<PAGE>



================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                   ----------

                                 FORM 10-K405/A

                                 AMENDMENT NO. 2

(Mark One)
    [X]       Annual Report Pursuant to Section 13 or 15(d) of the
                        Securities Exchange Act of 1934

                    For the fiscal year ended June 30, 2001

                                       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            (IRS Employer Identification Number)
incorporation or organization)


                Laurel Brook Road, Middlefield, Connecticut 06455
                -------------------------------------------------
               (Address of principal executive offices) (Zip Code)


                                (860) 347-8506
                    ---------------------------------------
                   (Registrant's telephone number, including area code:)


           Securities registered pursuant to Section 12(b) of the Act:
           -----------------------------------------------------------
                                      None


           Securities registered pursuant to Section 12(g) of the Act:
           -----------------------------------------------------------
                          Common Stock, $.10 Par Value


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 [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K405 or any amendment to
this Form 10-K405.  [ ]

State the aggregate market value of the voting stock held by non-affiliates of
the registrant. The aggregate market value shall be computed by reference to the
price at which the stock was sold, or the average bid and asked prices of such
stock, as of a specified date within 60 days prior to the date of filing.

         Aggregate market value at September 24, 2001, was $202,419,449
           Aggregate market value at February 8, 2002 was $203,485,531



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

    17,389,987 Shares of Common Stock, $.10 Par Value, at September 24, 2001
    17,434,609 Shares of Common Stock, $.10 Par Value, at February 8, 2002

================================================================================


                                       1





<PAGE>


                                EXPLANATORY NOTE

         Zygo Corporation is filing this Annual Report on Form 10-K405/A for the
year ended June 30, 2001 in order to correct a computational error in the pro
forma calculations appearing in Note 14, "Stock Compensation Plans," to
Consolidated Financial Statements. The Company's Consolidated Statements of
Earnings, Stockholders' Equity and Cash Flows and Consolidated Balance Sheets
for all periods presented were reported accurately. The revised pro forma
information in Note 14 does not affect any previously reported historical
operating results of the Company.

         As indicated in Note 14, Zygo applies APB Opinion No. 25, "Accounting
for Stock Issued to Employees" and related interpretations in accounting for its
stock compensation plans. Since all of Zygo's stock options were granted at an
exercise price equal to the fair market value on the date of grant, pursuant to
APB Opinion No. 25 no compensation cost is recognized for these stock option
grants. The pro forma net income (loss) and pro forma earnings (loss) per
share, diluted, included in Note 14 are computed as if Zygo accounted for its
stock options under an alternate methodology, in accordance with Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." Zygo does not use this alternate methodology in reporting its
actual financial results.

         In estimating the fair value of options at the date of grant under this
alternate methodology, Zygo utilized computer software to determine the pro
forma stock option expense for fiscal 2001 using the Black-Scholes model. The
wrong column total erroneously was extracted from the computer generated
report, causing an error in the computation of the "pro forma net income (loss)"
and "pro forma earnings (loss) per share, diluted" information presented in
Note 14. The correct pro forma net income for the year ended June 30, 2001 is
$3,436,000, compared to $9,952,000 as originally reported; and the correct pro
forma net earnings per share, diluted, for the year ended June 30, 2001 is
$0.21, compared to $0.62 as originally reported. Revised Note 14 also reflects
weighted average fair values at date of grant for options granted during fiscal
2001, 2000, and 1999 of $39.85, $17.18 and $6.17, respectively.

         Pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, as
amended, the complete text of Item 8 of Form 10-K405 as revised is presented in
this filing. Other than changes to Note 14, no other revisions have been made to
this Annual Report on Form 10-K405/A from the Form 10-K405 originally filed with
the Commission for fiscal 2001, as previously amended. This amendment does not
reflect events occurring after the filing of the original annual report on
Form 10-K405, as previously amended.


                                    PART II

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Financial statements and supplementary data required pursuant to this item begin
on Page F-1 of this report.

                                       2



<PAGE>

                                     PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a) The following documents are filed as part of this report:

       1. and 2. Financial Statements and Financial Statement Schedules:

                 An index to the financial statements and financial statement
                 schedules filed is located on page F-1.

       3.        EXHIBITS

       3.(i)     Restated Certificate of Incorporation of the Company and
                 amendments thereto (Exhibit 3.(i) to the Company's Annual
                 Report on Form 10-K for its year ended June 30, 1993)*

       3.(ii)    Certificate of Amendment of Certificate of Incorporation, filed
                 June 3, 1996 (Exhibit 3.(ii) to the Company's Annual Report on
                 Form 10-K405 for its year ended June 30, 1996)*

       3.(iii)   By-laws of the Company (Exhibit (3)(b) to Registration No.
                 2-87253 on Form S-1 hereinafter "Registration No. 2-87253")*

       4.1       Shareholders Agreement dated October 17, 1983, between Canon
                 Inc., Wesleyan University, Paul F. Forman, Carl A. Zanoni, and
                 Sol F. Laufer (Exhibit (4)(a) to Registration 2-87253)*

       10.1      Confidentiality and Non-Competition Agreement dated October 25,
                 1983, between the Company and Carl A. Zanoni (Exhibit (10)(b)
                 to Registration No. 2-87253)*

       10.2      Agreement dated May 27, 1975, between the Company and Canon
                 U.S.A., Inc., regarding information sharing and marketing
                 (Exhibit (10)(x) to Registration No. 2-87253)*

       10.3      Agreement dated November 20, 1980, between the Company and
                 Canon Inc. regarding exchange of information (Exhibit (10)(y)
                 to Registration No. 2-87253)*

       10.4      Amended and Restated Zygo Corporation Profit Sharing Plan
                 (Exhibit 10.15 to the Company's Annual Report on Form 10-K405
                 for its year ended June 30, 1995)*

       10.5      Canon/Zygo Confidentiality Agreement dated March 7, 1990,
                 between the Company and Canon Inc. regarding confidential
                 technical information

                                       3




<PAGE>


                 received from each other (Exhibit 10.42 to the Company's Annual
                 Report on Form 10-K for its year ended June 30, 1991)*

       10.6      Employment Agreement dated February 13, 1992, relating to the
                 employment of Gary K. Willis by the Company (Exhibit 10.38 to
                 the Company's Annual Report on Form 10-K for its year ended
                 June 30, 1992)*

       10.7      Amendment, dated August 26, 1993, to the Employment Agreement
                 dated February 13, 1992, between Gary K. Willis and the Company
                 (Exhibit 10.22 to the Company's Annual Report on Form 10-K for
                 its year ended June 30, 1993)*

       10.8      Second Amendment, dated March 10, 1995, to the Employment
                 Agreement dated February 13, 1992, between Gary K. Willis and
                 the Company (Exhibit 10.19 to the Company's Annual Report on
                 Form 10-K405 for its year ended June 30, 1996)*

       10.9      Stock Purchase Agreement dated March 4, 1992, relating to the
                 purchase of Company Common Stock by Gary K. Willis from
                 Wesleyan University (Exhibit 10.39 to the Company's Annual
                 Report on Form 10-K for its year ended June 30, 1992)*

       10.10     Services Agreement dated August 26, 1993, between the Company
                 and Paul F. Forman (Exhibit 10.26 to the Company's Annual
                 Report on Form 10-K for its year ended June 30, 1993)*

       10.11     Amendment Agreement dated as of December 31, 1996, between the
                 Company and Paul F. Forman.

       10.12     Non-Competition Agreement dated August 26, 1993, between the
                 Company and Paul F. Forman (Exhibit 10.27 to the Company's
                 Annual Report on Form 10-K for its year ended June 30, 1993)*

       10.13     Zygo Corporation Amended and Restated Non-Qualified Stock
                 Option Plan ratified and approved by the Company's Stockholders
                 on November 19, 1992 (Exhibit 10.30 to the Company's Annual
                 Report on Form 10-K for its year ended June 30, 1993)*

       10.14     Termination Agreement dated November 30, 1993, covering the
                 termination of the Shareholders' Agreement between Canon Inc.,
                 Wesleyan University, Paul F. Forman, Carl A. Zanoni, and Sol F.
                 Laufer dated October 17, 1983 (Exhibit 10.33 to the Company's
                 Annual Report on Form 10-K for its year ended June 30, 1994)*

       10.15     Registration Rights Agreement dated November 30, 1993, between
                 Canon Inc., Wesleyan University, Paul F. Forman, Carl A.
                 Zanoni, Sol F. Laufer, and the Company (Exhibit 10.34 to the
                 Company's Annual Report on Form 10-K for its year ended June
                 30, 1994)*

                                       4



<PAGE>


       10.16     Renewal of Line of Credit dated June 3, 1997, between the
                 Company and Fleet Bank Connecticut, N.A.*

       10.17     Zygo Corporation Non-Employee Director Stock Option Plan
                 ratified and approved by the Company's stockholders on November
                 17, 1994 (Exhibit 10.30 to the Company's Annual Report on Form
                 10-K405 for its year ended June 30, 1996)*

       10.18     Subcontract B335188 between The Regents of The University of
                 California Lawrence Livermore National Laboratory and Zygo
                 Corporation dated May 9, 1997*

       10.19     Agreement between Zygo Corporation and Dacon Corporation
                 covering an addition to the Company's Middlefield, Connecticut,
                 facilities (Project 1774) and the N.I.F. Manufacturing
                 Renovation (Project 1842) dated April 7, 1997*

       10.20     Employment agreement dated January 15, 1999, between Zygo
                 Corporation and J. Bruce Robinson. (Exhibit 10.34 to the
                 Company's Annual Report on Form 10-K 405 for its year ended
                 June 30, 1999)*

       10.21     Zygo Corporation Amended and Restated Non-Employee Director
                 Stock Option Plan ratified and approved by the Company's
                 stockholders on November 17, 1999 *

       10.22     Employment agreement dated July 1, 1999, between Zygo
                 Corporation and Brian J. Monti.

       10.23     Acquisition Agreement dated May 5, 2000, by and among Zygo
                 Corporation, Firefly Technologies Inc., and the Shareholders of
                 Firefly Technologies Inc. (Company's Current Reports on Form
                 8-K dated May 8, 2000 and on Form 8-KA dated June 30, 2000)*

       10.24     Employment agreement dated May 5, 2000, between Zygo
                 Corporation and John Berg. (Exhibit 10.01(e)(1) to the
                 Company's Current Reports on Form 8-K dated May 8, 2000 and on
                 Form 8-KA dated June 30, 2000)*

       10.25     Employment agreement dated May 5, 2000, between Zygo
                 Corporation and Patrick Tan. (Exhibit 10.01(e)(2) to the
                 Company's Current Reports on Form 8-K dated May 8, 2000 and on
                 Form 8-KA dated June 30, 2000)*

       10.26     Construction -- to Permanent Term Loan Promissory Note (Exhibit
                 10.26 to the Company's Annual Report on Form 10-K405 for the
                 fiscal year ended June 30, 2001)*

       21.       Subsidiaries of Registrant*

                                       5



<PAGE>


       23.       Accountants' Consent

       99.1      Certification pursuant to Section 906 of the Sarbanes-Oxley Act
                 of 2002

------------

*Incorporated herein by reference.

