8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

May 7, 2008

Date of Report (date of earliest event reported)

Nanometrics Incorporated

(Exact name of Registrant as specified in charter)

Delaware	0-13470	94-2276314
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

1550 Buckeye Drive, Milpitas, California 95035

(Address of principal executive offices)

Registrant’s telephone number, including area code: (408) 545-6000

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Explanatory Note

This Amendment No. 1 to the Current Report on Form 8-K is being filed for the purpose of amending the Current Report on Form

8-K dated May 7, 2008 filed by Nanometrics Incorporated, a Delaware corporation (the “Company”) with the Securities and Exchange Commission on May 9, 2008 announcing the entry into an Asset Purchase Agreement for substantially all of the assets of Tevet Process Control Technologies, Ltd., a company formed under the laws of Israel (“Tevet”).

The information previously reported in the Current Report on Form 8-K dated May 7, 2008 is hereby incorporated by reference into this Current Report on Form 8-K/A. This Current Report on Form 8-K/A amends Item 9.01 of the Current Report on Form 8-K dated May 7, 2008 to provide the following items:

(a) Financial Statements of Business Acquired

The audited consolidated financial statements of Tevet and its subsidiary as of and for the years ended December 31, 2007 and 2006.

(b) Pro Forma Financial Information

Unaudited pro forma condensed combined financial statements as of and for the year ended December 29, 2007 and as of and for the three months ended March 29, 2008.

Item 9.01 – Financial Statements and Exhibits.

(a) Financial Statements of Businesses Acquired.

The financial statements required by this item are included in this Amendment No. 1 to the Current Report on Form 8-K as Exhibit 99.1.

(b) Pro Forma Financial Information.

The pro forma financial information required by this item is included in this Amendment No. 1 to the Current Report on Form 8-K as Exhibit 99.2.

(d) Exhibits.

Exhibit No.	Description
23.1	Consent of Brightman Almagor Zohar & Co., Certified Public Accountants, a member of Deloitte Touche Tohmatsu, Independent Registered Public Accounting Firm.
99.1	Audited Consolidated Financial Statements of Tevet Process Control Technologies, Ltd. and its subsidiary as of and for the years ended December 31, 2007 and 2006 and Report of Independent Auditors therein.
99.2	Unaudited Pro Forma Condensed Combined Financial Statements of Tevet Process Control Technologies, Ltd. and Nanometrics Incorporated as of and for the year ended December 29, 2007 and as of and for the three months ended March 29, 2008.

Signature

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 hereunto duly authorized.

Dated: August 4, 2008	NANOMETRICS INCORPORATED
	/s/    Gary C. Schaefer
	Gary C. Schaefer Chief Financial Officer and Vice President of Finance and Administration

INDEX TO EXHIBITS

Exhibit No.	Description
23.1	Consent of Brightman Almagor Zohar & Co., Certified Public Accountants, a member of Deloitte Touche Tohmatsu, Independent Registered Public Accounting Firm.
99.1	Audited Consolidated Financial Statements of Tevet Process Control Technologies, Ltd. and its subsidiary as of and for the years ended December 31, 2007 and 2006 and Report of Independent Auditors therein.
99.2	Unaudited Pro Forma Condensed Combined Financial Statements of Tevet Process Control Technologies, Ltd. and Nanometrics Incorporated as of and for the year ended December 29, 2007 and as of and for the three months ended March 29, 2008.

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the use of our Report, dated July 30, 2008 relating to the consolidated financial statements of Tevet Process Control Technologies LTD. and its Subsidiary as of December 31, 2007 and 2006 as a part of Form 8-K/A.

/s/ Brightman Almagor Zohar & Co.

Brightman Almagor Zohar & Co.

Certified public accountants

Tel Aviv

August 4, 2008

EX-99.1

Exhibit 99.1

TEVET PROCESS CONTROL TECHNOLOGIES LTD.

CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2007

TEVET PROCESS CONTROL TECHNOLOGIES LTD.

CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2007

INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS

	Page
Independent Auditors’ Report	3
Consolidated Financial Statements:
Balance Sheets	4
Statements of Operations	5
Statements of Changes in Shareholders’ Equity	6
Statements of Cash Flows	7
Notes to the Consolidated Financial Statements	9

The accompanying notes are an integral part of the consolidated financial statements.

2

INDEPENDENT AUDITORS’ REPORT

TO THE SHAREHOLDERS OF

TEVET PROCESS CONTROL TECHNOLOGIES LTD.

We have audited the accompanying consolidated balance sheets of Tevet Process Control Technologies Ltd. (“the Company”) and its subsidiary as of December 31, 2007 and 2006, and the related consolidated statements of operations, changes in shareholders’ equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s Board of Directors and management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards, including those prescribed by the Auditors’ regulations (Auditors’ Mode of Performance) - 1973. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Company’s Board of Directors and management, as well as evaluating the overall financial statements presentation. We believe that our audits provide a reasonable basis for our opinion.

As described in Note 2A, the Company’s financial statements do not reflect the effect of the treatment for stock based compensation as required by Israeli Accounting Standard No. 24.

In our opinion, except for the matter mentioned above, the aforementioned consolidated financial statements, present fairly, in all material respects, the financial position of the Company and its subsidiary as of December 31, 2007 and 2006 and the results of their operations, changes in shareholders’ equity and cash flows for the years then ended, in conformity with generally accepted accounting principles in Israel.

As explained in Note 2C, the financial statements have been presented in U.S. dollars.

Without qualifying our opinion, we draw attention to Note 1B to the financial statements which indicates that the Company incurred a net loss of $2,483,627 and negative cash flows from operations of $2,261,099 during the year ended December 31, 2007. These conditions, along with other matters as set forth in Note 1B, indicate the existence of a material uncertainty which may cause substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of the uncertainty.

Brightman Almagor Zohar & Co.

Certified Public Accountants

Tel Aviv, Israel

July 30, 2008

The accompanying notes are an integral part of the consolidated financial statements.

3

TEVET PROCESS CONTROL TECHNOLOGIES LTD.

CONSOLIDATED BALANCE SHEETS

(In U.S. dollars)

	(unaudited) March 31,		December 31,
	2008	Note	2007	2006
ASSETS
CURRENT ASSETS
Cash and cash equivalents	232,486		720,275	1,151,222
Short-term bank deposits	264,358		464,358	139,040
Trade accounts receivable	306,807		142,438	793,070
Other current assets	81,470	3	85,049	168,356
Inventories	335,315		435,315	386,119
Total current assets	1,220,436		1,847,435	2,637,807
FINISHED GOODS USED IN OPERATIONS	5,924	2F	5,924	12,387
LONG-TERM DEPOSITS	12,878		12,878	19,333
PROPERTY AND EQUIPMENT, NET	280,483	4	276,765	302,462
	1,519,721		2,143,002	2,971,989
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Trade accounts payable	—		266,234	466,833
Deferred revenue	357,189		109,414	—
Current maturities on long-term loan	376,300	6	481,208	466,016
Other current liabilities	252,433	5	387,285	872,260
Total current liabilities	985,922		1,244,141	1,805,109
LONG-TERM LIABILITIES
Long term loan, net of current maturities	—	6	—	481,208
Liability for severance pay, net	31,717	7	31,717	40,414
			31,717	521,622
COMMITMENTS AND CONTINGENT LIABILITIES		8
SHAREHOLDERS’ EQUITY	502,082	9	867,144	645,258
	1,519,721		2,143,002	2,971,989

July 30, 2008
Date of approval	Ofer Du-Nour - Director and CEO

The accompanying notes are an integral part of the consolidated financial statements.

