|                                                        |                                                                                           |  | 
|------------------------------------------------------- | ----------------------------------------------------------------------------------------- |  | 
|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 September 30, 2012     
|                                                        |                                                                                           | 
|or                                                     
|                                                        |                                                                                           | 
|o                                                       | 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 0-12944                         
|                                                        |                                                                                           | 
|ZYGO CORPORATION                                       
|                                                       
|(Exact
 name of registrant as specified in its charter)

|                                                                                    |  |                                       | 
|----------------------------------------------------------------------------------- |  | ------------------------------------- | 
|Delaware                                                                            |  | 06-0864500                            | 
|                                                                                    |  |                                       | 
|(State or other
 jurisdiction of incorporation or organization)                     |  | (I.R.S.
 Employer Identification No.) | 
|                                                                                    |  |                                       | 
|Laurel Brook Road,
 Middlefield, Connecticut                                        |  | 06455                                 | 
|                                                                                    |  |                                       | 
|(Address of principal
 executive offices)                                           |  | (Zip
 Code)                           | 
|                                                                                    |  |                                       | 
|(860)
 347-8506                                                                    
|                                                                                   
|Registrants
 telephone number, including area code                                
|                                                                                   
|N/A                                                                                
|                                                                                   
|(Former
 name, former address, and former fiscal year, if changed from last report)

Indicate by check mark
whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past 90 days.
                              
x YES o
NO

Indicate by check mark
whether the registrant has submitted electronically and posted on its corporate
Web site, if any, every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post
such files).
                    
o
YES x
NO

Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated filer and smaller reporting company
in Rule 12b-2 of the Exchange Act.

|                                                                                                                   |                                                                       |                            
|------------------------------------------------------------------------------------------------------------------ | --------------------------------------------------------------------- | ---------------------------
|                                                                                                                   | Large accelerated filer o                                             | Accelerated filer x        
|                                                                                                                   | Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o
|                                                                                                                   |                                                                       |                            
|Indicate by check mark
 whether the registrant is a shell company (as defined in Rule 12b-2 of the
 Exchange Act).
|o YES x NO                                                                                                        

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of
shares outstanding of each of the issuers classes of common stock, as of the
latest practicable date.

18,436,393 shares of Common Stock, $.10 Par Value, at September 30,
2012

1

---



FORWARD LOOKING STATEMENTS

All statements other than
statements of historical fact included in this Form 10-Q Quarterly Report
regarding financial performance, condition and operations and the business
strategy, plans, anticipated revenues, bookings, market acceptance, growth
rates, market opportunities and objectives of management of the Company for
future operations are forward-looking statements. Forward-looking statements
provide managements current expectations or plans for the future operating and
financial performance of the Company based upon information currently available
and assumptions currently believed to be valid. Forward-looking statements can
be identified by the use of words such as anticipate, believe, estimate,
expect, intend, plan(s), strategy, project, should and other words
of similar meaning in connection with a discussion of current or future
operating or financial performance. Actual results could differ materially from
those contemplated by the forward-looking statements as a result of certain
factors. Among the important factors that could cause actual events to differ
materially from those in the forward-looking statements are fluctuations in
capital spending of our customers; fluctuations in revenues to our major
customers; manufacturing and supplier risks; risks of booking cancellations,
push-outs and de-bookings; dependence on timing and market acceptance of new
product development; rapid technological and market change; risks in
international operations; risks related to the reorganization of our business;
dependence on proprietary technology and key personnel; length of the revenue
cycle; environmental regulations; investment portfolio returns; fluctuations in
our stock price; the risk that anticipated growth opportunities may be smaller
than anticipated or may not be realized; and risks related to business
acquisitions.

Any forward-looking
statements included in this Quarterly Report speak only as of the date of this
document. We undertake no obligation to publicly update or revise
forward-looking statements to reflect events or circumstances after the date of
this Form 10-Q except as required by law. Further information on potential
factors that could affect our business is described in this Form 10-Q and in
our reports on file with the Securities and Exchange Commission, including our
Form 10-K for the fiscal year ended June 30, 2012, filed with the Securities
and Exchange Commission on September 13, 2012.

2

---



PART I - Financial
Information

Item 1. Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(UNAUDITED) (Thousands, except per share amounts)

|                                                               |  |                                    |        |      |   |        |  
|-------------------------------------------------------------- |  | ---------------------------------- | ------ | ---- | - | ------ | -
|                                                               |  | Three
 Months Ended
 September 30, |       
|                                                               |  |                                    |       
|                                                               |  | 2012                               |        | 2011 |  
|                                                               |  |                                    |        |      |  
|Net revenue                                                    |  | $                                  | 40,206 |      | $ | 43,992 |  
|Cost of goods sold                                             |  |                                    | 22,713 |      |   | 22,375 |  
|                                                               |  |                                    |        |      |   |        |  
|Gross profit                                                   |  |                                    | 17,493 |      |   | 21,617 |  
|                                                               |  |                                    |        |      |   |        |  
|Selling, general and administrative expenses                   |  |                                    | 8,521  |      |   | 9,463  |  
|Research, development and engineering expenses                 |  |                                    | 4,581  |      |   | 4,062  |  
|                                                               |  |                                    |        |      |   |        |  
|Operating profit                                               |  |                                    | 4,391  |      |   | 8,092  |  
|                                                               |  |                                    |        |      |   |        |  
|                                                               |  |                                    |        |      |   |        |  
|Other income (expense)                                         |  |                                    |        |      |   |        |  
|Miscellaneous income (expense), net                            |  |                                    | 36     |      |   | (330   | )
|                                                               |  |                                    |        |      |   |        |  
|Total other income (expense)                                   |  |                                    | 36     |      |   | (330   | )
|                                                               |  |                                    |        |      |   |        |  
|Income before income taxes, including noncontrolling interests |  |                                    | 4,427  |      |   | 7,762  |  
|Income tax expense                                             |  |                                    | (1,433 | )    |   | (786   | )
|                                                               |  |                                    |        |      |   |        |  
|Net income including noncontrolling interests                  |  |                                    | 2,994  |      |   | 6,976  |  
|Less: Net income attributable to noncontrolling interests      |  |                                    | 606    |      |   | 507    |  
|                                                               |  |                                    |        |      |   |        |  
|Net income attributable to Zygo Corporation                    |  | $                                  | 2,388  |      | $ | 6,469  |  
|                                                               |  |                                    |        |      |   |        |  
|                                                               |  |                                    |        |      |   |        |  
|Earnings per share attributable to Zygo Corporation            |  |                                    |        |      |   |        |  
|Basic earnings per share                                       |  | $                                  | 0.13   |      | $ | 0.36   |  
|                                                               |  |                                    |        |      |   |        |  
|Diluted earnings per share                                     |  | $                                  | 0.13   |      | $ | 0.35   |  
|                                                               |  |                                    |        |      |   |        |  
|                                                               |  |                                    |        |      |   |        |  
|Weighted average shares outstanding                            |  |                                    |        |      |   |        |  
|Basic shares                                                   |  |                                    | 18,341 |      |   | 17,800 |  
|                                                               |  |                                    |        |      |   |        |  
|Diluted shares                                                 |  |                                    | 19,047 |      |   | 18,353 |  
|                                                               |  |                                    |        |      |   |        |  

3

---



CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(UNAUDITED) (Thousands)

|                                                                    |  |                                    |       |      |   |       |  
|------------------------------------------------------------------- |  | ---------------------------------- | ----- | ---- | - | ----- | -
|                                                                    |  | Three
 Months Ended
 September 30, |      
|                                                                    |  |                                    |      
|                                                                    |  | 2012                               |       | 2011 |  
|                                                                    |  |                                    |       |      |  
|Net income attributable to
 Zygo Corporation                        |  | $                                  | 2,388 |      | $ | 6,469 |  
|Other comprehensive income
 (loss)                                  |  |                                    |       |      |   |       |  
|Foreign currency translation adjustment                             |  |                                    | 408   |      |   | (971  | )
|                                                                    |  |                                    |       |      |   |       |  
|Comprehensive income                                                |  |                                    | 2,796 |      |   | 5,498 |  
|Less: Comprehensive income attributable to noncontrolling interests |  |                                    | 66    |      |   | (207  | )
|                                                                    |  |                                    |       |      |   |       |  
|Comprehensive income
 attribuatable to Zygo Corporation             |  | $                                  | 2,730 |      | $ | 5,705 |  
|                                                                    |  |                                    |       |      |   |       |  

See accompanying notes to condensed consolidated financial
statements.

