Back to GetFilings.com

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2004

or

For the transition period from              to             

Commission file number 0-26482

TRIKON TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

DELAWARE

(State or other jurisdiction of incorporation or organization)

Ringland Way,

Newport, Gwent NP18 2TA, United Kingdom

(Address of principal executive offices)

95-4054321

(I.R.S. Employer Identification No.)

(Zip Code)

44 (0)1633 414 000

Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.001 Par Value

(Title of Class)

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    x

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).    x  Yes    ¨  No

As of June 30, 2004, the last business day of our most recently completed second quarter, there were 15,750,410 shares of common stock outstanding. The aggregate market value of our common stock held by non affiliates, based on the closing price of our common stock on June 30, 2004 as reported on the Nasdaq National Market was approximately $46,621,213. Common stock held by our officers and directors and by each person owning, to our knowledge, 5% or more of our common stock are excluded because such persons may be deemed affiliates of Trikon. This determination of affiliate status is not necessarily determinative for other purposes.

As of February 22, 2005, the registrant had outstanding 15,754,985 shares of Common Stock.

Documents Incorporated by Reference: None.

Table of Contents

TRIKON TECHNOLOGIES, INC.

Annual Report On Form 10-K For The Year Ended December 31, 2004

Index

Table of Contents

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains 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 based on the beliefs of our management as of the filing date of this Annual Report on Form 10-K. Examples of forward-looking statements include statements about new product development, our ability to penetrate new markets and the potential growth of these markets, our product strategies, availability to achieve or to raise additional capital or reduce expenditure.

Any expectations based on these forward-looking statements are subject to risks and uncertainties and other important factors discussed below in the section titled Risk Factors and in our prior Securities and Exchange Commission filings. These and other factors could affect our future financial condition and operating results and could cause actual results to differ materially from expectations based on forward looking statements made in this document and elsewhere.

All forward-looking statements included in this Annual Report on Form 10-K are based on information available to us as of the filing date of this Annual Report on 10-K, and we assume no obligation to update any such forward-looking statements. Stockholders are cautioned not to place undue reliance on such statements.

2

Table of Contents

PART I

ITEM 1. BUSINESS

Overview

Trikon Technologies Inc. (‘Trikon’ or ‘the Company’) was founded in 1987 as Plasma & Materials Technologies, Inc (‘PMT’), a California corporation. In August 1995, we completed our initial public offering of common stock. In November 1996, we acquired Electrotech Limited and Electrotech Equipments Limited (jointly ‘Electrotech’), both United Kingdom companies that were significantly larger than PMT and the Company was renamed Trikon Technologies, Inc. In 2002, the Company reincorporated into Delaware as Trikon Technologies, Inc. Our principal executive offices are located at Ringland Way, Newport, South Wales NP18 2TA, United Kingdom, and our telephone number is 44 (0) 1633-414-000. Our head quarters and management team together with our principle operations are based in the United Kingdom.

We design, manufacture, market and sell advanced production equipment used to process semiconductor wafers for the manufacture of integrated circuits. These circuits and devices are key components in most advanced electronic products, such as telecommunications devices, consumer and industrial electronics and computers. Our equipment has typical selling prices between $0.8 million and $3.5 million depending on the configuration of the equipment.

Our products carry out processes to deposit and/or remove materials on the surface of a wafer. In particular, our products are used for three of the primary steps in the manufacture of integrated circuits; chemical vapor deposition (CVD), physical vapor deposition (PVD) and dry etch processes. We sell, install and service our systems to semiconductor manufacturers worldwide and our existing customers include a wide range of semiconductor companies, including large independent device makers. We use a direct sales model in all of our markets except in Asia, where we use a combination of direct sales and distributors.

Our goal is to be responsive to the continually changing needs of our customers and the specialist demands associated with niche applications. There are many applications that require specialized development of standard equipment and we focus on those applications that we believe have significant growth potential. We have identified applications that include solutions for the power semiconductor, systems in a package (SiP.)/MEMS, Bulk Acoustic Wave Filter (BAW) and other Aluminum Nitride deposition needs and compound semiconductor markets. We believe that our 200 mm wafer and below processes satisfy the demands for cost effective production worthy tooling for a large variety of applications, while our flowfill and ORION technology provides solutions for gap fill and low k dielectrics at the leading edge of semiconductor development on 300 mm wafer. Overall, our strategy is to identify applications in which we believe we have a technology advantage, and we are positioned to be agile and responsive to support our customer’s equipment needs.

We make available free of charge through our website, www.trikon.com, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after such material is electronically submitted to the Securities Exchange Commission. Our Internet website and the information contained therein or incorporated therein are not intended to be incorporated into this Annual Report on Form 10-K.

Recent Developments

On March 14, 2005, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Aviza Technology, Inc. (“Aviza”), a privately held global supplier of thermal process and atomic layer deposition systems. Under the terms of the Merger Agreement, Baseball Acquisition Corp. I, a wholly-owned subsidiary of New Athletics, Inc., a newly formed Delaware corporation (“New Athletics”), will merge with and into us (the “Trikon Merger”), and Baseball Acquisition Corp. II, a wholly-owned subsidiary of New Athletics, will merge with and into Aviza (the “Aviza Merger”). Upon consummation of the mergers, we and Aviza will each continue as wholly-owned subsidiaries of New Athletics.

3

Table of Contents

In the Trikon Merger, each outstanding share of our common stock will be exchanged for 0.333 shares (the “Trikon Exchange Ratio”) of New Athletics common stock. In addition, each outstanding option and warrant to purchase shares of our common stock will be assumed by New Athletics and will thereafter represent the right to purchase a number of shares of New Athletics common stock based on the Trikon Exchange Ratio, and the exercise price per share will be adjusted accordingly.

In the Aviza Merger, (i) each outstanding share of Aviza common stock will be exchanged for a number of shares of New Athletics common stock equal to the Aviza Exchange Ratio, (ii) each outstanding share of Aviza Series A Preferred Stock will be exchanged for a number of shares of New Athletics common stock equal to the product of (x) the number of shares of Aviza common stock into which such share of Aviza Series A Preferred Stock would have been convertible immediately prior to the effective time of the Aviza Merger multiplied by (y) the Aviza Exchange Ratio, and (iii) each outstanding share of non-voting, redeemable Aviza Series B Preferred Stock will remain outstanding. In addition, each outstanding option to purchase shares of Aviza common stock will be assumed by New Athletics and will thereafter represent the right to purchase a number of shares of New Athletics common stock based on the Aviza Exchange Ratio, and the exercise price per share will be adjusted accordingly. Each outstanding warrant to purchase shares of Aviza Series A Preferred Stock that remains unexercised at the effective time of the Aviza Merger will be cancelled. The holders of such warrants have executed an irrevocable election to net exercise their warrants prior to the effective time of the Aviza Merger. The “Aviza Exchange Ratio” means the quotient obtained by dividing 8,325,000 by, as of immediately prior to the effective time of the Aviza Merger, the sum of all shares of Aviza common stock then (i) issued and outstanding, (ii) issuable upon the conversion of all shares of Aviza Series A Preferred Stock then issued and outstanding, (iii) issuable upon the exercise of all Aviza options then unexercised, unexpired and outstanding and (iv) issuable upon the conversion, exercise or exchange of any other securities then issued and outstanding.

Immediately after completion of the mergers, the New Athletics board of directors will consist of seven directors, including three current members of our board, three current members of the Aviza board, and one member who is not affiliated with us or Aviza.

Concurrently with entering into the Merger Agreement, Trikon and New Athletics entered into a Stockholder Agreement with VantagePoint Venture Partners IV (Q), L.P., VantagePoint Venture Partners IV, L.P. and VantagePoint Venture Partners IV Principals Fund, L.P. (collectively, “VPVP”). Under the terms of the Stockholder Agreement, among other commitments, VPVP will guarantee certain obligations of New Athletics and Aviza under a credit facility with a third-party commercial bank. In consideration for the guarantee, New Athletics will issue VPVP warrants to purchase 333,333 shares of New Athletics common stock.

The consummation of the merger is subject to the approval of our stockholders and other customary closing conditions. The requisite approval of the stockholders of Aviza has already been obtained. New Athletics intends to account for the transaction as a “purchase” of Trikon by Aviza for financial reporting and accounting purposes, in accordance with U.S. generally accepted accounting principles. The merger is expected to close in the second or third quarter of 2005.

Our Products

Integrated circuits are built on a silicon or other material wafer base, and include a variety of circuit components, such as transistors and other devices, that are connected by multiple layers of wiring (interconnects). To build an integrated circuit, the transistors, capacitors and other circuit components are first created on the surface of the wafer by performing a series of processes to modify, deposit and remove selected film layers. Similar processes are then used to build the layers of wiring structures on the wafer.

Our products are used in these processes to create the integrated circuit, which includes among many different processes; the following basic operations are used to create interconnect layers:

4

Table of Contents

These, and other processes, are repeated in multiple cycles, building up microscopically thin layers, thereby interconnecting countless transistors.

We supply production equipment for two of the most typical deposition techniques, chemical vapor deposition and physical vapor deposition, and plasma etching equipment for selective material removal.

Our proprietary technologies and leading-edge wafer processes capabilities enable our customers to perform new and advanced fabrication processes, thereby improving their products.

Chemical Vapor Deposition

Chemical vapor deposition is a process that can be used to deposit thin films of dielectric (insulating) and, to a lesser extent, conductive materials. During the CVD process, gases that contain atoms of the material to be deposited chemically react to form a thin film of solid material on the wafer. Typical uses for dielectric deposition by CVD include:

Our CVD products are based on our single chamber PECVD Delta 201 product and our Planar fxP and Planar 300 cluster tool products. The Planar systems can be configured with up to six process module positions and in addition to the deposition of silicon dioxide, the most common insulating material deposited, we have our Flowfill, low k Flowfill and Orion processes.

Silicon dioxide, when deposited by conventional techniques, displays small voids inside the structure and does not provide for a high degree of planarization. Our patented Flowfill and low k Flowfill products are directed towards customers that require the deposition of a planarizing layer or the deposition into small gaps that reduces the need for chemical metal polishing (CMP) processing with a corresponding reduction in cost of ownership, or in some cases actually removes the CMP steps. Our Flowfill process is a patented CVD technology that was developed to form high quality silicon dioxide layers that possess the properties of both gap fill and a high degree of planarization. When a high degree of planarization is reached, the upper surface of the layer is relatively flat, irrespective of the topography of the surface covered. Flowfill can fill features less than 40 nm wide with a less than 8:1 height to width ratio and simultaneously achieve a very high degree of planarization for large gaps up to 20 microns.

