<PAGE>

                         SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C. 20549
                                          
                                    FORM 10-Q/A2

(MARK ONE)

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998 OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___ TO ___

COMMISSION FILE NUMBER 0-17139

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

          California                                        94-279080
-------------------------------------------------------------------------------
(State or other jurisdiction of                        (I.R.S. Employer
incorporation or organization)                         Identification No.)

1139 Karlstad Drive, Sunnyvale, California                  94089
-------------------------------------------------------------------------------
(Address of principal executive offices)                 (Zip code)

                                   (408) 747-7120
-------------------------------------------------------------------------------
                (Registrant's telephone number, including area code)

                                   Not Applicable
-------------------------------------------------------------------------------
     (Former name, former address and former fiscal year, if changed since last
                                      report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                              Yes  X    No
                                 -----     -----


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

Common shares outstanding at August 7, 1998:            17,361,162
                                                      --------------


<PAGE>


                           PART I.  FINANCIAL INFORMATION


ITEM 1.  FINANCIAL STATEMENTS

                            GENUS, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

                   (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>

                                                                 THREE MONTHS ENDED              SIX MONTHS ENDED
                                                                      JUNE 30,                      JUNE 30,
                                                               1998 (a)         1997        1998 (a)          1997
                                                             ----------      ---------     ---------      ---------
<S>                                                          <C>            <C>            <C>            <C>
Net sales                                                    $  10,270      $  19,351      $  17,508      $  39,032

Costs and expenses:
   Cost of goods sold                                            9,724         11,540         16,665         23,853
   Research and development                                      2,939          3,058          6,271          6,249
   Selling, general and administrative                           5,683          4,189          9,906          8,056
   Special charge                                               13,216             --         13,216             --
                                                             ----------      ---------     ---------      ---------
     Income (loss) from operations                             (21,292)           564        (28,550)           874

Other, net                                                        (237)           (82)          (393)           (97)
                                                             ----------      ---------     ---------      ---------
   Income (loss) before income taxes                           (21,529)           482        (28,943)           777

Provision for income taxes                                          --            186             --            300
                                                             ----------      ---------     ---------      ---------
   Net income (loss)                                           (21,529)           296        (28,943)           477

   Deemed dividends on preferred stock                             (74)            --         (1,903)            --
                                                             ----------      ---------     ---------      ---------
   Net income (loss) available to common shareholders        $ (21,603)      $    296       $(30,846)      $    477
                                                             ----------      ---------     ---------      ---------
                                                             ----------      ---------     ---------      ---------
Net income (loss) available to common 
shareholders per common share and 
per common share assuming dilution                           $   (1.26)      $   0.02      $   (1.80)     $    0.03
                                                             ----------      ---------     ---------      ---------
                                                             ----------      ---------     ---------      ---------
Comprehensive income (loss)                                  $ (21,356)       $   321       $(28,509)     $     390
                                                             ----------      ---------     ---------      ---------
                                                             ----------      ---------     ---------      ---------

</TABLE>

(a) See "Restatement Note" in the accompanying notes to the consolidated
financial statements


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.


                                       2
<PAGE>


                            GENUS, INC. AND SUBSIDIARIES
                            CONSOLIDATED BALANCE SHEETS

                   (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>


                                                             UNAUDITED        AUDITED
                                                              JUNE 30,      DECEMBER 31,
                                                               1998            1997
                                                            ------------     ------------
<S>                                                          <C>            <C>
ASSETS
Current assets:
   Cash and cash equivalents                                  $  3,754       $  8,700
   Accounts receivable (net of allowance for doubtful 
   accounts of $1,103 in 1998 and $1,097 in 1997)                9,155         19,469
   Inventories                                                   5,173         28,986
   Net assets held for sale                                     25,130             --
   Other current assets                                            778          1,029
                                                            ------------    ------------
     Total current assets                                       43,990         58,184

   Property and equipment, net                                   4,628         15,276
   Other assets, net                                               734          3,278
                                                            ------------    ------------
     Total assets                                            $  49,352      $  76,738
                                                            ------------    ------------
                                                            ------------    ------------


LIABILITIES
Current liabilities:
   Short term bank borrowings                                 $  2,800       $  7,200
   Accounts payable                                             11,527          8,723
   Accrued expenses                                             10,205         10,613
   Current portion of long-term debt                                --            874
                                                            ------------    ------------
     Total current liabilities                                  24,532         27,410

   Long-term debt, less current portion                             36            971
                                                            ------------    ------------
     Total liabilities                                          24,568         28,381
                                                            ------------    ------------

SHAREHOLDERS' EQUITY
Preferred stock, no par value:
   Authorized, 2,000,000 shares;
   Issued and outstanding 98,000 shares at June 30, 1998
    and none at December 31, 1997                                6,098             --
Common stock, no par value:
   Authorized 50,000,000 shares;
   Issued and outstanding 17,314,141 shares at
   June 30, 1998 and 17,120,628 shares at
   December 31, 1997                                            99,779         99,149
Accumulated deficit                                            (79,598)       (48,863)
Cumulative translation adjustment                               (1,495)        (1,929)
                                                            ------------    ------------
   Total shareholders' equity                                   24,784         48,357
                                                            ------------    ------------
     Total liabilities and shareholders' equity              $  49,352      $  76,738
                                                            ------------    ------------
                                                            ------------    ------------
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.


