##### Table of Contents









UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549




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Form 10-Q



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|           |  |                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                             
|þ          |  | QUARTERLY REPORT PURSUANT TO SECTION 13
    OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|          
|           |  | For the quarterly period ended
    December 29, 2002                                        
|          
|or        
|          
|          
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR
    15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|          
|           |  | For the transition period
    from           to                                             

Commission file number 000-26911



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THERMA-WAVE, INC.

(Exact Name of Registrant as Specified in Its
Charter)


|                                                                                                               |  |                                            
|-------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------
|Delaware                                                                                                       |  | 94-3000561                                 
|(State or Other Jurisdiction of
    Incorporation or Organization)                                             |  | (I.R.S. Employer
    Identification Number)
|1250 Reliance Way
    Fremont, California 94539(Address of Principal Executive
    Offices Including Zip Code)

(510) 668-2200

(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 reports), and
(2) has been subject to such filing requirements for the
past 90 days.
YES þ          NO o

Indicate by check mark whether the registrant is
an accelerated filer (as defined in Rule 12b-2 of the
Exchange Act).
YES o          NO þ

Indicate the number of shares of the
issuers class of common stock, as of the latest practical
date:

|                             |  |                                 
|---------------------------- |  | --------------------------------
|Class                        |  | Outstanding as of April 30, 2003
|                             |  |                                 
|Common stock, $.01 par value |  | 29,359,413                      



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TABLE OF CONTENTS



|                                |                                                                                               |                                                                |  |  |  |  |  | 
|------------------------------- | --------------------------------------------------------------------------------------------- | -------------------------------------------------------------- |  |  |  |  |  | 
|PART I -- FINANCIAL INFORMATION
|                                | Item 1. Financial Statements                                                                 
|                                |                                                                                               | CONDENSED CONSOLIDATED BALANCE SHEETS                         
|                                |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS               
|                                |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS               
|                                |                                                                                               | NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|                                | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                | Item 3. Quantitative and Qualitative Disclosure about Market Risk                            
|                                | Item 4. Controls and Procedures                                                              
|PART II. -- OTHER INFORMATION  
|                                | Item 1. Legal Proceedings                                                                    
|                                | Item 2. Changes in Securities and Use of Proceeds                                            
|                                | Item 3. Defaults Upon Senior Securities                                                      
|                                | Item 4. Submission of Matters to a Vote of Security Holders                                  
|                                | Item 5. Other Information                                                                    
|                                | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                     
|CERTIFICATIONS                 
|EXHIBIT 10.42                  
|EXHIBIT 10.43                  
|EXHIBIT 10.44                  
|EXHIBIT 10.45                  
|EXHIBIT 10.46                  
|EXHIBIT 99.2                   



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##### Table of Contents



THERMA-WAVE, INC.

TABLE OF CONTENTS

|                                   |  |                                                                                                                        |    |          |    | 
|---------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------- | -- | -------- | -- | 
|                                   |  |                                                                                                                        |    | Page No.
|                                   |  |                                                                                                                        |    |         
|PART I.  FINANCIAL
    INFORMATION
|ITEM 1.                            |  | Financial Statements                                                                                                   |    |          | 1  | 
|                                   |  | Condensed Consolidated Balance Sheets as of
    December 31, 2002 and March 31, 2002                                   |    |          | 1  | 
|                                   |  | Condensed Consolidated Statements of Operations
    for the Three and Nine Months Ended December 31, 2002
    and 2001 |    |          | 2  | 
|                                   |  | Condensed Consolidated Statements of Cash Flows
    for the Nine Months Ended December 31, 2002 and 2001               |    |          | 3  | 
|                                   |  | Notes to Condensed Consolidated Financial
    Statements                                                               |    |          | 4  | 
|ITEM 2.                            |  | Managements Discussion and Analysis of
    Financial Condition and
    Results of Operations                          |    |          | 9  | 
|ITEM 3.                            |  | Quantitative and Qualitative Disclosures About
    Market Risk                                                         |    |          | 14 | 
|ITEM 4.                            |  | Controls and Procedures                                                                                                |    |          | 14 | 
|PART II.  OTHER
    INFORMATION   
|ITEM 1.                            |  | Legal Proceedings                                                                                                      |    |          | 16 | 
|ITEM 2.                            |  | Changes in Securities and Use of
    Proceeds                                                                          |    |          | 16 | 
|ITEM 3.                            |  | Defaults Upon Senior Securities                                                                                        |    |          | 16 | 
|ITEM 4.                            |  | Submission of Matters to a Vote of Security
    Holders                                                                |    |          | 16 | 
|ITEM 5.                            |  | Other Information                                                                                                      |    |          | 16 | 
|ITEM 6.                            |  | Exhibits and Reports on
    Form 8-K                                                                                   |    |          | 16 | 
|SIGNATURES                         |  |                                                                                                                        | 17 |         
|CERTIFICATIONS                     |  |                                                                                                                        | 18 |         

Explanatory note regarding the late filing of
this Form 10-Q

This quarterly report on Form 10-Q is being
filed late as a result of the restatement of our condensed
consolidated financial statements for the quarterly periods
ended September 30, 2001, December 31, 2001,
June 30, 2002 and September 30, 2002 and the year
ended March 31, 2002.

i



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##### Table of Contents






PART I  FINANCIAL
INFORMATION




Item 1.     Financial
Statements

THERMA-WAVE, INC.






CONDENSED CONSOLIDATED BALANCE
SHEETS


(In thousands)


(Unaudited)


|                                         |                                      |                                            |        |           |        |  |        |          |         | 
|---------------------------------------- | ------------------------------------ | ------------------------------------------ | ------ | --------- | ------ |  | ------ | -------- | ------- | 
|                                         |                                      | December 31,                               |        | March 31,
|                                         |                                      | 2002                                       |        | 2002     
|                                         |                                      |                                            |        |          
|ASSETS                                  
|Current assets:                          |                                      |                                            |        |           |        |  |        |         
|                                         | Cash and cash equivalents            |                                            | $      | 22,016    |        |  | $      | 46,484   |        
|                                         | Short-term investments               |                                            |        | 4,572     |        |  |        | 12,575   |        
|                                         | Accounts receivable, net             |                                            |        | 9,712     |        |  |        | 15,635   |        
|                                         | Inventories                          |                                            |        | 28,059    |        |  |        | 34,677   |        
|                                         | Other current assets                 |                                            |        | 1,290     |        |  |        | 3,415    |        
|                                         |                                      |                                            |        |           |        |  |        |         
|                                         |                                      | Total current assets                       |        |           | 65,649 |  |        |          | 112,786 | 
|Property and equipment, net              |                                      |                                            | 10,859 |           |        |  | 14,041 |         
|Goodwill and intangible assets, net      |                                      |                                            | 2,390  |           |        |  | 70,096 |         
|Other assets                             |                                      |                                            | 4,869  |           |        |  | 4,723  |         
|                                         |                                      |                                            |        |           |        |  |        |         
|                                         |                                      | Total assets                               |        | $         | 83,767 |  |        | $        | 201,646 | 
|                                         |                                      |                                            |        |           |        |  |        |         
|                                        
|LIABILITIES AND STOCKHOLDERS
    EQUITY
|Current liabilities:                     |                                      |                                            |        |           |        |  |        |         
|                                         | Accounts payable                     |                                            | $      | 3,372     |        |  | $      | 6,297    |        
|                                         | Accrued warranty costs               |                                            |        | 732       |        |  |        | 1,777    |        
|                                         | Deferred revenue                     |                                            |        | 9,352     |        |  |        | 9,493    |        
|                                         | Income tax payable                   |                                            |        | 4,892     |        |  |        | 4,903    |        
|                                         | Other current liabilities            |                                            |        | 8,242     |        |  |        | 9,303    |        
|                                         |                                      |                                            |        |           |        |  |        |         
|                                         |                                      | Total current liabilities                  |        |           | 26,590 |  |        |          | 31,773  | 
|Long term debt                           |                                      |                                            |       |           |        |  | 16     |         
|Other liabilities                        |                                      |                                            | 2,058  |           |        |  | 2,358  |         
|                                         |                                      |                                            |        |           |        |  |        |         
|                                         |                                      | Total liabilities                          |        |           | 28,648 |  |        |          | 34,147  | 
|                                         |                                      |                                            |        |           |        |  |        |         
|Stockholders equity:                    |                                      |                                            |        |           |        |  |        |         
|                                         | Common stock                         |                                            |        | 293       |        |  |        | 291      |        
|                                         | Treasury stock                       |                                            |        | (848      | )      |  |        |         |        
|                                         | Additional paid-in capital           |                                            |        | 322,352   |        |  |        | 321,466  |        
|                                         | Notes receivable from stockholders   |                                            |        | (196      | )      |  |        | (200     | )      
|                                         | Accumulated deficit                  |                                            |        | (263,804  | )      |  |        | (149,325 | )      
|                                         | Accumulated other comprehensive loss |                                            |        | (1,305    | )      |  |        | (1,790   | )      
|                                         | Deferred stock-based compensation    |                                            |        | (1,373    | )      |  |        | (2,943   | )      
|                                         |                                      |                                            |        |           |        |  |        |         
|                                         |                                      | Total stockholders equity                 |        |           | 55,119 |  |        |          | 167,499 | 
|                                         |                                      |                                            |        |           |        |  |        |         
|                                         |                                      | Total liabilities and stockholders equity |        | $         | 83,767 |  |        | $        | 201,646 | 
|                                         |                                      |                                            |        |           |        |  |        |         

See accompanying notes to condensed consolidated
financial statements.

