<PAGE>
 
               UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 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 period ended January 4, 1998 OR

[_]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
     EXCHANGE ACT OF 1934
     For the transition period from __________ to __________


                        Commission file number 333-29871


                               THERMA-WAVE, INC.
             (Exact name of Registrant as specified in its charter)

            DELAWARE                                    94-3000561
[State or other jurisdiction of          [I.R.S. Employer Identification Number]
 incorporation or organization]

          1250 Reliance Way
         Fremont, California                              94539
[Address of principal executive offices]                [Zip Code]

                                (510) 490-3663
              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 and 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 of the issuer's class of common stock, as of the
latest practical date:

                   Class                Outstanding as of February 1, 1998
-------------------------------------------------------------------------------
Class A Common stock, $.01 par value                9,073,532
Class B Common stock, $.01 par value                1,296,226
Class L Common stock, $.01 par value                1,008,170

                                       1
<PAGE>
 
Contents

                               THERMA-WAVE, INC.
                                   FORM 10-Q

                                     INDEX


Part I. Financial Information

Item 1. Unaudited Condensed Consolidated Financial Statements
 
        Condensed Consolidated Balance Sheets
          December 31, 1997 and March 31, 1997                             3
 
        Condensed Consolidated Statements of Operations
         Three and nine months ended December 31, 1997 and 1996            4
 
        Condensed Consolidated Statements of Cash Flows
          Nine months ended December 31, 1997 and 1996                     5
 
        Notes to Unaudited Condensed Consolidated Financial Statements     6
 

Item 2. Management's Discussion and Analysis of
        Financial Condition and Results of Operations                      9
 
 
Part II. Other Information
 
Item 1. Legal Proceedings                                                 13
 
Item 2. Changes in Securities and Use of Proceeds                         13
 
Item 3. Defaults upon Senior Securities                                   13
 
Item 4. Submission of Matters to a Vote of Security Holders               13
 
Item 5. Other Information                                                 13
 
Item 6. Exhibits and Reports on Form 8-K                                  13
 
Signatures                                                                14

                                       2
<PAGE>
 
Part I. Financial Information
Item 1. Unaudited Consolidated Condensed Financial Statements


                               THERMA-WAVE, INC.
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (in thousands)
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                                       December 31,                 March 31,
                                                                           1997                        1997
                                                                  ---------------------       --------------------
<S>                                                                 <C>                         <C>
                              ASSETS
 
Current assets:
 Cash and cash equivalents                                                     $ 15,827                   $ 16,741
 Accounts receivable, net                                                        22,649                     20,107
 Receivable from parent                                                               -                      1,425
 Inventories                                                                     20,571                     17,427
 Other current assets                                                             7,581                      5,939
                                                                    -------------------         ------------------
           Total current assets                                                  66,628                     61,639
 
 Property and equipment, net                                                      6,595                      5,843
 Deferred financing costs, net                                                   10,224                          -
 Other assets                                                                     1,882                      1,138
                                                                    -------------------         ------------------
           Total assets                                                        $ 85,329                   $ 68,620
                                                                    ===================         ==================
 
               LIABILITIES AND STOCKHOLDERS' EQUITY
                    (NET CAPITAL DEFICIENCY)
Current liabilities:
 Short term debt                                                    $              -                      $  3,834
 Accounts payable                                                                 4,655                      4,076
 Other current liabilities                                                       19,166                     15,009
                                                                    -------------------         ------------------
           Total current liabilities                                             23,821                     22,919
 Long term debt                                                                 115,000                     23,100
 Other liabilities                                                                2,862                      2,456
                                                                    -------------------         ------------------
           Total liabilities                                                    141,683                     48,475
 
Commitments and contingencies
 
Mandatorily redeemable preferred stock                                           14,308                          -
 
