<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

<TABLE>
<S>                             <C>                                <C>                      <C>  
For the Quarterly Period Ended  September 30, 1997                 Commission file number        0-23668
</TABLE>


                           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    


6,626,728 shares of Common Stock, par value $.008, were outstanding on November
10, 1997.


                                                   Total Number of Pages     20
                                                   Exhibit Index at Page     18


                                       1
<PAGE>   2
                           IBIS TECHNOLOGY CORPORATION

                                      INDEX


<TABLE>
<CAPTION>
PART 1 - FINANCIAL  INFORMATION                                            PAGE
-------------------------------                                           NUMBER
                                                                          ------
<S>                                                                       <C>   
    Item 1 - Financial Statements:

      Balance Sheets
          December 31, 1996 and September 30, 1997.......................     3
      Statements of Operations
          Three Months Ended September 30, 1996 and 1997
           and Nine Months Ended September 30, 1996 and 1997.............     4

      Statements of Cash Flows
          Nine Months Ended September 30, 1996 and 1997..................     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...............................................     15

Item 2 - Changes in Securities...........................................     15

Item 3 - Defaults upon Senior Securities.................................     15

Item 4 - Submission of Matters to a Vote of Security Holders.............     15

Item 5 - Other Information...............................................     15

Item 6 - Exhibits and Reports on Form 8-K ...............................     16

Signatures ..............................................................     17

Exhibit Index............................................................     18
</TABLE>


                                       2
<PAGE>   3
                           IBIS TECHNOLOGY CORPORATION

                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                        (UNAUDITED)
                                                                    DECEMBER 31,       SEPTEMBER 30,
                                                                        1996               1997
ASSETS                                                              ------------       -------------
------
<S>                                                                 <C>                <C>  
CURRENT ASSETS:
   Cash and cash equivalents ....................................   $  9,201,016        $ 14,155,131
   Accounts receivable, trade, net ..............................        920,388           1,685,832
   Unbilled revenue .............................................         77,860             293,462
   Inventories (note 3) .........................................        732,975             974,409
   Prepaid expenses and other current assets ....................         45,460              95,029
                                                                    ------------        ------------
         Total current assets ...................................     10,977,699          17,203,863
                                                                    ------------        ------------
Property and equipment ..........................................     14,392,843          17,703,992
   Less: Accumulated depreciation and amortization ..............     (6,240,062)         (7,764,488)
                                                                    ------------        ------------
         Net property and equipment .............................      8,152,781           9,939,504
Patents and other assets, net ...................................        411,902             373,509
                                                                    ------------        ------------
         Total assets ...........................................   $ 19,542,382        $ 27,516,876
                                                                    ============        ============

LIABILITIES AND STOCKHOLDERS' EQUITY                               
------------------------------------
CURRENT LIABILITIES:                                               
   Capital lease obligation, current ............................   $    657,070        $    478,009
   Accounts payable .............................................        955,781           1,099,066
   Accrued liabilities ..........................................      1,297,266             881,319
                                                                    ------------        ------------
         Total current liabilities ..............................      2,910,117           2,458,394
                                                                    ------------        ------------
Capital lease obligation, noncurrent ............................        973,351             623,742
Other accrued liabilities .......................................      1,294,963           1,555,688
                                                                    ------------        ------------
         Total liabilities ......................................      5,178,431           4,637,824
                                                                    ------------        ------------
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 5,182,148 and             
        6,606,519 shares in 1996 and 1997, respectively .........         41,457              52,852
    Additional paid-in capital ..................................     25,292,217          35,559,413
    Accumulated deficit .........................................    (10,952,573)        (12,716,063)
   Less: Notes receivable from stockholders .....................        (17,150)            (17,150)
                                                                    ------------        ------------
         Total stockholders' equity .............................     14,363,951          22,879,052
                                                                    ------------        ------------
         Total liabilities and stockholders' equity .............   $ 19,542,382        $ 27,516,876
                                                                    ============        ============
</TABLE>


                 See accompanying notes to financial statements.