1



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##### Table of Contents



THERMA-WAVE, INC.






CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS


(In thousands, except per share
data)


(Unaudited)


|                                            |                                                    |                          |         |                   |        |      |         |        |        |   |          |        |         |   |         |        |        | 
|------------------------------------------- | -------------------------------------------------- | ------------------------ | ------- | ----------------- | ------ | ---- | ------- | ------ | ------ | - | -------- | ------ | ------- | - | ------- | ------ | ------ | 
|                                            |                                                    |                          |         |                  
|                                            |                                                    | Three Months Ended       |         | Nine Months Ended
|                                            |                                                    | December 31,             |         | December 31,     
|                                            |                                                    |                          |         |                  
|                                            |                                                    | 2002                     |         | 2001              |        | 2002 |         | 2001  
|                                            |                                                    |                          |         |                   |        |      |         |       
|Net revenues                                |                                                    |                          |         |                   |        |      |         |        |        |   |          |        |         |   |         |       
|                                            | Product                                            |                          | $       | 4,789             |        |      | $       | 6,401  |        |   | $        | 20,188 |         |   | $       | 56,461 |       
|                                            | Service and parts                                  |                          |         | 5,460             |        |      |         | 4,653  |        |   |          | 15,956 |         |   |         | 13,074 |       
|                                            |                                                    |                          |         |                   |        |      |         |        |        |   |          |        |         |   |         |       
|                                            |                                                    | Total net revenues       |         |                   | 10,249 |      |         |        | 11,054 |   |          |        | 36,144  |   |         |        | 69,535 | 
|Cost of revenues                            |                                                    |                          | 10,233  |                   |        |      | 9,522   |        |        |   | 40,074   |        |         |   | 42,410  |       
|                                            |                                                    |                          |         |                   |        |      |         |        |        |   |          |        |         |   |         |       
|Gross profit (loss)                         |                                                    |                          | 16      |                   |        |      | 1,532   |        |        |   | (3,930   | )      |         |   | 27,125  |       
|                                            |                                                    |                          |         |                   |        |      |         |        |        |   |          |        |         |   |         |       
|Operating expenses:                         |                                                    |                          |         |                   |        |      |         |        |        |   |          |        |         |   |         |       
|                                            | Research and development                           |                          |         | 6,872             |        |      |         | 7,643  |        |   |          | 22,975 |         |   |         | 21,157 |       
|                                            | Selling, general and administrative                |                          |         | 6,097             |        |      |         | 5,213  |        |   |          | 18,877 |         |   |         | 15,841 |       
|                                            | Impairment of goodwill and other intangible assets |                          |         |                  |        |      |         |       |        |   |          | 66,977 |         |   |         |       |       
|                                            | Severance charge                                   |                          |         | 35                |        |      |         | 30     |        |   |          | 1,200  |         |   |         | 407    |       
|                                            | Stock-based compensation                           |                          |         | 359               |        |      |         |       |        |   |          | 1,411  |         |   |         |       |       
|                                            |                                                    |                          |         |                   |        |      |         |        |        |   |          |        |         |   |         |       
|                                            |                                                    | Total operating expenses |         |                   | 13,363 |      |         |        | 12,886 |   |          |        | 111,440 |   |         |        | 37,405 | 
|                                            |                                                    |                          |         |                   |        |      |         |        |        |   |          |        |         |   |         |       
|Operating loss                              |                                                    |                          | (13,347 | )                 |        |      | (11,354 | )      |        |   | (115,370 | )      |         |   | (10,280 | )     
|                                            |                                                    |                          |         |                   |        |      |         |        |        |   |          |        |         |   |         |       
|Other income (expense):                     |                                                    |                          |         |                   |        |      |         |        |        |   |          |        |         |   |         |       
|                                            | Interest expense                                   |                          |         | (52               | )      |      |         | (70    | )      |   |          | (154   | )       |   |         | (177   | )     
|                                            | Interest income                                    |                          |         | 118               |        |      |         | 449    |        |   |          | 883    |         |   |         | 2,032  |       
|                                            | Other, net                                         |                          |         | (9                | )      |      |         | 8      |        |   |          | 162    |         |   |         | 36     |       
|                                            |                                                    |                          |         |                   |        |      |         |        |        |   |          |        |         |   |         |       
|                                            |                                                    | Total other income       |         |                   | 57     |      |         |        | 387    |   |          |        | 891     |   |         |        | 1,891  | 
|                                            |                                                    |                          |         |                   |        |      |         |        |        |   |          |        |         |   |         |       
|Loss before income tax benefit              |                                                    |                          | (13,290 | )                 |        |      | (10,967 | )      |        |   | (114,479 | )      |         |   | (8,389  | )     
|Income tax benefit                          |                                                    |                          |        |                   |        |      |        |        |        |   |         |        |         |   |        |       
|                                            |                                                    |                          |         |                   |        |      |         |        |        |   |          |        |         |   |         |       
|Net loss                                    |                                                    | $                        | (13,290 | )                 |        | $    | (10,967 | )      |        | $ | (114,479 | )      |         | $ | (8,389  | )     
|                                            |                                                    |                          |         |                   |        |      |         |        |        |   |          |        |         |   |         |       
|Net loss per share:                         |                                                    |                          |         |                   |        |      |         |        |        |   |          |        |         |   |         |       
|                                            | Basic                                              |                          | $       | (0.47             | )      |      | $       | (0.45  | )      |   | $        | (4.02  | )       |   | $       | (0.35  | )     
|                                            |                                                    |                          |         |                   |        |      |         |        |        |   |          |        |         |   |         |       
|                                            | Diluted                                            |                          | $       | (0.47             | )      |      | $       | (0.45  | )      |   | $        | (4.02  | )       |   | $       | (0.35  | )     
|                                            |                                                    |                          |         |                   |        |      |         |        |        |   |          |        |         |   |         |       
|Weighted average common shares outstanding: |                                                    |                          |         |                   |        |      |         |        |        |   |          |        |         |   |         |       
|                                            | Basic                                              |                          |         | 28,404            |        |      |         | 24,114 |        |   |          | 28,485 |         |   |         | 23,995 |       
|                                            | Diluted                                            |                          |         | 28,404            |        |      |         | 24,114 |        |   |          | 28,485 |         |   |         | 23,995 |       

See accompanying notes to condensed consolidated
financial statements.

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##### Table of Contents



THERMA-WAVE, INC.






CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS


(In thousands)


(Unaudited)


