<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 quarterly period ended July 1, 2001

                                      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 000-26911

                               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)

      Registrant's Telephone Number, Including Area Code: (510) 668-2200

     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 of the issuer's class of common stock, as of
the latest practical date:

               Class                         Outstanding as of July 31, 2001
--------------------------------------------------------------------------------
    Common stock, $.01 par value                        24,129,898

                                       1
<PAGE>

                               THERMA-WAVE, INC.
                                   FORM 10-Q

                                     INDEX
<TABLE>
<S>                                                                                 <C>
Part I.  Financial Information

Item 1.  Unaudited Condensed Consolidated Financial Statements

         Condensed Consolidated Balance Sheets
           June 30, 2001 and March 31, 2001.................................           3

         Condensed Consolidated Statements of Operations
           Three months ended June 30, 2001 and 2000........................           4

         Condensed Consolidated Statements of Cash Flows
            Three months ended June 30, 2001 and 2000.......................           5

         Notes to Unaudited Condensed Consolidated Financial Statements.....           6

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations..........................................           9

Item 3.  Quantitative and Qualitative Disclosure About Market Risk..........          14


Part II. Other Information

Item 1.  Legal Proceedings..................................................          15

Item 2.  Changes in Securities and Use of Proceeds..........................          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...................................          15

Signatures..................................................................          16
</TABLE>

                                       2
<PAGE>

Part I. Financial Information
Item 1. Unaudited Condensed Consolidated Financial Statements


                               THERMA-WAVE, INC.
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                (in thousands)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                 June 30,               March 31,
                                                                   2001                   2001
                                                                ---------              ---------
<S>                                                             <C>                     <C>
                            ASSETS
Current assets:
 Cash and cash equivalents                                       $ 61,252              $  55,725
 Short-term investments                                            15,510                 19,850
 Accounts receivable, net                                          31,513                 43,348
 Inventories                                                       44,698                 47,181
 Other current assets                                               3,188                  3,925
                                                                ---------              ---------
    Total current assets                                          156,161                170,029

 Property and equipment, net                                       14,830                 14,478
 Deferred income taxes                                              3,405                  3,405
 Other assets                                                       3,800                  3,279
                                                                ---------              ---------
    Total assets                                                 $178,196              $ 191,191
                                                                =========              =========

              LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Accounts payable                                                $  4,868              $  12,547
 Accrued Warranty Costs                                             4,548                  3,742
 Deferred Revenue                                                  13,537                 17,096
 Income Tax Payable                                                 8,937                 10,810
 Other current liabilities                                          8,481                 15,985
                                                                ---------              ---------
    Total current liabilities                                      40,371                 60,180
 Long term debt                                                        16                     16
 Other liabilities                                                  2,222                  1,913
                                                                ---------              ---------
    Total liabilities                                              42,609                 62,109

Stockholders' equity
 Common stock                                                         241                    240
 Additional paid-in capital                                       231,784                230,646
 Notes receivable from stockholders                                  (210)                  (212)
 Accumulated deficit                                              (94,706)              (100,129)
 Other comprehensive loss                                          (1,522)                (1,463)
                                                                ---------              ---------
    Total stockholders' equity                                    135,587                129,082
                                                                ---------              ---------
    Total liabilities and stockholders' equity                   $178,196              $ 191,191
                                                                =========              =========
</TABLE>

    See accompanying notes to condensed consolidated financial statements.

                                       3
<PAGE>

                               THERMA-WAVE, INC.
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                     (in thousands, except per share data)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                Three months ended
                                                                                      June 30,
                                                                           -----------------------------
                                                                            2001                   2000
                                                                           -------               -------
<S>                                                                       <C>                  <C>
Net revenue                                                                $37,821               $39,641
Cost of revenue                                                             20,149                20,101
                                                                           -------               -------
Gross profit                                                                17,672                19,540

Operating expenses:
  Research and development                                                   6,981                 7,519
  Selling, general and administrative                                        5,707                 5,881
                                                                           -------               -------
         Total operating expenses                                           12,688                13,400
                                                                           -------               -------

Operating income                                                             4,984                 6,140

Other income (expense):
  Interest expense                                                             (84)                  (60)
  Interest income                                                              832                 1,039
  Other, net                                                                    39                    12
                                                                           -------               -------
         Total other income                                                    787                   991
                                                                           -------               -------

