SECURITIES AND EXCHANGE COMMISSION

                              Washington, DC 20549
                -------------------------------------------

                                    FORM 10-Q

(mark one)

[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934 for the Quarter Ended July 4, 1998.

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

                         Commission File Number 1-13876

                            THERMOSPECTRA CORPORATION
             (Exact name of Registrant as specified in its charter)

Delaware                                                          04-3242970
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                           Identification No.)

8 East Forge Parkway
Franklin, Massachusetts                                                02038
(Address of principal executive offices)                          (Zip Code)

     Registrant's telephone number, including area code: (781) 622-1000

      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 [ ]

      Indicate the number of shares outstanding of each of the issuer's classes
      of Common Stock, as of the latest practicable date.

                Class                   Outstanding at July 31, 1998
     ----------------------------       ----------------------------
     Common Stock, $.01 par value                15,326,934

<PAGE>


PART I - FINANCIAL INFORMATION

Item 1 - Financial Statements

                            THERMOSPECTRA CORPORATION

                           Consolidated Balance Sheet
                                   (Unaudited)

                                     Assets


                                                      July 4,   January 3,
(In thousands)                                           1998         1998
--------------------------------------------------------------------------

Current Assets:
  Cash and cash equivalents                          $ 33,152     $ 20,672
  Available-for-sale investments, at quoted
    market value (cost of $2,056)                       2,836        2,083
  Accounts receivable, less allowances of $1,684
    and $1,934                                         39,781       43,015
  Inventories:
    Raw materials and supplies                         16,745       16,850
    Work in process                                     6,774        7,096
    Finished goods                                      9,778       10,839
  Prepaid income taxes                                  7,220        7,337
  Other current assets                                  2,319        1,774
                                                     --------     --------

                                                      118,605      109,666
                                                     --------     --------

Property, Plant, and Equipment, at Cost                30,334       31,108
  Less: Accumulated depreciation and amortization      12,438       10,717
                                                     --------     --------

                                                       17,896       20,391
                                                     --------     --------

Patents, Trademarks, and Other Assets                   7,641        8,108
                                                     --------     --------

Cost in Excess of Net Assets of Acquired Companies    113,727      115,232
                                                     --------     --------

                                                     $257,869     $253,397
                                                     ========     ========

                                       2
<PAGE>

                            THERMOSPECTRA CORPORATION

                   Consolidated Balance Sheet (continued)
                                   (Unaudited)

                  Liabilities and Shareholders' Investment


                                                     July 4,    January 3,
(In thousands except share amounts)                     1998          1998
--------------------------------------------------------------------------

Current Liabilities:
  Notes payable to Thermo Electron                  $ 25,000      $ 15,000
  Accounts payable                                    11,837        12,842
  Accrued payroll and employee benefits                5,213         6,987
  Deferred revenue                                     4,559         4,695
  Accrued installation and warranty expenses           4,105         4,495
  Accrued income taxes                                 3,097         2,050
  Other accrued expenses                               8,479         8,496
  Due to affiliated companies                          3,574         1,561
                                                     --------     --------

                                                      65,864        56,126
                                                     --------     --------

Deferred Income Taxes and Other Deferred Items         2,060         1,633
                                                    --------      --------

Long-term Obligations, Due to Thermo Electron
  and Thermo Instrument                               57,300        67,300
                                                    --------      --------

Shareholders' Investment:
  Common stock, $.01 par value, 25,000,000
    shares authorized; 15,325,516 and 15,313,506
    shares issued                                        153           153
  Capital in excess of par value                     111,304       111,262
  Retained earnings                                   21,498        17,938
  Treasury stock at cost, 423 shares                      (7)           (7)
  Accumulated other comprehensive items (Note 4)        (303)       (1,008)
                                                    --------      --------

                                                     132,645       128,338
                                                     --------     --------

                                                    $257,869      $253,397
                                                    ========      ========


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


                                       3
<PAGE>

                            THERMOSPECTRA CORPORATION

                        Consolidated Statement of Income
                                   (Unaudited)


                                                        Three Months Ended
                                                        ------------------
                                                        July 4,   June 28,
(In thousands except per share amounts)                    1998       1997
--------------------------------------------------------------------------

