54,957
            
            
            53,789Accumulated
                other comprehensive loss
            
            
            (73
            )
            
            (82
            )TOTAL
                SHAREHOLDERS' EQUITY
            
            
            127,578
            
            
            126,141TOTAL
                LIABILITIES ANDSHAREHOLDERS'
                EQUITY
            
            $
            146,858
            
            $
            146,244





The
      accompanying notes are an integral part of these statements.




4





**THERAGENICSCORPORATION
                AND
                SUBSIDIARIES****CONDENSED
                CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE
                INCOME****(UNAUDITED)****(Amounts
                in thousands, except per share data)**Quarter
                EndedApril
                1,
            
            April
                2,2007
            
            2006REVENUEProduct
                sales
            
            $
            15,227
            
            $
            12,256Licensing
                fees
            
            
            224
            
            
            13815,451
            
            
            12,394COST
                OF SALES
            
            
            8,109
            
            
            6,055GROSS
                PROFIT
            
            
            7,342
            
            
            6,339OPERATING
                EXPENSESSelling,
                general & administrative
            
            
            4,856
            
            
            5,347Amortization
                of purchased intangibles
            
            
            469
            
            
            188Research
                & development
            
            
            291
            
            
            239Restructuring
                expenses
            
            
            -
            
            
            306Gain
                on sale of assets
            
            
            -
            
            
            (201
            )5,616
            
            
            5,879EARNINGS
                FROM OPERATIONS
            
            
            1,726
            
            
            460OTHER
                INCOME/(EXPENSE)Interest
                income
            
            
            389
            
            
            415Interest
                expense
            
            
            (183
            )
            
            (69
            )Other
            
            
            1
            
            
            (21
            )207
            
            
            325Earnings
                before income tax
            
            
            1,933
            
            
            785Income
                tax expense
            
            
            765
            
            
            10NET
                EARNINGS
            
            $
            1,168
            
            $
            775EARNINGS
                PER SHARE:Basic
            
            $
            0.04
            
            $
            0.02Diluted
            
            $
            0.04
            
            $
            0.02WEIGHTED
                AVERAGE SHARESBasic
            
            
            33,074
            
            
            32,052Diluted
            
            
            33,170
            
            
            32,085Comprehensive
                income:Net
                earnings
            
            $
            1,168
            
            $
            775Other
                comprehensive income (loss):Unrealized
                gain (loss) on securities available for sale, net of tax
            
            
            9
            
            
            (114
            )Total
                comprehensive income
            
            $
            1,177
            
            $
            661


The
      accompanying notes are an integral part of these statements.


5




**THERAGENICSCORPORATION
      AND SUBSIDIARY**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**(UNAUDITED)**


**(Amounts
      in thousands)**


Quarter
                EndedApril
                1,
              2007
            
            April
                2,
              2006CASH
                FLOWS FROM OPERATING ACTIVITIESNet
                earnings
            
            $
            1,168
            
            $
            775Adjustments
                to reconcile net earnings to net cash provided by operating
                activities:Depreciation
                and amortization
            
            
            1,567
            
            
            1,196Deferred
                income taxes
            
            
            693
            
            
            -Provision
                for allowances
            
            
            (144
            )
            
            67Share
                based compensation
            
            
            193
            
            
            59Deferred
                rent
            
            
            (6
            )
            
            -Decommissioning
                retirement liability
            
            
            10
            
            
            (146
            )Gain
                on sale of equipment
            
            
            -
            
            
            (201
            )Changes
                in assets and liabilities:Accounts
                receivable
            
            
            (749
            )
            
            (19
            )Inventories
            
            
            863
            
            
            (233
            )Prepaid
                expenses and other current assets
            
            
            (17
            )
            
            (145
            )Other
                assets
            
            
            -
            
            
            27Trade
                accounts payable
            
            
            (413
            )
            
            (203
            )Accrued
                salaries, wages and payroll taxes
            
            
            (401
            )
            
            (446
            )Other
                current liabilities
            
            
            38
            
            
            370Other
            
            
            36
            
            
            (5
            )Net
                cash provided by operating activities
            
            
            2,838
            
            
            1,096CASH
                FLOWS FROM INVESTING ACTIVITIESPurchases
                and construction of property and equipment
            
            
            (342
            )
            
            (122
            )Proceeds
                from sale of equipment
            
            
            -
            
            
            234Purchases
                of marketable securities
            
            
            (6,100
            )
            
            (7,347
            )Maturities
                of marketable securities
            
            
            3,924
            
            
            7,241Net
                cash (used) provided by investing activities
            
            
            (2,518
            )
            
            6CASH
                FLOWS FROM FINANCING ACTIVITIESExercise
                of stock options and stock purchase plan
            
            
            63
            
            
            23NET
                INCREASE IN CASH AND SHORT-TERM INVESTMENTS
            
            $
            383
            
            $
            1,125CASH
                AND SHORT-TERM INVESTMENTS ATBEGINNING
                OF PERIOD
            
            
            18,258
            
            
            10,073CASH
                AND SHORT-TERM INVESTMENTS ATEND
                OF PERIOD
            
            $
            18,641
            
            $
            11,198Supplementary
                cash flow disclosure:Interest
                paid
            
            $
            183
            
            $
            69


The
      accompanying footnotes are an integral part of these statements.





6


**THERAGENICSCORPORATION
        AND SUBSIDIARIES**
 **CONDENSED
        CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY**
 **FOR
        THE QUARTER ENDED APRIL 1, 2007**
 **(UNAUDITED)**
 **(Amounts
        in thousands)**




Common
                Stock
            
            
            
            
            
            AccumulatedNumberof
            
            ParValue
            
            Additional
              Paid-in
            
            Retained
            
            Other
              ComprehensiveShares
            
            Amount
            
            Capital
            
            Earnings
            
            Loss
            
            TotalBALANCE,
                December 31, 2006
            
            
            33,096
            
            $
            331
            
            $
            72,103
            
            $
            53,789
            
            $
            (82
            )
            $
            126,141Exercise
                of stock options
            
            
            13
            
            
            -
            
            
            53
            
            
            -
            
            
            -
            
            
            53Tax
                benefit of stock option exercises
            
            
            -
            
            
            -
            
            
            4
            
            
            -
            
            
            -
            
            
            4Employee
                stock purchase plan
            
            
            4
            
            
            -
            
            
            10
            
            
            -
            
            
            -
            
            
            10Issuance
                of common stock under
              vesting
                of restricted units
            
            
            23
            
            
            -
            
            
            
            
            
            
            
            
            
            
            
            -Issuance
                of restricted shares
            
            
            106
            
            
            1
            
            
            (1
            )
            
            -
            
            
            -
            
            
            -Share
                based compensation
            
            
            -
            
            
            -
            
            
            193
            
            
            -
            
            
            -
            
            
            193Unrealized
                gains on securities
              available
                for sale, net of taxes
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            9
            
            
            9Net
                earnings for the period
            
            
            -
            
            
            -
            
            
            -
            
            
            1,168
            
            
            -
            
            
            1,168BALANCE,
                April 1, 2007
            
            
            33,242
            
            $
            332
            
            $
            72,362
            
            $
            54,957
            
            $
            (73
            )
            $
            127,578




The
                accompanying footnotes are an integral part of these
                statements.





7
 **THERAGENICS
          CORPORATION AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **April
          1, 2007**
 **(Unaudited)**


**NOTEA
      - BASIS OF PRESENTATION AND DESCRIPTION OF
      BUSINESS**





The
      unaudited interim condensed consolidated financial statements included herein
      reflect the consolidated operations of Theragenics Corporation and its
      wholly-owned subsidiaries, CP Medical Corporation and Galt Medical Corp.
      (collectively, the “Company”). All material intercompany accounts and
      transactions have been eliminated in consolidation. These statements reflect
      all
      adjustments that are, in the opinion of management, necessary to present fairly
      the consolidated financial position, consolidated results of operations,
      consolidated cash flows and changes in shareholders’ equity for the periods
      presented. All such adjustments are of a normal recurring nature. Pursuant
      to
      the rules and regulations of the Securities and Exchange Commission for
      reporting on Form 10-Q, certain information and footnote disclosures normally
      included in financial statements prepared in accordance with accounting
      principles generally accepted in the United States of America have been
      condensed or omitted. These unaudited condensed consolidated financial
      statements and notes should be read in conjunction with the audited consolidated
      financial statements and notes for the year ended December 31, 2006, included
      in
      the Form 10-K Annual Report filed by the Company. The December 31, 2006
      condensed consolidated balance sheet included herein has been derived from
      the
      December 31, 2006 audited consolidated balance sheet included in the
      aforementioned Form 10-K. The consolidated results of operations for
      the quarter ended April 1, 2007 are not necessarily indicative of the
      results to be expected for a full year.





