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                                  UNITED STATES
                       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, 2003
                                              -----------------
                                       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
       incorporation or organization)              Identification Number)

       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. [ ]

Indicate  by  check  mark  whether  the  Registrant  is an accelerated filer (as
defined  in  Exchange  Act  Rule  12b-2).
Yes  [X]  No  [ ]

The  aggregate  market  value  of the voting stock held by non-affiliates of the
Registrant,  based  upon the average bid and asked price as of the last business
day  of the registrant's most recently completed second fiscal quarter (June 30,
2003)  as reported by the Nasdaq National Market, was approximately $84 million.
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,  2004,  Registrant  had  39,625,284 shares of common stock
outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE
Parts  of  the  following  document are incorporated by reference in Part III of
this  Form  10-K Report: Proxy Statement for Registrant's 2004 Annual Meeting of
Shareholders - Items 10, 11, 12 and 13.


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<PAGE>
<TABLE>
<CAPTION>
                                          GENUS, INC.

                                2003 ANNUAL REPORT ON FORM 10-K

                                       TABLE OF CONTENTS

                                                                                            PAGE
PART I.
<S>             <C>                                                                         <C>
Item 1.         Business                                                                     3
Item 2.         Properties                                                                  14
Item 3.         Legal Proceeding                                                            14
Item 4.         Submission of Matters to a Vote of Security Holders                         15

PART II.
Item 5.         Market for the Registrant's Common Equity and Related Shareholder Matters   16
Item 6.         Selected Financial Data                                                     17

Item 7.         Management's Discussion and Analysis of Financial Condition and Results of
                Operations                                                                  18
Item 7A.        Quantitative and Qualitative Disclosures About Market Risk                  34
Item 8.         Consolidated Financial Statements and Supplementary Data                    35
Item 9.         Changes in and Disagreements with Accountants on Accounting and
                Financial Disclosure                                                        35
Item 9A         Controls and Procedures                                                     36

PART III.
Item 10.        Directors and Executive Officers of the Registrant                          37
Item 11.        Executive Compensation                                                      37
Item 12.        Security Ownership of Certain Beneficial Owners and Management              37
Item 13.        Certain Relationships and Related Transactions                              37
Item 14.        Principal Accountant Fees and Services                                      37

PART IV.
Item 15.        Exhibits, Financial Statement Schedules and Reports on Form 8-K             38

SIGNATURES                                                                                  68
EXHIBITS                                                                                    69
</TABLE>


<PAGE>
                                     PART I

ITEM  1.  BUSINESS
------------------

OVERVIEW

     Since  1982,  we  have been supplying advanced manufacturing systems to the
semiconductor  industry  worldwide.  Major  semiconductor  manufacturers use our
leading-edge  thin  film  deposition equipment and process technology to produce
integrated circuits, commonly called chips, that are incorporated into a variety
of products, including personal computers, communications equipment and consumer
electronics.  We  pioneered  the  development of chemical vapor deposition (CVD)
tungsten silicide, which is used in certain critical steps in the manufacture of
integrated  circuits. In addition, today we are leading the commercialization of
atomic  layer  deposition,  also  known  as  ALD  technology. This technology is
designed  to  enable  a wide spectrum of thin film applications such as aluminum
oxide,  hafnium oxide and other advanced insulating and conducting materials for
advanced  integrated  circuit  manufacturing.

     We have also implemented a strategy of targeting non-semiconductor markets,
as  we are confident that our developed films can serve multiple applications in
both semiconductors and non-semiconductor segments. In addition to expanding our
total  available  market,  this  strategy  of  diversifying our customer base is
intended  to  provide  some  protection  against  cyclical  downturns  in  the
semiconductor  industry.  We  believe  our  emerging  ALD  technology will prove
effective  in  expanding  and  diversifying  our  customer  base.

     We  continue  to  develop  enabling thin film technology that addresses the
scaling  challenges  facing  the  semiconductor  industry  relating  to gate and
capacitor  materials.  The  International  Technology Roadmap for Semiconductors
(ITRS)  has  labeled  these challenges as "red zones" because there are no known
solutions  that  allow  for  further  reduction  in  feature  sizes and improved
performance.  Our  innovative  thin  film  technology  solutions are designed to
enable  chip  manufacturers  to  simplify  and  advance their integrated circuit
production processes and lower their total cost of manufacturing per chip, known
as  cost  of  ownership.

     As it is in the semiconductor industry, non-semiconductor business segments
have scaling initiatives as well.  For example, the making of thin film magnetic
heads  in  the  data  storage industry has scaling requirements analogous to the
scaling  trends in semiconductors.  A key part of our business strategy includes
providing  enabling  thin  film  solutions  for  non-semiconductor applications.

     We  provide  a  production-proven  platform  that  is  used  for  both  the
development  and  volume  production  of  new  thin  films in integrated circuit
manufacturing.  This  platform  is  based  on  a  common architecture and a high
percentage  of common parts that are designed to provide manufacturers with high
reliability  and  low  cost  of  ownership  across  a  wide  range  of thin film
deposition  applications. The modular design of our system permits manufacturers
to  add  capacity and to service their manufacturing systems easily. In addition
to  the  modular  platform  architecture,  our  systems  operate on standardized
software  that  is  designed  to  support  a  wide range of thin film deposition
processes.

     Our  global  customer  base consists of semiconductor and non-semiconductor
manufacturers  in  the  United  States,  Europe  and Asia. Our current customers
include  semiconductor  manufacturers  such  as  Infineon  Technologies, NEC and
Samsung  Electronics Company, Ltd. and non-semiconductor customers such as HGST,
Western  Digital,  Fujitsu,  and  Seagate  Technologies.


INDUSTRY  BACKGROUND

     The manufacture of an integrated circuit requires a number of complex steps
and processes. Most integrated circuits are built on a base of silicon, called a
wafer, and consist of two main structures. The lower structure is made up of
components, typically transistors or capacitors, and the upper structure
consists of the circuitry that


                                        3
<PAGE>
connects the components. Building an integrated circuit requires the deposition
of a series of film layers, which may be conductors, dielectrics (insulators),
or semiconductors. The overall growth of the semiconductor industry and the
increasing complexity of integrated circuits have led to increasing demand for
advanced semiconductor equipment. Although the semiconductor industry has grown
over 30 years with an average annual growth rate (CAGR) of 14.0%, it is prone to
cyclic variations, including significant downturns. Typically there are periods
of high demand followed by periods of low demand. Each cycle is one to three
years of high growth and one to three years of low growth. During 2003, we
continued to experience the biggest recession in the history of the
semiconductor and semiconductor equipment industries. VLSI Research, Inc. an
independent research company specializing in the high technology industry,
estimates that industry shipments in 2002 were down 69% compared to 2001 and
grew by around 5% in 2003 from 2002. VLSI expects a growth in industry shipments
in 2004 of approximately 40% when compared to 2003.


INDUSTRY DRIVERS: LOWERING THE COST PER FUNCTION AND INCREASING PERFORMANCE

     The  growth of computer markets and the emergence and growth of new markets
such  as  wireless  communications  and  digital  consumer  electronics  have
contributed to growth in the semiconductor industry. This increase also has been
fueled  by  the semiconductor industry's ability to supply increasingly complex,
higher  performance  integrated  circuits,  while continuing to reduce cost. The
increasing  complexity of integrated circuits and the accompanying reductions in
feature  size  require  more advanced and expensive wafer fabrication equipment,
which  can  increase  the average cost of advanced wafer fabrication facilities.
Technological  advances  in  semiconductor  manufacturing  equipment  have
historically enabled integrated circuit manufacturers to lower cost per function
and  improve  performance  dramatically  by:

-    reducing  feature  size  of integrated circuits and the introduction of new
     materials  with  scaled  dimensions;
-    increasing  the  wafer  size;
-    increasing  manufacturing  yields;  and
-    improving  the  utilization  of  wafer  fabrication  equipment.


REDUCING FEATURE SIZES AND ADDING NEW ENABLING THIN FILMS

     Smaller  feature  sizes  allow  more  circuits  to  fit on one wafer. These
reductions have contributed significantly to reducing the manufacturing cost per
chip.  The semiconductor industry is driven by performance (mainly the increased
speed  for  logic  and  memory  signals)  and increased chip density (mainly the
increased  density  of  memory and logic capacity). In addition to the continued
reduction  in  feature  sizes,  there  is  a  paradigm  shift for the use of new
materials  to  improve  performance  of  integrated  circuits. New materials are
required  for  gate,  capacitor and interconnect application segments within the
semiconductor  manufacturing  process.  The  adoption  of new types of thin film
conducting  and  insulating  materials  will  accelerate the trend toward higher
levels  of  semiconductor  performance  and  integration  while  maintaining the
historic  trend  of  reduction  of  cost  per  function.


                                        4
<PAGE>
LARGER  WAFER  SIZES

     By  increasing the wafer size, integrated circuit manufacturers can produce
more circuits per wafer, thus reducing the overall manufacturing costs per chip.
Leading-edge  wafer  fabrication  lines  are currently using 300-millimeter (mm)
wafers,  in  addition to the 200mm wafers that they have been using for the last
ten  to  fifteen years.  We believe that most major manufacturers will add 300mm
production  capabilities  within  the  next one to four years.


HIGHER  MANUFACTURING  YIELDS

     In  the last fifteen years, manufacturing yields, or the percentage of good
integrated  circuits  per wafer, have increased substantially, while the time to
reach  maximum  yield  levels  during  a  production  lifecycle  has  decreased
significantly.  As  the  complexity  of  chips  increases,  manufacturers  must
continually  reduce  defect  density  to  obtain  higher  yields.


IMPROVED EQUIPMENT UTILIZATION AND INTRODUCING NEW EQUIPMENT ARCHITECTURES

     The  utilization  of  semiconductor manufacturing lines has improved in the
last  ten  years. Manufacturing lines now operate continuously. In addition, new
architectures  of  production equipment are being explored that allow for higher
throughputs, better reliability, high quality, and low overall cost-of-ownership
as  measured  by  the  total  cost  to process each wafer through the equipment.

     While  these  production techniques are important for reducing the cost per
function  of  chips,  we believe that the most beneficial production solution is
likely to combine feature size reduction and the use of new thin film materials.


"RED  ZONE"  CHALLENGES  FACING  THE  SEMICONDUCTOR  INDUSTRY

     The semiconductor industry is driven by the need for higher performance and
greater  chip  density  as  measured by an increasing number of functions on the
chip. The semiconductor industry has historically been able to double the number
of  transistors  on  a  given space of silicon every 18 to 24 months by reducing
feature  sizes.  However,  as the industry approaches feature size dimensions of
100nm  and  below,  the  industry  continues  to face significant challenges and
roadblocks  pertaining  to  improving  device  performance  and  feature  size
reduction.  The  International  Technology  Roadmap  (2003)  has  labeled  these
challenges  "red  zones" for semiconductors because there are no known solutions
to  allow for further reduction in feature sizes and improved performance. It is
estimated  that semiconductor manufacturers need approximately two to four years
to  research, develop and commercially produce a new type of integrated circuit.


                                        5
<PAGE>
     As part of its strategy to solve the challenges posed by the red zones, the
semiconductor  industry is moving towards the use of ultra-thin dielectrics with
high  insulating  capabilities  for  gate  dielectrics and capacitors as well as
ultra-thin metal barriers for copper-based interconnect processes. Emerging thin
films  with  high  dielectric  capabilities  for gate and capacitor applications
include  metal  oxides  such  as  aluminum  oxide.


THE  GENUS  SOLUTION

     We are an innovative supplier of thin film deposition equipment to
semiconductor and non-semiconductor manufacturers and are focused on developing
enabling thin film technology to solve the challenges posed by the red zones.
Our patented multi-purpose process chamber serves as the foundation for all of
our current products. Our products are designed to deliver high throughput, low
cost of ownership and quick time to market, enhancing the ability of
manufacturers to achieve productivity gains.


INNOVATIVE  THIN  FILM  SOLUTIONS

     Our  systems  and  processes  are  designed to provide innovative thin film
solutions  that  address technical and manufacturing problems experienced by the
semiconductor  industry.  We  provide  our  customers  with advanced systems and
processes  for  depositing  thin  films  such as CVD tungsten silicide, tungsten
nitride,  and  blanket tungsten, and ALD films such as aluminum oxide, zirconium
oxide  and  hafnium  oxide. These innovative thin films solve certain key device
and  interconnect  problems  faced  by semiconductor manufacturers as they scale
their  device  geometries  below  0.10  micron.

VERSATILE  PRODUCTION  PLATFORM

     Our  LYNX  series  and  StrataGem  family  of systems are based on a common
outsourced,  reliable  wafer-handling robotic platform. The systems are designed
to  be flexible and can be configured for multiple deposition processes, such as
CVD,  plasma  enhanced  CVD and ALD. Our systems offer the following advantages:

     -    A  production-proven  platform  that  allows  for  easier  and  faster
          migration  from  research  and  development  to  production;

     -    A platform based upon a large number of standardized parts used across
          our  systems  to  enhance  reliability;

     -    A  modular  design  that  allows  for  simplified  service.

     In  addition,  all  of  our  systems  are  designed  with  a graphical user
interface  that  automates  tasks  and  allows  for comprehensive viewing of the
real-time  status  of  the systems. Our software supports our customers' process
development  needs with the ability to run a different set of processes for each
wafer.


                                        6
<PAGE>
LOW  COST  OF  OWNERSHIP

     Our  LYNX  series  and  StrataGem  family  of  equipment  offer low cost of
ownership  by  featuring  multiple  deposition  processes  capabilities,
production-proven  process  chamber  design,  advanced software architecture and
reliable  wafer handling. Based on feedback from our installed customer base, we
estimate  that  our  production  systems  consistently  achieve greater than 90%
availability,  and  that the mean time between failures of our system is greater
than  300  hours.  In addition, our customers have confirmed that we offer among
the  lowest  costs of operation. We are committed to improving these results and
achieving  these  same  levels  of  performance or better with our new thin film
products.


CUSTOMER  SUPPORT

     We  believe we deliver superior customer support and service to enhance our
long-term  customer relationships. We maintain an international customer support
infrastructure  with  fully  staffed  customer  support  capabilities  in United
States,  Korea,  Japan  and  Europe.  We provide training to  customer engineers
with  all of our equipment installations as well as 24 hours a day, seven days a
week  product support. We offer warranties consisting of a one to two year parts
warranty  and  a  one-year  labor  warranty.


MARKETS  AND  APPLICATIONS

     In  2003,  we  continued  to expand our CVD product line with new films and
applications  that  allow  us  to  serve broader markets. In 1999, Genus had CVD
tungsten  silicide and tungsten nitride for gate and barrier applications and we
were  just  introducing  ALD  technology. In 2003, we have developed films using
tungsten  silicide,  tungsten  nitride and blanket tungsten by conventional CVD,
and aluminum oxide, hafnium oxide and zirconium oxide by ALD. In addition, Genus
has  the  demonstrated  capability  to  integrate  these ALD films as alloys and
nanolaminates  (layered  structures)  for  the  engineering  of  specialized
capabilities on its platforms. These films serve the Company for applications in
semiconductors  for  gate  and  capacitor,  as  well  as  for  non-semiconductor
applications  (thin  film  magnetic heads used in the hard disk drive industry).

     By  focusing on a broader set of film markets, we believe we can reduce our
dependence  on  the volatile dynamic-random-access memory (DRAM) market, as well
as  benefit from participation in the logic segment and non-semiconductor market
opportunities.  We  are  now participating in semiconductor memory with gate and
capacitor  films,  in  semiconductor  logic  with  advanced  gate  films, and in
non-semiconductor  gap  dielectrics  for thin film magnetic heads. We have moved
from  solely  memory  applications  to this level of diversification in the last
three  years.

     We  focus  on  the  following  thin  film  market  segments:


CVD  SILICIDE  AND  METAL, AND ALD DIELECTRICS AND METAL BARRIERS FOR GATE STACK
FILMS

     CVD  tungsten  silicide  is used to reduce the electrical resistance of the
gate  material in a transistor device structure. Our tungsten silicide gate thin
films  are  used  in  DRAM  integrated  circuit  production.


                                        7
<PAGE>
Capacitor  films

     Genus  is  commercializing  its  ALD  technology  with  the  application to
advanced  capacitors,  including  cylinder ("stacked"), trench, embedded, rf and
decoupling capacitor applications. Two semiconductor customers have selected ALD
technology  for volume production. The state of the art has been advanced due to
high  conformality  and  high  quality  Genus  ALD  films.

Non-semiconductor  films

     Genus  has  developed  a market for its ALD films in the thin film magnetic
head  market.  This market developed because of a production ready-made solution
that  the  Genus ALD dielectrics provide for the scaling of the gap dielectrics.
Three  data  storage  customers  have  selected  Genus ALD technology for volume
production.  The  market  is scaling to thinner films, ideally suited to the ALD
approach.  Other non-semiconductor markets are targeted, these include: Magnetic
Random  Access  Memory  (MRAM),  Optical  interconnects / filters, Organic Light
Emiting  Diodes (OLEDs), Microelectromechanical Systems (MEMS), and photo masks,
in fact anywhere that film uniformity and conformality are enabling. However, it
is  too  early  to  predict  our  ability  to  penetrate  in  these  markets.


PRODUCTS  AND  TECHNOLOGY

     We  have  developed  our  product  strategy  around  the LYNX and StrataGem
platforms  concept.  The  LYNX  system refers specifically to the vacuum robotic
wafer  handler  and its wafer controlling software. The LYNX process modules are
generically  appropriate  for  CVD  and  plasma  enhanced  CVD,  and is used for
depositing  the  following  films:

     -    Tungsten  silicide-monosilane
     -    Tungsten  silicide-dichlorosilane
     -    Tungsten  nitride
     -    Tungsten

     Our  ALD  family of products called, StrataGem, serve the semiconductor and
storage  technology markets. StrataGem 200 , StrataGem 300 and StrataGem TFH are
used  for  depositing  the  following  films:

     -    Aluminum  oxide
     -    Advanced metal oxides (e.g., tantalum oxide, titanium oxide, zirconium
          oxide,  hafnium  oxide,  lanthanmoxide)
     -    Metal  films  (e.g.,  titanium  nitride  and  tungsten  nitride)
     -    Nanolaminates  and  alloys


LYNX  Series

     LYNX2(R).  Manufacturers  of  advanced  DRAM devices of 0.35 to 0.10 micron
currently  use  the  LYNX2  system in production. LYNX2 systems support over 200
process modules in high volume production. Production availability for the LYNX2
system  runs  from 90-95%. LYNX platforms are also used for customer development
and  pilot manufacturing for more advanced semiconductor applications below 0.10
micron. The LYNX2 features a wafer-handling platform that is compatible with the
Modular  Equipment  Standards  Committee  (MESC). This platform uses a centrally
located,  dual-end robot for high throughput operation. The system is controlled
by  a  graphical  user  interface  that  provides  the  operator  with real-time
information  such  as  recipe,  set  points,  and  hardware  status  and service
features.  The  modular  design  of  the LYNX2 allows the addition of up to four
process  modules,  which  can  be run serially or in parallel. The LYNX2 process
module  design  also offers 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.


                                        8
<PAGE>
     LYNX3(TM).  We  introduced the LYNX3 in January 1999 as our first 300mm low
pressure  CVD process module in a beta system. The LYNX3 process module is based
on  a  newly  developed  and  patented  process  chamber concept that results in
exceptional  uniformity.  The  LYNX3  is  designed  to  run  all films currently
supported by the LYNX2, as well as all films currently in development. The LYNX3
system  supports  up  to  four  process modules, which can be run serially or in
parallel.  Also,  we  have  developed an advanced version of the LYNX3, which is
designed  to  be a "bridge tool", capable of running either 200 or 300mm wafers.

StrataGem  Family  (StrataGem 200,  StrataGem 300  and  StrataGem TFH)

     The  ranges  of thin films that can be deposited using the StrataGem family
products  include:

     -    ALD  Dielectrics.  In  July 1999, we announced the availability of ALD
          aluminum  oxide.  ALD  has  many  possible  applications  in  the
          semiconductor market including as a high dielectric constant oxide for
          either  capacitors  or  for  gate  dielectrics,  as  an  etch stop for
          advanced  structures,  or  for  hard  mask applications. We made other
          advanced  ALD  dielectrics  available during 2000 and 2001. We believe
          that  our  ALD  aluminum  oxide-based  technology  will find near-term
          opportunities in the DRAM capacitor application. Other ALD dielectrics
          will  find  longer-term  applications  in  both  capacitor  and  gate
          dielectric  structures.

     -    ALD Metal Films. Metal films have been developed and offer application
          for  metal  gate (work function control as well as barrier), capacitor
          electrodes,  contact  and  interconnect barriers. The applications are
          current  in  the case of capacitor electrodes and contact barrier. For
          interconnects  they  will  likely  come  to  be  needed below the 90nm
          feature  size,  where  barrier  film  thickness  decrease  below  100
          angstroms.  Somewhat  beyond  2005, there will be an interest in these
          barriers  for  metal  gate  electrodes.

     -    Metal  Oxide  Alloys  and Nanolaminates. With the development of Genus
          ALD,  the  Company  has  been  able  to demonstrate a film flexibility
          otherwise  not  known.  For  example, Genus ALD system can provide the
          flexibility  to  deposit  up  to  3  compound  films in alloy and / or
          nanolaminate  form.  The  capability  has  become  enabling  for  the
          "engineering"  of  composite  films  for  optimal  performance in next
          generation  semiconductor  devices. Composites of both dielectrics and
          metals  can  be  achieved.

Genus  8700  Series  and  6000  Series.

While  we  no longer actively sell these thin film products, we continue to sell
spare  parts  and  provide  service  for  the  installed  base  worldwide.


                                        9
<PAGE>
FINANCIAL  INFORMATION  ABOUT  OPERATING  SEGMENTS

     Currently,  the  Company  operates  in one industry segment. The Company is
engaged  in  the design, manufacturing, marketing and servicing of advanced thin
film deposition systems used in the semiconductor manufacturing industry and the
Thin  Film  Head  segment  of the Data Storage Industry. Please refer to Item 6,
Selected  Financial  Data,  and  Item  8,  Consolidated Financial Statements and
Supplementary  Data  of this Annual Report on Form 10-K for geographic financial
information.


CUSTOMER  SUPPORT

     We  believe  that  our  customer  support  organization  is  critical  to
establishing and maintaining the long-term customer relationships that often are
the  basis upon which semiconductor manufacturers select their equipment vendor.
Our customer support organization is headquartered in Sunnyvale, California with
additional  employees  located  in  Japan,  South Korea and Europe.  Our support
personnel  are  available  on  a  24-hour  a day, seven days a week basis with a
maximum  one-hour  response  time.  All  support  personnel  have  technical
backgrounds,  most  with  process,  mechanical and electronics training, and are
supported  by  our  engineering  and  applications  personnel. Support personnel
install  systems, perform warranty and out-of-warranty service and provide sales
support.

     Generally,  we  offer  a 12-month labor warranty and a 12 to 24-month parts
warranty.  We  also  offer  training  to  our  customers at our headquarters and
on-site  support  as  an  enhancement  to  our  standard  warranty  program.


SALES  AND  MARKETING

     We  maintain  direct sales and service offices in the United States, Japan,
and  South  Korea.  From  these offices and other locations, we provide customer
support  directly  and maintain, "spares depots" for our products.  We also have
sales  representatives  in  the  United  States,  and  Taiwan.


CUSTOMERS

     We  rely  on a limited number of customers for a substantial portion of our
net  sales. Our major customers in 2003 included Samsung, Hitachi Global Storage
Systems  (HGST)  and  Seagate  Technologies.  As  of December 31, 2003 we had 10
active  customers  serving  three  market  segments  -  Memory,  Logic, and Data
Storage.


BACKLOG

     We  schedule  production  of  our systems based on both backlog and regular
sales  forecasts.  We  include  in  backlog only those systems for which we have
accepted  purchase  orders  or  a  letter  of intent and assigned shipment dates
within  the  next  12 months. All orders are subject to cancellation or delay by
the  customer  with  limited  or no penalty. Our backlog was approximately $13.0
million  as  of  December  31, 2003 compared to a backlog of $24.7 million as of
December 31, 2002. The year-to-year fluctuation is due primarily to the cyclical
nature  of  the  semiconductor industry. Because of possible changes in delivery
schedules and cancellations of orders, our backlog at any particular date is not
necessarily  representative  of  actual  sales  for  any  succeeding  period. In
particular, during periods of industry downturns we have experienced significant
delays  relating  to orders that were previously booked and included in backlog.


