<PAGE>

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

                             _____________________

                                   FORM 10-Q

(Mark One)

[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

                 For the quarterly period ended April 1, 2001

                                      OR

[_]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

For the transition period from _____________________ to _____________________

Commission file number 0-21970


                             _____________________

                           MATTSON TECHNOLOGY, INC.
            (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                                    <C>
            Delaware                                                77-0208119
(State or other jurisdiction of incorporation          (I.R.S. Employer Identification No.)
         or organization)
</TABLE>

         2800 Bayview Drive
         Fremont, California                                   94538
(Address of principal executive offices)                     (Zip Code)

                                (510) 657-5900
             (Registrant's telephone number, including area code)

                             _____________________

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

 Number of shares of common stock outstanding as of April 30, 2001: 37,612,886

                                       1
<PAGE>

                        PART I -- FINANCIAL INFORMATION

1.   Financial Statements

                   MATTSON TECHNOLOGY, INC. AND SUBSIDIARIES
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                (in thousands)

<TABLE>
<CAPTION>
                                          ASSETS

                                                               Apr. 1,             Dec. 31,
                                                                2001                 2000
                                                             (unaudited)
                                                             -----------         -----------
<S>                                                          <C>                 <C>
Current assets:
  Cash and cash equivalents                                    $  43,444           $  33,431
  Restricted cash                                                 31,995              31,995
  Short-term investments                                          30,962              38,814
  Accounts receivable, net                                        57,494              20,425
  Advance billings                                                75,938              40,704
  Inventories, net                                               147,922              43,905
  Finished goods inventories shipped and awaiting
     customer acceptance                                          47,102              11,528
  Deferred tax assets                                              4,010               4,010
  Prepaid expenses and other current assets                       12,599               8,963
                                                              -----------         -----------
       Total current assets                                      451,466             233,775
Property and equipment, net                                       44,734              15,953
Long-term investments                                              9,423               9,287
Deferred tax assets                                                2,403               2,403
Goodwill, intangibles and other assets                           216,833               8,250
                                                              -----------         -----------
       Total assets                                            $ 724,859           $ 269,668
                                                              ===========         ===========

                         LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Note payable to Steag AG, a shareholder                      $  48,920           $       -
  Current portion of long-term debt                                  416                   -
  Line of credit                                                   4,166                   -
  Accounts payable                                                42,772              15,091
  Accrued liabilities                                             69,674              27,746
  Deferred revenue                                                93,479              40,704
  Deferred income taxes                                            8,832                   -
                                                              -----------         -----------
       Total current liabilities                                 268,259              83,541
                                                              -----------         -----------
Long-term liabilities:
  Long-term debt                                                   2,208                   -
  Deferred income taxes                                           26,307                   -
                                                              -----------         -----------
       Total long-term liabilities                                28,515                   -

                                                              -----------         -----------
       Total liabilities                                         296,774              83,541
                                                              -----------         -----------
Stockholders' equity:
  Common stock                                                        37                  20
  Additional paid-in capital                                     494,583             198,835
  Accumulated other comprehensive loss                            (4,362)               (181)
  Treasury stock                                                  (2,987)             (2,987)
  Retained deficit                                               (59,186)             (9,560)
                                                              -----------         -----------
       Total stockholders' equity                                428,085             186,127
                                                              -----------         -----------
                                                               $ 724,859           $ 269,668
                                                              ===========         ===========
</TABLE>

    See accompanying notes to condensed consolidated financial statements.



<PAGE>

                   MATTSON TECHNOLOGY, INC. AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                   (in thousands, except per share amounts)
                                  (unaudited)

<TABLE>
<CAPTION>
                                                                THREE MONTHS ENDED
                                                           --------------------------
                                                             APR. 1,        MAR. 26,
                                                              2001            2000
                                                           -----------     ----------
<S>                                                        <C>             <C>
Net sales                                                   $  73,499       $ 39,957
Cost of sales                                                  50,327         21,606
                                                           -----------     ----------
  Gross profit                                                 23,172         18,351
                                                           -----------     ----------
Operating expenses:
  Research, development and engineering                        18,901          6,298
  Selling, general and administrative                          31,874         10,333
  In-process research and development (Note 3)                 10,100              -
  Amortization of goodwill and intangibles                     10,399            225
                                                           -----------     ----------
     Total operating expenses                                  71,274         16,856
                                                           -----------     ----------
Income (loss) from operations                                 (48,102)         1,495
Interest and other income, net                                    488            398
                                                           -----------     ----------
Income (loss) before provision for income taxes and
  cumulative effect of change in accounting principle         (47,614)         1,893
Provision for income taxes                                      2,012            189
                                                           -----------     ----------
Income (loss) before cumulative effect of change in
  accounting principle                                        (49,626)         1,704
Cumulative effect of change in accounting principle,
   net of tax                                                       -         (8,080)
                                                           -----------     ----------
Net loss                                                    $ (49,626)      $ (6,376)
                                                           ===========     ==========
Income (loss) per share before cumulative effect
  of a change in accounting principle:
     Basic                                                  $   (1.36)      $   0.10
     Diluted                                                $   (1.36)      $   0.09
Cumulative effect of change in accounting principle
     Basic                                                  $       -       $  (0.48)
     Diluted                                                $       -       $  (0.48)
Net loss per share:
     Basic                                                  $   (1.36)      $  (0.38)
     Diluted                                                $   (1.36)      $  (0.38)
Shares used in computing net income (loss) per share:
     Basic                                                     36,613         16,863
     Diluted                                                   36,613         16,863
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       3
<PAGE>

                    MATTSON TECHNOLOGY, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (unaudited)


<TABLE>
<CAPTION>
                                                                                      THREE MONTHS ENDED
                                                                                ------------------------------
                                                                                  APR. 1,          MAR. 26,
                                                                                    2001             2000
                                                                                -------------    -------------
<S>                                                                             <C>              <C>
Cash flows from operating activities:
  Net loss                                                                      $    (49,626)    $     (6,376)
  Adjustments  to reconcile  net loss to net cash
  used in operating activities:
     Cumulative effect of accounting change, net of tax                                  -              8,080
     Depreciation and amortization                                                     5,073            1,162
     Deferred taxes                                                                   (2,208)             -
     Allowance for bad debt                                                              339              -
     Amortization of goodwill and intangibles                                         10,399             225
     Acquired  in-process  research and  development                                  10,100              -
     Changes in assets and liabilities, net of effect of acquisitions:
       Accounts receivable                                                            38,101          (14,610)
       Advance billings                                                              (35,234)             -
       Inventories                                                                      (767)          (3,644)
       Finished goods inventories shipped and awaiting customer acceptance           (35,574)             -
       Prepaid expenses and other current assets                                         239               24
       Other assets                                                                    4,996               32
       Accounts payable                                                                2,411              137
       Accrued liabilities                                                           (31,110)           2,440
       Deferred revenue                                                               49,657            2,624
                                                                                -------------    -------------
Net cash used in operating activities                                                (33,204)          (9,906)
                                                                                -------------    -------------
Cash flows from investing activities:
  Acquisition of property and equipment                                               (4,070)            (859)
  Purchases and sales of investments, net                                              8,018              -
  Net cash acquired from acquisitions                                                 39,075              -
                                                                                -------------    -------------
Net cash provided by (used in) investing activities                                   43,023             (859)
                                                                                -------------    -------------

Cash flows from financing activities:
  Borrowings/(repayment) on line of credit, net                                        4,048           (3,000)
  Proceeds  from the issuance of common stock, net of costs                              961          124,413
                                                                                -------------    -------------
Net cash provided by financing activities                                              5,009          121,413
                                                                                -------------    -------------
Effect of exchange rate changes on cash and cash equivalents                          (4,815)              (7)
                                                                                -------------    -------------
Net increase in cash and cash equivalents                                             10,013          110,641
Cash and cash equivalents, beginning of year                                          33,431           16,965
                                                                                -------------    -------------
Cash and cash equivalents, end of year                                          $     43,444     $    127,606
                                                                                =============    =============
Supplemental disclosure of non-cash transactions:
  Common stock issued for businesses                                            $    294,804     $          -
                                                                                =============    =============
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       4
<PAGE>

                   MATTSON TECHNOLOGY, INC. AND SUBSIDIARIES
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                 April 1, 2001

                                  (unaudited)

Note 1  Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been included.
The condensed consolidated balance sheet as of December 31, 2000 has been
derived from the audited financial statements as of that date, but does not
include all disclosures required by generally accepted accounting principles.

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses during the
reporting period. Estimates are used for, but are not limited to, the accounting
for doubtful accounts, inventory reserves, depreciation and amortization, sales
returns, warranty costs and income taxes. Actual results could differ from these
estimates.

These condensed consolidated financial statements include the accounts of
Mattson Technology and its subsidiaries. All significant inter-company accounts
and transactions have been eliminated in consolidation. The financial statements
should be read in conjunction with the audited financial statements included in
our Annual Report on Form 10-K for the year ended December 31, 2000.

The results of operations for the three months ended April 1, 2001 are not
necessarily indicative of results that may be expected for the entire year
ending December 31, 2001.

