<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 1, 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                    (I.R.S. Employer Identification Number)
    Jurisdiction of Incorporation
          or 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 October 29, 2000
--------------------------------------------------------------------------------
Common stock, $.01 par value                        23,743,698
<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, 2000 and March 31, 2000                         3

         Condensed Consolidated Statements of Operations
            Three and Six Months Ended September 30, 2000 and 1999        4

         Condensed Consolidated Statements of Cash Flows
            Six Months Ended September 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                                               18

Item 2.  Changes in Securities and Use of Proceeds                       20

Item 3.  Defaults upon Senior Securities                                 20

Item 4.  Submission of Matters to a Vote of Security Holders             20

Item 5.  Other Information                                               20

Item 6.  Exhibits and Reports on Form 8-K                                20

Signatures                                                               22

                                       2
<PAGE>

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


                               THERMA-WAVE, INC.
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (in thousands)
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                                        September 30,                  March 31,
                                                                            2000                         2000
                                                                  ----------------------        ---------------------
<S>                                                                  <C>                           <C>
                     ASSETS

Current assets:
 Cash and cash equivalents                                                     $  55,027                    $  75,200
 Short-term investments                                                            9,482                            -
 Accounts receivable, net                                                         44,226                       24,400
 Inventories                                                                      39,781                       23,689
 Other current assets                                                              1,478                        1,720
                                                                  ----------------------        ---------------------
           Total current assets                                                  149,994                      125,009

 Property and equipment, net                                                       6,657                        4,999
 Deferred income taxes                                                             1,685                        1,685
 Other assets                                                                      2,228                        2,001
                                                                  ----------------------        ---------------------
           Total assets                                                        $ 160,564                    $ 133,694
                                                                  ======================        =====================

      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Accounts payable                                                              $  14,684                    $  10,111
 Other current liabilities                                                        23,428                       20,789
                                                                  ----------------------        ---------------------
           Total current liabilities                                              38,112                       30,900
 Long term debt                                                                       16                           16
 Other liabilities                                                                 2,613                        3,293
                                                                  ----------------------        ---------------------
           Total liabilities                                                      40,741                       34,209

Stockholders' equity
 Common stock                                                                        238                          236
 Additional paid-in capital                                                      228,238                      226,199
 Notes receivable from stockholders                                                 (210)                        (241)
 Accumulated deficit                                                            (107,592)                    (125,971)
 Accumulated other comprehensive loss                                               (851)                        (738)
                                                                  ----------------------        ---------------------
           Total stockholders' equity                                            119,823                       99,485
                                                                  ----------------------        ---------------------
           Total liabilities and stockholders' equity                          $ 160,564                    $ 133,694
                                                                  ======================        =====================

                         See accompanying notes to condensed consolidated financial statements.
</TABLE>

                                       3
<PAGE>

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

<TABLE>
<CAPTION>
                                                                    For the Three Months Ended         For the Six Months Ended
                                                                          September 30,                      September 30,
                                                                 --------------------------------   ------------------------------
                                                                       2000            1999               2000           1999
                                                                 --------------   ---------------   --------------   -------------
<S>                                                              <C>              <C>               <C>              <C>
Net revenues                                                     $    50,263      $    25,913       $    91,849      $    47,054
Cost of revenues                                                      24,885           13,676            45,437           25,904
                                                                 --------------   ---------------   --------------   --------------
Gross margin                                                          25,378           12,237            46,412           21,150

Operating Expenses:
    Research and development                                           8,676            5,086            16,195            8,941
    Selling, general and administrative                                6,896            4,847            12,778            8,902
                                                                 --------------   ---------------   --------------   --------------
     Total operating expenses                                         15,572            9,933            28,973           17,843
                                                                 --------------   ---------------   --------------   --------------

Operating income                                                       9,806            2,304            17,439            3,307

Other income (expense):
    Interest expense                                                     (52)          (3,488)             (112)          (7,013)
    Interest income                                                    1,045              135             2,084              285
    Other, net income                                                    130               42               143               75
                                                                 --------------   ---------------   --------------   --------------
                                                                       1,123           (3,311)            2,115           (6,653)
                                                                 --------------   ---------------   --------------   --------------

Income (loss) before provision for income taxes                       10,929           (1,007)           19,554           (3,346)
Provision for income taxes                                               224                -             1,173                -
                                                                 --------------   ---------------   --------------   --------------

Net income (loss)                                                     10,705           (1,007)           18,381           (3,346)