Income before provision for income taxes                                     5,771                 7,131
Provision for income taxes                                                    (346)                 (428)
                                                                           -------               -------
Income before cumulative effect of change in accounting principle            5,425                 6,703
Cumulative effect of change in accounting principle, net of taxes                -                (6,287)
                                                                           -------               -------
Net income                                                                 $ 5,425               $   416
                                                                           =======               =======

Basic net income per share:
  Income before cumulative effect of change in accounting
   principle                                                               $  0.23               $  0.29
  Cumulative effect of change in accounting principle                            -                 (0.27)
                                                                           -------               -------
Basic net income per share                                                 $  0.23               $  0.02
                                                                           =======               =======

Diluted net income per share:
  Income before cumulative effect of change in accounting
   principle                                                               $  0.22               $  0.27
  Cumulative effect of change in accounting principle                            -                 (0.25)
                                                                           -------               -------
Diluted net income per share                                               $  0.22               $  0.02
                                                                           =======               =======

Weighted average common shares outstanding:
  Basic                                                                     23,786                23,148
  Diluted                                                                   25,133                24,853
</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>
                                                                 Three months ended
                                                                      June 30,
                                                             -----------------------------
                                                               2001                 2000
                                                             -------               -------
<S>                                                     <C>                  <C>
Operating activities:
 Net income                                                   $  5,425              $   416
 Adjustments to reconcile net income to net cash used
  by operating activities:
   Change in Accounting Principles                                                    6,287
   Depreciation and amortization                                 1,366                  778
 Changes in assets and liabilities:
   Accounts receivable                                          11,835               (8,122)
   Inventories                                                   2,483               (5,137)
   Other assets                                                    248                 (560)
   Other liabilities                                           (19,472)               6,259
                                                              --------              -------
    Net cash provided (used) by operating activities             1,885                  (79)
                                                              --------              -------

Investing activities:
  Purchases of property and equipment                           (1,620)              (1,004)
  Short-term investments                                         4,340                    -
  Other                                                           (130)                (190)
                                                              --------              -------
     Net cash provided (used) by investing activities            2,590               (1,194)

Net cash provided by financing activities                        1,052                  436
                                                              --------              -------

 Net increase (decrease) in cash and cash equivalents            5,527                 (837)
 Cash and cash equivalents at beginning of period               55,725               75,200
                                                              --------              -------
 Cash and cash equivalents at end of period                   $ 61,252              $74,363
                                                              ========              =======

 Supplementary disclosures:
  Cash paid for interest                                      $     57              $    57
                                                              ========              =======
  Cash paid for taxes                                         $  2,445              $     1
                                                              ========              =======
</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. 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 our opinion, the financial
    statements reflect all adjustments, consisting only of normal recurring
    adjustments, necessary for a fair presentation of the financial position at
    June 30, 2001, and the operating results and cash flows for the three months
    ended June 30, 2001 and 2000. These financial statements and notes should be
    read in conjunction with our audited financial statements and notes thereto
    for the year ended March 31, 2001.

          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 on March 31, 2002.

          The first quarters of fiscal years 2002 and 2001 and the fiscal year
    2001 ended on July 1, 2001, July 2, 2000 and April 1, 2001, respectively.
    For presentation purposes, the accompanying financial statements have been
    shown as ending on the last day of the month proceeding each of these dates.

2.  Inventories

          Inventories are summarized as follows (in thousands):

<TABLE>
<CAPTION>
                                        June 30, 2001                March 31, 2001
                                 --------------------------    -------------------------
<S>                                <C>                           <C>

Purchased materials                       $20,727                      $22,197
Systems in process                         17,181                       19,571
Finished systems                            6,790                        5,413
                                          -------                      -------
                                          $44,698                      $47,181
                                          =======                      =======
</TABLE>


3.  Comprehensive Income

          Comprehensive income consists of net income for the period and change
    in accumulated foreign currency translation adjustments during the period.
    For the quarters ended June 30, 2001 and 2000, comprehensive income amounted
    to approximately $5.4 million and $424,000, respectively.

