##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended July 2, 2006
 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
 THERMA-WAVE, INC.
 
  Delaware
    
    94-3000561(State or Other Jurisdiction of Incorporation or Organization)
    
    (I.R.S. Employer IdentificationNumber)
 1250 Reliance Way
Fremont, California 94539
 
  (510) 668-2200
 
  þ o
  o þ o
 o þ
  Class
    
    Outstanding as of August 4, 2006Common stock, $0.01 par value
    
    37,187,815




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##### 



THERMA-WAVE, INC.
TABLE OF CONTENTS
 Page No.PART I. FINANCIAL INFORMATIONITEM 1. Financial Statements (Unaudited)Condensed Consolidated Balance Sheets as of June 30, 2006 and March 31, 2006
    
    
    3Condensed Consolidated Statements of Operations for the Three Months Ended June 30, 2006 and 2005
    
    
    4Condensed Consolidated Statements of Cash Flows for the Three Months Ended June 30, 2006 and 2005
    
    
    5Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    6ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    24ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    32ITEM 4. Controls and Procedures
    
    
    33PART II. OTHER INFORMATIONITEM 1. Legal Proceedings
    
    
    34ITEM 1A. Risk Factors
    
    
    34ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    43ITEM 3. Defaults Upon Senior Securities
    
    
    43ITEM 4. Submission of Matters to a Vote of Security Holders
    
    
    43ITEM 5. Other Information
    
    
    44ITEM 6. Exhibits
    
    
    45SIGNATURES
    
    
    46EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
  2




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##### Table of Contents



THERMA-WAVE, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(Unaudited)
 June 30,
    
    
    March 31,2006
    
    
    2006ASSETSCurrent assets:Cash and cash equivalents
    
    $
    18,943
    
    
    $
    20,623Accounts receivable, net of allowances for
doubtful accounts of $698 and $774 at June
30, 2006 and March 31, 2006, respectively
    
    
    15,546
    
    
    
    12,701Inventories
    
    
    26,478
    
    
    
    22,353Other current assets
    
    
    1,497
    
    
    
    1,621Total current assets
    
    
    62,464
    
    
    
    57,298Property and equipment, net
    
    
    796
    
    
    
    789Other assets, net
    
    
    1,177
    
    
    
    1,291Total assets
    
    $
    64,437
    
    
    $
    59,378LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    9,802
    
    
    $
    4,062Accrued liabilities
    
    
    13,438
    
    
    
    13,642Deferred revenues
    
    
    8,360
    
    
    
    7,874Term loan facility, net
    
    
    4,905
    
    
    
    4,896Warrants and embedded derivatives
    
    
    1,802
    
    
    
    2,178Total current liabilities
    
    
    38,307
    
    
    
    32,652Non-current deferred revenues
    
    
    685
    
    
    
    662Other long-term liabilities
    
    
    951
    
    
    
    1,076Total liabilities
    
    
    39,943
    
    
    
    34,390Commitments and contingencies (Note 6)Series B redeemable convertible preferred
stock: $0.01 par value; 10,400 shares
authorized; 10,400 shares issued and
outstanding at June 30, 2006 and March 31,
2006
    
    
    7,098
    
    
    
    6,940Stockholders equity:Common stock, $0.01 par value; 75,000,000
shares authorized; 37,114,679 shares issued
and outstanding at June 30, 2006; 37,045,692
shares issued and outstanding at March 31,
2006
    
    
    371
    
    
    
    371Additional paid-in capital
    
    
    336,424
    
    
    
    336,036Notes receivable from stockholders
    
    
    (174
    )
    
    
    (174
    )Accumulated other comprehensive loss
    
    
    (1,059
    )
    
    
    (1,108
    )Deferred stock-based compensation
    
    
    
    
    
    
    (36
    )Accumulated deficit
    
    
    (318,166
    )
    
    
    (317,041
    )Total stockholders equity
    
    
    17,396
    
    
    
    18,048Total liabilities and stockholders equity
    
    $
    64,437
    
    
    $
    59,378
  3




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##### Table of Contents



THERMA-WAVE, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands, except per share data)
 (Unaudited)
 Three Months Ended June 30,2006
    
    
    2005Net revenuesProduct
    
    $
    13,118
    
    
    $
    12,720Service and parts
    
    
    4,792
    
    
    
    4,819Total net revenues
    
    
    17,910
    
    
    
    17,539Cost of revenuesProduct
    
    
    7,598
    
    
    
    6,419Service and parts
    
    
    3,460
    
    
    
    4,005Total cost of revenues
    
    
    11,058
    
    
    
    10,424Gross profit
    
    
    6,852
    
    
    
    7,115Operating expenses:Research and development
    
    
    3,148
    
    
    
    3,837Selling, general and administrative
    
    
    4,998
    
    
    
    7,753Restructuring, severance and other
    
    
    
    
    
    
    1,467Total operating expenses
    
    
    8,146
    
    
    
    13,057Operating loss
    
    
    (1,294
    )
    
    
    (5,942
    )Other income (expense):Gain on sale of product line
    
    
    
    
    
    
    8,550Interest expense
    
    
    (200
    )
    
    
    (57
    )Interest income
    
    
    198
    
    
    
    32Other, net
    
    
    312
    
    
    
    (96
    )Total other income, net
    
    
    310
    
    
    
    8,429Income (loss) before provision for income taxes
    
    
    (984
    )
    
    
    2,487Provision (benefit) for income taxes
    
    
    (173
    )
    
    
    41Net income (loss)
    
    
    (811
    )
    
    
    2,446Accretion of Series B preferred stock to redemption value including dividends accrued
    
    
    (314
    )
    
    
    Net income (loss) available to common stockholders
    
    $
    (1,125
    )
    
    $
    2,446Net income (loss) per share:Basic
    
    $
    (0.03
    )
    
    $
    0.07Diluted
    
    $
    (0.03
    )
    
    $
    0.07Weighted average common shares outstanding:Basic
    
    
    36,784
    
    
    
    36,349Diluted
    
    
    36,784
    
    
    
    37,432
  4




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##### Table of Contents



THERMA-WAVE, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 (Unaudited)
 Three months ended June 30,2006
    
    
    2005Operating activities:Net income (loss)
    
    $
    (811
    )
    
    $
    2,446Adjustments to reconcile net income (loss) to net cash used in operating activities:Gain on sale of product line
    
    
    
    
    
    
    (8,550
    )Depreciation and amortization of property and equipment
    
    
    123
    
    
    
    716Amortization of intangible assets
    
    
    139
    
    
    