                                       3
<PAGE>



                            GENUS, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

                   (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>

                                                                 SIX MONTHS ENDED
                                                                      JUNE 30,
                                                            --------------------------
                                                                 1998          1997
                                                            ------------   -----------
<S>                                                         <C>            <C>
Cash flows from operating activities:
   Net income (loss)                                        $  (28,943)        $  477
   Adjustments to reconcile net income (loss) to net cash
   from operating activities:
     Depreciation and amortization                               1,863          2,420
     Special Charge                                             13,216             --
     Changes in assets and liabilities:
         Accounts receivable                                    10,402         (9,973)
         Inventories                                            (2,656)         1,629
         Other current assets                                      251           (222)
         Accounts payable                                        2,804          1,630
         Accrued expenses                                         (620)          (764)
         Other, net                                               (817)           113
                                                            ------------   -----------
           Net cash used in operating activities                (4,500)        (4,690)
                                                            ------------   -----------
Cash flows from investing activities:
   Acquisition of property and equipment                          (373)          (390)
                                                            ------------   -----------
     Net cash used in investing activities                        (373)          (390)
                                                            ------------   -----------
Cash flows from financing activities:
   Proceeds from issuance of common stock                          121            715
   Proceeds from issuance of preferred stock and 
   warrants, net                                                 4,815             --
   Proceeds from short-term bank borrowings                         --         10,346
   Payments of short-term bank borrowings                       (4,400)        (5,500)
   Payments of long-term debt                                     (739)          (814)
                                                            ------------   -----------
     Net cash provided by financing activities                    (203)         4,747
                                                            ------------   -----------
Effect of exchange rate changes on cash                            130            (14)
Net decrease in cash and cash equivalents                       (4,946)          (347)
Cash and cash equivalents, beginning of period                   8,700         11,827
                                                            ------------   -----------
Cash and cash equivalents, end of period                      $  3,754      $  11,480
                                                            ------------   -----------
                                                            ------------   -----------
</TABLE>


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.


                                       4
<PAGE>

                            GENUS, INC. AND SUBSIDIARIES
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 1998 (UNAUDITED)

BASIS OF PRESENTATION

   The accompanying consolidated financial statements have been prepared in
accordance with SEC requirements for interim financial statements.  These
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's 1997 Annual
Report on Form 10-K/A.
   
   The information furnished reflects all adjustments (consisting only of normal
recurring adjustments) which are, in the opinion of management, necessary for
the fair statement of financial position, results of operations and cash flows
for the interim periods.  The results of operations for the interim periods
presented are not necessarily indicative of results to be expected for the full
year.
   
NET INCOME (LOSS) PER SHARE

   Basic net income (loss) per share is computed by dividing income (loss)
available to common shareholders by the weighted average number of common shares
outstanding for the period.  Diluted net income (loss) per share is computed by
dividing income (loss) available to common shareholders, adjusted for
convertible preferred dividends and after-tax interest expense on convertible
debt, if any, by the sum of the weighted average number of common shares
outstanding and potential common shares (when dilutive).
   
   A reconciliation of the numerator and denominator of basic and diluted net
income (loss) per share is as follows:

<TABLE>
<CAPTION>
                                                                         (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

                                                                                THREE MONTHS ENDED           SIX MONTHS ENDED
                                                                                     JUNE 30,                      JUNE 30,
                                                                               1998            1997         1998              1997
                                                                           -----------      ---------    ----------        ---------
<S>                                                                      <C>                <C>          <C>               <C>
Numerator-basic:
   Net income (loss)                                                       $  (21,529)       $   296     $  (28,943)       $   477
   Deemed dividends on preferred stock                                            (74)            --         (1,903)            --
                                                                           -----------      ---------    ----------        ---------
      Net income (loss) available to common shareholders                   $  (21,603)       $   296     $  (30,846)       $   477
                                                                           -----------      ---------    ----------        ---------
                                                                           -----------      ---------    ----------        ---------
Denominator-basic:
   Weighted average common shares outstanding                                  17,160         16,782         17,143         16,760
                                                                           -----------      ---------    ----------        ---------
                                                                           -----------      ---------    ----------        ---------
Basic net income (loss) per share available to common 
shareholders                                                               $    (1.26)       $  0.02       $  (1.80)       $  0.03
                                                                           -----------      ---------    ----------        ---------
                                                                           -----------      ---------    ----------        ---------
Numerator-diluted:
   Net income (loss)                                                       $  (21,529)       $   296     $  (28,943)       $   477
   Deemed dividends on preferred stock                                            (74)            --         (1,903)            --
                                                                           -----------      ---------    ----------        ---------
      Net income (loss) available to common shareholders                   $  (21,603)       $   296     $  (30,846)       $   477
                                                                           -----------      ---------    ----------        ---------
                                                                           -----------      ---------    ----------        ---------
Denominator-diluted:
   Weighted average common shares outstanding                                  17,160         16,782         17,143         16,760
   Effect of dilutive securities:  stock options                                   --             72             --             95
                                                                           -----------      ---------    ----------        ---------
                                                                               17,160         16,854         17,143         16,855
                                                                           -----------      ---------    ----------        ---------
                                                                           -----------      ---------    ----------        ---------
Diluted net income (loss) per share available to common 
shareholders                                                               $    (1.26)       $  0.02       $  (1.80)       $  0.03
                                                                           -----------      ---------    ----------        ---------
                                                                           -----------      ---------    ----------        ---------
</TABLE>

