##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
  Form 10-K
  FOR ANNUAL AND TRANSITION
    REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    April 2, 2006oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          
    to   Commission file number
    000-26911
  THERMA-WAVE, INC.
 (Exact Name of Registrant as
    Specified in Its Charter)
  Delaware

94-3000561(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification Number)1250 Reliance Way
    Fremont, California(Address of Principal
    Executive Offices)

94539(Zip Code)   (Registrants telephone number, including area code)
 (510) 668-2200
 Securities registered pursuant to Section 12(b) of the
    Act:
 None
 Securities registered pursuant to Section 12(g) of the
    Act:
 Common Stock, par value $0.01 per share
 (Title of Class)
 o þ
 o þ
 þ o
 Regulation S-K Form 10-K, Form 10-K. o
 Rule 12b-2).
 Large
    accelerated filer  o
    Accelerated
    filer  þ
    Non-accelerated
    filer o Rule 12b-5 o þ




---



##### 



THERMA-WAVE,
    INC.
  FORM 10-K
  TABLE OF
    CONTENTS
  PagePART I.Item 1.


Business


3Item 1A.


Risk
    Factors


11Item 1B.


Unresolved Staff
    Comments


22Item 2.


Properties


22Item 3.


Legal
    Proceedings


23Item 4.


Submission of
    Matters to a Vote of Security Holders


23PART II.Item 5.


Market for the
    Registrants Common Equity, Related Stockholder Matters and
    Issuer Purchases of Equity Securities


23Item 6.


Selected Financial
    Data


24Item 7.


Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


25Item 7A.


Quantitative and
    Qualitative Disclosures About Market Risks


44Item 8.


Financial
    Statements and Supplementary Data


47Item 9.


Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure


86Item 9A.


Controls and
    Procedures


86Item 9B.


Other
    Information


87PART IIIItem 10.


Directors and
    Executive Officers of the Registrant


87Item 11.


Executive
    Compensation


87Item 12.


Security Ownership
    of Certain Beneficial Owners and Management and Related
    Stockholder Matters


88Item 13.


Certain
    Relationships and Related Transactions


88Item 14.


Principal
    Accountant Fees and Services


88PART IVItem 15.


Exhibits and
    Consolidated Financial Statement Schedules


88Signatures





92EXHIBIT 23.1EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2   2




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Special
    Note Regarding
  Forward-Looking Statements
  This annual report on
    Form 10-K
    contains forward-looking statements that involve risks and
    uncertainties, as well as assumptions that, if they do not fully
    materialize or prove incorrect, could cause our business and
    results of operations to differ materially from those expressed
    or implied by such forward-looking statements. Such
    forward-looking statements include, without limitation, any
    statements concerning the conditions in the semiconductor and
    semiconductor capital equipment industries, our operations,
    economic performance and financial condition, including in
    particular statements relating to our business, growth strategy,
    gross margins and product development efforts, our ability to
    manage our costs and reduce operating expenses, our ability to
    improve long-term profitability, our ability to provide cost
    efficiencies and sustain our operations and cash position, our
    ability to continue the successful development and introduction
    of new products and improvement of current products, the charges
    to be incurred in connection with, and the cost savings
    resulting from, our restructurings, cost savings from the sale
    of the compact critical dimension product line (CCD-I), future
    stock-based employee compensation charges, cash consumption for
    fiscal 2007, benefits to be derived from our agreement with
    Hermes-Epitek Corporation, the effect of our November 22,
    2005 private placement transaction, future sales levels for our
    advanced products, the impact of changes in our internal control
    over financial reporting, the impact of semiconductor capital
    equipment market changes on the demand and functionality of our
    products, and statements of belief and statements of assumptions
    underlying any of the foregoing. The words will,
    may, should, expects,
    plans, anticipates,
    believes, estimates,
    predicts, intends,
    potential, continue, or the negative of
    such terms, or other comparable terminology generally identify
    forward-looking statements.
  These forward-looking statements are based largely on our
    current expectations and are subject to a number of risks and
    uncertainties, including, without limitation, those identified
    under the section titled Risk Factors, and elsewhere
    in this annual report and other risks and uncertainties
    indicated from time to time in our filings with the SEC. Actual
    results could differ materially from these forward-looking
    statements. All forward-looking statements included in this
    annual report are based on information available to us as of the
    date hereof, and we assume no obligation to update these
    forward-looking statements.
 PART I   Item 1.
    Business  Overview
  ® ® ® tm and RT/
    CD®,
  
    Ion Implantation  implanting ions,
    usually boron, phosphorus or arsenic, into selected areas of the
    silicon wafer to alter its electrical properties. Ion
    implantation may be performed typically 10 to 24 times in the
    manufacture of ICs. Ion implantation creates the positively- and
    negatively-doped regions used to create each of the millions of
    transistors on each integrated circuit. It is also used to
    adjust the voltage (threshold voltage) at which the transistors
    will turn on. Our Therma-Probe product is an
    industry standard metrology tool for the monitoring of these ion
    implantation processes.
    Dielectric Film Deposition and
    Etching  depositing and selectively removing
    layers of dielectric films on the silicon wafer to provide
    electrical insulation for each layer of the semiconductor IC.
    Film deposition is typically done by Chemical Vapor Deposition
    (CVD), and film removal is typically done by plasma etching. Our
    Opti- Probe product is typically used as a standard, in-line
    metrology tool for film thickness 3




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measurement in these processes. Our Opti-Probe CD and RT/ CD, or
    Real-Time Critical Dimensions products, provide rapid,
    non-destructive wafer-state information for control of the
    Critical Dimensions (CDs) of the etch processes.  
    Conductor Film Deposition and
    Etching  depositing and selectively removing
    layers of metal, polysilicon, and metal barrier films used to
    interconnect the transistors within a semiconductor device. Film
    deposition is typically done by Physical Vapor Deposition (PVD)
    Electrochemical Deposition (ECG), or CVD. Film removal is
    typically done by plasma etching or chemical mechanical
    planarization. Our Opti-Probe is a standard metrology tool for
    non-opaque conductor films. Our Opti- Probe CD and RT/ CD
    provide rapid, non-destructive wafer-state information for
    control of the CDs of the etch processes.
    Chemical Mechanical Planarization, or
    CMP  leveling the top surface of
    the wafer after each layer of device features is added. The
    leveling is done by mechanical polishing in a chemical solution,
    and is required to maintain flatness of the wafer throughout the
    sequence of hundreds of process steps. Our Opti-Probe is a
    standard, in-line metrology tool for film thickness measurement
    in these processes.
    Wafer Patterning  using photolithographic
    techniques to create the fine (sub-micron) structures that
    define the integrated circuit. The wafer patterning is typically
    done by stepper exposure systems and the photoresist
    developing and removal is done by coater/developer
    track systems and asher/strip systems.
    Our Opti-Probe is typically used as a standard, in-line
    metrology tool for film thickness and reflectivity measurements
    in these processes. Our Opti-Probe CD and RT/ CD products
    provide rapid, non-destructive wafer-state information for
    control of the CDs during the wafer patterning process.  ®
    53-week Form 10-K
  Industry
    Background
    
    successive decreases in feature line width, for example, from
    130 nanometers (nm) to 110 nm, from 110 nm to 90 nm , from 90 nm
    to 65 nm and beyond;
    as many as 500 process steps; and
    an increase in the number of metal or interconnect
    layers.   4




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Therma-Wave
    Metrology Solutions
      Percentage of NetRevenuesFiscal Years EndedMarch 31,2006


2005


2004Net Revenues by Product
    FamilyOpti-Probe, including Opti-Probe CD


55
%


47
%


44
%Therma-Probe


14
%


22
%


8
%Integra CCD-i and Other


2
%


6
%


13
%Service and parts


29
%


25
%


28
%License



%



%


7
%Total


100
%


100
%


100
%   Therma-Probe
    Product Family
  easy-to-use
  Ion
    Implant Metrology
   5




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Opti-Probe
    Product Family
  ® ® ® ® ramp-up
  Thin-Film
    Metrology
        Opti-Probe
    CD and RT/ CD Products
  New
    Market Requirements
   6




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Employees
    Sales and
    Marketing
         7




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Percentage of NetRevenuesFiscal Years EndedMarch 31,2006


2005


2004Customers Over Ten Percent of
    Net RevenuesAdvanced Micro Devices
    (AMD)


23
%



%



%Taiwan Semiconductor Manufacturing
    Company



%


15
%


16
%Intel Corporation


12
%


12
%


14
%Samsung



%


10
%



%Tokyo Electron, Ltd.



%



%


12
%Raytex Corp.(1)



%



%


10
%Total


35
%


37
%


52
%     (1)
    
    Raytex Corp. was formally a subsidiary of Seki Technotron, our
    distributor for Japan.    Fiscal Years EndedMarch 31,2006


2005


2004Net Revenues by
    CountryUnited States


31
%


29
%


28
%Europe


26
%


11
%


14
%Taiwan


13
%


21
%


23
%Japan


13
%


13
%


22
%Korea


9
%


14
%


5
%China


4
%


6
%


5
%Singapore


2
%


6
%


3
%Malaysia


2
%



%



%Total


100
%


100
%


100
%   Services
    and Support
   8




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24-hour
  Research
    and Development and Engineering
    year-to-year
   9




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Manufacturing
          Competition
       10




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Patents
    and Proprietary Rights
        United States


Foreign


TotalPatents


Patents


PatentsBalance as of April 3, 2005


122



11



133Patents acquired


19







19Patents expired or sold


(26
)


(2
)


(28
)Balance as of April 2, 2006


115



9



124       and/or
    Available
    Information
  Form 10-K, Form 10-Q, Form 8-K, 1-800-SEC-0330. www.sec.gov
  Item 1A.
    Risk
    Factors  Factors
    Affecting Future Results
  Form 10-K Form 10-K
 11




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Form 10-K.
  WE
    HAVE INCURRED SIGNIFICANT OPERATING LOSSES AND MAY NOT BE
    PROFITABLE IN THE FUTURE; OUR PLANS TO MAINTAIN AND INCREASE
    LIQUIDITY MAY NOT BE SUCCESSFUL; THE REPORT OF OUR INDEPENDENT
    REGISTERED PUBLIC ACCOUNTING FIRM INCLUDES A GOING CONCERN
    UNCERTAINTY EXPLANATORY PARAGRAPH.
  Form 10-K.
  WE
    NEED TO HAVE SUFFICIENT CASH TO OPERATE IF OUR BUSINESS IS TO
    SUCCEED.
    Managements Discussion and Analysis
    of Financial Condition and Results of Operations Form 10-K.
  OUR
    QUARTERLY OPERATING RESULTS HAVE HISTORICALLY AND MAY, IN THE
    FUTURE, VARY SIGNIFICANTLY. THIS MAY RESULT IN VOLATILITY IN THE
    MARKET PRICE FOR OUR SHARES.
    
    customer demand, which is influenced by economic conditions in
    the semiconductor industry, demand for products that use
    semiconductors, market acceptance of our products and those of
    our customers, seasonality, changes in product mix, and the
    timing, cancellation or delay of customer orders and shipments;
    competition, such as competitive pressures on the prices of our
    products, the introduction or announcement of new products by us
    or our competitors and discounts that may be granted to
    customers; 12




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
    fluctuations in the availability and cost of components,
    subassemblies and production capacity;
    expenses incurred in connection with litigation;
    product development costs, such as increased research,
    development, engineering and marketing expenses associated with
    new products or product enhancements, and the effect of
    transitioning to new or enhanced products;
    delays in manufacturing or product shipments or contractual
    terms that require a delay between when our products are shipped
    and when we can recognize revenue in connection with such
    shipments; and
    levels of fixed expenses relative to revenue levels, including
    research and development costs associated with product
    development.    WE
    COMPLETED A PRIVATE PLACEMENT TRANSACTION IN NOVEMBER 2005,
    PURSUANT TO WHICH CERTAIN OF OUR STOCKHOLDERS HAVE PROTECTIVE
    RIGHTS THAT MAY LIMIT OUR ACCESS TO ADDITIONAL DEBT OR EQUITY
    CAPITAL AND OTHERWISE SIGNIFICANTLY IMPACT OUR LIQUIDITY,
    FINANCIAL POSITION AND EARNINGS.
    WE MAY
    INCUR INDEBTEDNESS IN THE FUTURE UNDER OUR BANK CREDIT
    FACILITIES OR OTHERWISE, WHICH COULD REQUIRE THE USE OF A
    PORTION OF OUR CASH FLOWS AND MAY LIMIT OUR ACCESS TO ADDITIONAL
    CAPITAL.
      