                                       3
<PAGE>   4
                           IBIS TECHNOLOGY CORPORATION

                            STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                  THREE MONTHS ENDED                    NINE MONTHS ENDED
                                                     SEPTEMBER 30,                         SEPTEMBER 30,
                                             -----------------------------         ------------------------------
                                                1996               1997               1996               1997
                                             -----------        -----------        -----------        -----------
<S>                                          <C>                <C>                <C>                <C>
SALES AND REVENUE:
  Product sales ......................       $ 1,209,976        $ 1,074,295        $ 3,600,363        $ 2,700,823
  Contract and other revenue .........            43,754          1,089,071            568,148          2,512,977
  Equipment revenue ..................         1,600,000               --            2,840,000               --
                                             -----------        -----------        -----------        -----------
      Total sales and revenue (note 2)         2,853,730          2,163,366          7,008,511          5,213,800

COST OF SALES AND REVENUE:
  Cost of product sales ..............           984,524          1,138,879          3,016,055          3,116,844
  Cost of contract and other revenue .            55,361            741,116            112,622          1,591,983
  Cost of equipment revenue ..........         1,200,000               --            2,130,000               --
                                             -----------        -----------        -----------        -----------
      Total cost of sales and  revenue         2,239,885          1,879,995          5,258,677          4,708,827
                                             -----------        -----------        -----------        -----------

      Gross profit ...................           613,845            283,371          1,749,834            504,973
                                             -----------        -----------        -----------        -----------

OPERATING EXPENSES:
  General and administrative .........           369,855            315,044          1,092,276          1,040,705
  Marketing and selling ..............           131,339            114,173            389,592            359,430
  Research and development ...........           361,097            346,655          1,067,538          1,010,781
                                             -----------        -----------        -----------        -----------
      Total operating expenses .......           862,291            775,872          2,549,406          2,410,916
                                             -----------        -----------        -----------        -----------
      Loss from operations ...........          (248,446)          (492,501)          (799,572)        (1,905,943)
                                             -----------        -----------        -----------        -----------
OTHER INCOME (EXPENSE):
  Interest income ....................           147,044            102,656            353,287            280,819
  Interest expense ...................           (75,624)           (29,651)          (284,825)          (137,366)
  Other ..............................               260               --                 (812)               256
                                             -----------        -----------        -----------        -----------
      Total other income .............            71,680             73,005             67,650            143,709
                                             -----------        -----------        -----------        -----------
      Loss before income taxes .......          (176,766)          (419,496)          (731,922)        (1,762,234)

Income tax expense ...................              --                 --                1,256              1,256
                                             -----------        -----------        -----------        -----------
      Net loss .......................       $  (176,766)       $  (419,496)       $  (733,178)       $(1,763,490)
                                             ===========        ===========        ===========        =========== 
Net loss per common share ............       $     (0.03)       $     (0.07)       $     (0.16)       $     (0.33)
                                             ===========        ===========        ===========        =========== 
Weighted average number
 of common shares outstanding ........         5,171,338          5,774,010          4,568,725          5,402,808
                                             ===========        ===========        ===========        ===========
</TABLE>




                 See accompanying notes to financial statements.

                                       4
<PAGE>   5
                           IBIS TECHNOLOGY CORPORATION

                             STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                             NINE MONTHS ENDED
                                                                                                SEPTEMBER 30,
                                                                                       --------------------------------
                                                                                          1996                1997
                                                                                       ------------        ------------
<S>                                                                                    <C>                 <C>  
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss ....................................................................       $   (773,178)       $ (1,763,490)
   Adjustments to reconcile net loss to net cash provided
     by (used in) operating activities:
     Depreciation and amortization .............................................          1,150,472           1,563,099
     Amortization of deferred compensation .....................................             14,625                --
     Loss from sale of asset ...................................................              1,788                --
     Changes in operating assets and liabilities ...............................            966,505          (1,283,986)
                                                                                       ------------        ------------ 
         Net cash provided by (used in)
             operating activities ..............................................          1,400,212          (1,484,377)
                                                                                       ------------        ------------ 
CASH FLOWS FROM INVESTING ACTIVITIES:
   Additions to property and equipment, net.....................................         (3,220,150)         (3,311,329)
   Increase in other assets ....................................................           (163,721)               (100)
                                                                                        ------------       ------------
         Net cash used in investing activities .................................         (3,383,871)         (3,311,429)
                                                                                        ------------       ------------ 
CASH FLOWS FROM FINANCING ACTIVITIES:
   Payments of bank notes payable ..............................................           (845,788)               --
   Payments of capital lease obligations .......................................           (604,337)           (528,670)
   Exercise of stock options
      and issuance of warrants .................................................             55,810             176,398
   Proceeds from warrant redemption,
      net of redemption costs ..................................................               --            10,102,193
   Proceeds from sale of common stock,
      net of issuance costs ....................................................         10,320,993                --
                                                                                       ------------        ------------
         Net cash provided by financing activities .............................          8,926,678           9,749,921
                                                                                       ------------        ------------
         Net increase in cash and cash equivalents .............................          6,943,019           4,954,115

