##### Table of Contents









UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549




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FORM 10-Q/A



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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
    September 30, 2001                                       
|                                
|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 the number of shares of the
issuers class of common stock, as of the latest practical
date:

|                             |  |                                   
|---------------------------- |  | ----------------------------------
|Class                        |  | Outstanding as of October 31, 2001
|                             |  |                                   
|Common stock, $.01 par value |  | 24,259,258                        



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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 4. Controls and Procedures                                                              
|PART II. -- OTHER INFORMATION  
|                                | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                     
|CERTIFICATION                  
|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
    September 30, 2001 and March 31, 2001                            |    |  | 1 | 
|                              |  |                                                                                           |    | Condensed Consolidated Statements of Operations
    Three and Six Months Ended September 30, 2001 and 2000 |    |  | 2 | 
|                              |  |                                                                                           |    | Condensed Consolidated Statements of Cash Flows
    Six Months Ended September 30, 2001 and 2000           |    |  | 3 | 
|                              |  |                                                                                           |    | Notes to Condensed Consolidated Financial
    Statements                                                   |    |  | 4 | 
|ITEM 2.                       |  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations |    |                                                                                                            | 8  | 
|ITEM 4.                       |  | Controls and Procedures                                                                   |    |                                                                                                            | 12 | 
|PART II. OTHER INFORMATION   
|ITEM 6.                       |  | Exhibits and Reports on
    Form 8-K                                                      |    |                                                                                                            | 14 | 
|SIGNATURES                    |  |                                                                                           | 15 |                                                                                                           
|CERTIFICATIONS                |  |                                                                                           | 16 |                                                                                                           

Explanatory note regarding this amendment on
Form 10-Q/A

This quarterly report on Form 10-Q/ A is
being filed 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 as further described in
Note 2  Restatement of Financial Results of this
Form 10-Q/A. This report still speaks as of the original
filing date and, as expressly stated, no attempt has been made
to update this report to reflect events occurring subsequent to
the date of the original filing.

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)


|                                         |                                      |                                            |   |           |         |  |   |          |         | 
|---------------------------------------- | ------------------------------------ | ------------------------------------------ | - | --------- | ------- |  | - | -------- | ------- | 
|                                         |                                      | September 30,                              |   | March 31,
|                                         |                                      | 2001                                       |   | 2001     
|                                         |                                      |                                            |   |          
|                                         |                                      | (As Restated)                              |   |          
|ASSETS                                  
|Current assets:                          |                                      |                                            |   |           |         |  |   |         
|                                         | Cash and cash equivalents            |                                            | $ | 58,446    |         |  | $ | 55,725   |        
|                                         | Short-term investments               |                                            |   | 19,171    |         |  |   | 19,850   |        
|                                         | Accounts receivable, net             |                                            |   | 24,734    |         |  |   | 43,348   |        
|                                         | Inventories                          |                                            |   | 44,839    |         |  |   | 47,181   |        
|                                         | Other current assets                 |                                            |   | 2,670     |         |  |   | 3,925    |        
|                                         |                                      |                                            |   |           |         |  |   |         
|                                         |                                      | Total current assets                       |   |           | 149,860 |  |   |          | 170,029 | 
|                                         | Property and equipment, net          |                                            |   | 13,967    |         |  |   | 14,478   |        
|                                         | Deferred income taxes                |                                            |   | 3,405     |         |  |   | 3,405    |        
|                                         | Other assets                         |                                            |   | 4,251     |         |  |   | 3,279    |        
|                                         |                                      |                                            |   |           |         |  |   |         
|                                         |                                      | Total assets                               |   | $         | 171,483 |  |   | $        | 191,191 | 
|                                         |                                      |                                            |   |           |         |  |   |         
|LIABILITIES AND STOCKHOLDERS
    EQUITY
|Current liabilities:                     |                                      |                                            |   |           |         |  |   |         
|                                         | Accounts payable                     |                                            | $ | 4,037     |         |  | $ | 12,547   |        
|                                         | Accrued warranty costs               |                                            |   | 3,814     |         |  |   | 3,742    |        
|                                         | Deferred revenue                     |                                            |   | 10,952    |         |  |   | 17,096   |        
|                                         | Income tax payable                   |                                            |   | 8,579     |         |  |   | 10,810   |        
|                                         | Other current liabilities            |                                            |   | 7,581     |         |  |   | 15,985   |        
|                                         |                                      |                                            |   |           |         |  |   |         
|                                         |                                      | Total current liabilities                  |   |           | 34,963  |  |   |          | 60,180  | 
|                                         | Long term debt                       |                                            |   | 16        |         |  |   | 16       |        
|                                         | Other liabilities                    |                                            |   | 2,370     |         |  |   | 1,913    |        
|                                         |                                      |                                            |   |           |         |  |   |         
|                                         |                                      | Total liabilities                          |   |           | 37,349  |  |   |          | 62,109  | 
|                                         |                                      |                                            |   |           |         |  |   |         
|Stockholders equity:                    |                                      |                                            |   |           |         |  |   |         
|                                         | Common stock                         |                                            |   | 242       |         |  |   | 240      |        
|                                         | Additional paid-in capital           |                                            |   | 232,872   |         |  |   | 230,646  |        
|                                         | Notes receivable from stockholders   |                                            |   | (201      | )       |  |   | (212     | )      
|                                         | Accumulated deficit                  |                                            |   | (97,552   | )       |  |   | (100,129 | )      
|                                         | Accumulated other comprehensive loss |                                            |   | (1,227    | )       |  |   | (1,463   | )      
|                                         |                                      |                                            |   |           |         |  |   |         
|                                         |                                      | Total stockholders equity                 |   |           | 134,134 |  |   |          | 129,082 | 
|                                         |                                      |                                            |   |           |         |  |   |         
|                                         |                                      | Total liabilities and stockholders equity |   | $         | 171,483 |  |   | $        | 191,191 | 
|                                         |                                      |                                            |   |           |         |  |   |         