Theragenics
      Corporation is a medical device company serving the cancer treatment and
      surgical markets, operating in two business segments. In its brachytherapy
      seed
      business, the Company produces, markets and sells TheraSeed ® ,
      its
      premier palladium-103 prostate cancer treatment device, I-Seed, its iodine-125
      based prostate cancer treatment device, and related products and
      services. The Company’s surgical products business consists of wound
      closure and vascular access products. Wound closure includes sutures, needles,
      and other surgical products with applications in, among other areas, urology,
      veterinary, cardiology, orthopedics, plastic surgery, and dental. Vascular
      access includes introducers and guidewires used in the interventional radiology,
      interventional cardiology, and vascular surgery markets.




**NOTE
      B - RECENTLY ISSUED ACCOUNTING STANDARDS**




In
      June
      2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation
      No. 48, *Accounting
      for Uncertainty in Income Taxes* ,
      (“FIN
      48”). The Company adopted FIN 48 on January 1, 2007. See footnote E.




In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      No.
      157, *Fair
      Value Measurements,* (“SFAS
      157”). SFAS 157 defines fair value, establishes a framework for measuring fair
      value in generally accepted accounting principles, and expands disclosures
      about
      fair value measurements. SFAS 157 does not require any new fair value
      measurements. SFAS 157 is effective for the Company beginning January 1, 2008. The
      Company is evaluating SFAS 157 and the potential impact of this statement on
      the
      Company’s consolidated financial statements has not been
      determined.





In
      February 2007, FASB issued Statement of Financial Accounting Standards SFAS
      No. 159, *The
      Fair Value Option for Financial Assets and Financial Liabilities -
      Including an amendment of FASB Statement No. 11* ,
      (“SFAS
      159”) *.* SFAS 159
      permits entities to choose to measure eligible items at fair value at specified
      election dates and report unrealized gains and losses on items for which the
      fair value option has been elected in earnings at each subsequent reporting
      date. SFAS 159 is effective for the Company beginning January 1, 2008. The
      Company is evaluating the impact of SFAS 159 and the potential impact of this
      statement on the Company’s consolidated financial statements has not been
      determined.





**NOTE
      C - ACQUISITION OF GALT MEDICAL**




The
      Company acquired all of the outstanding common stock and other equity interests
      of Galt Medical Corp. (“Galt”) on August 2, 2006. The acquisition was accounted
      for under the purchase method of accounting, in accordance with Statement of
      Financial Accounting Standards No. 141, *Business
      Combinations* .
      Results
      of operations of Galt are included in the Company’s financial statements
      subsequent to the acquisition date.




The
      total
      purchase price, including transaction costs, was approximately $32.7 million
      (net of cash acquired of approximately $2.3 million). The purchase price was
      paid $29.6 million in cash and the issuance of 978,065 shares of common stock
      valued at approximately $3.1 million. Galt develops, manufactures and markets
      disposable medical devices utilized for vascular access, primarily serving
      the
      interventional radiology, interventional cardiology and vascular surgery
      markets. Galt’s current products include guidewires, micro-introducer kits and
      tear-away introducer sets and kits, and hemostasis valved introducer kits and
      sets. This transaction further diversifies Theragenics’ medical device and
      surgical products businesses and leverages the Company’s existing strengths
      within these markets.


8
 **THERAGENICS
          CORPORATION AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **April
          1, 2007**
 **(Unaudited)**


Pro
      Forma Information




The
      following unaudited pro forma summary combines the Company’s results with those
      of Galt as if the acquisition had occurred at the beginning of the calendar
      year
      of the period presented. This unaudited pro forma information is not intended
      to
      represent or be indicative of the Company’s consolidated results of operations
      or financial condition that would have been reported had the acquisition been
      completed as of the beginning of the calendar year presented, and should not
      be
      taken as indicative of the Company’s future consolidated results of operations
      or financial condition (in thousands, except per share data):




Quarter
                Ended
              April
                2, 2006Revenue
            $
            14,902Net
                earnings
            $
            875Earnings
                per shareBasic
            $
            0.03Diluted
            $
            0.03




Certain
      pro forma adjustments have been made to reflect the impact of the purchase
      transaction, primarily consisting of amortization of intangible assets with
      determinate lives, reductions in interest income as a result of cash used in
      the
      acquisition, increases in interest expense resulting from borrowings under
      the
      Company’s credit facility, elimination of share based compensation on equity
      awards that terminated upon a change in control of the acquired company, income
      taxes to reflect the Company’s effective rate for the period, and increases in
      weighted average shares outstanding for the common shares issued in the
      transaction. The pro forma adjustments also include non-recurring charges of
      $398,000 for amortization of the fair market value adjustments for inventory
      and
      backlog.





**NOTE
      D - INVENTORIES**





Inventories
      are stated at the lower of cost or market. Cost is determined using the
      first-in, first-out (FIFO) method. Market is replacement cost or net realizable
      value. The Company estimates reserves for inventory obsolescence based on
      management’s judgment of future realization. Inventories were comprised of the
      following (in thousands):




April
                1,
              2007
            
            December
                31,
              2006Raw
                materials
            
            $
            3,840
            
            $
            4,409Work
                in process
            
            
            1,147
            
            
            950Finished
                goods
            
            
            1,220
            
            
            1,608Spare
                parts and supplies
            
            
            831
            
            
            9357,038
            
            
            7,902Allowance
                for slow moving and obsolete inventory
            
            
            (395
            )
            
            (469
            )Total
            
            $
            6,643
            
            $
            7,433





**NOTE
      E - INCOME TAXES**




The
      Company’s effective income tax rate for the first quarter of 2007 was
      approximately 40%, which is reflective of the approximate effective rate
      expected for 2007. This includes federal and state income taxes, and is higher
      than taxes computed at the statutory rates due to certain non-deductible items.




The
      Company’s effective tax rate for the first quarter of 2006 was approximately 1%.
      During 2006 the Company had an allowance for a deferred income tax asset that
      was reduced during the course of the year as it became more likely than not
      that
      some portion of the deferred tax asset would be realized. The first quarter
      of
      2006 included a tax benefit of approximately $312,000, representing a reduction
      in the allowance for the deferred income tax asset and significantly reducing
      the effective tax rate for that period. In the fourth quarter of 2006,
      Management determined that it was more likely than not that substantially all
      of
      the remaining deferred tax asset would be recognized and, accordingly, all
      but
      $239,000 of the allowance was released. The allowance of $239,000 remains at
      April 1, 2007, and primarily represents certain state net operating loss
      carryforwards for which the Company believes it is more likely than not that
      the
      benefit will not be realized.


9
 **THERAGENICS
          CORPORATION AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **April
          1, 2007**
 **(Unaudited)**




The
      Company adopted the provisions of Financial Accounting Standards Board (“FASB”)
      Interpretation No. 48, *Accounting
      for Uncertainty in Income Taxes* (“FIN
      48”), on January 1, 2007. FIN 48 clarifies the accounting for uncertainty
      in income taxes recognized in an enterprise’s financial statements in accordance
      with FASB Statement 109, *Accounting
      for Income Taxes* ,
      and
      prescribes a recognition threshold and measurement process for financial
      statement recognition and measurement of a tax position taken or expected to
      be
      taken in a tax return. FIN 48 also provides guidance on derecognition,
      classification, interest and penalties, accounting in interim periods,
      disclosure and transition. The Company has evaluated its tax positions for
      the
      tax years ended December 31, 2003, 2004, 2005 and 2006, the tax years that
      remain subject to examination by major tax jurisdictions as of March 31,
      2007. With few exceptions, the Company is no longer subject to U.S. federal,
      state and local, or income tax examinations by tax authorities for years prior
      to 2003. The Company concluded that there are no significant uncertain tax
      positions requiring recognition in the financial statements. Accordingly,
      adoption of FIN 48 did not have a material effect on the Company’s financial
      statements.