Note 2  Balance Sheet Detail (in thousands):

<TABLE>
<CAPTION>
                                                                 APR. 1,              DEC. 31,
                                                                  2001                 2000
                                                              -------------        -------------
     <S>                                                      <C>                  <C>
     Inventories:
       Purchased parts and raw materials                       $    89,510          $    25,108
       Work-in-process                                              42,055               14,241
       Finished goods                                               16,357                4,556
                                                              -------------        -------------
                                                               $   147,922          $    43,905
                                                              =============        =============

     Accrued liabilities:
       Warranty and installation reserve                       $    24,283          $    10,540
       Accrued compensation and benefits                             8,875                6,415
       Income taxes                                                  8,313                2,105
       Commissions                                                   4,246                2,130
       Other                                                        23,957                6,556
                                                              -------------        -------------
                                                               $    69,674          $    27,746
                                                              =============        =============
</TABLE>

Note 3  Acquisitions

On June 27, 2000, the Company entered into a definitive Strategic Business
Combination Agreement, subsequently amended by an Amendment to the Strategic
Business Combination Agreement dated December 15, 2000

                                       5
<PAGE>

("Combination Agreement") to acquire eleven direct and indirect subsidiaries,
comprising the semiconductor equipment division of STEAG Electronic Systems AG
("the STEAG Semiconductor Division"), and entered into an Agreement and Plan of
Merger ("Plan of Merger") to acquire CFM Technologies, Inc ("CFM"). Both
transactions were completed simultaneously on January 1, 2001.

STEAG Semiconductor Division

Pursuant to the Combination Agreement, the Company issued to STEAG Electronic
Systems AG ("SES") 11,850,000 shares of common stock valued at approximately
$124 million as of the date of the amended Combination Agreement, paid SES
$100,000 in cash, assumed certain obligations of SES and STEAG AG, the parent
company of SES, including certain intercompany indebtedness owed by the acquired
subsidiaries to SES in exchange for a secured promissory note in the principal
amount of $26.1 million (with an interest rate of 6%), which is payable by the
Company to SES on July 2, 2001, plus an obligation to reimburse SES
approximately $2.8 million in acquisition related costs. Under the Combination
Agreement, the Company is also obligated to cause two acquired subsidiaries to
pay certain amounts based on profits for 2000 to SES, in an amount estimated to
be 37.6 million Deutsche Marks (approximately $18.1 million as of January 1,
2001 and $16.8 million as of April 1, 2001). The actual amount to be paid is
subject to adjustment based on an audit of the profits of the relevant
subsidiaries for 2000. This portion of the amount due to SES is payable in
Deutsche Marks and, accordingly, the Company has exposure for exchange rate
volatility. The Company also agreed to grant options to purchase 850,000 shares
of common stock to employees of the STEAG Semiconductor Division subsequent to
the closing of the transaction, which is not included in the purchase price of
the STEAG Semiconductor Division. As part of the acquisition transaction, the
Company, SES, and Mr. Mattson entered into a Stockholder Agreement dated
December 15, 2000, providing for, among other things, the election of two
persons designated by SES to the Company's board of directors, restrictions on
future acquisitions or dispositions of Company common stock by SES, and
registration rights in favor of SES. The Company also entered into several
transition services agreements with SES, under which SES agreed to provide
specified payroll, communications, accounting information and intellectual
property administration services to certain German subsidiaries of the Company
for a term of one year. In fiscal year 2001, the Company estimates that it will
pay to SES approximately $700,000 in connection with the purchase of services or
supplies pursuant to the transition services agreements. In addition, the
Company entered into a manufacturing supply contract with a company affiliated
with SES, under which the Company has the right to utilize manufacturing and
assembly services based on an hourly rate. For fiscal 2001, the Company is
obligated to purchase at least $2.1 million worth of such services. SES holds
approximately 31.6% of the Company's common stock.

The acquisition has been accounted for under the purchase method of accounting
and the results of operations of the STEAG Semiconductor Division were included
in the condensed consolidated statement of operations of the Company from the
date of acquisition. The purchase price of the acquisition of $148 million,
which included $5.6 million of estimated direct acquisition related costs, was
used to acquire the common stock of the eleven direct and indirect subsidiaries
comprising of the STEAG Semiconductor Division. The allocation of the purchase
price to the assets acquired and liabilities assumed based on preliminary
estimates of fair value, which are subject to final adjustment, is as follows
(in thousands):

         Net tangible assets                                   $  96,136
         Acquired developed technology                            18,100
         Acquired workforce                                       11,500
         Goodwill                                                 28,148
         Acquired in-process research and development              5,400
         Deferred tax liability                                  (11,248)
                                                              -----------
                                                               $ 148,036
                                                              ===========


Purchased intangible assets, including goodwill, workforce and developed
technology of approximately $57.7

                                       6
<PAGE>

million, are being amortized over their estimated useful lives of seven, three
and five years, respectively. The Company attributed $5.4 million to in-process
research and development which we expensed immediately.

In connection with the acquisition of the STEAG Semiconductor Division, the
Company allocated approximately $5.4 million of the purchase price to in-process
research and development projects. This allocation represented the estimated
fair value based on risk-adjusted cash flows related to the incomplete research
and development projects. At the date of acquisition, the development of these
projects had not yet reached technological feasibility, and the research and
development in progress had no alternative future uses. Accordingly, the
purchase price allocated to in-process research and develoment was expensed as
of the acquisition date.

At the acquisition date, the STEAG Semiconductor Division was conducting design,
development, engineering and testing activities associated with the completion
of the Hybrid tool and the Single wafer tool. The projects under development at
the valuation date represent next-generation technologies that are expected to
address emerging market demands for wet processing equipment.

At the acquisition date, the technologies under development were approximately
60 percent complete based on engineering man-month data and technological
progress. The STEAG Semiconductor Division had spent approximately $3.3 million
on the in-process projects, and expected to spend approximately an additional
$2.4 million to complete all phases of the R&D. Anticipated completion dates
ranged from 10 to 18 months, at which times the Company expects to begin
benefiting from the developed technologies.

In making its purchase price allocation, management considered present value
calculations of income, an analysis of project accomplishments and remaining
outstanding items, an assessment of overall contributions, as well as project
risks. The value assigned to purchased in-process technology was determined by
estimating the costs to develop the acquired technology into commercially viable
products, estimating the resulting net cash flows from the projects, and
discounting the net cash flows to their present value. The revenue projection
used to value the in-process research and development was based on estimates of
relevant market sizes and growth factors, expected trends in technology, and the
nature and expected timing of new product introductions by the Company and its
competitors. The resulting net cash flows from such projects are based on
management's estimates of cost of sales, operating expenses, and income taxes
from such projects.

Aggregate revenues for the developmental STEAG Semiconductor Division products
were estimated to grow at a compounded annual growth rate of approximately 41
percent for the seven years following introduction, assuming the successful
completion and market acceptance of the major R&D programs. The estimated
revenues for the in-process projects were expected to peak within five years of
acquisition and then decline sharply as other new products and technologies are
expected to enter the market.

The rates utilized to discount the net cash flows to their present value were
based on estimated cost of capital calculations. Due to the nature of the
forecast and the risks associated with the projected growth and profitability of
the developmental projects, a discount rate of 23 percent was used to value the
in-process R&D. This discount rate was commensurate with the STEAG Semiconductor
Division stage of development and the uncertainties in the economic estimates
described above.

If these projects are not successfully developed, the sales and profitability of
the combined company may be adversely affected in future periods. Additionally,
the value of other acquired intangible assets may become impaired.

CFM Technologies

Under the Plan of Merger with CFM, the Company agreed to acquire CFM in a
stock-for-stock merger in which the Company issued 0.5223 shares of its common
stock for each share of CFM common stock outstanding at the closing date. In
addition, the Company agreed to assume all outstanding CFM stock options, based
on the same

                                       7
<PAGE>

0.5223 exchange ratio. The Company also agreed to issue additional options to
purchase 500,000 shares of its common stock to employees of CFM subsequent to
the closing of the transaction. On January 1, 2001, the Company completed its
acquisition of CFM. The purchase price included 4,234,335 shares of Mattson
common stock valued at approximately $150.2 million and the issuance of
1,763,678 options to acquire Mattson common stock for the assumption of
outstanding options to purchase CFM common stock valued at approximately $20.4
million using the Black Scholes option pricing model and the following
assumptions: risk free interest rate of 6.5%, average expected life of 2 years,
dividend yield of 0% and volatility of 80%.

The merger has been accounted for under the purchase method of accounting and
the results of operations of CFM were included in the consolidated statement of
operations of the Company from the date of acquisition. The purchase price of
the acquisition of CFM was $174 million, which included $3.4 million of
estimated direct acquisition related costs. The allocation of the purchase price
to the assets acquired and liabilities assumed based on preliminary estimates of
fair value, which are subject to final adjustment, is as follows (in thousands):

         Net tangible assets                                    $ 30,347
         Acquired developed technology                            50,500
         Acquired workforce                                       14,700
         Goodwill                                                 99,894
         Acquired in-process research and development              4,700
         Deferred tax liability                                  (26,080)
                                                              -----------
                                                               $ 174,061
                                                              ===========

Purchased intangible assets, including goodwill, workforce and developed
technology of approximately $165.1 million are being amortized over their
estimated useful lives of seven, three and five years, respectively. The Company
attributed $4.7 million to in-process research and development which was
expensed immediately.