                                       6
<PAGE>

4.  Change in Accounting Principle

          Effective April 1, 2000, we changed our method of accounting for
    revenue recognition in accordance with Securities and Exchange Commission
    Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in
    Financial Statements." Equipment sales are accounted for as multiple-element
    arrangement sales as described in SAB 101. The total revenue is allocated to
    each component of the multi-element arrangement. Revenue on each element is
    recognized when the contractual obligations have been performed, risk of
    loss has passed to the customer, collection is probable and customer
    acceptance has been obtained if applicable. Revenue from systems and spare
    parts are generally recognized at the time of shipment. Revenue on service
    contracts is deferred and recognized on a straight-line basis over the
    period of the contract. Estimated contractual warranty obligations are
    recorded when related sales are recognized.

          In accordance with guidance provided in SAB 101, we recorded $6.3
    million (net of income tax benefit of $0.4 million), or $0.25 per diluted
    share, as the cumulative effect of the change in accounting principle as of
    April 1, 2000. All periods presented are consistent with the guidance
    provided in SAB 101.

          During the quarters ended June 30, 2001 and 2000, we recognized $1.5
    million and $2.7 million respectively out of the $9.4 million revenue that
    was included in the cumulative effect adjustment as of April 1, 2000.

5.  Net Income Per Share

          Basic net income per share is based on the weighted-average number of
    common shares outstanding excluding contingently issuable or returnable
    shares such as unvested common stock or shares that contingently convert
    into common stock upon certain events. Diluted net income per share is based
    on the weighted average number of common shares outstanding and dilutive
    potential common shares outstanding.

          1,071,086 and 109,736 shares of stock options outstanding as of June
    30, 2001 and 2000, respectively, were not included in the calculation of
    diluted net income per share since their inclusion would be anti-dilutive.
    The weighted average exercise prices for anti-dilutive stock options as of
    June 30, 2001 and 2000 were $21.67 and $28.09, respectively.

6.  Recently Issued Accounting Statements

          In July 2001, the Financial Accounting Standards Board ("FASB") issued
    Statement of Financial Accounting Standards ("SFAS") No. 141, Business
    Combinations. SFAS No. 141 addresses financial accounting and reporting for
    business combinations and supersedes Accounting Principles Board ("APB")
    Opinion No. 16, Business Combinations, and SFAS No. 38, Accounting for
    Preacquisition Contingencies of Purchased Enterprises.  All business
    combinations in the scope of SFAS No. 141 are to be accounted for using one
    method, the

                                       7
<PAGE>

    purchase method. The provisions of SFAS No. 141 apply to all business
    combinations initiated after June 30, 2001.

          In July 2001, the FASB issued SFAS No. 142, Goodwill and Other
    Intangible Assets. SFAS No. 142 addresses financial accounting and reporting
    for acquired goodwill and other intangibles and supercedes APB Opinion No.
    17, Intangible Assets. The provisions of SFAS No. 142 are required to be
    applied starting with fiscal years beginning after December 15, 2001, with
    certain early adoption permitted.

7.  Commitments and Contingencies

          We are involved in various legal proceedings from time to time arising
    in the ordinary course of business, none of which are expected to have a
    material adverse effect on our business or financial condition.

                                       8
<PAGE>

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

     This quarterly report on Form 10-Q contains forward-looking statements,
  including, without limitation, statements concerning the conditions in the
  semiconductor and semiconductor capital equipment industries, our operations,
  economic performance and financial condition, including in particular
  statements relating to our business and growth strategy and product
  development efforts. The words "believe," "expect," "anticipate," "intend" and
  other similar expressions generally identify forward-looking statements.
  Potential investors are cautioned not to place undue reliance on these
  forward-looking statements, which speak only as of their dates.  These
  forward-looking statements are based largely on our current expectations and
  are subject to a number of risks and uncertainties, including, without
  limitation, those risks identified under the heading "Risk Factors" in Exhibit
  99.1 of this quarterly report and other risks and uncertainties indicated from
  time to time in our filings with the SEC. Actual results could differ
  materially from these forward-looking statements. We have experienced and
  expect to continue to experience significant fluctuations in our quarterly
  results of operations. Our 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 our revenues in a particular quarter.
  These factors include the cyclical nature of the semiconductor industry, the
  condition of the economy as a whole, the risk that factors which allowed us to
  experience relatively good performance in industry downturns may not protect
  us in future downturns, the timing of the receipt of orders from major
  customers, customer cancellations or delays of shipments, specific feature
  requests by customers, production delays or manufacturing inefficiencies,
  exchange rate fluctuations, management decisions to commence or discontinue
  product lines, our ability to design, introduce and manufacture new products
  on a cost effective and timely basis, the introduction of new products by
  ourselves or our competitors, the timing of research and development
  expenditures, and the future development of marketing and service
  capabilities. In light of these risks and uncertainties, there can be no
  assurance that the matters referred to in the forward-looking statements
  contained in this quarterly report will in fact occur.