Cash and cash equivalents, beginning of period .................................          2,279,852           9,201,016
                                                                                       ------------        ------------

Cash and cash equivalents, end of period .......................................       $  9,222,871        $ 14,155,131
                                                                                       ============        ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
   Cash paid during the period for interest ....................................       $    248,577        $    160,903
                                                                                       ============        ============
</TABLE>

                 See accompanying notes to financial statements.

                                       5
<PAGE>   6
                           IBIS TECHNOLOGY CORPORATION

                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)


(1) INTERIM FINANCIAL STATEMENTS

         The accompanying financial statements are unaudited, except for the
Balance Sheet as of December 31, 1996, 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 its 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, 1996 which are included
in the Annual Report on Form 10-K.

(2) REVENUE RECOGNITION

         Product sales are recognized upon shipment. Contract and equipment
revenue are 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:

<TABLE>
<CAPTION>
                                                                              DECEMBER 31,   SEPTEMBER 30,
                                                                                  1996            1997
                                                                              ------------     ---------
<S>                                                                           <C>            <C>  
                    Raw materials..................................           $    284,670     $ 322,173
                    Work in process................................                105,401        65,176
                    Finished goods.................................                342,904       587,060
                                                                              ------------     ---------
                                                                              $    732,975     $ 974,409
                                                                              ============     =========
</TABLE>


                                       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.
Over the past few years, there has been a shift in revenue to sales of SIMOX-SOI
wafers for commercial applications. For the nine months ended September 30, 1997
and for the fiscal year ended December 31, 1996, commercial product sales
(measured in dollar volume) represented 82% and 90%, respectively, of total
product sales compared with 24% of total product sales for the fiscal year ended
December 31, 1992. 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 is the first implanter the
Company has sold and has no commitments for additional implanter equipment
sales. The sale of the implanter accounted for 40% of total revenue in 1996.
Quarterly wafer sales have remained relatively consistent in the range of $1.1
to $1.3 million per quarter during 1996 and through the first quarter of 1997.
In the second quarter of 1997 wafer sales were approximately 43% of this range
due to lower wafer demand from one of the Company's customers in particular,
reduced production capacity as a result of repair and maintenance of the first
Ibis 1000, and use of the second Ibis 1000 for SIMOX-SOI development. During the
quarter ended September 30, 1997 wafer sales returned to a more typical level of
approximately $1.1 million.

         The Company has two Ibis 1000 implanters on-line, one of which is
primarily dedicated to serve Motorola Corporation's production requirements. Two
additional Ibis 1000 implanters are currently in construction, one anticipated
to be placed in production in the fourth quarter of 1997, the other in the
beginning of 1998 or at such time as additional capacity is needed to meet
demand. During the quarter ended June 30, 1997, the Company phased out
production of SIMOX-SOI wafers on the NV-200 implanters, consequently all
SIMOX-SOI wafers are being produced on Ibis 1000 implantation equipment. As the
Company expands its production capacity in anticipation of increased demand, it
is expected that gross margins on product sales will initially be adversely
affected until the implanters are operating at or near full capacity. There can
be no assurance that the Company will succeed in attracting a sufficient number
of customers and/or SIMOX-SOI wafer orders to offset such production costs or
that the Company will prevail over its competition.


