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

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FORM 10-Q

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(Mark One)

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR
     15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2002

OR

oTRANSITION 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

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 WayFremont, 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

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



|Class                        | Outstanding as of July 31, 2002
|---------------------------- | -------------------------------
|Common stock, $.01 par value | 29,210,621                     







THERMA-WAVE, INC.
                                TABLE OF CONTENTS



|PART I.   FINANCIAL INFORMATION                                                                                                                                                                            | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|                                                                                                                                                                                                           | 
|ITEM 1.   Financial Statements                                                                                                                                                                             | 
|                                                                                                                                                                                                           | 
|Condensed Consolidated Balance Sheets as of
          
June 30, 2002 and March 31, 2002                                                                                                                    | 
|                                                                                                                                                                                                           | 
|Condensed Consolidated Statements of Operations for the
          
    Three Months Ended June 30, 2002 and 2001                                                                                           | 
|                                                                                                                                                                                                           | 
|Condensed Consolidated Statements of Cash Flows for the
                                                                                                    
    Three Months Ended June 30, 2002 and 2001 | 
|                                                                                                                                                                                                           | 
|Notes to Condensed Consolidated Financial Statements                                                                                                                                                       | 
|                                                                                                                                                                                                           | 
|ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations                                                                                                              | 
|                                                                                                                                                                                                           | 
|ITEM 3.   Quantitative and Qualitative Disclosures About Market Risk                                                                                                                                       | 
|                                                                                                                                                                                                           | 

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                                                    | 

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PART I -- FINANCIAL INFORMATION

Item 1. Financial Statements

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THERMA-WAVE, INC.

                     CONDENSED CONSOLIDATED BALANCE SHEETS

                                (in thousands)

                                  (Unaudited)

`June 30,      March 31,
                                                          2002         2002
                                                      -----------  ------------
                           ASSETS
Current assets:
 Cash and cash equivalents.......................... $    27,180  $     46,484
 Short-term investments.............................      21,572        12,575
 Accounts receivable, net...........................      19,664        16,585
 Inventories........................................      33,899        33,838
 Other current assets...............................       3,456         3,427
                                                      -----------  ------------
    Total current assets............................     105,771       112,909
 Property and equipment, net........................      13,125        14,041
 Goodwill and intangible assets, net................      69,806        70,096
 Other assets.......................................       4,930         4,723
                                                      -----------  ------------
    Total assets....................................     193,632       201,769
                                                      ===========  ============
            LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Accounts payable...................................       4,975         6,297
 Accrued warranty costs.............................       1,459         1,802
 Deferred revenue...................................      11,212         8,683
 Income tax payable.................................       4,985         4,903
 Other current liabilities..........................       9,728         9,303
                                                      -----------  ------------
    Total current liabilities.......................      32,359        30,988
 Long term debt.....................................          16            16
 Other liabilities..................................       2,307         2,358
                                                      -----------  ------------
    Total liabilities...............................      34,682        33,362

Stockholders' equity:
 Common stock.......................................         293           291
 Additional paid-in capital.........................     322,299       321,466
 Notes receivable from stockholders.................        (200)         (200)
 Accumulated deficit................................    (159,720)     (148,417)
 Accumulated other comprehensive loss...............      (1,380)       (1,790)
 Deferred stock-based compensation..................      (2,342)       (2,943)
                                                      -----------  ------------
    Total stockholders' equity......................     158,950       168,407
                                                      -----------  ------------
    Total liabilities and stockholders' equity......     193,632       201,769
                                                      ===========  ============`

See accompanying notes to condensed consolidated financial statements.

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THERMA-WAVE, INC.

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                     (in thousands, except per share data)

                                  (Unaudited)

`Three Months Ended
                                                   June 30,
                                             --------------------
                                                2002       2001
                                             ---------  ---------
Net revenues............................... $  14,949  $  37,821
Cost of revenues...........................    11,871     20,149
                                             ---------  ---------
Gross profit...............................     3,078     17,672

Operating expenses:
  Research and development.................     7,995      6,981
  Selling, general and administrative......     6,121      5,707
  Stock-based compensation.................       586         --
                                             ---------  ---------
         Total operating expenses..........    14,702     12,688
                                             ---------  ---------
Operating income (loss)....................   (11,624)     4,984
Other income (expense):
  Interest expense.........................       (51)       (84)
  Interest income..........................       264        832
  Other, net...............................       108         39
                                             ---------  ---------
         Total other income................       321        787
                                             ---------  ---------
Income (loss) before provision for income t   (11,303)     5,771
Provision for income taxes.................        --       (346)
                                             ---------  ---------
Net income (loss).......................... $ (11,303) $   5,425
                                             =========  =========
Net income (loss) per share:
  Basic.................................... $   (0.40) $    0.23
  Diluted.................................. $   (0.40) $    0.22

Weighted average common shares outstanding:
  Basic....................................    28,565     23,786
  Diluted..................................    28,565     25,133`

See accompanying notes to condensed consolidated financial statements.