    a substantial portion of our cash flow from operations, if any,
    would be required to be dedicated to the repayment of
    indebtedness and would not be available for other purposes;
    our future ability to obtain additional debt financing for
    working capital, capital expenditures, acquisitions or other
    purposes may be limited; and
    our level of indebtedness has in the past, and could in the
    future, limit our flexibility in reacting to changes in the
    industry, general economic conditions and our ability to
    withstand a prolonged downturn in the semiconductor
    and/or
    semiconductor capital equipment industries. 13




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OUR
    PERFORMANCE IS AFFECTED BY THE CYCLICALITY OF THE SEMICONDUCTOR
    DEVICE INDUSTRY, WHICH MAY, FROM TIME TO TIME, LEAD TO DECREASED
    DEMAND FOR OUR PRODUCTS.
    IF WE
    FAIL TO REMEDIATE THE MATERIAL WEAKNESS AND CONTROL DEFICIENCY
    IN OUR INTERNAL CONTROL OVER FINANCIAL REPORTING WE MAY BE
    UNABLE TO ACCURATELY REPORT OUR FINANCIAL RESULTS OR PREVENT
    FRAUD WHICH COULD RESULT IN A LOSS OF INVESTOR CONFIDENCE IN OUR
    FINANCIAL REPORTS AND HAVE AN ADVERSE EFFECT ON OUR BUSINESS AND
    OPERATING RESULTS AND OUR STOCK PRICE.
  Controls and
    Procedures Form 10-K.
    OUR
    BANK CREDIT FACILITY IS SUBJECT TO A BORROWING BASE CALCULATION
    AND CONTAINS A MATERIAL ADVERSE CHANGE CLAUSE.
   14




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OUR
    RESTRUCTURING ACTIVITIES COULD RESULT IN MANAGEMENT
    DISTRACTIONS, OPERATIONAL DISRUPTIONS AND OTHER
    DIFFICULTIES.
    OUR
    LARGEST CUSTOMERS HAVE HISTORICALLY ACCOUNTED FOR A SIGNIFICANT
    PORTION OF OUR REVENUES. ACCORDINGLY, OUR BUSINESS MAY BE
    ADVERSELY AFFECTED BY THE LOSS OF, OR REDUCED PURCHASES BY, ONE
    OR MORE OF OUR LARGE CUSTOMERS.
    ANY
    SIGNIFICANT ORDER CANCELLATIONS OR ORDER DEFERRALS COULD
    ADVERSELY AFFECT OUR OPERATING RESULTS.
    OUR
    PRODUCTS TYPICALLY HAVE LENGTHY DESIGN CYCLES DURING WHICH A
    CUSTOMER MAY DECIDE TO CANCEL OR CHANGE ITS PRODUCT PLANS, WHICH
    COULD CAUSE US TO LOSE ANTICIPATED SALES.
   15




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IF ANY
    OF OUR SYSTEMS FAIL TO MEET OR EXCEED OUR INTERNAL QUALITY
    SPECIFICATIONS, WE CANNOT SHIP THEM UNTIL SUCH TIME AS THEY HAVE
    MET SUCH SPECIFICATIONS. IF WE EXPERIENCE SIGNIFICANT DELAYS OR
    ARE UNABLE TO SHIP OUR PRODUCTS TO OUR CUSTOMERS AS A RESULT OF
    OUR INTERNAL PROCESSES, OR FOR ANY OTHER REASON, OUR BUSINESS
    AND REPUTATION MAY SUFFER.
  and/or
  OUR
    CUSTOMERS FREQUENTLY REQUEST US TO PROVIDE LONG SUPPORT PERIODS
    THAT CAN RESULT IN EXCESS OR OBSOLETE INVENTORY.
    OUR
    BUSINESS COULD BE ADVERSELY AFFECTED IF WE ARE UNABLE TO PROTECT
    OUR PROPRIETARY TECHNOLOGY OR IF WE INFRINGE THE PROPRIETARY
    TECHNOLOGY OF OTHERS.
    IN
    ADDITION TO PATENT PROTECTION, WE RELY UPON TRADE SECRET
    PROTECTION FOR OUR CONFIDENTIAL AND PROPRIETARY INFORMATION AND
    TECHNOLOGY. WE ROUTINELY ENTER INTO CONFIDENTIALITY AGREEMENTS
    WITH OUR EMPLOYEES AND CUSTOMERS.
 16




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HOWEVER, THERE CAN BE NO ASSURANCE THAT THESE AGREEMENTS
    WILL NOT BE BREACHED, THAT WE WILL HAVE ADEQUATE REMEDIES FOR
    ANY BREACH OR THAT OUR CONFIDENTIAL AND PROPRIETARY INFORMATION
    AND TECHNOLOGY WILL NOT BE INDEPENDENTLY DEVELOPED BY, OR BECOME
    OTHERWISE KNOWN TO, THIRD PARTIES.
      PROTECTION
    OF OUR INTELLECTUAL PROPERTY RIGHTS, OR THIRD PARTIES SEEKING TO
    ENFORCE THEIR OWN INTELLECTUAL PROPERTY RIGHTS AGAINST US, MAY
    RESULT IN LITIGATION, THE COST OF WHICH COULD BE
    SUBSTANTIAL.
  and/or
  WE
    OPERATE IN THE HIGHLY COMPETITIVE SEMICONDUCTOR CAPITAL
    EQUIPMENT INDUSTRY AND COMPETE AGAINST SIGNIFICANTLY LARGER
    COMPANIES.
    COMPETITIVE
    CONDITIONS IN OUR INDUSTRY MAY REQUIRE US TO REDUCE OUR
    PRICES.
   17




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WE
    ENCOUNTER DIFFICULTIES IN SOLICITING CUSTOMERS OF OUR
    COMPETITORS BECAUSE OF HIGH SWITCHING COSTS IN THE MARKETS IN
    WHICH WE OPERATE.
    OUR
    FUTURE GROWTH DEPENDS ON OUR ABILITY TO DEVELOP NEW AND ENHANCED
    PRODUCTS FOR THE SEMICONDUCTOR INDUSTRY. WE CANNOT ASSURE YOU
    THAT WE WILL BE SUCCESSFUL IN OUR PRODUCT DEVELOPMENT EFFORTS OR
    THAT OUR NEW PRODUCTS WILL GAIN GENERAL MARKET
    ACCEPTANCE.
    OUR
    OPERATIONS ARE CHARACTERIZED BY THE NEED FOR CONTINUED
    INVESTMENT IN RESEARCH AND DEVELOPMENT AND, AS A RESULT, OUR
    ABILITY TO REDUCE COSTS IS LIMITED.
    RAPID
    TECHNOLOGICAL CHANGES IN OUR INDUSTRY WILL REQUIRE US TO
    CONTINUALLY DEVELOP NEW AND ENHANCED PRODUCTS.
   18




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WE
    WILL NEED TO BE ABLE TO ATTRACT AND RETAIN KEY PERSONNEL WITH
    KNOWLEDGE OF INSTRUMENTS USED IN SEMICONDUCTOR MANUFACTURING
    PROCESSES TO HELP SUPPORT OUR FUTURE GROWTH. COMPETITION FOR
    SUCH PERSONNEL IN OUR INDUSTRY IS INTENSE.
    WE
    OBTAIN SOME OF THE COMPONENTS AND SUBASSEMBLIES INCLUDED IN OUR
    SYSTEMS FROM A SINGLE SOURCE OR LIMITED GROUP OF SUPPLIERS, THE
    PARTIAL OR COMPLETE LOSS OF WHICH COULD HAVE AT LEAST A
    TEMPORARY ADVERSE EFFECT ON OUR OPERATIONS.
    WE ARE
    SUBJECT TO RISKS ASSOCIATED WITH MANUFACTURING ALL OF OUR
    PRODUCTS AT A SINGLE FACILITY. ANY PROLONGED DISRUPTION IN THE
    OPERATIONS OF THAT FACILITY COULD HAVE A MATERIAL ADVERSE EFFECT
    ON OUR BUSINESS.
    WE
    RELY UPON MANUFACTURERS SALES REPRESENTATIVES FOR A
    SIGNIFICANT PORTION OF OUR SALES. A DISRUPTION IN OUR
    RELATIONSHIP WITH ANY SALES REPRESENTATIVE COULD HAVE A MATERIAL
    ADVERSE EFFECT ON OUR BUSINESS.
   19




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OUR
    NET SALES AND RESULTS OF OPERATIONS CAN BE ADVERSELY AFFECTED BY
    THE INSTABILITY OF ASIAN ECONOMIES, FROM WHICH WE DERIVE A
    SIGNIFICANT PORTION OF OUR REVENUES.
    WE
    RECENTLY BEGAN CHANGING THE WAY WE MARKET AND SELL OUR PRODUCTS
    IN CERTAIN COUNTRIES IN ASIA, ONE OF OUR LARGEST MARKETS. AS A
    RESULT, WE CANNOT BE ASSURED THAT OUR SALES IN THAT REGION WILL
    BE IN LINE WITH HISTORICAL TRENDS.
    WE ARE
    SUBJECT TO OPERATIONAL, FINANCIAL, POLITICAL AND FOREIGN
    EXCHANGE RISKS DUE TO OUR SIGNIFICANT LEVEL OF
    INTERNATIONAL SALES.
    
    unexpected changes in regulatory requirements;
    tariffs and other market barriers;
    foreign currency exchange fluctuations;
    political and economic instability;
    potentially adverse tax consequences;
    outbreaks of hostilities;
    difficulties in accounts receivable collection;
    reduced or uncertain protection for intellectual property rights
    in some countries;
    extended payment terms;
    difficulties in managing foreign sales representatives; and
    difficulties in managing staffing and other elements of foreign
    subsidiary and branch operations.   20




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FUTURE
    CHANGES IN FINANCIAL ACCOUNTING STANDARDS OR PRACTICES OR
    EXISTING TAXATION RULES OR PRACTICES MAY CAUSE ADVERSE
    UNEXPECTED REVENUE FLUCTUATIONS AND AFFECT OUR REPORTED RESULTS
    OF OPERATIONS.
      PROVISIONS
    OF OUR CHARTER DOCUMENTS AND DELAWARE LAW COULD DISCOURAGE
    POTENTIAL ACQUISITION PROPOSALS AND COULD DELAY, DETER OR
    PREVENT A CHANGE IN CONTROL.
    
    a classified board of directors;
    a prohibition on stockholder action through written consents;
    a requirement that special meetings of stockholders be called
    only by our chief executive officer or the board of directors;
    advance notice requirements for stockholder proposals and
    nominations;
    limitations on the ability of stockholders to amend, alter or
    repeal our bylaws; and 21




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
    the authority of the board of directors to issue, without
    stockholder approval, preferred stock with such terms as the
    board may determine, which could have a dilutive effect on our
    stockholders;        IF WE
    ISSUE ADDITIONAL SHARES OF STOCK IN THE FUTURE, IT MAY HAVE
    A DILUTIVE EFFECT ON OUR STOCKHOLDERS.
    WE
    HAVE RECEIVED A NUMBER OF INQUIRIES FROM ONE OF OUR
    STOCKHOLDERS, WHICH MAY BE A PRECURSOR TO
    LITIGATION
    WE ARE
    NOT CERTIFIED UNDER THE INTERNATIONAL ORGANIZATION FOR
    STANDARDIZATION
    Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties   22




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Item 3.
    Legal
    Proceedings  and/or
  Item 4.
    Submission
    of Matters to a Vote of Security Holders   PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities    High


LowCommon Stock Price
    Ranges:Fiscal Year 2005First Fiscal Quarter

$
4.78


$
3.05Second Fiscal Quarter

$
4.93


$
3.06Third Fiscal Quarter

$
3.75


$
2.99Fourth Fiscal Quarter

$
3.48


$
1.67Fiscal Year 2006First Fiscal Quarter

$
2.38


$
1.39Second Fiscal Quarter

$
2.62


$
1.69Third Fiscal Quarter

$
1.80


$
1.28Fourth Fiscal Quarter

$
2.15


$
1.38    23




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Item 6.
    Selected
    Financial Data  Form 10-K.
  Fiscal Years Ended
    March 31,2006


2005


2004


2003


2002(In thousands, except per share
    data)Statement of Operations
    Data:Net revenues

$
66,286


$
81,261


$
65,309


$
49,220


$
81,937Cost of revenues


42,848



44,620



38,500



55,061



65,414Gross profit (loss)


23,438



36,641



26,809



(5,841
)


16,523Operating expenses:Research and development


12,663



17,559



18,710



29,230



29,122Selling, general and administrative


23,899



25,450



22,958



26,071



21,713In-process research and development


















16,340Impairment of goodwill and other
    intangible assets(1)














67,408



Restructuring, severance and other


4,626



347



1,938



4,293



1,470Stock-based compensation expense
    (benefit)


(297
)


(179
)


1,150



1,684



536Total operating expenses


40,891



43,177



44,756



128,686



69,181Operating loss


(17,453
)


(6,536
)


(17,947
)


(134,527
)