    185Fair value adjustment  warrants and embedded derivatives
    
    
    (376
    )
    
    
    Stock-based compensation expense (benefit)
    
    
    340
    
    
    
    (159
    )Provision (credit) for doubtful accounts receivable
    
    
    (76
    )
    
    
    48Loss on disposal of property and equipment
    
    
    
    
    
    
    93Changes in operating assets and liabilities (excluding assets sold and liabilities assumed):Accounts receivable
    
    
    (2,769
    )
    
    
    3,511Inventories
    
    
    (4,125
    )
    
    
    1,969Other assets
    
    
    140
    
    
    
    (198
    )Accounts payable
    
    
    5,740
    
    
    
    (3,395
    )Accrued and other liabilities
    
    
    (320
    )
    
    
    (2,379
    )Deferred revenues
    
    
    510
    
    
    
    (4,431
    )Net cash used in operating activities
    
    
    (1,485
    )
    
    
    (10,144
    )Investing activities:Sale of product line
    
    
    
    
    
    
    9,950Purchases of property and equipment
    
    
    (130
    )
    
    
    (40
    )Purchase of patents
    
    
    (41
    )
    
    
    (85
    )Net cash provided by (used in) investing activities
    
    
    (171
    )
    
    
    9,825Financing activities:Proceeds from issuance of common stock
    
    
    83
    
    
    
    276Payment of Series B preferred stock dividends
    
    
    (156
    )
    
    
    Net cash provided by (used in) financing activities
    
    
    (73
    )
    
    
    276Effect of exchange rates on cash
    
    
    49
    
    
    
    (143
    )Net decrease in cash and cash equivalents
    
    
    (1,680
    )
    
    
    (186
    )Cash and cash equivalents at beginning of period
    
    
    20,623
    
    
    
    13,419Cash and cash equivalents at end of period
    
    $
    18,943
    
    
    $
    13,233Supplementary disclosures:Cash paid for interest
    
    $
    137
    
    
    $
    223Cash paid for income taxes
    
    $
    44
    
    
    $
    10Application of customer deposit to sale of product line
    
    $
    
    
    
    $
    1,000Dividends and accretion on Series B convertible preferred stock
    
    $
    314
    
    
    $
    
  5




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##### Table of Contents



THERMA-WAVE, INC.
 
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 As of June 30, 2006
 1. Basis of Presentation
   Liquidity
   6




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##### Table of Contents



Revenue Recognition
  
     Persuasive evidence of an arrangement exists:
 Delivery has occurred or services have been rendered:
 The sellers price to the buyer is fixed or determinable:
 Collectibility is reasonably assured:
  7




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##### Table of Contents



a.
    
    Systems Sold Through Resellers. The Company accounts separately for the services
provided by resellers, including sales services and any post-shipment services that the
resellers may be contractually obligated to provide according to the terms of the specific
sales contract.b.
    
    Standard Product Warranty. The Company offers a standard product warranty of one year,
usually, beginning on the date of customer final acceptance. Additional periods of
warranty are sometimes included in the price of the system sale or are sold separately.
When service coverage outside the one-year warranty is included in the price of the system
sale, the Company defers the fair market value of that service coverage as a liability for
deferred service contract revenues and recognizes those revenues ratably over the service
delivery time periods applicable to the contract.c.
    
    Systems Under Trial and Evaluation Agreements. Revenues are not recognized for
shipments of systems under trial and evaluation agreements until the customer places a
firm order for the system and all other revenue recognition criteria are satisfied.d.
    
    Payment Terms. Payment terms usually are net 30 to net 90 days. In rare circumstances,
the Company agrees to extended payment terms greater than net 90 days. In those instances,
which generally involve foreign sales, revenue recognition is deferred until payment is
received.
   Service and Parts Revenues.
  Allowances for Doubtful Accounts Receivable and Sales Allowances
  8




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##### Table of Contents



Recently Issued Accounting Pronouncements
     2. Balance Sheet Components
 June 30,
    
    
    March 31,2006
    
    
    2006(In thousands)Inventories:Raw materials and field service inventory
    
    $
    12,056
    
    
    $
    11,136Systems in process
    
    
    9,900
    
    
    
    6,265Finished systems
    
    
    2,428
    
    
    
    3,648Inventory at customer locations
    
    
    2,094
    
    
    
    1,304Total inventories
    
    $
    26,478
    
    
    $
    22,353
 June 30,
    
    
    March 31,2006
    
    
    2006(In thousands)Property and equipment:Laboratory and test equipment
    
    $
    4,059
    
    
    $
    4,053Office furniture and equipment
    
    
    10,365
    
    
    
    10,241Machinery and equipment
    
    
    728
    
    
    
    728Leasehold improvements
    
    
    7,218
    
    
    
    7,218Total property and equipment
    
    
    22,370
    
    
    
    22,240Accumulated depreciation and amortization
    
    
    (21,574
    )
    
    
    (21,451
    )Total property and equipment, net
    
    $
    796
    
    
    $
    789
 9




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##### Table of Contents



June 30,
    
    
    March 31,2006
    
    
    2006(In thousands)Accrued liabilities:Accrued compensation and related expenses
    
    $
    2,775
    
    
    $
    3,078Accrued warranty
    
    
    1,179
    
    
    
    1,244Commissions payable
    
    
    2,292
    
    
    
    1,928Income taxes
    
    
    4,508
    
    
    
    4,696Restructuring liabilities
    
    
    515
    
    
    
    817Accrued auditing
    
    
    292
    
    
    
    831Accrued sales and property taxes
    
    
    319
    
    
    
    306Other accrued liabilities
    
    
    1,558
    
    
    
    742Total accrued liabilities
    
    $
    13,438
    
    
    $
    13,642
 3. Comprehensive Income (Loss)
  Three Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005Net income (loss)
    
    $
    (811
    )
    
    $
    2,446Other comprehensive income:Net change in cumulative translation adjustment
    
    
    49
    
    
    
    (143
    )Comprehensive income (loss)
    
    $
    (762
    )
    
    $
    2,303
 4. Net Income (Loss) Per Share
    June 30,2006
    
    
    2005(In thousands)Securities Excluded from Diluted Net Income (Loss) per ShareStock options
    
    
    5,292
    
    
    
    3,869Warrants
    
    
    1,722
    
    
    
    47Series B redeemable convertible preferred stock (assuming conversion to common shares)
    
    
    7,374
    
    
    
    
  10




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##### Table of Contents



Three Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005Basic:Net income (loss) available to common stockholders
    