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THERMA-WAVE, INC.

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (in thousands)

                                   (Unaudited)

`Three Months Ended
                                                             June 30,
                                                          --------------------
                                                             2002       2001
                                                          ---------  ---------
Operating activities:
 Net income (loss)...................................... $ (11,303) $   5,425
 Adjustments to reconcile net income (loss) to net cash
  provided (used) by operating activities:
   Depreciation and amortization........................     1,696      1,366
   Amortization of intangible assets....................       290         --
   Amortization of deferred stock-based compensation....       601         --
 Changes in assets and liabilities:                             --         --
   Accounts receivable..................................    (3,079)    11,835
   Inventories..........................................       (61)     2,483
   Other assets.........................................       (45)       248
   Liabilities..........................................     1,320    (19,472)
                                                          ---------  ---------
    Net cash provided (used) by operating activities....   (10,581)     1,885
                                                          ---------  ---------
Investing activities:
  Purchases of property and equipment...................      (593)    (1,620)
  (Purchase)Sale of short-term investments..............    (8,997)     4,340
  Other.................................................      (378)      (130)
                                                          ---------  ---------
     Net cash provided (used) by investing activities...    (9,968)     2,590
                                                          ---------  ---------
Financing activities:
  Proceeds from issuance of common stock................       835      1,139
  Principal payments under capital lease obligations....        --        (28)
                                                          ---------  ---------
Net cash provided by financing activities...............       835      1,111
                                                          ---------  ---------

  Effect of exchange rates on cash......................       410        (59)

 Net increase (decrease) in cash and cash equivalents...   (19,304)     5,527
 Cash and cash equivalents at beginning of period.......    46,484     55,725
                                                          ---------  ---------
 Cash and cash equivalents at end of period............. $  27,180  $  61,252
                                                          =========  =========
 Supplementary disclosures:
  Cash paid for interest................................ $      10  $      57
                                                          =========  =========
  Cash paid for taxes................................... $      35  $   2,445
                                                          =========  =========`

See accompanying notes to condensed consolidated financial statements.

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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 June 30, 2002,
and the operating results and cash flows for the three months ended June 30,
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 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.

The first quarters of fiscal years 2003 and 2002 and the
entire fiscal year 2002 ended on June 30, 2002, July 1, 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):

`June 30,       March 31,
                                         2002          2002
                                     ------------  ------------
Purchased materials................ $     11,850  $     11,172
Systems in process.................       14,975        12,657
Finished systems...................        7,074        10,009
                                     ------------  ------------
                                    $     33,899  $     33,838
                                     ============  ============`

3. Comprehensive Income (Loss)

Comprehensive income (loss) consists of net income (loss)
for the period and the change in accumulated foreign currency translation
adjustments during the period. For the quarters ended June 30, 2002 and 2001,
comprehensive income (loss) amounted to approximately $(10.9) million and $5.4
million, respectively.

4. Change in Accounting Principle

In accordance with guidance provided in SAB 101, we
recorded $6.3 million (net of income tax benefit of $0.4 million), or $0.25 per
diluted share, 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 June 30, 2002 and 2001, we
recognized $242,000 and $1.5 million, respectively, out of the $9.4 million
revenue that was included in the cumulative effect adjustment as of April 1,
2000.

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.

`June 30,
                                             -------------------
                                               2002      2001
                                             --------- ---------
  Common stock subject to repurchase
   (unvested)...............................        6        --
  Common stock held in escrow account.......      541        --
  Stock options.............................    4,861     1,071
  Warrants..................................      110        --`

For the three months ended June 30, 2002 and 2001, anti-
dilutive stock options have a weighted average exercise price of $16.81 and
$21.67, respectively. The warrants outstanding at June 30, 2002 that we excluded
from the above calculation had a weighted average exercise price of $3.72.