Stockholders' equity (net capital deficiency)
 Common stock                                                                         -                         45
 Common stock - Class A                                                              91                          -
 Common stock - Class B                                                              13                          -
 Common stock - Class L                                                              10                          -
 Additional paid-in capital                                                      21,363                     60,465
 Notes receivable from stockholders                                                (289)                         -
 Accumulated deficit                                                            (89,729)                   (38,927)
 Currency translation adjustment                                                 (2,121)                    (1,438)
                                                                    -------------------         ------------------
           Total stockholders' equity (net capital deficiency)                  (70,662)                    20,145
                                                                    -------------------         ------------------
           Total liabilities and stockholders' equity (net
            capital deficiency)                                                $ 85,329                   $ 68,620
 
                                                                    ===================         ==================
</TABLE>

    See accompanying notes to condensed consolidated financial statements.

                                       3
<PAGE>
 
                               THERMA-WAVE, INC.
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                (in thousands)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                                 
                                Three months ended December 31,        Nine months ended December 31,
                               ---------------------------------     ----------------------------------
                                        1997               1996               1997                1996
                                      -------            -------            -------             ------- 
<S>                              <C>                <C>                <C>                 <C>
Net revenue                           $29,664            $24,206            $86,155             $83,955
Cost of revenue                        14,573             11,823             40,974              37,592
                                      -------            -------            -------             ------- 
Gross margin                           15,091             12,383             45,181              46,363
 
Operating expenses:
 Research and development               5,103              2,861             14,677               9,029
 Selling, general and
  administrative                        6,520              4,741             18,294              16,368
 Amortization of goodwill and
  purchased intangibles                     -                319                  -               1,275
 Recapitalization and other
  non-recurring expenses                  300                  -              4,188                   -
                                      -------            -------            -------             ------- 
        Total operating
         expenses                      11,923              7,921             37,159              26,672
 
Operating income                        3,168              4,462              8,022              19,691
 
Other income (expense):
 Interest expense                      (3,581)              (389)            (9,362)             (1,230)
 Interest income                          208                100                548                 184
 Other, net                              (100)              (104)              (101)               (184)
                                      -------            -------            -------             ------- 
                                       (3,473)              (393)            (8,915)             (1,230)
                                      -------            -------            -------             ------- 
Income (loss) before income
 taxes                                   (305)             4,069               (893)             18,461
Provision (benefit) for income
 taxes                                   (119)             1,668               (347)              7,634
                                      -------            -------            -------             ------- 
Net income (loss)                        (186)           $ 2,401               (546)            $10,827
                                                         =======                                ======= 
Accretion of preferred stock
 dividend                                 208                                   532
                                      -------                               -------                       
Net loss attributable to
 common stockholders                  $  (394)                              $(1,078)
                                      =======                               =======                     
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       4
<PAGE>
 
                               THERMA-WAVE, INC.
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                  Nine months ended
                                                                                     December 31,
                                                                        -------------------------------------
 
                                                                            1997                     1996
                                                                        ------------             ------------
<S>                                                                     <C>                      <C>
Operating activities:
  Net income (loss)                                                         $   (546)                 $10,827
  Adjustments to reconcile net income (loss) to net cash provided
   by operating activities:
     Depreciation and amortization                                             2,581                    3,170
     Amortization of deferred financing costs                                    989                        -
     Non-cash recapitalization and related expenses                            3,888                        -
     Loss on disposal of property, plant and equipmant                           400                        -
     Changes in assets and liabilities:
      Accounts receivable                                                     (2,542)                  (3,454)
      Inventories                                                             (3,928)                  (4,943)
      Other assets                                                            (1,642)                    (100)
      Other liabilities                                                        4,142                    1,961
                                                                        ------------             ------------
       Net cash provided by operating activities                               3,342                    7,461

