<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 2, 2000 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)

<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>

      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 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 July 30, 2000
------------------------------------------------------------------------------
Common stock, $.01 par value                        23,724,818
<PAGE>

                               THERMA-WAVE, INC.
                                   FORM 10-Q

                                     INDEX


Part I.  Financial Information

Item 1.  Unaudited Condensed Consolidated Financial Statements

         Condensed Consolidated Balance Sheets
             June 30, 2000 and March 31, 2000                              3

         Condensed Consolidated Statements of Operations
         Three months ended June 30, 2000 and 1999                         4

         Condensed Consolidated Statements of Cash Flows
         Three months ended June 30, 2000 and 1999                         5

         Notes to Unaudited Condensed Consolidated Financial Statements    6

Item 2.  Management's Discussion and Analysis of
         Financial Condition and Results of Operations                    11

Part II. Other Information

Item 1.  Legal Proceedings                                                17

Item 2.  Changes in Securities and Use of Proceeds                        19

Item 3.  Defaults upon Senior Securities                                  19

Item 4.  Submission of Matters to a Vote of Security Holders              19

Item 5.  Other Information                                                19

Item 6.  Exhibits and Reports on Form 8-K                                 19

Signatures                                                                21

                                       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>
                                                            June 30,             March 31,
                                                              2000                 2000
                                                           ---------           -------------

                     ASSETS
<S>                                                        <C>                 <C>
Current assets:
 Cash and cash equivalents                                 $ 74,363              $  75,200
 Accounts receivable, net                                    32,522                 24,400
 Inventories                                                 29,147                 23,689
 Other current assets                                         1,797                  1,720
                                                           ---------            ----------
       Total current assets                                 137,829                125,009

 Property and equipment, net                                  5,342                  4,999
 Deferred income taxes                                        1,685                  1,685
 Other assets                                                 2,153                  2,001
                                                           ---------            ----------
       Total assets                                        $147,009              $ 133,694
                                                           =========            ==========

 LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Accounts payable                                          $ 11,791              $  10,111
 Other current liabilities                                   24,365                 20,789
                                                           ---------            ----------
       Total current liabilities                             36,156                 30,900
 Long term debt                                                  16                     16
 Other liabilities                                            2,836                  3,293
                                                           ---------            -----------
       Total liabilities                                     39,008                 34,209

Commitments and contingencies

Stockholders' equity
 Common stock                                                   237                    236
 Additional paid-in capital                                 227,003                226,199
 Notes receivable from stockholders                            (214)                  (241)
 Accumulated deficit                                       (118,295)              (125,971)
 Accumulated other comprehensive loss                          (730)                  (738)
                                                           ---------            -----------
       Total stockholders' equity                            108,001                99,485
                                                           ---------            -----------
       Total liabilities and stockholders' equity          $ 147,009             $ 133,694
                                                           =========            ===========
</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,
                                                      ---------------------------------
                                                           2000                1999
                                                      ----------------     -----------

<S>                                                   <C>                  <C>
Net revenue                                           $       41,586       $    21,141
Cost of revenue                                               20,552            12,228
                                                      --------------       ------------
Gross margin                                                  21,034             8,913

Operating expenses:
  Research and development                                     7,519             3,855
  Selling, general and administrative                          5,881             4,055
                                                      --------------       ------------
       Total operating expenses                               13,400             7,910
                                                      --------------       ------------

Operating income                                               7,634             1,003
Other income (expense):
  Interest expense                                               (60)           (3,525)
  Interest income                                              1,039               150
  Other, net                                                      12                33
                                                      --------------       ------------
                                                                 991            (3,342)
                                                      --------------       ------------
Income (loss) before income taxes                              8,625            (2,339)
Provision for income taxes                                     (949)                 -
                                                      --------------       ------------
Net income (loss)                                              7,676            (2,339)

Accretion of preferred stock dividend                              -               206
                                                      --------------       ------------
Net income (loss) available to common stockholders    $        7,676       $    (2,545)
                                                      ==============       ============

Net income (loss) per share:
  Basic                                               $         0.33       $     (0.31)
  Diluted                                             $         0.31       $     (0.31)

Weighted average common shares outstanding:
  Basic                                                       23,148             9,458
  Diluted                                                     24,853             9,458
</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,
                                                        -------------------------------------
                                                              2000                  1999
                                                        ------------------     --------------

