UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

(Mark One)

 (X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

                For the quarterly period ended September 30, 1996

                                       or

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
    
                 For the transition period from       to       
                                                -----    -----

                         Commission File Number 33-95284


                                ZYCON CORPORATION

             (Exact name of registrant as specified in its charter)

           Delaware                                         94-2348052
(State or other jurisdiction of                          (I.R.S. employer
incorporation or organization)                         Identification number)

                               445 El Camino Real
                              Santa Clara, CA 95050
                                 (408) 241-9900

    (Address, including zip code, and telephone number, including area code,
                  of registrant's principal executive offices)
                                 
                             -----------------------


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

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

Registrant had 11,056,000 shares of Common Stock,  $.001 Par Value,  outstanding
at October 31, 1996.


<PAGE>



                       ZYCON CORPORATION AND SUBSIDIARIES

                                      INDEX
                                                                            Page

Part I.    Financial Information

Item 1.    Financial Statements:

           Consolidated Condensed Balance Sheets as of September 30, 1996
             and December 31, 1995........................................    3

           Consolidated  Condensed  Statements  of Income for the three
             months and for the nine months ended September 30, 1996
             and 1995, respectively.......................................    4

           Consolidated Condensed Statements of Cash Flows for the nine
             months ended September 30, 1996 and 1995, respectively.......    5
       
           Notes to Consolidated Condensed Financial Statements...........    6

Item 2.    Management's Discussion and Analysis of Financial Condition and
             Results of Operations........................................    8

Part II.   Other Information

Item 1.    Legal Proceedings..............................................   15

Item 4.    Submission of Matters to a Vote of Security Holders ...........   15

Item 5.    Other Information..............................................   15

Item 6.    Exhibits and Reports on Form 8-K...............................   15

Signatures ...............................................................   16

Exhibits   ...............................................................   17

   

                                        2


<PAGE>


Part I:  Financial Information

Item I.  Condensed Financial Statements

                       ZYCON CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED CONDENSED BALANCE SHEETS
                        (In thousands, except share data)

                                     ASSETS

                                                   September 30,    December 31,
                                                       1996             1995
                                                   ------------     ------------
                                                    (unaudited)
Current Assets:
   Cash and cash equivalents.....................   $  7,683          $11,264
   Trade receivables.............................     26,920           20,886
   Inventories ..................................      9,118            6,131
   Prepaid expenses and other
     current assets..............................      2,272            1,734
                                                    --------          -------
               Total current assets..............     45,993           40,015
Plant and equipment, net.........................     73,549           52,130
Other assets ....................................     22,972            2,830
                                                    --------          -------
                                                    $142,514          $94,975
                                                    ========          =======

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
   Current portion of long-term debt..............  $  6,457          $ 2,567
   Accounts payable...............................    20,644           17,624
   Accrued liabilities............................     6,464            5,021
   Income taxes payable...........................         -            1,770
                                                    --------          -------
               Total current liabilities..........    33,565           26,982
Bank borrowings...................................    15,259                -
Long-term debt ...................................    22,194            5,458
Deferred income taxes.............................     7,534            6,634
                                                    --------          -------
               Total liabilities                      78,552           39,074
                                                    --------          -------

Stockholders' Equity:
   Preferred stock; $0.001 par value;
     20,000,000 shares authorized; none outstanding..     -                 -
   Common stock; $0.001 par value;
     25,000,000 shares authorized;
     11,056,000 and 11,000,000 shares issued
     and outstanding respectively..................       11                11
   Additional paid-in capital......................   33,017            32,369
   Retained earnings...............................   30,934            23,521
                                                    --------           -------
               Total stockholders' equity             63,962            55,901
                                                    --------           -------
                                                    $142,514           $94,975
                                                    ========           =======

    See accompanying Notes to the Consolidated Condensed Financial Statements

                                       3

<PAGE>

<TABLE>

                       ZYCON CORPORATION AND SUBSIDIARIES
                   CONSOLIDATED CONDENSED STATEMENTS OF INCOME
                                   (unaudited)
                      (In thousands, except per share data)
<CAPTION>

                                                              Three Months Ended                   Nine Months Ended 
                                                                 September 30,                       September 30,
                                                              1996            1995               1996             1995
                                                             ------          ------             ------           ------
   
<S>                                                         <C>             <C>                <C>              <C>     
Net sales.................................................  $ 55,181        $ 46,845           $ 158,649        $127,524
Cost of sales.............................................    46,987          39,555             133,389         110,882
                                                            --------        --------           ---------        --------
     Gross profit.........................................     8,194           7,290              25,260          16,642
                                                            --------        --------           ---------        --------

Selling, general and administrative expenses..............     4,164           2,808              11,601           7,402
                                                            --------        --------           ---------        --------
     Income from operations...............................     4,030           4,482              13,659           9,240

Interest expense, net.....................................       702             512                 975           1,478
                                                            --------        --------           ---------        --------
     Income before income taxes...........................     3,328           3,970              12,684           7,762

Income taxes..............................................     1,414           4,596               5,271           4,612
                                                            --------        --------           ---------        --------
     Net income (loss)....................................  $  1,914        $   (626)          $   7,413        $  3,150
                                                            ========        =========          =========        ========

Net Income Per Share......................................  $   0.17                           $    0.67
                                                            ========                           =========

