<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 October 3, 1999 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)

<TABLE>
<S>                                                          <C>
                    DELAWARE                                             94-3000561
(State or other jurisdiction of incorporation or           (I.R.S. Employer Identification Number)
                  organization)

                1250 Reliance Way
               Fremont, California                                         94539
    (Address of principal executive offices)                             (Zip Code)
</TABLE>

                                (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 October 31, 1999
--------------------------------------------------------------------------------
Class A Common stock, $.01 par value                    9,073,532
Class B Common stock, $.01 par value                    1,120,448
Class L Common stock, $.01 par value                    1,008,170
<PAGE>

                               THERMA-WAVE, INC.
                                   FORM 10-Q

                                     INDEX

Part I. Financial Information

Item 1. Unaudited Condensed Consolidated Financial Statements

        Condensed Consolidated Balance Sheets
          September 30, 1999 and March 31, 1999                             3

        Condensed Consolidated Statements of Operations
          Three and six months ended September 30, 1999 and 1998            4

        Condensed Consolidated Statements of Cash Flows
          Six months ended September 30, 1999 and 1998                      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                                                  16

Item 2. Changes in Securities and Use of Proceeds                          17

Item 3. Defaults upon Senior Securities                                    17

Item 4. Submission of Matters to a Vote of Security Holders                17

Item 5. Other Information                                                  17

Item 6. Exhibits and Reports on Form 8-K                                   17

Signatures                                                                 19


                                       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>
                                                                  September 30,      March 31,
                                                                      1999             1999
                                                                  -------------     -----------
<S>                                                               <C>               <C>
                              ASSETS
Current assets:
 Cash and cash equivalents                                          $  13,107         $  20,245
 Accounts receivable, net                                              23,668            12,180
 Inventories                                                           19,864            15,369
 Other current assets                                                   2,948             9,759
                                                                  -------------     ------------
           Total current assets                                        59,587            57,553

 Property and equipment, net                                            4,217             4,513
 Deferred financing costs, net                                          7,541             8,349
 Other assets                                                           2,460             1,937
                                                                  -------------     ------------
           Total assets                                             $  73,805         $  72,352
                                                                  =============     ============

           LIABILITIES AND STOCKHOLDERS' EQUITY
                (NET CAPITAL DEFICIENCY)
Current liabilities:
 Accounts payable                                                   $   8,749         $   4,034
 Other current liabilities                                             21,119            22,125
                                                                  -------------     ------------
           Total current liabilities                                   29,868            26,159
 Long term debt                                                       115,000           115,000
 Other liabilities                                                      3,322             2,817
                                                                  -------------     ------------
           Total liabilities                                          148,190           143,976

Commitments and contingencies

Mandatorily redeemable preferred stock                                 15,759            15,347

Stockholders' equity (net capital deficiency)
 Common stock - Class A                                                    91                91
 Common stock - Class B                                                    11                11
 Common stock - Class L                                                    10                10
 Additional paid-in capital                                            19,356            19,754
 Notes receivable from stockholders                                      (241)             (241)
 Accumulated deficit                                                 (108,762)         (105,416)
 Other comprehensive loss                                                (609)           (1,180)
                                                                  ------------      ------------
           Total stockholders' equity (net capital deficiency)        (90,144)          (86,971)
                                                                  ------------      ------------
           Total liabilities and stockholders' equity (net
             capital deficiency)                                    $  73,805         $  72,352
                                                                  ============      ============
</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                       Six months ended
                                            September 30,                            September 30,
                                    ---------------------------------     ----------------------------------

                                          1999               1998               1999                1998
                                    --------------     --------------     --------------      --------------

<S>                                 <C>                <C>                <C>                 <C>
Net revenue                                $25,913            $15,196            $47,054            $ 30,442
Cost of revenue                             13,676              8,883             25,904              17,862
                                    --------------     --------------     --------------      --------------
Gross margin                                12,237              6,313             21,150              12,580