Our low k Flowfill product has similar gap filling and planarization properties to the Flowfill product but also provides a low k dielectric process, which enables device manufacturers to speed up the performance of their integrated circuits. Our low k Flowfill technology is in production with a tunable dielectric constant (‘dielectric constant’ or ‘k value’) of between 2.8 and 3.3 and has the capability of achieving a dielectric constant of 2.5.

Advanced logic device makers use copper damascene wiring for the interconnect with a low k IMD to enhance device performance. Our ORION technology is an ultra low k offering aimed at advanced copper damascene applications where a k value of 2.5 or below is required. ORION can be deposited at dielectric constants of both 2.5 and 2.2, values, which have been independently verified.

5

Table of Contents

Physical Vapor Deposition

Physical vapor deposition is a process used to deposit conducting, liner and barrier metal layers on an integrated circuit. One of the primary PVD methods is sputtering, a process in which an electrical discharge creates ions of an inert gas, such as argon, which are then accelerated in a vacuum at a target typically composed of pure metal or metal compound, such as aluminum, aluminum compounds, tantalum or copper. The target atoms are sputtered away and deposited on the wafer to form a thin film. Thin conductive films, when patterned by lithography and etching, are used to wire an integrated circuit. These sputtered thin films consist of:

Our Sigma fxP^™ systems are used to sputter uniform layers of pure metals or metal alloys and metal compounds such as oxides or nitrides. These products are cluster tools based on industry standard robotics platforms.

Sigma is designed to be one of the cleanest PVD systems on the market, which is a key technology requirement for sputtering the wafer with as high quality film as possible. Various process chambers are available for a large variety of specific functions. In particular, there are advanced PVD chambers for depositing high quality barrier and liner layers for advanced metalization structures. These consist of the “long throw” Hi-Fill and “ionized metal” Advanced Hi-Fill PVD chambers for improved barrier and liner deposition into high aspect ratio structures. Where step coverage over high aspect ratio features is critical, a metal organic CVD (MOCVD) module is available to provide low temperature, largely conformance titanium nitride films. Additional chambers consist of pre heat and sputter etch. We believe that the Sigma systems have the lowest cost of ownership compared to our main competitors, and cost of ownership is an important factor for integrated circuit manufacturers.

We have developed unique, and in many cases patented processes for many markets. For example, in the rapidly growing power device market, we support both front side interconnect and backside solder metal applications, minimizing operating costs by offering same-type equipment for the entire metal module. We also supply technology for the emerging Aluminum Nitride deposition market, which includes the Bulk Acoustic Wave (‘BAW’) market, a technology driven sector for next generation communication devices. BAW devices require very uniform deposition of piezoelectric films and we have developed significant intellectual property in this arena.

Plasma Etch

Plasma etch is a process that removes precisely defined patterns from the wafer surface by chemically converting exposed portions of the surface into a gaseous by-product that is pumped away from the process chamber. Almost all deposition processes create a film covering the entire wafer surface. Many layers are required only in selected parts of the wafer, for example to create wires of metal that may be created by a series of steps including a Plasma etch step. Firstly, the entire wafer surface is covered with sputtered aluminum alloys and its associated barrier layers. These conductive layers are then coated with photo resist and are exposed to the wiring pattern during the photolithography process. Plasma etching is then used to remove the exposed conductive layer, thus replicating the wiring pattern. The metal remains in place under the protective photo resist, which is then stripped off.

Our Omega plasma etch system is available on two platforms as the Omega fxP^™ and a single chamber Omega 201. The Omega fxP^™, offers up to six process modules combined with tools for wafer alignment and cool-down and two vacuum cassette stations. Multiple chambers provide high throughput for the high volume

6

Table of Contents

user or the option to ‘mix and match’ different plasma sources so that advanced sequential etching processes can be addressed. The Omega 201 features our plasma source technologies in a single chamber format that combines high performance etching with small footprint and low costs. These attributes make the tool particularly well suited to cost-sensitive manufacturing of silicon integrated circuits, compound device makers and other niche markets.

Both platforms support our three main plasma sources, our M0RI^™ etch technology (M0RI), Plasma Enhanced Reactive Ion Etch (PERIE) and Inductively Coupled Plasma (ICP). Additional modules may also be added that provide secondary functions, such as post etch corrosion processes. M0RI offers the highest plasma density that provides process solutions for the most advanced polysilicon, oxide and low k etch requirements. The ICP is used extensively for high-density aluminium and polysilicon etching as well as for a broad range of front and back face processing on compound semiconductors. The PERIE offers medium plasma density for silicon and dielectric etching where the feature sizes are less challenging. We have also developed a variant of our M0RI etch process chamber specifically for very high aspect ratio silicon etching/micro machining. This Deep Silicon (DSi) chamber offers benefits to production users in Systems in a Package (SiP)/Wafer Level Packaging (WLP) and conventional MEMS applications. Deep Silicon etch techniques are used in a myriad of applications such as the manufacture of discrete components in SiP and accelerometers for car air bags. We also offer a Gas Phase Etch (GPE) module, which removes sacrificial layers to create microscopic moveable structures.

Marketing, Sales and Customer Support

We sell, install and service our systems to semiconductor manufacturers worldwide and our focus is upon building positive long-term relationships with our customers. We believe that we offer highly reliable products that give our customers a competitive edge through technology or cost advantage, comprehensive field support and a responsive parts replacement and service program. Our sales are divided among three geographic regions – Europe, North America and Asia. Set forth below in tabular format is the geographic distribution of our revenue for the past three fiscal years, expressed as a percentage of sales: -

In Europe, we market and sell our products primarily through our direct sales and service operations in the United Kingdom, the Netherlands, France and Germany. In North America, we also market and sell our products through our direct sales organization supported by regional service operations. In Asia we combine direct sales, agency and distributor arrangements. In Japan we use a local distributor. In Taiwan, China and the other South Eastern Asian markets we use the services of a regional agent supported in China and Taiwan by a direct sales presence.

Our total revenue includes amounts from certain individual customers that exceed 10% of our total revenue. For the year ended December 31, 2004 two customers exceeded 10% of revenues for the year. Infineon AG represented 16% of sales and a North American company represented 13%. For the year ended December 31, 2003, Sarnoff Corporation, Infineon AG and Philips accounted for 16%, 13% and 10% of our total revenue respectively. For the year ended December 31, 2002, Phillips was the only customer who exceeded 10% of our revenue, accounting for 11% of our revenue. Our largest customers may vary from year to year depending upon, among other things, a customer’s budget for capital expenditures, plans for new fabrication facilities and new product introductions.

Our sales are not usually seasonal in nature but are cyclical due to the buying patterns of major semiconductor manufacturers. These buying patterns are based on several factors including anticipated market demand for integrated circuits, the development of new technologies and general economic conditions.

7

Table of Contents

We provide customers with evaluation systems of our new products as part of our sales efforts. The provision of evaluation systems is an important step in the lengthy sales cycle. The average duration of an evaluation period for systems can be extensive and can exceed one year. Consequently, as we expand our sales efforts, particularly in new markets, we believe that continued investment in demonstration and evaluation systems will be needed.

We believe that a comprehensive support program is an essential component for each customer. We have developed an experienced central customer support group in addition to regional based service and support staff at local centers who are in close contact with our customers and provide comprehensive support programs.

Research, Development and Engineering

We believe that our future success will depend upon our ability to continue to improve our systems and technologies and to develop new products that compete effectively on the basis of technical performance and total cost of ownership. These technologies and systems will also need to meet customer requirements and emerging industry standards. Accordingly, we devote a significant portion of our personnel and financial resources to research and development programs and seek to maintain close relationships with our customers in order to remain responsive to their product needs. As of December 31, 2004, we employed 49 professional and technical personnel in research, development and engineering including our head office support team and our expenditure for research and development during the fiscal years 2004, 2003 and 2002 were $8.6 million, $9.6 million and $10.7 million, respectively.

Our research and development group is responsible for identifying new technology applications and developing processes to develop solutions for our target markets and customers. Our current significant research and development programs include projects to address process development for the needs of power semiconductors, MEMS/SiP device customers, Aluminium Nitride deposition including BAW devises, compound semiconductors and the development of our flowfill and Orion technologies. Resources are also being focused on implementing product cost reduction programs that can favorably impact our gross margin and allow us to compete in the cost competitive environment that exists today.

Manufacturing, Raw Materials and Supplies

Our manufacturing operations consist of the manufacture, assembly and testing of components and modules and their integration into finished systems at our Newport, United Kingdom facility, where substantially all of our long-lived assets are maintained. We purchase a significant number of parts including mechanical and electrical components from a variety of suppliers. We seek to qualify multiple suppliers for our purchased components, although this is not possible for all components and purchased assemblies and therefore any failure by a supplier to perform could have a short-term adverse effect on our operating results. Most significantly our Sigma^®fxP^™, Planar^™ fxP^™ and Omega^™ fxP^™ systems (“cluster tools”) are designed around an automation module supplied by Brooks Automation. Due to the high cost of these modules we keep very few in inventory. If Brooks Automation fails to deliver the component on a timely basis, delivery of our cluster tools will be delayed and sales may be lost. If Brooks Automation is unable to deliver any such modules for a prolonged period of time, we will have to redesign our cluster tools so that we may utilize other wafer transport systems.

Our manufacturing facility operates at the high levels of cleanliness required in the semiconductor industry. Our manufacturing and final test area is class 1000 representing a high level of cleanliness (a class is a standard definition which represents a number of particles per million, the smaller the number of particles the cleaner the facility). We also support our development and sales process with a class 100 engineering clean room and a class 10 processes and product demonstration room.

We also operate a CNC machinery center which produces chamber components and other parts and wafer transport assemblies. In order to ensure that the CNC facility remains competitive in both quality and price, and

8

Table of Contents

to help cover fixed costs, it also produces products for third parties. Revenue associated with this facility that is not related to the semiconductor equipment business was approximately $1.8 million; $0.9 million and $1.2 million during the years ended December 31, 2004, 2003 and 2002 respectively.

Competition

The global semiconductor equipment industry is highly competitive and subject to rapid technological change. Historically, new technologies have only gained acceptance when industry leaders have concurrently adopted such new technologies. Significant competitive factors include the size of the company, timing of new product offerings, system performance, cost of ownership, size of installed base, depth and breadth of product line and customer support.

We face significant competition from various suppliers of systems that utilize similar or alternative technologies. Competitors range from very large, well capitalized corporations with a diversified product portfolio to smaller companies that compete with a single innovative product. However, many of our competitors are substantially larger companies, some with broader product lines. They have well-established reputations in the markets in which we compete, greater experience with high volume manufacturing, broader name recognition, substantially larger customer bases, and substantially greater financial, technical, manufacturing and marketing resources.