                                       10
<PAGE>
RESEARCH  AND  DEVELOPMENT

     We focus our research and development efforts on developing innovative thin
film  products.  During  recent periods, we have devoted a significant amount of
resources  to  the  StrataGem200  and  StrataGem300  systems and CVD systems. We
expect  to  focus  our  future efforts on our StrataGem system for 200 and 300mm
applications  and  StrataGem  TFH  for advanced film technologies. We maintain a
Class  1  applications  laboratory and a separate thin films development area in
California. By basing our products on the Lynx and StrataGem systems, we believe
that  we can focus our development activities on the process chamber and develop
new  products  quickly  and  at  relatively  low  cost.

     Our  research  and  development  expenses  were $7.6 million for 2003, $8.0
million  for 2002, and $12.1 million for 2001, representing 13%, 20%, and 25% of
revenues,  respectively.

     The  worldwide  semiconductor industry is characterized by rapidly changing
technology,  evolving industry standards and continuous improvements in products
and services. Because of continual changes in these markets, we believe that our
future  success will depend upon our ability to continue to improve our existing
systems  and  process  technologies, and to develop systems and new technologies
that  compete  effectively.  We  must  adapt  our  systems  and  processes  to
technological  changes  and  to  support  emerging industry standards for target
markets.  We  cannot  be  sure  that  we  will  complete our existing and future
development  efforts within our anticipated schedule or that our new or enhanced
products  will  have  the  features  to  make  them  successful.

     We  may  experience difficulties that could delay or prevent the successful
development,  introduction  or  marketing  of new or improved systems or process
technologies.  These  new  and improved systems and process technologies may not
meet  the  requirements  of  the  marketplace  and  achieve  market  acceptance.
Furthermore,  despite  testing by us, difficulties could be encountered with our
products  after  shipment,  resulting  in  loss  of  revenue  or delay in market
acceptance  and  sales,  diversion  of  development  resources,  injury  to  our
reputation  or  increased  service and warranty costs. The success of new system
introductions  is  dependent on a number of factors, including timely completion
of  new  system  designs  and market acceptance. If we are unable to improve our
existing  systems  and  process  technologies  or to develop new technologies or
systems,  we  may  lose  sales  and  customers.


COMPETITION

     The  global  semiconductor  fabrication  equipment  industry  is  intensely
competitive  and  is  characterized  by rapid technological change and demanding
customer  service  requirements. Our ability to compete depends upon our ability
to  continually  improve our products, processes and services and our ability to
develop  new  products  that  meet  constantly  evolving  customer requirements.

     A substantial capital investment is required by semiconductor manufacturers
to  install  and  integrate  new  fabrication  equipment  into  a  semiconductor
production  line.  As a result, once a semiconductor manufacturer has selected a
particular  supplier's products, the manufacturer often relies for a significant
period  of time upon that equipment for the specific production line application
and  frequently  will  attempt  to  consolidate  its  other  capital  equipment
requirements  with  the  same  supplier.  It  is  difficult  for us to sell to a
particular  customer  for  a  significant period of time after that customer has
selected  a  competitor's  product,  and it may be difficult for us to unseat an
existing  relationship that a potential customer has with one of our competitors
in  order  to  increase  sales  of  our  products  to  that  customer.

     Each  of  our  product  lines competes in markets defined by the particular
wafer fabrication process it performs. In each of these markets we have multiple
competitors.  At  present, however, no single competitor competes with us in all
of  the  same  market  segments  in  which  we  compete.  Competitors in a given
technology  tend  to  have  different  degrees of market presence in the various
regional  geographic  markets.  Competition  is based on many factors, primarily
technological  innovation, productivity, total cost of ownership of the systems,
including  yield, price, product performance and throughput capability, quality,
contamination  control,  reliability  and  customer support. We


                                       11
<PAGE>
believe  that  our  competitive  position in each of our markets is based on the
ability of our products and services to address customer requirements related to
these  competitive  factors.

     Our  direct competitors in the CVD tungsten silicide market include Applied
Materials,  Inc.  and  Tokyo  Electron,  Ltd.  Our direct competitors in the ALD
market  include  ASM International, Veeco Instruments and two private companies;
Aviza  Technology,  based  in  Silicon  Valley  and  IPS,  based in South Korea.
Competition  from  these  competitors  increased in 2002 and 2003, and we expect
that  this  competition  will  continue to intensify. We believe that we compete
favorably  on  each  of  the  competitive  elements  in  this  market.

     We may not be able to maintain our competitive position against current and
potential  competition.  New  products,  pricing  pressures,  rapid  changes  in
technology  and other competitive actions from both new and existing competitors
could  materially  affect  our  market  position.  Some  of our competitors have
substantially greater installed customer bases and greater financial, marketing,
production,  technical and other resources than we do and may be able to respond
more  quickly  to  new  or  changing  opportunities,  technologies  and customer
requirements. Our competitors may introduce or acquire competitive products that
offer  enhanced  technologies  and  improvements.  In  addition,  some  of  our
competitors  or  potential  competitors  have  greater name recognition and more
extensive  customer  bases  that  could be leveraged to gain market share to our
detriment. We believe that the semiconductor equipment industry will continue to
be subject to increased consolidation, which will increase the number of larger,
more  powerful  companies  and  increase  competition.


MANUFACTURING  AND  SUPPLIERS

     Our  manufacturing  operations  are  based  in  our  Sunnyvale,  California
facility  and  consist  of  procurement,  subassembly,  final assembly, test and
reliability  engineering.  Our  manufacturing  facility maintains and operates a
Class-1  clean  room  to demonstrate integrated applications with its customers.
The  LYNX and StrataGem family systems are based on an outsourced wafer-handling
platform,  enabling  us  to  use  a  large  number  of  common subassemblies and
components.  Many  of  the major assemblies are procured completely from outside
sources.  We  focus  our  internal  manufacturing  efforts  on  those  precision
mechanical and electro-mechanical assemblies that differentiate our systems from
those  of  our  competitors.

     Most  of  the  components  for  our  thin  film  systems  are  produced  in
subassemblies  by  independent  domestic  suppliers  according to our design and
procurement  specifications.  We  anticipate  that the use of such subassemblies
will continue to increase to achieve additional manufacturing efficiencies. Many
of these components are obtained from a limited group of suppliers. In addition,
a  limited  number  of these components are available from only one supplier. We
generally  acquire  these  components  on  a  purchase order basis and not under
long-term  supply  contracts.  Our  reliance on outside vendors generally, and a
limited  group  of  suppliers in particular, involves several risks, including a
potential  inability  to  obtain  an  adequate supply of required components and
reduced  control  over  pricing  and  timely  delivery  of  components.

     Because the manufacture of certain of these components and subassemblies is
an  extremely  complex  process  and  can  require  long  lead  times,  we could
experience  delays  or shortages caused by suppliers. We are not currently aware
of  any  specific  problems  regarding the availability of components that might
significantly delay the manufacturing of our systems in the future. However, the
inability to develop alternate sources or to obtain sufficient source components
as  required  in  the  future,  could result in delays of product shipments that
would  have a material adverse effect on our business, results of operations and
financial  condition.

     We  are  subject  to  a variety of federal, state and local laws, rules and
regulations  relating  to  the use, storage, discharge and disposal of hazardous
chemicals  used  during  our  sales demonstrations and research and development.
Failure to comply with present or future regulations could result in substantial
liability  to us, suspension or cessation of our operations, restrictions on our
ability  to  expand at our present locations or requirements for the acquisition
of  significant  equipment  or  other  significant  expense.  To  date,  we have
adequately  complied  with  environmental rules and regulations. Such compliance
has  not  materially  affected  our  operations.


                                       12
<PAGE>
     In  December  2002 we received ISO 9001-2000 and ISO 14001 Certification by
NSAI,  a  qualified  examiner  for  ISO  Certification.


INTELLECTUAL  PROPERTY

     We  believe  that  because  of  the  rapid  technological  change  in  the
semiconductor  industry,  our  future  prospects  will depend primarily upon the
expertise  and  creative  skills  of  our  personnel  in process technology, new
product development, marketing, application engineering and product engineering,
rather  than  on  patent  protection. Nevertheless, we have a policy to actively
pursue  domestic  and foreign patent protection to cover technology developed by
us.  We hold 45 United States patents with 17 patent applications pending in the
United  States  as  well  as  several  foreign  patents  and patent applications
covering  various  aspects  of our products and processes. Where appropriate, we
intend  to  file  additional  patent applications to strengthen our intellectual
property  rights.

     Although  we  attempt  to  protect our intellectual property rights through
patents, copyrights, trade secrets and other measures, we cannot be sure that we
will  be  able  to  protect our technology adequately, and our competitors could
independently  develop  similar  technology,  duplicate  our  products or design
around our patents. To the extent we wish to assert our patent rights, we cannot
be sure that any claims of our patents will be sufficiently broad to protect our
technology  or  that  our  pending  patent  applications  will  be approved.  In
addition, litigation is uncertain, expensive and time consuming and there can be
no  assurance that we will prevail in any litigation.  Regardless of the results
of  any  such litigation, the related costs could have a material adverse effect
on  our  business and financial condition.  Moreover,  there can be no assurance
that  any  patents  issued  to  us  will  not  be  challenged,  invalidated  or
circumvented,  that any rights granted under these patents will provide adequate
protection  to  us,  or  that  we  will have sufficient resources to protect and
enforce  our  rights.  In  addition,  the laws of some foreign countries may not
protect  our  proprietary  rights  to  as  great an extent as do the laws of the
United  States.

     From  time  to  time,  we  may  receive notices from third parties alleging
infringement  of  patents  or intellectual property rights.  It is our policy to
respect all parties' legitimate intellectual property rights, and we will defend
against such claims or negotiate licenses on commercially reasonable terms where
appropriate.  However,  no  assurance  can  be given that, if we are required to
obtain  licenses  to  third  party  intellectual  property,  we  will be able to
negotiate  necessary  licenses  on  commercially reasonable terms, or at all, or
that  any litigation resulting from third party claims would not have a material
adverse  effect  on  our  business  and  financial  results.


EMPLOYEES

     As  of December 31, 2003, we employed 156 full-time and temporary employees
Worldwide.  The  success  of  our future operations depends in large part on our
ability  to  recruit  and  retain qualified employees, particularly those highly
skilled  design,  process  and  test  engineers  involved  in the manufacture of
existing  systems  and  the  development  of  new  systems  and  processes.  The
competition for such personnel is intense, particularly in the San Francisco bay
area,  where  our  headquarters  are  located.  At  times  we  have  experienced
difficulty  in  attracting  new  personnel,  and  we  may  not  be successful in
retaining  or  recruiting  sufficient  key  personnel in the future. None of our
employees  is represented by a labor union, and we have never experienced a work
stoppage,  slowdown  or strike. We consider our relationships with our employees
to  be  good.

     Information  regarding  our  foreign  and  domestic  operations  and export
revenues  is  included  in  Note  13  of the Notes to the Consolidated Financial
Statements.

     Genus'  financial  statements  are  available  at  the Company's website at
www.Genus.com  and  the  SEC's  website  at  www.sec.gov.
-------------                                -----------


                                       13
<PAGE>
ITEM  2.  PROPERTIES
--------------------

     We  maintain  our  headquarters, manufacturing and research and development
operations  in  Sunnyvale,  California.  We have a lease for a facility totaling
approximately  100,000 square feet. Our lease for the Sunnyvale facility expires
in  October  2012.  Commencing  in  2004,  our  annual  rental  expense  will be
approximately $1.8 million. Our monthly cash rent payments start at a lower rate
in  the  first  few  years and then increase periodically during the term of the
lease.  We  also  have  leases for our sales and support offices in Seoul, South
Korea  and  Tokyo,  Japan.  The  rent expense increase between 2002 and 2003 was
primarily due to increased monthly rent amounts in the United States. We believe
that  our  existing facilities are adequate to meet our current requirements and
that suitable additional or substitute space will be available as needed.


ITEM  3.  LEGAL  PROCEEDINGS
----------------------------

     On  June  6,  2001,  ASM America, Inc. ("ASMA") filed a patent infringement
action  against  Genus, Inc. ASMA's Complaint alleges that Genus is directly and
indirectly  infringing  U.S.  Patent  No. 5,916,365 (the "365 Patent"), entitled
"Sequential  Chemical Vapor Deposition," and U.S. Patent No. 6,015,590 (the "590
Patent")  entitled  "Method For Growing Thin Films," which ASMA claims to own or
exclusively  license.  The Complaint seeks monetary and injunctive relief. Genus
served its Answer to ASMA's complaint on August 1, 2001. Also on August 1, 2001,
Genus  counterclaimed  against ASMA and ASM International, N.V. ("ASMI") for (1)
infringement of U.S. Patent No. 5,294,568 (the "568 Patent") entitled "Method of
Selective Etching Native Oxide"; (2) declaratory judgment that the '365 and '590
Patents  are  invalid,  unenforceable,  and  not  infringed  by  Genus;  and (3)
antitrust  violations. An initial Case Management Conference was held on October
16,  2001.  On January 9, 2002, the Court issued an order granting ASMA leave to
amend  its complaint to add Dr. Sherman as a party and to add a claim that Genus
is  directly  and  indirectly  infringing  U.S.  Patent  No  4,798,165 (the "165
Patent")  entitled  "Apparatus  for  Chemical  Vapor Deposition Using an Axially
Symmetric Gas Flow", which ASMA claims to own. The Court also severed and stayed
discovery  and  trial  of  Genus'  antitrust claims until after the trial of the
patent  claims.  On  February 4, 2002, Genus served its Amended Answer to ASMA's
amended  complaint and counterclaimed against ASMA for declaratory judgment that
the '165 Patent is invalid, unenforceable, and not infringed by Genus. On August
15,  2002, the Court issued a claim construction order regarding the '590, '365,
and  598'  Patents.  A  claim construction hearing regarding the '165 Patent was
held  on  September  26,  2002, and the Court issued a claim construction ruling
regarding  this  patent  on November 13, 2002. On September 23, 2002 Genus filed
motions  for  summary  judgment  on  noninfringement regarding the '590 and '365
Patents.  On  November  20, 2002, the Court granted the Genus motion for summary
judgment  of  noninfringement of the '365 Patent. On January 10, 2003, the Court
granted  Genus' motion for summary judgment of non-infringement the '590 Patent.

     On  April 11, 2003, Genus settled its lawsuit with ASMI (the "Settlement").
Under  the  terms of the Settlement, Genus gained a royalty-free license to each
of  the  patents  ASMI asserted in the litigation, including both ALD patents as
well  as  Patent  '165. By specific agreement of the parties, these licenses are
applicable  to  Genus'  successors and affiliates. Genus has likewise obtained a
covenant  from  ASMI  that  it  will  not  sue  Genus for patent infringement or
antitrust  violations  for  the  next  five  years.

     In  return,  Genus  has  granted  ASMI  and its successors and affiliates a
royalty-free  license  to  the  patent  Genus asserted in the litigation, Patent
'568,  and  has  agreed  to dismiss its antitrust claims against ASMI. Genus has
also  agreed not to sue ASMI for patent infringement or antitrust violations for
the  next  five  years.

     No  payments  have  been made by either Genus or ASMI in exchange for these
licenses  and  the  covenant  not  to  sue.  However,  under  the  terms  of the
Settlement,  ASMI  has  the  right  to  pursue an appeal of the District Court's
judgments of non-infringement regarding the ALD patents. The agreement specifies
that  if the Federal Circuit vacates either of the existing judgments related to
the  ALD  patents  based on a change in the District Court's claim construction,
Genus  will pay ASMI $1 million for the royalty-free licenses to the ALD patents
it  has  been  granted  under  the  agreement.


                                       14
<PAGE>
     We  may  in  the future be party to litigation arising in the course of our
business, including claims that we allegedly infringe third party trademarks and
other  intellectual property rights. Such claims, even if not meritorious, could
result  in  the  expenditure  of significant financial and managerial resources.


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

None.



EXECUTIVE  OFFICERS  OF  THE  REGISTRANT

     As  of  December  31,  2003, the executive officers of the Company, who are
elected  by  and  serve  at  the  discretion  of  the Board of Directors, are as
follows:

<TABLE>
<CAPTION>
NAME                     AGE                           POSITION
-----------------------  ---  --------------------------------------------------------------
<S>                      <C>  <C>
William W.R. Elder. . .   65  Chairman and Chief Executive Officer
Thomas E. Seidel, Ph.D.   68  Executive Vice President, Chief Technical Officer
Shum Mukherjee. . . . .   53  Executive Vice President, Finance and Operations,
                                and Chief Financial Officer
Eddie Lee . . . . . . .   52  Executive Vice President, Advanced Engineering
</TABLE>

     Except  for  Mr.  Mukherjee,  and  Mr.  Lee,  all of the officers have been
associated  with  us 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 our
executive  officers.

     WILLIAM W.R. ELDER was a founder of Genus and is our Chairman of the Board,
President  and our Chief Executive Officer. From October 1996 to April 1998, Dr.
Elder  served  only as Chairman of the Board. From April 1990 to September 1996,
Dr.  Elder  was  Chairman of the Board, President and Chief Executive Officer of
the  Company.  From  November  1981 to April 1990, Dr. Elder was President and a
director  of  the  Company.

     THOMAS  E.  SEIDEL  has  served  as  our Executive Vice President and Chief
Technical Officer since January 1996. 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.

     SHUM  MUKHERJEE  has  served as our Executive Vice President of Finance and
Chief  Financial  Officer  since October 2001. Mr. Mukherjee has broad financial
management experience. From 1978 to 1984, Mr. Mukherjee was with Ford of Europe,
Raychem Corporation (now a division of Tyco International) from 1984 to 1998 and
with  E*TRADE  Group from 1998 to 2001. Mr. Mukherjee earned a Masters Degree in
Management  from  the  Sloan  School of Management at Massachusetts Institute of
Technology.

     EDDIE  LEE has served as our Executive Vice President, Advanced Technology,
Engineering  and  Strategic  Marketing  since  February 2001. Mr. Lee joined the
Company  in  August  2000,  as  Vice  President  of  New  Technology  Business
Development.  Prior  to  joining  the  Company,  Mr.  Lee  was Vice President of
Technology  at  Silicon  Valley  Group.  Working in the thin film industry since
1974, Mr. Lee has held managerial positions at Honeywell, Advanced Micro Devices
and  Varian.  He  is  currently  on  the  technical  advisory board of two other
privately  held  companies  in  a  non-competing  field  with  Genus.


                                       15
<PAGE>
PART  II

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


Common  Stock  Information

      Our common stock is traded in the over-the-counter market under the NASDAQ
symbol  GGNS.  The only class of Genus securities that is traded is Genus common
stock.  The  high and low closing sales prices for 2003 and 2002 set forth below
are  as reported by the NASDAQ National Market System.  At February 27, 2004, we
had  416  registered  shareholders as reported by Mellon Investor Services.  The
closing sales price of Genus common stock on December 31, 2003, the last trading
day in 2003, was $ 6.00.

<TABLE>
<CAPTION>
                            2003                2002
                     ------------------  ------------------
                       HIGH       LOW      HIGH       LOW
                     --------  --------  --------  --------
<S>                  <C>       <C>       <C>       <C>
First Quarter. . . . $   3.38  $   1.51  $   3.35  $   2.26
Second Quarter . . .     3.25      1.56      4.40      1.93
Third Quarter. . . .     4.82      2.40      1.95      1.00
Fourth Quarter . . . $   7.50  $   3.85  $   2.81  $   1.00
</TABLE>

      We  have  not paid cash dividends on our common stock since inception, and
our  Board  of  Directors presently intends to reinvest our earnings, if any, in
our business. Accordingly, it is anticipated that no cash dividends will be paid
to  holders  of  common  stock  in  the  foreseeable  future.


                                       16
<PAGE>
ITEM  6.  SELECTED  FINANCIAL  DATA
-----------------------------------

<TABLE>
<CAPTION>
                                                             YEAR ENDED DECEMBER 31,
                                                --------------------------------------------------
                                                  2003      2002       2001     2000(1)     1999
                                                --------  ---------  --------  ---------  --------
                                                      (IN  THOUSANDS,  EXCEPT  SHARE  DATA)
<S>                                             <C>       <C>        <C>       <C>        <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues . . . . . . . . . . . . . . . . . . .  $56,861   $ 39,767   $48,739   $ 40,638   $28,360
Costs and expenses:
    Costs of goods sold. . . . . . . . . . . .   39,249     29,143    32,500     24,385    16,628
    Research and development . . . . . . . . .    7,597      8,011    12,118      8,659     5,368
    Selling, general and administrative. . . .   11,741     12,621    10,381     10,093     7,930
    Restructuring and other. . . . . . . . . .        0          0         0          0       543
                                                --------------------------------------------------
Loss from operations . . . . . . . . . . . . .   (1,726)   (10,008)   (6,260)    (2,499)   (2,109)
Other income (expense), net. . . . . . . . . .   (1,565)    (1,074)     (336)       108       669
                                                --------------------------------------------------
Loss before provision for income taxes and
  cumulative effect of change in accounting
  principle. . . . . . . . . . . . . . . . . .   (3,291)   (11,082)   (6,596)    (2,391)   (1,440)
Provision for income taxes . . . . . . . . . .      228        538        70        490       177
                                                --------------------------------------------------
Loss before cumulative effect of change in
  accounting principle . . . . . . . . . . . .   (3,519)   (11,620)   (6,666)    (2,881)   (1,617)
Cumulative effect of change in accounting
  principle. . . . . . . . . . . . . . . . . .        0          0         0     (6,770)        0
                                                --------------------------------------------------
Net loss . . . . . . . . . . . . . . . . . . .  $(3,519)  $(11,620)  $(6,666)  $ (9,651)  $(1,617)
                                                ==================================================
Net loss per share before cumulative
  effect of change in accounting principle
    Basic and diluted. . . . . . . . . . . . .    (0.11)     (0.43)    (0.31)     (0.15)    (0.09)
    Cumulative effect of change in accounting
principle (1)
    Basic and diluted                                                             (0.36)
Net loss per share:
    Basic and diluted. . . . . . . . . . . . .    (0.11)     (0.43)    (0.31)     (0.51)    (0.09)
Shares used in computing net loss
per share:


                                       17
<PAGE>
    Basic and diluted. . . . . . . . . . . . .   31,303     26,934    21,163     18,937    18,134
</TABLE>


<PAGE>
     The following are pro forma amounts with the change in accounting principle
related  to  revenue  recognition  applied  retroactively  to  the  years  ended
December  31,  2000  and  1999,  respectively.

<TABLE>
<CAPTION>
                                YEAR ENDED DECEMBER 31,
                         -------------------------------------
                                2000(1)            1999
                         ------------------  -----------------
<S>                      <C>                 <C>
                         (IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues. . . . . . . .  $          40,638   $         27,992
Net loss. . . . . . . .             (2,881)            (3,232)
Net loss per share:
  Basic . . . . . . . .  $           (0.15)  $          (0.18)
  Diluted . . . . . . .  $           (0.15)  $          (0.18)
</TABLE>

(1)  In  2000, the Company changed its accounting method for recognizing revenue
     to  comply  with  Staff  Accounting  Bulletin  number  101.

<TABLE>
<CAPTION>
                                                       YEAR ENDED DECEMBER 31,
                                             --------------------------------------------
                                              2003     2002      2001     2000     1999
                                             -------  -------  --------  -------  -------
<S>                                          <C>      <C>      <C>       <C>      <C>
                                                (IN THOUSANDS, EXCEPT PER SHARE DATA)
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents . . . . . . . . .  $41,608  $11,546  $ 3,043   $ 3,136  $ 6,739
Working capital . . . . . . . . . . . . . .   45,313    9,650   (2,600)      896   14,151
Total assets. . . . . . . . . . . . . . . .   71,768   41,510   35,902    44,535   27,744
Convertible notes and long term liabilities    5,806    5,571        0         0        0
Total shareholders' equity. . . . . . . . .  $49,424  $13,797  $12,128   $11,292  $19,378
</TABLE>

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

     The  following  discussion  and  analysis  of  our  financial condition and
results  of operations should be read in conjunction with "Selected Consolidated
Financial  Data"  and  our  consolidated  financial statements and related notes
included elsewhere in this Annual Report on Form 10-K. In addition to historical
information,  the discussion in this Annual Report on Form 10-K contains certain
forward-looking  statements  that  involve  risks  and  uncertainties.  These
forward-looking  statements include statements about trends and uncertainties in
our  business,  such  as  projected  level  of  future  expenses, revenues etc.