Investing activities:
  Purchases of property and equipment                                         (2,634)                    (726)
  Other                                                                       (1,059)                    (636)
                                                                        ------------             ------------
       Net cash used in investing activities                                  (3,693)                  (1,362)
Financing activities:
  Issuance of Senior Notes                                                   115,000                        -
  Repayment of notes payable                                                 (26,934)                    (980)
  Redemption of common stock                                                 (96,900)                       -
  Proceeds from issuance of common stock                                      20,169                      524
  Deferred financing costs                                                   (11,213)                       -
  Other                                                                         (685)                     (79)
                                                                        ------------             ------------
       Net cash used in financing activities                                    (563)                    (535)
                                                                        ------------             ------------
Net (decrease)/increase in cash and cash equivalents                            (914)                   5,564
Cash and cash equivalents at beginning of period                              16,741                    7,690
                                                                        ------------             ------------
Cash and cash equivalents at end of period                                  $ 15,827                  $13,254
                                                                        ============             ============
Supplementary disclosures:
  Cash paid for interest                                                    $  6,495                  $ 1,283
                                                                        ============             ============
  Cash paid for taxes                                                       $  2,825                  $ 6,394
                                                                        ============             ============
Noncash financing activity:
  Common stock issued for notes receivable from stockholders                $    298                  $     -
                                                                        ============             ============
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       5
<PAGE>
 
                               THERMA-WAVE, INC.
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


1. Basis of Presentation

   The accompanying unaudited condensed consolidated financial statements have
   been prepared pursuant to the rules and regulations of the Securities and
   Exchange Commission and include the accounts of Therma-Wave, Inc. and its
   wholly owned subsidiaries (collectively "Therma-Wave" or the "Company").
   Certain information and footnote disclosures, normally included in financial
   statements prepared in accordance with generally accepted accounting
   principles, have been condensed or omitted pursuant to such rules and
   regulations. In the opinion of the Company, the financial statements reflect
   all adjustments, consisting only of normal recurring adjustments, necessary
   for a fair presentation of the financial position at December 31, 1997, and
   the operating results and cash flows for the three and nine months ended
   December 31, 1997 and 1996. These financial statements and notes should be
   read in conjunction with the Company's audited financial statements and notes
   thereto for the year ended March 31, 1997, included in the Company's
   Registration Statement on Form S-4 (Registration No. 333-29871) as declared
   effective by the Securities and Exchange Commission on September 10, 1997.

   The results of operations for the interim periods are not necessarily
   indicative of the results of operations that may be expected for any other
   period or for the fiscal year, which ends April 5, 1998.

   The third fiscal quarters of 1998 and 1997 and the fiscal year 1997 ended on
   January 4, 1998, January 5, 1997 and April 6, 1997, respectively. For
   presentation purposes, the accompanying financial statements have been shown
   as ending on the last day of the month.

2. Inventories

   Inventories are summarized as follows:

<TABLE>
<CAPTION>
                                    December 31, 1997              March 31, 1997
                                    -----------------              --------------
<S>                                 <C>                            <C>
Purchased materials                      $10,228                      $ 8,937
Systems in process                         8,647                        7,252
Finished systems                           1,696                        1,238
                                         -------                      -------
                                         $20,571                      $17,427
                                         =======                      =======
</TABLE>

                                       6
<PAGE>
 
3. Recapitalization

   In December 1996, the Board of Directors approved the Recapitalization
   Agreement (the "Recapitalization Agreement"). Pursuant to the
   Recapitalization Agreement, which closed on May 16, 1997, the Company: (i)
   redeemed from Toray Industries, Inc., ("Toray") and Shimadzu Corporation
   ("Shimadzu") approximately 86.6% of its outstanding capital stock for $96.9
   million; (ii) converted its remaining outstanding capital stock of 6.1
   million shares to newly issued shares of preferred stock and common stock;
   (iii) repaid substantially all of its outstanding borrowings of approximately
   $26.9 million; (iv) canceled its receivable from Toray and Shimadzu of $1.4
   million which was recorded as a reduction of additional paid-in capital; and
   (v) paid the estimated fees and expenses of approximately $11.2 million
   related to the Recapitalization. In order to finance the transactions
   effected by the Recapitalization Agreement, the Company: (i) issued $115.0
   million in aggregate principal amount of senior notes in a private debt
   offering; (ii) received an equity contribution of approximately $20.0 million
   in cash from an investor group, including investment funds associated with
   Bain Capital, Inc. ("Bain"), and members of the Company's senior management
   team; and (iii) converted equity securities of Toray and Shimadzu having a
   value of $15.0 million into newly issued shares of preferred stock and common
   stock.