(52,658
)Other income (expense), net(2)


8,560



177



(146
)


923



2,342Loss before provision (benefit) of
    income taxes


(8,893
)


(6,359
)


(18,093
)


(133,604
)


(50,316
)Provision (benefit) for income
    taxes


(144
)


462











(1,120
)Net loss


(8,749
)


(6,821
)


(18,093
)


(133,604
)


(49,196
)Accretion of Series B
    convertible preferred stock to redemption value including
    dividends accrued(3)


(449
)














Net loss available to common
    stockholders

$
(9,198
)

$
(6,821
)

$
(18,093
)

$
(133,604
)

$
(49,196
)Basic and diluted net loss per
    share

$
(0.25
)

$
(0.19
)

$
(0.56
)

$
(4.69
)

$
(1.98
)Weighted average common shares
    outstanding:Basic and diluted


36,734



35,912



32,387



28,500



24,894Other Financial Data:Cash used in operating activities

$
(16,237
)

$
(9,694
)

$
(2,884
)

$
(42,550
)

$
(17,289
)Cash provided by (used in)
    investing activities


8,424



(1,605
)


(677
)


10,165



4,039Cash provided by (used in)
    financing activities and effect of exchange rate on cash


15,017



819



13,765



(404
)


4,009Capital expenditures, included in
    cash provided by (used in) investing activities


279



1,106



254



1,464



4,364   24




---



##### Table of Contents



March 31,2006


2005


2004


2003


2002Balance Sheet Data:Cash and cash equivalents

$
20,623


$
13,419


$
23,899


$
13,695


$
59,059Working capital


24,646



22,832



28,785



24,452



82,036Total assets


59,378



67,573



64,282



66,760



200,623Long-term debt


















16Series B redeemable
    convertible preferred stock(3)


6,940















Stockholders equity


18,048



25,963



32,264



36,338



167,499     (1)
    
    During fiscal year ended March 31, 2003, we conducted
    impairment reviews of goodwill and other intangible assets in
    accordance with Statement of Financial Accounting Standards
    No. 142, Goodwill and Other Intangible Assets,
    (SFAS 142) and Statement of Financial Accounting
    Standards No. 144, Accounting for the Impairment or
    Disposal of Long-Lived Assets, (SFAS 144). As a
    result of the reviews, we wrote off $65.9 million for
    goodwill, $0.6 million for developed technology,
    $0.2 million for a development contract and
    $0.8 million for trade name intangible assets.(2)
    
    During fiscal year ended March 31, 2006 we sold the CCD-i
    product line (including the transfer of certain tangible assets,
    intellectual property and personnel related to the applications,
    support and manufacturing of the CCD-i product line) to TEL for
    a cash payment by TEL of $8.95 million, plus cancellation
    by TEL of $1.0 million in outstanding pre-paid purchase
    orders, and the assumption by TEL of certain liabilities
    relating to the purchased assets. A net gain of
    $8.7 million was recognized on the sale of the CCD-i
    product line.(3)
    
    On November 22, 2005, we finalized definitive agreements
    with two of our largest institutional shareholders for a private
    placement sale of $10.4 million of redeemable convertible
    preferred stock and warrants to purchase common stock. We
    recorded accretion of the Series B Preferred discount to
    its redemption value at the first fixed redemption date of
    November 22, 2010, using the effective interest method,
    along with accrued dividends.  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Form 10-K. Form 10-K.
  Overview
     25




---



##### Table of Contents



®
          Percentage of SystemOrdersFiscal Years EndedMarch 31,2006


2005


2004MarketsUnited States


38
%


17
%


13
%Asia, excluding Japan


37
%


39
%


56
%Europe


13
%


25
%


12
%Japan (inclusive of the IM orders)


12
%


19
%


19
%Total orders


100
%


100
%


100
%   Summary
    
    Increased cash and equivalents by $7.2 million;
    Increased working capital by $1.8 million;
    Restructured the Asian, European and North American operations; 26




---



##### Table of Contents




    Decreased research and development costs by $4.9 million
    Decreased selling, general and administrative costs by
    $1.6 million  Net
    Revenues
    Gross
    Margins
      Operating
    Expenses
      Balance
    Sheet
     27




---



##### Table of Contents



Outlook
      Critical
    Accounting Policies and Estimates
     28




---



##### Table of Contents



Revenue
    Recognition
    Product Revenues.
      Service and Parts Revenues.
  Inventory
    Valuation
  (first-in,
 29




---



##### Table of Contents



Allowances
    for Doubtful Accounts Receivable and Sales
    Allowances
    Valuation
    of Long-Lived and Intangible Assets
    
    significant under-performance relative to expected historical or
    projected future operating results;
    significant changes in the manner of our use of the acquired
    assets or the strategy for our overall business; and
    significant negative industry or economic trends.    Valuation
    of Warrants and Embedded Derivatives
  Warrants
    Embedded
    Derivatives
   30




---



##### Table of Contents



Income
    Taxes
    Warranty
   31




---



##### Table of Contents



Results
    of Operations
    Fiscal Year2006


2005


2004Results of OperationsNet revenues


100.0
%


100.0
%


100.0
%Cost of revenues


64.6



54.9



59.0Gross profit


35.4



45.1



41.0Operating expenses:Research and development


19.1



21.6



28.5Selling, general and administrative


36.1



31.3



35.2Restructuring, severance and other


6.9



0.4



3.0Stock-based compensation expense
    (benefit)


(0.4
)


(0.2
)


1.8Total operating expenses


61.7



53.1



68.5Operating loss:


(26.3
)


(8.0
)


(27.5
)Other income (expense), net:Gain on sale of product line


13.2







Exchange rate gains


0.2







Interest expense


(0.9
)






(0.1
)Interest income


0.6



0.2



0.2Other income (expense), net


(0.2
)






(0.3
)Total other income (expense), net


12.9



0.2



(0.2
)Loss before provision for income
    taxes


(13.4
)


(7.8
)


(27.7
)Provision (benefit) for income
    taxes


(0.2
)


0.6



Net loss


(13.2
)%


(8.4
)%


(27.7
)%Accretion of Series B
    preferred stock to redemption value including dividends accrued


(0.7
)






Net loss available to common
    stockholders


(13.9
)%


(8.4
)%


(27.7
)%     Fiscal
    Year Ended March 31, 2006 Compared to Fiscal Year Ended
    March 31, 2005
  Net Revenues.
 32




---



##### Table of Contents



Fiscal Year EndedMarch 31,2006


2005


2004Net RevenuesProducts (Systems)


71
%


75
%


72
%Services and parts


29
%


25
%


28
%Total net revenues


100
%


100
%


100
%           Gross Profit.
  Gross Profit(Decrease)Key contributors to gross
    profit decreases ($000s):Decrease in product revenues

$
(14,154
)Decrease in service and parts
    revenues


(821
)Decrease in standard manufacturing
    cost


5,819Decrease in inventory provision
    for excess and obsolete inventory


1,209Decreased benefit from sales of
    inventory previously written-off


(3,581
)Decrease in warranty provision


304Legacy product warranty costs


(919
)Other


(1,060
)Total

$
(13,203
)  33




---



##### Table of Contents



Fiscal Years EndedMarch 31,2006


2005(In thousands)Inventory provision for excess and
    obsolescence

$
3,880


$
5,089Benefit from the sales of
    inventory that had been previously written-off and obsolescence


3,602



7,183         Research and Development, Selling, General and Administrative
    Expenses, and Restructuring, Severance and
    Other.
  Fiscal Years Ended
    March 31,2006


2005% of Net





% of Net


IncreaseAmount


Revenue


Amount


Revenue


(Decrease)Research and development

$
12,663



19.1
%

$
17,559



21.6
%

$
(4,896
)Selling, general and administrative


23,899



36.1
%


25,450



31.3
%


(1,551
)Restructuring, severance and other


4,626



6.9
%


347



0.4
%


4,279Stock-based compensation expense
    (benefit)


(297
)


(0.4
)%


(179
)


(0.2
)%


(118
)Total operating expenses

$
40,891



61.7
%

$
43,177



53.1
%

$
(2,286
)   Research and Development, or R&D,
    Expense.
 34




---



##### Table of Contents



Selling, General and Administrative, or SG&A,
    Expense.
  Restructuring, Severance and Other.
    Liability as of








Liability as ofMarch 31,





Payments and


March 31,2005


Provision


Reductions


2006(In thousands)FY 2006 Restructuring
    ProgramsSeverance and workforce reduction

$



$
2,246


$
(2,180
)

$
66Consolidation of excess facilities






1,942



(663
)(1)


1,279FY 2005 Restructuring
    Program


178



438



(366
)


250Total

$
178


$
4,626


$
(3,209
)

$
1,595     (1)
    
    Includes non-cash fixed asset write-off of approximately
    $0.6 million related to July 29, 2005 restructuring
    plan for North American operations.    Stock-Based Compensation.
 35




---



##### Table of Contents



Other Income (Expense).
  Provision for Income Taxes (Benefit).
  Net Loss.
  Accretion of Series B Preferred Stock to
    Redemption Value and Dividends Accrued.
  Fiscal
    Year Ended March 31, 2005 Compared to Fiscal Year Ended
    March 31, 2004
  Net Revenues.
 36




---



##### Table of Contents



Fiscal Year EndedMarch 31,2005


2004


2003Net RevenuesProducts (Systems)


75
%


72
%


58
%Services and parts


25
%


28
%


42
%Total net revenues


100
%


100
%


100
%         Gross Profit.
  Gross ProfitImprovementKey contributors to gross
    profit improvement ($000s):Increased product revenues

$
11,475Increased service and parts
    revenues


1,369Decreased benefit from sales of
    inventory previously written-off


(3,380
)Decreased stock-based compensation
    expense


288Other


80Total

$
9,832    37




---



##### Table of Contents



Fiscal Years EndedMarch 31,2005


2004(In thousands)Inventory provision for excess and
    obsolescence

$
5,089


$
5,200Benefit from the sales of
    inventory that had been previously written-off and obsolescence


7,183



10,563     Research and Development, or R&D,
    Expense.
  Selling, General and Administrative, or SG&A,
    Expense.
  Impairment of Goodwill and Other Intangible
    Assets.
  Restructuring, Severance and Other.
  Liability as








Liability asof March 31,








of March 31,2004


Provision


Payment


2005Restructuring, severance and
    other ($000s):Consolidation of facilities

$
220


$
347


$
(389
)

$
178       Stock-Based Compensation.
 38




---



##### Table of Contents




    the new options issued in the exchange which were outstanding
    since September 10, 2003;
    options eligible for exchange that were not exchanged (about 1%
    of eligible options); and
    options issued to eligible participants within the six months
    prior to or following September 10, 2003.      Other Income (Expense).
  Provision for Income Taxes.
  Net Loss.
 39




---



##### Table of Contents



Liquidity
    and Capital Resources
  Form 10-K
         40




---



##### Table of Contents



Commitments
    Total2012


FutureAnd


MinimumFiscal Year

2007


2008


2009


2010


2011


thereafter


PaymentsOperating Leases

$
2,119


$
1,664


$
1,514


$
1,153


$
1,016


$



$
7,466Purchase Commitments


11,361



267



















11,628Minimum Royalty Payments


40























40Cancellation Fees


51



51



















102Series B Redeemable
    Convertible Preferred Stock






















10,400



10,400Term Debt(*)


1,161



2,497



1,342















5,000Total

$
14,732


$
4,479


$
2,856


$
1,153


$
1,016


$
10,400


$
34,636  41




---



##### Table of Contents



(*)
    
    The term loan has a stated maturity of September 2008, however
    the outstanding balance has been classified as a current
    liability as of March 31, 2006, primarily due to the
    Material Adverse Change clause that permits the lender to
    accelerate the maturity of the debt based upon factors that are
    subjective in nature.  Operating Leases.
  Purchase Commitment and Cancellation Fees.
  Minimum Royalty Payments.
  Financing/Other Contingencies. and/or
       42




---



##### Table of Contents



Series B Redeemable Convertible Preferred
    Stock.
    Recently
    Issued Accounting Pronouncements
   43




---



##### Table of Contents



Inflation
    Item 7A.
    Quantitative
    and Qualitative Disclosures about Market Risk  Market
    Risk Disclosures
   44




---



##### Table of Contents



Market
    Risk Related to Interest Rate, Stock Price and Foreign
    Currency
    Interest
    Rates Related to Investment Portfolio
    Interest
    Rates and Stock Price Related to Warrants
    Embedded
    Derivatives
   45




---



##### Table of Contents



Foreign
    Currency Exchange Risk
            OtherForeignJapan


UK


Locations


TotalAssets, costs and expenses
    subject to foreign currency Risk as of March 31, 2006
    ($000s)Net assets