|                                                 |                                                                                 |                                                                                  |                                                      |          |        |         |        |        |         |        |  
|------------------------------------------------ | ------------------------------------------------------------------------------- | -------------------------------------------------------------------------------- | ---------------------------------------------------- | -------- | ------ | ------- | ------ | ------ | ------- | ------ | -
|                                                 |                                                                                 |                                                                                 
|                                                 |                                                                                 | Nine Months Ended                                                               
|                                                 |                                                                                 | December 31,                                                                    
|                                                 |                                                                                 |                                                                                 
|                                                 |                                                                                 | 2002                                                                             |                                                      | 2001    
|                                                 |                                                                                 |                                                                                  |                                                      |         
|Operating activities:                            |                                                                                 |                                                                                  |                                                      |          |        |         |        |       
|                                                 | Net loss                                                                        |                                                                                  | $                                                    | (114,479 | )      |         | $      | (8,389 | )      
|                                                 | Adjustments to reconcile net loss to net cash
    used by operating activities: |                                                                                  |                                                      |          |        |         |        |        |        
|                                                 |                                                                                 | Depreciation and amortization                                                    |                                                      |          | 4,499  |         |        |        | 3,836   |       
|                                                 |                                                                                 | Amortization of intangible assets                                                |                                                      |          | 1,315  |         |        |        |        |       
|                                                 |                                                                                 | Amortization of deferred stock-based compensation                                |                                                      |          | 1,449  |         |        |        |        |       
|                                                 |                                                                                 | Impairment of goodwill and other intangible assets                               |                                                      |          | 66,977 |         |        |        |        |       
|                                                 |                                                                                 | Inventory charge                                                                 |                                                      |          | 7,425  |         |        |        |        |       
|                                                 |                                                                                 | Loss on disposal of fixed assets                                                 |                                                      |          | 55     |         |        |        |        |       
|                                                 |                                                                                 | Issuance of treasury stock in connection with
    payment of consulting services |                                                      |          | 50     |         |        |        |        |       
|                                                 | Changes in assets and liabilities:                                              |                                                                                  |                                                      |          |        |         |        |        |        
|                                                 |                                                                                 | Accounts receivable                                                              |                                                      |          | 5,923  |         |        |        | 25,984  |       
|                                                 |                                                                                 | Inventories                                                                      |                                                      |          | (807   | )       |        |        | 1,834   |       
|                                                 |                                                                                 | Other assets                                                                     |                                                      |          | 2,243  |         |        |        | (379    | )     
|                                                 |                                                                                 | Liabilities                                                                      |                                                      |          | (5,499 | )       |        |        | (27,833 | )     
|                                                 |                                                                                 |                                                                                  |                                                      |          |        |         |        |       
|                                                 |                                                                                 |                                                                                  | Net cash used by operating activities                |          |        | (30,849 | )      |        |         | (4,947 | )
|                                                 |                                                                                 |                                                                                  |                                                      |          |        |         |        |       
|Investing activities:                            |                                                                                 |                                                                                  |                                                      |          |        |         |        |       
|                                                 | Purchases of property and equipment                                             |                                                                                  |                                                      | (1,372   | )      |         |        | (2,034 | )      
|                                                 | (Purchase) sale of short-term investments                                       |                                                                                  |                                                      | 8,003    |        |         |        | 1,525  |        
|                                                 | Other                                                                           |                                                                                  |                                                      | (850     | )      |         |        | (619   | )      
|                                                 |                                                                                 |                                                                                  |                                                      |          |        |         |        |       
|                                                 |                                                                                 |                                                                                  | Net cash provided (used) by investing
    activities |          |        | 5,781   |        |        |         | (1,128 | )
|                                                 |                                                                                 |                                                                                  |                                                      |          |        |         |        |       
|Financing activities:                            |                                                                                 |                                                                                  |                                                      |          |        |         |        |       
|                                                 | Proceeds from issuance of common stock                                          |                                                                                  |                                                      | 1,049    |        |         |        | 2,291  |        
|                                                 | Proceeds from note receivable from stockholders                                 |                                                                                  |                                                      | 4        |        |         |        |       |        
|                                                 | Purchase of treasury stock                                                      |                                                                                  |                                                      | (938     | )      |         |        |       |        
|                                                 | Principal payments under capital lease obligations                              |                                                                                  |                                                      |         |        |         |        | (65    | )      
|                                                 |                                                                                 |                                                                                  |                                                      |          |        |         |        |       
|                                                 |                                                                                 |                                                                                  | Net cash provided by financing activities            |          |        | 115     |        |        |         | 2,226  |  
|                                                 |                                                                                 |                                                                                  |                                                      |          |        |         |        |       
|Effect of exchange rates on cash                 |                                                                                 |                                                                                  | 485                                                  |          |        |         | (153   | )     
|                                                 |                                                                                 |                                                                                  |                                                      |          |        |         |        |       
|Net decrease in cash and cash equivalents        |                                                                                 |                                                                                  | (24,468                                              | )        |        |         | (4,002 | )     
|Cash and cash equivalents at beginning of period |                                                                                 |                                                                                  | 46,484                                               |          |        |         | 55,725 |       
|                                                 |                                                                                 |                                                                                  |                                                      |          |        |         |        |       
|Cash and cash equivalents at end of period       |                                                                                 | $                                                                                | 22,016                                               |          |        | $       | 51,723 |       
|                                                 |                                                                                 |                                                                                  |                                                      |          |        |         |        |       
|Supplementary disclosures:                       |                                                                                 |                                                                                  |                                                      |          |        |         |        |       
|                                                 | Cash paid for interest                                                          |                                                                                  | $                                                    | 42       |        |         | $      | 77     |        
|                                                 |                                                                                 |                                                                                  |                                                      |          |        |         |        |       
|                                                 | Cash paid for taxes                                                             |                                                                                  | $                                                    | 130      |        |         | $      | 2,466  |        
|                                                 |                                                                                 |                                                                                  |                                                      |          |        |         |        |       

See accompanying notes to condensed consolidated
financial statements.

3



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##### Table of Contents



THERMA-WAVE, INC.






NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS


1.     Basis of
Presentation

The accompanying unaudited condensed consolidated
financial statements have been prepared pursuant to the rules
and regulations of the Securities and Exchange Commission and
include the accounts of Therma-Wave, Inc. and its wholly-owned
subsidiaries. Certain information and footnote disclosures,
normally included in financial statements prepared in accordance
with generally accepted accounting principles, have been
condensed or omitted pursuant to such rules and regulations. In
our opinion, the financial statements reflect all adjustments,
consisting only of normal recurring adjustments, necessary for a
fair presentation of the financial position at December 31,
2002, and the operating results and cash flows for the three and
nine months ended December 31, 2002 and 2001. These
financial statements and notes should be read in conjunction
with our audited financial statements and notes thereto for the
year ended March 31, 2002.

The Company has sustained significant losses for
the last four quarters. The Company expects to limit its capital
spending to essential items and to make further operating
expense reductions, as discussed in Note 11, Subsequent
Events. The Company believes that its existing capital will be
sufficient to fund its operations and its capital investments
for at least the next twelve months. No assurance can be given,
however, that this will be the case. The Company may require
additional equity or debt financing to meet its working capital
requirements or to fund its research and development activities.
The financing activities may involve substantial dilution to the
Companys stockholders, restrictive covenants, or high
interest costs. There can be no assurance that additional
financing will be available when required or, if available, will
be on terms satisfactory to the Company.

The results of operations for the interim periods
are not necessarily indicative of the results of operations that
may be expected for any other period or for the fiscal year,
which ends on March 30, 2003. Certain costs and expenses in
the three and nine months ended December 31, 2001 have been
reclassified to conform to the presentation in the three months
ended December 29, 2002.

The third quarters of fiscal years 2003 and 2002
and the entire fiscal year 2002 ended on December 29, 2002,
December 30, 2001 and March 31, 2002, respectively.
For presentation purposes, the accompanying financial statements
have been shown as ending on the last day of the calendar
quarter closest to each of these dates.

2.     Inventories

Inventories are summarized as follows (in
thousands):

|                    |  |              |        |           |  |   |        | 
|------------------- |  | ------------ | ------ | --------- |  | - | ------ | 
|                    |  | December 31, |        | March 31,
|                    |  | 2002         |        | 2002     
|                    |  |              |        |          
|Purchased materials |  | $            | 3,148  |           |  | $ | 11,172 | 
|Systems in process  |  |              | 15,144 |           |  |   | 12,657 | 
|Finished systems    |  |              | 9,767  |           |  |   | 10,848 | 
|                    |  |              |        |           |  |   |        | 
|                    |  | $            | 28,059 |           |  | $ | 34,677 | 
|                    |  |              |        |           |  |   |        | 

3.     Comprehensive
Loss

Comprehensive loss consists of net loss for the
period and the change in accumulated foreign currency
translation adjustments during the period. For the quarters
ended December 31, 2002 and 2001, comprehensive loss
amounted to approximately $13.1 million and
$11.4 million, respectively. For the nine months ended
December 31, 2002 and 2001, comprehensive loss amounted to
approximately $114.0 million and $8.6 million,
respectively.

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THERMA-WAVE, INC.


NOTES TO UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


4.     Change in
Accounting Principle

In accordance with guidance provided in SAB 101,
we recorded a $6.3 million charge (net of income tax
benefit of $0.4 million), or $0.25 per diluted share
charge, as the cumulative effect of the change in accounting
principle as of April 1, 2000. All periods presented are
consistent with the guidance provided in SAB 101. During
the three months ended December 31, 2002 and 2001, we
recognized $423,000 and $69,000, respectively, out of the
$9.4 million revenue that was included in the cumulative
effect adjustment as of April 1, 2000. During the nine
months ended December 31, 2002 and 2001, we recognized
$665,000 and $1.6 million, respectively, out of the
$9.4 million revenue that was included in the original
cumulative effect adjustment as of April 1, 2000. As of
December 31, 2002, there was $240,000 revenue pending
recognition out of the $9.4 million revenue.

5.     Net Income
(Loss) Per Share

Basic net income (loss) per share is based
on the weighted-average number of common shares outstanding
excluding contingently issuable or returnable shares such as
unvested common stock or shares that contingently convert into
common stock upon certain events. Diluted net income
(loss) per share is based on the weighted average number of
common shares outstanding and the potential dilution of
securities, by including stock options in the weighted average
number of common shares outstanding for a period if dilutive.

The following table summarizes securities
outstanding (in thousands) as of each period end which were not
included in the calculation of diluted net income
(loss) per share since their inclusion would be
anti-dilutive.

|                                              |  |              |       |      |  |  |       | 
|--------------------------------------------- |  | ------------ | ----- | ---- |  |  | ----- | 
|                                              |  |             
|                                              |  | December 31,
|                                              |  |             
|                                              |  | 2002         |       | 2001
|                                              |  |              |       |     
|Common stock subject to repurchase (unvested) |  |              |      |      |  |  | 150   | 
|Common stock held in escrow account           |  |              | 541   |      |  |  |      | 
|Stock options                                 |  |              | 4,928 |      |  |  | 2,561 | 
|Warrants                                      |  |              | 79    |      |  |  |      | 
|                                              |  |              |       |      |  |  |       | 
|                                              |  |              | 5,548 |      |  |  | 2,711 | 
|                                              |  |              |       |      |  |  |       | 

For the three months ended December 31, 2002
and 2001, anti-dilutive stock options have a weighted average
exercise price of $10.54 and $17.04, respectively. The warrants
outstanding at December 31, 2002 that we excluded from the
above calculation had a weighted average exercise price of $3.68.