Operating expenses:
 Research and development                    5,086              3,924              8,941               8,522
 Selling, general and administrative         4,847              4,500              8,902               9,133
 Expenses relating to operating cost
  improvements                                   -                475                  -               1,057
                                    --------------     --------------     --------------      --------------
        Total operating expenses             9,933              8,899             17,843              18,712
                                    --------------     --------------     --------------      --------------

Operating income (loss)                      2,304             (2,586)             3,307              (6,132)

Other income (expense):
 Interest expense                           (3,488)            (3,450)            (7,013)             (6,949)
 Interest income                               135                171                285                 377
 Other, net                                     42                105                 75                 (56)
                                    --------------     --------------     --------------      --------------
                                            (3,311)            (3,174)            (6,653)             (6,628)
                                    --------------     --------------     --------------      --------------
Loss before income taxes                    (1,007)            (5,760)            (3,346)            (12,760)
Benefit for income taxes                         -               (750)                 -              (1,660)
                                    --------------     --------------     --------------      --------------
Net loss                                    (1,007)            (5,010)            (3,346)            (11,100)

Accretion of preferred stock
 dividend                                      206                208                412                 414
                                    --------------     --------------     --------------      --------------
Net loss available to common
 stockholders                              $(1,213)           $(5,218)           $(3,758)           $(11,514)
                                    ==============     ==============     ==============      ==============
</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>
                                                                     Six months ended
                                                                       September 30,
                                                             ----------------------------------
                                                                 1999                  1998
                                                             ------------          ------------
<S>                                                          <C>                   <C>
Operating activities:
 Net loss                                                    $     (3,346)         $    (11,100)
 Adjustments to reconcile net loss to net cash used
   by operating activities:
   Depreciation and amortization                                    2,246                 2,206
   Amortization of deferred financing costs                           808                   800
   Non-cash expenses relating to operating cost
     improvements                                                       -                   100
   Changes in assets and liabilities:
     Accounts receivable                                          (11,488)                4,895
     Inventories                                                   (5,178)                 (475)
     Other assets                                                   6,314                  (121)
     Other liabilities                                              4,214                  (208)
                                                             ------------          ------------
       Net cash used by operating activities                       (6,430)               (3,903)
Investing activities:
  Purchases of property and equipment                              (1,038)                 (277)
  Other                                                              (255)                 (195)
                                                             ------------          ------------
       Net cash used in investing activities                       (1,293)                 (472)

Net cash provided used in financing activities                        585                    39
                                                             ------------          ------------


 Net decrease in cash and cash equivalents                         (7,138)               (4,336)
 Cash and cash equivalents at beginning of period                  20,245                20,422
                                                             ------------          ------------
 Cash and cash equivalents at end of period                  $     13,107          $     16,086
                                                             ============          ============

 Supplementary disclosures:
  Cash paid for interest                                     $      6,172          $      6,236
                                                             ============          ============
  Cash paid for taxes                                        $          -          $        273
                                                             ============          ============
</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
   September 30, 1999, and the operating results and cash flows for the six
   months ended September 30, 1999 and 1998. These financial statements and
   notes should be read in conjunction with our audited financial statements and
   notes thereto for the year ended March 31, 1999.

   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 April 2, 2000.

   The second quarters of fiscal years 2000 and 1999 and the fiscal year 1999
   ended on October 3, 1999, October 4, 1998 and April 4, 1999, respectively.
   For presentation purposes, the accompanying financial statements have been
   shown as ending on the last day of the month.

   In accordance with generally accepted accounting principles, earnings per
   share information is not presented since we do not have publicly held common
   stock.