The
      Company’s U.S. income tax returns for 2004 and 2005 are currently under
      examination by the IRS. An estimate of the range of possible changes that may
      result from the examination cannot be made at this time.




The
      Company may from time to time be assessed interest or penalties by major tax
      jurisdictions, although any such assessments historically have been minimal
      and
      immaterial to our financial results. Any interest or penalties assessed are
      classified as selling, general and administrative expenses.





**NOTE
      F - SHARE-BASED COMPENSATION**




During
      the quarter ended April 1, 2007, the Company granted 76,000 shares of restricted
      stock and 175,000 stock options to executive officers, each which vest over
      four
      years, under the 2007 Long Term Incentive Plan. The exercise price of the stock
      options is $5.00 per share, which is equal to the fair value of the underlying
      common stock on the date of grant. The Company also granted 30,000 shares of
      restricted stock to a consultant for services to be provided over a three year
      period. Compensation cost is being recorded over the vesting periods of the
      restricted stock and stock options. The weighted average grant date fair value
      of the restricted stock was $5.36 per share. Fair value of restricted shares
      granted to executive officers is based on the fair value of the underlying
      common stock at the grant date. The fair value of the restricted shares granted
      to non employees is remeasured each period until they are vested based on the
      fair value of the underlying common stock. The grant date fair value of the
      stock options was $2.68 per share and was estimated using the Black-Sholes
      options-pricing model using the following assumptions:







Expected
                dividend yield
            0.0%Expected
                volatility
            49.9%Risk-free
                interest rate
            4.8%Expected
                life
            6
                years





Expected
      stock price volatility is based on the historical volatility of the Company’s
      stock price over the most recent period commensurate with the expected option
      life. When  determining
      the expected life of stock options, the Company classifies options into groups
      for employees where relatively homogeneous exercise behavior is expected. The
      vesting period of the options, the length of time similar grants have remained
      outstanding in the past, and the expected volatility of the stock is also
      considered. These factors may cause the expected volatility and expected life
      of
      options granted to differ from period to period.


10
 **THERAGENICS
          CORPORATION AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **April
          1, 2007**
 **(Unaudited)**








As
      of
      April 1, 2007, there was
      approximately $523,000 and $438,000 of unrecognized compensation cost related
      to
      the restricted stock and stock options, respectively, granted in the first
      quarter of 2007, which is expected to be recognized over a weighted average
      period of 2.9 years and 2.5 years, respectively.





**NOTE
      G - DISTRIBUTION AGREEMENT AND MAJOR CUSTOMERS**




*Distribution
      Agreement*




The
      Company’s brachytherapy business sells its TheraSeed ® device
      directly to health care providers and to third party distributors. The Company’s
      primary non-exclusive distribution agreement is with C. R. Bard (“Bard”) for the
      distribution of the TheraSeed ® device
      (the “Bard Agreement”). The terms of the Bard Agreement provide for automatic
      one year extensions of the term, unless either party gives notice of its intent
      not to renew at least twelve months prior to the end of the current term. The
      current terms expires December 31, 2008, and will be automatically extended
      for
      one additional year unless either party gives notice of its intent not to extend
      by December 31, 2007. The Bard Agreement gives Bard the non-exclusive right
      to
      distribute the TheraSeed ® device
      in the U.S., Canada, and other international locations for the treatment of
      prostate cancer and other solid localized cancerous tumors.





*Major
      Customers*





Sales
      to
      Bard under the Bard Agreement represented approximately 54% of total
      brachytherapy seed product revenue, and approximately 29% of consolidated
      revenue, for the three months ended April 1, 2007. For the three months ended
      April 2, 2006, sales to Bard under the Bard Agreement represented approximately
      63% of brachytherapy seed product revenue and 45% of consolidated revenue.





Accounts
      receivable from Bard under the Bard Agreement represented approximately 45%
      of
      brachytherapy accounts receivable and 26% of consolidated accounts receivable
      at
      April 1, 2007. At December 31, 2006, accounts receivable from Bard under the
      Bard Agreement represented approximately 53% of brachytherapy accounts
      receivable and 31% of consolidated accounts receivable.




For
      the
      three months ended April 1, 2007, one customer represented approximately 12%
      of
      surgical product revenue. For the three months ended April 2, 2006, two
      customers equaled or exceeded 10% of surgical products sales, with one customer
      totaling 20% of sales and one customer totaling 10% of sales. No single customer
      exceeded 10% of surgical products accounts receivable at April 1, 2007. One
      customer represented approximately 11% of surgical products accounts receivable
      at December 31, 2006.





**NOTE
      H - SEGMENT REPORTING**





*Segment
      Reporting*





Theragenics
      is a medical device company serving the cancer treatment and surgical markets,
      operating in two business segments. In its brachytherapy seed business, the
      Company produces, markets and sells TheraSeed ® ,
      its
      premier palladium-103 prostate cancer treatment device, I-Seed, its iodine-125
      based prostate cancer treatment device, and related products and
      services. The Company’s surgical products business consists of wound
      closure and vascular access products. Wound closure includes sutures, needles
      and other surgical products with applications in, among other areas, urology,
      veterinary, cardiology, orthopedics, plastic surgery and dental. Vascular access
      includes introducers and guidewires used in the interventional radiology,
      interventional cardiology and vascular surgery markets.


11
 **THERAGENICS
          CORPORATION AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **April
          1, 2007**
 **(Unaudited)**


The
      following tables provide certain information for these segments (in
      thousands):




Quarter
                EndedApril
                1,
              2007
            
            April
                2,
              2006RevenuesBrachytherapy
                seed
            
            $
            8,649
            
            $
            9,008Surgical
                products
            
            
            6,839
            
            
            3,442Intersegment
                eliminations
            
            
            (37
            )
            
            (56
            )$
            15,451
            
            $
            12,394Restructuring
                expensesBrachytherapy
                seed
            
            $
            -
            
            $
            306Surgical
                products
            
            
            -
            
            
            -$
            -
            
            $
            306Gain
                on sale of assetsBrachytherapy
                seed
            
            $
            -
            
            $
            199Surgical
                products
            
            
            -
            
            
            2$
            -
            
            $
            201Earnings
                from operationsBrachytherapy
                seed
            
            $
            1,150
            
            $
            171Surgical
                products
            
            
            578
            
            
            309Intersegment
                eliminations
            
            
            (2
            )
            
            (20
            )$
            1,726
            
            $
            460Capital
                expendituresBrachytherapy
                seed
            
            $
            123
            
            $
            69Surgical
                products
            
            
            219
            
            
            53$
            342
            
            $
            122Depreciation
                and amortizationBrachytherapy
                seed
            
            $
            969
            
            $
            984Surgical
                products
            
            
            598
            
            
            212$
            1,567
            
            $
            1,196





E arnings
      from operations by segment do not include interest expense, interest income,
      other income and expense, or provisions for income taxes. Intersegment
      eliminations are for surgical products segment sales transactions consummated
      at
      arm’s length.