$
2,923


$
172


$
2,578


$
5,673Costs and expenses


3,902



2,427



3,608



9,937Percentage of total costs and
    expenses


5
%


3
%


4
%


12
%  46




---



##### Table of Contents



Item 8.
    Financial
    Statements and Supplemental Data  PageReport of
    Independent Registered Public Accounting Firm


48Consolidated
    Balance Sheets as of March 31, 2006 and 2005


50Consolidated
    Statements of Operations for the years ended March 31,
    2006, 2005 and 2004


51Consolidated
    Statements of Stockholders Equity for the years ended
    March 31, 2006, 2005 and 2004


52Consolidated
    Statements of Cash Flows for the years ended March 31,
    2006, 2005 and 2004


54Notes to
    Consolidated Financial Statements


55  47




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM       Consolidated
    financial statements
      Internal
    control over financial reporting
  , Internal Control  Integrated Framework
     48




---



##### Table of Contents



Internal
    Control  Integrated Framework Internal Control  Integrated Framework .
      49




---



##### Table of Contents



THERMA-WAVE,
    INC.
  CONSOLIDATED
    BALANCE SHEETS
  March 31,2006


2005(In thousands, except share and
    per share data)ASSETSCurrent assets:Cash and cash equivalents

$
20,623


$
13,419Accounts receivable, net of
    allowances of $774 and $715 at March 31, 2006 and 2005,
    respectively


12,701



15,678Inventories


22,353



30,870Other current assets


1,621



2,680Total current assets


57,298



62,647Property and equipment, net


789



2,976Intangibles and other assets, net


1,291



1,950Total assets

$
59,378


$
67,573LIABILITIES AND
    STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
4,062


$
8,227Accrued liabilities


13,642



15,784Deferred revenues


7,874



15,804Term loan facility, net


4,896



Warrants and embedded derivatives


2,178



Total current liabilities


32,652



39,815Non-current deferred revenues


662



1,425Other long-term liabilities


1,076



370Total liabilities


34,390



41,610Commitments and contingencies
    (Note 6)Series B redeemable
    convertible preferred stock: $0.01 par value;
    10,400 shares authorized; 10,400 shares issued and
    outstanding at March 31, 2006 (Series B liquidation
    preference of $10,400)


6,940



Stockholders equity:Common stock, $0.01 par
    value; 75,000,000 shares authorized; 37,045,692 shares
    issued and outstanding at March 31, 2006;
    36,318,565 shares issued and outstanding at March 31,
    2005


371



363Additional paid-in capital


336,036



334,352Notes receivable from stockholders


(174
)


(174
)Accumulated other comprehensive
    loss


(1,108
)


(659
)Deferred stock-based compensation


(36
)


(76
)Accumulated deficit


(317,041
)


(307,843
)Total stockholders equity


18,048



25,963Total liabilities and
    stockholders equity

$
59,378


$
67,573    50




---



##### Table of Contents



THERMA-WAVE,
    INC.
  CONSOLIDATED
    STATEMENTS OF OPERATIONS
  Fiscal Years Ended
    March 31,2006


2005


2004(In thousands, except per share
    data)Net revenuesProduct

$
46,776


$
60,930


$
46,938Service and parts


19,510



20,331



18,371Total net revenues


66,286



81,261



65,309Cost of revenues (including
    stock-based compensation expense (benefit) of $0, $(120) and
    $168)Product


27,514



30,174



24,645Service and parts


15,334



14,446



13,855Total cost of revenues


42,848



44,620



38,500Gross profit


23,438



36,641



26,809Operating expenses:Research and development
    (excluding stock-based compensation expense (benefit) of $(283),
    $(233) and $706)


12,663



17,559



18,710Selling, general and
    administrative (excluding stock-based compensation expense
    (benefit) of $(14), $54 and $444)


23,899



25,450



22,958Restructuring, severance and other


4,626



347



1,938Stock-based compensation expense
    (benefit)


(297
)


(179
)


1,150Total operating expenses


40,891



43,177



44,756Operating loss


(17,453
)


(6,536
)


(17,947
)Other income (expense):Gain on sale of product line


8,721







Interest expense


(588
)


(28
)


(76
)Interest income


389



205



160Other, net


38







(230
)Total other income (expense), net


8,560



177



(146
)Loss before provision (benefit)
    for income taxes


(8,893
)


(6,359
)


(18,093
)Provision (benefit) for income
    taxes


(144
)


462



Net loss

$
(8,749
)

$
(6,821
)

$
(18,093
)Accretion of Series B
    preferred stock to redemption value including dividends accrued


(449
)






Net loss available to common
    stockholders

$
(9,198
)

$
(6,821
)

$
(18,093
)Net loss per share:Basic and Diluted

$
(0.25
)

$
(0.19
)

$
(0.56
)Weighted average common shares
    outstanding:Basic and Diluted


36,734



35,912



32,387    51




---



##### Table of Contents



THERMA-WAVE,
    INC.CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
  Notes


AccumulatedAdditional








Receivable


Other


DeferredCommon Stock


Paid-In


Treasury Stock


from


Comprehensive


Stock


Accumulated





ComprehensiveShares


Amount


Capital


Shares


Amount


Stockholders


Loss


Compensation


Deficit


Total


(Loss)(In thousands, except share and
    per share data)Balance at March 31, 2003


29,360,026


$
293


$
322,048



(269,511
)

$
(437
)

$
(196
)

$
(1,334
)

$
(1,107
)

$
(282,929
)

$
36,338Net loss


































(18,093
)


(18,093
)

$
(18,093
)Currency translation adjustments,
    net of tax


























599











599



599Comprehensive loss









































$
(17,494
)Receipts from stockholders






















22















22Issuance of common stock under
    private offering


5,800,000



58



11,670



























11,728Issuance of common stock under ESPP


244,098



3



(223
)


266,854



434



















214Issuance of common stock under
    stock option plans


93,901



1



134



2,657



3



















138Issuance of common stock for the
    exercise of warrants






































Adjustment to deferred stock-based
    compensation due to reduction in work force










(260
)


















260







Deferred stock-based compensation
    expense resulting from the variable accounting treatment for
    stock options










1,643



















(1,643
)






Amortization of deferred
    stock-based compensation related to the variable accounting
    treatment for stock options






























737







737Amortization of deferred
    stock-based compensation related to Sensys acquisition






























581







581Balance at March 31, 2004


35,498,025


$
355


$
335,012






$



$
(174
)

$
(735
)

$
(1,172
)

$
(301,022
)

$
32,264Net loss


































(6,821
)


(6,821
)

$
(6,821
)Currency translation adjustments,
    net of tax


























76











76



76Comprehensive loss









































$
(6,745
)Issuance of common stock under
    private offering










(6
)


























(6
)Issuance of common stock under ESPP


640,764



6



506



























512Issuance of common stock under
    stock option plans


176,437



2



223



























225Issuance of common stock for the
    exercise of warrants


3,339







12



























12Adjustment to deferred stock-based
    compensation due to reduction in work force










(1,412
)


















1,412







Deferred stock-based compensation
    expense resulting from the variable accounting treatment for
    stock options










185



















(185
)






Amortization of deferred
    stock-based compensation related to the variable accounting
    treatment for stock options






























(542
)






(542
)Amortization of deferred
    stock-based compensation related to Sensys acquisition










(168
)


















411







243  52




---



##### Table of Contents



THERMA-WAVE,
    INC.
  CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS
    EQUITY  (Continued)
  Notes


AccumulatedAdditional








Receivable


Other


DeferredCommon Stock


Paid-In


Treasury Stock


from


Comprehensive


Stock


Accumulated





ComprehensiveShares


Amount


Capital


Shares


Amount


Stockholders


Loss


Compensation


Deficit


Total


(Loss)(In thousands, except share and
    per share data)Balance at March 31, 2005


36,318,565


$
363


$
334,352






$



$
(174
)

$
(659
)

$
(76
)

$
(307,843
)

$
25,963Net loss


































(8,749
)


(8,749
)

$
(8,749
)Currency translation adjustments,
    net of tax


























(449
)










(449
)


(449
)Comprehensive loss










































(9,198
)Issuance of common stock under ESPP


249,190



2



339



























341Issuance of common stock under
    stock option plans


452,030



6



395



























401Issuance of common stock for
    services


25,907







50



























50Debt discount for issuance of
    warrants in connection with financing










121



























121Beneficial conversion
    feature  Series B convertible preferred
    stock










1,115



























1,115Dividends
    accrued  Series B convertible preferred
    stock


































(223
)


(223
)Accretion  Series B
    convertible preferred stock


































(226
)


(226
)Adjustment to deferred stock-based
    compensation due to reduction in work force










(242
)


















24







(218
)Deferred stock-based compensation
    expense resulting from the variable accounting treatment for
    stock options










(94
)


























(94
)Amortization of deferred
    stock-based compensation related to Sensys acquisition






























16







16Balance at March 31, 2006


37,045,692


$
371


$
336,036






$



$
(174
)

$
(1,108
)

$
(36
)

$
(317,041
)

$
18,048     53




---



##### Table of Contents



THERMA-WAVE,
    INC.
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  Fiscal Years Ended
    March 31,2006


2005


2004(In thousands)Operating activities:Net loss

$
(8,749
)

$
(6,821
)

$
(18,093
)Adjustments to reconcile net loss
    to net cash used in operating activities:Gain on sale of product line


(8,721
)






Non-cash restructuring charge


616







Depreciation and amortization of
    property and equipment


1,764



2,679



4,221Amortization of intangible assets


645



758



2,548Fair value
    adjustment  warrants and embedded derivatives


60







Issuance of stock for services


50







Stock-based compensation expense
    (benefit)


(297
)


(299
)


1,318Provision (credit) for doubtful
    accounts receivable and sales allowances


59



(192
)


(646
)Loss on disposal of property and
    equipment


7



15



473Loss on sale of an investment










125Changes in operating assets and
    liabilities (excluding net assets sold):Accounts receivable, net


2,918



(714
)


(304
)Inventories


7,714



(13,701
)


4,977Other assets


1,049



(1,011
)


901Accounts payable


(4,182
)


807



5,272Accrued and other liabilities


(547
)


258



(1,240
)Deferred revenues


(8,623
)


8,527



(2,436
)Net cash used in operating
    activities


(16,237
)


(9,694
)


(2,884
)Investing activities:Sale of product line


8,950







Purchases of property and equipment


(279
)


(1,106
)


(254
)Proceeds from sale of an investment










375Purchase of patents


(247
)


(499
)


(798
)Net cash provided by (used in)
    investing activities


8,424



(1,605
)


(677
)Financing activities:Restricted cash










1,064Borrowings from term loan facility


5,000







Net proceeds from issuance of
    common stock


742



743



12,080Net proceeds from issuance of
    Series B convertible preferred stock and warrants


9,791







Payment of Series B preferred
    stock dividends


(67
)






Proceeds from note receivable from
    stockholders










22Net cash provided by financing
    activities


15,466



743



13,166Effect of exchange rates on cash


(449
)


76



599Net increase (decrease) in cash and
    cash equivalents


7,204



(10,480
)


10,204Cash and cash equivalents at
    beginning of year


13,419



23,899



13,695Cash and cash equivalents at end of
    year

$
20,623


$
13,419


$
23,899Supplementary disclosures:Cash paid for interest

$
489


$
10


$
4Cash paid for income taxes

$
273


$
360


$
9Application of customer deposit to
    sale of product line

$
1,000


$



$
Issuance costs
    incurred  Series B preferred stock

$
609


$



$
Fair market value of warrants
    issued in conjunction with Series B preferred stock

$
1,634


$



$
Dividends and accretion on
    Series B convertible preferred stock

$
449


$



$
Fair value embedded
    derivatives  Series B preferred stock

$
484


$



$
Beneficial conversion
    feature  Series B preferred stock

$
1,115


$



$
Fair market value of warrants
    issued in conjunction with loan and security agreement

$
121


$



$
    54




---



##### Table of Contents



THERMA-WAVE,
    INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  1.
    Organization
    and Summary of Significant Accounting Policies  Description
    of Business
      Basis
    of Presentation
  53-week
  Revenue
    Recognition
    (EITF 00-21) 
  EITF 00-21,
  EITF 00-21,
     55




---



##### Table of Contents



THERMA-WAVE,
    INC.
  NOTES TO
    CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
    Persuasive evidence of an arrangement
    exists:
  Delivery has occurred or services have been
    rendered:
  The sellers price to the buyer is fixed or
    determinable:
  Collectibility is reasonably assured:
             56




---



##### Table of Contents



THERMA-WAVE,
    INC.
  NOTES TO
    CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
      Service and Parts Revenues.
    Allowances
    for Doubtful Accounts Receivable and Sales
    Allowances
    Liquidity
   57




---



##### Table of Contents



THERMA-WAVE,
    INC.
  NOTES TO
    CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
     Concentration
    of Credit Risk/ Major Customers
    Percentage of NetRevenuesFiscal Years EndedMarch 31,2006


2005


2004Customers Over Ten Percent of
    Net RevenuesAdvanced Micro Devices
    (AMD)


23
%



%



%Taiwan Semiconductor Manufacturing
    Company



%


15
%


16
%Intel Corporation


12
%


12
%


14
%Samsung



%


10
%



%Tokyo Electron, Ltd.