2. Inventories

   Inventories are summarized as follows (in thousands):

                               September 30, 1999        March 31, 1999
                             ---------------------     ------------------
   Purchased materials              $ 7,169                  $ 6,678
   Systems in process                 9,776                    5,302
   Finished systems                   2,919                    3,389
                             ---------------------     ------------------
                                    $19,864                  $15,369
                             =====================     ==================

                                       6
<PAGE>

3.  Expenses Relating to Operating Cost Improvements

    On June 22, 1998 and September 24, 1998, we announced and implemented an
    operating cost improvement program aimed at bringing operating expenses in
    line with our operating environment. All terminated employees were notified
    of their severance and related benefits at the time the program was
    announced. This program resulted in a reduction of approximately 100
    employees primarily involved in customer service and manufacturing
    positions. Certain leased facilities in Texas, Arizona and Japan were closed
    and fixed assets were consolidated. Total cash outlays for fiscal 1999 were
    $832,000. Non-cash charges of $100,000 were primarily for asset write-offs.
    The balance of $25,000 at September 30, 1999 primarily represented cash
    payments and will be utilized during the remainder of fiscal 2000. Expenses
    relating to operating cost improvements are summarized as follows:

<TABLE>
<CAPTION>
                                    Provision
                 Provision        Quarter Ended                                                            Balance
               Quarter Ended      September 30,        Utilized          Balance                        September 30,
               June 30, 1998          1998             in FY99        March 31, 1999     Utilized           1999
            ---------------------------------------------------------------------------------------------------------
<S>         <C>                   <C>                  <C>            <C>                <C>            <C>
 Severance         $406               $431               $(762)         $ 75              $ (75)           $    -
 Facilities          76                 44                 (70)           50                (25)               25
 Other              100                  -                (100)            -                  -                 -
                   ----               ----               -----          ----              -----            ------
                   $582               $475               $(932)         $125              $(100)           $   25
</TABLE>


4.  Comprehensive Income

    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. The adoption of this
    statement had no significant impact on our net loss or stockholders' equity.
    SFAS 130 requires unrealized gains or losses on available-for-sale
    securities and foreign currency translation adjustments to be included in
    comprehensive loss. The difference between net loss and comprehensive loss
    is due to foreign currency translation adjustments. Prior year financial
    statements have been reclassified to conform to the requirements of SFAS
    130.

    During the three months ended September 30, 1999 and 1998, comprehensive
    loss amounted to approximately $308,000 and $4,916,000, respectively. During
    the six months ended September 30, 1999 and 1998, comprehensive loss
    amounted to approximately $2,775,000 and $11,007,000, respectively.

5.  Recently Issued Accounting Statements

    In June 1997, the Financial Accounting Standards Board ("FASB") issued
    Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures
    about Segments of an Enterprise and Related Information." SFAS No. 131
    establishes new requirements for the

                                       7
<PAGE>

    annual reporting of information regarding operating segments, products,
    services, geographic areas and major customers. We adopted SFAS No.131
    effective March 31, 1999.

    In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
    Instruments and Hedging Activities." SFAS No. 133 establishes a new model
    for accounting for derivatives and hedging activities and supercedes and
    amends a number of existing accounting standards. SFAS No. 133 requires that
    all derivatives be recognized in the balance sheet at their fair market
    value, and the corresponding derivative gains or losses be either reported
    in the statement of operations or as a deferred item, depending on the type
    of hedge relationship that exists with respect to such derivative. We
    currently do not hold any derivative instruments that are affected by the
    adoption of SFAS No. 133.

                                       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. 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 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
delay 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 expenses attendant to acquisitions, strategic
alliances and the future development of marketing and service capabilities.

General

We develop, manufacture, market and service process control metrology systems
for use in the manufacture of semiconductors.  Our process control metrology
systems are principally used to measure ion implantation and thin film
deposition and removal.  We have developed two product families of process
control metrology systems: the Therma-Probe systems and the Opti-Probe systems.

Therma-Probe Product Family

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

Opti-Probe Product Family

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

                                       9
<PAGE>

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 six months ended September 30, 1999 and 1998 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>
                                              Three months ended                     Six months ended
                                                 September 30,                        September 30,
                                      --------------------------------     ---------------------------------