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       |        | Six Months Ended
|                                                                             |                                     | September 30,            |        | September 30,   
|                                                                             |                                     |                          |        |                 
|                                                                             |                                     | 2001                     |        | 2000             |        | 2001          |        | 2000  
|                                                                             |                                     |                          |        |                  |        |               |        |       
|                                                                             |                                     | (As Restated)            |        |                  |        | (As Restated) |        |       
|Net revenues                                                                 |                                     | $                        | 20,660 |                  |        | $             | 47,770 |        |        | $ | 58,481 |        |        | $ | 87,411 |       
|Cost of revenues                                                             |                                     |                          | 12,739 |                  |        |               | 24,407 |        |        |   | 32,888 |        |        |   | 44,508 |       
|                                                                             |                                     |                          |        |                  |        |               |        |        |        |   |        |        |        |   |        |       
|Gross profit                                                                 |                                     |                          | 7,921  |                  |        |               | 23,363 |        |        |   | 25,593 |        |        |   | 42,903 |       
|                                                                             |                                     |                          |        |                  |        |               |        |        |        |   |        |        |        |   |        |       
|Operating expenses:                                                          |                                     |                          |        |                  |        |               |        |        |        |   |        |        |        |   |        |       
|                                                                             | Research and development            |                          |        | 6,533            |        |               |        | 8,676  |        |   |        | 13,514 |        |   |        | 16,195 |       
|                                                                             | Selling, general and administrative |                          |        | 5,298            |        |               |        | 6,896  |        |   |        | 11,005 |        |   |        | 12,778 |       
|                                                                             |                                     |                          |        |                  |        |               |        |        |        |   |        |        |        |   |        |       
|                                                                             |                                     | Total operating expenses |        |                  | 11,831 |               |        |        | 15,572 |   |        |        | 24,519 |   |        |        | 28,973 | 
|                                                                             |                                     |                          |        |                  |        |               |        |        |        |   |        |        |        |   |        |       
|Operating income (loss)                                                      |                                     |                          | (3,910 | )                |        |               | 7,791  |        |        |   | 1,074  |        |        |   | 13,930 |       
|                                                                             |                                     |                          |        |                  |        |               |        |        |        |   |        |        |        |   |        |       
|Other income (expense):                                                      |                                     |                          |        |                  |        |               |        |        |        |   |        |        |        |   |        |       
|                                                                             | Interest expense                    |                          |        | (23              | )      |               |        | (52    | )      |   |        | (107   | )      |   |        | (112   | )     
|                                                                             | Interest income                     |                          |        | 751              |        |               |        | 1,045  |        |   |        | 1,583  |        |   |        | 2,084  |       
|                                                                             | Other, net                          |                          |        | (12              | )      |               |        | 130    |        |   |        | 27     |        |   |        | 143    |       
|                                                                             |                                     |                          |        |                  |        |               |        |        |        |   |        |        |        |   |        |       
|                                                                             |                                     | Total other income       |        |                  | 716    |               |        |        | 1,123  |   |        |        | 1,503  |   |        |        | 2,115  | 
|                                                                             |                                     |                          |        |                  |        |               |        |        |        |   |        |        |        |   |        |       
|Income (loss) before benefit (provision) for
    income taxes                |                                     |                          | (3,194 | )                |        |               | 8,914  |        |        |   | 2,577  |        |        |   | 16,045 |       
|Benefit (provision) for income taxes                                         |                                     |                          | 346    |                  |        |               | (534   | )      |        |   |       |        |        |   | (962   | )     
|                                                                             |                                     |                          |        |                  |        |               |        |        |        |   |        |        |        |   |        |       
|Income (loss) before cumulative effect of
    change in accounting principle |                                     |                          | (2,848 | )                |        |               | 8,380  |        |        |   | 2,577  |        |        |   | 15,083 |       
|Cumulative effect of change in accounting
    principle, net of taxes        |                                     |                          |       |                  |        |               |       |        |        |   |       |        |        |   | (6,287 | )     
|                                                                             |                                     |                          |        |                  |        |               |        |        |        |   |        |        |        |   |        |       
|Net income (loss)                                                            |                                     | $                        | (2,848 | )                |        | $             | 8,380  |        |        | $ | 2,577  |        |        | $ | 8,796  |       
|                                                                             |                                     |                          |        |                  |        |               |        |        |        |   |        |        |        |   |        |       
|Basic net income (loss) per share:                                           |                                     |                          |        |                  |        |               |        |        |        |   |        |        |        |   |        |       
|Income (loss) before cumulative effect of
    change in accounting principle |                                     | $                        | (0.12  | )                |        | $             | 0.36   |        |        | $ | 0.11   |        |        | $ | 0.65   |       
|Cumulative effect of change in accounting
    principle, net of taxes        |                                     |                          |       |                  |        |               |       |        |        |   |       |        |        | $ | (0.27  | )     
|                                                                             |                                     |                          |        |                  |        |               |        |        |        |   |        |        |        |   |        |       
|Basic net income (loss) per share                                            |                                     | $                        | (0.12  | )                |        | $             | 0.36   |        |        | $ | 0.11   |        |        | $ | 0.38   |       
|                                                                             |                                     |                          |        |                  |        |               |        |        |        |   |        |        |        |   |        |       
|Diluted net income (loss) per share:                                         |                                     |                          |        |                  |        |               |        |        |        |   |        |        |        |   |        |       
|Income (loss) before cumulative effect of
    change in accounting principle |                                     | $                        | (0.12  | )                |        | $             | 0.34   |        |        | $ | 0.10   |        |        | $ | 0.60   |       
|Cumulative effect of change in accounting
    principle, net of taxes        |                                     |                          |       |                  |        |               |       |        |        |   |       |        |        | $ | (0.25  | )     
|                                                                             |                                     |                          |        |                  |        |               |        |        |        |   |        |        |        |   |        |       
|Diluted net income (loss) per share                                          |                                     | $                        | (0.12  | )                |        | $             | 0.34   |        |        | $ | 0.10   |        |        | $ | 0.35   |       
|                                                                             |                                     |                          |        |                  |        |               |        |        |        |   |        |        |        |   |        |       
|Weighted average common shares outstanding:                                  |                                     |                          |        |                  |        |               |        |        |        |   |        |        |        |   |        |       
|                                                                             | Basic                               |                          |        | 23,968           |        |               |        | 23,328 |        |   |        | 23,902 |        |   |        | 23,297 |       
|                                                                             | Diluted                             |                          |        | 23,968           |        |               |        | 24,980 |        |   |        | 25,188 |        |   |        | 24,915 |       

