<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549



                                   FORM 10-Q



              QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934

                 For the quarterly period ended March 28, 1997

                         Commission File Number 0-23628


                           FUSION SYSTEMS CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


         Delaware                                               52-0915080     
         --------                                               ----------     
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                               Identification No.)



                   7600 Standish Place, Rockville, MD  20855
                   -----------------------------------------
             (Address of principal executive offices and zip code)

      Registrant's telephone number, including area code:   (301) 251-0300
                                                            --------------

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


As of May 1,1997, 7,483,221 shares of registrant's Common Stock, par value $.01
per share, were outstanding.
<PAGE>   2
                  FUSION SYSTEMS CORPORATION AND SUBSIDIARIES
                                   FORM 10-Q
                      FOR THE QUARTER ENDED MARCH 28, 1997

                                     INDEX


<TABLE>
<CAPTION>
                                                                         PAGE NUMBER
                                                                         -----------
<S>                                                                         <C>
PART I - FINANCIAL INFORMATION

          Item 1 - Financial Statements                                      3

                   Consolidated Balance Sheets at March 28, 1997           
                   and December 31, 1996                                     3
                                                                           
                   Consolidated Statements of Income for the               
                   three-months ended March 28, 1997 and                   
                   March 29, 1996                                            4
                                                                           
                   Consolidated Statements of Cash Flows for the           
                   three-months ended March 28, 1997 and                   
                   March 29, 1996                                            5
                                                                           
                   Notes to Consolidated Financial Statements                6
                                                                           
          Item 2 - Management's Discussion and Analysis of                 
                   Financial Condition and Results of Operations             9
                                                                           
                                                                           
PART II - OTHER INFORMATION                                                
                                                                           
          Items 1-5 - Not applicable                                         -
                                                                           
          Item 6 - Exhibits and Reports on Form 8-K                         14
</TABLE>



                                      2
<PAGE>   3
PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


                 FUSION SYSTEMS CORPORATION AND SUBSIDIARIES
                         CONSOLIDATED BALANCE SHEETS
                     (In thousands, except share amounts)




<TABLE>
<CAPTION>
                                                                                 March 28,      December 31,
                                                                                   1997             1996
                                                                                -----------     ------------
                                                                                (unaudited)    
<S>                                                                          <C>               <C>
                                       ASSETS

Current Assets:
      Cash and cash equivalents                                                 $  29,869        $  38,445
      Short-term marketable securities                                             82,470           74,467
      Accounts receivable, net of allowance for doubtful
         accounts                                                                  14,798           14,487
      Inventories                                                                  15,724           14,905
      Prepaid expenses and other current assets                                       837              526
      Receivable from related party                                                   234              241
                                                                             ------------      -----------
               Total current assets                                               143,932          143,071

Fixed Assets, net of accumulated depreciation and amortization                     14,798           15,243
Deferred Income Taxes                                                               3,094            3,026
Other Assets                                                                          483              374
                                                                             ------------      -----------
                        Total assets                                            $ 162,307        $ 161,714
                                                                             ============      ===========

                             LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
      Accounts payable                                                          $   3,292        $   2,974
      Accrued expenses                                                              6,783            8,575
      Income taxes                                                                  2,865            3,391
                                                                             ------------      -----------
               Total current liabilities                                           12,940           14,940
                                                                             ------------      -----------

Commitments and Contingencies

Stockholders' Equity:
      Preferred stock, $0.01 par value; 5,000,000 shares authorized,
        none issued and outstanding                                                   -                -
      Common stock, $0.01 par value; 40,000,000 shares authorized,
        7,931,855  shares issued as of March 28, 1997 and December 31, 1996            79               79
      Additional paid-in capital                                                   41,442           41,486
      Retained earnings                                                           115,866          113,482
      Accumulated translation adjustment                                              (71)             (41)
      Treasury stock at cost: 452,867 and 469,000 shares, respectively             (7,949)          (8,232)
                                                                             ------------      -----------
               Total stockholders' equity                                         149,367          146,774
                                                                             ------------      -----------
                        Total liabilities and stockholders' equity              $ 162,307        $ 161,714
                                                                             ============      ===========
</TABLE>


  The accompanying notes are an integral part of these consolidated balance
                                   sheets.