Statement of Operations Data:               1999               1998              1999               1998
                                      --------------     -------------     --------------     --------------
<S>                                   <C>                <C>               <C>                <C>
Net revenue                                    100.0%            100.0%             100.0%             100.0%
Cost of revenue                                 52.8              58.5               55.1               58.7
                                      --------------     -------------     --------------     --------------
Gross margin                                    47.2              41.5               44.9               41.3
Operating expenses:
 Research and development                       19.6              25.8               19.0               28.0
 Selling, general and administrative            18.7              29.6               18.9               30.0
 Expenses relating to operating cost
  improvements                                     -               3.1                  -                3.5
                                      --------------     -------------     --------------     --------------
Operating income (loss)                          8.9             (17.0)               7.0              (20.2)
 Interest expense                              (13.5)            (22.7)             (14.9)             (22.8)
 Interest income                                 0.5               1.1                0.6                1.2
 Other, net                                      0.2               0.7                0.2               (0.2)
                                      --------------     -------------     --------------     --------------
Loss before income taxes                        (3.9)            (37.9)              (7.1)             (42.0)
Benefit for income taxes                           -              (4.9)                 -               (5.5)
                                      --------------     -------------     --------------     --------------
Net loss                                        (3.9)%           (33.0)%             (7.1)%            (36.5)%
                                      ==============     =============     ==============     ==============
</TABLE>


  Net Revenues. Revenues were $25.9 million and $47.1 million, respectively, for
the three and six months ended September 30, 1999.  For the three months ended
September 30, 1999, revenues were up 23% from the prior quarter and increased
71% from the same quarter a year ago.  For the six months ended September 30,
1999, revenues increased 55% from the same period in the prior fiscal year.  The
increase in revenue is a result of the improvement in the semiconductor
equipment industry that favorably impacted sales in both our product lines.  New
orders for the second quarter were up substantially from the prior quarter and
resulted in a strengthened backlog.

  Gross Margin. Gross margin was 47% and 45%, respectively, for the three and
six months ended September 30, 1999.  For the three months ended September 30,
1999, gross margin increased from 42% in the previous quarter and 42% for the
same quarter a year ago.  For the six months ended September 30, 1999, gross
margin increased from 41% in the same period in the prior fiscal year.  The
increase in gross margin is due to the improvement in the semiconductor

                                       10
<PAGE>

industry resulting higher average selling prices and a favorable mix in sales of
higher margin products. The increase in gross margin was slightly offset by
higher manufacturing costs associated with the manufacturing scale-up of new
products.

  Research and Development ("R&D") Expenses.  R&D expenses were $5.1 million
and $8.9 million, respectively, for the three and six months ended September 30,
1999.  For the three months ended September 30, 1999, R&D expenses increased 32%
from the previous quarter and 30% from the same quarter a year ago.  For the six
months ended September 30, 1999, R&D expenses increased 5% from the same period
in the prior fiscal year.  The increase from the prior periods is the result of
additional resources dedicated to new products expected to be released in the
next nine to fifteen months.  We believe that technical leadership is essential
to our success and expect to continue to commit significant resources to R&D
projects. In the near term, we expect our R&D expenses to increase in both
absolute dollar terms and as a percentage of our net revenues.

  Selling, General and Administrative ( "SG&A") Expenses. SG&A expenses were
$4.8 million and $8.9 million, respectively, for the three and six months ended
September 30, 1999. For the three months ended September 30, 1999, SG&A
increased 20% from the previous quarter and 8% from the same quarter a year ago.
For the six months ended September 30, 1999, SG&A decreased 3% from the same
period in the prior fiscal year. The increase from the prior periods is mainly
due to the increase in external sales commissions resulting from the increase in
sales and the change in customer sales mix. The decrease in the six months ended
September 30, 1999 from the same period of the prior fiscal year resulted from
reductions in headcount.

  Expenses Relating to Operating Cost Improvements. On June 22, 1998 and
September 24, 1998, we announced and implemented an operating cost improvement
program aimed at bringing operating expenses in line with our current operating
environment. All terminated employees were notified of their severance and
related benefits at the time the program was announced. This program resulted in
a reduction of approximately 100 employees primarily involved in customer
service and manufacturing positions. Certain leased facilities in Texas, Arizona
and Japan were closed and fixed assets were consolidated. Total cash outlays for
fiscal 1999 were $832,000. Non-cash charges of $100,000 were primarily for asset
write-offs.