Shares used in computing
     Net income per share.................................    11,091                              11,090
                                                            ========                           =========

Pro forma net income data:
     Income before income taxes, as reported..............                  $  3,970                             $  7,762
     Pro forma income tax expense.............................                 1,600                                3,128
                                                                            --------                             --------
     Pro forma net income.....................................              $  2,370                             $  4,634
                                                                            ========                             ========

     Pro forma net income per share...........................              $   0.27                             $   0.54
                                                                            ========                             ========

     Shares used in computing pro forma
       Net income per share...................................                 8,650                                8,650
                                                                            ========                             ========
<FN>


   See accompanying Notes to the Consolidated Condensed Financial Statements

</FN>
</TABLE>
                                       4


<PAGE>


                       ZYCON CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                   (unaudited)
                                 (In thousands)
                                                            Nine Months Ended
                                                          --------------------
                                                              September 30,
                                                           1996         1995
                                                          -------      -------

Cash flows from operating activities:
   Net income .........................................   $ 7,413      $ 3,150
   Adjustments to reconcile net income to net cash
      provided by operating activities:
      Depreciation and amortization....................     8,095        6,960
      Deferred income taxes............................       900        5,361
      Changes in operating assets and liabilities:
         Receivables...................................    (4,027)      (5,218)
         Inventories...................................    (1,971)        (492)
         Prepaid expenses, deposits and other assets...      (883)      (2,095)
         Accounts payable..............................     1,714        7,792
         Accrued liabilities...........................       938        1,435
         Income taxes payable..........................    (1,770)           -
                                                         --------     --------
           Net cash provided by operating activities...    10,409       16,893
                                                         --------     --------

Cash flows from investing activities:
   Purchase of ACT assets (net of cash)................    (8,884)           -
   Investment in Malaysia plant and equipment..........   (11,024)           -
   Malaysia equipment deposits and other assets........   (13,695)           -
   Purchases of plant and equipment, net...............   (12,972)     (14,568)
                                                         --------     --------
            Net cash used for investing activities.....   (46,575)     (14,568)
                                                         --------     --------

Cash flows from financing activities:
   Bank borrowings, net................................    13,916        2,000
   Proceeds from long-term debt........................    24,078        1,761
   Repayment of long-term debt.........................    (5,857)      (5,436)
   Deferred lease financing...........................        400            -
   Issuance of common stock ...........................        48            -
   Collections on stockholder notes....................         -          319
   Distribution paid to stockholders...................         -       (4,174)
                                                         --------     --------
            Net cash provided by (used for) financing
             activities................................    32,585       (5,530)
                                                         --------     --------

Decrease in cash and cash equivalents..................    (3,581)      (3,205)
Cash and cash equivalents at beginning of period.......    11,264        8,217
                                                         --------     --------
Cash and cash equivalents at end of period.............  $  7,683      $ 5,012
                                                         ========      =======

Supplemental disclosure of cash flow information:
   Interest paid.......................................  $  1,464      $ 1,865
                                                         ========      =======
   Taxes paid .........................................  $  6,290      $    60
                                                         ========      =======
Supplemental disclosure of noncash financing activity:
   Common stock issued in ACT acquisition..............  $    600      $     -
                                                         ========      =======
   Stockholder distributions declared but not paid.....  $      -      $ 1,219
                                                         ========      =======
   See accompanying Notes to the Consolidated Condensed Financial Statements

                                       5


<PAGE>


                       ZYCON CORPORATION AND SUBSIDIARIES
                        NOTES TO THE FINANCIAL STATEMENTS
                                   (unaudited)

 (1)     Basis of Presentation

         In the opinion of management,  these consolidated  condensed  financial
statements contain all normal recurring  adjustments for fair presentation.  The
results of  operations  for the nine months ended  September  30, 1996,  are not
necessarily an indication of the results to be expected for the full year.

         The accompanying  consolidated  condensed financial  statements include
the  accounts  of  Zycon  Corporation  and its  wholly-owned  subsidiaries.  All
material   intercompany  balances  and  transactions  have  been  eliminated  in
consolidation.

         The  unaudited  pro  forma   amounts   included  in  the   accompanying
consolidated  condensed statements of income for the nine months ended September
30,  1995  reflect  provisions  for income  taxes as if the Company had been a C
Corporation,  fully subject to federal and state income taxes.  On September 26,
1995, the Company elected C Corporation  status for federal and state income tax
reporting purposes.

         For information as to the significant  accounting  policies followed by
the Company and other  financial  and operating  information,  see the Company's
Form S-1 or Form 10-K  (File No.  33-95284),  as filed with the  Securities  and
Exchange  Commission.  These financial  statements should be read in conjunction
with the financial statements included in those filings.