      Our actual results could differ materially from those anticipated by these
forward-looking  statements  due to factors, including but not limited to, those
set  forth  under  "Risk  Factors"  and  elsewhere in this Annual Report on Form
10-K.


                                       18
<PAGE>
OVERVIEW

     Since  1982,  we  have been supplying advanced manufacturing systems to the
semiconductor  industry  worldwide.  Major  semiconductor  manufacturers use our
leading-edge  thin  film  deposition equipment and process technology to produce
integrated circuits, commonly called chips, that are incorporated into a variety
of products including personal computers, communications, equipment and consumer
electronics.  We  pioneered  the  development of chemical vapor deposition (CVD)
tungsten silicide, which is used in certain critical steps in the manufacture of
integrated  circuits. In addition, today we are leading the commercialization of
atomic  layer  deposition,  also  known  as  ALD technology and of our StrataGem
family  of  products.  This  technology is designed to enable a wide spectrum of
thin  film applications such as aluminum oxide, hafnium oxide and other advanced
dielectric  insulating  and  conducting  metal  barrier  materials  for advanced
integrated  circuit  manufacturing.

     Genus'  consolidated  financial statements have been prepared in accordance
with  accounting  principles  generally accepted in the United States of America
(US  GAAP). The preparation of these financial statements requires management to
make  estimates  and  assumptions  that affect the reported amount of assets and
liabilities  at  the date of the financial statements and the reported amount of
revenues  and  expenses  during  the  reporting  period.  On  a quarterly basis,
management  reevaluates  its  estimates  and  judgments  based  on  historical
experience  and relevant current conditions and adjusts the financial statements
as  required.

     Our  global  customer  base consists of semiconductor and non-semiconductor
manufacturers  in the United States, Europe and Asia. Over the past few years we
were dependent on one customer, Samsung, for a majority of our thin film product
revenue.  In 2003, Samsung accounted for 69% of our revenue, 58% in 2002 and 73%
in  2001.  There  is  no long-term agreement between Genus and Samsung. Over the
past three years, we have gradually expanded our customer base and at the end of
2003,  we  had  ten  customers.

     During  the  fiscal  year 2003, Genus increased efforts to generate revenue
from service activities by providing on-site services and support for fees based
on  the time spent by our engineers.  Currently, revenues from such services are
not  material,  but the Company hopes to expand service revenues in the future.

     International  revenue accounted for 77% of revenue in 2003, 72% of revenue
in 2002 and 93% of revenue in 2001. We anticipate that international sales, and,
in  particular,  sales  from  South  Korea,  will  continue  to  account  for  a
significant portion of our total revenue.

     The local currency is the functional currency for our foreign operations in
South  Korea  and  Japan.  All  other foreign operations are dollar denominated.
Gains or losses from translation of assets and liabilities of foreign operations
where  the  local  currencies  are  the  functional  currency  are included as a
component  of  shareholders'  equity  and  comprehensive  loss. Foreign currency
transaction  gains  and losses are recognized in the statement of operations. To
date, these gains and losses have not been material.

     Business  activity  in  the  semiconductor  and semiconductor manufacturing
equipment  industries  has  been  cyclical;  for  this and other reasons, Genus'
results  of  operations  for  the twelve months ended December 31, 2003, may not
necessarily  be  indicative  of  future  operating  results.

     In order to support our business strategy and maintain our competitiveness,
we will be required to make significant investments in research and development.
In  addition,  we  will need to divert additional resources to administration to
comply  with  our  reporting  requirement  under the Sarbanes-Oxley Act of 2002.
Based  on  our  cost  structure,  we believe selling, general and administrative
expenses  will  increase  slightly  as  sales  volumes  increase.  We  depend on
increases  in  sales  in  order  to  attain  profitability.  If our sales do not
increase,  we  may  need  to  reduce our operating costs, which could impair our
competitiveness  and  our  future  viability.


                                       19
<PAGE>
CRITICAL  ACCOUNTING  POLICIES

The  financial  statements are prepared in conformity with accounting principles
generally  accepted  in  the  United States of America and require management to
make  estimates  and  assumptions  in  certain circumstances that affect amounts
reported  in  the  accompanying  consolidated  financial  statements and related
footnotes.  As  such,  we  are required to make certain estimates, judgments and
assumptions that we believe are reasonable based upon the information available.
These  estimates  and  assumptions  affect  the  reported  amounts of assets and
liabilities  at the date of the financial statements and the reported amounts of
revenues  and  expenses during the periods presented. The significant accounting
policies  which  the  Company  believes  are  the  most critical to aid in fully
understanding  and  evaluating  our  reported  financial  results  include  the
following:

Revenue recognition

The  Company  derives  revenue  from  the sale and installation of semiconductor
manufacturing  systems and from engineering services and the sale of spare parts
to  support  such  systems.

Equipment selling arrangements generally involve contractual customer acceptance
provisions and installation of the product occurs after shipment and transfer of
title.  In  the  third  quarter  of  2002,  the  Company  established verifiable
objective  evidence  of  fair  value  of  installation  services,  one  of  the
requirements  for  Genus  to recognize revenue for multiple-element arrangements
prior  to  completion  of  installation  services.  If  a product delivered to a
customer  has  met  defined  customer acceptance experience levels with both the
customer  and  the  specific  type  of  equipment,  then  the Company recognizes
equipment  revenue  upon  shipment  and  transfer of title. A portion of revenue
associated  with  undelivered  elements such as installation and on-site support
related  tasks is recognized for installation when the installation is completed
and  the  customer  accepts  the  product and for on-site support as the support
service  is  provided.  For  products  that  have  not been demonstrated to meet
product  specifications  for  the customer prior to shipment, or where objective
and  reliable  evidence  of  the fair value of the undelivered elements, such as
installation  is  not  available,  revenue  is  recognized  when installation is
complete  and  the  customer  accepts  the  product.  Revenues  can  fluctuate
significantly  as  a  result  of  the  timing  of  customer  acceptances and the
applicability  of  multiple  element  accounting  to  products  shipped  in  any
particular  period.  At  December  31,  2003  and 2002, the Company had deferred
revenue  of  $331,000  and  $2.7  million,  respectively.

Revenues  from  sale  of  spare parts are recognized when title and risk of loss
passes  to  the  customers,  generally  upon shipment. Revenues from engineering
services  are  recognized as the services are completed over the duration of the
contract.

Accrual for warranty expenses

In  general,  the  Company's warranty period terminates for material coverage in
twelve  to  twenty-four months and for labor coverage in twelve months after the
warranty  period begins, but in any event no later then twenty seven months from
the  product  shipment  date  for material coverage and fifteen months for labor
coverage,  unless  otherwise stated in the quotation. The Company provides labor
for  all product repairs and replacement parts, excluding consumable items, free
of  charge during the warranty period. Warranty expenses are accrued at the time
that  revenue  is  recognized  from the sale of products. At present, based upon
historical  experience, the Company accrues material warranty equal to 2% and 5%
of  shipment  value  for  its  200mm and 300mm products, respectively, and labor
warranty  equal  to $20,000 per system for both its 200mm and 300mm products. At
the  end  of  every quarter, the Company reviews its actual spending on warranty
and  reassesses  if  its  accrual  is adequate to cover warranty expenses on the
systems  in  the  field  which are still under warranty. Differences between the
required  accrual  and  recorded  accrual  are  charged  or credited to warranty
expenses  for the period in which such difference is determined. At December 31,
2003  and  2002,  the Company had accrued $1,451,000 and $970,000, respectively,
for  material  and  labor warranty obligations. Actual results could differ from
estimates.  In the unlikely event that a problem is identified that would result
in  the  need  to  replace  components  on  a  large  scale, we would experience
significantly  higher  expenses  and  our  results  of  operations and financial
condition  could  be  materially  and  adversely  effected.


                                       20
<PAGE>
Valuation of Inventories

Inventories  are  recorded  at  the  lower  of standard cost, which approximates
actual  cost  on  a  first-in-first-out  basis,  or  market value. We write down
inventories  to  net  realizable  value  based  on  forecasted demand and market
conditions.  Raw  material and purchased parts include spare parts inventory for
systems  and  was $4.6 million at December 31, 2003 and $4.5 million at December
31, 2002. The forecasted demand for spare parts takes into account the Company's
obligations  to  support  systems  for  periods  that are as long as five years.

Actual demand and market conditions may be different from those projected by the
Company.  This  could  have a material effect on operating results and financial
position.  At  December  31, 2003 and 2002, the Company had cumulative inventory
write  downs  of  $4.8  million  and  $4.3  million,  respectively.

Valuation of research and demonstration equipment

Equipment includes research and demonstration equipment, which is located in our
Applications  Laboratory  and  is  used  to  demonstrate  to  our  customers the
capabilities  of  our  equipment  to process wafers and deposit films. The gross
value  of  demonstration  equipment is based on the cost of materials and actual
factory  labor  and  overhead  expenses incurred in manufacturing the equipment.
Costs  related  to refurbishing or maintaining existing demonstration equipment,
which  do  not  add to the capabilities or useful life of the equipment, are not
capitalized  and  are expensed as incurred. Demonstration equipment is stated at
cost  and depreciated over a period of three to five years. If the Company sells
the equipment, it may experience gross margins that are different from the gross
margins  achieved  on  equipment  manufactured  specifically  for  customers.



RESULTS  OF  OPERATIONS

Net  Sales

     Revenues were $56.9 million, $39.8 million and $48.7 million in 2003, 2002,
and  2001  respectively.  Revenues were up 43% in 2003 from 2002 and down 18% in
2002  from  2001. Revenues in 2003 included four 300mm CVD systems, and thirteen
Stratagem  ALD  systems  of  which four were for 300mm wafers and nine for 200mm
wafers.  Revenues in 2002 included four 200mm systems using CVD technology, four
StrataGem  200mm  systems,  one StrataGem 200mm upgrade, two 300mm systems using
CVD  technology  and one StrataGem 300mm system. Revenues in 2001 included seven
200mm  systems  using  CVD technology, one 300mm system using CVD technology and
four  StrataGem  200mm  systems.

     Revenues  from the sale of spares, upgrades and services were $10.2 million
in  2003  compared  to  $6.9  million in 2002 and $7.0 million in 2001. In 2003,
spares  revenues  accounted  for $4.9 million, or 9% of total revenues, upgrades
revenues accounted for $4.6 million, or 8% of total revenues and service revenue
accounted  for  $726,000,  or  1%  of  total  revenues.

     Export sales were 77%, 72% and 93% of total revenues in 2003, 2002 and 2001
respectively.

     Based  on  our long production cycle, our quarter-to-quarter revenues could
vary  significantly  depending  on  the  timing  of  our  bookings.

Gross  Profit  Margin

     Gross  profit  margin  in  2003 was $17.6 million or 31 percent of revenues
compared  to  gross  profit margin of $10.6 million or 27 percent of revenues in
2002 and gross profit margin of $16.2 million or 33 percent of revenues in 2001.
The  increase in gross margins in 2003 compared to 2002 was primarily due to the
following  factors:

     -    Increased  manufacturing efficiencies and overall lower material costs
          to  manufacture  our  CVD  and  ALD  systems  was  achieved
     -    Our revenues were higher in 2003 compared with 2002 and our fixed cost
          did not increase at the same rate. As a result a higher absorption was
          achieved  from  our  manufacturing  department's  costs.
     -    In  fiscal year 2003, we recorded $466,000 in inventory provisions for
          spare  parts  compared  to  2002,  when  we  recorded  $2.2 million in
          provisions  related  to  inventory  write-downs.  The  reduction  in
          inventory  write-downs  in fiscal year 2003 as compared to fiscal year
          2002  primarily  resulted from improved inventory purchasing processes
          implement  in  fiscal  year  2003.


                                       21
<PAGE>
The  reduction  in  gross  profit margin in 2002 compared to 2001 was due to the
following  factors:
     -    Our  revenues  were lower in 2002 due to customer delays in purchases.
          Our  manufacturing overheads did not decline at the rate that revenues
          declined.
     -    We  incurred  manufacturing  inefficiencies  of  $626,000  related  to
          expediting components supplies and compressing processing schedules to
          help  our  customers  meet  their production commitments in the fourth
          quarter  of  2002.
     -    We  recorded  provisions related to inventory reserves for spare parts
          for  our  CVD equipment of $2.2 million and $317,000 in 2002 and 2001,
          respectively.

Research  and  Development

     Research  and  Development  (R&D) expenses were $7.6 million, $8.0 million,
and $12.1 million in 2003, 2002, and 2001 respectively. As a percentage of total
revenues,  R&D expenses were 13 %, 20%, and 25% of total revenues in 2003, 2002,
and 2001 respectively. The decrease in R&D expenses in 2003 compared to 2002 and
2001  were  primarily  due to tighter cost controls and lower investments in new
R&D  projects  in  2003  as  compared  to  2002  and  2001.

     Going forward, we expect our R&D expenses to be slightly higher in 2004 due
primarily to continued investment in new R&D projects. In 2004, we will continue
to invest in development of new films for our advanced application in gate, DRAM
and  thin  film  head  market  segments.


Selling,  General  and  Administrative

     Selling,  general  and  administrative  (SG&A) expenses were $11.7 million,
$12.6  million  and  $10.4  million  in  2003, 2002, and 2001 respectively. As a
percentage  of  sales,  SG&A  expenses were 21%, 32%, and 21% in 2003, 2002, and
2001  respectively. The reduction in the absolute level of SG&A expenses in 2003
compared  to  2002  was  primarily  due to tighter cost controls and lower legal
expenses  which  declined from $2.9 million in 2002 to $1.2 million in 2003. The
Company  incurred  legal  expenses related to the ASMI lawsuit, of approximately
$800,000, $2.2 million and $0 in 2003, 2002 and 2001, respectively. In addition,
the Company received sub-leasing revenue of $5,000, $1,000 and $596,000 in 2003,
2002,  and 2001 respectively, and these were offset against the SG&A expenses in
2003,  2002,  and  2001,  respectively.

     Going  forward,  we  expect  our  SG&A  expenses  to  be higher in 2004 due
primarily  to  increased  sales  commissions as well as increased administrative
expenses  associated  with  enhanced  reporting  requirements  under  the
Sarbanes-Oxley  Act.


Interest  Expense

     Interest expense was $1.7 million, $1.2 million and $496,000 in 2003, 2002,
and  2001,  respectively.  The increase in 2003 was mainly due to an increase in
net interest charges on bank loans of approximately $285,000, and a full year of
interest  cost  of  $1.4  million  relating to the convertible notes, which were
issued  in August of 2002. In connection with the convertible notes, the Company
expects to incur interest expense of $1.4 million in 2004. The expected interest
expense  includes  $493,000  in  interest  expense related to convertibles notes
interest  and  $943,000  related to the accretion of the value of the beneficial
conversion feature and amortization of issuance costs related to the convertible
notes.

      The  increase in 2002 as compared with 2001 was due to increased levels of
debt including convertible debt outstanding in 2002, as compared to 2001.

     In  2004,  we  expect to see a slight drop in interest expense due to lower
debt  balances.


                                       22
<PAGE>
Provision  for  Income  Taxes

     We  recorded a provision for income taxes of $228,000, $538,000 and $70,000
in  2003,  2002  and 2001, respectively, for our South Korean subsidiary. We did
not  record any provision for income taxes in the United States and Japan, as we
incurred  losses  in these entities. We have provided a full valuation allowance
against  any  future  tax  benefit  associated  with  these  losses  given  the
uncertainty  related  to  the  timing  and amounts of any future taxable income.


     LIQUIDITY  AND  CAPITAL  RESOURCES

     At  December  31,  2003,  our cash and cash equivalents were $41.6 million,
compared  to  $11.5  million  as  of  December  31, 2002.  At December 31, 2003,
accounts  receivable  were  $9.6  million, an increase of $2.1 million from $7.5
million  as  of  December 31, 2002.

     Cash  used in operating activities was $4.5 million, $11.9 million and $1.9
million  in  2003,  2002  and  2001  respectively.

     Cash  used  in operating activities in 2003 consisted primarily of net loss
of  $3.5  million,  decrease  in  deferred  revenue of $2.4 million, decrease in
customer  advance  of $1.4 million, decrease in accounts payable of $1.5 million
and  increase  in  accounts  receivable  of  $2.1  million,  partially offset by
increase in accrued expenses of $1.1 million and depreciation of $3.3 million.

     Cash  used  in operating activities in 2002 consisted primarily of net loss
of  $11.6  million,  decreases in deferred revenues of $4.7 million and accounts
payable of $1.9 million, and an increase in accounts receivable of $3.2 million,
partially  offset  by  depreciation  of  $3.7  million, provision for excess and
obsolete  inventory at $2.2 million and an increase in customer advances of $1.8
million.

     Cash  used by operating activities totaled $1.9 million 2001, and consisted
primarily  of  net  loss  of  $6.7 million and decreases in deferred revenues of
$11.2  million,  partially offset by depreciation of $3.0 million and reductions
in  receivables  of  $4.2 million and reductions in inventories of $9.2 million.
Inventory  reductions were primarily related to improved supply chain management
decreases  in inventory held at customer sites from $9.5 million to $5.1 million
and  to  reductions  in shipment backlog, which reduced from $8.4 million at the
end  of  December  2000  to  $3.2  million  on  December  31,  2001.

     Financing  activities  provided  cash  of $37.4 million, $21.0 million, and
$9.4  million  in  2003  2002,  and  2001  respectively.

     In  November  2003,  the  Company issued 6.4 million shares of common stock
under a private placement and received proceeds, net of issuance costs, of $31.8
million.  In addition, the Company received $4.9 million from warrants exercises
and  $2.2  million from stock option exercises and  the issuance of shares under
the Genus Employee Stock Purchase Plan which was  partially offset by payment of
debt  of  $1.6  million.

     In  January  2002,  the  Company received net proceeds of $7.8 million in a
private  placement.  In  August  2002, the Company received $7.0 million, net of
issuance  costs,  from  the sale of subordinated convertible notes and warrants.
In  addition,  the  Company  received  $1.8  million  from warrant exercises and
$654,000  from  stock  option  exercises  and the employee stock purchase plan.

     Financing  activities provided cash of $9.4 million for 2001.  In May 2001,
we  received  approximately  $6.9  million  of net proceeds from the sale of 2.5
million  shares  of  our  common  stock  and warrants for 1.3 million additional
shares  of  our  common  stock.  Additionally,  we  increased our net short-term
borrowings  by  $1.8  million.


                                       23
<PAGE>
     We  had  capital  expenditures  of approximately $2.8 million, $786,000,and
$7.4  million  in 2003, 2002 and 2001 respectively. These were primarily related
to the continuing program of upgrading existing equipment in our development and
applications  laboratories  to  meet  our  most advanced system capabilities and
specifications,  especially for our ALD processes. This has improved our product
and  film  development  capabilities,  and  increased our customer demonstration
capabilities,  which  is  critical  in  the  sales  process.

     Our primary source of funds at December 31, 2003 consisted of $41.6 million
in  cash  and cash equivalents, and $9.6 million of accounts receivable, most of
which  we  have  collected  or  expect to collect during the three months ending
March  31,  2004.

     Significant  financing  transactions  completed  since  December  31,  2001
include  the  following:

     On  December  20, 2001 and as amended on March 27, 2002 and March 20, 2003,
we  maintained  line  of  credit  facilities  from Silicon Valley bank for $15.0
million,  secured  against eligible receivables and inventory. The interest rate
is  prime  plus  1.75% per annum and the facility expires on June 29, 2004.  The
loan  is  collateralized  by a first priority perfected security interest in our
assets  and has a covenant requiring us to maintain a minimum tangible net worth
(calculated  as  the  excess  of total assets over total liabilities adjusted to
exclude  intangible  assets  and balances receivable from officers or affiliates
and  to  exclude debt subordinated to Silicon Valley Bank) of $15 million. As of
December 31, 2003, there was $6.5 million outstanding under this credit facility
which  has  been  classified  as a current liability in our accompanying balance
sheet.

     On  January  4,  2002,  we  received gross proceeds of $1.2 million under a
secured loan with CitiCapital, a division of Citigroup. The loan is payable over
36  months, accrues interest of 8.75% per annum and is secured by two systems in
our  demonstration  lab.  There  was  a  $249,000 outstanding balance under this
agreement  at  December  31,  2003.

     A  summary  of  our  contractual  obligations as of December 31, 2003 is as
follows  (amounts  in  thousands):

<TABLE>
<CAPTION>
                                          Less than                           After 5
                      Total   Revolving     1 year    1-3 years   4-5 years    years
                     -------  ----------  ----------  ----------  ----------  --------
<S>                  <C>      <C>         <C>         <C>         <C>         <C>
Silicon Valley Bank  $ 6,500  $    6,500  $        0  $        0  $        0  $      0
Citicapital              249           0         249           0           0         0
Convertible Notes*     6,975           0           0       6,975           0         0
Operating Leases      16,774         N/A       1,700       3,525       3,729     7,820
                     -------  ----------  ----------  ----------  ----------  --------
                     $30,498  $    6,500  $    1,949  $   10,500  $    3,729  $  7,820
                     =======  ==========  ==========  ==========  ==========  ========
<FN>

     *In the event of a change of control in the Company, the note holder may elect to
receive  repayment  of  the  notes  at  a  premium  of  10%
</TABLE>

     At  December  31, 2003, the Company had approximately $ 5.5 million in open
purchase  order  obligations.


                                       24
<PAGE>
     We  believe  that  our existing working capital, credit lines and cash from
operations  will be sufficient to satisfy our cash needs for the next 12 months.
Accordingly,  these  financial  statements have been prepared on a going concern
basis.

     We  are  actively marketing our existing and new products, which we believe
will  ultimately  lead  to  profitable operations.  Management believes that the
cash  resources  and  borrowing  capacity  will  be sufficient to meet projected
working  capital,  capital expenditures and other cash requirements for the next
twelve months.  However, there can be no assurance the currently available funds
will  meet  the company's cash requirements in the future, or, that any required
additional  funding will be available on terms attractive to us or at all, which
could  have  a  material adverse affect on our business, financial condition and
results  of  operations.  Any  additional  equity  financing  may be dilutive to
shareholders,  and  any  additional  debt  financing,  if available, may involve
restrictive  covenants.


RELATED  PARTY  TRANSACTIONS

     Mario  Rosati,  a  director  of  the  Company,  is also a partner of Wilson
Sonsini Goodrich & Rosati, the general counsel of the Company. In 2003, 2002 and
2001,  the  Company  incurred  $259,000,  $630,000  and $781,000 in legal costs,
respectively,  and  paid  approximately  $490,000,  $1.1  million  and  $57,000,
respectively,  to  Wilson  Sonsini  Goodrich & Rosati. At December 31, 2003, the
Company  owed  approximately  $67,000  to  Wilson Sonsini Goodrich & Rosati. Our
business  activities  with  Wilson Sonsini Goodrich & Rosati are at arms length.


RECENT ACCOUNTING PRONOUNCEMENTS

     In  November  2002,  the  Emerging Issues Task Force reached a consensus on
Issue  00-21(EITF  00-21), Multiple-Deliverable Revenue Arrangements. EITF 00-21
addresses  how  to  account  for  arrangements  that may involve the delivery or
performance  of  multiple  products,  services  and/or rights to use assets. The
consensus  mandates  how to identify whether goods or services or both which are
to  be  delivered  separately in a bundled sales arrangement should be accounted
for separately because they are "separate units of accounting." The guidance can
affect  the  timing of revenue recognition for such arrangements, even though it
does not change rules governing the timing or patterns of revenue recognition of
individual  items  accounted  for  separately.  The  final  consensus  will  be
applicable to agreements entered into in fiscal periods beginning after June 15,
2003,  with  early  adoption permitted. Additionally, companies are permitted to
apply  the  consensus  guidance  to  all existing arrangements as the cumulative
effect  of  a  change  in  accounting  principle  in  accordance with Accounting
Principles  Board  Opinion  No. 20, Accounting Changes. The Company adopted EITF
00-21  during  the  third quarter of 2003 and the adoption did not result in any
material  impact on our financial position, cash flows or results of operations.


