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

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FORM 10-Q

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(Mark One)

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

For the quarterly period ended September 30, 2001

OR

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

For the transition period from ________to _________

Commission file number 000-26911

THERMA-WAVE, INC.(Exact Name of Registrant as Specified in Its Charter)



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

1250 Reliance WayFremont, California             94539(Address of Principal Executive Offices Including Zip Code)

(510) 668-2200(Registrant's Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file reports), and (2) has been subject to such filing
requirements for the past 90 days.    YES

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



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









THERMA-WAVE, INC.
                                TABLE OF CONTENTS



|PART I.   FINANCIAL INFORMATION                                                                                       | Page No.
|--------------------------------------------------------------------------------------------------------------------- | --------
|                                                                                                                      |         
|ITEM 1.   Financial Statements                                                                                        |         
|                                                                                                                      |         
|Condensed Consolidated Balance Sheets
          
September 30, 2001 and March 31, 2001                                | 3       
|                                                                                                                      |         
|Condensed Consolidated Statements of Operations
          
    Three and Six Months Ended September 30, 2001 and 2000 | 4       
|                                                                                                                      |         
|Condensed Consolidated Statements of Cash Flows
          
    Six Months Ended September 30, 2001 and 2000           | 5       
|                                                                                                                      |         
|Notes to Condensed Consolidated Financial Statements                                                                  | 6       
|                                                                                                                      |         
|ITEM 2.   Management's Discussion and Analysis of Financial
                      Condition and Results of Operations | 9       
|                                                                                                                      |         
|ITEM 3.   Quantitative and Qualitative Disclosures About Market Risk                                                  | 14      
|                                                                                                                      |         

PART II.  OTHER INFORMATION



|ITEM 1.   Legal Proceedings                                   | 15
|------------------------------------------------------------- | --
|                                                              |   
|ITEM 2.   Changes in Securities and Use of Proceeds           | 15
|                                                              |   
|ITEM 3.   Defaults Upon Senior Securities                     | 15
|                                                              |   
|ITEM 4.   Submission of Matters to a Vote of Security Holders | 15
|                                                              |   
|ITEM 5.   Other Information                                   | 15
|                                                              |   
|ITEM 6.   Exhibits and Reports on Form 8-K                    | 15
|                                                              |   
|SIGNATURES                                                    | 16

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PART I -- FINANCIAL INFORMATION

Item 1. Financial Statements

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THERMA-WAVE, INC.

                     CONDENSED CONSOLIDATED BALANCE SHEETS

                                (in thousands)

                                  (Unaudited)

`September 30,  March 31,
                                                          2001         2001
                                                      -----------  ------------
                           ASSETS
Current assets:
 Cash and cash equivalents.......................... $    58,446  $     55,725
 Short-term investments.............................      19,171        19,850
 Accounts receivable, net...........................      24,734        43,348
 Inventories........................................      44,489        47,181
 Other current assets...............................       2,670         3,925
                                                      -----------  ------------
    Total current assets............................     149,510       170,029
 Property and equipment, net........................      13,967        14,478
 Deferred income taxes..............................       3,405         3,405
 Other assets.......................................       4,251         3,279
                                                      -----------  ------------
    Total assets....................................     171,133       191,191
                                                      ===========  ============
            LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Accounts payable...................................       4,037        12,547
 Accrued warranty costs.............................       3,831         3,742
 Deferred revenue...................................       9,952        17,096
 Income tax payable.................................       8,579        10,810
 Other current liabilities..........................       7,581        15,985
                                                      -----------  ------------
    Total current liabilities.......................      33,980        60,180
 Long term debt.....................................          16            16
 Other liabilities..................................       2,370         1,913
                                                      -----------  ------------
    Total liabilities...............................      36,366        62,109

Stockholders' equity
 Common stock.......................................         242           240
 Additional paid-in capital.........................     232,872       230,646
 Notes receivable from stockholders.................        (201)         (212)
 Accumulated deficit................................     (96,919)     (100,129)
 Accumulated other comprehensive loss...............      (1,227)       (1,463)
                                                      -----------  ------------
    Total stockholders' equity......................     134,767       129,082
                                                      -----------  ------------
    Total liabilities and stockholders' equity......     171,133       191,191
                                                      ===========  ============`

See accompanying notes to condensed consolidated financial statements.