4

TEVET PROCESS CONTROL TECHNOLOGIES LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In U.S. dollars)

	(unaudited) Three Months ended March 31,					Year ended December 31,
	2008		2007		Note	2007		2006
Sales	514,437		244,898			1,902,580		3,000,758
Cost of sales	196,544		202,310			941,858		1,189,440
Gross profit	317,893		42,588			960,722		1,811,318
Operating costs and expenses:
Research and development expenses, net	375,524		424,930		10	1,385,458		1,039,285
Marketing expenses	118,367		301,624		11	1,030,020		1,395,992
General and administrative expenses	189,064		141,852		12	900,273		767,112
Total operating costs and expenses	682,955		868,406			3,315,751		3,202,389
Operating loss before financing expenses, net	(365,062	)	(825,818	)		(2,355,029	)	(1,391,071	)
Financing expenses, net	—		(33,693	)		(128,598	)	(151,457	)
Net loss for the year	(365,062	)	(859,511	)		(2,483,627	)	(1,542,528	)

The accompanying notes are an integral part of the consolidated financial statements.

5

TEVET PROCESS CONTROL TECHNOLOGIES LTD.

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(In U.S. dollars)

	Share capital		Additional paid in capital	Accumulated deficit		Total
Balance - January 1, 2006	198,779		10,801,505	(8,911,376	)	2,088,908
Warrants granted to third party	—		98,878	—		98,878
Net loss for the year	—		—	(1,542,528	)	(1,542,528	)
Balance - December 31, 2006	198,779		10,900,383	(10,453,904	)	645,258
Conversion of share capital to non par value shares	(198,779	)	198,779	—		—
Series AA preferred shares issuance in May 2007 (net of issuance expenses of $44,415)	—		2,705,513	—		2,705,513
Net loss for the year	—		—	(2,483,627	)	(2,483,627	)
Balance - December 31, 2007	—		13,804,675	(12,937,531	)	867,144
Net loss for the three-months (unaudited)	—		—	(365,062	)	(365,062	)
Balance - March 31, 2008 (unaudited)	—		13,804,675	(13,302,593	)	502,082

The accompanying notes are an integral part of the consolidated financial statements.

6

TEVET PROCESS CONTROL TECHNOLOGIES LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In U.S. dollars)

	(unaudited) Three Months ended March 31,				Year ended December 31,
	2008		2007		2007		2006
CASH FLOWS - OPERATING ACTIVITIES
Net loss for the year	(365,062	)	(859,511	)	(2,483,627	)	(1,542,528	)
Adjustments to reconcile net loss to net cash used in operating activities (Appendix A)	(217,819	)	246,912		222,528		140,704
Net cash provided by (used in) operating activities	582,881		612,599		(2,261,099	)	(1,401,824	)
CASH FLOWS - INVESTING ACTIVITIES
Additions to property and equipment	—		—		(50,043	)	(29,422	)
Increase in short-term bank deposits	200,000		4,533		(325,318	)	(139,040	)
Net cash provided by (used in) investing activities	200,000		4,533		(375,361	)	(168,462	)
CASH FLOWS - FINANCING ACTIVITIES
Issuance of shares, net	—		—		2,705,513		—
Receipt of long-term loan	—		—		—		1,416,236
Repayment of long-term loan	(104,908	)	(188,243	)	(500,000	)	(403,745	)
Net cash provided by (used in) financing activities	(104,908	)	(188,243	)	2,205,513		1,012,491
Decrease in cash and cash equivalents	(487,789	)	(796,309	)	(430,947	)	(557,795	)
Cash and cash equivalents - beginning of year	720,275		1,151,222		1,151,222		1,709,017
Cash and cash equivalents - end of year	232,486		354,913		720,275		1,151,222

The accompanying notes are an integral part of the consolidated financial statements.

7

TEVET PROCESS CONTROL TECHNOLOGIES LTD.

APPENDIX TO CONSOLIDATED STATEMENTS OF CASH FLOWS

(In U.S. dollars)

	Year ended December 31,
	2007		2006
A. Adjustments to reconcile net loss to net cash used in operating activities
Expenses not involving cash flows:
Depreciation and amortization	75,740		74,313
Decrease in liability for severance pay, net	(8,697	)	(11,129	)
Interest due to long-term loan	(5,179	)	10,357
Non-cash interest expenses on long-term loan	33,984		33,611
Changes in operating assets and liabilities:
Decrease (increase) in trade account receivable	650,632		(481,265	)
Decrease (increase) in other current assets	83,307		(39,232	)
Decrease in long-term deposits	6,455		66,078
Increase in inventories and finished goods used in operations	(42,733	)	(145,580	)
Increase in deferred revenues	109,414		—
Increase (decrease) in trade accounts payable and other current liabilities	(680,395	)	633,551
	222,528		140,704

The accompanying notes are an integral part of the consolidated financial statements.

8

TEVET PROCESS CONTROL TECHNOLOGIES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - DESCRIPTION OF BUSINESS AND GENERAL

A. Description of business

Tevet Process Control Technologies Ltd. (“the Company”), was founded and commenced operations in March 1999. The Company is engaged in developing, producing and marketing of products in the field of semiconductors.

In February 2002, the Company incorporated a wholly owned U.S. subsidiary, Tevet Process Control Technologies Inc. (the “Subsidiary”), a Delaware corporation, which is engaged in marketing, sales, and limited customer support of the Company’s products in the U.S. as well as other markets outside of Israel.

B. Risk factors

The Company has a limited operating history and faces a number of risks, including uncertainties regarding demand and market acceptance of the Company’s product, the effects of technological change, competition and the development of new products. Additionally, other risk factors exist such as the nature of the Company’s distribution channels, ability to manage growth, loss of key personnel and the effect of planned expansion of operations on the future results of the Company.

The financial statements of the Company for the year ended December 31, 2007, reflect a net loss in the amount of $2,483,627 and negative cash flows from operating activities in the amount of $2,261,099.

The Company anticipates that it will continue to incur significant operating costs and losses in connection with developing and marketing of its products and with increased business development and marketing efforts.

Those conditions indicate the existence of a substantial uncertainty, which may cause significant doubt about the Company’s ability to continue as a going concern.

On May 19, 2008, the Company sold its assets and liabilities in consideration of $3,525,000 cash payment less some of the Company’s liabilities, as agreed. As part of the agreement, the Company will deposit $528,750 in escrow to secure the Company’s obligations. Those will be distributed in accordance to the terms of the escrow agreement.

9

TEVET PROCESS CONTROL TECHNOLOGIES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies followed in the preparation of the financial statements, which are consistent with those of prior years, are as follows:

A. Stock based compensation

The Company’s financial statements do not reflect the effect of the treatment for stock based compensation as required by Accounting Standard No. 24.

B. Use of estimates in preparation of financial statements

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

C. Cash and cash equivalents

Cash and cash equivalents consist of cash and demand deposits in banks and highly liquid investments with original maturities of less than three months.

D. Property and equipment

Property and equipment are presented at cost, net of participation by the Israeli Office of the Chief Scientist (“OCS”) and less accumulated depreciation and amortization. Depreciation and amortization are calculated based on the straight-line method over the estimated useful lives of the related assets or terms of the related leases, as follows:

	%
Machinery and Equipment	6-15
Computers	33

E. Revenue recognition

The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable and collectibility is probable. Sales arrangements with specific acceptance terms are not recognized until the customer has confirmed that the product has been accepted.

Service revenues include post-contract customer support. Software maintenance agreements provide technical support on an if-and-when-available basis. Post-contract customer support revenues are recognized ratably over the term of the support period (generally one year) and other service revenues are recognized as the related services are provided.

F. Research and development costs

Research and development costs, net of participation by the Israeli Office of the Chief Scientist (“OCS”), are charged to operations as incurred.

10

TEVET PROCESS CONTROL TECHNOLOGIES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.)

G. Income taxes

Deferred tax assets in respect of carryforward losses and temporary differences are recognized when their future realization is probable. Due to the uncertainty regarding future taxable income, deferred income tax assets in respect of tax loss carryforwards and deductible temporary differences were not recorded in the financial statements.