                                       6




<PAGE>


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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


By  /s/ RICHARD M. DRESSLER                              Date: July 14, 2003
    --------------------------------
         Richard M. Dressler
         Vice President,
         Finance, Chief
         Financial Officer,
         and Treasurer


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.


         SIGNATURE                       TITLE
         ---------                       -----

/s/ J. BRUCE ROBINSON        Chairman, President, and    Date: July 14, 2003
    ----------------------   Chief Executive Officer
    J. Bruce Robinson


/s/ RICHARD M. DRESSLER      Vice President, Finance,    Date: July 14, 2003
    ----------------------   Chief Financial Officer
    Richard M. Dressler      and Treasurer


/s/ CARL A. ZANONI           Vice President, Technology  Date: July 14, 2003
    ----------------------   and Director
    Carl  A. Zanoni



/s/ EUGENE BANUCCI           Director                    Date: July 14, 2003
--------------------------
   (Eugene Banucci)


/s/ PAUL F. FORMAN           Director                    Date: July 14, 2003
--------------------------
   (Paul F. Forman)


/s/ SAMUEL FULLER            Director                    Date: July 14, 2003
--------------------------
   (Samuel Fuller)


/s/ SEYMOUR E. LIEBMAN       Director                    Date: July 14, 2003
---------------------------
   (Seymour E. Liebman)


/s/ ROBERT G. MCKELVEY       Director                    Date: July 14, 2003
---------------------------
   (Robert G. McKelvey)


/s/ ROBERT B. TAYLOR         Director                    Date: July 14, 2003
---------------------------
   (Robert B. Taylor)


/s/ BRUCE WORSTER            Director                    Date: July 14, 2003
---------------------------
   (Bruce Worster)



                                       7




<PAGE>


               CERTIFICATION OF DISCLOSURE IN THE REGISTRANT'S
                      AMENDMENT NO. 2 TO ANNUAL REPORT

I, J. Bruce Robinson, certify that:

1.   I have reviewed this Amendment No. 2 to the Annual Report on Form
     10-K405/A (the "Amendment to Annual Report") of Zygo Corporation;

2.   Based on my knowledge, the Amendment to Annual Report does not contain any
     untrue statement of a material fact or omit to state a material fact
     necessary to make the statements made, in light of the circumstances under
     which such statements were made, not misleading with respect to the period
     covered by the Amendment to Annual Report; and

3.   Based on my knowledge, the financial statements, and other financial
     information included in the Amendment to Annual Report, fairly present in
     all material respects the financial condition, results of operations and
     cash flows of the registrant as of, and for, the periods presented in the
     Amendment to Annual Report.

4.   The registrant's other certifying officer and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

(a)  designed such disclosure controls and procedures to ensure that material
     information relating to the registrant, including its consolidated
     subsidiaries, is made known to us by others within those entities,
     particularly during the period in which the Amendment to Annual Report is
     being prepared; and

(b)  evaluated the effectiveness of the registrant's disclosure controls and
     procedures as of a date within 90 days prior to the filing date of the
     Amendment to Annual Report.

5.   The registrant's other certifying officer and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of the registrant's board of directors (or persons performing the
     equivalent functions):

(a)  all significant deficiencies in the design or operation of internal
     controls which could adversely affect the registrant's ability to record,
     process, summarize and report financial data and have identified for the
     registrant's auditors any material weaknesses in internal controls; and

(b)  any fraud, whether or not material, that involves management or other
     employees who have a significant role in the registrant's internal
     controls.

Date: July 14, 2003
      -------------

                                           /s/ J. Bruce Robinson
                                           ------------------------
                                           J. Bruce Robinson
                                           Chairman, President, and
                                           Chief Executive Officer

                                       8


<PAGE>


               CERTIFICATION OF DISCLOSURE IN THE REGISTRANT'S
                      AMENDMENT NO. 2 TO ANNUAL REPORT

I, Richard M. Dressler, certify that:

1.   I have reviewed this Amendment No. 2 to Annual Report on Form 10-K405/A
     (the "Amendment to Annual Report") of Zygo Corporation;

2.   Based on my knowledge, the Amendment to Annual Report does not contain any
     untrue statement of a material fact or omit to state a material fact
     necessary to make the statements made, in light of the circumstances under
     which such statements were made, not misleading with respect to the period
     covered by the Amendment to Annual Report; and

3.   Based on my knowledge, the financial statements, and other financial
     information included in the Amendment to Annual Report, fairly present in
     all material respects the financial condition, results of operations and
     cash flows of the registrant as of, and for, the periods presented in the
     Amendment to Annual Report.

4.   The registrant's other certifying officer and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

(a)  designed such disclosure controls and procedures to ensure that material
     information relating to the registrant, including its consolidated
     subsidiaries, is made known to us by others within those entities,
     particularly during the period in which the Amendment to Annual Report is
     being prepared; and

(b)  evaluated the effectiveness of the registrant's disclosure controls and
     procedures as of a date within 90 days prior to the filing date of the
     Amendment to Annual Report.

5.   The registrant's other certifying officer and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of the registrant's board of directors (or persons performing the
     equivalent functions):

(a)  all significant deficiencies in the design or operation of internal
     controls which could adversely affect the registrant's ability to record,
     process, summarize and report financial data and have identified for the
     registrant's auditors any material weaknesses in internal controls; and

(b)  any fraud, whether or not material, that involves management or other
     employees who have a significant role in the registrant's internal
     controls.

Date: July 14, 2003
      -------------

                                         /s/ Richard M. Dressler
                                         -----------------------
                                         Richard M. Dressler
                                         Vice President, Finance
                                         Chief Financial Officer

                                       9


<PAGE>

                  ZYGO CORPORATION AND CONSOLIDATED SUBSIDIARY

                   INDEX TO FINANCIAL STATEMENTS AND SCHEDULE

Page
----
F-2            Report of Management

F-3            Independent Auditors' Report

F-4            Consolidated balance sheets at June 30, 2001 and 2000

F-5            Consolidated statements of earnings for the years ended June 30,
               2001, 2000, and 1999

F-6            Consolidated statements of stockholders' equity for the years
               ended June 30, 2001, 2000, and 1999

F-7            Consolidated statements of cash flows for the years ended
               June 30, 2001, 2000, and 1999

F-8 to F-22    Notes to consolidated financial statements

F-23           Selected consolidated quarterly financial data for the years
               ended June 30, 2001 and 2000


               CONSOLIDATED SCHEDULES

S-1            Independent Auditors' Report on Schedule

S-2            II - Valuation and qualifying accounts


        All other schedules have been omitted since the required information is
        not present or not present in amounts sufficient to require submission
        of the schedules or the information required is included in the
        consolidated financial statements or notes thereto.


                                      F-1






<PAGE>



REPORT OF MANAGEMENT

Management is responsible for preparing the Company's consolidated financial
statements and related information that appears in this annual report. The
consolidated financial statements were prepared in conformity with accounting
principles generally accepted in the United States of America appropriate in the
circumstances and, accordingly, include some amounts based on management's best
judgements and estimates. Financial information in this Annual Report is
consistent with that in the consolidated financial statements.

The Company maintains a system of internal controls and procedures which
provides reasonable assurance, at an appropriate cost/benefit relationship, that
assets are safeguarded and that transactions are authorized, recorded, and
reported properly. Management believes that the Company's system of internal
controls provides reasonable assurance that assets are safeguarded against
material loss from unauthorized use or disposition and that the financial
records are reliable for preparing financial statements and other data and for
maintaining accountability for assets.

The Audit Committee of the Board of Directors, composed solely of Directors who
are not officers or employees of the Company, meets with the independent
auditors and financial management periodically to discuss internal accounting
controls, auditing and financial reporting matters, and to discharge its
responsibilities outlined in its written charter. The Committee reviews with the
independent auditors the scope and results of the audit effort. The Committee
also meets with the independent auditors without management present to ensure
that the independent auditors have free access to the Committee.

The independent auditors, KPMG LLP, were recommended by the Audit Committee of
the Board of Directors and selected by the Board of Directors. KPMG LLP was
engaged to audit the 2001, 2000, and 1999 consolidated financial statements of
Zygo Corporation and its subsidiaries and conducted such tests and related
procedures as deemed necessary in conformity with auditing standards generally
accepted in the United States of America. The opinion of the independent
auditors, based upon their audits of the consolidated financial statements, is
included in this annual report.


Richard M. Dressler
Vice President, Finance,
Chief Financial Officer, and Treasurer


                                      F-2





<PAGE>



REPORT OF INDEPENDENT AUDITORS

THE BOARD OF DIRECTORS AND STOCKHOLDERS OF ZYGO CORPORATION:

We have audited the accompanying consolidated balance sheets of Zygo Corporation
and subsidiaries as of June 30, 2001 and 2000, and the related consolidated
statements of earnings, stockholders' equity and cash flows for each of the
years in the three-year period ended June 30, 2001. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Zygo Corporation and
subsidiaries as of June 30, 2001 and 2000, and the results of their operations
and their cash flows for each of the years in the three-year period ended June
30, 2001, in conformity with accounting principles generally accepted in the
United States of America.