(2)      Balance Sheet Components

         Receivables

         A summary of receivables follows (in thousands):

                                                    September 30,   December 31,
                                                        1996            1995
                                                     ---------       ---------

          Trade accounts receivable..............     $ 27,230       $ 21,136
          Less allowance for doubtful accounts...         (310)          (250)
                                                      --------        -------
                                                      $ 26,920       $ 20,886
                                                      ========       ========
         Inventories

          A summary of inventories follows (in thousands):

                                                    September 30,   December 31,
                                                        1996            1995
                                                     ---------       ---------

          Raw materials..........................     $  3,940        $  1,392
          Work in process........................        4,486           3,760
          Finished Goods.........................          692             979
                                                      --------        --------
                                                      $  9,118        $  6,131
                                                      ========        ========

                                       6



<PAGE>


                       ZYCON CORPORATION AND SUBSIDIARIES
                  NOTES TO THE FINANCIAL STATEMENTS (Continued)
                                   (unaudited)


(2)       Balance Sheet Components (Continued)

          Property, Plant and Equipment

          A summary of property, plant and equipment follows (in thousands):

                                                    September 30,   December 31,
                                                        1996            1995
                                                      --------        --------

          Machinery and equipment...................  $ 78,158        $ 61,975
          Building and leasehold improvements.......    39,248          23,704
          Office furniture and equipment............       847             520
          Construction in progress..................       387           3,250
          Other.....................................       765             580
                                                      --------       ---------
                                                       119,405          90,029
          Less accumulated depreciation
            and amortization                            45,856          37,899
                                                      --------        --------
                                                      $ 73,549        $ 52,130
                                                      ========        ========

(3)       Income Taxes

          The tax effects of temporary differences that give rise to significant
portions of the deferred  income tax assets and  liability  as of September  30,
1996, are presented below (in thousands):

          Deferred income tax assets:
             Allowance and accruals............................... $  749
             State income taxes...................................    167
                                                                  -------
                 Total deferred income tax assets.................    916

          Deferred income tax liability:
             Property and equipment, principally
             due to differences in depreciation................... (7,534)
                                                                  -------
                 Net deferred income tax liability................$(6,618)
                                                                  =======

                                       7



<PAGE>


                       ZYCON CORPORATION AND SUBSIDIARIES
                  NOTES TO THE FINANCIAL STATEMENTS (Continued)
                                   (unaudited)

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

          Except for the historical  information  contained herein,  the matters
discussed  below or  elsewhere  in this  quarterly  report are  forward  looking
statements that involve risks and uncertainties.  Any forward-looking statements
involving management's estimates or beliefs should be considered in light of the
factors  described below under "Factors That May Affect Future  Results." Actual
results may vary  materially from those  projected,  anticipated or indicated in
any forward-looking statements.

Results of Operations

Third Quarter

          Sales for the third  quarter of 1996  increased  18% to $55.2  million
from $46.8 million for the third quarter of 1995, primarily due to a 9% increase
in the average  selling  price per panel,  combined  with the  inclusion of $3.7
million of sales from the  Company's  newly  acquired  quickturn,  prototype and
design  facility,  Zycon Alternate  Circuits,  Inc.  (ZAC).  The increase in the
average selling price per panel was caused by a shift in customer demand towards
a greater  percentage  of higher  priced,  higher  layer count  printed  circuit
boards.  Unit volumes  shipped from the Santa Clara,  California  facility  were
virtually  unchanged  from the prior  year,  and  increased  6% from the  second
quarter of 1996.

          The  gross  profit  margin  was  14.9% in the  third  quarter  of 1996
compared  to 15.6% for the same  period in 1995.  The gross  margin  decline was
primarily  the  result of  higher  fixed  costs  associated  with the  Company's
capacity  expansion  during  the past  year.  The  third  quarter  gross  margin
represented an improvement  over the second quarter gross margin of 13.5%,  when
the Company experienced a slowing of orders.

          Selling, general and administrative (S,G&A) expenses increased to 7.5%
of sales in the third  quarter of 1996, as compared to 6.0% in the third quarter
of 1995. This was primarily due to an increase in Malaysia  related  expenses of
$526,000 and the addition of ZAC's S,G&A  expenses of  $560,000.  Excluding  the
increase in Malaysia  related start up expenses and ZAC's S,G&A expenses,  total
S,G&A would have remained at 6.0% of sales (without ZAC).

          Net  interest  expense  for the third  quarter  of 1996  increased  to
$702,000 from $512,000 in the third quarter of 1995,  mainly due to the addition
of $19 million of debt during June,  1996 to finance the Malaysia  operation and
domestic equipment purchases.

Year-to-Date

          For the nine months ended  September 30, 1996,  sales increased 24% to
$158.6  million from $127.5 million for the same period in 1995. The increase in
sales was  primarily  due to a 17%  increase  in the average  selling  price per
panel,  which  was  caused  by a shift in  customer  demand  towards  a  greater
percentage of higher priced,  higher layer count printed  circuit  boards.  Unit
volumes shipped from the Santa Clara facility  increased 3% over the same period
from the prior year.

          Gross profit margins for the nine month period  improved to 15.9% from
13.1% a year earlier.  This improvement was mainly due to the spreading of fixed
costs over a larger  sales base and the trend in  customer  demand  toward  more
complex, higher layer count, higher margin product.

                                       8


<PAGE>


          Selling,  general and  administrative  expenses  increased  to 7.3% of
sales for the nine months ended September 30, 1996,  compared to 5.8% during the
same period in 1995.  This was primarily due to an increase in Malaysia  related
expenses  of  $1,527,000,  the  addition of ZAC's  S,G&A  expenses of  $647,000,
additional  bonus accrual of $690,000,  with employee related expenses and legal
and professional  fees accounting for the difference.  Excluding the increase in
Malaysia  related start up expenses and ZAC's S,G&A expenses,  total S,G&A would
have increased slightly to 6.1% of sales (without ZAC).