  Interest Expense. Interest expense for the three and six months ended
September 30, 1999 was $3.5 million and $7.0 million, respectively. These
amounts are comparable to prior periods.

  Provision for Income Taxes. Our tax benefit for the three and six months ended
September 30, 1998 reflected the tax benefit rate of 13% based upon our loss
carryback potential.  For the three and six months ended September 30, 1998, we
recorded a benefit for income taxes of $0.8 million and $1.7 million,
respectively.  For fiscal 2000, we have not recorded any tax benefit since we
have fully utilized our loss carryback ability.

  Net Loss. We experienced a net loss of $1.0 million and $3.3 million,
respectively, for the three and six months ended September 30, 1999. For the
three months ended September 30, 1999, the net loss improved $1.3 million from
the previous quarter and $4.0 million from the

                                       11
<PAGE>

same quarter a year ago. For the six months ended September 30, 1999, the net
loss improved $7.8 million from the same period of the prior fiscal year.

Liquidity and Capital Resources

Our principal liquidity requirements are for working capital. Since the
recapitalization, we have funded our operating activities principally from funds
generated from operations. Cash flow used in operating activities was $6.4
million and $3.9 million for the six months ended September 30, 1999 and 1998,
respectively. The decrease in cash flow used in operating activities from fiscal
year 2000 to 1999 is mainly due to the increase in accounts receivable,
partially offset by the tax refund of $8.3 million, the decrease in net loss and
the increase in liabilities.

Purchases of property and equipment were $1.0 million and $0.3 million for the
six months ended September 30, 1999 and 1998, respectively.In May 1997, we
issued $115.0 million in aggregate principal amount of senior notes that,
together with a $20.1 million equity contribution, was used to finance the
recapitalization.  In the recapitalization, we used $26.9 million to repay
outstanding borrowings, $96.9 million to redeem a portion of our common stock,
$11.0 million to pay related fees and expenses and $0.3 million for general
working capital purposes.

In conjunction with the recapitalization, we entered into a senior credit
facility with various lending institutions, and Bankers Trust Company, as agent.
The bank credit facility bears interest, at our option, at (i) the base rate
plus 1.75% or (ii) the Eurodollar rate plus 3.00%.  Our borrowings under the
bank credit facility are secured by substantially all of our assets, a pledge of
all of the capital stock of any domestic subsidiaries and a pledge of 65% of the
capital stock of our first-tier foreign subsidiaries.  The bank credit facility
matures on May 16, 2002.

During the quarter ended June 30, 1998, we amended the bank credit facility to
have our borrowing availability subject to a borrowing base formula, which
provides a maximum revolving credit facility of $30.0 million, and to adjust the
financial covenants requiring us to maintain minimum levels of EBITDA during
each six-month period ending on the last day of each fiscal quarter and minimum
levels of cumulative EBITDA from April 7, 1996 to the last day of each fiscal
quarter.  In August 1999, we entered into a second amendment to our bank credit
facility to further adjust these financial tests. We may borrow amounts under
the amended bank credit facility to finance our working capital requirements and
other general corporate purposes.  The amended bank credit facility requires us
to meet certain financial tests and contains covenants customary for this type
of financing.  At September 30, 1999, there was $3.5 million outstanding under a
letter of credit and $26.5 million of unused borrowing capacity under the
amended bank credit facility.

Our principal sources of funds are anticipated to be cash on hand ($13.1 million
as of September

                                       12
<PAGE>

30,1999), cash flows from operating activities and, if necessary, borrowings
under the bank credit facility. In addition, we received a tax refund of $8.3
million during the first quarter of fiscal 2000. We believe that these funds
will provide us with sufficient liquidity and capital resources for us to meet
our current and future financial obligations, as well as to provide funds for
our working capital, capital expenditures and other needs for at least the next
12 months and, assuming continued improvement in the semiconductor industry,
through the next 24 months. 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.

We have filed a registration statement for an initial public offering of common
stock with the Securities and Exchange Commission.  The registration statement
has not yet become effective.