Revenues                                                $49,058    $49,692
                                                        -------    -------

Costs and Operating Expenses:
  Cost of revenues                                       28,434     27,990
  Selling, general, and administrative expenses          13,160     13,374
  Research and development expenses                       4,199      4,352
  Other nonrecurring expense                                  -        800
                                                        -------    -------

                                                         45,793     46,516
                                                        -------    -------

Operating Income                                          3,265      3,176

Interest Income                                             448        222
Interest Expense                                              -        (22)
Interest Expense, Related Party                          (1,185)    (1,170)
                                                        -------    -------

Income Before Provision for Income Taxes                  2,528      2,206
Provision for Income Taxes                                1,040        869
                                                        -------    -------

Net Income                                              $ 1,488    $ 1,337
                                                        =======    =======

Basic and Diluted Earnings per Share (Note 3)           $   .10    $   .09
                                                        =======    =======

Weighted Average Shares (Note 3):
  Basic                                                  15,324     15,220
                                                        =======    =======
  Diluted                                                15,351     15,351
                                                        =======    =======


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


                                       4
<PAGE>

                            THERMOSPECTRA CORPORATION

                        Consolidated Statement of Income
                                   (Unaudited)


                                                         Six Months Ended
                                                        ------------------
                                                        July 4,   June 28,
(In thousands except per share amounts)                    1998       1997
--------------------------------------------------------------------------

Revenues                                              $102,125    $ 86,869
                                                      --------    --------

Costs and Operating Expenses:
  Cost of revenues                                      58,831      48,892
  Selling, general, and administrative expenses         27,278      23,725
  Research and development expenses                      8,712       7,784
  Gain on sale of building                                (339)          -
  Other nonrecurring expense                                 -         800
                                                      --------    --------

                                                        94,482      81,201
                                                      --------    --------

Operating Income                                         7,643       5,668

Interest Income                                            773         408
Interest Expense                                             -         (48)
Interest Expense, Related Party                         (2,376)     (1,663)
                                                      --------    --------

Income Before Provision for Income Taxes                 6,040       4,365
Provision for Income Taxes                               2,480       1,840
                                                      --------    --------

Net Income                                            $  3,560    $  2,525
                                                      ========    ========

Basic and Diluted Earnings per Share (Note 3)         $    .23    $    .18
                                                      ========    ========

Weighted Average Shares (Note 3):
  Basic                                                 15,322      14,106
                                                      ========    ========
  Diluted                                               15,344      14,263
                                                      ========    ========


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


                                       5
<PAGE>

                            THERMOSPECTRA CORPORATION

                      Consolidated Statement of Cash Flows
                                   (Unaudited)

                                                       Six Months Ended
                                                      --------------------
                                                      July 4,     June 28,
(In thousands)                                           1998         1997
--------------------------------------------------------------------------

Operating Activities:
  Net income                                         $  3,560     $  2,525
  Adjustments to reconcile net income to net
    cash provided by operating activities:
      Depreciation and amortization                     3,581        3,106
      Other nonrecurring (income) expense                (339)         800
      Provision for losses on accounts receivable          96          172
      Other noncash expenses, net                         495          499
      Changes in current accounts, excluding the
        effects of acquisitions:
          Accounts receivable                           3,146        3,347
          Inventories                                     486         (919)
          Other current assets                           (427)         643
          Accounts payable                               (849)      (1,555)
          Due to affiliated companies                   2,013       (1,941)
          Other current liabilities                    (1,171)      (4,377)
      Other                                               106           27
                                                     --------     --------

Net cash provided by operating activities              10,697        2,327
                                                     --------     --------

Investing Activities:
  Acquisitions, net of cash acquired                        -      (13,885)
  Proceeds from sale of product line (Note 2)             750            -
  Purchases of property, plant, and equipment            (942)      (1,133)
  Proceeds from sale of property, plant, and
    equipment                                           2,052           22
  Other, net                                              (30)        (651)
                                                     --------     --------

Net cash provided by (used in) investing
  activities                                            1,830      (15,647)
                                                     --------     --------