                                      3

<PAGE>   4
                 FUSION SYSTEMS CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF INCOME
                    (In thousands, except per share data)
                                 (unaudited)


<TABLE>
<CAPTION>
                                                              Three Months Ended
                                                        -----------------------------
                                                         March 28,         March 29,
                                                           1997               1996
                                                        ----------         ----------
<S>                                                        <C>                <C>
Net Revenues                                               $19,429            $24,768
Cost of Sales                                                9,417             11,081
                                                        ----------         ----------
    Gross Profit                                            10,012             13,687
                                                        ----------         ----------

Operating Expenses:
  Selling, general and administrative                        3,888              5,294
  Research, development and engineering                      3,823              3,478
                                                        ----------         ----------
    Total operating expenses                                 7,711              8,772
                                                        ----------         ----------

    Operating Income                                         2,301              4,915
                                                        ----------         ----------

Other Income (Expense):
  Interest income, net                                       1,492                514
  Foreign exchange (loss) gain, net                            (65)                40
  Other, net                                                    (3)                 6
                                                        ----------         ----------
    Total other income, net                                  1,424                560
                                                        ----------         ----------

    Income from continuing operations
        before income taxes                                  3,725              5,475
Provision for Income Taxes
                 on Continuing Operations                    1,341              2,053
                                                        ----------         ----------

    Income from continuing operations                        2,384              3,422


Discontinued Operations, net of tax of $838                    -                1,395
                                                        ----------         ----------

             Net Income                                     $2,384             $4,817
                                                        ==========         ==========

Earnings Per Share:
    Continuing operations                                   $ 0.31             $ 0.42
    Discontinued operations                                    -                 0.18
                                                        ----------         ----------
    Total                                                   $ 0.31             $ 0.60
                                                        ==========         ==========

Weighted-Average Shares Outstanding                          7,749              8,059
                                                        ==========         ==========
</TABLE>


  The accompanying notes are an integral part of these consolidated statements.

                                      4
<PAGE>   5
                 FUSION SYSTEMS CORPORATION AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (In thousands)
                                 (unaudited)


<TABLE>
<CAPTION>
                                                                             Three Months Ended
                                                                           -----------------------
                                                                           March 28,     March 29,
                                                                             1997          1996
                                                                           ---------     ---------
<S>                                                                       <C>          <C>
Cash Flows from Operating Activities:

     Net Income                                                             $ 2,384       $ 4,817
     Adjustments to reconcile net income to net cash provided
       by (used in) operating activities:

        Depreciation and amortization                                           973           649
        Loss on disposal of fixed assets                                          3             -
        Cash provided by (used in) changes in assets
        and liabilities:  
          Accounts receivable                                                  (311)       (8,065)
          Receivable from related party, net                                      7           (41)
          Inventories                                                          (819)       (2,881)
          Prepaid expenses and other assets                                    (437)         (172)
          Deferred income taxes                                                 (68)         (609)
          Accounts payable                                                      318         1,461
          Accrued expenses and other liabilities                               (746)        1,262
          Income taxes accrued                                                 (526)        1,970
        Cash provided by changes in assets of
         discontinued operations                                                  -           965
                                                                           ---------      --------
Net Cash Provided by (Used in) Operating Activities                             778          (644)
                                                                           ---------      --------

Cash Flows from Investing Activities:

     Purchases of fixed assets                                                 (514)       (2,302)
     Payment of expenses related to sale of discontinued operations          (1,046)            -
     Net (purchases) sales of marketable securities                          (8,003)        5,959
     Foreign currency translation adjustments                                   (30)         (154)

                                                                           ---------      --------
Net Cash (Used in) Provided by Investing Activities                          (9,593)        3,503
                                                                           ---------      --------

Cash Flows from Financing Activities:

     Cash proceeds from exercise of stock options and stock sale, net           187            35
     Income tax benefit from exercise of stock options                           52             -
                                                                           ---------      --------
Net Cash Provided by Financing Activities                                       239            35
                                                                           ---------      --------

Net (Decrease) Increase in Cash and Cash Equivalents                         (8,576)        2,894

Cash and Cash Equivalents, beginning of period                               38,445        10,825
                                                                           ---------      --------
Cash and Cash Equivalents, end of period                                    $29,869       $13,719
                                                                           =========      ========
Supplemental Disclosure of Cash Flow Information-
     Cash paid during the period for:
        Interest                                                            $     2       $     2
        Income taxes                                                        $ 1,852       $   595
                                                                           =========      ========
</TABLE>


The accompanying notes are an integral part of these consolidated statements.

