##### 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
    December 30, 2001                                        
|          
|OR        
|          
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13
    OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|          
|           |  | For the transition period
    from                to                                        

Commission file number 000-26911



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THERMA-WAVE, INC.

(Exact Name of Registrant as Specified in Its
Charter)


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

1250 Reliance Way

Fremont, California 94539


(Address of Principal Executive Offices
Including Zip Code)


(510) 668-2200

(Registrants Telephone Number, Including
Area Code)


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

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

|                             |  |                                    |            | 
|---------------------------- |  | ---------------------------------- | ---------- | 
|Class                        |  | Outstanding as of January 31, 2002
|                             |  |                                   
|Common stock, $.01 par value |  |                                    | 28,811,884 | 



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TABLE OF CONTENTS



|                                |                                                                                               |                                                                |  |  |  |  |  | 
|------------------------------- | --------------------------------------------------------------------------------------------- | -------------------------------------------------------------- |  |  |  |  |  | 
|PART I -- FINANCIAL INFORMATION
|                                | Item 1. Financial Statements                                                                 
|                                |                                                                                               | CONDENSED CONSOLIDATED BALANCE SHEETS                         
|                                |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS               
|                                |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS               
|                                |                                                                                               | NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|                                | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                | Item 4. Controls and Procedures                                                              
|PART II. -- OTHER INFORMATION  
|                                | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                     
|CERTIFICATION                  
|EXHIBIT 99.2                   



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##### Table of Contents



THERMA-WAVE, INC.

TABLE OF CONTENTS

|                                   |  |                                                                                                                        |    |          |    | 
|---------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------- | -- | -------- | -- | 
|                                   |  |                                                                                                                        |    | Page No.
|                                   |  |                                                                                                                        |    |         
|PART I.  FINANCIAL
    INFORMATION
|ITEM 1.                            |  | Financial Statements                                                                                                   |    |          |    | 
|                                   |  | Condensed Consolidated Balance Sheets as of
    December 31, 2001 and
    March 31, 2001                               |    |          | 1  | 
|                                   |  | Condensed Consolidated Statements of Operations
    for the Three and Nine Months Ended December 31, 2001
    and 2000 |    |          | 2  | 
|                                   |  | Condensed Consolidated Statements of Cash Flows
    for the Nine Months Ended December 31, 2001 and 2000               |    |          | 3  | 
|                                   |  | Notes to Condensed Consolidated Financial
    Statements                                                               |    |          | 4  | 
|ITEM 2.                            |  | Managements Discussion and Analysis of
    Financial Condition and
    Results of Operations                          |    |          | 8  | 
|ITEM 4.                            |  | Controls and Procedures                                                                                                |    |          | 12 | 
|PART II.  OTHER
    INFORMATION   
|ITEM 6.                            |  | Exhibits and Reports on
    Form 8-K                                                                                   |    |          | 13 | 
|SIGNATURES                         |  |                                                                                                                        | 14 |         
|CERTIFICATIONS                     |  |                                                                                                                        | 15 |         

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

This quarterly report on Form 10-Q/ A is
being filed as a result of the restatement of our condensed
consolidated financial statements for the quarterly periods
ended September 30, 2001, December 31, 2001,
June 30, 2002 and September 30, 2002 and the year
ended March 31, 2002 as further described in
Note 2  Restatement of Financial Results of this
Form 10-Q/ A. This report still speaks as of the original
filing date and, as expressly stated, no attempt has been made
to update this report to reflect events occurring subsequent to
the date of the original filing.

i



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##### Table of Contents






PART I  FINANCIAL
INFORMATION






|        |                     
|------- | --------------------
|Item 1. | Financial Statements

THERMA-WAVE, INC.






CONDENSED CONSOLIDATED BALANCE
SHEETS


(in thousands)


(Unaudited)


|                                         |                                      |                                            |       |           |         |  |       |          |         | 
|---------------------------------------- | ------------------------------------ | ------------------------------------------ | ----- | --------- | ------- |  | ----- | -------- | ------- | 
|                                         |                                      | December 31,                               |       | March 31,
|                                         |                                      | 2001                                       |       | 2001     
|                                         |                                      |                                            |       |          
|                                         |                                      | (As Restated)                              |       |          
|ASSETS                                  
|Current assets:                          |                                      |                                            |       |           |         |  |       |         
|                                         | Cash and cash equivalents            |                                            | $     | 51,723    |         |  | $     | 55,725   |        
|                                         | Short-term investments               |                                            |       | 18,325    |         |  |       | 19,850   |        
|                                         | Accounts receivable, net             |                                            |       | 17,364    |         |  |       | 43,348   |        
|                                         | Inventories                          |                                            |       | 45,347    |         |  |       | 47,181   |        
|                                         | Other current assets                 |                                            |       | 5,346     |         |  |       | 3,925    |        
|                                         |                                      |                                            |       |           |         |  |       |         
|                                         |                                      | Total current assets                       |       |           | 138,105 |  |       |          | 170,029 | 
|                                         | Property and equipment, net          |                                            |       | 12,992    |         |  |       | 14,478   |        
|                                         | Deferred income taxes                |                                            |       | 1,379     |         |  |       | 3,405    |        
|                                         | Other assets                         |                                            |       | 4,566     |         |  |       | 3,279    |        
|                                         |                                      |                                            |       |           |         |  |       |         
|                                         |                                      | Total assets                               |       | $         | 157,042 |  |       | $        | 191,191 | 
|                                         |                                      |                                            |       |           |         |  |       |         
|                                        
|LIABILITIES AND STOCKHOLDERS
    EQUITY
|Current liabilities:                     |                                      |                                            |       |           |         |  |       |         
|                                         | Accounts payable                     |                                            | $     | 4,560     |         |  | $     | 12,547   |        
|                                         | Accrued warranty costs               |                                            |       | 2,484     |         |  |       | 3,742    |        
|                                         | Deferred revenue                     |                                            |       | 8,532     |         |  |       | 17,096   |        
|                                         | Income tax payable                   |                                            |       | 8,417     |         |  |       | 10,810   |        
|                                         | Other current liabilities            |                                            |       | 8,145     |         |  |       | 15,985   |        
|                                         |                                      |                                            |       |           |         |  |       |         
|                                         |                                      | Total current liabilities                  |       |           | 32,138  |  |       |          | 60,180  | 
|Long term debt                           |                                      |                                            | 16    |           |         |  | 16    |         
|Other liabilities                        |                                      |                                            | 2,057 |           |         |  | 1,913 |         
|                                         |                                      |                                            |       |           |         |  |       |         
|                                         |                                      | Total liabilities                          |       |           | 34,211  |  |       |          | 62,109  | 
|                                         |                                      |                                            |       |           |         |  |       |         
|Stockholders equity:                    |                                      |                                            |       |           |         |  |       |         
|                                         | Common stock                         |                                            |       | 243       |         |  |       | 240      |        
|                                         | Additional paid-in capital           |                                            |       | 232,934   |         |  |       | 230,646  |        
|                                         | Notes receivable from stockholders   |                                            |       | (201      | )       |  |       | (212     | )      
|                                         | Accumulated deficit                  |                                            |       | (108,518  | )       |  |       | (100,129 | )      
|                                         | Accumulated other comprehensive loss |                                            |       | (1,627    | )       |  |       | (1,463   | )      
|                                         |                                      |                                            |       |           |         |  |       |         
|                                         |                                      | Total stockholders equity                 |       |           | 122,831 |  |       |          | 129,082 | 
|                                         |                                      |                                            |       |           |         |  |       |         
|                                         |                                      | Total liabilities and stockholders equity |       | $         | 157,042 |  |       | $        | 191,191 | 
|                                         |                                      |                                            |       |           |         |  |       |         