6.     Recently
Issued Accounting Statements

In July 2001, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards
No. 142 (SFAS No. 142), Goodwill and Other
Intangible Assets. SFAS No. 142 supersedes Accounting
Principles Board Opinion No. 17, Intangible
Assets, and discontinues the amortization of goodwill. In
addition, SFAS No. 142 includes provisions regarding:
1) reclassification of amounts between goodwill and
identifiable intangible assets in accordance with the new
definition of identifiable intangible assets set forth in
Statement of Financial Accounting Standards No. 141,
Business Combinations; 2) reassessment of the
useful lives of existing recognized intangibles; and
3) testing for impairment of existing goodwill and other
intangibles using the discounted cash flows method. Our adoption
of SFAS No. 142 did not result in reclassifications between
goodwill and intangible assets, impairment charges or changes in
the useful lives of amortizable intangible assets. Intangible
assets include developed technology, development contract and
trade name and are being amortized on a straight-line basis over
the original estimated useful lives of two to five years.

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THERMA-WAVE, INC.


NOTES TO UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


The fair market value of intangible assets after
the impairment adjustments (see Note 7) is being amortized
on a straight-line basis over the remaining estimated useful
lives of 16 to 52 months. Components of intangible assets
were as follows (in thousands):

|                                          |                        |                      |       |                |       |                |      |              |      |   |        |        |       |   |      |      |      |  
|----------------------------------------- | ---------------------- | -------------------- | ----- | -------------- | ----- | -------------- | ---- | ------------ | ---- | - | ------ | ------ | ----- | - | ---- | ---- | ---- | -
|                                          |                        |                      |       |               
|                                          |                        | December 31, 2002    |       | March 31, 2002
|                                          |                        |                      |       |               
|                                          |                        | Gross Carrying       |       | Accumulated    |       | Gross Carrying |      | Accumulated 
|                                          |                        | Amount               |       | Amortization   |       | Amount         |      | Amortization
|                                          |                        |                      |       |                |       |                |      |             
|Goodwill and intangible assets, net       |                        |                      |       |                |       |                |      |              |      |   |        |        |       |   |      |     
|                                          |                        | Developed technology |       | $              | 314   |                |      | $            | (314 | ) |        | $      | 890   |   |      | $    | (92  | )
|                                          |                        | Development contract |       |                | 2,416 |                |      |              | (485 | ) |        |        | 2,590 |   |      |      | (107 | )
|                                          |                        | Trade name           |       |                | 628   |                |      |              | (169 | ) |        |        | 990   |   |      |      | (40  | )
|                                          |                        |                      |       |                |       |                |      |              |      |   |        |        |       |   |      |     
|                                          | Intangible assets, net |                      | $     | 3,358          |       |                | $    | (968         | )    |   | $      | 4,470  |       |   | $    | (239 | )   
|                                          |                        |                      |       |                |       |                |      |              |      |   |        |        |       |   |      |     
|                                          | Goodwill               |                      | $     |               |       |                | $    |             |      |   | $      | 65,865 |       |   | $    |     |     
|                                          |                        |                      |       |                |       |                |      |              |      |   |        |        |       |   |      |     
|Total goodwill and intangible assets, net |                        | $                    | 3,358 |                |       | $              | (968 | )            |      | $ | 70,335 |        |       | $ | (239 | )   
|                                          |                        |                      |       |                |       |                |      |              |      |   |        |        |       |   |      |     

Amortization of intangible assets was $150,000
and $729,000 for the three and nine months ended
December 31, 2002. Amortization expense is expected to be
$150,000 for the fourth quarter of fiscal 2003 (a total of
$0.9 million for fiscal 2003). Amortization expense for
fiscal 2004, 2005, 2006 and 2007 is expected to be
$0.6 million, $0.6 million, $0.6 million, and
$0.5 million, respectively.

In December 2002, SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal
Activities was issued. This statement provides guidance on
the recognition and measurement of liabilities associated with
exit or disposal activities and requires that such liabilities
be recognized when incurred. This statement is effective for
exit or disposal activities initiated on or after
January 1, 2003 and does not impact the recognition of
costs under our existing programs. Adoption of this standard is
expected to impact the timing of recognition of costs associated
with future exit and disposal activities.

In December 2002, SFAS No. 148,
Accounting for Stock-Based Compensation-Transition and
Disclosure was issued. This statement amends SFAS
No. 123, Accounting for Stock-Based
Compensation, to provide alternative methods of transition
for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition,
this statement amends the disclosure requirements of SFAS
No. 123 to require prominent disclosures in both annual and
interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method
used on reported results. The annual disclosures required by
this statement were proposed to be effective for financial
statements for fiscal years ending after December 15, 2002.
The disclosure provisions for interim financial information
would be effective for all periods presented in financial
reports containing condensed financial statements for interim
periods beginning after December 15, 2002.

7.     Impairment of
Goodwill and Intangible Assets

Due to current operating losses, the absence of
positive cash flows, recent significant declines in our common
stock price and uncertainties resulting from the duration and
severity of the industry downturn, we assessed the
recoverability of the intangible assets related to the Sensys
acquisition subject to amortization in accordance of
SFAS No. 144 and tested goodwill related to the Sensys
acquisition for impairment in accordance with
SFAS No. 142 during the quarter ended
September 30, 2002. Based upon our projection of
significantly reduced future cash flows related to Sensys
products, an impairment expense of $576,000 was recognized for
developed technology, $174,000 for development contract and
$362,000 for trade name

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THERMA-WAVE, INC.


NOTES TO UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


intangible assets in the quarter ended
September 30, 2002. The impairment test under
SFAS No. 142 was based on a two-step process
involving; 1) comparing the estimated fair value of the
related reporting unit to its net book value, and
2) comparing the estimated implied fair value of goodwill
to its carrying value. As a result of the test, we wrote down
goodwill assets by $65.9 million in the quarter ended
September 30, 2002. There was no impairment charge in the
quarter ended December 31, 2002.

8.     Commitments
and Contingencies

On April 22, 2002, we filed a patent
infringement suit against Boxer Cross Inc. in the United States
District Court, Northern District of California. The suit
alleges that Boxer Cross BX-10 product infringes certain
patents held by Therma-Wave related to ion implant monitoring.
Two of the asserted patents were previously found to be valid
and infringed in a suit filed against Jenoptik, AG, in 1994. The
earlier court rulings led to Jenoptiks withdrawal from the
U.S. market. On June 7, 2002, Boxer Cross filed its
amended answer and counterclaims to Therma-Waves complaint
and asserted various affirmative defenses to Therma-Waves
claims of patent infringement. The pleading also contained
various counterclaims including allegations that
Therma-Waves Therma-Probe product infringed upon certain
patents owned by Boxer Cross and also raised claims of
misappropriation of trade secrets, tortious interference with
contract, unfair competition and unfair business practices. We
replied to Boxer Crosss counterclaims, denying the
material allegations and asserting declaratory judgment
counterclaims. On December 9, 2002, the Court held a
Markman claim construction hearing on our patents-in-suit. The
Court has not yet issued its ruling. No discovery deadline or
trial date has been set. On April 29, 2003, Applied
Materials announced that it had acquired all of the outstanding
stock of Boxer-Cross. We believe that the outcome from this
matter, even if adverse to us, would not have a material adverse
effect on our financial condition or results of operations.

9.     Severance
Charge

During the second fiscal quarter of 2003, we
announced and implemented reduction in force programs aimed at
bringing operating expenses closer to being in line with our
operating environment for the fiscal year 2003. All terminated
employees were notified of their severance and related benefits
at the time the programs were announced. The programs resulted
in a reduction of approximately 21% or 115 employees of our
work force across all functional areas.

All expenses were paid out or are expected to be
paid out in cash with the remaining balance expected to be paid
out by March 31, 2003. Changes in the accrued expenses
relating to reductions in force are summarized in thousands as
follows:

|          |  |                |     |           |  |          |       |                   |  |   |        |   |  |   |    | 
|--------- |  | -------------- | --- | --------- |  | -------- | ----- | ----------------- |  | - | ------ | - |  | - | -- | 
|          |  | Balance        |     |           |  |          |       | Balance          
|          |  | March 31, 2002 |     | Additions |  | Utilized |       | December 31, 2002
|          |  |                |     |           |  |          |       |                  
|Severance |  | $              | 301 |           |  | $        | 1,200 |                   |  | $ | (1,403 | ) |  | $ | 98 | 

10.     Treasury
Stock

On August 1, 2002, the Companys Board
of Directors announced a stock repurchase program for the
repurchase of up to one million shares of Therma-Waves
common stock. As of December 31, 2002, the Company has
repurchased 447,500 shares of common stock at an average
price of $2.06 per share and has 416,825 shares in treasury
stock outstanding. These shares are to be used for various
purposes, including, without limitation, satisfying stock option
exercises and employee stock purchase plan requirements. The
repurchase program may be suspended at any time and from time to
time without prior notice.