                                      5

<PAGE>   6


                  FUSION SYSTEMS CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)


1. BASIS OF PRESENTATION:

Fusion Systems Corporation, together with its subsidiaries (the "Company"),
designs, manufactures, markets and services photostabilizers and ashers used to
make advanced semiconductor devices.

The accompanying consolidated financial statements include the accounts of the
Company and all of its subsidiaries, after elimination of significant
intercompany transactions and balances.

The accompanying unaudited financial statements have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission regarding interim financial reporting.  Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements and should be read in
conjunction with the financial statements and notes thereto for the year ended
December 31, 1996 included in the Company's Annual Report on Form 10-K.  The
accompanying financial statements reflect all adjustments (consisting solely of
normal, recurring adjustments) which are, in the opinion of management,
necessary for a fair presentation of results for the interim periods presented.
The results of operations for the three-month period ended March 28, 1997 are
not necessarily indicative of the results to be expected for the full fiscal
year.

2. SALE OF UV CURING BUSINESS:

On September 6, 1996, the Company sold the operations constituting its
ultraviolet curing business for $121 million in cash plus the assumption of
certain liabilities to the Fairey Group, plc, a United Kingdom based company.
The assets sold included all of the assets relating to the UV curing business
of Fusion UV Curing Systems Corporation and Fusion Europe Limited and all of
the capital stock of three of the Company's subsidiaries -- Fusion Aetek UV
Systems, Inc., Fusion Japan KK, and Fusion VuS GmbH. The Company has reported
these operations as discontinued operations in the financial statements and, as
a result, has reclassified the prior year presentation to conform with this
treatment.

3. SHORT-TERM MARKETABLE SECURITIES:

At March 28, 1997, short-term marketable securities consisted of investment
grade commercial paper, U.S. government agency discount notes and Treasury
bills, and are considered by management to be held to maturity.  These
investments mature at various dates from April 1997 to March 1998.





                                       6
<PAGE>   7
4. INVENTORIES:

Inventories are valued at the lower of cost (using the first-in, first-out
method) or market.  Inventories consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                                   March 28,          December 31,
                                                                      1997                1996
                                                                   ----------         ------------
     <S>                                                           <C>                  <C>
     Raw materials and purchased parts                               $ 4,789              $ 4,372
     Work in process and finished subassemblies                       10,246                9,812
     Finished goods                                                      689                  721
                                                                   ----------         ------------
                              Total inventories                      $15,724              $14,905
                                                                   ==========         ============
</TABLE>



5.  EARNINGS PER SHARE:

Earnings per common and equivalent share are based on the weighted-average
number of common equivalent shares outstanding during the periods.  Common
equivalent shares include the dilutive effect of all options outstanding.
Fully diluted earnings per share are not presented because the difference
between these amounts and the amounts presented is not material.

On March 3, 1997 the Financial Accounting Standards Board released Statement
No. 128, "Earnings Per Share". Statement 128 requires dual presentation of
basic and diluted earnings per share on the face of the income statement for
all periods presented. Basic earnings per share excludes dilution and is
computed by dividing income available to common stockholders by the
weighted-average number of common shares outstanding for the period. Diluted
earnings per share reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity. Diluted earnings per share is computed similarly
to fully diluted earnings per share pursuant to Accounting Principles Bulletin
No. 15. Statement 128 is effective for reporting periods ending after December
15, 1997 and, when adopted, will require restatement of prior years' earnings
per share.

The Company anticipates that, upon implementing Statement 128, diluted earnings
per share will not differ materially from amounts reported and that basic
earnings per share from continuing operations would have been $0.32 and $0.44
for the quarters ended March 28, 1997 and March 29, 1996, respectively.