                                       7
<PAGE>   8
                           IBIS TECHNOLOGY CORPORATION

                                 PART I - ITEM 2

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

RESULTS OF OPERATIONS

THIRD QUARTER ENDED SEPTEMBER 30, 1997 COMPARED TO THIRD QUARTER ENDED SEPTEMBER
30, 1996

         PRODUCT SALES. Product sales decreased $135,681, or 11%, to $1,074,295
for the third quarter ended September 30, 1997 from $1,209,976 for the third
quarter ended September 30, 1996. The decrease in product sales is attributable
to a decrease in wafer sales to a customer, a major semiconductor manufacturer,
as it has moved from the material evaluation stage of the SIMOX-SOI wafers to
the full circuit design and test phase; sales to this customer accounted for 37%
of total product sales during the third quarter of 1996 but only 5% of total
product sales during the third quarter of 1997. It is a normal part of the
SIMOX-SOI sales cycle for a customer to use fewer SIMOX-SOI wafers during full
circuit testing and additionally, in their case, the reduced wafer requirements
are being supplied by the Ibis 1000 implanter the customer owns. The decrease of
32% in total product sales to this customer was partially offset by a 21%
increase in total product sales to past as well as new customers.

         CONTRACT AND OTHER REVENUE. Contract and other revenue increased for
the third quarter ended September 30, 1997 to $1,089,071 from $43,754 for the
third quarter ended September 30, 1996, a twenty-four-fold increase of
$1,045,317. The increase in contract and other revenue is attributable to
revenues derived from a contract for consulting services related to
implementation of the magnetic scanning technology previously licensed to this
customer, as well as a fifteen-fold increase in government contract revenue over
the same period in 1996. License revenues generated in the third quarter ended
September 30, 1997 were $62,500 or 6% of contract and other revenue compared to
$19,475 or 45% of contract and other revenue during the third quarter ended
September 30, 1996, an increase of $43,025 or 221%. During 1997, the Company
began selling spare parts to the purchaser of the Ibis 1000 implanter, a major
semiconductor manufacturer. These sales accounted for 6% of contract and other
revenue for the third quarter ended September 30, 1997.

         EQUIPMENT REVENUE. There were no equipment sales during the third
quarter ended September 30, 1997 and no commitments for additional sales
currently exist. Equipment revenue of $1,600,000 for the third quarter ended
September 30, 1996 represents revenue recognized using the
percentage-of-completion method in connection with the sale of an Ibis 1000
implanter to a major semiconductor manufacturer. This implanter was shipped to
the customer in the fourth quarter of 1996.

         TOTAL SALES AND REVENUE. Total sales and revenue for the third quarter
ended September 30, 1997 was $2,163,366, a decrease of $690,364 or 24% from
total revenue of $2,853,730 for the third quarter ended September 30, 1996. This
decrease resulted from the lack of equipment revenue and the decrease in product
sales and was partially offset by increased contract and other revenue.

         TOTAL COST OF REVENUE. Cost of product sales for the third quarter
ended September 30, 1997 was $1,138,879, as compared to $984,524 for the third
quarter ended September 30, 1996, an increase of $154,355 or 16%. Cost of
contract revenue for the third quarter ended September 30, 1997 was $741,116, as
compared to $55,361 for the third quarter ended September 30, 1996, an increase
of $685,755, a twelve-fold increase. Cost of equipment revenue for the third
quarter ended September 30, 1996 was $1,200,000. The gross margin for all sales
was 13% for the third quarter ended September 30, 1997 as compared to 22% for
the third quarter ended September 30, 1996. The decrease in gross margin is
primarily attributable to the fundamental fixed cost nature of


                                       8
<PAGE>   9
                           IBIS TECHNOLOGY CORPORATION

                                 PART I - ITEM 2

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


product sales costs which did not have a reduction commensurate with the
decrease in product sales. In addition, the cost of sales for contract and other
revenue increased as a result of changes in the make-up of contract and other
revenue. Cost of sales for contract and other revenue consists of labor and
materials expended in performing consulting tasks during the third quarter of
1997 and cost of spare parts as compared to negligible costs associated with
licensing revenue generation during the third quarter ended September 30, 1996.
Also contributing to the overall gross margin decrease is the lack of gross
profit on equipment revenue in 1997.

         GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses for the third quarter ended September 30, 1997 were $315,044 (15% of
total revenue) as compared to $369,855 (13% of total revenue) for the third
quarter ended September 30, 1996, a decrease of $54,811 or 15%. The decrease is
due to decreases in professional fees, training and seminars expense and the
absence of loan origination fees.

         MARKETING AND SELLING EXPENSES. Marketing and selling expenses for the
third quarter ended September 30, 1997 were $114,173 (5% of total revenue) as
compared to $131,339 (5% of total revenue) for the third quarter ended September
30, 1996, a decrease of $17,166 or 13%. The decrease in marketing and selling
expenses is primarily the result of a decrease in payroll and related expenses.

         RESEARCH AND DEVELOPMENT EXPENSES. Internally funded research and
development expenses decreased by $14,442, or 4%, to $346,655 (16% of total
revenue) for the third quarter ended September 30, 1997, as compared to $361,097
(13% of total revenue) for the third quarter ended September 30, 1996. The
decrease is primarily due to the Company's increase in billable labor on various
contracts resulting in these charges being classified as costs of revenues,
offset by an increase in professional fees.

         LOSS FROM OPERATIONS. The loss from operations for the third quarter
ended September 30, 1997 was $492,501 as compared to a loss of $248,446 for the
third quarter ended September 30, 1997, an increase of $244,055 or 98%. The
increase in the loss from operations is the result of lack of equipment revenue.

         OTHER INCOME (EXPENSE). Total other income for the third quarter ended
September 30, 1997 was $73,005 as compared to total other income of $71,680 for
the third quarter ended September 30, 1996, a difference of $1,325 or 2%. This
difference is a result of reduced interest income earned on the remaining
proceeds from the April 1996 public offering, which was offset by decreased
interest expense resulting from the repayment of bank term debt.

         LOSS BEFORE INCOME TAXES. The loss before income taxes was $419,496 for
the third quarter ended September 30, 1997, as compared to $176,766 for the
third quarter ended September 30, 1996. The increase of $242,730 or 137% is due
to the lack of equipment revenue.


                                       9
<PAGE>   10
                           IBIS TECHNOLOGY CORPORATION

                                 PART I - ITEM 2

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


NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1996

         PRODUCT SALES. Product sales decreased $899,540, or 25%, to $2,700,823
for the nine months ended September 30, 1997 from $3,600,363 for the nine months
ended September 30, 1996. The decrease in product sales is attributable to
several factors, one of which was the negligible wafer sales during the first
three quarters of 1997 to a customer, a major semiconductor manufacturer, as it
has moved from the material evaluation stage of the SIMOX-SOI wafers to the full
circuit design and test phase; sales to this customer accounted for 34% of total
product sales for the nine months ended September 30, 1996. It is a normal part
of the SIMOX-SOI sales cycle for a customer to use fewer SIMOX-SOI wafers during
full circuit testing and additionally, in their case, the reduced wafer
requirements are being supplied by the Ibis 1000 the customer owns. In addition,
contributing to the decrease in product sales were wafer production related
issues arising during the second quarter of 1997. The first event was a
component failure on the first Ibis 1000 implanter which resulted in a ten week
production loss. The other matter was the dedication of the second Ibis 1000 to
process development for a specific customer, a decision which resulted in a six
week loss of production. These production issues were resolved during the third
quarter of 1997.

         CONTRACT AND OTHER REVENUE. Contract and other revenue increased for
the nine months ended September 30, 1997 to $2,512,977 from $568,148 for the
nine months ended September 30, 1996, a three-fold increase of $1,944,829. This
increase is attributable to revenues derived from a contract for consulting
services related to implementation of the magnetic scanning technology
previously licensed to this customer, as well as a nine-fold increase in
government contract revenue. License revenues generated in the nine months ended
September 30, 1997 were $62,500 or 2% of contract and other revenue compared to
license revenue of $477,249 or 84% of contract and other revenue during the nine
months ended September 30, 1996, a decrease of $414,749 or 87%. During 1997 the
Company began selling spare parts to the purchaser of the Ibis 1000 implanter, a
major semiconductor manufacturer. These sales accounted for 18% of contract and
other revenue for the nine months ended September 30, 1997.