%



%


12
%Raytex Corp.(1)



%



%


10
%Total


35
%


37
%


52
%     (1)
    
    Raytex Corp. was formally a subsidiary of Seki Technotron, our
    distributor for Japan.     58




---



##### Table of Contents



THERMA-WAVE,
    INC.
  NOTES TO
    CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
   Use of
    Estimates
    Foreign
    Currency Translations and Transactions
      Cash
    and Cash Equivalents
    Inventories
  first-in,
 59




---



##### Table of Contents



THERMA-WAVE,
    INC.
  NOTES TO
    CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
   Property
    and Equipment
    Goodwill,
    Intangibles and Other Assets, Net
      Long-Lived
    Assets
    Deferred
    Executive Compensation Plan
    Research
    and Development Expenses
    Stock-Based
    Compensation
   60




---



##### Table of Contents



THERMA-WAVE,
    INC.
  NOTES TO
    CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
      Fiscal Years EndedMarch 31,2006


2005


2004Assumptions for Estimating Fair
    Value of Option GrantsRisk-free interest rate


4.1
%


3.1
%


4.0
%Expected dividend yield










Expected volatility


76
%


86
%


118
%Expected life in years


4.0



4.5



3.9     Fiscal Years EndedMarch 31,2006


2005


2004Assumptions for Estimating Fair
    Value of ESPP Purchase
    RightsRisk-free interest rate


4.2
%


1.7
%


0.9
%Expected dividend yield










Expected volatility


68
%


63
%


125
%Expected life in years


1.1



1.2



1.3  61




---



##### Table of Contents



THERMA-WAVE,
    INC.
  NOTES TO
    CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
     Fiscal Years Ended
    March 31,2006


2005


2004(In thousands, except per share
    data)Pro forma Net Loss Under
    SFAS No. 123Net loss available to common
    stockholders (in thousands)As reported

$
(9,198
)

$
(6,821
)

$
(18,093
)Add: Stock-based employee
    compensation expense (benefit) included in the determination of
    net loss, net of tax, as reported


(297
)


(299
)


1,318Deduct: Stock-based employee
    compensation expense as determined using the fair value method


(1,556
)(1)


(4,009
)


(4,459
)Pro forma net loss available to
    common stockholders

$
(11,051
)

$
(11,129
)

$
(21,234
)Basic and diluted loss per shareAs reported

$
(0.25
)

$
(0.19
)

$
(0.56
)Pro forma

$
(0.30
)

$
(0.31
)

$
(0.66
)     (1)
    
    The decrease in pro-forma stock-based compensation expense in
    fiscal 2006 relates to a benefit from unvested options resulting
    from our restructuring in fiscal 2006 and the scheduled full
    vesting of options issued under the employee option exchange
    program that occurred in fiscal 2004 (See Note 11; titled
    Stock Options, Common Stock and Warrants).  Income
    Taxes
    Advertising
    Costs
    Recently
    Issued Accounting Standards
     62




---



##### Table of Contents



THERMA-WAVE,
    INC.
  NOTES TO
    CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
        2.
    Balance
    Sheet Components  March 31,2006


2005(In thousands)Inventories:Raw materials and field service
    inventory

$
11,136


$
11,339Systems in process


6,265



9,700Finished systems


3,648



4,537Inventory at customer locations


1,304



5,294Total inventories

$
22,353


$
30,870  63




---



##### Table of Contents



THERMA-WAVE,
    INC.
  NOTES TO
    CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
   March 31,2006


2005(In thousands)Property and
    equipment:Laboratory and test equipment

$
4,053


$
4,659Office furniture and equipment


10,241



10,802Machinery and equipment


728



709Leasehold improvements


7,218



8,649Total property and equipment


22,240



24,819Accumulated depreciation and
    amortization


(21,451
)


(21,843
)Total property and equipment, net

$
789


$
2,976     March 31,2006


2005(In thousands)Accrued liabilities:Accrued compensation and related
    expenses

$
3,078


$
3,352Accrued warranty


1,244



1,656Commissions payable


1,928



1,830Income taxes payable


4,696



4,972Restructuring liabilities


817



178Accrued auditing


831



148Accrued sales and property taxes


306



291Other accrued liabilities


742



3,357Total accrued liabilities

$
13,642


$
15,784   3.
    Net Loss
    Per Share   64




---



##### Table of Contents



THERMA-WAVE,
    INC.
  NOTES TO
    CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
     Fiscal Years Ended
    March 31,2006


2005


2004(In thousands)Numerator:Net loss available to common
    stockholders

$
(9,198
)

$
(6,821
)

$
(18,093
)Denominator:Weighted shares outstanding used
    for basic and diluted loss per share


36,734



35,912



32,387     March 31,2006


2005


2004(In thousands)Stock options


5,137



6,172



5,532Warrants


1,722



47



79Series B redeemable
    convertible preferred stock (assuming conversion to common
    shares)


7,374







     4.
    Financing
    Arrangements       65




---



##### Table of Contents



THERMA-WAVE,
    INC.
  NOTES TO
    CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
           66




---



##### Table of Contents



THERMA-WAVE,
    INC.
  NOTES TO
    CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
   5.
    Income
    Taxes    Fiscal Years Ended
    March 31,2006


2005


2004(In thousands)Domestic and foreign components
    of income (loss) before provision (benefit) for income
    taxes:Domestic

$
(7,996
)

$
(6,474
)

$
(16,999
)Foreign


(897
)


115



(1,094
)Total

$
(8,893
)

$
(6,359
)

$
(18,093
)     Fiscal Years Ended
    March 31,2006


2005


2004(In thousands)Components of the provision
    (benefit) for income taxes (current):Federal

$
(229
)

$



$
State






11



Foreign


85



451



Total

$
(144
)

$
462


$
     Fiscal Years Ended
    March 31,2006


2005


2004Reconciliation of US federal
    statutory rate to the effective tax rate:Benefit based on federal statutory
    rate


(35.0
)%


(35.0
)%


(35.0
)%State taxes






(2.8
)


(2.8
)Change in valuation allowance


33.2



40.2



30.7Reduction of tax reserves


(2.6
)






Other


2.8



4.9



7.1Effective tax rate


(1.6
)%


7.3
%



%  67




---



##### Table of Contents



THERMA-WAVE,
    INC.
  NOTES TO
    CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
     Fiscal Years Ended
    March 31,2006


2005(In thousands)Tax effects of temporary
    differences:Deferred tax assets:Accrued costs and expenses

$
10,432


$
14,681Depreciation and amortization


3,188



2,810Other


1,495



1,042Net operating loss and tax credit
    carryforwards


43,586



36,197Total gross deferred tax assets


58,701



54,730Less: valuation allowance


(58,701
)


(54,730
)Total deferred tax assets

$



$
             6.
    Commitments
    and Contingencies   68




---



##### Table of Contents



THERMA-WAVE,
    INC.
  NOTES TO
    CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
     2007


2008


2009


2010


2011


Thereafter


Total(In thousands)Contractual
    obligationsBy Fiscal Year
    March 31:Operating lease obligations

$
2,119


$
1,664


$
1,514


$
1,153


$
1,016


$



$
7,466   Operating Leases.
         69




---



##### Table of Contents



THERMA-WAVE,
    INC.
  NOTES TO
    CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
      Fiscal Year EndedMarch 31, 2006(In thousands)Calculation of gain on sale of
    product line:Proceeds from sale of product
    line:Cash payment by TEL

$
8,950TEL deposit applied to sale of
    product line


1,000Total proceeds from sale of
    product line


9,950Less: Net assets sold and
    transaction expenses:Property and equipment, net


79Inventory


803Patents, net


271Accrued warranty assumed by TEL


(243
)Legal expenses


296Transaction costs and other


23Total net assets sold, and
    transaction expenses:


1,229Gain on sale of product
    line

$
8,721   Indemnification
    Legal
    Proceedings
  and/or
 70




---



##### Table of Contents



THERMA-WAVE,
    INC.
  NOTES TO
    CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
   7.
    Restructuring,
    Severance and Other Costs    Liability as of





Payments and


Liability as ofMarch 31, 2005


Provision


Reductions


March 31, 2006(In thousands)FY 2006 Restructuring
    ProgramsSeverance and workforce reduction

$



$
2,246


$
(2,180
)

$
66Consolidation of excess facilities






1,942



(663
)*


1,279FY 2005 Restructuring
    Program


178



438



(366
)


250Total

$
178


$
4,626


$
(3,209
)

$
1,595     *
    
    Includes non-cash fixed asset write-off of approximately
    $0.6 million related to July 29, 2005 restructuring
    plan for North American operations.  Liability as of








Liability as ofMarch 31, 2004


Provision


Payments


March 31, 2005(In thousands)Restructuring severance and
    other costs incurredConsolidation of facilities

$
220


$
347


$
(389
)

$
178       Restructuring
    programs in fiscal year 2006.
    Restructuring
    of the Companys Asian operations.
   71




---



##### Table of Contents



THERMA-WAVE,
    INC.
  NOTES TO
    CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
   Restructuring
    of the Companys North American operations.
          Restructuring
    of the Companys European operations.
    Restructuring
    program in fiscal year 2005.
    8.
    Warranty
    Accrual   72




---



##### Table of Contents



THERMA-WAVE,
    INC.
  NOTES TO
    CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
    Provisions forWarranties


Settlements ofBeginning


Issued During


Pre-Existing


EndingBalance


the Period


Warranties


Balance(In thousands)Warranty AccrualFiscal year as of and for the year
    ended March 31, 2006

$
1,656


$
1,325
(2)

$
(1,737
)(1)

$
1,244Fiscal year as of and for the year
    ended March 31, 2005

$
1,731


$
1,629


$
(1,704
)

$
1,656     (1)
    
    Includes $0.2 million assumed by TEL,  See Note 6,
    titled Commitments and Contingencies. Additionally,
    $0.5 million was reclassified to accrued commissions
    related to the agreement with Hermes.(2)
    
    Excludes a charge of $0.9 million related to estimated
    warranty costs for legacy products to be serviced under one of
    our exclusive agreements. This amount was recorded in cost of
    revenues. The unpaid portion of $0.1 as of March 31, 2006
    is included in accrued liabilities.    9.
    Intangible
    and Other Assets        10.
    Mandatorily
    Redeemable Convertible Preferred Stock   73




---



##### Table of Contents



THERMA-WAVE,
    INC.
  NOTES TO
    CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
       Fiscal Year EndedMarch 31, 2006(In thousands)Redeemable convertible preferred
    stock

$
10,400Less:Issuance costs


609Fair value of warrants at issuance
    (see Warrants)


1,634Fair value of embedded derivative
    features at issuance (see Embedded Derivatives)


484Beneficial conversion feature (see
    Conversion)


1,115Subtotal

$
3,842Plus:Accrued unpaid dividends (see
    Dividends)


156Accretion of discount to
    redemption value


226Convertible preferred stock

$
6,940       Registration
    Rights
  Form S-3 Form S-3
  Voting
    Rights
   74




---



##### Table of Contents



THERMA-WAVE,
    INC.
  NOTES TO
    CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
   Board
    Nomination Rights
  Form 10-Q Form 10-K
  Dividends
        Conversion
         75




---



##### Table of Contents



THERMA-WAVE,
    INC.
  NOTES TO
    CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
      EITF 00-27, No. 98-5
    Redemptions
     76




---



##### Table of Contents



THERMA-WAVE,
    INC.
  NOTES TO
    CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
     Liquidation
    Preference
    Warrants
    Embedded
    Derivatives
   77




---



##### Table of Contents



THERMA-WAVE,
    INC.
  NOTES TO
    CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
   11.
    Stock
    Options, Common Stock and Warrants  Stock-Based
    Compensation
  Stock Options.
        Stock OptionsOptions





WeightedAvailable for


Number of


AverageFuture


Options


Exercise PriceIssuance


Outstanding


Per OptionStock Option ActivityBalance at March 31, 2003


884,013



5,756,357


$
8.27Authorized


1,293,755







Granted


(3,174,844
)


3,174,844



2.45Exercised






(96,558
)


1.44Cancelled


3,302,576



(3,302,576
)


10.35Balance at March 31, 2004


2,305,500



5,532,067


$
3.81Authorized


358,254







Granted


(1,513,870
)


1,513,870



3.55Exercised






(176,437
)


1.27Cancelled


697,904



(697,904
)


5.24Balance at March 31, 2005


1,847,788



6,171,596


$
3.66Authorized


368,045







Granted


(1,201,400
)


