FORM 10-Q. QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)

X    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934 For the quarterly period ended December 31, 1999

                                       or

     Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from ____________________________
to _______________________________

Commission File Number 0-12944

                                Zygo Corporation
             (Exact name of registrant as specified in its charter)

          Delaware                                               06-0864500
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               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. YES [X] NO [ ]

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate  by check mark  whether  the  registrant  has filed all  documents  and
reports  required  to be filed by  Sections  12, 13, or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court. YES [ ] 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.

           11,692,097 Common Stock, $.10 Par Value at February 8, 2000



<PAGE>

                         PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

                       CONSOLIDATED STATEMENTS OF EARNINGS
                      (Thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                     For the Three Months                 For the Six Months
                                                                      Ended December 31,                  Ended December 31,
                                                                  -------------------------            -------------------------
                                                                    1999             1998                1999             1998
                                                                  --------         --------            --------         --------
<S>                                                               <C>              <C>                 <C>              <C>
Net sales                                                         $ 21,272         $ 15,979            $ 39,173         $ 31,417
Cost of good sold                                                   11,923            9,860              22,499           19,924
                                                                  --------         --------            --------         --------

         Gross profit                                                9,349            6,119              16,674           11,493

Selling, general and administrative expenses                         4,632            3,982               8,800            8,623
Research, development and engineering expenses                       2,144            2,562               4,162            4,833
Amortization of goodwill and other intangibles                         403              277                 806              493
                                                                  --------         --------            --------         --------
         Operating profit (loss)                                     2,170             (702)              2,906           (2,456)
                                                                  --------         --------            --------         --------
Other income (expense):
         Interest income                                               255              313                 519              624
         Miscellaneous (expense), net                                  (10)             (23)                (70)            (114)
                                                                  --------         --------            --------         --------
                                                                       245              290                 449              510
                                                                  --------         --------            --------         --------
Earnings (loss) before income taxes and
   minority interest                                                 2,415             (412)              3,355           (1,946)
Income tax expense (benefit)                                           870              (76)              1,224             (539)
                                                                  --------         --------            --------         ========
Earnings (loss) before minority interest                             1,545             (336)              2,131           (1,407)
Minority interest                                                      (73)               0                 (73)               0
                                                                  --------         --------            --------         --------
Net earnings (loss) (note 2)                                      $  1,472         $   (336)           $  2,058         $ (1,407)
                                                                  ========         ========            ========         ========

Earnings (loss) per share:
         Basic (1)                                                $    .13         $   (.03)(2)        $    .18         $   (.13)(2)
                                                                  ========         ========            ========         ========
         Diluted (1)                                              $    .12         $   (.03)(2)        $    .17         $   (.13)(2)
                                                                  ========         ========            ========         ========
Weighted average number of shares:
         Basic                                                      11,306           11,158              11,273           11,110
                                                                  ========         ========            ========         ========
         Diluted                                                    12,328           11,158              12,242           11,110
                                                                  ========         ========            ========         ========
</TABLE>

(1)  The  difference   between  basic  shares  outstanding  and  diluted  shares
     outstanding is the assumed  conversion of common stock  equivalents  (stock
     options) in the amounts of 1,022,000 in the three months ended December 31,
     1999 and 969,000 in the six months ended December 31, 1999.

(2)  As per generally accepted accounting principles, the computation of the net
     loss per share is based on the weighted average basic shares outstanding.



