##### 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 June 30,
    2002                                            
|          
|or        
|          
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR
    15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|          
|           |  | For the transition period
    from           to                                             

Commission file number 000-26911



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Therma-Wave, Inc.

(Exact Name of Registrant as Specified in Its
Charter)


|                                                                   |  |                                            
|------------------------------------------------------------------ |  | -------------------------------------------
|Delaware                                                           |  | 94-3000561                                 
|(State or Other Jurisdiction of
    Incorporation or Organization) |  | (I.R.S. Employer
    Identification Number)

1250 Reliance Way

Fremont, California 94539


(Address of Principal Executive Offices
Including Zip Code)


(510) 668-2200

(Registrants Telephone Number, Including
Area Code)


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

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

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



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TABLE OF CONTENTS



|                                |                                                                                               |                                                                |  |  |  |  |  | 
|------------------------------- | --------------------------------------------------------------------------------------------- | -------------------------------------------------------------- |  |  |  |  |  | 
|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 as of
    June 30, 2002 and March 31, 2002                      |    |          | 1  | 
|                              |  | Condensed Consolidated Statements of Operations
    for the Three Months Ended June 30, 2002 and 2001 |    |          | 2  | 
|                              |  | Condensed Consolidated Statements of Cash Flows
    for the Three Months Ended June 30, 2002 and 2001 |    |          | 3  | 
|                              |  | Notes to Condensed Consolidated Financial
    Statements                                              |    |          | 4  | 
|ITEM 2.                       |  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations             |    |          | 9  | 
|ITEM 4.                       |  | Controls and Procedures                                                                               |    |          | 13 | 
|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 unaudited
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)


|                                         |                                      |                                            |   |           |         |  |   |          |         | 
|---------------------------------------- | ------------------------------------ | ------------------------------------------ | - | --------- | ------- |  | - | -------- | ------- | 
|                                         |                                      | June 30,                                   |   | March 31,
|                                         |                                      | 2002                                       |   | 2002     
|                                         |                                      |                                            |   |          
|                                         |                                      |                                           
|                                         |                                      | (As Restated)                             
|ASSETS                                  
|Current assets:                          |                                      |                                            |   |           |         |  |   |         
|                                         | Cash and cash equivalents            |                                            | $ | 27,180    |         |  | $ | 46,484   |        
|                                         | Short-term investments               |                                            |   | 21,572    |         |  |   | 12,575   |        
|                                         | Accounts receivable, net             |                                            |   | 18,714    |         |  |   | 15,635   |        
|                                         | Inventories                          |                                            |   | 34,738    |         |  |   | 34,677   |        
|                                         | Other current assets                 |                                            |   | 3,444     |         |  |   | 3,415    |        
|                                         |                                      |                                            |   |           |         |  |   |         
|                                         |                                      | Total current assets                       |   |           | 105,648 |  |   |          | 112,786 | 
|                                         | Property and equipment, net          |                                            |   | 13,125    |         |  |   | 14,041   |        
|                                         | Goodwill and intangible assets, net  |                                            |   | 69,806    |         |  |   | 70,096   |        
|                                         | Other assets                         |                                            |   | 4,930     |         |  |   | 4,723    |        
|                                         |                                      |                                            |   |           |         |  |   |         
|                                         |                                      | Total assets                               |   | $         | 193,509 |  |   | $        | 201,646 | 
|                                         |                                      |                                            |   |           |         |  |   |         
|                                        
|LIABILITIES AND STOCKHOLDERS
    EQUITY
|Current liabilities:                     |                                      |                                            |   |           |         |  |   |         
|                                         | Accounts payable                     |                                            | $ | 4,975     |         |  | $ | 6,297    |        
|                                         | Accrued warranty costs               |                                            |   | 1,434     |         |  |   | 1,777    |        
|                                         | Deferred revenue                     |                                            |   | 12,022    |         |  |   | 9,493    |        
|                                         | Income tax payable                   |                                            |   | 4,985     |         |  |   | 4,903    |        
|                                         | Other current liabilities            |                                            |   | 9,728     |         |  |   | 9,303    |        
|                                         |                                      |                                            |   |           |         |  |   |         
|                                         |                                      | Total current liabilities                  |   |           | 33,144  |  |   |          | 31,773  | 
|                                         | Long term debt                       |                                            |   | 16        |         |  |   | 16       |        
|                                         | Other liabilities                    |                                            |   | 2,307     |         |  |   | 2,358    |        
|                                         |                                      |                                            |   |           |         |  |   |         
|                                         |                                      | Total liabilities                          |   |           | 35,467  |  |   |          | 34,147  | 
|                                         |                                      |                                            |   |           |         |  |   |         
|Stockholders equity:                    |                                      |                                            |   |           |         |  |   |         
|                                         | Common stock                         |                                            |   | 293       |         |  |   | 291      |        
|                                         | Additional paid-in capital           |                                            |   | 322,299   |         |  |   | 321,466  |        
|                                         | Notes receivable from stockholders   |                                            |   | (200      | )       |  |   | (200     | )      
|                                         | Accumulated deficit                  |                                            |   | (160,628  | )       |  |   | (149,325 | )      
|                                         | Accumulated other comprehensive loss |                                            |   | (1,380    | )       |  |   | (1,790   | )      
|                                         | Deferred stock-based compensation    |                                            |   | (2,342    | )       |  |   | (2,943   | )      
|                                         |                                      |                                            |   |           |         |  |   |         
|                                         |                                      | Total stockholders equity                 |   |           | 158,042 |  |   |          | 167,499 | 
|                                         |                                      |                                            |   |           |         |  |   |         
|                                         |                                      | Total liabilities and stockholders equity |   | $         | 193,509 |  |   | $        | 201,646 | 
|                                         |                                      |                                            |   |           |         |  |   |         

