<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

(MARK ONE)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 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 November 6, 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              NINE MONTHS ENDED
                                                               SEPTEMBER 30,                   SEPTEMBER 30,
                                                           1998             1997            1998            1997
                                                        -----------     ------------    ------------    ------------
<S>                                                     <C>             <C>             <C>             <C>
Net sales                                               $    9,804      $   24,375      $   27,312      $   63,407

Costs and expenses:
   Cost of goods sold                                        5,889          16,024          22,554          39,877
   Research and development                                  1,517           3,066           7,788           9,315
   Selling, general and administrative                       2,347           4,358          12,253          12,414
   Special charge                                               --              --          13,216              --
                                                        -----------     ------------    ------------    ------------
     Income (loss) from operations                              51             927         (28,499)          1,801

Other, net                                                     (11)            (94)           (404)           (191)
                                                        -----------     ------------    ------------    ------------
   Income (loss) before income taxes                            40             833         (28,903)          1,610

Provision for income taxes                                      --             321              --             621
                                                        -----------     ------------    ------------    ------------
   Net income (loss)                                            40             512         (28,903)            989

   Deemed dividends on preferred stock                          --              --          (1,903)             --
                                                        -----------     ------------    ------------    ------------

   Net income (loss) available to common
   shareholders                                         $       40      $      512        $(30,806)     $      989
                                                        -----------     ------------    ------------    ------------
                                                        -----------     ------------    ------------    ------------

Net income (loss) available to common
shareholders per common share and per common
share assuming dilution                                         --      $     0.03      $   (1.79)      $     0.06
                                                        -----------     ------------    ------------    ------------
                                                        -----------     ------------    ------------    ------------

Comprehensive income (loss)                             $      (42)     $      432      $  (28,551)     $      822
                                                        -----------     ------------    ------------    ------------
                                                        -----------     ------------    ------------    ------------
</TABLE>

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
                                                                           SEPTEMBER 30,            DECEMBER 31,
                                                                                1998                    1997
                                                                         ------------------      ------------------
<S>                                                                      <C>                     <C>
ASSETS
Current assets:
   Cash and cash equivalents                                             $       6,408           $       8,700
   Restricted cash                                                               1,000                      --
   Accounts receivable (net of allowance for doubtful
   accounts of $245 in 1998 and $1,097 in 1997)                                 10,499                  19,469
   Inventories                                                                   4,685                  28,986
   Other current assets                                                            308                   1,029
                                                                         ------------------      ------------------
     Total current assets                                                       22,900                  58,184

   Property and equipment, net                                                   4,465                  15,276
   Other assets, net                                                               470                   3,278
                                                                         ------------------      ------------------
     Total assets                                                        $      27,835           $      76,738
                                                                         ------------------      ------------------
                                                                         ------------------      ------------------
LIABILITIES
Current liabilities:
   Short term bank borrowings                                            $          --           $       7,200
   Accounts payable                                                              1,383                   8,723
   Accrued expenses                                                              6,430                  10,613
   Current portion of long-term debt                                                --                     874
                                                                         ------------------      ------------------
   Total current liabilities                                                     7,813                  27,410
   Long-term debt, less current portion                                             10                     971
                                                                         ------------------      ------------------
   Total liabilities                                                             7,823                  28,381
                                                                         ------------------      ------------------
Redeemable Preferred stock, no par value:
   Authorized, 2,000,000 shares;
   Issued and outstanding 28,000 shares at
   September 30, 1998 and none at December 31, 1997                              1,324                      --