KPMG LLP
Hartford, Connecticut
August 10, 2001


                                      F-3






<PAGE>



<TABLE>

CONSOLIDATED BALANCE SHEETS
(Thousands of dollars, except share amounts)

<CAPTION>

                                                                           June 30,      June 30,
                                                                             2001          2000
                                                                           --------      -------
<S>                                                                        <C>           <C>
ASSETS
   CURRENT ASSETS:
      Cash and cash equivalents ......................................     $ 52,630      $15,598
      Marketable securities (note 3) .................................        7,121        8,268
      Receivables (note 4) ...........................................       27,278       20,138
      Income taxes receivable ........................................         --            866
      Inventories (note 5) ...........................................       24,261       11,879
      Costs in excess of billings (note 6) ...........................        1,802        5,743
      Prepaid expenses ...............................................        1,393        1,173
      Deferred income taxes (note 17) ................................        4,076        9,020
                                                                           --------      -------
         Total current assets ........................................      118,561       72,685
                                                                           --------      -------
Property, plant and equipment, net (notes 7 and 11) ..................       47,475       18,493
Deferred income taxes (note 17) ......................................       15,819         --
Goodwill and other intangibles, net (note 8) .........................        4,867        3,078
Other assets .........................................................          110          906
                                                                           --------      -------
TOTAL ASSETS .........................................................     $186,832      $95,162
                                                                           ========      =======
LIABILITIES AND STOCKHOLDERS' EQUITY
  CURRENT LIABILITIES:
     Current portion of long-term debt (note 10) .....................     $    279      $  --
     Accounts payable ................................................        8,648        8,380
     Accrued expenses and progress payments ..........................          549          279
     Accrued salaries and wages ......................................        7,153        3,485
     Other accrued expenses ..........................................        4,688        3,934
     Income taxes payable ............................................        3,132           57
                                                                           --------      -------
           Total current liabilities .................................       24,449       16,135
                                                                           --------      -------

Long-term debt (note 10) .............................................       12,281           84
Deferred income taxes (note 17) ......................................         --            271
Minority interest ....................................................          963          443

STOCKHOLDERS' EQUITY (NOTES 13, 14, 15, AND 16):
   Common stock, $.10 par value per share:
     40,000,000 shares authorized (15,000,000 in 2000);
     17,803,812 shares issued (14,441,231 in 2000);
     17,356,607 shares outstanding (14,233,631 in 2000) ..............        1,780        1,444
   Additional paid-in capital ........................................      134,380       68,304
   Retained earnings .................................................       19,714        9,055
   Accumulated other comprehensive income:
   Currency translation effects ......................................       (1,786)        (182)
   Net unrealized gain on swap agreement (note 10) ...................           31         --
   Net unrealized gain (loss) on marketable securities (note 3) ......           37          (91)
                                                                           --------      -------
                                                                            154,156       78,530
   Less treasury stock, at cost; 447,205 common shares
     (207,600 shares in 2000) ........................................        5,017          301
                                                                           --------      -------
      Total stockholders' equity .....................................      149,139       78,229
                                                                           --------      -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ...........................     $186,832      $95,162
                                                                           ========      =======
</TABLE>

See accompanying notes to consolidated financial statements.


                                                F-4






<PAGE>



<TABLE>

CONSOLIDATED STATEMENTS OF EARNINGS
(Thousands except per share amounts)

<CAPTION>
                                                                 Fiscal Year Ended June 30,
                                                            ----------------------------------
                                                              2001         2000        1999
                                                            --------     --------     --------
<S>                                                         <C>          <C>          <C>
Net sales (notes 18 and 19) ............................    $133,250     $ 87,243     $ 63,382
Cost of goods sold .....................................      72,081       54,688       40,997
                                                            --------     --------     --------
      Gross profit .....................................      61,169       32,555       22,385

Selling, general and administrative expenses ...........      29,119       18,504       19,633
Research and development ...............................      17,673       11,270        9,185
Nonrecurring acquisition-related charges ...............        --         14,001         --
Amortization and impairment of goodwill
   and other intangibles (note 2) ......................         797        7,102        1,258
                                                            --------     --------     --------
      Operating profit (loss) ..........................      13,580      (18,322)      (7,691)
                                                            --------     --------     --------

Other income (expense):
      Interest income ..................................       1,641        1,250        1,148
      Miscellaneous expense, net .......................        (526)        (240)        (308)
                                                            --------     --------     --------
         Total other income ............................       1,115        1,010          840
                                                            --------     --------     --------
         Earnings (loss) before income taxes and
             minority interest .........................      14,695      (17,312)      (6,851)

Income tax expense (benefit) (note 17) .................       3,454       (1,459)      (2,975)
                                                            --------     --------     --------
Earnings (loss) before minority interest ...............      11,241      (15,853)      (3,876)
Minority interest ......................................         582          194         --
                                                            --------     --------     --------
Net earnings (loss) ....................................    $ 10,659     $(16,047)    $ (3,876)
                                                            ========     ========     ========
Earnings (loss) per common and common
   equivalent share:
      Basic ............................................    $   0.69     $  (1.28)    $  (0.33)
                                                            ========     ========     ========
      Diluted ..........................................    $   0.66     $  (1.28)    $  (0.33)
                                                            ========     ========     ========
Weighted average common shares and common
   dilutive equivalents outstanding:
      Basic ............................................      15,398       12,511       11,780
                                                            ========     ========     ========
      Diluted ..........................................      16,063       12,511       11,780
                                                            ========     ========     ========
</TABLE>


See accompanying notes to consolidated financial statements.


                                                F-5





<PAGE>



CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Thousands of dollars)

<TABLE>
<CAPTION>

                                                                                     Other
                                                            Comp.      Retained       Comp.    Common    Treasury    Paid-In
                                               Total       Income      Earnings      Income     Stock      Stock      Capital
                                             --------------------------------------------------------------------------------
<S>                                          <C>          <C>          <C>         <C>          <C>      <C>         <C>
Balance at June 30, 1998                     $ 72,391                  $ 28,978    $    15      $1,352   $  (301)    $ 42,347
Comprehensive loss
  Net loss                                     (3,876)     (3,876)       (3,876)
                                                          -------
  Other comprehensive loss, net of tax
    Unrealized loss on marketable
      securities                                  (83)        (83)
    Foreign currency translation effect           (58)        (58)
                                                          -------
  Other comprehensive loss                                   (141)                    (141)
                                                          -------
Comprehensive loss                                         (4,017)
                                                          =======
Exercise of employee stock options
  And related tax effect                          338                                               18                    320
                                             --------------------------------------------------------------------------------
Balance at June 30, 1999                     $ 68,712                  $ 25,102    $  (126)     $1,370   $  (301)    $ 42,667
Comprehensive loss
  Net loss                                    (16,047)    (16,047)      (16,047)
                                                          -------
  Other comprehensive loss, net of tax
    Unrealized loss on marketable
      securities                                  (22)        (22)
    Foreign currency translation effect          (125)       (125)
                                                          -------
  Other comprehensive loss                                   (147)                    (147)
                                                          -------
Comprehensive loss                                        (16,194)
                                                          =======
Unearned Compensation                          12,024                                                                  12,024
Exercise of employee stock options
  And related tax effect                       13,687                                               74                 13,613
                                             --------------------------------------------------------------------------------
Balance at June 30, 2000                     $ 78,229                  $  9,055    $  (273)     $1,444   $  (301)    $ 68,304
Comprehensive income
  Net earnings                                 10,659      10,659        10,659
                                                          -------
  Other comprehensive income (loss),
     net of tax
       Unrealized gain on marketable
         securities, net of related tax effect    128         128
       Unrealized gain on Swap Agreement           31          31
       Foreign currency translation effect     (1,604)     (1,604)
                                                          -------
  Other comprehensive income                               (1,445)                  (1,445)
                                                          -------
Comprehensive income                                        9,214
                                                          =======
Repurchased common stock,
  net of adjustment                            (4,716)                                                    (4,716)
Secondary offering                             51,824                                              292                 51,532
Exercise of employee stock options
  and related tax effect                       14,588                                               44                 14,544
                                             --------------------------------------------------------------------------------
Balance at June 30, 2001                     $149,139                  $ 19,714    $(1,718)     $1,780   $(5,017)    $134,380
</TABLE>

See accompanying notes to consolidated financial statements.


                                                F-6





<PAGE>



CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of dollars)

<TABLE>
<CAPTION>

                                                                           Fiscal Year Ended June 30,
                                                                        -----------------------------------
                                                                         2001          2000          1999
                                                                        -------      --------      --------
<S>                                                                     <C>          <C>           <C>
Cash provided by (used for) operating activities:
   Net earnings (loss)                                                  $10,659      $(16,047)     $ (3,876)
   Adjustments to reconcile net earnings to cash provided by
      (used for) operating activities:
      Depreciation and amortization                                       3,996        11,318         4,448
      Loss on disposal of assets                                            869         1,176           662
      Deferred income taxes                                               2,446        (7,247)       (1,540)
      Unearned compensation related to stock options                       --          12,024          --
      Loss on sale of marketable securities                                --            --             (38)
      Changes in operating accounts:
         Receivables                                                     (7,140)       (7,657)        4,074
         Costs in excess of billings                                      3,942        (5,083)          522
         Inventories                                                    (12,382)        3,594        (1,043)
         Prepaid expenses and taxes                                       3,721         4,770            42
         Accounts payable and accrued expenses                            3,306         4,654        (5,252)
         Minority interest                                                  520           194          --
                                                                        -------      --------      --------
      Net cash provided by (used for) operating activities                9,937         1,696        (2,001)
                                                                        -------      --------      --------
Cash provided by (used for) investing activities:
   Additions to property, plant and equipment                           (33,050)       (6,513)       (4,372)
   Investment in marketable securities                                   (2,155)       (2,466)      (11,860)
   Investments in other assets                                           (1,790)         --          (2,958)
   Proceeds from the sale of marketable securities                        2,250          --           8,616
   Proceeds from maturity of marketable securities                        1,180         2,500         3,045
                                                                        -------      --------      --------
      Net cash used for investing activities                            (33,565)       (6,479)       (7,529)
                                                                        -------      --------      --------
Cash provided by (used for) financing activities:
   Proceeds (Repayments) of debt                                         12,556            48          (125)
   Exercise of employee stock options                                       996         7,062           338
   Issuance and repurchase of common stock                               47,108          --            --
   Contributions from minority interest of consolidated subsidiaries       --             249          --
                                                                        -------      --------      --------
      Net cash provided by financing activities                          60,660         7,359           213
                                                                        -------      --------      --------
Net increase (decrease) in cash and cash equivalents                     37,032         2,576        (9,317)
Cash and cash equivalents, beginning of year                             15,598        13,022        22,339
                                                                        -------      --------      --------
Cash and cash equivalents, end of year                                  $52,630      $ 15,598      $ 13,022
                                                                        =======      ========      ========
</TABLE>

See accompanying notes to consolidated financial statements.