                                       5
<PAGE>




                            GENUS, INC. AND SUBSIDIARIES
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 1998 (UNAUDITED)

   Stock options to purchase approximately 2,502,000 weighted average shares of
common stock were outstanding during the six months ended June 30, 1998 but were
not included in the computation of diluted loss per share because the Company
has a net loss for the six months ended June 30, 1998.
   
   Stock options to purchase approximately 1,685,000 weighted average shares of
common stock were outstanding during the six months ended June 30, 1997 but were
not included in the computation of diluted income per share because the exercise
price was greater than the average market value of the common shares.
   
COMPREHENSIVE INCOME (LOSS)

   In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS
130).  Effective January 1, 1998, the Company adopted SFAS 130, which
establishes standards for reporting comprehensive income and its components. 
Comparative financial statements for earlier periods have been reclassified to
reflect the adoption of SFAS 130.  The Company's other comprehensive income
consists of foreign currency translation adjustments.

STATEMENT OF CASH FLOW INFORMATION

<TABLE>
<CAPTION>

                                                                 (DOLLARS IN THOUSANDS)

                                                                   SIX MONTHS ENDED
                                                                        JUNE 30,
                                                               -----------------------
                                                                  1998          1997
                                                               ---------      --------
<S>                                                            <C>            <C>
Supplemental Cash Flow Information:

   Cash paid during the period for:
      Interest                                                 $   177         $  188
      Income taxes                                                  --              2

   Non-cash investing activities:
      Purchase of property and equipment under long-term
      debt obligations                                         $    --         $  753

   Non-cash financing activities:
      Deemed dividends on preferred stock related to 
      beneficial conversion feature                            $ 1,792         $   --
      Net assets held for sale                                  25,130             --
      Conversion of Series A Convertible Preferred Stock 
      to common stock                                              124             --

</TABLE>


LINE OF CREDIT

   The Company had a revolving line of credit agreement with a bank that
provided for maximum borrowings of $10 million which expired in July 1998.  At
June 30, 1998, the Company had $2.8 million in borrowings outstanding under the
line of credit which were paid off in July 1998 with proceeds from the Asset
Sale, as defined below.  See "Asset Sale".


                                       6
<PAGE>


                            GENUS, INC. AND SUBSIDIARIES
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 1998 (UNAUDITED)


INVENTORIES
INVENTORIES COMPRISE THE FOLLOWING:

<TABLE>
<CAPTION>
                                                             (DOLLARS IN THOUSANDS)

                                                              JUNE 30,     DECEMBER 31,
                                                               1998           1997
                                                            ------------   ------------
<S>                                                          <C>           <C>
Raw materials and parts                                       $  2,702      $  15,210
Work in progress                                                 2,092          6,879
Finished goods                                                     379          6,897
                                                            ------------   ------------
                                                              $  5,173      $  28,986
                                                            ------------   ------------
                                                            ------------   ------------

</TABLE>


ACCRUED EXPENSES
ACCRUED EXPENSES COMPRISE THE FOLLOWING:

<TABLE>
<CAPTION>
                                                              (DOLLARS IN THOUSANDS)

                                                              JUNE 30,     DECEMBER 31,
                                                               1998           1997
                                                            ------------   ------------
<S>                                                          <C>           <C>
System installation and warranty                                $  879       $  3,741
Accrued commissions and incentives                                 631          2,062
Accrued payroll and related items                                  435          1,264
Other                                                            8,260          3,546
                                                            ------------   ------------
                                                             $  10,205      $  10,613
                                                            ------------   ------------
                                                            ------------   ------------

</TABLE>

ASSET SALE

   In April 1998, the Company entered into an agreement with Varian 
Associates, Inc. ("Varian") to sell selected assets and transfer selected 
liabilities related to the millions of electron volts ("MeV") ion 
implantation equipment product line for approximately $25 million plus 
additional payments if certain revenue targets are achieved ("Asset Sale").  
The completion of the Asset Sale which was subject to approval by the 
Company's shareholders as well as to expiration of the applicable waiting 
periods under federal Hart-Scott-Rodino premerger notification requirements 
occurred in July 1998.  As a result of the Asset Sale, the Company will no 
longer engage in the ion implant business and will refocus its efforts on 
thin film deposition.  The Company used a portion of the net proceeds of the 
Asset Sale for repayment of certain outstanding indebtedness and the 
redemption of 70,000 shares of Series A Convertible Preferred Stock ("Series 
A Stock"), with the remaining proceeds to be used for working capital and 
general corporate purposes, including investment in R&D of thin film 
products.  In connection with the Asset Sale and the refocusing of the 
Company's business on thin film products, the Company significantly reduced 
the workforce at several of its locations during the second quarter, 
resulting in the special charge.