Supplemental
      information related to significant assets and liabilities follows (in
      thousands):





April
                1,
            
            December
                31,2007
            
            2006Identifiable
                assetsBrachytherapy
                seed
            
            $
            78,621
            
            $
            79,136Surgical
                products
            
            
            70,887
            
            
            69,860Corporate
                investment in subsidiaries
            
            
            61,667
            
            
            61,667Intersegment
                eliminations
            
            
            (64,317
            )
            
            (64,419
            )$
            146,858
            
            $
            146,244GoodwillBrachytherapy
                seed
            
            $
            2,578
            
            $
            2,578Surgical
                products
            
            
            36,246
            
            
            36,246$
            38,824
            
            $
            38,824Other
                intangible assetsBrachytherapy
                seed
            
            $
            5
            
            $
            6Surgical
                products
            
            
            13,288
            
            
            13,756$
            13,293
            
            $
            13,762 12
 **THERAGENICS
            CORPORATION AND SUBSIDIARIES**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **April
            1, 2007**
 **(Unaudited)**


Information
      regarding revenue by geographic regions follows (in thousands):




Quarter
                EndedApril
                1, 2007
            
            April
                2, 2006United
                States
            
            $
            14,411
            
            $
            11,790Europe
            
            
            621
            
            
            292Other
                foreign countries
            
            
            195
            
            
            174License
                fees (Canada)
            
            
            224
            
            
            138$
            15,451
            
            $
            12,394







Foreign
      sales are attributed to countries based on the location of the customer. License
      fees are recognized from the TheraSphere ® licensing agreement with Nordion, a Canadian based company. All other foreign
      sales are related to the surgical products segment. All of the Company’s
      long-lived assets are located within the United States.





**NOTE
      I - RESTRUCTURING**





$306,000
      of restructuring costs was incurred in the first quarter of 2006. These
      restructuring costs consisted primarily of the ongoing site exit and disposal
      costs associated with the restructuring of the brachytherapy business that
      was
      announced in August 2005. These restructuring activities were completed in
      the
      second quarter of 2006. Gain on sale of assets in the first quarter of 2006
      includes $199,000 related to assets sold that were idled in the
      restructuring.





**NOTE
      J - RELATED PARTY TRANSACTIONS**





The
      Company leases certain production, warehouse and office space from an entity
      controlled by the former owner of CP Medical Corporation, who is currently
      an
      officer and stockholder of Theragenics. At December 31, 2006, monthly payments
      of $14,000 were due under this lease through April 2010. This lease was amended
      in 2007 to increase the space being leased. Monthly payments as amended will
      be
      approximately $17,000. All other terms and conditions of the lease are
      unchanged.




**NOTE
      K - EARNINGS PER SHARE**




Basic
      earnings per share represents net earnings divided by the weighted average
      shares outstanding. Diluted earnings per share represents net earnings divided
      by weighted average shares outstanding adjusted for the incremental dilution
      of
      outstanding stock options and awards. A reconciliation of weighted average
      common shares outstanding to weighted average common shares outstanding assuming
      dilution for the periods presented follows (in thousands, except per share
      data):




Quarter
                  endedApril
                  1,2007
              
              April
                  2,2006Net
                  earnings
              
              $
              1,168
              
              $
              775Weighted
                  average common shares outstanding
              
              
              33,074
              
              
              32,052Incremental
                  common shares issuable under stock options and awards
              
              
              96
              
              
              33Weighted
                  average common shares outstanding assuming dilution
              
              
              33,170
              
              
              32,085Earnings
                  per shareBasic
              
              $
              0.04
              
              $
              0.02Diluted
              
              $
              0.04
              
              $
              0.02




For
        the
        quarters ended April 1, 2007 and April 2, 2006, common stock equivalents
        from
        1,969,333 and 2,433,333 stock options, respectively, were not included in
        the
        diluted earnings per share calculation because their effect is
        antidilutive.


13


**Item
      2.** **Management’sDiscussion
      and Analysis of Financial Condition and
      Results of Operations**





***Overview***





Theragenics
      Corporation is a medical device company serving the cancer treatment and
      surgical markets, operating in two business segments. In its brachytherapy
      seed
      business, the Company produces, markets and sells TheraSeed ® ,
      its
      premier palladium-103 prostate cancer treatment device; I-Seed, its iodine-125
      based prostate cancer treatment device; and other related products and services.
      Theragenics is the world’s largest producer of palladium-103, the radioactive
      isotope that supplies the therapeutic radiation for its TheraSeed ® device.
      Physicians, hospitals and other healthcare providers, primarily located in
      the
      United States, utilize the TheraSeed ® device.
      The majority of TheraSeed ® sales
      are channeled through third-party distributors. The Company also sells its
      TheraSeed ® and
      I-Seed devices directly to physicians.





The
      Company’s surgical products business consists of wound closure and vascular
      access products. Wound closure includes sutures, needles and other surgical
      products with applications in, among other areas, urology, veterinary,
      cardiology, orthopedics, plastic surgery and dental. Vascular access includes
      introducers and guidewires used in the interventional radiology, interventional
      cardiology and vascular surgery markets.





The
      Company has substantially diversified its operations and revenues in recent
      years. Prior to 2003, the Company’s sole product was the palladium-103
      TheraSeed ® prostate
      cancer treatment device. In 2003, the Company began to market an iodine-125
      based I-Seed prostate cancer treatment product. In May 2005, the Company
      expanded into the surgical products business with the acquisition of CP Medical
      Corporation (“CP Medical”), followed by the acquisition of Galt Medical Corp.
      (“Galt”) in August 2006. CP Medical and Galt comprise the Company’s surgical
      products business, which accounted for 44% of consolidated revenue in the first
      quarter of 2007. Prior to May 2005, the brachytherapy seed business constituted
      100% of the Company’s revenue.





Galt
      was
      acquired on August 2, 2006, for $32.7 million (net of $2.3 million of cash
      acquired), including $29.6 million in cash and the issuance of common shares
      valued at $3.1 million. The Company borrowed $7.5 million under its $40.0
      million credit facility in connection with the Galt acquisition. The Company’s
      consolidated results of operations include the results of Galt subsequent to
      the
      acquisition date.








***Results
      of Operations***




***Revenue***




Following
      is a summary of revenue by segment (in thousands):


Quarter
                    EndedApril
                    1, 2007
                
                April
                    2, 2006
                
                Change
                    (%)Brachytherapy
                    seedProduct
                    sales
                
                $
                8,425
                
                $
                8,870
                
                (5.0%)License
                    fees
                
                
                224
                
                
                138
                
                
                62.3
                %Total
                    brachytherapy seed
                
                $
                8,649
                
                $
                9,008
                
                (
                    4.0%)Surgical
                    products
                
                
                6,839
                
                
                3,442
                
                
                98.7
                %Intersegment
                    eliminations
                
                
                (37
                )
                
                (56
                )
                
                (33.9
                %)Consolidated
                
                $
                15,451
                
                $
                12,394
                
                
                24.7
                %




The
      increase in consolidated revenue is a result of the increase in the surgical
      products segment, which includes wound closure and vascular access products.
      2007 revenue includes the results of Galt, which was acquired in August 2006.
      CP
      Medical’s line of wound closure and related products increased 25% over the 2006
      period, resulting from greater penetration in key accounts. Wound closure and
      vascular access products are sold to original equipment manufacturers,
      distributors and, to a lesser extent, directly to hospitals and health care
      providers.


14




The
      decrease in brachytherapy sales primarily reflects softness in sales to our
      main
      distributor, which decreased 19%. Of the 19% decline to this main distributor,
      15% was attributable to a decrease in unit volume and 4% was due to a reduction
      in transfer price. The per unit transfer price under which the Company sells
      its
      TheraSeed® device to its distributors was reduced by 6% effective February 1,
      2007 in recognition of competitive marketplace pressures and new distributor
      strategies. This price decrease reduced gross margins on sales to the Company’s
      main distributor in the first quarter due to the decline in unit volume.
      Continued declines in unit volumes would reduce margins further due to the
      significant fixed cost component of manufacturing expenses. However, because
      of
      this significant fixed cost component, any appreciable increases in unit volumes
      to distributors could have the impact of increasing overall margins. The future
      effect of the pricing reduction to the Company’s distributors is dependent upon
      the performance of the distributors, and their ability to maintain or increase
      unit volumes.




The
      Company also maintains its own internal brachytherapy sales force that sells
      TheraSeed ® and
      I-Seed directly to hospitals and physicians. Revenue from direct sales increased
      15% in the first quarter of 2007 over 2006, resulting from programs implemented
      by the direct sales force, including direct to consumer advertising programs.
      Direct sales comprised 45% of brachytherapy product sales in the first quarter
      of 2007, compared to 37% in the first quarter of 2006. The average selling
      price
      of the TheraSeed® device sold directly to hospitals and physicians during the
      first quarter of 2007 was comparable to the 2006 period.