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THERMA-WAVE, INC.

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                     (in thousands, except per share data)

                                  (Unaudited)

`Three Months Ended    Six Months Ended
                                                September 30,         September 30,
                                             --------------------  --------------------
                                                2001       2000       2001       2000
                                             ---------  ---------  ---------  ---------
Net revenues............................... $  21,660  $  47,770  $  59,481  $  87,411
Cost of revenues...........................    13,106     24,407     33,255     44,508
                                             ---------  ---------  ---------  ---------
Gross profit...............................     8,554     23,363     26,226     42,903

Operating expenses:
  Research and development.................     6,533      8,676     13,514     16,195
  Selling, general and administrative......     5,298      6,896     11,005     12,778
                                             ---------  ---------  ---------  ---------
         Total operating expenses..........    11,831     15,572     24,519     28,973
                                             ---------  ---------  ---------  ---------
Operating income (loss)....................    (3,277)     7,791      1,707     13,930
Other income (expense):
  Interest expense.........................       (23)       (52)      (107)      (112)
  Interest income..........................       751      1,045      1,583      2,084
  Other, net...............................       (12)       130         27        143
                                             ---------  ---------  ---------  ---------
         Total other income................       716      1,123      1,503      2,115
                                             ---------  ---------  ---------  ---------
Income before provision for income taxes...    (2,561)     8,914      3,210     16,045
Provision for income taxes.................       346       (534)        --       (962)
                                             ---------  ---------  ---------  ---------
Income before cumulative effect of
  change in accounting principle...........    (2,215)     8,380      3,210     15,083
Cumulative effect of change in
  accounting principle, net of taxes.......        --         --         --     (6,287)
                                             ---------  ---------  ---------  ---------
Net income (loss).......................... $  (2,215) $   8,380  $   3,210  $   8,796
                                             =========  =========  =========  =========
Basic net income (loss) per share:
  Income before cumulative effect
   of change in accounting principle....... $   (0.09) $    0.36  $    0.13  $    0.65
  Cumulative effect of change in
   accounting principle....................        --         --         --      (0.27)
                                             ---------  ---------  ---------  ---------
Basic net income (loss) per share.......... $   (0.09) $    0.36  $    0.13  $    0.38
                                             =========  =========  =========  =========
Diluted net income (loss) per share:
  Income before cumulative effect
   of change in accounting principle....... $   (0.09) $    0.34  $    0.13  $    0.60
  Cumulative effect of change in
   accounting principle....................        --         --         --      (0.25)
                                             ---------  ---------  ---------  ---------
Diluted net income (loss) per share........ $   (0.09) $    0.34  $    0.13  $    0.35
                                             ========= ==========  =========  =========
Weighted average common shares outstanding:
  Basic....................................    23,968     23,328     23,902     23,297
  Diluted..................................    23,968     24,980     25,188     24,915`

See accompanying notes to condensed consolidated financial statements.

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THERMA-WAVE, INC.