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THERMA-WAVE, INC.


NOTES TO UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS 
(Continued)


11.     Warranty
Accrual

At the time of revenue recognition, we provide an
accrual for estimated costs to be incurred pursuant to our
warranty obligation. Our estimate is based primarily on
historical experience. Changes in the warranty accrual during
the year are summarized in thousands as follows:

|                 |  |                |       |                   |  |               |     |                   |  |   |        |   |  |   |     | 
|---------------- |  | -------------- | ----- | ----------------- |  | ------------- | --- | ----------------- |  | - | ------ | - |  | - | --- | 
|                 |  |                |       | Provision for     |  | Settlement of |     |                  
|                 |  | Balance        |       | Warranty Issued   |  | Pre-Existing  |     | Balance          
|                 |  | March 31, 2002 |       | During the Period |  | Warranties    |     | December 31, 2002
|                 |  |                |       |                   |  |               |     |                  
|Warranty Accrual |  | $              | 1,777 |                   |  | $             | 470 |                   |  | $ | (1,515 | ) |  | $ | 732 | 

12.     Subsequent
Events

The Company also announced reduction in force
programs aimed at bringing operating expenses closer in line
with our current operating environment. The programs implemented
resulted in a reduction of approximately 29% of our work force
from two separate actions taken, one in early February 2003 and
one in early April 2003, affecting all functional areas. The
Company also scheduled one shut-down week each quarter until
revenues improve to acceptable levels. Furthermore, the Company
has restructured and moved its Sensys Instruments operations
from two buildings located in Santa Clara, California into its
Fremont, California facility. The Company completed the closing
of the Santa Clara facilities during March 2003, and is in the
process of attempting to sublet both buildings. The Company also
completed relocating personnel out of a second small facility in
Fremont, California, and will use portions of that facility for
storage purposes until the facility can be sublet. There can be
no assurances that any of the facility space no longer in use
can be sublet.






|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 2. | Managements Discussion and Analysis
    of Financial Condition and Results of Operations

This quarterly report on Form 10-Q contains
forward-looking statements as that term is defined in the
Private Securities Reform Act of 1995, which are subject to
known and unknown risks and uncertainties that could cause
actual results to differ materially from those expressed or
implied by such statements. The words believe,
expect, anticipate, intend
and other similar expressions generally identify forward-looking
statements. Potential investors are cautioned not to place undue
reliance on these forward-looking statements, which speak only
as of their dates. Statements relating to our ability to manage
our costs and reduce operating expenses, sustain our operations
and cash position in an extended global economic downturn,
continue the successful development and introduction of new
products and improvement of current products and trends in our
financial performance are all based on current expectations.
Such statements are subject to risks, uncertainties, and changes
in conditions, particularly those related to our possible
de-listing from the Nasdaq National Market due to the late
filing of this report, industry performance in the current
severe industry and economic downturn, political unrest, foreign
currency exchange rates, activities and potential successes of
competitors and competing products and other risks, some of
which are detailed in documents filed with the Securities and
Exchange Commission, including specifically Exhibit 99.1 to
our amended annual report on Form 10-K/A for the year ended
March 31, 2002. See also the discussion of forward-looking
statements related to market risk in the first paragraph of
Item 3 below. We undertake no obligation to update the
information in this quarterly report on Form 10-Q.

General

We are a worldwide leader in the development,
manufacture, marketing and service of process control metrology
systems for use in the manufacture of semiconductors. Process
control metrology is used to monitor process parameters in order
to enable semiconductor manufacturers to maintain high yields on
the production lines, reduce feature size, increase wafer size,
increase equipment productivity and improve device performance.
Our metrology systems are used in all sections of the
semiconductor fabrication plant, or fab, to control

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the wafer fabrication processes. Examples of
wafer fab processes, in which our metrology systems supply key
information, are photoresist processing to support lithography,
deposition of insulator and conductor films, patterned removal,
or etching, of insulator and conductor films, ion
implantation and chemical mechanical planarization. We currently
sell four product families of process control metrology systems:
Therma-Probe® systems, Opti-Probe® systems, Opti-Probe
Real-Time/Critical Dimensions systems, and Integra
and Sensys integrated metrology systems.


Therma-Probe Product Family.Therma-Probe systems utilize our
proprietary thermal wave technology and are the predominant
non-destructive process control metrology systems used to
measure the critical ion implantation process on product wafers
in the fabrication of semiconductors.

Opti-Probe Product Family.Opti-Probe Film Metrology systems
provide the industrys most powerful capability to control
and diagnose non-opaque films for semiconductor production. This
unsurpassed metrology power is achieved by successfully
integrating different measurement technologies, including
optical technologies that are proprietary to Therma-Wave, into
each Opti-Probe system.

Opti-Probe Real-Time/Critical Dimensions
Product Family.Opti-Probe
Real-Time/Critical Dimension systems measure the lateral
dimensions, or critical dimensions, or CD, using our
real time critical dimensions software and a revolutionary,
nondestructive technique based on spectroscopic ellipsometry.
These systems are capable of providing CD metrology for the
smallest features of the next several generations of integrated
circuits, or ICs.

Sensys and Integra Product Family.The Sensys and Integra lines of
integrated metrology products are a broad-based families of
compact metrology modules which are installed and
function inside an IC process system, such as an etching system
or CVD deposition system, to provide metrology on each wafer
before it exits the process tool.

Critical Accounting Policies and
Estimates

Managements Discussion and Analysis of
Financial Condition and Results of Operations discusses our
consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the
disclosure of contingent liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. On an on-going basis,
management evaluates its estimates and judgments, including
those related to revenue recognition, goodwill and intangible
assets, inventories and income taxes. Management bases its
estimates and judgments on historical experience and on various
other factors that are believed to be reasonable under the
circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results
may differ from these estimates under different assumptions or
conditions.

During the quarter ended December 31, 2002,
our critical accounting policies have not changed from those
disclosed in our amended annual report on Form 10-K/A for
the year ended March 31, 2002.

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##### Table of Contents



Results of Operations

The following table summarizes our unaudited
historical results of operations as a percentage of net revenues
for the periods indicated. The historical financial data for the
three and nine months ended December 31, 2002 and 2001 were
derived from our unaudited consolidated financial statements
which, in the opinion of management, reflect all adjustments
(consisting of normal recurring adjustments) necessary for the
fair presentation of the financial condition and results of
operations for such periods.

|                               |                                                    |                          |        |              |       |      |        |      |       |  |        |       |       |  |       |      |      | 
|------------------------------ | -------------------------------------------------- | ------------------------ | ------ | ------------ | ----- | ---- | ------ | ---- | ----- |  | ------ | ----- | ----- |  | ----- | ---- | ---- | 
|                               |                                                    |                          |        |             
|                               |                                                    | Three Months             |        | Nine Months 
|                               |                                                    | Ended                    |        | Ended       
|                               |                                                    | December 31,             |        | December 31,
|                               |                                                    |                          |        |             
|                               |                                                    | 2002                     |        | 2001         |       | 2002 |        | 2001
|                               |                                                    |                          |        |              |       |      |        |     
|Net revenues                   |                                                    |                          |        |              |       |      |        |      |       |  |        |       |       |  |       |     
|                               | Product                                            |                          |        | 46.7         | %     |      |        | 57.9 | %     |  |        | 55.9  | %     |  |       | 81.2 | %   
|                               | Service and parts                                  |                          |        | 53.3         |       |      |        | 42.1 |       |  |        | 44.1  |       |  |       | 18.8 |     
|                               |                                                    |                          |        |              |       |      |        |      |       |  |        |       |       |  |       |     
|Total net revenues             |                                                    |                          | 100.0  |              |       |      | 100.0  |      |       |  | 100.0  |       |       |  | 100.0 |     
|Cost of revenues               |                                                    |                          | 99.8   |              |       |      | 86.1   |      |       |  | (110.9 | )     |       |  | 61.0  |     
|                               |                                                    |                          |        |              |       |      |        |      |       |  |        |       |       |  |       |     
|Gross profit                   |                                                    |                          | 0.2    |              |       |      | 13.9   |      |       |  | (10.9  | )     |       |  | 39.0  |     
|                               |                                                    |                          |        |              |       |      |        |      |       |  |        |       |       |  |       |     
|Operating expenses:            |                                                    |                          |        |              |       |      |        |      |       |  |        |       |       |  |       |     
|                               | Research and development                           |                          |        | 67.1         |       |      |        | 69.1 |       |  |        | 63.6  |       |  |       | 30.4 |     
|                               | Selling, general and administrative                |                          |        | 59.5         |       |      |        | 47.2 |       |  |        | 52.2  |       |  |       | 22.8 |     
|                               | Impairment of goodwill and other intangible assets |                          |        |             |       |      |        |     |       |  |        | 185.3 |       |  |       |     |     
|                               | Severance charge                                   |                          |        | 0.3          |       |      |        | 0.3  |       |  |        | 3.3   |       |  |       | 0.6  |     
|                               | Stock-based compensation                           |                          |        | 3.5          |       |      |        |     |       |  |        | 3.9   |       |  |       |     |     
|                               |                                                    |                          |        |              |       |      |        |      |       |  |        |       |       |  |       |     
|                               |                                                    | Total operating expenses |        |              | 130.4 |      |        |      | 116.6 |  |        |       | 308.3 |  |       |      | 53.8 | 
|                               |                                                    |                          |        |              |       |      |        |      |       |  |        |       |       |  |       |     
|Operating loss                 |                                                    |                          | (130.2 | )            |       |      | (102.7 | )    |       |  | (319.2 | )     |       |  | (14.8 | )   
|                               |                                                    |                          |        |              |       |      |        |      |       |  |        |       |       |  |       |     
|Other income (expense):        |                                                    |                          |        |              |       |      |        |      |       |  |        |       |       |  |       |     
|                               | Interest expense                                   |                          |        | (0.5         | )     |      |        | (0.6 | )     |  |        | (0.4  | )     |  |       | (0.3 | )   
|                               | Interest income                                    |                          |        | 1.1          |       |      |        | 4.1  |       |  |        | 2.4   |       |  |       | 2.9  |     
|                               | Other, net                                         |                          |        | (0.1         | )     |      |        |     |       |  |        | 0.5   |       |  |       | 0.1  |     
|                               |                                                    |                          |        |              |       |      |        |      |       |  |        |       |       |  |       |     
|                               |                                                    | Total other income       |        |              | 0.5   |      |        |      | 3.5   |  |        |       | 2.5   |  |       |      | 2.7  | 
|                               |                                                    |                          |        |              |       |      |        |      |       |  |        |       |       |  |       |     
|Loss before income tax benefit |                                                    |                          | (129.7 | )            |       |      | (99.2  | )    |       |  | (316.7 | )     |       |  | (12.1 | )   
|Income tax benefit             |                                                    |                          |       |              |       |      |       |      |       |  |       |       |       |  |      |     
|                               |                                                    |                          |        |              |       |      |        |      |       |  |        |       |       |  |       |     
|Net loss                       |                                                    |                          | (129.7 | )%           |       |      | (99.2  | )%   |       |  | (316.7 | )%    |       |  | (12.1 | )%  
|                               |                                                    |                          |        |              |       |      |        |      |       |  |        |       |       |  |       |     