4

---



CONDENSED CONSOLIDATED BALANCE SHEETS(UNAUDITED) 
(Thousands, except share and per share
amounts)

|                                                                                                                                                   |  |                     |         |                |   |         |  
|-------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------- | ------- | -------------- | - | ------- | -
|                                                                                                                                                   |  | September
 30, 2012 |         | June
 30, 2012 |  
|                                                                                                                                                   |  |                     |         |                |  
|Assets                                                                                                                                             |  |                     |         |                |   |         |  
|Current assets:                                                                                                                                    |  |                     |         |                |   |         |  
|Cash and cash equivalents                                                                                                                          |  | $                   | 78,834  |                | $ | 84,053  |  
|Receivables, net of allowance for doubtful accounts of $699 and $760,
 respectively                                                                |  |                     | 29,991  |                |   | 31,601  |  
|Inventories                                                                                                                                        |  |                     | 27,507  |                |   | 27,760  |  
|Prepaid expenses and other current assets                                                                                                          |  |                     | 2,567   |                |   | 2,851   |  
|Revenue recognized in excess of billings on uncompleted contracts                                                                                  |  |                     | 4,473   |                |   | 2,371   |  
|Deferred income taxes                                                                                                                              |  |                     | 9,788   |                |   | 8,004   |  
|                                                                                                                                                   |  |                     |         |                |   |         |  
|Total
 current assets                                                                                                                              |  |                     | 153,160 |                |   | 156,640 |  
|Marketable securities                                                                                                                              |  |                     | 718     |                |   | 729     |  
|Property, plant and
 equipment, net                                                                                                                |  |                     | 33,342  |                |   | 33,694  |  
|Deferred income taxes                                                                                                                              |  |                     | 13,768  |                |   | 13,760  |  
|Intangible assets, net                                                                                                                             |  |                     | 4,983   |                |   | 5,198   |  
|                                                                                                                                                   |  |                     |         |                |   |         |  
|Total
 assets                                                                                                                                      |  | $                   | 205,971 |                | $ | 210,021 |  
|                                                                                                                                                   |  |                     |         |                |   |         |  
|                                                                                                                                                   |  |                     |         |                |   |         |  
|Liabilities
 and Equity                                                                                                                            |  |                     |         |                |   |         |  
|Current liabilities:                                                                                                                               |  |                     |         |                |   |         |  
|Accounts payable                                                                                                                                   |  | $                   | 8,061   |                | $ | 9,613   |  
|Progress payments and deferred revenue                                                                                                             |  |                     | 3,742   |                |   | 5,482   |  
|Accrued salaries and wages                                                                                                                         |  |                     | 2,980   |                |   | 6,198   |  
|Other accrued expenses                                                                                                                             |  |                     | 7,324   |                |   | 7,234   |  
|Income taxes payable                                                                                                                               |  |                     | 648     |                |   | 416     |  
|                                                                                                                                                   |  |                     |         |                |   |         |  
|Total
 current liabilities                                                                                                                         |  |                     | 22,755  |                |   | 28,943  |  
|                                                                                                                                                   |  |                     |         |                |   |         |  
|Deferred income taxes                                                                                                                              |  |                     | 2,580   |                |   | 2,580   |  
|Other long-term
 liabilities                                                                                                                       |  |                     | 4,246   |                |   | 2,518   |  
|                                                                                                                                                   |  |                     |         |                |   |         |  
|Total Liabilities                                                                                                                                  |  |                     | 29,581  |                |   | 34,041  |  
|                                                                                                                                                   |  |                     |         |                |   |         |  
|                                                                                                                                                   |  |                     |         |                |   |         |  
|Commitments and contingencies                                                                                                                      |  |                     |         |                |   |         |  
|Equity:                                                                                                                                            |  |                     |         |                |   |         |  
|Common stock, $0.10 par value per share:                                                                                                           |  |                     |         |                |   |         |  
|40,000,000 shares authorized; 20,752,552 shares issued (20,499,861 at
 June 30, 2012); 18,436,393 shares outstanding (18,239,941 at June 30, 2012) |  |                     | 2,075   |                |   | 2,050   |  
|Additional paid-in capital                                                                                                                         |  |                     | 175,822 |                |   | 176,305 |  
|Retained earnings                                                                                                                                  |  |                     | 24,641  |                |   | 22,253  |  
|Accumulated other comprehensive income (loss):                                                                                                     |  |                     |         |                |   |         |  
|Currency translation effects                                                                                                                       |  |                     | 156     |                |   | (186    | )
|Treasury stock, at cost, 2,316,159 shares (2,259,920 at June 30,
 2012)                                                                            |  |                     | (27,859 | )              |   | (26,797 | )
|                                                                                                                                                   |  |                     |         |                |   |         |  
|Total shareholders equity
 - Zygo Corporation                                                                                                     |  |                     | 174,835 |                |   | 173,625 |  
|Noncontrolling interests                                                                                                                           |  |                     | 1,555   |                |   | 2,355   |  
|                                                                                                                                                   |  |                     |         |                |   |         |  
|Total equity                                                                                                                                       |  |                     | 176,390 |                |   | 175,980 |  
|                                                                                                                                                   |  |                     |         |                |   |         |  
|Total
 liabilities and equity                                                                                                                      |  | $                   | 205,971 |                | $ | 210,021 |  
|                                                                                                                                                   |  |                     |         |                |   |         |  

See accompanying notes to condensed consolidated financial statements.

5

---



CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS(UNAUDITED)
(Thousands)

|                                                                                                          |  |                                  |        |      |   |        |  
|--------------------------------------------------------------------------------------------------------- |  | -------------------------------- | ------ | ---- | - | ------ | -
|                                                                                                          |  | Three Months Ended September 30, |       
|                                                                                                          |  |                                  |       
|                                                                                                          |  | 2012                             |        | 2011 |  
|                                                                                                          |  |                                  |        |      |  
|Cash provided by operating activities:                                                                    |  |                                  |        |      |   |        |  
|Net income including noncontrolling
 interests                                                            |  | $                                | 2,994  |      | $ | 6,976  |  
|Adjustments to reconcile net income to cash provided by operating activities from
 continuing operations: |  |                                  |        |      |   |        |  
|Depreciation and amortization                                                                             |  |                                  | 1,400  |      |   | 1,452  |  
|Loss on disposal of assets                                                                                |  |                                  |       |      |   | 21     |  
|Deferred income taxes                                                                                     |  |                                  | (1,397 | )    |   |       |  
|Provision for doubtful accounts                                                                           |  |                                  | (62    | )    |   | (90    | )
|Compensation cost related to share-based
 payment arrangements                                            |  |                                  | 1,230  |      |   | 1,229  |  
|Excess tax benefits from share-based
 payment arrangements                                                |  |                                  |       |      |   | (2     | )
|Other                                                                                                     |  |                                  | (133   | )    |   | 38     |  
|Changes in operating accounts:                                                                            |  |                                  |        |      |   |        |  
|Receivables                                                                                               |  |                                  | 1,880  |      |   | (1,850 | )
|Inventories                                                                                               |  |                                  | 477    |      |   | 1,645  |  
|Prepaid expenses and other current assets                                                                 |  |                                  | 292    |      |   | (128   | )
|Revenue recognized in excess of billings on
 uncompleted contracts                                        |  |                                  | (2,102 | )    |   |       |  
|Accounts payable, accrued expenses and
 taxes payable                                                     |  |                                  | (4,314 | )    |   | (4,262 | )
|                                                                                                          |  |                                  |        |      |   |        |  
|Net cash provided by operating activities
 from continuing operations                                     |  |                                  | 265    |      |   | 5,029  |  
|                                                                                                          |  |                                  |        |      |   |        |  
|Net cash used for operating activities from
 discontinued operations                                      |  |                                  |       |      |   | (141   | )
|                                                                                                          |  |                                  |        |      |   |        |  
|Cash used for investing activities:                                                                       |  |                                  |        |      |   |        |  
|Additions to property, plant and equipment                                                                |  |                                  | (1,104 | )    |   | (390   | )
|Purchase of marketable securities                                                                         |  |                                  |       |      |   | (999   | )
|Additions to intangibles                                                                                  |  |                                  | (11    | )    |   | (25    | )
|Investments and acquisitions                                                                              |  |                                  | (3,155 | )    |   |       |  
|Proceeds from the sale and maturity of
 marketable securities                                             |  |                                  | 43     |      |   | 1,047  |  
|                                                                                                          |  |                                  |        |      |   |        |  
|Net cash used for investing activities                                                                    |  |                                  | (4,227 | )    |   | (367   | )
|                                                                                                          |  |                                  |        |      |   |        |  
|Cash used for financing activities:                                                                       |  |                                  |        |      |   |        |  
|Dividend payment to noncontrolling interest                                                               |  |                                  | (1,094 | )    |   | (746   | )
|Excess tax benefits from share-based
 payment arrangements                                                |  |                                  |       |      |   | 2      |  
|Repurchase of restricted stock                                                                            |  |                                  | (1,062 | )    |   | (295   | )
|Exercise of employee stock options                                                                        |  |                                  | 704    |      |   | 111    |  
|                                                                                                          |  |                                  |        |      |   |        |  
|Net cash used for financing activities                                                                    |  |                                  | (1,452 | )    |   | (928   | )
|                                                                                                          |  |                                  |        |      |   |        |  
|Effect of exchange rate changes on cash and
 cash equivalents                                             |  |                                  | 195    |      |   | (696   | )
|                                                                                                          |  |                                  |        |      |   |        |  
|Net increase (decrease) in cash and cash equivalents                                                      |  |                                  | (5,219 | )    |   | 2,897  |  
|Cash and cash equivalents, beginning of
 period                                                           |  |                                  | 84,053 |      |   | 60,039 |  
|                                                                                                          |  |                                  |        |      |   |        |  
|Cash and cash equivalents, end of period                                                                  |  | $                                | 78,834 |      | $ | 62,936 |  
|                                                                                                          |  |                                  |        |      |   |        |  

Supplemental Cash Flow Information

Net cash paid
for income taxes was $1,206 and $1,011 for the three months ended September 30,
2012 and 2011, respectively. Purchases of property, plant and equipment
included in accounts payable was $275 and $67 for the three months ended
September 30, 2012 and 2011, respectively.

See accompanying notes to condensed consolidated
financial statements.