REDEMPTION AND EXCHANGE OF SERIES A CONVERTIBLE PREFERRED STOCK

   In February 1998, the Company issued equity securities through a private 
placement of Series A Stock for gross proceeds of $5 million.  On July 29, 
1998 the Company redeemed 70,000 shares of the outstanding Series A Stock for 
$4.7 million.  In addition, the remaining 28,000 shares of Series A Stock 
were exchanged for 28,000 shares of Series B Stock which has a fixed 
conversion price of $1.25 per share.

SPECIAL CHARGE

   During the second quarter of 1998, the Company incurred a special charge 
of $13.2 million. Included in this charge are personnel charges of $1.9 
million associated with the Company's reduction in workforce as well as $5.4 
million in inventory write-downs, and $1.2 million in property and equipment 
write-downs.  In addition, the Company has provided $1.5 million for expenses 
associated with the closing of several sales offices and transaction losses 
as a result of the sale of the ion implant group to Varian.  Also included in 
the special charge are $1.2 million in legal, accounting and banking fees


                                       7
<PAGE>


associated with the Varian transaction. Finally, the special charge includes 
a $2.0 million write-off of ion implant inventory that is currently a matter 
of dispute with Varian in connection with the Asset Sale to Varian.  The 
Company and Varian are in the process of resolving the dispute through 
arbitration to determine whether Genus or Varian has rights to the one ion 
implant sale and inventory.  In accordance with generally accepted accounting 
principles, if and when the Company prevails in the arbitration, any 
adjustments to the Company's financial statements as a result of this gain 
contingency will be made in the quarter in which the decision is rendered and 
the collection of the amount in question is probable.  The Company is not 
conceding any rights to the disputed sale and believes that it will prevail 
in the arbitration.

RESTATEMENT

   The Company recognized a sale of $2.7 million in the second quarter which 
was determined to be not in accordance with GAAP, and subsequently reversed.  
The appropriate adjustments for the reversal of this sale were made to 
revenue, profit, and accounts receivable in the second quarter, and are 
reflected in the Company's current financial statements.  The amounts for net 
loss, net loss available to common shareholders, and net loss available to 
common shareholders per common share and per common share assuming dilution 
for the three and six month periods ended June 30, 1998 have been restated 
from amounts previously reported to reflect the reversal of a recorded sale 
and the resulting increase in the special charge.  These retroactive 
adjustments increased net loss available to common shareholders by $2.7 
million ($0.16 per common share) for the three and six month periods ended 
June 30, 1998 as follows:

<TABLE>
<CAPTION>
                                          (DOLLARS IN THOUSANDS, 
                                          EXCEPT PER SHARE DATA) 
                                        THREE MONTHS      SIX MONTHS
                                           ENDED             ENDED
                                        JUNE 30, 1998    JUNE 30, 1998
                                        -------------  ----------------
<S>                                     <C>            <C>
Previously reported                     $  (18,903)    $  (28,146)
Adjustments                                 (2,700)        (2,700)
As adjusted                             $  (21,603)    $  (30,846)

</TABLE>


                                       8
<PAGE>


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

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

RESULTS OF OPERATIONS

   Net sales for the three and six months ended June 30, 1998 were $10.3 million
and $17.5 million, respectively, compared to net sales of $19.4 million and
$39.0 million for the corresponding periods in 1997.  The decline is
attributable to lower unit sales of systems as well as lower revenue from spares
and service largely as a result of the Asian financial crisis which began for
the Company during the fourth quarter of 1997.  After modest sales growth for
the first nine months of 1997 compared to 1996, during the fourth quarter of
1997, the Company's sales fell from the immediate-prior quarter, and weakness
among the Company's Asian customers continued during the first half of 1998.
   
   Gross margin for the three and six month periods ended June 30, 1998 was 5%
and 5%, compared to 40% and 39%, respectively, for the same periods in 1997. 
The gross margin for the first half of 1998 was negatively impacted by the
depressed level of sales resulting in underabsorption of fixed manufacturing and
service costs and lower average selling prices.  Even at relatively constant
higher levels of sales, the Company's gross margins have historically been
affected by variations in average selling prices, changes in the mix of product
sales, unit shipment levels, the level of foreign sales, and competitive pricing
pressures.
   
   For the second quarter of 1998, research and development expenses ("R&D")
were $2.9 million, or 22% of sales, compared to $3.1 million, or 16% of sales,
for the second quarter of 1997.  R&D spending for the first half of 1998 of $6.3
million remained essentially flat relative to the comparable period in 1997. 
Despite the general industry slowdown and the near term outlook for sales, the
Company continues to invest in R&D to position itself for the latter half of
1998 and beyond.  The Company continually evaluates its R&D investment in view
of evolving competition and market conditions and expects that R&D spending may
increase during the second half of 1998.
   
   Selling, general and administrative expenses ("SG&A") were $5.7 million for
the second quarter of 1998.  Included in this amount is a $1.4 net million
charge for the write-off of an account receivable from Innotech Corporation, the
Company's Japanese distributor.  Absent this write-off, SG&A increased slightly
relative to the second quarter of 1997.
   
