<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 December 31, 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)

          DELAWARE                                     94-3000561
(State or Other Jurisdiction of          (I.R.S. Employer Identification Number)
Incorporation or Organization)

          1250 Reliance Way
          Fremont, California                                 94539
(Address of Principal Executive Offices)                    (Zip Code)


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

  Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities 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 January 28, 2001
--------------------------------------------------------------------------------
   Common stock, $.01 par value                           23,893,250
<PAGE>

                               THERMA-WAVE, INC.
                                   FORM 10-Q
<TABLE>
<CAPTION>
                                     INDEX


Part I.   Financial Information

<S>                                                                                            <C>
Item 1.   Unaudited Condensed Consolidated Financial Statements

          Condensed Consolidated Balance Sheets
               December 31, 2000 and March 31, 2000                                             3

          Condensed Consolidated Statements of Operations
               Three and Nine Months Ended December 31, 2000 and 1999                           4

          Condensed Consolidated Statements of Cash Flows
               Nine Months Ended December 31, 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                                                                                     21
</TABLE>

                                       2
<PAGE>

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


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

<TABLE>
<CAPTION>
                                                           December 31, 2000         March 31, 2000
                                                           -----------------         --------------
                     ASSETS
Current assets:
<S>                                                        <C>                       <C>
        Cash and cash equivalents                              $  47,611               $  75,200
        Short-term investments                                    19,344                       -
        Accounts receivable, net                                  49,563                  24,400
        Inventories                                               47,482                  23,689
        Other current assets                                         925                   1,720
                                                               ---------               ---------
             Total current assets                                164,925                 125,009
Property and equipment, net                                       10,009                   4,999
Deferred income taxes                                              1,685                   1,685
Other assets                                                       3,469                   2,001
                                                               ---------               ---------
             Total assets                                      $ 180,088               $ 133,694
                                                               =========               =========

        LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
        Accounts payable                                       $  15,906               $  10,111
        Other current liabilities                                 27,723                  20,789
                                                               ---------               ---------
             Total current liabilities                            43,629                  30,900
Long term debt                                                        16                      16
Other liabilities                                                  3,888                   3,293
                                                               ---------               ---------
             Total liabilities                                    47,533                  34,209

Stockholders' equity
  Common stock                                                       239                     236
  Additional paid-in capital                                     229,096                 226,199
  Notes receivable from stockholders                                (210)                   (241)
  Accumulated deficit                                            (95,508)               (125,971)
  Other comprehensive loss                                        (1,062)                   (738)
                                                               ---------               ---------
            Total stockholders' equity                           132,555                  99,485
                                                               ---------               ---------
            Total liabilities and stockholders' equity         $ 180,088               $ 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>
                                                For the Three Months Ended December 31,    For the Nine Months Ended December 31,
                                               ----------------------------------------  ------------------------------------------
                                                       2000                 1999                 2000                 1999
                                               ------------------   -------------------  -------------------   --------------------
<S>                                            <C>                  <C>                  <C>                   <C>
Net revenues                                      $   57,310          $    31,977            $  149,159            $  79,031
Cost of revenues                                      28,096               16,397                73,534               42,301
                                                  ----------          -----------            ----------            ---------
Gross margin                                          29,214               15,580                75,625               36,730

Operating Expenses:
  Research and development                             9,282                5,842                25,476               14,783
  Selling, general and administrative                  7,892                5,645                20,669               14,547
                                                  ----------          -----------            ----------            ---------
    Total operating expenses                          17,174               11,487                46,145               29,330
                                                  ----------          -----------            ----------            ---------

Operating income                                      12,040                4,093                29,480                7,400

Other income (expense):
  Interest expense                                       (47)              (3,532)                 (159)             (10,545)
  Interest income                                        902                  115                 2,986                  400
  Other, net                                             (40)                 (32)                  102                   43
                                                  ----------          -----------            ----------            ---------
                                                         815               (3,449)                2,929              (10,102)
                                                  ----------          -----------            ----------            ---------
Income (loss) before provision for income taxes       12,855                  644                32,409               (2,702)

Provision for income taxes                               771                    -                 1,944                    -
                                                  ----------          -----------            ----------            ---------
Net income (loss)                                     12,084                  644                30,465               (2,702)

Accretion of preferred stock dividend                      -                  314                     -                  726
                                                  ----------          -----------            ----------            ---------
Net income (loss) available to common             $   12,084          $       330            $   30,465            $  (3,428)
stockholders                                      ==========          ===========            ==========            =========


Net income (loss) per share:
  Basic                                           $     0.52          $     (0.05)           $     1.30            $   (0.54)
  Diluted                                         $     0.48          $     (0.05)           $     1.20            $   (0.54)

Weighted average common shares outstanding:
  Basic                                               23,446                9,542                23,370                9,594
  Diluted                                             25,116                9,542                25,387                9,594
</TABLE>


    See accompanying notes to condensed consolidated financial statements.