H. Fair value of financial instruments

The Company’s financial instruments include mainly non-derivative assets (cash and cash equivalents, short term deposits, trade accounts receivable and other current assets) and non-derivative liabilities. Due to the nature of these instruments their fair values approximate the amounts presented in the financial statements.

I. Exchange rates and linkage basis

Balances denominated in, or linked to currencies other than the dollar are presented according to the representative exchange rates published by the Bank of Israel as of the balance sheet date.

Balances which are linked to the Israeli Consumer Price Index (“CPI”) are presented on the basis of the index in respect of December (i.e., the first index published subsequent to the balance sheet date), based on the terms of the applicable transactions.

Exchange rate of linkage differences are charged to operations as incurred.

Data in respect of the NIS/dollar exchange rate and the CPI are as follows:

	Representative exchange rate of the dollar		CPI in respect of December
	(NIS per $1)		(in points)
As of:
March 31, 2008	3.553		Not available
December 31, 2007	3.846		106.4
December 31, 2006	4.225		102.9
	%		%
Change during:
Three months ended March 31, 2008	(7.6	)	—
Year ended December 31, 2007	(8.9	)	3.4
Year ended December 31, 2006	(8.2	)	(0.1	)

11

TEVET PROCESS CONTROL TECHNOLOGIES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - OTHER CURRENT ASSETS

	(unaudited) March 31,	December 31,
	2008	2007	2006
	$	$	$
Government of Israel (VAT refundable and other)	4,249	9,291	90,081
Office of the Chief Scientist	60,385	22,956	49,432
Other	16,836	52,802	28,843
	81,470	85,049	168,356

NOTE 4 - PROPERTY AND EQUIPMENT

A. Composition:

	(unaudited) March 31,	December 31,
	2008	2007	2006
	$	$	$
Cost:
Laboratory equipment	129,261	182,567	180,492
Leasehold improvements	304,312	313,733	313,733
Computers and software	199,672	217,146	171,328
Furniture and office equipment	64,896	65,354	63,204
	698,141	778,800	728,757
Accumulated depreciation and amortization:
Laboratory equipment	110,122	154,858	141,261
Leasehold improvements	149,474	149,654	126,642
Computers and software	145,473	164,518	130,367
Furniture and office equipment	12,589	33,005	27,223
	417,658	502,035	425,493
Grants received from the OCS, net	—	—	(802	)
	280,483	276,765	302,462

NOTE 5 - OTHER CURRENT LIABILITIES

	(unaudited) March 31,	December 31,
	2008	2007	2006
	$	$	$
Employees and related institutions	67,993	175,397	285,889
Accrued vacation	173,625	147,579	169,139
Accrued warranty	10,825	10,000	20,000
Accrued expenses	—	54,309	397,232
	252,433	387,285	872,260

12

TEVET PROCESS CONTROL TECHNOLOGIES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 - LONG-TERM LOAN

A. Composition:

	(unaudited) March 31,		December 31,
	2008		2007		2006
	$		$		$
Long- term loan	—		—		1,012,491
Less - current maturities on long-term loan	—		—		(500,000	)
Less - long term prepaid finance expenses derived from warrant granted	—		—		(31,283	)
	—		—		481,208
Current maturity of long - term loan	407,783		512,491		500,000
Less -short term prepaid finance expenses derived from warrant granted	(31,483	)	(31,283	)	(33,984	)
Total current maturity of long-term loan, net	376,300		481,208		466,016

B. General:

In November 2005, the Company signed a loan agreement with European Venture II Leveraged Venture Leasing Company Limited (the “Lender”). The loan in the amount of $1,500,000 was received in January 2006. The loan is denominated in U.S. dollars and bears annual interest of 12.5% and will be repaid in 36 equal installments. Amount of approximately $84 thousand was reduced from the loan in advance.

Within the framework of the agreement, the Company registered a fixed, as well as, a floating lien on its assets, liabilities and rights of any kind, possessed by the company, including intangible assets.

In addition, the Company granted the Lender, at no additional consideration, with a warrant to purchase 1,899,032 Company’s D preferred shares NIS 0.01 par value at an exercise price of $0.11 per share. These warrants expire in January 2015 and may be exercised on the earlier of (a) the nine year anniversary of the grant date; (b) the consummation of an initial public offering or (c) the closing of a merger or sale event.

During the recapitalization of the Company’s shares in May 2007 (See Note 9A) the existing D warrant was cancelled and in line of such cancellation, the lender received a warrant to purchase 190,855 ordinary shares with no par value, at an exercise price of $1.00311 per share. All other terms of the cancelled D warrant remain the same.

13

TEVET PROCESS CONTROL TECHNOLOGIES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 - LIABILITY FOR SEVERANCE PAY, NET

The Company’s liability for severance pay is calculated in accordance with Israeli law based on the most recent salary paid to employees and the length of employment in the Company. Part of the liability is funded through individual insurance policies purchased from outside insurance companies, which are not under the Company’s control. The balance presented in liability for severance pay, net, represents the unfunded portion.

NOTE 8 - COMMITMENTS AND CONTINGENT LIABILITIES

A. In February 1999, the development project of the Company was approved by the Government of Israel, through the Office of the Chief Scientist (“OCS”) under the technological incubator program. Pursuant to such program, the OCS participated in 85% of an approved project for a period of two years ended October 2000.

In addition, in May 2000, the Company received an approval from the OCS for its participation in research and development costs of the Company based on budgets approved by the OCS, subject to the fulfillment of specified milestones.

As of December 31, 2007, the Company has received OCS participation totaling approximately $305 thousand.

The Company is obligated to pay the Government of Israel royalties of 3% on the sales of products in respect, of which, the Government has participated in research and development costs. Such payments are not to exceed the amount originally received from the Government, linked to the dollar. As of December 31, 2007, the Company paid royalties in the total amount of $270 thousand and accrued expenses in the amount of $31 thousand.

B. In January 2001, another budget was approved by the OCS for 50% participation in the research and development of testing Beta Site units of specific applications. According to the commitment with the OCS, the Company will be obligated to pay royalties of between 3% - 3.5% of the sales deriving from the research and development financed by the OCS up to the amount originally received from the Government, linked to the dollar, and bearing annual interest at Libor rate.

As of December 31, 2007, the Company has received OCS participation totaling approximately $240 thousand.

C. In May 2005, the Company received an additional approval from the OCS for its participation in research and development costs of the Company up to 60% of the total approved budget of approximately $760 thousand (NIS 3,500 thousand). The budget is for a period of fourteen months, commencing December 2005 and ending February 2007. As of December 31, 2007, the Company completed the approved budget and received total of $404 thousand as participation from the OCS. According to the terms of the approval, the Company will be obligated to pay royalties of the sales deriving from the products, which research and development costs were financed by the OCS, up to the amount originally received from the Government.

14

TEVET PROCESS CONTROL TECHNOLOGIES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - COMMITMENTS AND CONTINGENT LIABILITIES (Cont.)

D. In June 2007, the Company received an additional approval from the OCS for its participation in research and development costs of the Company up to 50% of the total approved budget of approximately $933 thousand (NIS 3,800 thousand). The budget is for a period of one year, commencing June 2007 and ending May 2008. As of December 31, 2007, the Company received total of $138 thousand as participation from the OCS. According to the terms of the approval, the Company will be obligated to pay royalties of the sales deriving from the products, which research and development costs were financed by the OCS, up to the amount originally received from the Government.

E. The Company also participates in the MAGNET Program, in the OCS for 50% participation in the research and development costs of the Company. First program for the period of one year commencing August 1, 2005 until July 31, 2006 was for a total approved budget of $154 thousand (NIS 648 thousand). Second program for total approved budget of $270 thousand (NIS 1,189 thousand) is for a period of one year commencing August 1, 2006 until July 31, 2007 and a third program for total approved budget of $276 thousand (NIS 1,195 thousand) is for a period of one year commencing August 1, 2007 until July 31, 2008. As of December 31, 2007 the Company received a total participation of $230 thousand from all three programs. The Company is not obligated to pay royalties due to the development costs financed by the OCS within the MAGNET program.