<S>                                                     <C>                    <C>
Operating activities:
  Net income (loss)                                     $      7,676           $    (2,339)
  Adjustments to reconcile net income (loss) to net
   cash used by operating activities:
    Depreciation and amortization                                778                 1,134
    Amortization of deferred financing costs                       -                   405
    Changes in assets and liabilities:
     Accounts receivable                                      (8,122)               (6,314)
     Inventories                                              (5,458)                  131
     Other assets                                               (156)                6,893
     Other liabilities                                         5,203                (2,529)
                                                        ------------           -----------
      Net cash used by operating activities                      (79)               (2,619)

Investing activities:
  Purchases of property and equipment                         (1,004)                 (389)
  Other                                                         (190)                 (149)
                                                        ------------           -----------
      Net cash used in investing activities                   (1,194)                 (538)

Net cash provided (used) in financing activities                 436                  (147)
                                                        ------------           -----------

  Net decrease in cash and cash equivalents                     (837)               (3,304)
  Cash and cash equivalents at beginning of period            75,200                20,245
                                                        ------------           -----------
  Cash and cash equivalents at end of period                 $74,363           $    16,941
                                                        ============           ===========


 Supplementary disclosures:
  Cash paid for interest                                $         57           $     6,172
                                                        ============           ===========
  Cash paid for taxes                                   $          1           $        10
                                                        ============           ===========
</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, 2000, and the operating results and cash
     flows for the three months ended June 30, 2000 and 1999. These financial
     statements and notes should be read in conjunction with our audited
     financial statements and notes thereto for the year ended March 31, 2000.

          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 1, 2001.

          The first quarters of fiscal years 2001 and 2000 and the fiscal year
     2000 ended on July 2, 2000, July 4, 1999 and April 2, 2000, respectively.
     For presentation purposes, the accompanying financial statements have been
     shown as ending on the last day of the month.

2.   Inventories

          Inventories are summarized as follows (in thousands):

                                    June 30, 2000         March 31, 2000
                                --------------------   --------------------
         Purchased materials         $   10,620             $   7,752
         Systems in process              14,349                12,370
         Finished systems                 4,178                 3,567
                                          -----                 -----
                                      $  29,147             $  23,689
                                      =========             =========


3.   Comprehensive Income

          In June 1997, the Financial Accounting Standards Board 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 income

                                       6
<PAGE>

     (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 income (loss). The difference
     between net income (loss) and comprehensive income (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 quarter ended June 30, 2000 and 1999, comprehensive income
     (loss) amounted to approximately $7,684,000 and $(2,467,000), respectively.

4.   Net Income (Loss) Per Share

        Basic net income (loss) 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 (loss)
     per share is based on the weighted average number of common shares
     outstanding and dilutive potential common shares outstanding.

        Class A Common Stock, Class B Common Stock and Class L Common Stock
     share ratably in the net income (loss) remaining after giving effect to the
     12% yield on Class L Common Stock for the period the shares were
     outstanding. Net loss for the three months ended June 30, 1999 used in the
     net loss per share calculation represents the loss attributable to the
     weighted average number of shares of Class A, Class B and Class L Common
     Stock outstanding after giving effect to the 12% yield on Class L Common
     Stock. As a result of the losses incurred by the Company, all potential
     common shares were anti-dilutive and excluded from the diluted net income
     (loss) per share calculation for fiscal 2000.

        On February 4, 2000, all classes of Common Stock were converted to one
     class of common stock.

        The following tables set forth the computation of net income (loss) per
     share of common stock:

<TABLE>
<CAPTION>
                                                                                             Three Months Ended June 30,
                                                                                                2000              1999
                                                                                             ---------------------------
<S>                                                                                          <C>              <C>
     Numerator (in thousands):
     Income (loss) before extraordinary charge.......................................          $ 7,676          $(2,339)
     Less: Preferred stock dividend  ................................................               --             (206)
     Less: Income attributable to Class L Stock  ....................................               --             (434)
                                                                                               -------          -------
                                                                                               $ 7,676          $(2,979)
                                                                                               =======          =======

     Denominator (in thousands):
     Common Stock  ..................................................................           23,148               --
     Class A Stock  .................................................................               --            9,074
     Class B Stock (vested)  ........................................................               --              385
                                                                                               -------          -------
     Weighted average shares outstanding used for basic income (loss)
         per share  ..................................................................          23,148            9,458
                                                                                               =======          =======

     Unvested Shares.................................................................              517               --
     Dilutive Stock Options..........................................................            1,188               --
                                                                                               -------          -------
     Weighted average shares outstanding used for diluted income (loss)
         per share....................................................................          24,853            9,458
                                                                                               =======          =======
</TABLE>

                                       7
<PAGE>

          The following table summarizes securities outstanding as of each
  period end which were not included in the calculation of diluted net loss per
  share since their inclusion would be anti-dilutive.