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       |         | Nine Months Ended
|                                                                             |                                     | December 31,             |         | December 31,     
|                                                                             |                                     |                          |         |                  
|                                                                             |                                     | 2001                     |         | 2000              |        | 2001          |        | 2000  
|                                                                             |                                     |                          |         |                   |        |               |        |       
|                                                                             |                                     |                          |         |                   |        | (As Restated) |        |       
|Net revenues                                                                 |                                     | $                        | 11,054  |                   |        | $             | 57,029 |        |        | $ | 69,535  |        |        | $ | 144,440 |       
|Cost of revenues                                                             |                                     |                          | 9,522   |                   |        |               | 27,633 |        |        |   | 42,410  |        |        |   | 72,141  |       
|                                                                             |                                     |                          |         |                   |        |               |        |        |        |   |         |        |        |   |         |       
|Gross profit                                                                 |                                     |                          | 1,532   |                   |        |               | 29,396 |        |        |   | 27,125  |        |        |   | 72,299  |       
|                                                                             |                                     |                          |         |                   |        |               |        |        |        |   |         |        |        |   |         |       
|Operating expenses:                                                          |                                     |                          |         |                   |        |               |        |        |        |   |         |        |        |   |         |       
|                                                                             | Research and development            |                          |         | 7,643             |        |               |        | 9,282  |        |   |         | 21,157 |        |   |         | 25,477 |       
|                                                                             | Selling, general and administrative |                          |         | 5,243             |        |               |        | 7,892  |        |   |         | 16,248 |        |   |         | 20,669 |       
|                                                                             |                                     |                          |         |                   |        |               |        |        |        |   |         |        |        |   |         |       
|                                                                             |                                     | Total operating expenses |         |                   | 12,886 |               |        |        | 17,174 |   |         |        | 37,405 |   |         |        | 46,146 | 
|                                                                             |                                     |                          |         |                   |        |               |        |        |        |   |         |        |        |   |         |       
|Operating income (loss)                                                      |                                     |                          | (11,354 | )                 |        |               | 12,222 |        |        |   | (10,280 | )      |        |   | 26,153  |       
|                                                                             |                                     |                          |         |                   |        |               |        |        |        |   |         |        |        |   |         |       
|Other income (expense):                                                      |                                     |                          |         |                   |        |               |        |        |        |   |         |        |        |   |         |       
|                                                                             | Interest expense                    |                          |         | (70               | )      |               |        | (47    | )      |   |         | (177   | )      |   |         | (159   | )     
|                                                                             | Interest income                     |                          |         | 449               |        |               |        | 902    |        |   |         | 2,032  |        |   |         | 2,986  |       
|                                                                             | Other, net                          |                          |         | 8                 |        |               |        | (40    | )      |   |         | 36     |        |   |         | 102    |       
|                                                                             |                                     |                          |         |                   |        |               |        |        |        |   |         |        |        |   |         |       
|                                                                             |                                     | Total other income       |         |                   | 387    |               |        |        | 815    |   |         |        | 1,891  |   |         |        | 2,929  | 
|                                                                             |                                     |                          |         |                   |        |               |        |        |        |   |         |        |        |   |         |       
|Income (loss) before provision for income taxes                              |                                     |                          | (10,967 | )                 |        |               | 13,037 |        |        |   | (8,389  | )      |        |   | 29,082  |       
|Provision for income taxes                                                   |                                     |                          |        |                   |        |               | (735   | )      |        |   |        |        |        |   | (1,697  | )     
|                                                                             |                                     |                          |         |                   |        |               |        |        |        |   |         |        |        |   |         |       
|Income (loss) before cumulative effect of
    change in accounting principle |                                     |                          | (10,967 | )                 |        |               | 12,302 |        |        |   | (8,389  | )      |        |   | 27,385  |       
|Cumulative effect of change in accounting
    principle, net of taxes        |                                     |                          |        |                   |        |               |       |        |        |   |        |        |        |   | (6,287  | )     
|                                                                             |                                     |                          |         |                   |        |               |        |        |        |   |         |        |        |   |         |       
|Net income (loss)                                                            |                                     | $                        | (10,967 | )                 |        | $             | 12,302 |        |        | $ | (8,389  | )      |        | $ | 21,098  |       
|                                                                             |                                     |                          |         |                   |        |               |        |        |        |   |         |        |        |   |         |       
|Basic net income (loss) per share:                                           |                                     |                          |         |                   |        |               |        |        |        |   |         |        |        |   |         |       
|Income (loss) before cumulative effect of
    change in accounting principle |                                     | $                        | (0.45   | )                 |        | $             | 0.52   |        |        | $ | (0.35   | )      |        | $ | 1.17    |       
|Cumulative effect of change in accounting
    principle, net of taxes        |                                     |                          |        |                   |        |               |       |        |        |   |        |        |        | $ | (0.27   | )     
|                                                                             |                                     |                          |         |                   |        |               |        |        |        |   |         |        |        |   |         |       
|Basic net income (loss) per share                                            |                                     | $                        | (0.45   | )                 |        | $             | 0.52   |        |        | $ | (0.35   | )      |        | $ | 0.90    |       
|                                                                             |                                     |                          |         |                   |        |               |        |        |        |   |         |        |        |   |         |       
|Diluted net income (loss) per share:                                         |                                     |                          |         |                   |        |               |        |        |        |   |         |        |        |   |         |       
|Income (loss) before cumulative effect of
    change in accounting principle |                                     | $                        | (0.45   | )                 |        | $             | 0.49   |        |        | $ | (0.35   | )      |        | $ | 1.08    |       
|Cumulative effect of change in accounting
    principle, net of taxes        |                                     |                          |        |                   |        |               |       |        |        |   |        |        |        | $ | (0.25   | )     
|                                                                             |                                     |                          |         |                   |        |               |        |        |        |   |         |        |        |   |         |       
|Diluted net income (loss) per share                                          |                                     | $                        | (0.45   | )                 |        | $             | 0.49   |        |        | $ | (0.35   | )      |        | $ | 0.83    |       
|                                                                             |                                     |                          |         |                   |        |               |        |        |        |   |         |        |        |   |         |       
|Weighted average common shares outstanding:                                  |                                     |                          |         |                   |        |               |        |        |        |   |         |        |        |   |         |       
|                                                                             | Basic                               |                          |         | 24,114            |        |               |        | 23,446 |        |   |         | 23,995 |        |   |         | 23,370 |       
|                                                                             | Diluted                             |                          |         | 24,114            |        |               |        | 25,116 |        |   |         | 23,995 |        |   |         | 25,387 |       