SHAREHOLDERS' EQUITY
   Common stock, no par value:
   Authorized 50,000,000 shares; Issued and outstanding 17,361,162 
   shares at September 30, 1998 and 17,120,628 shares at
   December 31, 1997                                                            99,778                  99,149
Accumulated deficit                                                            (79,513)                (48,863)
Cumulative translation adjustment                                               (1,577)                 (1,929)
                                                                         ------------------      ------------------
   Total shareholders' equity                                                   18,688                  48,357
                                                                         ------------------      ------------------
     Total liabilities, redeemable preferred stock, and
     shareholders' equity                                                $      27,835           $      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>
                                                                                  NINE MONTHS ENDED
                                                                                    SEPTEMBER 30,
                                                                            ------------------------------
                                                                                1998             1997
                                                                            ------------     -------------
<S>                                                                         <C>              <C>
Cash flows from operating activities:
   Net income (loss)                                                        $  (28,903)      $      989
   Adjustments to reconcile net income (loss) to net cash from
   operating activities:
     Depreciation and amortization                                               2,315            3,651
     Special Charge                                                             13,216               --
     Changes in assets and liabilities:
       Accounts receivable                                                       9,027          (13,832)
       Inventories                                                              (1,721)             625
       Other current assets                                                        721             (946)
       Accounts payable                                                         (7,340)           3,379
       Accrued expenses                                                         (3,966)             143
       Other, net                                                                 (643)              63
                                                                            ------------     -------------
         Net cash used in operating activities                                 (17,294)          (5,928)
                                                                            ------------     -------------
Cash flows from investing activities:
   Acquisition of property and equipment                                           (442)           (565)
   Sales of Ion Technology Products                                              23,150              -- 
                                                                            ------------     -------------
     Net cash used in investing activities                                       22,708            (565)
                                                                            ------------     -------------
Cash flows from financing activities:
   Proceeds from issuance of common stock                                          120              782
   Proceeds from issuance of preferred stock and warrants, net                   4,816               --
   Redemption of preferred stock                                                (4,725)              --
   Proceeds from short-term bank borrowings                                         --           15,896
   Payments of short-term bank borrowings                                       (7,200)          (8,416)
   Payments of long-term debt                                                     (870)          (1,071)
                                                                            ------------     -------------
     Net cash provided by financing activities                                  (7,859)           7,191
                                                                            ------------     -------------
Effect of exchange rate changes on cash                                            153              (65)
Net increase (decrease) in cash and cash equivalents                            (2,292)             633
Cash and cash equivalents, beginning of period                                   8,700           11,827
                                                                            ------------     -------------
                                                                            ------------     -------------
Cash and cash equivalents, end of period                                    $    6,408       $   12,460
                                                                            ------------     -------------
                                                                            ------------     -------------
</TABLE>

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


                                      4
<PAGE>

                          GENUS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         SEPTEMBER 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           NINE MONTHS ENDED
                                                                          SEPTEMBER 30,                SEPTEMBER 30,
                                                                        1998          1997           1998          1997
                                                                    ------------  ------------   ------------  ------------
<S>                                                                 <C>           <C>            <C>           <C>
Numerator-basic:
   Net income (loss)                                                $       40    $      512     $  (28,903)   $      989
   Deemed dividends on preferred stock                                      --            --         (1,903)           --
                                                                    ------------  ------------   ------------  ------------
     Net income (loss) available to common shareholders             $       40    $      512     $  (30,806)   $      989
                                                                    ------------  ------------   ------------  ------------
Denominator-basic:
   Weighted average common shares outstanding                           17,361         16,954        17,216        16,824
                                                                    ------------  ------------   ------------  ------------
Basic net income (loss) per share available to common
shareholders                                                        $       --    $     0.03     $    (1.79)   $     0.06
                                                                    ------------  ------------   ------------  ------------
Numerator-diluted:
   Net income (loss)                                                $       40    $      512     $  (28,903)   $      989
   Deemed dividends on preferred stock                                      --            --         (1,903)           --
                                                                    ------------  ------------   ------------  ------------
     Net income (loss) available to common shareholders             $       40    $      512     $  (30,806)   $      989
                                                                    ------------  ------------   ------------  ------------
Denominator-diluted:
   Weighted average common shares outstanding                           17,361        16,954         17,216        16,824
   Effect of dilutive securities:  stock options                            52           106             --            99
                                                                    ------------  ------------   ------------  ------------
                                                                        17,413        17,060         17,216        16,923
                                                                    ------------  ------------   ------------  ------------
Diluted net income (loss) per share available to common
shareholders                                                        $       --    $     0.03     $    (1.79)   $     0.06
                                                                    ------------  ------------   ------------  ------------
</TABLE>


                                      5
<PAGE>

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

     Stock options to purchase approximately 1,856,043 weighted average 
shares of common stock were outstanding during the nine months ended 
September 30, 1998 but were not included in the computation of diluted loss 
per share because the Company has a net loss for the nine months ended 
September 30, 1998.

     Stock options to purchase approximately 1,634,918 weighted average 
shares of common stock were outstanding during the nine months ended 
September 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)

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

   Cash paid during the period for:
     Interest                                                               $      183       $      298
     Income taxes                                                                    1                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       $       --

     Conversion of Series A Convertible Preferred Stock to
     common stock                                                                  124               --
</TABLE>

LINE OF CREDIT

     The Company secured a $5 million Accounts Receivable Purchase Agreement 
with a bank, and is currently negotiating an additional $5 million revolving 
line of credit with the same bank. At September 30, 1998, the Company had no 
outstanding borrowings under the Accounts Receivable Purchase Agreement.