In connection with the acquisition of CFM, the Company allocated approximately
$4.7 million of the purchase price to an in-process research and development
project. This allocation represented the estimated fair value based on risk-
adjusted cash flows related to one incomplete research and development project.
At the date of acquisition, the development of this project had not yet reached
technological feasibility, and the research and development in progress had no
alternative future use. Accordingly, the purchase allocated to in-process
research and development was expensed as of the acquisition date.

At the acquisition date, CFM was conducting design, development, engineering and
testing activities associated with the completion of the O3Di (Ozonated Water
Module). The project under development at the valuation date represents next-
generation technology that is expected to address emerging market demands for
more effective, lower cost, and safer resist and oxide removal processes. At the
acquisition date, the technology under development was approximately 80 percent
complete based on engineering man-month data and technological progress. CFM had
spent approximately $0.2 million on the in-process project, and expected to
spend approximately an additional $50,000 to complete all phases of the research
and development. Anticipated completion dates ranged from 2 to 3 months, at
which times the Company expects to begin benefiting from the developed
technology.

In making its purchase price allocation, management considered present value
calculations of income, an analysis of project accomplishments and remaining
outstanding items, an assessment of overall contributions, as well as project
risks. The value assigned to purchased in-process technology was determined by
estimating the costs to develop the acquired technology into a commercially
viable product, estimating the resulting net cash flows from the project, and
discounting the net cash flows to their present value. The revenue projection
used to value the in-process research and development was based on estimates of
relevant market sizes and growth factors, expected trends in technology, and the
nature and expected timing of new product introductions by the Company and its
competitors. The resulting net cash flows from the project is based on
management's estimates of cost of sales, operating expenses, and income taxes
from such projects.

                                       8
<PAGE>

Aggregate revenues for the developmental CFM product were estimated for the five
to seven years following introduction, assuming the successful completion and
market acceptance of the major research and development programs. The estimated
revenues for the in-process project was expected to peak within two years of
acquisition and then decline sharply as other new products and technologies are
expected to enter the market.

The rates utilized to discount the net cash flows to their present value were
based on estimated cost of capital calculations. Due to the nature of the
forecast and the risks associated with the projected growth and profitability of
the developmental project, a discount rate of 23 percent was used to value the
in-process research and development. This discount rate was commensurate with
CFM's stage of development and the uncertainties in the economic estimates
described above.

If this project is not successfully developed, the sales and profitability of
the combined company may be adversely affected in future periods. Additionally,
the value of other acquired intangible assets may become impaired.

The following table presents the unaudited pro forma results for the three
months ended March 26, 2000 assuming that the Company acquired the STEAG
Semiconductor Division and CFM on January 1, 2000. The pro forma
information does not purport to be indicative of what would have occurred had
the acquisitions been made as of January 1, 2000 or of the results that may
occur in the future. Net loss excludes the write-off of acquired-in-process
research and development of $10.1 million and includes amortization of goodwill
and intangibles related to these acquisitions of $10.2 million for the three
months ended March 26, 2000. The unaudited pro forma information is as follows
(in thousands, except net loss per share):

                     Net sales                   $  82,817

                     Net loss                    $ (37,944)

                     Net loss per share          $   (1.15)

Note 4 Accounting for Derivative Instruments and Hedging Activities

On January 1, 2001 the Company adopted the Statement of Financial Accounting
Standards ("SFAS") No. 133. Prior to this the Company did not employ hedge
accounting and therefore all hedging contracts were measured at fair value. As a
result, the Company did not have a transition adjustment related to the fair
value of derivatives upon adoption, and the impact of adoption of this standard
was immaterial to the Company.

The Company maintains a foreign currency risk management strategy that uses
derivative instruments to protect it from unanticipated fluctuations in earnings
and cash flows caused by volatility in currency exchange rates. The Company uses
forward foreign exchange contracts to hedge forecasted intercompany Yen sales by
matching terms of currency, amount and maturity based on purchase orders. The
Company also hedges existing foreign intercompany receivables until collections
are received. The maximum time horizon the Company hedges its exposure to the
variability in future cash flows for forecasted transactions or receivables is
for less than one year.

Certain hedging instruments have been designated as cash flow hedges under SFAS
No. 133. The Company formally documents all designated hedging instruments and
their relationship to respective hedged items, including its risk management
strategy, hedged risk, assessment of hedge effectiveness and method for
recognizing hedge results in earnings. The Company assesses, both at the hedge's
inception and on an ongoing basis, whether the derivatives that are used in
hedging transactions are highly effective in offsetting changes in the cash flow
of hedged items. In situations where the Company is hedging existing foreign
currency receivables, the Company has decided not to designate the contracts in
hedging relationships. Although the hedges will be economically effective at
offsetting changing cash flows from collecting the foreign receivables, the
Company believes that the financial reporting results will be similar as if they
designated the contracts.

The Company discontinues hedge accounting prospectively when (1) it is
determined that a derivative is no longer effective in offsetting changes in the
fair value of a hedged item; (2) the derivative expires, is terminated or
exercised, or (3) the derivative is discontinued as a hedge instrument, because
it is unlikely that a transaction will occur. As of April 1, 2001, the Company
has not discontinued any cash flow hedges.

                                       9
<PAGE>

The Company records the foreign currency forward contracts as either an
asset/liability on the balance sheet at fair value. If the contract has been
designated and is effective as a cash flow hedge, the change in fair value is
recorded to accumulated other comprehensive income. The Company immediately
recognizes into earnings any hedge ineffectiveness. In the same period that the
hedged item affects earnings, the Company reclassifies the results of the hedge
from accumulated other comprehensive income into earnings. For the three months
ended April 1, 2001, the Company recorded changes in the fair value of the
derivatives of approximately $332,000 as in increase to other assets and
accumulated other comprehensive income, respectively. For undesignated forward
foreign exchange contracts, the change in fair value is recorded in other
expense every period. Generally, this had the effect of offsetting the losses
recognized from remeasuring foreign currency denominated receivables for the
period.

The Company anticipates shipment of the open purchase orders during fiscal 2001
to its Japanese subsidiary for which it designated cash flow hedges. When
these sales are recognized, it will result in a reclassification of the balance
in accumulated other comprehensive income, which is currently $332,000. This is
anticipated to occur within the next twelve months.


Note 5 Net Loss Per Share

SFAS No. 128 requires dual presentation of basic and diluted earnings per share
on the face of the income statement. Basic EPS is computed by dividing income
(loss) available to common stockholders (numerator) by the weighted average
number of common shares outstanding (denominator) for the period. Diluted EPS
gives effect to all dilutive potential common shares outstanding during the
period. The computation of diluted EPS uses the average market prices during the
period. All amounts in the following table are in thousands except per share
data.

<TABLE>
<CAPTION>
                                                                          THREE MONTHS ENDED
                                                                   ---------------------------------
                                                                      APR. 1,           MAR. 26,
                                                                       2001               2000
                                                                   --------------    ---------------
       <S>                                                         <C>               <C>
       BASIC AND DILUTED LOSS PER SHARE:
         Loss available to common stockholders                      $   (49,626)       $   (6,376)
         Weighted average common shares outstanding                      36,613            16,863
                                                                   --------------    ---------------
         Basic loss per share                                       $     (1.36)       $    (0.38)
                                                                   ==============    ===============
</TABLE>

Total stock options outstanding at April 1, 2001 and March 26, 2000 of 4,989,244
and 2,973,288 respectively were excluded from the computation of diluted EPS
because the effect of including them would have been anitdilutive due to the
loss available to common stockholders.

Note 6 Comprehensive Income

In 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income."
SFAS No. 130 establishes standards for disclosure and financial statement
presentation for reporting total comprehensive income and its individual
components. Comprehensive income, as defined, includes all changes in equity
during a period from
                                       10
<PAGE>

non-owner sources. The Company's comprehensive income includes net income,
foreign currency translation adjustments and unrealized gains and losses on
investments, and is presented in the statement of stockholders' equity. The
adoption of this Statement had no impact on the Company's net income or
stockholders' equity.