                                                F-7





<PAGE>



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2001, 2000, and 1999
Thousands, except for per share amounts

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of Zygo
Corporation and its subsidiaries ("ZYGO" or the "Company"). All material
transactions and accounts with the subsidiaries have been eliminated from the
consolidated financial statements. As discussed in Note 2, all the outstanding
shares of Firefly Technologies, Inc. ("Firefly") were acquired by the Company on
May 5, 2000, in a transaction accounted for as a pooling-of-interests.
Accordingly the financial statements of the Company have been restated to
reflect the merger as if it had occurred on July 1, 1997.

CASH AND CASH EQUIVALENTS

The Company considers cash and cash investments with maturities at the date of
purchase of three months or less to be cash and cash equivalents.

MARKETABLE SECURITIES

The Company considers investments in securities with maturities at the date of
purchase in excess of three months as marketable securities. Marketable
securities primarily consist of corporate and tax exempt bonds. All securities
held by the Company at June 30, 2001 and 2000, were classified as
available-for-sale and recorded at fair value or held to maturity and recorded
at cost. Unrealized holding gains and losses, net of the related tax effect, on
available-for-sale securities are excluded from earnings and are reported as a
separate component of stockholders' equity until realized.

INVENTORIES

Inventories are stated at the lower of cost (determined on a first-in, first-out
basis) or market.

DEPRECIATION

Depreciation is based on the estimated useful lives of the various classes of
assets and is computed using the straight-line method. See note 7.

IMPAIRMENT OF LONG-LIVED ASSETS

As required by Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets for Long-Lived Assets to Be Disposed
Of," the Company evaluates the carrying value of its long-lived and intangible
assets at each balance sheet date to determine if impairment exists based upon
estimated undiscounted future cash flows. The impairment, if any, is measured by
the difference between carrying value and estimated fair value and charged to
expense in the period identified. The remaining amortization periods are
periodically evaluated and would be revised if considered necessary. See notes 8
and 20.

REVENUE RECOGNITION

Revenues, other than revenue under the National Ignition Facility ("NIF")
contract (note 20) and revenue from certain automation contracts (note 6), are
recognized when units are shipped. Revenues related to NIF and certain
automation contracts are recognized under the percentage-of-completion method of
accounting.

In December 1999, the Securities and Exchange Commission ("SEC") issued SEC
Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements." SAB 101 summarized certain of the SEC's views in applying generally
accepted accounting principles to revenue recognition


                                       F-8






<PAGE>



in financial statements. SAB 101 was effective for ZYGO in the fourth quarter of
fiscal 2001. The adoption of SAB 101 did not have a material effect on ZYGO's
financial position or results of operations.

EARNINGS PER SHARE

Basic and diluted earnings per share are calculated in accordance with Statement
of Financial Accounting Standards No. 128, "Earnings Per Share."

The following table sets forth the reconciliation of weighted average shares
outstanding and diluted weighted average shares outstanding:

-------------------------------------------------------------------------
                                JUNE 30,        June 30,         June 30,
                                  2001            2000             1999
-------------------------------------------------------------------------
Weighted average shares
outstanding                      15,398          12,511           11,780
                                 ------          ------           ------
Dilutive effect of stock
options                             665            --               --
                                 ------          ------           ------
Diluted weighted average
shares outstanding               16,063          12,511           11,780
-------------------------------------------------------------------------

During 2000 and 1999, the Company recorded a loss and all options were excluded
from the computation because of the anti-dilutive effect on earnings per share.

GAIN CONTINGENCY

The Company was awarded $2,669 plus recovery of certain costs in a judgment
rendered by the United States District Court (District of Arizona) on June 2,
1994. The Court's decision was appealed to the Court of Appeals for the Federal
Circuit located in Washington, D.C. by the defendant and oral arguments of the
appeal were heard by the Court on March 9, 1995. On April 1, 1996, the United
States Court of Appeals for the Federal Circuit rendered an Opinion Announcing
Judgment of the Court. The appellate court affirmed-in-part and reversed-in-part
the District Court's earlier findings and remanded the case to the District
Court for a redetermination of the damage award. ZYGO recorded a gain of $1
million in the third quarter of 2000 when the Company received the proceeds from
this settlement.

STOCK BASED COMPENSATION

Stock-based compensation awards to employees under the Company's stock plans are
accounted for using the intrinsic value method prescribed in Accounting
Principals Board Opinion ("APB") No. 25, "Accounting for Stock Issued to
Employees" and related interpretations. The Company has adopted the disclosure
requirements of Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation."

The Company follows the practice of recording amounts received upon the exercise
of options by crediting common stock and additional capital. Except as discussed
in Note 2, no charges are reflected in the consolidated statements of operations
as a result of the grant or exercise of stock options, which are granted with an
exercise price at fair-market value on the date of grant. The Company realizes
an income tax benefit from the exercise or early disposition of certain stock
options. This benefit results in a decrease in current income taxes payable and
an increase in additional paid-in capital.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments," requires that reporting entities provide, to
the extent practicable, the fair value of financial


                                      F-9






<PAGE>



instruments, both assets and liabilities. The carrying amounts of cash, accounts
receivable, accounts payable, and accrued expenses approximate fair value
because of the short maturity of these items.

USE OF ESTIMATES

Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets, liabilities, revenues and expenses and the
disclosure of contingent assets and liabilities to prepare these consolidated
financial statements in conformity with accounting principles generally accepted
in the United States of America. Actual results could differ from those
estimates.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In June 1998 and June 1999, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting
for Derivative Instruments and Hedging Activities," as amended, which
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts and for
hedging activities. Under SFAS No. 133, certain contracts that were not formerly
considered derivatives may now meet the definition of a derivative. It requires
that an entity recognize all derivatives as either assets or liabilities in the
statements of financial position and measure those instruments at fair value. In
addition, SFAS No. 133 permits hedge accounting when certain conditions are met.
SFAS No. 133, as amended by SFAS No. 137 and No. 138, is effective for all
fiscal quarters of fiscal years beginning after June 15, 2000. The adoption of
SFAS No. 133 did not have a material effect our results of operations or
financial position.

In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements." SAB No.
101 summarizes the views of the SEC staff in applying accounting principles
generally accepted in the United States to revenue recognition in financial
statements. Subsequently, the SEC issued SAB No. 101A and SAB No. 101B,
"Amendment: Revenue Recognition in Financial Statements," that delays the
implementation date of certain provisions of SAB No. 101. The adoption of SAB
No. 101 in the fourth quarter of fiscal 2001 did not have a material effect on
our results of operations or financial position.

In March 2000, the FASB issued Interpretation No. 44, "Accounting for Certain
Transactions involving Stock Compensation, an interpretation of APB Opinion No.
25." The Interpretation answers questions dealing with APB No. 25 implementation
practice issues. Interpretation No. 44 is applied prospectively to new awards,
modifications to outstanding awards, and changes in employee status on or after
July 1, 2000, except as follows: (a) requirements related to the definition of
an employee apply to new awards granted after December 15, 1998; (b)
modifications that directly or indirectly reduce the exercise price of an award
apply to modifications made after December 15, 1998; and (c) modifications to
add a reload feature to an award apply to modifications made after January 12,
2000. Financial statements for periods prior to July 1, 2000 will not be
affected. The adoption of Interpretation No. 44 did not have a material impact
on our results of operations or financial position.

In September 2000, the FASB's Emerging Issues Task Force (EITF) released its
discussion on EITF Issue No. 00-10, "Accounting for Shipping and Handling Fees
and Costs." EITF No. 00-10 sets forth guidance on how a seller of goods should
classify in the income statement (a) amounts billed to a customer for shipping
and handling and (b) costs incurred for shipping and handling. The adoption of
EITF Issue No. 00-10 did not have a material impact on our results of operations
or financial position.

In June 2001, the FASB issued SFAS No. 141, "Business Combinations" which
addresses the financial accounting and reporting for business combinations and
supercedes Accounting Principles Board (APB) Opinion No. 16, "Business
Combinations," and SFAS No. 38, "Accounting for Preacquisition


                                      F-10





<PAGE>



Contingencies of Purchased Enterprises." SFAS No. 141 requires that all business
combinations be accounted for by a single method, the purchase method, modifies
the criteria for recognizing intangible assets, and expands disclosure
requirements. The provisions of SFAS No. 141 apply to all business combinations
initiated after June 30, 2001. We do not expect the adoption of SFAS No. 141 to
have a material effect on our results of operations or statements of financial
position.

