<PAGE>

       AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 13, 1998

                          SECURITIES AND EXCHANGE COMMISSION
                                 WASHINGTON, DC 20549

                                      FORM 10-K

[X]  Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934 for the fiscal year ended December 31, 1997
                                           -----------------

                                          OR

[ ]  Transition report pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934

                            Commission File No. 0-17139
                                                -------

                                     GENUS, INC.
             (Exact name of registrant as specified in its charter)

           CALIFORNIA                                 94-2790804
(State or other jurisdiction of         (I.R.S. Employer Identification Number)
 incorporation or organization)

  1139 Karlstad Drive, Sunnyvale, CA                         94089
(Address of principal executive offices)                   (Zip Code)

Registrant's telephone number, including area code (408) 747-7120
                                                   --------------
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act: Common Stock, no par
                                                             value

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

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

The aggregate market value of the voting stock held by non-affiliates of the 
Registrant, based upon the closing sale price of the Common Stock on February 
27, 1998, in the over-the-counter market as reported by the NASDAQ National 
Market, was approximately $29,978,000.  Shares of Common Stock held by each 
officer and director and by each person who owns 5% or more of the 
outstanding voting stock have been excluded in that such persons may be 
deemed to be affiliates.  This determination of affiliate status is not 
necessarily a conclusive determination for other purposes.

As of February 27, 1998, Registrant had 17,129,260 shares of Common Stock 
outstanding.

                        DOCUMENTS INCORPORATED BY REFERENCE

Parts of the following documents are incorporated by reference in Part III of 
this Form 10-K Report: Proxy Statement for Registrant's 1998 Annual Meeting 
of Shareholders -- Items 10, 11, 12 and 13.

                                    Page 1
<PAGE>

                              TABLE OF CONTENTS

PART I    Item 1.   Business
                    Markets
                    Products
                    Marketing, Sales and Service
                    Research and Development
                    Competition
                    Manufacturing and Suppliers
                    Intellectual Property
                    Employees
                    Environmental Regulation
          Item 2.   Properties
          Item 3.   Legal Proceedings
          Item 4.   Submission of Matters to a Vote of Security Holders
PART II   Item 5.   Market for the Registrant's Common Equity and Related
                    Stockholder Matters
          Item 6.   Selected Financial Data
          Item 7.   Management's Discussion and Analysis of Financial Condition 
                    and Results of Operations
          Item 8.   Financial Statements and Supplementary Data
          Item 9.   Changes In and Disagreements with Accountants on Accounting 
                    and Financial Disclosure
PART III  Item 10.  Directors and Executive Officers of the Registrant
          Item 11.  Executive Compensation
          Item 12.  Security Ownership of Certain Beneficial Owners and 
                    Management
          Item 13.  Certain Relationships and Related Transactions
PART IV   Item 14.  Exhibits, Financial Statement Schedule, and Reports of 
                      Form 8-K:
                    (1) Financial Statements
                    (2) Financial Statement Schedule
                    (3) Exhibits
                    (4) Reports on Form 8-K

                                    Page 2
<PAGE>

                                    PART I

ITEM 1.

BUSINESS

     Genus, Inc. ("Genus" or "the Company") designs, manufactures and markets 
capital equipment and processes for advanced semiconductor manufacturing.  
The Company's products, high energy millions of electron volts ("MeV") ion 
implantation systems and chemical vapor deposition ("CVD") equipment, are 
used worldwide to produce integrated circuits ("ICs") for the data 
processing, communications, medical, military, transportation and consumer 
electronics industries.  Genus pioneered the technical development of high 
energy MeV ion implantation and the CVD of tungsten silicide ("WSix"), which 
perform two critical steps in the manufacture of semiconductors.  These 
technologies enable chip manufacturers to simplify their IC production 
process and lower their cost-of-ownership.

     The Company's global customer base consists of semiconductor 
manufacturers in the United States, Europe and Asia/Pacific including Japan, 
South Korea and Taiwan.

MARKETS

MeV ION IMPLANTATION

     Ion implantation is the process by which a beam of electrically charged 
dopant atoms (ions) are accelerated and driven into the surface of a silicon 
wafer.  This process alters the electrical characteristics of the silicon by 
making it more or less conductive.  Since its inception, ion implantation has 
been used to create all of the active devices, such as transistors, in an IC. 
Genus implanters have led the way to new applications where "wells" are 
formed to isolate the active devices.

     The market for ion implanters consists of three primary segments: high 
current, medium current and high energy.  Currently, high and medium current 
ion implanters make up approximately 80% of the total ion implantation 
market. However, high energy ion implantation is one of the fastest growing 
segments in the entire capital equipment industry due to its use in emerging 
advanced technology simplification applications.  High energy MeV ion 
implantation improves transistor performance and reduces overall 
manufacturing costs by placing dopants deep into the silicon to create 
regions that isolate transistors from one another.

THIN FILM (CVD)

     The manufacture of ICs includes the formation of isolation, transistor 
and interconnect capabilities.  Genus' CVD equipment provides thin films for 
the gate electrode of the transistor and for barrier metal to clad the 
interconnect and contact elements.  WSix is used as a gate electrode and also 
improves the conductivity of local interconnects, producing faster Dynamic 
Random Access Memory ("DRAM"), Static Random Access memory ("SRAM") and flash 
memory devices. Tungsten nitride ("WN") is emerging as a barrier-of-choice 
for advanced gate formation, memory cell electrodes and metal interconnect 
and contact applications in logic.

PRODUCTS

     The primary products manufactured by Genus include four MeV ion
implantation systems and three CVD systems.  Each of these products is available
with a variety of options and/or upgrades. Ion implantation systems have 
accounted for 68%, 62% and 41% of total revenues for 1997, 1996 and 1995, 
respectively, while CVD systems have accounted for 32%, 38% and 59%, 
respectively, for the same period.

CURRENT MeV ION IMPLANT PRODUCTS

     THE KESTREL-TM- FAMILY OF ION IMPLANTERS.  Introduced in July 1997, Genus'
fourth-generation of implanters, the Kestrel Family, offers high productivity
manufacturing, low cost-of-ownership and

                                    Page 3
<PAGE>

flexibility for MeV, medium current backup, chained implants, mainstream 
retrograde well and advanced well applications.  The Kestrel's accelerator, a 
direct current ("DC") tandem-based design, simplifies both operation and 
maintenance while also providing the lowest power consumption and smallest 
footprint of any high energy system currently in the market.  In addition, 
the system's DC tandem allows fast energy change times resulting in a 
superior ability to chain multiple implants together without unloading 
wafers.  This enhances overall throughput as well as reducing 
cost-of-ownership.  The system's end station, where the ion beam meets the 
wafers, is optimized for high energy applications.  The large volume of the 
process chamber and the design of the high vacuum pumping system minimizes a 
phenomenon known as photoresist outgassing which can hamper throughput and 
process quality in implanters.  All-in-vacuum wafer handling generates the 
fewest particles added per wafer pass of any high energy implanter.  These 
benefits all translate to higher yields and greater cost savings.

     As the high energy market has moved from high volume production to a 
bifurcated one that is application specific, the Kestrel family of products 
is poised to meet the varying requirements with appropriate price and 
performance.

     KESTREL 750.  The Kestrel 750, the most recent addition to the Kestrel 
family, is best used for advanced well applications such as triple wells and 
Genus developed and patented BILLI (see below).  The accelerator technology 
for the Kestrel 750 has been improved in several dimensions.  Most 
importantly, the maximum energy range has been increased 15% for each charge 
state.  This translates into greater beam currents at critical energies 
(higher throughput and lower cost-of-ownership) to support advanced well 
applications.  The value of this new accelerator design, higher energy and 
beam currents, is achieved while increasing the Kestrel's reliability, 
serviceability and stability.  These advantages have been incorporated 
without expanding the system's small footprint.

     KESTREL 650.  The Kestrel 650 has been optimized to meet the 
requirements of established retrograde well applications which require a 
lower price/performance point.  The accelerator design is the same as that of 
the Tandetron-TM- 1520 which is used worldwide for retrograde well, research 
and development ("R&D") as well as production applications.

     Both the Kestrel 650 and 750 possess a multi-faceted improvement to 
process chamber vacuum integrity. All three critical elements for minimizing 
photoresist outgassing (process chamber volume, cryo pump location and cryo 
pump size) have been improved. Both products also offer significant 
improvements in the areas of gas distribution, dose control and low energy 
control. Additionally, each product comes with an extended warranty on the 
accelerator.  This warranty covers all major accelerator components (except 
the turbopump) for four years on the Kestrel 650 and five years on the 
Kestrel 750.

     In addition to these improvements, the Kestrel products include all of 
the advantages present in the Tandetron 1520, Genus' third-generation MeV ion 
implanter introduced in November 1995.  The Tandetron 1520 evolved from the 
highly successful Genus 1500 system, introduced in 1988, and the Genus 1510 
system, introduced in 1992.

     The advantages of the Kestrel products are based on an overall 
philosophy of design simplicity.  Modular construction improves manufacturing 
cycle times, system installation times and ease of maintenance.  In addition, 
improved features such as a more efficient, longer lasting Bernas Ion Source, 
provide significant advantages in manufacturing environments.

     TANDETRON 1520.  In November 1995, Genus introduced the Tandetron 1520, 
a third-generation MeV ion implanter that evolved from the Genus 1500 system, 
introduced in 1988, and the Genus 1510 system, introduced in 1992.  Although 
specifically designed for high energy applications, the Tandetron uses a wide 
range of energies from 10 keV (thousands of electron volts) to three MeV for 
implantation.  This broad range allows the system to effectively meet high 
energy applications and also serve as an alternative (back-up) for medium 
current/medium energy application requirements.  The system's accelerator, a 
DC tandem-based design, simplifies both operation and maintenance while also 
providing the lowest power consumption of any

                                    Page 4
<PAGE>

high energy system currently in the market.  Additionally, the system's DC 
tandem allows fast energy change times resulting in a superior ability to 
chain multiple implants together without unloading wafers.  This enhances 
overall throughput as well as reducing cost-of-ownership.  The system's end 
station, where the ion beam meets the wafers, is optimized for high energy 
applications.  The large volume of the process chamber and the design of the 
high vacuum pumping system minimize photoresist outgassing which can hamper 
throughput and process quality in implanters of poorer design.  All-in-vacuum 
wafer handling generates the fewest particles added per wafer pass of any 
high energy implanter.  This translates to higher yields and greater cost 
savings.

     The improvements of the Tandetron 1520 are based on an overall 
philosophy of design simplicity.  Modular construction improves manufacturing 
cycle times, system installation times and ease of maintenance.  The system's 
footprint has been reduced by 20%, making the 1520 the smallest MeV implanter 
on the market. In addition, improved features such as a more efficient, 
longer lasting Bernas Ion Source, provide significant advantages in 
manufacturing environments.

     GENUS 1510.  The Company's 1510 MeV ion implantation system was designed 
to meet low and medium dose requirements in the 40 keV to three MeV range. 
Introduced in September 1992, the 1510 is Genus' second generation MeV ion 
implanter and incorporates the basic design and field experience of its 
predecessor, the 1500.  It is a fully automated, highly reliable implanter 
with excellent beam purity at throughput approaching 180 wafers per hour on 
200mm wafers.

BILLI TECHNOLOGY FOR THE KESTREL FAMILY OF IMPLANTERS

     To further advance low-cost manufacturing processes, Genus developed, 
through joint development programs with its customers, a special isolation 
technology called the Buried Implanted Layer for Lateral Isolation ("BILLI") 
structure and process.  BILLI, an advanced MeV retrograde well formation 
technology, can be used for process simplification in the manufacture of 
DRAM, SRAM and flash memory as well as logic.  BILLI can eliminate one to two 
masking steps from current standard MeV retrograde well processes and three 
to four masking steps from conventional diffused well processes.  An 
additional benefit that BILLI brings to logic IC design is that transistors 
can be placed closer together on a chip, improving packing densities.  Also, 
when the BILLI structure is used, latch up, a parasitic effect that degrades 
Complementary Metal Oxide Semiconductor ("CMOS") IC performance, can be 
improved thus delaying the introduction of complex oxide isolation schemes 
such as shallow trench isolation.  In some cases, use of the BILLI structure 
has eliminated the need to use expensive silicon epitaxy.  Presently, several 
of the world's leading device makers are engaged with the Company in joint 
development programs established to develop low-cost manufacturing processes 
utilizing the BILLI process.

     A partial list of Genus' ion implant customers include: AMD, Fujitsu, 
Hyundai, LG Semicon, Mitsubishi, Newport Wafer-Fab Ltd., Philips 
Semiconductor, Samsung, SGS-Thomson, Sharp, Sony, Symbios Logic and TSMC.

CURRENT THIN FILM PRODUCTS

     Genus' CVD systems are designed for the deposition of WSix and WN on the 
gate electrode and interconnect.  The Company offers the LYNX2-TM- (formerly 
called the 7000 Series), a single wafer, thin film cluster tool.  Genus' two 
other hardware architectures, the 8700 Series and the 6000 Series, deposit 
WSix using batch processes.

     GENUS LYNX2 SYSTEM.  In July 1997, in conjunction with the introduction 
of two new films, Genus changed the name of the Genus 7000 Series system to 
the LYNX2.  Launched in December 1994, the LYNX2 system was designed to meet 
the advanced technology requirements of the 16M DRAM generation and beyond.  
This single wafer, open architecture cluster tool supports silane and 
dichlorosilane ("DCS") process chemistries.  Semiconductor manufacturers 
benefit by the high throughput offered by the LYNX2, which results in higher 
productivity and lower cost-of-ownership.  By offering the lowest fluorine 
content, manufacturers using DCS 

                                    Page 5
<PAGE>

also gain more reliable gate oxides with the Genus LYNX2.  In addition, its 
low deposited stress provides higher process yields with improved step 
coverage.

     This system is currently used in production by manufacturers of advanced 
DRAM and flash memory devices to 0.25 micron.  The LYNX2 features a Modular 
Equipment Standards Committee ("MESC") compatible wafer handling platform 
from Brooks Automation with a centrally located, dual end effector robot for 
high throughput operation with up to four process modules.  The cluster tool 
is controlled by an easy-to-use Windows-TM--based graphic user interface.  
The modular design of the LYNX2 enables the addition of other process modules 
to the cluster tool.  Other manufacturing advantages offered by the LYNX2 
include a multi-zone resistive heater for more uniform wafer heating, 
two-zone showerheads for improved film composition uniformity and a 
state-of-the-art gas delivery system that minimizes chamber-to-chamber 
variance.

     LRS SILICIDE.  LRS Silicide, a Low-Resistivity, low-Stress ("LRS") CVD 
WSix, was introduced by Genus in December 1996.  LRS silicide offers a 20% 
reduction in resistivity and extremely as-deposited low stress, while 
retaining the advantages of conventional DCS chemistry.  Memory device 
manufacturers using the production-proven DCS and tungsten hexafluoride 
chemistries can easily insert LRS silicide into existing process flows, 
providing increased yields and faster devices.