         EQUIPMENT REVENUE. There were no equipment sales during the nine months
ended September 30, 1997 and no commitments for additional sales currently
exist. Equipment revenue of $2,840,000 for the nine months ended September 30,
1996 represents revenue recognized using the percentage-of-completion method in
connection with the sale of an Ibis 1000 implanter to a major semiconductor
manufacturer. This implanter was shipped to the customer in the fourth quarter
of 1996.

         TOTAL SALES AND REVENUE. Total sales and revenue for the nine months
ended September 30, 1997 was $5,213,800, a decrease of $1,794,711 or 26% from
total revenue of $7,008,511 for the nine months ended September 30, 1996. This
decrease resulted from the lack of equipment revenue and the decrease in product
sales and was partially offset by increased contract and other revenue.

         TOTAL COST OF REVENUE. Cost of product sales for the nine months ended
September 30, 1997 was $3,116,844, as compared to $3,016,055 for the nine months
ended September 30, 1996, an increase of $100,789 or 3%. Cost of contract
revenue for the nine months ended September 30, 1997 was $1,591,983, as compared
to $112,622 for the nine months ended September 30, 1996, an increase of
$1,479,361, or a thirteen-fold increase. Cost of equipment revenue for the nine
months ended September 30, 1996 was $2,130,000. The gross margin for all sales
was 10% for the nine months September 30, 1997 as compared to 25% for the nine
months ended


                                       10
<PAGE>   11
                           IBIS TECHNOLOGY CORPORATION

                                 PART I - ITEM 2

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


September 30, 1996. The decrease in gross margin is primarily attributable to
the fundamental fixed cost nature of product sales costs which did not have a
reduction commensurate with the significant decrease in product sales and
additional capacity costs in 1997. In addition, the cost of sales for contract
and other revenue increased as a result of changes in the make-up of contract
and other revenue. Cost of sales for contract and other revenue consists of
labor and materials expended in performing consulting tasks during the first
nine months of 1997 and cost of spare parts as compared to negligible costs
associated with license revenue generation during the nine months ended
September 30, 1996. Another contributing factor to the overall gross margin
decrease is the lack of gross profit on equipment revenue in 1997.

         GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses for the nine months ended September 30, 1997 were $1,040,705 (20% of
total revenue) as compared to $1,092,276 (16% of total revenue) for the nine
months ended September 30, 1996, a decrease of $51,571 or 5%.

         MARKETING AND SELLING EXPENSES. Marketing and selling expenses for the
nine months ended September 30, 1997 were $359,430 (7% of total revenue) as
compared to $389,592 (6% of total revenue) for the nine months ended September
30, 1996, a decrease of $30,162 or 8%. The decrease is primarily attributable to
reduced payroll and related expenses offset by advertising and public relations
expenses commencing in 1997.

         RESEARCH AND DEVELOPMENT EXPENSES. Internally funded research and
development expenses decreased by $56,757, or 5%, to $1,010,781 (19% of total
revenue) for the nine months ended September 30, 1997, as compared to $1,067,538
(15% of total revenue) for the nine months ended September 30, 1996. The
decrease is due to the Company's increase in billable labor on various contracts
resulting in these charges being classified as costs of revenues, offset by
increases in professional fees and test wafer expenses for process development.

         LOSS FROM OPERATIONS. The loss from operations for the nine months
ended September 30, 1997 was $1,905,943 as compared to a loss of $799,572 for
the nine months ended September 30, 1996, an increase of $1,106,371 or 138%. The
increase in loss from operations is the result of lack of equipment revenue,
diminished product sales and reduced available production capacity in the second
quarter of 1997.

         OTHER INCOME (EXPENSE). Total other income for the nine months ended
September 30, 1997 was $143,709 as compared to total other income of $67,650 for
the nine months ended September 30, 1996. The increase in total other income is
due to interest income earned on the remaining proceeds from the April 1996
public offering offset by decreased interest expense resulting from the
repayment of bank term debt.