    $
    (1,125
    )
    
    $
    2,446Weighted shares outstanding
    
    
    36,784
    
    
    
    36,349Net income (loss) per share
    
    $
    (0.03
    )
    
    $
    0.07Diluted:Net income (loss) available to common stockholders
    
    $
    (1,125
    )
    
    $
    2,446Weighted shares outstanding
    
    
    36,784
    
    
    
    36,349Effect of dilutive securities:Stock options, warrants and convertible preferred stock
    
    
    
    
    
    
    1,083Diluted weighted shares outstanding
    
    
    36,784
    
    
    
    37,432Net income (loss) per share
    
    $
    (0.03
    )
    
    $
    0.07
 5. Stock-Based Compensation
   i.e. Accounting for Stock-Based Compensation,
  11




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##### Table of Contents



Prior to the adoption of SFAS No. 123(R)
   Three Months EndedJune 30, 2005Pro forma Net Income (loss) Under SFAS No. 123Net income (in thousands)As reported
    
    $
    2,446Add: Stock-based employee compensation (benefit)
included in the determination of net income, as
reported
    
    
    (159
    )Deduct: Stock-based employee compensation
expense as determined using the fair value
method
    
    
    (249
    )Pro forma net income
    
    $
    2,038Basic net income per shareAs reported
    
    $
    0.07Pro forma
    
    $
    0.06Diluted net income per shareAs reported
    
    $
    0.07Pro forma
    
    $
    0.05
  Impact of the adoption of SFAS No. 123(R)
  Three Months EndedJune 30, 2006Stock-based compensation expense by type of award (in thousands):Employee stock options
    
    $
    319Employee stock purchase plan
    
    
    21Net effect on net loss
    
    $
    340
  Valuation Assumptions
  12




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##### Table of Contents



Three Months Ended June 30,2006
    
    2005Assumptions for Estimating Fair Value of Option GrantsRisk-free interest rate
    
    
    5.0
    %
    
    
    3.8
    %Expected dividend yield
    
    
    
    
    
    
    Expected volatility
    
    
    95
    %
    
    
    74
    %Expected life in years
    
    
    5.4
    
    
    
    3.2Estimated pre-vesting annual forfeiture rate
    
    
    14.2
    %
    
    
    
   Three Months Ended June 30,2006
    
    2005Assumptions for Estimating Fair Value of ESPP Purchase RightsRisk-free interest rate
    
    
    4.1
    %
    
    
    3.4
    %Expected dividend yield
    
    
    
    
    
    
    Expected volatility
    
    
    72
    %
    
    
    48
    %Expected life in years
    
    
    0.5
    
    
    
    0.5
     13




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##### Table of Contents



Stock OptionsOptions
    
    
    
    
    
    
    WeightedAvailable for
    
    
    Number of
    
    
    AverageFuture
    
    
    Options
    
    
    Exercise PriceIssuance
    
    
    Outstanding
    
    
    Per OptionStock Option ActivityBalance at March 31, 2003
    
    
    884,013
    
    
    
    5,756,357
    
    
    $
    8.27Authorized
    
    
    1,293,755
    
    
    
    
    
    
    
    Granted
    
    
    (3,174,844
    )
    
    
    3,174,844
    
    
    
    2.45Exercised
    
    
    
    
    
    
    (96,558
    )
    
    
    1.44Cancelled
    
    
    3,302,576
    
    
    
    (3,302,576
    )
    
    
    10.35Balance at March 31, 2004
    
    
    2,305,500
    
    
    
    5,532,067
    
    
    $
    3.81Authorized
    
    
    358,254
    
    
    
    
    
    
    
    Granted
    
    
    (1,513,870
    )
    
    
    1,513,870
    
    
    
    3.55Exercised
    
    
    
    
    
    
    (176,437
    )
    
    
    1.27Cancelled
    
    
    697,904
    
    
    
    (697,904
    )
    
    
    5.24Balance at March 31, 2005
    
    
    1,847,788
    
    
    
    6,171,596
    
    
    $
    3.66Authorized
    
    
    368,045
    
    
    
    
    
    
    
    Granted
    
    
    (1,201,400
    )
    
    
    1,201,400
    
    
    
    1.63Exercised
    
    
    
    
    
    
    (452,030
    )
    
    
    0.88Cancelled
    
    
    1,784,311
    
    
    
    (1,784,311
    )
    
    
    3.00Balance at March 31, 2006
    
    
    2,798,744
    
    
    
    5,136,655
    
    
    $
    3.66Authorized
    
    
    59,282
    
    
    
    
    
    
    
    Granted
    
    
    (264,000
    )
    
    
    264,000
    
    
    
    1.62Exercised
    
    
    
    
    
    
    (3,000
    )
    
    
    0.47Forfeited or expired
    
    
    105,207
    
    
    
    (105,207
    )
    
    
    3.06Balance at June 30, 2006
    
    
    2,699,233
    
    
    
    5,292,448
    
    
    $
    3.57
  Total ExercisableTotal Stock Options Outstanding
    
    
    Stock OptionsWeighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageRemaining
    
    
    
    
    
    
    Exercise
    
    
    
    
    
    
    ExerciseContractual
    
    
    Stock Options
    
    
    Price per
    
    
    Number of
    
    
    Price perLife (Years)
    
    
    Outstanding
    
    
    Option
    
    
    Options
    
    
    OptionSummary of Outstanding Options
as of June 30, 2006Range of exercise prices:$  0.42  $  0.42
    
    
    6.69
    
    
    
    400,000
    
    
    $
    0.42
    
    
    
    325,000
    
    
    $
    0.42$  0.47  $  0.47
    
    
    6.81
    
    
    
    247,774
    
    
    
    0.47
    
    
    
    191,251
    
    
    
    0.47$  0.60  $  0.66
    
    
    6.60
    
    
    
    506,000
    
    
    
    0.66
    
    
    
    421,915
    
    
    
    0.66$  1.23  $  1.58
    
    
    9.02
    
    
    
    407,157
    
    
    
    1.46
    
    
    
    68,584
    
    
    
    1.45$  1.62  $  2.00
    
    
    9.14
    
    
    
    780,863
    
    
    
    1.82
    
    
    
    64,434
    
    
    
    1.98$  2.38  $  2.38
    
    
    1.19
    
    
    
    632,782
    
    
    
    2.38
    
    
    
    632,782
    
    
    
    2.38$  2.48  $  3.51
    
    
    7.74
    
    
    
    676,935
    
    
    
    3.06
    
    
    