See accompanying notes to condensed consolidated
financial statements.

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THERMA-WAVE, INC.






CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS


(in thousands)


(Unaudited)


|                                                 |                                                                                          |                                           |                                       |        |         |        |         |         |         |        |  
|------------------------------------------------ | ---------------------------------------------------------------------------------------- | ----------------------------------------- | ------------------------------------- | ------ | ------- | ------ | ------- | ------- | ------- | ------ | -
|                                                 |                                                                                          |                                          
|                                                 |                                                                                          | Nine Months Ended                        
|                                                 |                                                                                          | December 31,                             
|                                                 |                                                                                          |                                          
|                                                 |                                                                                          | 2001                                      |                                       | 2000  
|                                                 |                                                                                          |                                           |                                       |       
|                                                 |                                                                                          | (As Restated)                             |                                       |       
|Operating activities:                            |                                                                                          |                                           |                                       |        |         |        |         |        
|                                                 | Net income (loss)                                                                        |                                           | $                                     | (8,389 | )       |        | $       | 21,098  |        
|                                                 | Adjustments to reconcile net income (loss) to net
    cash used by operating activities: |                                           |                                       |        |         |        |         |         |        
|                                                 |                                                                                          | Change in accounting principle            |                                       |        |        |        |         |         | 6,287   |       
|                                                 |                                                                                          | Depreciation and amortization             |                                       |        | 3,836   |        |         |         | 2,202   |       
|                                                 | Changes in assets and liabilities:                                                       |                                           |                                       |        |         |        |         |         |        
|                                                 |                                                                                          | Accounts receivable                       |                                       |        | 25,984  |        |         |         | (25,163 | )     
|                                                 |                                                                                          | Inventories                               |                                       |        | 1,834   |        |         |         | (23,472 | )     
|                                                 |                                                                                          | Other assets                              |                                       |        | (379    | )      |         |         | (1,228  | )     
|                                                 |                                                                                          | Liabilities                               |                                       |        | (27,833 | )      |         |         | 17,122  |       
|                                                 |                                                                                          |                                           |                                       |        |         |        |         |        
|                                                 |                                                                                          |                                           | Net cash used by operating activities |        |         | (4,947 | )       |         |         | (3,154 | )
|                                                 |                                                                                          |                                           |                                       |        |         |        |         |        
|Investing activities:                            |                                                                                          |                                           |                                       |        |         |        |         |        
|                                                 | Purchases of property and equipment                                                      |                                           |                                       | (2,034 | )       |        |         | (6,865  | )      
|                                                 | (Purchase) sale of short-term investments                                                |                                           |                                       | 1,525  |         |        |         | (19,344 | )      
|                                                 | Other                                                                                    |                                           |                                       | (619   | )       |        |         | (370    | )      
|                                                 |                                                                                          |                                           |                                       |        |         |        |         |        
|                                                 |                                                                                          | Net cash used by investing activities     |                                       |        | (1,128  | )      |         |         | (26,579 | )     
|                                                 |                                                                                          |                                           |                                       |        |         |        |         |        
|Financing activities:                            |                                                                                          |                                           |                                       |        |         |        |         |        
|                                                 | Proceeds from issuance of common stock                                                   |                                           |                                       | 2,291  |         |        |         | 2,931   |        
|                                                 | Principal payments under capital lease obligations                                       |                                           |                                       | (65    | )       |        |         | (461    | )      
|                                                 | Other                                                                                    |                                           |                                       | (153   | )       |        |         | (326    | )      
|                                                 |                                                                                          |                                           |                                       |        |         |        |         |        
|                                                 |                                                                                          | Net cash provided by financing activities |                                       |        | 2,073   |        |         |         | 2,144   |       
|                                                 |                                                                                          |                                           |                                       |        |         |        |         |        
|Net decrease in cash and cash equivalents        |                                                                                          |                                           | (4,002                                | )      |         |        | (27,589 | )      
|Cash and cash equivalents at beginning of period |                                                                                          |                                           | 55,725                                |        |         |        | 75,200  |        
|                                                 |                                                                                          |                                           |                                       |        |         |        |         |        
|Cash and cash equivalents at end of period       |                                                                                          | $                                         | 51,723                                |        |         | $      | 47,611  |        
|                                                 |                                                                                          |                                           |                                       |        |         |        |         |        
|Supplementary disclosures:                       |                                                                                          |                                           |                                       |        |         |        |         |        
|                                                 | Cash paid for interest                                                                   |                                           | $                                     | 77     |         |        | $       | 171     |        
|                                                 |                                                                                          |                                           |                                       |        |         |        |         |        
|                                                 | Cash paid for taxes                                                                      |                                           | $                                     | 2,466  |         |        | $       | 541     |        
|                                                 |                                                                                          |                                           |                                       |        |         |        |         |        