See accompanying notes to condensed consolidated
financial statements.

1



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THERMA-WAVE, INC.






CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS


(in thousands, except per share
data)


(Unaudited)


|                                                    |                                     |                          |         |        |        |   |        |        |        | 
|--------------------------------------------------- | ----------------------------------- | ------------------------ | ------- | ------ | ------ | - | ------ | ------ | ------ | 
|                                                    |                                     |                         
|                                                    |                                     | Three Months Ended      
|                                                    |                                     | June 30,                
|                                                    |                                     |                         
|                                                    |                                     | 2002                     |         | 2001  
|                                                    |                                     |                          |         |       
|Net revenues                                        |                                     | $                        | 14,949  |        |        | $ | 37,821 |       
|Cost of revenues                                    |                                     |                          | 11,871  |        |        |   | 20,149 |       
|                                                    |                                     |                          |         |        |        |   |        |       
|Gross profit                                        |                                     |                          | 3,078   |        |        |   | 17,672 |       
|                                                    |                                     |                          |         |        |        |   |        |       
|Operating expenses:                                 |                                     |                          |         |        |        |   |        |       
|                                                    | Research and development            |                          |         | 7,995  |        |   |        | 6,981  |       
|                                                    | Selling, general and administrative |                          |         | 6,121  |        |   |        | 5,707  |       
|                                                    | Stock-based compensation            |                          |         | 586    |        |   |        |       |       
|                                                    |                                     |                          |         |        |        |   |        |       
|                                                    |                                     | Total operating expenses |         |        | 14,702 |   |        |        | 12,688 | 
|                                                    |                                     |                          |         |        |        |   |        |       
|Operating income (loss)                             |                                     |                          | (11,624 | )      |        |   | 4,984  |       
|                                                    |                                     |                          |         |        |        |   |        |       
|Other income (expense):                             |                                     |                          |         |        |        |   |        |       
|                                                    | Interest expense                    |                          |         | (51    | )      |   |        | (84    | )     
|                                                    | Interest income                     |                          |         | 264    |        |   |        | 832    |       
|                                                    | Other, net                          |                          |         | 108    |        |   |        | 39     |       
|                                                    |                                     |                          |         |        |        |   |        |       
|                                                    |                                     | Total other income       |         |        | 321    |   |        |        | 787    | 
|                                                    |                                     |                          |         |        |        |   |        |       
|Income (loss) before provision for income
    taxes |                                     |                          | (11,303 | )      |        |   | 5,771  |       
|Provision for income taxes                          |                                     |                          |        |        |        |   | (346   | )     
|                                                    |                                     |                          |         |        |        |   |        |       
|Net income (loss)                                   |                                     | $                        | (11,303 | )      |        | $ | 5,425  |       
|                                                    |                                     |                          |         |        |        |   |        |       
|Net income (loss) per share:                        |                                     |                          |         |        |        |   |        |       
|                                                    | Basic                               |                          | $       | (0.40  | )      |   | $      | 0.23   |       
|                                                    |                                     |                          |         |        |        |   |        |       
|                                                    | Diluted                             |                          | $       | (0.40  | )      |   | $      | 0.22   |       
|                                                    |                                     |                          |         |        |        |   |        |       
|Weighted average common shares outstanding:         |                                     |                          |         |        |        |   |        |       
|                                                    | Basic                               |                          |         | 28,565 |        |   |        | 23,786 |       
|                                                    | Diluted                             |                          |         | 28,565 |        |   |        | 25,133 |       

See accompanying notes to condensed consolidated
financial statements.