The
      Company has two non-exclusive distribution agreements in place for the
      distribution of the TheraSeed ®  device.
      The primary distribution agreement is with C. R. Bard (“Bard”), which is
      effective through December 31, 2008 (the “Bard Agreement”). Sales to Bard under
      the Bard Agreement represented approximately 54% and 63% of brachytherapy
      product revenue in the first quarter of 2007 and 2006, respectively (29% and
      45%
      of consolidated revenue in the first quarter of 2007 and 2006, respectively).
      The terms of the Bard Agreement provide for automatic one-year extensions of
      the
      term, unless either party gives notice of its intent not to renew at least
      twelve months prior to the end of the current term. The current term expires
      on
      December 31, 2008, and will be automatically extended for one additional year
      unless either party gives notice of its intent not to extend by December 31,
      2007. The Company also has a non-exclusive distribution agreement in place
      with
      a second distributor, though revenue generated from the second distributor
      was
      not material.




Management
      believes that the brachytherapy industry continues to be affected by competition
      from alternative therapies, declining prices for iodine-125 and palladium-103
      seeds, competitors’ selling tactics and the effects of consolidation in the
      industry. Theragenics’ brachytherapy business also continues to be affected by
      the Company’s non-exclusive distributors. Medicare reimbursement policies have
      affected the brachytherapy market and can also continue to affect the
      brachytherapy market. In December 2006 Congress enacted the Tax Relief and
      Health Care Act of 2006 (the “Act”), which retains the “pass-through” status of
      reimbursement for brachytherapy seeds for 2007, and requires that a separate
      reimbursement code be established for stranded seeds. Stranded seeds are
      becoming a larger portion of the Company’s brachytherapy business. The Company
      believes that fixed reimbursement rates for seeds will be implemented beginning
      in 2008, (see “ *Medicare
      Developments* ”
below)
      and that this and other factors can be expected to lead to continued pricing
      pressure from hospitals and other health care providers. Accordingly,
      Theragenics and/or its non-exclusive distributors may continue to change their
      respective pricing policies for the TheraSeed ® device
      and Theragenics may change its pricing policy with respect to I-seed in order
      to
      take advantage of market opportunities or respond to competitive situations.
      Responding to market opportunities and competitive situations could have an
      adverse effect on average selling prices. Responding to market opportunities
      and
      competitive situations could also have a favorable effect or prevent an
      unfavorable effect on market share and volumes. Conversely, the Company or
      its
      non-exclusive distributors could individually and independently decide to
      maintain per unit pricing under certain competitive situations that could
      adversely affect current or potential market share and volumes.


15









***Operating
      Income and costs and expenses***




Following
      is a summary of operating income by segment (in thousands):


Quarter
                  Ended
              
              IncreaseApril
                  1, 2007
              
              April
                  2, 2006
              
              
              
              $%Operating
                  incomeBrachytherapy
                  seed
              
              $
              1,150
              
              $
              171
              
              $
              979
              
              
              572.5
              %Surgical
                  Products
              
              
              578
              
              
              309
              
              
              269
              
              
              87.1
              %Intersegment
                  eliminations
              
              
              (2
              )
              
              (20
              )
              
              18
              
              
              90.0
              %Consolidated
              
              $
              1,726
              
              $
              460
              
              $
              1,266
              
              
              275.2
              %




The
      increase in operating income in the brachytherapy segment was a result of a
      $1.3
      million decrease in selling, general and administrative (“SG&A”) expenses,
      primarily consisting of declines in advertising and professional fees. The
      decline in brachytherapy revenue compared to 2006 partially offset the increase
      in operating income, due to the high fixed cost component of brachytherapy
      manufacturing operations. Gross margins on product sales in the brachytherapy
      business decreased to 53% of product sales in 2007 compared to 55% in 2006,
      as
      costs of manufacturing were consistent at $4.1 million in 2007 and $4.0 million
      in 2006. Gross margins in the brachytherapy seed business are expected to
      continue to be dependent on sales levels, due to this high fixed cost component.




Operating
      income in the surgical products segment reflect the results of Galt, acquired in
      August 2006, and the revenue growth in the wound closure lines at CP Medical
      over the 2006 period. Gross margins were 41% and 40% in the first quarter of
      2007 and 2006, respectively, with costs of manufacturing totaling $4.0 million
      in 2007 compared to $2.1 million for the 2006 period. Gross margins in the
      surgical products business are dependent on product and sales channel mix.
      Operating expenses in the 2007 period included approximately $200,000 of
      severance costs and an increase of $282,000 in amortization of purchased
      intangibles over 2006 due to the Galt acquisition. The 2007 period also reflects
      higher personnel and other infrastructure costs to support increased capacity
      and anticipated future growth. Research and development (“R&D”) expenses
      also increased over 2006 as investments were made in new product development
      in
      the surgical products business. The Company expects to continue to invest in
      infrastructure and R&D during 2007, as investments are made to support
      anticipated future growth and in product development to address growth
      opportunities in our surgical products business.




***Other
      income/expense***




Interest
      income was comparable between the 2007 and 2006 periods. Higher interest rates
      and yields were offset by a decrease in invested funds due to cash used for
      the
      Galt acquisition in August 2006. The Company’s investments consist primarily of
      short-term cash investments and high-credit quality corporate and municipal
      obligations, in accordance with the Company’s investment policies. Funds
      available for investment have and will continue to be utilized for the Company’s
      current and future expansion programs and strategic opportunities for growth
      and
      diversification. As funds continue to be used for these programs and activities,
      and as interest rates continue to change, management expects interest income
      to
      fluctuate accordingly.




Interest
      and financing costs increased in 2007 as a result of the $7.5 million in
      borrowings under the Company’s $40.0 million credit facility in August 2006.
      Interest on outstanding borrowings is payable at LIBOR plus 1%, which was an
      effective rate of 6.3% at April 1, 2007. The Company expects to maintain
      borrowings under its credit facility to provide flexibility for future strategic
      initiatives and diversification. Accordingly, interest expense will be impacted
      by increases or decreases in the effective interest rate on the borrowings.
      Interest expense may also increase in future periods as a result of any future
      borrowings to support expansion programs and strategic opportunities for growth
      and diversification.


16




***Income
      tax expense***




The
      Company’s effective income tax rate for the first quarter of 2007 was
      approximately 40%, which is reflective of the approximate effective rate
      expected for 2007. This includes federal and state income taxes, and is higher
      than taxes computed at the statutory rates due to certain non-deductible items.




The
      Company’s effective tax rate for the first quarter of 2006 was approximately 1%.
      During 2006 the Company had an allowance for a deferred income tax asset that
      was reduced during the course of the year and as it became more likely than
      not
      that some portion of the deferred tax asset would be realized. The first quarter
      of 2006 included a tax benefit of approximately $312,000, representing a
      reduction in the allowance for the deferred income tax asset and significantly
      reducing the effective tax rate for that period. In the fourth quarter of 2006,
      Management determined that it was more likely than not that substantially all
      of
      the remaining deferred tax asset would be recognized and, accordingly, all
      but
      $239,000 of the allowance was released. The allowance of $239,000 remains at
      April 1, 2007, and primarily represents certain state net operating loss
      carryforwards for which the Company believes it is more likely than not that
      the
      benefit will not be realized.




The
      Company adopted the provisions of Financial Accounting Standards Board
      Interpretation No. 48, *Accounting
      for Uncertainty in Income Taxes* (“FIN
      48”) on January 1, 2007 (see *“Critical
      Accounting Policies”* below).
      The Company has evaluated its tax positions and concluded that there are no
      significant uncertain tax positions requiring recognition in the financial
      statements. This evaluation was performed for all tax years that remain subject
      to examination by major tax jurisdictions as of April 1, 2007. Accordingly,
      adoption of FIN 48 did not have a material effect on the Company’s financial
      statements. However, Management considers many factors when evaluating and
      estimating tax positions and tax benefits, which may require periodic
      adjustments and may not accurately anticipate actual outcomes.