Accretion of preferred stock dividend                                      -              206                 -              412
                                                                 --------------   ---------------   --------------   --------------
Net income (loss) available to common stockholders               $    10,705      $    (1,213)      $    18,381      $    (3,758)
                                                                 ==============   ===============   ==============   ==============

Net income (loss) per share:
    Basic                                                        $      0.46      $     (0.19)      $      0.79      $     (0.50)
    Diluted                                                             0.43            (0.19)      $      0.74            (0.50)

Weighted average common shares outstanding:
    Basic                                                             23,328            9,574            23,297            9,574
    Diluted                                                           24,980            9,574            24,915            9,574
</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,
                                                      ----------------------------------------
                                                            2000                   1999
                                                      -----------------      -----------------
<S>                                                        <C>                    <C>
Operating activities:
  Net income (loss)                                        $ 18,381               $ (3,346)
  Adjustments to reconcile net income (loss) to net
   cash used by operating activities:
   Depreciation and amortization                              1,562                  2,246
   Amortization of deferred financing costs                       -                    808
   Changes in assets and liabilities:
     Accounts receivable                                    (19,826)               (11,488)
     Inventories                                            (16,092)                (5,178)
     Other assets                                               170                  6,314
     Other liabilities                                        6,965                  4,214
                                                      -----------------      -----------------
      Net cash used by operating activities                  (8,840)                (6,430)

Investing activities:
  Purchases of property and equipment                        (3,024)                (1,038)
  Change in short-term investments                           (9,482)                     -
  Investments in intangible assets                             (351)                  (255)
                                                      -----------------      -----------------
      Net cash used in investing activities                 (12,857)                (1,293)

Net cash provided by financing activities                     1,524                    585
                                                      -----------------      -----------------

 Net decrease in cash and cash equivalents                  (20,173)                (7,138)
 Cash and cash equivalents at beginning of period            75,200                 20,245
                                                      -----------------      -----------------
 Cash and cash equivalents at end of period                $ 55,027               $ 13,107
                                                      =================      =================


 Supplementary disclosures:
  Cash paid for interest                                   $    114               $  6,172
                                                      =================      =================
  Cash paid for taxes                                      $    371               $      -
                                                      =================      =================
 </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, 2000, and the operating results and cash flows for the three and
  six months ended September 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 March 31, 2001.

     The second quarters of fiscal years 2001 and 2000 and the fiscal year 2000
  ended on October 1, 2000, October 3, 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):

<TABLE>
<CAPTION>
                                         September 30, 2000               March 31, 2000
                                   ---------------------------     --------------------------
  <S>                                 <C>                             <C>
  Purchased materials                          $19,784                        $ 7,752
  Systems in process                            14,310                         12,370
  Finished systems                               5,687                          3,567
                                   ---------------------------     --------------------------
                                               $39,781                        $23,689
                                   ===========================     ==========================
</TABLE>

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 (loss) or stockholders' equity. SFAS 130
  requires unrealized gains or losses on available-for-

                                       6
<PAGE>

  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 September 30, 2000 and 1999, comprehensive income
  (loss) amounted to approximately $10,584,000 and $(308,000), respectively. For
  the six months ended September 30, 2000 and 1999, comprehensive income (loss)
  was approximately $18,268,000 and $(2,775,000), 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 and six months ended September 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 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                Six Months
                                                               Ended September 30,        Ended September 30,
                                                              2000            1999          2000         1999
                                                           ------------  ------------  ------------  ------------
  <S>                                                      <C>           <C>           <C>           <C>
  Numerator (in thousands):
  Net income (loss)......................................       $10,705      $(1,007)      $18,381      $(3,346)
  Less: preferred stock dividend.........................            --         (206)           --         (412)
  Less: income attributable to Class L common stock......            --         (607)           --       (1,043)
                                                           ------------  ------------  ------------  ------------
                                                                $10,705      $(1,820)      $18,381      $(4,801)
  Denominator (in thousands):

  Common stock...........................................        23,328           --        23,297           --
  Class A common stock...................................            --        9,073            --        9,073
  Class B common stock (vested)..........................            --          501            --          501
                                                           ------------  ------------  ------------  ------------
  Weighted average shares outstanding used for
  basic income (loss) per share.........................         23,328        9,574        23,297        9,574

  Unvested shares                                                   400           --           400           --
  Dilutive stock options                                          1,252           --         1,218           --
                                                           ------------  ------------  ------------  ------------
  Weighted average shares outstanding used for
   diluted income (loss) per share.......................        24,980        9,574        24,915        9,574
                                                           ============  ===========  ============= =============
</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>
                                                                                                September 30,
                                                                                            ---------------------
                                                                                               2000       1999
                                                                                            ----------  ---------
  <S>                                                                                        <C>       <C>
  Common Stock Subject to Repurchase (unvested)........................................      400,339     617,305
  Mandatorily Redeemable Convertible Preferred Stock...................................           --     748,739
  Stock Options........................................................................      106,436   2,605,338
</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.