F. The Company rents its facilities under lease agreements, which expire in 2014. The annual rental payment is approximately $69 thousand. As part of the agreement the Company has provided the leaser with a bank guarantee of approximately $48 thousand. The subsidiary rents its facilities under lease agreements, which expire in 2007. The annual rental payment is approximately $19 thousand

G. The Company rents motor vehicles under lease agreements, which expire in 2008, 2009 and 2010. The annual rental payments are approximately $77 thousand.

H. See Note 6B.

NOTE 9 - SHAREHOLDERS’ EQUITY

A. General

On May 3, 2007 the Company signed on a recapitalization agreement with its existing shareholders in which the Company has decided to make the following changes in its share capital:

(1) Authorized share capital was increased. As of December 31, 2007 total authorized shares of the Company totaled 35,100,000.

15

TEVET PROCESS CONTROL TECHNOLOGIES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 - SHAREHOLDERS’ EQUITY (Cont.)

A. General (Cont.)

(2) Reclassification and conversion of all preferred shares into ordinary shares, with no par value in the following ratio:

A preferred shares	1:80
B preferred shares	1:112
C preferred shares	1:150
C-1 preferred shares	1:1
C-2 preferred shares	1:1
D preferred shares	1:250

(3) The Company decided on a reverse split of its share capital when 1000 ordinary shares with no par value will be represented by one ordinary share with no par value.

Ordinary shares and Series AA preferred shares confer to holders the right to receive notice to participate and vote in the general meetings of the Company and the right to receive dividends if declared. Ordinary shares and Series AA preferred shares are identical in most respects with some exceptions including for preferential rights granted to holders of preferred shares upon liquidation.

B. Composition of share capital as of December 31, 2007 and 2006:

	December 31, 2007 Number of shares		December 31, 2006 Number of shares
	Registered	Issued and paid-up	Registered	Issued and paid-up
Ordinary Shares with no par value	28,000,000	12,621,981	—	—
Series AA Preferred with no par value	7,100,000	6,601,666	—	—
Ordinary Shares NIS 0.01 par value each	—	—	53,738,238	11,873,000
Series A Preferred Shares NIS 0.01 par value each	—	—	4,361,762	4,361,762
Series B Preferred Shares NIS 0.01 par value each	—	—	10,000,000	10,000,000
Series B1 Preferred Shares NIS 0.01 par value each	—	—	7,100,000	—
Series C Preferred Shares NIS 0.01 par value each	—	—	60,000,000	45,000,000
Series C1 Preferred Shares NIS 0.01 par value each	—	—	13,000,000	—
Series C2 Preferred Shares NIS 0.01 par value each	—	—	15,000,000	—
Series D Preferred Shares NIS 0.01 par value each	—	—	19,985,048	18,086,016

16

TEVET PROCESS CONTROL TECHNOLOGIES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 - SHAREHOLDERS’ EQUITY (Cont.)

C. Issuance of share capital

1) In August 1999, the Company signed an agreement with an investor, who is also providing the Company with supplementary financing, according to which 769 ordinary shares NIS 0.01 par value were transferred from Naiot to the investor in consideration for approximately $100 thousand. In addition, in February 2000, as a result of an investment agreement signed by the Company with other parties, the investor invested approximately $27 thousand in exchange for 111 ordinary shares NIS 0.01 par value, in order to maintain his shareholding percentage in the Company.

2) In January and February 2000, the Company signed agreements with various investors in which the Company issued the investors 1,035 ordinary shares NIS 0.01 par value in consideration for approximately $250 thousand. In addition, in February 2000, as a result of the investment agreement with the various investors, an existing shareholder invested approximately $66 thousand in consideration for 274 ordinary shares NIS 0.01 par value, in order to maintain his shareholding percentage in the Company.

3) In June 2000, the Company issued 985 Series A preferred shares NIS 0.01 par value as part of a rights offering to existing shareholders, in consideration for approximately $502 thousand.

4) In June 2000, the Company issued 100 ordinary shares NIS 0.01 par value at their nominal value to an investment company as part of an agreement in which the investment company acted to recruit investors for the Company.

5) In August 2000, the Company signed agreements with an investor in which the Company issued the investor 100 Series A preferred shares NIS 0.01 par value in consideration for approximately $51 thousand.

6) In August 2000, the Company allotted bonus shares to existing shareholders in the Company at a ratio of 1:999. As part of the allocation, the Company issued 11,870,711 ordinary shares of NIS 0.01 par value and 1,083,915 Series A preferred shares of NIS 0.01 par value.

7) In October 2000, the Company signed an agreements with various investors in which the Company issued the investors 2,926,285 Series A preferred shares NIS 0.01 par value in consideration for $600 thousand.

8) In January 2001, the Company signed an agreement with an investor in which the Company issued the investor 350,477 Series A preferred shares NIS 0.01 par value in consideration for approximately $200 thousand.

9) In April 2002, the Company signed an agreement with various investors in which the Company issued the investors 10,000,000 Series B preferred shares NIS 0.01 par value of the Company in consideration for approximately $3 million.

17

TEVET PROCESS CONTROL TECHNOLOGIES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 - SHAREHOLDERS’ EQUITY (Cont.)

C. Issuance of share capital (Cont.)

10) In June 2004, the Company signed an agreement with various investors in which the convertible loan in the amount of $820,000 with an additional investment of $3,680,000 was exercised to 45,000,000 Series C preferred shares NIS 0.01 par value.

11) In September 2005, the Company signed an agreement with various investors in which the Company issued the investors 18,086,016 Series D preferred shares NIS 0.01 par value of the Company in consideration for $2 million.

As of December 31, 2007, all preferred shares were converted into ordinary shares. (See A above)

12) In May 2007, the Company signed an agreement with various investors in which the Company issued the investors 6,601,666 Series AA preferred shares with no par value in consideration for $2.75 million.

D. Warrants

1) As of December 31, 2007, the Company granted its shareholders with warrants to purchase 15,000,000 Company’s C preferred shares NIS 0.01 par value at a price of $0.10 per share. The warrants can be exercised, in whole or in part, during the period beginning on the date of the grant and ending on the date which is immediately prior to: (a) the closing of the Company’s offer of its Ordinary Shares to the public which results in net proceeds to the Company of at least $20 million, or (b) the sale, lease, license or other transfer or other disposal of all or substantially all of the Company’s assets, the sale or other transfer of all or substantially all of the shares in the Company, or a merger or other transaction the result of which is that the holders of the Company’s voting securities immediately prior to such transaction hold less than 50% of the voting securities in the surviving corporation.

During the recapitalization of the Company’s shares in May 2007, the existing C warrants were cancelled. In line of the cancelled C warrants, warrant holders received warrants to purchase 1,507,519 (as set forth in the agreement) at an exercise price of $0.995012 per ordinary share with no per value. All other terms of the cancelled C warrant remain the same.

2) See Note 6B.

3) As part of the recapitalization agreement signed on May 3, 2007, the Company issued to each shareholder holding preferred A shares or preferred B shares prior to the conversion (see A above), warrants to purchase one ordinary share for every 10 series AA preferred shares, with no par value, purchased by such share holder at a purchase price of $0.995012 per ordinary share. The terms and conditions of the new warrants shall be the same as terms and conditions of the new C warrants. (See D(1) above)

18

TEVET PROCESS CONTROL TECHNOLOGIES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 - SHAREHOLDERS’ EQUITY (Cont.)

E. Share options

1) Share option plans to employees outstanding as of December 31, 2007:

As of December 31, 2007, the Company had total of 2,380,846 outstanding options to purchase ordinary shares, of the Company, with no par value. The options will vest over various periods not exceeding four years and will expire ten years from the date of grant. The exercise price will be between $0.05 and $0.51 per share.