     In  April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS No. 149 amends and clarifies
financial  accounting  and  reporting  of  derivative  instruments  and  hedging
activities  under SFAS No. 133. The amendments pertain to decisions made: (i) as
part  of  the Derivatives Implementation Group process that require amendment to
SFAS  133,  (ii)  in  connection with other FASB projects dealing with financial
instruments,  and  (iii)  in  connection  with  the implementation issues raised
related  to  the  application  of  the  definition  of a derivative. SFAS 149 is
effective  for  contracts  entered  into or modified after June 30, 2003 and for
designated  hedging  relationships after June 30, 2003. SFAS 149 will be applied
prospectively. The Company adopted SFAS 149 during the third quarter of 2003 and
the  adoption  did  not result in any material impact on our financial position,
cash  flows  or  results  of  operations.

     In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments  with  Characteristics of both Liabilities and Equity. The Statement
establishes  standards  for  how  an  issuer  classifies  and  measures  certain


                                       25
<PAGE>
financial  instruments  with  characteristics of both liabilities and equity and
further  requires  that  an  issuer classify as a liability (or an asset in some
circumstances)  financial  instruments  that  fall within its scope because that
financial  instrument  embodies  an  obligation  of  the  issuer.  Many  of such
instruments were previously classified as equity. The statement is effective for
financial instruments entered into or modified after May 31, 2003, and otherwise
is  effective  at the beginning of the first interim period beginning after June
15,  2003,  except for mandatory redeemable financial instruments as they relate
to  minority interest in consolidated finite-lived entities. The Statement is to
be  implemented  by  reporting  the  cumulative effect of a change in accounting
principle  for  financial instruments created before the issuance of the date of
the  Statement  and  still  existing  at  the beginning of the interim period of
adoption.  Restatement is not permitted. The Company adopted SFAS 150 during the
third  quarter of 2003 and the adoption did not result in any material impact on
our  financial  position,  cash  flows  or  results  of  operations.

     In  January  2003,  the  FASB issued FASB Interpretation No. 46 ("FIN 46"),
Consolidation  of  Variable Interest Entities - an interpretation of ARB No. 51.
FIN  46  requires  certain  variable interest entities to be consolidated by the
primary  beneficiary  of the entity if the equity investors in the entity do not
have  the  characteristics  of  a  controlling financial interest or do not have
sufficient  equity  at  risk  for  the  entity to finance its activities without
additional  subordinated  financial  support  from  other  parties.  FIN  46  is
effective immediately for all new variable interest entities created or acquired
after January 31, 2003. For variable interest entities created or acquired prior
to  February  1,  2003,  the  provisions  of FIN 46 must be applied to the first
reporting  period  beginning  after June 15, 2004. The Company believes that the
adoption  of  this  standard  will  have  no material effect on our consolidated
financial  statements.

RISK  FACTORS

     You  should  carefully  consider  the  following  risks  before  making  an
investment  decision  in our common stock. The risks described below are not the
only  risks that we face. Additional risks and uncertainties not presently known
to  us,  or  that  are  currently deemed immaterial may also impair our business
operations.  Our  business,  operating  results  or financial condition could be
harmed by, and the trading price of our common stock could decline due to any of
those  risks  and  you  may lose all or part of your investment. You should also
refer  to  the  other  information and our financial statements included in this
Annual  Report on Form 10K and the related information incorporated by reference
into  this  Annual  Report  on  Form  10K.

WE  HAVE  EXPERIENCED  LOSSES  OVER THE LAST FEW YEARS AND WE MAY NOT BE ABLE TO
ACHIEVE  OR  SUSTAIN  PROFITABILITY

     We  have experienced losses of $3.5 million, $11.6 million and $6.7 million
for  2003,  2002  and  2001,  respectively.

     While  we  believe our cash position, anticipated cash from operations, and
our  available  credit  facilities are sufficient for the next twelve months, we
cannot  provide  assurances  that  future  cash  flows  from  operations will be
sufficient to meet operating requirements and allow us to service debt and repay
any  underlying  indebtedness at maturity.   If we do not achieve the cash flows
that  we  anticipate,  we  may  not  be able to meet our planned product release
schedules  and  our  forecast  sales  objectives.  In such event we will require
additional  financing  to  fund  on-going and planned operations and may need to
implement further expense reduction measures, including, but not limited to, the
sale  of  assets,  the consolidation of operations, workforce reductions, and/or
the  delay, cancellation or reduction of certain product development, marketing,
licensing,  or other operational programs.  Some of these measures would require
third-party  consents  or  approvals,  including that of our bank, and we cannot
provide assurances that these consents or approvals will be obtained.  There can
be  no  assurance that we will be able to make additional financing arrangements
on  satisfactory  terms,  if  at  all, and our operations and liquidity would be
materially  adversely  affected.

     We  cannot  assure  our  shareholders  and  investors  that we will achieve
profitability  in  fiscal 2004 and beyond, nor can we provide assurances that we
will  achieve  the  sales  necessary  to avoid further expense reductions in the
future.


                                       26
<PAGE>
SUBSTANTIALLY  ALL  OF OUR NET SALES COME FROM A SMALL NUMBER OF LARGE COMPANIES

     In  2003, Samsung Electronics Company, Ltd, Infineon, Seagate Technologies,
Inc.,  HGST (formerly IBM), and Western Digital (formerly Read-Rite Corporation)
accounted  for  69%,  8%,  7%,  7%,  and  4% of revenues, respectively. In 2002,
Samsung  Electronics  Company,  Ltd., Seagate Technologies, Inc., IBM, and Asuka
Project  accounted  for 58%, 24%, 7%, and 6% of revenues, respectively. In 2001,
Samsung  Electronics  Company, Ltd, Read-Rite Corporation, NEC, Infineon and SCS
accounted  for  73%,  7%,  6%,  6%  and  5%  of  revenues,  respectively.

    The  semiconductor  manufacturing  industry  generally consists of a limited
number  of  larger companies. Consequently, we expect that a significant portion
of  our  future  product sales will continue to be concentrated within a limited
number  of  customers,  even  though  we  are  making  progress  in reducing the
concentration of our reliance on these customers through our strategy of product
and  customer  diversification.

None of our customers have entered into a long-term agreement with us requiring
them to purchase our products. In addition, sales to these customers may
decrease in the future when they complete their current semiconductor equipment
purchasing requirements. If any of our customers were to encounter financial
difficulties or become unable to continue to do business with us at or near
current levels, our business, results of operations and financial condition
could be materially harmed. Customers may delay or cancel orders or may stop
doing business with us for a number of reasons including:

     -    customer departures from historical buying patterns;
     -    general market conditions;
     -    economic conditions; or
     -    Competitive conditions in the semiconductor industry or in the
          industries that manufacture products utilizing integrated circuits.


WE  DEPEND  UPON  A  LIMITED  NUMBER  OF  SUPPLIERS  FOR  MANY  COMPONENTS  AND
SUBASSEMBLIES,  AND SUPPLY SHORTAGES OR THE LOSS OF THESE SUPPLIERS COULD RESULT
IN  INCREASED  COST  OR  DELAYS  IN  THE  MANUFACTURE  AND SALE OF OUR PRODUCTS.

     We  rely  on  third  parties  to  manufacture  the  components  used in our
products.  Some  of our suppliers are sole or limited source.  In addition, some
of these suppliers are relatively small-undercapitalized companies that may have
difficulties  in  raising  sufficient funding to continue operations.  There are
risks associated with the use of independent suppliers, including unavailability
of  or  delays  in  obtaining  adequate  supplies  of components and potentially
reduced  control  of  quality,  production costs and timing of delivery.  We may
experience  difficulty  identifying  alternative  sources  of supply for certain
components  used  in our products.  In addition, the use of alternate components
may  require  design  alterations,  which  may  delay  installation and increase
product  costs.  These  components  may  not  be  available  in  the  quantities
required, on reasonable terms, or at all.  Financial or other difficulties faced
by  our  suppliers  or  significant  changes  in  demand for these components or
materials  could  limit their availability.  Any failures by these third parties
to  adequately  perform  may  impair our ability to offer our existing products,
delay the submission of products for regulatory approval, and impair our ability
to  deliver  products  on  a  timely  basis  or otherwise impair our competitive
position.  Establishing  our  own  capabilities  to manufacture these components
would  be  expensive  and  could significantly decrease our profit margins.  Our
business,  results  of  operations  and  financial  condition would be adversely
affected  if we were unable to continue to obtain components in the quantity and
quality  desired  and  at  the  prices  we  have  budgeted.

WE ARE SUBJECT TO RISKS BEYOND OUR CONTROL OR INFLUENCE AND ARE HIGHLY DEPENDENT
ON  OUR  INTERNATIONAL  SALES,  PARTICULARLY  SALES  IN  ASIAN  COUNTRIES

     Export  sales accounted for approximately 77%, 72% and 93% of our total net
sales  in 2003, 2002 and 2001, respectively. Net sales to our South Korean-based
customers  accounted  for  approximately  68%, 56% and 73% of total net sales in
2003,  2002  and  2001,  respectively.  We  anticipate that international sales,
including  sales  to  South


                                       27
<PAGE>
Korea, will continue to account for a significant portion of our net sales. As a
result,  a  significant  portion  of  our  net  sales  will be subject to risks,
including:

     -    unexpected  changes  in  foreign  law  or  regulatory  requirements;
     -    exchange  rate  volatility;
     -    tariffs  and  other  barriers;
     -    political  and  economic  instability;
     -    military  confrontation;
     -    difficulties  in  accounts  receivable  collection;
     -    difficulties  in  managing  distributors  or  representatives;
     -    difficulties  in  staffing  our  subsidiaries;
     -    difficulties  in  managing  foreign  subsidiary  operations;  and
     -    potentially  adverse  tax  consequences.

     Our  foreign  sales are primarily denominated in U.S. dollars and we do not
engage  in  hedging  transactions. As a result, our foreign sales are subject to
the  risks  associated  with  unexpected  changes in exchange rates, which could
increase  the  cost  of  our  products  to  our  customers  and could lead these
customers  to  delay  or  defer  their  purchasing  decisions.

     Wherever  currency  devaluations  occur  abroad,  our  goods  become  more
expensive  for  our  customers  in that country. In addition, difficult economic
conditions  may limit capital spending by our customers. These circumstances may
also  affect  the  ability  of  our customers to meet their payment obligations,
resulting  in  the  cancellations  or  deferrals  of  existing  orders  and  the
limitation  of  additional  orders.

OUR  SALES  REFLECT  THE  CYCLICALITY OF THE SEMICONDUCTOR INDUSTRY, WHICH COULD
CAUSE  OUR  OPERATING  RESULTS  TO FLUCTUATE SIGNIFICANTLY AND COULD CAUSE US TO
FAIL  TO  ACHIEVE  ANTICIPATED  SALES

     Our  business  depends  upon  the  capital  expenditures  of  semiconductor
manufacturers, which in turn depend on the current and anticipated market demand
for  integrated circuits and products utilizing integrated circuits. Although we
are  marketing  our  atomic  layer  deposition  technology  to non-semiconductor
markets  such  as  markets  in  magnetic  thin  film heads, flat panel displays,
micro-electromechanical  systems  and inkjet printers, we are still dependent on
sales  to  semiconductor  manufacturers.  The semiconductor industry is cyclical
which  impacts  the  semiconductor  industry's  demand  for  semiconductor
manufacturing  capital  equipment.

     Semiconductor industry downturns have significantly decreased our revenues,
operating  margins  and  results  of operations in the past. During the industry
downturn  in  1998, several of our customers delayed or cancelled investments in
new  manufacturing  facilities  and  equipment due to declining DRAM prices, the
Asian economic downturn, and general softening of the semiconductor market. This
caused  our  sales  in  1998  to  be significantly lower than in the prior three
years.

     After  the  dramatic  industry boom for semiconductor equipment that peaked
early  in  the  year  2000, another cyclical downturn occurred from year 2000 to
around year 2003. The sharp and severe industry downturn in 2001 was the largest
in the industry's history. Almost all previous downturns have been solely due to
pricing  declines.  However,  the  2001  downturn  in  the  industry  marked  a
corresponding  decline  in  unit  production,  as  well  as  price  reduction.

OUR  FUTURE  GROWTH  IS  DEPENDENT  ON  ACCEPTANCE  OF  NEW  PRODUCTS AND MARKET
ACCEPTANCE  OF  OUR  SYSTEMS  RELATING  TO  THOSE  PRODUCTS

     We  believe  that  our  future  growth  will  depend in large part upon the
acceptance  of  our  new  thin  films and processes, especially our atomic layer
deposition  technology. As a result, we expect to continue to invest in research


                                       28
<PAGE>
and  development  in  these new thin films and the systems that use these films.
There  can  be no assurance that the market will accept our new products or that
we  will  be  able  to develop and introduce new products or enhancements to our
existing  products and processes in a timely manner to satisfy customer needs or
achieve  market  acceptance.  The  failure  to  do  so,  or  even a delay in our
introduction of new products or enhancements, could harm our business, financial
condition  and  results  of  operations.

     We  must  manage  product transitions successfully, as introductions of new
products  could harm sales of existing products. We derive our revenue primarily
from  the  sale of equipment used to chemically deposit tungsten silicide in the
manufacture  of memory chips. We estimate that the life cycle for these tungsten
silicide  deposition  systems is three-to-ten years. There is a risk that future
technologies, processes or product developments may render our product offerings
obsolete  and  we  may  not  be  able  to  develop and introduce new products or
enhancements  to  our  existing  products  in  a  timely  manner  or  at  all.


WE MAY NOT BE ABLE TO CONTINUE TO SUCCESSFULLY COMPETE IN THE HIGHLY COMPETITIVE
SEMICONDUCTOR  INDUSTRY  AGAINST  COMPETITORS  WITH  GREATER  RESOURCES

     The  semiconductor  manufacturing  capital  equipment  industry  is  highly
competitive.  We  face  substantial competition throughout the world. We believe
that  to  remain competitive, we will require significant financial resources to
develop  new products, offer a broader range of products, establish and maintain
customer  service  centers  and  invest  in  research  and  development.

     Many  of  our existing and potential competitors have substantially greater
financial  resources,  more  extensive  engineering,  manufacturing,  marketing,
customer  service  capabilities  and  greater  name  recognition.  We expect our
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  our  competitors  enter  into  strategic  relationships  with  leading
semiconductor manufacturers covering thin film products similar to those sold by
us,  it  would  materially  adversely affect our ability to sell our products to
such  manufacturers.  In addition, to expand our sales we must often replace the
systems  of our competitors or sell new systems to customers of our competitors.
Our competitors may develop new or enhanced competitive products that will offer
price  or performance features that are superior to our systems. Our competitors
may  also  be  able  to respond more quickly to new or emerging technologies and
changes  in  customer  requirements,  or  to  devote  greater  resources  to the
development,  promotion  and  sale of their product lines. We may not be able to
maintain  or  expand  our  sales  if  our  resources  do not allow us to respond
effectively  to  such  competitive  forces.


WE  MAY  NOT ACHIEVE ANTICIPATED REVENUE GROWTH IF WE ARE NOT SELECTED AS VENDOR
OF  CHOICE  FOR  NEW  OR  EXPANDED FABRICATION FACILITIES AND IF OUR SYSTEMS AND
PRODUCTS  DO  NOT  ACHIEVE  BROADER  MARKET  ACCEPTANCE

     Because  semiconductor  manufacturers must make a substantial investment to
install  and  integrate  capital  equipment  into  a  semiconductor  fabrication
facility,  these  manufacturers  will  tend  to  choose  semiconductor equipment
manufacturers  based  on  established  relationships,  product compatibility and
proven  system  performance.

     Once  a  semiconductor  manufacturer  selects a particular vendor's capital
equipment,  the  manufacturer  generally relies for a significant period of time
upon  equipment  from  this  vendor  of  choice for the specific production line
application.  To  do  otherwise  creates  risk  for the manufacturer because the
manufacture  of  a  semiconductor  requires many process steps and a fabrication
facility will contain many different types of machines that must work cohesively
to  produce  products  that  meet the customers' specifications. If any piece of
equipment  fails  to  perform  as expected, the customer could incur significant
costs related to defective products, production line downtime, or low production
yields.


                                       29
<PAGE>
     Since  most  new  fabrication  facilities  are  similar  to  existing ones,
semiconductor  manufacturers  tend to continue using equipment that has a proven
track record. Based on our experience with major customers like Samsung, we have
observed  that  once  a particular piece of equipment is selected from a vendor,
the  customer is likely to continue purchasing that same piece of equipment from
the  vendor  for  similar  applications in the future. Our customer list, though
limited,  has expanded in recent months. Yet our broadening market share remains
at  risk  due  to  choices  made  by customers that continue to be influenced by
pre-existing installed bases by competing vendors. Consequently, our penetrating
these  markets  and  our  ability  to  get  additional  orders  may  be limited.

     A  semiconductor  manufacturer  frequently  will attempt to consolidate its
other  capital  equipment requirements with the same vendor. Accordingly, we may
face  narrow  windows of opportunity to be selected as the "vendor of choice" by
potential  new  customers.  It  may  be difficult for us to sell to a particular
customer  for  a  significant  period  of  time  once  that  customer  selects a
competitor's  product,  and  we  may  not  be  successful  in  obtaining broader
acceptance  of our systems and technology. If we are not able to achieve broader
market  acceptance  of  our systems and technology, we may be unable to grow our
business  and  our  operating  results  and  financial condition will be harmed.

OUR  LENGTHY  SALES  CYCLE INCREASES OUR COSTS AND REDUCES THE PREDICTABILITY OF
OUR  REVENUE

     Sales  of our systems depend upon the decision of a prospective customer to
increase  manufacturing capacity. That decision typically involves a significant
capital  commitment  by  our customers. Accordingly, the purchase of our systems
typically  involves  time-consuming  internal  procedures  associated  with  the
evaluation,  testing,  implementation  and introduction of new technologies into
our  customers'  manufacturing  facilities.  For  many  potential  customers, an
evaluation  as  to  whether  new semiconductor manufacturing equipment is needed
typically  occurs  infrequently.  Following  an evaluation by the customer as to
whether  our systems meet its qualification criteria, we have experienced in the
past  and  expect  to experience in the future delays in finalizing system sales
while  the  customer  evaluates  and  receives  approval for the purchase of our
systems  and  constructs  a  new  facility  or  expands  an  existing  facility.

     Due  to  these  factors,  our  systems typically have a lengthy sales cycle
during  which  we  may  expend substantial funds and management effort. The time
between  our  first  contact  with a customer and the customer placing its first
order  typically  lasts  from  nine  to  twelve months and is often longer. This
lengthy  sales  cycle makes it difficult to accurately forecast future sales and
may  cause  our  quarterly and annual revenue and operating results to fluctuate
significantly  from  period  to  period.  If anticipated sales from a particular
customer  are  not  realized  in  a  particular period due to this lengthy sales
cycle,  our  operating  results  may  be  adversely  affected  for  that period.


IF  WE  ARE  FOUND  TO  INFRINGE  THE  PATENTS OR INTELLECTUAL PROPERTY OF OTHER
PARTIES,  OUR  ABILITY  TO  GROW  OUR  BUSINESS  MAY  BE  SEVERELY  LIMITED.

     From  time  to  time,  we  may  receive notices from third parties alleging
infringement  of  patents  or  intellectual property rights. It is our policy to
respect all parties' legitimate intellectual property rights, and we will defend
against such claims or negotiate licenses on commercially reasonable terms where
appropriate.  However,  no  assurance  can  be  given  that  we  will be able to
negotiate  any  such  necessary licenses on commercially reasonable terms, or at
all, or that any litigation resulting from such claims would not have a material
adverse  effect  on  our  business  and  financial  results.

     Litigation  is  time consuming, expensive and its outcome is uncertain.  We
may  not prevail in any litigation in which we are involved.  Should we be found
to  infringe  any  of  the  patents  asserted or any other intellectual property
rights  of  others, in addition to potential monetary damages and any injunctive
relief  granted,  we  may  need  either to obtain a license to commercialize our
products  or  redesign  our  products  so they do not infringe any third party's


                                       30
<PAGE>
intellectual  property.  If  we  are  unable  to  obtain  a  license  or adopt a
non-infringing  product  design, we may not be able to proceed with development,
manufacture  and  sale  or our atomic layer products.  In this case our business
may  not  develop  as  planned,  and  our  results  could  materially  suffer.

     On  June  6,  2001,  ASM America, Inc. ("ASMA") filed a patent infringement
action  against  Genus, Inc. ASMA's Complaint alleges that Genus is directly and
indirectly  infringing  U.S.  Patent  No. 5,916,365 (the "365 Patent"), entitled
"Sequential  Chemical Vapor Deposition," and U.S. Patent No. 6,015,590 (the "590
Patent")  entitled  "Method For Growing Thin Films," which ASMA claims to own or
exclusively  license.  The Complaint seeks monetary and injunctive relief. Genus
served its Answer to ASMA's complaint on August 1, 2001. Also on August 1, 2001,
Genus  counterclaimed  against ASMA and ASM International, N.V. ("ASMI") for (1)
infringement of U.S. Patent No. 5,294,568 (the "568 Patent") entitled "Method of
Selective Etching Native Oxide"; (2) declaratory judgment that the '365 and '590
Patents  are  invalid,  unenforceable,  and  not  infringed  by  Genus;  and (3)
antitrust  violations. An initial Case Management Conference was held on October
16,  2001.  On January 9, 2002, the Court issued an order granting ASMA leave to
amend  its complaint to add Dr. Sherman as a party and to add a claim that Genus
is  directly  and  indirectly  infringing  U.S.  Patent  No  4,798,165 (the "165
Patent")  entitled  "Apparatus  for  Chemical  Vapor Deposition Using an Axially
Symmetric Gas Flow", which ASMA claims to own. The Court also severed and stayed
discovery  and  trail  of  Genus'  antitrust claims until after the trial of the
patent  claims.  On  February 4, 2002, Genus served its Amended Answer to ASMA's
amended  complaint and counterclaimed against ASMA for declaratory judgment that
the '165 Patent is invalid, unenforceable, and not infringed by Genus. On August
15,  2002, the Court issued a claim construction order regarding the '590, '365,
and  598'  Patents.  A  claim construction hearing regarding the '165 Patent was
held  on  September  26,  2002, and the Court issued a claim construction ruling
regarding  this  patent  on November 13, 2002. On September 23, 2002 Genus filed
motions  for  summary  judgment  on  noninfringement regarding the '590 and '365
Patents.  On  November  20, 2002, the Court granted the Genus motion for summary
judgment  on  noninfringement of the '365 Patent. On January 10, 2003, the Court
granted  Genus'  motion  for  summary  judgment  on  the  '590  Patent.

     On  April 11, 2003, Genus settled its lawsuit with ASMI (the "Settlement").
Under  the  terms of the Settlement, Genus gained a royalty-free license to each
of  the  patents  ASMI asserted in the litigation, including both ALD patents as
well  as  Patent  '165. By specific agreement of the parties, these licenses are
applicable  to  Genus'  successors and affiliates. Genus has likewise obtained a
covenant  from  ASMI  that  it  will  not  sue  Genus for patent infringement or
antitrust  violations  for  the  next  five  years.

     In  return,  Genus  has  granted  ASMI  and its successors and affiliates a
royalty-free  license  to  the  patent  Genus asserted in the litigation, Patent
'568,  and  has  agreed  to dismiss its antitrust claims against ASMI. Genus has
also  agreed not to sue ASMI for patent infringement or antitrust violations for
the  next  five  years.

     No  payments  have  been made by either Genus or ASMI in exchange for these
licenses  and  the  covenant  not  to  sue.  However,  under  the  terms  of the
Settlement,  ASMI  has  the  right  to  pursue an appeal of the District Court's
judgments of non-infringement regarding the ALD patents. The agreement specifies
that  if the Federal Circuit vacates either of the existing judgments related to
the  ALD  patents  based on a change in the District Court's claim construction,
Genus  will pay ASMI $1 million for the royalty-free licenses to the ALD patents
it  has  been  granted  under  the  agreement.

     We  may  in  the future be party to litigation arising in the course of our
business, including claims that we allegedly infringe third party trademarks and
other  intellectual property rights. Such claims, even if not meritorious, could
result  in  the  expenditure  of significant financial and managerial resources.