Net Revenues.Net
revenues for the fiscal quarter ended December 31, 2002
were $10.2 million. Compared to the second quarter of
fiscal 2003, net revenues decreased $0.7 million, or 6.4%,
from $10.9 million. Net revenues decreased
$0.8 million, or 7.3%, from $11.1 million in the same
fiscal quarter of the prior year. For the nine months ended
December 31, 2002, net revenues were $36.1 million, a
decrease of $33.4 million, or 48.0%, from
$69.5 million in the comparable period of the prior year.
The decrease in revenues was primarily the result of capital
spending reductions by our customers due to the downturn of the
semiconductor industry and the weakness of the global economy.

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The following table summarizes our revenues in
different categories as a percentage of total net revenues for
the periods indicated.

|             |                    |              |  |              |   |      |  |       |   |  |  |       |   |  |  |       |  
|------------ | ------------------ | ------------ |  | ------------ | - | ---- |  | ----- | - |  |  | ----- | - |  |  | ----- | -
|             |                    |              |  |             
|             |                    | Three Months |  | Nine Months 
|             |                    | Ended        |  | Ended       
|             |                    | December 31, |  | December 31,
|             |                    |              |  |             
|             |                    | 2002         |  | 2001         |   | 2002 |  | 2001 
|             |                    |              |  |              |   |      |  |      
|Net revenues |                    |              |  |              |   |      |  |       |   |  |  |       |   |  |  |      
|             | System             |              |  | 46.7         | % |      |  | 57.9  | % |  |  | 55.9  | % |  |  | 81.2  | %
|             | Service and parts  |              |  | 53.3         |   |      |  | 42.1  |   |  |  | 44.1  |   |  |  | 18.8  |  
|             |                    |              |  |              |   |      |  |       |   |  |  |       |   |  |  |      
|             | Total net revenues |              |  | 100.0        | % |      |  | 100.0 | % |  |  | 100.0 | % |  |  | 100.0 | %
|             |                    |              |  |              |   |      |  |       |   |  |  |       |   |  |  |      

International sales accounted for approximately
71% and 52% of our total net revenues for the three months ended
December 31, 2002 and 2001, respectively. For the nine
months ended December 31, 2002 and 2001, respectively,
international sales accounted for approximately 72% and 57% of
our total net revenues. We anticipate that international sales
will continue to account for a significant portion of our net
revenues in the foreseeable future. A substantial portion of our
international sales are denominated in U.S. dollars. As a
result, changes in the values of foreign currencies relative to
the value of the U.S. dollar can render our products
comparatively more expensive. Although we have not been
negatively impacted in the past by foreign currency changes in
Taiwan, Japan, China, Korea, and Europe, such conditions could
negatively impact our international sales in future periods.
Also, political instability, war or disease epidemics may affect
our international sales.

Gross Profit (Loss).Gross profit for the third quarter of
fiscal 2003 was $16,000, compared with a gross loss of
$(7.0) million in the previous fiscal quarter. Compared to
the same quarter of fiscal 2002, gross profit decreased
$1.5 million. As a percentage of net revenues, gross margin
for the current quarter was 0.0%, compared to (64.2)% for last
fiscal quarter and 13.9% for the same quarter of last fiscal
year. For the nine months ended December 31, 2002, gross
loss was $(3.9) million, a decrease of $31.1 million, or
114.5%, from $27.1 million gross profit in the comparable
period of the prior year. As a percentage of net revenues, gross
margin for the current nine months was (10.9)%, compared to
39.0% in the comparable period of the prior year. The increase
in gross profit in the current quarter from the second fiscal
quarter of 2003 was primarily due to a $7.4 million charge
associated with additional reserves for obsolete and excess
inventory in the second fiscal quarter of 2003 offset by a loss
contract reserve in the third fiscal quarter of 2003. Based upon
direct discussions with a customer on the status of a
development project, the Company reassessed the remaining costs
to complete the project and determined that a loss existed. As a
result, during the quarter ended December 31, 2002, a loss
of $613,000 was recognized on a development contract being
accounted for under the percentage-of-completion method. The
decrease of gross profit in the current quarter from the same
quarter of fiscal 2002 was primarily due to our lower net
revenues and production volume. The change of gross profit from
the nine months ended December 31, 2002 to the nine months
ended December 30, 2001 was primarily due to lower net
revenues and production volume and the above mentioned
$7.4 million inventory charge.

Research and Development, or R&D,
Expenses.R&D expenses for the
third quarter of fiscal 2003 were $6.9 million, a decrease
of 15.2% from the prior quarter and a decrease of 10.1% from the
same quarter of last fiscal year. For the nine months ended
December 31, 2002, R&D expenses were
$23.0 million, an increase of $1.8 million, or 8.6%,
from $21.2 million in the comparable period of the prior
year. The decrease of R&D expenses from the prior quarter
and the same quarter of last fiscal year was primarily due to
reduced headcount in R&D functions resulting from our
reduction in force programs during the fourth quarter of fiscal
2002 and the second quarter of fiscal 2003. We expect to
continue to commit significant resources to the development of
new advanced metrology products of precision performance at
higher wafer throughputs.

Selling, General and Administrative, or
SG&A, Expenses.SG&A expenses
for the third quarter of fiscal 2003 were $6.1 million, a
decrease of 8.4% from SG&A expenses of $6.7 million in
the prior fiscal quarter. Compared to the same quarter of last
fiscal year, SG&A expenses increased by 17.0%. For the nine
months ended December 31, 2002, SG&A expenses were
$18.9 million, an increase of $3.0 million, or 19.2%,
from

11



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##### Table of Contents



$15.8 million in the comparable period of
the prior year. The decrease of SG&A expense from the prior
fiscal quarter was primarily due to reduced headcount in
SG&A functions resulting from our reduction in force
programs during the fourth quarter of fiscal 2002 and the second
quarter of fiscal 2003. The increase from same periods of the
prior year was primarily due to the addition of SG&A
expenses incurred by Sensys which we acquired in January 2002.


Impairment of Goodwill and Other Intangible
Assets.During the second fiscal
quarter of 2003, we completed a goodwill impairment test, and
the results of that test indicated that our goodwill and
intangible assets were impaired by $67.0 million. The
impairment test under SFAS No. 144 and No. 142 was
based on a two-step process involving: 1) comparing the
estimated fair value of the related reporting unit to its net
book value, and 2) comparing the estimated implied fair value of
goodwill to its carrying value. The circumstances leading to the
impairment of goodwill and intangible assets primarily relate to
current operating losses, market capitalization decreased below
tangible book value, the absence of positive cash flows and
uncertainties resulting from the duration and severity of the
industry downturn. We wrote down goodwill and intangible assets
by $67.0 million in the second fiscal quarter of 2003.