                                       7
<PAGE>   8
6.  INFORMATION CONCERNING GEOGRAPHIC REGIONS:

Net Revenues by Geographic Region

The Company sells its products in several geographic regions.  Net revenues
relating to each region are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                        Three Months Ended
                                                                   ---------------------------------
                                                                   March 28,               March 29,
                                                                     1997                    1996
                                                                   ----------              ---------
     <S>                                                            <C>                    <C>
     North America                                                   $10,513                $13,461
     Europe                                                            4,514                  4,523
     Pacific Rim                                                       2,575                  5,651
     Japan                                                             1,522                  1,030
     Other                                                               305                    103
                                                                   ----------              ---------
                               Total net revenues                    $19,429                $24,768
                                                                   ==========              =========
</TABLE>


Operating Locations

The Company manufactures its products domestically. The foreign operations
consist primarily of sales and service activities.  A significant portion of
the Company's revenues from its sales and service offices in Europe, South
Korea and Japan represent equipment sales shipped directly from U.S.
facilities.  A summary of net revenues by operating location is as follows (in
thousands):

<TABLE>
<CAPTION>
                                                                         Three Months Ended
                                                                   --------------------------------
                                                                   March 28,              March 29,
                                                                      1997                  1996
                                                                   ----------             ----------
     <S>                                                            <C>                   <C>
     Domestic                                                        $14,549                $19,801
     Europe                                                            4,533                  4,517
     South Korea                                                         323                    450
     Japan                                                                24                      -
                                                                   ----------             ----------
                               Total net revenues                    $19,429                $24,768
                                                                   ==========             ==========
</TABLE>





                                       8
<PAGE>   9
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS


Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the accompanying financial
statements for the periods specified and the associated notes. Further
reference should be made to the Company's Annual Report on Form 10-K for the
year ended December 31, 1996.

RESULTS OF CONTINUING OPERATIONS

Fusion Systems Corporation, together with its subsidiaries (the "Company"),
designs, manufactures, markets and services photostabilizers and ashers used to
make advanced semiconductor devices.

NET REVENUES.  Net revenues, consisting of revenues from system sales, spare
parts, service and royalty revenues, were $19.4 million for the first quarter
of 1997, as compared to $18.4 million in the fourth quarter of 1996 and $24.8
million in the first quarter of 1996.  The sequential increase in the first
quarter of 1997 over the last quarter of 1996 was primarily due to increases in
the shipments of the Gemini(R) product lines. The decrease over the same
quarter in the prior year was due to a general industry slowdown which started
in the third quarter of 1996.

GROSS PROFIT.  The Company's gross profit as a percentage of revenues was 51.5%
in the first quarter of 1997, as compared to 49.2% in the fourth quarter of
1996 and 55.3% in the first quarter of 1996.  The 230 basis point sequential
improvement over the fourth quarter of last year was primarily due to increased
production levels and improvements in manufacturing efficiency, particularly
with respect to the new product lines.  The decline, in comparison with the
first quarter of 1996, was primarily due to the lower production volume which
reduced the Company's ability to absorb its overhead costs.

SELLING, GENERAL AND ADMINISTRATIVE.  Selling, general and administrative
expenses were $3.9 million, $3.9 million and $5.3 million or 20.0%, 21.2% and
21.4% of net revenues for the quarters ended March 28, 1997, December 31, 1996
and March 29, 1996, respectively.  The level of expense in the first quarter of
1997 was comparable to the last quarter of 1996.  The decrease when compared to
the first quarter of 1996 is primarily due to the lower product shipment levels
in 1997, which resulted in lower commission costs, and to the implementation of
significant cost control programs at the time of the downturn last year.

RESEARCH, DEVELOPMENT AND ENGINEERING.  Research, development and engineering
expenses were $3.8 million, $3.9 million and $3.5 million, or 19.7%, 21.3% and
14.0% of net revenues for the quarters ended March 28, 1997, December 31, 1996
and March 29, 1996, respectively.  The relatively small reduction in the first
quarter of 1997 compared to the last quarter of 1996 was due primarily to a
reduction in the amount of materials being consumed in the current quarter.
The increases in dollars and percentage in the first quarter of 1997 versus the
first quarter of last year was primarily due to an increase in the level and
rate of expenditures related to new product and development activities over the
prior year.