   Immediately after the Recapitalization, the outstanding equity securities of
   the Company consisted of 9,073,532 shares of Class A Common; 1,334,875 shares
   of Class B Common; 1,008,170 shares of Class L Common; and 748,738 shares of
   Preferred Stock. The shares of Class A Common and Class L Common each entitle
   the holder thereof to one vote per share on all matters to be voted upon by
   the stockholders of the Company and are otherwise identical, except that the
   shares of Class L Common are entitled to a preference over the Class A Common
   with respect to any distribution by the Company to holders of its capital
   stock equal to the original cost of such share ($19.085) plus an amount which
   accrues on a daily basis at a rate of 12% per annum, compounded annually. The
   Class B Common is identical to the Class A common except that the Class B
   Common is nonvoting and is convertible into Class A Common at any time
   following an initial public offering by the Company at the option of the
   holder thereof. The Preferred Stock has a liquidation preference of $18.40
   per share and is convertible into one share of Class A Common at the option
   of the holder thereof. Dividends on the Preferred Stock accrue at a rate of
   6.0% per annum. The Preferred Stock has a scheduled redemption on May 16,
   2007, and is otherwise redeemable by the Company at any time from time to
   time after the earlier of (i) June 30, 1998; or (ii) an initial public
   offering by the Company. The Preferred Stock entitles the holder thereof to
   one vote for each share of Class A Common issuable upon conversion of such
   Preferred Stock.

4. Financing Arrangements

   The $115.0 million of senior notes ("Notes") issued to finance the
   Recapitalization are senior unsecured obligations of the Company and will
   mature on May 15, 2004. Interest on the Notes will accrue at the rate of 10
   5/8% per annum and is payable semiannually in cash on each May 15 and
   November 15, commencing on November 15, 1997, to registered holders at the
   close of business on May 1 and November 1, respectively, immediately
   preceding the 

                                       7
<PAGE>
 
   applicable interest payment date. The Notes are not entitled to the benefit
   of any mandatory sinking fund and are redeemable at the Company's option in
   whole at any time or in part from time to time, on and after May 15, 2001,
   upon not less than 30 nor more than 60 days notice, at specified redemption
   prices. At any time, or from time to time, on or prior to May 15, 2000, the
   Company may, at its option, use the net cash proceeds of one or more equity
   offerings to redeem up to 40% of the aggregate principal amount of Notes
   originally issued at a redemption price equal to 110.625% of the principal
   amount thereof plus accrued and unpaid interest.

   In connection with the Recapitalization Agreement, the initial purchasers of
   the $115.0 million of Notes were granted certain exchange and registration
   rights. Based upon the terms of such agreement, the Company issued new notes
   with substantially identical terms as the old notes except that the new notes
   are registered under the Securities Act and therefore do not bear legends
   restricting their transfer.

   In conjunction with the Recapitalization, the Company entered into a new bank
   credit facility (the "Bank Credit Facility") with Bankers Trust Company,
   which provides for a revolving credit facility of $30.0 million. The Company
   may borrow amounts under the Bank Credit Facility to finance its working
   capital requirements and other general corporate purposes. The Bank Credit
   Facility requires the Company to meet certain financial tests and contains
   covenants customary for this type of financing. At December 31, 1997, there
   was $3.5 million of an outstanding letter of credit that was collateralized
   by the Bank Credit Facility.

5. Recently Issued Accounting Standard

   In June 1997, the Financial Accounting Standards Board ("FASB") issued
   Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
   Comprehensive Income." The statement established standards for the reporting
   and display of comprehensive income and its components. Comprehensive income
   is defined as the change in equity of a business enterprise during a period
   from transactions and other events and circumstances from non-owner sources.
   It includes all changes in equity during a period except those resulting from
   investments by owners and distributions to owners. This standard will require
   that an enterprise display an amount representing total comprehensive income
   for the period. SFAS No. 130 will be effective for fiscal year 1998. The
   Company does not expect the adoption of SFAS No. 130 to have a significant
   impact on the Company's reported results of operations.