<PAGE>

                           CONSOLIDATED BALANCE SHEETS
                    As of December 31, 1999 and June 30, 1999
                        (Thousands, except share amounts)

ASSETS                                                   December 31,  June 30,
                                                             1999        1999
                                                           --------    --------
Current Assets:
     Cash and cash equivalents                             $ 14,616    $ 13,020
     Marketable securities                                    8,297       8,351
     Receivables                                             21,143      12,094
     Inventories:
         Raw materials and manufactured parts                 5,156       7,866
         Work in process                                      3,907       4,622
         Finished goods                                       2,393       2,985
                                                           --------    --------
                Total inventories                            11,456      15,473
                                                           --------    --------
     Costs in excess of billings                              1,526         660
     Income taxes receivable                                      0         741
     Prepaid expenses and taxes                               1,086         799
     Deferred income taxes                                    3,678       3,683
                                                           --------    --------
                Total current assets                         61,802      54,821
                                                           --------    --------

Property, plant and equipment, at cost                       34,478      33,708
Less accumulated depreciation                                18,569      17,460
                                                           --------    --------
     Net property, plant and equipment                       15,909      16,248
                                                           --------    --------
Goodwill and other intangible assets, net                     9,271       9,939
Other assets                                                    964         819
                                                           --------    --------
             Total assets                                  $ 87,946    $ 81,827
                                                           ========    ========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
     Accounts payable                                      $  6,199    $  4,989
     Accrued expenses and customer progress payments          5,532       6,251
     Federal and state income taxes                           1,608           0
                                                           --------    --------
             Total current liabilities                       13,339      11,240
                                                           --------    --------

Deferred income taxes                                         2,213       2,213
Minority interest                                               163           0

Stockholders' Equity:
     Common stock, $.10 par value per share:
     15,000,000 shares authorized; 11,603,972                 1,160       1,140
     shares issued (11,402,442 at June 30, 1999)
     Additional paid-in capital                              44,441      42,587
     Retained earnings (note 2)                              27,132      25,074
     Currency translation effects                              (104)        (57)
     Net unrealized (loss) on marketable securities             (97)        (69)
                                                           --------    --------
                                                             72,532      68,675
     Less treasury stock, at cost; 207,600 shares               301         301
                                                           --------    --------
             Total stockholders' equity                      72,231      68,374
                                                           --------    --------
             Total liabilities and stockholders' equity    $ 87,946    $ 81,827
                                                           ========    ========



<PAGE>

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                   Six Months Ended December 31, 1999 and 1998
                             (Thousands of dollars)

<TABLE>
<CAPTION>
Cash provided by (used for)                                                     1999         1998
     operating activities:                                                    --------     --------
<S>                                                                           <C>          <C>
         Net earnings (loss) (note 2)                                         $  2,058     $ (1,407)
         Adjustments to reconcile net earnings (loss) to cash
          provided by (used for) operating activities:
              Depreciation and amortization                                      2,524        2,049
              Loss on disposal of assets                                            54          108
              Gain on sale of marketable securities                                  0          (35)
              Changes in operating accounts:
                  Receivables                                                   (5,732)       5,128
                  Costs in excess of billings                                     (866)        (866)
                  Inventories                                                      812         (486)
                  Prepaid expenses                                                (287)         242
                  Accounts payable and accrued expenses                          4,084       (7,465)
                  Minority interest                                                 73            0
                                                                              --------     --------
              Net cash provided by (used for) operating activities               2,720       (2,732)
                                                                              --------     --------
Cash (used for) provided by
     investing activities:
         Additions to property, plant and equipment                             (1,439)      (1,492)
         Investment in marketable securities                                      (248)      (9,113)
         Investment in other assets                                               (309)      (2,212)
         Proceeds from sale of marketable securities                                 0        5,361
         Proceeds from maturity of marketable securities                           250        2,545
                                                                              --------     --------
         Net cash (used for) by investing activities                            (1,746)      (4,911)
                                                                              --------     --------
Cash provided by financing activities:
         Repayment of long-term debt                                                 0            0
         Exercise of employee stock options                                        532          280
         Contributions from minority interest of consolidated subsidiaries          90            0
                                                                              --------     --------
              Net cash provided by financing activities                            622          280
                                                                              --------     --------
Net increase (decrease) in cash and cash equivalents                             1,596       (7,363)
Cash and cash equivalents, beginning of year                                    13,020       22,023
                                                                              --------     --------
Cash and cash equivalents, end of quarter                                     $ 14,616     $ 14,660
                                                                              ========     ========
</TABLE>

These  interim  financial  statements  should  be read in  conjunction  with the
financial  statements  and notes  included in the Company's June 30, 1999 Annual
Report on Form 10-K405 including items incorporated by reference therein.