6

---



NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED) 
(Thousands, except share and per share
amounts)

Note 1: Accounting Policies

Basis of Presentation and Principles of ConsolidationZygo Corporation is a worldwide supplier of optical
metrology instruments, precision optics, and electro-optical design and
manufacturing services, serving customers in the semiconductor capital
equipment, research, defense, life sciences and industrial markets. The
accompanying condensed consolidated financial statements include the accounts
of Zygo Corporation and its subsidiaries (Zygo, we, us, our or the
Company). The Company follows accounting principles generally accepted in the
United States of America (US GAAP). Zygos reporting currency is the U.S.
dollar. The functional currencies of our foreign subsidiaries are their local
currency and, as such, amounts included in the condensed consolidated
statements of operations are translated at the weighted-average exchange rates
for the period. Assets and liabilities are translated at period-end exchange
rates, and resulting foreign exchange translation adjustments are recorded in
the consolidated balance sheets as a component of accumulated other
comprehensive income. All transactions and accounts with the subsidiaries are
eliminated from the condensed consolidated financial statements. The results of
operations for the three months ended September 30, 2012 are not necessarily
indicative of the results to be expected for the full fiscal year.

The condensed
consolidated balance sheet at September 30, 2012, the condensed consolidated
statements of operations and the condensed consolidated statements of
comprehensive income for the three months ended September 30, 2012 and 2011,
and the condensed consolidated statements of cash flows for the three months
ended September 30, 2012 and 2011 are unaudited but, in managements opinion,
include all adjustments, consisting only of normal recurring accruals,
necessary for a fair presentation of the results of the interim periods. The
accompanying condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes included in
our Annual Report on Form 10-K for the year ended June 30, 2012, including
items incorporated by reference therein.

Adoption of New Accounting PronouncementsIn June 2011, the FASB issued new guidance on the
presentation of comprehensive income that requires presentation of the
components of net income and other comprehensive income in one continuous
statement or in two separate, but consecutive statements. There are no changes
to the components that are recognized in net income or other comprehensive
income under current US GAAP. The adoption of this guidance in the first
quarter of fiscal 2013 did not have a material impact on our condensed
consolidated financial statements.

Note 2: Earnings Per Share

For the three
months ended September 30, 2012 and 2011, outstanding stock options and
restricted stock awards for 132,013 shares and 542,335 shares, respectively of
the Companys common stock were excluded from the calculation of diluted
earnings per share because they were antidilutive.

The following
table sets forth the reconciliation of basic weighted average shares
outstanding and diluted weighted average shares outstanding for the periods
presented:

|                                                        |  |                                  |            |      |  |            | 
|------------------------------------------------------- |  | -------------------------------- | ---------- | ---- |  | ---------- | 
|                                                        |  | Three Months Ended September 30, |           
|                                                        |  |                                  |           
|                                                        |  | 2012                             |            | 2011 | 
|                                                        |  |                                  |            |      | 
|Basic weighted average shares outstanding               |  |                                  | 18,341,320 |      |  | 17,799,754 | 
|Dilutive effect of stock options and
 restricted shares |  |                                  | 705,784    |      |  | 553,627    | 
|                                                        |  |                                  |            |      |  |            | 
|Diluted weighted average shares outstanding             |  |                                  | 19,047,104 |      |  | 18,353,381 | 
|                                                        |  |                                  |            |      |  |            | 

7

---



Note 3: Shareholders Equity

The following
table sets forth shareholders equity and
noncontrolling interest for the three months ended September 30, 2012 and 2011:

|                                                           |  |                                   |         |                              |   |               |   |                                   |         |                              |   |               |   |   |       |   |   |         |  
|---------------------------------------------------------- |  | --------------------------------- | ------- | ---------------------------- | - | ------------- | - | --------------------------------- | ------- | ---------------------------- | - | ------------- | - | - | ----- | - | - | ------- | -
|                                                           |  | Three
 Months Ended September 30, |        
|                                                           |  |                                   |        
|                                                           |  | 2012                              |         | 2011                         |  
|                                                           |  |                                   |         |                              |  
|                                                           |  | Shareholders
 Equity
 Zygo Corp. |         | Non-
 Controlling
 Interests |   | Total
 Equity |   | Shareholders
 Equity
 Zygo Corp. |         | Non-
 Controlling
 Interests |   | Total
 Equity |  
|                                                           |  |                                   |         |                              |   |               |   |                                   |         |                              |   |               |  
|Equity, beginning of period                                |  | $                                 | 173,625 |                              | $ | 2,355         |   | $                                 | 175,980 |                              | $ | 124,720       |   | $ | 3,367 |   | $ | 128,087 |  
|                                                           |  |                                   |         |                              |   |               |   |                                   |         |                              |   |               |   |   |       |   |   |         |  
|Net income                                                 |  |                                   | 2,388   |                              |   | 606           |   |                                   | 2,994   |                              |   | 6,469         |   |   | 507   |   |   | 6,976   |  
|Foreign currency translation effect                        |  |                                   | 342     |                              |   | 66            |   |                                   | 408     |                              |   | (764          | ) |   | (207  | ) |   | (971    | )
|                                                           |  |                                   |         |                              |   |               |   |                                   |         |                              |   |               |   |   |       |   |   |         |  
|Total                                                      |  |                                   | 2,730   |                              |   | 672           |   |                                   | 3,402   |                              |   | 5,705         |   |   | 300   |   |   | 6,005   |  
|                                                           |  |                                   |         |                              |   |               |   |                                   |         |                              |   |               |   |   |       |   |   |         |  
|Share based compensation                                   |  |                                   | 1,615   |                              |   |              |   |                                   | 1,615   |                              |   | 1,229         |   |   |      |   |   | 1,229   |  
|Repurchase of restricted stock                             |  |                                   | (1,062  | )                            |   |              |   |                                   | (1,062  | )                            |   | (295          | ) |   |      |   |   | (295    | )
|Exercise of employee stock options and related tax effect  |  |                                   | 704     |                              |   |              |   |                                   | 704     |                              |   | 111           |   |   |      |   |   | 111     |  
|Dividends attributable to noncontrolling interests         |  |                                   |        |                              |   | (1,094        | ) |                                   | (1,094  | )                            |   |              |   |   | (746  | ) |   | (746    | )
|Purchase of subsidiary shares from noncontrolling interest |  |                                   | (2,777  | )                            |   | (378          | ) |                                   | (3,155  | )                            |   |              |   |   |      |   |   |        |  
|                                                           |  |                                   |         |                              |   |               |   |                                   |         |                              |   |               |   |   |       |   |   |         |  
|Equity, end of period                                      |  | $                                 | 174,835 |                              | $ | 1,555         |   | $                                 | 176,390 |                              | $ | 131,470       |   | $ | 2,921 |   | $ | 134,391 |  
|                                                           |  |                                   |         |                              |   |               |   |                                   |         |                              |   |               |   |   |       |   |   |         |  

Note 4: Changes in Zygo Corporations
Ownership Interest in Subsidiary

Zygo
Corporation purchased the outstanding noncontrolling interest in our German
subsidiary for $3,155. The following table discloses the effects on our equity
of changes in our ownership interest of ZygoLot, German subsidiary.

|                                                                                                                                |  |                                    |       |      |   |       | 
|------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------- | ----- | ---- | - | ----- | 
|                                                                                                                                |  | Three
 Months Ended
 September 30, |      
|                                                                                                                                |  |                                    |      
|                                                                                                                                |  | 2012                               |       | 2011 |  
|                                                                                                                                |  |                                    |       |      |  
|Net income attributable to Zygo Corporation                                                                                     |  | $                                  | 2,388 |      | $ | 6,469 | 
|                                                                                                                                |  |                                    |       |      |   |       | 
|                                                                                                                               
|Transfers to the noncontrolling interest Decrease in Zygo
 Corporations paid in capital for purchase of noncontrolling interest |  |                                    | 2,749 |      |   |      | 
|                                                                                                                                |  |                                    |       |      |   |       | 
|Net transfers to noncontrolling interest                                                                                        |  |                                    | 2,749 |      |   |      | 
|                                                                                                                                |  |                                    |       |      |   |       | 
|                                                                                                                                |  |                                    |       |      |   |       | 
|                                                                                                                                |  |                                    |       |      |   |       | 
|Change from net income attributable to Zygo Corporations shareholders
 and transfers to noncontrolling interest                 |  | $                                  | (361  | )    | $ | 6,469 | 
|                                                                                                                                |  |                                    |       |      |   |       | 

8

---



Note 5: Marketable Securities

Marketable
securities consisted of a mutual fund investment consisting primarily of
corporate securities as of September 30, 2012 which is classified as a trading
security. Dividend and interest income is recognized when earned. Straight-line
amortization related to discounts and premiums on the purchase of marketable
securities is recorded in interest income. Realized gains and losses are
included in net income and are derived using the specific identification method
for determining the cost of securities sold.

Trading
securities consisted of a mutual fund investment corresponding to elections
made in our deferred compensation program. In December 2010, we began quarterly
distributions in accordance with the deferred compensation program agreement.
The following table sets forth the beginning balance at July 1, 2012 and 2011,
gross unrealized gains and losses, contributions, redemptions and fair value of
trading securities at September 30, 2012 and 2011:

|                               |  |                                    |     |                          |   |                           |  |                  |      |                |   |                 |  |   |     |   |   |     | 
|------------------------------ |  | ---------------------------------- | --- | ------------------------ | - | ------------------------- |  | ---------------- | ---- | -------------- | - | --------------- |  | - | --- | - | - | --- | 
|                               |  | Beginning
 Balance of
 Fiscal Year |     | Gross
 Unrealized
 Gains |   | Gross
 Unrealized
 Losses |  | Contri-
 butions |      | Redemp-
 tions |   | Ending
 Balance | 
|                               |  |                                    |     |                          |   |                           |  |                  |      |                |   |                 | 
|September 30, 2012 Mutual Fund |  | $                                  | 729 |                          | $ | 32                        |  | $                |     |                | $ |                |  | $ | (43 | ) | $ | 718 | 
|                               |  |                                    |     |                          |   |                           |  |                  |      |                |   |                 |  |   |     |   |   |     | 
|                               |  |                                    |     |                          |   |                           |  |                  |      |                |   |                 |  |   |     |   |   |     | 
|September 30, 2011 Mutual Fund |  | $                                  | 980 |                          | $ |                          |  | $                | (101 | )              | $ |                |  | $ | (47 | ) | $ | 832 | 
|                               |  |                                    |     |                          |   |                           |  |                  |      |                |   |                 |  |   |     |   |   |     | 

Note 6. Fair Value Measurements

Fair value
measurement disclosures utilize a valuation hierarchy for determining the
grouping of the inputs used. This hierarchy prioritizes the inputs into three
broad levels. Level 1 inputs are quoted prices (unadjusted) in active markets
for identical assets or liabilities. Level 2 inputs are quoted prices for
similar assets and liabilities in active markets or inputs that are observable
for the asset or liability, either directly or indirectly through market
corroboration, for substantially the full term of the financial instrument.
Level 3 inputs are unobservable inputs based on managements assumptions used
to measure assets and liabilities at fair value. A financial asset or
liabilities classification within the hierarchy is determined based on the
lowest level input that is significant to the fair value measurement.