  General

     We are a worldwide leader in the development, manufacture, marketing and
  service of process control metrology systems for use in the manufacture of
  semiconductors. Process control metrology is used to monitor process
  parameters in order to enable semiconductor manufacturers to reduce feature
  size, increase wafer size, increase equipment productivity and improve device
  performance. Our current process control metrology systems are principally
  used to measure ion implantation and thin film deposition and removal. We
  currently sell five product families of process control metrology systems:
  Therma-Probe systems, Opti-Probe systems, Opti-Probe CD systems, Meta-Probe
  systems and Integra systems.

                                       9
<PAGE>

     Therma-Probe Product Family.   Therma-Probe systems utilize our proprietary
  thermal wave technology and are the predominant non-destructive process
  control metrology systems used to measure the critical ion implantation
  process on product wafers in the fabrication of semiconductors.

     Opti-Probe Product Family.   Opti-Probe systems significantly improve upon
  existing thin film metrology systems by successfully integrating different
  measurement technologies and utilizing our proprietary optical technologies.

     Opti-Probe CD Product Family.   Opti-Probe CD systems are spectroscopic
  ellipsometer-based systems that provide revolutionary, nondestructive Critical
  Dimension (CD) metrology for the smallest features of the next generations of
  integrated circuits (IC's).

     Meta-Probe Product Family.   Meta-Probe thin film measurement systems
  utilize a patented technique based on x-ray reflectometry to rapidly measure
  thickness, density, and roughness of each film in multi-layer stacks.

     Integra Product Family.   Our Integra line of integrated metrology products
  is a broad-based family of compact metrology "modules" which will be installed
  and function with an IC process system, such as an etch or chemical vapor
  deposition system, to provide metrology on each wafer before it exits the
  process tool.

     Effective April 1, 2000, we changed our method of accounting for revenue
  recognition in accordance with Securities and Exchange Commission Staff
  Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
  Statements." Historically, revenue from systems and spare parts was generally
  recognized at the time of shipment. Revenue on service contracts is deferred
  and recognized on a straight-line basis over the period of the contract.
  Estimated contractual warranty obligations are recorded when related sales are
  recognized. Under SAB 101, equipment sales are accounted for as multiple-
  element arrangement sales as described in SAB 101. The total revenue is
  allocated to each component of the multi-element arrangement. Revenue on each
  element is recognized when the contractual obligations have been performed,
  risk of loss has passed to the customer, collection is probable and customer
  acceptance has been obtained if applicable. Discussion and analysis of net
  revenue, gross profit in this quarterly report on Form 10-Q is based on SAB
  101.

     During the three months ended June 30, 2001, we derived approximately 89%
  of our revenues from system sales, 5% from sales of replacement and spare
  parts, including associated labor, and 6% from service contracts. During the
  three months ended June 30, 2000, we derived approximately 89% of our revenues
  from system sales, 7% from sales of replacement and spare parts, including
  associated labor, and 4% from service contracts.

     International sales accounted for approximately 59% and 69% of our total
  revenues for the three months ended June 30, 2001 and 2000, respectively. We
  anticipate that international sales will continue to account for a significant
  portion of our revenue in the foreseeable future. A substantial portion of our
  international sales are denominated in U.S. dollars. As a

                                       10
<PAGE>

  result, changes in the values of foreign currencies relative to the value of
  the U.S. dollar can render our products comparatively more expensive. Although
  we have not been negatively impacted in the past by foreign currency changes
  in Japan, Korea, Taiwan and Europe, such conditions could negatively impact
  our international sales in future periods.