   During the second quarter of 1998, the Company incurred a special charge 
of $13.2 million. Included in this charge are personnel charges of $1.9 
million associated with the Company's reduction in workforce as well as $5.4 
million in inventory write-downs, and $1.2 million in property and equipment 
write-downs. In addition, the Company has provided $1.5 million for expenses 
associated with the closing of several sales offices and transaction losses 
as a result of the sale of the ion implant equipment product line to Varian 
Associates, Inc. ("Varian").  Also included in the special charge are $1.2 
million in legal, accounting and banking fees associated with the Varian 
transaction.  Finally, the special charge includes a $2.0 million write-off 
of ion implant inventory that is currently a matter of dispute with Varian in 
connection with the Asset Sale to Varian.  The Company and Varian are in the 
process of resolving the dispute through arbitration to determine whether 
Genus or Varian has rights to the one ion implant sale and inventory.  In 
accordance with generally accepted accounting principles, if and when the 
Company prevails in the arbitration, any adjustments to the Company's 
financial statements as a result of this gain contingency will be made in the 
quarter in which the decision is rendered and the collection of the amount in 
question is probable.  The Company is not conceding any rights to the 
disputed sale and believes that it will prevail in the arbitration.

                                       9
<PAGE>


   The net loss for the quarter ended June 30, 1998 was $21.5 million.  This
compares with net income of $296,000 for the second quarter of 1997.  The net
loss for the six month period was $28.9 million, compared to net income of
$477,000 for the first six months of 1997.
   
   In February 1998, the Company issued $5 million of Series A Convertible
Preferred Stock ("Series A Stock") in a private placement.  Warrants were also
issued as part of the transaction.  During the first quarter, the Company
recorded deemed dividends on preferred stock of $1.8 million to reflect the
difference between the proceeds allocated to the Series A Stock and the fair
value of the Series A Stock (assuming immediate conversion) upon issuance.  For
the second quarter, the Company recorded dividends of $74,000.  These charges
resulted in a net loss available to common shareholders of $21.6 million, or
$1.26 per share for the second quarter of 1998 and a net loss available to
common shareholders of $30.8 million or $1.80 per share for the first half of
1998.  In July 1998, the Company redeemed 70,000 shares of the Series A Stock
and exchanged the remaining 28,000 shares of Series A Stock for 28,000 shares of
Series B Convertible Preferred Stock ("Series B Stock").  See "Subsequent Events
- Redemption and Exchange of Series A Convertible Preferred Stock".
   
LIQUIDITY AND CAPITAL RESOURCES

   The Company's cash and cash equivalents decreased to $3.8 million at June 30,
1998 from $8.7 million at year-end.  Accounts receivable declined from $19.5
million at year-end to $9.2 million at June 30, 1998.  The decline in accounts
receivable is due to the lower sales level as well as collections during the
quarter, and the $3.0 million write-off of an account receivable from Innotech
Corporation.  The Company's primary source of funds at June 30, 1998 consisted
of $3.8 million in cash.  The Company had a $10.0 million revolving line of
credit, secured by substantially all of the assets of the Company which expired
in July 1998.  At June 30, 1998, the Company had $2.8 million of borrowings
outstanding under the line of credit, which were paid off with proceeds from the
Asset Sale, as defined below.  See "Subsequent Events - Asset Sale to Varian".
   
   The Company incurred operating losses during each of the two years in the
period ended December 31, 1997 and incurred additional operating losses in the
first and second quarters of 1998.  Additionally, the Company's bank line of
credit expired in July 1998.  However, with the completion of the Asset Sale,
the Company believes that its existing cash resources will be sufficient to fund
the Company's expected working capital requirements for at least the next 12
months.  In addition, the Company is in discussions with financial institutions
to secure a line of credit.  While the Company feels that its existing cash
resources will be sufficient to implement the Company's operating strategy and
meet the Company's other working capital requirements, if the industry downturn
persists, the Company may be required to seek additional equity or debt
financing. There can be no assurance that the Company would be able to obtain
additional debt or equity financing, if and when needed, on terms that the
Company finds acceptable.  Any additional equity or debt financing may involve
substantial dilution to the Company's shareholders, restrictive covenants or
high interest costs.
   
SUBSEQUENT EVENTS
   
ASSET SALE TO VARIAN
   
   In April 1998, the Company entered into an agreement with Varian to sell
selected assets and transfer selected liabilities related to the millions of
electron volts ("MeV") ion implantation equipment product line for approximately
$25 million plus additional payments if certain revenue targets are achieved
("Asset Sale").  The completion of the Asset Sale which was subject to approval
by the Company's shareholders as well as to expiration of the applicable waiting
periods under federal Hart-Scott-Rodino premerger notification requirements
occurred in July 1998.  As a result of the Asset Sale, the Company will no
longer engage in the ion implant business and will refocus its efforts on thin
film deposition.  The Company used a portion of the net proceeds of the Asset
Sale for repayment of certain outstanding indebtedness and the redemption of
70,000 shares of Series A Stock, with the remaining proceeds to be used for
working capital and general corporate purposes, including investment in R&D of
thin film products.  In connection with the Asset Sale and the refocusing of the
Company's business on thin film products, the Company significantly reduced the
workforce at several of its locations during the second quarter, resulting in
the special charge.