When
available, the Company uses quoted market prices to determine the fair value of
its assets and liabilities included in Level 1. When quoted market prices are
unobservable, the Company uses quotes from independent pricing vendors based on
recent trading activity and other relevant information. The carrying value of
other financial instruments, including cash, accounts receivable, accounts
payable and accrued liabilities, approximates fair value due to their short
maturities.

The following
tables provide the assets and liabilities carried at fair value measured on a
recurring basis as of September 30, 2012 and June 30, 2012:

Assets and Liabilities Measured at Fair Value:

|                       |  |                                               |        |                                               |   |                                                   |  |                                              |     |   |   |   | 
|---------------------- |  | --------------------------------------------- | ------ | --------------------------------------------- | - | ------------------------------------------------- |  | -------------------------------------------- | --- | - | - | - | 
|                       |  |                                               |        | Fair value measurements at September 30, 2012 |  
|                       |  |                                               |        |                                               |  
|                       |  | Total carrying
 value at
 September 30,
 2012 |        | Quoted prices
 in active
 markets
 (Level 1)  |   | Significant
 other
 observable
 inputs
 (Level 2) |  | Significant
 unobservable
 inputs
 (Level 3) |    
|                       |  |                                               |        |                                               |   |                                                   |  |                                              |    
|Money market funds     |  | $                                             | 19,932 |                                               | $ | 19,932                                            |  | $                                            |    |   | $ |  | 
|Trading securities     |  |                                               | 718    |                                               |   | 718                                               |  |                                              |    |   |   |  | 
|Foreign currency hedge |  |                                               | (46    | )                                             |   |                                                  |  |                                              | (46 | ) |   |  | 
|                       |  |                                               |        |                                               |   |                                                   |  |                                              |     |   |   |   | 
|Total                  |  | $                                             | 20,604 |                                               | $ | 20,650                                            |  | $                                            | (46 | ) | $ |  | 
|                       |  |                                               |        |                                               |   |                                                   |  |                                              |     |   |   |   | 

9

---



Assets
and Liabilities Measured at Fair Value:

|                        |  |                                         |        |                                              |   |                                                   |  |                                              |    |   |   |   | 
|----------------------- |  | --------------------------------------- | ------ | -------------------------------------------- | - | ------------------------------------------------- |  | -------------------------------------------- | -- | - | - | - | 
|                        |  |                                         |        | Fair value measurements at June 30, 2012     |  
|                        |  |                                         |        |                                              |  
|                        |  | Total carrying
 value at
 June 30, 2012 |        | Quoted prices
 in active
 markets
 (Level 1) |   | Significant
 other
 observable
 inputs
 (Level 2) |  | Significant
 unobservable
 inputs
 (Level 3) |   
|                        |  |                                         |        |                                              |   |                                                   |  |                                              |   
|Money market
 funds     |  | $                                       | 19,931 |                                              | $ | 19,931                                            |  | $                                            |   |   | $ |  | 
|Trading
 securities     |  |                                         | 729    |                                              |   | 729                                               |  |                                              |   |   |   |  | 
|Foreign
 currency hedge |  |                                         | (3     | )                                            |   |                                                  |  |                                              | (3 | ) |   |  | 
|                        |  |                                         |        |                                              |   |                                                   |  |                                              |    |   |   |   | 
|Total                   |  | $                                       | 20,657 |                                              | $ | 20,660                                            |  | $                                            | (3 | ) | $ |  | 
|                        |  |                                         |        |                                              |   |                                                   |  |                                              |    |   |   |   | 

Note 7: Share-Based Payments

We recorded
share-based compensation expense for the three months ended September 30, 2012
and 2011 of $1,230 and $1,229, respectively, with related tax benefits of $398
and $442, respectively.

Stock OptionsWe use the Black-Scholes option-pricing model to
calculate the fair value of stock option awards. The key assumptions for this
valuation method include the expected term of the option, stock price
volatility, risk-free interest rate, dividend yield and exercise price. Many of
these assumptions are judgmental and highly sensitive in the determination of
compensation expense. Under the assumptions indicated below, the
weighted-average fair value of stock option grants for the three months ended
September 30, 2012 and 2011 was $11.49 and $7.09, respectively. During the
three months ended September 30, 2012 and 2011, we issued stock options for an
aggregate of 122,934 and 221,062 shares of common stock, respectively.

The table
below indicates the key assumptions used in the option valuation calculations
for options granted in the periods presented:

|                         |  |                                  |           |      |  |           |  
|------------------------ |  | -------------------------------- | --------- | ---- |  | --------- | -
|                         |  | Three Months Ended September 30, |          
|                         |  |                                  |          
|                         |  | 2012                             |           | 2011 | 
|                         |  |                                  |           |      | 
|Term                     |  |                                  | 7.3 Years |      |  | 6.6 Years |  
|Volatility               |  |                                  | 59.2      | %    |  | 59.5      | %
|Dividend
 yield          |  |                                  | 0.0       | %    |  | 0.0       | %
|Risk-free
 interest rate |  |                                  | 1.2       | %    |  | 1.5       | %

Restricted StockOur share-based compensation expense also includes the
effects of the issuance of restricted stock units. The compensation expense
related to restricted stock awards is determined based on the market price of
our stock at the date of grant applied to the total number of shares that are
anticipated to fully vest, which is then amortized over the expected term.
During the three months ended September 30, 2012 and 2011, an aggregate of
132,901 and 115,503 shares, respectively, of restricted stock units were issued
at a weighted average stock price at date of grant of $19.39 and $12.26,
respectively. Generally, the restrictions on the restricted stock units granted
to employees prior to January 1, 2011 lapse at a rate of 50% after three years
and the remaining 50% after the fourth year. Restrictions on restricted stock
units granted to employees after January 1, 2011 lapse at a rate of 25% each
year.

10

---



Note 8: Receivables

The following
table sets forth the components of accounts receivable at September 30, 2012
and June 30, 2012:

|                                 |  |                     |        |                |   |        |  
|-------------------------------- |  | ------------------- | ------ | -------------- | - | ------ | -
|                                 |  | September 30,
 2012 |        | June 30,
 2012 |  
|                                 |  |                     |        |                |  
|Trade                            |  | $                   | 30,528 |                | $ | 32,261 |  
|Other                            |  |                     | 162    |                |   | 100    |  
|                                 |  |                     |        |                |   |        |  
|                                 |  |                     | 30,690 |                |   | 32,361 |  
|Allowance
 for doubtful accounts |  |                     | (699   | )              |   | (760   | )
|                                 |  |                     |        |                |   |        |  
|                                 |  | $                   | 29,991 |                | $ | 31,601 |  
|                                 |  |                     |        |                |   |        |  

Note 9: Inventories

Inventories
are stated at the lower of cost (determined on a first-in, first-out basis) or
market. The following table sets forth the components of inventories at
September 30, 2012 and June 30, 2012:

|                                      |  |                     |        |                 |   |        | 
|------------------------------------- |  | ------------------- | ------ | --------------- | - | ------ | 
|                                      |  | September 30,
 2012 |        | June
 30,
 2012 |  
|                                      |  |                     |        |                 |  
|Raw materials and
 manufactured parts |  | $                   | 12,679 |                 | $ | 12,753 | 
|Work in process                       |  |                     | 11,381 |                 |   | 12,031 | 
|Finished goods                        |  |                     | 3,447  |                 |   | 2,976  | 
|                                      |  |                     |        |                 |   |        | 
|                                      |  | $                   | 27,507 |                 | $ | 27,760 | 
|                                      |  |                     |        |                 |   |        | 

Note 10: Property, Plant and Equipment

Property,
plant and equipment are stated at cost less impairments. Maintenance and
repairs are charged to expense as incurred. Management evaluates, on an ongoing
basis, the carrying value of property, plant and equipment and makes
adjustments when impairments are identified. Depreciation is based on the
estimated useful lives of the various classes of assets and is computed using
the straight-line method. The following table sets forth the components of
property, plant and equipment at September 30, 2012 and June 30, 2012:

|                                           |  |                     |         |                 |   |                                 |   |  |       | 
|------------------------------------------ |  | ------------------- | ------- | --------------- | - | ------------------------------- | - |  | ----- | 
|                                           |  | September 30,
 2012 |         | June
 30,
 2012 |   | Estimated
 Useful Life
 (Years) |  
|                                           |  |                     |         |                 |   |                                 |  
|Land and improvements                      |  | $                   | 4,030   |                 | $ | 4,030                           |   |  |      | 
|Building and improvements                  |  |                     | 24,303  |                 |   | 24,228                          |   |  | 15-40 | 
|Machinery, equipment and
 office furniture |  |                     | 58,388  |                 |   | 58,259                          |   |  | 3-8   | 
|Leasehold improvements                     |  |                     | 969     |                 |   | 964                             |   |  | 1-5   | 
|Construction in progress                   |  |                     | 2,152   |                 |   | 1,625                           |   |  |      | 
|                                           |  |                     |         |                 |   |                                 |   |  |       | 
|                                           |  |                     | 89,842  |                 |   | 89,106                          |   |  |       | 
|Accumulated depreciation                   |  |                     | (56,500 | )               |   | (55,412                         | ) |  |       | 
|                                           |  |                     |         |                 |   |                                 |   |  |       | 
|                                           |  | $                   | 33,342  |                 | $ | 33,694                          |   |  |       | 
|                                           |  |                     |         |                 |   |                                 |   |  |       | 

Depreciation
expense was $1,175 and $1,243 for the three months ended September 30, 2012 and
2011, respectively.