See accompanying notes to condensed consolidated
financial statements.

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THERMA-WAVE, INC.






CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS


(in thousands)


(Unaudited)


|                                          |                                                                                              |                                                    |                                                  |        |         |        |       |         |         |         |  
|----------------------------------------- | -------------------------------------------------------------------------------------------- | -------------------------------------------------- | ------------------------------------------------ | ------ | ------- | ------ | ----- | ------- | ------- | ------- | -
|                                          |                                                                                              |                                                   
|                                          |                                                                                              | Six Months Ended                                  
|                                          |                                                                                              | September 30,                                     
|                                          |                                                                                              |                                                   
|                                          |                                                                                              | 2001                                               |                                                  | 2000  
|                                          |                                                                                              |                                                    |                                                  |       
|                                          |                                                                                              | (As Restated)                                      |                                                  |       
|Operating activities:                     |                                                                                              |                                                    |                                                  |        |         |        |       |        
|                                          | Net income                                                                                   |                                                    | $                                                | 2,577  |         |        | $     | 8,796   |        
|                                          | Adjustments to reconcile net income to net cash
    provided (used) by operating activities: |                                                    |                                                  |        |         |        |       |         |        
|                                          |                                                                                              | Change in accounting principle                     |                                                  |        |        |        |       |         | 6,287   |        
|                                          |                                                                                              | Depreciation and amortization                      |                                                  |        | 2,468   |        |       |         | 1,562   |        
|                                          | Changes in assets and liabilities:                                                           |                                                    |                                                  |        |         |        |       |         |        
|                                          |                                                                                              | Accounts receivable                                |                                                  |        | 18,614  |        |       |         | (19,826 | )      
|                                          |                                                                                              | Inventories                                        |                                                  |        | 2,342   |        |       |         | (15,771 | )      
|                                          |                                                                                              | Other assets                                       |                                                  |        | 441     |        |       |         | (401    | )      
|                                          |                                                                                              | Liabilities                                        |                                                  |        | (24,704 | )      |       |         | 10,513  |        
|                                          |                                                                                              |                                                    |                                                  |        |         |        |       |        
|                                          |                                                                                              |                                                    | Net cash provided (used) by operating activities |        |         | 1,738  |       |         |         | (8,840  | )
|                                          |                                                                                              |                                                    |                                                  |        |         |        |       |        
|Investing activities:                     |                                                                                              |                                                    |                                                  |        |         |        |       |        
|                                          |                                                                                              | Purchases of property and equipment                |                                                  |        | (1,757  | )      |       |         | (3,024  | )      
|                                          |                                                                                              | (Purchase) sale of short-term investments          |                                                  |        | 679     |        |       |         | (9,482  | )      
|                                          |                                                                                              | Other                                              |                                                  |        | (358    | )      |       |         | (351    | )      
|                                          |                                                                                              |                                                    |                                                  |        |         |        |       |        
|                                          |                                                                                              |                                                    | Net cash used by investing activities            |        |         | (1,436 | )     |         |         | (12,857 | )
|                                          |                                                                                              |                                                    |                                                  |        |         |        |       |        
|Financing activities:                     |                                                                                              |                                                    |                                                  |        |         |        |       |        
|                                          |                                                                                              | Proceeds from issuance of common stock             |                                                  |        | 2,228   |        |       |         | 1,985   |        
|                                          |                                                                                              | Principal payments under capital lease obligations |                                                  |        | (56     | )      |       |         | (433    | )      
|                                          |                                                                                              | Other                                              |                                                  |        | 247     |        |       |         | (28     | )      
|                                          |                                                                                              |                                                    |                                                  |        |         |        |       |        
|Net cash provided by financing activities |                                                                                              |                                                    | 2,419                                            |        |         |        | 1,524 |        
|                                          |                                                                                              |                                                    |                                                  |        |         |        |       |        
|                                          | Net increase (decrease) in cash and cash
    equivalents                                     |                                                    |                                                  | 2,721  |         |        |       | (20,173 | )      
|                                          | Cash and cash equivalents at beginning of period                                             |                                                    |                                                  | 55,725 |         |        |       | 75,200  |        
|                                          |                                                                                              |                                                    |                                                  |        |         |        |       |        
|                                          | Cash and cash equivalents at end of period                                                   |                                                    | $                                                | 58,446 |         |        | $     | 55,027  |        
|                                          |                                                                                              |                                                    |                                                  |        |         |        |       |        
|                                          | Supplementary disclosures:                                                                   |                                                    |                                                  |        |         |        |       |         |        
|                                          |                                                                                              | Cash paid for interest                             |                                                  | $      | 57      |        |       | $       | 114     |        
|                                          |                                                                                              |                                                    |                                                  |        |         |        |       |        
|                                          |                                                                                              | Cash paid for taxes                                |                                                  | $      | 2,453   |        |       | $       | 371     |        
|                                          |                                                                                              |                                                    |                                                  |        |         |        |       |        