     TUNGSTEN NITRIDE.  In July 1997, Genus announced the industry's first 
plasma-enhanced CVD WN barrier film.  This film, compatible with the LYNX2 
product platform, has the potential for broadening Genus' thin film customer 
base by bringing the Company's CVD products into the logic market.  WN 
enables gigabit-scale DRAM device production by serving as the top barrier 
electrode for tantalum oxide capacitors.  WN is amorphous as deposited (to 
500 degrees centigrade), and acts as a superior barrier even when deposited 
to a thickness of 100 angstroms.  It has also been proven to be a superior 
barrier for copper diffusion relative to titanium nitride, and can be used as 
an adhesion layer for blanket tungsten.

     GENUS 8700 SERIES.  A batch CVD WSix product, the 8700 Series 
incorporates six heated chucks in the batch chamber and six gas injection 
ports, which enable individual wafer process adjustments of gas flows and 
chuck temperature for superior wafer-to-wafer repeatability.  The dual 
cassette load-lock system provides continuous wafer loading and unloading 
capability, which results in high system throughput (wafers per hour).

     The cold wall reaction chamber and robotic wafer handling system are 
designed to ensure highly reliable operation with a minimum of foreign 
material generation.  The system's through-the-wall mounted main frame design 
is ideally suited for use in Class-1 or above cleanrooms.  All models of the 
8700 can be configured to process from 100mm (4") to 200mm (8") wafers.

     GENUS 6000 SERIES.  Similar in design to the 8700 Series, the 6000 
Series is a third-generation product incorporating new designs to ensure 
reliability and ease of maintenance.  It was designed to meet the factory 
automation needs of the industry.  The 6000 Series consists of a closed 
architecture cluster system that incorporates the 8700-style six-chuck batch 
CVD chamber.  This system also offers dual cassette load-lock architecture 
that enables continuous batch processing.  A new robotic handling system 
allows mechanical set-up through computer-controlled recipes.  The overall 
design features component upgrades that provide production-worthy processing 
of 100mm (4") to 200mm (8") wafers.

     Genus' Thin Films manufacturing facility maintains and operates a 
Class-1 cleanroom to demonstrate integrated applications with their 
customers.  The Genus technical staff includes an experienced consulting 
resource for successful process integration of its products and processes.

     Genus' thin film customers include: AMD, Fujitsu, Hitachi, Hyundai, IBM, 
Intel, LG Semicon, Samsung, Sanyo, SGS-Thomson and Sharp.

                                    Page 6
<PAGE>

MARKETING, SALES AND SERVICE

     Genus sells and supports its ion implantation and CVD products through 
direct sales and customer support organizations in the U.S., Western Europe 
and South Korea and through eight exclusive sales representatives and 
distributors in the U.S., Europe, Japan, South Korea, Taiwan, Hong Kong and 
Singapore. Yarbrough Southwest provides sales distribution in the 
Southwestern region of the U.S. and SemiTorr in the Northwest.  Genus Europa 
supports and sells Genus' equipment in Europe, and Macrotron Systems GmbH 
represents Genus in Germany. Genus KK provides field service and support in 
Japan.  Innotech Corporation serves as the Company's sales distributor and 
augments Genus KK's support efforts in Japan.  Genus Korea, Ltd., provides 
in-country field service and support, and in late 1997, assumed all 
responsibilities for system sales in South Korea.  Sales in the Singapore and 
Taiwan market segments are served by the representative organizations of 
Spirox Singapore, Pte. Ltd. and Spirox Taiwan, respectively.  Hong Kong and 
the People's Republic of China are served by Katech International, Ltd., 
based in Hong Kong.  The Asia/Pacific organizations provide sales and 
service, as well as distribution assistance for spare parts.  Genus 
distributes spare parts from several worldwide depots including Sunnyvale, 
California; Newburyport, Massachusetts; Austin, Texas; Tokyo, Japan; Seoul, 
Korea; Hsin-Chu City, Taiwan; and Evry, France.  To facilitate its marketing 
efforts, the Company has cleanroom applications laboratories in Sunnyvale, 
California, and Newburyport, Massachusetts.

     Genus' products are sold primarily to domestic and foreign device 
manufacturers, including both foundries (companies producing semiconductors 
principally for other semiconductor manufacturers) and companies producing 
semiconductors mainly for outside sales.

     The Company maintains sales, technical support and service personnel at 
its principal executive offices located in Sunnyvale, California and 
Newburyport, Massachusetts.  Genus has also established several foreign 
subsidiaries to facilitate its sales and service activities abroad: Genus 
Korea, Ltd. in Seoul, Korea; Genus KK in Tokyo, Japan; Genus Europa SARL in 
Evry, France; Genus Europa Ltd. in Melbourn, Herts, England; Genus Europa 
GmbH in Stuttgart, Germany; and Genus Europa Srl. in Milan, Italy.  These 
subsidiaries provide installation, field service and maintenance, as well as 
additional technical support to assist Genus' customers in effectively 
utilizing the Company's products.  Such services are also provided by the 
Company's distributors in Tokyo, Taipei, Singapore and Hong Kong.  The 
Company warrants its products against defects in material and workmanship for 
12 months.  In December 1997, Genus announced the industry's first extended 
factory warranty program covering the accelerators of its new Kestrel 650 and 
750 systems.  Under this new program, the Company's accelerators are 
guaranteed against failures or degradation in performance for four years on 
the Kestrel 650 and five years on the Kestrel 750.

     While the Company has experienced no difficulty to date in complying 
with U.S. export controls, these rules could change in the future and make it 
more difficult or impossible for the Company to export its products to 
various countries and could have a material adverse effect on the Company's 
business, financial condition and results of operations.

     BACKLOG.  The Company's backlog at December 31, 1997, was approximately 
$25.6 million, compared with approximately $19.8 million at December 31, 1996. 
Genus includes in its backlog only those orders for which a customer purchase 
order has been received and a delivery date within 12 months has been 
specified. The Company's backlog at December 31, 1997, consisted of product 
shipments of $21.6 million and non-recurring engineering revenue of $4.0 
million expected to be delivered during calendar year 1998.  However, because 
of the possibility of customer changes in delivery schedules or cancellations 
of orders, the Company's backlog as of any particular date may not be 
representative of actual sales for any succeeding period.

RESEARCH AND DEVELOPMENT

     Constant technological change, fierce competition and a high rate of 
technical obsolescence are key characteristics of the semiconductor equipment 
industry.  Genus' future prospects depend in part on the Company's ability to 
broaden its market acceptance by differentiating its products on the basis of 
production-worthiness, technical capability, productivity, particle control 
and customer support.  To maintain

                                    Page 7
<PAGE>

close relationships with its customers and remain responsive to their 
requirements, continued investment is needed for R&D.  R&D expenses may 
increase in the future.

     As part of its R&D program, the Company has established technical 
research relationships with certain major semiconductor manufacturers and 
universities to further enhance its product development and knowledge for 
advanced Ultra Large Scale Integration ("ULSI") devices.

COMPETITION

     The Company believes that the principal competitive factors in the 
semiconductor equipment market are product performance, quality and 
reliability, wafer throughput, customer support, equipment automation, price 
and relationships.

     Genus competes with a number of companies that historically have had 
wider name recognition, broader product acceptance within the industry and 
substantially greater resources.  In addition, the rapid rate of 
technological change in the industry creates opportunities for firms to enter 
this market and apply new technologies to meet its needs.  Accordingly, the 
Company anticipates that it will continue to face competition in the domestic 
as well as foreign market from both well-established and new competitors.  
There can be no assurance that the Company can successfully compete with such 
companies.

     In the ion implantation market, the Company's MeV ion implantation 
system competes primarily with one other MeV system.  The Company believes 
that its high energy MeV system currently has certain technological 
advantages over the competing MeV system.  Genus has new applications for MeV 
ion implantation technology that it believes will see widespread use in the 
future since they enable significant manufacturing cost reduction and 
improved IC performance. The Company faces direct competition from Eaton 
Corporation.  The presence of Eaton in the MeV marketplace continued to 
increase during 1997.  There can be no assurance that competition in the 
Company's particular MeV product market will not intensify or that Genus' 
technical advantages may not be reduced or lost as a result of technical 
advances made by competitors or changes in semiconductor processing 
technology.

     In the CVD market, Genus competes with other producers of CVD systems, 
as well as alternative methods of deposition, such as sputtering and thin 
films other than WSix, WN and DCS.  The Company faces direct competition in 
all three films from Applied Materials, Inc. and Tokyo Electron, Ltd.  The 
impact of their presence in these niche markets continued to increase during 
1997.  There can be no assurance that levels of competition in the Company's 
particular CVD product market will not intensify or that Genus' technical 
advantages may not be reduced or lost as a result of technical advances made 
by competitors or changes in semiconductor processing technology.

MANUFACTURING AND SUPPLIERS

     Most of the components for the Company's CVD systems are produced in 
subassemblies by independent domestic suppliers according to the Company's 
design and procurement specifications.  Many components of the Company's MeV 
ion implantation systems are also acquired as subassemblies from outside 
domestic vendors.  The Company anticipates that the use of such subassemblies 
will continue to increase in order to achieve additional manufacturing 
efficiencies. The Company has alternate sources of supply for the components 
and parts purchased from outside suppliers, except for certain components 
used in its CVD tungsten and MeV ion implantation products which are 
presently available only from a single source.  To date, the Company has been 
able to obtain adequate supplies of such components in a timely manner from 
existing sources.  The inability to develop alternate sources or to obtain 
sufficient source components as required in the future, however, could result 
in delays of product shipments that would have a material adverse affect on 
the Company's operating results.

     The Company's thin film CVD operation is located in Sunnyvale, 
California, and its MeV ion implantation technology manufacturing operation 
is located in Newburyport, Massachusetts.

                                    Page 8
<PAGE>

INTELLECTUAL PROPERTY

     The Company believes that because of the rapid technological change in 
the industry, its future prospects will depend primarily upon the expertise 
and creative skills of its personnel in process technology, new product 
development, marketing, application engineering and product engineering, 
rather than on patent protection. Nevertheless, the Company has a policy to 
actively pursue domestic and foreign patent protection to cover technology 
developed by the Company.  The Company's current patents include technology 
relating to cold wall CVD of WSix, ion beam formation, high energy ion 
acceleration, ion implant angle control, wafer cleaning, and wafer heating 
and handling in vacuum.

     In 1987, the Company's Ion Technology Products (formerly General Ionex) 
and Eaton Corporation entered into a licensing agreement whereby the Company 
uses certain ion implantation-related technology.

EMPLOYEES

     As of December 31, 1997, the Company employed 301 people on a full-time 
basis.  Genus reduced its workforce in January 1997 by 8%.  The Company 
believes that its relations with its employees are satisfactory.  None of the 
employees are covered by a collective bargaining agreement.

ENVIRONMENTAL REGULATION

     Federal, state and local regulations impose various environmental 
controls on the discharge of chemicals and gases used in the manufacturing 
process.  The Company believes that its activities conform to present 
environmental regulations. Increasing public attention has, however, been 
focused on the environmental impact of semiconductor operations.  While the 
Company has not experienced any materially adverse effects on its operations 
from governmental regulations, there can be no assurance that changes in such 
regulations will not impose the need for additional capital equipment or 
other requirements.  Any failure by the Company to adequately restrict the 
discharge of hazardous substances could subject it to future liabilities or 
could cause its manufacturing operations to be suspended.

ITEM 2. PROPERTIES

     The Company's executive offices, thin film manufacturing and R&D 
operations are presently located in one building in Sunnyvale, California, 
totaling approximately 100,500 square feet.  The California facilities are 
occupied under a lease expiring in October 2002, with a current annual rental 
expense of approximately $680,000.  Genus' Ion Technology Product operation 
is located in Newburyport, Massachusetts.  This facility, totaling 
approximately 70,000 square feet, is occupied under a lease expiring in May 
2017, with an annual rental expense of approximately $845,000.  The Company 
also leases sales and support offices in Seoul, Korea; Tokyo, Japan; Evry, 
France; and Austin, Texas.  The Company owns substantially all of the 
machinery and equipment used in its facilities.  See Notes 3 and 8 of Notes 
to Consolidated Financial Statements. The Company believes that its existing 
facilities and capital equipment are adequate to meet its current 
requirements and that suitable additional or substitute space will be 
available as needed.

ITEM 3. LEGAL PROCEEDINGS

     None.

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

     None.

                                    Page 9
<PAGE>

                                   SPART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
        MATTERS

COMMON STOCK INFORMATION

     The common stock of Genus, Inc., is traded in the over-the-counter 
market under the NASDAQ symbol GGNS.  The high and low last sales prices for 
1997 and 1996, set forth below are as reported by the NASDAQ National Market 
System.  At February 27, 1998, the Company has 479 registered shareholders.

<TABLE>
<CAPTION>
                                     1997                   1996 
                             --------------------   --------------------
                               HIGH          LOW       HIGH       LOW
                             ---------    -------   ---------   --------
<S>                          <C>          <C>       <C>         <C>
First Quarter..............  $ 6  7/8     $ 3 5/8   $  9        $ 5 5/8
Second Quarter.............    6  7/16      3 1/8     12          5 3/4
Third Quarter..............    7  7/8       4 1/2      9 1/2      5 3/4
Fourth Quarter.............    6 15/16      3 1/8      7 1/16     4 7/8
</TABLE>

     The Company has not paid cash dividends on its common stock since 
inception, and its Board of Directors presently intends to reinvest the 
Company's earnings, if any, in its business.  Additionally, the Company's 
line of credit prohibits the payment of cash dividends.  Accordingly, it is 
anticipated that no cash dividends will be paid to holders of common stock in 
the foreseeable future.