Impact of Currency Exchange Rates

Foreign exchange rate fluctuations have historically not had a significant
impact on our results of operations since our export sales are denominated in
United States dollars.  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.  Due
to the unpredictability of currency exchange rates, there can be no assurance
that we will not experience negative currency translation adjustments in the
future, nor can we predict the effect of exchange rate fluctuations upon future
operating results.

Year 2000

Many computer systems used by us and our suppliers may not properly recognize a
date using "00" as the year 2000. This could result in system/program failure
or logic errors that could disrupt normal business activities. We have
established a formal project with a project office and project team to address
this issue and achieve year 2000 readiness.

The project is focused on four key readiness areas:

Internal Infrastructure Readiness, addressing internal hardware, software and
non-information technology systems;

Supplier Readiness, addressing the preparedness of those suppliers providing
material incorporated into our products;

Product Readiness, addressing product functionality; and

                                       13
<PAGE>

Customer Readiness, addressing customer support and transactional activity.

For each readiness area, we are systematically performing a global risk
assessment, conducting testing and remediation (renovation and implementation),
developing contingency plans to mitigate unknown risk, and communication with
employees, suppliers and customers to raise awareness of the Year 2000 problem.

Internal Infrastructure Readiness Program. We conducted an assessment of
internal hardware and software applications beginning early in calendar 1999.
All software applications and all hardware, including network fabric,
telecommunications equipment and workstations have now been made Year 2000
compliant.

In addition to applications and information technology hardware, remediation of
facilities and other operations has been completed.

Supplier Readiness Program. This program focuses on minimizing the risks
associated with suppliers in two areas: (1) a supplier's business capability to
continue providing products and services; and (2) a supplier's product
integrity. We have identified and contacted key suppliers based on their
relative risks in these two areas. To date, we have received responses from all
of our key suppliers, most of which indicate that they either have completed or
are in the process of developing and implementing remediation plans. Based on
our assessment of each supplier's progress to adequately address the Year 2000
issue, we have developed a supplier action list and contingency plans. We
revisited key suppliers during the third calendar quarter of 1999 to ensure that
supplier commitments had been met. Alternate sources are being investigated for
those few vendors that we have identified as high risk, and such alternative
sources are expected to be in place by November 1, 1999. We have identified
certain key components of our products and will increase our inventory level of
these items during the fourth calendar quarter of this year. We anticipate all
of these items to be usable in our products, and therefore we do not expect such
additional inventory purchases to have a material adverse effect on our
financial condition.

Product Readiness Program.  This program focuses on identifying and resolving
Year 2000 issues existing in our products. The program encompasses a number of
activities including testing, evaluation, engineering and manufacturing
implementation. Sematech is a consortium of integrated circuit manufacturers
that provides guidelines to equipment suppliers to the semiconductor industry.
We have adopted the Sematech guidelines known as Year 2000 readiness testing
scenarios as the baseline for our product testing. Sematech is a consortium of
integrated circuit manufacturers that provides guidelines to equipment suppliers
in the semiconductor industry. We believe that the use of these scenarios should
enable our products to meet standards that we believe are generally accepted
across the computer industry for Year 2000 readiness. The testing, and
subsequent remediation, of our products to meet the Sematech guidelines has not
had a material adverse impact on our operations. As of the fourth calendar
quarter of 1998, we believe that all of our products then in production met the
Sematech guidelines for Year 2000 readiness. Our customers were notified of
known risks and remediation plans in the third calendar quarter of 1998.
Retrofitting of customer equipment covered by

                                       14
<PAGE>

warranty or contract has been essentially completed during the first three
calendar quarters of 1999, and minor work yet to be performed will be completed
by the end of 1999.

  Customer Readiness Program. This program is focused on customer support,
including the coordination of retrofit activity, and developing contingency
plans where appropriate, as well as the ability of our customers to continue to
conduct business with us. The retrofit activity is essentially complete and the
general contingency plan is complete except for finalization of staffing levels
which will be completed by mid November 1999.