11

---



Note 11: Warranty

A limited
warranty is provided on our products for periods ranging from 3 to 24 months,
and allowances for estimated warranty costs are recorded during the period of
sale. The determination of such allowances requires management to make
estimates of product return rates and expected costs to repair or replace
products under warranty. If actual return rates or repair and replacement
costs, or both, differ significantly from management estimates, adjustments to
the expense will be required.

The following
table is a reconciliation of the beginning and ending balances of the accrued
warranty liability, which is included in Other accrued expenses in the
condensed consolidated balance sheets:

|                                                                     |  |                                   |       |      |   |       |  
|-------------------------------------------------------------------- |  | --------------------------------- | ----- | ---- | - | ----- | -
|                                                                     |  | Three
 Months Ended September 30, |      
|                                                                     |  |                                   |      
|                                                                     |  | 2012                              |       | 2011 |  
|                                                                     |  |                                   |       |      |  
|Beginning balance                                                    |  | $                                 | 1,188 |      | $ | 1,333 |  
|Reductions for payments made                                         |  |                                   | (910  | )    |   | (284  | )
|Changes in accruals related to pre-warranties                        |  |                                   | 232   |      |   | 127   |  
|Changes in accruals related to warranties made in the current period |  |                                   | 648   |      |   | 104   |  
|                                                                     |  |                                   |       |      |   |       |  
|Ending balance                                                       |  | $                                 | 1,158 |      | $ | 1,280 |  
|                                                                     |  |                                   |       |      |   |       |  

Note 12: Intangible Assets

Intangible
assets includes patents, customer relationships and technology and a covenant
not-to-compete. The cost of patents and customer relationships and technology
is amortized on a straight-line basis over estimated useful lives ranging from
3-17 years. We entered into a non-compete agreement with a former officer and
director of the Company effective February 28, 2009. The agreement calls for
payments over a four year period of declining amounts totaling $878, which
includes $27 of imputed interest. As of September 30, 2012, current liabilities
includes $17 related to the payments under this agreement. We amortize the
value of the non-compete over four years on a declining-balance method.

The following
table sets forth the components of intangible assets, as of September 30, 2012
and June 30, 2012:

|                                       |  |                     |        |                 |   |        |  
|-------------------------------------- |  | ------------------- | ------ | --------------- | - | ------ | -
|                                       |  | September 30,
 2012 |        | June
 30,
 2012 |  
|                                       |  |                     |        |                 |  
|Patents                                |  | $                   | 6,944  |                 | $ | 6,934  |  
|Customer relationships and
 technology |  |                     | 2,163  |                 |   | 2,163  |  
|Covenant not-to-compete                |  |                     | 851    |                 |   | 851    |  
|                                       |  |                     |        |                 |   |        |  
|                                       |  |                     | 9,958  |                 |   | 9,948  |  
|Accumulated amortization               |  |                     | (4,975 | )               |   | (4,750 | )
|                                       |  |                     |        |                 |   |        |  
|Total                                  |  | $                   | 4,983  |                 | $ | 5,198  |  
|                                       |  |                     |        |                 |   |        |  

Amortization
expense related to intangibles was $225 and $210 for the three months ended
September 30, 2012 and 2011, respectively. This amortization expense related to
intangible assets is included in Cost of goods sold and Selling, general and
administrative expenses in the condensed consolidated statements of
operations.

Based on the
carrying amount of the intangible assets as of September 30, 2012, the
estimated future amortization expense is as follows:

|                                  |  |                                         |   |       |  | 
|--------------------------------- |  | --------------------------------------- | - | ----- |  | 
|                                  |  | Estimated
 Future Amortization
 Expense |  
|                                  |  |                                         |  
|Nine months ending June
 30, 2013 |  |                                         | $ | 665   |  | 
|Fiscal year ending June
 30, 2014 |  |                                         |   | 807   |  | 
|Fiscal year ending June
 30, 2015 |  |                                         |   | 796   |  | 
|Fiscal year ending June
 30, 2016 |  |                                         |   | 576   |  | 
|Fiscal year ending June
 30, 2017 |  |                                         |   | 445   |  | 
|Fiscal year ending June
 30, 2018 |  |                                         |   | 322   |  | 
|Thereafter                        |  |                                         |   | 1,372 |  | 
|                                  |  |                                         |   |       |  | 
|Total                             |  |                                         | $ | 4,983 |  | 
|                                  |  |                                         |   |       |  | 

12

---



Note 13: Segment and Major Customer
Information

Our business
is organized into two operating divisions  Metrology Solutions (Metrology
Solutions segment) and Optical Systems (Optical Systems segment). Consistent
with our business structure, we report our segments as Metrology Solutions and
Optical Systems. Our Metrology Solutions segment includes 3-Dimensional surface
metrology products, precision positioning systems and custom-engineered
solutions used in the semiconductor capital equipment, research, defense and
industrial markets. Our Optical Systems segment designs, develops and
manufactures high precision optical components and electro-optical systems used
in the semiconductor capital equipment, defense, life sciences and research
markets. The chief operating decision-maker uses this information to allocate
resources.

The following
table sets forth segment net revenues, gross profit and gross margin for the
three months ended September 30, 2012 and 2011:

|                    |  |                                  |        |      |   |        |  
|------------------- |  | -------------------------------- | ------ | ---- | - | ------ | -
|                    |  | Three Months Ended September 30, |       
|                    |  |                                  |       
|                    |  | 2012                             |        | 2011 |  
|                    |  |                                  |        |      |  
|Metrology Solutions |  |                                  |        |      |   |        |  
|Net revenues        |  | $                                | 25,878 |      | $ | 29,842 |  
|Gross profit        |  | $                                | 14,335 |      | $ | 17,370 |  
|Gross margin        |  |                                  | 55     | %    |   | 58     | %
|                   
|Optical Systems     |  |                                  |        |      |   |        |  
|Net revenues        |  | $                                | 14,328 |      | $ | 14,150 |  
|Gross profit        |  | $                                | 3,158  |      | $ | 4,247  |  
|Gross margin        |  |                                  | 22     | %    |   | 30     | %
|                   
|Total               |  |                                  |        |      |   |        |  
|Net revenues        |  | $                                | 40,206 |      | $ | 43,992 |  
|Gross profit        |  | $                                | 17,493 |      | $ | 21,617 |  
|Gross margin        |  |                                  | 44     | %    |   | 49     | %

Separate
financial information by segment for total assets, capital expenditures and
depreciation and amortization is not evaluated by our chief operating
decision-maker. Substantially all of our operating expenses, assets and
depreciation and amortization are U.S. based.

The following
table sets forth revenues by geographic area:

|            |  |                                  |        |      |   |        | 
|----------- |  | -------------------------------- | ------ | ---- | - | ------ | 
|            |  | Three Months Ended September 30, |       
|            |  |                                  |       
|            |  | 2012                             |        | 2011 |  
|            |  |                                  |        |      |  
|Americas    |  | $                                | 18,863 |      | $ | 24,293 | 
|Japan       |  |                                  | 6,331  |      |   | 6,786  | 
|China       |  |                                  | 7,538  |      |   | 6,080  | 
|Europe      |  |                                  | 4,822  |      |   | 4,271  | 
|Pacific Rim |  |                                  | 2,652  |      |   | 2,562  | 
|            |  |                                  |        |      |   |        | 
|Total       |  | $                                | 40,206 |      | $ | 43,992 | 
|            |  |                                  |        |      |   |        | 

Revenues from
two customers included in both segments accounted for 7% and 12% of the net
revenues for the three months ended September 30, 2012 and for 11% and 10% of
revenues for the three months ended September 30, 2011.

13

---



Note 14: Transactions with Shareholder

Revenues from
Canon Inc., a shareholder, and Canon Sales Co., Inc., a distributor of certain
of our products in Japan and a subsidiary of Canon Inc. (collectively referred
to as Canon), amounted to $2,812 and $4,794 (7% and 11% of net revenues,
respectively) for the three months ended September 30, 2012 and 2011,
respectively. Selling prices of products sold to Canon are based, generally, on
the terms customarily given to distributors. At September 30, 2012 and June 30,
2012, there were, in the aggregate, $1,474 and $1,604, respectively, of trade
accounts receivable from Canon.

Note 15: Derivatives and Hedging Activities

We enter into
foreign currency forward contracts to reduce the impact of adverse fluctuations
on income associated with foreign currency exchange rate changes. We do not
enter into any derivative transactions for speculative purposes. The contracts
are not designated as cash flow, fair value, or net investment hedges as
defined under authoritative guidance on accounting for derivative instruments
and hedging activities. These contracts are marked-to-market with changes in
fair value recorded in the condensed consolidated statements of operations in
Miscellaneous income. The contracts are entered into for periods consistent
with the expected currency transaction exposures, generally three to six
months. Any gains and losses on the fair value of these contracts are expected
to substantially offset corresponding losses and gains on the underlying transactions.