ITEM 6. SELECTED FINANCIAL DATA

                        SELECTED CONSOLIDATED FINANCIAL DATA
                          FOR THE YEARS ENDED DECEMBER 31,
             (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND EMPLOYEE DATA)

<TABLE>
<CAPTION>
                                                          1997         1996        1995        1994       1993
                                                       ----------   ----------   ---------   --------   --------
<S>                                                    <C>          <C>          <C>         <C>        <C>
Net sales............................................  $   84,286   $   82,509   $ 100,350   $ 63,616   $ 44,236
Gross profit.........................................      29,524       26,972      39,239     24,967     13,900
Gross profit as a percentage of sales................         35%          33%         39%        39%        31%
Income (loss) from operations........................     (3,129)     (11,458)       7,976      3,729     (6,974)
Net income (loss)....................................    (19,336)      (9,205)      19,282      4,177     (6,883)
Net income (loss) per share-basic....................      (1.15)       (0.56)        1.26       0.33      (0.57)
Net income (loss) per share-diluted..................      (1.15)       (0.56)        1.20       0.32      (0.57)

Cash and cash equivalents............................       8,700       11,827      12,630     10,188     10,423
Total assets.........................................      76,738       89,132      95,247     54,997     45,205

Long-term obligations, less current portion..........         971        1,260       1,034        523      1,042

Working capital......................................      30,774       39,290      50,061     23,201     22,162

Shareholders' equity.................................      48,357       68,251      75,361     36,986     31,751

Backlog..............................................      25,554       19,846      44,996     44,011     18,945

Number of employees..................................         301          325         319        264        212
</TABLE>

                                    Page 10
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

     STATEMENTS IN THIS REPORT WHICH EXPRESS "BELIEF", "ANTICIPATION" OR 
"EXPECTATION" AS WELL AS OTHER STATEMENTS WHICH ARE NOT HISTORICAL FACT ARE 
FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE 
SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 
1934.  THESE FORWARD LOOKING STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND 
UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM 
HISTORICAL RESULTS OR ANTICIPATED RESULTS, INCLUDING THOSE SET FORTH UNDER 
"RISK FACTORS" IN THIS "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 
CONDITION AND RESULTS OF OPERATIONS" AND ELSEWHERE IN OR INCORPORATED BY 
REFERENCE INTO THIS REPORT.  THE FOLLOWING DISCUSSION SHOULD BE READ IN 
CONJUNCTION WITH THE COMPANY'S FINANCIAL STATEMENTS AND NOTES THERETO 
INCLUDED ELSEWHERE IN THIS REPORT.

1997 COMPARED TO 1996

     The components of the Company's statements of income, expressed as 
percentage of total revenue, are as follows:

<TABLE>
<CAPTION>
                                                 YEARS ENDED DECEMBER 31,
                                             --------------------------------
                                               1997        1996        1995
                                             -------     -------      -------
<S>                                          <C>         <C>          <C>
Net sales.................................   100.0%      100.0%       100.0%

Costs and expenses:
  Cost of goods sold......................    65.0        67.3         60.9
  Research and development................    14.6        17.7         12.2
  Selling, general and administrative.....    24.1        21.7         18.9
  Special charge..........................      --         7.2           --
                                             -------     -------      -------
    Income (loss) from operations.........    (3.7)      (13.9)         8.0
Other income, net.........................    (1.6)        0.1          0.3
                                             -------     -------      -------
    Income (loss) before provision for        
     income taxes.........................    (5.3)      (13.8)         8.3
Provision for (benefit from) income taxes.    17.6        (2.7)       (10.9)
                                             -------     -------      -------
    Net income (loss).....................   (22.9)%     (11.1)%       19.2%
                                             -------     -------      -------
                                             -------     -------      -------
</TABLE>

     Net sales for the year ended December 31, 1997 were $84.3 million, 
compared to net sales of $82.5 million in 1996.  While 1997 sales showed a 
modest increase on a year-to-year basis, the Company experienced volatility 
on a quarterly basis during both years.  Sales for the nine month period 
ended September 30, 1997 increased over the same period for 1996 as the 
industry and the Company recovered from the slowdown in the DRAM market 
experienced during the latter half of 1996.  However, in the fourth quarter 
of 1997, the Company's sales fell from the prior quarter due partially to the 
financial crisis in Asia that caused some customers to push out their 
required delivery dates. International sales accounted for 82% of the 
Company's net sales in 1997, compared to 86% in 1996.  Non-system sales 
remained relatively flat year-to-year, accounting for 20% of revenue in 1997, 
compared to 23% in 1996.

     During 1996, in response to the industry slowdown, the Company incurred 
$5.9 million in special charges during the third and fourth quarters as it 
restructured its operations to attain profitability at a decreased sales 
level. These charges reflected capacity cost reductions, including reductions 
in headcount, write-off of some manufacturing equipment and increased 
inventory reserves.  During 1997, these measures resulted in lower expenses 
in cost of goods sold and R&D.

     Gross margin for the year ended December 31, 1997 was 35%, a two 
percentage point improvement compared to 33% in 1996.  Improvements in 
operating efficiencies as a result of the restructuring were mitigated by 
pricing pressures, especially from Asian customers.  The Company's gross 
margins have historically been affected by variations in average selling 
prices, changes in the mix of product sales, unit 

                                    Page 11
<PAGE>

shipment levels, the level of foreign sales and competitive pricing 
pressures. The Company anticipates that these conditions will continue for 
the foreseeable future in light of current market conditions.

     As a percentage of net sales, R&D expenses for the year ended December 
31, 1997 were 15%, compared to 18% in 1996.  On a dollar basis, R&D expenses 
during 1997 decreased $2.3 million when compared to the same period in 1996, 
primarily due to the restructuring.  The Company serves markets that are 
highly competitive and rapidly changing, and the Company believes that it 
must continue to maintain its investment in R&D to develop competitive 
products.  Accordingly, the Company anticipates that R&D expenses may 
increase in the future.

     Selling, General and Administrative ("SG&A") expenses were 24% of net 
sales for the year ended December 31, 1997, compared to 22% of net sales for 
1996. Included in SG&A for 1997 was a write-off of an outstanding receivable 
from a Malaysian customer.  Absent this bad debt expense, SG&A expense would 
have increased only approximately $300,000 or 2% from 1996.

     In 1997, the Company had $1.4 million in other expense, compared to 
$53,000 in other income for the comparable period in 1996.  As a result of 
the Asian financial crisis and the devaluation of the Korean won, the Company 
incurred a foreign exchange transaction loss of $1.1 million during the 
fourth quarter of 1997.  Net interest expense for the year was $289,000 as 
compared to net interest income of $124,000 for 1996 as a result of higher 
outstanding short-term borrowings and lower levels of invested cash and cash 
equivalents during the year.

     During 1997, the Company provided a full valuation allowance for the 
deferred tax assets which were recorded in 1995 and 1996 in accordance with 
Statement of Financial Accounting Standards No. 109, "Accounting for Income 
Taxes" ("SFAS 109"), resulting in a tax provision of $14.8 million. 
Accordingly, the effective tax rate for the year ended December 31, 1997 was 
330% compared to an effective tax rate of (19)% for the same period in 1996.

     Due to the current market conditions, the fluctuation in the Company's 
order rates in the last 12 months, the Company's continued reliance on one 
customer for a significant portion of its orders and that customer's recent 
announcements to reduce or delay semiconductor equipment purchases, the 
slowdown in the Korean semiconductor market, the continued competitive market 
environment for the Company's products, and the historically cyclical nature 
of the semiconductor equipment market, the Company remains cautious about the 
prospects for its business over the next twelve months.  The Company 
continues to make strategic investments in new product development and 
manufacturing improvements with a view of augmenting future performance by 
enhancing product offerings; however, such investment may adversely affect 
short-term operating performance. The Company is also continuing its efforts 
to implement productivity improvements for future operating performance.  The 
Company believes that the future economic environment could continue to 
lengthen the order and sales cycles for its products, causing it to continue 
to simultaneously book and ship some orders during the same quarter.  There 
can be no assurance that the Company's strategic efforts will be successful.

1996 COMPARED TO 1995

     Net sales for the year ended December 31, 1996 were $82.5 million, 
compared to net sales of $100.4 million in 1995.  The 18% decrease in net 
sales was due primarily to lower tungsten CVD systems sales as a result of 
the overall slowdown of the DRAM market during the last 12 months 
(particularly in Korea), offset by greater ion implantation MeV system and 
non-system sales.  Foreign sales accounted for 86% of the Company's net sales 
in 1996, compared to 88% in 1995.  In 1996, non-system sales increased 13% 
when compared to non-system sales during same period in 1995.

     Gross margin for the year ended December 31, 1996 was 33%, compared to 
39% in 1995.  The decline in gross margin was primarily due to the shift in 
product sales mix from CVD system sales, which have higher gross margins, to 
MeV system sales, which have lower gross margins, lower absorption of 
manufacturing costs as a result of lower sales volumes and higher service 
costs associated primarily with the opening of Genus

                                    Page 12
<PAGE>

Korea, Ltd.  The Company's gross margins have historically been affected by 
variations in average selling prices, changes in the mix of product sales, 
unit shipment levels, the level of foreign sales and competitive pricing 
pressures.

     As a percentage of net sales, R&D expenses for the year ended December 
31, 1996 were 18%, compared to 12% in 1995.  On a dollar basis, R&D expenses 
during 1996 increased $2.4 million when compared to the same period in 1995.  
This increase was primarily due to investments in personnel, product 
development material costs and engineering tools for new product development. 
 The increase in R&D expenses as a percentage of net sales was due to lower 
net sales in addition to the increased R&D spending.  The Company's R&D 
expenses in 1996 and 1995 are net of software capitalization costs of 
$400,000 and $900,000, respectively.

     SG&A expenses were 22% of net sales for the year ended December 31, 
1996, compared to 19% of net sales for 1995.  The increase was primarily due 
to lower net sales.  On an absolute dollar basis, SG&A expenses for the year 
ended December 31, 1996 decreased $1.1 million when compared to the same 
period in 1995.  The decrease was due to lower payroll-related costs 
associated with the reduction in force during the third and fourth quarters 
of 1996 and lower commission and incentive expenses.

     During the year ended December 31, 1996, the Company incurred special 
charges of $5.9 million, relating primarily to capacity cost reductions in 
association with the Company's reduction in personnel in the third and fourth 
quarters of 1996, increased inventory reserves and the write-off of property 
and equipment.

     In 1996, the Company had $53,000 in other income, compared to $300,000 
in other income for the comparable period in 1995.  This decrease was 
principally due to lower interest income as a result of lower cash balances 
and higher interest expense associated with lease financing.  The effective 
tax rate for the year ended December 31, 1996 was a 19% benefit compared to a 
132% benefit for the same period in 1995.  The significant change in the 
effective tax rate was due primarily to the recognition of lower amounts of 
deferred tax assets in accordance with SFAS 109.

LIQUIDITY AND CAPITAL RESOURCES

     During the year ended December 31, 1997, the Company's cash and cash 
equivalents decreased by $3.1 million.  A total of $3.7 million was used in 
operating activities, primarily due to a growth in accounts receivable and 
inventories, partially offset by increased accounts payable.  Fourth quarter 
sales grew over the similar period in 1996, resulting in increased accounts 
receivable.  Inventory levels increased as several customer delivery dates 
were rescheduled from the fourth quarter of 1997 to early 1998.

     Capital expenditures during 1997, either by cash or capital lease 
obligations, were $4.4 million and related primarily to acquisition of 
machinery and equipment for the Company's R&D and Applications Laboratories 
and leasehold improvements and equipment for the Ion Technology facility in 
Newburyport, Massachusetts.  The Company financed these expenditures through 
new or existing lease lines.  Furthermore, the Company anticipates that 
additional capital expenditures, if any, during 1998 will be funded through 
existing working capital or lease financing.

     Proceeds from sale of common stock was $1.2 million and net short-term 
borrowings increased $4.7 million from 1996.

     The Company's primary source of funds at December 31, 1997 consisted of 
$8.7 million in cash and cash equivalents.  The Company has a $10.0 million 
revolving line of credit which is secured by substantially all of the assets 
of the Company and expires in June 1998.  At December 31, 1997, the Company 
had $2.8 million in unused letters of credit and borrowings of $7.2 million 
outstanding under the line of credit. Availability of borrowings is based on 
eligible accounts receivable and inventory.  Based on eligible accounts 
receivable and inventory at December 31, 1997, the Company's borrowing 
capacity under the revolving credit facility was in excess of $10 million.  A 
monthly borrowing base certificate is required by the bank.

                                    Page 13
<PAGE>

     The Company incurred operating losses during each of the two years in 
the period ended December 31, 1997 and, as of December 31, 1997, had an 
accumulated deficit of $48.9 million. Additionally, the Company's bank line 
of credit is scheduled to expire in June 1998. The accompanying consolidated 
financial statements have been prepared assuming the Company will continue as 
a going concern and do not include any adjustments to reflect the possible 
future effects on the recoverability and classification of assets and 
liabilities that may result from the outcome of this uncertainty.

     In February 1998, the Company issued equity securities through a private 
placement of convertible preferred stock ("Series A Stock") for gross 
proceeds of $5 million. Upon fulfillment of certain conditions, the same 
investors in the Company's Series A Stock have committed to providing 
additional equity financing. Assuming the Company fulfills these conditions 
and receives the proceeds from this additional preferred stock financing and 
assuming the Company is able to secure borrowings upon renewal of its 
existing bank line of credit or under a new line of credit, the Company 
believes that its existing cash resources together with funds from this 
additional preferred stock financing and line of credit will be sufficient to 
fund the Company's expected working capital requirements for at least the 
next 12 months. However, the exact amount and timing of these working capital 
requirements and the Company's ability to continue as a going concern will be 
determined by numerous factors, including the level of and gross margin on 
future sales, the payment terms extended to and by the Company and the timing 
of capital expenditures. Furthermore, there can be no assurance that funds 
will be received or become available from the additional preferred stock 
financing or line of credit or that these funds, together with the Company's 
existing cash resources, will be sufficient to implement the Company's 
operating strategy or meet the Company's other working capital requirements. 
Accordingly, the Company may be required to seek additional equity or debt 
financing. There can be no assurance that the Company would be able to obtain 
additional debt or equity financing, if and when needed, on terms that the 
Company finds acceptable. Any additional equity or debt financing may involve 
substantial dilution to the Company's shareholders, restrictive covenants or 
high interest costs.

     If the Company is unable to obtain sufficient funds to satisfy its cash 
requirements, it will be forced to curtail operations, dispose of assets or 
seek extended payment terms from its vendors. There can be no assurance that 
the Company would be able to reduce expenses or successfully complete other 
steps necessary to continue as a going concern. Such events would materially 
and adversely affect the value of the Company's equity securities.

RISK FACTORS

     CERTAIN SECTIONS OF MANAGEMENT'S DISCUSSION AND ANALYSIS CONTAIN 
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE 
SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES 
EXCHANGE ACT OF 1934, AS AMENDED.  ACTUAL RESULTS COULD DIFFER MATERIALLY 
FROM THOSE PROJECTED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF THE 
FACTORS SET FORTH ABOVE IN MANAGEMENT'S DISCUSSION AND ANALYSIS AND THIS RISK 
FACTORS SECTION.  THE DISCUSSION OF THESE FACTORS IS INCORPORATED BY THIS 
REFERENCE AS IF SAID DISCUSSION WAS FULLY SET FORTH IN MANAGEMENT'S 
DISCUSSION AND ANALYSIS.