The
      Company’s U.S. income tax returns for 2004 and 2005 are currently under
      examination by the IRS. An estimate of the range of possible changes that may
      result from the examination cannot be made at this time.




***Critical
      Accounting Policies***





The
      preparation of financial statements requires Management to make estimates and
      assumptions that affect the reported amount of assets and liabilities and
      disclosure of contingent assets and liabilities at the date of the financial
      statements and the reported amounts of revenues and expenses during the
      reporting period. The SEC defines “critical accounting policies” as those that
      require application of management’s most difficult, subjective or complex
      judgments, often as a result of the need to make estimates about the effect
      of
      matters that are inherently uncertain and may change in subsequent periods.
      The
      following is not intended to be a comprehensive list of all of the Company’s
      critical accounting policies. The Company’s significant accounting policies are
      more fully described in the notes to its consolidated financial statements
      included in its Annual Report on Form 10-K and as updated in this Form 10-Q.
      In
      many cases, the accounting treatment of a particular transaction is specifically
      dictated by accounting principles generally accepted in the United States,
      with
      no need for Management’s judgment in their application. The accounting policies
      described below are those which we believe are most critical in fully
      understanding and evaluating our reported financial results, and are areas
      in
      which Management’s judgment in selecting an available alternative might produce
      a materially different result.




*Property,
      plant and equipment.* Property, plant and equipment are recorded at cost and depreciated on a
      straight-line basis over the estimated useful lives of such assets. The
      Company’s estimates can result in differences from the actual useful lives of
      certain assets. The significant portion of equipment is comprised of the
      Company’s cyclotrons, utilized in the brachytherapy business. As of December 31,
      2006, the Company owned and operated eight cyclotrons, the first of which
      entered service in 1998. Each of the Company’s cyclotrons is depreciated using
      an estimated 10-year life. Management’s estimate of the useful life of these
      cyclotrons is based on the Company’s experience to date with these cyclotrons.
      Based on experience gained relative to the operation, refurbishment, and
      maintenance of the cyclotrons, Management believes there is a substantive basis
      for the current depreciable lives of the cyclotrons.




Management
      will continue to periodically examine estimates used for depreciation for
      reasonableness. If the Company determines that the useful life of property,
      plant or equipment should be shortened or lengthened, depreciation expense
      would
      be adjusted accordingly for the remaining useful lives of the identified
      assets.




Management
      assesses the impairment of its depreciable assets whenever events or
      circumstances indicate that such assets might be impaired. In the event the
      expected undiscounted future cash flow attributable to the asset is less than
      the carrying value of the asset, an impairment loss equal to the excess of
      the
      asset’s carrying value over its fair value is recorded. The estimation of fair
      value, whether in conjunction with an asset to be held and used or with an
      asset
      held for sale, also involves judgment.


17









It
      is
      possible that Management’s estimates concerning the realizability of the
      Company’s depreciable assets or assets held for sale could change in the
      future.




*Goodwill.* The
      Company has $36.2 million of goodwill associated with its surgical products
      business and $2.6 million of goodwill associated with its brachytherapy seed
      business. The Company accounts for goodwill and other intangible assets in
      accordance with the provisions of Statement of Financial Accounting Standards
      No. 142, *Goodwill
      and Other Intangible Assets* (“SFAS
      142”). Under SFAS 142, goodwill and intangible assets with indefinite lives are
      not amortized to expense and must be reviewed for impairment annually or more
      frequently if events or changes in circumstances indicate that such assets
      might
      be impaired. The first step of the impairment test, used to identify potential
      impairment, compares the fair value of a reporting unit with its carrying
      amount, including goodwill and intangible assets with indefinite lives. If
      fair
      value exceeds book value, goodwill is considered not impaired. If book value
      exceeds fair value, the second step of the impairment test is performed to
      measure the amount of impairment loss, if any. For this step the implied fair
      value of the goodwill is compared with the book value of the goodwill. If the
      carrying amount of the goodwill exceeds the implied fair value of the goodwill,
      an impairment loss would be recognized in an amount equal to that excess. Any
      loss recognized cannot exceed the carrying amount of goodwill. After an
      impairment loss is recognized, the adjusted carrying amount of goodwill is
      its
      new accounting basis. Subsequent reversal of a previously recognized impairment
      loss is prohibited once the measurement of that loss is completed.




The
      Company performs an annual goodwill impairment assessment during the fourth
      quarter. Management also makes judgments about goodwill whenever events or
      changes in circumstances indicate that impairment in the value of goodwill
      recorded on our balance sheet may exist. The timing of an impairment test may
      result in charges to our statements of income in the current reporting period
      that could not have been reasonably foreseen in prior periods. In order to
      estimate the fair value of goodwill, Management typically makes various
      assumptions about the future prospects for the reporting unit that the asset
      relates to, considers market factors specific to that reporting unit and
      estimates future cash flows to be generated by that reporting unit. Assumptions
      used in these assessments are consistent with the Company’s internal planning.
      The most recent assessment was performed in the fourth quarter of 2006 and
      the
      Company determined that goodwill was not impaired.




Intangible
      assets with definite lives are being amortized, and this amortization is
      included in the accompanying consolidated statements of operations.




*Allowance
      for doubtful accounts and returns.* Management judgments and estimates are made and used in connection with
      establishing an allowance for the possibility that portions of our accounts
      receivable balances may become uncollectible or subject to return. Accounts
      receivable are reduced by this allowance. Specifically, Management analyzes
      accounts receivable in relation to current economic trends, changes in our
      customer payment history, and changes in sales returns history in establishing
      this allowance.





*Share-based
      compensation.*  The
      Company accounts for share-based compensation in accordance with Statement
      of
      Financial Accounting Standard No. 123R, *Shared-based
      Payment* (‘SFAS
      123R”). Under the fair value recognition provisions of this statement,
      share-based compensation cost is measured at the grant date based on the value
      of the award and is recognized as expense over the vesting period. Determining
      the fair value of share-based awards at the grant date requires judgment,
      including estimating the Company’s stock price volatility, employee stock option
      exercise behaviors and, for performance based awards, expected performance
      rates
      during the vesting period.





Expected
      stock price volatility is primarily based on the historical volatility of the
      Company’s stock price over the most recent period commensurate with the expected
      option life. When  determining
      the expected life of stock options, the Company classifies options into groups
      for employees where relatively homogeneous exercise behavior is expected. The
      vesting period of the options, the length of time similar grants have remained
      outstanding in the past, and the expected volatility of the stock is also
      considered. These factors may cause the expected volatility and expected life
      of
      options granted to differ from period to period.




In
      February 2006, the Compensation Committee of the Board of Directors approved
      the
      issuance of performance restricted stock units to executive officers, which
      vest
      on December 31, 2008 (the “2006 Performance Restricted Stock Units”). The number
      of common shares issuable upon vesting of the 2006 Performance Restricted
      Stock Units is subject to a minimum of 31,200 shares and a maximum of
      208,000 shares, and will be partly based on the Company’s revenue and earnings
      per share from 2006 to 2008, relative to its strategic objectives over the
      same
      period, and partly based on the subjective discretion of the Compensation
      Committee. The grant date fair value of the 2006 Performance Restricted Stock
      Units was based on the fair value of the underlying common stock and is
      recognized over the three-year requisite service period. For the portion of
      the
      2006 Performance Restricted Stock Units containing performance conditions,
      the
      grant date fair value is adjusted each period for the number of shares
      ultimately expected to be issued. For the portion of the 2006 Performance
      Restricted Stock Units subject to discretionary performance conditions, the
      grant date has not been established and accordingly, the fair value of the
      award
      is updated each period for changes in the fair value of the underlying common
      stock. T o
      the
      extent that the underlying fair value of the Company’s common stock varies
      significantly, and/or the number of shares issuable is determined, the Company
      may record additional compensation expense or adjust cumulative compensation
      expense.