As of
September 30, 2012, there were thirteen currency contracts outstanding
involving our Japanese operation with notional amounts aggregating $4,500.
These foreign currency hedges are not designated as hedging instruments. For
the three months ended September 30, 2012 and 2011, we recognized net
unrealized losses of $43 and net unrealized gains of $39, respectively, from
foreign currency forward contracts. These unrealized losses and gains are
essentially offset by foreign exchange gains and losses on intercompany
balances recorded by our subsidiaries and are recorded in miscellaneous income
on our condensed consolidated statements of operations.

The following
table summarizes the fair value of derivative instruments as of September 30,
2012 and June 30, 2012:

|                    |                                                    |                                        |  |    |  |                                            |  |     |  |  | 
|------------------- | -------------------------------------------------- | -------------------------------------- |  | -- |  | ------------------------------------------ |  | --- |  |  | 
|                    | Derivatives
 not designated as hedging instruments |                                        |  |    |  | Balance
 Sheet Location                    |  |     | 
|                    |                                                    |                                        |  |    |  |                                            |  |     | 
|                    |                                                    |                                        |  |    |  |                                            |  |     | 
|September
 30, 2012 |                                                    | Number of
 foreign exchange contracts: |  | 13 |  | Other
 accrued liabilities                 |  | $46 | 
|                    |                                                    |                                        |  |    |  |                                            |  |     | 
|June 30,
 2012      |                                                    | Number of
 foreign exchange contracts: |  | 9  |  | Prepaid
 expenses and other current assets |  | $14 | 
|                    |                                                    |                                        |  |    |  | Other
 accrued expenses                    |  | $17 | 

14

---



Note 16: Income Taxes

|                    |  |                                  |       |              |  |        |   |              |     |  |  |    |  
|------------------- |  | -------------------------------- | ----- | ------------ |  | ------ | - | ------------ | --- |  |  | -- | -
|                    |  | Three Months Ended September 30, |      
|                    |  |                                  |      
|                    |  | 2012                             |       | 2011         | 
|                    |  |                                  |       |              | 
|                   
|                    |  | Amount                           |       | Tax 
 Rate % |  | Amount |   | Tax 
 Rate % |    
|                    |  |                                  |       |              |  |        |   |              |    
|                   
|Income tax
 expense |  | $                                | 1,433 |              |  | 32     | % | $            | 786 |  |  | 10 | %

Income tax expense for the three months ended September 30, 2012 related primarily to
United States (U.S.) Federal, state and foreign income tax expense and
includes a tax benefit of $398 to correct an error in recording deferred tax
asset balances as of June 30, 2012 relating to fixed assets and foreign tax
credits. Income tax expense for the three months ended September 30, 2011
related primarily to foreign and state income tax expense; there was no U.S.
federal tax expense during that period due to the valuation allowance on net
operating loss carryforwards. The Company is subject to U.S. federal income tax
as well as income tax in multiple state and foreign jurisdictions. The Company
is no longer subject to U.S. federal income tax audit or tax adjustments for
years prior to June 30, 2007, except to the extent there are NOLs and credits arising
from any of those years. Those years are subject to audit at the time the NOL
or credit is utilized. The Company is no longer subject to state and foreign
income tax audit or tax adjustments for years prior to June 30, 2006.

In the normal
course of business, we analyze for uncertain tax positions and adjust our
unrecognized tax benefits or liabilities accordingly. For the three months
ended September 30, 2012, we recognized an additional liability of $190 for changes in
tax positions. We are not aware of any tax positions that would create a
material adjustment to the unrecognized tax benefits during the next twelve
months.

Note 17: Commitments and Contingencies

From time to
time we are subject to certain legal proceedings and claims that arise in the
normal course of business.

We are aware
of certain levels of environmental contamination that are below reportable
levels on one of our properties. In addition, we are aware of certain
contamination on an adjacent property that we formerly owned. The future effect
of environmental matters, including potential liabilities, is often difficult
to estimate. At this time, we are unable to determine or reasonably estimate
the amount of costs, if any, that we might incur or for which we may
potentially be responsible. We will record a reserve for the exposure related to the
environmental contamination when and if it is both probable that a liability
has been incurred and the amount of any liability can be reasonably estimated,
whether or not a claim has been asserted.

15

---



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

OVERVIEW

Zygo
Corporation is a worldwide supplier of optical metrology instruments, precision
optics and electro-optical design and manufacturing services, serving customers
in the semiconductor capital equipment, research, defense, life sciences and
industrial markets. We conduct the majority of our manufacturing in our 153,500
square foot facility in Middlefield, Connecticut, our 55,300 square foot facility
in Richmond, California, and our 22,560 square foot facility in Tucson,
Arizona. In May 2012, we purchased a 110,020 square-foot facility in Tucson,
Arizona, which will function as the manufacturing site for our Tucson operation
when we complete our transition to the new site.

We conduct
business in China through a joint venture in which we are the majority owner.
In Germany, we historically operated through a joint venture, ZygoLot
GmbH (ZygoLot); and in the first quarter of fiscal 2013 we purchased the
outstanding noncontrolling interest representing 40% of ZygoLot for 2.5
million euros. As a result of this purchase, 100% of the income from ZygoLot is
included in our consolidated statements of operations commencing with the first
quarter of fiscal 2013.

During the
first quarter, we established a Taiwan subsidiary to provide local sales,
servicing support and manufacturing capability to support our Asian customers
and to increase our footprint in this region. This facility and additional
highly qualified resources will support our customers in the backend
semiconductor 3D/2D inspection market for PC substrate and IC packages. The new
Taiwan subsidiary will also play an important role in supporting sales and
service for other Zygo products in Taiwan, China and throughout the Asia
region.

Bookings for
the first quarter of fiscal 2013 were $37.3 million, a decrease of 13% compared
with bookings of $42.9 million in the first quarter of fiscal 2012 and an
increase of 5% compared with the fourth quarter of fiscal 2012. Bookings for
the Metrology Solutions segment were 68% of the total; Optical Systems segment
bookings were 32%. Backlog was $65.1 million at September 30, 2012, compared
with $60.9 million at September 30, 2011, and $68.0 million at June 30, 2012.
Currently, the backlog is represented 66% by Optical System bookings which
generally carry a lower gross margin than Metrology Solutions. If the mix of
revenues changes to a greater proportion of Optics revenues, it is likely to
adversely affect reported gross margin. The impact on gross margin will also depend
on future bookings, particularly Metrology bookings with shorter shipping
cycles.

Our effective tax rate increased as a result of the reversal of
the valuation allowance on our deferred tax assets in the fourth quarter of
fiscal 2012. Previous years results benefitted from the offset
effect of reversing valuation allowance against tax provision, essentially eliminating U.S. Federal income tax expense. Since the
valuation allowance against deferred tax assets was eliminated at the end of fiscal 2012 due to improved operating performance
and improved business outlook, current year results reflect tax expense at the full effective tax rate. Although the financial
statements will reflect the increased tax rate in fiscal 2013, cash taxes actually paid will remain at approximately 11% of pretax
income until the net operating losses and available credits are fully utilized on the Companys tax returns.

16

---



CRITICAL ACCOUNTING POLICIES, SIGNIFICANT
JUDGMENTS AND ESTIMATES

The discussion
and analysis of our financial condition and results of operations are based
upon our condensed consolidated financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United
States of America. The preparation of these condensed consolidated financial
statements requires us to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues, and expenses, and related disclosures
at the date of our condensed consolidated financial statements. On an ongoing
basis, management evaluates its estimates and judgments, including those
related to bad debts, inventories, marketable securities, warranty obligations,
income taxes, long-lived assets, share-based payments and accruals for health
insurance. Management bases its estimates and judgments on historical
experience and current market conditions and on various other factors that are
believed to be reasonable under the circumstances, the results of which form
the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions. As
discussed in Item 7, Managements Discussion and Analysis of Financial
Condition and Results of Operations of the Companys Annual Report on Form
10-K for the fiscal year ended June 30, 2012, management considers the
Companys policies on revenue recognition and allowance for doubtful accounts;
inventory valuation; other-than-temporary impairment of marketable securities;
share-based compensation; warranty costs; accounting for income taxes;
valuation of long-lived assets; and accruals for health insurance to be
critical accounting policies due to the estimates, assumptions and application
of judgment involved in each.

Adoption of New Accounting Pronouncements


In June 2011,
the FASB issued new guidance on the presentation of comprehensive income that
requires presentation of the components of net income and other comprehensive
income in one continuous statement or in two separate, but consecutive
statements. There are no changes to the components that are recognized in net
income or other comprehensive income under current US GAAP. The adoption of
this guidance in the first quarter of fiscal 2013 did not have a material
impact on our condensed consolidated financial statements.