                                       10
<PAGE>

   
   
REDEMPTION AND EXCHANGE OF SERIES A CONVERTIBLE PREFERRED STOCK
   
   In February 1998, the Company issued equity securities through a private
placement of Series A Stock for gross proceeds of $5 million.  On July 29, 1998
the Company redeemed 70,000 shares of the outstanding Series A Stock for $4.7
million.  In addition, the remaining 28,000 shares of Series A Stock were
exchanged for 28,000 shares of Series B Stock which has a fixed conversion price
of $1.25 per share.










                                       11
<PAGE>

RISK FACTORS

   CERTAIN SECTIONS OF MANAGEMENT'S DISCUSSION AND ANALYSIS CONTAIN 
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE 
SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES 
EXCHANGE ACT OF 1934, AS AMENDED.  ACTUAL RESULTS COULD DIFFER MATERIALLY 
FROM THOSE PROJECTED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF THE 
FACTORS SET FORTH ABOVE IN MANAGEMENT'S DISCUSSION AND ANALYSIS AND THIS RISK 
FACTORS SECTION.  THE DISCUSSION OF THESE FACTORS IS INCORPORATED BY THIS 
REFERENCE AS IF SAID DISCUSSION WAS FULLY SET FORTH IN MANAGEMENT'S 
DISCUSSION AND ANALYSIS.
   
   HISTORICAL PERFORMANCE.  Although the Company had net income of $19.3 
million and $4.2 million in the years ended December 31, 1995 and 1994, the 
Company experienced losses of $19.3 million, $9.2 million, and $6.9 million 
for the years ended December 31, 1997, 1996 and 1993, respectively.  In 
addition, the Company experienced an additional operating loss of $28.9 
million in the first half of 1998.  As a result of the Company's inconsistent 
sales and operating results in recent years, there can be no assurance that 
the Company will be able to attain or sustain consistent future revenue 
growth on a quarterly or annual basis, or that the Company will be able to 
attain or maintain consistent profitability on a quarterly or annual basis.
   
   RELIANCE ON A SMALL NUMBER OF CUSTOMERS AND CONCENTRATION OF CREDIT RISK. 
The Company continued its efforts to expand its customer base in 1997 and was 
successful, with new customers in Taiwan and North America.  Historically, 
the Company has relied on a limited number of customers for a substantial 
portion of its net sales.  In 1997, two customers, Samsung Electronics 
Company, Ltd. and Innotech Corporation accounted for 47% and 17%, 
respectively, of the Company's net sales.  In 1996, these same two customers 
accounted for 53% and 18%, respectively, of the Company's net sales.  With 
the sale of its ion implantation business in July 1998, the Company's main 
customer for its current generation product is Samsung Electronics Company, 
Ltd., which accounted for over 90% of the Company's net sales of thin film 
products in 1997 and 1996.  Because the semiconductor manufacturing industry 
is concentrated in a limited number of generally larger companies, the 
Company expects that a significant portion of its future product sales will 
be concentrated within a limited number of customers.  None of these 
customers has entered into a long-term agreement requiring it to purchase the 
Company's products.  Furthermore, sales to certain of these customers may 
decrease in the future when those customers complete their current 
semiconductor equipment purchasing requirements for new or expanded 
fabrication facilities.  The loss of a significant customer or any reduction 
in orders from a significant customer, including reductions due to customer 
departures from recent buying patterns, market, economic or competitive 
conditions in the semiconductor industry or in the industries that 
manufacture products utilizing ICs, could have a material adverse affect on 
the Company's business, financial condition and results of operations.

   The Company is dependent on a small number of customers.  Accordingly, the
Company is subject to concentration of credit risk.  If a major customer were to
encounter financial difficulties and become unable to meet its obligations, the
Company would be adversely impacted.

   RELIANCE ON INTERNATIONAL SALES.  Export sales accounted for approximately 
74%, 84% and 88% of total net sales in the years ended 1997, 1996 and 1995, 
respectively.  In addition, net sales to South Korean customers accounted for 
approximately 50%, 59% and 63%, respectively, of total net sales during the 
same periods. During the first half of 1998, the Company sold three systems, 
two of which were sold to domestic customers, thereby decreasing export sales 
to 40% of total net sales.  Nonetheless, the Company anticipates that 
international sales, including sales to South Korea, will continue to account 
for a significant portion of net sales. As a result, a significant portion of 
the Company's sales will be subject to certain risks, including unexpected 
changes in regulatory requirements, tariffs and other barriers, political and 
economic instability, difficulties in accounts receivable collection, 
difficulties in managing distributors or representatives, difficulties in 
staffing and managing foreign subsidiary operations and potentially adverse 
tax consequences.  Although the Company's foreign system sales are primarily 
denominated in U.S. dollars and the Company does not engage in hedging 
transactions, the Company's foreign sales are subject to the risks associated 
with unexpected changes in exchange rates, which could have the effect of 
making the Company's products more or less expensive. There can be no 
assurance that any of these factors will not have a material adverse affect 
on the Company's business, financial condition and results of operations.