  Results of Operations

     The following table summarizes our unaudited historical results of
  operations as a percentage of net revenues for the periods indicated.  The
  historical financial data for the three months ended June 30, 2001 and 2000
  were derived from our 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>
                                                          For the Three Months Ended
                                                                   June 30,
                                                          ---------------------------
                                                            2001               2000
                                                          --------            -------
<S>                                                       <C>                 <C>
Net revenues                                                 100.0 %            100.0 %
Cost of revenues                                              53.3               50.7
                                                          --------            -------
Gross profit                                                  46.7               49.3

Operating Expenses:
     Research and development                                 18.5               19.0
     Selling, general and administrative                      15.0               14.8
                                                          --------            -------
          Total operating expenses                            33.5               33.8

Operating income                                              13.2               15.5

Other income (expense):
     Interest expense                                         (0.2)              (0.2)
     Interest income                                           2.2                2.6
     Other, net                                                0.1                0.1
                                                          --------            -------
          Total other income                                   2.1                2.5
Income before income taxes                                    15.3               18.0
Provision for income taxes                                    (1.0)              (1.1)
                                                          --------            -------
Income before cumulative effect of change in accounting
  principle                                                   14.3               16.9
Cumulative effect of change in accounting principle, net of
  taxes                                                          -              (15.9)
                                                          --------            -------
Net income                                                    14.3 %              1.0 %
                                                          ========            =======
</TABLE>


     Net Revenues.   Net revenues for the fiscal quarters ended June 30, 2001
  and 2000 were $37.8 million and $39.6 million, respectively, representing a
  decrease of $1.8 million or 4.6%. Compared to the prior fiscal quarter, net
  revenues decreased $16 million or 29.6%

                                       11
<PAGE>

  from $53.8 million. . The decrease in revenue was the result of capital
  spending reductions by our customers due to the cyclical downturn of the
  semiconductor industry and the weakness of the global economy.

     In the near future, we may continue to expect low order booking rates,
  rescheduling of delivery and order cancellations based on current industry
  conditions. If we are unsuccessful in our efforts to secure existing
  production orders, our results of operations will be materially adversely
  impacted in the near-term.

     Gross Profit.   Gross profit for the first quarter of fiscal 2002 decreased
  27.8% to $17.7 million from $24.5 million in the previous fiscal quarter.
  Compared to the same quarter of fiscal 2001, gross profit decreased $1.9
  million or 9.6%. As a percentage of net revenues, gross margin for current
  quarter was 46.7%, compared to 45.5% for last fiscal quarter and 49.3% for the
  same quarter of last fiscal year. The decrease in gross margin was primarily
  attributable to lower production levels, with relatively stable overhead
  costs.

     Research and Development ("R&D") Expenses. R&D expenses for the first
  quarter of fiscal 2002 were $7.0 million, a decrease of 17% from the prior
  quarter and a decrease of 7% from the first quarter of last fiscal year. The
  decrease was primarily the result of reduction of contract labor as well as
  decreased patent defense expense. We continue committing significant resources
  to the development of new products. We believe that technical leadership is
  essential to our success and will eventually benefit us when the next economic
  upturn comes. In the near term we do not expect to reduce spending on our
  current key R&D projects.

     Selling, General and Administrative ("SG&A") Expenses. SG&A expenses for
  the first quarter of fiscal 2002 were $5.7 million, a decrease of 38.4% from
  SG&A expenses of $9.3 million in the prior fiscal quarter, which included a
  $1.7 million one-time charge. Compared to the first quarter of last fiscal
  year, SG&A expense decreased 3%. The decrease from the prior fiscal quarter
  was due to lower sales commissions resulting from the lower sales volume as
  well as the effect of implementing strong cost containment measures.

     Other Income.   Other income for the first quarter of fiscal 2002 was $0.8
  million, which was slightly lower than that of the prior fiscal quarter (after
  excluding a $3.0 million litigation settlement charge) as well as the first
  quarter of the prior fiscal year. We derived other income primarily from the
  investment of our cash on hand. The decrease in other income was attributable
  to lower average interest rates for the period.

     Provision for Income Taxes.   For the first quarter of fiscal 2002, we
  recorded a $0.3 million provision for income taxes using an effective tax rate
  of 6%.

     Net Income.  Net income was $5.4 million for the first quarter of fiscal
  2002, 14% higher than net income of $4.7 million in the prior fiscal quarter,
  which included $4.7 million in one-time charges. Before the cumulative effect
  of changes in accounting principles regarding

                                       12
<PAGE>

  our revenue recognition practices, net income for the quarter ended June 30,
  2001 decreased 19% compared to that of same quarter of last fiscal year.

  Liquidity and Capital Resources

     Our principal liquidity requirements are for working capital. We have
  funded our operating activities principally from funds generated from
  operations, tax refunds and net proceeds from an initial public offering.