2



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THERMA-WAVE, INC.






CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS


(in thousands)


(Unaudited)


|                                                         |                                                                                                         |                                                   |                                                      |         |        |         |        |        |         |       | 
|-------------------------------------------------------- | ------------------------------------------------------------------------------------------------------- | ------------------------------------------------- | ---------------------------------------------------- | ------- | ------ | ------- | ------ | ------ | ------- | ----- | 
|                                                         |                                                                                                         |                                                  
|                                                         |                                                                                                         | Three Months Ended                               
|                                                         |                                                                                                         | June 30,                                         
|                                                         |                                                                                                         |                                                  
|                                                         |                                                                                                         | 2002                                              |                                                      | 2001   
|                                                         |                                                                                                         |                                                   |                                                      |        
|Operating activities:                                    |                                                                                                         |                                                   |                                                      |         |        |         |        |       
|                                                         | Net income (loss)                                                                                       |                                                   | $                                                    | (11,303 | )      |         | $      | 5,425  |        
|                                                         | Adjustments to reconcile net income
    (loss) to net cash provided (used) by operating
    activities: |                                                   |                                                      |         |        |         |        |        |        
|                                                         |                                                                                                         | Depreciation and amortization                     |                                                      |         | 1,696  |         |        |        | 1,366   |      
|                                                         |                                                                                                         | Amortization of intangible assets                 |                                                      |         | 290    |         |        |        |        |      
|                                                         |                                                                                                         | Amortization of deferred stock-based compensation |                                                      |         | 601    |         |        |        |        |      
|                                                         | Changes in assets and liabilities:                                                                      |                                                   |                                                      |         |        |         |        |        |        
|                                                         |                                                                                                         | Accounts receivable                               |                                                      |         | (3,079 | )       |        |        | 11,835  |      
|                                                         |                                                                                                         | Inventories                                       |                                                      |         | (61    | )       |        |        | 2,483   |      
|                                                         |                                                                                                         | Other assets                                      |                                                      |         | (45    | )       |        |        | 248     |      
|                                                         |                                                                                                         | Liabilities                                       |                                                      |         | 1,320  |         |        |        | (19,472 | )    
|                                                         |                                                                                                         |                                                   |                                                      |         |        |         |        |       
|                                                         |                                                                                                         |                                                   | Net cash provided (used) by operating
    activities |         |        | (10,581 | )      |        |         | 1,885 | 
|                                                         |                                                                                                         |                                                   |                                                      |         |        |         |        |       
|Investing activities:                                    |                                                                                                         |                                                   |                                                      |         |        |         |        |       
|                                                         | Purchases of property and equipment                                                                     |                                                   |                                                      | (593    | )      |         |        | (1,620 | )      
|                                                         | (Purchase) sale of short-term investments                                                               |                                                   |                                                      | (8,997  | )      |         |        | 4,340  |        
|                                                         | Other                                                                                                   |                                                   |                                                      | (378    | )      |         |        | (130   | )      
|                                                         |                                                                                                         |                                                   |                                                      |         |        |         |        |       
|                                                         |                                                                                                         |                                                   | Net cash provided (used) by investing
    activities |         |        | (9,968  | )      |        |         | 2,590 | 
|                                                         |                                                                                                         |                                                   |                                                      |         |        |         |        |       
|Financing activities:                                    |                                                                                                         |                                                   |                                                      |         |        |         |        |       
|                                                         | Proceeds from issuance of common stock                                                                  |                                                   |                                                      | 835     |        |         |        | 1,139  |        
|                                                         | Principal payments under capital lease obligations                                                      |                                                   |                                                      |        |        |         |        | (28    | )      
|                                                         |                                                                                                         |                                                   |                                                      |         |        |         |        |       
|Net cash provided by financing activities                |                                                                                                         |                                                   | 835                                                  |         |        |         | 1,111  |       
|                                                         |                                                                                                         |                                                   |                                                      |         |        |         |        |       
|                                                         | Effect of exchange rates on cash                                                                        |                                                   |                                                      | 410     |        |         |        | (59    | )      
|                                                         |                                                                                                         |                                                   |                                                      |         |        |         |        |       
|Net increase (decrease) in cash and cash
    equivalents |                                                                                                         |                                                   | (19,304                                              | )       |        |         | 5,527  |       
|Cash and cash equivalents at beginning of period         |                                                                                                         |                                                   | 46,484                                               |         |        |         | 55,725 |       
|                                                         |                                                                                                         |                                                   |                                                      |         |        |         |        |       
|Cash and cash equivalents at end of period               |                                                                                                         | $                                                 | 27,180                                               |         |        | $       | 61,252 |       
|                                                         |                                                                                                         |                                                   |                                                      |         |        |         |        |       
|Supplementary disclosures:                               |                                                                                                         |                                                   |                                                      |         |        |         |        |       
|                                                         | Cash paid for interest                                                                                  |                                                   | $                                                    | 10      |        |         | $      | 57     |        
|                                                         |                                                                                                         |                                                   |                                                      |         |        |         |        |       
|                                                         | Cash paid for taxes                                                                                     |                                                   | $                                                    | 35      |        |         | $      | 2,445  |        
|                                                         |                                                                                                         |                                                   |                                                      |         |        |         |        |       