                                       4
<PAGE>

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


<TABLE>
<CAPTION>
                                                                         Nine Months Ended
                                                                           December 31,
                                                               -------------------------------------
                                                                       2000              1999
                                                               --------------        ---------------
Operating activities:
<S>                                                            <C>                  <C>
  Net income (loss)                                                $  30,465          $  (2,702)
  Adjustments to reconcile net income (loss) to net
   cash used by operating activities:
   Depreciation and amortization                                       2,202              3,425
   Amortization of deferred financing costs                                -              1,212
   Changes in assets and liabilities:
     Accounts receivable                                             (25,163)           (11,612)
     Inventories                                                     (23,793)            (8,976)
     Other assets                                                       (650)             5,965
     Other liabilities                                                13,785              5,580
                                                                   ---------          ---------
      Net cash used by operating activities                           (3,154)            (7,108)

Investing activities:
  Purchases of property and equipment                                 (6,865)            (1,704)
  Change in short-term investments                                   (19,344)                 -
  Investments in intangible assets                                      (370)              (309)
                                                                   ---------          ---------
      Net cash used in investing activities                          (26,579)            (2,013)

Net cash provided by financing activities                              2,144                575
                                                                   ---------          ---------

 Net decrease in cash and cash equivalents                           (27,589)            (8,546)
 Cash and cash equivalents at beginning of period                     75,200             20,245
                                                                   ---------          ---------
 Cash and cash equivalents at end of period                        $  47,611           $ 11,699
                                                                   =========          =========


 Supplementary disclosures:
  Cash paid for interest                                           $     171           $ 12,343
                                                                   =========          =========
  Cash paid for taxes                                              $     541           $      2
                                                                   =========          =========
</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 December 31, 2000, and the operating results and cash
     flows for the three and nine months ended December 31, 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 third quarters of fiscal years 2001 and 2000 and the fiscal year
     2000 ended on December 31, 2000, January 2, 2000 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):

                              December 31, 2000              March 31, 2000
                              -----------------              --------------
     Purchased materials                $22,022                     $ 7,752
     Systems in process                  19,753                      12,370
     Finished systems                     5,707                       3,567
                              -----------------              --------------
                                        $47,482                     $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
     (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 quarters ended December 31, 2000 and 1999, comprehensive
     income amounted to approximately $11,873,000 and $741,000, respectively.
     For the nine months ended December 31, 2000 and 1999, comprehensive income
     (loss) was approximately $30,141,000 and $(2,034,000), 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 income (loss) for the three and nine months ended December
     31, 1999 used in the net income (loss) per share calculation represents the
     income (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 for the nine month period ended December 31, 1999, all potential
     common shares were anti-dilutive and excluded from the diluted net loss per
     share calculation.

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

                                       7
<PAGE>

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

<TABLE>
<CAPTION>
                                                                              Three Months,              Nine Months,
                                                                           Ended December 31,         Ended December 31,
                                                                           2000          1999          2000       1999
                                                                       ------------  -----------    ----------  ---------
     <S>                                                               <C>           <C>            <C>         <C>
     Numerator (in thousands):
     Net income (loss)   ...........................................   $     12,084  $       644    $   30,465  $  (2,702)
     Less: preferred stock dividend  ...............................             --         (314)           --       (726)
     Less: income attributable to Class L common stock..............             --         (763)           --     (1,800)
                                                                       ------------  -----------    ----------  ---------
                                                                       $     12,084  $      (433)   $   30,465  $  (5,228)
     Denominator (in thousands):
     Common stock  .................................................         23,446           --        23,370         --
     Class A common stock  .........................................             --        9,074            --      9,074
     Class B common stock (vested)  ................................             --          468            --        520
                                                                       ------------  -----------    ----------  ---------
     Weighted average shares outstanding used for
      basic income (loss) per share  ...............................         23,446        9,542        23,370      9,594


     Unvested shares................................................            367           --           367         --
     Dilutive stock options.........................................          1,303           --         1,650         --
                                                                       ------------  -----------    ----------  ---------
     Weighted average shares outstanding used for
      diluted income (loss) per share...............................         25,116        9,542        25,387      9,594
                                                                       ============  ===========    ==========  =========
</TABLE>