In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets" which addresses financial accounting and reporting for acquired goodwill
and other intangible assets and supersedes APB No. 17, "Intangible Assets." SFAS
No. 142 addresses how intangible assets that are acquired individually or with a
group of other assets should be accounted for in financial statements upon their
acquisition and after they have been initially recognized in the financial
statements. SFAS No. 142 requires that goodwill and intangible assets that have
indefinite useful lives not be amortized but rather tested at least annually for
impairment, and intangible assets that have finite useful lives be amortized
over their useful lives. SFAS No. 142 provides specific guidance for testing
goodwill and intangible assets that will not be amortized for impairment. In
addition, SFAS No. 142 expands the disclosure requirements for goodwill and
other intangible assets in the years subsequent to their acquisition. SFAS No.
142 is effective for our fiscal year 2003, with early adoption permitted at the
beginning of our fiscal year 2002. Impairment losses for goodwill and
indefinite-life intangible assets that arise due to the initial application of
SFAS No. 142 are to be reported as resulting from a change in accounting
principles. However, goodwill and intangible assets acquired after June 30, 2001
will be subject immediately to provisions of SFAS No. 142. We are in the process
of evaluating the impact that this SFAS will have on our results of operations
and financial position.

NOTE 2: MERGERS, ACQUISITIONS AND STRATEGIC INITIATIVES

On May 5, 2000, the Company entered into an agreement and plan of merger with
Firefly Technologies, Inc. ("Firefly"), a Delaware corporation, Zygo TeraOptix,
Inc., ("Zygo TeraOptix") a Delaware corporation and a wholly-owned subsidiary of
the Company, and the security holders of Firefly, pursuant to which the Company
agreed to acquire Firefly. Immediately thereafter, the acquisition was
consummated by the merger of Zygo TeraOptix with and into Firefly and Firefly
became a wholly-owned subsidiary of the Company under the new name Zygo
TeraOptix, Inc.

Under the terms of the acquisition, the Company exchanged an aggregate of
2,303,937 shares of its common stock, $.10 par value per share, for all of the
then outstanding capital stock and stock options of Firefly. The acquisition,
which is intended to be tax free for federal income tax purposes to the Firefly
security holders, has been accounted for as a pooling-of-interest transaction.
Firefly manufactures metrology equipment, micro-optics, switches and filters for
the telecommunications industry, as well as heads and related products for the
optical data storage industry. The telecommunications components are used in
wave division multiplexers to increase the capacity of optical fibers. The
Company intends to continue to use the assets acquired in the acquisition for
these purposes.

Related to the transaction and the vesting of certain Firefly stock options, the
Company has recorded approximately $12,024 of additional compensation expense
and in addition recorded $1,977 in acquisition related costs for legal,
investment banking and accounting fees in fiscal 2000.

In the fourth quarter of fiscal 2000, the Company decided to discontinue its
investment in certain product lines, which were no longer compatible with its
strategic plan. Related to the discontinuance of these product lines, the
Company recorded approximately $10,567 of charges in the fourth quarter of
fiscal year 2000 which consisted of the write-down of goodwill and other
intangible assets ($5,478) and inventory ($5,089) which the Company will no
longer continue to develop.


                                      F-11





<PAGE>



On September 1, 1997, the Company, through its Technical Instruments subsidiary,
completed the purchase of the remaining 50% of Syncotec Neue Technologien und
Instrumente GmbH ("Syncotec") the Company did not already own. The Company paid
$2,262 and issued 19,432 shares of common stock, $.10 par value, valued at $623.
The transaction was accounted for as a purchase. The net purchase price was
allocated to the fair value of the net assets acquired. This allocation resulted
in a charge of $878 of in-process research and development costs.

NOTE 3: MARKETABLE SECURITIES

Marketable securities consisted primarily of corporate bonds and tax-exempt
bonds issued by various state and municipal agencies for both 2001 and 2000.
Marketable securities at June 30, 2001 and June 30, 2000 are reported either at
fair value or at cost depending on their classification. The unrealized gain on
marketable securities of $51 (gross) is shown net of its related tax effect of
$37 as a separate component of stockholders' equity.

Dividend and interest income is recognized when earned. Realized gains and
losses are included in earnings and are derived using the specific
identification method for determining the cost of securities sold.

The cost, gross unrealized holding gains (losses), and fair value of
available-for-sale securities at June 30, 2001 and 2000 were as follows:

                                                 Gross        Gross
                                               Unrealized   Unrealized
                                                 Holding      Holding     Fair
                                      Cost        Gains       Losses      Value
                                    ------     ----------   ----------   ------
AT JUNE 30, 2001
  CORPORATE, STATE AND LOCAL
       MUNICIPAL BONDS              $5,320        $ 51         $ --      $5,371

At June 30, 2000
   Corporate, state and local
       Municipal bonds              $7,240        $ --         $(154)    $7,086
                                    ======        ====         =====     ======

There were no gross realized gains or losses recorded in 2001 or 2000.

Maturities of investment securities classified as available-for-sale were as
follows at June 30, 2001 and 2000:

<TABLE>
<CAPTION>

                                                   JUNE 30, 2001          June 30, 2000
                                                ------------------       -----------------
                                                            FAIR                    Fair
                                                 COST       VALUE         Cost      Value
                                                ------      ------       ------     ------
<S>                                             <C>        <C>           <C>        <C>
Due within one year                             $  --      $  --         $ --       $ --
Due after one year through five years            5,320       5,371        7,240      7,086
                                                ------      ------       ------     ------
                                                $5,320      $5,371       $7,240     $7,086
                                                ======      ======       ======     ======
</TABLE>


                                      F-12





<PAGE>



Maturities of investment securities classified as held-to-maturity were as
follows at June 30, 2001 and 2000:

<TABLE>
<CAPTION>

                                                  JUNE 30, 2001            June 30, 2000
                                                ------------------       -----------------
                                                            FAIR                    Fair
                                                 COST       VALUE         Cost      Value
                                                ------      ------       ------     ------
<S>                                             <C>        <C>           <C>        <C>
Due within one year                             $1,750      $1,750       $1,182     $1,182
                                                ------      ------       ------     ------
Due after one year through five years             --          --           --         --
                                                ------      ------       ------     ------
                                                $1,750      $1,750       $1,182     $1,182
                                                ======      ======       ======     ======
</TABLE>

NOTE 4: ACCOUNTS RECEIVABLE

At June 30, 2001 and 2000, accounts receivable, net of allowances, were as
follows:


                                     JUNE 30,           June 30,
                                       2001              2000
                                     --------          --------
Trade (note 19)                      $ 25,644          $ 19,293
Other                                   2,015             1,079
                                     --------          --------
                                       27,659            20,372
Allowance                                (381)             (234)
                                     --------          --------
                                     $ 27,278          $ 20,138
                                     ========          ========

NOTE 5: INVENTORIES

At June 30, 2001 and 2000, inventories, net of reserves, were as follows:

                                            JUNE 30,         June 30,
                                              2001             2000
                                            --------         --------
Raw materials and manufactured parts        $ 20,359         $  9,759
Work in process                                5,674            3,471
Finished goods                                 1,308            1,496
                                            --------         --------
                                              27,341           14,726
Reserves                                      (3,080)          (2,847)
                                            --------         --------
                                            $ 24,261         $ 11,879
                                            ========         ========

NOTE 6: COSTS IN EXCESS OF BILLINGS

Revenues from automation projects are accounted for under the
percentage-of-completion method using total project costs incurred to date in
relation to estimated total costs of the contracts to measure the stage of
completion. The cumulative effects of revisions of estimated total contract
costs and revenues are recorded in the period in which the facts become known.
When a loss is anticipated on a contract, the full amount of the loss is
provided for currently. The differences between amounts billed and revenue
recognized is shown as costs in excess of billings on the accompanying balance
sheets.

Totals of revenue earned and billings issued on contracts were as follows:

                                           JUNE 30,         June 30,
                                             2001             2000
                                           --------         --------
Revenue recognized to date                  $50,529          $37,069
Billings to date                             48,727           31,326
                                            -------          -------
                                            $ 1,802          $ 5,743
                                            =======          =======


                                      F-13





<PAGE>



NOTE 7: PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost. Costs of additions,
replacements and improvements are capitalized and depreciated over a range of
3-40 years. Maintenance and repairs are charged to expense as incurred. At June
30, 2001 and 2000, property, plant and equipment, at cost, were as follows:

                                                    JUNE 30,        June 30,
                                                      2001           2000
                                                    --------       --------
Land                                                 $ 3,778        $   897
Building                                               9,199          9,115
Machinery, equipment and office furniture             31,101         23,839
Leasehold improvements                                   625            519
Construction in progress                              23,849          3,621
                                                     -------        -------
                                                      68,552         37,991
Less accumulated depreciation                         21,077         19,498
                                                     -------        -------
                                                     $47,475        $18,493
                                                     =======        =======

NOTE 8: GOODWILL AND OTHER INTANGIBLES

The cost of goodwill and other intangible assets is amortized on a straight-line
basis, which ranges from 4 to 20 years. Management evaluates, on an ongoing
basis, the carrying value of its goodwill and other intangible assets and makes
adjustments when impairments are identified. Goodwill and other intangibles,
net, at June 30, 2001 and 2000 were as follows:

                                         JUNE 30,          June 30,
                                           2001             2000
                                         --------          --------
Goodwill and other intangibles            $7,726           $5,140
Accumulated amortization                   2,859            2,062
                                          ------           ------
                                          $4,867           $3,078
                                          ======           ======

NOTE 9: BANK LINE OF CREDIT

The Company has a $3,000 unsecured bank line of credit with interest at LIBOR
plus 60 basis points (approximately 4.5% at June 30, 2001). The line of credit
is available through November 22, 2001. At June 30, 2001 and 2000, no amounts
were outstanding under the bank line of credit.

NOTE 10: LONG-TERM DEBT

On May 14, 2001 the Company entered into a mortgage on the newly constructed
facility located in Westborough, Massachusetts. The mortgage amount is $12,560
at an interest rate of LIBOR plus 100 basis points (approximately 4.9% at June
30, 2001) and is payable in full on May 14, 2007. Interest only payments are to
be made through February 14, 2002. The mortgage is amortizing on a 15-year level
amortization schedule requiring level monthly principal and interest payments.
As of June 30, 2001, long-term debt was $12,281 with a current portion of
long-term debt of $279. The agreement contains financial covenants, which among
others relate to debt service and consolidated debt ratios. As of June 30, 2001,
the Company is in compliance with the financial covenants.