The following are the components of comprehensive loss:

<TABLE>
<CAPTION>
                                                                  THREE MONTHS ENDED
                                                             ----------------------------
    (in thousands)                                             APR. 1,        MAR. 26,
                                                                 2001           2000
                                                             -------------   ------------
    <S>                                                      <C>             <C>
    Net loss                                                  $   (49,626)    $   (6,376)

    Foreign currency translation adjustments...............        (4,815)            (7)
    Unrealized investment  gain............................           303              -
    Gain on cash flow hedging instruments..................           332              -
                                                             -------------   ------------
    Comprehensive loss.....................................   $ (53,806)      $   (6,383)
                                                             =============   ============
</TABLE>

The components of accumulated other comprehensive loss, net of related tax are
as follows:

<TABLE>
<CAPTION>
    (in thousands)                                             APR. 1,        DEC. 31,
                                                                 2001           2000
                                                             -------------   ------------
    <S>                                                      <C>             <C>
    Cumulative translation adjustments....................      $ (5,074)      $  (258)
    Unrealized investment  gain...........................           380            77
    Gain on cash flow hedging instruments.................           332             -
                                                             -------------   ------------
                                                                $ (4,362)      $  (181)
                                                             =============   ============
</TABLE>

Note 7 Reportable Segments

SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information" supersedes SFAS No. 14, "Financial Reporting for Segments of a
Business Enterprise", replacing the "industry segment" approach with the
"management" approach. SFAS No. 131 establishes standards for reporting
information about operating segments in financial statements. Operating segments
are defined as components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker, or chief decision making group, in deciding how to allocate
resources and in assessing performance. Brad Mattson, Chief Executive Officer of
the Company, is the Company's chief operating decision maker. As the Company's
business is completely focused on one industry segment, design, manufacturing
and marketing of advanced fabrication equipment to the semiconductor
manufacturing industry, management believes that the Company has one reportable
segment. The Company's revenues and profits are generated through the sale and
service of products for this one segment. As a result, no additional operating
segment information is required to be disclosed.

Note 8 Line of Credit

During fiscal 2000, one of the subsidiaries we acquired as part of the
acquisition of the STEAG Semiconductor Division entered into a two-year
revolving line of credit with a bank in Japan in the amount of 500 million Yen
(approximately $4.0 million), expiring in September 2002. Under this line of
credit, the current borrowing is 450 million Yen (approximately $3.6 million)
and bears interest at a per annum rate equal to 1.96% through March 2001 and
thereafter bears an interest rate of 1.75%. The line of credit is secured by a
letter of credit.

                                       11
<PAGE>

Note 9 Revenue Recognition

Mattson derives revenue from two primary sources- equipment sales and spare part
sales. In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements." The Company implemented the provisions of SAB 101 in the fourth
quarter of 2000, retroactive to January 1, 2000. The Company previously
recognized revenue from the sales of its products generally upon shipment.
Effective January 1, 2000, the Company changed its method of accounting for
equipment sales to recognize the corresponding revenues as follows: 1) for
equipment sales of existing products with new specifications or acceptance
clauses to a new customer, and for all sales of new products, revenue is
recognized upon customer acceptance; 2) for equipment sales to existing
customers, who have purchased the same equipment with the same customer
specified and previously demonstrated acceptance provisions, the lesser of the
fair value of the equipment or the contractual amount billable upon shipment is
recorded as revenue upon title transfer. The remainder is recorded as deferred
revenue and recognized as revenue upon customer acceptance. From time to time,
however, the Company allows customers to evaluate systems, and since customers
can return such systems at any time with limited or no penalty, the Company does
not recognize revenues until these evaluation systems are accepted by the
customer. Revenues associated with equipment sales to customers in Japan are
deferred until customer acceptance. Revenue recognition for spare part sales has
generally not changed under the provisions of SAB 101. In all cases, revenue is
only recognized when persuasive evidence of an arrangement exists, delivery has
occurred or services have been rendered, the seller's price is fixed or
determinable and collectibility is reasonably assured. The cumulative effect of
the change in accounting principle of $8.1 million is reported as a loss in the
quarter ended March 26, 2000. The cumulative effect of the change in accounting
principle includes system revenue net of cost of sales and certain expenses,
including warranty and commission expenses, that will be recognized when the
conditions for revenue recognition are met. We restated our operating results
for the first three quarters of the year ended December 31, 2000, as reflected
in the Quarterly Results of Operations reported in our Form 10-K for the year
ended December 31, 2000.

Service and maintenance contract revenue, which to date has been insignificant,
is recognized on a straight-line basis over the service period of the related
contract.

Note 10 Subsequent Events

In February 2001, the Company announced plans to divest or shut-down our single-
wafer RT-CVD business unit, previously known as STEAG CVD Systems. The business
unit, which was acquired as part of the STEAG Semiconductor Division, included
lamp-based RT-CVD tools that do not fit with our strategic roadmap for thermal
and CVD products.

In April 2001, the Company completed the acquisition of 97% of the outstanding
shares of R.F. Services, Inc. for a price of approximately $887,000. Brad
Mattson, Chief Executive Officer of the Company, owned a majority of the
outstanding shares of R.F. Services, Inc. and served as a director of that
company.

A major restructuring project has been initiated in order to cut costs. Twelve
key areas have been identified and the implementation has started. The cost
cutting measures include a significant headcount reduction, shorter work week
and a 10% pay cut for executives. The Company will be recording restructuring
charges in the second quarter for these actions.

Item 2. Management's  Discussion and Analysis of Financial Condition and Results
of Operations.

The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our condensed consolidated
financial statements and related notes included elsewhere in this report. In
addition to historical information, this discussion contains certain
forward-looking statements that involve risks and uncertainties. Our actual
results could differ materially from those anticipated by these forward-looking
statements due to factors, including but not limited to, those set forth or
incorporated by reference under "Factors That May Affect Future Results and
Market Price of Stock" and elsewhere in this report.

Overview

We are a leading supplier of advanced, high productivity semiconductor
processing equipment used in the fabrication of integrated circuits. We provide
our customers with semiconductor manufacturing equipment that delivers high
productivity and advanced process capability. In addition, through our
international technical support organization and comprehensive warranty program,
we provide global customer support.

                                       12
<PAGE>

We began operations in 1989 and in 1991 we shipped our first product, the Aspen
Strip, a photoresist removal system. Our Aspen Strip, CVD, RTP and LiteEtch
product lines are based on a common Aspen platform with a modular, multi-
station, multi-chamber architecture, designed to deliver high productivity, low
cost of ownership and savings of cleanroom space. On January 1, 2001 we
completed a business combination under the purchase method of accounting with
the semiconductor equipment division of STEAG Electronic Systems AG ("the STEAG
Semiconductor Division") and a merger with CFM Technologies, Inc. ("CFM") (we
refer to these related acquisitions together as "the Merger"). The three
combined companies had pro forma 2000 revenues in excess of $500 million, which
would make us the 14th largest semiconductor processing equipment supplier. As a
result of the merger, we offer industry-leading products and technologies in
multiple product lines, and we employ more than 1,800 people worldwide. Before
the merger, we were already the world leader in dry strip process equipment
market share. With the addition of the RTP product line from the STEAG
Semiconductor Division and the combination of CFM and STEAG Semiconductor
Division wet technology tools, we are now second in rapid thermal processing
("RTP") market share and among the top five providers of wet processing
equipment. Our products now include strip, etch, deposition, rapid thermal
processing, wet and Epi systems. Our customers include nine of the top ten
semiconductor manufacturers worldwide.

Our business depends upon capital expenditures by manufacturers of semiconductor
devices. The level of capital expenditures by these manufacturers depends upon
the current and anticipated market demand for such devices. The semiconductor
industry had one of its best years ever in 2000, but signs of a downturn became
apparent towards the end of that year and have resulted in lower predictions for
2001. The cyclicality and uncertainties regarding overall market conditions
continue to present significant challenges to us and impair our ability to
forecast near term revenue. Our ability to quickly modify our operations in
response to changes in market conditions is limited.

During the first quarter ended April 1, 2001, we had a net loss of $49.6
million, including the effects of in-process R&D write-offs and amortization of
merger-related goodwill. Future results will depend on a variety of factors,
particularly overall market conditions and timing of significant orders, our
ability to bring new systems to market, the timing of new product releases by
our competitors, patterns of capital spending by our customers, market
acceptance of new and/or enhanced versions of our systems, changes in pricing by
us, our competitors, customers, or suppliers and the mix of products sold. We
are dependent upon increases in sales in order to achieve and sustain
profitability. If our sales do not increase, the current levels of operating
expenses could materially and adversely affect our financial results.

Recent Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
establishes new standards of accounting and reporting for derivative instruments
and hedging activities. SFAS No. 133 requires that all derivatives be recognized
at fair value in the statement of financial position, and that the corresponding
gains or losses be reported either in the statement of operations or as a
component of comprehensive income, depending on the type of hedging relationship
that exists. SFAS No. 133 is effective for fiscal years beginning after June 15,
2000 and cannot be applied retroactively. The required implementation date of
the standard was delayed by the issuance of SFAS No. 137 and amended by SFAS No.
138. The Company adopted the standards in the first quarter of 2001.

In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101 ("SAB

                                       13
<PAGE>

101"), Revenue Recognition in Financial Statements. SAB 101 provides guidance on
applying generally accepted accounting principles to revenue recognition issues
in financial statements. Among other things, SAB 101 has resulted in a change
from the established practice of recognizing revenue at the time of shipment of
a system, and instead delays revenue recognition, in whole or in part until the
time of customer acceptance of the system. Because of the cyclical nature of the
semiconductor equipment industry, and our dependence on a small number of
comparatively large sales, the change in revenue recognition practices can have
a material affect on revenue in any particular reporting period. We adopted SAB
101 in the fourth quarter of fiscal 2000, effective retroactive to January 1,
2000, with the impact recorded as a cumulative effect in the first quarter of
2000. Our previously reported results of operations for the first three quarters
of 2000 were restated by applying SAB 101 to those periods. A detailed
explanation of our revenue recognition policy under SAB 101 is described above
in Note 9 of the "Notes to Condensed Consolidated Financial Statements."