Financing Activities:
  Proceeds from issuance of long-term obligation
    to Thermo Electron                                      -       10,000
  Net proceeds from issuance of Company common
    stock                                                  42          188
  Increase in short-term borrowings, net                    -          405
                                                     --------     --------

Net cash provided by financing activities                  42       10,593
                                                     --------     --------

Exchange Rate Effect on Cash                              (89)        (299)
                                                     --------     --------

Increase (Decrease) in Cash and Cash Equivalents       12,480       (3,026)
Cash and Cash Equivalents at Beginning of Period       20,672       16,580
                                                     --------     --------

Cash and Cash Equivalents at End of Period           $ 33,152     $ 13,554
                                                     ========     ========


                                       6
<PAGE>

                            THERMOSPECTRA CORPORATION

              Consolidated Statement of Cash Flows (continued)
                                   (Unaudited)


                                                       Six Months Ended
                                                      --------------------
                                                      July 4,     June 28,
(In thousands)                                           1998         1997
--------------------------------------------------------------------------

Noncash Activities:
  Fair value of assets of acquired companies         $      -     $108,820
  Cash paid for acquired companies                          -      (17,044)
  Stock options issued in connection with
    acquisition of PSI                                      -       (2,080)
  Stock issuable to Thermo Instrument in
    connection with acquisition of NESLAB                   -      (32,571)
  Debt assumed in connection with acquisition
    of NESLAB                                               -      (44,815)
                                                     --------     --------

    Liabilities assumed of acquired companies        $      -     $ 12,310
                                                     ========     ========


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

                                       7
<PAGE>

                            THERMOSPECTRA CORPORATION


                 Notes to Consolidated Financial Statements

1.  General

    The interim consolidated financial statements presented have been prepared
by ThermoSpectra Corporation (the Company) without audit and, in the opinion of
management, reflect all adjustments of a normal recurring nature necessary for a
fair statement of the financial position at July 4, 1998, the results of
operations for the three- and six-month periods ended July 4, 1998, and June 28,
1997, and the cash flows for the six-month periods ended July 4, 1998, and June
28, 1997. Interim results are not necessarily indicative of results for a full
year.

    The consolidated balance sheet presented as of January 3, 1998, has been
derived from the consolidated financial statements that have been audited by the
Company's independent public accountants. The consolidated financial statements
and notes are presented as permitted by Form 10-Q and do not contain certain
information included in the annual financial statements and notes of the
Company. The consolidated financial statements and notes included herein should
be read in conjunction with the financial statements and notes included in the
Company's Annual Report on Form 10-K for the fiscal year ended January 3, 1998,
filed with the Securities and Exchange Commission.

2.  Disposition

    In January 1998, the Company's Nicolet Imaging Systems subsidiary sold its
security screening product line to OSI Systems, Inc. for $750,000 in cash. No
material gain or loss was recognized on the sale of the product line, which
represented less than 0.5% of the Company's revenues.

                                          8
<PAGE>

                            THERMOSPECTRA CORPORATION


3.  Earnings per Share

    Basic and diluted earnings per share were calculated as follows:

                                 Three Months Ended      Six Months Ended
                                 ------------------     ------------------
(In thousands except             July 4,   June 28,     July 4,   June 28,
per share amounts)                  1998       1997        1998       1997
--------------------------------------------------------------------------
Basic
Net income                       $ 1,488    $ 1,337     $ 3,560    $ 2,525
                                 -------    -------     -------    -------

Weighted average shares           12,565     12,461      12,563     12,454
Shares issuable for
  acquisition of NESLAB            2,759      2,759       2,759      1,652
                                 -------    -------     -------    -------

Weighted average shares,
  as adjusted                     15,324     15,220      15,322     14,106
                                 -------    -------     -------    -------

Basic earnings per share         $   .10    $   .09     $   .23    $   .18
                                 =======    =======     =======    =======

Diluted
Net income                       $ 1,488    $ 1,337     $ 3,560    $ 2,525
                                 -------    -------     -------    -------

Basic weighted average
  shares                          15,324     15,220      15,322     14,106
Effect of stock options               27        131          22        157
                                 -------    -------     -------    -------

Weighted average shares,
  as adjusted                     15,351     15,351      15,344     14,263
                                 -------    -------     -------    -------

Diluted earnings per share       $   .10    $   .09     $   .23    $   .18
                                 =======    =======     =======    =======

    The computation of diluted earnings per share for each period excludes the
effect of assuming the exercise of certain outstanding stock options because the
effect would be antidilutive. As of July 4, 1998, there were 761,000 of such
options outstanding, with exercise prices ranging from $10.54 to $17.15 per
share.