         LOSS BEFORE INCOME TAXES. The loss before income taxes was $1,762,234
for the nine months ended September 30, 1997, as compared to $731,922 for the
nine months ended September 30, 1996, an increase of $1,030,312 or 141%. The
increase in loss before income taxes is the result of lack of equipment revenue,
diminished product sales and reduced available production capacity in the second
quarter of 1997.

LIQUIDITY AND CAPITAL RESOURCES

         On April 9, 1996, the Company completed a public offering of 1,600,000
shares of common stock at $7.25 per share. The Company's net proceeds were
approximately $10,300,000, after deducting approximately $1,300,000 for
underwriting discounts, commissions and other associated expenses.


                                       11
<PAGE>   12
                           IBIS TECHNOLOGY CORPORATION

                                 PART I - ITEM 2

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


         As of September 30, 1997, the Company had cash and cash equivalents of
$14,155,131. During the nine months ended September 30, 1997, the Company
utilized $1,484,377 in cash from operating activities as compared to cash
generated by operations in the amount of $1,400,212 for the same period in 1996.
The decline of $2,884,589 in cash provided from operating activities resulted
primarily from increased loss, receivables, inventory and by a reduction in
liabilities. The increase in net cash used in investing activities is attributed
to cash outlays for the two Ibis 1000 implanters in construction and
expenditures for capital additions relating to production capacity expansion. As
of September 30, 1997, construction in progress represented $4,434,365, or 25%,
of total property and equipment of $17,703,992. Depreciation and amortization
expense for the nine months ended September 30, 1997 and 1996 was $1,563,099 and
$1,150,472, respectively. This accounted for 30% and 16% of total revenue,
respectively. Due to the capital intensive nature of the Company's business and
the expansion of its 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, equipment lines of credit, a working capital line of
credit, a term loan, sale leaseback arrangements, collaborative relationships
and government contracts. The principal uses of cash during the nine months
ended September 30, 1997 were to fund the Company's operations, construction of
Ibis 1000 implanters and other additions to property and equipment which totaled
approximately $3.3 million. At September 30, 1997, the Company had commitments
to purchase approximately $41,000 in material or subassemblies to be used to
manufacture the two additional Ibis 1000 implanters.

         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 expansion of its
manufacturing capacity, its research and development programs and operations.
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 three years. The anticipated scale of operations
includes the two additional Ibis 1000 implanters (in addition to its two Ibis
1000 implanters currently on-line), the purchase of support equipment and
expansion of the Company's facilities. Of the two new implanters in
construction, one is expected to be transferred to production in the fourth
quarter of 1997, the other in the first quarter of 1998 or at such time as
additional capacity is needed to meet demand. The Company has phased out
production of SIMOX-SOI wafers from its NV-200 implanters, consequently all
SIMOX-SOI wafers are being produced on the Ibis 1000 implantation equipment.


                                       12
<PAGE>   13
                           IBIS TECHNOLOGY CORPORATION

                                 PART I - ITEM 2

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


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.

BUSINESS OUTLOOK

         The 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 1994, 1995 and
1996, revenues from four customers averaged in the aggregate between 39% 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 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.

CHANGE IN MANAGEMENT

         Effective December 1, 1997, Martin J. Reid will become President and
Chief Executive Officer and a member of the Company's Board of Directors. Mr.
Reid will succeed Dr. Geoffrey Ryding as President and Chief Executive Officer.
Dr. Ryding will remain a member of the Board of Directors.

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 will be required to
present both basic net income per share and diluted net income per share. Basic
net income per share is expected to be higher than the currently presented net
income per share as the effect of dilutive stock options will not be considered
in computing basic net income per share. The impact on diluted net income per
share is not expected to be material. The Company plans to adopt SFAS No. 128 in
its fiscal quarter ending December 31, 1997 and at that time all historical net
income per share data presented will be restated to conform to the provisions of
SFAS No. 128.


                                       13
<PAGE>   14
                           IBIS TECHNOLOGY CORPORATION

                                 PART I - ITEM 2

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


         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 consolidated
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 consolidated financial statements and footnote
disclosures.