                                      6
<PAGE>

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

INVENTORIES
INVENTORIES COMPRISE THE FOLLOWING:

<TABLE>
<CAPTION>
                                                                                (DOLLARS IN THOUSANDS)

                                                                           SEPTEMBER 30,            DECEMBER 31,
                                                                                1998                    1997
                                                                         ------------------      ------------------
<S>                                                                      <C>                     <C>
Raw materials and parts                                                  $       3,029           $      15,210
Work in progress                                                                 1,277                   6,879
Finished goods                                                                     379                   6,897
                                                                         ------------------      ------------------
                                                                         $       4,685           $      28,986
                                                                         ------------------      ------------------
</TABLE>

ACCRUED EXPENSES
INVENTORIES COMPRISE THE FOLLOWING:

<TABLE>
<CAPTION>
                                                                                (DOLLARS IN THOUSANDS)

                                                                           SEPTEMBER 30,            DECEMBER 31,
                                                                                1998                    1997
                                                                         ------------------      ------------------
<S>                                                                      <C>                     <C>
System installation and warranty                                         $         855           $       3,741
Accrued commissions and incentives                                                 945                   2,062
Accrued payroll and related items                                                  561                   1,264
Other                                                                            4,069                   3,546
                                                                         ------------------      ------------------
                                                                         $       6,430           $      10,613
                                                                         ------------------      ------------------
</TABLE>

ASSET SALE TRANSACTION

     In July 1998, the Company completed the ion implant product line sale to 
Varian Associates, Inc. ("Varian") for approximately $25 million, plus 
additional payments if certain revenue targets are achieved ("Asset Sale"). 
The net assets and liabilities transferred to Varian included inventory of 
$18.9 million, capital equipment and other assets of $9.7 million, and 
warranty and installation liabilities of $3.6 million. 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.

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.

ARBITRATION WITH VARIAN ASSOCIATES, INC.

     The Company and Varian are in the process of resolving a dispute through 
arbitration as defined in the Asset Purchase Agreement. This dispute is in 
regard to whether Genus or Varian has rights to 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.


                                      7
<PAGE>

RESTRUCTURING RESERVE BALANCE

     In the second quarter of 1998, the Company set up a reserve account of 
$13.2 million for costs associated with restructuring the Company and the 
closing of the Varian Asset Sale. To date, $12.8 million has or is expected 
to be charged against this reserve, including inventory of $5.4 million, 
leasehold improvements of $1.1 million, reduction in workforce costs of $1.7 
million, costs associated with closing of foreign offices of $1.4 million, 
Varian transaction costs of $1.2 million, and the disputed ion implant system 
contingency of $2.0 million. Any legal costs associated with the pending 
arbitration with Varian will be charged against the remaining balance of 
approximately $400,000.

SUBSEQUENT EVENT

REDEMPTION SERIES B CONVERTIBLE PREFERRED STOCK

     On July 29, 1998, the Company exchanged 28,000 shares of Series A Stock 
for 28,000 shares of Series B Stock, which has a fixed conversion price of 
$1.25 per share. On October 16, the Company redeemed 12,000 shares of its 
outstanding Series B Stock for $600,000, leaving 16,000 shares of Series B 
Stock outstanding. The Series B Stock holders may require the Company at any 
time to redeem all of its shares outstanding at a redemption price equal to 
the stated value per share. The Series B stock may be redeemed at the option 
of the Company on or after July 30, 2003 at a redemption price equal to the 
product of (i) the average of the closing bid prices for the five trading 
days immediately preceding (a) July 30, 2003, or (b) the date of payment by 
the Company of the redemption price, whichever is greater, and (ii) the 
conversion ratio applicable to the Series B Stock calculated on July 30, 2003.

                                      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

     On July 28, 1998, the Company completed the sale transaction of its ion 
implant product line to Varian, Inc. During the period of time from July 1 
through July 28, all transactions related to the ion implant product line 
were included in the Company's third quarter operating results. As a result 
of not incurring two months of ion implant expenses, all expense categories 
below compare favorably to the prior year.

     Net sales for the three and nine months ended September 30, 1998 were 
$9.8 million and $27.3 million, respectively, compared to net sales of $24.4 
million and $63.4 million for the corresponding periods in 1997. The decline 
is attributable to lower unit sales of systems, 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, and only partial contribution from 
the ion implant product line. 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 three quarters of 1998.