In conjunction with the mortgage, the Company entered into an interest rate swap
agreement that provides for a fixed interest rate of approximately 7% for the
duration of the mortgage. As of June 30,


                                      F-14





<PAGE>



2001, the market value of the agreement is $31 and is recorded as an asset with
a corresponding credit to stockholders' equity.

Interest payments on debt and capital leases were $107, $6, and $11 in fiscal
2001, 2000, and 1999, respectively.

NOTE 11: LEASES

The Company leases certain manufacturing equipment and facilities under
operating leases, some of which include cost escalation clauses, expiring on
various dates through 2006. Total rental expense charged to operations was
$1,562 in 2001, $986 in 2000, and $738 in 1999. At June 30, 2001 the minimum
future rental commitments under noncancellable leases payable over the remaining
lives of the leases were:

Year ending June 30,                                 Capital     Operating
                                                     -------     ---------
2002                                                  $ 33        $1,798
2003                                                    --         1,448
2004                                                    --         1,151
2005                                                    --           925
2006                                                    --           745
                                                       ----        ------
           Total minimum lease payments                  33        $6,067
                                                                   ======

Less amount representing interest                        3

Present value of minimum lease payments                 30

Less current portion of capital lease obligations       30
                                                      ----

Capital lease obligation, excluding current portion   $ --
                                                      ====

NOTE 12: PROFIT-SHARING PLAN

The Company maintains a deferred profit-sharing plan under which substantially
all full-time employees of the Company are eligible to participate.
Profit-sharing expense for the years ended June 30, 2001, 2000, and 1999,
amounted to $2,516, $1,209, and $607, respectively. The profit-sharing plan
consists of a cash distribution and a contribution to the Company's 401(k)
program. Profit-sharing contributions are determined annually at the discretion
of the Board of Directors. The cash distribution for the years ended June 30,
2001, 2000, and 1999, amounted to $930, $709, and $0, respectively.

Effective June 30, 1985, the existing profit-sharing plan was revised and
amended to incorporate a 401(k) tax deferred payroll deduction program and an
Employee Stock Ownership Program. Under the 401(k) program, employees may
contribute a tax-deferred amount of up to 15% of their compensation, as defined.
The Company may contribute to the 401(k) program an amount determined annually
at the discretion of the Board of Directors. The 401(k) contribution expense for
the years ended June 30, 2001, 2000, and 1999 amounted to $1,586, $500, and
$607, respectively.

As of January 1, 2001, the employees of Zygo TeraOptix have been incorporated
into the Company's 401(k) program for fiscal 2001. Prior to January 1, 2001, the
Company maintained a separate defined contribution retirement plan for the
employees of Zygo TeraOptix. The plan allowed employees to participate after
three months of employment with the Company by deferring up to 15% of their
salary on a pre-tax basis, and allowed the Company to make discretionary
contributions to the plan, which


                                      F-15






<PAGE>



were allocated to the participants' accounts. The Company did not make any
contributions to the plan through January 1, 2001.

Under the Employee Stock Ownership Program, the Company may, at the discretion
of the Board of Directors, contribute its own stock or contribute cash to
purchase its own stock. The purchased stock's fair market value can not exceed
the maximum amount of employee stock ownership credit as determined under
Section 416 of the Internal Revenue Code. There were no purchases and no
contributions made under this program for the years ended June 30, 2001, 2000,
and 1999.

NOTE 13: STOCKHOLDERS' EQUITY

On July 31, 2000 the shareholders voted to increase the number of authorized
shares of common stock from 15 million to 40 million.

On March 7, 2001 the Company closed a secondary public offering of 2,924,500
shares of common stock including 424,500 shares sold to underwriters to cover
over-allotments. The offering price was $19 per share. The net proceeds to the
Company including the over-allotment shares, after deducting underwriting
discounts, commissions, and offering expenses totaled $51,824.

On April 11, 2001, the Company purchased 239,605 shares of its common stock from
two officers and directors, pursuant to stock purchase agreements; all at a
price per share of $20.81 (the closing price of the common stock in the public
markets on that day) for $4,986. The funding for the purchase came from cash
balances. The purpose of the purchase was to allow these two officers and
directors to satisfy their tax obligations arising from the Firefly acquisition,
in which they were principal stockholders, and to satisfy and extinguish the
margin loans they incurred to pay additional taxes, which arose from the
acquisition of Firefly and were due prior to the date the Company made the
loans. The common stock purchased is being held as treasury stock.

NOTE 14: STOCK COMPENSATION PLANS

As of June 30, 2001, Zygo Corporation has two stock-based compensation plans,
which are described below (see note 15). The Company applies APB Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations in
accounting for its plans. Since all options were granted with an exercise price
equal to the fair-market value on the date of the grant, no compensation cost
has been recognized for its fixed option plans. Pro forma information regarding
net income and earnings per share is required by SFAS No. 123, "Accounting for
Stock-Based Compensation," which requires that the information be determined as
if the Company has accounted for its stock options granted in fiscal years
beginning after December 15, 1994 under the fair value method of the Statement.

The fair value of options at date of grant was estimated using the Black-Scholes
model. The Company's pro forma information is as follows:

<TABLE>
<CAPTION>

                                                      JUNE 30,       June 30,       June 30,
                                                      2001(1)          2000           1999
                                                      --------       ---------      --------
<S>                                                    <C>           <C>            <C>
Pro forma net income (loss)                            $3,436        $(16,930)      $(4,697)
Pro forma earnings (loss) per share - diluted          $ 0.21        $  (1.35)      $ (0.40)
</TABLE>

(1) The company previously reported pro forma net income of $9,952 and pro forma
earnings per share-diluted of $0.62 for the year ended June 30, 2001. In
estimating the fair value of options at the date of grant using the alternate
methodology under SFAS No. 123 for fiscal 2001, the Company utilized computer
software to determine the pro forma stock option expense using the Black-Scholes
model. The wrong column total erroneously was extracted from the computer
generated report, causing an error in the computation of the "pro forma net
income (loss)" and "pro forma earnings (loss) per share, diluted" information
previously presented in note 14 for this period.



                                      F-16





<PAGE>


The fair value of these options at the date of grant was estimated with the
following weighted average assumptions for 2001, 2000, and 1999:

                                       JUNE 30,       June 30,       June 30,
                                         2001           2000           1999
                                      ---------       ---------     ---------
Risk free rate of interest                  5.0%            5.9%          4.8%
Dividend yield                              0.0%            0.0%          0.0%
Volatility factor                            77%             67%           58%
Expected life of option                4.8 YEARS       5.6 years     5.7 years

Weighted-average fair values at date of grant for options granted during fiscal
2001, 2000, and 1999 were $39.85, $17.18, and $6.17, respectively.

The above pro forma information is based on historical activity and may not
represent future trends.

On June 26, 2001, the Board of Directors granted an option to purchase 25,000
shares of the Company's common stock to the Zetetic Institute, a non-profit
organization that provides assistance to the Company in connection with certain
research and development activities. The option has an exercise price of $18.64
per share, the closing price of the common stock on the date of the grant, and
will vest, in equal annual increments, over the four-year period following the
date of grant.

NOTE 15: STOCK OPTION PLANS

EMPLOYEE STOCK OPTION PLAN AND DATA

The Zygo Corporation Amended and Restated Non-Qualified Stock Option Plan
permits the granting of non-qualified options to purchase a total of 4,850,000
shares (adjusted for splits) of common stock at prices not less than the
fair-market value on the date of grant. Options generally become exercisable at
the rate of 25% of the shares each year commencing one year after the date of
grant. The Plan as amended will expire on September 3, 2002.

                                                     JUNE 30, 2001
                                            ---------------------------------
                                                                  WEIGHTED
                                                                  AVERAGE
                                           SHARES              EXERCISE PRICE
                                            ---------          --------------
Outstanding at beginning of year              798,299            $ 10.0199
Granted                                     1,386,436            $ 61.8101
Exercised                                    (347,463)           $  3.5084
Expired or canceled                           (58,964)           $ 58.5268
                                            ---------            ---------
Outstanding at end of year                  1,778,308            $ 50.2233
                                            =========            =========

                                                       June 30, 2000
                                            ---------------------------------
                                                                  Weighted
                                                                  Average
                                             Shares            Exercise Price
                                            ---------          --------------
Outstanding at beginning of year            1,245,299            $  7.2277
Granted                                       182,650            $ 23.1386
Exercised                                    (519,200)           $  7.2148
Expired or canceled                          (110,450)           $ 13.2402
                                            ---------            ---------
Outstanding at end of year                    798,299            $ 10.0199
                                            =========            =========


                                      F-17





<PAGE>



                                                      June 30, 1999
                                            ---------------------------------
                                                                  Weighted
                                                                  Average
                                             Shares            Exercise Price
                                            ---------          --------------
Outstanding at beginning of year            1,416,779            $  7.2866
Granted                                       228,000            $ 10.5957
Exercised                                    (184,480)           $  1.8362
Expired or canceled                          (215,000)           $ 26.6993
                                            ---------            ---------
Outstanding at end of year                  1,245,299            $  7.2277
                                            =========            =========


NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN AND DATA

The Zygo Corporation Amended and Restated Non-Employee Director Stock Option
Plan permits the granting of non-qualified options to purchase a total of
620,000 shares (adjusted for splits) of common stock at prices not less than the
fair-market value on the date of grant. Under the terms of the Plan, as amended
on September 24, 1999, each new non-employee director (other than a person who
was previously an employee of the Company or any of its subsidiaries) is granted
an option to purchase 8,000 shares of Common stock, generally, on his or her
first day of service as a non-employee director; and each other non-employee
director is granted an option to purchase 3,000 shares of Common stock on an
annual basis. All Options are fully exercisable on the date of grant and have a
10-year term. The Plan, as amended, will expire on November 17, 2009.