WE  ARE  DEPENDENT  UPON  KEY  PERSONNEL  WHO ARE EMPLOYED AT WILL, WHO WOULD BE
DIFFICULT  TO  REPLACE  AND  WHOSE  LOSS  WOULD IMPEDE OUR DEVELOPMENT AND SALES


                                       31
<PAGE>
     We  are highly dependent on key personnel to manage our business, and their
knowledge  of  business,  management  skills  and  technical  expertise would be
difficult  to replace. Our success depends upon the efforts and abilities of Dr.
William  W.R.  Elder,  our  chairman  and chief executive officer, Dr. Thomas E.
Seidel,  our  chief  technology  officer, and other key managerial and technical
employees who would be difficult to replace. The loss of Dr. Elder or Dr. Seidel
or  other key employees could limit or delay our ability to develop new products
and  adapt  existing  products to our customers' evolving requirements and would
also  result  in  lost  sales and diversion of management resources. None of our
executive  officers  are  bound  by  a  written  employment  agreement,  and the
relationships  with  our  officers  are  at  will.

     Because  of  competition  for additional qualified personnel, we may not be
able to recruit or retain necessary personnel, which could impede development or
sales  of  our products. Our growth depends on our ability to attract and retain
qualified,  experienced  employees.  There  is  substantial  competition  for
experienced  engineering, technical, financial, sales and marketing personnel in
our  industry.  In  particular, we must attract and retain highly skilled design
and  process  engineers. Competition for such personnel is intense, particularly
in the San Francisco bay area where we are based. If we are unable to retain our
existing key personnel, or attract and retain additional qualified personnel, we
may  from  time  to time experience inadequate levels of staffing to develop and
market  our  products  and  perform services for our customers. As a result, our
growth  could  be  limited due to our lack of capacity to develop and market our
products  to  customers,  or  fail  to  meet  delivery commitments or experience
deterioration  in  service  levels  or  decreased  customer  satisfaction.

OUR FAILURE TO COMPLY WITH ENVIRONMENTAL REGULATIONS COULD RESULT IN SUBSTANTIAL
LIABILITY  TO  US

     We  are  subject  to  a variety of federal, state and local laws, rules and
regulations  relating  to  the  protection  of health and the environment. These
include  laws,  rules  and  regulations  governing  the use, storage, discharge,
release,  treatment  and  disposal  of  hazardous  chemicals  during  and  after
manufacturing,  research and development and sales demonstrations. If we fail to
comply  with  present  or future regulations, we could be subject to substantial
liability  for  clean  up efforts, property damage, personal injury and fines or
suspension  or  cessation  of  our  operations.

     We  use  the  following  regulated  gases  at our manufacturing facility in
Sunnyvale:  tungsten hexafluoride, dichlorosilane silicide, silane and nitrogen.
We  also  use regulated liquids such as hydrofluoric acid and sulfuric acid. The
city  of  Sunnyvale,  California,  imposes  high  environmental  standards  to
businesses  operating  within  the city. Genus has received an operating license
from  Sunnyvale. Presently, our compliance record indicates that our methods and
practices  successfully  meet  standards.  Moving  forward,  if  we  fail  to
continuously  maintain  high standards to prevent the leakage of any toxins from
our  facilities  into  the environment, restrictions on our ability to expand or
continue  to  operate our present locations could be imposed upon us or we could
be  required  to acquire costly remediation equipment or incur other significant
expenses.


WE  DEPEND  UPON  FIVE  INDEPENDENT  SALES  REPRESENTATIVES  FOR THE SALE OF OUR
PRODUCTS  AND  ANY  DISRUPTION  IN THESE RELATIONSHIPS WOULD ADVERSELY AFFECT US

     We  currently  sell and support our thin film products through direct sales
and customer support organizations in the United States, Europe, South Korea and
Japan and through five independent sales representatives and distributors in the
United  States,  Europe,  South Korea, Taiwan, Singapore and Malaysia. We do not
have  any  long-term  contracts with our sales representatives and distributors.
Any  disruption  or  termination of our existing distributor relationships could
negatively  impact  sales  and  revenue.

WE  ESTABLISHED  A  DIRECT SALES ORGANIZATION IN JAPAN AND WE MAY NOT SUCCEED IN
EFFECTIVELY  PENETRATING  THE  JAPANESE  MARKETPLACE

     In  2000,  we  invested  significant  resources  in Japan by establishing a
direct  sales  organization,  Genus-Japan,  Inc.  To  date,  we have had limited
success  in penetrating in Japanese semiconductor industry. Although we continue


                                       32
<PAGE>
to  invest  significant  resources  in  our  Japan office, we may not be able to
attract  new  customers in the Japanese semiconductor industry, and as a result,
we  may  fail  to  yield  a  profit or return on our investment in our office in
Japan.


THE  PRICE  OF  OUR  COMMON STOCK HAS FLUCTUATED IN THE PAST AND MAY CONTINUE TO
FLUCTUATE  SIGNIFICANTLY IN THE FUTURE, WHICH MAY LEAD TO LOSSES BY INVESTORS OR
TO  SECURITIES  LITIGATION

     Our common stock has experienced substantial price volatility, particularly
as  a  result  of  quarter-to-quarter  variations in our, our competitors or our
customers'  actual  or  anticipated  financial  results,  our competitors or our
customers'  announcements  of  technological  innovations,  revenue  recognition
policies,  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 we do
business,  may  adversely  affect  the  market  price  of  our  common  stock.


BUSINESS  INTERRUPTIONS  COULD  ADVERSELY  AFFECT  OUR  BUSINESS

     Our  operations  are  vulnerable to interruption by fire, earthquake, power
loss, telecommunications failure and other events beyond our control. A disaster
could  severely damage our ability to deliver our products to our customers. Our
products  depend  on our ability to maintain and protect our operating equipment
and  computer  systems,  which  are  primarily  located in or near our principal
headquarters  in Sunnyvale, California. Sunnyvale exists near a known earthquake
fault  zone.  Although  our  facilities  are  designed to be fault tolerant, the
systems  are  susceptible  to damage from fire, floods, earthquakes, power loss,
telecommunications  failures,  and  similar events. Although we maintain general
business  insurance against interruptions such as fires and floods, there can be
no  assurance  that  the  amount  of coverage will be adequate in any particular
case.


WE  ARE  OBLIGATED  TO  ISSUE  SHARES OF OUR STOCK UNDER OUTSTANDING OPTIONS AND
WARRANTS  AND  SUCH  ISSUANCE  WILL  DILUTE  YOUR  PERCENTAGE OWNERSHIP IN GENUS

     As of February 29, 2004, we had approximately of 3,949,000 shares of common
stock  underlying  warrants and outstanding employee stock options. Of the stock
options,  1,824,000  shares were exercisable as of February 29, 2004. All of the
shares  underlying  the  warrants  are currently exercisable. Some warrants have
terms  providing  for  an  adjustment  of  the  number  of shares underlying the
warrants  in  the  event  that  we  issue  new  shares at a price lower than the
exercise  price of the warrants, where we make a distribution of common stock to
our  shareholders  or  effect  a  reclassification.

     If  all  of the shares underlying the exercisable options and warrants were
exercised  and  sold in the public market, the value of your current holdings in
Genus  may  decline  because  there may not be sufficient demand to purchase the
increased  number  of  shares  that  would  be  available  for  sale.


WE  HAVE  IMPLEMENTED  ANTI-TAKEOVER  MEASURES  THAT MAY RESULT IN DILUTING YOUR
PERCENTAGE  OWNERSHIP  OF  GENUS  STOCK

     On  September 7, 2000, the Company's Board of Directors declared a dividend
pursuant to a newly adopted Share Purchase Rights Plan, which replaced a similar
earlier  plan  that  had  expired  on July 3, 2000.  The intended purpose of the
Rights  Plan  is  to protect shareholders' rights and to maximize share value in
the  event  of an unfriendly takeover attempt.  As of the record date of October
13,  2000, each share of common stock of Genus, Inc. outstanding was granted one
right  under  the  new  plan.  Each  right  is  exercisable  only  under certain
circumstances  and  upon the occurrence of certain events and permits the holder
to  purchase  from the Company one one-thousandth (0.001) of a share of Series C
Participating  Preferred  Stock  at  an  initial exercise price of forty dollars
($40.00)  per  one  one-thousandth  share.  The


                                       33
<PAGE>
2,000  shares  of  Series  C  preferred  stock authorized in connection with the
Rights  Plan  will  be  used  for  the exercise of any preferred shares purchase
rights  in  the  event  that any person or group (the Acquiring Person) acquires
beneficial  ownership  of  15%  or more of the outstanding common stock. In such
event,  the  shareholders (other than the Acquiring Person) would receive common
stock  of the Company having a market value of twice the exercise price. Subject
to  certain  restrictions,  the  Company  may redeem the rights issued under the
Rights  Plan  for  $0.001  per  right  and may amend the Rights Plan without the
consent  of  rights  holders. The rights will expire on October 13, 2010, unless
redeemed  by  the  Company.

     In  the  event  that  circumstances  trigger  the  transferability  and
exercisability  of  rights  granted in our Rights Plan, your current holdings in
Genus  may decline as a result of dilution to your percentage ownership in Genus
or as a result of a reduction in the per share value of our stock resulting from
the  increase  in the number of outstanding shares available and your failure to
exercise  your  rights  under  the  Rights  Plan.

     In  the  event  of a change of control of the Company, the convertible note
holders  may  elect  to  receive repayment of the notes at a premium of 10% over
face  value  of  the  notes.


FORWARD-LOOKING  STATEMENTS

     This  Annual  Report  on Form 10-K contains or incorporates 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 regarding, among other items,
our  business  strategy, growth strategy and anticipated trends in our business.
We  may  make additional written or oral forward-looking statements from time to
time  in  filings with the Securities and Exchange Commission or otherwise. When
we  use  the  words  "believe,"  "expect,"  "anticipate,"  "project" and similar
expressions,  this  should  alert  you that this is a forward-looking statement.

     We  base  these  forward-looking  statements  on our expectations. They are
subject  to  a  number  of  risks  and  uncertainties  that cannot be predicted,
quantified  or  controlled.  Future  events  and  actual  results  could  differ
materially  from  those  set  forth  in,  contemplated  by,  or  underlying  the
forward-looking  statements.

     Statements  in  this  Annual  Report  on  Form  10-K,  and  in  documents
incorporated  therein,  including  those  set  forth  above  in  "Risk Factors,"
describe  factors,  among  others,  that  could  contribute  to  or  cause these
differences.  In  light  of  these  risks  and  uncertainties,  there  can be no
assurance  that  the forward-looking information contained in this Annual Report
on  Form  10-K  will  in  fact transpire or prove to be accurate. All subsequent
written and oral forward-looking statements attributable to us or persons acting
on  our  behalf  are  expressly  qualified  in  their  entirety by this section.


ITEM  7A.  QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT  MARKET  RISK
---------------------------------------------------------------------------

     Approximately  83.8%  of  our  revenues  are U.S. dollar denominated sales.
Consequently,  fluctuations  in  our  exchange  rate  could  make  our  products
relatively  more  expensive to our customers, which could lead to reduced demand
for  our  products.

     Similarly, 16.2 % of our sales are denominated in non-U.S. based
currencies.  As exchange rates fluctuate, our revenues from sales of foreign
currency denominated products will fluctuate which could have an adverse impact
on our margins.  An increase in the value of the U.S. dollar relative to foreign
currencies could make our products more expensive and, therefore, reduce the
demand for our products. Reduced demand for our products could materially
adversely affect our business, results of operations and financial condition.

     We have both fixed rate and floating rate interest obligations.  Fixed rate
obligations  may  result  in  interest  expenses  in  excess  of market rates if
interest  rates  fall,  while floating rate obligations may result in additional


                                       34
<PAGE>
interest  costs  if interest rates rise.  An increase of one percentage point in
interest  rates  would  not  materially  impact  the  results of our operations.

     At  any time, fluctuations in interest rates could affect interest earnings
on  our cash, cash equivalents or increase any interest expense owed on the line
of  credit  facility. We believe that the effect, if any, of reasonably possible
near  term  changes  in  interest  rates  on  our financial position, results of
operations  and  cash  flows  would  not be material. Currently, we do not hedge
these  interest  rates  exposures.


ITEM  8.  CONSOLIDATED  FINANCIAL  STATEMENTS  AND  SUPPLEMENTARY  DATA
-----------------------------------------------------------------------

     The  consolidated financial statements, together with the report thereon of
PricewaterhouseCoopers  LLP,  independent  auditors  dated  March  11, 2004, are
included  in  a  separate  section  of  this  Annual  Report.


SUPPLEMENTARY  DATA:  SELECTED  CONSOLIDATED  QUARTERLY  DATA (UNAUDITED)

     The  following  table  presents  our  unaudited  consolidated statements of
operations  data for each of the eight quarters in the period ended December 31,
2003  In  our  opinion, this information has been presented on the same basis as
the  audited consolidated financial statements included in a separate section of
this  report, and all necessary adjustments, consisting only of normal recurring
adjustments,  have  been  included  in  the  amounts below to present fairly the
unaudited  quarterly  results  when  read  in  conjunction  with  the  audited
consolidated  financial  statements and related notes. The operating results for
any  quarter  should  not be relied upon as necessarily indicated of results for
any  future  period.  We  expect our quarterly operating results to fluctuate in
future  periods  due  to  a  variety  of  reasons,  including those discussed in
"Business  Risks."

<TABLE>
<CAPTION>
                                                 FIRST QTR     SECOND QTR    THIRD QTR   FOURTH QTR
                                               -------------  -----------  ------------  ----------
<S>                                            <C>            <C>          <C>           <C>
                                                 (UNAUDITED, IN  THOUSANDS,  EXCEPT  SHARE  DATA)
2003
Revenues                                       $     17,695   $   14,739   $     9,107   $  15,320
Gross profit                                          6,118        3,926         2,058       5,510
Net Income (loss)                                       408       (1,358)       (2,837)        268
Basic net Income (loss) per share              $       0.01   $    (0.05)  $     (0.09)  $    0.01
Diluted net Income (loss) per share            $       0.01   $    (0.05)  $     (0.09)  $    0.01

2002
Revenues                                       $      9,591   $    6,743   $    12,153   $  11,280
Gross profit                                          2,124        1,573         4,327       2,600
Net loss                                             (3,752)      (3,609)       (1,575)     (2,684)
Basic net loss per share                       $      (0.15)  $    (0.13)  $     (0.06)  $   (0.09)
Diluted net loss per share                     $      (0.15)  $    (0.13)  $     (0.06)  $   (0.09)
</TABLE>


ITEM  9.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING AND
--------------------------------------------------------------------------------
FINANCIAL  DISCLOSURE
---------------------

None.


                                       35
<PAGE>
ITEM  9A.  CONTROLS  AND  PROCEDURES
------------------------------------

     EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. Our management evaluated,
with  the  participation  of  our  Chief  Executive  Officer and Chief Financial
Officer,  the  effectiveness of our disclosure controls and procedures as of the
end  of  the  period  covered  by this Annual Report on Form 10-K. Based on this
evaluation,  our  Chief  Executive  Officer and our Chief Financial Officer have
concluded  that  our  disclosure controls and procedures are effective to ensure
that  information  we are required to disclose in reports that we file or submit
under the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in Securities and Exchange Commission
rules  and  forms.

     CHANGES  IN  INTERNAL  CONTROLS OVER FINANCIAL REPORTING. During the fiscal
2002 financial reporting process, management, in consultation with the Company's
independent  auditors,  identified deficiencies involving internal controls over
inventories,  warranties and the Company's Korean operations which constituted a
"Reportable  Condition" under standards established by the American Institute of
Certified  Public  Accountants.  Management believes that these matters have not
had  any  material  impact on our financial statements. Management established a
project  plan  and  implemented  processes  and  controls  to  address  these
deficiencies  in  fiscal  year  2003.

     Our  management,  including our Chief Executive Officer and Chief Financial
Officer,  does  not  expect  that  our disclosure controls and procedures or our
internal  controls  will  prevent all errors and all potential frauds. A control
system,  no matter how well conceived and operated, can provide only reasonable,
not  absolute,  assurance  that  the  objectives  of the control system are met.
Further,  the  design  of  a control system must reflect the fact that there are
resource  constraints,  and the benefits of controls must be considered relative
to  their  costs. Because of the inherent limitations in all control systems, no
evaluation  of  controls  can provide absolute assurance that all control issues
and  instances  of  fraud,  if  any,  within  Genus  have  been  detected.


                                       36
<PAGE>
PART  III


ITEM  10.  DIRECTORS  AND  EXECUTIVE  OFFICERS  OF  THE  REGISTRANT
-------------------------------------------------------------------

     Information  about  the Directors of the Company, including Company's audit
committee financial expert is incorporated by reference from our proxy statement
for  the  2004  Annual  Meeting  of  Shareholders filed with the SEC (the "Proxy
Statement") under the heading "Election of Directors". Information about Section
16  reporting  compliance  is  incorporated  by reference to the Proxy Statement
under  the  heading  "Section  16  Beneficial  Ownership  Reporting Compliance."
Information  about our Code of Conduct is incorporated by reference to the Proxy
Statement  under  the  heading  "Protocol."  Information regarding our Executive
Officers  is  set forth in Part I of this Form 10-K under the caption "Executive
Officers  of  the  Registrant".


ITEM  11.  EXECUTIVE  COMPENSATION
----------------------------------

     The  information  required  by  this  Item  is incorporated by reference to
"Board  of  Directors  and  Committees,"  "Summary  Compensation  Table," "Stock
Options  and  Stock  Appreciation  Rights"  and  "Retirement  Benefits"  in  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
"Information  Relating  to  Directors,  Nominees  and Executive Officers" in the
Company's  Proxy  Statement


ITEM  13.  CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS
-------------------------------------------------------------

     The  information  required  by  this  Item  is incorporated by reference to
"Certain  Transactions"  in  the  Company's  Proxy  Statement

ITEM  14.     PRINCIPAL  ACCOUNTANT  FEES  AND  SERVICES
--------------------------------------------------------

     The  information  required  by  this  Item  is incorporated by reference to
"Principal  Accountant  Fees  and  Services"  in  the Company's definitive Proxy
Statement.


                                       37
<PAGE>
PART  IV

ITEM  15.  EXHIBITS,  FINANCIAL  STATEMENT  SCHEDULE  AND  REPORTS  ON  FORM 8-K
--------------------------------------------------------------------------------

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

1.   Consolidated  Financial  Statements.

     Report  of  Independent  Auditors

     Consolidated  Balance  Sheets  -  December  31,  2003  and  2002

     Consolidated Statements of Operations - Years Ended December 31, 2003, 2002
     and  2001

     Consolidated  Statements  of  Shareholders' Equity and Comprehensive Loss -
     Years  Ended  December  31,  2003,  2002  and  2001

     Consolidated Statements of Cash Flows - Years Ended December 31, 2003, 2002
     and  2001

     Notes  to  the  Consolidated  Financial  Statements

2.   Financial  Statement  Schedule.

     Schedule  II  "Valuation  and  Qualifying  Accounts"

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.

(b)  Reports  on  Form  8-K

     The  following  reports  on  Form  8-K  were  filed or furnished during the
quarter  ended  December  31,  2003:

1)   A Report on Form 8-K was filed on November 10, 2003, reporting under Item 5
     the  announcement  of  the private placement transaction closed November 7,
     2003.

2)   A Report on Form 8-K was furnished on October 28, 2003 reporting under Item
     7  and Item 12 financial results for the fiscal quarter ended September 30,
     2003.

(c)  Financial  Statement  Schedule  11 - Valuation and Qualifying Accounts (See
     page  64)

(d)  Exhibits:  For  a  list of exhibits filed with this Form 10-K, refer to the
     exhibit  index  beginning  on  page  65



                                       38
<PAGE>
REPORT  OF  INDEPENDENT  AUDITORS


To  the  Board  of  Directors  and  Shareholders  of
Genus,  Inc.:

     In  our  opinion, the consolidated financial statements listed in the index
appearing  under  Item  15  (a)(1) present fairly, in all material respects, the
financial  position of Genus, Inc. and its subsidiaries at December 31, 2003 and
2002,  and  the results of their operations and their cash flows for each of the
three years in the period ended December 31, 2003, in conformity with accounting
principles  generally  accepted in the United States of America. 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  of these statements in accordance with
auditing  standards  generally  accepted  in the United States of America, which
require  that we plan and perform the audit to obtain reasonable assurance about
whether  the  financial  statements  are free of material misstatement. An audit
includes  examining,  on  a  test  basis,  evidence  supporting  the amounts and
disclosures  in  the  financial  statements, assessing the accounting principles
used  and  significant  estimates made by management, and evaluating the overall
financial  statement  presentation.  We  believe  that  our  audits  provide  a
reasonable  basis  for  our  opinion.