Severance Charge.During the second quarter of fiscal
2003, we announced and implemented reduction in force programs
aimed at bringing operating expenses closer to being in line
with our operating environment for the fiscal year 2003. We
reduced approximately 21% of our work force across all
functional areas. We recorded a $35,000 severance charge for the
three months ended December 31, 2002, an increase of
$5,000, from $30,000 in the same period of fiscal 2002. For the
nine months ended December 31, 2002, severance charges were
$1.2 million, an increase of $0.8 million, from
$0.4 million in the same period of fiscal 2002. All
terminated employees were notified of their severance and
related benefits at the time the programs were announced.

Stock-Based Compensation.As part of the acquisition of Sensys,
we recorded $3.5 million of stock-based compensation to be
amortized over the vesting period of the options granted to
Sensys employees. The amortization expense was
$0.4 million, or 3.5% of revenue, for the quarter ended
December 31, 2002. For the nine months ended
December 31, 2002, the amortization expense was
$1.4 million, or 3.9% of revenue. We had no similar
expenses for the same periods of last fiscal year.

Other Income.Other
income for the third quarter of fiscal 2003 was $57,000, which
was 88.9% lower than other income in the prior fiscal quarter.
Compared to the same quarter of the prior fiscal year, other
income decreased 85.3%. For the nine months ended
December 31, 2002, other income was $0.9 million, a
decrease of $1.0 million, or 52.9%, from $1.9 million
in the comparable period of the prior year. We derive other
income primarily from the investment of our cash on hand. The
decrease of other income was primarily due to reduced cash
balance invested during the third quarter of fiscal 2003.

Provision for Income Taxes.For the nine months ended
December 31, 2002, no tax provision was recorded based upon
our projected tax loss for fiscal 2003.

Net Loss.The
combination of all the factors discussed above contributed to a
net loss of $13.3 million for the third quarter of fiscal
2003, compared with net loss of $89.9 million in the prior
fiscal quarter and net loss of $11.0 million in the same quarter
of last fiscal year. For the nine months ended December 31,
2002, net loss was $114.5 million, a decrease of
$106.1 million, from net loss of $8.4 million in the
comparable period of the prior year.

Liquidity and Capital Resources

Our principal liquidity requirements are for
working capital. Over the last three fiscal years, we have
funded our operating activities principally from funds generated
from operations and net proceeds from an initial public offering.

Cash flows used by operating activities were
$30.8 million and $4.9 million for the first nine
months of fiscal 2003 and 2002, respectively. The decrease in
cash flows provided by operating activities from fiscal year
2002 to 2003 was mainly due to our net loss, exclusive of
non-cash charges, in the first nine months of fiscal

12



---



##### Table of Contents



year 2003. Our net loss in the period was
primarily due to lower net revenues and production volume in the
industry downturn, while our expense reductions did not match
the decrease in revenue.


Cash flows provided (used) by investing
activities were $5.8 million and $(1.1) million for the
first nine months of fiscal 2003 and 2002, respectively. The
increase in cash flows provided by investing activities was
primarily due to an increase in the sale of short-term
investments in the first nine months of fiscal year 2003.
Purchases of property and equipment were $1.4 million and
$2.0 million for the first nine months of fiscal 2003 and
2002, respectively.

Cash flows provided by financing activities were
$0.1 million and $2.2 million for the first nine
months of fiscal 2003 and 2002, respectively. Cash was generated
from the exercise of stock options and warrants and the issuance
of common stock under our employee stock purchase plan. In the
first nine months of fiscal 2003, proceeds from issuance of
common stock had been largely offset by the use of cash to
repurchase stock pursuant to the stock repurchase program
discussed in Note 10 of the financial statements entitled
Treasury Stock.

In June 2001, we entered into a
$10.0 million loan and security agreement with Comerica
Bank. In December 2001, we amended this bank credit facility and
as a result of this amendment, the credit extension limit was
changed to $13.5 million. In November 2002, we further amended
the bank credit facility to allow for the loss that was expected
to be incurred during the quarter ended December 31, 2002 and
amend certain other covenants and conditions going forward. As a
result of the amendment, the credit extension limit was changed
to $10.0 million. The amended bank credit facility allowed us to
borrow money bearing interest either at a floating rate per
annum equal to the prime rate plus one quarter percent or at a
rate per annum equal to LIBOR plus two percent under the amended
agreement. We could request advances in an aggregate outstanding
amount not to exceed the lesser of $10.0 million or the
borrowing base, in each case minus the aggregate face amount of
outstanding letters of credit, including any drawn but
un-reimbursed letters of credit. Any borrowings under the
Comerica Bank credit facility would be secured by substantially
all of our assets. We currently have a $3.5 million standby
letter of credit as required by the lessor of our building. The
existing amended Comerica Bank credit facility matures on
September 30, 2003.

We continue negotiations to secure sufficient
access to credit going forward. Subsequent to the quarter ended
December 31, 2002, we violated covenants in the bank credit
facility under the December 2001 amendment by the late filing of
this Form 10-Q as well as by violating the quarter loss
covenant. Comerica bank has verbally agreed to continue to
extend the line to the extent necessary to cover the
$3.5 million standby letter of credit on our building until
the facility matures. However, the remaining balance of the
credit line will likely no longer be available to us under the
amended agreement. We will continue discussions with Comerica
bank, and, if necessary, with other banks, in an attempt to
re-establish the full line of credit. However, there can be no
assurances that we will be successful in obtaining additional
credit.

Our other contractual obligations at
December 31, 2002 and the effect such obligations are
expected to have on our liquidity and cash flow in future
periods, have not changed materially since March 31, 2002
as described in our Form 10-K/A.

Our principal sources of funds for at least the
next three to four quarters, are anticipated to be cash and
short-term investments on hand ($26.6 million as of
December 31, 2002). We expect to limit our capital spending
to essential items and have made further operating expense
reductions as discussed in Note 11, Subsequent Event. We
believe that these funds will provide us with sufficient
liquidity and capital resources for us to meet our current and
future financial obligations for at least the next twelve
months. No assurance can be given, however, that this will be
the case. We may require additional equity or debt financing to
meet our working capital requirements or to fund our research
and development activities. There can be no assurance that
additional financing will be available when required or, if
available, will be on terms satisfactory to us.

13



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##### Table of Contents



Inflation

The impact of inflation on our business has not
been material for the fiscal quarter ended December 31,
2002.






|        |                                                              
|------- | -------------------------------------------------------------
|Item 3. | Quantitative and Qualitative Disclosure
    about Market Risk

Market Risk Disclosures

The following discussion about market risk
disclosures involves forward-looking statements. Actual results
could differ materially from those projected in the
forward-looking statements. We are exposed to market risks
related to changes in interest rates and foreign currency
exchange rates. We do not have any derivative financial
instruments. See also the discussion of forward-looking
statements in the first paragraph of Item 2 above.

Interest Rate Risk

As of December 31, 2002, our cash and cash
equivalents included money market securities and investment
grade commercial paper. Due to the short-term duration of such
an investment portfolio, an immediate 10% change in interest
rates would not have a material effect on the fair market value
of such a portfolio, therefore, we would not expect our
operating results or cash flows to be affected to any
significant degree by the effect of a sudden change in market
interest rates on our securities portfolio.

Foreign Currency Exchange Risk

A substantial portion of our sales are
denominated in U.S. dollars and, as a result, we have relatively
little exposure to foreign currency exchange risk with respect
to sales made. We do not use forward exchange contracts to hedge
exposures denominated in foreign currencies or any other
derivative financial instruments for trading or speculative
purposes. The effect of an immediate 10% change in exchange
rates would not have a material impact on our future operating
results or cash flows.






|        |                        
|------- | -----------------------
|Item 4. | Controls and Procedures

During the 90-day period prior to the filing date
of this report, management, including our Chief Executive
Officer and Chief Financial Officer, evaluated the effectiveness
of the design and operation of the companys disclosure
controls and procedures. In late January 2003, management became
aware of a possible revenue recognition issue associated with
the sale of one tool through one of our foreign branches. Our
Audit Committee launched an investigation and engaged outside
legal counsel and independent forensic accountants to assist it.
The investigation was conducted to (i) identify additional
potential revenue recognition issues, if any; (ii) to
review the business expense practices of certain of our
employees at that foreign branch. As a result of this matter,
management conducted a detailed review of revenue recognition.
Based upon the investigation and managements revenue
recognition review, a material weakness has been identified
relating to controls surrounding evaluating and reporting
revenue transactions, particularly in the Asia/Pacific region.
As a result, we have implemented or are in the process of
implementing the following changes or additions to our internal
controls and procedures, among others:



| |   |                                                                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Changing our internal reporting structure to
    require branch accounting personnel to report directly to our
    finance department in the United States;                                                                    
|
| |  | Establishing audit and review procedures for each
    foreign branch consistent with each branchs exposure,
    including, as appropriate, outside auditors;                                                                  
|
| |  | Requiring managers of foreign operations to
    attest in writing that final acceptance documents for any given
    period are valid acceptances that justify revenue recognition
    and that will result in customer payment;
|
| |  | Requiring corporate financial management
    personnel to investigate transactions where revenue has been
    recognized but the customer has not paid according to terms;                                                     

14



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##### Table of Contents





| |   |                                                                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Re-training employees and developing an ongoing
    training program with particular focus on company policies and
    procedures related to revenue recognition, expense
    reimbursements and bank account reconciliations;
|
| |  | Establishing yearly or twice-yearly (for larger
    branches) reviews with both internal and external accounting
    personnel and local management, to be coordinated with quarterly
    business reviews; and               
|
| |  | Establishing controls to closely monitor the
    credit status of certain customers, with emphasis on
    distributors.                                                                                                       

Management is considering additional controls as
a result of the special investigation and development is ongoing.