6. Recently Issued Accounting Statements

On January 16, 2002, we adopted the non-amortization
provisions of 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.  We have completed the goodwill impairment test as of the beginning of
fiscal 2003, and the results of that test indicated that our goodwill and other
intangible assets are not impaired.  Intangible assets include developed
technology, development contract and trade name and are being amortized on a
straight-line basis over the estimated useful lives of two to five years. No
changes were made to the useful lives of amortizable intangible assets or
reclassifications made in connection with the adoption of SFAS No. 142.
Components of intangible assets were as follows (in thousands):

`June 30, 2002                 March 31, 2002
                                ----------------------------  ----------------------------
                                Gross Carrying  Accumulated   Gross Carrying  Accumulated
                                   Amount      Amortization      Amount      Amortization
                                -------------  -------------  -------------  -------------
Intangible assets
 subject to amortization:
  Developed technology........ $         890  $        (202) $         890  $         (92)
  Development contract........         2,590           (237)         2,590           (107)
  Trade name..................           990            (90)           990            (40)
                                -------------  -------------  -------------  -------------
                               $       4,470  $        (529) $       4,470  $        (239)
                                =============  =============  =============  =============
Intangible assets
 not subject to amortization:
  Goodwill.................... $      65,865                 $      65,865
                                =============  =============  =============  =============`

Amortization of intangible assets was $0.3 million for the
three months ended June 30, 2002.  Amortization expense is expected to be $0.9
million for the remainder of fiscal 2003 (a total of $1.2 million for fiscal
2003).  Amortization expense for fiscal 2004, 2005, 2006 and 2007 is expected to
be $1.1 million, $0.7 million, $0.7 million, and $0.6 million, respectively. Net
loss remains unchanged after the adoption of SFAS No. 142 as all goodwill is not
subject to amortization.

7. Commitments and Contingencies

On December 17, 2001, we signed a
definitive agreement to acquire Sensys Instruments Corporation. On December 28,
2001, Sensys was named in a patent infringement suit filed by KLA-Tencor
Corporation. KLA-Tencor alleged that it patented an aspect of the integrated
metrology technology that Sensys uses in their integrated product family. KLA-
Tencor is seeking damages and an injunction to stop the sale of the equipment
they allege uses this aspect. On February 25, 2002, Sensys answered KLA-Tencor's
complaints by denying the material allegations and asserting declaratory
judgment counterclaims. KLA-Tencor filed its reply on March 22, 2002. A case
management conference was held on July 11, 2002.  Discovery cut-off was set for
August 4, 2003 but a trial date has not been set. We believe none of the current
Sensys products infringes any of the claims of KLA-Tencor's patent. 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.

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 April 26, 2002, we moved for a preliminary
injunction to enjoin and prohibit Boxer Cross from making, using, importing,
selling, or offering for sale its BX-10 during the pendency of the lawsuit. A
hearing on Therma-Wave's motion is scheduled for August 12, 2002, and discovery
related to the motion is ongoing. 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 raising claims of misappropriation of trade secrets, tortious
interference with contract, unfair competition and unfair business
practices. A case management conference is scheduled for
August 26, 2002.  No discovery cut-off or trial dates have been set. 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.

We are involved in various legal proceedings from time to
time arising in the ordinary course of business, none of which are expected to
have a material adverse effect on our business or financial condition.

8. Severance Charge

During fiscal year 2002, we announced and implemented
reduction in force programs aimed at bringing operating expenses in line with
our operating environment for the fiscal year 2002. 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 130 employees
primarily involved in customer service and manufacturing positions. All expenses
were paid out or are expected to be paid out in cash with the remaining balance
expected to be paid out by September 30, 2002. Changes in the accrued expenses
relating to reductions in force are summarized as follows:

`Balance                            Balance
                            March 31, 2002 Additions Utilized  June 30, 2002
                            -------------  --------  --------  -------------
   Severance.............. $         184  $     --  $    (64) $         120
   Other..................           117         9       (65)            61
                            -------------  --------  --------  -------------
                           $         301  $      9  $   (129) $         181
                            =============  ========  ========  =============`

9. Subsequent Event

On August 1, 2002, the Company's Board of Directors approved
a stock repurchase program for the repurchase of up to 1 million shares of Therma-Wave's
common stock. The Company has subsequently repurchased 347,400 shares of common stock
at an average price of $2.40 per share.