See accompanying notes to condensed consolidated
financial statements.

3



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##### Table of Contents



THERMA-WAVE, INC.






NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS


1.     Basis of
Presentation

The accompanying unaudited condensed consolidated
financial statements have been prepared pursuant to the rules
and regulations of the Securities and Exchange Commission and
include the accounts of Therma-Wave, Inc. and its wholly-owned
subsidiaries. Certain information and footnote disclosures,
normally included in financial statements prepared in accordance
with generally accepted accounting principles, have been
condensed or omitted pursuant to such rules and regulations. In
our opinion, the financial statements reflect all adjustments,
consisting only of normal recurring adjustments, necessary for a
fair presentation of the financial position at June 30,
2002, and the operating results and cash flows for the three
months ended June 30, 2002 and 2001. These financial
statements and notes should be read in conjunction with our
audited financial statements and notes thereto for the year
ended March 31, 2002.

The results of operations for the interim periods
are not necessarily indicative of the results of operations that
may be expected for any other period or for the fiscal year,
which ends on March 30, 2003.

The first quarters of fiscal years 2003 and 2002
and the entire fiscal year 2002 ended on June 30, 2002,
July 1, 2001 and March 31, 2002, respectively. For
presentation purposes, the accompanying financial statements
have been shown as ending on the last day of the calendar
quarter closest to each of these dates.

2.     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 three transactions 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.
|
| | (2) Product revenues of $760,000 and related
    cost of goods sold of $499,000 (including $10,000 of warranty
    and installation costs), related to two tools, which were
    originally recognized in the quarter ended March 31, 2002,
    are being restated to defer the recognition of the revenue and
    related cost of goods sold for one of the tools until the
    quarter ended September 30, 2002 ($360,000 of revenue and
    related                                                                                                                                                                                  

4



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##### Table of Contents



THERMA-WAVE, INC.


NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)



| |                                                                                                                                                                                                                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | inventory cost of the tool of $152,000) and for
    the other tool revenue has not been recognized ($400,000) and
    the cost of the tool ($337,000) is included in inventory. This
    change relates to shipments made to a distributor that did not
    have the ability to pay independent of completing the ultimate
    sale to the end customer.

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.

The balance sheets as of June 30, 2002 and
March 31, 2002 have been restated for the impact of the
items above.

The following table outlines the balance sheet
impact of these adjustments as of June 30, 2002 and
March 31, 2002:

|                                           |  |                |          |                |  |               |          |             |  |   |          |   |  |   |          |  
|------------------------------------------ |  | -------------- | -------- | -------------- |  | ------------- | -------- | ----------- |  | - | -------- | - |  | - | -------- | -
|                                           |  |                |          |               
|                                           |  | June 30, 2002  |          | March 31, 2002
|                                           |  |                |          |               
|                                           |  | As Previously  |          |                |  | As Previously |          |            
|                                           |  | Reported       |          | As Restated    |  | Reported      |          | As Restated
|                                           |  |                |          |                |  |               |          |            
|                                           |  |                |          |               
|                                           |  | (In thousands) |          | (In thousands)
|Accounts receivable, net                   |  | $              | 19,664   |                |  | $             | 18,714   |             |  | $ | 16,585   |   |  | $ | 15,635   |  
|Inventories                                |  |                | 33,899   |                |  |               | 34,738   |             |  |   | 33,838   |   |  |   | 34,677   |  
|Other current assets                       |  |                | 3,456    |                |  |               | 3,444    |             |  |   | 3,427    |   |  |   | 3,415    |  
|Total current assets                       |  |                | 105,771  |                |  |               | 105,648  |             |  |   | 112,909  |   |  |   | 112,786  |  
|Total assets                               |  |                | 193,632  |                |  |               | 193,509  |             |  |   | 201,769  |   |  |   | 201,646  |  
|Accrued warranty costs                     |  |                | 1,459    |                |  |               | 1,434    |             |  |   | 1,802    |   |  |   | 1,777    |  
|Deferred revenue                           |  |                | 11,212   |                |  |               | 12,022   |             |  |   | 8,683    |   |  |   | 9,493    |  
|Total current liabilities                  |  |                | 32,359   |                |  |               | 33,144   |             |  |   | 30,988   |   |  |   | 31,773   |  
|Total liabilities                          |  |                | 34,682   |                |  |               | 35,467   |             |  |   | 33,362   |   |  |   | 34,147   |  
|Accumulated deficit                        |  |                | (159,720 | )              |  |               | (160,628 | )           |  |   | (148,417 | ) |  |   | (149,325 | )
|Total stockholders equity                 |  |                | 158,950  |                |  |               | 158,042  |             |  |   | 168,407  |   |  |   | 167,499  |  
|Total liabilities and stockholders equity |  |                | 193,632  |                |  |               | 193,509  |             |  |   | 201,769  |   |  |   | 201,646  |  