15



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##### Table of Contents






PART II.  OTHER
INFORMATION






Item 1.     Legal
Proceedings


On April 22, 2002, we filed a patent infringement
suit against Boxer Cross Inc. in the United States District
Court, Northern District of California. The suit alleges that
Boxer Cross BX-10 product infringes certain patents held
by Therma-Wave related to ion implant monitoring. Two of the
asserted patents were previously found to be valid and infringed
in a suit filed against Jenoptik, AG, in 1994. The earlier court
rulings led to Jenoptiks withdrawal from the
U.S. market. On June 7, 2002, Boxer Cross filed its amended
answer and counterclaims to Therma-Waves complaint and
asserted various affirmative defenses to Therma-Waves
claims of patent infringement. The pleading also contained
various counterclaims including allegations that
Therma-Waves Therma-Probe product infringed upon certain
patents owned by Boxer Cross and also raised claims of
misappropriation of trade secrets, tortious interference with
contract, unfair competition and unfair business practices. We
replied to Boxer Crosss counterclaims, denying the
material allegations and asserting declaratory judgment
counterclaims. On December 9, 2002, the Court held a Markman
claim construction hearing on our patents-in-suit. The Court has
not yet issued its ruling. No discovery deadline or trial date
has been set. On April 29, 2003, Applied Materials
announced that it had acquired all of the outstanding stock of
Boxer Cross. We believe that the outcome from this matter, even
if adverse to us, would not have a material adverse effect on
our financial condition or results of operations.






|        |                                              
|------- | ---------------------------------------------
|Item 2. | Changes in Securities and Use of
    Proceeds

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) The following exhibits are included
herein:

|        |       |             |  |                                                                                                                                               
|------- | ----- | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |            
|Number  |       | Description
|        |       |            
|        | 10.42 |             |  | Amendment No. 2 to Loan And Security
    Agreement, dated as of November 18, 2002, between
    Therma-Wave, Inc. and Comerica Bank-California.
|        | 10.43 |             |  | Employment Agreement dated as of February 5,
    2003, by and between Therma-Wave, Inc. and Boris Lipkin.                                     
|        | 10.44 |             |  | Stock Option Agreement dated as of
    February 5, 2003, by and between Therma-Wave, Inc. and
    Boris Lipkin.                               
|        | 10.45 |             |  | Offer letter, Board Services, dated as of
    March 12, 2003, from Therma-Wave, Inc. to Papken S. Der
    Torossian.                          
|        | 10.46 |             |  | Stock Option Agreement, dated as of
    March 15, 2003, by and between Therma-Wave, Inc. and Papken
    Der Torossian.                        
|        | 99.1  |             |  | Risk Factors.(1)                                                                                                                              
|        | 99.2  |             |  | Certifications Pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002.                                                                 



---



|    |                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Incorporated by reference to the same numbered
    exhibit in the Companys amended Annual Report on
    Form 10-K/A for the period ended March 31, 2002 (File
    No. 000-26911).

(b) Reports on Form 8-K

None.

16



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##### Table of Contents






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.



| |                                                        
| | -------------------------------------------------------
| | THERMA-WAVE, INC.                                      
| | (Registrant)                                           
|
| | /s/ L. RAY CHRISTIE                                    
| |                                                        
| | L. Ray Christie                                        
| | Chief Financial Officer                                
| | (as Registrant and as Principal Accounting
    Officer)

May 5, 2003

17



---



##### Table of Contents



THERMA-WAVE, INC.






CERTIFICATION PURSUANT TO SECTION 302 OF
THE


SARBANES-OXLEY ACT OF 2002


I, Boris Lipkin, certify that:



| |                                                                                                                                                                                                                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. I have reviewed this quarterly report on
    Form 10-Q of Therma-Wave, Inc.;                                                                                                                                                                                                                                                                      
|
| | 2. Based on my knowledge, this quarterly
    report does not contain any untrue statement of a material fact
    or omit to state a material fact necessary to make the
    statements made, in light of the circumstances under which such
    statements were made, not misleading with respect to the period
    covered by this quarterly report;
|
| | 3. Based on my knowledge, the financial
    statements, and other financial information included in this
    quarterly report, fairly present in all material respects the
    financial condition, results of operations and cash flows of the
    registrant as of, and for, the periods presented in this
    quarterly report;                   
|
| | 4. The registrants other certifying
    officers and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the registrant and we have:                                                                                                             



| |                                                                                                                                                                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a. Designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this quarterly report is being prepared;
|
| | b. Evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this
    quarterly report (the Evaluation Date); and                                                                                                      
|
| | c. Presented in this quarterly report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                



| |                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5. The registrants other certifying
    officers and I have disclosed, based on our most recent
    evaluation, to the registrants auditors and the audit
    committee of registrants board of directors (or persons
    performing the equivalent function):



| |                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a. All significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the registrants ability to record, process,
    summarize and report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b. Any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    



| |                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6. The registrants other certifying
    officers and I have indicated in this quarterly report whether
    or not there were significant changes in internal controls or in
    other factors that could significantly affect internal controls
    subsequent to the date of our most recent evaluation, including
    any corrective actions with regard to significant deficiencies
    and material weaknesses.



| |                                          
| | -----------------------------------------
| | /s/ BORIS LIPKIN                         
| |                                          
| | Boris Lipkin                             
| | President and Chief Executive
    Officer

May 5, 2003

18



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##### Table of Contents



THERMA-WAVE, INC.

CERTIFICATION PURSUANT TO SECTION 302 OF
THE

SARBANES-OXLEY ACT OF 2002


I, L. Ray Christie, certify that:



| |                                                                                                                                                                                                                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. I have reviewed this quarterly report on
    Form 10-Q of Therma-Wave, Inc.;                                                                                                                                                                                                                                                                      
|
| | 2. Based on my knowledge, this quarterly
    report does not contain any untrue statement of a material fact
    or omit to state a material fact necessary to make the
    statements made, in light of the circumstances under which such
    statements were made, not misleading with respect to the period
    covered by this quarterly report;
|
| | 3. Based on my knowledge, the financial
    statements, and other financial information included in this
    quarterly report, fairly present in all material respects the
    financial condition, results of operations and cash flows of the
    registrant as of, and for, the periods presented in this
    quarterly report;                   
|
| | 4. The registrants other certifying
    officers and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the registrant and we have:                                                                                                             



| |                                                                                                                                                                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a. Designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this quarterly report is being prepared;
|
| | b. Evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this
    quarterly report (the Evaluation Date); and                                                                                                      
|
| | c. Presented in this quarterly report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                



| |                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5. The registrants other certifying
    officers and I have disclosed, based on our most recent
    evaluation, to the registrants auditors and the audit
    committee of registrants board of directors (or persons
    performing the equivalent function):



| |                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a. All significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the registrants ability to record, process,
    summarize and report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b. Any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    



| |                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6. The registrants other certifying
    officers and I have indicated in this quarterly report whether
    or not there were significant changes in internal controls or in
    other factors that could significantly affect internal controls
    subsequent to the date of our most recent evaluation, including
    any corrective actions with regard to significant deficiencies
    and material weaknesses.



| |                        
| | -----------------------
| | /s/ L. RAY CHRISTIE    
| |                        
| | L. Ray Christie        
| | Chief Financial Officer

May 5, 2003

19



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##### Table of Contents



EXHIBIT INDEX

|        |       |             |  |                                                                                                                                               
|------- | ----- | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |            
|Number  |       | Description
|        |       |            
|        | 10.42 |             |  | Amendment No. 2 to Loan And Security
    Agreement, dated as of November 18, 2002, between
    Therma-Wave, Inc. and Comerica Bank-California.
|        | 10.43 |             |  | Employment Agreement dated as of February 5,
    2003, by and between Therma-Wave, Inc. and Boris Lipkin.                                     
|        | 10.44 |             |  | Stock Option Agreement dated as of
    February 5, 2003, by and between Therma-Wave, Inc. and
    Boris Lipkin.                               
|        | 10.45 |             |  | Offer letter, Board Services, dated as of
    March 12, 2003, from Therma-Wave, Inc. to Papken S.
    Der Torossian.                          
|        | 10.46 |             |  | Stock Option Agreement dated as of March 12,
    2003, by and between Therma-Wave, Inc. and Papken S. Der
    Torossian.                      
|        | 99.1  |             |  | Risk Factors.(1)                                                                                                                              
|        | 99.2  |             |  | Certifications Pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002.                                                                 



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|    |                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Incorporated by reference to the same numbered
    exhibit in the Companys amended Annual Report on
    Form 10-K/A for the period ended March 31, 2002 (File
    No. 000-26911)