     HISTORICAL PERFORMANCE.  Although the Company had net income of $19.3 
million and $4.2 million in the years ended December 31, 1995 and 1994, the 
Company experienced losses of $19.3 million, $9.2 million, and $6.9 million 
for the years ended December 31, 1997, 1996 and 1993, respectively.  As a 
result of the Company's inconsistent sales and operating results in recent 
years, there can be no assurance that the Company will be able to sustain 
consistent future revenue growth on a quarterly or annual basis, or that the 
Company will be able to maintain consistent profitability on a quarterly or 
annual basis.

     RELIANCE ON INTERNATIONAL SALES.  International sales accounted for 
approximately 82%, 86% and 88% of total net sales in the years ended 1997, 
1996 and 1995, respectively.  In addition, net sales to South Korean 
customers accounted for approximately 50%, 59% and 63%, respectively, of 
total net sales during the same periods.  The Company anticipates that 
international sales, including sales to South Korea, will continue to account 
for a significant portion of net sales.  As a result, a significant portion 
of the Company's sales will be subject to certain risks, including unexpected 
changes in regulatory requirements, tariffs and other barriers, political and 
economic instability, difficulties in accounts receivable collection, 
difficulties in managing distributors or representatives, difficulties in 
staffing and managing foreign subsidiary operations and potentially adverse 
tax consequences.  Although the Company's foreign system sales are primarily 
denominated in U.S. dollars and the Company does not engage in hedging 
transactions, the Company's foreign sales are subject to the risks associated 
with unexpected changes in exchange rates, which could have the effect of 
making the Company's products more or less expensive. There can be no 
assurance that any of these factors will not have a material adverse effect 
on the Company's business, financial condition and results of operations.

     Further, the Company has a wholly owned South Korean subsidiary 
providing service and support to the installed base of customers and whose 
functional currency is the won.  As a result of the devaluation of the won in 
the fourth quarter of 1997, the Company incurred a foreign exchange loss of 
$1.1 million. There can be no assurance that the Company will not incur 
currency losses or gains in future quarters as the currency fluctuates.

     A substantial portion of the Company's sales are in Asia.  Recent 
turmoil in the Asian financial markets has resulted in dramatic currency 
devaluations, stock market declines, restriction of available credit and 
general financial weakness.  In addition, DRAM prices have fallen 
dramatically and may continue to do so as some Asian IC manufacturers may be 
selling DRAMs at less than cost in order to raise cash.  These developments 
may affect the Company in several ways. Currency devaluation may make 
dollar-denominated goods, such as the Company's, more expensive for Asian 
clients.  Asian manufacturers may limit capital spending.  Furthermore, the 
uncertainty of the DRAM market may cause manufacturers everywhere to delay 
capital spending plans.  These circumstances may also affect the ability of 
Company customers to meet their payment obligations, resulting in the 
cancellations or deferrals of existing orders and the limitation of 
additional orders.  Some of the Company's South Korean customers have 
rescheduled their required delivery dates for orders

                                    Page 14
<PAGE>

previously placed and have announced delays in the facilitization of their 
new manufacturing areas. In addition, some portion of IC fabrication plant 
construction has been subsidized by Asian governments.  Financial turmoil may 
weaken these governments' willingness to continue such subsidies.  Such 
developments could have a material adverse affect on the Company's business, 
financial condition and results of operations.

     RELIANCE ON A SMALL NUMBER OF CUSTOMERS.  The Company continued its 
efforts to expand its customer base in 1997 and was successful, with new 
customers in Taiwan and North America.  Historically, the Company has relied 
on a limited number of customers for a substantial portion of its net sales.  
In 1997, two customers, Samsung Electronics Company, Ltd. and Innotech 
Corporation accounted for 47% and 17%, respectively, of the Company's net 
sales.  In 1996, these same two customers accounted for 53% and 18%, 
respectively, of the Company's net sales.  Because the semiconductor 
manufacturing industry is concentrated in a limited number of generally 
larger companies, the Company expects that a significant portion of its 
future product sales will be concentrated within a limited number of 
customers.  None of these customers has entered into a long-term agreement 
requiring it to purchase the Company's products.  Furthermore, sales to 
certain of these customers may decrease in the future when those customers 
complete their current semiconductor equipment purchasing requirements for 
new or expanded fabrication facilities. The loss of a significant customer or 
any reduction in orders from a significant customer, including reductions due 
to customer departures from recent buying patterns, market, economic or 
competitive conditions in the semiconductor industry or in the industries 
that manufacture products utilizing ICs, could have a material adverse effect 
on the Company's business, financial condition and results of operations.

     CYCLICAL NATURE OF THE SEMICONDUCTOR INDUSTRY.  The Company's business 
depends upon the capital expenditures of semiconductor manufacturers, which 
in turn depend on the current and anticipated market demand for ICs and 
products utilizing ICs.  The semiconductor industry is cyclical and 
experiences periodic downturns, which have an adverse effect on the 
semiconductor industry's demand for semiconductor manufacturing capital 
equipment.  Semiconductor industry downturns have adversely affected the 
Company's revenues, operating margins and results of operations.  There can 
be no assurance that the Company's revenues and operating results will not 
continue to be materially and adversely affected by future downturns in the 
semiconductor industry.  In addition, the need for continued investment in 
R&D, substantial capital equipment requirements and extensive ongoing 
worldwide customer service and support capability limits the Company's 
ability to reduce expenses.  Accordingly, there is no assurance that the 
Company will be able to attain profitability in the future.

     FLUCTUATIONS IN QUARTERLY OPERATING RESULTS.  The Company's revenue and 
operating results may fluctuate significantly from quarter to quarter.  The 
Company derives its revenue primarily from the sale of a relatively small 
number of high-priced systems, many of which may be ordered and shipped 
during the same quarter.  The Company's results of operations for a 
particular quarter could be adversely affected if anticipated orders, for 
even a small number of systems, were not received in time to enable shipment 
during the quarter, anticipated shipments were delayed or canceled by one or 
more customers or shipments were delayed due to manufacturing difficulties.  
The Company's revenue and operating results may also fluctuate due to the mix 
of products sold and the channel of distribution.

     COMPETITION.  The semiconductor manufacturing capital equipment industry 
is highly competitive.  Genus faces substantial competition throughout the 
world. The Company believes that to remain competitive, it will require 
significant financial resources in order to offer a broader range of 
products, to maintain customer service and support centers worldwide and 
invest in product and process R&D.  Many of the Company's existing and 
potential competitors have substantially greater financial resources, more 
extensive engineering, manufacturing, marketing and customer service and 
support capabilities, as well as greater name recognition than the Company.  
The Company expects its competitors to continue to improve the design and 
performance of their current products and processes and to introduce new 
products and processes with improved price and performance characteristics.  
If the Company's competitors enter into strategic relationships with leading 
semiconductor manufacturers covering MeV or CVD products similar to those 
sold by the Company, it would materially adversely affect the Company's 
ability to sell its products to these manufacturers.  There can be no 
assurance that the Company will continue to compete successfully in the 
United States or worldwide.  The Company faces direct competition in CVD WSix 
from Applied Materials, Inc. and Tokyo Electron, Ltd.  In the MeV 

                                    Page 15
<PAGE>

marketplace, the Company's MeV ion implantation systems compete with MeV 
systems marketed by Eaton Corporation.  There can be no assurance that these 
or other competitors will not succeed in developing new technologies, 
offering products at lower prices than those of the Company or obtaining 
market acceptance for products more rapidly than the Company.

     DEPENDENCE ON NEW PRODUCTS AND PROCESSES.  The Company believes that its 
future performance will depend in part upon its ability to continue to 
enhance its existing products and their process capabilities and to develop 
and manufacture new products with improved process capabilities.  As a 
result, the Company expects to continue to invest in R&D.  The Company also 
must manage product transitions successfully, as introductions of new 
products could adversely affect sales of existing products.  There can be no 
assurance that the market will accept the Company's new products or that the 
Company will be able to develop and introduce new products or enhancements to 
its existing products and processes in a timely manner to satisfy customer 
needs or achieve market acceptance.  The failure to do so could have a 
material adverse effect on the Company's business, financial condition and 
results of operations.  Furthermore, if the Company is not successful in the 
development of advanced processes or equipment for manufacturers with whom it 
has formed strategic alliances, its ability to sell its products to those 
manufacturers would be adversely affected.

     PRODUCT CONCENTRATION; RAPID TECHNOLOGICAL CHANGE.  Semiconductor 
manufacturing equipment and processes are subject to rapid technological 
change. The Company derives its revenue primarily from the sale of its MeV 
ion implantation and WSix CVD systems.  The Company estimates that the life 
cycle for these systems is generally three to five years.  The Company 
believes that its future prospects will depend in part upon its ability to 
continue to enhance its existing products and their process capabilities and 
to develop and manufacture new products with improved process capabilities.  
As a result, the Company expects to continue to make significant investments 
in R&D.  The Company also must manage product transitions successfully, as 
introductions of new products could adversely affect sales of existing 
products.  There can be no assurance that future technologies, processes or 
product developments will not render the Company's product offerings obsolete 
or that the Company will be able to develop and introduce new products or 
enhancements to its existing and future processes in a timely manner to 
satisfy customer needs or achieve market acceptance.  The failure to do so 
could adversely affect the Company's business, financial condition and 
results of operations.  Furthermore, if the Company is not successful in the 
development of advanced processes or equipment for manufacturers with whom it 
currently does business, its ability to sell its products to those 
manufacturers would be adversely affected.

     DEPENDENCE ON KEY SUPPLIERS.  Certain of the components and 
sub-assemblies included in the Company's products are obtained from a single 
supplier or a limited group of suppliers. Disruption or termination of these 
sources could have a temporary adverse effect on the Company's operations. The 
Company believes that alternative sources could be obtained and qualified to 
supply these products, if necessary. Nevertheless, a prolonged inability to 
obtain certain components could have a material adverse effect on the 
Company's business, financial condition and results of operations.

     DEPENDENCE ON INDEPENDENT DISTRIBUTORS.  The Company currently sells and 
supports its MeV ion implantation and CVD products through direct sales and 
customer support organizations in the U.S., Western Europe and South Korea and 
through five exclusive sales representatives and distributors in the U.S., 
Japan, Taiwan and Singapore. Although the Company believes that alternative 
sources of distribution are available, the disruption or termination of its 
existing distributor relationships could have a temporary adverse effect on 
the Company's business, financial condition and results of operations.

     VOLATILITY OF STOCK PRICE; EFFECT OF CONVERSION OF SERIES A STOCK ON THE 
STOCK PRICE.  The Company's Common Stock has experienced substantial price 
volatility, particularly as a result of quarter-to-quarter variations in the 
actual or anticipated financial results of, or announcements by, the Company, 
its competitors or its customers, announcements of technological innovations 
or new products by the Company or its competitors, changes in earnings 
estimates by securities analysts and other events or factors.  Also, the 
stock market has experienced extreme price and volume fluctuations which have 
affected the market price of many technology companies, in particular, and 
which have often been unrelated to the operating performance of these 
companies.  These broad market fluctuations, as well as general economic and 
political conditions in the United States and the countries in which the 
Company does business, may adversely affect the market price of the Company's 
Common Stock.  Furthermore, trading in the stock is thin and because the 
Series A Stock is convertible at a discount to the market price, the holders 
of Series A Stock can convert the Series A Stock into Common Stock and sell 
such Common Stock at a profit at any time, which may have a depressive effect 
on the stock price.  In addition, the occurrence of any of the events 
described in these "Risk Factors" could have a material adverse effect on 
such market price.

     READINESS FOR YEAR 2000.  Many existing computer systems and 
applications, and other control devices, use only two digits to identify a 
year in the date field, without considering the impact of the upcoming change 
in the century. These computer systems and applications could fail or create 
erroneous results unless corrected so that they can process data related to 
the year 2000.  The Company relies on its systems, applications and devices 
in operating and monitoring all major aspects of its business, including 
financial systems (such as general ledger, accounts payable and payroll 
modules), customer service, infrastructure, embedded computer chips, networks 

                                    Page 16
<PAGE>

and telecommunications equipment and end products.  The Company also relies 
on external systems of business enterprises such as customers, suppliers, 
creditors, financial organizations, and of governments both domestically and 
globally, directly for accurate exchange of data and indirectly.  During 
1997, the Company started the implementation of a new business system.  One 
criteria for the selection of the enterprise software was compliance with 
Year 2000 issues.  Accordingly, the Company's current estimate is that the 
costs associated with the Year 2000 issue, and the consequences of incomplete 
or untimely resolution of the Year 2000 issue, will not have a material 
adverse affect on the result of operations or financial position of the 
Company in any given year.  However, despite the Company's efforts to address 
the Year 2000 impact on its internal systems, there can be no assurance that 
the Company has fully identified such impact or that it can resolve it 
without disruption of its business and without incurring significant expense. 
 In addition, even if the internal systems of the Company are not materially 
affected by the Year 2000 issue, the Company could be affected through 
disruption in the operation of the enterprises with which the Company 
interacts.

                                    Page 17
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                            GENUS, INC. AND SUBSIDIARIES
                            CONSOLIDATED BALANCE SHEETS

                                 AS OF DECEMBER 31,
                   (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                           1997       1996
                                                        ---------  ---------
<S>                                                     <C>        <C>
ASSETS

Current Assets:
  Cash and cash equivalents...........................  $  8,700   $ 11,827
  Accounts receivable (net of allowance for doubtful
   accounts of $1,097 in 1997 and $250 in 1996).......    19,469     15,555
  Inventories.........................................    28,986     26,464
  Other current assets................................     1,029        638
  Current deferred taxes..............................        --      4,427
                                                        ---------  ---------
    Total current assets..............................    58,184     58,911
  Property and equipment, net.........................    15,276     15,345
  Other assets, net...................................     3,278      4,459
  Noncurrent deferred taxes...........................        --     10,417
                                                        ---------  ---------
                                                        $ 76,738   $ 89,132
                                                        ---------  ---------
                                                        ---------  ---------

LIABILITIES
Current Liabilities:
  Short-term bank borrowings..........................  $  7,200   $  2,500
  Accounts payable....................................     8,723      5,304
  Accrued expenses....................................    10,613     10,808
  Current portion of long-term debt and capital 
   lease obligations..................................       874      1,009
                                                        ---------  ---------
    Total current liabilities.........................    27,410     19,621
Long-term debt and capital lease obligations, less 
 current portion......................................       971      1,260
                                                        ---------  ---------
    Total liabilities.................................  $ 28,381   $ 20,881
                                                        ---------  ---------

Commitments (Note 8)

SHAREHOLDERS' EQUITY
Preferred stock, no par value:
  Authorized, 2,000,000 shares;
   Issued and outstanding, none.......................       --         --
Common stock, no par value:
  Authorized 50,000,000 shares;
   Issued and outstanding, 17,120,628 shares (1997) 
   and 16,723,927 shares (1996).......................    99,149     97,915
  Accumulated deficit.................................   (48,863)   (29,527)
  Cumulative translation adjustment...................    (1,929)      (137)
                                                        ---------  ---------
    Total shareholders' equity........................    48,357     68,251
                                                        ---------  ---------
                                                        $ 76,738   $ 89,132
                                                        ---------  ---------
                                                        ---------  ---------
</TABLE>

         The accompanying notes are an integral part of the 
                consolidated financial statements.