    375,418
    
    
    
    2.96$  3.66  $  3.90
    
    
    8.10
    
    
    
    501,440
    
    
    
    3.70
    
    
    
    242,013
    
    
    
    3.71$  4.15  $  4.70
    
    
    7.30
    
    
    
    337,519
    
    
    
    4.18
    
    
    
    237,434
    
    
    
    4.19$   6.37  $   8.93
    
    
    3.38
    
    
    
    271,233
    
    
    
    7.93
    
    
    
    236,250
    
    
    
    8.16$10.68  $15.89
    
    
    1.67
    
    
    
    465,430
    
    
    
    12.38
    
    
    
    465,428
    
    
    
    12.38$21.31  $27.50
    
    
    3.98
    
    
    
    65,315
    
    
    
    23.25
    
    
    
    65,315
    
    
    
    23.25Total
    
    
    6.23
    
    
    
    5,292,448
    
    
    $
    3.57
    
    
    
    3,325,824
    
    
    $
    4.34
 6. Commitments and Contingencies
  14




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##### Table of Contents



2007
    
    2008
    
    2009
    
    2010
    
    2011
    
    Thereafter
    
    Total(In thousands)Contractual obligations By Fiscal Year March 31:Operating lease obligations
    
    $
    1,384
    
    
    $
    1,664
    
    
    $
    1,239
    
    
    $
    1,153
    
    
    $
    1,016
    
    
    $
    
    
    
    $
    6,456
 Operating Leases
       15




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##### Table of Contents



Three MonthsEnded June 30,2005(In thousands)Calculation of gain on sale of product line:Proceeds from sale of product line:Cash payment by TEL
    
    $
    8,950TEL deposit applied to sale of product line
    
    
    1,000Total proceeds from sale of product line
    
    
    9,950Less: Net assets sold and transaction expenses:Property and equipment, net
    
    
    79Inventory
    
    
    803Patents, net
    
    
    271Accrued warranty assumed by TEL
    
    
    (243
    )Legal expenses
    
    
    296Transaction costs and other
    
    
    194Total net assets sold, and transaction expenses:
    
    
    1,400Gain on sale of product line
    
    $
    8,550
 Indemnification
  Legal Proceedings
  16




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##### Table of Contents



7. Financing Arrangements
       17




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##### Table of Contents



8. Restructuring, Severance and Other Costs
  Liability
    
    
    
    
    
    
    
    
    
    
    Liabilityas of March
    
    
    
    
    
    
    
    
    
    
    as of June31, 2006
    
    
    Provision
    
    
    Payments
    
    
    30, 2006(In thousands)Restructuring severance and other costs incurredSeverance and workforce reduction
    
    $
    66
    
    
    $
    
    
    
    $
    (47
    )
    
    $
    19Consolidation of excess facilities
    
    
    1,529
    
    
    
    
    
    
    
    (371
    )
    
    
    1,158Total
    
    $
    1,595
    
    
    $
    
    
    
    $
    (418
    )
    
    $
    1,177
    *
 Liability
    
    
    
    
    
    
    
    
    
    
    Liabilityas of March
    
    
    
    
    
    
    
    
    
    
    as of June31, 2005
    
    
    Provision
    
    
    Payments
    
    
    30, 2005(In thousands)Restructuring severance and other costs incurredSeverance and workforce reduction
    
    $
    
    
    
    $
    1,225
    
    
    $
    (660
    )
    
    $
    565Consolidation of excess facilities
    
    
    178
    
    
    
    242
    
    
    
    (154
    )
    
    
    266Total
    
    $
    178
    
    
    $
    1,467
    
    
    $
    (814
    )
    
    $
    831
    *
 
 *
    
    Include $662,000 and $15,000 classified as long-term as of June 30, 2006 and 2005, respectively. Severance and workforce reduction.
   Consolidation of excess facilities.
  18




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##### Table of Contents



9. Accrued Warranty
  Provisionsfor Warranties
    
    
    SettlementsIssued
    
    
    OfBeginning
    
    
    During
    
    
    Pre-Existing
    
    
    EndingBalance
    
    
    The Period
    
    
    Warranties
    
    
    Balance(In thousands)Accrued WarrantyThree Months Ended June 30, 2006
    
    $
    1,244
    
    
    $
    137
    
    
    
    ($202
    )
    
    $
    1,179Three Months Ended June 30, 2005
    
    $
    1,656
    
    
    $
    104
    
    
    *
    ($457
    )
    
    $
    1,303
 
 *
    
    Includes $243,000 assumed by TEL. See Note 6 of Notes to the Unaudited Condensed Consolidated
Financial Statements, entitled Commitments and Contingencies.  10. Other Assets, Net
  11. Mandatorily Redeemable Convertible Preferred Stock
    Fiscal Quarter EndedJune 30, 2006(In thousands)Redeemable convertible preferred stock
    
    $
    10,400Less:Issuance costs
    
    
    609Fair value of warrants at issuance (see Warrants)
    
    
    1,634
 19




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##### Table of Contents



Fiscal Quarter EndedJune 30, 2006(In thousands)Fair value of embedded derivative features at issuance (see Embedded Derivatives)
    
    
    484Beneficial conversion feature at issuance (see Conversion)
    
    
    1,115Subtotal
    
    $
    3,842Plus:Accrued unpaid dividends (see Dividends)
    
    
    156Accretion of discount to redemption value
    
    
    384Convertible preferred stock
    
    $
    7,098
   Registration Rights
  Voting Rights
  Board Nomination Rights
   Dividends
  20




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##### Table of Contents



Conversion
        21




---



##### Table of Contents



Redemptions
    Liquidation Preference
  Warrants
  Embedded Derivatives
  22




---



##### Table of Contents



12. Segment Information
      Three Months Ended June 30,2006
    
    2005Revenues by CountryGermany
    
    
    5
    %
    
    
    38
    %United States
    
    
    42
    %
    
    
    22
    %Japan
    
    
    13
    %
    
    
    17
    %Taiwan
    
    
    21
    %
    
    
    10
    %Europe, excluding Germany
    
    
    2
    %
    
    
    7
    %Korea
    
    
    3
    %
    
    
    4
    %China
    
    
    5
    %
    
    
    1
    %Singapore
    
    
    9
    %
    
    
    1
    %Total
    
    
    100
    %
    
    
    100
    %
    23




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##### Table of Contents



OtherForeignU.S.
    