<TABLE>
<CAPTION>
                                                                                               June 30,
                                                                                          ------------------
     <S>                                                                                       <C>      <C>
                                                                                             2000       1999
                                                                                          -------  ---------
     Common Stock Subject to Repurchase (unvested).................................       516,524    734,037
     Mandatorily Redeemable Convertible Preferred Stock............................            --    748,739
     Stock Options.................................................................       109,736  1,701,491
</TABLE>

5.   Recently Issued Accounting Statements

          In June 1998, the Financial Accounting Standards Board issued
     Statement on Financial Accounting Standard 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 do not currently hold any derivative instruments that
     are affected by the adoption of SFAS No. 133 .

          In December 1999, the Securities Exchange Commission issued Staff
     Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
     Statements," potentially changing the interpretation of revenue recognition
     rules. This proposed interpretation may change revenue recognition from the
     date of shipment to the date of final customer acceptance, when such
     acceptance is part of the purchase contract. In March 2000, Staff
     Accounting Bulletin No. 101A was issued which allowed deferral of the
     requirements until the second fiscal quarter of 2000 for most companies. In
     June 2000, Staff Accounting Bulletin No. 101B was issued which allowed
     further deferral of the requirements until the fourth fiscal quarter of
     fiscal years beginning after December 15, 1999. Because we have complied
     with generally accepted accounting principles for our historical revenue
     recognition, a change, if any, in our revenue recognition policy resulting
     from SAB 101 will be reported as a change in accounting principle in our
     fourth quarter of fiscal 2001. Depending on the final interpretation of SAB
     101, the change in accounting policy may result in the restatement of the
     Company's results for each of the first three quarters of fiscal 2001 and a
     cumulative adjustment in the first quarter of fiscal 2001 to reflect the
     deferral of revenue for shipments previously recorded as revenue for which
     customers had not signed acceptance certificates as of the first day of
     fiscal 2001. We are still in the process of assessing the impact of SAB 101
     on our financial statements. While SAB 101 would not affect the fundamental
     aspects of our operations as measured by our shipments and cash flows,
     implementation of SAB 101 could have a material adverse effect on our
     reported results of operations for fiscal 2001. We are also considering
     potential changes to our standard contracts for equipment sales that could
     mitigate the potential impact of SAB 101 on a going forward basis.

                                       8
<PAGE>

6.   Commitments and Contingencies

          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 of operations.

          Subsequent to the end of the quarter, on July 20, 2000, United States
     District Court Judge Charles A. Legge granted our Motion for summary
     judgment that one of our Opti-Probe 5000 products does not infringe KLA-
     Tencor's U.S. Patent, which was the subject of the suit, either literally
     or under the doctrine of equivalents. Only our older Opti-Probe products
     remain at issue in this lawsuit.

          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
     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-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 or
     operations.

                                       9
<PAGE>

          On October 25, 1999, we commenced an action against KLA-Tencor for
     patent infringement with respect to two of our patents relating to optical
     measurement systems that include a calibrating ellipsometer. In addition to
     the infringement claims, we also filed claims against KLA-Tencor for
     engaging in a pattern of conduct designed to disparage and improperly
     damage us.

          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.

                                       10
<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 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 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. 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 two product families of process control metrology systems:
  Therma-Probe systems and Opti-Probe systems.

                                       11
<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.

     We derive our revenues from system sales, sales of replacement and spare
  parts, and 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. During the three months ended June 30, 1999, we derived
  approximately 82% of our revenues from system sales, 10% from sales of
  replacement and spare parts, including associated labor, and 8% from service
  contracts. Revenue from system sales, replacement and spare parts is 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.

     International sales accounted for approximately 67% and 61% of our total
  revenues for the three months ended June 30, 2000 and 1999, 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 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.

     On February 9, 2000, we completed an initial public offering of common
  stock. In connection with this offering and the exercise of the underwriters'
  over-allotment option, we sold 10,350,000 shares of common stock at a price of
  $20.00 per share. Net proceeds, net of underwriting discounts and offering
  costs, were $190.7 million. During the early part of March 2000, we used
  approximately $130.5 million of net proceeds to redeem or repurchase
  substantially all of our outstanding senior notes, including accrued interest,
  redemption premiums and related expenses. We also used $3.5 million of net
  proceeds to buy out the seven and one half years remaining in the term of a
  consulting agreement with Bain Capital, Inc. Remaining cash proceeds have been
  used for general corporate purposes, including working capital.

     On March 3, 2000, the Company called for redemption of all outstanding
  shares of Preferred Stock. On March 24, 2000 and March 29, 2000, respectively,
  169,589 and 579,150 shares of Preferred Stock were converted into an aggregate
  of 748,739 shares of common stock.