1,201,400



1.63Exercised






(452,030
)


0.88Cancelled


1,784,311



(1,784,311
)


3.00Balance at March 31, 2006


2,798,744



5,136,655


$
3.66  78




---



##### Table of Contents



THERMA-WAVE,
    INC.
  NOTES TO
    CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
     Total ExercisableTotal Stock Options
    Outstanding


Stock OptionsWeighted





Weighted





WeightedAverage





Average





AverageRemaining





Exercise





ExerciseContractual


Stock Options


Price per


Number of


Price perLife (Years)


Outstanding


Option


Options


OptionSummary of Outstanding Options
    as of March 31, 2006Range of exercise prices:$0.42 - $0.42


6.94



400,000


$
0.42



300,000


$
0.42$0.47 - $0.47


7.05



260,774



0.47



173,471



0.47$0.60 - $0.66


6.84



506,000



0.66



390,290



0.66$1.23 - $1.58


9.28



410,157



1.46



8,057



1.29$1.64 - $2.00


9.06



539,463



1.91



59,073



1.98$2.38 - $2.38


1.44



645,769



2.38



645,769



2.38$2.48 - $3.51


7.99



683,595



3.06



336,980



2.95$3.66 - $3.90


8.35



521,922



3.70



214,407



3.71$4.15 - $4.70


7.53



361,061



4.20



231,036



4.20$6.37 - $8.93


3.72



277,169



7.89



236,017



8.16$10.68 - $15.89


1.92



465,430



12.38



465,428



12.38$21.31 - $27.50


4.23



65,315



23.25



65,315



23.25Total


6.31



5,136,655


$
3.66



3,125,843


$
4.51       Employee Stock Purchase Plan.
    Stock-Based Compensation.
 79




---



##### Table of Contents



THERMA-WAVE,
    INC.
  NOTES TO
    CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
         Warrants.
        Director Stock Option Agreement.
 80




---



##### Table of Contents



THERMA-WAVE,
    INC.
  NOTES TO
    CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
   12.
    Related
    Party Transactions            13.
    Retirement
    Plans    U.S.-based
  14.
    Segment
    Information     81




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##### Table of Contents



THERMA-WAVE,
    INC.
  NOTES TO
    CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
        Percentage ofNet RevenuesFiscal Years EndedMarch 31,2006


2005


2004Net Revenues by Product
    FamilyOpti-Probe, including Opti-Probe CD


55
%


47
%


44
%Therma-Probe


14
%


22
%


8
%Integra and Other


2
%


6
%


13
%Service and parts


29
%


25
%


28
%License



%



%


7
%Total


100
%


100
%


100
%      82




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##### Table of Contents



THERMA-WAVE,
    INC.
  NOTES TO
    CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
    Fiscal Years EndedMarch 31,2006


2005


2004Net Revenues by
    CountryUnited States


31
%


29
%


28
%Europe


26
%


11
%


14
%Taiwan


13
%


21
%


23
%Japan


13
%


13
%


22
%Korea


9
%


14
%


5
%China


4
%


6
%


5
%Singapore


2
%


6
%


3
%Malaysia


2
%



%



%Total


100
%


100
%


100
%       83




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##### Table of Contents



THERMA-WAVE,
    INC.
  NOTES TO
    CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
  OtherForeignU.S.


Japan


Korea


UK


Locations


Eliminations


ConsolidatedSegment Information (in
    thousands)Fiscal Year Ended March 31,
    2004Sales to unaffiliated customers

$
57,778


$
2,355


$
1,444


$
1,787


$
1,945


$



$
65,309Transfers between geographic regions


(574
)


556



266



655



1,319



(2,222
)


Total net revenues

$
57,204


$
2,911


$
1,710


$
2,442


$
3,264


$
(2,222
)

$
65,309Operating income (loss)

$
(16,776
)

$
(218
)

$
105


$
381


$
(493
)

$
(946
)

$
(17,947
)Long-lived assets

$
4,296


$
61


$
70


$



$
159


$
(22
)

$
4,564All other identifiable assets


62,693



2,555



1,761



629



1,123



(9,043
)


59,718Total assets

$
66,989


$
2,616


$
1,831


$
629


$
1,282


$
(9,065
)

$
64,282Fiscal Year Ended March 31,
    2005Sales to unaffiliated customers

$
71,401


$
3,250


$
1,554


$
2,012


$
3,044


$



$
81,261Transfers between geographic regions


(858
)


256



362



354



1,348



(1,462
)


Total net revenues

$
70,543


$
3,506


$
1,916


$
2,366


$
4,392


$
(1,462
)

$
81,261Operating income (loss)

$
(6,631
)

$
(361
)

$
(75
)

$
(16
)

$
53


$
494


$
(6,536
)Long-lived assets

$
2,692


$
103


$
19


$
27


$
152


$
(17
)

$
2,976All other identifiable assets


67,386



3,037



2,103



983



1,266



(10,178
)


64,597Total assets

$
70,078


$
3,140


$
2,122


$
1,010


$
1,418


$
(10,195
)

$
67,573Fiscal Year Ended March 31,
    2006Sales to unaffiliated customers

$
58,691


$
3,230


$
1,983


$
1,510


$
872


$



$
66,286Transfers between geographic regions


(2,260
)


469



585



291



357



558



Total net revenues

$
56,431


$
3,699


$
2,568


$
1,801


$
1,229


$
558


$
66,286Operating income (loss)

$
(19,245
)

$
(203
)

$
185


$
(626
)

$
4


$
2,432


$
(17,453
)Long-lived assets

$
929


$
73


$
10


$
12


$



$
(235
)

$
789All other identifiable assets


60,496



2,850



1,826



160



741



(7,484
)


58,589Total assets

$
61,425


$
2,923


$
1,836


$
172


$
741


$
(7,719
)

$
59,378    84




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##### Table of Contents



THERMA-WAVE,
    INC.
  NOTES TO
    CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
   15.
    Accounts
    Receivable Valuation and Qualifying Accounts  Balance at





DeductionsBeginning





Including


Balance atDescription

of Period


Additions


Write-Offs


End of Period(In thousands)Year ended March 31, 2006:Reserves and allowances deducted
    from asset accountsAllowances for doubtful accounts
    receivable and sales allowances

$
715


$
133


$
74


$
774Year ended March 31, 2005:Reserves and allowances deducted
    from asset accountsAllowances for doubtful accounts
    receivable and sales allowances

$
907


$
509


$
701


$
715Year ended March 31, 2004:Reserves and allowances deducted
    from asset accountsAllowances for doubtful accounts
    receivable and sales allowances

$
1,553


$
658


$
1,304


$
907   Supplementary
    Data: Selected Consolidated Quarterly Data
    THERMA-WAVE,
    INC.
    QUARTERLY FINANCIAL DATA (UNAUDITED)
  Fiscal Year 2006


Fiscal Year 2005Q1(1)


Q2


Q3


Q4(2)


Year(1)


Q1


Q2


Q3


Q4


Year(In thousands except per share
    data)Net revenues

$
17,539


$
17,265


$
15,428


$
16,054


$
66,286


$
21,151


$
22,602


$
21,470


$
16,038


$
81,261Gross profit

$
7,115


$
5,944


$
5,368


$
5,011


$
23,438


$
10,720


$
10,772


$
9,102


$
6,047


$
36,641Operating profit (loss)

$
(5,942
)

$
(4,294
)

$
(3,894
)

$
(3,323
)

$
(17,453
)

$
(1,221
)

$
1,293


$
(1,754
)

$
(4,854
)

$
(6,536
)Net income (loss)

$
2,446


$
(4,148
)

$
(3,840
)

$
(3,207
)

$
(8,749
)

$
(1,169
)

$
1,317


$
(1,911
)

$
(5,058
)

$
(6,821
)Net income (loss) available to
    common stockholders

$
2,446


$
(4,148
)

$
(3,938
)

$
(3,558
)

$
(9,198
)

$
(1,169
)

$
1,317


$
(1,911
)

$
(5,058
)

$
(6,821
)Net income (loss) per share:Basic

$
0.07


$
(0.11
)

$
(0.11
)

$
(0.10
)

$
(0.25
)

$
(0.03
)

$
0.04


$
(0.05
)

$
(0.14
)

$
(0.19
)Diluted

$
0.07


$
(0.11
)

$
(0.11
)

$
(0.10
)

$
(0.25
)

$
(0.03
)

$
0.03


$
(0.05
)

$
(0.14
)

$
(0.19
)     (1)
    
    During the first quarter of the fiscal year ended March 31,
    2006 the Company recorded a gain of $8.7 million related to
    the CCD-i product line that was sold to TEL.(2)
    
    In the fourth quarter of the fiscal year ended March 31,
    2006, the Company recorded a charge of $0.9 million related
    to estimated warranty costs for legacy products to be serviced
    under the Hermes-Epitek Corporation agreement. This amount is
    recorded in cost of revenues. 85




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##### Table of Contents



Item 9.
    Changes
    in and Disagreements with Accountants and Financial
    Disclosure    Item 9A.
    Controls
    and Procedures Disclosure Controls and Procedures    Rules 13a-15(e) 15d-15(e)) Form 10-K
  Managements
    Report on Internal Control over Financial Reporting
          Form 10-K.
 86




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##### Table of Contents



Changes
    in Internal Control over Financial Reporting
    
    Implementing additional monitoring controls used in conjunction
    with the performance of independent internal reviews of all key
    account reconciliations, including inventory and warranty
    related transactions and all corresponding journal entries and
    related support;
    Hiring new senior accounting personnel and recruiting additional
    experienced accounting and finance staff, including an
    experienced corporate controller and assistant controller, and
    Enhancing our training programs for accounting staff as well as
    our overall supervision of finance personnel.      Item 9B.
    Other
    Information   PART III  Item 10.
    Directors
    and Executive Officers of the Registrant    Form 10-K
    Item 11.
    Executive
    Compensation   87




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##### Table of Contents



Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    Item 13.
    Certain
    Relationships and Related Transactions    Item 14.
    Principal
    Accountant Fees and Services   PART IV  Item 15.
    Exhibits
    and Consolidated Financial Statement Schedules  The following documents are filed as part of this report:
      ExhibitNumber

Description3
.1

Restated Certificate of
    Incorporation of Therma-Wave, Inc. (Incorporated herein by
    reference to Exhibit 3.1 to Therma-Waves annual
    report on
    Form 10-K
    for the period ended April 2, 2000.)3
.2

Certificate of Amendment to
    Restated Certificate of Incorporation of Therma-Wave, Inc.
    (Incorporated herein by reference to Exhibit 3.1 in
    Therma-Waves quarterly report on
    Form 10-Q
    for the period ended September 29, 2002.)3
.3

Amended and Restated By-Laws of
    Therma-Wave. (Incorporated herein by reference to
    Exhibit 3.2 in Therma-Waves annual report on
    Form 10-K
    for the period ended April 1, 2001.)3
.4

Certificate of Designation of
    Rights, Preferences and Privileges of Series B Convertible
    Preferred Stock of Therma-Wave dated November 22, 2005
    (Incorporated herein by reference to Exhibit 3.3 to
    Therma-Waves Registration Statement on
    Form S-3
    (Registration
    No. 333-130717).)4
.1

Form of certificate representing
    shares of Common Stock. (Incorporated herein by reference to
    Exhibit 4.6 to Therma-Waves Registration Statement on
    Form S-1
    (Registration No
    333-76019).)4
.2

Registration Rights Agreement,
    dated as of September 15, 2003, by and among Therma-Wave,
    Inc. and the holders named therein. (Incorporated herein by
    reference to Exhibit 4.6 to Therma-Waves Registration
    Statement on
    Form S-1
    (Registration
    No. 333-110162).)4
.3

Form of Warrants to Purchase
    Common Stock of Therma-Wave, Inc. (Incorporated herein by
    reference to Therma-Waves Registration Statement on
    Form S-3
    (Registration
    No. 333-130717).)10
.1

Loan and Security Agreement, dated
    June 13, 2003, by and between Therma-Wave, Inc. and Silicon
    Valley Bank. (Incorporated herein by reference to
    Exhibit 10.2 in Therma-Waves annual report for the
    year ended March 30, 2003.) 88




---



##### Table of Contents



ExhibitNumber

Description10
.2

First Modification to the Loan and
    Security Agreement, dated as of September 30, 2005, by and
    between Therma-Wave, Inc. and Silicon Valley Bank. (Incorporated
    herein by reference to Exhibit 10.1 in Therma-Waves
    current report on
    Form 8-K
    dated October 6, 2005.)10
.3

Loan Modification Agreement, dated
    as of July 24, 2003 by and between Therma-Wave, Inc. and
    Silicon Valley Bank. (Incorporated herein by reference to
    Exhibit 10.38 to Therma-Waves quarterly report for
    the period ended June 29, 2003.)10
.4