<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1: Principles of Consolidation

The consolidated balance sheet at December 31, 1999, the consolidated statements
of earnings for the three- and six-months  ended December 31, 1999 and 1998, and
the consolidated  statements of cash flows for the six-months ended December 31,
1999 and 1998 are  unaudited  but,  in the opinion of the  Company,  include all
adjustments,  consisting only of normal recurring accruals, necessary for a fair
statement of the results of the interim  periods.  The  consolidated  statements
include the  accounts of Zygo  Corporation  and all  consolidated  subsidiaries,
including  a  consolidated  joint  venture,  which the Company  entered  into in
October 1999. The minority interest  represents the 40% of the joint venture not
owned  by the  Company.  The  results  of  operations  for the  three-month  and
six-month periods ended December 31, 1999 are not necessarily  indicative of the
results to be expected for the full year.

Note 2: New Accounting Pronouncements

As of July 1, 1998,  the  Company  adopted  Statement  of  Financial  Accounting
Standards No. 130 "Reporting Comprehensive Income." SFAS No. 130 establishes new
rules for the reporting and display of comprehensive  income and its components;
however,  the adoption of this statement had no impact on the Company's reported
net income or stockholders'  equity.  Comprehensive  income (loss) is defined as
net income plus nonstockholder  direct adjustments to stockholders' equity which
consist of foreign currency translation  adjustments and adjustments for the net
unrealized gains (losses) related to the Company's marketable equity securities.

Comprehensive  income totaled  $1,359,000 and $1,983,000 in the  three-month and
six-month  periods  ended  December  31,  1999,  respectively,  as  compared  to
comprehensive  losses of $372,000 and  $1,346,000 in the  comparable  prior-year
periods.

In June 1997,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards  No.  131,  "Disclosures  about  Segments of an
Enterprise and Related  Information." This statement establishes standards using
a management approach,  for reporting  information regarding operating segments.
The Company has viewed its operations as one segment providing sales and service
in  metrology,  process  control,  and  yield  enhancement  solutions  for  high
precision manufacturing industries. Substantially all of the Company's operating
results,  assets,  depreciation,  and amortization are U.S. based. The Company's
export sales are as follows:

                                  For the Three Months       For the Six Months
                                   Ended December 31,        Ended December 31,
                                   ------------------       --------------------
                                   1999         1998         1999          1998
                                  -------      -------      -------      -------
(Thousands of dollars)
Far East:
     Japan                        $ 4,412      $ 3,379      $ 8,012      $ 7,836
     Pac Rim                        2,679          783        5,309        1,383
                                  -------      -------      -------      -------
Total Far East                      7,091        4,162       13,321        9,219
Europe and other                    3,211        2,939        4,915        4,665
                                  -------      -------      -------      -------
Total                             $10,302      $ 7,101      $18,236      $13,884
                                  =======      =======      =======      =======



<PAGE>

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

Results of Operations

Net sales of $21,272,000 for the three months and $39,173,000 for the six months
ended  December 31, 1999,  increased by $5,293,000 or 33% and $7,756,000 or 25%,
respectively, from the net sales in the comparable prior year periods. Net sales
of the Company's  instruments  and systems  during the second  quarter of fiscal
2000  increased by 38% to  $15,680,000  over the second  quarter of fiscal 1999,
mainly as a result of sales growth in the mask metrology and automation markets.
Net  sales of  modules  and  components  totaled  approximately  $5,592,000,  an
increase of 22% from the comparable  quarter in the prior year. Net sales of the
Company's  instruments  and  systems  and net sales of  modules  and  components
increased by  $7,148,000  or 34% and $608,000 or 6%,  respectively,  for the six
months  ended  December  31,  1999 as  compared to the  six-month  period  ended
December 31, 1998.