                                       12
<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 three months ended June 30, 2000 and 1999
  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.

                                                            Three months ended
                                                                 June 30,
                                                        ----------------------
  Statement of Operations Data:                           2000            1999
                                                        ------         -------

  Net revenue                                            100.0%          100.0%
  Cost of revenue                                         49.4            57.8
                                                        ------         -------

  Gross margin                                            50.6            42.2
  Operating expenses:
   Research and development expenses                      18.1            18.3
   Selling, general and administrative                    14.1            19.2
                                                        ------         -------
   Operating income                                       18.4             4.7
  Other income (expense):
   Interest expense                                       (0.1)          (16.7)
   Interest income                                         2.5             0.7
   Other, net                                             (0.1)            0.2
                                                        ------         -------

  Income (loss) before income taxes                       20.7           (11.1)
  Provision for income taxes                              (2.3)              -
                                                        ------         -------
  Net income (loss)                                       18.4%          (11.1)%
                                                        ======         =======


     Net Revenues. Net revenues for the fiscal quarters ended June 30, 2000 and
  1999 were $41.6 million and $21.1 million, respectively. Compared to the prior
  fiscal quarter, net revenues increased $4.9 million or 13%. Compared to the
  corresponding period of fiscal 1999, net revenues increased $20.4 million or
  97%. The increase in revenue is the result of the improvement in the
  semiconductor capital equipment industry, which is primarily related to the
  growth of semiconductor manufacturers and the recovery of economic conditions
  in the Asia Pacific region. Revenues have increased primarily due to increased
  unit sales of both our Therma-Probe and Opti-Probe products.

     Gross Margin. Gross margin for the first quarter of fiscal 2001 was 50.6%,
  about the same as the fourth quarter of fiscal 2000 and up from 42.2% for the
  first quarter of our last fiscal year.  The increase versus the first quarter
  of fiscal 2000 is due to higher revenue levels and favorable sales mix.

                                       13
<PAGE>

     Research and Development ("R&D") Expenses. R&D expenses for the first
  quarter of fiscal 2001 were $7.5 million, an increase of 8% from the prior
  quarter and an increase of 95% from the first quarter of our last fiscal year.
  The increase was the result of additional resources dedicated to the
  development of new products expected to be released later this year. 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 continue to increase in absolute dollar terms.

     Selling, General and Administrative ("SG&A") Expenses.   SG&A expenses
  for the first quarter of fiscal 2001 were $5.9 million, a decrease of 6% from
  the prior fiscal quarter and an increase of 45% from the first quarter of last
  fiscal year.  The decrease from the prior fiscal quarter was due to lower
  sales commissions resulting from the change in customer sales mix.  The
  increase from the first quarter of the prior fiscal year resulted from higher
  revenue levels.

     Interest Expense.   Interest expense for the first quarter of fiscal 2001
  was $0.1 million, which was significantly lower than that of the prior fiscal
  quarter as well as the first quarter of the prior fiscal year. The decrease in
  interest expense is attributable to the redemption and repurchase of
  substantially all of our outstanding senior notes in March 2000.

     Provision for Income Taxes.   For the first quarter of fiscal 2001, we
  recorded a $0.9 million provision for income taxes.  The tax rate of 11% is
  based upon our loss carryforward potential and research and development tax
  credit carryforward benefits.

     Net Income/Loss.  Net income was $7.7 million for the first quarter of
  fiscal 2001.  This was a major turnaround from our $18.1 million loss for the
  prior fiscal quarter (which included $21.9 million for an extraordinary loss
  due to the early redemption and repurchase of our senior notes), and, as
  compared to our net loss for the first quarter of fiscal 2000, represented an
  improvement of $10.2 million.


  Backlog

     Effective April 1, 2000, our backlog consists of product orders for which a
  customer purchase order has been received and accepted and which is scheduled
  for shipment within twelve months. Prior to April 1, 2000, orders that were
  scheduled for shipment beyond six months were not included in backlog. This
  change of backlog policy increased our backlog by approximately $3 million.

     Orders are subject to rescheduling or cancellation by the customer, usually
  without penalty. Backlog also consists of recurring fees payable under support
  contracts with our customers and orders for spare parts and billable service.
  Because of possible changes in product delivery schedules and cancellation of
  product orders and because our sales will sometimes reflect orders shipped in
  the same quarter that they are received, our backlog at any particular date is
  not necessarily indicative of actual sales for any succeeding period.