We have granted non-exclusive, worldwide, paid-up licenses of our M0RI technology to Applied Materials and Lam Research. As a result, in the future our etch products may have to compete with products of Applied Materials or Lam Research based on our technologies. The license agreements do not preclude us from utilizing, or licensing to other third parties, the licensed technologies.

Backlog

As of December 31, 2004, our backlog was approximately $6.1 million, as compared to approximately $6.2 million at December 31, 2003. Our backlog consists of system purchase orders that provide for delivery within the following year and the unearned revenue of systems previously shipped. Backlog includes only systems for which a purchase order has been received and a delivery date assigned. Orders are typically subject to cancellation or delay by the customer with limited or no penalties. Because of possible changes in delivery schedules and cancellations of orders, our backlog at any particular date is not necessarily representative of actual sales for any succeeding periods, nor is backlog any assurance that we will realize profit from completing these orders.

Intellectual Property

We believe that our competitive position is significantly dependant upon skills in engineering, manufacturing, customer support and marketing in addition to our patent position. Protection of our technological assets by obtaining and enforcing patents is important and we file patent applications in the United Kingdom, United States and other countries as we believe to be appropriate. We currently hold 46 U.S. and 89 foreign patents with patents issued and pending in key markets around the world. The issued patents and any subsequent issued patent arising from our pending applications expire between 2009 and 2023.

There can be no assurance that patents will be issued on our pending patent applications or that competitors will not be able to legitimately ascertain proprietary information embedded in our products that is not covered by patent or copyright. In such case, we may be precluded from preventing the competitor from making use of such information. In addition, should we wish to assert our patent rights against a particular competitor’s product, there can be no assurance that any claim in any of our patents will be sufficiently broad nor, if sufficiently broad, any assurance that our patent will not be challenged, invalidated or circumvented, or that we will have sufficient resources to prosecute our rights.

9

Table of Contents

In the normal course of business, we receive inquiries regarding possible patent infringement. In dealing with such inquiries, it may become necessary or useful for us to obtain or grant licenses or other rights. However, there can be no assurance that such licenses or rights will be available to us on commercially reasonable terms. If we are not able to resolve a claim, negotiate a settlement of the matter, obtain necessary licenses on commercially reasonable terms and/or successfully prosecute or defend our position, our business, financial condition and results of operations could be materially and adversely affected.

Environmental Matters

We are subject to regulations relating to the use, storage, discharge and disposal of hazardous chemicals and gases used during customer demonstrations and in research and development activities. The United Kingdom has adopted a comprehensive environmental law known as the Environmental Act 1995, which, among other things, deals with the allocation of responsibility for the clean up of contaminated property and expands potential liability with respect to the remediation of such contamination. We lease a number of facilities in the United Kingdom, and failure to comply with present or future regulations could result in substantial liability, suspension or cessation of our operations, restrictions on our ability to expand at our present locations, or requirements for the acquisition of significant equipment or other significant expense. To date, compliance with environmental rules and regulations has not had a material effect on our operations. We believe that we are in material compliance with all applicable environmental rules and regulations and are in compliance with ISO14000 environmental standards.

Employees

As of December 31, 2004, we had 190 full-time employees and 24 temporary employees or contractors. None of our employees are covered by a collective bargaining agreement and we consider our relations with our employees to be good.

ITEM 2. PROPERTIES

Certain information concerning our principal properties at December 31, 2004 is set forth below:

We have a number of smaller properties and field offices located in the United States, the United Kingdom, Germany and France. We believe that our properties adequately serve our present needs.

10

Table of Contents

ITEM 3. LEGAL PROCEEDINGS

On March 10, 2004 Dr. Jihad Kiwan departed the Company as Director and Chief Executive Officer. On March 29, 2004 and April 2, 2004 we received letters from a United Kingdom law firm and from a French law firm, respectively, on behalf of Dr. Kiwan, detailing certain monetary claims for severance amounts due to Dr. Kiwan with respect to his employment with Trikon. On April 28, 2004 Dr. Kiwan filed a lawsuit in France and on June 10, 2004 filed similar proceedings in the United Kingdom. Dr. Kiwan has subsequently withdrawn the proceedings in the United Kingdom. We are in the process of vigorously defending against the French claim. We do not believe that the outcome of these claims will be material to results of operations or the financial condition of Trikon.

In addition, from time to time we become involved in ordinary, routine or regulatory legal proceedings incidental to our business.

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

No matters were submitted to a vote of our stockholders during the quarter ended December 31, 2004.

11

Table of Contents

PART II

Market for the Registrant’s Common Equity

Our Common Stock trades on the Nasdaq National Market under the symbol “TRKN”. The quarterly high and low sale prices for Common Stock as reported by the Nasdaq National Market for the periods indicated below are as follows:

As of February 22, 2005, there were 168 holders of record of our common stock. On February 22, 2005, the closing price of the Common Stock as reported on the Nasdaq National Market was $2.06 per share.

We have never declared or paid dividends on the Common Stock and we do not expect to pay dividends on our common stock in the foreseeable future.

The information required by this item regarding equity compensation plans is incorporated by reference to the information set forth in item 12 of this Annual Report on Form 10-K.

ITEM 6. SELECTED FINANCIAL DATA

The following selected consolidated financial data are qualified by reference to and should be read in conjunction with our consolidated financial statements and notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which are included elsewhere in this report. The selected consolidated financial data set forth below as of December 31, 2004, and 2003 and for the years ended December 31, 2004, 2003, and 2002 have been derived from our audited financial statements included elsewhere in this annual report. The selected consolidated financial data set forth below as of December 31, 2002, 2001 and 2000 and for the years ended December 31, 2001 and 2000 have been derived from our audited financial statements that are not included in this annual report.

12

Table of Contents

13

Table of Contents

Overview

Our business is to design, manufacture, market and sell advanced production equipment used in the production of semiconductors and to provide related support services. We face a variety of challenges in responding to the dynamics of this industry, which is characterized by a high level of volatility caused by sudden changes in demand for semiconductors and manufacturing capacity. In addition, because of the large unit price associated with our systems, which typically vary between $0.8 million and $3.5 million, our backlog, shipments and revenues can be affected, positively or negatively, by a relatively small change in the number of orders.

In addition to the initial sale of equipment, we also provide on site support and spares parts. Sales of on-site support and spare parts were $11.7 million, $10.7 million and $9.0 million (including sales of our CNC subsidiary of $1.8 million, $0.9 million and $1.1 million) for the years ended December 31, 2004, 2003 and 2002, respectively. The sales of support and spares are less volatile than the sale of the equipment.

Recent Developments

On March 14, 2005, we entered into an Agreement and Plan of Merger with Aviza Technology, Inc., a privately held global supplier of thermal process and atomic layer deposition systems. Under the terms of the Merger Agreement, a wholly-owned subsidiary of New Athletics, Inc., a newly formed Delaware corporation, will merge with and into us, and a wholly-owned subsidiary of New Athletics will merge with and into Aviza. Upon consummation of the mergers, we and Aviza will each continue as wholly-owned subsidiaries of New Athletics.

New Athletics intends to account for the transaction as a “purchase” of Trikon by Aviza for financial reporting and accounting purposes, in accordance with U.S. generally accepted accounting principals. Product revenues for the three months and year ended December 31, 2004 include $900,000 attributable to sales of products to Aviza.

The consummation of the merger is subject to the approval of our stockholders and other customary closing conditions. The requisite approval of the stockholders of Aviza has already been obtained. The merger is expected to close in the second or third quarter of 2005.

Critical Accounting Policies

General

Our discussion and analysis of the financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles.

14

Table of Contents

A critical accounting policy is defined as one that is both material to the presentation of our financial statements and requires management to make difficult, subjective or complex judgments that could have a material effect on our financial condition and results of operations. Specifically, critical accounting estimates generally require us to make assumptions about matters that are highly uncertain at the time of the estimate; and if different estimates or judgments were used, the use of these estimates or judgments would have a material effect on our financial condition or results of operations.

The estimates and judgments we make that affect the reported amount of assets, liabilities, revenues and expenses are based on our historical experience and on various other factors, which we believe to be reasonable in the circumstances under which they are made. Actual results may differ from these estimates under different assumptions or conditions. We consider our accounting policies related to revenue recognition, foreign currency translation, the valuation of inventories including demonstration inventory and accounting for the costs of installation and warranty obligations to be critical accounting policies.

Revenue Recognition

We derive our revenues from three sources—equipment sales, spare parts sales and the provision of services. In accordance with Staff Accounting Bulletin 104 issued by the staff of the Securities and Exchange Commission, we recognize revenue when all the following criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or services rendered, the sales price is fixed or determinable and collectivity is reasonably assured. For transactions that consist of multiple deliverables we allocate revenue to each of the deliverables based upon relative fair values and apply the revenue recognition criteria above to each element.

Generally, we recognize revenue on shipment, as the equipment is pre-tested in the factory prior to shipment and our terms of business are FOB factory. For new customers, or new products, revenue is recognized on shipment only if the customer attends and approves the pre-shipment testing procedures and we, and the customer, are satisfied that the performance of the equipment, once installed and operated, will meet the customer-defined specifications. Generally even with new customers we recognize revenue on shipment because the customer attends and approves the pre-shipment testing. The amount of revenue recorded is reduced by the amount of any customer retention (typically between 10% and 20%), which is not payable by the customer until installation is completed and final customer acceptance is achieved.

The amount of revenue related to system shipments and customer retentions deferred at December 31, 2004 was $1.9 million compared to $5.1 million at December 31, 2003. Generally, the provision of installation and commissioning services are not considered essential to the functionality of the equipment.

Equipment sold as demonstration or evaluation units are recognized as revenue on transfer of title and either final acceptance, or satisfactory completion of testing to demonstrate that the equipment meets all the customer defined specifications.

Revenue related to spare parts is recognized on shipment. Revenue related to service contracts is recognized ratably over the duration of the contracts. Revenue deferred on service contracts was $0.3 million at December 31, 2004 compared to $0.7 million at December 31, 2003.

During fiscal 2003 we entered into a contract to develop a piece of equipment for a customer and we determined that the revenue associated with this transaction should be accounted for in accordance with SOP 81-1—‘Accounting for the performance of Construction-Type and certain Production-Type contracts’. The developed equipment was shipped to the customer in fiscal 2003, however significant development work was required and therefore no revenue was recognized with respect to this project in fiscal 2003. This contract was completed in fiscal 2004 and the revenue was recognized accordingly.