                                    Page 18
<PAGE>

                         GENUS, INC. AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF OPERATIONS

                      FOR THE YEARS ENDED DECEMBER 31,
               (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                1997           1996       1995
                                             ---------     ----------   ---------
<S>                                          <C>           <C>          <C>
Net sales..................................  $  84,286     $  82,509    $ 100,350
Costs and expenses:
  Cost of goods sold.......................     54,762        55,537       61,111
  Research and development.................     12,327        14,639       12,259
  Selling, general and administrative......     20,326        17,901       19,004
  Special charge...........................         --         5,890           --
                                             ---------     ----------   ---------
    Income (loss) from operations..........     (3,129)      (11,458)       7,976
 
Other income (expense), net................     (1,363)           53          327
                                             ---------     ----------   ---------
  Income (loss) before provision for
   (benefit from) income taxes.............     (4,492)      (11,405)       8,303
 
Provision for (benefit from) income taxes..     14,844        (2,200)     (10,979)
                                             ---------     ----------   ---------
    Net income (loss)......................  $ (19,336)    $  (9,205)   $  19,282
                                             ---------     ----------   ---------
                                             ---------     ----------   ---------
Net income (loss) per share-basic..........  $   (1.15)    $   (0.56)   $    1.26
                                             ---------     ----------   ---------
                                             ---------     ----------   ---------
Net income (loss) per share-diluted........  $   (1.15)    $   (0.56)   $    1.20
                                             ---------     ----------   ---------
                                             ---------     ----------   ---------
</TABLE>

             The accompanying notes are an integral part of the 
                     consolidated financial statements.

                                    Page 19
<PAGE>

                          GENUS, INC. AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

                 FOR THE THREE YEARS ENDED DECEMBER 31, 1997
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                                                 CUMULATIVE
                                                               COMMON         ACCUMULATED        TRANSLATION  
                                                               STOCK            DEFICIT           ADJUSTMENT       TOTAL
                                                              ----------      ------------       -----------      ---------
<S>                                                           <C>             <C>                <C>              <C>
Balances, January 1, 1995.................................    $   76,590      $  (39,604)        $     --         $  36,986
  Issuance of 2,539,018 shares of common stock under 
   private placement offering.............................        16,222              --               --            16,222
  Issuance of 542,450 shares of common stock under 
   stock option plan......................................         1,161              --               --             1,161
  Tax benefit on exercise of stock options................           750              --               --               750
  Issuance of 269,043 shares of common stock under 
   employee stock purchase plan...........................           960              --               --               960
  Net income..............................................            --          19,282               --            19,282
                                                              ----------      ------------       -----------      ---------
Balances, December 31, 1995...............................        95,683         (20,322)              --            75,361
  Issuance of 310,471 shares of common stock under 
   stock option plan......................................         1,125              --               --             1,125
  Issuance of 249,917 shares of common stock under 
   employee stock purchase plan...........................         1,107              --               --             1,107
  Net loss................................................            --          (9,205)              --            (9,205)
  Translation adjustment..................................            --              --             (137)             (137)
                                                              ----------      ------------       -----------      ---------
Balances, December 31, 1996...............................        97,915         (29,527)            (137)           68,251
  Issuance of 124,199 shares of common stock under 
   stock option plan......................................           364              --               --               364
  Issuance of 272,502 shares of common stock under
   employee stock purchase plan...........................           870              --               --               870
  Net loss................................................            --         (19,336)              --           (19,336)
  Translation adjustment..................................            --              --           (1,792)           (1,792)
                                                              ----------      ------------       -----------      ---------
Balances, December 31, 1997...............................    $   99,149      $  (48,863)        $ (1,929)        $  48,357
                                                              ----------      ------------       -----------      ---------
                                                              ----------      ------------       -----------      ---------
</TABLE>

              The accompanying notes are an integral part of the 
                      consolidated financial statements.

                                    Page 20
<PAGE>

                          GENUS, INC. AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF CASH FLOWS

                     FOR THE YEARS ENDED DECEMBER 31,
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                                1997           1996          1995
                                                                             ----------     ----------    ----------
<S>                                                                          <C>            <C>           <C>
Cash flows from operating activities:
  Net income (loss)........................................................  $ (19,336)     $  (9,205)    $  19,282
  Adjustments to reconcile to net cash from operating activities:
    Special charge.........................................................         --          5,890            --
    Loss on disposal of leasehold improvements.............................         --             --           261
    Depreciation and amortization..........................................      5,073          6,945         4,244
    Provision for doubtful accounts........................................      2,930             --            --
    Deferred taxes.........................................................     14,844         (2,534)      (11,560)
    Changes in assets and liabilities:
      Accounts receivable..................................................     (7,181)        11,191       (11,627)
      Inventories..........................................................     (2,998)        (4,509)       (9,760)
      Other current assets.................................................       (391)          (865)           32
      Accounts payable.....................................................      3,419         (1,825)        1,271
      Accrued expenses.....................................................       (543)        (1,094)        4,417
      Other, net...........................................................        527         (1,545)         (701)
                                                                             ----------     ----------    ----------
        Net cash provided by (used in) operating activities................     (3,656)         2,449        (4,141)
                                                                             ----------     ----------    ----------
Cash flows from investing activities:
  Acquisition of property and equipment....................................     (3,835)        (6,611)       (5,594)
  Capitalization of software development costs.............................         --           (360)         (937)
                                                                             ----------     ----------    ----------
        Net cash used in investing activities..............................     (3,835)        (6,971)       (6,531)
                                                                             ----------     ----------    ----------
Cash flows from financing activities:
  Proceeds from issuance of common stock...................................      1,234          2,232        18,343
  Proceeds from short-term bank borrowings.................................     50,290          4,000            --
  Payment of short-term bank borrowings....................................    (45,590)        (1,500)       (3,800)
  Payments of long-term debt...............................................       (939)          (990)       (1,429)
                                                                             ----------     ----------    ----------
        Net cash provided by financing activities..........................      4,995          3,742        13,114
                                                                             ----------     ----------    ----------
Effect of exchange rate changes on cash....................................       (631)           (23)           --
Net increase (decrease) in cash and cash equivalents.......................     (3,127)          (803)        2,442
Cash and cash equivalents, beginning of year...............................     11,827         12,630        10,188
                                                                             ----------     ----------    ----------
Cash and cash equivalents, end of year.....................................  $   8,700      $  11,827     $  12,630
                                                                             ----------     ----------    ----------
                                                                             ----------     ----------    ----------
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the year for:
  Interest.................................................................  $     445      $     210     $     172
  Income taxes.............................................................         94            105           209
Non-cash investing activities:
  Purchase of property and equipment under long-term debt obligations......        515          1,544         1,416
  Tax benefit on exercise of stock options.................................         --             --           750
</TABLE>

              The accompanying notes are an integral part of the 
                        consolidated financial statements.

                                    Page 21
<PAGE>

                        GENUS, INC. AND SUBSIDIARIES
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)


NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS

     Genus, Inc. develops, manufactures, markets and services advanced thin 
film deposition and high energy MeV ion implantation equipment used in the 
fabrication of advanced semiconductor integrated circuits.  The Company's 
products are marketed worldwide either directly to end-users or through 
exclusive sales representative arrangements.  In January 1996, the Company 
opened a subsidiary in South Korea to provide sales and service support to 
Korean customers.  In April 1997, the Company's Japanese subsidiary commenced 
significant operations, providing sales and service support to Japanese 
customers.  The Company's customers include semiconductor manufacturers 
located throughout the United States, Europe and in the Pacific Rim including 
Japan, South Korea and Taiwan.  Genus conducts its business within one 
industry segment.  The following is a summary of Genus' significant 
accounting policies.

BASIS OF PRESENTATION

     The Company incurred operating losses during each of the two years in 
the period ended December 31, 1997 and, as of December 31, 1997, had an 
accumulated deficit of $48,863. Additionally, the Company's bank line of 
credit is scheduled to expire in June 1998. The accompanying consolidated 
financial statements have been prepared assuming the Company will continue as 
a going concern and do not include any adjustments to reflect the possible 
future effects on the recoverability and classification of assets and 
liabilities that may result from the outcome of this uncertainty.

     In February 1998, the Company issued equity securities through a private 
placement of convertible preferred stock ("Series A Stock") for gross 
proceeds of $5,000. Upon fulfillment of certain conditions, the same 
investors in the Company's Series A Stock have committed to providing 
additional equity financing. Assuming the Company fulfills these conditions 
and receives the proceeds from this additional preferred stock financing and 
assuming the Company is able to secure borrowings upon renewal of its 
existing bank line of credit or under a new line of credit, the Company 
believes that its existing cash resources together with funds from this 
additional preferred stock financing and line of credit will be sufficient to 
fund the Company's expected working capital requirements for at least the 
next 12 months. However, the exact amount and timing of these working capital 
requirements and the Company's ability to continue as a going concern will be 
determined by numerous factors, including the level of and gross margin on 
future sales, the payment terms extended to and by the Company and the timing 
of capital expenditures. Furthermore, there can be no assurance that funds 
will be received or become available from the additional preferred stock 
financing or line of credit or that these funds, together with the Company's 
existing cash resources, will be sufficient to implement the Company's 
operating strategy or meet the Company's other working capital requirements. 
Accordingly, the Company may be required to seek additional equity or debt 
financing. There can be no assurance that the Company would be able to obtain 
additional debt or equity financing, if and when needed, on terms that the 
Company finds acceptable. Any additional equity or debt financing may involve 
substantial dilution to the Company's shareholders, restrictive covenants or 
high interest costs.

     If the Company is unable to obtain sufficient funds to satisfy its cash 
requirements, it will be forced to curtail operations, dispose of assets or 
seek extended payment terms from its vendors. There can be no assurance that 
the Company would be able to reduce expenses or successfully complete other 
steps necessary to continue as a going concern. Such events would materially 
and adversely affect the value of the Company's equity securities.

PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements include the accounts of Genus, 
Inc. and its wholly owned subsidiaries after elimination of significant 
intercompany accounts and transactions.

CASH AND CASH EQUIVALENTS

     The Company considers all highly liquid investments with a maturity of 
three months or less when purchased to be cash equivalents.

FAIR VALUE OF FINANCIAL INSTRUMENTS

     The carrying amounts of cash and cash equivalents approximate estimated 
fair value because of the short maturity of those financial instruments.  
Based on rates currently available to the Company for debt with similar terms 
and remaining maturities, the carrying amounts of debt approximate estimated 
fair values.

CONCENTRATION OF CREDIT RISK

     Financial instruments, which potentially subject the Company to 
concentrations of credit risk, consist principally of cash and trade 
receivables.  The Company places its cash with high credit quality financial 
institutions located in the United States.  The Company does not require 
collateral from its customers and maintains an allowance for credit losses.

     Three customers accounted for an aggregate of 75% and 71% of accounts 
receivable at December 31, 1997 and 1996, respectively.  South Korean and 
Japanese customers accounted for an aggregate of 70% and 60% of accounts 
receivable at December 31, 1997 and 1996, respectively.

INVENTORIES

     Inventories are stated at the lower of cost or market, using standard 
costs that approximate actual costs, under the first-in, first-out method.

                                    Page 22
<PAGE>

                           GENUS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)


NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

LONG-LIVED ASSETS

     Property and equipment are stated at cost and depreciated using the 
straight-line method over their estimated useful lives, which range from 
three to ten years.  Leasehold improvements are amortized using the 
straight-line method over their estimated useful lives or the remaining lease 
term, whichever is less.

     Other assets include goodwill and software development costs and are 
stated at cost.  Goodwill represents the cost in excess of an acquired 
business and is amortized on a straight-line basis over 15 years.  Software 
development costs represent costs incurred subsequent to establishing the 
technological feasibility of software products and are amortized over the 
expected life of the products, estimated to be three years.

     Whenever events or changes in circumstances indicate that the carrying 
amounts of long-lived assets and goodwill related to those assets may not be 
recoverable, the Company estimates the future cash flows, undiscounted and 
without interest charges, expected to result from the use of those assets and 
their eventual disposition.  If the sum of the future cash flows is less than 
the carrying amounts of those assets, the Company recognizes an impairment 
loss based on the excess of the carrying amounts over the fair values of the 
assets.

REVENUE RECOGNITION

     Revenue related to systems is recognized upon shipment or, prior to 
shipment, upon completion of customer source inspection and factory 
acceptance of the system where risk of loss and title to the system passes to 
the customer.  A provision for the estimated future cost of system 
installation, warranty and commissions is recorded when revenue is recognized.

USE OF ESTIMATES

     The preparation of financial statements in conformity with generally 
accepted accounting principles requires management to make estimates and 
assumptions that affect the reported amounts of assets and liabilities and 
disclosure of contingent assets and liabilities at the date of the financial 
statements and the reported amounts of revenues and expenses during the 
reporting period. Actual results could differ from those estimates.

INCOME TAXES

     The Company accounts for income taxes using a method that requires 
deferred tax assets to be computed annually on an asset and liability method 
and adjusted when new tax laws or rates are enacted.  Valuation allowances 
are established when necessary to reduce deferred tax assets to the amounts 
expected to be realized.  Income tax expense (benefit) is the tax payable 
(refundable) for the period plus or minus the change in deferred tax assets 
and liabilities during the period.

FOREIGN CURRENCY

     The Company has foreign sales and service operations.  With respect to 
all foreign subsidiaries excluding South Korea and Japan, the functional 
currency is the U.S. dollar, and transaction and translation gains and losses 
are included in net income (loss) and have not been material in any year 
presented.  The functional currency of the Company's South Korean subsidiary 
is the won, and the functional currency of the Company's 

                                    Page 23
<PAGE>

                          GENUS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)


NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

FOREIGN CURRENCY (CONTINUED)

Japanese subsidiary is the yen.  The translation from the applicable foreign
currency to U.S. dollars is performed for balance sheet accounts using current
exchange rates in effect at the balance sheet date and for revenue and expense
accounts using the weighted average exchange rate during the period. 
Adjustments resulting from such translation are reflected as a separate
component of stockholders' equity.  Gains or losses resulting from foreign
currency transactions, including intercompany transactions, are included in the
results of operations.