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
September 30, 2001, and the operating results and cash
flows for the three and six months ended September 30, 2001 and
2000. These financial statements and notes should be read in
conjunction with our audited financial statements and notes
thereto for the year ended March 31, 2001.

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 31, 2002.

The second quarters of fiscal years 2002 and 2001
and the fiscal year 2001 ended on September 30, 2001,
October 1, 2000 and April 1, 2001, respectively. For
presentation purposes, the accompanying financial statements
have been shown as ending on the last day of the month preceding
each of these dates.

2. Restatement of Financial
Results

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. In addition,
management became aware of potential non-compliance with the
companys expense reimbursement policies by certain
employees at the same foreign branch. While the evidence of the
revenue recognition issue was not clear at that time,
conflicting facts arose that indicated that revenue recognized
in the quarter ended September 30, 2001 from the sale of
the tool at issue potentially should have been deferred until a
later period. In early February 2003, our Audit Committee
launched an internal investigation relating to these issues.

In connection with the investigation conducted by
our Audit Committee, the Committee 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; and (ii) to
review the business expense practices of certain of our
employees at that foreign branch.

From February 2003 through April 2003, based on
the investigation conducted by our Audit Committee, a number of
changes to the Companys Taiwan management team and
executive management team were effected, including termination
of certain employees.

As a result of the matters noted above,
management conducted a detailed review of revenue recognition
with the assistance of the Companys independent
accountants. The additional review undertaken by management
resulted in the revenue and related costs (including associated
warranty and installation costs) for one transaction to be
restated as follows:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) Product revenues of $1,000,000 and
    related cost of goods sold of $367,000, which were originally
    recognized in the quarter ended September 30, 2001 are
    being restated to defer the recognition of the revenue and cost
    of goods sold related to this sale until the quarter ended
    March 31, 2003. Changes in the original terms of
    arrangement between the Company and its customer were made just
    subsequent to the date of original revenue recognition and
    provided for the completion of additional services. These
    services were not completed until the quarter ended
    March 31, 2003.

As a result of the above, we have restated our
financial reports 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, all of which were affected by the above
revenue transactions. No adjustments related to non-

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THERMA-WAVE, INC.


NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

compliance with the Companys expense
reimbursement policies were required as unauthorized amounts
were expensed at the time they were incurred and are not deemed
recoverable from the former employees.

The three and six month periods ended
September 30, 2001 and the balance sheet as of
September 30, 2001 have been restated for the impact of the
item above.

The following table outlines the impact of these
adjustments on operating results:

|                                                              |  |                    |        |                    |  |               |        |             |  |   |        |  |  |   |        | 
|------------------------------------------------------------- |  | ------------------ | ------ | ------------------ |  | ------------- | ------ | ----------- |  | - | ------ |  |  | - | ------ | 
|                                                              |  |                    |        |                   
|                                                              |  | Three Months Ended |        | Six Months Ended  
|                                                              |  | September 30, 2001 |        | September 30, 2001
|                                                              |  |                    |        |                   
|                                                              |  | As Previously      |        |                    |  | As Previously |        |            
|                                                              |  | Reported           |        | As Restated        |  | Reported      |        | As Restated
|                                                              |  |                    |        |                    |  |               |        |            
|                                                              |  |                    |        |                   
|                                                              |  | (in thousands)     |        | (in thousands)    
|Net revenues                                                  |  | $                  | 21,660 |                    |  | $             | 20,660 |             |  | $ | 59,481 |  |  | $ | 58,481 | 
|Cost of revenues                                              |  |                    | 13,106 |                    |  |               | 12,739 |             |  |   | 33,255 |  |  |   | 32,888 | 
|Gross profit                                                  |  |                    | 8,554  |                    |  |               | 7,921  |             |  |   | 26,226 |  |  |   | 25,593 | 
|Operating income (loss)                                       |  |                    | (3,277 | )                  |  |               | (3,910 | )           |  |   | 1,707  |  |  |   | 1,074  | 
|Income (loss) before benefit (provision) for
    income taxes |  |                    | (2,561 | )                  |  |               | (3,194 | )           |  |   | 3,210  |  |  |   | 2,577  | 
|Net income (loss)                                             |  |                    | (2,215 | )                  |  |               | (2,848 | )           |  |   | 3,210  |  |  |   | 2,577  | 
|Basic net income (loss) per share                             |  |                    | (0.09  | )                  |  |               | (0.12  | )           |  |   | 0.13   |  |  |   | 0.11   | 
|Diluted net income (loss) per share                           |  |                    | (0.09  | )                  |  |               | (0.12  | )           |  |   | 0.13   |  |  |   | 0.10   | 