As part of the outstanding options above, the Company granted an employee of the Company options to purchase 1,363,752 ordinary shares exercisable at no cost. 952,976 of the options will vest immediately as of the date of the grant, 25% of the remaining options will vest 12 months following the date of the grant and an additional 2.083% of the remaining options will vest monthly.

2) Share option plans to consultants outstanding as of December 31, 2007:

As of December 31, 2007, the Company granted certain various consultants and members of the Board of Advisors options to purchase 1,370 ordinary shares, of the Company, NIS 0.01 par value, in exchange for services. Those options will vest over two years, and the exercise price will be between $0.01 and $0.57 per share.

NOTE 10 - RESEARCH AND DEVELOPMENT EXPENSES, NET

	(unaudited) Three Months ended March 31,	Year ended December 31,
	2008	2007		2006
	$	$		$
Salaries and related expenses	256,665	1,117,395		1,018,495
Patents and subcontractors	69,443	72,441		45,337
Car expenses	446	135,718		109,942
Depreciation and amortization	—	39,157		46,153
Rent and office maintenance	44,204	50,902		36,432
Travel expenses	4,786	38,537		47,954
Other	—	297,319		188,028
	375,524	1,751,469		1,492,341
Less - grants from the OCS	—	(366,011	)	(453,056	)
	375,524	1,385,458		1,039,285

19

TEVET PROCESS CONTROL TECHNOLOGIES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 - MARKETING EXPENSES

	(unaudited) Three Months ended March 31,	Year ended December 31,
	2008	2007	2006
	$	$	$
Salaries and related expenses	79,175	651,097	814,267
Exhibition	—	61,062	44,057
Travel expenses	5,159	126,561	157,693
Sales commissions	—	100,913	281,891
Rent and office maintenance	9,175	11,312	9,633
Car expenses	—	30,871	22,337
Depreciation and amortization	—	8,702	8,829
Other	24,858	39,502	57,285
	118,367	1,030,020	1,395,992

NOTE 12 - GENERAL AND ADMINISTRATIVE EXPENSES

	(unaudited) Three Months ended March 31,	Year ended December 31,
	2008	2007	2006
	$	$	$
Salaries and related expenses	144,011	516,539	503,301
Professional fees	10,050	58,840	53,771
Rent and office maintenance	11,438	65,644	38,181
Depreciation and amortization	—	30,558	13,824
Car expenses	5,079	22,195	21,731
Travel expenses	—	65,016	77,877
Other	18,486	141,481	58,427
	189,064	900,273	767,112

20

TEVET PROCESS CONTROL TECHNOLOGIES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 - INCOME TAXES

A. The Law for the Encouragement of Capital Investments, 1959

In December 2001, the Company was granted “approved enterprise” status under the “alternative track”, in accordance with the Law for the Encouragement of Capital Investment - 1959 (“the Law”), for an investment program in the aggregate amount of $497 thousand.

As of December 31, 2007, the Company invested approximately $443 thousand.

The framework of the “alternative track” provides for a tax exemption on undistributed earnings derived from assets included in the approved enterprise investment program for a period of six years and a reduced tax rate of 25% during the following year. These tax benefits will be granted to the Company commencing with the first year in which it generates taxable income from the approved enterprise. This is contingent on the fact that a period of 12 years has not elapsed since the approved enterprise’s commencement of operations, as determined by the Investment Center, or 14 years from the year in which the approval certificate had been issued, whichever is earlier.

According to this Law, should the Company distribute a dividend out of the profits, which benefited from exemption as an approved enterprise, it would become subject to corporate taxes of 25% on the taxable income from which this dividend had been distributed.

A dividend paid out of such profits that are subject to withholding tax of 15%.

A dividend paid out of profits not benefiting from exemption is subject to a tax rate of 25% (or less, if the party receiving the dividend is resident in a country with which Israel has a tax treaty for the prevention of double taxation). A distribution to a company resident in Israel is exempt from tax.

According to the law for Amending the Income Tax Ordinance (No.147), 2005, the corporate tax rate is to be reduced gradually from 31% for the 2006 tax-year (2005 – 34%) until 25% for the 2010 tax-year.

Obtaining such benefits is contingent upon fulfilling the provisions of the Law as well as the approval certificate. Failure to adhere to the stipulated conditions may cause the cancellation of the benefits and - in certain circumstances - may call for the Company’s reimbursement of benefits already received, with interest and linkage differences.

B. Inflation adjustment for tax purposes

The Company is subject to the Income Tax Law (Inflationary Adjustments), 1985, pursuant to which taxable income is measured on the basis of changes in the CPI.

On February 26, 2008 a new law for amending the Income Tax Law was passed in the Kneset -“Income Tax Ordinance (No. 20), 2008”. The new law ends the application of inflationary adjustments on taxable income starting 2008 tax year.

21

TEVET PROCESS CONTROL TECHNOLOGIES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 - INCOME TAXES (Cont.)

C. Deferred taxes

Due to the uncertainty of realizing the benefit of the Company’s tax loss carry forwards, deferred income tax assets in respect of tax loss carry forwards and deductible temporary differences were not recorded in the financial statements.

D. The Company and its subsidiary have not received tax assessments since incorporation.

NOTE 14 - RECONCILIATION TO U.S. GAAP

The consolidated financial statements of the Company have been prepared in accordance with Israeli GAAP. Had the consolidated financial statements been prepared in accordance with U.S. GAAP, the effects would have been as follows:

1. Income statements

	Year ended December 31,
	2007		2006
	$		$
Net loss as presented	(2,483,627	)	(1,542,528	)
Stock-based compensation (1)	(223,327	)	(1,696	)
Amortization of additional Series D warrants fair value (2)	(7,135	)	(7,057	)
Total adjustments	(230,462	)	(8,753	)
Net loss as per U.S. GAAP	(2,714,089	)	(1,551,281	)

2. Balance sheets

	December 31,
	2007		2006
	$		$
Current maturities of long term loan as presented	481,208		466,016
Additional short term prepaid finance expenses derived from Series D warrants granted (3)	(6,569	)	(7,035	)
Current maturities of long term loan as per U.S. GAAP	474,639		458,981
Long term loan, net of current maturities as presented	—		481,208
Additional long term prepaid finance expenses derived from Series D warrants granted (3)	—		(6,569	)
Long term loan, net of current maturities as per U.S. GAAP	—		474,639
Additional paid-in capital as presented	13,804,675		10,900,383
Stock-based compensation for 2006 (1)	1,696		1,696
Valuation of Series D preferred stock warrants (2)	20,761		20,761
Stock-based compensation for 2007 (1)	223,327		—
Accumulated deficit as per U.S. GAAP	14,050,459		10,922,840
Accumulated deficit as presented	(12,937,531	)	(10,453,904	)
Total adjustments to net loss for 2006	(8,753	)	(8,753	)
Total adjustments to net loss for 2007	(230,462	)	—
Accumulated deficit as per U.S. GAAP	(13,176,746	)	(10,462,657	)

(1) Stock-based compensation expense is recognized under SFAS No. 123(R) “Share-Based Payment” and is related to the unvested employee stock options awards made to the Company’s employees and directors pursuant to the employee stock option plan.

(2) Valuation of the 1,899,032 Series D preferred stock warrants issued by the Company to a Lender (see Note 6) were valued using a Black-Scholes valuation model for U.S. GAAP purposes. The Black-Scholes calculation provides a valuation of $20,761 higher than the valuation under Israeli GAAP and is amortized over the life of the loan using the effective interest method.

(3) Adjustment represents the increase in the short term prepaid finance expenses to be recognized within one year from the increased valuation of the Series D preferred stock warrants referenced above.

NOTE 15 - SUBSEQUENT EVENTS

See Note 1B.