                                       14
<PAGE>

  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 flow used in operating activities were $0.1 million and $2.6 million
  for the first quarters of fiscal 2001 and 2000, respectively.  The decrease in
  cash flow used in operating activities from fiscal year 2001 to 2000 is mainly
  due to the increase in net income offset by a higher investment in working
  capital.

     Purchases of property and equipment were $1.0 million and $0.4 million for
  the first quarters of fiscal 2001 and 2000, respectively.

     In May 1997, 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
  provided 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. The second amendment
  also provided that if we had not consummated a qualified initial public
  offering by the end of December 31, 1999, then the loan commitment amount
  would be reduced by $5.0 million to $25.0 million. In March 2000, we entered
  into a third amendment to permit the redemption and conversion of the
  mandatorily redeemable preferred stock into common stock.  These amendments
  were effected in light of the impact of the downturn in the semiconductor
  industry on our operating results. Without the first amendment to our bank
  credit facility, on June 30, 1998, we would have violated the financial test
  relating to the maintenance of minimum levels of EBITDA for the six-month
  period ending on such date. 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
  financial tests and contains covenants customary for this type of financing.
  At June 30, 2000, there was $3.5 million outstanding under a letter of credit
  and $21.5 million of unused borrowing capacity under the amended bank credit
  facility.  Our anticipated level of capital spending for the next fiscal year
  would be in excess of the allowable amounts under the covenants of our third
  amendment.  We are currently in the process of negotiating a new loan
  agreement.  No assurances can be given that the new loan agreement will be
  satisfactorily negotiated.

                                       15
<PAGE>

     On February 9, 2000, we completed an initial public offering of common
  stock.  In connection with this offering and the exercise of the underwriters'
  over-allotment option, we sold 10,350,000 shares of common stock at a price of
  $20.00 per share.  Net proceeds, net of underwriting discounts and offering
  costs, were $190.7 million.  During the early part of March 2000, we used
  approximately $130.5 million of net proceeds to redeem or repurchase
  substantially all of the outstanding senior notes, including accrued interest,
  redemption premiums and related expenses.  We also used $3.5 million of net
  proceeds to buy out of the seven and one half years remaining in the term of a
  consulting agreement with Bain Capital.  Remaining cash proceeds will be used
  for general corporate purposes, including working capital.

     Our principal sources of funds are anticipated to be cash on hand ($74.4
  million as of June 30, 2000), 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.


  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.

                                       16
<PAGE>

Part II. Other Information

Item 1. Legal Proceedings

     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.

     Subsequent to the end of the quarter, on July 20, 2000, United States
  District Court Judge Charles A. Legge granted our Motion for summary judgment
  that one of our Opti-Probe 5000 products does not infringe KLA-Tencor's U.S.
  Patent, which was the subject of the suit, either literally or under the
  doctrine of equivalents. Only our older Opti-Probe products remain at issue in
  this lawsuit.

     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 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-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 or operations.

                                       17
<PAGE>

     On October 25, 1999, we commenced an action against KLA-Tencor for patent
  infringement with respect to two of our patents relating to optical
  measurement systems that include a calibrating ellipsometer. In addition to
  the infringement claims, we also filed claims against KLA-Tencor for engaging
  in a pattern of conduct designed to disparage and improperly damage us.

     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.

                                       18
<PAGE>

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

          The 2000 Annual Meeting of Stockholders was held on July 31, 2000. The
     following matters were voted on: (1) Election of G. Leonard Baker, Jr. and
     Ian K. Loring as Class I Directors; (2) Approval of the Amendment to the
     2000 Equity Incentive Plan to Increase the Number of Shares Authorized of
     Issuance. The vote tally was as follows:

     Proposal I:

<TABLE>
<CAPTION>
                                    Total Vote For Each              Total Vote Withheld From
                                          Director                       Each Director
<S>                                 <C>                         <C>
     G. Leonard Baker, Jr.               21,020,632                        12,733
     Ian K. Loring                       21,020,686                        12,679
</TABLE>

Proposal II:

<TABLE>
<CAPTION>
          For                Against             Abstain             Broker Non-Vote
<S>                        <C>                 <C>                 <C>
     15,316,300             4,431,531             1,836                1,283,698
</TABLE>

Item 5. Other Information

          None.

Item 6. Exhibits and Reports on Form 8-K

     The following exhibits are included herein:


     Exhibit
     Number              Description

     27.1                Financial Data Schedule.
     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, 2000 (Registration No. 333-29871)

                                       19
<PAGE>

    The Company filed a report on Form 8-K on July 26, 2000 to report a set of
    agreements with Applied Materials, Inc. The Agreements include a Development
    and Cooperation Agreement, a Technology Escrow Agreement and a Global Supply
    Agreement.

                                       20
<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, 2000

                                       21