See accompanying notes to condensed consolidated
financial statements.

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THERMA-WAVE, INC.






NOTES TO UNAUDITED CONDENSED


CONSOLIDATED FINANCIAL STATEMENTS


1.     Basis of
Presentation

The accompanying unaudited condensed consolidated
financial statements have been prepared pursuant to the rules
and regulations of the Securities and Exchange Commission and
include the accounts of Therma-Wave, Inc. and its wholly owned
subsidiaries. Certain information and footnote disclosures,
normally included in financial statements prepared in accordance
with generally accepted accounting principles, have been
condensed or omitted pursuant to such rules and regulations. In
our opinion, the financial statements reflect all adjustments,
consisting only of normal recurring adjustments, necessary for a
fair presentation of the financial position at December 31,
2001, and the operating results and cash flows for the three and
nine months ended December 31, 2001 and 2000. These financial
statements and notes should be read in conjunction with our
audited financial statements and notes thereto for the year
ended March 31, 2001.

The results of operations for the interim periods
are not necessarily indicative of the results of operations that
may be expected for any other period or for the fiscal year,
which ends on March 31, 2002.

The third quarters of fiscal years 2002 and 2001
and the fiscal year 2001 ended on December 30, 2001,
December 31, 2000 and April 1, 2001, 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 one transaction to be
restated as follows:



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

As a result of the above, we have restated our
financial reports for the quarterly periods ended
September 30, 2001, December 31, 2001, June 30,
2002, and September 30, 2002, and the year ended
March 31, 2002, all of which were affected by the above
revenue transactions. No adjustments related to non-

4



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##### Table of Contents



THERMA-WAVE, INC.


NOTES TO UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


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

The nine-month periods ended December 30,
2001 and the balance sheet as of December 30, 2001 have
been restated for the impact of the item above.

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

|                                                    |  |                        |        |             |  |   |         |  
|--------------------------------------------------- |  | ---------------------- | ------ | ----------- |  | - | ------- | -
|                                                    |  |                       
|                                                    |  | Nine Months Ended     
|                                                    |  | December 30, 2001     
|                                                    |  |                       
|                                                    |  | As Previously Reported |        | As Restated
|                                                    |  |                        |        |            
|                                                    |  |                       
|                                                    |  | (in thousands)        
|Net revenues                                        |  | $                      | 70,535 |             |  | $ | 69,535  |  
|Cost of revenues                                    |  |                        | 42,777 |             |  |   | 42,410  |  
|Gross profit                                        |  |                        | 27,758 |             |  |   | 27,125  |  
|Operating income (loss)                             |  |                        | (9,647 | )           |  |   | (10,280 | )
|Income (loss) before provision for income
    taxes |  |                        | (7,756 | )           |  |   | (8,389  | )
|Net income (loss)                                   |  |                        | (7,756 | )           |  |   | (8,389  | )
|Basic net income (loss) per share                   |  |                        | (0.32  | )           |  |   | (0.35   | )
|Diluted net income (loss) per share                 |  |                        | (0.32  | )           |  |   | (0.35   | )

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

|                                           |  |                        |          |             |  |   |          |  
|------------------------------------------ |  | ---------------------- | -------- | ----------- |  | - | -------- | -
|                                           |  | As Previously Reported |          | As Restated
|                                           |  |                        |          |            
|                                           |  |                       
|                                           |  | (in thousands)        
|Inventories                                |  | $                      | 44,997   |             |  | $ | 45,347   |  
|Total current assets                       |  |                        | 137,755  |             |  |   | 138,105  |  
|Total assets                               |  |                        | 156,692  |             |  |   | 157,042  |  
|Accrued warranty costs                     |  |                        | 2,501    |             |  |   | 2,484    |  
|Deferred revenue                           |  |                        | 7,532    |             |  |   | 8,532    |  
|Total current liabilities                  |  |                        | 31,155   |             |  |   | 32,138   |  
|Total liabilities                          |  |                        | 33,228   |             |  |   | 34,211   |  
|Accumulated deficit                        |  |                        | (107,885 | )           |  |   | (108,518 | )
|Total stockholders equity                 |  |                        | 123,464  |             |  |   | 122,831  |  
|Total liabilities and stockholders equity |  |                        | 156,692  |             |  |   | 157,042  |  

3.     Inventories

Inventories are summarized as follows (in
thousands):

|                    |  |               |        |           |  |   |        | 
|------------------- |  | ------------- | ------ | --------- |  | - | ------ | 
|                    |  | December 31,  |        | March 31,
|                    |  | 2001          |        | 2001     
|                    |  |               |        |          
|                    |  | (As Restated) |        |          
|Purchased materials |  | $             | 22,018 |           |  | $ | 22,197 | 
|Systems in process  |  |               | 15,147 |           |  |   | 19,571 | 
|Finished systems    |  |               | 8,182  |           |  |   | 5,413  | 
|                    |  |               |        |           |  |   |        | 
|                    |  | $             | 45,347 |           |  | $ | 47,181 | 
|                    |  |               |        |           |  |   |        | 

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THERMA-WAVE, INC.