Loan Modification Agreement, dated
    as of May 4, 2004, by and between Therma-Wave, Inc. and
    Silicon Valley Bank. (Incorporated herein by reference to
    Exhibit 10.16 to Therma-Waves annual report on
    Form 10-K
    for the period ended March 28, 2004.)10
.5

Loan Modification Agreement, dated
    as of January 31, 2005, by and between Therma-Wave, Inc.
    and Silicon Valley Bank. (Incorporated by reference herein to
    Exhibit 10.4 to Therma-Waves  Annual Report on Form
    10-K for the
    period ended April 3, 2005)10
.6

Amended and Restated Loan and
    Security Agreement, dated June 10, 2005, by and between
    Therma-Wave, Inc. and Silicon Valley Bank. (Incorporated herein
    by reference to Exhibit 10.1 to Therma-Waves current
    report on
    Form 8-K
    dated June 16, 2005.)10
.7

Streamline Facility Agreement,
    dated June 10, 2005, by and between Therma-Wave, Inc. and
    Silicon Valley Bank. (Incorporated herein by reference to
    Exhibit 10.1 to Therma-Waves current report on
    Form 8-K
    dated June 16, 2005.)10
.8

Borrower Agreement, dated as of
    June 4, 2004, by and between Therma-Wave, Inc. and the
    Export-Import Bank of the United States. (Incorporated herein by
    reference to Exhibit 10.31 to Therma-Waves annual
    report on
    Form 10-K
    for the period ended March 28, 2004.)10
.9*

Exclusive Representation
    Agreement, dated as of April 19, 2005, by and between
    Therma-Wave, Inc. and Hermes-Epitek Corporation (Incorporated
    herein by reference to Exhibit 10.8 to Therma-Waves
    annual report on
    Form 10-K
    for the period ended April 3, 2005.)10
.10

Lease Agreement, dated as of
    May 26, 1995, by and between Therma-Wave and Sobrato
    Interests. (Incorporated herein by reference to
    Exhibit 10.14 to Therma-Waves Registration Statement
    on
    Form S-4
    (Registration
    No. 333-29871).)10
.11

Lease between Minos Management,
    Inc. as Landlord, and Therma-Wave as Tenant, dated May 31,
    2000. (Incorporated herein by reference to Exhibit 10.32 to
    Therma-Waves annual report on
    Form 10-K
    for the period ended April 2, 2000.)10
.12

Agreement between Therma-Wave,
    Inc. and KLA-Tencor Corporation effective as of July 1,
    2004. (Incorporated by reference to Therma-Waves current
    report on
    Form 8-K
    filed August 27, 2004.)10
.13#

Form of Indemnification Agreement
    with directors and executive officers. (Incorporated herein by
    reference to Exhibit 10.12 to Therma-Waves Annual Report
    on
    Form 10-K
    for the period ended April 3, 2005.)10
.14#

Therma-Wave Executive Deferred
    Compensation Plan, effective January 1, 2000. (Incorporated
    herein by reference to Exhibit 10.31 to Therma-Waves
    annual report on
    Form 10-K
    for the period ended April 2, 2000.)10
.15#

1997 Stock Purchase and Option
    Plan. (Incorporated herein by reference to Exhibit 10.20 to
    Therma-Waves Registration Statement on
    Form S-4
    (Registration
    No. 333-29871).)10
.16#

1997 Employee Stock Purchase and
    Option Plan. (Incorporated herein by reference to
    Exhibit 10.30 to Therma-Waves Registration Statement
    on
    Form S-1
    (Registration No
    333-76019).)10
.17#

1997 Special Employee Stock
    Purchase and Option Plan. (Incorporated herein by reference to
    Exhibit 10.31 to Therma-Waves Registration Statement
    on
    Form S-1
    (Registration
    No. 333-76019).)10
.18#

2000 Equity Incentive Plan.
    (Incorporated herein by reference to Exhibit 10.22 to
    Therma-Waves annual report on
    Form 10-K
    for the period ended March 31, 2000.)10
.19#

Amendment No. 1 to
    Therma-Wave, Inc. 2000 Equity Incentive Plan. (Incorporated
    herein by reference to Exhibit 99.2 in Therma-Waves
    Registration Statement on
    Form S-8
    (Registration
    No. 333-83282).)10
.20#

Amendment No. 2 to
    Therma-Wave, Inc. 2000 Equity Incentive Plan. (Incorporated
    herein by reference to Exhibit 99.1 in Therma-Waves
    current report on
    Form 8-K
    filed August 27, 2004.) 89




---



##### Table of Contents



ExhibitNumber

Description10
.21#

Amendment No. 3 to
    Therma-Wave, Inc. 2000 Equity Incentive Plan. (Incorporated
    herein by reference to Exhibit 99.2 in Therma-Waves
    Registration Statement on
    Form S-8
    (Registration
    No. 333-83282).)10
.22#

Amendment No. 4 to
    Therma-Wave, Inc. 2000 Equity Incentive Plan (Incorporated
    herein by reference to Exhibit 10.21 to Therma-Waves
    annual report on
    Form 10-K
    for the period ended April 3, 2005.)10
.23#

Form of Stock Option Agreement
    under the 2000 Equity Incentive Plan. (Incorporated herein by
    reference to Exhibit 10.1 to Therma-Waves current
    report on
    Form 8-K
    filed May 11, 2005.)10
.24#

Form of Amendment No. 1 to
    Stock Option Agreement for directors under the 2000 Equity
    Incentive Plan. (Incorporated herein by reference to
    Exhibit 99.3 in Therma-Waves current report on
    Form 8-K
    filed August 27, 2004.)10
.25#

Form of Director Stock Option
    Agreement adopted November 24, 2004. (Incorporated herein
    by reference to Exhibit 10.1 to Therma-Waves report
    for the period ended December 26, 2004.)10
.26#

Amended and Restated 2000 Employee
    Stock Purchase Plan. (Incorporated herein by reference to
    Exhibit 10.1 in Therma-Waves current report on
    Form 8-K
    dated August 23, 2005.)10
.27#

Form of Change of Control
    Severance Agreement for executive officers dated as of
    October 5, 2005 (Incorporated herein by reference to
    Exhibit 10.3 to Therma-Waves current report on
    Form 8-K
    dated October 6, 2005.)10
.28

Change of Control Severance
    Agreement by and between Therma-Wave and Jon L. Opsal dated as
    of October 5, 2005 (Incorporated herein by reference to
    Exhibit 10.3 to Therma-Waves current report on
    Form 8-K
    dated October 6, 2005.)10
.29

Registration Rights Agreement,
    dated as of November 22, 2005, by and among Therma-Wave,
    Inc. and the holders named therein. (Incorporated herein by
    reference to Exhibit 10.2 to Therma-Waves
    Registration Statement on
    Form S-3
    (Registration
    No. 333-130717).)10
.30

Stockholders Agreement, dated as
    of November 22, 2005, by and among Therma-Wave, Inc. and
    the parties listed on Exhibit A thereto (Incorporated
    herein by reference to Exhibit 10.3 to Therma-Waves
    Registration Statement on
    Form S-3
    (Registration
    No. 333-130717).)10
.31

Purchase Agreement by and between
    Therma-Wave and each of the purchasers listed on Exhibit A
    thereto dated as of November 18, 2005 (Incorporated herein
    by reference to Exhibit 10.1 to Therma-Waves
    Registration Statement on
    Form S-3
    (Registration
    No. 333-130717).)10
.32#

Offer Letter, Board Services,
    dated as of March 12, 2003, from Therma-Wave, Inc. to
    Papken S. Der Torossian. (Incorporated herein by reference to
    Exhibit 10.45 in Therma-Waves quarterly report on
    Form 10-Q
    for the period ended December 29, 2002.)10
.33#

Employment Agreement dated as of
    February 5, 2003, by and between Therma-Wave, Inc. and
    Boris Lipkin. (Incorporated herein by reference to
    Exhibit 10.43 in Therma-Waves quarterly report on
    Form 10-Q
    for the period ended December 29, 2002.)10
.34#

Amendment No. 1 to Employment
    Agreement, dated as of August 21, 2003, between Boris
    Lipkin and Therma-Wave, Inc. (Incorporated herein by reference
    to Exhibit 10.39 to Therma-Waves quarterly report for
    the period ended September 28, 2003.)10
.35#

Amendment No. 2, dated as of
    March 25, 2004 to the Employment Agreement by and between
    Therma-Wave and Boris Lipkin. (Incorporated herein by reference
    to Exhibit 10.9 to Therma-Waves annual report on
    Form 10-K
    for the period ended March 28, 2004.)10
.36#

Employment Agreement, dated as of
    August 10, 1998, by and between Therma-Wave and L. Ray
    Christie. (Incorporated herein by reference to
    Exhibit 10.27 to Therma-Waves Registration Statement
    on
    Form S-1
    (Registration
    No. 333-76019).)10
.37#

Amendment No. 1 to Employment
    Agreement, dated as of August 21, 2003, between L. Ray
    Christie and Therma-Wave, Inc. (Incorporated herein by reference
    to Exhibit 10.40 to Therma-Waves quarterly report for
    the period ended September 28, 2003.)10
.38#

Executive Stock Agreement, dated
    as of May 16, 1997, by and between Therma-Wave, Inc. and
    Jon L. Opsal. (Incorporated herein by reference to
    Exhibit 10.9 to Therma-Waves registration statement
    on
    Form S-4
    (Registration
    No. 333-29871).) 90




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##### Table of Contents



ExhibitNumber

Description10
.39#

Summary of Compensation for
    Outside Directors (Incorporated herein by reference to
    Exhibit 10.36 to Therma-Waves annual report on
    Form 10-K
    for the period ended April 3, 2005.)10
.40#

Summary of Compensation
    Arrangements with Certain Executives. (Incorporated herein by
    reference to Exhibit 10.37 to Therma-Waves annual
    report on
    Form 10-K
    for the period ended April 3, 2005.)10
.41#

Employment Agreement with Joseph
    Passarello dated April 8, 2005. (Incorporated herein by
    reference to Exhibit 10.38 to Therma-Waves annual
    report on
    Form 10-K
    for the period ended April 3, 2005.)21
.1

Subsidiaries of Therma-Wave.
    (Incorporated herein by reference to Exhibit 21.1 to
    Therma-Waves annual report on
    Form 10-K
    for the period ended March 30, 2003.)23
.1

Consent of Independent Registered
    Public Accounting Firm.31
.1

Certification of the Chief
    Executive Officer pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002.31
.2

Certification of the Chief
    Financial Officer pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002.32
.1

Certification of the Chief
    Executive Officer pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002.32
.2

Certification of the Chief
    Financial Officer pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002.     *
    
    Confidential treatment has been requested for certain portions
    of this exhibit.#
    
    Denotes management contract or compensatory plan. 91




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##### Table of Contents



SIGNATURES      By:
    /s/  Boris Lipkin      POWER OF
    ATTORNEY
  attorneys-in-fact Form 10-K attorneys-in-fact attorneys-in-fact
    Signature

Title

Date/s/  Papken S. Der
    TorossianPapken
    S. Der Torossian

Chairman of the Board

June 13, 2006/s/  Boris LipkinBoris
    Lipkin

President, Chief Executive Officer
    and Director (Principal Executive Officer)

June 13, 2006/s/  Joseph
    PassarelloJoseph
    Passarello

Senior Vice President, Chief
    Financial Officer and Secretary (Principal Financial and
    Accounting Officer)

June 13, 2006/s/  David AspnesDavid
    Aspnes

Director

June 13, 2006/s/  G. Leonard BakerG.
    Leonard Baker

Director

June 13, 2006/s/  John
    DErricoJohn
    DErrico

Director

June 13, 2006/s/  Peter R. HanleyPeter
    R. Hanley

Director

June 13, 2006 92




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##### Table of Contents



Signature

Title

Date/s/  Nam Pyo SuhNam
    Pyo Suh

Director

June 13, 2006/s/  Lawrence
    TomlinsonLawrence
    Tomlinson

Director

June 13, 2006/s/  Gregory GravesGregory
    Graves

Director

June 13, 2006/s/  John WillingeJohn
    Willinge

Director

June 13, 2006  93




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##### Table of Contents



Exhibit
    Index
  ExhibitNumber

Description3
.1

Restated Certificate of
    Incorporation of Therma-Wave, Inc. (Incorporated herein by
    reference to the Exhibit 3.1 to Therma-Waves annual
    report on
    Form 10-K
    for the period ended April 2, 2000.)3
.2

Certificate of Amendment to
    Restated Certificate of Incorporation of Therma-Wave, Inc.
    (Incorporated herein by reference to Exhibit 3.1 in
    Therma-Waves quarterly report on
    Form 10-Q
    for the period ended September 29, 2002.)3
.3