4.  Comprehensive Income

    During the first quarter of 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income." This
pronouncement sets forth requirements for disclosure of the Company's
comprehensive income and accumulated other comprehensive items. In general,
comprehensive income combines net income and "other comprehensive items," which
represent certain amounts that are reported as components of shareholders'
investment in the accompanying balance sheet, including foreign currency
translation adjustments and unrealized net-of-tax gains and losses from
available-for-sale investments. During



                                       9
<PAGE>

                            THERMOSPECTRA CORPORATION


4.  Comprehensive Income (continued)

the second quarter of 1998 and 1997, the Company's comprehensive income totaled
$1,984,000 and $1,371,000, respectively. During the first six months of 1998 and
1997, the Company's comprehensive income totaled $4,264,000 and $1,858,000,
respectively.

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

    Forward-looking statements, within the meaning of Section 21E of the
Securities and Exchange Act of 1934, are made throughout this Management's
Discussion and Analysis of Financial Condition and Results of Operations. For
this purpose, any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, the words "believes," "anticipates," "plans," "expects," "seeks,"
"estimates," and similar expressions are intended to identify forward-looking
statements. There are a number of important factors that could cause the results
of the Company to differ materially from those indicated by such forward-looking
statements, including those detailed under the heading "Forward-looking
Statements" in Exhibit 13 to the Company's Annual Report on Form 10-K for the
fiscal year ended January 3, 1998, filed with the Securities and Exchange
Commission.

Overview

    The Company develops, manufactures, and markets imaging and inspection,
temperature-control, and test and measurement instruments. These instruments are
generally combined with proprietary operations and analysis software to provide
industrial and research customers with integrated systems that address their
specific needs. The Company's products include test and measurement systems
consisting of digital oscillographic recorders, digital storage oscilloscopes
(DSOs), and data- acquisition systems; X-ray microanalyzers; X-ray fluorescence
instruments; nondestructive X-ray inspection systems; specialty X-ray tubes; and
confocal laser scanning microscopes. In 1997, the Company broadened its product
offerings through the acquisition of Park Scientific Instruments Corporation
(PSI), a manufacturer of scanning-probe microscopes; NESLAB Instruments, Inc., a
supplier of temperature-control products; and Sierra Research and Technology
Inc. (SRT), a manufacturer of systems used for the rework and repair of printed
circuit boards.

    The Company's growth strategy includes acquiring complementary businesses,
developing new applications for its technology to address related market
segments, and strengthening its presence in selected geographic markets. Because
the Company competes primarily on the basis of its technology, it will also need
to continually improve the technology underlying the products of any company it
acquires. One of the Company's principal goals during recent quarters has been
to improve operating margins. A part of this plan included the December 1997 and
January 1998 divestitures of two low-margin product lines (Note 2).



                                       10
<PAGE>

                            THERMOSPECTRA CORPORATION


Overview (continued)

    A significant portion of the Company's total revenues is attributable to the
sale of products and related services to customers in the semiconductor
industry. The semiconductor industry has historically been cyclical and is
characterized by sudden and sharp changes in supply and demand. Demand for the
Company's products and services within the semiconductor industry is dependent
upon, among other factors, the level of capital spending by semiconductor
companies. The semiconductor industry is currently experiencing a downturn in
demand for its products as a result of the current economic crisis in Asia,
excess manufacturing capacity, and a slowdown in sales of high-end personal
computers. Many semiconductor manufacturers have delayed construction or
expansion of their production facilities in response to the foregoing
conditions. Further decreases in semiconductor activities could have a
significant adverse effect upon the demand for the Company's products and
related services, which would materially adversely affect the Company's business
and future results of operations.