15

Table of Contents

Foreign Currency Translation

Most of our operations are located within the United Kingdom and most of our costs are incurred in British pounds. However our system sales are generally in US dollars and, to a lesser extent, in euros, and we report in US dollars. As a result, fluctuations in the exchange rate between the US dollar and the British pound could have a significant effect on our reported earnings and net asset position. We have determined that the functional currency for all UK operations is the British pound and as a result our actual expenses expressed in US dollars will fluctuate with changes in foreign currency exchange rates and result in currency gains and losses, which are charged to net income. Changes in the value of non-US net assets as a result of these movements of foreign currency exchange rates are treated as changes to the cumulative translation adjustment on the balance sheet. We also have significant intercompany loans between the United Kingdom operating subsidiary and the parent, which were determined as being repayable in the foreseeable future. This determination results in exchange gains and losses associated with these loans being accounted for in the statement of operations.

Inventory Valuation

Inventories are stated at the lower of cost or net realizable value, using standard costs which approximate to actual cost. We maintain a perpetual inventory system and continuously record the quantity on hand and standard cost of each product including purchased components, sub assemblies and finished goods. We maintain the integrity of the perpetual inventory through a cycle stock count program.

Our standard costs are re-assessed at least annually and generally reflect the most recent purchase cost and currently achievable assembly and test labor and overhead rates. We estimate our labor and overhead rates based upon average utilization rates and treat as a period cost abnormal absorption variances, which arise due to low or high production volumes. As a result of the low levels of production, significant negative volume variances are being experienced, which has resulted in a gross margin that is below levels that could be achieved at higher revenue levels.

We also make provision for slow moving and obsolete inventory and evaluate their adequacy on a quarterly basis. For our work in process and finished goods inventory, which generally consist of specific systems or modules, we compare the inventory on hand to current sales and market forecasts and other information that indicates the ability to identify a purchaser for such equipment. We apply a formula approach to reserves against raw materials and spares inventory based upon 12 months historic usage, applying different criteria to components that are required for current products, non-current products and spares.

A major component of the estimate of inventory reserves is our forecast of future customer demand, technological and/or market obsolescence, and general semiconductor market conditions. If future customer demand or market conditions are less favorable than our projections then additional inventory write-downs may be required, and these would be reflected in cost of sales in the period the reserves were adjusted.

Installation and Warranty

Our contracts cover on-site installation services and provide for a warranty of the machine. Generally we accrue for the costs of installation at the time of revenue recognition. Our standard warranty period varies from 12 to 24 months, depending on a number of factors including the specific equipment purchased.

We account for the estimated warranty cost as a charge to cost of sales at the time we recognize revenue. The warranty reserve is based upon historic product performance and is based on a rolling 12-month average of the historical cost per machine per warranty month outstanding. We also recalculate the estimated warranty cost for all remaining systems still under warranty using the most recent historic average and the difference is included as a component of cost of sales. We do not maintain any general reserves for warranty obligations. Actual warranty costs in the future may vary from historic costs, which could result in adjustments to our warranty reserves in future periods that are more volatile than in recent years.

16

Table of Contents

Comparison of the Years Ended December 31, 2004 and 2003

Product Revenue.

Product revenues for the year ended December 31, 2004 increased 28% to $36.7 million compared to $28.7 million for the year ended December 31, 2003. Shipments for the year ended December 31, 2004 were $33.7 million compared to $32.7 million shipped in the prior year.

Product revenues outside of the United States accounted for approximately 72% and 61% of total revenues for the years ended December 31, 2004 and 2003, respectively. We expect that sales outside of the United States will continue to represent a significant percentage of our product sales through 2005.

Our sales by product as a percentage of total revenue are as follows:

Due to the large unit price associated with our systems, we anticipate that our product sales will continue to be made to a small number of customers in each quarter. The quantity, geographical location and type of product may fluctuate significantly from quarter to quarter and the individual customers to whom these products are sold can also change from quarter to quarter. Further, our customers are demanding greater flexibility and shorter delivery times, which increase the fluctuations that may occur each quarter. Due to the unit prices associated with our products the level of sales activity by type of product in any quarter can significantly impact the product and geographical mix, and are therefore not indicative of a trend.

License Revenues.

License revenues are associated with an exclusive license of power supply technology and a non-exclusive license of our M0RI technology to a systems integrator in Japan for a non-competing application. License revenues increased 45% to $157,000 for the year ended December 31, 2004 compared to $108,000 received during the year ended December 31 2003.

Gross Margin.

The gross margin for the year ended December 31, 2004 was 32.0% as compared to 26.8% for the year ended December 31, 2003. The improvement in gross margin is primarily attributable to improved efficiency within manufacturing and customer support with the combination of increased utilization and significantly reduced headcount following cost reductions in fiscal 2003 and 2004.

Research and Development Expenses.

Research and development expenses for the year ended December 31, 2004 were $8.6 million or 23.3% of total revenues compared with $9.6 million or 33.4% of total revenues for the prior year. The decrease in research and development expenses for fiscal 2004 compared to the prior year reflects reduced headcount and other expenses. We believe, however, that the current levels of expenditure are adequate and are focused upon the development of new processes to further advance our proprietary PVD, CVD and etch technologies This includes

17

Table of Contents

the development of novel process solutions for emerging applications and for advanced applications at technology nodes of 90nm and below.

We have also received an offer of a grant from the UK government to develop Broad ion beam deposition technology for MRAM applications and we expect to develop this technology over the next eighteen months in collaboration with other parties. This grant will reimburse 50% of our total project costs and expenditure to a maximum reimbursement of $3.1 million. None of these funds has been received as of December 31, 2004 and are contingent on all parties accepting the offer. Although we have been informed that one party may not wish to continue the program, we have been informed that it will be possible to substitute such party. The expenditure and funding are expected to commence in fiscal 2005 and would be expended/received over the eighteen month period of the project.

Selling, General and Administrative Expenses.

Selling, general and administrative expenses for the year ended December 31, 2004 were $19.9 million, or 54.1% of total revenues, compared to $20.0 million, or 69.5% of total revenues, in the year ended December 31, 2003. The major portion of our costs are incurred in British pounds and therefore our expenses, when reported in U.S. dollars increased $2.1 million solely as a result of the unfavorable movement in exchange rate in fiscal 2004 or $2.1. However, on a like for like exchange rate basis, selling general and administration expenses were reduced by $2.2 million or 6% of total revenue for the year ended December 31, 2004.

The year ended December 31, 2004 includes non-recurring costs totaling $1.9 million for higher than usual legal fees, consultancy services including, expenses related to compliance costs with respect to section 404 of the Sarbanes Oxley Act, costs of a reduction in force and other higher than normal legal and professional charges, compared to similar non recurring costs of $0.9 million in the prior year.

Restructuring Costs

In the fourth quarter of fiscal 1997 the Company commenced a restructuring program related to the closure of its M0RI etch operations located in Chatsworth, California, which included the transfer of the M0RI technology to the Company’s Omega platform and the obsolescence and phase-out of the existing platform. An accrual was charged to the income statement in fiscal 1997 for this restructuring. During fiscal 1998 and 1999 the Company completed this reorganization and negotiated settlements with many of its customers. The restructuring reserve was reduced accordingly. The Company has carried a residual accrual in the amount of $1.2 million since December 31, 1999 for other potential claims arising out of this restructuring. Following a review of the situation in the third quarter of 2004, the Company has concluded that the probability of further claims is remote and accordingly the reserve has been reversed to the income statement during the year ended December 31, 2004.

Result from Operations.

We incurred a loss from operations of $15.6 million in the year ended December 31, 2004 compared to a loss of $25.5 million in the prior year. The combination of increased revenue, better gross margins and reduced operating expenses all contributed to the reduction in the loss from operations. The pension settlement charge of $3.5 million in the year ended December 31, 2003 and the release of the reserve for restructuring in fiscal 2004 of $1.2 million also had an effect on the comparison of the results of operations for fiscal 2004 when compared to fiscal 2003.

Other Income.

We earned $0.5 million during the year ended December 31, 2003 in connection with the sale of property we no longer required for our operations. No similar income was received in fiscal 2004.

18

Table of Contents

Interest Income and Expense, Net.

Net interest income was $60,000 for the year ended December 31, 2004 compared with $27,000 for the year ended December 31, 2003. Net interest income increased in the year ended December 31, 2004 compared to the prior year, due to higher interest payable in fiscal 2003 from interest payable on taxes incurred in fiscal 2003, which did not reoccur in fiscal 2004. Excluding this item, net interest income declined due to lower cash balances.

Income Taxes.

For the year ended December 31, 2004 we recorded a tax charge of $0.2 million compared to a tax charge of $0.2 million for year ended December 31, 2003 resulting in an effective income tax rate of (1.6)% and (1.0)%, respectively. The current year tax charge primarily relates to US state franchise taxes and to income taxes in our non United Kingdom subsidiaries. The low effective tax rate arises primarily as a result of the generation of net operating losses for which we have not recognized any deferred tax assets, which can only be utilized against future profits. See Note 6 of the notes to the financial statements for a detailed reconciliation of the tax rate for 2004 and 2003.

As of December 31, 2004, we had US federal losses of $25.6 million, various state operating losses and United Kingdom net operating losses of approximately $64.4 million, which can be offset against future income. Our ability to use our US and United Kingdom net operating losses and credit carry forwards will depend upon the ability to generate future income within the US and United Kingdom to utilize these losses. Further, a portion of our US net operating losses are subject to annual limitations arising from a change of control as defined by Section 382 of the internal revenue code, as revised.

Comparison of the Years Ended December 31, 2003 and 2002

Product Sales.

Product sales for the year ended December 31, 2003 decreased 12% to $28.7 million compared to $32.8 million for the year ended December 31, 2002. Shipments for the year ended December 31, 2003 were $32.7 million compared to $28.9 million shipped in the prior year. The level of sales and shipments in the year reflected the effects of the global slowdown in the semiconductor industry.

Our sales by product as a percentage of revenue are as follows:

Sales outside of the United States accounted for approximately 61% and 67% of total revenues for the years ended December 31, 2003 and 2002, respectively.

License Revenues.

License revenues are associated with an exclusive license of power supply technology and a non-exclusive license of our M0RI technology to a systems integrator in Japan for a non-competing application. License

19

Table of Contents

revenues increased 116% to $108,000 for the year ended December 31, 2003 compared to $50,000 received during the year ended December 31 2002.

Gross Margin on Product Sales.