Amended and Restated By-Laws of
    Therma-Wave. (Incorporated herein by reference to
    Exhibit 3.2 in Therma-Waves annual report on
    Form 10-K
    for the period ended April 1, 2001.)3
.4

Certificate of Designation of
    Rights, Preferences and Privileges of Series B Convertible
    Preferred Stock of Therma-Wave dated November 22, 2005
    (Incorporated herein by reference to Exhibit 3.3 to
    Therma-Waves Registration Statement on
    Form S-3
    (Registration
    No. 333-130717).)4
.1

Form of certificate representing
    shares of Common Stock. (Incorporated herein by reference to
    Exhibit 4.6 to Therma-Waves Registration Statement on
    Form S-1
    (Registration No
    333-76019).)4
.2

Registration Rights Agreement,
    dated as of September 15, 2003, by and among Therma-Wave,
    Inc. and the holders named therein. (Incorporated herein by
    reference to Exhibit 4.6 to Therma-Waves Registration
    Statement on
    Form S-1
    (Registration
    No. 333-110162).)4
.3

Form of Warrants to Purchase
    Common Stock of Therma-Wave, Inc. (Incorporated herein by
    reference to Therma-Waves Registration Statement on
    Form S-3
    (Registration
    No. 333-130717).)10
.1

Loan and Security Agreement, dated
    June 13, 2003, by and between Therma-Wave, Inc. and Silicon
    Valley Bank. (Incorporated herein by reference to
    Exhibit 10.2 in Therma-Waves annual report for the
    year ended March 30, 2003.)10
.2

First Modification to the Loan and
    Security Agreement, dated as of September 30, 2005, by and
    between Therma-Wave, Inc. and Silicon Valley Bank. (Incorporated
    herein by reference to Exhibit 10.1 in Therma-Waves
    current report on
    Form 8-K
    dated October 6, 2005.)10
.3

Loan Modification Agreement, dated
    as of July 24, 2003 by and between Therma-Wave, Inc. and
    Silicon Valley Bank. (Incorporated herein by reference to
    Exhibit 10.38 to Therma-Waves quarterly report for
    the period ended June 29, 2003.)10
.4

Loan Modification Agreement, dated
    as of May 4, 2004, by and between Therma-Wave, Inc. and
    Silicon Valley Bank. (Incorporated herein by reference to
    Exhibit 10.16 to Therma-Waves annual report on
    Form 10-K
    for the period ended March 28, 2004.)10
.5

Loan Modification Agreement, dated
    as of January 31, 2005, by and between Therma-Wave, Inc.
    and Silicon Valley Bank. (Incorporated by reference herein to
    Exhibit 10.4 to Therma-Waves Annual Report on Form
    10-K for the
    period ended April 3, 2005)10
.6

Amended and Restated Loan and
    Security Agreement, dated June 10, 2005, by and between
    Therma-Wave, Inc. and Silicon Valley Bank. (Incorporated herein
    by reference to Exhibit 10.1 to Therma-Waves current
    report on
    Form 8-K
    dated June 16, 2005.)10
.7

Streamline Facility Agreement,
    dated June 10, 2005, by and between Therma-Wave, Inc. and
    Silicon Valley Bank. (Incorporated herein by reference to
    Exhibit 10.1 to Therma-Waves current report on
    Form 8-K
    dated June 16, 2005.)10
.8

Borrower Agreement, dated as of
    June 4, 2004, by and between Therma-Wave, Inc. and the
    Export-Import Bank of the United States. (Incorporated herein by
    reference to Exhibit 10.31 to Therma-Waves annual
    report on
    Form 10-K
    for the period ended March 28, 2004.)10
.9*

Exclusive Representation
    Agreement, dated as of April 19, 2005, by and between
    Therma-Wave, Inc. and Hermes-Epitek Corporation (Incorporated
    herein by reference to Exhibit 10.8 to Therma-Waves
    annual report on
    Form 10-K
    for the period ended April 3, 2005.)10
.10

Lease Agreement, dated as of
    May 26, 1995, by and between Therma-Wave and Sobrato
    Interests. (Incorporated herein by reference to
    Exhibit 10.14 to Therma-Waves Registration Statement
    on
    Form S-4
    (Registration
    No. 333-29871).)10
.11

Lease between Minos Management,
    Inc. as Landlord, and Therma-Wave as Tenant, dated May 31,
    2000. (Incorporated herein by reference to Exhibit 10.32 to
    Therma-Waves annual report on
    Form 10-K
    for the period ended April 2, 2000.)




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##### Table of Contents



ExhibitNumber

Description10
.12

Agreement between Therma-Wave,
    Inc. and KLA-Tencor Corporation effective as of July 1,
    2004. (Incorporated by reference to Therma-Waves current
    report on
    Form 8-K
    filed August 27, 2004.)10
.13#

Form of Indemnification Agreement
    with directors and executive officers. (Incorporated herein by
    reference to Exhibit 10.12 to Therma-Waves Annual Report
    on Form 10-K
    for the period ended April 3, 2005.)10
.14#

Therma-Wave Executive Deferred
    Compensation Plan, effective January 1, 2000. (Incorporated
    herein by reference to Exhibit 10.31 to Therma-Waves
    annual report on
    Form 10-K
    for the period ended April 2, 2000.)10
.15#

1997 Stock Purchase and Option
    Plan. (Incorporated herein by reference to Exhibit 10.20 to
    Therma-Waves Registration Statement on
    Form S-4
    (Registration
    No. 333-29871).)10
.16#

1997 Employee Stock Purchase and
    Option Plan. (Incorporated herein by reference to
    Exhibit 10.30 to Therma-Waves Registration Statement
    on
    Form S-1
    (Registration No
    333-76019).)10
.17#

1997 Special Employee Stock
    Purchase and Option Plan. (Incorporated herein by reference to
    Exhibit 10.31 to Therma-Waves Registration Statement
    on
    Form S-1
    (Registration
    No. 333-76019).)10
.18#

2000 Equity Incentive Plan.
    (Incorporated herein by reference to Exhibit 10.22 to
    Therma-Waves annual report on
    Form 10-K
    for the period ended March 31, 2000.)10
.19#

Amendment No. 1 to
    Therma-Wave, Inc. 2000 Equity Incentive Plan. (Incorporated
    herein by reference to Exhibit 99.2 in Therma-Waves
    Registration Statement on
    Form S-8
    (Registration
    No. 333-83282).)10
.20#

Amendment No. 2 to
    Therma-Wave, Inc. 2000 Equity Incentive Plan. (Incorporated
    herein by reference to Exhibit 99.1 in Therma-Waves
    current report on
    Form 8-K
    filed August 27, 2004.)10
.21#

Amendment No. 3 to
    Therma-Wave, Inc. 2000 Equity Incentive Plan. (Incorporated
    herein by reference to Exhibit 99.2 in Therma-Waves
    Registration Statement on
    Form S-8
    (Registration
    No. 333-83282).)10
.22#

Amendment No. 4 to
    Therma-Wave, Inc. 2000 Equity Incentive Plan (Incorporated
    herein by reference to Exhibit 10.21 to Therma-Waves
    annual report on
    Form 10-K
    for the period ended April 3, 2005.)10
.23#

Form of Stock Option Agreement
    under the 2000 Equity Incentive Plan. (Incorporated herein by
    reference to Exhibit 10.1 to Therma-Waves current
    report on
    Form 8-K
    filed May 11, 2005.)10
.24#

Form of Amendment No. 1 to
    Stock Option Agreement for directors under the 2000 Equity
    Incentive Plan. (Incorporated herein by reference to
    Exhibit 99.3 in Therma-Waves current report on
    Form 8-K
    filed August 27, 2004.)10
.25#

Form of Director Stock Option
    Agreement adopted November 24, 2004. (Incorporated herein
    by reference to Exhibit 10.1 to Therma-Waves
    quarterly report for the period ended December 26, 2004.)10
.26#

Amended and Restated 2000 Employee
    Stock Purchase Plan. (Incorporated herein by reference to
    Exhibit 10.1 in Therma-Waves current report on
    Form 8-K
    dated August 23, 2005.)10
.27#

Form of Change of Control
    Severance Agreement for executive officers dated as of
    October 5, 2005 (Incorporated herein by reference to
    Exhibit 10.3 to Therma-Waves current report on
    Form 8-K
    dated October 6, 2005.)10
.28#

Change of Control Severance
    Agreement by and between Therma-Wave and Jon L. Opsal dated as
    of October 5, 2005 (Incorporated herein by reference to
    Exhibit 10.3 to Therma-Waves current report on
    Form 8-K
    dated October 6, 2005.)10
.29

Registration Rights Agreement,
    dated as of November 22, 2005, by and among Therma-Wave,
    Inc. and the holders named therein. (Incorporated herein by
    reference to Exhibit 10.2 to Therma-Waves
    Registration Statement on
    Form S-3
    (Registration
    No. 333-130717).)10
.30

Stockholders Agreement, dated as
    of November 22, 2005, by and among Therma-Wave, Inc. and
    the parties listed on Exhibit A thereto (Incorporated
    herein by reference to Exhibit 10.3 to Therma-Waves
    Registration Statement on
    Form S-3
    (Registration
    No. 333-130717).)10
.31

Purchase Agreement by and between
    Therma-Wave and each of the purchasers listed on Exhibit A
    thereto dated as of November 18, 2005 (Incorporated herein
    by reference to Exhibit 10.1 to Therma-Waves
    Registration Statement on
    Form S-3
    (Registration
    No. 333-130717).)10
.32#

Offer Letter, Board Services,
    dated as of March 12, 2003, from Therma-Wave, Inc. to
    Papken S. Der Torossian. (Incorporated herein by reference to
    Exhibit 10.45 in Therma-Waves quarterly report on
    Form 10-Q
    for the period ended December 29, 2002.)




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##### Table of Contents



ExhibitNumber

Description10
.33#

Employment Agreement dated as of
    February 5, 2003, by and between Therma-Wave, Inc. and
    Boris Lipkin. (Incorporated herein by reference to
    Exhibit 10.43 in Therma-Waves quarterly report on
    Form 10-Q
    for the period ended December 29, 2002.)10
.34#

Amendment No. 1 to Employment
    Agreement, dated as of August 21, 2003, between Boris
    Lipkin and Therma-Wave, Inc. (Incorporated herein by reference
    to Exhibit 10.39 to Therma-Waves quarterly report for
    the period ended September 28, 2003.)10
.35#

Amendment No. 2, dated as of
    March 25, 2004 to the Employment Agreement by and between
    Therma-Wave and Boris Lipkin. (Incorporated herein by reference
    to Exhibit 10.9 to Therma-Waves annual report on
    Form 10-K
    for the period ended March 28, 2004.)10
.36#

Employment Agreement, dated as of
    August 10, 1998, by and between Therma-Wave and L. Ray
    Christie. (Incorporated herein by reference to
    Exhibit 10.27 to Therma-Waves Registration Statement
    on
    Form S-1
    (Registration
    No. 333-76019).)10
.37#

Amendment No. 1 to Employment
    Agreement, dated as of August 21, 2003, between L. Ray
    Christie and Therma-Wave, Inc. (Incorporated herein by reference
    to Exhibit 10.40 to Therma-Waves quarterly report for
    the period ended September 28, 2003.)10
.38#

Executive Stock Agreement, dated
    as of May 16, 1997, by and between Therma-Wave, Inc. and
    Jon L. Opsal. (Incorporated herein by reference to
    Exhibit 10.9 to Therma-Waves registration statement
    on
    Form S-4
    (Registration
    No. 333-29871).)10
.39#

Summary of Compensation for
    Outside Directors (Incorporated herein by reference to
    Exhibit 10.36 to Therma-Waves annual report on
    Form 10-K
    for the period ended April 3, 2005.)10
.40#

Summary of Compensation
    Arrangements with Certain Executives. (Incorporated herein by
    reference to Exhibit 10.37 to Therma-Waves annual
    report on
    Form 10-K
    for the period ended April 3, 2005.)10
.41#

Employment Agreement with Joseph
    Passarello dated April 8, 2005. (Incorporated herein by
    reference to Exhibit 10.38 to Therma-Waves annual
    report on
    Form 10-K
    for the period ended April 3, 2005.)21
.1

Subsidiaries of Therma-Wave.
    (Incorporated herein by reference to Exhibit 21.1 to
    Therma-Waves annual report on
    Form 10-K
    for the period ended March 30, 2003.)23
.1

Consent of Independent Registered
    Public Accounting Firm.31
.1

Certification of the Chief
    Executive Officer pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002.31
.2

Certification of the Chief
    Financial Officer pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002.32
.1

Certification of the Chief
    Executive Officer pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002.32
.2

Certification of the Chief
    Financial Officer pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002.     *
    
    Confidential treatment has been requested for certain portions
    of this exhibit.#
    
    Denotes management contract or compensatory plan.