    
    Locations
    
    
    Eliminations
    
    
    ConsolidatedSegment Information (in thousands)Three Months Ended June 30, 2006Sales to unaffiliated customers
    
    $
    16,708
    
    
    $
    1,202
    
    
    $
    
    
    
    $
    17,910Transfers between geographic regions
    
    
    294
    
    
    
    98
    
    
    
    (392
    )
    
    
    Total net revenues
    
    $
    17,002
    
    
    $
    1,300
    
    
    $
    (392
    )
    
    $
    17,910Operating loss
    
    $
    (999
    )
    
    $
    (180
    )
    
    $
    (115
    )
    
    $
    (1,294
    )Three Months Ended June 30, 2005Sales to unaffiliated customers
    
    $
    15,112
    
    
    $
    2,427
    
    
    $
    
    
    
    $
    17,539Transfers between geographic regions
    
    
    (430
    )
    
    
    552
    
    
    
    (122
    )
    
    
    Total net revenues
    
    $
    14,682
    
    
    $
    2,979
    
    
    $
    (122
    )
    
    $
    17,539Operating loss
    
    $
    (6,355
    )
    
    $
    (56
    )
    
    $
    469
    
    
    $
    (5,942
    )
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Overview
 ® ® ®
   24




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##### Table of Contents



Critical Accounting Policies and Estimates
   Stock-Based Compensation
 Share-Based Payment, Accounting for
Stock Issued to Employees Accounting for Stock-Based compensation.
 Results of Operations
  25




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##### Table of Contents



Three Months Ended June 30,2006
    
    2005Net revenuesProduct
    
    
    73.2
    %
    
    
    72.5
    %Service and parts
    
    
    26.8
    %
    
    
    27.5
    %Total net revenues
    
    
    100.0
    %
    
    
    100.0
    %Cost of revenuesProduct
    
    
    42.4
    %
    
    
    36.6
    %Service and parts
    
    
    19.3
    %
    
    
    22.8
    %Total cost of revenues
    
    
    61.7
    %
    
    
    59.4
    %Gross profit
    
    
    38.3
    %
    
    
    40.6
    %Operating expenses:Research and development
    
    
    17.6
    %
    
    
    21.9
    %Selling, general and administrative
    
    
    27.9
    %
    
    
    44.2
    %Restructuring, severance and other
    
    
    
    %
    
    
    8.4
    %Total operating expenses
    
    
    45.5
    %
    
    
    74.5
    %Operating loss
    
    
    (7.2
    )%
    
    
    (33.9
    )%Other income (expense):Gain on sale of product line
    
    
    
    %
    
    
    48.7
    %Interest expense
    
    
    (1.1
    )%
    
    
    (0.3
    )%Interest income
    
    
    1.1
    %
    
    
    0.2
    %Other, net
    
    
    1.7
    %
    
    
    (0.5
    )%Total other income, net
    
    
    1.7
    %
    
    
    48.1
    %Income (loss) before provision for income taxes
    
    
    (5.5
    )%
    
    
    14.2
    %Provision (benefit) for income taxes
    
    
    (1.0
    )%
    
    
    0.2
    %Net Income (loss)
    
    
    (4.5
    )%
    
    
    14.0
    %Accretion of Series B preferred stock to redemption value including dividends accrued
    
    
    (1.8
    )%
    
    
    
    %Net income (loss)
    
    
    (6.3
    )%
    
    
    14.0
    %
 Net Revenues.
    Gross Profit.
 26




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##### Table of Contents



Research and Development (R&D) Expenses.
 Selling, General and Administrative (SG&A) Expenses.
 Restructuring, Severance and Other.
 Stock-Based Employee Compensation.
  Three Months Ended June 30,2006
    
    
    2005Stock-based compensation expense (benefit) included in:Cost of revenues
    
    $
    47
    
    
    $
    4Operating expenses:Research and development
    
    
    74
    
    
    
    (178
    )Selling, general and administrative
    
    
    219
    
    
    
    15Total operating expneses (benefit)
    
    
    293
    
    
    
    (163
    )Total stock-based compensation expense (benefit)
    
    $
    340
    
    
    $
    (159
    )
  Other Income (Expense).
 27




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##### Table of Contents



Provision for Income Taxes (Benefit).
 Accretion of Series B Preferred Stock to Redemption Value and Dividends Accrued.
 Liquidity and Capital Resources
     28




---



##### Table of Contents



Commitments
  2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2012Fiscal Year:
    
    (9 months)
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    And thereafter
    
    
    TotalOperating leases
    
    $
    1,384
    
    
    $
    1,664
    
    
    $
    1,239
    
    
    $
    1,153
    
    
    $
    1,016
    
    
    $
    
    
    
    $
    6,456Purchase commitments
    
    
    10,455
    
    
    
    194
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,649Minimum royalty payments
    
    
    40
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40Cancellation fees
    
    
    74
    
    
    
    74
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    148Series B Redeemable ConvertiblePreferred Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,400
    
    
    
    10,400Term debt *
    
    
    1,250
    
    
    
    2,500
    
    
    
    1,250
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,000Interest payments on term debt**
    
    
    403
    
    
    
    403
    
    
    
    67
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    873Total future minimum payments
    
    $
    13,606
    
    
    $
    4,835
    
    
    $
    2,556
    
    
    $
    1,153
    
    
    $
    1,016
    
    
    $
    10,400
    
    
    $
    33,566
 29




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##### Table of Contents



*
    
    The term loan has a stated maturity of September 2008, however the outstanding balance has
been classified as a current liability as of June 30, 2006, primarily due to the Material
Adverse Change clause that permits the lender to accelerate the maturity of the debt based
upon factors that are subjective in nature.**
    
    Interest payments are based on a variable rate as described in Footnote 7, Financing
Arrangements. Payment commitments included in this disclosure are estimated based on the quarter
ended June 30, 2006 interest rate of 10.75% Operating Leases.
 Purchase Commitment and Cancellation Fees.
 Minimum Royalty Payments.
 Financing/Other Contingencies.
    30




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##### Table of Contents



Series B Redeemable Convertible Preferred Stock.
  31




---



##### Table of Contents



Inflation
  
 Item 3. Quantitative and Qualitative Disclosure about Market Risk
 Market Risk Disclosures
  Market Risk Related to Interest Rate, Stock Price and Foreign Currency
  Interest Rates Related to Investment Portfolio
  Interest Rates and Stock Price Related to Warrants
  Embedded Derivatives
  
 32




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##### Table of Contents



Item 4. Controls and Procedures
 Disclosure Controls and Procedures
    Changes in Internal Control over Financial Reporting
  
