<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20569

                                    FORM 10-Q


              [X] Quarterly Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

                                       Or

              [ ] Transition Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934


For the Quarterly Period Ended MARCH 31, 1998     Commission file number 0-23150


                           Ibis Technology Corporation
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

          Massachusetts                                           04-2987600
-------------------------------                              -------------------
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)


                        32 Cherry Hill Drive, Danvers, MA               01923
--------------------------------------------------------------------------------
                    (Address of principal executive offices)          (Zip Code)


                                 (978) 777-4247
--------------------------------------------------------------------------------
              (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 such reports), and (2) has been subject to such filing
requirements for the past 90 days.


                                                         Yes  X           No
                                                             ---             ---


6,732,836 shares of Common Stock, par value $.008, were outstanding on May 8,
1998.




                                       1
<PAGE>   2

                           IBIS TECHNOLOGY CORPORATION

                                      INDEX


<TABLE>
<CAPTION>
                                                                           PAGE
                                                                          NUMBER
                                                                          ------
<S>                                                                      <C>
PART 1 - FINANCIAL  INFORMATION

    Item 1 - Financial Statements:

      Balance Sheets
          December 31, 1997 and  March 31, 1998............................   3

      Statements of Operations
          Three Months Ended March 31, 1997 and 1998.......................   4

      Statements of Cash Flows
          Three Months Ended March 31, 1997 and 1998.......................   5

      Notes to Financial Statements........................................   6

    Item 2 - Management's Discussion and Analysis of Financial
          Condition and Results of Operations..............................   7



PART II - OTHER INFORMATION

Item 1 - Legal Proceedings.................................................  13

Item 2 - Changes in Securities.............................................  13

Item 3 - Defaults upon Senior Securities...................................  13

Item 4 - Submission of Matters to a Vote of Security Holders...............  13

Item 5 - Other Information.................................................  13

Item 6 - Exhibits and Reports on Form 8-K .................................  13

Signatures.................................................................  15

Exhibit Index..............................................................  16
</TABLE>






                                       2
<PAGE>   3

                           IBIS TECHNOLOGY CORPORATION

                                 BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                            (UNAUDITED)
                                                        DECEMBER 31,         MARCH 31,
                                                            1997               1998
                                                        ------------       ------------
<S>                                                     <C>                <C>
ASSETS
CURRENT ASSETS:
  Cash and cash equivalents............................ $ 13,309,823       $ 12,556,629
  Accounts receivable, trade, net......................    1,064,607          1,187,041
  Unbilled revenue.....................................      230,490            205,815
  Inventories (note 3).................................      487,031            545,850
  Prepaid expenses and other current assets............      124,711             75,628
                                                        ------------       ------------
        Total current assets...........................   15,216,662         14,570,963
                                                        ------------       ------------
Property and equipment.................................   17,695,312         18,735,496
  Less: Accumulated depreciation and amortization......   (8,250,372)        (8,714,656)
                                                        ------------       ------------
        Net property and equipment.....................    9,444,940         10,020,840
Patents and other assets, net..........................      256,638            179,317
                                                        ------------       ------------
        Total assets................................... $ 24,918,240       $ 24,771,120
                                                        ============       ============

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Capital lease obligation, current.................... $    474,539       $    491,777
  Accounts payable.....................................      691,325          1,235,727
  Accrued liabilities..................................    1,193,504            999,645
                                                        ------------       ------------
        Total current liabilities......................    2,359,368          2,727,149
                                                        ------------       ------------

Capital lease obligation, noncurrent...................      498,685            369,084
Other accrued liabilities..............................    1,303,187          1,277,232
                                                        ------------       ------------
        Total liabilities..............................    4,161,240          4,373,465
                                                        ------------       ------------

STOCKHOLDERS' EQUITY:
  Undesignated preferred stock, $.01 par value
  Authorized 2,000,000 shares; none issued.............           --                 --
  Common stock, $.008 par value
  Authorized 10,000,000 shares; issued 6,628,728 and
    6,715,004 shares in 1997 and 1998, respectively....       53,030             53,720
  Additional paid-in capital...........................   35,593,999         36,143,038
  Accumulated deficit..................................  (14,890,029)       (15,799,103)
                                                        ------------       ------------
        Total stockholders' equity.....................   20,757,000         20,397,655
                                                        ------------       ------------
        Total liabilities and stockholders' equity..... $ 24,918,240       $ 24,771,120
                                                        ============       ============
</TABLE>



                 See accompanying notes to financial statements.