/s/  PRICEWATERHOUSECOOPERS  LLP
--------------------------------
PricewaterhouseCoopers  LLP


San  Jose,  California
March 11, 2004


                                       39
<PAGE>
<TABLE>
<CAPTION>
                                         GENUS, INC. AND SUBSIDIARIES
                                         CONSOLIDATED BALANCE SHEETS
                                               (IN THOUSANDS)
                                                                                             DECEMBER  31,
                                                                                        ----------------------
                                                                                           2003        2002
                                                                                        ----------  ----------
<S>                                                                                     <C>         <C>
ASSETS
Current Assets:
  Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $  41,608   $  11,546
  Accounts receivable (net of allowances for doubtful accounts
    of $0 in 2003 and $69 in 2002, respectively) . . . . . . . . . . . . . . . . . . .      9,606       7,505
  Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      9,783      11,405
  Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        854       1,336
                                                                                        ----------  ----------
    Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     61,851      31,792
  Equipment, furniture and fixtures, net . . . . . . . . . . . . . . . . . . . . . . .      8,748       8,661
  Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      1,169       1,057
                                                                                        ----------  ----------
    Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $  71,768   $  41,510
                                                                                        ==========  ==========

LIABILITIES
Current Liabilities:
  Short-term bank borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $   6,500   $   7,813
  Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      4,956       6,498
  Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      4,130       3,064
  Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        331       2,713
  Customer advances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        372       1,809
  Long term liabilities, current portion . . . . . . . . . . . . . . . . . . . . . . .        249         245
                                                                                        ----------  ----------
Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     16,538      22,142
Convertible notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      5,806       5,301
Long term liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          -         270
                                                                                        ----------  ----------
    Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     22,344      27,713
                                                                                        ----------  ----------

Commitments and contingencies (Note 7)

SHAREHOLDERS' EQUITY
Preferred stock, no par value:
Authorized 2,000 shares; Issued and outstanding, none. . . . . . . . . . . . . . . . .          -           -
Common stock, no par value:
Authorized 100,000 shares on December 31, 2003 and 50,000 shares on December 31 2002;
    Issued and outstanding, 39,554 shares in 2003 and
    28,621 shares in 2002. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    163,061     123,890
Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   (111,328)   (107,809)
Note receivable from shareholder . . . . . . . . . . . . . . . . . . . . . . . . . . .       (187)       (151)
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . .     (2,122)     (2,133)
                                                                                        ----------  ----------
  Total shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     49,424      13,797
                                                                                        ----------  ----------
  Total liabilities and shareholders' equity . . . . . . . . . . . . . . . . . . . . .  $  71,768   $  41,510
                                                                                        ==========  ==========
</TABLE>

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


                                       40
<PAGE>
<TABLE>
<CAPTION>
                               GENUS, INC. AND SUBSIDIARIES
                           CONSOLIDATED STATEMENTS OF OPERATIONS
                           (IN THOUSANDS, EXCEPT PER SHARE DATA)

                                                              YEARS  ENDED  DECEMBER  31,
                                                             -----------------------------
                                                               2003      2002       2001
                                                             --------  ---------  --------
<S>                                                          <C>       <C>        <C>
Revenues. . . . . . . . . . . . . . . . . . . . . . . . . .  $56,861   $ 39,767   $48,739
Costs and expenses:
  Cost of goods sold. . . . . . . . . . . . . . . . . . . .   39,249     29,143    32,500
  Research and development. . . . . . . . . . . . . . . . .    7,597      8,011    12,118
  Selling, general and administrative . . . . . . . . . . .   11,741     12,621    10,381
                                                             --------  ---------  --------
Loss from operations. . . . . . . . . . . . . . . . . . . .   (1,726)   (10,008)   (6,260)
Interest expense. . . . . . . . . . . . . . . . . . . . . .   (1,723)    (1,237)     (496)
Interest income . . . . . . . . . . . . . . . . . . . . . .       56         83        75
Other income, net . . . . . . . . . . . . . . . . . . . . .      102         80        85
                                                             --------  ---------  --------
Loss before provision for income taxes. . . . . . . . . . .   (3,291)   (11,082)   (6,596)
Provision for income taxes. . . . . . . . . . . . . . . . .      228        538        70
                                                             --------  ---------  --------
Net loss. . . . . . . . . . . . . . . . . . . . . . . . . .  $(3,519)  $(11,620)  $(6,666)
                                                             ========  =========  ========
Per share data:
Basic and diluted net loss per share. . . . . . . . . . . .  $ (0.11)  $  (0.43)  $ (0.31)
                                                             ========  =========  ========
Shares used to compute basic and diluted net loss per share   31,303     26,934    21,163
                                                             ========  =========  ========
</TABLE>

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


                                       41
<PAGE>
<TABLE>
<CAPTION>
                                            GENUS, INC. AND SUBSIDIARIES
                                  CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                               AND COMPREHENSIVE LOSS
                                                   (IN THOUSANDS)

                                                            NOTES          RETAINED       OTHER      TOTAL
                                        COMMON STOCK      RECEIVABLE       EARNINGS      COMPRE-    SHARE-
                                      ----------------       FROM        (ACCUMULATED    HENSIVE    HOLDERS
                                      SHARES   AMOUNT    SHAREHOLDERS      DEFICIT)       LOSS      EQUITY
                                      ------  --------  --------------  --------------  ---------  ---------
<S>                                   <C>     <C>       <C>             <C>             <C>        <C>
Balances, December 31, 2000. . . . .  19,319  $102,837  $           0   $     (89,523)  $ (2,022)  $ 11,292
Issuance of  shares of common
    stock and warrants to purchase
    common stock under private
    placement, net of issuance cost
    of $725. . . . . . . . . . . . .   2,542     6,900              0               0          0      6,900
  Issuance of shares of common stock
    under stock option plan. . . . .     243       521           (151)              0          0        370
  Issuance of shares of common stock
    under employee stock purchase
    plan . . . . . . . . . . . . . .     261       417              0               0          0        417
  Stock-based compensation . . . . .       0        78              0               0          0         78
  Net loss . . . . . . . . . . . . .       0         0              0          (6,666)         0
  Translation adjustments. . . . . .       0         0              0               0        (263)
Comprehensive loss . . . . . . . . .       0         0              0               0          0     (6,929)
                                      ------  --------  --------------  --------------  ---------  ---------
Balances, December 31, 2001. . . . .  22,365   110,753           (151)        (96,189)    (2,285)    12,128
  Issuance of shares of common stock
    and warrants to purchase common
    stock under private placement,
    net of issuance costs of $447. .   3,871     7,750              0               0          0      7,750
  Value of warrants related to the
    issuance of 7% convertible notes
    and warrants . . . . . . . . . .       0     1,312              0               0          0      1,312
  Value of beneficial conversion
    feature related to the
    issuance of 7% convertible notes
    and warrants . . . . . . . . . .       0       928              0               0          0        928
  Issuance of warrants . . . . . . .       0        54              0               0          0         54
  Exercise of warrants . . . . . . .   1,536     1,764              0               0          0      1,764
  Conversion of notes payable to
    shares of common stock . . . . .     490       675              0               0          0        675
  Issuance of shares of common stock
    under stock option plan. . . . .     159       324              0               0          0        324
  Issuance of shares of common stock
    under employee stock purchase
    plan . . . . . . . . . . . . . .     200       330              0               0          0        330
  Net  loss. . . . . . . . . . . . .       0         0              0         (11,620)         0
  Translation adjustments. . . . . .       0         0              0               0        152
Comprehensive loss . . . . . . . . .       0         0              0               0          0    (11,468)
                                      ------  --------  --------------  --------------  ---------  ---------
Balances, December 31, 2002. . . . .  28,621  $123,890          ($151)      ($107,809)   ($2,133)  $ 13,797
                                      ======  ========  ==============  ==============  =========  =========
</TABLE>


                                       42
<PAGE>
<TABLE>
<CAPTION>
                                                                   NOTES        RETAINED       OTHER      TOTAL
                                               COMMON STOCK      RECEIVABLE     EARNINGS      COMPRE-    SHARE-
                                             ----------------       FROM      (ACCUMULATED    HENSIVE   HOLDERS
                                             SHARES   AMOUNT    SHAREHOLDERS     DEFICIT)       LOSS     EQUITY
                                             ------  --------  --------------  -----------  ---------  --------
<S>                                        <C>       <C>       <C>             <C>          <C>        <C>
Balances, December 31, 2002 . . . . . . .    28,621  $123,890  $        (151)  $ (107,809)  $ (2,133)  $13,797
Issuance of shares of common stock
    under private placement,
    net of issuance costs of $1.8 million     6,400    31,828              0            0          0    31,828
  Exercise of warrants. . . . . . . . . .     3,094     4,946              0            0          0     4,946
  Conversion of notes payable to
    shares of common stock. . . . . . . .       120       150              0            0          0       150
  Interest from notes receivable. . . . .         0         0            (36)           0          0       (36)
  Issuance of shares of common stock
    under stock option plan . . . . . . .     1,143     1,887              0            0          0     1,887
  Issuance of shares of common stock
    under employee stock purchase
    plan. . . . . . . . . . . . . . . . .       176       360              0            0          0       360
  Net  loss . . . . . . . . . . . . . . .         0         0              0       (3,519)         0         0
  Translation adjustments . . . . . . . .         0         0              0            0         11
  Comprehensive loss. . . . . . . . . . .         0         0              0            0          0    (3,508)
                                             ------  --------  --------------  -----------  ---------  --------

Balances, December 31, 2003 . . . . . . .    39,554  $163,061          ($187)   ($111,328)   ($2,122)  $49,424
                                           ========  ========  ==============  ===========  =========  ========
</TABLE>

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


                                       43
<PAGE>
<TABLE>
<CAPTION>
                                 GENUS, INC. AND SUBSIDIARIES
                             CONSOLIDATED STATEMENTS OF CASH FLOWS
                                         (IN THOUSANDS)
                                                                  YEARS  ENDED  DECEMBER  31,
                                                                -------------------------------
                                                                  2003       2002       2001
                                                                ---------  ---------  ---------
<S>                                                             <C>        <C>        <C>
Cash flows from operating activities:
  Net loss . . . . . . . . . . . . . . . . . . . . . . . . . .  $ (3,519)  $(11,620)  $ (6,666)
  Adjustments to reconcile net loss to net cash from operating
  activities:
    Depreciation and amortization. . . . . . . . . . . . . . .     3,287      3,748      3,034
    Provision for excess and obsolete inventories and
      lower of cost or market. . . . . . . . . . . . . . . . .       466      2,190        317
    Provision for doubtful accounts. . . . . . . . . . . . . .        40          5          0
    Amortization of deferred finance costs . . . . . . . . . .       943        525          0
    Write off of fixed assets. . . . . . . . . . . . . . . . .       140         72          0
    Stock-based compensation . . . . . . . . . . . . . . . . .         0          0         78
    Changes in assets and liabilities:
      Accounts receivable. . . . . . . . . . . . . . . . . . .    (2,141)    (3,248)     4,217
      Inventories. . . . . . . . . . . . . . . . . . . . . . .       945      1,647      8,884
      Other assets . . . . . . . . . . . . . . . . . . . . . .      (409)        26       (512)
      Accounts payable . . . . . . . . . . . . . . . . . . . .    (1,542)    (1,854)      (295)
      Accrued expenses . . . . . . . . . . . . . . . . . . . .     1,066       (489)       238
      Deferred revenue . . . . . . . . . . . . . . . . . . . .    (2,382)    (4,675)   (11,174)
      Customer advances. . . . . . . . . . . . . . . . . . . .    (1,437)     1,809          0
                                                                ---------  ---------  ---------
      Net cash used in operating activities. . . . . . . . . .    (4,543)   (11,864)    (1,879)
                                                                ---------  ---------  ---------
Cash flows from investing activities:
  Acquisition of equipment, furniture and fixtures . . . . . .    (2,573)      (502)    (7,400)
  Acquisition of Intangible assets . . . . . . . . . . . . . .      (275)      (284)         0
                                                                ---------  ---------  ---------
Net cash used in investing activities. . . . . . . . . . . . .    (2,848)      (786)    (7,400)
                                                                ---------  ---------  ---------
Cash flows from financing activities:
  Issuance of convertible notes and warrants net of cash
    issuance costs of $814 . . . . . . . . . . . . . . . . . .         0      6,986          0
  Net proceeds from issuance of common stock and warrants. . .    39,021     10,168      7,687
  Proceeds from short-term bank borrowings . . . . . . . . . .    32,356     28,122     14,236
  Payments of short-term bank borrowings . . . . . . . . . . .   (33,669)   (24,790)   (12,474)
  Proceeds from debt . . . . . . . . . . . . . . . . . . . . .         -      1,200          0
  Payments for debt. . . . . . . . . . . . . . . . . . . . . .      (266)      (685)         0
                                                                ---------  ---------  ---------
      Net cash provided by financing activities. . . . . . . .    37,442     21,001      9,449
                                                                ---------  ---------  ---------
Effect of exchange rate changes on cash. . . . . . . . . . . .        11        152       (263)
                                                                ---------  ---------  ---------
Net increase (decrease) in cash and cash equivalents . . . . .    30,062      8,503        (93)

Cash and cash equivalents, beginning of year . . . . . . . . .    11,546      3,043      3,136
                                                                ---------  ---------  ---------
Cash and cash equivalents, end of year . . . . . . . . . . . .  $ 41,608   $ 11,546   $  3,043
                                                                =========  =========  =========
Supplemental Cash Flow Information
Cash paid for interest . . . . . . . . . . . . . . . . . . . .  $    778   $    227   $    470
Cash paid for income taxes . . . . . . . . . . . . . . . . . .       431        157          1
Non-cash investing and financing activities:
  Transfer of fixed assets to inventory. . . . . . . . . . . .         0      2,594          0
  Transfer of inventory to fixed assets. . . . . . . . . . . .       143          0          0
  Transfer of other assets to fixed assets . . . . . . . . . .       600          0          0
  Conversion of notes payable to common stock. . . . . . . . .       150        675          0
  Issuance of warrants in connection with convertible
    notes financing. . . . . . . . . . . . . . . . . . . . . .  $      0   $     54   $      0
</TABLE>

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


                                       44
<PAGE>
                          GENUS, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


NOTE  1.  ORGANIZATION  AND  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES

     Nature  of  Operations.  Genus,  Inc.  (the  "Company") was incorporated in
California  in  1981.  The  Company  designs,  manufactures  and markets capital
equipment and deposition processes for advanced semiconductor manufacturing. The
Company's  products  are  marketed  worldwide  either  directly  to end-users or
through sales representative arrangements. In January 1996, the Company opened a
subsidiary  in  South  Korea  to  provide  sales  and  service support to Korean
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. The following is a summary of the Company's significant
accounting  policies.

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

     Liquidity.  The  Company has incurred losses of approximately $3.5 million,
$11.6  million  and $6.7 million for the years ended December 31, 2003, 2002 and
2001,  respectively and had an accumulated deficit of $111.3 million at December
31,  2003.  The  Company  raised  $31.8  million,  net of issuance costs, from a
private  placement  in  November of 2003. Management believes that existing cash
and  available  financing  will be sufficient to meet projected working capital,
capital  expenditure  and other cash requirements for the next twelve months but
cannot  provide  assurances  that  future  cash  flows  from  operations will be
sufficient  to meet operating requirements and allow the Company to service debt
and  repay  any  underlying  indebtedness  at  maturity. The Company is actively
marketing  its existing and new products, which it believes will ultimately lead
to  profitable  operations.  However,  if  the  Company  does  not  achieve  the
anticipated  cash  flows,  we  may  not  be able to meet planned product release
schedules  and forecast sales objectives. In such event the Company will require
additional  financing  to  fund  on-going and planned operations and may need to
implement  further  expense  reduction  measures. In the event the Company needs
additional financing, there is no assurance that funds would be available to the
Company  or,  if available, under terms that would be acceptable to the Company.

     Risks and Uncertainties. The Company operates in the highly competitive and
rapidly  changing  semiconductor  and  semiconductor  manufacturing  equipment
industries  and  is  dependant on limited financial resources, a small number of
suppliers  and customers with a concentration in Asian countries.  The Company's
future  growth  is dependant on acceptance of new products and market acceptance
of  systems relating to those products. Significant technological changes in the
industry  could  affect  operating  results  adversely.

     Cash  and  Cash  Equivalents.  The  Company  considers  all  highly  liquid
investments  with  maturity  of  three  months or less when purchased to be cash
equivalents.  Cash  equivalents  consist  primarily  of  money  market  funds.

     Fair  Value of Financial Instruments. The carrying amounts of cash and cash
equivalents,  accounts  receivable,  short  term  bank  borrowings  and accounts
payable  approximate estimated fair value because of the short maturity of those
financial  instruments.  The fair value of the convertible notes maturing August
15,  2005 with a carrying value of $5.8 million was approximately $30 million at
December 31, 2003.

     Concentration  of  Credit  Risk.  Financial  instruments, which potentially
subject  the  Company  to  concentrations of credit risk, consist principally of
cash  and  cash  equivalents  and trade receivables. The Company places cash not
required  for  current  disbursement in money market funds in the United States.
The  Company  does  not  require  collateral from its customers and maintains an
allowance  for  credit  losses.


                                       45
<PAGE>
     Three customers accounted for an aggregate of 91% of accounts receivable at
December  31,  2003. Two customers accounted for an aggregate of 95% of accounts
receivable  at  December  31,  2002.  The  Company  has written off bad debts of
$152,000, $5,000 and $294,000 in 2003, 2002, and 2001, respectively. The Company
recovered  $109,000  from  previously  written  off  bad  debts  during  2003.

     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.

     Long-Lived Assets. Equipment, furniture and fixtures are stated at cost and
depreciated  using  the  straight-line method over their estimated useful lives,
ranging between three and five years. Leasehold improvements are amortized using
the  straight-line  method  over  their  estimated useful lives or the remaining
lease  term,  whichever  is  less.

     Equipment  includes  demonstration  equipment,  which  is  located  in  our
Applications  Laboratory  and  is  used  to  demonstrate  to  our  customers the
capabilities  of  our  equipment  to process wafers and deposit films. The gross
value  of  demonstration  equipment is based on the cost of materials and actual
factory  labor  and  overhead  expenses incurred in manufacturing the equipment.
Costs  related  to refurbishing or maintaining existing demonstration equipment,
which  do  not  add  to  the  capabilities  or useful life of the equipment, are
expensed  as incurred. Demonstration equipment is stated at cost and depreciated
over  a  period  of  three  to  five  years.


     Revenue  recognition.  The  Company  derives  revenue  from  the  sale  and
installation  of  semiconductor  manufacturing  systems  and  from  engineering
services  and  the  sale  of  spare  parts  to  support  such  systems.

     Equipment  selling  arrangements  generally  involve  contractual  customer
acceptance  provisions and installation of the product occurs after shipment and
transfer  of  title.  In  the  third  quarter  of  2002, the Company established
verifiable objective evidence of fair value of installation services, one of the
requirements  for  Genus  to recognize revenue for multiple-element arrangements
prior  to  completion  of  installation  services.  If  a product delivered to a
customer  has  met  defined  customer acceptance experience levels with both the
customer  and  the  specific  type  of  equipment,  then  the Company recognizes
equipment  revenue  upon  shipment  and  transfer of title. A portion of revenue
associated  with  undelivered  elements such as installation and on-site support
related  tasks is recognized for installation when the installation is completed
and  the  customer  accepts  the  product and for on-site support as the support
service  is  provided.  For  products  that  have  not been demonstrated to meet
product specifications for the customer prior to shipment or where objective and
reliable  evidence  of  the  fair  value  of  the  undelivered elements, such as
installation,  is  not  available,  revenue  is  recognized when installation is
complete  and  the  customer  accepts  the  product.  Revenues  can  fluctuate
significantly as a result of the timing of customer acceptances. At December 31,
2003  and  2002,  the Company had deferred revenue of $331,000 and $2.7 million,
respectively.

     Revenues  from  sale  of  spare parts are recognized when title and risk of
loss  passes to the customer, generally upon shipment. Revenues from engineering
services  are  recognized as the services are completed over the duration of the
contract.


     Product  Warranty. In general, the Company's warranty period terminates for
material  coverage  in  twelve  to  twenty-four months and for labor coverage in
twelve  months  after the warranty period begins, but in any event no later then
twenty  seven  months  from  the product shipment date for material coverage and
fifteen months for labor coverage, unless otherwise stated in the quotation. The
Company  provides labor for all product repairs and replacement parts, excluding
consumable  items,  free of charge during the warranty period. Warranty expenses
are  accrued  upon  revenue  recognition.  At  present,  based  upon  historical
experience, the Company accrues material warranty equal to 2% and 5% of shipment
value  for  its  LYNX2(R)  and  LYNX3 products, respectively, and labor warranty
equal to $20,000 per system for both its LYNX2(R) and LYNX3 products. At the end
of  every  quarter,  the  Company  reviews  its  actual spending on warranty and
reassess if its accrual is adequate to cover warranty expenses on the systems in
the  field  which  are  still  under  warranty. Differences between the required
accrual  and  recorded  accrual are charged or credited to warranty expenses for
the  period.


                                       46
<PAGE>
     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 more
likely  than not 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 results of operations. The functional currency of the
Company's South Korean subsidiary is the Won, and the functional currency of the
Company's  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  cumulative
translation  adjustments.

     Net  Loss  Per Share. Basic net loss per share is computed by dividing loss
available to common shareholders by the weighted average number of common shares
outstanding  for  the period. Diluted net loss per share is computed by dividing
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).

     Stock Compensation. The Company accounts for stock-based compensation using
the  intrinsic  value  method  prescribed in Accounting Principles Board Opinion
(APB)  No.  25,  "Accounting  for  Stock  Issued  to  Employees"  and  Financial
Accounting  Standards  Board  Interpretation  No.  44  "Accounting  for  Certain
Transactions  Involving Stock Compensation."  Generally, the Company's policy is
to  grant options with an exercise price equal to the quoted market price of the
Company's  stock on the date of the grant. Accordingly, no compensation cost has
been recognized in the Company's statements of operations. Pro forma information
regarding  net  loss  and  net  loss  per  share  as  if  the  Company  recorded
compensation  expense  based  on  the fair value of stock-based awards have been
presented in accordance with Statement of Financial Accounting Standards No.148,
"Accounting  for Stock-Based Compensation - Transition and Disclosure" and is as
follows  for  the  years  ended  December 31, 2003, 2002 and 2001 (in thousands,
except  per  share  data):

<TABLE>
<CAPTION>
                                                     YEARS  ENDED  DECEMBER  31,
                                                    -----------------------------
                                                      2003      2002       2001
                                                    --------  ---------  --------
<S>                                                 <C>       <C>        <C>

Net loss, as reported. . . . . . . . . . . . . . .  $(3,519)  $(11,620)  $(6,666)
  Deduct: Total stock-based employee compensation
  expense determined under fair value based method
  for all awards, net of related tax effects . . .   (2,049)    (2,797)   (3,240)
                                                    --------  ---------  --------
  Pro forma net loss attributable to common
  shareholders . . . . . . . . . . . . . . . . . .  $(5,568)  $(14,417)  $(9,906)
                                                    ========  =========  ========

  Earnings per share
  Basic and diluted - as reported. . . . . . . . .  $ (0.11)  $  (0.43)  $ (0.31)
  Basic and diluted  - pro forma . . . . . . . . .  $ (0.18)  $  (0.54)  $ (0.47)
</TABLE>

     The  above  pro  forma effects on net 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.

     The  fair  value  of  options  was estimated at the date of grant using the
Black-Scholes  option-pricing  model  with  the  following  weighted  average
assumptions  for  2003,  2002  and  2001;


                                       47
<PAGE>

                               2003         2002        2001

  Risk free interest rates .   2.50%       2.03%        4.19%
  Expected life. . . . . . .   3.73 yrs     3.0 yrs     3.0 yrs
  Expected volatility. . . .    103%        112%        112%
  Expected dividend yield. .      0%          0%          0%

     The  weighted  average fair value of options granted in 2003, 2002 and 2001
was  $2.80,  $1.42  and  $1.93,  respectively.

     The  fair  value  of the employees' purchase rights under the 1989 Employee
Stock  Purchase  Plan was estimated using the Black-Scholes option-pricing model
with  the following assumptions for those rights granted in 2003, 2002 and 2001.

                               2003         2002        2001

  Risk free interest rates .   1.01%       1.21%        3.42%
  Expected life. . . . . . .    0.5 yrs     0.5 yrs      0.5 yrs
  Expected volatility. . . .     78%        123%          78%
  Expected dividend yield. .      0%          0%           0%

     The  weighted  average fair value of those purchase rights granted in 2003,
2002  and  2001  was  $0.90,  $1.06  and  $1.30,  respectively.

     Software  development  costs.  Software development costs have been accrued
for  in  accordance  with  SFAS  No.  86  " Accounting for the Costs of Computer
Software  to  be Sold, Leased or otherwise Marketed". Capitalization of software
development  costs  begins  upon  establishment  of  technological  feasibility,
subject  to  net realizable considerations. During the years ended December 2003
and  2002,  the  Company  capitalized  $275,000  and  $284,000,  respectively.
Capitalized  costs  are  amortized  over  a three-year period on a straight-line
basis.  The  Company  recorded  amortization  expenses  related  to  capitalized
software  of  $130,000  during the year ended December 31, 2003. No amortization
expenses  of  capitalized  software  was  recorded  in  2002  and  2001.

     Comprehensive  loss.  Comprehensive  loss  includes  all  changes in equity
during  a  period  from  non-owner  sources.  The  Company's  comprehensive loss
includes  net loss and foreign currency translation adjustments and is displayed
in  the  statement  of  shareholders'  equity.

     RECLASSIFICATIONS.  Certain  reclassifications  have been made to the prior
year  financial  statements  to  conform  to  current  year's presentation. Such
reclassifications  had no effect on the previously reported loss from operations
or  retained  earnings.

RECENT  ACCOUNTING  PRONOUNCEMENTS.

     In  November  2002,  the  Emerging Issues Task Force reached a consensus on
Issue  00-21(EITF  00-21), Multiple-Deliverable Revenue Arrangements. EITF 00-21
addresses  how  to  account  for  arrangements  that may involve the delivery or
performance  of  multiple  products,  services  and/or rights to use assets. The
consensus  mandates  how to identify whether goods or services or both which are
to  be  delivered  separately in a bundled sales arrangement should be accounted
for separately because they are "separate units of accounting." The guidance can
affect  the  timing of revenue recognition for such arrangements, even though it
does not change rules governing the timing or patterns of revenue recognition of
individual  items accounted for separately. The final consensus is applicable to
agreements  entered  into  in fiscal periods beginning after June 15, 2003, with
early  adoption  permitted.  Additionally,  companies are permitted to apply the
consensus  guidance  to  all existing arrangements as the cumulative effect of a
change  in  accounting  principle in accordance with Accounting Principles Board
Opinion  No.  20,  Accounting Changes. The Company adopted EITF 00-21 during the
third  quarter of 2003 and the adoption did not result in any material impact on
our  financial  position,  cash  flows  or  results  of  operations.


                                       48
<PAGE>
     In  April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS No. 149 amends and clarifies
financial  accounting  and  reporting  of  derivative  instruments  and  hedging
activities  under SFAS No. 133. The amendments pertain to decisions made: (i) as
part  of  the Derivatives Implementation Group process that require amendment to
SFAS  133,  (ii)  in  connection with other FASB projects dealing with financial
instruments,  and  (iii)  in  connection  with  the implementation issues raised
related  to  the  application  of  the  definition  of a derivative. SFAS 149 is
effective  for  contracts  entered  into or modified after June 30, 2003 and for
designated  hedging  relationships after June 30, 2003. SFAS 149 will be applied
prospectively. The Company adopted SFAS 149 during the third quarter of 2003 and
the  adoption  did  not result in any material impact on our financial position,
cash  flows  or  results  of  operations.