OTHER INCOME, NET.  Other income, net of expenses, was $1.4 million, $1.8
million and $560,000 in the quarters ended March 28, 1997, December 31, 1996
and March 29, 1996, respectively. The





                                       9
<PAGE>   10
decrease in the first quarter of 1997, as compared to the last quarter of 1996,
was due to the payment, late in the fourth quarter of last year, of over $30
million in income taxes related to the gain on the sale of the UV curing
business. The increase in the first quarter of 1997, when compared to the first
quarter of last year, was due to the additional interest earned on the net
proceeds of the sale of the UV curing business.

PROVISION FOR INCOME TAXES.  The Company's effective tax rates were 36.0%,
31.7% and 37.5% for the quarters ended March 28, 1997, December 31, 1996 and
March 29, 1996, respectively. The rate  increase in the first quarter of 1997
compared to the last quarter of 1996 was due to an unusual level of tax credits
and other tax benefits becoming available to the Company during the last
quarter of 1996. The rate decrease, when compared to the first quarter of 1996,
was primarily due to an increase in the level of  benefit provided by the
utilization of a foreign sales corporation and an increase in the research and
development credit.

NET INCOME. As a result of the above performance, net income from continuing
operations for the quarter ended March 31, 1997 was $2.4 million, or $0.31 per
share, as compared to $2.1 million, or $0.26 per share, for the fourth quarter
of 1996 and $3.4 million, or $0.42 per share, for the first quarter of 1996.

LIQUIDITY AND CAPITAL RESOURCES

The Company's cash and marketable securities were $112.3 million as of March
28, 1997, almost $600,000 lower than the $112.9 million available at December
31, 1996. The operating cash flow for the quarter was positive, but net cash
decreased due to payment of accrued expenses related to the sale of the UV
curing business.

The Company's operating cash needs are primarily for working capital and to
fund its capital expenditure program. The Company's capital requirements
typically consist of manufacturing equipment, research and development
equipment, office equipment, leasehold improvements, computers, furniture and
fixtures.  Capital expenditures were $514,000, $1.7 million and $2.3 million in
the three-month periods ended March 28, 1997, December 31, 1996 and March 29,
1996, respectively. The decrease, in both the fourth quarter of 1996 and the
first quarter of 1997, compared to the first quarter of 1996, was due to the
build out of the Rockville manufacturing facility which was completed early in
the first quarter of 1997. The Company expects to spend approximately $6
million for capital expenditures during 1997.

Management expects that existing working capital and cash flow from operations
will be sufficient to meet its working capital and other operating expenditure
requirements for the foreseeable future.

OUTLOOK

The semiconductor capital equipment market has recently been experiencing a
slowdown in the rate of new orders, as well as some order cancellations and
shipment delays from customers, due to market conditions. The Company is not
immune to these conditions.  Although shipments in the first quarter of 1997
were sequentially up from the fourth quarter of 1996, they were substantially
lower than the first quarter of 1996. If sales were to remain substantially
lower than in 1996 or to decrease sequentially, it could have a negative effect
on future revenues and put pressure on operating margins. Management believes
the business is well positioned with its new product lines and currently
believes that general market conditions in the industry are improving.





                                       10
<PAGE>   11
CAUTIONARY STATEMENTS

     In addition to the other information in this Quarterly Report on Form
10-Q, the following cautionary statements should be considered carefully in
evaluating the Company and its business.  Information provided by the Company
from time to time may contain certain "forward-looking" information, as that
term is defined by (i)  the Private Securities Litigation Reform Act of 1995
(the "Act") and (ii)  in releases made by the Securities and Exchange
Commission (the "SEC").  The factors discussed in these cautionary statements,
among other factors, could cause actual results to differ materially from those
contained in forward-looking statements made in this report and presented
elsewhere by management from time to time.  These cautionary statements are
being made pursuant to the provisions of the Act and with the intention of
obtaining the benefits of the "safe harbor" provisions of the Act.  Reference
is also made to the "Risk Factors" described in the Company's Prospectus dated
October 5, 1994.