                                       3
<PAGE>   4

                           IBIS TECHNOLOGY CORPORATION

                            STATEMENTS OF OPERATIONS
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED
                                                                   MARCH 31,
                                                          --------------------------
                                                             1997            1998
                                                          ----------     -----------
<S>                                                       <C>            <C>

SALES AND REVENUE:
  Product sales ......................................    $1,113,948     $ 1,006,698
  Contract and other revenue .........................       524,753         490,203
  Equipment revenue ..................................          --           200,000
                                                          ----------     -----------
          Total sales and revenue (note 2) ...........     1,638,701       1,696,901

COST OF SALES AND REVENUE:
  Cost of product sales ..............................       980,454       1,312,538
  Cost of contract and other revenue .................       343,629         365,913
  Cost of equipment revenue ..........................          --           125,198
                                                          ----------     -----------
          Total cost of sales and revenue ............     1,324,083       1,803,649
                                                          ----------     -----------

          Gross profit (loss) ........................       314,618        (106,748)
                                                          ----------     -----------

OPERATING EXPENSES:
  General and administrative .........................       337,583         444,500
  Marketing and selling ..............................       110,049         114,585
  Research and development ...........................       347,694         381,955
                                                          ----------     -----------
          Total operating expenses ...................       795,326         941,040
                                                          ----------     -----------

           Loss from operations ......................      (480,708)     (1,047,788)
                                                          ----------     -----------

OTHER INCOME (EXPENSE):
  Interest income ....................................       103,288         174,690
  Interest expense ...................................       (58,703)        (34,720)
  Other ..............................................            16              --
                                                          ----------     -----------
          Total other income .........................        44,601         139,970
                                                          ----------     -----------

           Loss before income taxes ..................      (436,107)       (907,818)

Income tax expense ...................................         1,256           1,256
                                                          ----------     -----------

           Net loss ..................................    $ (437,363)    $  (909,074)
                                                          ==========     ===========

Net loss per common share - basic and diluted ........    $    (0.08)    $     (0.14)
                                                          ==========     ===========

Weighted average number of common shares outstanding -
  basic and diluted ..................................     5,190,839       6,670,718
                                                          ==========     ===========
</TABLE>



                 See accompanying notes to financial statements.



                                       4
<PAGE>   5

                           IBIS TECHNOLOGY CORPORATION

                            STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                  THREE MONTHS ENDED
                                                                        MARCH 31,
                                                              ---------------------------
                                                                  1997            1998
                                                              -----------     -----------
<S>                                                           <C>             <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss ...............................................    $  (437,363)    $  (909,074)
  Adjustments to reconcile net loss to net cash
    provided by (used in) operating activities:
     Depreciation and amortization .......................        518,688         476,811
     Changes in operating assets and liabilities .........          9,765         217,093
                                                              -----------     -----------

       Net cash provided by (used in) operating activities         91,090        (215,170)
                                                              -----------     -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Additions to property and equipment ....................     (2,387,344)     (1,040,184)
  Decrease in other assets ...............................         79,327          64,794
                                                              -----------     -----------

       Net cash used in investing activities .............     (2,308,017)       (975,390)
                                                              -----------     -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Payments of capital lease obligations ..................       (219,700)       (112,363)
  Exercise of stock options ..............................          2,719         549,729
                                                              -----------     -----------

       Net cash provided by (used in) financing activities       (216,981)        437,366
                                                              -----------     -----------

       Net decrease in cash and cash equivalents .........     (2,433,908)       (753,194)

Cash and cash equivalents, beginning of period ...........      9,201,016      13,309,823
                                                              -----------     -----------

Cash and cash equivalents, end of period .................    $ 6,767,108     $12,556,629
                                                              ===========     ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid during the period for interest ...............    $    54,790     $    34,720
                                                              ===========     ===========
</TABLE>




                 See accompanying notes to financial statements.



                                       5
<PAGE>   6

                           IBIS TECHNOLOGY CORPORATION

                          NOTES TO FINANCIAL STATEMENTS
                                 MARCH 31, 1998
                                   (UNAUDITED)


(1)   INTERIM FINANCIAL STATEMENTS

      The accompanying financial statements are unaudited, except for the
Balance Sheet as of December 31, 1997, and have been prepared by the Company in
accordance with generally accepted accounting principles.