     In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments  with  Characteristics of both Liabilities and Equity. The Statement
establishes  standards  for  how  an  issuer  classifies  and  measures  certain
financial  instruments  with  characteristics of both liabilities and equity and
further  requires  that  an  issuer classify as a liability (or an asset in some
circumstances)  financial  instruments  that  fall within its scope because that
financial  instrument  embodies  an  obligation  of  the  issuer.  Many  of such
instruments were previously classified as equity. The statement is effective for
financial instruments entered into or modified after May 31, 2003, and otherwise
is  effective  at the beginning of the first interim period beginning after June
15,  2003,  except for mandatory redeemable financial instruments as they relate
to  minority interest in consolidated finite-lived entities. The Statement is to
be  implemented  by  reporting  the  cumulative effect of a change in accounting
principle  for  financial instruments created before the issuance of the date of
the  Statement  and  still  existing  at  the beginning of the interim period of
adoption.  Restatement is not permitted. The Company adopted SFAS 150 during the
third  quarter of 2003 and the adoption did not result in any material impact on
our  financial  position,  cash  flows  or  results  of  operations.

     In  January  2003,  the  FASB issued FASB Interpretation No. 46 ("FIN 46"),
Consolidation  of  Variable Interest Entities - an interpretation of ARB No. 51.
FIN  46  requires  certain  variable interest entities to be consolidated by the
primary  beneficiary  of the entity if the equity investors in the entity do not
have  the  characteristics  of  a  controlling financial interest or do not have
sufficient  equity  at  risk  for  the  entity to finance its activities without
additional  subordinated  financial  support  from  other  parties.  FIN  46  is
effective immediately for all new variable interest entities created or acquired
after January 31, 2003. For variable interest entities created or acquired prior
to  February  1,  2003,  the  provisions  of FIN 46 must be applied to the first
reporting  period  beginning  after June 15, 2004. The Company believes that the
adoption  of  this  standard  will  have  no material effect on our consolidated
financial  statements.


NOTE  2.  INVENTORIES
---------------------

Inventories comprise the following (in thousands):

<TABLE>
<CAPTION>
                                             DECEMBER 31,
                                        ---------------------
                                           2003       2002
                                        ---------  ----------
<S>                                     <C>        <C>
Raw materials and purchased parts. . .  $   4,602  $    4,493
  Work in process. . . . . . . . . . .      3,686       3,417
  Finished goods. . . . . . . . . . . .       478         175
  Inventory at customers' locations . .     1,017       3,320
                                        ---------  ----------
                                        $   9,783  $   11,405
                                        =========  ==========
</TABLE>


                                       49
<PAGE>
     Finished  goods  include customer evaluation units with a net book value of
$478,000  and $175,000 at December 31, 2003 and 2002, respectively. Inventory at
customers'  locations  represent  the  cost  of systems shipped to customers for
which  the  Company  is  awaiting  customer  acceptance.


NOTE  3.  EQUIPMENT,  FURNITURE  AND  FIXTURES
----------------------------------------------

     Equipment,  furniture  and  fixtures  are  stated  at cost and comprise the
following  (in  thousands):

<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                               --------------------
                                                                 2003       2002
                                                               ---------  ---------
<S>                                                            <C>        <C>
  Equipment (useful life of 3 years). . . . . . . . . . . . .  $ 10,005   $  9,481
  Demonstration equipment (useful life ranges from 3-5 years)    18,584     21,258
  Furniture and fixtures (useful life of 3 years) . . . . . .     1,078      1,045
  Leasehold improvements (useful life ranges from 4-10 years)     4,337      4,332
                                                               ---------  ---------
                                                                 34,004     36,116
  Less accumulated depreciation . . . . . . . . . . . . . . .   (25,929)   (27,688)
                                                               ---------  ---------
                                                                  8,075      8,428
  Construction in progress. . . . . . . . . . . . . . . . . .       673        233
                                                               ---------  ---------
                                                               $  8,748   $  8,661
                                                               =========  =========
</TABLE>

     Depreciation  expense  was  $3.2 million, $3.7 million and $3.0 million for
2003,  2002  and  2001,  respectively.


NOTE  4.  ACCRUED  EXPENSES
---------------------------

     Accrued  expenses  are  comprised  of  the  following  (in  thousands):

<TABLE>
<CAPTION>
                                                DECEMBER 31,
                                              ----------------
                                               2002     2001
                                              ------  --------
<S>                                           <C>     <C>

  System warranty . . . . . . . . . . . . .   $1,451  $    970
  Accrued compensation and related expenses      720       491
  Federal, state and foreign income taxes .      511       751
  Accrued rent. . . . . . . . . . . . . . .      362       162
  Accrued professional fees . . . . . . . .      260        87
  Accrued sales  tax. . . . . . . . . . . .      270        19
  Accrued interest. . . . . . . . . . . . .      184       202
  Other . . . . . . . . . . . . . . . . . .      372       382
                                              ------  --------
                                              $4,130  $  3,064
                                              ======  ========
</TABLE>

NOTE  5.  WARRANTIES
--------------------

     The  Company  warrants  that  each of the products we sell shall be free of
defects  in material and workmanship and meets performance specifications during
our  warranty  period.  The warranty period means the period commencing upon the
earlier  of  successful  completion of acceptance tests agreed in writing by the
Company's  customers;  the  customer's  use  of  products  for  the  customer's
pre-production,  production or product development activities; ninety days after
the  product  shipment  date.


                                       50
<PAGE>
     In  general, the Company's warranty period terminates for material coverage
in  twelve  to  twenty-four months and for labor coverage in twelve months after
the  warranty  period begins, but in any event no later than twenty seven months
from  the  product  shipment  date  for material coverage and fifteen months for
labor  coverage,  unless otherwise stated in the quotation. The Company provides
labor for all product repairs and replacement parts, excluding consumable items,
free  of  charge  during  the  warranty  period.

     Changes  in  our  warranty  liability,  which is included as a component of
"accrued  expenses"  on  the  Consolidated  Balance  Sheets,  during  the period
follows:

<TABLE>
<CAPTION>
<S>                                                                     <C>
  Balance at January 1, 2002                                            $   803
  Accrual for warranty liability for revenues recognized in the period      576
  Settlements made                                                         (409)
                                                                        --------
  Balance at December 31, 2002                                          $   970

  Accrual for warranty liability for revenues recognized in the period    1,938
  Settlements made                                                       (1,457)
                                                                        --------
  Balance at December 31, 2003                                          $ 1,451
                                                                        ========
</TABLE>


NOTE  6.  SHORT-TERM  BANK  BORROWING
-------------------------------------

     On  December  20, 2001 and as amended on March 27, 2002 and March 20, 2003,
the  Company  maintained  line of credit facilities from Silicon Valley bank for
$15.0  million,  borrowable amounts based on eligible receivables and inventory.
The  interest  rate  is prime plus 1.75% per annum (as at December 31, 2003) and
the facility expires on June 29, 2004. The line of credit is collateralized by a
first  priority  perfected  security  interest in the Company's assets and has a
covenant  requiring  the  Company  to  maintain  a  minimum  tangible  net worth
(calculated  as  the  excess  of total assets over total liabilities adjusted to
exclude  intangible  assets  and balances receivable from officers or affiliates
and  to  exclude debt subordinated to Silicon Valley Bank) of $15 million. As of
December  31, 2003 and 2002, there was $6.5 million and $7.8 million outstanding
respectively,  under  this  credit  facility.

     On  January  4,  2002,  the Company received gross proceeds of $1.2 million
under  a  secured  loan  with  CitiCapital, a division of Citigroup. The loan is
payable  over  36  months, accrues interest of 8.75% per annum and is secured by
two  systems  in  the Company's demonstration lab. The balance outstanding under
this  agreement  was  $249,000  and  $515,000  at  December  31,  2003  and 2002
respectively.


NOTE  7.  COMMITMENTS  AND  CONTINGENCIES
-----------------------------------------

     We  maintain  our  headquarters, manufacturing and research and development
operations  in Sunnyvale, California. Our lease for approximately 100,000 square
feet for our Sunnyvale facility expires in October 2012. Commencing in 2003, our
annual  rental  expense  will be approximately $1.8 million. We also have leases
for  our  sales  and  support offices in Seoul, South Korea and Tokyo, Japan. We
believe  that  our  existing  facilities  are  adequate  to  meet  our  current
requirements  and that suitable additional or substitute space will be available
as  needed.


                                       51
<PAGE>
     At December 31, 2003, minimum lease payments required under these operating
leases  are  as  follows  (in  thousands):

<TABLE>
<CAPTION>
<S>                   <C>
2004 . . . . . . . . .   $  1,700
2005 . . . . . . . . .      1,752
2006 . . . . . . . . .      1,773
2007 . . . . . . . . .      1,799
2008 . . . . . . . . .      1,930
Thereafter . . . . . .      7,820
                        ---------
                        $  16,774
                        =========
</TABLE>

     Rent  expense  was  $1.9  million;  $1.0 million and $682,000 for the years
ended December 31, 2003, 2002 and 2001, respectively. Sublease rental income was
$5,000,  $1,000  and  $596,000  for  the years ended December 31, 2003, 2002 and
2001,  respectively.

     At  December  31,  2003, the Company had approximately $5.5 million in open
purchase  order  obligations.

Legal  Proceedings

     On  June  6,  2001,  ASM America, Inc. ("ASMA") filed a patent infringement
action  against  Genus, Inc. ASMA's Complaint alleges that Genus is directly and
indirectly  infringing  U.S.  Patent  No. 5,916,365 (the "365 Patent"), entitled
"Sequential  Chemical Vapor Deposition," and U.S. Patent No. 6,015,590 (the "590
Patent")  entitled  "Method For Growing Thin Films," which ASMA claims to own or
exclusively  license.  The Complaint seeks monetary and injunctive relief. Genus
served its Answer to ASMA's complaint on August 1, 2001. Also on August 1, 2001,
Genus  counterclaimed  against ASMA and ASM International, N.V. ("ASMI") for (1)
infringement of U.S. Patent No. 5,294,568 (the "568 Patent") entitled "Method of
Selective Etching Native Oxide"; (2) declaratory judgment that the '365 and '590
Patents  are  invalid,  unenforceable,  and  not  infringed  by  Genus;  and (3)
antitrust  violations. An initial Case Management Conference was held on October
16,  2001.  On January 9, 2002, the Court issued an order granting ASMA leave to
amend  its complaint to add Dr. Sherman as a party and to add a claim that Genus
is  directly  and  indirectly  infringing  U.S.  Patent  No  4,798,165 (the "165
Patent")  entitled  "Apparatus  for  Chemical  Vapor Deposition Using an Axially
Symmetric Gas Flow", which ASMA claims to own. The Court also severed and stayed
discovery  and  trial  of  Genus'  antitrust claims until after the trial of the
patent  claims.  On  February 4, 2002, Genus served its Amended Answer to ASMA's
amended  complaint and counterclaimed against ASMA for declaratory judgment that
the '165 Patent is invalid, unenforceable, and not infringed by Genus. On August
15,  2002, the Court issued a claim construction order regarding the '590, '365,
and  598'  Patents.  A  claim construction hearing regarding the '165 Patent was
held  on  September  26,  2002, and the Court issued a claim construction ruling
regarding  this  patent  on November 13, 2002. On September 23, 2002 Genus filed
motions  for  summary  judgment  on  noninfringement regarding the '590 and '365
Patents.  On  November  20, 2002, the Court granted the Genus motion for summary
judgment  of  noninfringement of the '365 Patent. On January 10, 2003, the Court
granted  Genus'  motion  for  summary  judgment  of non-infringement on the '590
Patent.

     On  April 11, 2003, Genus settled its lawsuit with ASMI (the "Settlement").
Under  the  terms of the Settlement, Genus gained a royalty-free license to each
of  the  patents  ASMI asserted in the litigation, including both ALD patents as
well  as  Patent  '165. By specific agreement of the parties, these licenses are
applicable  to  Genus'  successors and affiliates. Genus has likewise obtained a
covenant  from  ASMI  that  it  will  not  sue  Genus for patent infringement or
antitrust  violations  for  the  next  five  years.

     In  return,  Genus  has  granted  ASMI  and its successors and affiliates a
royalty-free  license  to  the  patent  Genus asserted in the litigation, Patent
'568,  and  has  agreed  to dismiss its antitrust claims against ASMI. Genus has
also  agreed not to sue ASMI for patent infringement or antitrust violations for
the  next  five  years.

     No  payments  have  been made by either Genus or ASMI in exchange for these
licenses  and  the  covenant  not  to  sue.  However,  under  the  terms  of the
Settlement,  ASMI  has  the  right  to  pursue an appeal of the District Court's
judgments of non-infringement regarding the ALD patents. The agreement specifies
that  if  the  Federal  Circuit


                                       52
<PAGE>
vacates  either  of the existing judgments related to the ALD patents based on a
change  in  the  District  Court's  claim  construction,  Genus will pay ASMI $1
million  for  the  royalty-free  licenses to the ALD patents it has been granted
under  the  agreement.

     We  may  in  the future be party to litigation arising in the course of our
business, including claims that we allegedly infringe third party trademarks and
other  intellectual property rights. Such claims, even if not meritorious, could
result  in  the  expenditure  of significant financial and managerial resources.

NOTE  8.  CONVERTIBLE  NOTES  AND  WARRANTS
-------------------------------------------

     On August 15, 2002, the Company raised $7.0 million, net of issuance costs,
by  issuing $7.8 million unsecured 7% convertible notes and warrants to purchase
2,761,000  shares  of  common  stock.

     -    $7.5  million  of  the  convertible notes were convertible into common
          stock  at  a  price of $1.42 per share and a $300,000 convertible note
          was  convertible  into  common  stock  at  a price of $1.25 per share.
          During  2002,  convertible  notes  with  a face value of $525,000 were
          converted  into common stock at a price of $1.42 and convertible notes
          with  a  face value of $150,000 were converted at a price of $1.25 per
          share.  During  2003,  convertible notes with a face value of $150,000
          were  converted  at  a  price  of  $1.25  per  share.  The  remaining
          convertible notes with a face value of $6,975,000 are redeemable three
          years  after  issuance  or  may  be converted into 4,912,000 shares of
          common  stock  at  a  price of $1.42 per share prior to the redemption
          date  at  the  election of the investors. All convertible notes accrue
          interest  at  7% per annum, payable semi-annually each February 15 and
          August  15,  in cash or, at the election of the Company, in registered
          stock.

     -    Warrants  exercisable  for  2,641,000  shares  of  common stock had an
          exercise price of $1.42 per share and warrants exercisable for 120,000
          shares  of  common  stock had an exercise price of $1.25 per share. In
          2002,  warrants for 300,000 shares were exercised for cash proceeds of
          $400,000.  The  remaining warrants were exercised during 2003 for cash
          proceeds  of  $3.5  million.

     The net cash proceeds from the issuance of the convertible notes and
warrants were recorded as follows (in thousands):

Convertible note(face value $7.8 million)         $5,560
Detachable warrants                                1,312
Beneficial conversion feature                        928
                                                 -------
Proceeds from convertible notes and warrants       7,800
Other asset, issuance costs                        (814)
                                                 -------
Net cash proceeds                                 $6,986
                                                 =======


                                       53
<PAGE>
     The  Company  classified  the warrants as equity and allocated a portion of
the proceeds from the convertible notes to the warrants, using the relative fair
value  method  in  accordance with APB No. 14. " Accounting for Convertible Debt
and  Debt  Issued with Stock Purchase Warrants". The Company determined the fair
value  of the warrants, using the Black Scholes option pricing model with a risk
free  interest rate of 4.4 percent, volatility of 75%, a term of three years and
no  dividend  yield.  The  allocation  of  proceeds  to the warrants reduced the
carrying  value  of  the  convertible  notes. As a result, the fair value of the
common  stock  issuable upon conversion of the notes exceeded the carrying value
of  the  convertible  notes,  resulting  in a beneficial conversion feature. The
value  of  the beneficial conversion feature is accreted over the stated term of
the  convertible  notes  in  accordance  with  EITF  No.  98-5  " Accounting for
Convertible  Securities  with  Beneficial  Conversion  Features  or Contingently
Adjustable Conversion Ratios" and EITF No. 00-27, "Application Issue No. 98-5 to
Certain  Convertible  Instruments".

     The  $2.2  million  difference  between  the $7.8 million face value of the
notes  and  the  $5.6 million original carrying value, representing the value of
the  warrants and the beneficial conversion feature, has been recorded as equity
and  is accreted as interest expense over the three year term of the convertible
notes,  using  the  effective  interest  rate  method.

     The Company incurred issuance costs of approximately $868,000, representing
cash  obligations  of  $814,000  and  warrants with a fair value of $54,000. The
warrants  to  purchase  79,000  shares  of  common  stock at $1.42 per share was
subsequently net exercised for 38,631 shares of common stock. Issuance costs are
included with other assets and are amortized as interest expense over the stated
term  of  the  convertible  notes.

     In  the  event  of a change of control of the Company, the note holders may
elect  to receive repayment of the notes at a premium of 10% over the face value
of  the  notes.

     The  carrying  value of the convertible note and deferred issuance costs at
December  31,  2003  is  as  follows  (in  thousands):

                                       Convertible    Other Asset,
                                          Note       Issuance Costs
                                      -------------  ---------------
Balance at issuance, August 15, 2002  $      5,560            ($868)
Conversions                                   (675)               -
Accretion and amortization                     416              104
                                      -------------  ---------------
Balance at December 31, 2002                 5,301             (764)
Conversions                                   (150)               -
Accretion and amortization                     655             288
                                      -------------  ---------------
Balance at December 31, 2003         $      5,806            ($476)
                                      =============  ===============

     The  Company  recorded  interest costs related to the convertible notes and
warrants  of $1.4 million and $735,000 for the years ended December 31, 2003 and
2002,  respectively.


                                       54
<PAGE>
NOTE  9.  SHAREHOLDERS'  EQUITY
-------------------------------

Sale  of  Common  Stock

     On  May 17, 2001, the Company sold 2,541,785 shares of our common stock and
warrants  to  purchase  up to 1,461,525 of additional shares of common stock for
net  proceeds  of  approximately  $6.9  million.

     On  January 25, 2002, the Company sold 3,871,330 shares of our common stock
and warrants to purchase up to 580,696 additional shares of common stock for net
proceeds  of  approximately  $7.9  million.

     On  November  7,  2003,  the  Company  completed  a  private  placement  of
approximately  $33.6 million for 6.4 million shares of its common stock at a per
share  price  of  $5.25. The offering resulted in net proceeds to the company of
approximately  $31.8  million.  The  purchase  price  for the shares represented
approximately  a  5  percent  discount  to the average closing price for 10 days
prior  to  the  close  on  November  7,  2003.  No  warrants were issued in this
transaction.

Warrants

     Shares  subject  to warrants to purchase common stock (in thousands, except
per  share  amounts):

<TABLE>
<CAPTION>
                          NO OF SHARES OF COMMON                                       NUMBER OF SHARES OF
                             STOCK UNDERLYING                                              COMMON STOCK
               EXERCISE        WARRANTS UPON                                          UNDERLYING WARRANTS ON
DATE ISSUED      PRICE       DATE OF ISSUANCE                   REASON                  DECEMBER 31, 2003
-------------  ---------  -----------------------  ---------------------------------  ----------------------
<S>            <C>        <C>                      <C>                                <C>
November 1999  $    2.39                    25(1)  Credit facility costs                                   -
May 2001       $    3.50                 1,271(1)  Warrants issued to investors                            -
May 2001       $    3.00                      69   Placement agent (financing costs)                       8
May 2001       $    5.24                     121   Placement agent (financing costs)                     110

January 2002   $    2.19                   760(1)  Warrants issued to investors                            -
January 2002   $    3.23                     581   Warrants issued to investors                          115
August 2002    $    1.42                 2,641(1)  Warrants issued to notes holder                         -
August 2002    $    1.25                  120 (1)  Warrants issued to notes holder                         -
August 2002    $    1.42                   79 (1)  Placement agent (financing costs)                       -
                          -----------------------                                     ----------------------
Totals                                     5,667                                                         233
                          =======================                                     ======================
<FN>
(1)     Exercised in full prior to December 31, 2003.
</TABLE>

     In connection with the sale of common stock in May 2001, the Company issued
warrants  to  purchase  1,461,525  shares  of  common stock with exercise prices
ranging  from  $3.00  to  $5.24.  The  warrants  hade  terms  providing  for  an
adjustment of the number of shares underlying the warrants in the event that the
Company  issued


                                       55
<PAGE>
new  shares  at a price lower than the exercise price of the warrants, where the
Company  makes  distributions  of  common stock to its shareholders or effects a
reclassification.  In January 2002, warrants exercisable for 1,270,891 shares of
common  stock  were adjusted and thereafter exercisable for an aggregate 760,203
additional  shares  of  common  stock.  With  the  exception of certain warrants
exercisable  for 118,449 shares of common stock, the warrants issued in May 2001
have  been  exercised  in  full.

     In  connection  with  the sale of common stock in January 2002, the Company
issued  warrants to purchase 580,696 shares of common stock at an exercise price
of  $3.23.  The warrants have terms providing for an adjustment of the number of
shares  underlying  the warrants in the event that the Company issues new shares
at  a  price  lower  than  the exercise price of the warrants, where the Company
makes  a  distribution  of  common  stock  to  its  shareholders  or  effects  a
reclassification.  In  August 2002, the Company issued a convertible note with a
face  value  of $7.8 million and warrants to purchase 2,760,669 shares of common
stock  with  exercise prices ranging from $1.25 to $1.42 to the note holders. In
connection  with  the  issuance of convertible notes in August 2002, the Company
adjusted  the  January  2002  warrant to be exercisable for an additional 86,979
shares  of  common  stock.  Additionally  the exercise price of the January 2002
warrants  was  adjusted to $2.48. As of December 31, 2003, with the exception of
certain  warrants  exercisable  for 114,979 shares of common stock, the warrants
issued  in January 2002, as amended in August 2002, have been exercised in full.

Shares  reserved  for  future  issuance

     A  summary  of  shares  reserved  for  future issuance by the Company as of
December  31,  2003  is  as  follows:

<TABLE>
<CAPTION>
<S>                                 <C>
Exercise of warrants                  233,000
Conversion of convertible notes     4,912,000
Stock options outstanding           3,654,000
Employee Stock Purchase Plan          456,000
Stock options available for grants    215,000
                                    ---------
                                    9,470,000
                                    =========
</TABLE>

Net  Loss  Per  Share

     A reconciliation of the numerator and denominator of basic and diluted loss
per  share  is  as  follows  (in  thousands,  except  per  share  data):

<TABLE>
<CAPTION>
                                                                      YEAR ENDED DECEMBER 31,
                                                                   -------------------------------
                                                                     2003      2002        2001
                                                                   --------  ---------  ----------
<S>                                                                <C>       <C>        <C>
Loss attributable to common shareholders:
  Numerator-Basic and diluted:
    Net loss attributable to common shareholders. . . . . . . . .  $(3,519)  $(11,620)  $  (6,666)
                                                                   ========  =========  ==========
  Denominator-Basic and diluted:
    Weighted average common stock outstanding . . . . . . . . . .   31,303     26,934      21,163
                                                                   ========  =========  ==========
    Basic and diluted net loss per share. . . . . . . . . . . . .  $ (0.11)  $  (0.43)  $   (0.31)
                                                                   ========  =========  ==========
</TABLE>


                                       56
<PAGE>
     Stock  options to purchase 3,654,226 shares of common stock with a weighted
average  exercise price of $3.78 were outstanding on December 31, 2003, but were
not  included  in  the computation of diluted loss per share because the Company
has  a  net loss for 2003. Warrants for the purchase of 233,428 shares of common
stock  with  a  weighted  average  exercise  price  of $3.80 were outstanding at
December  31,  2003 but were not included in the computation of diluted loss per
share  because  the  Company  has  a  net  loss  for  2003.

     Stock  options to purchase 4,142,254 shares of common stock with a weighted
average  exercise price of $3.05 were outstanding on December 31, 2002, but were
not  included  in  the computation of diluted loss per share because the Company
has a net loss for 2002. Warrants for the purchase of 3,336,224 shares of common
stock  with  a  weighted  average  exercise  price  of $1.89 were outstanding at
December  31,  2002 but were not included in the computation of diluted loss per
share  because  the  Company  has  a  net  loss  for  2002.