3. Inventories

Inventories are summarized as follows (in
thousands):

|                    |  |               |        |           |  |   |        | 
|------------------- |  | ------------- | ------ | --------- |  | - | ------ | 
|                    |  | June 30,      |        | March 31,
|                    |  | 2002          |        | 2002     
|                    |  |               |        |          
|                    |  |              
|                    |  | (As Restated)
|Purchased materials |  | $             | 11,850 |           |  | $ | 11,172 | 
|Systems in process  |  |               | 14,975 |           |  |   | 12,657 | 
|Finished systems    |  |               | 7,913  |           |  |   | 10,848 | 
|                    |  |               |        |           |  |   |        | 
|                    |  | $             | 34,738 |           |  | $ | 34,677 | 
|                    |  |               |        |           |  |   |        | 

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

5. Change in Accounting
Principle

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

6. Net Income (Loss) Per Share

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

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

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

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

7. Recently Issued Accounting
Statements

On January 16, 2002, we adopted the
non-amortization provisions of Statement of Financial Accounting
Standards No. 142 (SFAS No. 142), Goodwill and
Other Intangible Assets. SFAS No. 142 supersedes
Accounting Principles Board Opinion No. 17,
Intangible Assets, and discontinues the amortization
of goodwill. In addition, SFAS No. 142 includes provisions
regarding: 1) reclassification of amounts between goodwill
and identifiable intangible assets in accordance with the new
definition of identifiable intangible assets set forth in
Statement of Financial Accounting Standards No. 141,
Business Combinations; 2) reassessment of the
useful lives of existing recognized intangibles; and
3) testing for impairment of existing goodwill and other
intangibles using the discounted cash flows method. We have
completed the goodwill impairment test as of the beginning of
fiscal 2003, and the results of that test indicated that our
goodwill and other intangible assets are not impaired.
Intangible assets include developed technology, development
contract and trade name and are being amortized on a
straight-line basis over the estimated useful lives of two to
five years. No changes were made to the useful lives of
amortizable intangible assets or reclassifications made in

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THERMA-WAVE, INC.


NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

connection with the adoption of SFAS
No. 142. Components of intangible assets were as follows
(in thousands):

|                     |  |                |        |                |  |                |      |              |  |   |        |  |  |   |      |  
|-------------------- |  | -------------- | ------ | -------------- |  | -------------- | ---- | ------------ |  | - | ------ |  |  | - | ---- | -
|                     |  |                |        |               
|                     |  | June 30, 2002  |        | March 31, 2002
|                     |  |                |        |               
|                     |  | Gross Carrying |        | Accumulated    |  | Gross Carrying |      | Accumulated 
|                     |  | Amount         |        | Amortization   |  | Amount         |      | Amortization
|                     |  |                |        |                |  |                |      |             
|Intangible assets    |  |                |        |                |  |                |      |              |  |   |        |  |  |   |      |  
|Developed technology |  | $              | 890    |                |  | $              | (202 | )            |  | $ | 890    |  |  | $ | (92  | )
|Development contract |  |                | 2,590  |                |  |                | (237 | )            |  |   | 2,590  |  |  |   | (107 | )
|Trade name           |  |                | 990    |                |  |                | (90  | )            |  |   | 990    |  |  |   | (40  | )
|                     |  |                |        |                |  |                |      |              |  |   |        |  |  |   |      |  
|Intangible assets    |  | $              | 4,470  |                |  | $              | (529 | )            |  | $ | 4,470  |  |  | $ | (239 | )
|                     |  |                |        |                |  |                |      |              |  |   |        |  |  |   |      |  
|Goodwill             |  | $              | 65,865 |                |  | $              |     |              |  | $ | 65,865 |  |  | $ |     |  
|                     |  |                |        |                |  |                |      |              |  |   |        |  |  |   |      |  

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

8. Commitments and
Contingencies

On December 17, 2001, we signed a definitive
agreement to acquire Sensys Instruments Corporation. On
December 28, 2001, Sensys was named in a patent
infringement suit filed by KLA-Tencor Corporation. KLA-Tencor
alleged that it patented an aspect of the integrated metrology
technology that Sensys uses in their integrated product family.