Results of Operations

The following table sets forth our statement of operations data expressed as a
percentage of net sales for the period indicated:

<TABLE>
<CAPTION>
                                                                    THREE MONTHS ENDED
                                                               ----------------------------
                                                                  APR. 1,        MAR. 26,
                                                                    2001           2000
                                                               -------------   ------------
    <S>                                                        <C>             <C>
    Net sales                                                          100%           100%
    Cost of sales                                                       68%            54%
                                                               -------------   ------------
      Gross profit                                                      32%            46%
                                                               -------------   ------------

    Operating expenses:
      Research, development and engineering                             26%            16%
      Selling, general and administrative                               43%            26%
      In-process research and development                               14%             -
      Amortization of goodwill and intangibles                          14%             -
                                                               -------------   ------------
         Total operating expenses                                       97%            42%
                                                               -------------   ------------
    Income (loss) from operations                                      (65)%            4%
    Interest and other income, net                                       1%             1%
                                                               -------------   ------------
    Income (loss) before provision for income taxes and                (65)%            5%
       cumulative effect of change in accounting principle
    Provision for income taxes                                           3%            (1)%
                                                               -------------   ------------
    Income (loss) before cumulative effect of change in                (68)%            4%
       accounting principle
    Cumulative effect of change in accounting principle,
       net of tax benefit                                                -            (20)%
                                                               -------------   ------------
    Net loss                                                           (68)%          (16)%
                                                               =============   ============
</TABLE>


Net Sales

Net sales for the first quarter of 2001 were $73.5 million on a consolidated
basis. We estimate that on a pro forma basis for the three months ended March
26, 2000, assuming that we had acquired the STEAG Semiconductor Division and CFM
on January 1, 2000, the combined company would have had net sales of $82.8
million, so that net sales in the first quarter of 2001 would reflect a decrease
of 11%. Excluding the STEAG Semiconductor Division and CFM, net sales for the
first quarter of 2001 were $39.6 million, a decrease of 1% from $40.0 million
for the same quarter last year. The decrease in quarterly net sales is due to
the economic downturn in the semiconductor industry and also the timing effects
of revenue recognition based on our shipments to Japan effected by SAB 101,
where the time-lag between shipment and customer acceptance can exceed one year.
In the first quarter of 2000 sales to Japan were through our distributor in
Japan and revenue was recognized upon shipment. Approximately 22% of our
shipments in the first quarter of 2001 were to Japan-based customers and
corresponding net sales were deferred in accordance with our revenue recognition
policy.

In addition, the majority of net sales by the STEAG Semiconductor Division and
CFM in the first quarter of 2001 were deferred due to the complexities of the
equipment shipped and the associated acceptance clauses in accordance with our
revenue recognition policy. Our deferred revenue at the end of first quarter of
2001 was approximately $93.5 million, up from $40.7 million at the end of the
fourth quarter of 2000. We expect these deferred revenues to be recognized as
revenue in our consolidated statement of operations in the next six to twelve
months. Under the rules of the purchase method of accounting, no deferred
revenues relating to sales by the acquired entities are carried over-through the
acquisition. As a result, it will take several quarters of combined operation
before our net sales results normalize and our prior periods can be compared
across reporting periods.

                                      14

<PAGE>

First quarter bookings were $98.5 million, an increase of 72% compared to
bookings of $57.4 million in the first quarter of 2000, resulting in a book to
bill ratio of 0.8 to 1.0. Backlog increased 21% to $85.7 million in the first
quarter of 2001 compared to $70.9 million in the first quarter of 2000. These
increases can be attributed to the acquisitions of STEAG Semiconductor Division
and CFM.

International sales, which are predominantly to customers based in Japan and the
Pacific Rim (which includes Taiwan, Singapore and Korea), accounted for 53% and
62% of net sales for the first quarter of 2001 and 2000, respectively. In the
second quarter of 2000, we shifted our strategy in Japan to a direct sales model
and terminated our distributor relationship with Marubeni. We anticipate that
international sales will continue to account for a significant portion of net
sales for 2001.

Gross Margin

Our gross margin for the first quarter of 2001 decreased to 32% from 46% for
the first quarter of 2000. The decrease in gross margins was principally due to
lower gross margins experienced by STEAG Semiconductor Division due to the
write-up of inventory to fair value on the opening balance sheet in accordance
with APB 16. We expect this inventory to be expensed through cost of goods sold
over the next two or three quarters.

Our gross margin has varied over the years and will continue to vary based on
multiple factors including effects of revenue recognition under SAB 101, our
product mix, economies of scale, overhead absorption levels, and costs
associated with the introduction of new products. Although we have not offered
substantial discounts on our systems to date, with the downturn in the
semiconductor industry we can expect to experience pricing pressures. Our gross
margin, for each of our product divisions, on international sales is
substantially the same as domestic sales.

Research, Development and Engineering

Research, development and engineering expenses for the first quarter of 2001
were $18.9 million, or 26% of net sales, as compared to $6.3 million, or 16% of
net sales, for the first quarter of 2000. The increase in absolute dollars was
due to the increase in personnel and spending as a result of the merger. The
increase in research, development and engineering expenses, as a percentage of
net sales during the first quarter of 2001 compared to the same period last year
is due to a significant portion of sales being deferred for CFM and the STEAG
Semiconductor Division in accordance with our revenue recognition policy.

Selling, General and Administrative

Selling, general and administrative expenses for the first quarter of 2001 were
$31.9 million, or 43% of net sales, as compared to $10.3 million, or 26% of net
sales, for the first quarter of 2000. The increase in absolute dollars was due
to the increase in personnel, spending and additional professional expenses for
integration as a result of the merger. The increase in selling, general and
administrative expenses as a percentage of net sales during the first quarter of
2001 as compared to the same period last year is due to relatively lower
revenues recognized under SAB 101 during the first quarter of 2001, and higher
expenses related to the integration of the acquisitions.

STEAG Semiconductor Division's In-Process Research and Development

In connection with the acquisition of the STEAG Semiconductor Division, we
allocated approximately $5.4 million of the purchase price to in-process
research and development projects. This allocation represented the estimated
fair value based on risk-adjusted cash flows related to the incomplete research
and development projects. At the date of acquisition, the development of these
projects had not yet reached technological feasibility, and the research and
development in progress had no alternative future uses. Accordingly, the
purchase price allocated to in-process research and development was expensed as
of the acquisition date.

At the acquisition date, the STEAG Semiconductor Division was conducting design,
development, engineering and testing activities associated with the completion
of the Hybrid tool and the Single wafer tool. The projects under development at
the valuation date represent next-generation technologies that are expected to
address emerging market demands for wet processing equipment.

At the acquisition date, the technologies under development were approximately
60 percent complete based on engineering man-month data and technological
progress. The STEAG Semiconductor Division had spent approximately $3.3 million
on the in-process projects, and expected to spend approximately an additional
$2.4 million to complete all phases of the R&D. Anticipated completion dates
ranged from 10 to 18 months, at which times we expect to begin benefiting from
the developed technologies.

In making our purchase price allocation, we considered present value
calculations of income, an analysis of project accomplishments and remaining
outstanding items, an assessment of overall contributions, as well as project
risks. The value assigned to purchased in-process technology was determined by
estimating the costs to develop the acquired technology into commercially viable
products, estimating the resulting net cash flows from the projects, and
discounting the net cash flows to their present value. The revenue projection
used to value the in-process research and development was based on estimates of
relevant market sizes and growth factors, expected trends in technology, and the
nature and expected timing of new product introductions by us and our
competitors. The resulting net cash flows from such projects are based on our
management's estimates of cost of sales, operating expenses, and income taxes
from such projects.

Aggregate revenues for the developmental STEAG Semiconductor Division products
were estimated to grow at a compounded annual growth rate of approximately 41
percent for the seven years following introduction, assuming the successful
completion and market acceptance of the major R&D programs. The estimated
revenues for the in-process projects were expected to peak within five years of
acquisition and then decline sharply as other new products and technologies are
expected to enter the market.

The rates utilized to discount the net cash flows to their present value were
based on estimated cost of capital calculations. Due to the nature of the
forecast and the risks associated with the projected growth and profitability of
the developmental projects, a discount rate of 23 percent was used to value the
in-process R&D. This discount rate was commensurate with the STEAG Semiconductor
Division stage of development and the uncertainties in the economic estimates
described above.

If these projects are not successfully developed, our sales and profitability
may be adversely affected in future periods. Additionally, the value of other
acquired intangible assets may become impaired.

CFM's In-Process Research and Development

In connection with the acquisition of CFM we allocated approximately $4.7
million of the purchase price to the in-process research and development
project. This allocation represented the estimated fair value based on risk-
adjusted cash flows related to the incomplete research and development project.
At the date of acquisition, the development of this project had not yet reached
technological feasibility, and the research and development in progress had no
alternative future use. Accordingly, the purchase price allocated to in-process
research and development was expensed as of the acquisition date.