    
    Implementing additional monitoring controls used in conjunction with the performance
of independent internal reviews of all key account reconciliations, including
inventory and warranty related transactions and all corresponding journal entries and
related support;
    
    Hired new senior accounting personnel and experienced accounting and finance staff, and
    
    Enhancing our training programs for accounting staff as well as our overall
supervision of finance personnel.
  Internal Control Over Financial Reporting
  Limitation on Effectiveness of Controls
  33




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
 Factors Affecting Future Results
  WE HAVE INCURRED SIGNIFICANT OPERATING LOSSES AND MAY NOT BE PROFITABLE IN THE FUTURE; OUR PLANS TO
MAINTAIN AND INCREASE LIQUIDITY MAY NOT BE SUCCESSFUL; THE REPORT OF OUR INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM INCLUDES A GOING CONCERN UNCERTAINTY EXPLANATORY PARAGRAPH.
  WE NEED TO HAVE SUFFICIENT CASH TO OPERATE IF OUR BUSINESS IS TO SUCCEED.
   34




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##### Table of Contents



OUR QUARTERLY OPERATING RESULTS HAVE HISTORICALLY AND MAY, IN THE FUTURE, VARY
SIGNIFICANTLY. THIS MAY RESULT IN VOLATILITY IN THE MARKET PRICE FOR OUR SHARES.
  
    
    customer demand, which is influenced by economic conditions
in the semiconductor industry, demand for products that use
semiconductors, market acceptance of our products and those
of our customers, seasonality, changes in product mix, and
the timing, cancellation or delay of customer orders and
shipments;
    
    competition, such as competitive pressures on the prices of
our products, the introduction or announcement of new
products by us or our competitors and discounts that may be
granted to customers;
    
    fluctuations in the availability and cost of components, subassemblies and production capacity;
    
    expenses incurred in connection with litigation;
    
    product development costs, such as increased research, development, engineering and marketing
expenses associated with new products or product enhancements, and the effect of transitioning
to new or enhanced products;
    
    delays in manufacturing or product shipments or contractual terms that require a delay between
when our products are shipped and when we can recognize revenue in connection with such
shipments; and
    
    levels of fixed expenses relative to revenue levels, including research and development costs
associated with product development.
  WE COMPLETED A PRIVATE PLACEMENT TRANSACTION IN NOVEMBER 2005, PURSUANT TO WHICH CERTAIN
OF OUR STOCKHOLDERS HAVE PROTECTIVE RIGHTS THAT MAY LIMIT OUR ACCESS TO ADDITIONAL DEBT OR EQUITY
CAPITAL AND OTHERWISE SIGNIFICANTLY IMPACT OUR LIQUIDITY, FINANCIAL POSITION AND EARNINGS.
  WE MAY INCUR INDEBTEDNESS IN THE FUTURE UNDER OUR BANK CREDIT FACILITIES OR OTHERWISE,
WHICH COULD REQUIRE THE USE OF A PORTION OF OUR CASH FLOWS AND MAY LIMIT OUR ACCESS TO ADDITIONAL
CAPITAL.
  35




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##### Table of Contents




    
    a substantial portion of our cash flow from operations, if
any, would be required to be dedicated to the repayment of
indebtedness and would not be available for other purposes;
    
    our future ability to obtain additional debt financing for
working capital, capital expenditures, acquisitions or
other purposes may be limited; and
    
    our level of indebtedness has in the past, and could in the
future, limit our flexibility in reacting to changes in the
industry, general economic conditions and our ability to
withstand a prolonged downturn in the semiconductor and/or
semiconductor capital equipment industries.
 OUR PERFORMANCE IS AFFECTED BY THE CYCLICALITY OF THE SEMICONDUCTOR DEVICE INDUSTRY,
WHICH MAY, FROM TIME TO TIME, LEAD TO DECREASED DEMAND FOR OUR PRODUCTS.
  IF WE FAIL TO REMEDIATE THE MATERIAL WEAKNESS AND CONTROL DEFICIENCY IN OUR INTERNAL
CONTROL OVER FINANCIAL REPORTING WE MAY BE UNABLE TO ACCURATELY REPORT OUR FINANCIAL RESULTS OR
PREVENT FRAUD WHICH COULD RESULT IN A LOSS OF INVESTOR CONFIDENCE IN OUR FINANCIAL REPORTS AND HAVE
AN ADVERSE EFFECT ON OUR BUSINESS AND OPERATING RESULTS AND OUR STOCK PRICE.
 Controls and Procedures
  OUR BANK CREDIT FACILITY IS SUBJECT TO A BORROWING BASE CALCULATION AND CONTAINS A MATERIAL ADVERSE
CHANGE CLAUSE.
  36




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##### Table of Contents



OUR RESTRUCTURING ACTIVITIES COULD RESULT IN MANAGEMENT DISTRACTIONS, OPERATIONAL DISRUPTIONS AND
OTHER DIFFICULTIES.
  OUR LARGEST CUSTOMERS HAVE HISTORICALLY ACCOUNTED FOR A SIGNIFICANT PORTION OF OUR
REVENUES. ACCORDINGLY, OUR BUSINESS MAY BE ADVERSELY AFFECTED BY THE LOSS OF, OR REDUCED PURCHASES
BY, ONE OR MORE OF OUR LARGE CUSTOMERS.
  ANY SIGNIFICANT ORDER CANCELLATIONS OR ORDER DEFERRALS COULD ADVERSELY AFFECT OUR
OPERATING RESULTS.
  OUR PRODUCTS TYPICALLY HAVE LENGTHY DESIGN CYCLES DURING WHICH A CUSTOMER MAY DECIDE TO
CANCEL OR CHANGE ITS PRODUCT PLANS, WHICH COULD CAUSE US TO LOSE ANTICIPATED SALES.
  37