NET INCOME (LOSS) PER SHARE

     The Company adopted Statement of Financial Accounting Standards No. 128, 
"Earnings Per Share" ("SFAS 128") during the fourth quarter of 1997 and, 
accordingly, has restated all prior-period net income (loss) per share data 
presented.  Pursuant to the requirements of SFAS 128, the Company has 
computed and presented net income (loss) per share under two methods, basic 
and diluted. Basic net income (loss) per share is computed by dividing income 
(loss) available to common shareholders by the weighted average number of 
common shares outstanding for the period.  Diluted net income (loss) per 
share is computed by dividing income (loss) available to common shareholders, 
adjusted for convertible preferred dividends and after-tax interest expense 
on convertible debt, if any, by the sum of the weighted average number of 
common shares outstanding and potential common shares (when dilutive).

NOTE 2. INVENTORIES

     Inventories comprise the following:

<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                          --------------------
                                                            1997        1996
                                                          --------    --------
<S>                                                       <C>         <C>
Raw materials and parts.................................  $ 15,210    $ 14,776
Work in process.........................................     6,879       6,847
Finished goods..........................................     6,897       4,841
                                                          --------    --------
                                                          $ 28,986    $ 26,464
                                                          --------    --------
                                                          --------    --------
</TABLE>

                                    Page 24
<PAGE>

                          GENUS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)


NOTE 3. PROPERTY AND EQUIPMENT

     Property and equipment are stated at cost and comprise the following:

<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                          --------------------
                                                            1997        1996
                                                          --------    --------
<S>                                                       <C>         <C>
Equipment...............................................  $ 19,510    $ 16,145
Demonstration equipment.................................    14,352      14,047
Furniture and fixtures..................................     2,645       2,631
Leasehold improvements..................................     6,631       6,900
                                                          --------    --------
                                                            43,138      39,723
Less accumulated depreciation and amortization..........   (28,833)    (24,669)
                                                          --------    --------
                                                            14,305      15,054
Construction in process.................................       971         291
                                                          --------    --------
                                                          $ 15,276    $ 15,345
                                                          --------    --------
                                                          --------    --------
</TABLE>

     Equipment includes $3,745 and $3,479 of assets under capital leases at 
December 31, 1997 and 1996, respectively.  Accumulated amortization on these 
assets is $2,628 and $1,402 at December 31, 1997 and 1996, respectively.

NOTE 4. OTHER ASSETS

     Other assets comprise the following:

<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                          --------------------
                                                            1997        1996
                                                          --------    --------
<S>                                                       <C>         <C>
Goodwill                                                  $  3,802    $  3,802
Software development costs..............................     1,347       1,347
                                                          --------    --------
                                                             5,149       5,149
Accumulated amortization -- goodwill....................    (2,675)     (2,421)
Accumulated amortization -- software development costs..      (980)       (579)
                                                          --------    --------
                                                             1,494       2,149
Other...................................................     1,784       2,310
                                                          --------    --------
                                                          $  3,278    $  4,459
                                                          --------    --------
                                                          --------    --------
</TABLE>

     Amortization expense for software development costs was $401, $507 and 
$376 in 1997, 1996 and 1995, respectively.

                                    Page 25
<PAGE>

                        GENUS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

               (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 5. LINE OF CREDIT

     The Company has a revolving line of credit agreement with a bank that 
provides for maximum borrowings of $10,000 and expires in June 1998.  
Borrowings under the line of credit, which are collateralized by 
substantially all of the assets of the Company, bear interest at the bank's 
prime rate minus .25% (8.25% at December 31, 1997) or LIBOR plus 2% (7.625% 
at December 31, 1997).  The agreement requires the Company to comply with 
certain financial covenants and restricts the payment of dividends. At 
December 31, 1997, the Company had $2,800 in unused letters of credit and 
borrowings of $7,200 outstanding under the line of credit. Availability of 
borrowings is based on eligible accounts receivable and inventory.  Based on 
eligible accounts receivable and inventory at December 31, 1997, the 
Company's borrowing capacity under the revolving credit facility was in 
excess of $10,000. A monthly borrowing base certificate is required by the 
bank.

NOTE 6. ACCRUED EXPENSES

     Accrued expenses comprise the following:

<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                          --------------------
                                                            1997        1996
                                                          --------    --------
<S>                                                       <C>         <C>
System installation and warranty........................  $  3,741    $  4,884
Accrued commissions and incentives......................     2,062       1,344
Accrued payroll and related items.......................     1,264       1,003
Other...................................................     3,546       3,577
                                                          --------    --------
                                                          $ 10,613    $ 10,808
                                                          --------    --------
                                                          --------    --------
</TABLE>

NOTE 7. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS

     Long-term debt comprises the following:

<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                          --------------------
                                                            1997        1996
                                                          --------    --------
<S>                                                       <C>         <C>
Capital lease obligations with interest rates ranging                 
 from 4.9 - 15.6%.......................................  $  1,737    $  2,153
Mortgage loan payable in monthly installments through
 October 2000 at 9 1/4% interest per annum and
 collateralized by a building...........................       108         116
                                                          --------    --------
                                                             1,845       2,269
Less amounts due within one year........................      (874)     (1,009)
                                                          --------    --------
                                                          $    971    $  1,260
                                                          --------    --------
                                                          --------    --------
</TABLE>

                                    Page 26
<PAGE>

                            GENUS, INC. AND SUBSIDIARIES
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                   (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 7. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS (CONTINUED)

     The future aggregate payments of long-term debt and capital lease 
obligations are as follows: 

<TABLE>
<S>                                                                <C>
1998.............................................................  $    954
1999.............................................................       543
2000.............................................................       358
2001.............................................................       110
                                                                   --------
                                                                      1,965
Less amounts representing interest on long-term debt and 
 capital lease obligations.......................................      (120)
                                                                   --------
Principal payments and present value of minimum capital 
 lease obligations...............................................  $  1,845
                                                                   --------
                                                                   --------
</TABLE>

     Certain of the capital lease agreements require the Company to comply 
with specific financial covenants and to pay stipulated amounts upon default 
or termination prior to the expiration of the basic lease terms.


NOTE 8. LEASE COMMITMENTS
     
     The Company leases certain of its facilities and various office 
equipment under operating leases expiring through 2017.  The Company is 
responsible for property taxes, insurance and maintenance under the facility 
leases.  Certain of these leases contain renewal options.

     At December 31, 1997, minimum lease payments required under these 
operating leases are as follows:

<TABLE>
<S>                                                                <C>
1998.............................................................  $  1,854
1999.............................................................     1,585
2000.............................................................     1,600
2001.............................................................     1,681
2002.............................................................     1,584
Thereafter.......................................................    10,215
                                                                   --------
                                                                   $ 18,519
                                                                   --------
                                                                   --------
</TABLE>

     Rent expense for 1997, 1996 and 1995 was $2,215, $2,218 and $1,251, 
respectively.

                                    Page 27
<PAGE>

                        GENUS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

              (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)


NOTE 9. CAPITAL STOCK

NET INCOME (LOSS) PER SHARE

     A reconciliation of the numerator and denominator of basic and diluted 
income (loss) per share is as follows:

<TABLE>
<CAPTION>
                                                       YEARS ENDED DECEMBER 31,
                                                 -----------------------------------
                                                    1997          1996        1995
                                                 ----------    ---------    --------
<S>                                              <C>           <C>          <C>
Numerator-Basic:
  Net income (loss)............................  $ (19,336)    $ (9,205)    $ 19,282
                                                 ----------    ---------    --------
                                                 ----------    ---------    --------
Denominator-Basic:
  Weighted average common stock outstanding....     16,860       16,423       15,334
                                                 ----------    ---------    --------
                                                 ----------    ---------    --------
Basic net income (loss) per share..............  $   (1.15)    $  (0.56)    $   1.26
                                                 ----------    ---------    --------
                                                 ----------    ---------    --------
Numerator-Diluted:
  Net income (loss)............................  $ (19,336)    $ (9,205)    $ 19,282
                                                 ----------    ---------    --------
                                                 ----------    ---------    --------
Denominator-Diluted:
  Weighted average common stock outstanding....     16,860       16,423       15,334
  Effect of dilutive securities:
     Stock options.............................         --           --          729
                                                 ----------    ---------    --------
                                                    16,860       16,423       16,063
                                                 ----------    ---------    --------
                                                 ----------    ---------    --------
Diluted net income (loss) per share............  $   (1.15)    $  (0.56)    $   1.20
                                                 ----------    ---------    --------
                                                 ----------    ---------    --------
</TABLE>

     Stock options to purchase 1,979,000 shares of common stock were 
outstanding in 1997 on a weighted average basis, but were not included in the 
computation of diluted loss per share because the Company has a net loss for 
1997.

     Stock options to purchase 1,838,000 shares of common stock were 
outstanding in 1996 on a weighted average basis, but were not included in the 
computation of diluted loss per share because the Company has a net loss for 
1996.

     Stock options to purchase 152,000 shares of common stock were 
outstanding in 1995 on a weighted average basis, but were not included in the 
computation of diluted income per share because the exercise price was 
greater than the average market value of the common shares.

PRIVATE PLACEMENT OFFERING

     On February 17, 1995, the Company sold 2,539,018 shares of common stock 
for $16,200 through a private placement offering.

STOCK OPTION PLAN

     The Company has a 1991 Incentive Stock Option Plan (the "Plan") under 
which the Board of Directors may issue incentive and nonstatutory stock 
options.  The Plan expires ten years after adoption and the Board of

                                    Page 28
<PAGE>

                           GENUS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 9. CAPITAL STOCK (CONTINUED)

Directors has the authority to determine to whom options will be granted, the 
number of shares, the term and exercise price.  The options are exercisable 
at times and increments as specified by the Board of Directors, and expire 
five years from date of grant.  These options generally vest over a 
three-year period.  At December 31, 1997, the Company had reserved 3,503,006 
shares of common stock for issuance under the Plan.  A total of 785,340 
shares remained available for future grants at December 31, 1997.  At 
December 31, 1995, 351,866 options were exercisable at a weighted average 
exercise price of $3.28.  At December 31, 1996, 492,729 options were 
exercisable at a weighted average exercise price of $5.56.  At December 31, 
1997, 789,670 options were exercisable at a weighted average exercise price 
of $6.50.

     Activity under the Plan is set forth in the table below:

<TABLE>
<CAPTION>
                                                                                  WEIGHTED
                                                    OUTSTANDING                    AVERAGE 
                                      SHARES       OPTIONS PRICE                  EXERCISE
                                     (in 000's)      PER SHARE         TOTAL         PRICE   
                                     ----------   ---------------    --------     ---------
<S>                                  <C>          <C>                <C>          <C>
Balance, January 1, 1995............   1,279      $1.25 to $ 6.88    $  3,682     $  2.88
  Granted...........................   1,277       7.75 to  15.63      12,084        9.46
  Exercised.........................    (542)      1.25 to   6.88      (1,161)       2.14
  Terminated........................    (428)      1.25 to  15.63      (4,658)      10.88
                                     ----------   ---------------    --------     ---------
Balance, December 31, 1995..........   1,586       1.75 to  15.63       9,947        6.27
  Granted...........................   1,027       5.94 to   8.38       6,705        6.53
  Exercised.........................    (310)      1.75 to   8.63      (1,125)       3.63
  Terminated........................    (213)      2.75 to  15.63      (1,776)       8.34 
                                     ----------   ---------------    --------     ---------
Balance, December 31, 1996..........   2,090       1.75 to   8.63      13,751        6.58
  Granted...........................     537       3.88 to   6.94       2,707        5.04
  Exercised.........................    (124)      1.75 to   6.13        (364)       2.94
  Terminated........................    (652)      2.25 to   8.63      (4,473)       6.86 
                                     ----------   ---------------    --------     ---------
Balance, December 31, 1997..........   1,851      $2.25 to $ 8.63    $ 11,621        6.28 
                                     ----------   ---------------    --------     --------- 
                                     ----------   ---------------    --------     ---------
</TABLE>

     The Company has elected to follow Accounting Principles Board Opinion 
No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and related 
interpretations in accounting for its employee stock options.  Under APB 25, 
because the exercise price of the Company's stock options equals the market 
price of the underlying stock on the date of grant, no compensation expense 
is recognized.

     Pro forma information regarding net income (loss) and net income (loss) 
per share is required by Statement of Financial Accounting Standards No. 123, 
"Accounting for Stock-Based Compensation" ("SFAS 123"), which also requires 
that the information be determined as if the Company had accounted for its 
employee stock options granted subsequent to December 31, 1995 under the fair 
value method prescribed by SFAS 123.  

                                    Page 29
<PAGE>

                        GENUS, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

             (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 9. CAPITAL STOCK (CONTINUED)

     The fair value of these options was estimated at the date of grant using 
a Black-Scholes single option pricing model with the following weighted 
average assumptions for 1997, 1996 and 1995:

<TABLE>
<CAPTION>
                                                       1997           1996          1995
                                                    ---------      ---------      ---------
<S>                                                 <C>            <C>            <C>
Risk free interest rates..........................     6.220%         6.070%         6.320%
Expected life.....................................  3.5 years      3.5 years      3.5 years
Expected volatility...............................      77.7%          77.7%          77.7%
Expected dividend yield...........................        --%            --%            --%
</TABLE>

     The weighted average fair value of options granted in 1997, 1996 and 
1995 was $2.92, $3.81 and $4.58, respectively.

     Under the 1989 Employee Stock Purchase Plan, the Company does not 
recognize compensation cost related to employee purchase rights under the 
Plan.  To comply with the pro forma reporting requirements of SFAS 123, 
compensation cost is estimated for the fair value of the employees' purchase 
rights using the Black-Scholes model with the following assumptions for those 
rights granted in 1997, 1996 and 1995.

<TABLE>
<CAPTION>
                                                       1997           1996          1995
                                                    ---------      ---------      ---------
<S>                                                 <C>            <C>            <C>
Risk free interest rates..........................     5.630%         5.340%         6.250%
Expected life.....................................  0.5 years      0.5 years      0.5 years
Expected volatility...............................      77.7%          77.7%          77.7%
Expected dividend yield...........................        --%            --%            --%
</TABLE>

     The weighted average fair value of those purchase rights granted in 
1997, 1996 and 1995 was $1.80, $3.26 and $3.88, respectively.     

     Had compensation cost for the Company's stock-based compensation plans 
been determined based on the fair value at the grant dates for awards under 
those plans consistent with the method of SFAS 123, the Company's net income 
(loss) and basic and diluted net income (loss) per share would have been the 
pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                       1997           1996          1995
                                                    ---------      ---------      ---------
<S>                                                 <C>            <C>            <C>
Pro forma net income (loss).......................  $(21,537)      $(12,053)       $17,858
Pro forma net income (loss) per share -- basic....  $  (1.28)      $  (0.73)       $  1.16
Pro forma net income (loss) per share -- diluted..  $  (1.28)      $  (0.73)       $  1.13
</TABLE>

     The above pro forma effects on net income (loss) may not be 
representative of the effects on future results as options granted typically 
vest over several years and additional option grants are expected to be made 
in future years.