  In addition to the above programs, we have identified "worst case" scenarios
and developed appropriate contingency plans. The most reasonably likely worst
case scenario is a breakdown of general infrastructure, such as widespread power
failures. We have investigated most of our exposure in this area and do not
consider the foregoing a high risk. However, we have prepared for short-term
public service interruptions as part of our existing disaster recovery plan. The
plan consists of utilizing emergency power supplies, employing remote storage
facilities for copies of our vital records and using off-site backup computer
systems provided by an independent service supplier. To aid our customers,
emergency response teams are being formed within our organization to respond to
any unexpected product issues that may arise as a result of our or any third
party's failure to be Year 2000 compliant. We are selecting people for these
teams who were trained in troubleshooting all aspects of our products. We expect
these teams to be formed by November 30, 1999.

  We estimate that total Year 2000 incremental costs will be approximately
$150,000. Through September 30, 1999, we have spent approximately $138,000 to
address the Year 2000 issue. We are continuing our assessments and developing
alternatives that will necessitate refinement of this estimate over time. There
can be no assurance, however, that there will not be a delay in, or increased
costs associated with, the programs described in this section.

  Since the programs described in this section are ongoing, all potential Year
2000 complications may not have yet been identified. Therefore, the potential
impact of these complications on our financial condition and results of
operations cannot be determined at this time. If computer systems used by us or
our suppliers, products provided to us by our suppliers, or the software
applications of hardware used in systems manufactured or sold by us, fail or
experience significant difficulties related to the Year 2000 issue, our results
of operations and financial condition could be materially adversely affected. We
could incur delays in producing and delivering products to our customers, which
could result in order cancellations and lost revenue and profits. We believe the
likelihood of losing revenue and profits from difficulties resulting from Year
2000 issues is low.

                                       15
<PAGE>

Part II. Other Information

Item 1. Legal Proceedings

  On June 5, 1998, at our request, the United States Patent Office initiated an
  interference proceeding between Therma-Wave and Rudolph Technologies. The
  subject matter of the interference relates to ellipsometer technology that
  Rudolph employs in its commercial devices. We believe we developed and
  patented this technology prior to Rudolph. The interference proceedings will
  determine ownership of the technology as between Rudolph Technologies and
  Therma-Wave. A successful outcome of the interference proceeding may result in
  Rudolph being required to pay us licensing fees. Since we have not
  commercialized this technology, an unsuccessful outcome in the interference
  proceeding would not have a material adverse effect on our business, financial
  condition or results of operations.

  On September 3, 1998, we were named in a patent infringement suit filed by
  KLA-Tencor. KLA-Tencor alleged that it patented an aspect of the thin film
  thickness measuring technology that we use in our Opti-Probe product family.
  KLA-Tencor is seeking damages and an injunction to stop the sale of the
  equipment they allege uses this aspect. We believe none of our products
  infringe any of the claims of KLA-Tencor's patent and that their infringement
  allegations are unfounded. Nonetheless, KLA-Tencor has made broad allegations
  covering technology that accounts for a significant portion of our revenues.
  Since we believe these allegations are unfounded, we intend to vigorously
  defend our position, and we expect to prevail. We believe that the outcome
  from such litigation, even if adverse to us, would not have a material adverse
  effect on our business, financial condition or results or operations.

  On January 14, 1999, we commenced an action against KLA-Tencor for patent
  infringement with respect to one of our fundamental thin film technology
  combination patents. The suit seeks damages for patent infringement and a
  permanent injunction against any future activities undertaken by KLA-Tencor or
  any third party working in conjunction with them, which infringe on our
  patent. The suit was filed as a counterclaim in the 1998 infringement action
  initiated by KLA-Tencor and described in the prior paragraph and also seeks a
  declaratory judgment that KLA-Tencor's patent, which we were alleged of
  infringing, is invalid and not infringed by any of our systems.