      The interim financial statements are unaudited, but in the opinion of
management include all adjustments which consist only of normal and recurring
adjustments, necessary for a fair presentation of the Company's financial
position and results of operations. Results of operations for the interim
periods are not necessarily indicative of the results to be expected for the
full year. These financial statements should be read in conjunction with the
financial statements of the Company as of and for the year ended December 31,
1997 which are included in the Annual Report on Form 10-K.

(2)   REVENUE RECOGNITION

      Product sales are recognized upon shipment. Revenue derived from
consulting services is recognized upon performance. Contract and equipment
revenue is recognized on the percentage-of-completion method. Provisions for
anticipated losses are made in the period in which such losses become
determinable. Unbilled revenue represents contract revenue earned but not yet
billable based on the terms of the contract which include shipment of the
product, achievement of milestones or completion of the contract.

(3)   INVENTORIES

      Inventories consist of the following:

                                                    DECEMBER 31,     MARCH 31,
                                                        1997            1998
                                                    ------------     ---------

       Raw materials................................  $221,378        $274,471
       Work in process..............................   105,607          87,299
       Finished goods...............................   160,046         184,080
                                                      --------        --------
                                                      $487,031        $545,850
                                                      ========        ========



                                       6
<PAGE>   7

                           IBIS TECHNOLOGY CORPORATION

                                 PART I - ITEM 2

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


OVERVIEW

      Ibis Technology Corporation ("Ibis" or the "Company") was formed in
October 1987 and commenced operations in January 1988. The Company's initial
activities consisted of producing and selling SIMOX-SOI wafers and conducting
funded and unfunded research and development activities. This research led to
the Company's development of a proprietary second generation implanter, the Ibis
1000, and to other proprietary process technology.

      Until 1993, much of the Company's revenue was derived from research and
development contracts and sales of SIMOX-SOI wafers for military applications.
Since 1993, there has been a shift in revenue to sales of SIMOX-SOI wafers for
commercial applications. For the quarter ended March 31, 1998 and for the fiscal
year ended December 31, 1997, commercial product sales (measured in dollar
volume) represented 93% and 83%, respectively, of total product sales compared
with 48% of total product sales for the fiscal year ended December 31, 1993. To
date, most customers of the Company that have purchased wafers for what the
Company believes are commercial applications have done so solely for the purpose
of characterizing and evaluating the wafers. Thus, historical sales are not
necessarily indicative of future operations because such sales would not be
considered of a recurring nature. In the second quarter of 1997, however, the
Company announced that two of its customers had indicated their intentions to
adopt SIMOX-SOI technology in commercial products.

      During 1996 the Company recognized revenue from the sale of an Ibis 1000
implanter to a semiconductor manufacturer. This was the first implanter the
Company sold and accounted for 40% of total revenue in 1996. During the first
quarter of 1998, the Company entered into negotiations with two current
customers of the Company for the sale of an aggregate of three Ibis 1000
implanters. The Company received a confirming purchase order for one Ibis 1000
implanter from one of these customers during April 1998. There can be no
assurance that the Company will successfully complete the negotiations with the
second customer to sell two additional implanters. During 1997 the Company
experienced quarterly fluctuations in wafer sales due to reduced wafer
requirements from one of the Company's customers. In addition, repair and
maintenance on the first Ibis 1000, use of the second Ibis 1000 for SIMOX-SOI
development, and a mismatch of capacity and wafer size requirements of customer
orders all contributed to the quarterly fluctuation in wafer sales. During 1998
the Company may continue to see fluctuations in revenue as customer demands
shift during various stages of the SIMOX-SOI sales cycle and until the Company
has a sufficient number of Ibis 1000's on-line such that specific implanters can
be dedicated to the various products, sizes and continued research and
development efforts.

      The Company currently has two Ibis 1000 oxygen implanters on-line, one of
which was funded by Motorola Corporation and must first be used to serve
Motorola's production requirements. Two Ibis 1000 implanters are currently under
construction and the Company has begun to procure parts for two additional
implanters. The Company anticipates that three of these implanters will be sold
to customers and one will be used to increase the Company's internal production
capacity. One Ibis 1000 implanter is in the final qualification phase, the
second implanter is scheduled for completion during the second half of 1998; the
two remaining implanters are anticipated to be completed in the first quarter of
1999. During the year ended December 31, 1997, the Company phased the two NV-200
implanters out of production. Consequently, all SIMOX-SOI wafers are being
produced on the Ibis 1000's. As the Company expands its production capacity in



                                       7
<PAGE>   8

                           IBIS TECHNOLOGY CORPORATION

                                 PART I - ITEM 2

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)


anticipation of expected increases in demand, it is anticipated that gross
margins on product sales will initially be adversely affected until the
implanters operate at or near full capacity. There can be no assurance, however,
that the Company will succeed in attracting a sufficient number of customers
and/or orders for SIMOX-SOI wafers to offset such production costs or that the
Company will prevail over its competition.