VARIABILITY OF QUARTERLY OPERATING RESULTS.  The Company's quarterly operating
results may vary significantly from quarter to quarter, depending upon factors
such as the timing of product sales and the receipt of orders from major
customers, production difficulties causing delayed shipments, the proportion of
international sales, specific economic conditions in the semiconductor
industry, the mix of products sold by the Company and competitive pricing
pressures.  Because a high percentage of the Company's expenses are relatively
fixed in the near term, minor variations in the timing of shipments can cause
significant variations in quarterly operating results. All orders are subject
to cancellation or rescheduling by the customer with limited or no penalties,
and the Company's ability to accurately forecast future revenues and income for
any period is necessarily limited. Industry trends in the semiconductor markets
can sometimes cause sudden and significant order cancellations or pushouts of
orders. Any forward-looking information provided from time to time by the
Company represents only management's then current estimate of future results or
trends, and actual results may differ materially from those contained in the
Company's estimates.

DEPENDENCE ON KEY CUSTOMERS.  Because of the relative concentration of
semiconductor device manufacturing, the Company typically sells a significant
percentage of its systems to a limited number of customers.  Sales to three of
the Company's customers each represented between 10% and 15% of net revenues in
1996. The loss of business or the delay of orders from any of these  three
customers or from other key accounts of the Company due to business conditions
affecting a particular customer, industry-wide slowdowns impacting multiple
customers, pricing pressures or the impact of competitive products, could
materially adversely affect the Company's business and financial results.  As
is typical in the semiconductor industry, none of the Company's customers has
entered into a long-term agreement requiring it to purchase the Company's
products, and all orders are subject to cancellation or rescheduling by the
customer.

POTENTIAL VOLATILITY OF STOCK PRICE.  There has been significant volatility in
the market price of securities of high technology companies.  The Company
believes factors such as announcements of new products or product enhancements
by the Company or its competitors, quarterly fluctuations in the Company's
financial results or other manufacturer's financial results, shortfalls in the
Company's actual financial results compared to results previously forecasted by
stock market analysts, general conditions in the semiconductor industry and
general conditions in the financial markets, could cause the market price of
the Common Stock to fluctuate substantially.  These market fluctuations may
adversely affect the price of the Company's Common Stock.





                                       11
<PAGE>   12
CYCLICALITY OF THE SEMICONDUCTOR INDUSTRY.  The Company's business depends in
large part upon the capital equipment expenditures of semiconductor
manufacturers, which in turn depend on the current and anticipated market
demand for integrated circuits and products utilizing integrated circuits.  The
semiconductor industry is highly cyclical and has historically experienced
periodic downturns, which often have had a severe adverse effect on capital
equipment expenditures by semiconductor manufacturers.  Semiconductor industry
downturns have adversely affected the sales, gross profit, and operating
results of semiconductor equipment suppliers, including the Company.  The
Company anticipates that a significant portion of new orders will depend upon
demand from semiconductor manufacturers building or expanding large fabrication
facilities, and there can be no assurance that such demand will exist in any
given period of time.  Moreover, the Company's net sales and operating results
will be materially and adversely affected if unanticipated downturns or
slowdowns in the semiconductor market occur in the future.

RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS.  Sales outside North America
accounted for 46% of the Company's total net revenues from continuing
operations in the first quarter of 1997, 50% of the Company's total net
revenues from continuing operations in fiscal 1996, 60% of the Company's total
net revenues from continuing operations in fiscal 1995, and 54% of the
Company's total net revenues from continuing operations in fiscal 1994, and may
continue to represent a significant portion of the Company's revenues.  Any
decrease in sales outside North America may have a material adverse effect on
the Company's operating results.  The Company's international sales and
operations are subject to customary risks of international operations including
risks associated with fluctuations in interest and currency exchange rates,
changes in foreign economic conditions, trade restrictions, longer payment
cycles often associated with international sales, changes in tariffs and other
taxes, difficulties in accounts receivable collections, difficulties in
managing distributors or representatives, difficulties in staffing and managing
foreign subsidiary operations, and potentially adverse tax consequences.  The
Company's international business and financial performance may be adversely
affected by such factors.

RAPID TECHNOLOGICAL CHANGE; COMPETITION.  Equipment and processes used in
semiconductor manufacturing are subject to rapid technological development and
product innovation.  The Company, to remain successful, must be responsive to
new developments in photostabilization and asher technology, "white space"
product technology and enhanced process capabilities. The Company will continue
to  face competition from its competitors who will continue to develop new
products or enhancements that may offer improved performance. The Company's
financial results may be negatively impacted by the failure of new or existing
products to be favorably received by customers due to price, availability,
features, other product choices or the level and quality of support for the
Company's products.