          Net  interest  expense for the first nine months of 1996  decreased to
$975,000  from  $1,478,000  in the  same  period a year  earlier  due to a $17.5
million  paydown of debt in the fourth  quarter of 1995,  following  the initial
public offering  (IPO).  Total debt remained at low levels until the $19 million
debt  drawdown in late June 1996 to finance the  Malaysia  facility and domestic
equipment purchases.

Income Taxes

          Based on current tax laws, the Company estimates that it will incur an
effective  income tax rate of  approximately  40% in the  current  year for it's
domestic  operations.  Accordingly,  it has provided for income taxes during the
first nine months of 1996 using this estimate.  The consolidated  effective rate
is somewhat higher because the Malaysia losses are not deductible in the U.S.

          Since the Company was an S corporation during the first nine months of
1995,  pro forma net income data is presented  which reflect  income taxes as if
the Company had been a C  corporation.  With the return to C corporation  status
immediately  prior to the IPO, the Company recorded a net deferred tax liability
of $4.5 million and a nonrecurring charge to income tax expense.

Liquidity and Capital Resources

          As of September  30, 1996,  the  Company's  working  capital was $12.4
million  versus $13.0  million at December 31, 1995.  Cash and cash  equivalents
were $7.7 million at September  30, 1996 compared with $11.3 million at December
31, 1995. In the nine months ended September 30, 1996 the Company generated cash
from operations of $10.4 million,  and used $46.6 million for investments in the
ACT  acquisition  and plant  and  equipment  for the  Malaysia  and Santa  Clara
facilities,  which were partially  financed by $32.6 million in net  borrowings.
Receivables  increased to $26.9 million at September 30, 1996 from $20.9 million
at  December  31,  1995,  primarily  due to the  increased  sales  level and the
addition of the receivables from the Company's newly acquired subsidiary, ZAC.

          As of September 30, 1996 the following  lines of credit were available
to the Company:

             Working Capital Revolver ($28 million maximum)           $9 million
             Foreign Credit Lines for Malaysia Plant and Working 
                Capital                                              $18 million
             Domestic Credit Line for Malaysia Equipment              $6 million

          On June 18, 1996, the Company  purchased  substantially all the assets
of Alternate Circuit Technology, Inc. (ACT), a quick-turn,  prototype and design
printed  circuit  board   manufacturer.   The  initial   consideration  for  the
acquisition  was  approximately  $8.7  million  in cash,  $600,000  worth of the
Company's  common  stock  (50,000  shares  valued at $12.00 per share),  and the
assumption  of  approximately  $5.0  million  of  liabilities.  The  acquisition
agreement  also calls for  payment  of  $200,000  after a three  year  period if
certain  non-compete  covenants are met. The  acquisition was funded from excess
working capital.

          In July,  1996, the Company  renewed its revolving bank line of credit
for another two years at an increased maximum limit of $28 million,  up from $14
million  previously.  Borrowings  under the line of credit incur interest at the
bank's prime rate (8.25% as of September 30, 1996) and are secured by equipment,
trade receivables and inventories.

                                      9

<PAGE>

          During June,  1996,  the Company  borrowed a total of $19 million,  of
which $10 million in fixed assets lines of credit was used to finance  equipment
that had been purchased and paid for during the last nine months, and $9 million
of a  domestic  credit  line was  used for the  building  and  equipment  of the
Company's Malaysia facility.

Malaysia Investment

          The Company is the first major U.S.  independent printed circuit board
manufacturer to establish an Asian manufacturing  facility.  Construction of the
Company's new  manufacturing  plant in Kuching,  Malaysia was completed in July,
with  initial  shipments  commencing  in November  of this year.  The plant will
initially  produce  lower  layer count  boards for export  back to current  U.S.
customers,  allowing the Santa Clara facility to continue to focus on the higher
layer count product.

          Management  believes  that  the  Malaysia  facility  is  strategically
important  for several  reasons:  1) it will  provide a lower cost  structure to
competitively  manufacture  lower layer count  boards for export back to current
U.S. customers,  2) it provides an Asian manufacturing  presence that will allow
the Company to  eventually  build  higher  layer count  product to sell into the
Southeast  Asian  and  European  markets,  and  3)  the  Company's  geographical
diversification  will be improved.  With the exception of our recently  acquired
quickturn, prototype and design plant located in Massachusetts, the Santa Clara,
California facility was previously this Company's only manufacturing location.

          The Company believes that the Malaysia operation will begin generating
operating  profits by the end of 1997.  The  Company  estimates  that due to the
limited  sales  level from the  Malaysia  facility  during  the fourth  quarter,
combined with it's large fixed overhead base, the foreign loss from the Malaysia
operations (not tax deductible)  could approach an approximate  range of $1.0 to
$1.2 million, or -$.09 to $-.11 per share on an estimated 11,120,000 shares. The
results from each of the first three quarters of 1996 included  Malaysia startup
expenses that reduced total earnings by approximately  $-.03,  $-.04, and $-.04,
respectively. Thus the estimated negative impact of the Malaysian startup on our
fourth  quarter  results  will be an  additional  $-.05 to $-.07  over the third
quarter of 1996.