                                       14
<PAGE>   15
                           IBIS TECHNOLOGY CORPORATION

                                     PART II

                                OTHER INFORMATION


Item 1 - Legal Proceedings
         None

Item 2 - Changes in Securities

         Redeemable Common Stock Purchase Warrants - The holders of 1,380,000
         publicly traded Redeemable Common Stock Purchase Warrants had been
         entitled to purchase 1.044 shares of Common Stock per Warrant at a
         price of $8.05 per share through May 20, 1999. This right expired
         August 25, 1997 pursuant to notice provided July 24, 1997 that the
         Company would redeem all of its outstanding Redeemable Common Stock
         Purchase Warrants on August 26, 1997 at a redemption price of $.20 per
         Warrant. 1,270,795 of these Warrants were exercised for an aggregate of
         1,326,705 shares of Common Stock.

         Underwriter Redeemable Common Stock Purchase Warrants - The holders of
         120,000 privately held Underwriter Redeemable Common Stock Purchase
         Warrants had been entitled to purchase 1.09 shares of Common Stock per
         Warrant at a price of $9.26 per share through May 20, 1999. This right
         expired August 25, 1997 pursuant to notice provided July 24, 1997 that
         the Company would redeem all of its outstanding Underwriter Redeemable
         Common Stock Purchase Warrants on August 26, 1997 at a redemption price
         of $.20 per Warrant. None of these Warrants were exercised.

Item 3 - Defaults upon Senior Securities
         None

Item 4 - Submission of Matters to a Vote of Security Holders
         None

Item 5 - Other Information
         None


                                       15
<PAGE>   16
                           IBIS TECHNOLOGY CORPORATION

                                     PART II

                                OTHER INFORMATION



Item 6 - Exhibits and Reports on Form 8-K

         (a)      Exhibits furnished as Exhibits hereto:

                  11       Statement regarding computation of per share loss.

                  27       Financial Data Schedule.

         (b)      Reports on Form 8-K

                  The Company filed with the Securities and Exchange Commission
                  (the "Commission") on July 24, 1997 a Current Report on Form
                  8-K for the July 24, 1997 event reporting the public
                  dissemination of a press release announcing that it had
                  provided notice that it would redeem in whole the Company's
                  publicly traded Redeemable Common Stock Purchase Warrants
                  (Nasdaq: IBISW) on August 26, 1997 at the redemption price of
                  $0.20 per Warrant, unless such Warrants are exercised by 5:00
                  p.m. New York time on August 25, 1997.

                  The Company filed with the Commission on August 6, 1997 a
                  Current Report on Form 8-K for the July 30, 1997 event
                  reporting the public dissemination of a press release
                  announcing its financial results for the second quarter and
                  six months ended June 30, 1997.

                  The Company filed with the Commission on August 19, 1997 a
                  Current Report on Form 8-K for the August 15, 1997 event
                  reporting the public dissemination of a press release
                  announcing the appointment of Robert L. Gable to its Board of
                  Directors.

                  The Company filed with the Commission on September 4, 1997 a
                  Current Report on Form 8-K for the September 2, 1997 event
                  reporting the public dissemination of a press release
                  announcing it had received net proceeds of approximately $10.2
                  million through the exercise of its publicly traded Redeemable
                  Common Stock Purchase Warrants.


                                       16
<PAGE>   17
                           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:  November 13, 1997            By: /s/ Nancy J. Neill
                                        ---------------------------------------
                                        Nancy J. Neill
                                        Controller and Assistant Treasurer


Date:  November 13, 1997            By: /s/ Timothy J. Burns
                                        --------------------------------------
                                        Timothy J. Burns
                                        Chief Financial Officer, Operations
                                        Manager, Treasurer and Clerk
                                       (principal financial and accounting 
                                        officer)


                                       17
<PAGE>   18
                           IBIS TECHNOLOGY CORPORATION

                                  EXHIBIT INDEX


<TABLE>
<CAPTION>
EXHIBIT NO.                           DESCRIPTION                                                   PAGE
-----------                           -----------                                                   ----
<S>                        <C>                                                                      <C>
11                         Statement regarding computation of per share loss                         19

27                         Financial Data Schedule                                                   20
</TABLE>


                                       18