          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>
                                                                               December 31,
                                                                        -----------------------
                                                                            2000        1999
                                                                        -----------  ----------
     <S>                                                                <C>          <C>
     Common Stock Subject to Repurchase (unvested)  ..................    366,745      583,711
     Mandatorily Redeemable Convertible Preferred Stock  .............         --      748,739
     Stock Options  ..................................................    161,986    2,810,000
</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," changing the interpretation of revenue recognition rules. This
     interpretation change requires a deferral of a portion of revenue
     recognition from the date of shipment to the date of final customer
     acceptance when the final payment is due upon final acceptance as 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

                                       8
<PAGE>

     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, this change 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 effective as of the beginning of fiscal year 2001.
     This change in accounting policy will result in the restatement of the
     Company's results for each of the first three quarters of fiscal 2001 and a
     cumulative adjustment as of the beginning of fiscal year 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.


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. 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.

                                       9
<PAGE>

          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. We believe that the outcome from such
     litigation, even if adverse to us, would not have a material adverse effect
     on our business, financial condition or results or operations.

          On 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.

<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 upturns or downturns may not protect us in future downturns, the
     timing of the receipt of orders from major customers, customer
     cancellations or delays of shipments, specific feature requests by
     customers, production delays or manufacturing inefficiencies, exchange rate
     fluctuations, management decisions to commence or discontinue product
     lines, our ability to design, introduce and manufacture new products on a
     cost effective and timely basis, the introduction of new products by
     ourselves or our competitors, the timing of research and development
     expenditures, and 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 the following product families of process
     control metrology systems: Therma-Probe systems, Opti-Probe systems, Meta-
     Probe systems and Integrated Metrology 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. During this fiscal year, we introduced the Opti-Probe CD for
     critical dimension metrology, which enables semiconductor manufacturers to
     achieve higher productivity and improved IC performance through advanced
     and cost-effective critical dimension measurements.

          Meta-Probe Product Family. Meta-Probe systems are our metal film
     metrology family of products which employ a fast, patented form of X-ray
     Reflectrometry to measure in a non-contact, non-destructive manner, the
     thickness, density and surface roughness of important metal films,
     including copper, used in the semiconductor industry. This product is
     currently in beta test development and we expect to begin full production
     by the third calendar quarter of 2001.

          Integrated Metrology Product Family. INTEGRA is our line of integrated
     metrology products which enhances the productivity of process tools by
     greatly reducing the usage of costly nonproductive test wafers while
     decreasing set-up and requalification times. This product family is being
     developed under development and supply agreements with Applied Materials.

          On February 9, 2000, we completed an initial public offering of our
     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 and nine months ended December 31,
  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.

<TABLE>
<CAPTION>
                                                   Three Months Ended                      Nine Months Ended
                                                      December 31,                            December 31,
                                           -------------------------------         -------------------------------
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                                     49.0              51.3                  49.3              53.5
                                           -------------     -------------         -------------     -------------
Gross margin                                        51.0              48.7                  50.7              46.5
Operating expenses:
 Research and development                           16.2              18.3                  17.1              18.7
 Selling, general and administrative                13.8              17.6                  13.9              18.4
                                           -------------     -------------         -------------     -------------
Operating income                                    21.0              12.8                  19.7               9.4
Other income (expense):
 Interest expense                                   (0.1)            (11.1)                 (0.1)            (13.3)
 Interest income                                     1.6               0.4                   2.0               0.5
 Other, net income                                  (0.1)             (0.1)                  0.1                 -
                                           -------------     -------------         -------------     -------------
Income (loss) before income taxes                   22.4               2.0                  21.7              (3.4)
Provision for income taxes                           1.3                 -                   1.3                 -
                                           -------------     -------------         -------------     -------------
Net income (loss)                                   21.1%              2.0%                 20.4%             (3.4)%
                                           =============     =============         =============     =============
</TABLE>

          Net Revenues. Net revenues for the fiscal quarter ended December 31,
     2000 were $57.3 million, an increase of 79% from $32.0 million in the
     comparable fiscal quarter of the prior year. Compared to the prior fiscal
     quarter, net revenues increased $7.0 million or 14%. For the nine months
     ended December 31, 2000, net revenues were $149.1 million, up 89% from
     $79.0 million for the comparable period of the prior year. This quarter has
     seen significant net revenue increase, as compared to the prior quarter, in
     the regions of North America and Europe offset by a decline 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 December
     31, 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 three
<PAGE>

     months ended December 31, 1999, we derived approximately 86% of our net
     revenues from system sales, 8% from sales of replacement and spare parts,
     including associated labor, and 6% from service contracts. During the nine
     months ended December 31, 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 nine
     months ended December 31, 1999, we derived approximately 84% of our net
     revenues from system sales, 9% from sales of replacement and spare parts,
     including associated labor, and 7% from service contracts. Currently, 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.