At the acquisition date, CFM was conducting design, development, engineering and
testing activities associated with the completion of the O3Di (Ozonated Water
Module). The project under development at the valuation date represents next-
generation technology that is expected to address emerging market demands for
more effective, lower cost, and safer resist and oxide removal processes. At the
acquisition date, the technology under development was approximately 80 percent
complete based on engineering man-month data and technological progress. CFM had
spent approximately $0.2 million on the in-process project, and expected to
spend approximately an additional $0.05 million to complete all phases of the
research and development. Anticipated completion dates ranged from 2 to 3
months, at which times we expect to begin benefiting from the developed
technology.

In making our purchase price allocation, management considered present value
calculations of income, an analysis of project accomplishments and remaining
outstanding items, an assessment of overall contributions, as well as project
risks. The value assigned to purchased in-process technology was determined by
estimating the costs to develop the acquired technology into a commercially
viable product, estimating the resulting net cash flows from the project, and
discounting the net cash flows to their present value. The revenue projection
used to value the in-process research and development was based on estimates of
relevant market sizes and growth factors, expected trends in technology, and the
nature and expected timing of new product introductions by us and our
competitors. The resulting net cash flows from such projects are based on
management's estimates of cost of sales, operating expenses, and income taxes
from such projects.

Aggregate revenues for the developmental CFM product were estimated for the five
to seven years following introduction, assuming the successful completion and
market acceptance of the major R&D programs. The estimated revenues for the in-
process projects were expected to peak within two years of acquisition and then
decline sharply as other new products and technologies are expected to enter the
market.

The rates utilized to discount the net cash flows to their present value were
based on estimated cost of capital calculations. Due to the nature of the
forecast and the risks associated with the projected growth and profitability of
the developmental project, a discount rate of 23 percent was used to value the
in-process research and development. This discount rate was commensurate with
CFM's stage of development and the uncertainties in the economic estimates
described above.

If this project is not successfully developed, our sales and profitability may
be adversely affected in future periods. Additionally, the value of other
acquired intangible assets may become impaired.

                                       15
<PAGE>

Financial Statements.

Amortization of Goodwill and Intangibles

Goodwill and intangibles represent the purchase price of the STEAG Semiconductor
Division and CFM in excess of identified tangible assets. In connection with the
Merger effective January 1, 2001, the Company recorded $222.8 million of
goodwill and intangibles which are being amortized on a straight-line basis over
three to seven years. The allocation of total purchase price to assets acquired
and liabilities assumed are based on preliminary estimates of fair value which
are subject to final adjustment. The Company recorded amortization expense of
$10.4 million for the three months ended April 1, 2001, respectively. There can
be no assurance that the value of the goodwill and intangible assets may not
become impaired prior to being fully amortized.

Provision for Income Taxes

The Company recorded a provision for income taxes for the quarter ended April 1,
2001 of approximately $2.0 million which consisted primarily of income taxes in
foreign jurisdictions.

Liquidity and Capital Resources

Our cash and cash equivalents, restricted cash and short-term investments were
$106 million at April 1, 2001, an increase of $2 million at December 31, 2000.
Stockholders' equity at April 1, 2001 was approximately $428 million.

During fiscal 2000, one of the subsidiaries we acquired as part of the STEAG
Semiconductor Division entered into a two-year revolving line of credit with a
bank in Japan in the amount of 500 million Yen (approximately $4.0 million),
expiring in September 2002. Under this line of credit the current borrowing is
450 million Yen (approximately $3.6 million) which bears interest at a per annum
rate equal to 1.96% through March 2001 and thereafter bears an interest rate of
1.75%. The line of credit is secured by a letter of credit.

Net cash used in operating activities was $33.2 million during the first quarter
of 2001 as compared to $9.9 million during the same quarter last year. The net
cash used in operating activities during the first quarter of 2001 was primarily
attributable to the net loss of $49.6 million, deferred taxes of $2.2 million,
an increase in advance billings of $35.2 million, an increase in inventories of
$36.3 million, and a decrease in accrued liabilities of $31.1 million, offset by
non-cash depreciation and amortization of $5.1 million, amortization of goodwill
and intangibles of $10.4 million, acquired in-process research and development
of $10.1 million, a decrease in accounts receivable of $38.1 million, an
increase in accounts payable of $2.4 million, and an increase in deferred
revenue of $49.7 million. Net cash used in operating activities during the first
quarter of 2000 was $9.9 million and was primarily due to an increase in
accounts receivable and inventories of $14.6 million and $3.6 million,
respectively. The increase in accounts receivable and inventories was partially
offset by our net loss of $6.4 million and depreciation and amortization expense
of $1.4 million.

Net cash provided by investing activities was $43.0 million during the first
quarter of 2001 as compared to net cash used in investing activities of $0.9
million during the first quarter of 2000. The net cash provided by investing
activities during the first quarter of 2001 is attributable to the net cash
acquired from the acquisition of the STEAG Semiconductor Division and CFM of
$39.1 million, sales of investments of $8.0 million, offset by purchases of
property and equipment of $4.1 million. Net cash used in investing activities
during the first quarter of 2000 was $0.9 million and was attributable to the
purchase of property and equipment of $0.9 million.

Net cash provided by financing activities was $5.0 million during the first
quarter of 2001 as compared to $121.4

                                      16
<PAGE>

million during the same period last year. The net cash provided by financing
activities during the first quarter of 2001 is primarily attributable to the
borrowings from our Japanese line of credit of $4.0 million, and proceeds from
our stock plans of $1.0 million. Net cash provided by financing activities
during the first quarter of 2000 was $121.4 million and was primarily
attributable to the completion of our follow on public offering of 3,000,0000
shares of common stock on March 8, 2000. The public offering price was $42.50
per share before offering costs. On March 16, 2000, the underwriters exercised a
right to purchase an additional 90,000 shares to cover over-allotments. The net
proceeds of approximately $124.4 million were used for general corporate
purposes, principally working capital and capital expenditures. This increase
was offset by a $3.0 million repayment against our U.S. bank line of credit,
which has subsequently expired.

Upon the closing of the acquisition of the STEAG Semiconductor Division on
January 1, 2001, Mattson issued to STEAG Electronic Systems AG ("SES") a secured
promissory note, due July 2, 2001, in the principal amount of $26.1 million, to
offset the amount of outstanding working capital loans from SES to the STEAG
Semiconductor Division at the time of closing. Our restricted cash balance at
April 1, 2001 is intended to cover the full obligation for this payment. In
accordance with the Combination Agreement to acquire the STEAG Semiconductor
Division, we are also required to make a payment, estimated to be 37.6 million
Deutsche Marks (approximately $18.1 million as of January 1, 2001 and $16.8
million as of April 1, 2001) to SES to satisfy an obligation to cause two
acquired subsidiaries to pay certain amounts based on their profits for 2000 to
SES, plus an obligation to reimburse SES approximately $2.8 million in
acquisition related costs. These obligations, which are expected to be settled
in the second quarter of 2001, will be met by our existing cash balance.

Based on current projections, we believe that our current cash and investments
positions along with cash generated through operations will be sufficient to
meet our anticipated cash needs for working capital and capital expenditures for
at least the next 12 months. Management's projections are based on the ability
to manage inventories and collect our accounts receivable balances in this
market downturn. If we are unable to control our inventory or accounts
receivable balances, we may be required to seek alternative sources of
financing. We may need to raise additional funds in future periods through
public or private financing, or other sources, to fund our operations. We may
not be able to obtain adequate or favorable financing when needed. Failure to
raise capital when needed could harm our business. If we raise additional funds
through the issuance of equity securities, the percentage ownership of our
stockholders would be reduced. Furthermore, these equity securities may have
rights, preferences or privileges senior to our common stock.

Mergers and Acquisitions

On January 1, 2001, the Company completed its acquisition of the STEAG
Semiconductor Division. In connection with the acquisition, the Company issued
11,850,000 shares of Mattson common stock and paid $100,000 in cash. The Company
is obligated to make additional cash payments of approximately $48.9 million by
July 2001.

On January 1, 2001, the Company also completed its acquisition of CFM under the
purchase method of accounting. In connection with the acquisition, 4,234,335
shares of Mattson common stock valued at approximately $150.2 million and
Mattson stock options valued at approximately $20.4 million were exchanged at
the closing date.

In April 2001, the Company completed the acquisition of 97% of the outstanding
shares of R.F. Services, Inc. for a price of approximately $887,000. Brad
Mattson, our Chief Executive Officer of the company, owned a majority of the
outstanding shares of R.F. Services, Inc. and served as a director of that
corporation.