KLA-Tencor is seeking damages and an injunction
to stop the sale of the equipment they allege uses this aspect.
On February 25, 2002, Sensys answered KLA-Tencors
complaints by denying the material allegations and asserting
declaratory judgment counterclaims. KLA-Tencor filed its reply
on March 22, 2002. A case management conference was held on
July 11, 2002. Discovery cut-off was set for August 4,
2003 but a trial date has not been set. We believe none of the
current Sensys products infringes any of the claims of
KLA-Tencors patent. We believe that the outcome from this
matter, even if adverse to us, would not have a material adverse
effect on our financial condition or results of operations.

On April 22, 2002, we filed a patent
infringement suit against Boxer Cross Inc. in the United States
District Court, Northern District of California. The suit
alleges that Boxer Cross BX-10 product infringes certain
patents held by Therma-Wave related to ion implant monitoring.
Two of the asserted patents were previously found to be valid
and infringed in a suit filed against Jenoptik, AG, in 1994. The
earlier court rulings led to Jenoptiks withdrawal from the
U.S. market. On April 26, 2002, we moved for a preliminary
injunction to enjoin and prohibit Boxer Cross from making,
using, importing, selling, or offering for sale its BX-10 during
the pendency of the lawsuit. A hearing on Therma-Waves
motion is scheduled for August 12, 2002, and discovery
related to the motion is ongoing. On June 7, 2002, Boxer
Cross filed its amended answer and counterclaims to
Therma-Waves complaint and asserted various affirmative
defenses to Therma-Waves claims of patent infringement.
The pleading also contained various counterclaims including
allegations that Therma-Waves Therma-Probe product
infringed upon certain patents owned by Boxer Cross and also
raising claims of misappropriation of trade secrets, tortious
interference with contract, unfair competition and unfair
business practices. A case management conference is scheduled
for August 26, 2002. No discovery cut-off or trial dates
have been set. We believe that the outcome from this matter,
even if adverse to us, would not have a material adverse effect
on our financial condition or results of operations.

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THERMA-WAVE, INC.


NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

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.

9. Severance Charge

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

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

10. Subsequent Event

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

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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. Statements relating to our ability to manage
our costs and reduce operating expenses, sustain our operations
and cash position in an extended global economic downturn,
continue the successful development and introduction of new
products and improvement of current products, continue to
smoothly integrate Sensys into our operation and trends in our
financial performance are all based on current expectations.
Such statements are subject to risks, uncertainties, and changes
in conditions, particularly those related to industry
performance in the current severe industry and economic
downturn, political unrest, foreign currency exchange rates,
activities and potential successes of competitors and competing
products and other risks, some of which are detailed in
documents filed with the Securities and Exchange Commission,
including specifically Exhibit 99.1 to the companys
amended Annual Report on Form 10-K/A for the year ended
March 31, 2002. See also the discussion of forward-looking
statements related to market risk in the first paragraph of
Item 3 below. 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. Process
control metrology is used to monitor process parameters in order
to enable semiconductor manufacturers to maintain high yields on
the production lines, reduce feature size, increase wafer size,
increase equipment productivity and improve device performance.
Our metrology systems are used in all sections of the
semiconductor fabrication plant, or fab, to control the wafer
fabrication processes. Examples of wafer fab processes, in which
our metrology systems supply key information, are photoresist
processing to support lithography, deposition of insulator and
conductor films, patterned removal, or etching, of
insulator and conductor films, ion implantation and chemical
mechanical planarization. We currently sell four product
families of process control metrology systems: Therma-Probe
systems, Opti-Probe systems, Opti-Probe CD systems, and Sensys
and Integra integrated metrology systems.

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

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

Opti-Probe CD Product Family.Opti-Probe CD systems measure the
lateral dimensions, or critical dimensions, or CD,
using a revolutionary, nondestructive technique based on
spectroscopic ellipsometry. These systems are capable of
providing CD metrology for the smallest features of the next
several generations of ICs.

Sensys and Integra Product Family.The Sensys and Integra line of
integrated metrology products are a broad-based family of
compact metrology modules which are installed and
function inside an IC process system, such as an etching system
or CVD deposition system, to provide metrology on each wafer
before it exits the process tool. In January 2002, we acquired
Sensys Instruments Corporation, or Sensys, a developer of
integrated metrology systems. We are now merging our Integra
product line with the Sensys product family.