The following table outlines the balance sheet
impact of these adjustments as of September 30, 2001:

|                                           |  |                |         |             |  |   |         |  
|------------------------------------------ |  | -------------- | ------- | ----------- |  | - | ------- | -
|                                           |  | As Previously  |         |            
|                                           |  | Reported       |         | As Restated
|                                           |  |                |         |            
|                                           |  |               
|                                           |  | (in thousands)
|Inventories                                |  | $              | 44,489  |             |  | $ | 44,839  |  
|Total current assets                       |  |                | 149,510 |             |  |   | 149,860 |  
|Total assets                               |  |                | 171,133 |             |  |   | 171,483 |  
|Accrued warranty costs                     |  |                | 3,831   |             |  |   | 3,814   |  
|Deferred revenue                           |  |                | 9,952   |             |  |   | 10,952  |  
|Total current liabilities                  |  |                | 33,980  |             |  |   | 34,963  |  
|Total liabilities                          |  |                | 36,366  |             |  |   | 37,349  |  
|Accumulated deficit                        |  |                | (96,919 | )           |  |   | (97,552 | )
|Total stockholders equity                 |  |                | 134,767 |             |  |   | 134,134 |  
|Total liabilities and stockholders equity |  |                | 171,133 |             |  |   | 171,483 |  

3. Inventories

Inventories are summarized as follows (in
thousands):

|                    |  |               |        |           |  |   |        | 
|------------------- |  | ------------- | ------ | --------- |  | - | ------ | 
|                    |  | September 30, |        | March 31,
|                    |  | 2001          |        | 2001     
|                    |  |               |        |          
|                    |  | (As Restated) |        |          
|Purchased materials |  | $             | 23,440 |           |  | $ | 22,197 | 
|Systems in process  |  |               | 14,095 |           |  |   | 19,571 | 
|Finished systems    |  |               | 7,304  |           |  |   | 5,413  | 
|                    |  |               |        |           |  |   |        | 
|                    |  | $             | 44,839 |           |  | $ | 47,181 | 
|                    |  |               |        |           |  |   |        | 

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THERMA-WAVE, INC.


NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

4. Comprehensive Income (Loss)

Comprehensive income (loss) consists of net
income (loss) for the period and change in accumulated
foreign currency translation adjustments during the period. For
the quarters ended September 30, 2001 and 2000,
comprehensive income (loss) amounted to approximately
$(2.6) million (as restated) and $8.3 million,
respectively. For the six months ended September 30, 2001
and 2000, comprehensive income amounted to approximately
$2.8 million (as restated) and $8.7 million,
respectively.

5. Change in Accounting
Principle

Effective April 1, 2000, we changed our
method of accounting for revenue recognition in accordance with
Securities and Exchange Commission Staff Accounting Bulletin
No. 101 (SAB 101), Revenue
Recognition in Financial Statements. Equipment sales are
accounted for as multiple-element arrangement sales as described
in SAB 101. The total revenue is allocated to each
component of the multi-element arrangement. Revenue on each
element is recognized when the contractual obligations have been
performed, risk of loss has passed to the customer, collection
is probable and customer acceptance has been obtained, if
applicable. Revenue from systems and spare parts is generally
recognized at the time of shipment. Revenue on service contracts
is deferred and recognized on a straight-line basis over the
period of the contract. Estimated contractual warranty
obligations are recorded when related sales are recognized.

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 September 30,
2001 and 2000, we recognized $59,000 and $1.9 million,
respectively, out of the $9.4 million revenue that was
included in the cumulative effect adjustment as of April 1,
2000. During the six months ended September 30, 2001 and
2000, we recognized $1.5 million and $4.6 million,
respectively, out of the $9.4 million revenue that was
included in the cumulative effect adjustment as of April 1,
2000.

6. Net Income (Loss) Per Share

Basic net income (loss) per share and
diluted net loss per share are 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 per share is based on the weighted
average number of common shares outstanding and dilutive
potential common shares outstanding.

183,372 shares of unvested common stock
outstanding as of September 30, 2001 were not included in
the calculation of diluted net loss per share since their
inclusion would be anti-dilutive. 1,377,939 and 106,436 shares
of stock options outstanding as of September 30, 2001 and
2000, respectively, were not included in the calculation of
diluted net income per share since their inclusion would be
anti-dilutive. The weighted average exercise prices for
anti-dilutive stock options as of September 30, 2001 and
2000 were $20.13 and $27.92, respectively.

7. Recently Issued Accounting
Statements

In July 2001, the Financial Accounting Standards
Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 141, Business
Combinations. SFAS No. 141 addresses financial accounting
and reporting for business combinations and supersedes
Accounting Principles Board (APB) Opinion
No. 16, Business Combinations, and SFAS No. 38,
Accounting for Preacquisition Contingencies of Purchased
Enterprises. All business combinations in the scope of SFAS
No. 141 are to be accounted for using

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THERMA-WAVE, INC.


NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

one method, the purchase method. The provisions
of SFAS No. 141 apply to all business combinations
initiated after June 30, 2001.

In July 2001, the FASB issued SFAS No. 142,
Goodwill and Other Intangible Assets. SFAS No. 142
addresses financial accounting and reporting for acquired
goodwill and other intangibles and supercedes APB Opinion
No. 17, Intangible Assets. The provisions of SFAS
No. 142 are required to be applied starting with fiscal
years beginning after December 15, 2001, with certain early
adoption permitted. The company currently does not have any
goodwill or other intangible assets that would need to be
accounted for under SFAS No. 142.