18


*Accounting
      for income taxes.* Our
      judgments, assumptions and estimates relative to the provision for income taxes
      takes into account current tax laws and our interpretation of current tax laws.
      Management must make assumptions, judgments and estimates to determine our
      tax
      provision and our deferred income tax assets and liabilities, including the
      valuation allowance to be recorded against a deferred tax asset. Actual
      operating results and the underlying amount and category of income
      in future years could differ materially from our current assumptions,
      judgments and estimates of recoverable net deferred taxes.




Management
      evaluates the realizability of the deferred tax assets and assesses the need
      for
      the valuation allowance each reporting period. In the future if, based on the
      facts and circumstances surrounding the Company’s ability to generate adequate
      future taxable income, it becomes more likely than not that some or all of
      the
      deferred tax asset will not be realized, the valuation allowance may be required
      to be increased. At April 1, 2007, the Company has recorded a current deferred
      tax asset of $7.0 million, a long-term deferred tax liability of $6.1 million
      and an allowance of $239,000.




The
      Company adopted the provisions of Financial Accounting Standards Board (“FASB”)
      Interpretation No. 48, *Accounting
      for Uncertainty in Income Taxes* (“FIN
      48”), on January 1, 2007. FIN 48 clarifies the accounting for uncertainty
      in income taxes recognized in an enterprise’s financial statements in accordance
      with FASB Statement 109, *Accounting
      for Income Taxes* ,
      and
      prescribes a recognition threshold and measurement process for financial
      statement recognition and measurement of a tax position taken or expected to
      be
      taken in a tax return. FIN 48 also provides guidance on derecognition,
      classification, interest and penalties, accounting in interim periods,
      disclosure and transition. The adoption of FIN 48 did not have a material effect
      on the Company’s financial statements. Management considers many factors when
      evaluating and estimating tax positions and tax benefits, which may require
      periodic adjustments and may not accurately anticipate actual
      outcomes.





**New
      Accounting Pronouncements**





In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      No.
      157, Fair *Value
      Measurements* ,
      (“SFAS
      157”). SFAS 157 defines fair value, establishes a framework for measuring fair
      value in generally accepted accounting principles, and expands disclosures
      about
      fair value measurements. SFAS 157 does not require any new fair value
      measurements. SFAS 157 is effective for the Company beginning January 1, 2008.





In
      February 2007, FASB issued Statement of Financial Accounting Standards SFAS
      No. 159, *The
      Fair Value Option for Financial Assets and Financial Liabilities -
      Including an amendment of FASB Statement No. 11* ,
      (“SFAS
      159”) *.* SFAS 159
      permits entities to choose to measure eligible items at fair value at specified
      election dates and report unrealized gains and losses on items for which the
      fair value option has been elected in earnings at each subsequent reporting
      date. SFAS 159 is effective for the Company beginning January 1, 2008.





The
      Company is evaluating the impact of these new pronouncements and their potential
      impact on its consolidated financial statements has not been
      determined.





***Liquidity
      and Capital Resources***





The
      Company had cash, short-term investments and marketable securities of $35.6
      million at April 1, 2007, compared to $33.0 million at December 31, 2006.
      Marketable securities consist primarily of high-credit quality corporate and
      municipal obligations in accordance with the Company’s investment policies. The
      aggregate increase in cash, short-term investments and marketable securities
      was
      primarily the result of cash generated from operations.





Working
      capital was $60.9 million at April 1, 2007, compared to $58.3 million at
      December 31, 2006. The Company also has a Credit Agreement with a financial
      institution that provides for revolving borrowings of up to $40.0 million,
      including a $5.0 million sub-limit for letters of credit, through a credit
      facility which expires on October 31, 2009. $7.5 million of borrowings was
      outstanding under the Credit Agreement as of April 1, 2007. Interest is payable
      quarterly at LIBOR plus 1% (effective rate of 6.3% at April 1, 2007). Letters
      of
      credit, representing decommission funding required by the Georgia Department
      of
      Natural Resources, totaling $876,000 were outstanding under the Credit Agreement
      as of April 1, 2007. The Credit Agreement is unsecured, but provides for a
      lien
      to be established on substantially all of the assets of the Company (subject
      to
      certain exceptions) in the event certain events of default occur under the
      Credit Agreement. The Credit Agreement, as amended, contains representations
      and
      warranties, as well as affirmative, reporting and negative covenants, customary
      for financings of this type. Among other things, certain provisions of the
      Credit Agreement limit the incurrence of additional debt and require the
      maintenance of certain financial ratios and tests. The Company was in compliance
      with these covenants as of April 1, 2007.


19




Cash
      provided by operations was $2.8 million and $1.1 million during the first
      quarter of 2007 and 2006, respectively. Cash provided by operations consists
      of
      net earnings plus non-cash expenses such as depreciation, amortization, and
      changes in balance sheet items such as accounts receivable, inventories, prepaid
      expenses and payables. Accounts receivable increased $749,000 primarily due
      to
      higher sales volume in the first quarter of 2007 compared to the fourth quarter
      of 2006. Inventories decreased $863,000 during the first quarter of 2007 as
      a
      result of our efforts to minimize inventory levels. Trade accounts payable,
      and
      accrued salaries, wages and payroll taxes decreased an aggregate of $814,000
      during the first quarter of 2007 primarily as a result of the timing of the
      payments.





Capital
      expenditures totaled $342,000 and $122,000 during the first quarter of 2007
      and
      2006, respectively. The Company expects capital expenditures in 2007 to continue
      to be higher than 2006 as investments are made primarily in the surgical
      products business.





Cash
      provided by financing activities was $63,000 and $23,000 in the first quarter
      of
      2007 and 2006, respectively, consisting of cash proceeds from the exercise
      of
      stock options and the Company’s Employee Stock Purchase Plan.





Cash
      could be used in 2007 for increased marketing and TheraSeed ® support
      activities, support for growth in the surgical products segment, and in the
      pursuit of additional diversification efforts such as product development and
      the purchase of technologies, products or companies.





The
      Company believes that current cash and investment balances and cash from future
      operations and credit facilities will be sufficient to meet its current
      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.




***Medicare
      Developments***




The
      Medicare Prescription Drug, Improvement and Modernization Act of 2003 (“MMA”),
      which went into effect on January 1, 2004, contained brachytherapy provisions
      requiring Medicare to reimburse hospitals for each brachytherapy seed/source
      furnished between January 1, 2004 to December 31, 2006 based on the hospital’s
      costs for each patient (calculated from the hospital’s charges adjusted by the
      hospital’s specific cost-to-charge ratio). The MMA also directed the U.S.
      Government Accountability Office (“GAO”) to conduct a study examining future
      payment policies for brachytherapy seeds. The GAO published its report on July
      25, 2006, concluding that the Centers for Medicare and Medicaid Services
      (“CMS”), the regulatory body that sets Medicare reimbursement policies, could
      establish separate prospective payment rates effective in 2007 for palladium-103
      brachytherapy seeds/sources (such as TheraSeed ® )
      and
      iodine-125 seeds/sources using Medicare’s hospital outpatient data. On November
      1, 2006, CMS posted a final rule with payment rates for brachytherapy seeds
      for
      Medicare's hospital outpatient prospective payment system (“OPPS”) for calendar
      year 2007. The use of prospective payment rates will fix the per seed rate
      at
      which hospitals will be reimbursed. From 2004 through 2006, hospitals were
      reimbursed at the per seed purchased cost. The Company believed that CMS’
approach to determining the reimbursement rate for brachytherapy seeds was
      fundamentally flawed. For example, CMS did not stratify cost data on differing
      seed configurations, such as loose versus “stranded” seeds. Accordingly, the
      Company continued to work with policy makers in an effort to rectify the
      shortcomings it believed to be contained in the new CMS rule.