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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 three transactions 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.                                                                                                                                                                      
|
| | (2) Product revenues of $760,000 and related
    cost of goods sold of $499,000 (including $10,000 of warranty
    and installation costs), related to two tools, which were
    originally recognized in the quarter ended March 31, 2002
    are being restated to defer the recognition of the revenue and
    related cost of goods sold for one of the tools until the
    quarter ended September 30, 2002 ($360,000 of revenue and
    related inventory cost of the tool of $152,000) and for the
    other tool revenue has not been recognized ($400,000) and the
    cost of the tool ($337,000) is included in inventory. This
    change relates to shipments made to a distributor that did not
    have the ability to pay independent of completing the ultimate
    sale to the end customer.

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. However, we do not believe these
adjustments have a material impact on our financial position as
of March 31, 2002. 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 months ended June 30, 2002 and 2001 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 June 30,          
|                                                |                                     |                         
|                                                |                                     | 2002                     |       | 2001
|                                                |                                     |                          |       |     
|Net revenues                                    |                                     |                          | 100.0 | %    |      |  | 100.0 | %   
|Cost of revenues                                |                                     |                          | 79.4  |      |      |  | 53.3  |     
|                                                |                                     |                          |       |      |      |  |       |     
|Gross profit                                    |                                     |                          | 20.6  |      |      |  | 46.7  |     
|                                                |                                     |                          |       |      |      |  |       |     
|Operating expenses:                             |                                     |                          |       |      |      |  |       |     
|                                                | Research and development            |                          |       | 53.5 |      |  |       | 18.5 |     
|                                                | Selling, general and administrative |                          |       | 40.9 |      |  |       | 15.0 |     
|                                                | Stock-based compensation            |                          |       | 4.0  |      |  |       |     |     
|                                                |                                     |                          |       |      |      |  |       |     
|                                                |                                     | Total operating expenses |       |      | 98.4 |  |       |      | 33.5 | 
|                                                |                                     |                          |       |      |      |  |       |     
|Operating income (loss)                         |                                     |                          | (77.8 | )    |      |  | 13.2  |     
|                                                |                                     |                          |       |      |      |  |       |     
|Other income (expense):                         |                                     |                          |       |      |      |  |       |     
|                                                | Interest expense                    |                          |       | (0.3 | )    |  |       | (0.2 | )   
|                                                | Interest income                     |                          |       | 1.8  |      |  |       | 2.2  |     
|                                                | Other, net                          |                          |       | 0.7  |      |  |       | 0.1  |     
|                                                |                                     |                          |       |      |      |  |       |     
|                                                |                                     | Total other income       |       |      | 2.2  |  |       |      | 2.1  | 
|                                                |                                     |                          |       |      |      |  |       |     
|Income (loss) before provision for income taxes |                                     |                          | (75.6 | )    |      |  | 15.3  |     
|Provision for income taxes                      |                                     |                          |      |      |      |  | (1.0  | )   
|                                                |                                     |                          |       |      |      |  |       |     
|Net income (loss)                               |                                     |                          | (75.6 | )%   |      |  | 14.3  | %   
|                                                |                                     |                          |       |      |      |  |       |     

Comparisons of the three months ended
June 30, 2002 as compared to the three months ended
March 31, 2002, as restated.

Net Revenues.Net
revenues for the fiscal quarter ended June 30, 2002 were
$14.9 million. Compared to the fourth quarter of fiscal
2002, net revenues increased $2.5 million, or 20.5%, from
$12.4 million. Net revenues decreased $22.9 million,
or 60.5%, from $37.8 million in the same fiscal quarter of
the prior year. The decrease in revenues was primarily the
result of capital spending reductions by our customers due to
the downturn of the semiconductor industry and the weakness of
the global economy.

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

International sales accounted for approximately
77% and 59% of our total net revenues for the three months ended
June 30, 2002 and 2001, respectively. We anticipate that
international sales will continue to account for a significant
portion of our net revenues in the foreseeable future. A
substantial portion of our international sales are denominated
in U.S. dollars. As a result, changes in the values of foreign
currencies relative to the value of the U.S. dollar can render
our products comparatively more expensive. Although we have not
been negatively impacted in the past by foreign currency changes
in Japan, Korea, Taiwan and Europe, such conditions could
negatively impact our international sales in future periods.