In October 2001, the FASB issued SFAS
No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets. SFAS No. 144 addresses financial
accounting and reporting for the impairment or disposal of
long-lived assets and supercedes SFAS No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of, and APB No. 30, Reporting the
Results of Operations-Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions. SFAS
No. 144 is effective for fiscal years beginning after
December 15, 2001 as well as interim periods within those
fiscal years. The company is currently reviewing this statement
to determine its effect on its Companys financial position
and results of operation.

8. Commitments and
Contingencies

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.

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

This Quarterly Report on Form 10-Q/A
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. Such statements relating to our ability to
manage our costs and reduce operating expenses, sustain our
operations and cash position in an extended 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 industry performance
in the current severe industry and economic downturn, political
unrest, 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, 2001. 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/A.

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.
Semiconductor manufacturers use process control metrology
systems to monitor process parameters, increase equipment
productivity, and improve device performance. Our current
process control metrology systems are principally used for
measuring ion implantation and thin film deposition and removal.
We currently sell five product families of process control
metrology systems: Therma-Probe systems, Opti-Probe systems,
Opti-Probe CD systems, Meta-Probe systems, and Integra 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 integrated circuits production cycle.

Opti-Probe Product Family.Opti-Probe systems utilize our
proprietary optical technologies and integrate different
measurement technologies to significantly improve existing thin
film metrology systems.

Opti-Probe CD Product Family.Opti-Probe CD systems are
spectroscopic, scatterometry-based systems that provide
revolutionary, nondestructive Critical Dimension
(CD) metrology for the smallest features of next generation
integrated circuits.

Meta-Probe Product Family.Meta-Probe thin-film measurement
systems utilize a patented technique based on x-ray
reflectometry to rapidly and independently measure thickness,
density, and roughness of each film in multi-layer stacks.

Integra Product Family.Integra line of integrated metrology
systems are a broad-based family of compact metrology
modules that function with an integrated circuit
process system, such as an etch or chemical vapor deposition
system, to provide metrology on each wafer before it exits the
process tool.

Restatement of Financial Results

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. In addition,
management became aware of potential non-compliance with the
companys expense reimbursement policies by certain
employees at the same foreign branch. While the evidence of the
revenue recognition issue was not clear at that time,
conflicting facts arose that indicated that revenue recognized
in the quarter ended September 30, 2001 from the sale of
the tool at issue potentially should have been deferred until a
later period. In early February 2003, our Audit Committee
launched an internal investigation relating to these issues.

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In connection with the investigation conducted by
our Audit Committee, the Committee 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; and (ii) to
review the business expense practices of certain of our
employees at that foreign branch.

From February 2003 through April 2003, based on
the investigation conducted by our Audit Committee, a number of
changes to the companys Taiwan management team and
executive management team were effected, including termination
of certain employees.

As a result of the matters noted above,
management conducted a detailed review of revenue recognition
with the assistance of the companys independent
accountants. The additional review undertaken by management
resulted in the revenue and related costs (including associated
warranty and installation costs) for one transaction to be
restated as follows:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) Product revenues of $1,000,000 and
    related cost of goods sold of $367,000, which were originally
    recognized in the quarter ended September 30, 2001 are
    being restated to defer the recognition of the revenue and cost
    of goods sold related to this sale until the quarter ended
    March 31, 2003. Changes in the original terms of
    arrangement between the company and its customer were made just
    subsequent to the date of original revenue recognition and
    provided for the completion of additional services. These
    services were not completed until the quarter ended
    March 31, 2003.

As a result of the above, we have restated our
financial reports 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, all of which were affected by the above
revenue transactions. No adjustments related to non-compliance
with the companys expense reimbursement policies were
required as unauthorized amounts were expensed at the time they
were incurred and are not deemed recoverable from the former
employees.