   Further, the Company has a wholly owned South Korean subsidiary providing 
service and support to the installed base of customers and whose functional 
currency is the won.  As a result of the devaluation of the won in the fourth 
quarter of 1997, the Company incurred a foreign exchange loss of $1.1 
million. There can be


                                       23
<PAGE>


no assurance that the Company will not incur currency losses or gains in 
future quarters as the currency fluctuates.

   A substantial portion of the Company's sales is in Asia.  Recent turmoil 
in the Asian financial markets has resulted in dramatic currency 
devaluations, stock market declines, restriction of available credit and 
general financial weakness.  In addition, Dynamic Random Access Memory 
("DRAM") prices have fallen dramatically and may continue to do so as some 
Asian integrated circuit ("IC") manufacturers may be selling DRAMs at less 
than cost in order to raise cash. These developments may affect the Company 
in several ways.  Currency devaluation may make dollar-denominated goods, 
such as the Company's, more expensive for Asian clients. Asian manufacturers 
may limit capital spending.  Furthermore, the uncertainty of the DRAM market 
may cause manufacturers everywhere to delay capital spending plans.  These 
circumstances may also affect the ability of Company customers to meet their 
payment obligations, resulting in the cancellations or deferrals of existing 
orders and the limitation of additional orders.  Some of the Company's South 
Korean customers have rescheduled their required delivery dates for orders 
previously placed and have announced delays in the facilitization of their 
new manufacturing areas.  In addition, some portion of IC fabrication plant 
construction has been subsidized by Asian governments.  Financial turmoil may 
weaken these governments' willingness to continue such subsidies.  Such 
developments could have a material adverse affect on the Company's business, 
financial condition and results of operations.

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

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

   COMPETITION.  The semiconductor manufacturing capital equipment industry is
highly competitive.  Genus faces substantial competition throughout the world. 
The Company believes that to remain competitive, it will require significant
financial resources in order to offer a broader range of products, to maintain
customer service and support centers worldwide and to invest in product and
process R&D.  Many of the Company's existing and potential competitors have
substantially greater financial resources, more extensive engineering,
manufacturing, marketing and customer service and support capabilities, as well
as greater name recognition than the Company.  The Company expects its
competitors to continue to improve the design and performance of their current
products and processes and to introduce new products and processes with improved
price and performance characteristics.  If the Company's competitors enter into
strategic relationships with leading semiconductor manufacturers covering
chemical vapor deposition ("CVD") products similar to those sold by the Company,
it would materially adversely affect the Company's ability to sell its products
to these manufacturers.  There can be no assurance that the Company will
continue to compete successfully in the United States or worldwide.  The Company
faces direct competition in CVD tungsten silicide ("WSiX") from Applied
Materials, Inc. and Tokyo Electron, Ltd.  There can be no assurance that these
or other competitors will not succeed in developing new technologies, offering
products at lower prices than those of the Company or obtaining market
acceptance for products more rapidly than the Company.

   DEPENDENCE ON NEW PRODUCTS AND PROCESSES.  The Company believes that its
future performance will depend in part upon its ability to continue to enhance
its existing products and their process capabilities and to


                                       13
<PAGE>


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

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

   DEPENDENCE ON PATENTS AND PROPRIETARY RIGHTS.  The Company's success 
depends in part on its proprietary technology.  While the Company attempts to 
protect its proprietary technology through patents, copyrights and trade 
secret protection, it believes that the success of the Company will depend on 
more technological expertise, continuing the development of new systems, 
market penetration and growth of its installed base and the ability to 
provide comprehensive support and service to customers.  There can be no 
assurance that the Company will be able to protect its technology or that 
competitors will not be able to develop similar technology independently.  
The Company currently has a number of United States and foreign patents and 
patent applications.  There can be no assurance that any patents issued to 
the Company will not be challenged, invalidated or circumvented or that the 
rights granted thereunder will provide competitive advantages to the Company.

   From time-to-time, the Company has received notices from third parties 
alleging infringement of such parties' patent rights by the Company's 
products. In such cases, it is the policy of the Company to defend against 
the claims or negotiate licenses on commercially reasonable terms where 
considered appropriate. However, no assurance can be given that the Company 
will be able to negotiate necessary licenses on commercially reasonable 
terms, or at all, or that any litigation resulting from such claims would not 
have a material adverse affect on the Company's business and financial 
results.

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

   DEPENDENCE ON INDEPENDENT DISTRIBUTORS.  The Company currently sells and
supports its CVD products through direct sales and customer support
organizations in the U.S., South Korea and through seven exclusive, independent
sales representatives and distributors in the U.S., Europe, South Korea, Taiwan,
Hong Kong and Singapore.  The Company does not have any long-term contracts with
its sales representatives and distributors.  Although the Company believes that
alternative sources of distribution are available, the disruption or termination
of its existing distributor relationships could have a temporary adverse affect
on the Company's business, financial condition and results of operations.