          The Company's total  investment in its Malaysia plant and equipment at
September  30,  1996 was  approximately  $28  million,  and is expected to total
approximately  $31 million when completed during the fourth quarter of 1996. One
or portions of both of the credit lines remaining for the building and equipment
of the Company's  Malaysian facility will be used to fund the estimated start-up
costs still  remaining  of  approximately  $3 million  over the next two months,
leaving available credit lines of approximately $21 million.


Factors That May Affect Future Results

          The Company operates in a changing  environment that involves a number
of  risks,  some of which  are  beyond  the  Company's  control.  The  following
discussion highlights some of these risks.

          Variability of Customer Requirements;  Absence of Customer Commitments
on Orders. The level and timing of orders placed by the Company's customers vary
due to a number of factors,  including  customer  attempts to manage  inventory,
changes in customer  manufacturing  strategies and variation in demand for their
products.  Since the Company typically does not obtain long-term purchase orders
or  commitments,  it must  anticipate  the  future  volume  of  orders  based on
discussions  with  its  customers.   The  Company  relies  on  its  estimate  of
anticipated  future  volumes  when  making  commitments  regarding  the level of
business  that it will seek and accept,  the mix of products  that it intends to
manufacture,  the timing of production  schedules and the levels and utilization
of personnel and other resources. A variety of conditions,  both specific to the
individual customer and generally affecting the customer's  industry,  may cause
customers  to  cancel,  reduce  or delay  orders  that were

                                       10

<PAGE>

previously made or anticipated. Generally, customers may cancel, reduce or delay
purchase orders and commitments without penalty, except for payment for work and
materials  expended  through  the  cancellation  date.  Significant  or numerous
cancellations,  reductions  or  delays  in  orders  by a  customer  or  group of
customers  could  have a  material  adverse  effect on the  Company's  business,
financial condition and results of operations.

          Competition.  The printed circuit board industry is  characterized  by
intense  competition.  Competition in this market is expected to increase in the
future.  The Company competes  principally in the market for complex  multilayer
printed  circuit  boards.  The Company's  competitors in this market segment are
primarily  large  domestic  manufacturers  and,  to a  lesser  degree,  small or
regional  producers.  In  addition,  OEMs with  captive  printed  circuit  board
manufacturing  operations  may seek  orders in the open  market  to fill  excess
capacity,   thereby  increasing  price   competition.   Some  of  the  Company's
competitors are substantially  larger and have greater financial  resources than
the Company.  In the future,  the printed circuit board industry could encounter
competition  from  new  technologies,  including  multichip  modules  and  other
technologies  that may reduce the number of printed  circuit boards  required in
electronic  equipment or may render  existing  technology  less  competitive  or
obsolete.

          Fluctuations  in  Operating  Results.   The  Company  has  experienced
significant  fluctuations in its operating  results and  anticipates  that these
fluctuations  will  continue in the  future.  For  example,  the Company had net
income for the first and second  quarters of 1994 that was  significantly  below
the Company's net income for the comparable periods of 1993,  reflecting,  among
other things,  a decline in average  selling price.  In addition,  the Company's
gross  profit  margin  decreased  to 13.5%  and  14.9% in the  second  and third
quarters  of 1996,  respectively,  from  19.1%  in the  first  quarter  of 1996,
primarily  as a result of a drop in sales  volume and  increases  in fixed costs
associated  with the  Company's  capacity  expansion  during the past year.  The
Company's  operating results are affected by a number of factors,  including the
timing of orders from and  shipments  to major  customers,  the volume of orders
relative to the Company's  capacity,  the timing of expenditures in anticipation
of future sales,  competitive pressures,  variations in product mix and economic
conditions in the  electronics  industry.  Many of these factors are outside the
control of the Company.  Since a significant  portion of the Company's operating
expenses  are  fixed,  even a  relatively  small  revenue  shortfall  can have a
disproportionate effect on the Company's results of operations.

          Malaysia   Facility.   The  Company   has   recently   constructed   a
manufacturing  facility  in  Malaysia.  The  start-up  costs  of this  facility,
including working capital for the Company's Malaysia  subsidiary,  are estimated
to be approximately $31 million, and the Company believes that the facility will
be ready to commence  operations by November,  1996.  The start up costs for the
Malaysia  facility have been funded primarily  through bank loans. The Company's
management has no experience in operating foreign manufacturing facilities,  and
there can be no  assurance  that the  Company  will be able to  operate  the new
facility on a profitable  basis.  It is anticipated  that the Malaysia  facility
will incur  operating  losses during its first several  quarters of  operations,
primarily as a result of start-up costs.  The Company expects that a substantial
portion of the capacity of the Malaysia  facility will initially be dedicated to
lower  layer  count  segments of the printed  circuit  board  market,  and it is
possible  that the  Company  could incur  losses even after the initial  year of
operations as a result of various factors  including  intense price  competition
for the  products  which it intends to produce at the new  facility.  Management
believes that losses incurred in the Company's  Malaysia  operations will not be
deductible for United States income tax purposes.  International  operations are
subject  to a number  of  risks,  including  unforeseen  changes  in  regulatory
requirements,  exchange rates,  tariffs and other trade barriers,  and political
and economic instability.  These risks are particularly  significant in the case
of the Company because of management's  inexperience in foreign manufacturing or
in managing international operations.