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (in thousands)

                                   (Unaudited)

`Six Months Ended
                                                             September 30,
                                                          --------------------
                                                             2001       2000
                                                          ---------  ---------
Operating activities:
 Net income............................................. $   3,210  $   8,796
 Adjustments to reconcile net income to net cash used
  by operating activities:
   Change in accounting principles......................        --      6,287
   Depreciation and amortization........................     2,468      1,562
 Changes in assets and liabilities:                             --         --
   Accounts receivable..................................    18,614    (19,826)
   Inventories..........................................     2,692    (15,771)
   Other assets.........................................       441       (401)
   Other liabilities....................................   (25,687)    10,513
                                                          ---------  ---------
    Net cash provided (used) by operating activities....     1,738     (8,840)

Investing activities:
  Purchases of property and equipment...................    (1,757)    (3,024)
  Short-term investments................................       679     (9,482)
  Other.................................................      (358)      (351)
                                                          ---------  ---------
     Net cash used by investing activities..............    (1,436)   (12,857)

Financing activities:
  Proceeds from issuance of common stock................     2,228      1,985
  Principal payments under capital leas obligations.....       (56)      (433)
  Other.................................................       247        (28)
                                                          ---------  ---------
Net cash provided by financing activities...............     2,419      1,524
                                                          ---------  ---------
 Net increase (decrease) in cash and cash equivalents...     2,721    (20,173)
 Cash and cash equivalents at beginning of period.......    55,725     75,200
                                                          ---------  ---------
 Cash and cash equivalents at end of period............. $  58,446  $  55,027
                                                          =========  =========
 Supplementary disclosures:
  Cash paid for interest................................ $      57  $     114
                                                          =========  =========
  Cash paid for taxes................................... $   2,453  $     371
                                                          =========  =========`

See accompanying notes to condensed consolidated financial statements.

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THERMA-WAVE, INC.

        NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The accompanying unaudited condensed consolidated
financial statements have been prepared pursuant to the rules and regulations of
the Securities and Exchange Commission and include the accounts of Therma-Wave,
Inc. and its wholly owned subsidiaries. Certain information and footnote
disclosures, normally included in financial statements prepared in accordance
with generally accepted accounting principles, have been condensed or omitted
pursuant to such rules and regulations. In our opinion, the financial statements
reflect all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the financial position at September 30,
2001, and the operating results and cash flows for the three and six months
ended September 30, 2001 and 2000. These financial statements and notes should
be read in conjunction with our audited financial statements and notes thereto
for the year ended March 31, 2001.

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

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

2. Inventories

Inventories are summarized as follows (in thousands):

`September 30,   March 31,
                                         2001          2001
                                     ------------  ------------
Purchased materials................ $     23,440  $     22,197
Systems in process.................       14,095        19,571
Finished systems...................        6,954         5,413
                                     ------------  ------------
                                    $     44,489  $     47,181
                                     ============  ============`

3. Comprehensive Income (Loss)

Comprehensive income (loss) consists of net income (loss)
for the period and change in accumulated foreign currency translation
adjustments during the period. For the quarters ended September 30, 2001 and
2000, comprehensive income (loss) amounted to approximately $(1.9) million and
$8.3 million, respectively. For the six months ended September 30, 2001 and
2000, comprehensive income amounted to approximately $3.5 million and $8.7
million, respectively.

4. Change in Accounting Principle

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

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

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

5. Net Income (Loss) Per Share

Basic net income (loss) per share and diluted net loss
per share are based on the weighted-average number of common shares outstanding
excluding contingently issuable or returnable shares such as unvested common
stock or shares that contingently convert into common stock upon certain events.
Diluted net income per share is based on the weighted average number of common
shares outstanding and dilutive potential common shares outstanding.

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

6. 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.  The company currently does not have any
goodwill or other intangible assets that would need to be accounted for under
SFAS No. 142.

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

7. Commitments and Contingencies

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

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

This Quarterly Report on Form 10-Q contains forward-
looking statements as that term is defined in the Private Securities Reform Act
of 1995, which are subject to known and unknown risks and uncertainties that
could cause actual results to differ materially from those expressed or implied
by such statements. The words "believe," "expect," "anticipate," "intend" and
other similar expressions generally identify forward-looking statements.
Potential investors are cautioned not to place undue reliance on these forward-
looking statements, which speak only as of their dates. 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.