RESULTS OF OPERATIONS

FIRST QUARTER ENDED MARCH 31, 1998 COMPARED TO FIRST QUARTER ENDED 
MARCH 31, 1997

      PRODUCT SALES. Product sales decreased to $1,006,698 for the first quarter
ended March 31, 1998, a decrease of $107,250 or 10% from $1,113,948 for the
first quarter ended March 31, 1997. The decrease in product sales is
attributable to a lower average sales price due to a different product mix; the
number of wafers sold has slightly increased, however, there was a higher ratio
of lower priced four inch wafers sold in the first quarter ended March 31, 1998
compared to the first quarter ended March 31, 1997.

      CONTRACT AND OTHER REVENUE. Contract and other revenue decreased for the
first quarter ended March 31, 1998 to $490,203 from $524,753 for the first
quarter ended March 31, 1997, a decrease of $34,550 or 7%. The decrease in
contract and other revenue is attributable to decreased revenues derived from a
contract for consulting services related to the implementation of magnetic
scanning technology previously licensed to this customer, Orion Equipment, Inc.
("Orion"). Revenue from the Orion contract amounted to approximately $322,000
and $136,000 in the first quarter of 1997 and 1998, respectively. The decrease
in contract and other revenue was partially offset by an increase in government
contract revenue. Revenues under the Orion contract have decreased substantially
since the beginning of 1998 and the Company expects that all work under the
Orion contract will cease by the end of the second quarter of 1998.

      EQUIPMENT REVENUE. Equipment revenue of $200,000 for the first quarter
ended March 31, 1998 represents revenue recognized using the
percentage-of-completion method in connection with the sale of an implanter that
was shipped in 1996. The revenue was deferred until certain software upgrades
were delivered, an event which occurred during the first quarter of 1998. This
sale represents the only sale of an Ibis 1000 implanter to a customer to date.

      TOTAL COST OF REVENUE. Cost of product sales for the first quarter ended
March 31, 1998 was $1,312,538, as compared to $980,454 for the first quarter
ended March 31, 1997, an increase of $332,084 or 34%. Cost of contract and other
revenue for the first quarter ended March 31, 1998 was $365,913, as compared to
$343,629 for the first quarter ended March 31, 1997, an increase of $22,284, or
6%. Cost of equipment revenue for the first quarter ended March 31, 1998 was
$125,198. The negative gross margin for all sales was 6% for the first quarter
ended March 31, 1998 as compared with a gross margin of 19% for the first
quarter ended March 31, 1997. This decrease in gross margin is primarily
attributable to lower product margins due to a lower average sales price and
increased costs such as upgrades, repairs and maintenance on implanters and
epitaxial material. In addition, in the first quarter of 1997, the Company had
four implanters on-line and the excess capacity was used to produce wafers for
stock resulting in more costs allocated to inventory than in the first quarter
of 1998.

      GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
for the first quarter ended March 31, 1998 were $444,500 (or 26% of total
revenue) as compared to $337,583 (or 21% of total revenue) for the first quarter
ended March 31, 1997, an increase of $106,917, or 32%. This increase is
primarily due to an



                                       8
<PAGE>   9

                           IBIS TECHNOLOGY CORPORATION

                                 PART I - ITEM 2

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)


increase in professional fees. Also contributing to the increase were higher
training expenses, securities compliance fees and directors' fees in the quarter
ended March 31, 1998 as compared to the quarter ended March 31, 1997.

      MARKETING AND SELLING EXPENSES. Marketing and selling expenses for the
first quarter ended March 31, 1998 were $114,585 (or 7% of total revenue) as
compared to $110,049 (or 7% of total revenue) for the first quarter ended
March 31, 1997, an increase of $4,536 or 4%. This increase is attributable to
increases in trade show expenditures and related travel expenses, offset by a
decrease in public relations expenses.