The gross margin on product revenues for the year ended December 31, 2003 was 26.8% as compared to 25.4% for the year ended December 31, 2002. Cost of goods sold for the year ended December 31, 2003 included $290,000 relating to the costs of a reduction in workforce compared to $345,000 in the year ended December 31, 2002. Cost of goods sold for the year ended December 31, 2003 also included a non-cash charge of $2.1 million with respect to the write-down of inventory associated with the current downturn in the semiconductor business compared to $2.3 million in the prior year. Better utilization of manufacturing costs positively impacted the gross margin in fiscal 2003, but this was offset in part by an unfavorable product mix compared to 2002.

Research and Development Expenses.

Research and development expenses for the year ended December 31, 2003 were $9.6 million or 33.4% of total revenues compared with $10.7 million or 32.6% of total revenues for the prior year. The major focus of our research and development efforts continued to be the development of new processes in further advancing our proprietary PVD, CVD and etch technologies as well as adding enhancements to our existing products.

Selling, General and Administrative Expenses.

Selling, general and administrative expenses for the year ended December 31, 2003 were $20.0 million, or 69.5% of total revenues, compared to $18.7 million, or 57.0% of total revenues, in the year ended December 31, 2002. As the majority of our costs are incurred in British pounds, in local currency terms our expenses declined in fiscal 2003 compared to fiscal 2002. While selling general and administrative expenses when reported in US dollars for the year ended December 31, 2003 compared to the prior year increased 7%, the movement in the US dollar exchange rate to the British pound increased reported expenses by 9%. In addition, in fiscal 2003 we incurred non-recurring costs associated with employer social security taxes relating to the vesting of 1,149,281 shares, a contested 2003 annual shareholder meeting, accruals with respect to leasehold buildings no longer used by the Company and the succession of the Chief Executive Officer, which totaled $941,000.

Result from Operations.

We incurred a loss from operations of $25.5 million in the year ended December 31, 2003 compared to a loss of $21.9 million in the prior year. Lower revenue was the major component of the increase in the loss from operations. The pension settlement charge of $3.5 million in the year ended December 31, 2003 compared to $818,000 in the year ended December 31, 2002 had a significant effect upon the result of operations for fiscal 2003. See note 11, ‘Pensions and other Post Retirement Benefits’ in the notes to the consolidated financial statements.

Other Income.

We earned $474,000 during the year ended December 31, 2003 in connection with the sale of property we no longer required for our operations.

Interest Income and Expense, Net.

Net interest income was $27,000 for the year ended December 31, 2003 compared with $112,000 for the year ended December 31, 2002. Net interest income was reduced in the year ended December 31, 2003 compared to the prior year, in part due to lower cash balances, but also due to interest payable on taxes outstanding from the prior year, which was settled during the year.

20

Table of Contents

Income Taxes.

For the year ended December 31, 2003 we recorded a tax charge of $0.2 million compared to a tax credit of $2.2 million for year ended December 31, 2002 resulting in an effective income tax rate of (1.0%) and 9.9%, respectively. The tax charge primarily relates to US state franchise taxes and to income taxes related to operations in our German subsidiary

We generated a significant portion of our consolidated pre-tax losses for the year ended December 31, 2003 and December 31, 2002 within the United Kingdom, which has a lower statutory rate of 30% compared to the US federal rate of 35%. In addition to the lower statutory rate, the generation of net operating losses results in fluctuations in the effective tax rate, as we have not recognized any deferred tax assets with respect to net operating losses, which can only be utilized against future profits. We incurred United Kingdom income taxes in fiscal 2001 and we were able to carry back some of the tax losses incurred in the United Kingdom during fiscal 2002 against these taxes and hence recognize a deferred tax benefit. See Note 6 to the notes to the financial statements for a detailed reconciliation of the tax rate for 2003 and 2002.

Liquidity and Capital Resources

At December 31, 2004, we had $21.2 million in cash and cash equivalents, compared to $31.6 million at December 31, 2003.

At December 31, 2003, we had a term loan from a British bank with a balance outstanding of 6.2 million British pounds (approximately $11.2 million at the December 31, 2003 exchange rate). The term loan was repaid in full during the first quarter of fiscal 2004.

In July 2003 we entered into a two-year revolving credit facility for 5.0 million British pounds (approximately $9.6 million at the December 31, 2004 exchange rate) (‘2003 facility’). Interest on the 2003 facility will be incurred at LIBOR plus 1.75% for borrowings in British pounds and at the bank’s short-term offered rate plus 1% for loans in any other currency. At December 31, 2004 we had drawn down the whole of this facility.

The 2003 facility, as subsequently amended, includes financial covenants that require that we maintain a consolidated net worth of not less than $40 million, and that our interest expense on the loan net of any interest receivable from the same British bank does not exceed 70,000 British pounds in any one fiscal quarter. At December 31, 2004 our consolidated net worth was $40.9 million. The primary factors that affect our consolidated net worth are foreign currency translation and net losses. To the extent the US dollar strengthens against the British pound or we incur net losses, our consolidated net worth will continue to decline. If our consolidated net worth falls below $40 million then we would be in breach of this covenant and our bank could exercise its right to cause us to repay amounts outstanding under the 2003 facility and not permit such amounts to be redrawn. We may breach this covenant at the end of the first quarter of 2005, and in any event unless the 2003 facility is renewed, it will expire pursuant to it’s terms at the end of the second quarter of 2005 and all amounts outstanding at that time will be required to be repaid.

Our cash and cash equivalent balances, net of amounts borrowed under the 2003 facility was $11.6 million at December 31, 2004 and represents our primary source of liquidity. Our cash used in operating activity has been $7.2 million, $10.8 million and $6.9 million in the years ended December 31, 2004, 2003 and 2002 respectively. As a result, if we do not continue to increase revenue, reduce operating costs and return to profitability we may use all, or a substantial part of our cash balance to fund our current obligations and our operations.

The amount of funding required by operations in fiscal 2005 will depend on numerous factors including, market conditions within the semi conductor industry, general economic conditions, our ability to increase our

21

Table of Contents

revenue, or reduce our expenditures or our ability to reduce our working capital requirements in areas such as inventory and accounts receivable. However, management believes, based upon our current forecast for revenues, operating expenses, cashflows and other financial metrics that the resources available at December 31, 2004 are sufficient to fund operations for at least the next twelve months. If anticipated revenues from fiscal 2005 do not meet our expectations we would continue to seek to scale back our operations to lower the use of cash. We also anticipate that we would seek to raise additional debt or equity funding during the next twelve months and to seek an extension or replacement to the current line of credit.

At December 31, 2004, our cash obligations and commitments relating to our debt obligations and lease payments were as follows ($’000):

With the exception of the above operating leases we have no off balance sheet financing activities.

22

Table of Contents

RISK FACTORS

We have experienced losses over the last few years and we may not be able to achieve profitability and may need to raise additional capital to support our operations.

We have experienced losses of $13.8 million, $24.6 million and $19.6 million during the years ended December 31, 2004, 2003 and 2002, respectively. We will need to increase sales and/or reduce costs to return to profitability. However we may never generate sufficient revenues to achieve profitability. Even if we do achieve profitability, we may not sustain or increase profitability on a quarterly or annual basis in the future.

As of December 31, 2004, we had cash and cash equivalents of approximately $21.2 million and short-term debt of approximately $9.9 million. The short-term debt includes 5 million British pounds ($9.6 million at the December 31, 2004 exchange rate) outstanding under our credit facility that we may be required to repay if we breach the consolidated net worth covenant in the facility. A breach of this covenant may occur at the end of the first quarter of fiscal 2005 and in any event, this facility expires on June 30, 2005. There can be no assurance that a replacement facility can be obtained. and we may need to raise additional capital in the next twelve months from the sale of equity. In addition, regardless of whether such financing is absolutely necessary, we may seek additional debt or equity financing in the next twelve months in order to strengthen our cash position. We may not be able to obtain additional financing on acceptable terms, or at all. If we issue additional equity or convertible debt securities to raise funds, the ownership percentage of our existing stockholders would be reduced and they may experience significant dilution. New investors may demand rights, preferences or privileges that differ from, or are senior to, those of existing holders of our common stock, including warrants in addition to the securities purchased and protection against future dilutive transactions. If we are unable to achieve positive cash flows or raise additional capital, we may be forced to implement further expense reduction measures, including, but not limited to, the sale of assets, the consolidation of operations, workforce reductions, and/or the delay, cancellation or reduction of certain product development, marketing or other operational programs.

We may not achieve profitability in fiscal 2005 and may not achieve the sales necessary to avoid further expense reduction measures in the future. Such expense reduction measures could materially adversely affect our results of operations and prospects and may not be successful in preserving sufficient cash to continue operations.

The semiconductor industry is highly cyclical and unpredictable.

Our business depends upon the capital expenditures of semiconductor manufacturers, which in turn depend on the current anticipated market demand for integrated circuits. The semiconductor industry has historically been cyclical due to sudden changes in demand for semiconductors and manufacturing capacity using the latest technology. These changes in demand have affected the timing and amounts of customers’ capital equipment purchases and investments in technology, and continue to affect our orders, net sales, gross margin and results of operations.

During periods of decreasing demand for integrated circuit manufacturing equipment, we must be able to appropriately align our cost structure with prevailing market conditions and effectively motivate and retain key employees. Conversely, during periods of increasing demand, we must have sufficient manufacturing capacity and inventory to meet customer demand, and must be able to attract, retain and motivate a sufficient number of qualified individuals. If we are not able to timely adjust our cost structure with business conditions and/or to effectively manage our resources and production capacity during changes in demand, our business, financial condition or results of operations may be materially and adversely affected.

We are exposed to risks associated with a highly concentrated customer base.

Our orders and revenue are from a relatively small number of manufacturers of integrated circuits and we expect this to continue. In fiscal 2004 two customers exceeded 10% of revenue. This may lead customers to demand from us less favorable pricing and other terms. In addition, sales to any single customer may vary

23

Table of Contents

significantly from quarter to quarter. If current customers delay, cancel or do not place orders we may not be able to replace these orders with new orders. As our products are configured to customer specifications, changing, rescheduling or canceling orders may result in significant and often non-recoverable costs. The resulting fluctuations in the amount of and terms of orders could have a material adverse effect on our business, financial condition and results of operations.

We will not be able to compete effectively if we fail to address the technology needs of our customers.