Gross  profit for the three  months  and six months  ended  December  31,  1999,
amounted to $9,349,000 and $16,674,000,  respectively, an increase of $3,230,000
and  $5,181,000  from the  comparable  prior  year  periods.  Gross  profit as a
percentage of net sales for the quarter and six months ended  December 31, 1999,
amounted  to 44%  and  43%,  respectively,  an  increase  in both  periods  of 6
percentage points from gross profit as a percentage of net sales of 38% and 37%,
respectively,  for the three months and six months ended  December 31, 1998. The
increase  in gross  profit and gross  profit as a  percentage  of net sales were
primarily due to the significant increase in sales levels and an improved mix.

Selling,  general and  administrative  expenses of  $4,632,000  and  $8,800,000,
respectively,  in the three  months  and six months  ended  December  31,  1999,
increased by $650,000 or 16%, and  $177,000 or 2%,  respectively,  from the same
periods the year earlier. The increases in the three-month period ended December
31, 1999 primarily  resulted from product marketing and volume related expenses,
such as commissions  paid to the Company's  direct sales  personnel and external
sales agents, and increased  expenses related to the additional  infrastructure,
such as sales offices in Japan and a new joint venture in Europe (ZygoLOT). As a
percentage of net sales, selling,  general and administrative expenses decreased
in both the three  months and six months ended  December  31,  1999,  to 22%, as
compared to 25% and 27%, respectively, in the comparable prior year period.

Research, development and engineering expenses ("R&D") amounted to $2,144,000 or
10% of net sales and $4,162,000 or 11% of net sales, respectively, for the three
months and six months  ended  December 31, 1999.  In the  comparable  three- and
six-month  periods in the prior year, R&D expenses totaled  $2,562,000 or 16% of
net sales and $4,833,000 or 15% of net sales, respectively.  The decrease in R&D
expenses is primarily a result of cost  reduction  actions taken in fiscal 1999.
The Company's management  continues to focus considerable  attention on projects
which will enhance the Company's  product offering and should provide  long-term
benefits to the Company.

The Company  recorded  operating  profit in the three months ended  December 31,
1999 totaling  $2,170,000,  as compared to an operating  loss in the  comparable
prior year period of $702,000.  The Company's operating profit in the six months
ended  December 31, 1999 was  $2,906,000,  as compared to an  operating  loss of
$2,456,000 in the six months ended December 31, 1998.

The Company  recorded net income of $1,472,000 in the  three-month  period ended
December  31,  1999,  as compared  to a net loss of $336,000 in the  three-month
period ended  December 31, 1998.  The net earnings on a per share basis was $.12
for the quarter  ending  December  31, 1999,  compared  with a net loss on a per
share basis in the comparable prior year period of $(.03).  The Company recorded
net income of $2,058,000 or $.17 per share for the first half of fiscal 2000, as
compared to a net loss in the  comparable  prior-year  period of  $1,407,000  or
$(.13) per share.



<PAGE>

Financial Condition

At December 31, 1999, working capital was $48,463,000, an increase of $4,882,000
from the amount at June 30, 1999 and $3,957,000  from September 30, 1999 levels.
The Company at December 31, 1999 had cash and cash  equivalents  of  $14,616,000
and marketable securities of $8,297,000 for a total of $22,913,000,  an increase
of $4,984,000  from September 30, 1999.  The increase in working  capital in the
quarter  was  principally  due to the  increase  in the  level  of cash and cash
equivalents.  Receivables  increased by $2,058,000  and  inventory  decreased by
$822,000  from the amounts  reported at September  30, 1999.  As of December 31,
1999, there were no borrowings  outstanding under the Company's  $3,000,000 bank
line of  credit.  Unused  amounts  under the line of credit  are  available  for
short-term working capital needs.

The Company's backlog at December 31, 1999 totaled  $31,987,000,  an increase of
$816,000 or 3% from  September 30, 1999.  The increase in the Company's  backlog
from September 30, 1999 was due to increased demand for capital equipment in the
industrial and semiconductor markets.