                                    Page 30
<PAGE>

                         GENUS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

               (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 9. CAPITAL STOCK (CONTINUED)

     The options outstanding and currently exercisable by exercise price 
under the option plan at December 31, 1997 are as follows:

<TABLE>
<CAPTION>
                                        OPTIONS OUTSTANDING                              OPTIONS EXERCISABLE
                      -------------------------------------------------------      -------------------------------
                          NUMBER      WEIGHTED AVERAGE                               NUMBER                        
   RANGE OF           OUTSTANDING        REMAINING           WEIGHTED AVERAGE      OUTSTANDING    WEIGHTED AVERAGE
EXERCISE PRICES        (IN 000'S)     CONTRACTUAL LIFE        EXERCISE PRICE       (IN 000'S)       EXERCISE PRICE
---------------       -----------     ----------------       ----------------      -----------    ----------------
<S>                   <C>             <C>                    <C>                   <C>            <C>
 $2.25-$5.25               538             3.12                  $ 4.24                192            $  3.66
 $5.56-$6.13               580             3.67                    6.01                202               5.99
 $6.38-$8.38               486             2.93                    7.70                229               7.77
 $8.63-$8.63               247             2.95                    8.55                167               8.63
                      -----------                                                  -----------
 $2.25-$8.63             1,851             3.22                  $ 6.28                790            $  6.50
                      -----------                                                  -----------
                      -----------                                                  -----------
</TABLE>

EMPLOYEE STOCK PURCHASE PLAN

     The Company has reserved a total of 1,750,000 shares of common stock for 
issuance under a qualified stock purchase plan, which provides substantially 
all Company employees with the right to acquire shares of the Company's 
common stock through payroll deductions.  Under the plan, the Company's 
employees, subject to certain restrictions, may purchase shares of common 
stock at the lesser of 85% of fair market value at either the beginning of 
each two-year offering period or the end of each six-month purchase period 
within the two-year offering period. At December 31, 1997, 1,625,086 shares 
have been issued under the plan.

COMMON STOCK PURCHASE RIGHTS

     In July 1990, the Company distributed a dividend to shareholders 
comprised of a right to purchase one share of common stock (a "Right") for 
each outstanding share of common stock of the Company they hold.  These 
rights do not become exercisable or transferable apart from the common stock 
until the Distribution Date which is either the tenth day after a person or 
group (a) acquires beneficial ownership of 20% or more of the Company's 
common stock or (b) announces a tender or exchange offer, the consummation of 
which would result in ownership by a person or group of 30% or more of the 
Company's common stock.  After the Distribution Date, each Right will entitle 
the holder to purchase from the Company one share of common stock at a price 
of $28.00 per share.

     If the Company is acquired in a merger or other business combination 
transaction, or if 50% or more of its consolidated assets or earnings power 
is sold, each Right will entitle the holder to purchase at the exercise price 
that number of shares of the acquiring company having a then current market 
value of two times the exercise price of the Right.  In the event that the 
Company is the surviving corporation in a merger and the Company's common 
stock remains outstanding, or in the event that an acquiring party engages in 
certain self-dealing transactions, each Right not owned by the acquiring 
party will entitle the holder to purchase at the exercise price that number 
of shares of the Company's common stock having a then current market value of 
two times the exercise price of the Right.

                                    Page 31
<PAGE>

                        GENUS, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

             (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 9. CAPITAL STOCK (CONTINUED)

     The Rights are redeemable at the Company's option for $.01 per Right 
prior to becoming exercisable, may be amended at the Company's option on or 
prior to the Distribution Date and expire on July 3, 2000.

NOTE 10. EMPLOYEE BENEFIT PLAN

     During 1988, the Company adopted the Genus, Inc. 401(k) Plan (the 
"Benefit Plan") to provide retirement and incidental benefits for eligible 
employees. The Benefit Plan provides for Company contributions as determined 
by the Board of Directors which may not exceed 6% of the annual aggregate 
salaries of those employees eligible for participation.  In 1997, 1996 and 
1995, the Company made $92, $87 and $61, respectively, in contributions to 
the Benefit Plan.

NOTE 11. SPECIAL CHARGE

     During 1996, the Company incurred special charges of $5,890 relating 
primarily to payroll costs associated with the reduction in workforce and 
inventory and demonstration equipment write-downs.

NOTE 12. OTHER INCOME (EXPENSE), NET

     Other income (expense), net, comprises the following:

<TABLE>
<CAPTION>
                                                  YEARS ENDED DECEMBER 31,
                                              --------------------------------
                                                1997         1996        1995
                                              --------      ------      ------
<S>                                           <C>           <C>         <C>
Interest income.............................. $    156      $  334      $  790
Interest expense.............................     (445)       (210)       (172)
Loss on disposal of leasehold improvements...       --          --        (261)
Foreign exchange.............................   (1,107)         --          --
Other, net...................................       33         (71)        (30)
                                              --------      ------      ------
                                              $ (1,363)     $   53      $  327
                                              --------      ------      ------
                                              --------      ------      ------
</TABLE>

                                    Page 32
<PAGE>

                        GENUS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

               (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 13. INCOME TAXES

     Income tax expense (benefit) for the years ended December 31, 1997, 1996 
and 1995 consists of the following:

<TABLE>
<CAPTION>
                                               1997          1996         1995
                                             --------     ---------     ---------
<S>                                          <C>          <C>           <C>
Federal:                                                              
  Current................................... $     --     $     --      $     431
  Deferred..................................   14,004       (2,343)     $ (11,036)
                                             --------     ---------     ---------
                                               14,004       (2,343)       (10,605)
                                             --------     ---------     ---------
State:                                                                
  Current...................................       --           --            150
  Deferred..................................      840         (191)          (524)
                                             --------     ---------     ---------
                                                  840         (191)          (374)
                                             --------     ---------     ---------
Foreign:
  Current...................................       --          334             --
                                             --------     ---------     ---------
                                             $ 14,844     $ (2,200)     $ (10,979)
                                             --------     ---------     ---------
                                             --------     ---------     ---------
</TABLE>

     The Company's effective tax rate for the years ended December 31, 1997, 
1996 and 1995 differs from the U.S. federal statutory income tax rate as 
follows:

<TABLE>
<CAPTION>
                                               1997          1996         1995
                                             --------     ---------     ---------
<S>                                          <C>          <C>           <C>
Federal income tax at statutory rate.......     (34)%         (35)%          34%
Change in valuation allowance..............     372            13          (173)
Alternative minimum tax....................      --            --             5
State income taxes.........................      --            --             2
Foreign income taxes.......................      --             3            --
Other......................................      (8)           --            --
                                             --------     ---------     ---------
                                                330%          (19)%        (132)%
                                             --------     ---------     ---------
                                             --------     ---------     ---------
</TABLE>

     The components of the net deferred tax asset comprise the following:

<TABLE>
<CAPTION>
                                                         1997        1996
                                                      ---------    ---------
<S>                                                   <C>          <C>
Deferred tax assets (liabilities):                                    
  Net operating loss carryforwards..................  $  13,097    $  9,447
  Tax credit carryforward...........................      1,867       1,288
  Inventory, accounts receivable and other 
   reserves.........................................        401       1,835
  Non-deductible accrued expenses...................      1,152       1,264
  Other reserves....................................         --       1,245
  Depreciation and amortization.....................        215        (235)
  Valuation allowance...............................    (16,732)         --
                                                      ---------    ---------
Net deferred tax assets.............................  $      --    $ 14,844
                                                      ---------    ---------
                                                      ---------    ---------
</TABLE>
                                    Page 33
<PAGE>

                         GENUS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 13. INCOME TAXES (CONTINUED)

     Temporary differences represent the cumulative taxable or deductible 
amounts recorded in the financial statements in different years than 
recognized in the tax returns.

     At December 31, 1997, the Company had the following income tax 
carryforwards available:

<TABLE>
<CAPTION>
                                                TAX          EXPIRATION 
                                             REPORTING          DATES
                                             ---------       -----------
<S>                                          <C>             <C>
U.S. regular tax operating losses..........   $ 36,700        2005-2012
U.S. business tax credits..................   $  1,867        2002-2009
State net operating losses.................   $ 11,800        1998-2003 
</TABLE>

     Based on the weight of available evidence as prescribed by Statement of 
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 
109"), management has determined that it is more likely than not that the net 
deferred tax asset at December 31, 1997 will not be realized and has, 
therefore, provided a full valuation allowance against the net deferred tax 
asset.  The amount of the net deferred tax asset that is realizable could be 
increased in the near term if actual operating results differ significantly 
from current estimates.  The utilization of the Company's net operating 
losses may be limited upon certain changes in ownership.

NOTE 14. SEGMENT INFORMATION

     The Company is engaged in the design, manufacture, marketing and 
servicing of advanced thin film deposition systems and MeV ion implantation 
systems used primarily in the semiconductor manufacturing industry.  The 
Company's sales are primarily generated from two products, CVD WSix and MeV 
ion implantation systems.  The Company's CVD system is designed for the 
deposition of WSix to create multiple interconnect layers on ICs.  The MeV 
ion implantation system drives electrically charged ions into the surface of 
a silicon wafer to convert the electrical characteristics of the wafer.  Both 
products are primarily used in the manufacturing of DRAMs.  Its business 
serves the semiconductor manufacturing industry only.  Net sales, 
identifiable assets and the results of operations of subsidiaries in foreign 
countries are not material.

INTERNATIONAL SALES

     International sales (principally from sales to customers in the Far East 
and Europe) for 1997, 1996 and 1995 represented 82%, 86% and 88% of net 
sales, respectively.

MAJOR CUSTOMERS

     In 1997, two customers, Samsung Electronics Company, Ltd. and Innotech 
Corporation, accounted for 47% and 17%, respectively, of net sales, and in 
1996, these same two customers accounted for 53% and 18%, respectively, of 
net sales.  In 1995, one customer accounted for 63% of net sales.

                                    Page 34
<PAGE>

                        GENUS, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

              (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 15. INTERIM FINANCIAL INFORMATION (UNAUDITED)

<TABLE>
<CAPTION>
                                           1997 QUARTERS ENDED
                              -------------------------------------------------
                              MARCH 31    JUNE 30    SEPTEMBER 30  *DECEMBER 31
                              --------    --------   ------------  ------------
<S>                           <C>         <C>        <C>           <C>
Net sales.................... $ 19,681    $ 19,351     $  24,375    $  20,879
Gross profit.................    7,368       7,811         8,351        5,994
Net income (loss)............      181         296           512      (20,325)
Net income (loss) per share- 
 basic and diluted...........     0.01        0.02          0.03        (1.20)
</TABLE>

<TABLE>
<CAPTION>
                                           1996 QUARTERS ENDED
                              -------------------------------------------------
                              MARCH 31    JUNE 30    SEPTEMBER 30   DECEMBER 31
                              --------    --------   ------------  ------------
<S>                           <C>         <C>        <C>           <C>
Net sales.................... $ 26,360    $ 25,095    $   13,892     $  17,162
Gross profit.................    9,438       9,176         3,399         4,959
Net income (loss)............      593         645      **(8,105)     **(2,338)
Net income (loss) per share- 
 basic and diluted...........     0.04        0.04         (0.49)        (0.14)
</TABLE>

     * During the fourth quarter of 1997, delays in shipments to Asian 
customers resulted in lower sales.  In addition, the Company incurred a net 
charge of $2,930 for bad debt expense.  The lower sales, coupled with this 
write-off, resulted in an operating loss of $4,930 for the fourth quarter.  
Other income (loss) for the quarter included $1,107 in foreign exchange 
losses as a result of the effect of the devaluation of the Korean won on 
intercompany transactions. In addition, based on the weight of available 
evidence as prescribed by SFAS 109, management determined that it is more 
likely than not that the net deferred tax asset at December 31, 1997 will not 
be realized and, therefore, provided a full valuation allowance against the 
net deferred tax asset during the fourth quarter of 1997.

     ** During the third and fourth quarters of 1996, the Company recognized 
special charges aggregating $5,890 relating primarily to payroll costs 
associated with a reduction in workforce and inventory and demonstration 
equipment write-downs.

NOTE 16. SUBSEQUENT EVENTS

     On January 28, 1998 the Board of Directors offered employees the 
opportunity to reprice outstanding stock options as of February 5, 1998.  The 
repriced options, both vested and unvested, are precluded from exercise for a 
period of one year from the repricing date.  Approximately 1,544,750 options 
with original exercise prices ranging from $3.88 to $8.63 were repriced at 
$3.03, the fair market value as of February 5, 1998.

     On February 12, 1998 the Company completed a private equity placement of 
$5,000 of convertible preferred stock to a group of institutional investors. 
Upon fulfillment of certain specified conditions, these same investors have 
also committed to provide additional financing of up to $5,000.

                                    Page 35
<PAGE>
                         REPORT OF INDEPENDENT ACCOUNTANTS




To the Board of Directors and Shareholders
Genus, Inc.
     
     We have audited the accompanying consolidated balance sheets of Genus, Inc.
and subsidiaries as of December 31, 1997 and 1996, and the related consolidated
statements of operations, shareholders' equity and cash flows for each of the
three years in the period ended December 31, 1997.  These financial statements
are the responsibility of the Company's management.  Our responsibility is to
express an opinion on these financial statements based on our audits.
     
     We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis for our
opinion.
     
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Genus, Inc. and
subsidiaries as of December 31, 1997 and 1996 and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1997, in conformity with generally accepted accounting
principles.

     The accompanying consolidated financial statements have been prepared 
assuming that the Company will continue as a going concern. As discussed in 
Note 1 to the consolidated financial statements, the Company has suffered 
losses from operations during each of the past two years and has an 
accumulated deficit, that raise substantial doubt about its ability to 
continue as a going concern. Management's plans in regard to these matters 
are also described in Note 1. The financial statements do not include any 
adjustments that might result from the outcome of this uncertainty.
     
     
     
                                                 COOPERS & LYBRAND L.L.P.
     
San Jose, California
January 26, 1998, except for Notes 1, 5 and 16,
as to which the date is March 2, 1998

                                  Page 36
<PAGE>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE
     
     None.
     
     
                                   PART III

     Certain information required by Part III is omitted from this Report in
that the Registrant will file a definitive proxy statement pursuant to
Regulation 14A relating to the Registrant's 1998 Annual Meeting of Shareholders
(the "Proxy Statement") not later than 120 days after the end of the fiscal year
covered by this Report, and certain information included therein is incorporated
herein by reference.
     
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
     
     The information regarding directors and nominees for directors of the
Company is incorporated by reference to the Company's Proxy Statement.
     