17

---



RESULTS OF OPERATIONS

|                           |  |             |        |              |                      |     |        |   |                      |  |  |     |   | 
|-------------------------- |  | ----------- | ------ | ------------ | -------------------- | --- | ------ | - | -------------------- |  |  | --- | - | 
|Net
 Revenues by Segment   |  |             |        |              |                      |     |        |   |                      |  |  |     |  
|                           |  | Fiscal 2013 |        | Fiscal
 2012 |                     
|                           |  |             |        |              |                     
|(Dollars in millions)      |  |             | Amount |              | Percentage
 of Total |     | Amount |   | Percentage
 of Total | 
|                           |  |             |        |              |                      |     |        |   |                      | 
|Quarter ended September 30 |  |             |        |              |                      |     |        |   |                      |  |  |     |  
|Metrology Solutions        |  | $           | 25.9   |              |                      | 64  | %      | $ | 29.8                 |  |  | 68  | %
|Optical Systems            |  |             | 14.3   |              |                      | 36  | %      |   | 14.2                 |  |  | 32  | %
|                           |  |             |        |              |                      |     |        |   |                      |  |  |     |  
|Total                      |  | $           | 40.2   |              |                      | 100 | %      | $ | 44.0                 |  |  | 100 | %
|                           |  |             |        |              |                      |     |        |   |                      |  |  |     |  

Net revenues
for the three months ended September 30, 2012 decreased $3.8 million, or 9%,
compared with the prior year period, reflecting decreases in the Metrology
Solutions segment revenues of 13%. The decrease in the Metrology Solutions
segment was primarily due to volume decreases of $5.0 million in certain
product revenues attributable to soft demand in the semiconductor sector,
partially offset by an increase in instruments product lines. The Optical
Systems segment was stable year over year with increases in extreme precision
optics of $3.2 million offsetting declines in contract manufacturing and, to a
lesser extent, laser fusion optics.

Revenues from
two customers included in both our segments accounted for 12% and 7% of the net
revenues for the three months ended September 30, 2012 and 11% and 10% of the
net revenues for the three months ended September 30, 2011.

Revenues
denominated in U.S. dollars for the three months ended September 30, 2012 and
2011 were 79% and 85%, respectively. The balance of revenue was denominated in
Euro, Yen and Yuan. Revenues based in foreign currency are exposed to foreign
exchange fluctuations from the time customers are invoiced in foreign currency
until collection occurs. Significant changes in the values of foreign
currencies relative to the value of the U.S. dollar, or in the general economic
conditions in our export markets, could materially impact the revenues of our
products in these markets and our condensed consolidated financial position and
results of operations.

|                            |  |             |              |             |              |    |              |   |              |  |  |    |   | 
|--------------------------- |  | ----------- | ------------ | ----------- | ------------ | -- | ------------ | - | ------------ |  |  | -- | - | 
|Gross Margin
by Segment     |  |             |              |             |              |    |              |   |              |  |  |    |  
|                            |  | Fiscal 2013 |              | Fiscal 2012 |             
|                            |  |             |              |             |             
|(Dollars in
 millions)      |  |             | Gross Profit |             | Gross Margin |    | Gross Profit |   | Gross Margin | 
|                            |  |             |              |             |              |    |              |   |              | 
|Quarter
 ended September 30 |  |             |              |             |              |    |              |   |              |  |  |    |  
|Metrology Solutions         |  | $           | 14.3         |             |              | 55 | %            | $ | 17.4         |  |  | 58 | %
|Optical Systems             |  |             | 3.2          |             |              | 22 | %            |   | 4.2          |  |  | 30 | %
|                            |  |             |              |             |              |    |              |   |              |  |  |    |  
|Total                       |  | $           | 17.5         |             |              | 44 | %            | $ | 21.6         |  |  | 49 | %
|                            |  |             |              |             |              |    |              |   |              |  |  |    |  

Gross margin
for the three months ended September 30, 2012 was 44%, a decrease of five
percentage points from the comparable prior year period. Within the Metrology
Solutions segment, the decrease in gross margin for the three months ended
September 30, 2012 compared with the prior year period was primarily due to
lower margins on certain custom orders within the instruments product line and
the effect of lower volumes on overhead as a percentage of revenues. The gross
margin of the Optical Systems segment for the three months ended September 30,
2012 decreased by eight percentage points compared with the prior year period,
primarily due to lower margins on custom orders and a change in mix of product
revenues.

Selling, General and Administrative Expenses (SG&A)

|                           |  |             |        |              |                              |    |        |   |                               |  |  |    |   | 
|-------------------------- |  | ----------- | ------ | ------------ | ---------------------------- | -- | ------ | - | ----------------------------- |  |  | -- | - | 
|                           |  | Fiscal 2013 |        | Fiscal
 2012 |                             
|                           |  |             |        |              |                             
|(Dollars in millions)      |  |             | Amount |              | Percentage of 
 Net Revenues |    | Amount |   | Percentage
 of 
 Net Revenues | 
|                           |  |             |        |              |                              |    |        |   |                               | 
|                          
|Quarter ended September 30 |  | $           | 8.5    |              |                              | 21 | %      | $ | 9.5                           |  |  | 22 | %

18

---



SG&A
decreased in the three months ended September 30, 2012 by $1.0 million from the
comparable prior year period. The decrease was primarily due to a decrease in
costs related to performance-based compensation, partially offset by an
increase in salaries and wages related to increased headcount.

Research, Development and Engineering Expenses (RD&E)

|                           |  |             |        |              |                              |    |        |   |                               |  |  |   |   | 
|-------------------------- |  | ----------- | ------ | ------------ | ---------------------------- | -- | ------ | - | ----------------------------- |  |  | - | - | 
|                           |  | Fiscal 2013 |        | Fiscal
 2012 |                             
|                           |  |             |        |              |                             
|(Dollars in millions)      |  |             | Amount |              | Percentage of 
 Net Revenues |    | Amount |   | Percentage
 of 
 Net Revenues | 
|                           |  |             |        |              |                              |    |        |   |                               | 
|                          
|Quarter ended September 30 |  | $           | 4.6    |              |                              | 11 | %      | $ | 4.1                           |  |  | 9 | %

RD&E for
the three months ended September 30, 2012 increased by $0.5 million compared
with the prior year period. The increase was primarily due to the increases in
spending in our lithography-related product line and in the Optical Systems segment.

|                           |  |             |        |              |                              |   |        |   |                               |   |  |   |   | 
|-------------------------- |  | ----------- | ------ | ------------ | ---------------------------- | - | ------ | - | ----------------------------- | - |  | - | - | 
|Other Income (Expense)     |  |             |        |              |                              |   |        |   |                               |   |  |   |  
|                           |  | Fiscal 2013 |        | Fiscal
 2012 |                             
|                           |  |             |        |              |                             
|(Dollars
 in millions)     |  |             | Amount |              | Percentage of 
 Net Revenues |   | Amount |   | Percentage
 of 
 Net Revenues |  
|                           |  |             |        |              |                              |   |        |   |                               |  
|                          
|Quarter ended September 30 |  | $           |       |              |                              | 0 | %      | $ | (0.3                          | ) |  | 1 | %

Other income
for the three months ended September 30, 2011 consisted of a loss on marketable
securities, miscellaneous tax expense and certain costs related to our then
German joint venture.

|                           |  |             |        |              |            |    |        |   |             |  |  |    |   | 
|-------------------------- |  | ----------- | ------ | ------------ | ---------- | -- | ------ | - | ----------- |  |  | -- | - | 
|Income Tax Expense         |  |             |        |              |            |    |        |   |             |  |  |    |  
|                           |  | Fiscal 2013 |        | Fiscal
 2012 |           
|                           |  |             |        |              |           
|(Dollars in millions)      |  |             | Amount |              | Tax Rate % |    | Amount |   | Tax
 Rate % | 
|                           |  |             |        |              |            |    |        |   |             | 
|                          
|Quarter ended September 30 |  | $           | 1.4    |              |            | 32 | %      | $ | 0.8         |  |  | 10 | %

Income tax
expense for the three months ended September 30, 2012 included income taxes in
United States federal, state and foreign jurisdictions, while income tax
expense for the three months ended September 30, 2011 included income taxes for
state and foreign jurisdictions only. In the prior year, the valuation
allowance recorded on substantially all of our net deferred tax assets,
including those in the United States, effectively eliminated U.S. federal tax
expense. Income tax expense for the three months ended September 30, 2012 also
included a tax benefit of $0.4 million to correct an error in recording deferred
tax asset balances as of June 30, 2012 relating to fixed assets and foreign tax
credits.

19

---



TRANSACTIONS WITH SHAREHOLDER

Revenues from
Canon Inc., a shareholder, and Canon Sales Co., Inc., a distributor of certain
of our products in Japan and a subsidiary of Canon Inc. (collectively referred
to as Canon), amounted to $2.8 million and $4.8 million (7% and 11% of net
revenues, respectively) for the three months ended September 30, 2012 and 2011,
respectively. Selling prices of products sold to Canon are based, generally, on
the terms customarily given to distributors. At September 30, 2012 and June 30,
2012, there were, in the aggregate, $1.5 million and $1.6 million,
respectively, of trade accounts receivable from Canon.

LIQUIDITY AND CAPITAL RESOURCES

We assess our
liquidity in terms of our ability to generate cash to fund our operating,
investing and financing activities. Our principal source of liquidity is our
cash reserves and operating cash flows. In addition to operating cash flows,
other significant factors that affect our overall management of liquidity
include: capital expenditures, customer credit requirements, investments in
businesses and the availability of bank lines of credit.

At September
30, 2012, cash and cash equivalents were $78.8 million, a decrease of $5.3
million from $84.1 million at June 30, 2012. Cash in a money market account is invested primarily in U.S. government securities. We do not believe
there is any risk to liquidity in the money market account, nor are there
currently any limits on redemptions.

Cash provided
by operating activities from continuing operations decreased period over period
by $4.8 million to $0.3 million, due primarily to a decrease in net income of
$4.0 million and cash flows from fiscal 2012 to fiscal 2013 generated by inventories, revenue recognized in excess of billings and deferred income taxes.

Cash used for
investing activities increased $3.9 million to $4.2 million, due primarily to
the buyout of the noncontrolling interest of ZygoLOT for $3.2 million (2.5
million), a decrease in the proceeds from sales of marketable securities, and
an increase in additions to property, plant and equipment of $0.7 million.