     Cash flows provided (used) by operating activities were $1.9 million and
  $0.1 million for the first quarters of fiscal 2002 and 2001, respectively. The
  increase in cash flow provided by operating activities from fiscal year 2001
  to 2002 is mainly due to net income and reductions in working capital.

     Cash flows provided (used) by investing activities were $2.6 million and
  $(1.2) million for the first quarters of fiscal 2002 and 2001, respectively.
  Purchases of property and equipment were $1.6 million and $1.0 million for the
  first quarters of fiscal 2002 and 2001, respectively. Cash used for the
  purchase of property and equipment in the first three months of fiscal 2002
  was offset by a net decrease of $4.3 million in short-term investments.

     Cash flows provided by financing activities were $1.1 million and $0.4
  million for the first three months of fiscal 2002 and 2001, respectively. The
  increase in cash flow provided by operating activities from fiscal year 2001
  to 2002 was primarily due to the exercise of stock options and issuance of
  common stock under the employee stock purchase plan.

     In June 2001, we replaced our existing bank credit facility and an
  associated $3.5 million outstanding letter of credit with a new $10 million
  loan and security agreement and a $3.5 million letter of credit with Comerica
  Bank. This new bank credit facility allows us to borrow money bearing interest
  either at a floating rate per annum equal to the prime rate or at a rate per
  annum equal to LIBOR plus 1.5%. We may request advances in an aggregate
  outstanding amount not to exceed $7.5 million minus the aggregate face amount
  of outstanding letters of credit, including any drawn but unreimbursed letters
  of credit. Our borrowings under the Comerica bank credit facility are secured
  by substantially all of our assets. The Comerica bank credit facility matures
  on March 28, 2004.

     Our principal sources of funds are anticipated to be cash and short-term
  investments on hand ($76.8 million as of June 30, 2001), cash flows from
  operating activities and, if necessary, borrowings under the bank credit
  facility. We believe that these funds will provide us with sufficient
  liquidity and capital resources for us to meet our current and future
  financial obligations for at least the next two years. No assurance can be
  given, however, that this will be the case. We may require additional equity
  or debt financing to meet our working capital requirements or to fund our
  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 us.

                                       13
<PAGE>

Item 3. Quantitative and Qualitative Disclosure About Market Risk

  Market Risk Disclosures

     The following discussion about market risk disclosures involves forward-
  looking statements. Actual results could differ materially from those
  projected in the forward-looking statements. We are exposed to market risks
  related to changes in interest rates and foreign currency exchange rates. We
  do not have any derivative financial instruments.

  Interest Rate Risk

     As of June 30, 2001, our cash included money market securities and
  commercial paper.  Due to the short term duration of our investment portfolio,
  an immediate 10% change in interest rates would not have a material effect on
  the fair market value of our portfolio, therefore, we would not expect our
  operating results or cash flows to be affected to any significant degree by
  the effect of a sudden change in market interest rates on our securities
  portfolio.

  Foreign Currency Exchange Risk

     A substantial portion of our sales are denominated in U.S. dollars and, as
  a result, we have relatively little exposure to foreign currency exchange risk
  with respect to sales made. We do not use forward exchange contracts to hedge
  exposures denominated in foreign currencies or any other derivative financial
  instruments for trading or speculative purposes. The effect of an immediate
  10% change in exchange rates would not have a material impact on our future
  operating results or cash flows.

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<PAGE>

Part II. Other Information

Item 1. Legal Proceedings

       There are no material legal proceedings pending against us. We could be
     involved in various legal proceedings from time to time arising in the
     ordinary course of business, none of which are expected to have a material
     adverse effect on our business or financial condition.

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) The following exhibits are included herein:

     Exhibit
     Number         Description
     10.26.1        Amendment No. 1 to 2000 Employee Stock Purchase Plan
     10.37          Amendment to Employment Agreement between Therma-Wave, Inc.
                    and Martin M. Schwartz
     99.1           Risk Factors. (1)

     ___________
         (1)  Incorporated by reference to the same numbered exhibit in the
              Company's Annual Report on Form 10-K for the period ended March
              31, 2001 (Registration No. 000-26911)

     (b) Reports on Form 8-K

     None

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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/ L. RAY CHRISTIE
                 ----------------------------------------------

                                L. RAY CHRISTIE
                            Chief Financial Officer
              (as Registrant and as Principal Accounting Officer)

                                August 15, 2001

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