      RESEARCH AND DEVELOPMENT. Internally funded research and development
expenses have increased by $34,261, or 10%, to $381,955 (or 23% of total
revenue) for the first quarter ended March 31, 1998, as compared to $347,694 (or
21% of total revenue) for the first quarter ended March 31, 1997. The increase
is due primarily to an increase in the purchase of engineering materials.

      LOSS FROM OPERATIONS. The loss from operations for the first quarter ended
March 31, 1998 was $1,047,788 as compared to a loss of $480,708 for the first
quarter ended March 31, 1997, an increase of $567,080 or 118%. The increase in
the loss from operations is attributable to lower product margins and an
increase in operating expenses.

      OTHER INCOME (EXPENSE). Total other income for the first quarter ended
March 31, 1998 was $139,970 as compared to total other income of $44,601 for the
first quarter ended March 31, 1997, an increase of $95,369 or 214%. The increase
in total other income is attributable to interest income earned on the proceeds
from the August 1997 exercise of its Public Warrants as well as reduced interest
expense on capitalized leases.

      LOSS BEFORE INCOME TAXES. The loss before income taxes was $907,818 for
the first quarter ended March 31, 1998, as compared to $436,107 for the first
quarter ended March 31, 1997, an increase of $471,712 or 108%. The increase in
the loss from operations is attributable to lower product margins and an
increase in operating expenses.

IMPACT OF THE YEAR 2000 ISSUE

      The Year 2000 Issue refers to potential problems with computer systems or
any equipment with computer chips or software that use dates where the date has
been stored as just two digits (e.g., 98 for 1998). On January 1, 2000, any
clock or date recording mechanism incorporating date sensitive software which
uses only two digits to represent the year may recognize a date using 00 as the
year 1900 rather than the year 2000. This could result in a system failure or
miscalculations causing disruption of operations, including, among other things,
a temporary inability to process transactions, send invoices, or engage in
similar business activities.

      The Company is in the process of conducting a review of its internal
information systems to determine the extent of any Year 2000 problem. The
Company is still gathering information, but based on such review to date, the
Company does not believe that the impact of any Year 2000 problem will be
material, because its principal information systems appear to correctly define
the year 2000. Although there exists the possibility that Year 2000 issues will
be identified, based on such review to date, the Company does not currently
expect that any such problems will have a material adverse effect on the
Company's future operating results or financial condition.



                                       9
<PAGE>   10

                           IBIS TECHNOLOGY CORPORATION

                                 PART I - ITEM 2

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)


      The Company is in the process of contacting its major suppliers and
customers in an effort to determine the extent to which the Company may be
vulnerable to those parties' failure to timely correct their own Year 2000
problems. To date, the Company is unaware of any situations of noncompliance
that would materially adversely affect its operations or financial condition.
There can be no assurance, however, that instances of noncompliance which could
have a material adverse effect on the Company's operations or financial
condition will be identified; that the systems of other companies with which
the Company transacts business will be corrected on a timely basis; or that a
failure by such entities to correct a year 2000 problem or a correction which is
incompatible with the Company's information systems would not have a material
adverse effect on the Company's operations or financial condition.

LIQUIDITY AND CAPITAL RESOURCES

      As of March 31, 1998, the Company had cash and cash equivalents of
$12,556,629. During the first quarter ended March 31, 1998, the Company used
$215,170 in cash from operating activities as compared to cash provided by
operating activities in the amount of $91,090 for the same period in 1997.
Depreciation and amortization expense for the first quarters ended March 31,
1998 and 1997 was $476,811 and $518,688, representing 28% and 32% of total
revenue, respectively. Due to the capital intensive nature of the Company's
business and the anticipated expansion of its facilities and production
capacity, management expects that depreciation and amortization will continue to
be a significant portion of its expenses. To date, the Company's working capital
requirements have been funded through debt and equity financings, warrant
conversions, equipment lines of credit, a working capital line of credit, a term
loan, sale leaseback arrangements, collaborative relationships and government
contracts. At March 31, 1998, the Company had commitments to purchase
approximately $2,059,000 in material or subassemblies to be used to manufacture
the additional Ibis 1000 implanters and approximately $323,000 in capital
equipment.