                                       8
<PAGE>
 
Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations


When used in this discussion, the words "expects", "anticipates" and similar
expressions are intended to identify forward-looking statements.  Such forward-
looking statements are subject to a number of risks and uncertainties that could
cause actual results to differ materially from the statements made. The Company
has experienced and expects to continue to experience significant fluctuations
in its quarterly results.  The Company's expense levels are based, in part, on
expectations of future revenues.  If revenue levels in a particular quarter do
not meet expectations, operating results are adversely affected.  A variety of
factors could have an influence on the level of the Company's revenues in a
particular quarter.  These factors include the cyclical nature of the
semiconductor industry, the risk that factors which allowed the Company to
experience relatively good performance in industry downturns may not protect the
Company in future downturns, the timing of the receipt of orders from major
customers, customer cancellations or delay of shipments, specific feature
requests by customers, production delays or manufacturing inefficiencies,
exchange rate fluctuations, management decisions to commence or discontinue
product lines, the Company's ability to design, introduce and manufacture new
products on a cost effective and timely basis, the introduction of new products
by the Company or its competition, the timing of research and development
expenditures, and expenses attendant to acquisitions, strategic alliances and
the future development of marketing and service capabilities.

General

The Company is a worldwide leader in the development, manufacture, marketing and
service of process control metrology systems for use in the manufacture of
semiconductors.  The Company's process control metrology systems are principally
used to measure ion implantation and thin film deposition and removal.  The
Company has developed two major lines of process control metrology systems: (i)
the Therma-Probe system and (ii) the Opti-Probe system.  The Therma-Probe
system, introduced in 1985, utilizes the Company's proprietary thermal wave
technology and is the predominant nondestructive process control metrology
system used to measure the critical ion implantation process on product wafers
in the fabrication of semiconductors.  The Opti-Probe system, introduced in
1992, significantly improves upon existing thin film metrology systems by
successfully integrating different measurement technologies into one system and
utilizing the Company's proprietary optical technologies.

The Company's third quarters of fiscal years 1998 and 1997 ended on January 4,
1998 and January 5, 1997, respectively. For presentation purposes, any reference
herein to such periods refer to the periods ended December 31 of such fiscal
year.

                                       9
<PAGE>
 
Results of Operations

The following table summarizes Therma-Wave's unaudited historical results of
operations as a percentage of net revenues for the periods indicated.  The
historical financial data for the three and nine months ended December 31, 1997
and 1996 were derived from the Company's unaudited consolidated financial
statements which, in the opinion of management, reflect all adjustments
(consisting of normal recurring adjustments) necessary for the fair presentation
of the financial condition and results of operations for such periods.

<TABLE>
<CAPTION>
                                                 Three months ended                 Nine months ended
                                                     December 31,                      December 31,
                                               -----------------------            ------------------------
Income Statement Data:                          1997             1996              1997              1996
                                               -----             -----             -----             -----
<S>                                          <C>                <C>               <C>               <C>
Net revenue                                    100.0%            100.0%            100.0%            100.0%
Cost of revenue                                 49.1              48.9              47.6              44.8
                                               -----             -----             -----             -----
Gross margin                                    50.9              51.1              52.4              55.2
Operating expenses:
Research and development expenses               17.2              11.8              17.0              10.7
Selling, general and administrative             22.0              19.6              21.2              19.5
Amortization of goodwill and
 purchased intangibles                             -               1.3                 -               1.5
Recapitalization and other
 non-recurring expenses                          1.0                 -               4.9                 -
                                               -----             -----             -----             -----
Operating income                                10.7              18.4               9.3              23.5
Interest expense                               (12.1)             (1.6)            (10.8)             (1.5)
Interest income                                  0.7               0.4               0.6               0.2
Other, net                                      (0.3)             (0.4)             (0.1)             (0.2)
                                               -----             -----             -----             -----
Income (loss) before income taxes               (1.0)             16.8              (1.0)             22.0
Provision (benefit) for income taxes            (0.4)              6.9              (0.4)              9.1
                                               -----             -----             -----             -----
Net income (loss)                               (0.6)%             9.9%             (0.6)%            12.9%
                                               =====             =====             =====             =====
</TABLE>