22

TEVET PROCESS CONTROL TECHNOLOGIES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16 - CONDENSED FINANCIAL DATA OF THE COMPANY IN NOMINAL NIS FOR TAX PURPOSES

A. Balance sheets

	December 31,
	2007	2006
	NIS	NIS
ASSETS
CURRENT ASSETS
Cash and cash equivalents	2,218,806	4,038,686
Short term bank deposits	2,003,044	568,292
Related party	—	1,822,598
Other current assets	304,071	666,674
Inventories	1,891,438	1,689,242
Total current assets	6,417,359	8,785,492
INVESTMENT IN A SUBSIDIARY	1,415,729	950,639
FINISHED GOODS USED IN OPERATIONS	27,293	53,855
LONG-TERM DEPOSITS	55,288	81,681
PROPERTY AND EQUIPMENT, NET	1,151,009	1,240,385
	9,066,678	11,112,052
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Trade accounts payable	698,701	1,915,347
Related party	721,279	—
Current maturities on long-term loan	1,891,688	1,956,957
Other current liabilities	1,352,741	2,195,709
Total current liabilities	4,664,409	6,068,013
LONG-TERM LIABILITIES
Long term loan	—	2,022,088
Liability for severance pay, net	137,299	170,748
Total long term liabilities	137,299	2,192,836
SHAREHOLDERS’ EQUITY	4,264,970	2,851,203
	9,066,678	11,112,052

23

TEVET PROCESS CONTROL TECHNOLOGIES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16 - CONDENSED FINANCIAL DATA OF THE COMPANY IN NOMINAL NIS FOR TAX PURPOSES (Cont.)

B. Statements of operations

	Year ended December 31,
	2007		2006
	NIS		NIS
Sales	3,138,394		5,192,818
Cost of sales	(3,914,245	)	(5,278,294	)
Gross loss	(775,851	)	(85,476	)
Operating costs and expenses:
Research and development expenses, net	5,752,499		4,518,645
Marketing expenses	1,626,358		1,219,020
General and administrative expenses	1,984,134		827,642
Total operating expenses	9,362,991		6,565,307
Operating loss before financing income (expenses), net	(10,138,842	)	(6,650,783	)
Financing income (expenses), net	525,165		(678,808	)
Loss before Company’s share in net income of the Subsidiary	(9,613,677	)	(7,329,591	)
Company’s share in net income of the Subsidiary	178,707		236,131
Net loss	(9,434,970	)	(7,093,460	)

24

TEVET PROCESS CONTROL TECHNOLOGIES LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16 - CONDENSED FINANCIAL DATA OF THE COMPANY IN NOMINAL NIS FOR TAX PURPOSES (Cont.)

C. Statements of changes in shareholders’ equity

	Share capital		Additional paid in capital	Accumulated deficit		Total
	NIS		NIS	NIS		NIS
Balance - January 1, 2006	893,208		49,287,861	(40,688,972	)	9,492,097
Warrants granted to third party	—		452,566	—		452,566
Net loss for the year	—		—	(7,093,460	)	(7,093,460	)
Balance - December 31, 2006	893,208		49,740,427	(47,782,432	)	2,851,203
Conversion of share capital to non par value shares	(893,208	)	893,208	—		—
Series AA preferred shares issuance in May 2007 (net of issuance expenses of NIS188,314)	—		10,848,737	—		10,848,737
Net loss for the year	—		—	(9,434,970	)	(9,434,970	)
Balance - December 31, 2007	—		61,482,372	(57,217,402	)	4,264,970

25

EX-99.2

Exhibit 99.2

NANOMETRICS INCORPORATED

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

Nanometrics Incorporated (“Nanometrics” or the “Company”) acquired all of the assets and assumed specified liabilities of Tevet Process Control Technologies, Ltd. (“Tevet”) in an all cash transaction which closed on May 19, 2008. The following unaudited pro forma condensed combined financial statements are based on the historical financial statements of Nanometrics and Tevet after giving effect to the acquisition of Tevet by Nanometrics (the “Acquisition”) using the purchase method of accounting and applying the assumptions and adjustments described in the accompanying notes.

The fiscal years of Nanometrics and Tevet ended within 90 days of each other for 2007. Accordingly, the unaudited pro forma condensed combined balance sheet combines Nanometrics’ with Tevet’s historical consolidated balance sheet as of March 29, 2008, giving effect to the merger as if it had occurred on March 29, 2008. The unaudited pro forma condensed combined statement of operations for the year ended December 29, 2007 and the three months ended March 29, 2007 combines Nanometrics’ with Tevet’s historical consolidated statements of operations. The unaudited pro forma condensed combined statements of operations give effect to the merger as if it had occurred on December 31, 2006. You should read this information in conjunction with the:

• accompanying notes to the Unaudited Pro Forma Condensed Combined Financial Statements;

• separate historical financial statements of Nanometrics as of and for the fiscal year ended December 29, 2007, included in Nanometrics’ annual report on Form 10-K for the fiscal year ended December 29, 2007;

• separate historical financial statements of Tevet as of and for the fiscal year ended December 31, 2007 which are included as Exhibit 99.1 to Nanometrics’ current report on Form 8-K/A filed with the Securities Exchange Commission on August 4, 2008.

The pro forma information presented is for illustrative purposes only and is not necessarily indicative of the financial position or results of operations that would have been realized if the Acquisition had been completed on the dates indicated, nor is it indicative of future operating results or financial position. The pro forma adjustments are based upon currently available information and certain assumptions that we believe are reasonable.

Further, the unaudited pro forma condensed combined financial statements do not include any adjustments for liabilities that may result from integration activities, as management of Nanometrics and Tevet are in the process of making these assessments, and estimates of these costs are not currently known. However, liabilities ultimately may be recorded for severance or relocation costs related to Tevet employees, costs of vacating some facilities of Tevet, or other costs associated with exiting activities of Tevet that would affect amounts in the pro forma financial statements. In addition, Nanometrics may incur significant restructuring charges upon completion of the Acquisition or in subsequent quarters for severance or relocation costs related to Nanometrics employees. Any such restructuring charges would be recorded as an expense in the consolidated statement of operations in the period in which they were incurred.

Pursuant to the purchase method of accounting, the total estimated purchase price, calculated as described in Note 1 to these unaudited pro forma condensed combined financial statements, has been preliminarily allocated to assets acquired and liabilities assumed based on their respective fair values. Nanometrics’ management, with the assistance of a third party valuation firm, has estimated the preliminary fair value of the identifiable intangible assets and tangible assets acquired and liabilities assumed. Any differences between the fair value of the consideration issued and the fair value of the assets acquired and liabilities assumed will be recorded as goodwill. Since these unaudited pro forma condensed combined financial statements have been prepared based on preliminary estimates of fair values attributable to the Acquisition, the actual amounts recorded for the Acquisition may differ materially from the information presented. These allocations are subject to change pending further review of the fair value of the assets acquired and liabilities assumed as well as the actual transaction costs.

The unaudited pro forma condensed combined financial statements have been prepared by Nanometrics for illustrative purposes only and are not necessarily indicative of the condensed consolidated financial position or results of operations in future periods or the results that actually would have been realized had Nanometrics and Tevet been a combined company during the specified periods. The pro forma adjustments are based on the preliminary information available at the time of the preparation of this document. The unaudited pro forma condensed combined financial statements, including the notes thereto, should be read in conjunction with, Nanometrics’ historical consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 29, 2007 and Tevet’s historical consolidated financial statements for the years ended December 31, 2007 and 2006 which are included as Exhibit 99.1 to Nanometrics’ current report on Form 8-K/A filed with the Securities Exchange Commission on August 4, 2008.