We operate in a highly competitive environment, and our future success is heavily dependent on effective development, commercialization and customer acceptance of new products compared to our competitors. In addition, our success is dependent upon our ability to timely and cost-effectively: (1) develop and market new products and technologies; (2) improve existing products and technologies; (3) expand into or develop equipment solutions for new markets for integrated circuit products; (4) achieve market acceptance and accurately forecast demand for our products and technologies; (5) achieve cost efficiencies across our product offerings; (6) qualify new or improved products for volume manufacturing with our customers; and (7) lower our customers’ cost of ownership. The development, introduction and support of new or improved products and technologies, including those which enable smaller feature sizes, new materials and the utilization of 300 mm wafers becomes increasingly expensive and unpredictable. For example, the adoption of our ORION for ultra low k deposition has been delayed as a result of integration issues at the potential customers. Until such integration issues are resolved our ability to obtain commercial sales of our ORION technology is limited and there can be no assurance that these integration issues will be resolved. We also need to continue to develop technology for such customer needs as power semiconductors, SiP/Mems, BAW, Flowfill, and other applications and there can be no assurance that such developments will be consistent with the needs of these customers.

We may not be able to accurately forecast or respond to the technological trends in the semiconductor industry or respond to specific product announcements by our competitors. Our competitors may be developing technologies and products that are more effective or that achieve more widespread acceptance. In addition, we may incur substantial costs to ensure the functionality and reliability of our current and future products. If our new developed products are unreliable or do not meet our customers’ expectations, then reduced orders, higher manufacturing costs, delays in collecting accounts receivable or additional service and warranty expense could result. Our customers may purchase equipment for their new products but experience delays and technical and manufacturing difficulties in their introductions or transition to volume production using our systems causing significant delays between the sale of an initial tool into our customers development facility and limit the potential for follow on sales for manufacturing. Any of these events could negatively affect our ability to generate the return we expect to achieve on our investments in these new products.

Integrated circuit manufacturers have been slow to adopt the use of new materials and if we fail to continue to develop these solutions to achieve all the specifications required by device manufacturers and/or the device manufacturers fail to successfully integrate these technologies with their other processes, or our competitors develop competing solutions, then our ability to grow our revenues from these products would be negatively affected.

Our operating results could be negatively affected by currency fluctuations.

We are based in the United Kingdom, and most of our operating expenses are incurred in British pounds. Our revenues, however, are generally denominated in US dollars, and to a lesser extent in euros, and we report our financial results in US dollars. Accordingly, if the British pound increases in value against the US dollar, our expenses as a percentage of revenues will increase and gross margins and net income will be negatively affected.

The semiconductor industry is global and is expanding within the Asian region. If we are unable to penetrate this market our ability to grow our revenues will be restricted.

The percentage of worldwide semiconductor production that is based in the Asian region is growing, particularly within China. Our business has traditionally been strongest with the European semiconductor

24

Table of Contents

manufacturers and we have only a small installed base and limited brand recognition in Asia. It will be necessary for us to penetrate new customers in this region to grow our business. While we have appointed sales representatives in this region and we were able to increase the percentage of sales in the Asian region in fiscal 2004 to 10% of total revenues, there is no assurance that we will be able to continue to penetrate these geographic markets, which are subject to growth rates that are higher than worldwide growth rates. Failure to penetrate these markets may harm our competitive position and adversely affect our future business prospects.

Our competitors have greater financial resources and greater name recognition than we do and therefore may compete more successfully.

We face competition or potential competition from many companies with greater resources than ours. If we are unable to compete effectively with these companies, our market share may decline and our business could be harmed.

Virtually all of our primary competitors are substantially larger companies and some of them have broader product lines than ours. They have well-established reputations in the markets in which we compete, greater experience with high volume manufacturing, broader name recognition, substantially larger customer bases, and substantially greater financial, technical, manufacturing and marketing resources than we do. We also face potential competition from new entrants, including established manufacturers in other segments of the semiconductor capital equipment market who may decide to diversify and develop and market products that compete with our current offerings.

Semiconductor manufacturers are loyal to their current semiconductor equipment supplier, which may make it difficult for us to obtain new customers.

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

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

Since most new fabrication facilities are similar to existing ones, semiconductor manufacturers tend to continue using equipment that has a proven track record. Based on our experience with major customers such as Infineon, we have observed that once a particular piece of equipment is selected from a vendor, the customer is likely to continue purchasing that same piece of equipment from the vendor for similar applications in the future. Our customer list, though limited, has increased in fiscal 2004. Yet our broadening market share remains at risk due to choices made by customers that continue to be influenced by pre-existing installed bases by competing vendors. Consequently, our penetration of new customers and our ability to get additional orders may be limited.

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

25

Table of Contents

acceptance of our systems and technology, we may be unable to grow our business and our operating results and financial condition will be harmed.

Our products generally have long sales cycles and implementation periods, which increase our costs of obtaining orders and reduce the predictability of our earnings.

Our products are technologically complex. Prospective customers generally must commit significant resources to test and evaluate our products and to install and integrate them into larger systems. In addition, customers often require a significant number of product presentations and demonstrations, in some instances evaluating equipment on site, before reaching a sufficient level of confidence in the product’s performance and compatibility with their requirements to place an order. As a result, our sales process is often subject to delays associated with lengthy approval processes that typically accompany the design and testing of new products. The sales cycles of our products often last for many months or even years. Longer sales cycles require us to invest significant resources in attempting to make sales and delay the generation of revenue. In addition, we may incur significant costs in supporting evaluation equipment at our customers’ facilities.

Long sales cycles also subject us to other risks, including customers’ budgetary constraints, internal acceptance reviews and cancellations. In addition, orders expected in one quarter could shift to another because of the timing of customers’ purchase decisions. The time required for our customers to incorporate our products into their manufacturing processes can vary significantly with the needs of our customers and generally exceeds several months, which further complicates our planning processes and reduces the predictability of our operating results.

Customers are also demanding shorter delivery times from the time of placing a purchase order. We therefore are required to negotiate with our suppliers shorter lead times for the materials required and we may need to purchase inventory and to commence building for a customer prior to receipt of a confirmed purchase order. It is not possible to fully mitigate this risk within the supply chain. In the event a purchase order is not received from a customer where we had commenced manufacturing, then higher inventory levels would be incurred and potential inventory write-offs would also be incurred if an alternative customer is not identified to purchase that system.

We depend upon sole suppliers for certain key components.

We depend on a number of sole suppliers for key components used in the manufacture of our products. If we are unable to obtain timely delivery of sufficient quantities of these components, we would be unable to manufacture our products to meet customer demand, unless we are able to locate replacement components. Most significantly, our cluster tools are designed around an automation module supplied by Brooks Automation. Due to the high cost of these modules we keep very few in inventory. If Brooks Automation fails to deliver the component on a timely basis, delivery of our cluster tools will be delayed and sales may be lost. If Brooks Automation is unable to deliver any such modules for a prolonged period of time, we will have to redesign our cluster tools so that we may utilize other wafer transport systems. There can be no assurance that we will be able to do so, or that customers will adopt the redesigned systems.

Our final assembly and testing is concentrated in one facility.

Our final assembly and testing activity is concentrated in our facility in Newport, United Kingdom. We have no alternative facilities to allow for continued production if we are required to cease production in our facility, as a result of a fire, natural disaster or otherwise. In such event, we will be unable to produce any products until the facility is replaced. Any such interruption in our manufacturing schedule could cause us to lose sales and customers, which could significantly harm our business.

If we are unable to hire and retain a sufficient number of qualified personnel, our ability to manage growth will be negatively affected.

Our business and future operating results depend in part upon our ability to attract and retain qualified management, technical, sales and support personnel for our operations on a worldwide basis. Competition for

26

Table of Contents

qualified personnel is intense, and we cannot guarantee that we will be able to continue to attract and retain qualified personnel. Our operations could be negatively affected if we lose key executives or employees or are unable to attract and retain skilled executives and employees as needed.

Our ability to compete could be jeopardized if we are unable to protect our intellectual property rights from challenges by third parties.

Our success and ability to compete depend in large part upon protecting our proprietary technology. We rely on a combination of patent, trade secret, copyright and trademark laws, non-disclosure and other contractual agreements and technical measures to protect our proprietary rights.

There can be no assurance that patents will be issued on our pending patent applications or that competitors will not be able to ascertain legitimately proprietary information embedded in our products that is not covered by patent or copyright. In such case, we may be precluded from preventing the competitor from making use of such information.

In addition, should we wish to assert our patent rights against a particular competitor’s product, there can be no assurance that any claim in any of our patents will be sufficiently broad nor, if sufficiently broad, any assurance that our patent will not be challenged, invalidated or circumvented, or that we will have sufficient resources to prosecute our rights. Failure to protect our intellectual property could have an adverse effect on our business.

Claims or litigation regarding intellectual property rights could seriously harm our business or require us to incur significant costs.

In recent years, there has been significant litigation in the semiconductor equipment industry involving patents and other intellectual property rights. Infringement claims may be asserted against us in the future and, if such claims are made, we may not be able to defend against such claims successfully or, if necessary, obtain licenses on reasonable terms. Any claim that our products infringe proprietary rights of others would force us to defend ourselves and possibly our customers against the alleged infringement. These claims and any resulting lawsuit, if successful, could subject us to significant liability for damages and invalidation of our proprietary rights. These lawsuits, regardless of their outcome, would likely be time-consuming and expensive to resolve and would divert management’s time and attention. Any potential intellectual property litigation could force us to do one or more of the following:

If we are forced to take any of the foregoing actions, our business could be severely harmed.

Our operations are subject to health and safety and environmental laws that may expose us to liabilities for noncompliance.

We are subject to a variety of governmental regulations relating to the use, storage, discharge, handling, manufacture and disposal of all materials present at, or our output from, our facilities, including the toxic or other

27

Table of Contents

hazardous chemical by-products of our manufacturing processes. Environmental claims against us, or our failure to comply with any present or future regulations, could result in significant costs to remediate, the assessment of damages or imposition of fines against us; the suspension of production of our products; or the cessation of our operations.

New regulations could require us to purchase costly equipment or to incur other significant expenses. Our failure to control the use or adequately restrict the discharge of hazardous substances could subject us to future liabilities, which could negatively affect our operating results and financial condition.

Any acquisitions we may make could disrupt our business and severely harm our financial condition.

We may consider it necessary to invest in complementary products, companies or technologies, such investments involve numerous risks, including but not limited to: (1) diversion of management’s attention from other operational matters; (2) inability to complete acquisitions as anticipated or at all; (3) inability to realize synergies expected to result from an acquisition; (4) failure to commercialize purchased technologies; (5) ineffectiveness of an acquired company’s internal controls; (6) impairment of acquired intangible assets as a result of technological advancements or worse-than-expected performance of the acquired company or its product offerings; (7) unknown and/or undisclosed commitments or liabilities; (8) failure to integrate and retain key employees; and (9) ineffective integration of operations. Mergers and acquisitions are inherently subject to significant risks, and the ability to effectively manage these risks could materially and adversely affect our business, financial condition and results of operations.