     Gross margin for the three and nine months ended September 30, 1998 was 
40% and 17%, respectively, compared to 34% and 37%, respectively, for the 
same periods in 1997. Gross margin for the third quarter of 1998 increased 
due to lower fixed manufacturing and service expenses as a percentage of 
sales, reflecting cost containment measures implemented during the second 
quarter of 1998 and lower ion implant product line expenses absorbed by the 
Company. The gross margin for the first three quarters 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 third quarter of 1998, research and development expenses ("R&D") 
were $1.5 million, or 15% of sales, compared to $3.1 million, or 13% of 
sales, for the third quarter of 1997. R&D spending for the first three 
quarters of 1998 was $7.8 million, compared to $9.3 million for the first 
three quarters of 1997. These reductions were almost entirely attributed to 
lower ion implant expenses incurred during the third quarter of 1998. 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 fourth quarter 
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 over the next few quarters.

     Selling, general and administrative expenses ("SG&A") for the three and 
nine month periods ending September 30, 1998 were $2.3 million and $12.3 
million, compared to $4.4 million and $12.4 million, respectively, for the 
prior year. SG&A spending for the third quarter of 1998 was lower due to the 
cost containment measures implemented in the second quarter of 1998 and lower 
ion implant related expenses absorbed by the Company. SG&A spending for the 
nine months ending September 30, 1998 was relatively flat with the prior 
year's nine month total, due to the $1.4 million net charge for the write-off 
of an account receivable from Innotech Corporation in the second quarter of 
1998.

     Net income for the quarter ended September 30, 1998 was $40,000. This 
compares with net income of $512,000 for the third quarter of 1997. The net 
loss for the nine-month period was $28.9 million, compared to net income of 
$989,000 for the first nine months of 1997.


                                      9
<PAGE>

     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 $30.8 
million or $1.79 per share for the first nine months 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").

LIQUIDITY AND CAPITAL RESOURCES

The Company's cash and cash equivalents, including restricted cash held in 
escrow, decreased to $7.4 million at September 30, 1998 from $8.7 million at 
year-end.  In July, the Company received $23.2 million from the asset sale to 
Varian, with an additional $1 million held in escrow pending resolution of a 
Massachusetts tax audit lien and expiration of change of control agreements 
with former ion implant employees currently working for Varian.  The Company 
used the funds to pay off existing accounts payable obligations of $16.0 
million, the outstanding line of credit obligation of $2.8 million, and to 
redeem 70,000 shares of Series A Stock at $4.7 million. Accounts receivable 
declined from $19.5 million at year-end to $10.5 million at September 30, 
1998. The decline in accounts receivable is due to lower sales levels. The 
Company's primary source of funds at September 30, 1998 consisted of $6.4 
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. In September, the Company secured a $5 million Accounts Receivable 
Purchase Agreement with a bank, and is currently negotiating an additional $5 
million revolving line of credit with the same bank. 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. However, with the completion of the Asset Sale, the Company 
believes that its existing cash resources, collection of its accounts 
receivable, and borrowing capabilities will be sufficient to fund the 
Company's expected working capital requirements for at least the next 12 
months. 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.

REDEMPTION SERIES B CONVERTIBLE PREFERRED STOCK

     On July 29, 1998, the Company exchanged 28,000 shares of Series A Stock 
for 28,000 shares of Series B Stock, which has a fixed conversion price of 
$1.25 per share. On October 16, the Company redeemed 12,000 shares of its 
outstanding Series B Stock for $600,000, leaving 16,000 shares of Series B 
Stock outstanding. The Series B Stock holders may require the Company at any 
time to redeem all of its shares outstanding at a redemption price equal to 
the stated value per share. The Series B stock may be redeemed at the option 
of the Company on or after July 30, 2003 at a redemption price equal to the 
product of (i) the average of the closing bid prices for the five trading 
days immediately preceding (a) July 30, 2003, or (b) the date of payment by 
the Company of the redemption price, whichever is greater, and (ii) the 
conversion ratio applicable to the Series B Stock calculated on July 30, 2003.

                                      10
<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. The Company experienced losses of $19.3 million 
and $9.2 million for the years ended December 31, 1997 and 1996, 
respectively. In addition, the Company experienced an operating loss of $28.9 
million in the first three quarters 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 three quarters of 1998, the 
Company sold six systems, three of which were sold to domestic customers, 
thereby decreasing export sales to approximately 49% 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 no 


                                      11
<PAGE>

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' 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 


                                      12
<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. and South Korea, and through eight exclusive, 
independent sales representatives and distributors in the U.S., Europe, South 
Korea, Japan, Taiwan, Hong Kong, Mainland China, Malaysia, 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.