UNAUDITED PROFORMA CONDENSED COMBINED BALANCE SHEET

AS OF MARCH 29, 2008

(in thousands)

	Tevet			Nanometrics			Pro Forma Adjustments			Proforma Combined
Current Assets
Cash and cash equivalents	$	232		$	18,723		$	(3,762	) (b)	$	15,193
Short term marketable debt securities		264			—			—			264
Accounts receivable, net		307			29,854			—			30,161
Inventories		335			31,658			111	(e)		32,104
Inventories - delivered systems		—			236			—			236
Prepaid expenses and other current assets		82			3,336			—			3,418
Total current assets		1,220			83,807			(3,651	)		81,376
Property and equipment, net		280			44,140			—			44,420
Goodwill		—			52,132			1,353	(c)		53,485
Intangibles assets, net		—			20,935			1,420	(d)		22,355
Other assets		19			1,670			—			1,689
Total assets	$	1,519		$	202,684		$	(878	)	$	203,325
Current Liabilities
Revolving line of credit	$	—		$	—		$	—		$	—
Accounts payable		—			9,173			—			9,173
Accrued payroll and related expenses		32			4,687			—			4,719
Customer deposits and deferred revenue		357			1,384			—			1,741
Accrued liabilities		252			7,775			—			8,027
Income taxes payable		—			1,228			—			1,228
Current portion of debt obligations		376			150			(376	) (f)		150
Total current liabilities		1,017			24,397			(376	)		25,038
Deferred income taxes		—			382			—			382
Debt obligations and long-term liabilities		—			1,251			—			1,251
		1,017			26,030			(376	)		26,671
Stockholders’ equity
Common stock		—			19			—			19
Additional paid-in-capital		13,805			187,856			(13,805	) (a)		187,856
Accumulated deficit		(13,303	)		(14,641	)		13,303	(a)		(14,641	)
Accumulated other comprehensive income		—			3,420			—			3,420
Total stockholders’ equity		502			176,654			(502	)		176,654
Total stockholders’ equity and liabilities	$	1,519		$	202,684		$	(878	)	$	203,325

UNAUDITED PROFORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 29, 2007

(in thousands, except per share amounts)

	Tevet			Nanometrics			Pro Forma Adjustments			Proforma Combined
Net revenues:
Products	$	1,903		$	126,049		$	—		$	127,952
Service		—			20,241			—			20,241
Total net revenues		1,903			146,290			—			148,193
Costs of net revenues:
Cost of products		942			63,938			—			64,880
Cost of service		—			20,717			—			20,717
Total costs of net revenues		942			84,655			—			85,597
Gross profit		961			61,635			—			62,596
Operating expenses:
Research and development		1,386			18,577			61	(h)		20,024
Selling and marketing		1,030			19,561			12	(h)		20,603
General and administrative		900			21,704			150	(h)		22,754
Amortization of intangible sssets		—			5,782			471	(g)		6,253
Restructuring charge		—			2,128			—			2,128
Gain on sale of assets		—			(2,100	)		—			(2,100	)
Total operating expenses		3,316			65,652			694			69,662
Loss from operations		(2,355	)		(4,017	)		(694	)		(7,066	)
Other income (expense):
Interest income		—			202			—			202
Interest expense		(129	)		(211	)		(7	) (i)		(347	)
Other income		—			(13	)		—			(13	)
Total other income (expense), net		(129	)		(22	)		(7	)		(158	)
Loss before provision (benefit) for income taxes		(2,484	)		(4,039	)		(701	)		(7,224	)
Provision (benefit) for income taxes		—			(31	)		—			(31	)
Net loss	$	(2,484	)	$	(4,008	)	$	(701	)	$	(7,193	)
Shares used in per share computation
Basic					18,099						18,099
Diluted					18,099						18,099
Net income per share
Basic				$	(0.22	)				$	(0.40	)
Diluted				$	(0.22	)				$	(0.40	)

UNAUDITED PROFORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE THREE-MONTHS ENDED

(in thousands, except per share amounts)

	March 29, 2008
	Tevet			Nanometrics			Pro Forma Adjustments			Proforma Combined
Net revenues:
Products	$	514		$	27,929		$	—		$	28,443
Service		—			6,799			—			6,799
Total net revenues		514			34,728			—			35,242
Costs of net revenues:
Cost of products		196			13,662			—			13,858
Cost of service		—			5,238			—			5,238
Total costs of net revenues		196			18,900			—			19,096
Gross profit		318			15,828			—			16,146
Operating expenses:
Research and development		376			4,255			4	(h)		4,635
Selling and marketing		118			4,839			1	(h)		4,958
General and administrative		189			5,524			4	(h)		5,717
Amortization of intangible assets		—			1,285			89	(g)		1,374
Restructuring charge		—			870			—			870
Total operating expenses		683			16,773			98			17,554
Loss from operations		(365	)		(945	)		(98	)		(1,408	)
Other income (expense):
Interest income		—			98			—			98
Interest expense		—			(77	)		—			(77	)
Other income		—			454			—			454
Total other income (expense), net		—			475			—			475
Loss before provision for income taxes		(365	)		(470	)		(98	)		(933	)
Provision for income taxes		—			254			—			254
Net loss	$	(365	)	$	(724	)	$	(98	)	$	(1,187	)
Shares used in per share computation
Basic					18,590						18,590
Diluted					18,590						18,590
Net income per share
Basic				$	(0.04	)				$	(0.06	)
Diluted				$	(0.04	)				$	(0.06	)

NOTES TO UNAUDITED PRO FORMA

CONDENSED COMBINED BALANCE SHEET

1. Basis of Pro Forma Presentation

On May 19, 2008, Nanometrics acquired Tevet Process Control Technologies, Ltd, (“Tevet”) an Israel-based privately held corporation. The acquisition of Tevet, an integrated metrology company serving the worldwide semiconductor and solar manufacturing industry, is expected to further Nanometrics’ strategy to offer a breadth of process control metrology solutions that address both advanced technology as well as cost of ownership. Under the terms of the Acquisition agreement relating to the acquisition, the total consideration to purchase all assets and assume specified liabilities of Tevet was $3.8 million in an all-cash transaction. The Company also incurred $0.2 million in transaction fees, including legal, valuation and accounting fees. The Acquisition has been accounted for under the purchase method of accounting in accordance with SFAS No. 141, Business Combinations. Under the purchase method of accounting, the total estimated purchase price is allocated to the net tangible and identifiable intangible assets of Tevet acquired in connection with the Acquisition, based on their respective estimated fair values.

There were no significant intercompany balances and transactions between Nanometrics and Tevet as of the dates and for the periods of these pro forma condensed combined financial statements. Certain reclassification adjustments have been made to conform Nanometrics’ and Tevet’ historical reported balances to the pro forma condensed combined financial statement basis of presentation.

The total preliminary estimated purchase price of the Tevet Acquisition is as follows:

	Amount
Cash paid for the net assets acquired of Tevet	$	3,525,000
Estimated direct transaction fees and expenses		237,149
Total preliminary estimated purchase price	$	3,762,149

The total preliminary estimated purchase price is allocated as follows (in thousands):

	Amount			First Year Charges		Estimated Useful Life
Net assets acquired	$	456,514	*	$	N/A
Goodwill and other intangible assets:
Goodwill		1,885,635			N/A
Customer relationships		600,000			154,000	7 Years
Developed technology		600,000			97,000	7 Years
Backlog		220,000			220,000	1 Year
Total Goodwill and other intangible assets		3,305,635		$	471,000
	$	3,762,149

* based on an estimate of fair value of tangible assets acquired as of May 19, 2008

In accordance with SFAS No. 142, the Company will not amortize the goodwill, but will evaluate it annually for impairment or whenever events or circumstances occur which indicate that goodwill might be impaired.

A final determination of fair values may differ materially from the preliminary estimates and will include management’s final valuation of the fair values of assets acquired and liabilities assumed. This final valuation will be based on the actual net tangible assets of Tevet that exist as of the date of the completion of the Acquisition. The final valuation may change the allocations of purchase price, which could affect the fair value assigned to the assets and liabilities and could result in a change to the unaudited pro forma condensed combined financial statements data.