Net revenues for the three and nine months ended December 31, 1997 were $29.7
million and $86.2 million, respectively.  Compared to the corresponding periods
of fiscal 1997, net revenues increased $5.5 million or 22.5% for the three month
period ended December 31, 1997 and $2.2 million or 2.6% for the nine month
period ended December 31, 1997.  This is primarily attributed to higher Opti-
Probe sales and increased service revenues, partially offset by a decrease in
Therma-Probe sales due to a decrease in new semiconductor manufacturing
facilities.

Gross margin percentages for the three and nine months ended December 31, 1997
were 50.9% and 52.4%, respectively.  Compared to the corresponding periods of
fiscal 1997, the gross margin percentage decreased by 0.2 and 2.8 percentage
points for the three and nine months, respectively.  This decrease is primarily
attributable to increased investment in the Company's service organization.

                                       10
<PAGE>
 
Research and development expenses were $5.1 million and $14.7 million for the
three and nine months ended December 31, 1997.  Compared to the corresponding
periods of fiscal 1997, research and development expenses increased $2.2
million, or 78.4% and $5.6 million, or 62.6% for the three and nine months,
respectively. The increase in research and development is due to increased
headcount and project expense increases related to new product developments. The
Company believes that technical leadership is essential to its success and
expects to continue to commit significant resources to research and development
projects.

Selling, general and administrative expenses as a percentage of net revenues for
the three and nine months ended December 31, 1997, were 22.0% and 21.2%,
respectively.  For the three and nine months ending December 31, 1996, selling,
general and administrative expenses as a percentage of net revenues were 19.6%
and 19.5%.  The increase for the periods ended December 31, 1997 is a result of
increased spending in marketing and related expenses for new products, slightly
offset by a decrease in sales commissions.

Recapitalization and other non-recurring expenses for the nine months ended
December 31, 1997 was $4.2 million.  Non-cash charges related to the
arrangements for the Company's executive officers in connection with the
Recapitalization were $3.9 million.  Costs incurred relating to the Company's
postponed initial public offering were approximately $0.3 million.

Interest expense for the three and nine months ended December 31, 1997 were $3.6
million and $9.4 million, respectively.  Compared to the corresponding periods
of fiscal 1997, interest expense increased $3.2 million and $8.1 million,
respectively.  This increased interest expense is attributed to the additional
debt incurred as part of the Recapitalization.

For the three and nine months ended December 31, 1997, the Company recorded a
benefit for income taxes of $0.1 million and $0.3 million, respectively. During
the three and nine months ended December 31, 1996, the Company recorded a
provision for income taxes of $1.7 million and $7.6 million, respectively.
These decreases were caused by reductions in net income of the Company for the
respective periods.

Liquidity and Capital Resources

The Company's principal liquidity requirements are for working capital,
consisting primarily of accounts receivable, inventories, capital expenditures
and debt service.  Historically, the Company has funded its operating activities
principally from working capital and working capital lines of credit.

Cash flow provided by operating activities was $3.3 million and $7.5 million for
the nine months ended December 31, 1997 and 1996, respectively.  The decrease in
cash flow provided by operating activities is mainly due to the decrease in net
income, offset by the increase in non-recurring recapitalization and related
expenses and a lower investment in working capital.

Purchases of property and equipment were $2.6 million and $0.7 million for the
nine months ended December 31, 1997 and 1996.

                                       11
<PAGE>
 
The Company issued $115.0 million in aggregate principal amount of senior notes
to finance the Recapitalization, including the repayment of notes payable and
redemption of common stock.  The Company also received proceeds of approximately
$20.2 million from the issuance of common stock.