      On July 24, 1997, the Company notified the holders of its 1,380,000
publicly traded Redeemable Common Stock Purchase Warrants (the "Public
Warrants") and its 120,000 privately held Underwriter Redeemable Common Stock
Purchase Warrants (the "Underwriter Warrants") that it would redeem these
Warrants on August 26, 1997 at the redemption price of $.20 per Warrant. Prior
to August 26, 1997, the holder of a Public Warrant had the right to exercise
such Warrant to acquire 1.044 shares of the Company's Common Stock at a price of
$8.05 per share and the holder of an Underwriter Warrant had the right to
exercise such Warrant to acquire 1.09 shares of Common Stock at a price of $9.26
per share. The Company received net proceeds of approximately $10.1 million
through the exercise of its Public Warrants. The holders of approximately 92% of
these Warrants elected to exercise the Warrants rather than have them redeemed.
Approximately 1,327,000 shares of Common Stock were issued upon exercise of the
Public Warrants. None of the Underwriter Warrants were exercised.

      The Company anticipates that it may be required to raise substantial
additional capital in the future in order to finance further expansion of its
manufacturing capacity and its research and development programs. The Company's
existing cash resources together with funds generated from operations are
believed to be sufficient to support the Company's operations on their
anticipated scale for at least the next twelve months. Management of the Company
currently believes that this anticipated scale of operations will include
additional Ibis 1000 oxygen implanters (in addition to its two oxygen implanters
currently on-line), the purchase of support equipment and expansion of the
Company's facilities.



                                       10
<PAGE>   11

                           IBIS TECHNOLOGY CORPORATION

                                 PART I - ITEM 2

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)


NEW ACCOUNTING PRONOUNCEMENTS

      In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share." SFAS 128 establishes a different method of computing net income per
share than is currently required under the provisions of Accounting Principles
Board Opinion No. 15. Under SFAS No. 128, the Company is required to present
both basic net income per share and diluted net income per share. The Company
adopted SFAS No. 128 in its quarter ending December 31, 1997 and both basic and
diluted net loss per share represent the same number due to antidilution
factors.

      In June 1997, the Financial Accounting Standards Board issued SFAS 130,
"Reporting Comprehensive Income," which establishes standards for reporting and
display of comprehensive income and its components in a full set of
general-purpose financial statements. Under this concept, all revenues,
expenses, gains and losses recognized during the period are included in income,
regardless of whether they are considered to be results of operations of the
period. SFAS 130, which becomes effective for the Company in its year ending
December 31, 1998, is not expected to have a material impact on the financial
statements of the Company.

      In June 1997, the Financial Accounting Standards Board issued SFAS 131,
"Disclosures about Segments of an Enterprise and Related Information," which
establishes standards for the way that public business enterprises report
selected information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports to shareholders. It also establishes
standards for related disclosures about products and services, geographic areas
and major customers. SFAS 131, which becomes effective for the Company in its
year ending December 31, 1998, is currently not expected to have a material
impact on the Company's financial statements and footnote disclosures.

      Effective January 1, 1998, the Company adopted American Institute of
Certified Public Accountants' Statement of Position 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use" (SOP 98-1)
which establishes guidelines for the accounting for the costs of all computer
software developed or obtained for internal use. SOP 98-1 must be applied on a
prospective basis as of the adoption date. Under SOP 98-1, certain consulting,
payroll and related costs for company consultants or employees working on the
application of development stage projects as defined in the SOP for internal use
computer software must be capitalized and amortized over the expected useful
life of the software. Previously, the Company had expensed these costs as
incurred. The adoption of SOP 98-1 did not have a material impact on the
Company's results of operations in the first quarter of 1998 or financial
position at March 31, 1998.

EFFECTS OF INFLATION

      The Company believes that over the past three years inflation has not had
a significant impact on the Company's sales or operating results.



                                       11
<PAGE>   12

                           IBIS TECHNOLOGY CORPORATION

                                 PART I - ITEM 2

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)