NOTES TO UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


4.     Comprehensive
Income (Loss)

Comprehensive income (loss) consists of net
income (loss) for the period and the change in accumulated
foreign currency translation adjustments during the period. For
the quarters ended December 31, 2001 and 2000,
comprehensive income (loss) amounted to approximately
$(11.4) million and $12.1 million, respectively. For the
nine months ended December 31, 2001 and 2000, comprehensive
income (loss) amounted to approximately $(8.6) million
(as restated) and $20.8 million, respectively.

5.     Change in
Accounting Principle

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

In accordance with guidance provided in SAB 101,
we recorded $6.3 million (net of income tax benefit of
$0.4 million), or $0.25 per diluted share, as the
cumulative effect of the change in accounting principle as of
April 1, 2000. All periods presented are consistent with
the guidance provided in SAB 101.

During the three months ended December 31,
2001 and 2000, we recognized $69,000 and $1.4 million,
respectively, out of the $9.4 million revenue that was
included in the cumulative effect adjustment as of April 1,
2000. During the nine months ended December 31, 2001 and
2000, we recognized $1.6 million and $6.0 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 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 (in thousands).

|                                              |  |              |       |      |  |  |     | 
|--------------------------------------------- |  | ------------ | ----- | ---- |  |  | --- | 
|                                              |  |             
|                                              |  | December 31,
|                                              |  |             
|                                              |  | 2001         |       | 2000
|                                              |  |              |       |     
|Common stock subject to repurchase (unvested) |  |              | 150   |      |  |  | 367 | 
|Stock options                                 |  |              | 2,561 |      |  |  | 162 | 

For the three months ended December 31, 2001
and 2000, anti-dilutive stock options have a weighted average
exercise price of $17.04 and $21.85, respectively. For the nine
months ended December 31, 2001 and 2000, anti-dilutive
stock options have a weighted average exercise price of $20.16
and $26.63, respectively.

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THERMA-WAVE, INC.


NOTES TO UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


7.     Recently
Issued Accounting Statements

In July 2001, the Financial Accounting Standards
Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 141, Business
Combinations. SFAS No. 141 addresses financial accounting
and reporting for business combinations and supersedes
Accounting Principles Board (APB) Opinion
No. 16, Business Combinations, and SFAS No. 38,
Accounting for Preacquisition Contingencies of Purchased
Enterprises. All business combinations in the scope of SFAS
No. 141 are to be accounted for using one method, the
purchase method. The provisions of SFAS No. 141 apply to
all business combinations initiated after June 30, 2001.

In July 2001, the FASB issued SFAS No. 142,
Goodwill and Other Intangible Assets. SFAS No. 142
addresses financial accounting and reporting for acquired
goodwill and other intangibles and supercedes APB Opinion
No. 17, Intangible Assets. The provisions of SFAS
No. 142 are required to be applied starting with fiscal
years beginning after December 15, 2001, with certain early
adoption permitted.

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

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. 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. 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.

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

9.     Subsequent
Event

On January 16, 2002, the Company completed
its acquisition of Sensys Instruments Corporation
(Sensys), a privately held California corporation,
which was focusing primarily on the emerging market for
integrated metrology. Under the terms of the agreement,
approximately 5,408,000 shares of the Companys common
stock are issuable for shares of Sensys, and assumed Sensys
stock options and warrants. Based on the closing price of
Therma-Waves common stock over the 5 day period,
representing two days before and after January 11, 2002,
the aggregate purchase price represents the fair value of the
shares issued to Sensys shareholders totalling approximately
$72.8 million and the estimated fair value of stock options
and warrants assumed totalling $14.2 million. The Company
will also incur acquisition related costs, which will be
included in the total purchase price. The acquisition will be
accounted for as a purchase business combination subject to the
guidance under FAS 141 and 142.

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

This Quarterly Report on Form 10-Q/A
contains forward-looking statements as that term is defined in
the Private Securities Reform Act of 1995, which are subject to
known and unknown risks and uncertainties that could cause
actual results to differ materially from those expressed or
implied by such statements. The words believe,
expect, anticipate, intend
and other similar expressions generally identify forward-looking
statements. Potential investors are cautioned not to place undue
reliance on these forward-looking statements, which speak only
as of their dates. Such statements relating to our ability to
manage our costs and reduce operating expenses, sustain our
operations and cash position in an extended downturn, continue
the successful development and introduction of new products and
improvement of current products and trends in our financial
performance are all based on current expectations. Such
statements are subject to risks, uncertainties, and changes in
conditions, particularly those related to industry performance
in the current severe industry and economic downturn, political
unrest, activities and potential successes of competitors and
competing products and other risks, some of which are detailed
in documents filed with the Securities and Exchange Commission,
including specifically Exhibit 99.1 to the companys
Annual Report on Form 10-K for the year ended
March 31, 2001. See also the discussion of forward-looking
statements related to market risk in the first paragraph of
Item 3 below. The company undertakes no obligation to
update the information in this Quarterly Report on
Form 10-Q/A.

General

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

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

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

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

Integrated Metrology Product Family.Our Integra line of integrated
metrology systems is a broad-based family of compact metrology
modules that function with an integrated circuit
process system, such as an etch or chemical vapor deposition
system, to provide metrology on each wafer before it exits the
process tool. With our acquisition of Sensys on January 16,
2002, we expect to complement our current technology with that
of Sensys to become the leader in the emerging integrated
metrology market.

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

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##### Table of Contents



issue potentially should have been deferred until
a later period. In early February 2003, our Audit Committee
launched an internal investigation relating to these issues.


In connection with the investigation conducted by
our Audit Committee, the Committee engaged outside legal counsel
and independent forensic accountants to assist it. The
investigation was conducted to (i) identify additional
potential revenue recognition issues, if any; and (ii) to
review the business expense practices of certain of our
employees at that foreign branch.

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

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



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

As a result of the above, we have restated our
financial reports for the quarterly periods ended
September 30, 2001, December 31, 2001, June 30,
2002 and September 30, 2002 and the year ended
March 31, 2002, all of which were affected by the above
revenue transactions. No adjustments related to non-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.