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

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

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

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

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

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

Results of Operations

The following table summarizes our unaudited historical
results of operations as a percentage of net revenues for the periods indicated.
The historical financial data for the three and six months ended September 30,
2001 and 2000 were derived from our unaudited consolidated financial statements
which, in the opinion of management, reflect all adjustments (consisting of
normal recurring adjustments) necessary for the fair presentation of the
financial condition and results of operations for such periods.

`Three Months Ended    Six Months Ended
                                                September 30,         September 30,
                                             --------------------  --------------------
                                                2001       2000       2001       2000
                                             ---------  ---------  ---------  ---------
Net revenues...............................     100.0 %    100.0 %    100.0 %    100.0 %
Cost of revenues...........................      60.5       51.1       55.9       50.9
                                             ---------  ---------  ---------  ---------
Gross profit...............................      39.5       48.9       44.1       49.1
                                             ---------  ---------  ---------  ---------
Operating expenses:
  Research and development.................      30.2       18.2       22.7       18.5
  Selling, general and administrative......      24.4       14.4       18.5       14.7
                                             ---------  ---------  ---------  ---------
         Total operating expenses..........      54.6       32.6       41.2       33.2
                                             ---------  ---------  ---------  ---------
Operating income (loss)....................     (15.1)      16.3        2.9       15.9
Other income (expense):
  Interest expense.........................      (0.1)      (0.1)      (0.2)      (0.1)
  Interest income..........................       3.5        2.2        2.7        2.4
  Other, net...............................      (0.1)       0.3        0.0        0.2
                                             ---------  ---------  ---------  ---------
         Total other income................       3.3        2.4        2.5        2.5
                                             ---------  ---------  ---------  ---------
Income before provision for income taxes...     (11.8)      18.7        5.4       18.4
Provision for income taxes.................       1.6       (1.2)        --       (1.1)
                                             ---------  ---------  ---------  ---------
Income before cumulative effect of
  change in accounting principle...........     (10.2)      17.5        5.4       17.3
Cumulative effect of change in
  accounting principle, net of taxes.......        --         --         --       (7.2)
                                             ---------  ---------  ---------  ---------
Net income (loss)..........................     (10.2)%     17.5 %      5.4 %     10.1 %
                                             ========= ==========  =========  =========`

Net Revenues. Net revenues for the fiscal quarter
ended September 30, 2001 were $21.7 million, a decrease of $26.1 million, or
54.7%, from $47.8 million in the same fiscal quarter of the prior year. Compared
to the prior fiscal quarter, net revenues decreased $16.2 million, or 42.7%,
from $37.8 million. For the six months ended September 30, 2001, net revenues
were $59.5 million, a decrease of $27.9 million, or 32.0%, from $87.4 million in
the comparable period of the prior year. The decrease in revenue was primarily
the result of capital spending reductions by our customers due to the cyclical
downturn of the semiconductor industry and the weakness of the global economy.

During the three months ended September 30, 2001, we derived
approximately 80% of our revenues from system sales, 9% from sales of
replacement and spare parts, including associated labor, and 11% from service
contracts. During the three months ended September 30, 2000, we derived
approximately 91% of our revenues from system sales, 6% from sales of
replacement and spare parts, including associated labor, and 3% from service
contracts. During the six months ended September 30, 2001, we derived
approximately 86% of our revenues from system sales, 6% from sales of
replacement and spare parts, including associated labor, and 8% from service
contracts. During the six months ended September 30, 2000, we derived
approximately 91% of 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 59% and 67%
of our total revenues for the three months ended September 30, 2001 and 2000,
respectively. International sales accounted for approximately 59% and 68% of our
total revenues for the six months ended September 30, 2001 and 2000,
respectively. We anticipate that international sales will continue to account
for a significant portion of our revenue in the foreseeable future. A
substantial portion of our international sales are denominated in U.S. dollars.
As a result, changes in the values of foreign currencies relative to the value
of the U.S. dollar can render our products comparatively more expensive.
Although we have not been negatively impacted in the past by foreign currency
changes in Japan, Korea, Taiwan and Europe, such conditions could negatively
impact our international sales in future periods.