Factors That May Affect Future Results and Market Price of Stock

In this report and from time to time, we may make forward looking statements
regarding, among other matters, our future strategy, product development plans,
productivity gains of our products, financial performance and growth. The
forward-looking statements are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Forward looking statements
address matters which are subject to a number of risks and uncertainties,
including those set forth in our Annual Report on Form 10-K, and Exhibit 99.1
hereto, all of which

                                       17
<PAGE>

are incorporated here by reference, and the following:

OUR SALES REFLECT THE CYCLICALITY OF THE SEMICONDUCTOR INDUSTRY WHICH CAN CAUSE
OUR OPERATING RESULTS TO FLUCTUATE SIGNIFICANTLY AND COULD CAUSE US TO FAIL TO
ACHIEVE ANTICIPATED SALES.

Our business, including the recently acquired businesses of the STEAG
Semiconductor Division and CFM, have depended in significant part upon capital
expenditures by manufacturers of semiconductor devices, including manufacturers
that are opening new or expanding existing fabrication facilities. The level of
capital expenditures by these manufacturers of semiconductor devices depends
upon the current and anticipated market demand for such devices and the products
utilizing such devices. The semiconductor industry is highly cyclical. Following
the very strong year in 2000, the semiconductor industry now faces a significant
downturn in 2001, and we and other industry participants are experiencing
significant order delays and cancellations. The severity and duration of the
downturn are unknown. When these downturns occur, our operating results and
financial condition may be adversely affected. We anticipate that a significant
portion of new orders will continue to depend upon demand from semiconductor
manufacturers and independent foundries that build or expand large fabrication
facilities. If existing fabrication facilities are not expanded or new
facilities are not built, demand for our systems may not develop or increase,
and we may be unable to generate significant new orders for our systems. If we
are unable to develop new orders for our systems, we will not achieve
anticipated net sales levels. Any future downturns or slowdowns in the
semiconductor industry will materially and adversely affect our net sales and
operating results. Following the acquisition of the STEAG Semiconductor Division
and CFM, we are a larger, more geographically diverse company and may be less
able to react quickly to the cyclicality of the semiconductor business,
particularly in Europe and in other regions with restrictive laws relating to
termination of employees.

OUR QUARTERLY FINANCIAL RESULTS FLUCTUATE SIGNIFICANTLY AND MAY FALL SHORT OF
ANTICIPATED LEVELS, WHICH COULD CAUSE OUR STOCK PRICE TO DECLINE.

We intend to base our operating expenses on anticipated revenue levels, and a
substantial percentage of our expenses may be fixed in the short term. As a
result, any delay in generating or recognizing revenues could cause our
operating results to be below the expectations of market analysts or investors,
which could cause the price of our common stock to decline. Our quarterly
revenue and operating results have varied significantly in the past and may vary
significantly in the future due to a number of factors, including:

 .    difficulty of assimilating the operations, products and personnel of the
     acquired businesses, particularly where these involve international
     operations;

 .    market acceptance of our systems and the products of our customers;

 .    substantial changes in revenues from significant customers;

 .    increased manufacturing overhead expenses due to reductions in the number
     of systems manufactured;

 .    timing of announcement and introduction of new systems by us and our
     competitors;

 .    sudden changes in component prices or availability;

 .    changes in product mix;

 .    delays in orders due to customer financial difficulties;

 .    manufacturing inefficiencies caused by uneven or unpredictable order
     patterns, reducing our gross margins; and

 .    higher fixed costs due to increased levels of research and development or
     patent litigation costs and expansion of our worldwide sales and marketing
     organization.

Due to the foregoing factors, we believe that period-to-period comparisons of
our operating results should not be

                                       18
<PAGE>

relied upon as an indicator of our future performance.

THE TRANSACTIONS WITH STEAG SEMICONDUCTOR DIVISION AND CFM MAY FAIL TO ACHIEVE
BENEFICIAL SYNERGIES.

We entered into the Merger with the expectation that it would result in
beneficial synergies between and among the semiconductor equipment businesses of
the three combining companies. Achieving these anticipated synergies and their
potential benefits will depend on a number of factors, some of which include:

 .    our ability to timely develop new products and integrate the products and
     sales efforts of the combined company;

 .    the risk that our customers, CFM's customers and the customers of the STEAG
     Semiconductor Division may defer purchasing decisions;

 .    the risk that it may be more difficult to retain key management, marketing,
     and technical personnel after the consummation of the transactions; and

 .    competitive conditions and cyclicality in the semiconductor manufacturing
     process equipment market.

Even if we are able to integrate operations, there can be no assurance that the
anticipated synergies will be achieved. The failure to achieve such synergies
could have a material adverse effect on our business, results of operations, and
financial condition.

TO EFFECTIVELY MANAGE OUR GROWTH AND GREATLY EXPANDED OPERATIONS FOLLOWING THE
COMPLETION OF THE MERGER. WE WILL NEED TO IMPROVE EXISTING AND IMPLEMENT NEW
SYSTEMS, PROCEDURES, AND CONTROLS.

Following consummation of the Merger, we are responsible for integrating and
managing expanded operations, including operations in new geographic locations,
that may place a significant strain on our management information systems and
our administrative, financial, and operational resources. We are making
additional significant investments in research and development to support
product development. We have grown from 349 employees at December 31, 1998, to
443 at December 31, 1999, to 641 employees at December 31, 2000, to over 1,800
employees world-wide on January 1, 2001, following consummation of the Merger.
This expansion will continue to result in substantial demands on our management
resources. To accommodate continued anticipated growth and expansion following
completion of the transactions, we will be required to:

 .    improve existing, and implement new, operational and financial systems,
     procedures, and controls;

 .    manage the financial and strategic position of the acquired and developed
     products, services and technologies;

 .    hire, train, manage, retain, and motivate qualified personnel;

 .    and obtain additional facilities and suppliers.

These measures may place additional burdens on our management and internal
resources.

THE STEAG SEMICONDUCTOR DIVISION AND CFM HAVE EXPERIENCED FINANCIAL LOSSES AND
MAY REQUIRE SIGNIFICANT FINANCIAL SUPPORT FROM US.

The STEAG Semiconductor Division and CFM have suffered losses from operations in
recent periods. These acquired businesses may experience further losses that
affect our financial results, reduce our earnings per share,

                                       19
<PAGE>

and require us to fund those businesses to sustain their operations. In
addition, the acquisition of these new businesses could reduce cost efficiencies
or profitability, or result in unanticipated costs. If losses continue at
historic levels for the STEAG Semiconductor Division and CFM, we may be required
to use a significant portion of our cash balances.

OUR REPORTED FINANCIAL RESULTS WILL SUFFER AS A RESULT OF PURCHASE ACCOUNTING
TREATMENT AND THE IMPACT OF AMORTIZATION OF GOODWILL AND OTHER INTANGIBLES, AND
RESTRUCTURING CHARGES RELATING TO THE TRANSACTIONS.

We have accounted for our acquisition of the STEAG Semiconductor Division and
CFM under the purchase method of accounting. Under purchase accounting, we will
record the fair value of the consideration given to SES in exchange for the
stock of the subsidiaries comprising the STEAG Semiconductor Division, as well
as the fair value of the consideration given in exchange for the outstanding CFM
common stock and for the outstanding options to purchase CFM common stock
assumed by us, plus the amount of direct acquisition costs, as the purchase
price of STEAG Semiconductor Division and CFM. We allocated the purchase price
to the individual assets and liabilities of the companies being acquired,
including various identifiable intangible assets such as acquired technology,
acquired trademarks and trade names and acquired workforce, and to in-process
research and development, based on their respective fair values. Intangible
assets, including goodwill, will be generally amortized over a three- to seven-
year period. The current allocation of the purchase price to the assets acquired
and liabilities assumed is based on preliminary estimates of fair value which
are subject to final adjustment.

The amount of purchase price allocated to goodwill and other intangibles is
approximately $223 million. The goodwill and other intangible assets will be
amortized over 3-7 years and the accounting charge attributable to these items
would be approximately $10.2 million per quarter or $40 million per fiscal year.
As a result, purchase accounting treatment of the transactions could have a
material adverse effect on the market value of our common stock following
completion of the transactions.

A major restructuring project has been initiated in order to improve internal
processes and cut costs.  Twelve key areas have been identified and the
implementation has started.  The cost cutting measures include a significant
headcount reduction, shorter work week and a 10% pay cut for executives.

We will incur restructuring costs in order to achieve desired synergies after
the transactions, which will adversely impact future financial results. These
restructuring costs could be a result of, but not limited to, the following:

     .    severance costs associated with possible headcount reductions due to
          duplication; and

     .    asset write-offs associated with manufacturing and facility
          consolidations.



THE TRANSACTIONS WITH STEAG SEMICONDUCTOR DIVISION AND CFM COULD ADVERSELY
AFFECT COMBINED FINANCIAL RESULTS.

The direct transaction costs of approximately $9.1 million were incurred in
connection with the merger. If the benefits of the merger do not exceed the
costs associated with the transactions, including any dilution to our
stockholders resulting from the issuance of shares in connection with the
transactions, our financial results, including earnings per share, could be
adversely affected.

ANY FUTURE BUSINESS ACQUISITIONS MAY DISRUPT OUR BUSINESS, DILUTE STOCKHOLDER
VALUE, OR DISTRACT MANAGEMENT ATTENTION.