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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 six months ended September 30, 2001 and 2000 were
derived from our unaudited condensed 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       |       | Six Months Ended
|                                                                             |                                     | September 30,            |       | September 30,   
|                                                                             |                                     |                          |       |                 
|                                                                             |                                     | 2001                     |       | 2000             |      | 2001          |       | 2000
|                                                                             |                                     |                          |       |                  |      |               |       |     
|                                                                             |                                     | (As Restated)            |       |                  |      | (As Restated) |       |     
|Total net revenues                                                           |                                     |                          | 100.0 | %                |      |               | 100.0 | %    |      |  | 100.0 | %    |      |  | 100.0 | %   
|Cost of revenues                                                             |                                     |                          | 61.7  |                  |      |               | 51.1  |      |      |  | 56.2  |      |      |  | 50.9  |     
|                                                                             |                                     |                          |       |                  |      |               |       |      |      |  |       |      |      |  |       |     
|Gross profit                                                                 |                                     |                          | 38.3  |                  |      |               | 48.9  |      |      |  | 43.8  |      |      |  | 49.1  |     
|                                                                             |                                     |                          |       |                  |      |               |       |      |      |  |       |      |      |  |       |     
|Operating expenses:                                                          |                                     |                          |       |                  |      |               |       |      |      |  |       |      |      |  |       |     
|                                                                             | Research and development            |                          |       | 31.6             |      |               |       | 18.2 |      |  |       | 23.1 |      |  |       | 18.5 |     
|                                                                             | Selling, general and administrative |                          |       | 25.6             |      |               |       | 14.4 |      |  |       | 18.8 |      |  |       | 14.7 |     
|                                                                             |                                     |                          |       |                  |      |               |       |      |      |  |       |      |      |  |       |     
|                                                                             |                                     | Total operating expenses |       |                  | 57.2 |               |       |      | 32.6 |  |       |      | 41.9 |  |       |      | 33.2 | 
|                                                                             |                                     |                          |       |                  |      |               |       |      |      |  |       |      |      |  |       |     
|Operating income (loss)                                                      |                                     |                          | (18.9 | )                |      |               | 16.3  |      |      |  | 1.9   |      |      |  | 15.9  |     
|                                                                             |                                     |                          |       |                  |      |               |       |      |      |  |       |      |      |  |       |     
|Other income (expense):                                                      |                                     |                          |       |                  |      |               |       |      |      |  |       |      |      |  |       |     
|                                                                             | Interest expense                    |                          |       | (0.1             | )    |               |       | (0.1 | )    |  |       | (0.2 | )    |  |       | (0.1 | )   
|                                                                             | Interest income                     |                          |       | 3.6              |      |               |       | 2.2  |      |  |       | 2.7  |      |  |       | 2.4  |     
|                                                                             | Other, net                          |                          |       | (0.1             | )    |               |       | 0.3  |      |  |       |     |      |  |       | 0.2  |     
|                                                                             |                                     |                          |       |                  |      |               |       |      |      |  |       |      |      |  |       |     
|                                                                             |                                     | Total other income       |       |                  | 3.4  |               |       |      | 2.4  |  |       |      | 2.5  |  |       |      | 2.5  | 
|                                                                             |                                     |                          |       |                  |      |               |       |      |      |  |       |      |      |  |       |     
|Income (loss) before (provision) benefit for
    income taxes                |                                     |                          | (15.5 | )                |      |               | 18.7  |      |      |  | 4.4   |      |      |  | 18.4  |     
|(Provision) benefit for income taxes                                         |                                     |                          | 1.7   |                  |      |               | (1.2  | )    |      |  |      |      |      |  | (1.1  | )   
|                                                                             |                                     |                          |       |                  |      |               |       |      |      |  |       |      |      |  |       |     
|Income (loss) before cumulative effect of
    change in accounting principle |                                     |                          | (13.8 | )                |      |               | 17.5  |      |      |  | 4.4   |      |      |  | 17.3  |     
|Cumulative effect of change in accounting
    principle, net of taxes        |                                     |                          |      |                  |      |               |      |      |      |  |      |      |      |  | (7.2  | )   
|                                                                             |                                     |                          |       |                  |      |               |       |      |      |  |       |      |      |  |       |     
|Net income (loss)                                                            |                                     |                          | (13.8 | )%               |      |               | 17.5  | %    |      |  | 4.4   | %    |      |  | 10.1  | %   
|                                                                             |                                     |                          |       |                  |      |               |       |      |      |  |       |      |      |  |       |     

Comparisons of the three and six months ended
September 30, 2001 as compared to the three and six months
ended September 30, 2000, as restated.

Net Revenues.Net
revenues for the fiscal quarter ended September 30, 2001
were $20.7 million, a decrease of $27.1 million, or
56.8%, from $47.8 million in the same fiscal quarter of the
prior year. Compared to the prior fiscal quarter, net revenues
decreased $17.2 million, or 45.4%, from $37.8 million.
For the six months ended September 30, 2001, net revenues
were $58.5 million, a decrease of $28.9 million, or
33.1%, from $87.4 million in the comparable period of the
prior year. The decrease in revenue was primarily the result of
capital spending reductions by our customers due to the cyclical
downturn of the semiconductor industry and the weakness of the
global economy.

During the three months ended September 30,
2001, we derived approximately 79% of our revenues from system
sales, 9% from sales of replacement and spare parts, including
associated labor, and 12% from service contracts. During the
three months ended September 30, 2000, we derived
approximately 91% of our revenues from system sales, 6% from
sales of replacement and spare parts, including associated
labor, and 3% from service contracts. During the six months
ended September 30, 2001, we derived approximately 86% of
our revenues from system sales, 6% from sales of replacement and
spare parts, including associated labor, and 8% from service
contracts. During the six months ended September 30, 2000,
we derived approximately 91% of

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##### Table of Contents



our revenues from system sales, 6% from sales of
replacement and spare parts, including associated labor, and 3%
from service contracts.


International sales accounted for approximately
57% and 67% of our total revenues for the three months ended
September 30, 2001 and 2000, respectively. International
sales accounted for approximately 58% and 68% of our total
revenues for the six months ended September 30, 2001 and
2000, respectively. We anticipate that international sales will
continue to account for a significant portion of our revenue 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.

We do not expect our revenues to increase for at
least the next two quarters and possibly longer. Low order
booking rates, rescheduling of delivery and order cancellations
will likely continue to deteriorate our results of operations in
the near-term.

Gross Profit.Gross
profit for the second quarter of fiscal 2002 was
$7.9 million, a decrease of $9.8 million, or 55.2%,
from $17.7 million in the previous fiscal quarter. Compared
to the same quarter of fiscal 2001, gross profit decreased
$15.4 million or 66.1%. As a percentage of net revenues,
gross margin for the current quarter was 38.3%, compared to
46.7% for last fiscal quarter and 48.9% for the same quarter of
last fiscal year. For the six months ended September 30,
2001, gross profit was $25.6 million, a decrease of
$17.3 million, or 40.3%, from $42.9 million in the
comparable period of the prior year. As a percentage of net
revenues, gross margin for the current six months was 43.8%,
compared to 49.1% in the comparable period of the prior year.
Although we implemented some cost reduction measures during the
quarter, these measures were not sufficient to completely offset
the sharp decline in revenue and the lower overhead absorption
resulting from our substantially lower production volume.