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, continue to smoothly integrate Sensys into our operation 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 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 the
Company's Annual Report on Form 10-K 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. The Company undertakes 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 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 CD systems, and Sensys and
Integra 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 CD Product Family.  Opti-Probe CD systems
measure the lateral dimensions, or "critical dimensions", or CD, using
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 ICs.

Sensys and Integra Product Family.  The Sensys and
Integra line of integrated metrology products are a broad-based family 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.  In January 2002, we
acquired Sensys Instruments Corporation, or Sensys, a developer of integrated
metrology systems.  We are now merging our Integra product line with the Sensys
product family.

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 months ended June 30, 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 Ended
                                                June 30,
                                             --------------------
                                                2002       2001
                                             ---------  ---------
Net revenues...............................     100.0 %    100.0 %
Cost of revenues...........................      79.4       53.3
                                             ---------  ---------
Gross profit...............................      20.6       46.7
                                             ---------  ---------
Operating expenses:
  Research and development.................      53.5       18.5
  Selling, general and administrative......      40.9       15.0
  Stock-based compensation.................       4.0         --
                                             ---------  ---------
         Total operating expenses..........      98.4       33.5
                                             ---------  ---------
Operating income (loss)....................     (77.8)      13.2
Other income (expense):
  Interest expense.........................      (0.3)      (0.2)
  Interest income..........................       1.8        2.2
  Other, net...............................       0.7        0.1
                                             ---------  ---------
         Total other income................       2.2        2.1
                                             ---------  ---------
Income (loss) before provision for income t     (75.6)      15.3
Provision for income taxes.................        --       (1.0)
                                             ---------  ---------
Net income (loss)..........................     (75.6)%     14.3 %
                                             ========= ==========`

Net Revenues. Net revenues for the fiscal quarter
ended June 30, 2002 were $14.9 million. Compared to the fourth quarter of fiscal
2002, net revenues increased $1.7 million, or 13.6%, from $13.2 million. Net
revenues decreased $22.9 million, or 60.5%, from $37.8 million in the same
fiscal quarter 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.

During the three months ended June 30,
2002, we derived approximately 65% of our net revenues from system sales, 22%
from sales of replacement and spare parts, including associated labor, and 13%
from service contracts. During the three months ended June 30, 2001, we derived
approximately 89% of our net revenues from system sales, 5% from sales of
replacement and spare parts, including associated labor, and 6% from service
contracts.

International sales accounted for approximately 77% and 59%
of our total net revenues for the three months ended June 30, 2002 and 2001,
respectively. 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 Japan, Korea, Taiwan and Europe, such conditions could negatively
impact our international sales in future periods.

Gross Profit. Gross profit for the first quarter of
fiscal 2003 was $3.1 million, an increase of $13.4 million, from a loss of $10.3
million in the previous fiscal quarter. Compared to the same quarter of fiscal
2002, gross profit decreased $14.6 million or 82.6%. As a percentage of net
revenues, gross margin for the current quarter was 20.6%, compared to (78.4)%
for last fiscal quarter and 46.7% for the same quarter of last fiscal year.  The
significant change of gross profit from the previous fiscal quarter is primarily
due to a $12.2 million non-recurring inventory charge recorded in the fourth
quarter of fiscal 2002. The significant decrease of gross profit from the same
quarter of fiscal 2002 is primarily due to our substantially lower revenue and
production volume.

Research and Development, or R&D, Expenses.
R&D expenses for the first quarter of fiscal 2003 were $8.0 million, an
increase of 0.4% from the prior quarter and an increase of 14.5% from the first
quarter of last fiscal year. The increase from the same quarter of last fiscal
year was primarily due to the R&D expenses incurred by Sensys whom we
acquired in January 2002. We expect to continue to commit significant resources
to the development of new products and other programs because we believe that
technical leadership will strengthen our market position in the next economic
upturn.

Selling, General and Administrative, or SG&A,
Expenses. SG&A expenses for the first quarter of fiscal 2003 were $6.1
million, an increase of 4.3% from SG&A expenses of $5.7 million in the prior
fiscal quarter. Compared to the first quarter of last fiscal year, SG&A
expenses increased by 7.3%. The increase was primarily due to the addition of
SG&A expenses incurred by Sensys whom we acquired in January 2002.

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. The amortization expense was $0.6
million in the quarter ended June 30, 2002, or 4% of revenue for the quarter.
We had no similar expenses for the same period of last fiscal year.