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##### Table of Contents



IF ANY OF OUR SYSTEMS FAIL TO MEET OR EXCEED OUR INTERNAL QUALITY SPECIFICATIONS, WE
CANNOT SHIP THEM UNTIL SUCH TIME AS THEY HAVE MET SUCH SPECIFICATIONS. IF WE EXPERIENCE SIGNIFICANT
DELAYS OR ARE UNABLE TO SHIP OUR PRODUCTS TO OUR CUSTOMERS AS A RESULT OF OUR INTERNAL PROCESSES,
OR FOR ANY OTHER REASON, OUR BUSINESS AND REPUTATION MAY SUFFER.
  OUR CUSTOMERS FREQUENTLY REQUEST US TO PROVIDE LONG SUPPORT PERIODS THAT CAN RESULT IN
EXCESS OR OBSOLETE INVENTORY.
  OUR BUSINESS COULD BE ADVERSELY AFFECTED IF WE ARE UNABLE TO PROTECT OUR PROPRIETARY
TECHNOLOGY OR IF WE INFRINGE THE PROPRIETARY TECHNOLOGY OF OTHERS.
  IN ADDITION TO PATENT PROTECTION, WE RELY UPON TRADE SECRET PROTECTION FOR OUR
CONFIDENTIAL AND PROPRIETARY INFORMATION AND TECHNOLOGY. WE ROUTINELY ENTER INTO CONFIDENTIALITY
AGREEMENTS WITH OUR EMPLOYEES AND CUSTOMERS. HOWEVER, THERE CAN BE NO ASSURANCE THAT THESE
AGREEMENTS WILL NOT BE BREACHED, THAT WE WILL HAVE ADEQUATE REMEDIES FOR ANY BREACH OR THAT OUR
CONFIDENTIAL AND PROPRIETARY INFORMATION AND TECHNOLOGY WILL NOT BE INDEPENDENTLY DEVELOPED BY, OR
BECOME OTHERWISE KNOWN TO, THIRD PARTIES.
  38




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##### Table of Contents



PROTECTION OF OUR INTELLECTUAL PROPERTY RIGHTS, OR THIRD PARTIES SEEKING TO ENFORCE
THEIR OWN INTELLECTUAL PROPERTY RIGHTS AGAINST US, MAY RESULT IN LITIGATION, THE COST OF WHICH
COULD BE SUBSTANTIAL.
  WE OPERATE IN THE HIGHLY COMPETITIVE SEMICONDUCTOR CAPITAL EQUIPMENT INDUSTRY AND
COMPETE AGAINST SIGNIFICANTLY LARGER COMPANIES.
  COMPETITIVE CONDITIONS IN OUR INDUSTRY MAY REQUIRE US TO REDUCE OUR PRICES.
  WE ENCOUNTER DIFFICULTIES IN SOLICITING CUSTOMERS OF OUR COMPETITORS BECAUSE OF HIGH
SWITCHING COSTS IN THE MARKETS IN WHICH WE OPERATE.
  39




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##### Table of Contents



OUR FUTURE GROWTH DEPENDS ON OUR ABILITY TO DEVELOP NEW AND ENHANCED PRODUCTS FOR THE
SEMICONDUCTOR INDUSTRY. WE CANNOT ASSURE YOU THAT WE WILL BE SUCCESSFUL IN OUR PRODUCT DEVELOPMENT
EFFORTS OR THAT OUR NEW PRODUCTS WILL GAIN GENERAL MARKET ACCEPTANCE.
  OUR OPERATIONS ARE CHARACTERIZED BY THE NEED FOR CONTINUED INVESTMENT IN RESEARCH AND
DEVELOPMENT AND, AS A RESULT, OUR ABILITY TO REDUCE COSTS IS LIMITED.
  RAPID TECHNOLOGICAL CHANGES IN OUR INDUSTRY WILL REQUIRE US TO CONTINUALLY DEVELOP NEW
AND ENHANCED PRODUCTS.
  WE WILL NEED TO BE ABLE TO ATTRACT AND RETAIN KEY PERSONNEL WITH KNOWLEDGE OF INSTRUMENTS USED IN
SEMICONDUCTOR MANUFACTURING PROCESSES TO HELP SUPPORT OUR FUTURE GROWTH. COMPETITION FOR SUCH
PERSONNEL IN OUR INDUSTRY IS INTENSE.
  WE OBTAIN SOME OF THE COMPONENTS AND SUBASSEMBLIES INCLUDED IN OUR SYSTEMS FROM A SINGLE
SOURCE OR LIMITED GROUP OF SUPPLIERS, THE PARTIAL OR COMPLETE LOSS OF WHICH COULD HAVE AT LEAST A
TEMPORARY ADVERSE EFFECT ON OUR OPERATIONS.
  40




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##### Table of Contents



WE ARE SUBJECT TO RISKS ASSOCIATED WITH MANUFACTURING ALL OF OUR PRODUCTS AT A SINGLE
FACILITY. ANY PROLONGED DISRUPTION IN THE OPERATIONS OF THAT FACILITY COULD HAVE A MATERIAL ADVERSE
EFFECT ON OUR BUSINESS.
  WE RELY UPON MANUFACTURERS SALES REPRESENTATIVES FOR A SIGNIFICANT PORTION OF OUR
SALES. A DISRUPTION IN OUR RELATIONSHIP WITH ANY SALES REPRESENTATIVE COULD HAVE A MATERIAL ADVERSE
EFFECT ON OUR BUSINESS.
  OUR NET SALES AND RESULTS OF OPERATIONS CAN BE ADVERSELY AFFECTED BY THE INSTABILITY OF ASIAN
ECONOMIES, FROM WHICH WE DERIVE A SIGNIFICANT PORTION OF OUR REVENUES.
  WE RECENTLY CHANGED THE WAY WE MARKET AND SELL OUR PRODUCTS IN CERTAIN COUNTRIES IN
ASIA, ONE OF OUR LARGEST MARKETS. AS A RESULT, WE CANNOT BE ASSURED THAT OUR SALES IN THAT REGION
WILL BE IN LINE WITH HISTORICAL TRENDS.
  WE ARE SUBJECT TO OPERATIONAL, FINANCIAL, POLITICAL AND FOREIGN EXCHANGE RISKS DUE TO
OUR SIGNIFICANT LEVEL OF INTERNATIONAL SALES.
  41




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##### Table of Contents




    
    unexpected changes in regulatory requirements;
    
    tariffs and other market barriers;
    
    foreign currency exchange fluctuations;
    
    political and economic instability;
    
    potentially adverse tax consequences;
    
    outbreaks of hostilities;
    
    difficulties in accounts receivable collection;
    
    reduced or uncertain protection for intellectual property rights in some countries;
    
    extended payment terms;
    
    difficulties in managing foreign sales representatives; and
    
    difficulties in managing staffing and other elements of foreign subsidiary and branch operations.
  FUTURE CHANGES IN FINANCIAL ACCOUNTING STANDARDS OR PRACTICES OR EXISTING TAXATION RULES
OR PRACTICES MAY CAUSE ADVERSE UNEXPECTED REVENUE FLUCTUATIONS AND AFFECT OUR REPORTED RESULTS OF
OPERATIONS.
   PROVISIONS OF OUR CHARTER DOCUMENTS AND DELAWARE LAW COULD DISCOURAGE POTENTIAL
ACQUISITION PROPOSALS AND COULD DELAY, DETER OR PREVENT A CHANGE IN CONTROL.
  