                                      13
<PAGE>

     NASDAQ NATIONAL MARKET LISTING REQUIREMENTS. On October 20, the Company 
was notified by the National Association of Securities Dealers that it does 
not meet the Nasdaq National Market listing requirements because the stock 
failed to maintain a closing bid price of greater than or equal to $1.00 for 
the prior thirty consecutive trading days, in accordance with Marketplace 
Rule 4450(a)(5). The Company has ninety calendar days in which to regain 
compliance, which is defined as the Company's stock price having a closing 
bid price of equal to or greater than $1.00 for ten consecutive trading days. 
If the Company is unable to achieve compliance during this time, a request 
for a hearing before the Nasdaq review panel and a stay of delisting will be 
initiated prior to the deadline of January 18, 1999. The Company will present 
to Nasdaq a plan to remedy the situation at that time. If the Company's stock 
is delisted from the Nasdaq National Market, it will trade on the Nasdaq 
Small Cap Market. If this occurs, the Company's stock may be subject to 
reduced liquidity and reduced analyst coverage, which may have an adverse 
effect on the market price of the Company's common stock. Additionally, this 
may inhibit the Company's ability to raise capital in the future. Such 
developments could have a material adverse affect on the Company's business, 
financial condition and results of operations

     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.


                                      14
<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 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     The Company's Annual Meeting of Shareholders was held on July 24 in Palo
     Alto, California. Proxies for the meeting were solicited pursuant to
     Regulation 14A. At the Company's Annual Meeting, the shareholders approved
     the following resolutions:

     (1)  Election of the following persons as directors.

<TABLE>
<CAPTION>
              Director                         In Favor                 Withheld
              --------                         --------                 --------
<S>                                            <C>                      <C>
              William W.R. Elder               14,071,772               632,995
              Todd S. Myhre                    14,094,216               610,551
              G. Frederick Forsyth             14,068,042               638,725
              Mario M. Rosati                  14,096,242               608,525
</TABLE>

     (2)  Approval of the Asset Purchase Agreement to sell the ion implant
          product line to Varian.

<TABLE>
<S>                                            <C>
              For:                             9,338,689
              Against:                         458,170
              Abstain:                         120,610
              Broker Non-Vote:                 4,787,298
</TABLE>

     (3)  Approval of the conversion of securities exceeding 20% of the
          outstanding common stock.

<TABLE>
<S>                                            <C>
              For:                             8,774,549
              Against:                         833,751
              Abstain:                         309,169
              Broker Non-Vote:                 4,787,298
</TABLE>

     (4)  Amendment of the 1989 Employee Stock Purchase Plan to increase the
          number of shares reserved for issuance thereunder by 300,000 shares.

<TABLE>
<S>                                            <C>
              For:                             13,226,215
              Against:                         1,210,025
              Abstain:                         268,527
</TABLE>

     (5)  Ratification and appointment of PricewaterhouseCoopers LLP as
          independent accountants.

<TABLE>
<S>                                            <C>
              For:                             14,346,629
              Against:                         196,127
              Abstain:                         162,011
</TABLE>


                                      15
<PAGE>

ITEM 5.  OTHER INFORMATION

     In the fourth quarter of 1998, the Board of Directors of the Company
     amended the Company's Bylaws to (i) adopt a provision providing for an
     advance notice requirement of shareholder business to be brought before a
     meeting of the shareholders, (ii) amend a provision to provide that a
     special meeting of the shareholders may be called by the Board of
     Directors, the Chairman of the Board and the President only and (iii) make
     other necessary conforming changes.

     With respect to shareholder proposals not included in the Company's proxy
     statement for the 1999 Annual Meeting of Shareholders, the persons named in
     management's proxy for the 1999 Annual Meeting of Shareholders will be
     entitled to exercise the discretionary voting power conferred by such proxy
     under the circumstances specified in Rule 14a-4(c) of the Securities
     Exchange Act of 1934, as amended, and under Section 2.5 of the Company's
     Bylaws, including with respect to proposals received by the Company not
     later than one hundred and twenty (120) days prior to the first anniversary
     of the date of mailing of the proxy statement for the prior year's Annual
     Meeting of Shareholders. Proposals of shareholders of the Company that are
     intended to be presented by such shareholders at the Company's 1999 Annual
     Meeting must be received by the Company no later than March 1, 1999. If
     such shareholder fails to comply with the foregoing notice provision, the
     proxy holders will be allowed to use their discretionary voting authority
     when the proposal is raised at the 1999 Annual Meeting.


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 July 29, 1998 to
     describe the closing of the sale to Varian Associates, Inc. of the ion
     implant equipment product line.


                                       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>
    3.2       By-laws of Registrant, as amended
    4.5       Certificate of Determination of Rights, Preferences and
              Privileges of Series B Convertible Preferred Stock (1)
    4.6       Redemption and Exchange Agreement, dated July 16, 1998, among
              the Registrant and the Investors (1)
   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 July 29, 1998.


                                      18