          Expansion of  Manufacturing  Capacity.  The Company  believes that its
competitive  position depends in part on its ability to expand its manufacturing
capacity.  The Company has made a significant investment in a major expansion of
space at its  Northern  California  manufacturing  facility and has expanded its
prototype manufacturing capabilities by its acquisition of the assets of an East
Coast quick turn,  prototype and design  facility.  In January 1996, the Company
entered into an  additional  facility  lease for a 59,000  square foot  building
which is expected to be  constructed  by the end of January 1997.  This building
will be immediately  adjacent to the

                                       11

<PAGE>

Company's  three  buildings  leased in Santa Clara,  California.  The  Company's
capital  expenditure  projects  also include the completion of the manufacturing
facility in Malaysia and the  purchase of  additional  equipment  which is being
installed at its Northern  California,  Massachusetts,  and Malaysia facilities.
There  can be no  assurance  that  the  Company  will  be  able  to  expand  its
manufacturing  capacity  in a timely  manner or that the cost of such  expansion
will not exceed  management's  current  estimates.  In addition,  the  Company's
expansion of its  manufacturing  capacity has and will continue to significantly
increase  its fixed  costs,  and the future  profitability  of the Company  will
depend on its ability to utilize  its  manufacturing  capacity  in an  effective
manner.  The Company's  inability to generate the additional  sales necessary to
utilize its  additional  capacity  could have a material  adverse  effect on the
Company's business, financial condition and results of operations.

          Technological Change.  Printed circuit board manufacturing  technology
has  evolved  from single and double  sided  printed  circuit  boards to include
multilayer printed circuit boards that require finer lines and spacing,  smaller
drilled holes and incorporate  surface mount technology  ("SMT").  Technological
change is rapid and  continuous,  and in the future the  manufacture  of complex
printed circuit boards will require  increased  technological  and manufacturing
expertise.  There can be no assurance  that the Company will be able to maintain
its  current  technological  position.  In  addition,  the  introduction  of new
technologies  may  require  the Company to  substantially  increase  its capital
expenditures.   Although  the  Company  has  developed   certain   technological
processes,  there can be no assurance  that these  technological  processes will
become  commercially  viable or that there will be commercial  applications  for
these technologies.

          Dependence on Electronics Industry.  The Company's principal customers
are  OEMs  and   contract   manufacturers   of  data   communication   products,
telecommunications  equipment, advanced storage systems,  workstations,  servers
and personal computers. These industry segments, and the electronics industry as
a whole,  are subject to rapid  technological  change and product  obsolescence.
Discontinuance or modifications of products containing  components  manufactured
by  the  Company  could  adversely  affect  the  Company's  business,  financial
condition and results of operations. The Company's growth has resulted, in part,
from its  ability to focus on  customers  in  rapidly  growing  segments  of the
electronics  industry.  There can be no assurance that the Company will continue
to be able to identify  and attract  customers  with rapid  growth rates or that
these industry  segments will continue to grow at their  historical  rates or at
all.  Moreover,  pricing pressures within one or more of these industry segments
may  lead  to  decreased  margins  on  sales  of  the  Company's  products.  The
electronics  industry  is  subject  to  economic  cycles  and  has in  the  past
experienced, and is likely in the future to experience,  recessionary periods. A
recession  or any other  event  leading to excess  capacity  in the  electronics
industry would likely result in intensified  price competition and a decrease in
unit  volume,  which  could  have a  material  adverse  effect on the  Company's
business, financial condition and results of operations.

          Concentration of Customers.  Since its inception,  the Company's sales
to a small number of its top customers have  accounted for a high  percentage of
the Company's  annual net sales.  The  composition  of the  Company's  principal
customers changes over time, and some of the Company's current largest customers
have only been customers for a relatively  short period of time. There can be no
assurance that the Company's  relationships with any of its principal  customers
will continue at current levels,  if at all, and the loss of one or more of such
customers  could  have a  material  adverse  effect on the  Company's  business,
financial condition and results of operations.

          Process  Failure.  The  Company's  business  involves  highly  complex
manufacturing  processes that could be subject to periodic failure. In the past,
process  failures have occurred,  which have resulted in short delays in certain
product shipments. There can be no assurance that failures will not occur in the
future.  The loss of revenue and  earnings  to the  Company  from such a failure
could  have a  material  adverse  effect on the  Company's  business,  financial
condition and results of operations.

          Dependence on Single  Manufacturing  Facility.  The Company's  current
high volume printed  circuit board  manufacturing  operations are centralized in
three  adjacent  buildings  in  Northern  California.  Since the Company is just
beginning to operate  multiple  facilities  in  different  geographic  areas,  a
disruption  of  the 

                                       12

<PAGE>

Company's Northern California  manufacturing operations resulting from sustained
process  abnormalities,  human  error,  government  intervention  or  a  natural
disaster  such as fire,  earthquake or flood could cause the Company to cease or
limit its  manufacturing  operations and  consequently  have a material  adverse
effect on the Company's business, financial condition and results of operations.