FUTURE ACQUISITIONS OR CONSOLIDATIONS.  The Company believes that consolidation
among companies in the semiconductor equipment industry is likely for business
and technical reasons.  The Company has stated that, with its relatively strong
cash position, in the future it may pursue acquisitions or mergers of
businesses in the semiconductor equipment industry.  Any such transactions may
result in potentially dilutive issuances of equity securities, the incurrence
of debt and amortization expenses related to goodwill and other intangible
assets, and other costs and expenses, all of which could materially adversely
affect the Company's financial results following such a transaction.  In
addition, such transactions involve numerous business risks, including
difficulties in the assimilation of the operations, technologies and products
of





                                       12
<PAGE>   13
the acquired companies, the diversion of management's attention from other
business concerns, and the potential loss of key employees of the combined
company.  In the event any such transaction does occur, there can be no
assurance as to the beneficial effect on the Company's business and financial
results.

SOLE OR LIMITED SOURCES OF SUPPLY. The Company relies to a substantial extent
on outside suppliers to manufacture many of its components.  Certain of these
are obtained from a sole supplier or a limited group of suppliers.  One
component used in two of the Company's three product families has been
continuously obtained by the Company for over 20 years from a single source.
The supplier is a leading, worldwide electronics manufacturer which
historically has provided timely delivery without any significant delay or
interruptions. The Company's reliance on outside suppliers involves several
risks, including a potential inability to obtain an adequate supply of required
components and reduced control over pricing and timely delivery of components.
Because the manufacture of certain of these components is a complex process and
requires long lead times, there can be no assurance that delays or shortages
caused by suppliers will not occur.  Any inability to obtain adequate
deliveries or any other circumstance that would require the Company to seek
alternative sources of supply or to manufacture such components internally,
could delay the Company's ability to ship its systems and could have a material
adverse affect on the Company.

INTELLECTUAL PROPERTY RIGHTS.   Although the Company seeks to protect its
proprietary technology, proprietary rights relating to the Company's technology
will be protected from unauthorized use by others only to the extent that they
are covered by enforceable patents or are maintained in confidence as trade
secrets.  There can be no assurance that patents will issue from current patent
applications or that any patent issued to the Company will not be challenged,
invalidated or circumvented or that the rights granted thereunder will provide
adequate protection or competitive advantages to the Company.  Moreover, even
with patent protection, the Company's business may be  adversely affected by
competitors that independently develop functionally equivalent technology.
Although there are no pending lawsuits against the Company regarding
infringement of any existing patents, there can be no assurance that third
parties will not assert infringement claims in the future. If any such claims
are asserted against the Company, the Company could seek to obtain a license
from third parties or challenge the claim in litigation.  Failure to obtain
licenses or adverse determinations in any litigation could materially adversely
affect the Company's business, financial condition and results of operations.

RELIANCE ON ATTRACTING AND RETAINING KEY EMPLOYEES.  The Company's continued
success will depend in large part on its ability to attract and retain
highly-qualified technical, managerial, sales and marketing, and other
personnel.  Competition for such personnel in the Company's industry is
intense. None of the senior management of the Company is subject to a long-term
employment contract.  There can be no assurance that the Company will be able
to continue to attract or retain such personnel.





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<PAGE>   14

PART II - OTHER INFORMATION

ITEMS 1 - 5.     NOT APPLICABLE


ITEM  6.         EXHIBITS AND REPORTS ON FORM 8-K

A.       Exhibits

          Exhibit 11 - Statement Regarding Computation of Per Share Earnings

B.       Reports on Form 8-K

          None





                                       14
<PAGE>   15
                                   SIGNATURE


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


                                FUSION SYSTEMS CORPORATION




May 9, 1997                     By: /s/Joseph F. Greeves
                                    --------------------
                                    Joseph F. Greeves
                                    Vice President and Chief Financial Officer





                                       15
<PAGE>   16
                               INDEX TO EXHIBITS


<TABLE>
<CAPTION>
     Number                                 Description                                   Page
---------------    -----------------------------------------------------            -----------------
       <S>         <C>                                                                       <C>
       11          Statement Regarding Computation of Per Share Earnings                     17
</TABLE>





                                       16