          International sales accounted for approximately 51% of our total
     revenues for the three months ended December 31, 2000, as compared to 70%
     of our total revenues for the comparable period of the prior year. For the
     nine months ended December 31, 2000, international sales accounted for 61%,
     as compared to 65% of our total revenues for the comparable period of the
     prior year. International sales as a percentage of total revenues has
     decreased due to the decline of sales in the Asia Pacific region. However,
     international sales still accounted for a significant portion of our
     revenue and we anticipate it will remain so 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 third quarter of fiscal 2001 was
     51.0%, up from 50.5% for the prior fiscal quarter and up from 48.7% for the
     third quarter of our last fiscal year. For the nine months ended December
     31, 2000, gross margin was 50.7%, up from 46.5% for the same period of the
     prior year. Higher revenue and production levels and greater production
     efficiency contributed to the increase in gross margin.

          Research and Development (''R&D'') Expenses. R&D expenses for the
     third quarter of fiscal 2001 were $9.3 million, an increase of 7% from the
     prior quarter and an increase of 59% from the same quarter of our last
     fiscal year. Year-to-date R&D expenses were $25.5 million, up from $14.8
     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 third quarter of fiscal 2001 were $7.9 million, an increase of 14%
     from the prior fiscal quarter and an increase of 40% from the third quarter
     of last fiscal year. SG&A expenses for the first nine months of fiscal 2001
     were $20.7 million, an increase of 42% from the same period last fiscal
     year. The increase from the prior periods resulted primarily from higher
     orders and revenue levels.
<PAGE>

          Interest Expense and Income. Interest expense for the third quarter of
     fiscal 2001 was $47,000, which was about the same as that of the prior
     fiscal quarter and was significantly lower than that of the third quarter
     of the prior fiscal year. Year-to-date interest expense was $159,000 in
     comparison to $10.5 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.

          Interest income for the third quarter of fiscal 2001 was $0.9 million
     compared to $0.1 million for the same quarter of the prior year. Interest
     income for the year to date period in fiscal 2001 is $3.0 million as
     compared to $0.4 million for the same period of the prior year. This
     increase is due to the additional cash and investments we received from the
     net proceeds of our IPO in February 2000.

          Provision for Income Taxes. For the third quarter of fiscal 2001, we
     recorded a $0.8 million provision for income taxes. Based upon our current
     evaluation of our loss carry-forward potential and research and development
     tax credit carry-forward benefits, we believe our effective tax rate for
     the fiscal year is approximately 6%.

          Net Income/Loss. Net income was $12.1 million for the third quarter of
     fiscal 2001, up 13% from $10.7 million for the prior fiscal quarter, and,
     as compared to our net income for the third quarter of fiscal 2000,
     represented an improvement of $11.4 million. For the nine months ended
     December 31, 2000, net income increased to $30.5 million from a net loss of
     $3.4 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 fund
     our operating activities principally from funds generated from operations,
     tax refunds and net proceeds from our initial public offering.
<PAGE>

          Cash flow used in operating activities was $3.2 million and $7.1
     million for the first three quarters of fiscal 2001 and 2000, respectively.
     The decrease in cash flow from operating activities is primarily due to the
     increase in accounts receivable and inventories, offset by the increase in
     net income and the tax refund of $8.3 million received in fiscal 2000.

          Purchases of property and equipment were $6.9 million and $1.7 million
     for the first three 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
     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 nine-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 first
     two amendments were effected in light of the impact of the downturn in the
     semiconductor industry on our operating results to give us greater
     flexibility under our bank credit facility.

          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
     December 31, 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. We have received consent of our lender to increase
     our capital spending limit to a maximum of $10.0 million. Without this
     increase, we would be in excess of the allowable amount of capital spending
     for fiscal 2001 under the covenants of our third amendment.

          We are also in the process of negotiating a new bank credit facility
     with Comerica Bank to replace our current facility. We have signed an
     agreement to the terms and anticipate to finalize the bank credit facility
     by the end of the fiscal year.
<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 and
     investments on hand ($67 million as of December 31, 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. 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.
<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. 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. 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.
<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.
<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

    None.

Item 5. Other Information

    None.

Item 6. Exhibits and Reports on Form 8-K

    The following exhibits are included herein:

    Exhibit
    Number      Description
    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)

    No reports on Form 8-K were filed during the third quarter of fiscal 2001.
<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)

                               February 14, 2001