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

Gross Profit. Gross profit for the second quarter of
fiscal 2002 was $8.6 million, a decrease of $9.1 million, or 51.6%, from $17.7
million in the previous fiscal quarter. Compared to the same quarter of fiscal
2001, gross profit decreased $14.8 million or 63.4%. As a percentage of net
revenues, gross margin for the current quarter was 39.5%, compared to 46.7% for
last fiscal quarter and 48.9% for the same quarter of last fiscal year. For the
six months ended September 30, 2001, gross profit was $26.2 million, a decrease
of $16.7 million, or 38.9%, from $42.9 million in the comparable period of the
prior year. As a percentage of net revenues, gross margin for the current six
months was 44.1%, compared to 49.1% in the comparable period of the prior year.
Although we implemented some cost reduction measures during the quarter, these
measures were not sufficient to completely offset the sharp decline in revenue
and the lower overhead absorption resulting from our substantially lower
production volume.

Research and Development ("R&D") Expenses. R&D
expenses for the second quarter of fiscal 2002 were $6.5 million, a decrease of
6.4% from the prior quarter and a decrease of 24.7% from the second quarter of
last fiscal year. For the six months ended September 30, 2001, R&D expenses
were $13.5 million, a decrease of $2.7 million, or 16.6%, from $16.2 million in
the comparable period of the prior year. The decrease from the prior fiscal
quarter was primarily due to the reduction in discretionary expenses. The
decrease from the same periods of the prior fiscal year was primarily the result
of reductions in patent defense expense, contract labor and discretionary
expenses. We expect to continue committing significant resources to the
development of new products and other programs because we believe that technical
leadership will strengthen our market position in the next economic upturn.

Selling, General and Administrative ("SG&A")
Expenses. SG&A expenses for the second quarter of fiscal 2002 were $5.3
million, a decrease of 7.2% from SG&A expenses of $5.7 million in the prior
fiscal quarter. Compared to the second quarter of last fiscal year, SG&A
expenses decreased 23.2%. For the six months ended September 30, 2001, SG&A
expenses were $11.0 million, a decrease of $1.8 million, or 13.9%, from $12.8
million in the comparable period of the prior year. The decrease was primarily
due to lower sales commissions resulting from the lower orders and sales volume
and to a lesser effect, the implementation of cost containment measures.

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

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

Net Income (Loss). The combination of all the factors
discussed above contributed to a net loss of $2.2 million for the second quarter
of fiscal 2002, compared with net income of $5.4 million in the prior fiscal
quarter, and net income of $8.4 million in the same quarter of last fiscal year.
For the six months ended September 30, 2001, net income was $3.2 million, a
decrease of $5.6 million, or 63.5%, from $8.8 million in the comparable period
of the prior year.

Liquidity and Capital Resources

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

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

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

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

In June 2001, we replaced our existing bank credit facility
with a new $10 million loan and security agreement with Comerica Bank. This new
bank credit facility allows us to borrow money bearing interest either at a
floating rate per annum equal to the prime rate or at a rate per annum equal to
LIBOR plus 1.5%. We may request advances in an aggregate outstanding amount not
to exceed $7.5 million minus the aggregate face amount of outstanding letters of
credit, including any drawn but unreimbursed letters of credit. Our borrowings
under the Comerica bank credit facility are secured by substantially all of its
assets. The Comerica bank credit facility matures on March 28, 2004.  As of
September 30, 2001, there was $3.5 million letter of credit outstanding, as
required by the lessor of our building, and $6.5 million of the unused borrowing
capacity under the new bank credit facility.  We have been in compliance with all
financial covenants related to this bank credit facility.