                                                     JUNE 30, 2001
                                            ---------------------------------
                                                                  WEIGHTED
                                                                  AVERAGE
                                             SHARES            EXERCISE PRICE
                                            ---------          --------------
Outstanding at beginning of year              249,000            $  5.7922
Granted                                        23,000            $ 55.8726
Exercised                                     (90,000)           $  2.0000
Expired or canceled                              --              $    --
                                            ---------            ---------
Outstanding at end of year                    182,000            $ 13.9963
                                            =========            =========

                                                     June 30, 2000
                                            ---------------------------------
                                                                  Weighted
                                                                  Average
                                             Shares            Exercise Price
                                            ---------          --------------
Outstanding at beginning of year              450,000            $  6.2292
Granted                                        15,000            $ 17.2500
Exercised                                    (216,000)           $  7.4983
Expired or canceled                              --              $    --
                                            ---------            ---------
Outstanding at end of year                    249,000            $  5.7922
                                            =========            =========

                                                    June 30, 1999
                                            ---------------------------------
                                                                  Weighted
                                                                  Average
                                             Shares            Exercise Price
                                            ---------          --------------
Outstanding at beginning of year              450,000            $  6.2292
Granted                                          --              $    --
Exercised                                        --              $    --
Expired or canceled                              --              $    --
                                            ---------            ---------
Outstanding at end of year                    450,000            $  6.2292
                                            =========            =========


                                      F-18





<PAGE>



The following table summarizes information about all fixed stock options
outstanding at June 30, 2001:

<TABLE>
<CAPTION>

                                   Options Outstanding                            Options Exercisable
                    -------------------------------------------------    ------------------------------------
                         Number        Weighted Average
      Range of         Outstanding        Remaining        Weighted            Number             Weighted
      Exercise            as of          Contractual        Average      Exercisable as of        Average
       Prices         June 30, 2001          Life        Exercise Price       June 30, 2001     Exercise Price
 ----------------------------------    --------------------------------  -------------------------------------
<S>                      <C>                 <C>           <C>                <C>               <C>
  $ 1.92 - $ 9.50        267,674             4.61          $ 4.1931           207,700           $ 2.7381
  $10.56 - $13.38        163,875             7.35          $11.0178            67,875           $10.9442
  $14.31 - $18.64        405,283             9.76          $18.4411            25,375           $16.3963
  $18.82 - $43.06        196,360             8.05          $27.3266            87,325           $27.3800
  $43.88 - $77.75        199,420             9.20          $66.7770             8,700           $54.1896
  $78.00 - $80.13          8,100             9.06          $80.0988             8,000           $80.1250
  $81.50 - $81.50          2,240             9.18          $81.5000                 0           $      0
  $83.00 - $83.00        126,000             9.23          $83.0000                 0           $      0
  $87.00 - $87.00        581,356             9.25          $87.0000                 0           $      0
  $90.81 - $90.81         10,000             9.00          $90.8100             2,500           $90.8130
---------------------------------------------------------------------    ------------------------------------
  $ 1.92 - $90.81      1,960,308             8.43          $46.8599           407,475           $13.3948
=====================================================================    ====================================
</TABLE>

As discussed in Note 2, the Company recorded approximately $12,024 of additional
compensation expense to reflect the derived fair market value of certain Firefly
stock options, which were exercised by Firefly employees in connection with the
exchange of Firefly capital stock and stock options for Zygo Corporation common
stock. No Firefly options have been included in the tables above because all
Firefly options were exercised and converted to ZYGO shares in connection with
the merger.

NOTE 16: EMPLOYEE STOCK PURCHASE PLAN

In November 2000, Zygo Corporation's Board of Directors adopted a
non-compensatory Employee Stock Purchase Plan ("ESPP"). Under the ESPP,
employees of the company who elect to participate are granted options to
purchase common stock at a 15 percent discount from the market value of such
stock. The ESPP permits an enrolled employee to make contributions to purchase
shares of common stock by having withheld from his or her salary an amount
between 1 percent and 10 percent of compensation. The total number of shares of
common stock that may be issued pursuant to options granted under the ESPP is
approximately 500,000. At June 30, 2001, the Company had withheld $613 for
purchase of shares under this plan; and in July 2001, issued approximately
32,000 shares of common stock.


                                      F-19





<PAGE>



NOTE 17: INCOME TAXES

The components of income tax expense (benefit) for each year are as follows:

                                             Fiscal Year Ended June 30,
                                         ----------------------------------
                                          2001         2000         1999
                                         ----------------------------------
Currently payable:
   Federal                               $  --        $ 1,136     $ (1,339)
   State                                    --            (71)         101
   Foreign                                 1,008          604          101
                                         ----------------------------------
                                         $ 1,008      $ 1,669     $ (1,137)
                                         ==================================
Deferred:
   Federal                               $ 2,328     $ (3,051)    $ (1,034)
   State                                     118          (77)        (755)
   Foreign                                  --           --            (49)
                                         ----------------------------------
                                         $ 2,446     $ (3,128)    $ (1,838)
                                         ----------------------------------
Total income tax (benefit) expense       $ 3,454     $ (1,459)    $ (2,975)
                                         ==================================

Income taxes refunded amounted to $1,979, $2,539, and $848 in fiscal 2001, 2000,
and 1999, respectively.

The total income tax expense (benefit) differs from the amount computed by
applying the applicable U.S. federal income tax rate of 35% in each of the
fiscal years 2001, 2000, and 1999 to earnings before income taxes for the
following reasons:

                                              Fiscal Year Ended June 30,
                                         ----------------------------------
                                           2001         2000         1999
                                         ----------------------------------
Computed "expected" tax expense
   (benefit)                             $ 5,143     $ (5,886)    $ (2,400)
Increases (reductions) in
  taxes resulting from:
    Acquisition- related charges          (1,112)       4,329           --
    State taxes, net of federal
      income tax benefit                    (331)         (96)        (432)
    Tax exempt interest income               (43)         (15)        (131)
    FSC benefit                             (254)        (300)          --
    Change in Valuation Allowance            619           --           --
    Research Credit                       (1,114)        (300)        (109)
    Other, net                               546          809           97
                                         ----------------------------------
                                         $ 3,454     $ (1,459)    $ (2,975)
                                         ==================================


                                      F-20





<PAGE>



The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities as of June 30, 2001 and
2000 are presented below:

                                                       JUNE 30,        June 30,
                                                         2001            2000
                                                       --------        --------
Deferred tax assets:
   Accounts receivable, principally due to
      the allowance for doubtful accounts              $    143        $    468
   Accrued liabilities                                      610             395
   Inventory valuation                                    1,492           1,412
   Unrealized gain on marketable securities                --                57
   One-time charges                                       1,943           2,140
   Intangibles                                               96             245
   Federal and state NOLs and credits                    17,486           4,572
   Other                                                   --                30
                                                       --------        --------
                                                         21,770           9,319
   Less valuation allowance                               1,653            --
                                                       --------        --------
   Deferred tax asset                                    20,117           9,319

Deferred tax liabilities:
   Prepaid expenses                                         (92)            (39)
   Plant and equipment, principally due
      to differences in depreciation expense               (111)           (516)
   Unrealized gain on marketable securities                 (19)           --
   Other                                                   --               (15)
                                                       --------        --------
   Deferred tax liability                                  (222)           (570)
                                                       --------        --------
Net deferred tax asset                                 $ 19,895        $  8,749
                                                       ========        ========

The net current deferred tax assets and net non-current deferred tax liabilities
as recorded on the balance sheet as of June 30, 2001 and 2000 are as follows:

                                                        JUNE 30,      June 30,
                                                          2001          2000
                                                        --------      --------
Net current deferred tax asset                          $ 4,076       $ 9,020
Net noncurrent deferred tax asset (liability)            15,819          (271)
                                                        -------       -------
Net deferred tax asset (liability)                      $19,895       $ 8,749
                                                        =======       =======

The Company has recorded a valuation allowance to reflect the uncertainty of
realizing certain state net operating loss carryforwards. The valuation
allowance as of July 1, 2000 was $0. The net change in the total valuation
allowance for the year ended June 30, 2001 was an increase of $1,653.
Subsequently recognized tax benefits relating to the valuation allowance for
deferred tax assets as of June 30, 2001 will be allocated as follows:

               Income tax benefit                  $    619
               Additional paid in capital             1,034
                                                   --------
                                                   $  1,653

Management believes it is more likely than not that the remaining net deferred
tax assets of $19,895 will be realized as the results of future operations are
expected to generate sufficient taxable income to do so.

At June 30, 2001, the Company's share of the cumulative undistributed earnings
of foreign subsidiaries was $1,699. No provision has been made for U.S. or
additional foreign taxes on the undistributed earnings of foreign subsidiaries
since the Company intends to continue to reinvest these earnings.


                                      F-21





<PAGE>



Determination of the amount of unrecognized deferred tax liability associated
with these earnings is not practicable.

At June 30, 2001, the Company has federal and state net operating loss
carryforwards of approximately $36,507 and $50,500 which are available to reduce
federal and state taxable income, if any, through 2019. The Company also has a
federal general business credit carry forward of approximately $1,989, which is
available to reduce federal taxable income, if any, through 2019.

During 2001, the Company realized tax benefits of approximately $6,889 from the
exercise of stock options which was credited to consolidated stockholders'
equity which is a non-cash transaction as it relates to the consolidated
statement of cash flows.

NOTE 18: SEGMENT REPORTING

The Company has adopted the Financial Accounting Standards Board (FASB)
Statement No. 131, "Disclosures about Segments of an Enterprise and Related
Information." FASB No. 131 establishes standards, using a management approach,
for reporting information regarding operating segments in annual financial
statements. The management approach designates the internal reporting that is
used by the chief operating decision maker when making operating decisions and
assessing performance as the source of the Company's reportable segments. The
Company's president has been determined to be its chief operating
decision-maker, as defined under Statement 131.

The Company operates in three principal business segments globally:
Semiconductor; Industrial; and Telecommunications. For its fiscal year 2000,
ZYGO operated in one segment, as a world leader in metrology, process control,
and yield solutions servicing high precision industries. Substantially all of
the Company's operating results, assets, depreciation, and amortization are U.S.
based. The segment data is presented below in a manner consistent with
management's internal measurement of the business.