     On July 20, 2000, United States District Court Judge Charles A. Legge
  granted our motion for summary judgment on the bases that our Opti-Probe 5000
  products do not infringe KLA-Tencor's U.S. Patent, which was the subject of
  the suit, either literally or under the doctrine of equivalents. Therefore,
  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 paragraphs 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.

     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.


  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 and six months ended September 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.

                                       12
<PAGE>

<TABLE>
<CAPTION>
                                                       Three Months Ended                       Six Months Ended
                                                         September 30,                           September 30,
                                             ----------------------------------      ----------------------------------
  Statement of Operations Data:                    2000                1999                2000                1999
                                             --------------      --------------      --------------      --------------
  <S>                                           <C>                 <C>                 <C>                 <C>
  Net revenue                                         100.0%              100.0%              100.0%              100.0%
  Cost of revenue                                      49.5                52.8                49.5                55.1
                                             --------------      --------------      --------------      --------------
  Gross margin                                         50.5                47.2                50.5                44.9
  Operating expenses:
   Research and development expenses                   17.3                19.6                17.6                19.0
   Selling, general and administrative                 13.7                18.7                13.9                18.9
                                             --------------      --------------      --------------      --------------
  Operating income                                     19.5                 8.9                19.0                 7.0
  Other income (expense):
   Interest expense                                    (0.2)              (13.5)               (0.1)              (14.9)
   Interest income                                      2.1                 0.5                 2.3                 0.6
   Other, net income                                    0.3                 0.2                 0.1                 0.2
                                             --------------      --------------      --------------      --------------
  Income (loss) before income taxes                    21.7                (3.9)               21.3                (7.1)
  Provision for income taxes                            0.4                   -                 1.3                   -
                                             --------------      --------------      --------------      --------------
  Net income (loss)                                    21.3%              (3.9)%               20.0%              (7.1)%
                                             ==============      ==============      ==============      ==============
</TABLE>

     Net Revenues. Net revenues for the fiscal quarters ended September 30, 2000
  were $50.3 million, an increase of 94% from $25.9 million in the comparable
  fiscal quarter of the prior year. Compared to the prior fiscal quarter, net
  revenues increased $8.7 million or 21%. For the six months ended September 30,
  2000, net revenues were $91.9 million, up 95% from $47.1 million for the
  comparable period of the prior year. Net revenues increased broadly across all
  geographic regions and all product families including our new 300mm products.
  The increase in net 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.

     We derive our net revenues from system sales, sales of replacement and
  spare parts, and service contracts. During the three months ended September
  30, 2000, we derived approximately 92% of our net revenues from system sales,
  6% from sales of replacement and spare parts, including associated labor, and
  2% from service contracts. During the three months ended September 30, 1999,
  we derived approximately 83% of our net revenues from system sales, 11% from
  sales of replacement and spare parts, including associated labor, and 6% from
  service contracts. During the six months ended September 30, 2000, we derived
  approximately 91% of our net revenues from system sales, 6% from sales of
  replacement and spare parts, including associated labor, and 3% from service
  contracts. During the six months ended September 30, 1999, we derived
  approximately 83% of our net revenues from system sales, 10% from sales of
  replacement and spare parts, including associated labor, and 7% from service
  contracts. Net revenues from system sales, replacement and spare parts are
  generally recognized at the time of shipment. Net revenues on service
  contracts are deferred and recognized on a straight-line basis over the period
  of the contract.

                                       13
<PAGE>

     International sales accounted for approximately 66% of our total revenues
  for the three months ended September 30, 2000, as compared to 61% of our total
  revenues for the comparable period of the prior year. For the six months ended
  September 30, 2000, international sales accounted for 67%, as compared to 61%
  of our total revenues for the comparable period of the prior year. 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.

     Gross Margin. Gross margin for the second quarter of fiscal 2001 was 50.5%,
  about the same as the prior fiscal quarter and up from 47.2% for the second
  quarter of our last fiscal year. For the six months ended September 30, 2000,
  gross margin was 50.5%, up from 44.9% for the same period of the prior year.
  The increase in gross margin in the second quarter of fiscal 2001 versus the
  same quarter of fiscal 2000 is due to higher revenue levels and favorable
  sales mix.