A preliminary estimate of $0.5 million has been allocated to net tangible assets acquired and $1.4 million has been allocated to amortizable identifiable intangible assets acquired. The depreciation and amortization related to the fair value adjustment to net tangible assets and the amortization related to the amortizable intangible assets are reflected as pro forma adjustments to the unaudited pro forma condensed combined statements of operations.

Identifiable intangible assets. Of the total estimated purchase price, $1.4 million has been allocated to customer relationships, purchased technology and backlog. This adjustment is preliminary and is based on Nanometrics management’s estimates. The amount ultimately allocated to identifiable intangible assets may differ materially from this preliminary allocation. A ten percent increase or decrease in value allocated to the amortizable intangible assets would increase or decrease annual amortization by less than $0.1 million.

Identification and allocation of value to the identified intangible assets was based on the provisions of SFAS 141. The fair value of the identified intangible assets was estimated by performing a discounted cash flow analysis using the “income” approach. This method includes a forecast of direct revenues and costs associated with the respective intangible assets and charges for economic returns on tangible and intangible assets utilized in cash flow generation. Net cash flows attributable to the identified intangible assets are discounted to their present value at a rate commensurate with the perceived risk. The projected cash flow assumptions considered contractual relationships, customer attrition, eventual development of new technologies and market competition.

Purchased Technology. The amount allocated to purchased technology was determined through established valuation techniques in the high-technology industry. The purchased technology intangible asset was determined by discounting the estimated future net cash flows to their present value utilizing the relief of royalty method of the income approach. The estimated net cash flows from the products were based on estimates of royalty streams from each of the product revenues and related income taxes charges. The Company believes the assumptions used in the valuation were reasonable at the time of the Acquisition. The estimated net revenues were based on management’s projections and reflect a perpetual long-term growth rate of five percent. The business projections were compared with and found to be in line with industry analysts’ forecasts of growth in substantially all of the relevant markets. These projections were based on estimates of market size and growth, expected trends in technology, and the nature and expected timing of new product introductions by the Company and those of its competitors. The Company applied a

royalty rate from the estimated net revenues for each product to attribute value for dependency on existing technology of seven percent. The royalty rate was based upon a profit split analysis and industry comparable royalty agreements. The effective tax rate utilized in the analysis reflects a 35% rate for the United States Federal and state statutory income taxes. The risk adjusted discount rate used in computing the present value of net cash flows was 30%.

Customer relationships. Tevet has established relationships with its major customers. The customer relationships intangible assets were determined by discounting the estimated future net cash flows to their present value utilizing the excess earnings method of the income approach. The estimated net cash flows associated with the customers were based on estimates of the product revenues, product gross margins, operating expenses and related income taxes charges. The Company believes the assumptions used in the valuation were reasonable at the time of the Acquisition. The estimated net revenues were based on management’s projections and reflect a perpetual growth rate of five percent. The business projections were compared with and found to be in line with industry analysts’ forecasts of growth in all of the relevant markets. These projections were based on estimates of market size and growth, expected trends in technology, and the nature and expected timing of new product introductions by the Company and those of its competitors. Projected gross margins were based on Tevet’s historical margins, which were in line with industry averages. Estimated operating expenses used in the valuation analysis of Tevet included research and development expenses and selling, marketing and administrative expenses. In developing future expense estimates and evaluation of Tevet’s overall business model, an assessment of specific product results, including both historical and expected direct expense levels and general industry metrics, was conducted. The effective tax rate utilized in the analysis of the products reflects a 35% rate for the United States Federal and state statutory income taxes. The Company applied an attrition rate of 30% per year to the estimated cash flows to account for the loss of customers based upon its historical experience. The risk adjusted discount rate used in computing the present value of net cash flows was 30%.

Backlog. Tevet had existing backlog of revenue at the time of the Acquisition. The backlog intangible asset was determined by discounting the estimated future net cash flows to their present value utilizing the excess earnings method of the income approach. The estimated net cash flows associated with the backlog were based on revenue from customer purchase orders for products not yet delivered, product gross margins, operating expenses and related income taxes charges. A return on each of the contributory assets, which included net working capital, fixed assets and intangible assets comprising the assembled workforce, was selected considering the cost for funds and the type of asset. The Company believes the assumptions used in the valuation were reasonable at the time of the Acquisition. Projected gross margins were based on Tevet’s historical margins, which were in line with industry averages. Estimated operating expenses used in the valuation analysis of Tevet included research and development and administrative expenses. Sales and marketing expense were not deducted because the backlog had already been sold and those expenses had been incurred prior to the Acquisition date. The effective tax rate utilized in the analysis of the products reflects a 35% rate for the United States Federal and state statutory income taxes. The risk adjusted discount rate used in computing the present value of net cash flows was 30%.

Amounts allocated to the identifiable intangible assets are expected to be amortized over a life of seven years. The estimates of expected useful lives are based on guidance from SFAS No. 141 and take into consideration the effects of competition, product lives and possible obsolescence. The useful lives of customer relationships and purchased technology are based on the number of years in which net cash flows have been projected. The useful live of customer relationships was estimated based upon Tevet’s established customer relationships with its major customers. Backlog is expected to be fulfilled within one year of the Acquisition date.

Assumptions used in forecasting cash flows for each of the identified intangible assets included consideration of the following:

• Tevet’s historical operating margins;

• Tevet’s market share and growth;

• Trends in technology; and

• The nature and expected timing of new product introductions by Tevet and its competitors.

Goodwill. Goodwill represents the excess of the purchase price over the fair value of the underlying net tangible and identifiable intangible assets. In accordance with SFAS No. 142, goodwill will not be amortized but instead will be tested for impairment at least annually (more frequently if certain indicators are present). In the event the management of the combined company determines that the value of goodwill has become impaired, the combined company will incur an accounting charge for the amount of impairment during the fiscal quarter in which the determination is made.

The preliminary allocation of the Tevet purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed was based on management’s estimates of fair value at the date of Acquisition. The preliminary allocation of the purchase price was based, in part, upon a valuation and estimates, and assumptions which are subject to change. The primary areas of the purchase price allocation that are not yet finalized relate to completion of management’s valuation analysis. We expect the valuation process to be completed during the fourth quarter of fiscal 2008.

2. Pro Forma Adjustments

Pro forma adjustments are necessary to reflect the estimated purchase price, to reflect amounts related to Tevet’ net tangible and intangible assets at an amount equal to the preliminary estimate of their fair values, to reflect the amortization expense related to the estimated amortizable intangible assets and deferred stock-based compensation. The pro forma combined provision for income taxes does not necessarily reflect the amounts that would have resulted had Nanometrics and Tevet filed consolidated income tax returns during the periods presented.

There were no significant intercompany balances and transactions between Nanometrics and Tevet for the year ended December 29, 2007.

The pro forma adjustments included in the unaudited pro forma condensed combined financial statements are as follows:

(a) To eliminate Tevet’s equity

(b) To reflect the amount of cash paid by Nanometrics for Tevet

(c) To record goodwill

(d) To record the fair value of Tevet’s identifiable intangible assets

(e) To adjust Tevet’ inventory to fair value. This adjustment will result in an increase in cost of products upon the sale of the related inventory. The increase in costs is non-recurring and as such, is not reflected in the pro forma condensed combined statement of operations.

(f) To eliminate liability not assumed by Nanometrics

(g) To record amortization of intangible assets

(h) To record amortization of stock-based compensation of unvested stock options

(i) To record increase in finance expenses from increased valuation of the Series D preferred stock warrants.

3. Pro Forma Net Income Per Share

The pro forma basic net income per share is based on the number of Nanometrics shares used in computing basic net income per share.

The pro forma diluted net income per share is based on the number of Nanometrics shares used in computing diluted net income per and the potential dilution from assumed dilutive stock options (using the treasury stock method).