<TABLE>
<CAPTION>

                                                Fiscal Year Ended June 30, 2001
                              ---------------------------------------------------------------
                              Semiconductor    Industrial     Telecommunications      Total
                              -------------    ----------     ------------------     --------
<S>                              <C>             <C>               <C>               <C>
Sales                            $ 84,561        $35,178           $13,511           $133,250
Gross Profit                       38,737         15,969             6,463             61,169
Gross Profit as a % Sales            46%           45%                48%                46%
</TABLE>

Separate financial information by segment for total assets, capital expenditures
and depreciation and amortization is not available and is not evaluated by the
chief operating decision maker of the Company.

Sales to Canon Inc. and to Canon Sales Co., Inc., accounted for more than 19% of
total Company sales for each of the years ended June 30, 2001, 2000, and 1999
(see note 19). No other individual customer accounted for more than 10% of total
Company sales for any year presented in the accompanying consolidated financial
statements. Substantially all of the Company's operating results, assets,
depreciation, and amortization are U.S. based. The Company's sales are noted
below.


                                      F-22





<PAGE>



Sales by geographic area were as follows:

                                                 Fiscal Year Ended June 30,
                                            ------------------------------------
                                              2001          2000          1999
                                            ------------------------------------
Americas (primarily United States)          $ 68,299      $ 48,835      $ 35,353
Far East:
   Japan                                      45,194        17,588        14,143
   Pacific Rim                                 7,423        11,714         6,038
                                            ------------------------------------
Total Far East                              $ 52,617      $ 29,302      $ 20,181
Europe and Other (primarily Europe)           12,334         9,106         7,848
                                            ------------------------------------
Total                                       $133,250      $ 87,243      $ 63,382
                                            ====================================

NOTE 19: RELATED PARTY TRANSACTIONS

Sales to Canon Inc., a stockholder, and Canon Sales Co., Inc., a distributor of
certain of the Company's products in Japan and a subsidiary of Canon Inc.,
amounted to $43,336 (33% of net sales), $16,463 (19% of net sales), and $13,375
(21% of net sales), for the years ended June 30, 2001, 2000, and 1999,
respectively. Selling prices of products sold to Canon Inc. and Canon Sales Co.,
Inc. are based, generally, on the normal terms given to distributors. At June
30, 2001 and 2000, there was approximately, in the aggregate, $3,827 and $2,171,
respectively, of trade accounts receivable from Canon Inc. and Canon Sales Co.,
Inc.

On April 11, 2001, the Company purchased 239,605 shares of its common stock from
two officers and directors for $4,986 (see note 13).

NOTE 20: MATERIAL CONTRACTS

On May 9, 1997, the Company announced it had entered into a contract with the
University of California's Lawrence Livermore National Laboratory ("LLNL"),
whereby the Company will be a primary supplier of large plano optical components
for the National Ignition Facility ("NIF"), a $1.2 billion Department of Energy
project at LLNL to produce the world's largest laser for nuclear fusion
research. The contract provided for the Company to design, manufacture, and
equip a world-class optical fabrication facility at its Middlefield, Connecticut
operations for a fixed price of nearly $10 million over an 18-month time period.
Revenues recognized on this contract in fiscal 2001, 2000, and 1999 amounted to
$3,308, $2,802, and $900, respectively. To accommodate the space required for
the NIF facility and to provide additional office facilities, the Company built
a 35,500-square-foot building addition to its Middlefield, Connecticut facility.

During fiscal year 1999, the Company entered into an agreement with IBM, which
allows for marketing and servicing rights for its Atomic Force Microscope (AFM)
line of business for a four-year period. The Company made payments totaling
$2,250 to secure this relationship, which are being amortized over four years or
less.


                                      F-23





<PAGE>



On March 28, 2000, the Company entered into an agreement to terminate the
distribution agreement to market and sell AFM products. As part of the
agreement, the Company was granted a nonexclusive license to the IBM AFM
technology for the next three years and may continue to license the technology
for additional terms thereafter. The Company and Veeco Corporation, which
subsequently entered into the distribution agreement with IBM, have entered into
an additional agreement for support and service of AFM products previously sold
by ZYGO. As a result of this agreement ZYGO's AFM sales and service department
has been discontinued.


                                      F-24





<PAGE>



SELECTED CONSOLIDATED QUARTERLY FINANCIAL DATA (UNAUDITED)
(Thousands except per share amounts)

<TABLE>
<CAPTION>

                                                      FOR THE FISCAL YEAR ENDED JUNE 30, 2001
                                              ------------------------------------------------------
                                              SEPTEMBER 30,   DECEMBER 31,    MARCH 31,     JUNE 30,
                                              -------------   ------------    ---------     --------
<S>                                              <C>            <C>           <C>           <C>
Net sales                                        $ 23,932       $ 32,731      $ 38,717      $37,870
Earnings before taxes and minority interest      $  1,379       $  3,063      $  5,055      $ 5,198
Income taxes                                          469          1,041         1,719          225
Minority interest                                      93            117           129          243
                                                 --------       --------      --------      -------
Net earnings                                     $    817       $  1,905      $  3,207      $ 4,730
                                                 ========       ========      ========      =======
Net earnings per share:
   Basic (1)                                     $   0.06       $   0.13      $   0.21      $  0.27
                                                 ========       ========      ========      =======
   Diluted (1)                                   $   0.05       $   0.13      $   0.20      $  0.26
                                                 ========       ========      ========      =======

<CAPTION>

                                                           For the Fiscal Year Ended June 30, 2000
                                                   ----------------------------------------------------------
                                                   September 30   December 31         March 31      June 30(3)
                                                   ------------   -----------         ---------     ----------
<S>                                                  <C>            <C>               <C>            <C>
Net sales                                            $ 18,603       $ 22,362          $  22,408      $ 23,870
Earnings before taxes, minority interest and
  nonrecurring charges                               $    926       $  2,424          $   2,136      $  1,770
Income taxes                                              354            960                609           342
Minority interest                                        --               73                 (6)          127
                                                     --------       --------          ---------      --------
Earnings before nonrecurring charges                 $    572       $  1,391          $   1,533      $  1,301
                                                     ========       ========          =========      ========
Earnings per share before nonrecurring charges:
      Basic                                          $   0.05       $   0.12          $    0.13      $   0.09
                                                     ========       ========          =========      ========
      Diluted                                        $   0.04       $   0.11          $    0.11      $   0.08
                                                     ========       ========          =========      ========

Net earnings (loss)                                  $    572       $   (949)         $     792      $(16,462)
                                                     ========       ========          =========      ========
Net earnings (loss) per share:
   Basic (1)                                         $   0.05       $  (0.08)(2)      $    0.06      $  (1.17)(2)
                                                     ========       ========          =========      ========
   Diluted (1)                                       $   0.04       $  (0.08)(2)      $    0.06      $  (1.17)(2)
                                                     ========       ========          =========      ========
</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 909, 764, 440, and 547 for fiscal 2001 quarters
     and 1,075, 0, 1,595, and 0 for fiscal 2000 quarters ended September 30,
     December 31, March 31, and June 30, respectively.

(2)  Accounting principles generally accepted in the United States of America
     require the computation of the net loss per share to be based on the
     weighted average basic shares outstanding.

(3)  Nonrecurring charges include acquisition-related charges of $14,001 and the
     West Coast operations reorganization costs of $10,567 in the fourth quarter
     ended June 30, 2000.


                                      F-25





<PAGE>



INDEPENDENT AUDITORS' REPORT ON SCHEDULE

The Board of Directors
Zygo Corporation

Under date of August 10, 2001, we reported on the consolidated balance sheets of
Zygo Corporation and subsidiaries as of June 30, 2001 and 2000, and the related
consolidated statements of earnings, stockholders' equity and cash flows for
each of the years in the three-year period ended June 30, 2001 as contained in
the 2001 annual report to stockholders. In connection with our audits of the
aforementioned consolidated financial statements, we also audited the related
consolidated financial statement schedule listed in the accompanying index. This
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion on this financial statement schedule
based on our audits.

In our opinion, this financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.

KPMG LLP

Hartford, Connecticut
August 10, 2001


                                      S-1





<PAGE>



                          ZYGO CORPORATION AND CONSOLIDATED SUBSIDIARY

                        SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

                           YEARS ENDED JUNE 30, 2001, 2000, AND 1999

<TABLE>
<CAPTION>

                                  Balance                                           Balance
                                at Beginning                                         at End
Description                      of Period       Provision        Write-Offs        of Period
-----------                    -------------    -----------       -----------      -----------
<S>                            <C>              <C>               <C>              <C>
YEAR ENDED JUNE 30, 2001:
  ALLOWANCE FOR DOUBTFUL
    ACCOUNTS                   $   234,400      $   245,500       $    98,600      $   381,300

  INVENTORY RESERVE            $ 2,846,600      $   311,700       $    77,900      $ 3,080,400


Year Ended June 30, 2000:
  Allowance for Doubtful
    Accounts                   $ 1,324,300      $    70,100       $ 1,160,000      $   234,400

  Inventory Reserve            $ 4,513,300      $   (23,800)      $ 1,642,900      $ 2,846,600


Year Ended June 30, 1999:
  Allowance for Doubtful
    Accounts                   $   753,600      $ 1,286,600       $   715,900      $ 1,324,300

  Inventory Reserve            $ 2,423,500      $ 2,679,000       $   589,200      $ 4,513,300
</TABLE>


                                              S-2



<PAGE>


<TABLE>
<CAPTION>
                                EXHIBIT INDEX

EXHIBIT
 TABLE                                                                        FORM 10-K405
NUMBER                                                                        PAGE NUMBER
-------                                                                       ------------
<S>            <C>                                                            <C>
23.            Accountants' Consent

99.1           Certification pursuant to Section 906 of the Sarbanes-Oxley
               Act of 2002

</TABLE>


                           STATEMENT OF DIFFERENCES

The section symbol shall be expressed as.................................   'SS'
The greater-than-or-equal-to sign shall be expressed as..................     >=