     The executive officers of the Company, who are elected by and serve at the
discretion of the Board of Directors, and their ages at March 10, 1998, are as
follows:

<TABLE>
<CAPTION>

NAME                            AGE                            POSITION
----------------------------    ----   -------------------------------------------------------
<S>                             <C>    <C>
William W.R. Elder..........     59    Chairman of the Board
James T. Healy..............     57    President, Chief Executive Officer
John E. Aldeborgh...........     41    Executive Vice President, Customer Satisfaction Officer
Mary F. Bobel...............     48    Executive Vice President, Chief Financial Officer
Frederick E. Heslet, Ed.D...     58    Executive Vice President, Chief Quality Officer
Thomas E. Seidel, Ph.D......     62    Executive Vice President, Chief Technical Officer
Mario M. Rosati.............     51    Secretary
</TABLE>

     Except as set forth below, all of the executive officers have been
associated with the Company in their present or other capacities for more than
the past five years.  Officers are elected annually by the Board of Directors
and serve at the discretion of the Board.  There are no family relationships
among executive officers of the Company.
     
     Mr. Elder, a founder of the Company, is the Chairman of the Board.  From
April 1990 to September 1996, he was Chairman of the Board, President and Chief
Executive Officer of the Company.  From November 1981 to April 1990, he was
President and a director of the Company.
     
     Mr. Healy joined the Company in September 1996 as President and Chief
Executive Officer of the Company.  From December 1990 to September 1996, Mr.
Healy was associated with Credence Systems Corporation, a manufacturer of
semiconductor test equipment, in various senior executive management positions,
most recently as President and a director of the Company.
     
     Mr. Aldeborgh joined the Company in June 1989 and serves as the Executive
Vice President and Customer Satisfaction Officer.  From January 1993 to January
1996, he was Vice President and General Manager, Ion Technology Products of the
Company.  From June 1989 to January 1993, he was the Director of Operations of
the Ion Technology Products.  From May 1983 to May 1989, Mr. Aldeborgh was with
LTX Corporation, a manufacturer of semiconductor test equipment, in various
management positions, most recently as Director of Manufacturing for the Linear
Manufacturing Division.

                                  Page 37
<PAGE>

     Ms. Bobel joined the Company in March 1997 as Executive Vice President and
Chief Financial Officer.  From October 1994 to September 1996, Ms. Bobel served
as Vice President and Chief Financial Officer at Educational Publishing
Corporation, a publisher of supplementary educational materials.  From March
1990 to September 1994, she was employed at Adobe Systems, a publicly held
software company, most recently as Vice President and Corporate Controller.
     
     Dr. Heslet joined the Company in November 1996 as Chief Quality Officer and
Executive Vice President, Human Resources.  In addition, he also is employed by
California State University, Hayward, where he has been a professor of
educational psychology since 1968.  From November 1990 to December 1996, he
served as Vice President of Quality and Development at Credence Systems
Corporation, a manufacturer of semiconductor test equipment.
     
     Dr. Seidel joined the Company in January 1996 and is the Executive Vice
President and Chief Technical Officer of the Company.  From July 1988 to January
1996, Dr. Seidel was associated with SEMATECH, a semiconductor-industry
consortium, in various senior management positions, most recently as Chief
Technologist and Director of Strategic Technology.
     
     Mr. Rosati has been a director of the Company since its inception in
November 1981, and has served as Secretary since June 1995.  From July 1995 to
April 1996, Mr. Rosati was the Company's Assistant Secretary.  He is a member of
Wilson Sonsini Goodrich & Rosati, P.C., general counsel to the Company.
     
ITEM 11. EXECUTIVE COMPENSATION
     
     The information required by this Item is incorporated by reference to the
Company's Proxy Statement.
     
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
     
     The information required by this Item is incorporated by reference to the
Company's Proxy Statement.
     
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
     
     The information required by this Item is incorporated by reference to the
Company's Proxy Statement.
     
     

                                  Page 38
<PAGE>

                                  PART IV
     
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
     
     (a)  The following documents are filed as a part of this Report:

1.   FINANCIAL STATEMENTS.

     Consolidated Balance Sheets -- December 31, 1997 and 1996

     Consolidated Statements of Operations -- Years Ended December 31, 1997,
     1996 and 1995

     Consolidated Statements of Shareholders' Equity -- Years Ended December 31,
     1997, 1996 and 1995

     Consolidated Statements of Cash Flows -- Years Ended December 31, 1997,
     1996 and 1995

     Notes to Consolidated Financial Statements

     Report of Independent Accountants

2.   FINANCIAL STATEMENT SCHEDULE.  The following financial statement schedule
     of Genus, Inc. for the years ended December 31, 1997, 1996 and 1995 is
     filed as part of this Report and should be read in conjunction with the
     Consolidated Financial Statements of Genus, Inc.

                                                      PAGE
                                                      ----
          Report of Independent Accountants.........   40
     II-- Valuation and Qualifying Accounts.........   41


     Schedules not listed above have been omitted because they are not
     applicable or are not required or the information required to be set forth
     therein is included in the Consolidated Financial Statements or Notes
     thereto.

3.   EXHIBITS.  The Exhibits listed on the accompanying Index to Exhibits
     immediately following the financial statement schedule are filed as part
     of, or incorporated by reference into, this Report.

4.   REPORTS ON FORM 8-K.  No reports on Form 8-K were filed by the Company
     during the fiscal quarter ended December 31, 1997.


                                  Page 39
<PAGE>

                         REPORT OF INDEPENDENT ACCOUNTANTS
     
     
     
     
To the Board of Directors and Shareholders
Genus, Inc.
     
     Our report on the consolidated financial statements of Genus, Inc. is
included on page 36 of this Form 10-K.  In connection with our audits of such
financial statements, we have also audited the related financial statement
schedule listed in Item 14 of this Form 10-K.
     
     In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
     
     
     
     
     
                                       COOPERS & LYBRAND L.L.P.

San Jose, California
January 26, 1998


                                  Page 40
<PAGE>

                                                                  SCHEDULE II

                                    GENUS, INC.
                                          
                         VALUATION AND QUALIFYING ACCOUNTS
                FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
                               (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                              BALANCE AT        CHARGED TO                              BALANCE AT
                                              BEGINNING          COSTS AND                                END OF
             DESCRIPTION                      OF PERIOD          EXPENSES            DEDUCTIONS           PERIOD
-------------------------------------------- ----------         ----------          -----------       -------------
             COLUMN A                         COLUMN B           COLUMN C            COLUMN D            COLUMN E
-------------------------------------------- ----------         ----------          -----------       -------------
<S>                                          <C>                <C>                 <C>               <C>
1995                                                                             
Allowance for doubtful accounts............. $    250           $     --             $    --              $     250
Inventory reserves..........................    2,665                995                 389                  3,271
Product warranty and installation accruals..    2,394              3,640               1,716                  4,318

1996                                                                                                               
Allowance for doubtful accounts.............      250                 --                  --                    250
Inventory reserves..........................    3,271              4,603               1,338                  6,536
Product warranty and installation accruals..    4,318              4,022               3,456                  4,884

1997                                                                                                               
Allowance for doubtful accounts.............      250              4,589               3,742                  1,097
Inventory reserves..........................    6,536                910               2,040                  5,406
Product warranty and installation accruals..    4,884              3,620               4,754                  3,750
</TABLE>

                                  Page 41
<PAGE>

                                   GENUS, INC.
                             ANNUAL REPORT ON FORM 10-K
                            YEAR ENDED DECEMBER 31, 1997
                                          
                                 INDEX TO EXHIBITS

<TABLE>
<CAPTION>

 EXHIBIT
    NO.                                    DESCRIPTION
---------  -----------------------------------------------------------------
<S>        <C>
 3.1       Amended and Restated Articles of Incorporation of Registrant as
           filed June 6, 1997 (11)
 3.2       By-laws of Registrant, as amended (2)
 4.1       Common Shares Rights Agreement, dated as of April 27, 1990, between
           Registrant and Bank of America, N.T. and S.A., as Rights Agent (4)
 4.2       Convertible Preferred Stock Purchase Agreement, dated February 2,
           1998, among the Registrant and the Investors (14)
 4.3       Registration Rights Agreement, dated February 2, 1998, among the
           Registrant and the Investors (14)
 4.4       Certificate of Determination (14)
10.1       Lease, dated December 6, 1985, for Registrant's facilities at 4
           Mulliken Way, Newburyport, Massachusetts, and amendment and
           extension of lease, dated March 17, 1987 (1)
10.2       Assignment of Lease, dated April 1986, for Registrant's facilities
           at Unit 11A, Melbourn Science Park, Melbourn, Hertz, England (1)
10.3       Registrant's 1989 Employee Stock Purchase Plan, as amended (5)
10.4       Registrant's 1991 Incentive Stock Option Plan, as amended (10)
10.5       International Distributor Agreement, dated November 23, 1987,
           between General Ionex Corporation and Innotech Corporation (1)
10.6       Distributor/Representative Agreement, dated August 1, 1984, between
           Registrant and Aju Exim (formerly Spirox Holding Co./You One Co.
           Ltd.) (1)
10.7       Exclusive Sales and Service Representative Agreement, dated October
           1, 1989, between Registrant and AVBA Engineering Ltd. (3)
10.8       Exclusive Sales and Service Representative Agreement, dated as of
           April 1, 1990, between Registrant and Indosale PVT Ltd. (3)
10.9       License Agreement, dated November 23, 1987, between Registrant and
           Eaton Corporation (1)
10.10      Exclusive Sales and Service Representative Agreement, dated May 1,
           1989, between Registrant and Spirox Taiwan, Ltd. (2)
10.11      Lease, dated April 7, 1992, between Registrant and The John A. and
           Susan R. Sobrato 1979 Revocable Trust for property at 1139 Karlstad
           Drive, Sunnyvale, California (6)
10.12      Asset Purchase Agreement, dated May 28, 1992, by and between the
           Registrant and Advantage Production Technology, Inc. (7)
10.13      License and Distribution Agreement, dated September 8, 1992, between
           the Registrant and Sumitomo Mutual Industries, Ltd. (8)
10.14      Lease Agreement, dated October 1995, for Registrant's facilities at
           Lot 62, Four Stanley Tucker Drive, Newburyport, Massachusetts (9)
10.15      International Distributor Agreement, dated July 18, 1997, between
           Registrant and Macrotron Systems GmbH (12)
10.16      Credit Agreement, dated August 18, 1997, between Registrant and
           Sumitomo Bank of California (12)
21.1       Subsidiaries of Registrant
23.1       Consent of Independent Accountants
24.1       Power of Attorney (included on page 44)
27.1       Financial Data Schedule
27.2       Financial Data Schedule (Restated Fiscal Year Ends 1995, 1996 and 
           Quarters 1, 2, 3 of 1996)
27.3       Financial Data Schedule (Restated Quarters 1, 2, 3 of 1997)
</TABLE>
                                  Page 42

<PAGE>

 (1) Incorporated by reference to the exhibit filed with Registrant's
     Registration Statement on Form S-1 (No. 33-23861) filed August 18, 1988,
     and amended on September 21, 1988, October 5, 1988, November 3, 1988,
     November 10, 1988, and December 15, 1988, which Registration Statement
     became effective November 10, 1988.
     
 (2) Incorporated by reference to the exhibit filed with the Registrant's
     Registration Statement on Form S-1 (No. 33-28755) filed on May 17, 1989,
     and amended May 24, 1989, which Registration Statement became effective May
     24, 1989.
     
 (3) Incorporated by reference to the exhibit filed with the Registrant's
     Annual Report on Form 10-K for the year ended December 31, 1989.
     
 (4) Incorporated by reference to the exhibit filed with the Registrant's
     Quarterly Report on Form 10-Q for the quarter ended September 30, 1990.
     
 (5) Incorporated by reference to the exhibit filed with the Registrant's
     Annual Report on Form 10-K for the year ended December 31, 1990.
     
 (6) Incorporated by reference to the exhibit filed with the Registrant's
     Quarterly Report on Form 10-Q for the quarter ended June 30, 1992.
     
 (7) Incorporated by reference to the exhibit filed with the Registrant's
     Report on Form 8-K dated June 12, 1992.
     
 (8) Incorporated by reference to the exhibit filed with the Registrant's
     Annual Report on Form 10-K for the year ended December 21, 1992.
     
 (9) Incorporated by reference to the exhibit filed with the Registrant's
     Annual Report on Form 10-K for the year ended December 31, 1995.
     
(10) Incorporated by reference to the exhibit filed with the Registrant's
     Quarterly Report on Form 10-Q for the quarter ended March 31, 1997.

(11) Incorporated by reference to the exhibit filed with the Registrant's
     Quarterly Report on Form 10-Q for the quarter ended June 30, 1997.
     
(12) Incorporated by reference to the exhibit filed with the Registrant's
     Quarterly Report on Form 10-Q for the quarter ended September 30, 1997.

(13) Incorporated by reference to the exhibit filed with the Registrant's
     Quarterly Report on Form 10-Q for the quarter ended September 30, 1990.

(14) Incorporated by reference to the exhibit filed with the Registrant's
     Current Report on Form 8-K dated February 12, 1998.

                                  Page 43
<PAGE>

SIGNATURES
     
     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Sunnyvale, State of California, on the 13th day of March 1998.

                               GENUS, INC.


                               By:    /s/  Mary F. Bobel
                                   --------------------------
                                           Mary F. Bobel
                                     EXECUTIVE VICE PRESIDENT
                                     CHIEF FINANCIAL OFFICER

                                  POWER OF ATTORNEY
     
     KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints James T. Healy and Mary F. Bobel, jointly
and severally, as his or her attorneys-in-fact, each with the power of
substitution, for him or her in any and all capacities, to sign any amendments
to this Report on Form 10-K, and to file the same, with exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his or her substitute or substitutes, may do or cause to
be done by virtue hereof.
     
     Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.


         NAME                       TITLE                      DATE
------------------------  ------------------------      -----------------

/s/  WILLIAM W.R. ELDER     Chairman of the Board        March 13, 1998
-------------------------
     William W.R. Elder

/s/  JAMES T. HEALY         President, Chief Executive   March 13, 1998
-------------------------     Officer (Principal 
     James T. Healy           Executive Officer)
 

/s/  MARY F. BOBEL          Executive Vice President,    March 13, 1998 
-------------------------     Chief Financial Officer 
     Mary F. Bobel            (Principal Financial 
                              Officer and Principal 
                              Accounting Officer)

/s/  STEPHEN F. FISHER      Director                     March 13, 1998
-------------------------
     Stephen F. Fisher                  
                    
/s/  G. FREDERICK FORSYTH   Director                     March 13, 1998
-------------------------
     G. Frederick Forsyth 
                    
/s/  TODD S. MYHRE          Director                     March 13, 1998
-------------------------
     Todd S. Myhre                 
                    
/s/  MARIO M. ROSATI        Director                     March 13, 1998
-------------------------
     Mario M. Rosati

                                  Page 44