In
      December 2006, Congress enacted the Tax Relief and Health Care Act of 2006,
      which extends and refines the Medicare safeguards initially enacted by Congress
      in 2003 for brachytherapy seeds administered in the hospital outpatient setting.
      The President signed the legislation on December 20, 2006. The legislation
      supercedes the final rule published by CMS on November 1, 2006 by extending
      the
      current reimbursement policies for brachytherapy seeds through the end of 2007,
      ensuring that the Medicare program does not implement potentially restrictive
      caps on reimbursement during that period. In addition, the legislation
      recognizes that prostate cancer patients must have meaningful access to stranded
      brachytherapy seeds, which increasingly are used in clinical practice to further
      enhance the safety and efficacy of treatment. The legislation establishes a
      permanent requirement for Medicare to use separate codes for the reimbursement
      of stranded brachytherapy devices, beginning no later than July 1, 2007.
      Stranded seeds are becoming a larger portion of Theragenics’ brachytherapy
      business. This important provision should allow reimbursement rules to recognize
      the value of this important clinical configuration even after 2007.




The
      Tax
      Relief and Healthcare Act of 2006 requires the establishment of a separate
      reimbursement code for stranded seeds, and Medicare will continue to reimburse
      hospitals at the per seed purchased cost (as defined in the Medicare rules)
      during 2007. The Company expects reimbursement rates for brachytherapy seeds
      will be fixed based on isotope beginning in 2008. If implemented in 2008 or
      thereafter, prospective rates can be expected to lead to an increase in pricing
      pressure from hospitals, which could adversely affect our brachytherapy revenue.


20







***Forward
      Looking and Cautionary Statements***





This
      document contains certain forward-looking statements within the meaning of
      the
      Private Securities Litigation Reform Act of 1995 including, without limitation,
      statements regarding sales, marketing and distribution efforts, the Company’s
      direct sales organization, including, but not limited to, its growth and
      effectiveness, third-party reimbursement, CMS policy, sales mix, effectiveness
      and continuation of non-exclusive distribution agreements, pricing for the
      TheraSeed ® and
      I-Seed devices, anticipated growth in the Surgical Products business segment,
      future cost of sales, future gross margins, R&D efforts and expenses,
      investment in additional personnel and infrastructure, SG&A expenses, other
      income, potential new products and opportunities, the development of new markets
      and technologies, diversification of operations, results in general, plans
      and
      strategies for continuing diversification, and the sufficiency of the Company’s
      liquidity and capital resources. From time to time, the Company may also make
      other forward-looking statements relating to such matters as well as statements
      relating to anticipated financial performance, business prospects, technological
      developments, other research and development activities and similar matters.
      These forward-looking statements are subject to certain risks, uncertainties
      and
      other factors which could cause actual results to differ materially from those
      anticipated, including risks associated with new product development cycles,
      effectiveness and execution of marketing and sales programs of the Company’s
      business segments and its distributors, third-party distribution agreements,
      competitive conditions and selling tactics of the Company’s competitors, the
      impact of changes in third-party (including CMS) reimbursement, changes in
      product pricing by the Company’s brachytherapy business segment, changes in cost
      of materials used in production processes, continued acceptance of products
      by
      the market, continued demand for the Company’s brachytherapy, wound closure and
      vascular access products, integration of Galt and CP Medical into the
      Theragenics organization, capitalization on opportunities for growth within
      the
      Company’s surgical products business, ability to recognize benefits from areas
      of shared expertise, competition within the medical device industry, development
      and growth of new applications within the markets for vascular access, wound
      closure, brachytherapy and more broadly, medical devices, competition from
      companies within vascular access, wound closure and medical device markets,
      competition from other methods of treatment, ability to execute on acquisition
      opportunities on favorable terms and successfully integrate any acquisitions,
      and other factors including the risks identified in Part II, Item 1A of the
      Company’s most recent Form 10-K Annual Report. All forward looking statements
      and cautionary statements included in this document are made as of the date
      hereof based on information available to the Company as of the date hereof,
      and
      the Company assumes no obligation to update any forward looking statement or
      cautionary statement.





**Item
      3.** **Quantitativeand
      Qualitative Disclosures About Market
      Risk**





The
      Company's market risk exposure related to market risk sensitive financial
      instruments is not material. As of April 1, 2007, the Company had borrowings
      of
      $7.5 million and letters of credit of approximately $876,000 outstanding under
      the terms of its Credit Agreement. Interest on outstanding borrowings is payable
      monthly at LIBOR plus 1% (effective rate of 6.3% as of April 1,
      2007),





**Item
      4.**  **Controlsand
      Procedures**





Under
      the
      supervision and with the participation of the Company's management, including
      its Chief Executive Officer and Chief Financial Officer, the Company conducted
      an evaluation of the effectiveness of the design and operation of its disclosure
      controls and procedures, as such term is defined under Rule 13a-15(e)
      promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange
      Act”). Based on this evaluation, the Chief Executive Officer and Chief Financial
      Officer concluded that the Company's disclosure controls and procedures were
      effective as of April 1, 2007, the end of the period covered by this
      report.





The
      Company acquired Galt Medical Corporation (“Galt”) on August 2, 2006. Since the
      date of acquisition, the Company has been focusing on analyzing, evaluating,
      and
      implementing changes in Galt's procedures and controls to determine their
      effectiveness and to make them consistent with our disclosure controls and
      procedures. Prior to our acquisition of Galt, Galt was not required to prepare
      financial statements in accordance with accounting principles generally accepted
      in the United States of America. In addition, Galt was not previously required
      to maintain disclosure controls and procedures or maintain, document and assess
      internal control over financial reporting, in each case as required under the
      rules and regulation of the Securities and Exchange Commission. As noted in
      Management's Report on Internal Control over Financial Reporting in the
      Company’s Form 10-K for the year ended December 31, 2006 and as permitted by
      guidance issued by the staff of the U.S. Securities and Exchange Commission,
      Galt was excluded from the scope of management’s assessment over the
      effectiveness of internal control over financial reporting as of December 31,
      2006. We have similarly excluded Galt from the scope of our quarterly discussion
      of material changes in internal control over financial reporting below. Galt
      constituted 16.7% of consolidated revenue for the three months ended April
      1,
      2007 and 25.1% of consolidated assets as of April 1, 2007.


21





No
      changes in the Company's internal control over financial reporting were
      identified as having occurred during the fiscal quarter ended April 1, 2007
      that
      have materially affected, or are reasonably likely to materially affect, the
      Company's internal control over financial reporting, except as described above
      with respect to Galt.








**PARTII.
      OTHER INFORMATION**





**Item
      1.** **LegalProceedings**





From
      time
      to time, the Company is subject to certain legal proceedings and claims in
      the
      ordinary course of business. We currently are not aware of any such legal
      proceedings or claims that we believe will have, individually or in aggregate,
      a
      material adverse effect on our business, financial condition, or operating
      results.





**Item
      1A.** **RiskFactors**





In
      addition to the other information set forth in this report, the factors
      discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K
      for the year ended December 31, 2006, which could materially affect our
      business, financial condition or future results, should be carefully considered.
      The risks described in our Annual Report on Form 10-K are not the only risks
      facing our Company. Additional risks and uncertainties not currently known
      to us
      or that we currently deem to be immaterial also may materially adversely affect
      our business, financial condition and/or operating results.





**Item
      6.** **Exhibits**




Exhibit
                No.
            Title31.1
            Certification
                of Chief Executive Officer pursuant to Rule 13a-14(a) and Section
                302 of
                the Sarbanes-Oxley Act of 2002.31.2
            Certification
                of Chief Financial Officer pursuant to Rule 13a-14(a) and Section
                302 of
                the Sarbanes-Oxley Act of 2002.32.1
            Certification
                of Chief Executive Officer pursuant to Section 1350, Chapter 63 of
                Title
                18, United States Code, as adopted to Section 906 of the Sarbanes-Oxley
                Act of 2002.32.2
            Certification
                of Chief Financial Officer pursuant to Section 1350, Chapter 63 of
                Title
                18, United States Code, as adopted to Section 906 of the Sarbanes-Oxley
                Act of 2002.






22




SIGNATURES




Pursuant
      to the requirements 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.






REGISTRANT:THERAGENICS
                CORPORATIONDate: May
                9, 2007
            By:
            /s/ M.
                Christine JacobsM.
                Christine JacobsChief
                Executive OfficerDate: May
                9, 2007
            By:
            /s/ Francis
                J. TaralloFrancis
                J. TaralloChief
                Financial Officer










23