Changes in accounting rules

We prepare our financial statements in conformity with accounting principles generally accepted in the United States of America. These principles are subject to interpretation by the Securities and Exchange Commission (the “SEC”) and various bodies formed to interpret and create accounting policies. A change in these policies can have a significant effect on our reported results and may even retroactively affect previously reported transactions. In particular, changes to FASB guidelines relating to accounting for stock-based compensation will likely increase our compensation expense, could make our net result less predictable in any given reporting period and could change the way we compensate our employees or cause other changes in the way we conduct out business.

You may have difficulty protecting your rights as a stockholder and in enforcing civil liabilities because many of our executive officers and the majority of the members of our board of directors and the majority of our assets are located outside the United States.

Our principal assets and manufacturing plants are located in the United Kingdom. In addition, most of the members of our board of directors and our executive officers are residents of jurisdictions other than the United States. As a result, it may be difficult for stockholders to serve process within the United States upon members of our board of directors and our executive officers, or to enforce against us or members of our board of directors or our executive officers judgments of the U.S. courts, to enforce outside the United States judgments obtained against members of our board of directors or our executive officers in U.S. courts, or to enforce in U.S. courts judgments obtained against members of our board of directors or our executive officers in courts in jurisdictions outside the United States, in any action, including actions that derive from the civil liability provisions of the U.S. securities laws. In addition, it may be difficult for our stockholders to enforce, in original actions brought in courts in jurisdictions located outside the United States, liabilities that derive from U.S. securities laws.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our earnings and cash flow are subject to fluctuations in foreign currency exchange rates. Significant factors affecting this risk include our manufacturing, research and development and administrative cost base, which are

28

Table of Contents

predominately incurred in British pounds, and product sales outside the United States, which may be expressed in currencies other than the United States dollar. We constantly monitor currency exchange rates and match currency availability and requirements whenever possible. We may from time to time enter into forward foreign exchange transactions in order to minimize risk from firm future positions arising from trading. As at December 31, 2004 and December 31, 2003 we did not have any open forward currency transactions.

Based upon budgeted income and expenditures, a hypothetical increase of 10% in the value of the British pound against all other currencies in the year ended December 31, 2005 would have no material effect on revenues, which are primarily expressed in United States dollars but would increase operating costs and reduce cash flow by approximately $4.5 million. The same increase in the value of the British pound would increase the value of the net assets expressed in United States dollars by approximately $3.8 million. We have also received orders for revenue that are denominated in euros, therefore an increase in the value of the euro in relation to the United States dollar would effect the reported value of revenue. The effect of the hypothetical change in exchange rates ignores the affect this movement may have on other variables including competitive risk. If it were possible to quantify this impact, the results could well be different from the sensitivity effects shown above. In addition, it is unlikely that all currencies would uniformly strengthen or weaken relative to the British pound. In reality, some currencies may weaken while others may strengthen.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See the Index included at “Item 15. Exhibits and Financial Statements Schedules.”

None.

ITEM 9A. CONTROLS AND PROCEDURES

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over the Company’s financial reporting as defined in rules 13a-15(f) and 15d-15(f) under the securities exchange act of 1934. There are inherent limitations in any system of internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even effective internal controls can provide only reasonable assurance that they will prevent or detect misstatements with respect to financial statement preparation. Further, because of changes in conditions, the effectiveness of internal controls over financial reporting may become inadequate over time.

We assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2004. In making the assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework.

Based on our assessment, using those criteria, we believe that, as of December 31, 2004 our internal control over financial reporting was effective.

Management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2004 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included on page 31 herein.

Evaluation of Disclosure Controls and Procedures

An evaluation was performed under the supervision and with the participation of our management team, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the

29

Table of Contents

design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our management, including the CEO and CFO, have concluded that our disclosure controls and procedures were effective as of December 31, 2004 to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

30

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To: The Stockholders and the Board of Directors of Trikon Technologies Inc.

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control over Financial Reporting, that Trikon Technologies Inc. maintained effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Trikon Technologies Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Trikon Technologies, Inc. maintained effective internal control over financial reporting as of December 31, 2004 is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, Trikon Technologies, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Trikon Technologies, Inc. as of December 31, 2004 and 2003, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2004 of Trikon Technologies, Inc. and our report dated March 15, 2005 2005 expressed an unqualified opinion thereon.

Ernst & Young LLP

Bristol, England

March 15, 2005

31

Table of Contents

ITEM 9B. OTHER INFORMATION

On March 14, 2005, we entered into an Agreement and Plan of Merger with Aviza Technology, Inc. On the same date, we and Aviza also entered into an agreement for the joint development of control software for an existing Aviza process module (the “JDA”). Each party’s specific development obligations and the specific timetable for the development of this control software are to be established pursuant to collaborative process specified in the JDA. The total development fee payable by Aviza to us under the JDA is $1.2 million. The development fee includes $900,000 payable upon delivery and sale by us to Aviza of one standard, unmodified Trikon transport module. The JDA acknowledges that such delivery and sale and related payment was completed in December 2004 prior to executing the JDA.

The JDA also obligates Aviza to purchase, and Trikon to sell, eight additional Trikon transport modules incorporating the developed software, all on a cost-plus-a specified percentage basis, and all within two years after the completion of the development work (for delivery no later than two and a half years after the date of the JDA).

To enable Aviza to commercialize complete wafer-fabrication systems that include Aviza process modules, the JDA includes our grant of license rights to Aviza with respect to the process-module control software, certain manufacturing documentation and software source code for the existing Trikon transport module. The total license fee payable by Aviza to us under the JDA is $4 million, half of which was paid upon execution of the JDA, the other half of which is payable by Aviza on or before July 31, 2005. The JDA also specifies per-unit royalties that Aviza is to pay us for licensed products sold, subject to an overall cap of $2 million.

The parties’ obligations under the JDA are not conditioned on the merger proceeding, and all such obligations would survive termination of the Agreement and Plan of Merger for any reason.

32

Table of Contents

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The following table sets forth the executive officers of the Company as of February 23,2005

Dr. John Macneil.    Dr. Macneil joined Trikon in 1996 and was appointed Vice President of Technology in June 1998. On March 10, 2004, Dr. Macneil was appointed Acting President and Chief Executive Officer, and a member of the Board of Directors. On July 26, 2004 Dr. Macneil was appointed President and Chief Executive Officer. Prior to joining Trikon, Dr. Macneil served in various technical positions at Motorola, and held senior technical positions in a number of research driven organizations both in the United Kingdom and in the United States. Dr Macneil earned his MBA from Cardiff University in 1996 and gained a PhD in Solid State Physics from Leicester University in 1983.

William J. Chappell.    Mr. William Chappell A.C.A. joined Trikon in January 2001 as Chief Financial Officer. Mr. Chappell served with Coopers & Lybrand in various positions between 1983 and 1993, most recently as a Senior Audit Manager in the San Jose, California office. From 1993 to 1995, he served as Director of Finance at Adac Laboratories. Before joining Trikon, Mr. Chappell served as the Chief Financial Officer of a Canadian public company and a private German company. Mr. Chappell has a chemistry degree from the University of Leeds, England.

Andrew Noakes.    Mr. Andrew Noakes joined Trikon in November 1996 on the acquisition of Electrotech and served in several senior sales and marketing positions and was appointed our Senior Vice President responsible for Sales in Europe and Asia in June 2003. From January 1998 to October 1999 he spent two years in the ion implant business development group at Applied Materials. Prior to November 1996, Mr Noakes held various sales and engineering positions at Electrotech. Mr. Noakes holds a BSc (hons) degree in Physics from the University of Sheffied and a masters degree from the University of Bristol.

Scott Brown.    Mr. Scott Brown joined Trikon in November 1996 on the acquisition of Electrotech and served as Vice President for North America. He was appointed Senior Vice President for North America in April 2004 following a short break away from the company. From 1994 to 1996 he served as Vice President North America for Electrotech. Prior to Electrotech he held various senior sales management positions with Eaton Semiconductor Equipment and Materials Research Corporation.

The following table sets forth the Directors of the Company as of February 23, 2005. Each of the director’s term of office expires at our next Annual General Meeting of Stockholders:

33

Table of Contents

Dr. Christopher D. Dobson.    Dr. Dobson joined the Board of Directors as Chairman in November 1996 upon the acquisition of Electrotech. From December 1997 to May 1998, Dr. Dobson was Chief Executive Officer. Dr. Dobson was appointed Chief Technical Officer in May 1998 and served in such capacity until his retirement on May 15, 2001. Dr. Dobson continues to serve as the Chairman of the Board of Directors, a non-executive position. Dr. Dobson was a co-founder of Electrotech and was its Chairman from 1971 to November 1996.

Nigel Wheeler.    Mr. Wheeler joined Trikon as a director and the President and Chief Operating Officer in November 1996 upon the acquisition of Electrotech. From October 1998 through March 2003, Mr. Wheeler served as Chief Executive Officer. From July 1993 to November 1996, Mr. Wheeler served as Electrotech’s Chief Executive Officer. On March 31, 2003, Mr. Wheeler became Vice Chairman of the Board of Directors.

Robert R. Anderson.    Mr. Anderson was elected to the Board of Directors in April 2000. Mr. Anderson is a private investor. From January 1994 to January 31, 2001, he was Chairman of Silicon Valley Research, Inc., a semiconductor design automation software company, and its Chief Executive Officer from December 1996 to August 1998, and from April 1994 to July 1995. He also served as Chairman and Chief Executive Officer of Yield Dynamics, Inc., a private semiconductor process control software company, from October 1998 to October 2000, and presently serves as a director. In 1975, Mr. Anderson co-founded KLA Instruments Corporation, the predecessor to KLA-Tencor (“KLA”), a supplier of semiconductor process control systems, from which he retired in 1994. He served as Vice-Chairman of KLA from November 1991 to March 1994, and as Chairman of KLA from May 1985 to November 1991. Prior to that, Mr. Anderson served as Chief Operating Officer and Chief Financial Officer of KLA. In addition to serving as a director of Trikon, Mr. Anderson currently serves as a director of MKS Instruments, Inc., and Aehr Test Systems, Inc. Furthermore, he serves as a director for two other private companies.

Richard M. Conn.    Mr. Conn was elected to the Board of Directors in January 1998. Mr. Conn formed Business Development Consulting in early 1997 and serves as a consultant in the semiconductor equipment industry. Prior to forming Business Development Consulting, Mr. Conn was a Vice President of Sales at KLA from 1984 until 1996. During his tenure at KLA, Mr. Conn was a member of the board of directors of KLA’s subsidiaries in the United Kingdom, France and Germany. Mr. Conn has held several other positions in the semiconductor industry at companies that include Eaton Semiconductor Equipment, Applied Materials UK and ITT Semiconductors.