9



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##### Table of Contents



Results of Operations

The following table summarizes our unaudited
historical results of operations as a percentage of net revenues
for the periods indicated. The historical financial data for the
three and nine months ended December 31, 2001 and 2000 were
derived from our unaudited condensed consolidated financial
statements which, in the opinion of management, reflect all
adjustments (consisting of normal recurring adjustments)
necessary for the fair presentation of the financial condition
and results of operations for such periods.

|                                                                             |                                     |                          |        |                   |       |               |       |      |      |  |       |      |      |  |       |      |      | 
|---------------------------------------------------------------------------- | ----------------------------------- | ------------------------ | ------ | ----------------- | ----- | ------------- | ----- | ---- | ---- |  | ----- | ---- | ---- |  | ----- | ---- | ---- | 
|                                                                             |                                     |                          |        |                  
|                                                                             |                                     | Three Months Ended       |        | Nine Months Ended
|                                                                             |                                     | December 31,             |        | December 31,     
|                                                                             |                                     |                          |        |                  
|                                                                             |                                     | 2001                     |        | 2000              |       | 2001          |       | 2000
|                                                                             |                                     |                          |        |                   |       |               |       |     
|                                                                             |                                     |                          |        |                   |       | (As Restated) |       |     
|Total net revenues                                                           |                                     |                          | 100.0  | %                 |       |               | 100.0 | %    |      |  | 100.0 | %    |      |  | 100.0 | %   
|Cost of revenues                                                             |                                     |                          | 86.1   |                   |       |               | 48.5  |      |      |  | 61.0  |      |      |  | 49.9  |     
|                                                                             |                                     |                          |        |                   |       |               |       |      |      |  |       |      |      |  |       |     
|Gross profit                                                                 |                                     |                          | 13.9   |                   |       |               | 51.5  |      |      |  | 39.0  |      |      |  | 50.1  |     
|                                                                             |                                     |                          |        |                   |       |               |       |      |      |  |       |      |      |  |       |     
|Operating expenses:                                                          |                                     |                          |        |                   |       |               |       |      |      |  |       |      |      |  |       |     
|                                                                             | Research and development            |                          |        | 69.1              |       |               |       | 16.3 |      |  |       | 30.4 |      |  |       | 17.6 |     
|                                                                             | Selling, general and administrative |                          |        | 47.5              |       |               |       | 13.8 |      |  |       | 23.4 |      |  |       | 14.4 |     
|                                                                             |                                     |                          |        |                   |       |               |       |      |      |  |       |      |      |  |       |     
|                                                                             |                                     | Total operating expenses |        |                   | 116.6 |               |       |      | 30.1 |  |       |      | 53.8 |  |       |      | 32.0 | 
|                                                                             |                                     |                          |        |                   |       |               |       |      |      |  |       |      |      |  |       |     
|Operating loss                                                               |                                     |                          | (102.7 | )                 |       |               | 21.4  |      |      |  | (14.8 | )    |      |  | 18.1  |     
|                                                                             |                                     |                          |        |                   |       |               |       |      |      |  |       |      |      |  |       |     
|Other income (expense):                                                      |                                     |                          |        |                   |       |               |       |      |      |  |       |      |      |  |       |     
|                                                                             | Interest expense                    |                          |        | (0.6              | )     |               |       | (0.1 | )    |  |       | (0.3 | )    |  |       | (0.1 | )   
|                                                                             | Interest income                     |                          |        | 4.1               |       |               |       | 1.6  |      |  |       | 2.9  |      |  |       | 2.1  |     
|                                                                             | Other, net                          |                          |        |                  |       |               |       |     |      |  |       | 0.1  |      |  |       |     |     
|                                                                             |                                     |                          |        |                   |       |               |       |      |      |  |       |      |      |  |       |     
|                                                                             |                                     | Total other income       |        |                   | 3.5   |               |       |      | 1.5  |  |       |      | 2.7  |  |       |      | 2.0  | 
|                                                                             |                                     |                          |        |                   |       |               |       |      |      |  |       |      |      |  |       |     
|Income (loss) before provision for income
    taxes                          |                                     |                          | (99.2  | )                 |       |               | 22.9  |      |      |  | (12.1 | )    |      |  | 20.1  |     
|Provision for income taxes                                                   |                                     |                          |       |                   |       |               | (1.4  | )    |      |  |      |      |      |  | (1.2  | )   
|                                                                             |                                     |                          |        |                   |       |               |       |      |      |  |       |      |      |  |       |     
|Income (loss) before cumulative effect of
    change in accounting principle |                                     |                          | (99.2  | )                 |       |               | 21.5  |      |      |  | (12.1 | )    |      |  | 18.9  |     
|Cumulative effect of change in accounting
    principle, net of taxes        |                                     |                          |       |                   |       |               |      |      |      |  |      |      |      |  | (4.4  | )   
|                                                                             |                                     |                          |        |                   |       |               |       |      |      |  |       |      |      |  |       |     
|Net income (loss)                                                            |                                     |                          | (99.2  | )%                |       |               | 21.5  | %    |      |  | (12.1 | )%   |      |  | 14.5  | %   
|                                                                             |                                     |                          |        |                   |       |               |       |      |      |  |       |      |      |  |       |     

Comparisons of the nine months ended
December 31, 2001 compared to the nine months ended
December 31, 2000, as restated.

Net Revenues.Net
revenues for the fiscal quarter ended December 31, 2001
were $11.1 million, a decrease of $45.9 million, or
80.6%, from $57.0 million in the same fiscal quarter of the
prior year. Compared to the prior fiscal quarter, net revenues
decreased $9.6 million, or 46.5%, from $20.7 million.
For the nine months ended December 31, 2001, net
revenues were $69.5 million, a decrease of
$74.9 million, or 51.9%, from $144.4 million in the
comparable period of the prior year. The decrease in revenue was
primarily the result of capital spending reductions by our
customers due to the cyclical downturn of the semiconductor
industry and the weakness of the global economy.