     Research and Development ("R&D") Expenses.   R&D expenses for the second
  quarter of fiscal 2001 were $8.7 million, an increase of 15% from the prior
  quarter and an increase of 71% from the same quarter of our last fiscal year.
  Year-to-date R&D expenses were $16.2 million, up from $8.9 million for the
  same period last year. The increase was primarily the result of additional
  resources dedicated to the development of new products. 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 second quarter of fiscal 2001 were $6.9 million, an increase of 17%
  from the prior fiscal quarter and an increase of 42% from the second quarter
  of last fiscal year. SG&A expenses for the first six months of fiscal 2001
  were $12.8 million, an increase of 44% from the same period last fiscal year.
  The increase from the prior periods resulted from higher orders and revenue
  levels.

     Interest Expense.   Interest expense for the second quarter of fiscal 2001
  was $0.1 million, which was about the same as that of the prior fiscal quarter
  and was significantly lower than that of the second quarter of the prior
  fiscal year. Year-to-date interest expense was $0.1 million in comparison to
  $7.0 million for the same period last year. The decrease in interest expense
  from prior year was attributable to the redemption and repurchase of
  substantially all of our outstanding senior notes in March 2000.

     Provision for Income Taxes.   For the second quarter of fiscal 2001, we
  recorded a $0.2 million provision for income taxes.  This lowered our
  cumulative tax rate for the six months ended September 30, 2000 to 6% from 11%
  in the first fiscal quarter. The 6% tax rate is

                                       14
<PAGE>

  based upon our current evaluation of our loss carry-forward potential and
  research and development tax credit carry-forward benefits.

     Net Income/Loss.  Net income was $10.7 million for the second quarter of
  fiscal 2001, up 39% from $7.7 million for the prior fiscal quarter, and, as
  compared to our net loss for the second quarter of fiscal 2000, represented an
  improvement of $11.9 million. For the six months ended September 30, 2000, net
  income increased to $18.4 million from a net loss of $3.8 million last year.


  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.

     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.


  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 $8.8 million and $6.4 million
  for the first two quarters of fiscal 2001 and 2000, respectively.  The
  increase in cash flow used in operating activities from fiscal year 2000 to
  2001 is mainly due to the higher investment in working capital.

     Purchases of property and equipment were $3.0 million and $1.0 million for
  the first two 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 expires on May
  16, 2002. During the quarter ended June 30, 1998, we amended the bank credit
  facility to have our borrowing availability

                                       15
<PAGE>

  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 September 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
  have requested a consent to increase our capital spending limit. No assurance
  can be given that we will receive this consent.

     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 and investments
  on hand ($64.5 million as of September 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

                                       16
<PAGE>

  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.

                                       17
<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 of operations.

     On July 20, 2000, United States District Court Judge Charles A. Legge
  granted our motion for summary judgment on the bases that Opti-Probe 5000
  products do not infringe KLA-Tencor's U.S. patent, which was the subject of
  the suit, either literally or under the doctrine of equivalents. Therefore,
  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 paragraphs 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.

                                       18
<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.

                                       19
<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 an amendment to our 2000
    Equity Incentive Plan to increase the number of shares that may be issued
    under the plan from 300,000 shares (plus any shares returned to the company
    as a result of terminated options granted under our 1997 Plans and plus an
    annual increase of one percent of the company's outstanding shares) to a
    total of 3,300,000 shares (plus any shares returned to the company as a
    result of terminated options granted under our 1997 Plans and plus an annual
    increase of one percent of the company's outstanding shares). The vote tally
    was as follows:


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

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

       David Dominik, Martin M. Schwartz and Allan Rosencwaig are directors of
    the company whose term of office continued beyond the 2000 Annual Meeting of
    Stockholders.

Item 5. Other Information

    None.

Item 6. Exhibits and Reports on Form 8-K

    The following exhibits are included herein:

                                       20
<PAGE>

    Exhibit
    Number               Description
    *10.34               Development and Cooperation Agreement entered into by
                         and among Applied Materials, Inc. and Therma-Wave,
                         Inc., effective as of July 24, 2000.
    *10.35               Technology Escrow Agreement entered into by and among
                         Applied Materials, Inc. and Therma-Wave, Inc.,
                         effective as of July 24, 2000.
    27.1                 Financial Data Schedule.
    99.1                 Risk Factors. (1)

--------------------------------------------------------------------------------
    *    Confidential treatment is being requested for portions of this
         agreement.
    (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)

    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.

                                       21
<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)

                               November 14, 2000

                                       22