Dr. William W.R. Elder.    Dr. Elder was elected to the Board of Directors to fill a vacancy in May 2004. The Corporate Governance and Nominating Committee identified Dr. Elder as an individual qualified to serve as a director and recommended him to the Board of Directors. Dr. Elder was a founder of Genus, Inc., a supplier of advanced manufacturing systems to the Semiconductor and Data Storage Industries and currently serves as its Chairman, President and Chief Executive Officer. From October 1996 to April 1998, Dr. Elder served as Chairman of the Board of Genus, Inc. From April 1990 to September 1996, Dr. Elder served as Chairman of the Board, President and Chief Executive Officer of Genus, Inc. From November 1981 to April 1990, Dr. Elder was President and a director of Genus, Inc. Dr. Elder is also a director of Aehr Test Systems, Inc., a semiconductor testing company.

Audit Committee Financial Expert

The Board of Directors has determined that Robert Anderson is an audit committee financial expert as defined by Item 401(h) of Regulation S-K of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and is independent within the meaning of Item 7(d)(3)(iv) of Schedule 14A of the Exchange Act.

34

Table of Contents

Code of Ethics

Trikon has adopted a code of business conduct and ethics for directors, officers (including Trikon’s principal executive officer, principal financial officer and controller) and employees, known as The Code of Business Conduct and Ethics. The Code of Business Conduct and Ethics is available on Trikon’s website at www.Trikon.com. Trikon intends to satisfy the disclosure requirements under Item 5.05 of Form 8-K regarding amendment to, or waiver from, a provision of the code of business conduct and ethics either by filing a Form 8-K or posting such information on our website at www.Trikon.com, provided such method of disclosure is then in compliance with the rules of the NASDAQ National Market and the rules of the Securities and Exchange Commission.

Compliance with SEC Reporting Requirements

Section 16(a) of the Exchange Act requires Trikon’s directors and executive officers and persons beneficially owning more than ten percent of a class of Trikon’s capital stock to file certain reports of beneficial ownership and changes in beneficial ownership (Forms 3, 4 and 5) with the SEC. Based solely on its review of copies of Forms 3, 4 and 5 available to it, or written representations that no Forms 5 were required, Trikon believes that all required Forms concerning 2004 beneficial ownership were filed on time by all directors and executive officers.

ITEM 11. EXECUTIVE COMPENSATION.

Summary of Cash and Certain Other Compensation

The following table sets forth all compensation received for services rendered to Trikon in all capacities for the years ended December 31, 2004, 2003 and 2002, by (i) each person who served as Chief Executive Officer of Trikon during the year ended December 31, 2004 and (ii) each of the other executive officers of Trikon who were serving as executive officers at December 31, 2004 and whose total compensation exceeded $100,000 (collectively, the “Named Executive Officers”). Perquisites amounting in aggregate to the lesser of $50,000 or 10% of the total annual salary and bonus reported for the named executive officer are not disclosed. For the purpose of calculating salaries and other compensation paid in British pounds to John Macneil, William Chappell and Andrew Noakes the average rate of exchange between the British pound and the US dollar of $1.83, $1.64 $1.504 for each British pound for the years ended December, 31, 2004, 2003 and 2002, respectively, has been used. For the purposes of calculating salaries and other compensations paid in euro to Jihad Kiwan, the average rate of exchange between the euro and the US dollar of $1.24 and $1.13 for the year ended December 31, 2004 and 2003 respectively has been used.

35

Table of Contents

Summary Compensation Table

36

Table of Contents

Option Grants in Last Fiscal Year

The following table sets forth each grant of stock options made during the year ended December 31, 2004 to each of the Named Executive Officers.

Aggregated Stock Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values

The following table sets forth the number of exercisable and unexercisable options held by each of the Named Executive Officers at December 31, 2004.

Employment Agreements

On March 10, 2004, the Company entered into an employment agreement with Dr. John Macneil, pursuant to which Dr. Macneil was appointed the Acting President and Chief Executive Officer and nominated to the Board of Directors. On July 26, 2004, Dr. Macneil was subsequently appointed as the President and Chief Executive Officer of the Company. Dr. Macneil’s employment agreement included, among other terms and

37

Table of Contents

conditions, a one-time bonus of 20,000 British pounds, eligibility in a bonus plan that may vary from year to year, and a one-year grant of 25,000 cash settled stock appreciation rights which subsequently lapsed without value. The employment agreement also provides for Dr. Macneil to receive six months notice of termination of employment (or a severance payment in lieu of such notice). Dr. Macneil is also entitled to additional payments of one half of his total earnings in the 12 months preceding a change in control if he resigns for good reason following such change of control transaction.

The Company has provided termination benefits to certain named executive officers as set forth below.

Pursuant to an offer letter dated October 12, 2000, Trikon agreed to provide Mr. Chappell with six months notice of termination (or severance payment in lieu of notice).

Pursuant to an offer letter dated June 3, 2003, Trikon agreed to provide Mr. Noakes with six months notice of termination (or severance payment in lieu of notice)

Pursuant to an offer letter dated April 6, 2004 Trikon agreed to provide Scott Brown with nine months severance on termination.

Directors’ Compensation

Employee members of the Board of Directors do not receive additional compensation for their services as directors. Non-employee directors (other than the Chairman of the Board of Directors) earn an annual retainer of $15,000 and receive $2,000 for attending a meeting of the Board of Directors in person, $750 for attending a meeting of the board of directors by telephone and $750 for attending a committee meeting unless Chairman of the Committee in which case $1,250 for each meeting attended.

The Chairman of the Board of Directors, if he is not an executive of the Company, receives an annual retainer of $30,000 and receives $4,000 for attending a meeting of the Board of Directors in person and $1,500 for attending meetings of the Board of Directors by telephone, and $750 for attending meetings of committees of the board of directors in person or by telephone.

Each of the members of the executive committee of the Board of Directors received monthly compensation for their services on the executive committee. The amount of compensation was set by the Compensation Committee of the Board of Directors and was principally based upon the number of hours service provided by the executive committee members. Following the formation of the committee in April 2004 each member of the committee received 7,500 British Pounds for their services during that month. This amount was reduced to 5,000 British Pounds per month for the period until December 31, 2004. The executive committee was retired on January 11, 2005.

Non-employee directors are also reimbursed reasonable expenses in connection with attendance at board and committee meetings.

In addition, each non-employee director participates in an equity compensation agreement under our 2004 equity incentive plan and prior to the approval of this plan the 1998 Director’s stock option plan. When first elected or appointed to the Board of Directors as a non-employee director (if such director previously was not an executive officer of Trikon), such director will receive, at the time of such initial election or appointment, a stock option to purchase 20,000 shares of common stock, and at each annual stockholders meeting thereafter will receive a stock option to purchase 8,000 (or, in the case of a non-executive Chairman of the Board of Directors, 12,000) shares of common stock.

The initial option grant on first election or appointment vests in a series of four (4) successive equal annual installments upon the director’s completion of each year of service on the board of directors over the four (4) year period measured from the date of grant, and the subsequent annual grants vest upon completion of one year of service, or the next annual meeting of stockholders, whichever is earlier.

38

Table of Contents

In addition to his compensation as a non employee Chairman as described above, Dr. Dobson, when he was appointed Chief Executive Officer of Trikon in May 1998, entered into a letter agreement with the Company which provided certain benefits based upon the continued performance of services to Trikon either as (i) an employee, (ii) a non employee member of the Board or (iii) Independent Consultant. The benefits are a restricted stock award and a special acquisition bonus as described below.

Dr. Dobson received 1,149,281 restricted shares of common stock when Trikon consummated a debt for equity exchange. The restricted shares vested in full on May 14, 2003.

Dr. Dobson will receive a special acquisition bonus in the event of a transfer of more than 50% of Trikon’s voting rights in a direct sale or merger of Trikon or other disposition of more than 80% of the assets of Trikon. The size of the bonus payable varies with the amount of consideration paid in the transaction as set forth in the table below, and no bonus will be earned if the total purchase price is valued at less than $250 million.

Mr. Conn received consulting fees of $11,163 during the year ended December 31, 2004.

Mr. Wheeler was appointed Vice Chairman of the Board of Directors on March 31, 2003 and entered into a consulting agreement with the company on June 4, 2003. Under the terms of the consulting agreement with Trikon, Mr. Wheeler receives 60,000 British pounds per annum ($109,800 at the average exchange rate for fiscal 2004) for acting as Vice Chairman and providing consulting services to the Board of Directors. In addition to this annual compensation Mr. Wheeler is provided a company car and fuel together with other usual benefits paid to UK employees. The consulting arrangement is for a two year period commencing July 1, 2003 and can be terminated with three months notice by either party. Mr. Wheeler does not receive the non-employee board member payments described above but did receive an annual stock grant under the 2004 Equity Incentive Plan. Mr. Wheeler has deferred his cash compensation for services as the Vice Chairman while he was in receipt of compensation for services on the executive committee.

Equity Compensation Plan Information

The following table provides information as of December 31, 2004 with respect to shares of our Common Stock that may be issued upon the exercise of options, granted to employees, consultants or members of our Board of Directors under all of our existing equity compensation plans, including the 1991 Stock Option Plan and the 1998 Directors Stock Option Plan and the 2004 Equity Incentive Plan. No warrants or other rights have been issued to employees, consultants or members of our Board of Directors.

39

Table of Contents

Security Ownership of Certain Beneficial Owners and Management

To the extent known by Trikon, the following table sets forth certain information regarding beneficial ownership of Trikon common stock as of January 17, 2005 by: (i) each person (or group of affiliated persons) who is known by Trikon to own beneficially more than 5% of Trikon’s outstanding shares of common stock, (ii) each of Trikon’s directors, (iii) each of the named executive officers and (iv) Trikon’s directors and executive officers as a group. For purposes of calculating the percentage beneficially owned, 15,754,985 shares of Common Stock outstanding as of January 17, 2005 were used. Except where otherwise noted and subject to applicable community property laws, to Trikon’s knowledge the persons noted below have sole voting and investment power with respect to all shares of common stock held by them.

40

Table of Contents

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

See information under the caption ‘Employment agreements’ under item 10 of this Annual Report or Form 10-K.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The following table shows the fees paid or accrued by Trikon for the audit and other services provided by Ernst & Young LLP for fiscal 2004 and 2003.

The audit committee approves all services provided by Ernst & Young LLP prior to their incurrence, including fees related to the audit of our controls over financial reporting.

41

Table of Contents

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) The following documents are filed as part of this Annual Report on Form 10-K

(1) Financial Statements

(2) Financial Statement Schedules