In connection with the Recapitalization, the Company entered into the Bank
Credit Facility.  The Bank Credit Facility provides for borrowings of up to
$30.0 million for working capital and other general corporate purposes, and
bears interest, at the Company's option, at (i) the Base Rate (as defined in the
Bank Credit Facility) plus 1.75% or (ii) the Eurodollar Rate (as defined in the
Bank Credit Facility) plus 3.00%.  The Company's borrowings under the Bank
Credit Facility are secured by substantially all of the Company's assets and a
pledge of substantially all of the capital stock of the Company's domestic
subsidiaries and 65% of the capital stock of the Company's first-tier foreign
subsidiaries.  The Bank Credit Facility matures on May 16, 2002. At December 31,
1997, there was $3.5 million of an outstanding letter of credit that was
collateralized by the Bank Credit Facility and unused borrowing capacity under
the Bank Credit Facility of $26.5 million.

The Bank Credit Facility requires the Company to meet certain financial tests
and contains covenants customary for this type of financing.

On October 2, 1997, the Company filed a Registration Statement on Form S-1 with
the Securities and Exchange Commission relating to an initial public offering of
its common stock.  The Company has decided to postpone such offering until a
future date, due to current uncertainty in the technology sector of the stock
market.

The Company's principal sources of funds are cash flows from operating
activities and borrowings under the Bank Credit Facility.  The Company believes
that these funds will provide the Company with sufficient liquidity and capital
resources for the Company to meet its current and future financial obligations,
as well as to provide funds for the Company's working capital, capital
expenditures and other needs for at least the next twelve months.  No assurance
can be given, however, that this will be the case.  Depending upon its rate of
growth and profitability, the Company may require additional equity or debt
financing to meet its working capital requirements or to fund its research and
development activities.  There can be no assurance that additional financing
will be available when required or, if available, will be on terms satisfactory
to the Company.  The Company's future operating performance and ability to
service or refinance the Notes and to repay, extend or refinance the Bank Credit
Facility will be subject to future economic conditions and to financial,
business and other factors, many of which are beyond the Company's control.

Foreign exchange rate fluctuations have historically not had a significant
impact on the Company's results of operations.  Due to the unpredictability of
currency exchange rates, there can be no assurance that the Company will not
experience negative currency translation adjustments in the future, nor can the
Company predict the effect of exchange rate fluctuations upon future operating
results.

                                       12
<PAGE>
 
Part II. Other Information

  Item 1. Legal Proceedings

     On November 26, 1997, the Company received a favorable jury verdict in its
     United States patent infringement suit against Jenoptik GmbH ("Jenoptik"),
     a German company. The jury found all six of the Company's patents valid and
     concluded that Jenoptik infringed all thirty-one claims at issue from these
     patents.

  Item 2. Changes in Securities and Use of Proceeds

     None.

  Item 3. Defaults Upon Senior Securities

     None.

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

     None.

  Item 5. Other Information

     None.

  Item 6. Exhibits and Reports on Form 8-K

     (a) Exhibits

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

        3.1  Restated Certificate of Incorporation of Therma-Wave, Inc. (1)
        3.2  Amended and Restated By-Laws of Therma-Wave, Inc. (1)
       27.1  Financial Data Schedule
      _____
         (1) Incorporated by reference to the same numbered exhibit to the
             Company's Registration Statement on Form S-4 (Registration No. 333-
             29871)

      (b) Reports on Form 8-K

      The Company did not file any reports on Form 8-K during the nine months
      ended December 31, 1997.

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<PAGE>
 
                                   SIGNATURES

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


                               THERMA-WAVE, INC.
                                  (Registrant)


                                /s/ ANTHONY LIN
                          ____________________________

                                  ANTHONY LIN
                           Executive Vice President,
                            Chief Financial Officer
               (as Registrant and as Principal Financial Officer)

                               February 13, 1998

                                       14