  On July 22, 1999, we were named in a second patent infringement suit filed by
  KLA-Tencor. KLA-Tencor has alleged that it patented another aspect of one of
  the thin film thickness measuring technologies that we have recently added to
  some of our Opti-Probe products. KLA-Tencor is seeking damages and an
  injunction to stop the sale of the equipment they allege uses this aspect.
  Since the patent, which is the subject of this second suit, was issued on June
  8,1999, any potential liability for past sales is not material. Prior to
  filing its first infringement action, KLA-Tencor notified us of an earlier
  version of the patent that is the subject of this second suit. We believe none
  of our products infringed any of the claims of the earlier version of this
  KLA-Tencor patent and previously informed KLA-Tencor of our belief. KLA-
  Tencor's new patent is a continuation of the earlier patent. We believe KLA-


                                       16
<PAGE>

  Tencor's new patent is invalid and we intend to vigorously defend our position
  and we expect to prevail. We believe that the outcome from such litigation,
  even if adverse to us, would not have a material adverse effect on our
  business, financial condition or results of operations.

  On October 25, 1999 we filed claims against KLA-Tencor Corporation for
  infringement of two of our patents, both entitled "Thin Film Optical
  Measurement System and Method With Calibrating Ellipsometer". The patents
  contain both device and method claims relating to optical measurement systems
  that include a calibrating ellipsometer. In addition to the patent
  infringement claims, we also filed claims against KLA-Tencor for engaging in a
  pattern of conduct designed to disparage and improperly damage Therma-Wave. We
  also charged KLA-Tencor with violations of the Lanham Act and California state
  law, including unfair competition and tortious interference with economic
  advantage and contractual relations. Our claims were filed in the United
  States District Court for the Northern District of California.

  There can be no assurances, however, that we will prevail in any ongoing
  patent litigation described above. We believe, however, the litigation
  described above will not have a material adverse effect on our business,
  financial condition or results of operations.

  We are also 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

    On August 6, 1999 the stockholders voted on a consent in lieu of an annual
    meeting. The following matters were voted on: (1) Amended and Restated
    Certificate of Incorporation (which included among other things the
    establishment of a classified Board of Directors and the election of
    existing Directors to such Classified Board); (2) Amended and Restated By-
    Laws; (3) Appointment of Independent Public Accountant; (4) Form of
    Indemnification Agreements; (5) 1999 Equity Incentive Plan; (6) 1999
    Employee Stock Purchase Plan; (7) Election of the following Directors in
    connection with the establishment of a Classified Board: G. Leonard Baker,
    Jr. and Ian K. Loring will serve until annual stockholders meeting in 2000;
    Martin M. Schwartz and David Dominik will serve until the annual
    stockholders meeting in 2001; Dr. Allan Rosencwaig and Adam W. Kirsch will
    serve until the annual stockholders meeting in 2002. On all matters the vote
    tally was 8,484,915 votes for, with three (3) shareholders abstaining.

    On August 26, 1999 the stockholders voted on a consent in lieu of a special
    meeting.  The following matters were voted on: (1) Amended and Restated
    Certificate of Incorporation (which, among other things, deleted the
    Classified Board); (2) Amended and Restated By-Laws; (3) Election of the
    following Directors in connection with the dissolution of the Classified
    Board:  G. Leonard Baker, Jr., Ian K. Loring, Martin M. Schwartz, David
    Dominik, Dr. Allan Rosencwaig and Adam W. Kirsch.  On all matters the vote
    tally was 8,484,915 votes for, with three (3) shareholders abstaining.

Item 5. Other Information

     None.

Item 6. Exhibits and Reports on Form 8-K

     The following exhibits are included herein:

     Exhibit
     Number   Description

     3.1      Restated Certificate of Incorporation of Therma-Wave, Inc.
     3.2      Amended and Restated By-Laws of Therma-Wave, Inc.
    10.29     Second Amendment to Credit Agreement, dated as of August 13, 1999,
              between Therma-Wave and Bankers Trust Company, as agent.(1)
    27.1      Financial Data Schedule.
    99.1      Risk Factors. (1)

    _______

                                       17
<PAGE>

      (1)  Incorporated by reference to the same numbered exhibit to the
           Company's Registration Statement on Form S-1 (Registration No.
           333-76019)

The Company did not file any reports on Form 8-K during the six months ended
September 30, 1999.

                                       18
<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)

                               October 28, 1999

                                       19