Cash used for
financing activities increased $0.5 million to $1.5 million, due primarily to
increases in the repurchase of restricted stock of $0.8 million and in a
dividend payment to noncontrolling interest of $0.3 million, partially offset
by an increase in exercise of employee stock options of $0.6 million.

We currently
have no lines of credit. In the future, if the need for debt or credit lines
arises, there is no assurance that we would be able to secure such financing.
We believe we have sufficient cash flows from operations and cash reserves to
maintain adequate amounts of liquidity and to meet our future liquidity
requirements for at least the next twelve months.

20

---



OFF-BALANCE SHEET ARRANGEMENTS

We have not
created, and are not party to, any special-purpose or off-balance sheet
entities for the purpose of raising capital, incurring debt, or operating parts
of our business that are not consolidated into our financial statements. We
have not guaranteed any obligations of a third party.

Item 3. Quantitative and Qualitative
Disclosures about Market Risk

There have
been no material changes in our quantitative and qualitative market risk
disclosures during the three months ended September 30, 2012. Please refer to
Item 7a., Quantitative and Qualitative Disclosures about Market Risk, of our
Annual Report on Form 10-K for the year ended June 30, 2012, filed with the
Securities and Exchange Commission (the 2012 Annual Report) for a discussion
of our exposure to market risk.

Item 4. Controls and Procedures

The
effectiveness of our or any system of disclosure controls and procedures is
subject to certain limitations, including the exercise of judgment in
designing, implementing, and evaluating the controls and procedures, the
assumptions used in identifying the likelihood of future events, and the
inability to eliminate misconduct completely. In designing, implementing, and
evaluating the disclosure controls and procedures, our management recognized
that any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving the desired control objectives,
and our management necessarily was required to apply its judgment in evaluating
the cost-benefit relationship of possible controls and procedures.

We identified
a material weakness as of June 30, 2012 related to inadequate design of processes,
procedures and controls regarding our accounting for income taxes and,
subsequently, concluded that our internal control over financial reporting was
not effective at June 30, 2012. In the first quarter of fiscal 2013, we implemented, and are continuing to implement, additional controls in our financial reporting process, including adding control processes to aid in preparing the amounts
related to certain tax assets and liabilities and the current and deferred
income tax expense to ensure those amounts are recorded in accordance with
accounting principles generally accepted in the United States of America, and
have added external accounting resources to prepare and assist in the review of
our accounting for income taxes. Certain controls designed and implemented to
address the identified material weakness in the period-end financial reporting
process have not had a sufficient period of time to operate for our management
to conclude that they are operating effectively at September 30, 2012.

Our management,
with the participation of our Chief Executive Officer and Principal Financial
Officer, carried out an evaluation, as of the end of the period covered by this
report (the quarter ended September 30, 2012), of the effectiveness of our
disclosure controls and procedures (as such term is defined in Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the
Exchange Act)), including controls and procedures implemented to address the
material weakness described above. Based upon their evaluation and the lack of
a sufficient period of time for the additional controls and processes to
operate, the Chief Executive Officer and Principal Financial Officer concluded
that, as of the end of such period, a material weakness still existed and our
disclosure controls and procedures were not effective in recording, processing,
summarizing and reporting within the time periods specified in the Securities
and Exchange Commissions rules and forms information required to be disclosed
by us in the reports that we file or submit under the Exchange Act and were not
effective in ensuring that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is accumulated and
communicated to our management, including the Chief Executive Officer and
Principal Financial Officer, as appropriate to allow timely decisions regarding
required disclosure.

Except as
described above, there were no changes in our internal control over financial
reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) that occurred in the most recent fiscal quarter (the quarter
ended September 30, 2012) that materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.

21

---



PART II - Other Information

Item 1A. Risk Factors

Part I, Item
1A. Risk Factors in our 2012 Annual Report includes a listing of risk factors
that could materially affect our business, financial condition, or future
results. There have been no material changes in our risk factors from those set
forth in our 2012 Annual Report; however, the risks described in our 2012
Annual Report are not the only risks facing our Company.

Item 2. Unregistered Sales of Equity
Securities and Use of Proceeds

The following
table provides information about our purchases during the quarter ended
September 30, 2012, of equity securities that are registered by us pursuant to
Section 12 of the Securities Exchange Act of 1934.

|                                        |  |                                   |        |                               |   |                                                                                          |  |                                                                                                            |   |  |   |     | 
|--------------------------------------- |  | --------------------------------- | ------ | ----------------------------- | - | ---------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------- | - |  | - | --- | 
|Period                                  |  | Total number of
 shares purchased |        | Average price
 paid per share |   | Total number of
 shares purchased as
 part of publicly
 announced
 plans or programs (1) |  | Approximate dollar
 value of shares that
 may yet be purchased
 under the plans or
 programs (in millions) |  
|                                        |  |                                   |        |                               |   |                                                                                          |  |                                                                                                            |  
|                                       
|July 1, 2012 - July 31,
 2012           |  |                                   | 25,591 |                               | $ | 18.57                                                                                    |  |                                                                                                            |  |  | $ | 5.0 | 
|August 1, 2012 - August
 31, 2012       |  |                                   | 31,086 |                               | $ | 19.07                                                                                    |  |                                                                                                            |  |  | $ | 5.0 | 
|September 1, 2012 -
 September 30, 2012 |  |                                   |       |                               |   | n/a                                                                                      |  |                                                                                                            |  |  | $ | 5.0 | 

| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | In August
 2007, our Board of Directors authorized the repurchase of up to $25.0 million
 of our outstanding common stock. During the three months ended September 30,
 2012, there were no repurchases of common stock in the open market. The
 previous share repurchases under this program have been effected pursuant to
 plans in conformity with Rule 10b5-1 under the Securities Exchange Act of
 1934. This rule allows public companies to adopt written, pre-arranged stock
 trading plans when they do not have material, non-public information in their
 possession. The adoption of this stock trading plan allows us to repurchase
 our shares during periods when we otherwise might be prevented from doing so
 under insider trading laws or because of self-imposed trading blackout
 periods.

22

---



Item 6. Exhibits

|    |                                                          |                                                                                                                                                                     
|--- | -------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Exhibits:                                               
|    |                                                          |                                                                                                                                                                     
|    | 10.1*                                                    | ZygoLot
 Share Purchase Agreement, dated September 28, 2012                                                                                                         
|    |                                                          |                                                                                                                                                                     
|    | 31.1                                                     | Certification
 Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of
 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|    |                                                          |                                                                                                                                                                     
|    | 31.2                                                     | Certification
 Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of
 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|    |                                                          |                                                                                                                                                                     
|    | 32.1                                                     | Certification
 Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the
 Sarbanes-Oxley Act of 2002                                            
|    |                                                          |                                                                                                                                                                     
|    | 32.2                                                     | Certification
 Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the
 Sarbanes-Oxley Act of 2002                                            
|    |                                                          |                                                                                                                                                                     
|    | 101.INS**
 XBRL Instance Document                       
|    |                                                         
|    | 101.SCH**
 XBRL Taxonomy Extension                      
|    |                                                         
|    | 101.CAL** XBRL
 Taxonomy Extension Calculation Linkbase 
|    |                                                         
|    | 101.DEF**
 XBRL Taxonomy Extension Definition Linkbase  
|    |                                                         
|    | 101.LAB**
 XBRL Taxonomy Extension Label Linkbase       
|    |                                                         
|    | 101.PRE**
 XBRL Taxonomy Extension Presentation Linkbase

*Confidential treatment has been requested for certain confidential information contained in this exhibit, marked by brackets. The omitted information has been filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

**To be furnished by amendment as soon as practicable after the date hereof.

23

---



SIGNATURE

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.

| |                                                        |  |  | 
| | ------------------------------------------------------ |  |  | 
| | Zygo
 Corporation                                      | 
| |                                                        | 
| | (Registrant)                                           | 
| |                                                        | 
| |                                                        | 
| | /s/ Chris L.
 Koliopoulos                              |  | 
| |                                                        |  | 
| | Chris L.
 Koliopoulos                                  | 
| | President
 and Chief Executive Officer                
| |                                                        | 
| |                                                        | 
| | /s/ John P.
 Jordan                                    |  | 
| |                                                        |  | 
| | John P.
 Jordan                                        | 
| | Vice
 President, Chief Financial Officer and Treasurer

Date: November 9, 2012

24

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EXHIBIT INDEX

|                                                         |                                                                                                                                                                     
|-------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.1*                                                    | ZygoLot
 Share Purchase Agreement, dated September 28, 2012                                                                                                         
|                                                         |                                                                                                                                                                     
|31.1                                                     | Certification
 Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of
 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|                                                         |                                                                                                                                                                     
|31.2                                                     | Certification
 Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of
 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|                                                         |                                                                                                                                                                     
|32.1                                                     | Certification
 Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the
 Sarbanes-Oxley Act of 2002                                            
|                                                         |                                                                                                                                                                     
|32.2                                                     | Certification
 Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the
 Sarbanes-Oxley Act of 2002                                            
|                                                         |                                                                                                                                                                     
|101.INS**
 XBRL Instance Document                       
|                                                         |                                                                                                                                                                     
|101.SCH**
 XBRL Taxonomy Extension                      
|                                                         |                                                                                                                                                                     
|101.CAL**
 XBRL Taxonomy Extension Calculation Linkbase 
|                                                        
|101.DEF**
 XBRL Taxonomy Extension Definition Linkbase  
|                                                        
|101.LAB**
 XBRL Taxonomy Extension Label Linkbase       
|                                                        
|101.PRE**
 XBRL Taxonomy Extension Presentation Linkbase

*Confidential treatment has been requested for certain confidential information contained in this exhibit, marked by brackets. The omitted information has been filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

**To be furnished by amendment as soon as practicable after the date hereof.

---