During the three months ended December 31,
2001, we derived approximately 58% of our revenues from system
sales, 21% from sales of replacement and spare parts, including
associated labor, and 21% from service contracts. During the
three months ended December 31, 2000, we derived
approximately 91% of our revenues from system sales, 5% from
sales of replacement and spare parts, including associated
labor, and 4% from service contracts. During the nine months
ended December 31, 2001, we derived approximately 81% of
our revenues from system sales, 9% from sales of replacement and
spare parts, including associated labor, and 10%

10



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##### Table of Contents



from service contracts. During the nine months
ended December 31, 2000, we derived approximately 91% of
our revenues from system sales, 6% from sales of replacement and
spare parts, including associated labor, and 3% from service
contracts.


International sales accounted for approximately
52% and 40% of our total revenues for the three months ended
December 31, 2001 and 2000, respectively. International
sales accounted for approximately 57% of our total revenues for
the nine months ended December 31, 2001 and 2000,
respectively. We anticipate that international sales will
continue to account for a significant portion of our revenue in
the foreseeable future. A substantial portion of our
international sales are denominated in U.S. dollars. As a
result, changes in the values of foreign currencies relative to
the value of the U.S. dollar can render our products
comparatively more expensive. Although we have not been
negatively impacted in the past by foreign currency changes in
Japan, Korea, Taiwan and Europe, such conditions could
negatively impact our international sales in future periods.

We do not expect our revenues to increase
significantly for the next quarter or possibly longer. We
believe that current over capacity in the semiconductor business
has limited the total purchases made in new equipment. Current
sales reflect our customers demand for cutting-edge
technology while purchases to increase capacity have been
delayed. Low order booking rates, rescheduling of delivery and
order cancellations will likely continue to depress our results
of operations in the near-term.

Gross Profit.Gross
profit for the third quarter of fiscal 2002 was
$1.5 million, a decrease of $6.4 million, or 80.7%,
from $7.9 million in the previous fiscal quarter. Compared
to the same quarter of fiscal 2001, gross profit decreased
$27.8 million or 94.8%. As a percentage of net revenues,
gross margin for the current quarter was 13.9%, compared to
38.3% for last fiscal quarter and 51.5% for the same quarter of
last fiscal year. For the nine months ended December 31,
2001, gross profit was $27.1 million, a decrease of
$45.2 million, or 62.5%, from $72.3 million in the
comparable period of the prior year. As a percentage of net
revenues, gross margin for the current nine months was 39.0%,
compared to 50.1% for the comparable period of the prior year.
Although we have continued to implement some cost reduction
measures during the quarter, these measures were not sufficient
to substantially offset the sharp decline in revenue and the
lower overhead absorption resulting from our substantially lower
production volume.

Research and Development (R&D)
Expenses.R&D expenses for the
third quarter of fiscal 2002 were $7.6 million, a increase
of 17.0% from the prior quarter and a decrease of 17.7% from the
third quarter of last fiscal year. For the nine months ended
December 31, 2001, R&D expenses were
$21.2 million, a decrease of $4.3 million, or 17.0%,
from $25.5 million in the comparable period of the prior
year. The increase from the prior fiscal quarter was primarily
due to the increase in materials, headcount and other expenses
related to our critical projects. The decrease from the same
periods of the prior fiscal year was primarily the result of
reductions in patent defense expense, contract labor and
discretionary expenses. We expect to continue 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
(SG&A) Expenses.SG&A expenses for the third
quarter of fiscal 2002 were $5.2 million, a decrease of
1.0% from SG&A expenses of $5.3 million in the prior
fiscal quarter. Compared to the third quarter of last fiscal
year, SG&A expenses decreased 33.6%. For the nine months
ended December 31, 2001, SG&A expenses were
$16.2 million, a decrease of $4.4 million, or 21.4%,
from $20.6 million in the comparable period of the prior
year. The decrease was primarily due to lower sales commissions
resulting from the lower orders and sales volume and to a lesser
effect, the implementation of cost containment measures.

Other Income.Other
income for the third quarter of fiscal 2002 was $0.4 million,
which was 45.9% lower than that of the prior fiscal quarter.
Compared to the third quarter of the prior fiscal year, other
income decreased 52.5%. We derived other income primarily from
the investment of our cash on hand. For the nine months ended
December 31, 2001, other income was $1.9 million, a
decrease of $1.0 million, or 35.4%, from $2.9 million
in the comparable period of the prior year. The decrease in
other income was attributable to lower average interest rates
during the periods.

11



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##### Table of Contents



Provision for Income Taxes.For the three and nine months ended
December 31, 2001, the effective tax rate of 0% was based
upon our projected tax loss for fiscal 2002.

Net Income (Loss).The combination of all the factors
discussed above contributed to a net loss of $11.0 million
for the third quarter of fiscal 2002, compared with net loss of
$2.8 million in the prior fiscal quarter, and net income of
$12.3 million in the same quarter of last fiscal year. For
the nine months ended December 31, 2001, net loss was
$8.4 million, compared with net income of
$21.1 million in the same period of the prior fiscal year.

Liquidity and Capital Resources

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

Cash flows used by operating activities were
$4.9 million and $3.2 million for the first nine
months of fiscal 2002 and 2001, respectively. The increase in
cash flows used by operating activities from fiscal year 2001 to
2002 was mainly due to our net loss in the first nine months of
fiscal year 2002.

Cash flows used by investing activities were
$1.1 million and $26.6 million for the first nine
months of fiscal 2002 and 2001, respectively. Purchases of
property and equipment were $2.0 million and
$6.9 million for the first nine months of fiscal 2002 and
2001, respectively.

Cash flows provided by financing activities were
$2.1 million and $2.1 million for the first nine
months of fiscal 2002 and 2001, respectively. Cash was generated
from the exercise of stock options and issuance of common stock
under our employee stock purchase plan.