Other Income. Other income for the first quarter of
fiscal 2003 was $0.3 million, which was 28.7% lower than other income in the
prior fiscal quarter. Compared to the first quarter of the prior fiscal year,
other income decreased 59.2%. We derived other income primarily from the
investment of our cash on hand. The decrease in other income was attributable to
lower average interest rates as well as lower average balance of investment in
the first quarter of fiscal 2003.

Provision for Income Taxes. For the three months ended
June 30, 2002, the effective tax rate of 0% was based upon our projected tax
loss for fiscal 2003.

Net Income (Loss). The combination of all the factors
discussed above contributed to a net loss of $11.3 million for the first quarter
of fiscal 2003, compared with net loss of $40.5 million in the prior fiscal
quarter and net income of $5.4 million in the same quarter of last fiscal 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 provided (used) by operating activities were
$(10.6) million and $1.9 million for the first quarters 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 in the first three
months of fiscal year 2003.

Cash flows provided (used) by investing activities were
$(10.0) million and $2.6 million for the first quarters of fiscal 2003 and 2002,
respectively.  The decrease in cash flows provided by investing activities is
primarily due to an increase in the purchase of short-term investments in the
first three months of fiscal year 2003. Purchases of property and equipment were
$0.6 million and $1.6 million for the first quarters of fiscal 2003 and 2002,
respectively.

Cash flows provided by financing activities were $0.8 million
and $1.1 million for the first quarters 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 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. As a result of the amendment, the credit extension limit was
increased to $13.5 million. The amended bank credit facility allows us to borrow
money bearing interest either at a floating rate per annum equal to the prime
rate or at a rate per annum equal to LIBOR plus 2.0%. We may request advances in
an aggregate outstanding amount not to exceed the lesser of $13.5 million or the
borrowing base, in each case minus the aggregate face amount of outstanding
letters of credit, including any drawn but unreimbursed letters of credit. Our
borrowings under the Comerica bank credit facility are secured by substantially
all of our assets. The amended Comerica bank credit facility matures on June 30,
2004.  We currently have a $3.5 million standby letter of credit as required by
the lessor of our building and we have $10.0 million of unused borrowing
capacity under the amended bank credit facility. We are in compliance with all
financial covenants related to the bank credit facility.

Our principal sources of funds are anticipated to be cash and
short-term investments on hand ($48.8 million as of June 30, 2002), cash flows
from operating activities and, if necessary, borrowings under the bank credit
facility. We expect to limit our capital spending to essential items. 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, 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.

Inflation

The impact of inflation on our business has not been material for the
fiscal quarter ended June 30, 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 June 30, 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.



Part II. -- Other Information

Item 1. Legal Proceedings

On December 17, 2001, we signed a
definitive agreement to acquire Sensys Instruments Corporation. On December 28,
2001, Sensys was named in a patent infringement suit filed by KLA-Tencor. KLA-
Tencor alleged that it patented an aspect of the integrated metrology technology
that Sensys uses in their integrated product family. KLA-Tencor is seeking
damages and an injunction to stop the sale of the equipment they allege uses
this aspect. On February 25, 2002, Sensys answered KLA-Tencor's complaints by
denying the material allegations and asserting declaratory judgment
counterclaims. KLA-Tencor filed its reply on March 22, 2002. A case management
conference was held on July 11, 2002.  Discovery cut-off was set for August 4,
2003 but a trial date has not been set. We believe none of the current Sensys
products infringes any of the claims of KLA-Tencor's patent. 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.

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 April 26, 2002, we moved for a preliminary
injunction to enjoin and prohibit Boxer Cross from making, using, importing,
selling, or offering for sale its BX-10 during the pendency of the lawsuit. A
hearing on Therma-Wave's motion is scheduled for August 12, 2002, and discovery
related to the motion is ongoing. 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 raising claims of misappropriation of trade secrets, tortious
interference with contract, unfair competition and unfair business
practices.A case management conference is scheduled for
August 26, 2002.  No discovery cut-off or trial dates have been set. 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.

We are involved in various legal proceedings from time to
time arising in the ordinary course of business, none of which are expected to
have a material adverse effect on our business or financial condition.

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 exhibit is included herein:

|Exhibit Number | Description                                                    
|-------------- | ---------------------------------------------------------------
|10.39          | Form of Stock Option Agreement under 2000 Equity Incentive
Plan
|99.1           | Risk Factors. (1)                                              

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

(b) Reports on Form 8-K

None



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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)

August 14, 2002





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