As part of our ongoing business strategy, we may consider additional
acquisitions of, or significant investments in, businesses that offer products,
services, and technologies complementary to our own. Such acquisitions could
materially adversely affect our operating results and/or the price of our common
stock. Acquisitions also entail numerous risks, including:

 .    difficulty of assimilating the operations, products, and personnel of the
     acquired businesses;

                                       20
<PAGE>

 .    potential disruption of our ongoing business;

 .    unanticipated costs associated with the acquisition;

 .    inability of management to manage the financial and strategic position of
     acquired or developed products, services, and technologies;

 .    inability to maintain uniform standards, controls, policies, and
     procedures; and

 .    impairment of relationships with employees and customers which may occur as
     a result of integration of the acquired business.

To the extent that shares of our stock or other rights to purchase stock are
issued in connection with any future acquisitions, dilution to our existing
stockholders will result and our earnings per share may suffer. Any future
acquisitions may not generate additional revenue or provide any benefit to our
business, and we may not achieve a satisfactory return on our investment in any
acquired businesses.

MOST OF OUR REVENUE COMES FROM A SMALL NUMBER OF LARGE SALES, AND ANY DELAY IN
THE TIMING OF INDIVIDUAL SALES COULD CAUSE OUR OPERATING RESULTS TO FLUCTUATE
FROM QUARTER TO QUARTER.

A delay in a shipment or a customer acceptance event near the end of a quarter
may cause net sales in that quarter to fall below our expectations and the
expectations of market analysts or investors. Currently, we derive most of our
revenues from the sale of a relatively small number of high dollar value
systems. The list prices on these systems range from $500,000 to over $2.2
million. Each sale, or failure to make a sale, could have a material effect on
us. Our lengthy sales cycle for each of our systems, coupled with customers'
competing capital budget considerations, make the timing of customer orders
uneven and difficult to predict. In addition, our backlog at the beginning of a
quarter is not expected to include all orders required to achieve our sales
objectives for that quarter. As a result, our net sales and operating results
for a quarter depend on our shipping orders as scheduled during that quarter as
well as obtaining new orders for systems to be shipped in that same quarter. Any
delay in scheduled shipments or acceptances or in shipments or acceptances from
new orders would materially adversely affect our operating results for that
quarter, which could cause our stock price to decline.

In the past, we have experienced cancellation of orders, and there can be no
assurance that further order cancellations or reductions in order growth or the
level of overall orders for semiconductor capital equipment will not have a
further material adverse effect upon our business or results of operations. The
need for continued investment in research, development and engineering,
marketing, and customer satisfaction activities may limit our ability to reduce
expenses in response to continued or future downturns in the semiconductor
industry. Our net sales and results of operations could be materially adversely
affected when downturns or slowdowns in the semiconductor markets occur in the
future.

WE AND MANUFACTURERS OF OUR PRODUCTS RELY ON A CONTINUOUS POWER SUPPLY TO
CONDUCT OPERATIONS, AND CALIFORNIA'S CURRENT ENERGY CRISIS COULD DISRUPT OUR
BUSINESS AND INCREASE OUR EXPENSES.

California is in the midst of an energy crisis that could disrupt our operations
and increase our expenses. In the event of an acute power shortage, California
has on some occasions implemented, and may in the future continue to implement,
rolling blackouts throughout California. We have significant operations located
in California. We currently do not have backup generators or alternate sources
of power in the event of a blackout. If blackouts interrupt our power supply, we
would be temporarily unable to continue operations at our California facilities.
Any such interruption in our ability to continue operations at our facilities
could damage our reputation, harm our ability to retain existing customers and
to obtain new customers, and could result in lost revenue, any of which

                                       21
<PAGE>

could substantially harm our business and results of operation.

Item 3.  Quantitative and Qualitative Disclosures Regarding Market Risk

Interest Rate Risk.

The Company's exposure to market risk for changes in interest rates relates to
the Company's investment portfolio. The Company does not use derivative
financial instruments in its investment portfolio. The Company places its
investments with high credit quality issuers and, by policy, limits the amount
of credit exposure to any one issuer. The portfolio includes only marketable
securities with active secondary or resale markets to ensure portfolio
liquidity. We have no cash flow exposure due to rate changes for cash
equivalents and short-term investments, as all of these investments are at fixed
interest rates.

The table below presents principal amounts and related weighted average interest
rates for the Company's investment portfolio and the fair value of each as of
April 1, 2001.

<TABLE>
<CAPTION>
                                                 Fair Value
                                                  April 1,
                                                    2001
                                               --------------
                                               (In thousands)
        <S>                                    <C>
        Assets
         Cash and cash equivalents                 $ 43,444
              Average interest rate                    2.75%
         Short-term investments                    $ 30,962
              Average interest rate                    6.52%
         Long-term investments                     $  9,423
              Average interest rate                    6.34%
</TABLE>

Foreign Currency Risk

The Company transacts business in various foreign countries. Our primary foreign
currency cash flows are in Japan and Germany. During the first quarter of 2001,
we employed a foreign currency hedging program utilizing foreign currency
forward exchange contracts. The goal of the hedging program is to lock in
exchange rates to minimize the impact to us of foreign currency fluctuations. We
do not use foreign currency forward exchange contracts for speculative or
trading purposes.

The following table provides information as of April 1, 2001 about our
derivative financial instruments, which are comprised of foreign currency
forward exchange contracts. The information is provided in U.S. dollar
equivalent amounts. The table presents the notional amounts (at the contract
exchange rates), the weighted average contractual foreign currency exchange
rates, and the estimated fair value of those contracts.

<TABLE>
<CAPTION>
                                                             Average    Estimated
                                                  Notional  Contract      Fair
                                                   Amount     Rate        Value
                                                  --------  --------    ---------
                                                     (In thousands, except for
                                                       average contract rate)
  <S>                                             <C>       <C>         <C>
  Foreign currency forward exchange contracts:

         Japanese Yen............................ $ 24,696   105.75     $2,997
         Germany Mark.............................$ 19,116     2.22     $ <435>
</TABLE>


                                                  $214.969

                                       22


<PAGE>

The local currency is the functional currency for all foreign sales operations.
To date, our exposure related to exchange rate volatility has not been
significant. Our exposure to foreign currency risk has increased as a result of
our acquisition of the STEAG Semiconductor Division and CFM. In addition, a
payment obligation to STEAG AG in the amount estimated to be 37.6 million
Deutsche Marks is payable in Deutsche Marks and, according, is exposure for
exchange rate volatility.

                         PART II -- OTHER INFORMATION

Item 1.   Legal Proceedings.

With reference to the litigation filed in March, 1997 by Dainippon Screen Mfg.
Co. Ltd. and DNS Electronics LLC (collectively "DNS"), against the Company's
CFM subsidiary in the United States District Court for the Northern District of
California, the judge has issued claims construction rulings relating to U.S.
Patents No. 4,911,761 and 4,984,597. DNS added new claims for unfair
competition, interference with business relations, and trade libel against CFM.
The judge dismissed DNS' antitrust claim against CFM on summary judgement.
Dispositive Motions and Motions In Limine have been filed with the court. The
trial date of May 8, 2001 has been delayed and no new trial date is set at this
time.

The Company's involvement in any patent dispute or other intellectual property
dispute or action could result in a material adverse effect on the Company's
business. We may in the future be party to litigation arising in the course of
our business, including claims that we infringe third party patents, trademarks
and other intellectual property rights. Such claims, even if not meritorious,
could result in the expenditure of significant financial and managerial
resources. Adverse determinations in current litigation or any other litigation
in which the Company may become involved could subject the Company to
significant liabilities to third parties, require the Company to grant licenses
to or seek licenses from third parties, and prevent the Company from
manufacturing and selling its products. Any of these situations could have a
material adverse effect on the Company.

Item 2.   Changes in Securities.

          None

Item 3.   Defaults Upon Senior Securities.

          None

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

          None

Item 5.   Other Information.

          None

Item 6.   Exhibits and Reports on Form 8-K.

     (a)    Exhibits

              3.1*    Restated Articles of Incorporation of the Company
              3.2*    Bylaws of the Registrant
             99.1     Risk Factors incorporated by reference to Annual Report on
                      Form 10-K.

                                       23
<PAGE>

          (1)  Incorporated by reference to the corresponding Exhibit previously
               filed with the report on Form 8-K/A filed by the Company on
               January 30, 2001
          (b)  Reports on Form 8-K

          On January 16,2001, the Company filed a report on Form 8-K reporting
          under Item 2 that on January 1, 2001, the Company acquired the
          semiconductor equipment division of STEAG Electronic Systems AG
          and simultaneously acquired CFM Technologies, Inc.

          On January 30, 2001, the Company filed an amended report on Form 8-K/A
          amending the Form 8-K filed January 16, 2001 to include historical and
          pro forma financial statements of the business acquired.

                                       24
<PAGE>

                                  SIGNATURES

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

                                            MATTSON TECHNOLOGY, INC.




Date: May 16, 2001                               /s/ Ludger Viefhues
                                      ------------------------------------------
                                                     Ludger Viefhues
                                         Executive Vice President -- Finance
                                              and Chief Financial Officer

                                       25