On December 29, 2001, we amended our
existing bank credit facility with Comerica Bank. The credit
extension limit was amended to $13.5 million from
$10.0 million. The amended agreement 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%. Under the amendment, 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. As of
December 31, 2001, there was a $3.5 million letter of
credit outstanding, as required by the lessor of our building,
and $10.0 million of unused borrowing capacity under the
new bank credit facility. We have been in compliance with all
financial covenants related to the bank credit facility before
and after the amendment.

Our principal sources of funds are anticipated to
be cash and short-term investments on hand ($70.0 million
as of December 31, 2001), cash flows from operating
activities and, if necessary, borrowings under the bank credit
facility. We expect to limit our capital spending to essential
items. We believe that these funds will provide us with
sufficient liquidity and capital resources for us to meet our
current and future financial obligations for at least the next
twelve months. The acquisition of Sensys Instruments, which
closed in January 2002, is not expected to have a material
effect on our liquidity and capital resources. No assurance can
be given, however, that this will be the case. We may require
additional equity or debt financing to meet our working capital
requirements and to fund our research and development
activities. There can be no assurance that additional financing
will be available when required or, if available, will be on
terms satisfactory to us.






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

During the 90-day period prior to the filing date
of this report, management, including our Chief Executive
Officer and Chief Financial Officer, evaluated the effectiveness
of the design and operation of the companys disclosure
controls and procedures. Based upon that evaluation and the
investigation discussed in Note 2 of the financial
statements entitled Restatement of Financial
Results, a material weakness has been identified relating
to controls surrounding evaluating and reporting revenue
transactions, particularly in the

12



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##### Table of Contents



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.






PART II.  OTHER
INFORMATION







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

(a) The following exhibits are included
herein:

|        |       |             |  |                                                                                                                                                                                                                                                  
|------- | ----- | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |            
|Number  |       | Description
|        |       |            
|        | 2.1   |             |  | Agreement and Plan of Reorganization, dated as of
    December 17, 2001, among Therma-Wave, Inc., FND Corp.,
    Sensys Instruments Corporation and a certain representative of
    all of the shareholders of Sensys Instruments Corporation.(1)
|        | 4.1   |             |  | Form of Registration Rights Agreement, dated as
    of January 16, 2002, among Therma-Wave, Inc., Sensys
    Instruments Corporation and each holder of Sensys Instruments
    Corporation capital stock.(2)                                     
|        | 4.2   |             |  | Employment Agreement, dated as of
    December 17, 2001, among Therma-Wave, Inc. and Talat
    Hasan.(2)                                                                                                                                         
|        | 10.38 |             |  | Amendment To Loan And Security Agreement, dated
    as of December 29, 2001, between Therma-Wave, Inc. and
    Comerica Bank-California.(3)                                                                                                      
|        | 99.1  |             |  | Risk Factors.(4)                                                                                                                                                                                                                                 
|        | 99.2  |             |  | Certifications Pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002.                                                                                                                                                                    



---



|    |                                                                                                                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Incorporated herein by reference to
    Therma-Waves Current Report on Form 8-K, as filed
    with the Commission on December 19, 2001 (Registration
    No. 000-26911)                              
|   
|(2) | Incorporated herein by reference to
    Therma-Waves Current Report on Form 8-K, as filed
    with the Commission on January 16, 2002 (Registration
    No. 000-26911)                               
|   
|(3) | Incorporated by reference to the same numbered
    exhibit in the Companys originally filed Quarterly Report
    on Form 10-Q for the period ended December 31, 2001
    (Registration No. 000-26911)
|   
|(4) | Incorporated by reference to the same numbered
    exhibit in the Companys Annual Report on Form 10-K
    for the period ended March 31, 2001 (Registration
    No. 000-26911)                       

(b)     Reports on
Form 8-K

The Company filed a report on Form 8-K on
December 19, 2001 to report the Agreement and Plan of
Reorganization with FND Corporation and Sensys Instruments
Corporation.

13



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##### Table of Contents






SIGNATURES

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



| |                  
| | -----------------
| | THERMA-WAVE, INC.
| | (Registrant)     



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

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

May 5, 2003

14



---



##### 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

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.



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

May 5, 2003

16



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##### Table of Contents



EXHIBIT INDEX

|        |       |             |  |                                                                                                                                                                                                                                                  
|------- | ----- | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |            
|Number  |       | Description
|        |       |            
|        | 2.1   |             |  | Agreement and Plan of Reorganization, dated as of
    December 17, 2001, among Therma-Wave, Inc., FND Corp.,
    Sensys Instruments Corporation and a certain representative of
    all of the shareholders of Sensys Instruments Corporation.(1)
|        | 4.1   |             |  | Form of Registration Rights Agreement, dated as
    of January 16, 2002, among Therma-Wave, Inc., Sensys
    Instruments Corporation and each holder of Sensys Instruments
    Corporation capital stock.(2)                                     
|        | 4.2   |             |  | Employment Agreement, dated as of
    December 17, 2001, among Therma-Wave, Inc. and Talat
    Hasan.(2)                                                                                                                                         
|        | 10.38 |             |  | Amendment To Loan And Security Agreement, dated
    as of December 29, 2001, between Therma-Wave, Inc. and
    Comerica Bank-California.(3)                                                                                                      
|        | 99.1  |             |  | Risk Factors.(4)                                                                                                                                                                                                                                 
|        | 99.2  |             |  | Certifications Pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002.                                                                                                                                                                    



---



|    |                                                                                                                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Incorporated herein by reference to
    Therma-Waves Current Report on Form 8-K, as filed
    with the Commission on December 19, 2001 (Registration
    No. 000-26911)                              
|   
|(2) | Incorporated herein by reference to
    Therma-Waves Current Report on Form 8-K, as filed
    with the Commission on January 16, 2002 (Registration
    No. 000-26911)                               
|   
|(3) | Incorporated by reference to the same numbered
    exhibit in the Companys originally filed Quarterly Report
    on Form 10-Q for the period ended December 31, 2001
    (Registration No. 000-26911)
|   
|(4) | Incorporated by reference to the same numbered
    exhibit in the Companys Annual Report on Form 10-K
    for the period ended March 31, 2001 (Registration
    No. 000-26911)