Research and Development (R&D)
Expenses.R&D expenses for the
second quarter of fiscal 2002 were $6.5 million, a decrease
of 6.4% from the prior quarter and a decrease of 24.7% from the
second quarter of last fiscal year. For the six months ended
September 30, 2001, R&D expenses were
$13.5 million, a decrease of $2.7 million, or 16.6%,
from $16.2 million in the comparable period of the prior
year. The decrease from the prior fiscal quarter was primarily
due to the reduction in discretionary expenses. The decrease
from the same periods of the prior fiscal year was primarily the
result of reductions in patent defense expense, contract labor
and discretionary expenses. We expect to continue committing
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
(SG&A) Expenses.SG&A expenses for the second
quarter of fiscal 2002 were $5.3 million, a decrease of
7.2% from SG&A expenses of $5.7 million in the prior
fiscal quarter. Compared to the second quarter of last fiscal
year, SG&A expenses decreased 23.2%. For the six months
ended September 30, 2001, SG&A expenses were
$11.0 million, a decrease of $1.8 million, or 13.9%, from
$12.8 million in the comparable period of the prior year.
The decrease was primarily due to lower sales commissions
resulting from the lower orders and sales volume and to a lesser
effect, the implementation of cost containment measures.

Other Income.Other
income for the second quarter of fiscal 2002 was $0.7 million,
which was 9% lower than that of the prior fiscal quarter.
Compared to the second quarter of the prior fiscal year, other
income decreased 36.2%. We derived other income primarily from
the investment of our cash on hand. For the six months ended
September 30, 2001, other income was $1.5 million, a
decrease of $0.6 million, or 28.9%, from $2.1 million
in the comparable period of the prior year. The decrease in
other income was attributable to lower average interest rates.

Provision for Income Taxes.For the second quarter of fiscal 2002,
we recorded a $0.3 million adjustment to eliminate the
year-to-date provision for income taxes. The effective tax rate
of 0% was based upon our projected tax loss for fiscal 2002 and
our loss carryback potential.

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Net Income (Loss).The combination of all the factors
discussed above contributed to a net loss of $2.8 million
for the second quarter of fiscal 2002, compared with net income
of $5.4 million in the prior fiscal quarter, and net income
of $8.4 million in the same quarter of last fiscal year.
For the six months ended September 30, 2001, net income was
$2.6 million, a decrease of $6.2 million, or 70.7%,
from $8.8 million in the comparable period of the prior
year.

Liquidity and Capital Resources

Our principal liquidity requirements are for
working capital. We have funded our operating activities
principally from funds generated from operations, tax refunds
and net proceeds from an initial public offering.

Cash flows provided (used) by operating
activities were $1.7 million and $(8.8) million for the
first six months of fiscal 2002 and 2001, respectively. The
increase in cash flow provided by operating activities from
fiscal year 2001 to 2002 was mainly due to collections from
customers and net income exceeding cash outlays for working
capital and purchases of property and equipment.

Cash flows used by investing activities were
$1.4 million and $12.9 million for the first six
months of fiscal 2002 and 2001, respectively. Purchases of
property and equipment were $1.8 million and
$3.0 million for the first six months of fiscal 2002 and
2001, respectively.

Cash flows provided by financing activities were
$2.4 million and $1.5 million for the first six months
of fiscal 2002 and 2001, respectively. The increase in cash flow
provided by financing activities from fiscal year 2001 to 2002
was primarily due to the exercise of stock options and issuance
of common stock under our employee stock purchase plan.

In June 2001, we replaced our existing bank
credit facility with a new $10 million loan and security
agreement with Comerica Bank. This new 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 1.5%. We may request advances in an
aggregate outstanding amount not to exceed $7.5 million
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 its assets. The Comerica bank
credit facility matures on March 28, 2004. As of
September 30, 2001, there was a $3.5 million letter of
credit outstanding, as required by the lessor of our building,
and $6.5 million of unused borrowing capacity under the new
bank credit facility. We have been in compliance with all
financial covenants related to this bank credit facility.

Our principal sources of funds are anticipated to
be cash and short-term investments on hand ($77.6 million
as of September 30, 2001), 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 and 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.






|        |                        
|------- | -----------------------
|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. Based upon that evaluation and the
investigation discussed in Note 2 of the financial
statements entitled Restatement of Financial
Results, 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;

12



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##### Table of Contents





| |   |                                                                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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;                                                     
|
| |  | 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.

13



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##### Table of Contents






PART II.  OTHER
INFORMATION






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

(a) The following exhibits are included
herein:

|        |      |             |  |                                                                              
|------- | ---- | ----------- |  | -----------------------------------------------------------------------------
|Exhibit |      |            
|Number  |      | Description
|        |      |            
|        | 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 Annual Report on Form 10-K
    for the period ended March 31, 2001 (Registration
    No. 000-26911)

(b) Reports on Form 8-K

None

14



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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)     



| |     |                    
| | --- | -------------------
| | By: | /s/ L. RAY CHRISTIE

| |                                                        
| | -------------------------------------------------------
| |                                                        
| | L. Ray Christie                                        
| | Chief Financial Officer                                
| | (as Registrant and as Principal Accounting
    Officer)

May 5, 2003

15



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##### 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/A 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.

May 5, 2003

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

16



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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/A 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

17



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##### Table of Contents



EXHIBIT INDEX

|        |      |             |  |                                                                              
|------- | ---- | ----------- |  | -----------------------------------------------------------------------------
|Exhibit |      |            
|Number  |      | Description
|        |      |            
|        | 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 Annual Report on Form 10-K
    for the period ended March 31, 2001 (Registration
    No. 000-26911)