    The Company conducts all of its manufacturing operations in the United
States, except for the production of certain DSOs that are manufactured in
England. The Company sells its products worldwide. During 1997, exports from the
Company's U.S. and foreign subsidiaries to the Far East represented 15% of total
revenues. Exports to Japan represented 8% of total revenues and exports to
Taiwan, South Korea, and Singapore, collectively, represented 5% of total
revenues. Asia is experiencing a severe economic crisis, which has been
characterized by sharply reduced economic activity and liquidity, highly
volatile foreign-currency- exchange and interest rates, and unstable stock
markets. The Company's sales in Asia could be adversely affected by the unstable
economic conditions there. Additionally, certain of the Company's customers
located outside of the Asian region could be adversely affected by the unstable
economic conditions in Asia.

    The Company anticipates that a significant portion of its revenues will
continue to be from sales to customers outside the United States. The Company's
business activities outside the United States are conducted through sales and
service subsidiaries and through third-party representatives and distributors.
The results of the Company's international operations are subject to foreign
currency fluctuations, and the exchange rate value of the dollar may have a
significant impact on both revenues and earnings. The Company may use forward
contracts to reduce its exposure to currency fluctuations.

Results of Operations

Second Quarter 1998 Compared With Second Quarter 1997

    Revenues were $49.1 million in the second quarter of 1998, compared with
$49.7 million in the second quarter of 1997. Combined revenues at Kevex
Instruments, Nicolet Instrument Technology, and Gould Instrument Systems
(Gould), which represented 28% of revenues in the second quarter of 1998,
decreased 14% from the second quarter of 1997 due to decreased


                                       11
<PAGE>

Second Quarter 1998 Compared With Second Quarter 1997 (continued)

demand for their products. These decreases were offset in part by increased
revenues at Nicolet Imaging Systems (NIS) and NORAN Instruments, exclusive of
NIS product line dispositions in late 1997 and early 1998 (Note 2), due to
increased demand domestically and in Europe. Revenues increased $1.2 million,
net due to the inclusion of revenues from SRT, acquired in July 1997, and the
exclusion of revenues from the NIS product lines that were sold. Revenues were
adversely affected by approximately $0.4 million due to the strengthening in the
value of the U.S. dollar relative to currencies in foreign countries in which
the Company operates. The Company's backlog decreased $9.6 million during the
second quarter of 1998 to $26.8 million. The backlog was adversely affected by a
slowdown in the semiconductor business and related industries, which represented
approximately 30% of the Company's 1997 revenues. New orders at NESLAB decreased
$2.9 million in the second quarter of 1998 from the first quarter of 1998. In
addition, total new orders in the Pacific Rim decreased approximately 45% to
$4.7 million during the second quarter of 1998 from the first quarter of 1998.

    The gross profit margin declined to 42% in the second quarter of 1998 from
44% in the second quarter of 1997. Gross profit margins at Gould, PSI, and Kevex
Instruments declined due to decreased sales of higher-margin products.

    Selling, general, and administrative expenses as a percentage of revenues
were unchanged at 27% in the second quarter of 1998 and 1997. Restructuring
expenses of $0.3 million, primarily at PSI, were offset by cost reductions at
most of the Company's subsidiaries. The Company has initiated cost reductions
and made management changes at under-performing businesses during the second
quarter of 1998, and further actions have been taken during the third quarter.
The cost of these actions was $0.3 million in the second quarter of 1998. The
Company expects to incur additional charges during the remainder of 1998 and to
realize cost savings as a result of such actions.

    Research and development expenses declined slightly to $4.2 million in the
second quarter of 1998 from $4.4 million in the second quarter of 1997.

    Interest income increased slightly to $0.4 million in the second quarter of
1998 from $0.2 million in the second quarter of 1997, due to higher average
invested cash balances. Interest expense, related party, represents interest
incurred on the $60.0 million aggregate amount of promissory notes issued to
Thermo Electron Corporation in 1997 in connection with acquisitions.