                                       14
<PAGE>


   VOLATILITY OF STOCK PRICE.  The Company's Common Stock has experienced
substantial price volatility, particularly as a result of quarter-to-quarter
variations in the actual or anticipated financial results of, or announcements
by, the Company, its competitors or its customers, announcements of
technological innovations or new products by the Company or its competitors,
changes in earnings estimates by securities analysts and other events or
factors.  Also, the stock market has experienced extreme price and volume
fluctuations which have affected the market price of many technology companies,
in particular, and which have often been unrelated to the operating performance
of these companies.  These broad market fluctuations, as well as general
economic and political conditions in the United States and the countries in
which the Company does business, may adversely affect the market price of the
Company's Common Stock. In addition, the occurrence of any of the events
described in these "Risk Factors" could have a material adverse affect on such
market price.

   READINESS FOR YEAR 2000.  Many existing computer systems and applications, 
and other control devices, use only two digits to identify a year in the date 
field, without considering the impact of the upcoming change in the century. 
These computer systems and applications could fail or create erroneous 
results unless corrected so that they can process data related to the year 
2000.  The Company relies on its systems, applications and devices in 
operating and monitoring all major aspects of its business, including 
financial systems (such as general ledger, accounts payable and payroll 
modules), customer service, infrastructure, embedded computer chips, networks 
and telecommunications equipment and end products.  The Company also relies 
on external systems of business enterprises such as customers, suppliers, 
creditors, financial organizations, and of governments both domestically and 
globally, directly for accurate exchange of data and indirectly.  During 
1997, the Company started the implementation of a new business system.  One 
criteria for the selection of the enterprise software was compliance with 
Year 2000 issues.  Accordingly, the Company's current estimate is that the 
costs associated with the Year 2000 issue, and the consequences of incomplete 
or untimely resolution of the Year 2000 issue, will not have a material 
adverse affect on the result of operations or financial position of the 
Company in any given year.  However, despite the Company's efforts to address 
the Year 2000 impact on its internal systems, there can be no assurance that 
the Company has fully identified such impact or that it can resolve it 
without disruption of its business and without incurring significant expense. 
In addition, even if the internal systems of the Company are not materially 
affected by the Year 2000 issue, the Company could be affected through 
disruption in the operation of the enterprises with which the Company 
interacts.  The Company has not contacted the entities with which it 
interacts to determine whether such entities are addressing the Year 2000 
issue.


                                       15
<PAGE>


                            PART II.  OTHER INFORMATION

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

   See Subsequent Events discussion regarding redemption and exchange of Series
A Convertible Preferred Stock.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

     The Exhibits listed on the accompanying "Index to Exhibits" are filed as
     part hereof, or incorporated by reference into, the report.

(b)  Report on Form 8-K

     The Company filed a Current Report on Form 8-K dated April 24, 1998 to
     describe the sale to Varian Associates, Inc. of the ion implant equipment
     product line.

     The Company filed a Current Report on Form 8-K/A dated May 7, 1998.







                                       16
<PAGE>




                                     GENUS, INC.
                                     SIGNATURES


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






Date:  November 16, 1998           GENUS, INC.



                                   /s/ William W.R. Elder
                                   ------------------------------------
                                   William W.R. Elder
                                   Chairman and Chief Executive Officer


                                   /s/ Kenneth Schwanda
                                   -------------------------------------
                                   Kenneth Schwanda
                                   Vice President, Finance
                                   (Principal Accounting Officer)






                                       17
<PAGE>


                                   GENUS, INC.
                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>

EXHIBIT     DESCRIPTION
-------     ---------------------------------------------------------------------
<S>         <C>
 2.1        Asset Purchase Agreement, dated April 15, 1998, by and between
            Varian Associates, Inc. and Registrant and exhibits thereto (2)
 4.2        Convertible Preferred Stock Purchase Agreement, dated February 2,
            1998, among the Registrant and the Investors (1)
 4.3        Registration Rights Agreement, dated February 2, 1998, among the
            Registrant and the Investors (1)
 4.4        Certificate of Determination of Rights, Preferences and Privileges
            of Series A Convertible Preferred Stock (1)
 4.5        Certificate of Determination of Rights, Preferences and Privileges
            of Series B Convertible Preferred Stock (4)
 4.6        Redemption and Exchange Agreement, dated July 16, 1998, among the
            Registrant and the Investors (4)
10.17       Settlement Agreement and Mutual Release, dated April 20, 1998,
            between Registrant and James T. Healy (3)
10.18       Form of Change of Control Severance Agreement (3)
10.19       Settlement Agreement and Mutual Release, dated June 30, 1998,
            between Registrant and John Aldeborgh
10.20       Settlement Agreement and Mutual Release, dated July 15, 1998,
            between Registrant and Mary Bobel
27.1        Financial Data Schedule

-----------------------------------
</TABLE>

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

(2)  Incorporated by reference to the exhibit filed with the Registrant's
     Current Report on Form 8-K dated April 15, 1998.

(3)  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.

(4)  Incorporated by reference to the exhibit filed with the Registrant's
     Current Report on Form 8-K dated July 29, 1998.


                                       18