Our principal sources of funds are anticipated to be cash and
short-term investments on hand ($77.6 million as of September 30, 2001), cash
flows from operating activities and, if necessary, borrowings under the bank
credit facility. We expect to limit our capital spending to essential items. We
believe that these funds will provide us with sufficient liquidity and capital
resources for us to meet our current and future financial obligations for at
least the next twelve months. No assurance can be given, however, that this will
be the case. We may require additional equity or debt financing to meet our
working capital requirements, 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 3. Quantitative and Qualitative Disclosure About Market Risk

Market Risk Disclosures

The following discussion about market risk disclosures
involves forward-looking statements. Actual results could differ materially from
those projected in the forward-looking statements. We are exposed to market
risks related to changes in interest rates and foreign currency exchange rates.
We do not have any derivative financial instruments. See also the discussion of
forward-looking statements in the first paragraph of Item 2 above.

Interest Rate Risk

As of September 30, 2001, our cash and cash equivalents
included money market securities and investment grade commercial paper. Due to
the short term duration of such an investment portfolio, an immediate 10% change
in interest rates would not have a material effect on the fair market value of
such a portfolio, therefore, we would not expect our operating results or cash
flows to be affected to any significant degree by the effect of a sudden change
in market interest rates on our securities portfolio.

Foreign Currency Exchange Risk

A substantial portion of our sales are denominated in
U.S. dollars and, as a result, we have relatively little exposure to foreign
currency exchange risk with respect to sales made. We do not use forward
exchange contracts to hedge exposures denominated in foreign currencies or any
other derivative financial instruments for trading or speculative purposes. The
effect of an immediate 10% change in exchange rates would not have a material
impact on our future operating results or cash flows.



Part II. -- Other Information

Item 1. Legal Proceedings

There are no material legal proceedings pending against
us. We could be involved in various legal proceedings from time to time arising
in the ordinary course of business, none of which are expected to have a
material adverse effect on our business or financial condition.

Item 2. Changes in Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Submission of Matters to a Vote of Security Holders

The 2001 Annual Meeting of Stockholders was held on July 27,
2001. The following proposals were voted on and approved: (1) the election of
our directors; (2) an increase in the number of shares of common stock that may
be issued under the 2000 Employee Stock Purchase Plan from 500,000 shares to a
total of 1,500,000 shares. The vote tally was as follows:

Proposal I

|Directors          | Director Class | Total Vote for Each Director | Total Vote Withheld From Each Director
|------------------ | -------------- | ---------------------------- | --------------------------------------
|Frank Alvarez      | II             | 20,136,658                   | 279,172                               
|David Dominik      | II             | 20,136,558                   | 279,272                               
|Martin M. Schwartz | II             | 17,357,372                   | 3,058,458                             
|David Aspnes       | III            | 20,136,758                   | 279,072                               
|John D'Errico      | III            | 20,136,558                   | 279,272                               



Proposal II

|For        | Against   | Abstain
|---------- | --------- | -------
|18,139,132 | 2,170,188 | 106,510

``

Allan Rosencwaig, G. Leonard Baker, Jr. and Ian K.
Loring continued as directors after the meeting.

Item 5. Other Information

None.

Item 6. Exhibits and Reports on Form 8-K

(a) The following exhibit is included herein:

|Exhibit Number | Description      
|-------------- | -----------------
|99.1           | Risk Factors. (1)

(1) Incorporated by reference to the same
numbered exhibit in the Company's Annual Report on Form 10-K for the period
ended March 31, 2001 (Registration No. 000-26911)

(b) Reports on Form 8-K

None

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SIGNATURES

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



| |                  
| | -----------------
| | THERMA-WAVE, INC.

| |             
| | ------------
| | (Registrant)



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

| |                                                                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                
| | L. RAY CHRISTIE                                                                                                                                                                                                                
| | Chief Financial Officer
              (as Registrant and as Principal Accounting Officer)

                                                                                                            Dated: November 14, 2001

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