    
    a classified board of directors;
    
    a prohibition on stockholder action through written consents;
    
    a requirement that special meetings of stockholders be called only by our chief
executive officer or the board of directors;
    
    advance notice requirements for stockholder proposals and nominations;
    
    limitations on the ability of stockholders to amend, alter or repeal our bylaws; and
 42




---



##### Table of Contents




    
    the authority of the board of directors to issue, without
stockholder approval, preferred stock with such terms as
the board may determine, which could have a dilutive effect
on our stockholders;
    IF WE ISSUE ADDITIONAL SHARES OF STOCK IN THE FUTURE, IT MAY HAVE A DILUTIVE EFFECT ON
OUR STOCKHOLDERS.
  WE HAVE RECEIVED A NUMBER OF INQUIRIES FROM ONE OF OUR STOCKHOLDERS, WHICH MAY BE A
PRECURSOR TO LITIGATION
  WE ARE NOT CERTIFIED UNDER THE INTERNATIONAL ORGANIZATION FOR STANDARDIZATION
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  43




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Item 5. Other Information
   44




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##### Table of Contents



Item 6. Exhibits
 Exhibit Number
    
    Description3.1(1)#
    
    Restated Certificate of Incorporation of Therma-Wave, Inc.3.2(2)#
    
    Certificate of Amendment to Restated Certificate of Incorporation of Therma-Wave, Inc.3.3(3)#
    
    Amended and Restated By-Laws of Therma-Wave, Inc.4.1(4)#
    
    Form of certificate representing shares of Common Stock of Therma-Wave, Inc.10.6(5)
    
    Amended and Restated Loan and Security Agreement between Therma-Wave, Inc. and Silicon Valley Bank
dated June 10, 200510.7(5)
    
    Streamline Facility Agreement between Therma-Wave, Inc. and Silicon Valley Bank dated June 10, 200510.8 (6)
    
    Second Modification to Loan and Security Agreement between Therma-Wave, Inc. and Silicon Valley Bank
dated July 31, 200610.9 (7)
    
    Amended the Companys 2000 Employee Stock Purchase Plan under Section 423 of the Internal Revenue Code31.1
    
    Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 (1)
    
    Incorporated herein by reference to Therma-Waves Annual Report on Form 10-K for the period
ended April 2, 2000 (File No. 000-26911) and filed with the SEC on June 30, 2000.(2)
    
    Incorporated herein by reference to Therma-Waves Quarterly Report on Form 10-Q for the
period ended September 29, 2002 (File No. 000-26911) and filed with the SEC on November 13,
2002.(3)
    
    Incorporated herein by reference to Therma-Waves Annual Report on Form 10-K for the period
ended April 1, 2001 (File No. 000-26911) and filed with the SEC on June 21, 2001.(4)
    
    Incorporated herein by reference to Therma-Waves Amendment No. 3 to Registration Statement
on Form S-1 (Registration No 333-76019) and filed with the SEC on July 21, 1999.(5)
    
    Incorporated by reference to Therma-Waves Current Report on Form 8-K dated June 10, 2005 (File
No. 000-26911) and filed with the SEC on June 16, 2005(6)
    
    Incorporated by reference to Therma-Waves Current Report on Form 8-K dated July 31, 2006
(File No. 000-26911) and filed with the SEC on August 2, 2006(7)
    
    Incorporated by reference to Therma-Waves Current Report on Form 8-K dated July 27, 2006
(File No. 000-26911) and filed with the SEC on July 28, 2006#
    
    Denotes management contract 45




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##### Table of Contents



SIGNATURES
  THERMA-WAVE, INC.(Registrant)/s/ Boris LipkinBoris LipkinPresident, Chief Executive Officer and DirectorAugust 9, 2006THERMA-WAVE, INC.(Registrant)/s/ Joseph PassarelloJoseph PassarelloSenior Vice President, Chief Financial Officer and Secretary(as Registrant and as Principal Accounting Officer)August 9, 2006
 46




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##### Table of Contents



EXHIBIT INDEX
 Exhibit Number
    
    Description3.1(1)
    
    Restated Certificate of Incorporation of Therma-Wave, Inc.3.2(2)
    
    Certificate of Amendment to Restated Certificate of Incorporation of Therma-Wave, Inc.3.3(3)
    
    Amended and Restated By-Laws of Therma-Wave, Inc.4.1(4)
    
    Form of certificate representing shares of Common Stock of Therma-Wave, Inc.10.6(5)
    
    Amended and Restated Loan and Security Agreement between Therma-Wave, Inc. and Silicon Valley Bank
dated June 10, 200510.7(5)
    
    Streamline Facility Agreement between Therma-Wave, Inc. and Silicon Valley Bank dated June 10, 200510.8(6)
    
    Second Modification to Loan and Security Agreement between Therma-Wave, Inc. and Silicon Valley Bank dated July 31, 200610.9(7)
    
    Amended the Companys 2000 Employee Stock Purchase Plan under Section 423 of the Internal Revenue Code31.1
    
    Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 (1)
    
    Incorporated herein by reference to Therma-Waves Annual Report on Form 10-K for the period
ended April 2, 2000 (File No. 000-26911) and filed with the SEC on June 30, 2000.(2)
    
    Incorporated herein by reference to Therma-Waves Quarterly Report on Form 10-Q for the
period ended September 29, 2002 (File No. 000-26911) and filed with the SEC on November 13,
2002.(3)
    
    Incorporated herein by reference to Therma-Waves Annual Report on Form 10-K for the period
ended April 1, 2001 (File No. 000-26911) and filed with the SEC on June 21, 2001.(4)
    
    Incorporated herein by reference to Therma-Waves Amendment No. 3 to Registration Statement
on Form S-1 (Registration No 333-76019) and filed with the SEC on July 21, 1999.(5)
    
    Incorporated by reference to Therma-Waves Current Report on Form 8-K dated June 10, 2005
(File No. 000-26911) and filed with the SEC on June 16, 2005(6)
    
    Incorporated by reference to Therma-Waves Current Report on Form 8-K dated July 31, 2006
(File No. 000-26911) and filed with the SEC on August 2, 2006(7)
    
    Incorporated by reference to Therma-Waves Current Report on Form 8-K dated July 27, 2006
(File No. 000-26911) and filed with the SEC on July 28, 2006#
    
    Denotes management contract 47