BUSINESS OUTLOOK

      This Form 10-Q contains forward-looking statements within the meaning of
the "safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. Such statements are based on management's current expectations and are
subject to a number of factors and uncertainties which could cause actual
results to differ materially from those described in the forward-looking
statements. Such factors and uncertainties include, but are not limited to, the
uncertainty that the performance advantages of SIMOX-SOI wafers will be realized
commercially or that a commercial market for SIMOX-SOI wafers will continue to
develop; the dependence by the Company on key customers (during 1995, 1996 and
1997, revenues from four customers averaged in the aggregate between 25% and 68%
of the Company's revenues, so that the loss of one or more of these major
customers and the failure of the Company to obtain other sources of revenue
could have a material adverse impact on the Company); the dependence by the
Company on revenues from its consulting arrangement with Orion (during 1995,
1996 and 1997, consulting revenues were approximately 0%, 2% and 26%,
respectively, of the Company's revenues, so that the expected loss of Orion as a
source of consulting fees by the end of the second quarter of 1998 and the
failure of the Company to obtain other sources of consulting revenue could have
a material impact on the Company); the loss of the services of one or more of
the Company's key individuals, which could have a material adverse impact on the
Company; the development of competing or superior technologies and products from
manufacturers, many of which have substantially greater financial, technical and
other resources than the Company; the Company's lack of experience in producing
commercial quantities of its products at acceptable costs; the Company's ability
to develop and maintain strategic alliances for the manufacturing, marketing and
distribution of its products; the cyclical nature of the semiconductor industry,
which has negatively affected the Company's sales of SIMOX-SOI wafers during
industry downturns and which could continue to do so in the future; the limited
availability of critical materials and components for wafer products and
implanters, as a shortage of such materials and components or a significant
increase in the price thereof could have a material adverse effect on the
Company's business and results of operations; the availability of additional
capital to fund expansion on acceptable terms, if at all; and general economic
conditions.




                                       12
<PAGE>   13

                           IBIS TECHNOLOGY CORPORATION

                                     PART II

                                OTHER INFORMATION


Item 1 - LEGAL PROCEEDINGS
         None

Item 2 - CHANGE IN SECURITIES
         None

Item 3 - DEFAULTS UPON SENIOR SECURITIES
         None

Item 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
         None

Item 5 - OTHER INFORMATION
         None

Item 6 - EXHIBITS AND REPORTS ON FORM 8-K 
         (a)   Exhibits furnished as Exhibits hereto:

               27 -      Financial Data Schedule

         (b)   Reports on Form 8-K

               The Company filed with the Securities and Exchange Commission
               (the "Commission") on February 4, 1998 a Current Report on Form
               8-K for the February 3, 1998 event reporting the public
               dissemination of a press release announcing the expected
               financial results for the year ended December 31, 1997. The
               Company also announced the promotion of the Chief Electronics
               Engineer to Vice President of Engineering and the hiring of a new
               Chief Financial Officer.

               The Company filed with the Commission on March 6, 1998 a Current
               Report on Form 8-K for the March 5, 1998 event reporting the
               public dissemination of a press release announcing (i) the
               receipt of purchase orders for two Ibis 1000 oxygen implanters
               from one customer and a letter of intent for one Ibis 1000 oxygen
               implanter from another customer, and (ii) its financial results
               for the fourth quarter and fiscal year ended December 31, 1997.

               The Company filed with the Commission on March 12, 1998 a Current
               Report on Form 8-K for the March 11, 1998 event reporting the
               public dissemination of a press release announcing that
               Mitsubishi Materials Corporation had issued a letter of intent to
               purchase an Ibis 1000 oxygen implanter and had entered into
               discussions regarding a licensing agreement. The letter of intent
               was previously disclosed in the March 5, 1998 press release and
               Form 8-K Current Report as filed with the Commission on March 6,
               1998.



                                       13
<PAGE>   14

                           IBIS TECHNOLOGY CORPORATION

                                     PART II

                                OTHER INFORMATION


               The Company filed with the Commission on March 17, 1998 a Current
               Report on Form 8-K for the March 16, 1998 event reporting the
               public dissemination of a press release announcing it had been
               awarded two research and development contracts, totaling
               approximately $1,041,000, by various government agencies.





                                       14
<PAGE>   15

                           IBIS TECHNOLOGY CORPORATION

                                   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.


                               Ibis Technology Corporation



Date: May 14, 1998             By: /s/ Nancy J. Neill
                                   -------------------------------------------
                                   Nancy J. Neill
                                   Controller


Date: May 14, 1998             By: /s/ Debra L. Nelson
                                   -------------------------------------------
                                   Debra L. Nelson
                                   Chief Financial Officer,Treasurer and Clerk
                                   (principal financial and accounting officer)






                                       15
<PAGE>   16

                           IBIS TECHNOLOGY CORPORATION

                                  EXHIBIT INDEX



EXHIBIT NO.                        DESCRIPTION                              PAGE
-----------                        -----------                              ----

27                             Financial Data Schedule                       17














                                       16