    The effective tax rate was 41% in the second quarter of 1998, compared with
39% in the second quarter of 1997. The effective tax rates exceeded the
statutory federal income tax rate primarily due to the impact of state income
taxes and nondeductible amortization of cost in excess of net assets of acquired
companies for certain of the Company's acquisitions. The increase in the
effective tax rate in 1998 was primarily due to higher nondeductible
amortization of cost in excess of net assets of acquired companies for
acquisitions completed in 1997.

                                       12
<PAGE>


Second Quarter 1998 Compared With Second Quarter 1997 (continued)

     The Company is currently assessing the potential impact of the year 2000 on
the processing of date-sensitive information by the Company's computerized
information systems and on products sold as well as products purchased by the
Company. The Company believes that its internal information systems and current
products are either year 2000 compliant or will be so prior to the year 2000
without incurring material costs. There can be no assurance, however, that the
Company will not experience unexpected costs and delays in achieving year 2000
compliance for its internal information systems and current products, which
could result in a material adverse effect on the Company's future results of
operations.

     The Company is presently assessing the effect that the year 2000 issue may
have on its previously sold products. The Company is also assessing whether its
key suppliers are adequately addressing this issue and the effect this might
have on the Company. The Company has not completed its analysis and is unable to
conclude at this time that the year 2000 issue as it relates to its previously
sold products and products purchased from key suppliers is not reasonably likely
to have a material adverse effect on the Company's future results of operations.

First Six Months 1998 Compared With First Six Months 1997

    Revenues were $102.1 million in the first six months of 1998, compared with
$86.9 million in the first six months of 1997, an increase of 18%. Revenues
increased $18.6 million, net due to the inclusion of revenues from NESLAB,
acquired for accounting purposes effective March 1997; PSI, acquired in March
1997; and SRT, acquired in July 1997; and the exclusion of revenues from the NIS
product lines that were sold. Combined revenues at Kevex Instruments, Nicolet
Instrument Technology, and Gould, which represented 28% of revenues for the
first six months of 1998, decreased 15% from the first six months of 1997 due to
decreased demand for their products and a large shipment at Kevex Instruments
that occurred in the first quarter of 1997. Revenues were adversely affected by
approximately $0.9 million due to the strengthening in the value of the U.S.
dollar relative to currencies in foreign countries in which the Company
operates.

    The gross profit margin declined to 42% in the first six months of 1998 from
44% in the first six months of 1997. The decline was primarily due to the
inclusion of lower-margin revenues from NESLAB for the full period, which had a
gross profit margin of 37% in the first six months of 1998, and, to a lesser
extent, lower gross profit margins at Gould due to decreased sales of
higher-margin products.

    Selling, general, and administrative expenses as a percentage of revenues
were unchanged at 27% in the first six months of 1998 and 1997. The impact of
the inclusion of lower selling expenses as a percentage of revenues at NESLAB
was substantially offset by the inclusion of higher selling, general, and
administrative expenses as a percentage of revenues at PSI.


                                       13
<PAGE>


First Six Months 1998 Compared With First Six Months 1997 (continued)

    Research and development expenses increased to $8.7 million in the first six
months of 1998 from $7.8 million in the first six months of 1997, primarily due
to the inclusion of NESLAB and PSI for the full period in 1998.

    Interest income increased to $0.8 million in the first six months of
1998 from $0.4 million in the first six months of 1997, due to higher average
invested cash balances. Interest expense, related party, represents interest
incurred on the $60.0 million aggregate amount of promissory notes issued to
Thermo Electron in 1997 in connection with acquisitions.

    The effective tax rate was 41% in the first six months of 1998, compared
with 42% in the first six months of 1997. The effective tax rates exceeded the
statutory federal income tax rate primarily due to the impact of state income
taxes and nondeductible amortization of cost in excess of net assets of acquired
companies for certain of the Company's acquisitions.

Liquidity and Capital Resources

    Consolidated working capital was $52.7 million at July 4, 1998, compared
with $53.5 million at January 3, 1998. Included in working capital are cash,
cash equivalents, and short-term investments of $36.0 million at July 4, 1998,
compared with $22.8 million at January 3, 1998. Cash provided by operating
activities was $10.7 million in the first six months of 1998. A decrease in
accounts receivable as a result of improved collections and increased domestic
sales, which carry shorter collection cycles, provided $3.1 million of cash.