     Stock  options to purchase 3,378,321 shares of common stock with a weighted
average  exercise price of $3.72 were outstanding on December 31, 2001, but were
not  included  in  the computation of diluted loss per share because the Company
has  a  net  loss  for  2001.  Warrants  for the purchase of 1,486,525 shares of
common stock with a weighted average exercise price of $3.60 were outstanding at
December  31, 2001, but were not included in the computation of diluted loss per
share  because  the  Company  has  a  net  loss  for  2001.


Stock  Option  Plan

     In  March of 2000, the Company adopted the 2000 Incentive Stock Option Plan
to replace the 1991 Incentive Stock Option Plan. The 1991 Incentive Stock Option
Plan  was  scheduled  to  expire ten years after its adoption in 1991. Under the
2000 Incentive Stock Option Plan, the Board of Directors can grant incentive and
nonstatutory  stock  options.  The  Board  of  Directors  has  the  authority to
determine  to  whom options will be granted, the number of options, the term and
exercise price. The options are exercisable at times and increments as specified
by  the  Board  of  Directors,  and  generally vest over a three-year period and
expire  five  years  from  the  date  of  grant.  In  October 2003, the Board of
Directors  changed the vesting for future grants to vest over a four-year period
and  expire in ten years from the date of grant for all new grants.  At December
31,  2003,  the  Company  had  registered  7,503,000  shares of common stock for
issuance  under  the  2000  Incentive  Stock Option Plan, which included 700,000
1,000,000  and  1,000,000  shares  added  to  the  plan  in 2001, 2002 and 2003,
respectively.  At  December  31,  2003,  a  total  of  215,000  shares  remained
available  for  future  grants.

     Activity  under the 1991 and 2000 Incentive Stock Option Plans is set forth
in  the  table  below:  (in  thousands,  except  per  share  data):

<TABLE>
<CAPTION>
                                                                                     WEIGHTED
                            AVAILABLE            OPTIONS OUTSTANDING                 AVERAGE
                               FOR                                                   EXERCISE
                              GRANT     OPTIONS         PRICE PER SHARE    AMOUNT     PRICE
                            ----------  --------  ----------------------  --------  ---------
<S>                         <C>         <C>       <C>         <C>         <C>       <C>

Balance, January 31, 2001         418     2,972         0.88  to   15.75   12,733        4.28
  Granted                      (1,005)    1,005         1.59  to    6.83    2,859        2.85
  Exercised                         -      (243)        2.02  to    7.32     (521)       2.15
  Terminated                      356      (356)        2.02  to   15.75   (2,489)       6.99
  Authorized                      700         -            -           -        -           -
                            ----------  --------  ----------------------  --------  ---------
Balance, December 31, 2001        469     3,378         0.88  to   15.75   12,582        3.72
  Granted                      (1,629)    1,629         1.07  to    2.89    3,421        2.02
  Exercised                         -      (159)        0.88  to    3.03     (324)       2.05


                                       57
<PAGE>
  Expired                        (336)        -            -           -        -           -
  Terminated                      706      (706)        0.88  to    4.00   (3,044)       1.57
  Authorized                    1,000         -            -           -        -           -
                            ----------  --------  ----------------------  --------  ---------
Balance, December 31, 2002        210     4,142   $     0.88  to  $15.75  $12,635   $    2.11
  Granted                      (1,146)    1,146         2.09  to    6.55    4,556        3.97
  Exercised                         -    (1,143)        0.88  to    5.34   (1,887)       1.65
  Expired                        (340)        -            -           -        -           -
  Terminated                      491      (491)        1.29  to   15.75   (1,500)       3.06
  Authorized                    1,000         -            -           -        -           -
                            ----------  --------  ----------------------  --------  ---------
Balance, December 31, 2003        215     3,654   $     1.07  to  $15.75  $13,804   $    3.78
                            ==========  ========  ======================  ========  =========
</TABLE>

     Options  outstanding  and currently exercisable by exercise price under the
option  plan  at  December  31,  2003  are  as  follows:

<TABLE>
<CAPTION>


                                 OPTIONS OUTSTANDING                   OPTIONS EXERCISABLE
                  ----------------------------------------------  ----------------------------
                                 WEIGHTED AVG.
    RANGE OF        NUMBER        REMAINING       WEIGHTED AVG.     NUMBER      WEIGHTED AVG.
EXERCISE PRICES   OUTSTANDING  CONTRACTUAL LIFE  EXERCISE PRICE   EXERCISABLE  EXERCISE PRICE
----------------  -----------  ----------------  ---------------  -----------  ---------------
<S>               <C>          <C>               <C>              <C>          <C>
1.07 - $ 1.07           3,000              3.79  $          1.07        1,167  $          1.07
1.29 -   1.29         517,200              3.82             1.29      183,837             1.29
1.59 -   2.44         495,396              2.67             2.28      301,784             2.24
2.47 -   2.56         472,675              3.42             2.56      209,647             2.56
2.57 -   3.09         460,622              2.69             2.80      327,123             2.86
3.13 -   3.88          42,333              3.11             3.59       35,306             3.60
4.08 -   4.08         978,000              9.81             4.08            -                -
4.34 -   6.25         382,500              2.08             5.48      355,611             5.49
6.30 -  11.69         204,000              2.07             8.40      185,667             8.59
15.75-  15.75          98,500              1.19            15.75       98,500            15.75
----------------  -----------  ----------------  ---------------  -----------  ---------------
1.07 - $15.75       3,654,226              4.72  $          3.78    1,698,642  $          4.48
================  -----------  ----------------  ===============  -----------  ===============
</TABLE>

     On  January  24,  2001, the Company's Chief Executive Officer issued a full
recourse  promissory  note for $151,000 in connection with the exercise of stock
options. The note bears interest of 8% per annum and is repayable on January 24,
2004.  As  of  December  31,  2003,  the total amount outstanding related to the
promissory  note  was  $187,000,  which  included  interest  of  $36,000.

Employee  Stock  Purchase  Plan

     The  Company  has  reserved a total of 3,550,000 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. This total includes 300,000 shares added to the plan
in  each  of  2003 and 2002. 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 period or the end of each
six-month  purchase  period.  At  December  31, 2003, 3,094,000 shares have been
issued  under  the  plan.  The  Company has issued 175,936, 200,247, and 261,177
shares  in  2003,  2002  and  2001,  respectively. At December 31, 2003, 456,000
shares  were  available  for  purchase  under  this  plan.

Share  Purchase  Rights  Plan


                                       58
<PAGE>
     On  September 7, 2000, the Company's Board of Directors declared a dividend
pursuant to a newly adopted Share Purchase Rights Plan, which replaced a similar
earlier  plan  that  had  expired  on  July 3, 2000. The intended purpose of the
Rights  Plan  is  to protect shareholders' rights and to maximize share value in
the  event  of  an unfriendly takeover attempt. As of the record date of October
13,  2000, each share of common stock of Genus, Inc. outstanding was granted one
right  under  the  new  plan.  Each  right  is  exercisable  only  under certain
circumstances  and  upon the occurrence of certain events and permits the holder
to  purchase  from the Company one one-thousandth (0.001) of a share of Series C
Participating  Preferred  Stock  at  an  initial exercise price of forty dollars
($40.00)  per one one-thousandth share. The 50,000 shares of Series C  preferred
stock  authorized  in  connection  with  the  Rights  Plan  will be used for the
exercise  of any preferred share purchase rights in the event that any person or
group (the Acquiring Person) acquires beneficial ownership of 15% or more of the
outstanding  common  stock.  In  such  event,  the  shareholders (other than the
Acquiring  Person)  would  receive  common  stock of the Company having a market
value  of twice the exercise price. Subject to certain restrictions, the Company
may  redeem the rights issued under the Rights Plan for $0.001 per right and may
amend  the  Rights  Plan  without the consent of rights holders. The rights will
expire  on  October  13,  2010,  unless  redeemed  by  the  Company.

Stock  Compensation

     The Company recorded $28,000 of stock compensation in 2001 resulting from a
shortfall  in  shares  approved  for  the ESPP. The calculation and recording of
expense  was made in accordance with EITF 97-12, "Accounting for Increased Share
Authorizations  in  an  IRS  Section  423 Employee Stock Purchase Plan under APB
Opinion  No.  25."  In  accordance with this consensus, a compensation charge is
calculated  for  the  amount  by  which  the  quoted  stock price on the date of
shareholder  approval,  less  a 15% discount, exceeds the price at which options
were  granted under the ESPP. The compensation charge so determined is amortized
over  the  term  of  the  options  issued  under  the  ESPP  that  remains after
shareholder  approval of additional shares. The Company did not record any stock
compensation charge during 2002 and 2003 related to the ESPP plan since the plan
had  adequate  shares  reserved  for  issuance under the ESPP plan in both these
years.

     During  2001,  the  Company  recorded  $34,000  of  stock  compensation  in
connection  with  the  accelerated  vesting  of  options granted to a terminated
employee.  There was no acceleration of vesting of options during 2002 and 2003.


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  that  may  not  exceed  6%  of the annual aggregate salaries of those
employees  eligible  for  participation.  In  2003,  2002  and 2001, the Company
contributed $174,000, $170,000, and $101,000, respectively, to the Benefit Plan.


NOTE  11.  OTHER  INCOME  (EXPENSE),  NET
-----------------------------------------

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

<TABLE>
<CAPTION>
                             YEAR ENDED DECEMBER 31,
                        --------------------------------
                           2003       2002       2001
                        ----------  ---------  ---------
<S>                     <C>         <C>        <C>
Foreign exchange, net.        111         98        (27)
  Other, net . . . . .         (9)       (18)       112
                        ----------  ---------  ---------
                        $     102   $      80  $     85
                        ==========  =========  =========
</TABLE>


                                       59
<PAGE>

NOTE  12.  INCOME  TAXES
------------------------

     The provision for income tax expense for the years ended December 31, 2003,
2002  and  2001  was  $228,000,  $538,000,  and  $70,000,  respectively.

     The  components  of  income  (loss) before income taxes were as follows (in
thousands):

<TABLE>
<CAPTION>
                                                           YEAR ENDED DECEMBER 31,
                                                     ---------------------------------
                                                        2003        2002       2001
                                                     ----------  ----------  ---------
<S>                                                  <C>         <C>         <C>
Domestic loss before taxes. . . . . . . . . . . . .  $  (2,823)  $ (11,407)  $ (6,905)
Foreign income (loss) before taxes. . . . . . . . .       (468)        325        309
                                                     ----------  ----------  ---------
  Loss before taxes . . . . . . . . . . . . . . . .  $  (3,291)  $ (11,082)  $ (6,596)
                                                     ==========  ==========  =========
</TABLE>

     The  income  tax  expense for 2003, 2002 and 2001, respectively, was due to
current  foreign  taxes.


  The  Company's  effective tax rate for the years ended December 31, 2003, 2002
and  2001  differs  from  the U.S. federal statutory income tax rate as follows:
<TABLE>
<CAPTION>
                                                           YEAR ENDED DECEMBER 31,
                                                     ---------------------------------
                                                        2003        2002       2001
                                                     ----------  ----------  ---------
<S>                                                  <C>         <C>         <C>
  Federal  income tax at statutory rate. . . . . . .    (35.0%)     (35.0%)    (35.0%)
  Foreign income taxes . . . . . . . . . . . . . . .      6.9         4.9        1.1
  Net operating loss not benefited . . . . . . . . .     35.0        35.0       35.0
                                                     ----------  ----------  ---------
                                                          6.9%        4.9%       1.1%
                                                     ==========  ==========  =========
</TABLE>

Deferred  tax  assets  (liabilities)  consist  of  the following (in thousands):

<TABLE>
<CAPTION>
                                                            DECEMBER 31,
                                                       ----------------------
                                                          2003        2002
                                                       -----------  ---------
<S>                                                    <C>          <C>
Deferred tax assets
    Depreciation and amortization . . . . . . . . . .  $    3,069   $  2,511
    Inventory, accounts receivable and other related
      allowances. . . . . . . . . . . . . . . . . . .       2,293      2,092
    Tax credits . . . . . . . . . . . . . . . . . . .       2,322      2,267
    Net operating loss. . . . . . . . . . . . . . . .      36,051     34,554
    Deferred revenue. . . . . . . . . . . . . . . . .       1,087      1,563
    Non-Deductible accruals . . . . . . . . . . . . .         601      1,236
                                                       -----------  ---------
                                                           45,423     44,223
  Deferred tax asset valuation allowance. . . . . . .   (  45,423)   (44,223)
                                                       -----------  ---------
  Net deferred tax assets . . . . . . . . . . . . . .  $        -   $      -
                                                       ===========  =========
</TABLE>

     The  deferred  tax assets valuation allowance at December 31, 2003 and 2002
is  attributable  to  federal and state deferred tax assets. Management believes
that sufficient uncertainty exists with regard to the realizability of these tax


                                       60
<PAGE>
assets  such that a full valuation allowance is necessary. These factors include
the  lack  of a significant history of consistent profits and lack of carry-back
capacity  to  realize these assets. Based on these factors, management is unable
to  assert  that  it  is  more  likely  than  not that the Company will generate
sufficient  taxable  income  to  realize  the Company's net deferred tax assets.

     As  of December 31, 2003, the Company has a net operating loss carryforward
of approximately $100 million for federal purposes and $10 million for state tax
purposes. If not utilized, these carryforwards will begin to expire beginning in
2015  for  federal  purposes  and  2005  for  state  purposes.

     The Company has research credit carryforwards of approximately $1.1 million
and  $1.7  million  for federal and state income tax purposes, respectively.  If
not  utilized, the federal carryforward will expire in various amounts beginning
in  2013.  The  California  credit  can  be  carried  forward  indefinitely.

     Utilization  of  the  net operating losses and credits may be subject to an
annual  limitation  due  to  the  ownership  change  limitations provided by the
Internal  Revenue  Code and similar state provisions. The annual limitations may
result in the expiration of net operating loss carry-forwards and credits before
utilization.


NOTE  13.  SEGMENT  INFORMATION
-------------------------------

     Currently,  the  Company  operates  in one industry segment. The Company is
engaged  in  the  design,  manufacture, marketing and servicing of advanced thin
film  deposition  systems  used  in  the  semiconductor  manufacturing industry.

Export  Revenues

     For  reporting  purposes, export revenues are determined by the location of
the  parent  company of the Company's customer, regardless of where the delivery
was  made  by  the  Company.


Revenues by geographical region for the years ended December 31, 2003, 2002, and
2001  were  as  follows  (in  thousands):

<TABLE>
<CAPTION>
                        YEAR ENDED DECEMBER 31,
                     ------------------------------
                       2003      2002       2001
                     --------  ---------  ---------
<S>                  <C>       <C>        <C>

United States . . .  $ 12,833  $  11,199  $   3,200
South Korea . . . .    38,502     22,430     35,767
Japan . . . . . . .     1,887      2,758      3,089
Europe. . . . . . .     3,112      3,295      2,706
Taiwan. . . . . . .         0         85      2,300
Rest of world . . .       527          0      1,677
                     --------  ---------  ---------
                     $ 56,861  $  39,767  $  48,739
                     ========  =========  =========
</TABLE>

      The Company did not hold any material long-lived assets in countries other
than  the  United  States  at  December  31,  2003  and  December  31,  2002.


                                       61
<PAGE>
Major  Customers

     In  2003, Samsung Electronics Company, Ltd, Infineon, Seagate Technologies,
Inc.,  HGST (formerly IBM), and Western Digital (formerly Read-Rite Corporation)
accounted  for  69%,  8%,  7%,  7%,  and  4% of revenues, respectively. In 2002,
Samsung  Electronics  Company,  Ltd,  Seagate Technologies, Inc., IBM, and Asuka
Project  accounted  for 58%, 24%, 7%, and 6% of revenues, respectively. In 2001,
Samsung  Electronics  Company, Ltd, Read-Rite Corporation, NEC, Infineon and SCS
accounted  for  73%,  7%,  6%,  6%  and  5%  of  revenues,  respectively.


NOTE  14.  RELATED  PARTY  TRANSACTIONS
---------------------------------------

     Mario  Rosati,  a  director  of  the  Company,  is also a partner of Wilson
Sonsini Goodrich & Rosati, the general counsel of the Company. In 2003, 2002 and
2001,  the  Company  incurred  $259,000,  $630,000  and $781,000 in legal costs,
respectively,  and  paid  approximately  $490,000,  $1.1  million  and  $57,000,
respectively,  to  Wilson  Sonsini  Goodrich & Rosati. At December 31, 2003, the
Company owed approximately $67,000 to Wilson Sonsini Goodrich & Rosati.


                                       62
<PAGE>
ITEM  15  (A)  2.  FINANCIAL  STATEMENT  SCHEDULE
-------------------------------------------------


REPORT  OF  INDEPENDENT  AUDITORS  ON  FINANCIAL  STATEMENT  SCHEDULE

To  the  Board  of  Directors
of  Genus,  Inc.:

Our  audits  of  the consolidated financial statements referred to in our report
dated  March 11, 2004 appearing in this Annual Report on Form 10-K also included
an  audit  of  the  financial statement schedule listed in Item 15(a)(2) of this
Form 10-K. In our opinion, this financial statement schedule presents fairly, in
all  material  respects,  the  information  set  forth  therein  when  read  in
conjunction  with  the  related  consolidated  financial  statements.


/s/  PRICEWATERHOUSECOOPERS  LLP
--------------------------------
PricewaterhouseCoopers  LLP

San  Jose,  California
March 11, 2004


                                       63
<PAGE>
Schedule  II  "Valuation  and  Qualifying  Accounts"

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
Description                        Balance at     Additions   Deductions   Balance at
                                  Beginning of   Charged to     Charged      to end
                                     Period       costs/exp      Other      of period
--------------------------------------------------------------------------------------
<S>                               <C>            <C>          <C>          <C>
2003
Allowance for doubtful accounts.  $          69  $        83  $       152  $         0
Allowance for excess and
obsolete inventory . . . . . . .          4,305          629          163        4,771
Deferred tax valuation allowance         44,223        1,200            0       45,423

2002
Allowance for doubtful accounts.  $          69  $         5  $         5  $        69
Allowance for excess and
obsolete inventory . . . . . . .          2,115        2,190            0        4,305
Deferred tax valuation allowance         38,049        6,174            0       44,223

2001
Allowance for doubtful accounts.  $         363  $         0  $       294  $        69
Allowance for excess and
obsolete inventory . . . . . . .          2,830          317        1,032        2,115
Deferred tax valuation allowance         30,826        7,223            0       38,049
--------------------------------------------------------------------------------------
</TABLE>


                                       64
<PAGE>
                                   GENUS, INC.
                           ANNUAL REPORT ON FORM 10-K
                          Year ended December 31, 2003

INDEX TO EXHIBITS

No.  Description
---  -----------
2.1       Asset  Purchase Agreement, dated April 15, 1998, by and between Varian
          Associates,  Inc.  and  Registrant  and  exhibits  thereto  (15)
3.1       Amended  and Restated Articles of Incorporation of Registrant as filed
          September  6,  1997  (11)
3.2       By-laws  of  Registrant,  as  amended  (13)
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 of Rights, Preferences and Privileges of
          Series  A  Convertible  Preferred  Stock  (14)
4.5       Certificate  of Determination of Rights, Preferences and Privileges of
          Series  B  Convertible  Preferred  Stock  (17)
4.6       Redemption  and  Exchange  Agreement,  dated  July 16, 1998, among the
          Registrant  and  the  Investors  (17)
4.7       Registration  Rights  Agreement,  dated  January 17, 2002, as amended,
          amongst  the  Registrant  and  the  Investors  (20)
4.8       Securities  Purchase  Agreement  dated July 31, 2002 among the Company
          and  the  Purchasers  signatory  thereto.  (21)
4.9       Resale  Registration  Rights Agreement dated August 14, 2002 among the
          Company  and  the  Purchasers  signatory  thereto.  (21)
4.10      7%  Convertible Subordinated Note Due 2005 dated August 14, 2002. (21)
4.11      Stock  Purchase  and  Registration  Agreement  dated  November 7, 2003
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      Registrant's  2000  Stock  Plan  (19)
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)


                                       65
<PAGE>
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)
10.18     Settlement  Agreement  and  Mutual  Release,  dated  April 20, 1998,
          between  Registrant  and  James  T.  Healy  (16)
10.19     Form  of  Change  of  Control  Severance  Agreement  (16)
10.20     Settlement Agreement and Mutual Release, dated January 1998, between
          the  Registrant  and  John  Aldeborgh  (18)
10.21     Settlement Agreement and Mutual Release, dated May 1998, between the
          Registrant  and  Mary  Bobel  (18)
14.1      Genus  Code  of  Conduct
21.1      Subsidiaries  of  Registrant
23.1      Consent  of  Independent  Accountants
31.1      Certification of Chief Executive Officer pursuant to Exchange Act Rule
          13a-14(a)
31.2      Certification of Chief Financial Officer pursuant to Exchange Act Rule
          13a-14(a)
32.1      Certification of Chief Executive Officer pursuant to 18 U.S.C. Section
          1350,  as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
          2002
32.2      Certification of Chief Financial Officer pursuant to 18 U.S.C. Section
          1350,  as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
          2002

---------------------------
(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 September 30, 1992.
(7)  Incorporated by reference to the exhibit filed with the Registrant's Report
     on  Form  8-K  dated  September  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 September 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.


                                       66
<PAGE>
(13) Incorporated  by  reference  to  the  exhibit  filed  with the Registrant's
     Quarterly  Report  on  Form  10-Q for the quarter ended September 30, 1998.
(14) Incorporated  by  reference  to  the  exhibit  filed  with the Registrant's
     Current  Report  on  Form  8-K  dated  February  12,  1998.
(15) Incorporated  by  reference  to  the  exhibit  filed  with the Registrant's
     Current  Report  on  Form  8-K  dated  April  15,  1998.
(16) Incorporated by reference to the exhibit filed with the Registrant's Annual
     Report  on  Form  10-K/A  for  the  year  ended  December  31,  1997.
(17) Incorporated  by  reference  to  the  exhibit  filed  with the Registrant's
     Current  Report  on  Form  8-K  dated  July  29,  1998.
(18) Incorporated  by  reference  to  the  exhibit  filed  with the Registrant's
     Quarterly  Report  on Form 10 Q/A for the quarter ended September 30, 1998.
(19) Incorporated by reference to the exhibit filed with the Registrant's Annual
     Report on Form 10-K for the year ended December 31, 2000.
(20) Incorporated  by  reference  to  the  exhibit  filed  with the Registrant's
     Current  Report  on  Form  8-K  dated  January  25,  2002.
(21) Incorporated  by  reference  to  the  exhibit  filed  with the Registrant's
     Current  Report  on  Form  8-K  dated  August  20,  2002.


                                       67
<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 12th day of March 2004

                                       GENUS,  INC.


                                       By:     /s/ Shum  Mukherjee
                                               -------------------
                                               Shum  Mukherjee
                                               Executive Vice President, Finance
                                               Chief Financial Officer


POWER  OF  ATTORNEY

     KNOW  ALL  PERSONS  BY  THESE  PRESENTS,  that  each person whose signature
appears  below  constitutes  and  appoints Shum Mukherjee and William W R Elder,
jointly  and  severally,  his  attorneys-in-fact  each  with  the  power  of
substitution,  for him in any and all capacities, to sign any amendments to this
Annual  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 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.

<TABLE>
<CAPTION>
         NAME                          TITLE                     DATE
------------------------  ----------------------------------  --------------
<S>                       <C>                                 <C>

/s/ William W.R. Elder    Chairman of the Board, President    March 12, 2004
-----------------------   and Chief Executive Officer
William W.R. Elder        (principal executive officer)


/s/ SHUM MUKHERJEE        Executive Vice President, Finance   March 12, 2004
------------------------  Chief Financial Officer
Shum Mukherjee            (principal financial officer and
                          principal accounting officer)


/s/ G. Frederick Forsyth  Director                            March 12, 2004
------------------------
G. Frederick Forsyth


/s/ Todd S. Myhre          Director                           March 12, 2004
------------------------
Todd S. Myhre


/s/ Mario M. Rosati       Director                            March 12, 2004
------------------------
Mario M. Rosati


/s/ Robert J. Richardson  Director                            March 12, 2004
------------------------
Robert J. Richardson
</TABLE>


                                       68
<PAGE>