During the quarter,  the Company  entered into an agreement  with LOT-Oriel GmbH
establishing  a European  joint  venture.  Zygo owns a 60%  interest in this new
company,  called  ZygoLOT  GmbH.  The Company's  results for the second  quarter
include ZygoLOT financial performance effective October 1, 1999.

Year 2000

The Company has transitioned into the year 2000 with minimal  interruptions.  We
are  continuing to monitor our  products,  product  design tools,  manufacturing
tools,  information  systems,  business  infrastructure,  material  and  service
suppliers and  customers.  Overall there has been no  significant  impact on the
Company. The cost spent on the year 2000 problem has been immaterial to date.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are subject to interest rate risk on our investment portfolio.

A move in interest rates of 10% of our weighted-average  worldwide interest rate
in 2000  affecting our financial  investments as of December 31, 1999 would have
an insignificant effect on our pretax earnings. In fiscal 1999, the same move in
the interest rate affecting our interest sensitive investments would have had an
insignificant  effect on our financial position,  results of operations and cash
flows.

Forward Looking Statements

This report contains forward looking statements which are subject to a number of
risks and uncertainties  that may cause actual results to differ materially from
expectations.  These  uncertainties  include,  but are not limited  to,  general
economic  conditions,  competitive  conditions in markets served by the Company,
most notably high technology markets such as data storage and semiconductor, and
economic and  political  developments  in countries  where the Company  conducts
business.



<PAGE>

                                     PART II

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

The Annual Meeting of Stockholders  was held on November 17, 1999. The following
matters were submitted to a vote of the Company's stockholders:

     Proposal No. 1 - Election of Board of Directors

          To  elect  eight   directors  for  the  ensuing  year.  The  following
          individuals,  all of whom were Company directors  immediately prior to
          the vote, were elected as a result of the following vote:

                                                 For              Against
                                                 ---              -------
               Paul F. Forman                  9,786,364           54,088
               Seymour E. Liebman              9,785,594           54,858
               Robert G. McKelvey              9,787,534           52,918
               Paul W. Murrill                 9,787,930           52,522
               J. Bruce Robinson               9,783,426           57,026
               Robert B. Taylor                9,788,810           51,642
               Gary K. Willis                  9,782,995           57,457
               Carl A. Zanoni                  9,787,426           53,026

     Proposal No. 2 - Amend and Restate Non-Employee Director Stock Option Plan

          To approve the adoption of the Zygo  Corporation  Amended and Restated
          Non-Employee Director Stock Option Plan.

          For                                  6,952,202
          Against                                206,217

     There  were  no  other  matters  submitted  to  a  vote  of  the  Company's
stockholders.

Item 6. Exhibits and Reports on Form 8-K

     (a)  EXHIBITS

          10.1 Employment  Agreement  dated  November  17, 1999  between Gary K.
               Willis and the Company.

          10.2 Amended Employment  Agreement dated November 17, 1999, between J.
               Bruce Robinson and the Company.

          27   Financial Data Schedule.

     (b)  None

<PAGE>

                                    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/       J. BRUCE ROBINSON
                                           -------------------------------------
                                           J. Bruce Robinson
                                           President and Chief Executive Officer




                                           /s/          KEVIN M. McGUANE
                                           -------------------------------------
                                           Kevin M. McGuane
                                           Vice President Finance, Treasurer,
                                           and Chief Financial Officer






Date: February 9, 2000

<PAGE>


                                  EXHIBIT INDEX

Exhibit   Description                                                      Page
-------   -----------                                                      ----

10.1      Employment Agreement dated November 17, 1999, between Gary K.
          Willis and the Company.

10.2      Amended Employment Agreement dated November 17, 1999, between
          J. Bruce Robinson and the Company

27        Financial  Data  Schedule for the  quarterly  report on Form
          10-Q for the period ended December 31, 1999.