    Cash of $1.8 million was provided by investing activities during the first
six months of 1998. During this period, the Company received $0.8 million of
cash from the sale of a product line (Note 2) and $2.1 million from the sale of
property, plant, and equipment, primarily from the sale of a building by Gould.
The Company expended $0.9 million during the period for purchases of property,
plant, and equipment and plans to spend an additional $2.1 million for capital
expenditures during the remainder of 1998.

    On July 15, 1998, the Company signed a nonbinding letter of intent to
acquire the assets of a scanning probe microscope manufacturing business (the
Business) for approximately $8.0 million in cash. The proposed acquisition is
subject to certain conditions including completion of due diligence, negotiation
of a definitive purchase agreement, and approval by the boards of directors of
the Company and the Business and by the stockholders of the Business. The final
terms of this acquisition have not been determined and there can be no assurance
that it will be completed.


                                       14
<PAGE>

Liquidity and Capital Resources (continued)

    Although the Company expects to generate positive cash flow from its
existing operations, the Company may require significant amounts of cash to
pursue the acquisition of complementary businesses. The Company expects that it
will finance any such acquisitions through a combination of internal funds
and/or borrowings from Thermo Instrument or Thermo Electron, although it has no
agreement with these companies to ensure that funds will be available on
acceptable terms or at all. The Company believes that its existing resources and
cash provided by operations are sufficient to meet the capital requirements of
its existing businesses for the foreseeable future. Thermo Electron has
indicated that it will seek repayment of the notes due to it in 1998 and 1999
only to the extent the Company's cash flow permits such repayment.

PART II - OTHER INFORMATION

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

    On June 1, 1998, at the Annual Meeting of Shareholders, the
shareholders elected six directors to a one-year term expiring in 1999.
The directors elected at the meeting were: Dr. Robert E. Finnigan, Dr.
Elias P. Gyftopoulos, Mr. Barry S. Howe, Mr. Earl R. Lewis, Mr. Theo
Melas-Kyriazi, and Mr. Arvin H. Smith. Each director, except Dr. Finnigan,
received 11,661,270 shares voted in favor of his election and 15,997
shares voted against. Dr. Finnigan received 11,661,130 shares voted in
favor of his election and 16,137 shares voted against. No abstentions or
broker nonvotes were recorded on the election of directors.

Item 5 - Other Information

    Pursuant to recent amendments to the rules relating to proxy statements
under the Securities Exchange Act of 1934, as amended (the Exchange Act),
shareholders of the Company are hereby notified that any shareholder proposal
not included in the Company's proxy materials for its 1999 Annual Meeting of
Shareholders (the Annual Meeting) in accordance with Rule 14a-8 under the
Exchange Act will be considered untimely for the purposes of Rules 14a-4 and
14a-5 under the Exchange Act if notice thereof is received by the Company after
March 15, 1999. Management proxies will be authorized to exercise discretionary
voting authority with respect to any shareholder proposal not included in the
Company's proxy materials for the Annual Meeting unless (a) the Company receives
notice of such proposal by March 15, 1999, and (b) the conditions set forth in
Rule 14a-4(c)(2)(i)-(iii) under the Exchange Act are met.

Item 6 - Exhibits

    See Exhibit Index on the page immediately preceding exhibits.



                                       15
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                                   SIGNATURES


    Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized as of the 11th day of August 1998.

                                         THERMOSPECTRA CORPORATION



                                         Paul F. Kelleher
                                         --------------------------
                                         Paul F. Kelleher
                                         Chief Accounting Officer



                                         John N. Hatsopoulos
                                         --------------------------
                                         John N. Hatsopoulos
                                         Chief Financial Officer and
                                         Senior Vice President


                                       16
<PAGE>

                                  EXHIBIT INDEX


Exhibit
Number        Description of Exhibit
----------------------------------------------------------------------------

27.1          Financial Data Schedule.

27.2          Financial Data Schedule for the Quarter Ended March 29, 1997
              (restated for the acquisition of NESLAB).

                                       17
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