          Management  of  Growth;   Acquisitions.   The  Company  has  initiated
significant expansion,  including geographic expansion,  of its overall level of
operations,  which has placed, and is expected to continue to place, significant
demands on the Company's managerial,  technical,  financial and other resources.
This expansion will require the Company to invest in its  operations,  including
its financial and management  information systems,  and to retain,  motivate and
effectively  manage its  employees.  If the  Company's  management  is unable to
manage growth  effectively and to retain key personnel,  then the quality of the
Company's products and services,  as well as its business,  financial  condition
and results of operations, could be materially and adversely affected.

          The  Company  may from time to time  pursue the  acquisition  of other
companies,  assets or product  lines  that  complement  or expand  its  existing
business. Acquisitions involve a number of risks that could adversely affect the
Company's operating results,  including the diversion of management's attention,
the assimilation of the operations and personnel of the acquired companies,  the
amortization  of  acquired  intangible  assets  and  the  potential  loss of key
employees.  No assurance can be given that any  acquisition  by the Company will
not  materially  and adversely  affect the Company or that any such  acquisition
will enhance the Company's business.

          Availability  of Materials and  Components.  Raw materials used by the
Company in producing printed circuit boards are purchased by the Company and, in
certain  circumstances,  the Company  bears the risk of price  fluctuations.  In
addition,  shortages of certain types of materials have occurred in the past and
may occur in the future.

          Dependence  on Key  Personnel.  The  Company's  success  depends  to a
significant  degree upon the  continued  contributions  of members of its senior
management,  many of whom would be difficult to replace.  The future  success of
the  Company  also  depends  on its  ability  to  identify,  attract  and retain
additional  qualified  technical  and  managerial  personnel.  The  loss  of the
President or other  officers  and key  personnel  could have a material  adverse
effect on the Company's business, financial condition and results of operations.
None of these  employees  has  entered  into an  employment  agreement  with the
Company,  and there can be no assurance  that the Company will be able to retain
these employees.

          Intellectual  Property.  The Company's  success depends in part on its
proprietary techniques and manufacturing  expertise. The Company has few patents
for these proprietary techniques and chooses to rely principally on trade secret
protection.  There can be no assurance  that the Company will be able to protect
its  technology  or  that  competitors  will  not be  able  to  develop  similar
technology independently. In addition, there can be no assurance that the claims
allowed on any patents held by the Company will be sufficiently broad to protect
the  Company's  technology,  that any patents  issued to the Company will not be
challenged,  invalidated or circumvented  or that the rights granted  thereunder
will provide competitive advantages to the Company.

          Environmental  Matters.  The Company  uses  certain  materials  in its
manufacturing process which are classified as hazardous substances. Proper waste
disposal  and  environmental  regulation  are major  considerations  for printed
circuit board  manufacturers.  Although the Company believes that its facilities
are currently in material compliance with all applicable  environmental laws and
monitors it operations to avoid violations arising from human error or equipment
failures, there can be no assurance that violations will not occur. In the event
of a future  violation of  environmental  laws, the Company could be held liable
for damages  and for the costs of remedial  actions and could also be subject to
revocation  of permits  necessary to conduct its business.  Any such  revocation
could  require  the  Company  to cease or limit  production  at its  facilities,
thereby causing a material adverse effect on the Company's operations.  Zycon is
also subject to environmental laws and air quality  regulations  relating to the
storage,  use and  disposal  of  chemicals,  solid  waste  and  other  hazardous
materials.  As a generator  of  hazardous  materials,  the Company is subject to
financial exposure even if it fully complies with such

                                       13

<PAGE>

laws. In addition,  there can be no assurance that more stringent  environmental
laws will not be  adopted  over  time,  imposing  greater  compliance  costs and
increasing  risks and penalties  associated with a violation.  The City of Santa
Clara has adopted an ordinance that, as of April 1, 1997,  significantly reduces
the amount of waste,  including copper and nickel,  that companies such as Zycon
may discharge  into the city  sanitary  sewer.  The new  ordinance  provides for
substantial penalties for intentional or negligent  violations.  These penalties
include  fines  ranging from $10,000 to $50,000 per day,  revocation of required
business  permits,  the issuance of a cease and desist order and,  under certain
circumstances,  up to nine months  imprisonment.  Under the new  ordinance,  the
Company  is  subject  to  stringent  requirements  on the amount of water it can
discharge and is required to substantially  reduce the concentrations of certain
chemicals, including copper and nickel, which it currently discharges. Under the
new ordinance,  the  concentration  limit for the Company's  copper discharge is
reduced from 2.00  milligrams per liter to 1.02  milligrams  per liter,  and the
concentration  limit for the  Company's  nickel  discharge  is reduced from 2.60
milligrams per liter to 0.02 milligrams per liter.  The Company believes that by
using  a  combination  of  existing  and  developing   technologies,   including
established  methods for the chemical removal of copper, it will be able to meet
the  concentration  standards by April 1, 1997, the required date of compliance.
However,  there can be no assurance that the Company will be able to comply with
the reduced  discharge  levels  mandated by the  ordinance  or that the costs of
complying with the new ordinance will not exceed the Company's current estimate.
Furthermore,  there can be no assurance that  compliance with the ordinance will
not  have a  material  adverse  effect  on  the  Company's  business,  financial
condition and results of operations.