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Gross Profit.Gross
profit for the first quarter of fiscal 2003 was $3.1 million, an
increase of $13.7 million, from a loss of
$10.6 million in the previous fiscal quarter. Compared to
the same quarter of fiscal 2002, gross profit decreased
$14.6 million or 82.6%. As a percentage of net revenues,
gross margin for the current quarter was 20.6%, compared to
(85.5)% for last fiscal quarter and 46.7% for the same quarter
of last fiscal year. The significant change of gross profit from
the previous fiscal quarter is primarily due to a
$12.2 million non-recurring inventory charge recorded in
the fourth quarter of fiscal 2002. The significant decrease of
gross profit from the same quarter of fiscal 2002 is primarily
due to our substantially lower revenue and production volume.

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

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

Stock-Based Compensation.As part of the acquisition of Sensys,
we recorded $3.5 million of stock-based compensation to be
amortized over the vesting period of the options. The
amortization expense was $0.6 million in the quarter ended
June 30, 2002, or 4% of revenue for the quarter. We had no
similar expenses for the same period of last fiscal year.

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

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

Net Income (Loss).The combination of all the factors
discussed above contributed to a net loss of $11.3 million
for the first quarter of fiscal 2003, compared with net loss of
$40.8 million in the prior fiscal quarter and net income of
$5.4 million in the same quarter of last fiscal year.

Liquidity and Capital Resources

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

Cash flows provided (used) by operating
activities were $(10.6) million and $1.9 million for the
first quarters of fiscal 2003 and 2002, respectively. The
decrease in cash flows provided by operating activities from
fiscal year 2002 to 2003 was mainly due to our net loss in the
first three months of fiscal year 2003.

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

Cash flows provided by financing activities were
$0.8 million and $1.1 million for the first quarters
of fiscal 2003 and 2002, respectively. Cash was generated from
the exercise of stock options and warrants and the issuance of
common stock under our employee stock purchase plan.

12



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##### Table of Contents



In June 2001, we entered into a
$10.0 million loan and security agreement with Comerica
Bank. In December 2001, we amended this bank credit facility. As
a result of the amendment, the credit extension limit was
increased to $13.5 million. The amended bank credit facility
allows us to borrow money bearing interest either at a floating
rate per annum equal to the prime rate or at a rate per annum
equal to LIBOR plus 2.0%. We may request advances in an
aggregate outstanding amount not to exceed the lesser of
$13.5 million or the borrowing base, in each case minus the
aggregate face amount of outstanding letters of credit,
including any drawn but unreimbursed letters of credit. Our
borrowings under the Comerica bank credit facility are secured
by substantially all of our assets. The amended Comerica bank
credit facility matures on June 30, 2004. We currently have
a $3.5 million standby letter of credit as required by the
lessor of our building and we have $10.0 million of unused
borrowing capacity under the amended bank credit facility. We
are in compliance with all financial covenants related to the
bank credit facility.

Our principal sources of funds are anticipated to
be cash and short-term investments on hand ($48.8 million
as of June 30, 2002), cash flows from operating activities
and, if necessary, borrowings under the bank credit facility. We
expect to limit our capital spending to essential items. We
believe that these funds will provide us with sufficient
liquidity and capital resources for us to meet our current and
future financial obligations for at least the next twelve
months. No assurance can be given, however, that this will be
the case. We may require additional equity or debt financing to
meet our working capital requirements 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.

Inflation

The impact of inflation on our business has not
been material for the fiscal quarter ended June 30, 2002.






|        |                        
|------- | -----------------------
|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;                                                                    
|
| |  | 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
|        |       |            
|        | 10.39 |             |  | Form of Stock Option Agreement under the 2000
    Equity Incentive Plan(1)   
|        | 99.1  |             |  | Risk Factors.(2)                                                             
|        | 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 originally filed Quarterly Report
    on Form 10-Q for the period ended June 30, 2002 (File
    No. 000-26911)
|   
|(2) | Incorporated by reference to the same numbered
    exhibit in the Companys amended Annual Report on
    Form 10-K/ A for the period ended March 31, 2002 (File
    No. 000-26911)        

(b) Reports on Form 8-K

None

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)                                           
|
| | /s/ L. RAY CHRISTIE                                    
| |                                                        
| | L. Ray Christie                                        
| | Chief Financial Officer                                
| | (as Registrant and as Principal Accounting
    Officer)

May 5, 2003

15



---



##### 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
|        |       |            
|        | 10.39 |             |  | Form of Stock Option Agreement under the 2000
    Equity Incentive Plan.(1)  
|        | 99.1  |             |  | Risk Factors.(2)                                                             
|        | 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 originally filed Quarterly Report
    on Form 10-Q for the period ended June 30, 2002 (File
    No. 000-26911)
|   
|(2) | Incorporated by reference to the same numbered
    exhibit in the Companys amended Annual Report on
    Form 10-K/ A for the period ended March 31, 2002 (File
    No. 000-26911)