          Possible  Volatility  of Stock Price.  The Company  believes  that the
trading price of the Common Stock could be subject to  significant  fluctuations
in response to variations in quarterly  operating  results,  developments in the
electronics  industry,  stock market conditions and other factors.  In addition,
any  variance  or  shortfall  in revenue or  earnings  from  levels  expected by
securities analysts or the investment community at large could have an immediate
and  significant  adverse  effect on the trading price of the  Company's  Common
Stock.




                                       14


<PAGE>


PART II - OTHER INFORMATION

Item 1.  LEGAL PROCEEDINGS

          In March 1993, the U.S. Environmental Protection Agency (EPA) notified
Zycon of its  potential  liability  for  maintenance  and  remediation  costs in
connection  with a  hazardous  waste  disposal  facility  operated  by  Casmalia
Resources,   a  California  Limited   Partnership,   in  Santa  Barbara  County,
California.  The EPA  identified  Zycon as one of the 65  generators  which  had
disposed  the greatest  amounts of  materials  at the site by weight  during the
final years in which material was accepted by Casmalia  Resources.  Based on the
total  tonnage  contributed  by all  generators,  Zycon's  share is estimated at
approximately  0.3% of the total weight.  Approximately  20,000  generators that
contributed material to the site have been identified.
          The Casmalia  site was regulated by the EPA during the period when the
material was accepted. There is no allegation that Zycon violated any law in the
disposal of material at the site, rather the EPA's actions stemmed from the fact
that Casmalia  Resources may not have the financial means to implement a closure
plan for the site and  because of Zycon's  status as a  generator  of  hazardous
waste.
          In September,  1996 a Consent  Decree was entered into between the EPA
and  48  companies  (including  Zycon)  acting  through  the  Casmalia  Steering
Committee  (CSC).  The  Consent  Decree has been  filed  with the United  States
District  Court in Los Angeles,  California,  which must approve the  agreement.
Although  this approval is pending,  work has started under the Consent  Decree.
The Consent Decree sets forth the terms and conditions  under which the CSC will
carry out work aimed at final closure of the site.  Certain  closure  activities
will be performed by the CSC. Later work will be performed by the CSC, if funded
by other parties.  Under the Consent Decree, the settling parties will work with
the EPA to pursue  the  non-settling  parties  to  ensure  they  participate  in
contributing  to the closure and  long-term  operation  and  maintenance  of the
facility.
          The EPA will continue as the lead  regulatory  agency during the final
closure  work.  Because  long-term  maintenance  plans  for the site will not be
determined for a number of years,  it has not yet been decided which  regulatory
agency will oversee this phase of the work plan or how the long-term  costs will
be funded.  However,  the  agreement  provides a mechanism  for ensuring that an
appropriate federal, state or local agency will assume regulatory responsibility
for long-term maintenance.
          The Company has reserved $250,000 for its share of future  remediation
costs and believes  such amount is a reasonable  approximation  of its potential
responsibility under the Consent Decree, but if certain of the Casmalia Steering
Committee  members are ultimately  unable to fund their  allocated  shares or if
Zycon must  contribute to long-term  maintenance  of the site, the Company could
incur  additional  obligations.  Except for the  Casmalia  Consent  Decree,  the
Company is not party to any material litigation.

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

          None

Item 5.  OTHER INFORMATION

          None

Item 6.  EXHIBITS AND REPORTS ON FORM 8-K

          (a)     See the index to  exhibits  filed as part of this Form 10-Q on
                  page 17.

          (b)     Reports on Form 8-K
          A report  on Form 8-K was  filed on June 24,  1996,  as  amended  by a
          report on Form  8-K/A,  Amendment  No. 1, filed on July 29,  1996,  as
          further  amended by a report on Form 8-K/A,  Amendment No. 2, filed on
          August 23, 1996,  to disclose the  acquisition  of certain  assets and
          liabilities of Alternate Circuit Technology, Inc.

                                       15


<PAGE>



                                   SIGNATURES

          Pursuant to the  requirements of the Securities  Exchange Act of 1934,
the  Registrant  has duly  caused  this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                              ZYCON CORPORATION


Date:  November 8, 1996                       By:   /s/ Ronald H. Donati
                                              --------------------------
                                              Ronald H. Donati
                                              Chief Executive Officer,
                                              President



                                              By:   /s/ Kenneth R. Shilling
                                              Kenneth R. Shilling
                                              Chief Financial Officer
                                              Vice President, Finance



                                       16


<PAGE>


                                ZYCON CORPORATION
                                INDEX TO EXHIBITS

Exhibit Number                     Description                              Page
--------------                     -----------                              ----
     3.1           Restated Certificate of Incorporation of Registrant        *

     3.2           Bylaws of Registrant                                       *

     4             Specimen Common Stock Certificate                          *

    10.1           Revolving Credit Note Agreement dated July 17, 1996        18
                   by and between the Company and Comerica Bank -
                   California

    10.2           Third Amendment to Loan Agreement (Revolver) and First     20
                   Amendment to Loan Agreement (Term Loan) dated July 26,
                   1996 by and between the Company and Comerica Bank -
                   California

    11             Computation of Net Income Per Share                        23

    27             Financial Data Schedule                                    24


     *Exhibits  3.1, 3.2, and 4 are  incorporated  by reference to Exhibits 3.3,
3.4, and 4.1, respectively,  of Registrant's Registration Statement on Form S-1,
File No. 33-95284.



                                       17