United
        States Securities and Exchange Commission
 Washington,
        D.C. 20549
  FORM
        10-QSB
  Quarterly
        Report of Small Business Issuers under Section 13 or 15(d) of the Securities
        Exchange Act of 1934 for the quarterly period ended June 30, 2005
  Commission
        File No. 333-42936
  **DND
        Technologies, Inc.**
 (Exact
        name of registrant as specified in its charter)
  
  Nevada
                  (State
                    or other jurisdiction of incorporation or organization)
                
                84-1405298
                  (I.R.S.
                    Employer Identification No.)375
                    E. Elliot Rd., Bldg. 6
                  Chandler,
                    Arizona
                  (Address
                    of principal executive offices)
                
                85225
                  (Zip
                    Code)
  Issuer's
                      telephone number, including area code:(480)
                      892-7020_________________________________________________________________
                    (Former
                      name, former address, and former fiscal year, if changed since
                      last
                      report)The
                      issuer has (1) filed all reports required to be filed by Section
                      13 or
                      15(d) of the Exchange Act during the past 12 months (or for
                      such shorter
                      period that the registrant was required to file such reports),
                      and (2)
                      been subject to such filing requirements for the past 90 days.
    Number
                      of shares outstanding of each of the issuer's classes of common
                      equity:Class
                  Outstanding
                      as of August 12, 2005Common
                      stock, $0.001 par value
                  26,097,153
  The
                      issuer is not using the Transitional Small Business Disclosure
                      format.
 
  
 
 
  **DND
        TECHNOLOGIES, INC.**
 
 **Table
        of Contents**
 
 PagePART
                  I
              FINANCIAL
                  INFORMATION
              
              1Item
                  1.
              Consolidated
                  Unaudited Financial Statements
              
              1Condensed
                  Consolidated Unaudited Balance Sheet
              
              1Condensed
                  Consolidated Unaudited Statements of Operations
              
              2Condensed
                  Consolidated Unaudited Statements of Stockholders' Deficit
              
              4Condensed
                  Consolidated Unaudited Statements of Cash Flows
              
              5Notes
                  to Condensed Consolidated Unaudited Financial Statements
              
              7Item
                  2.
              Management's
                  Discussion and Analysis of Financial Condition and Results of
                  Operations
              
              13Item
                  3.
              Controls
                  and Procedures
              
              24PART
                  II
              OTHER
                  INFORMATION
              
              24Item
                  4.
              Submission
                  of Matters to a Vote of Security Holders
              
              24Item
                  5.
              Other
                  Information
              
              24Item
                  6.
              Exhibits
                  and Reports on Form 8-K
              
              24SIGNATURES
              
              
              26
 
 
 i
 
 
  **PART
        I.**  **FINANCIAL
        INFORMATION**
 
 **Item
        1.**   **Financial
        Statements (Unaudited)**
 
 **DND
        TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **CONDENSED
        CONSOLIDATED BALANCE SHEET**
 **JUNE
        30, 2005**
 **(UNAUDITED)**
 
 ASSETSCURRENT
                  ASSETS:Cash
                  and cash equivalents
              
              $
              153,005Accounts
                  receivable, net
              
              
              1,341,899Inventories,
                  net
              
              
              3,310,807Prepaid
                  expenses
              
              
              434,888Total
                  current assets
              
              
              5,240,599PROPERTY
                  AND EQUIPMENT, Net of accumulated depreciation
              
              
              204,842LICENSE
                  AGREEMENTS, Net of accumulated amortization
              
              
              3,082,861OTHER
              
              
              25,754TOTAL
                  ASSETS
              
              $
              8,554,056LIABILITIES
                  AND STOCKHOLDERS' DEFICITCURRENT
                  LIABILITIES:Notes
                  payable, current portion
              
              $
              1,187,836Capital
                  leases payable, current portion
              
              
              11,774Accounts
                  payable and accrued expenses
              
              
              2,196,929Deposits
                  from customers
              
              
              1,775,753Payables,
                  Lam Research Corporation
              
              
              3,979,538License
                  and royalty payable, Axcelis
              
              
              922,009Amounts
                  due to related party
              
              
              426,219Total
                  current liabilities
              
              
              10,500,058LONG
                  TERM LIABILITIES:Capital
                  leases payable, long term portion
              
              
              11,539STOCKHOLDERS'
                  DEFICIT:Preferred
                  stock
              
              
              -Common
                  stock, par value, $.001 per share;authorized,
                  50,000,000 shares;issued
                  and outstanding, 26,097,153 shares
              
              
              26,097Paid-in
                  capital
              
              
              2,359,063Accumulated
                  deficit
              
              
              (4,342,701
              )Total
                  stockholders' deficit
              
              
              (1,957,541
              )TOTAL
                  LIABILITIES AND STOCKHOLDERS' DEFICIT
              
              $
              8,554,056
  See
          accompanying notes.
 1
 **DND
        TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **CONDENSED
        CONSOLIDATED STATEMENTS OF OPERATIONS**
 **FOR
        THE THREE AND SIX MONTHS ENDED JUNE 30, 2005 AND 2004**
 **(UNAUDITED)**
 
 
 
 **Three
                  Months**
              
              **Six
                  Months**REVENUE:
              
              **2005**
              
              **2004**
              
              **2005**
              
              **2004**Systems
                  and chillers
              
              $
              991,216
              
              $
              2,096,399
              
              $
              3,824,717
              
              $
              3,835,800Parts,
                  assemblies and consumables
              
              
              1,187,926
              
              
              1,597,397
              
              
              2,697,899
              
              
              3,099,086Field
                  service and training
              
              
              88,118
              
              
              43,738
              
              
              104,979
              
              
              93,423Total
                  revenue
              
              
              2,267,260
              
              
              3,737,534
              
              
              6,627,595
              
              
              7,028,309COST
                  OF REVENUE:Cost
                  of revenues
              
              
              1,629,608
              
              
              2,526,313
              
              
              4,351,747
              
              
              4,456,468Reserve
                  for slow movingand
                  obsolete inventory
              
              
              (94,438
              )
              
              (800,668
              )
              
              33,571
              
              
              (800,668
              )Total
                  cost of revenue
              
              
              1,535,170
              
              
              1,725,645
              
              
              4,385,318
              
              
              3,655,800GROSS
                  PROFIT
              
              
              732,090
              
              
              2,011,889
              
              
              2,242,277
              
              
              3,372,509OPERATING
                  EXPENSES:Research
                  and development
              
              
              45,281
              
              
              16,656
              
              
              66,408
              
              
              31,843Sales
                  and marketing
              
              
              393,913
              
              
              551,328
              
              
              1,041,367
              
              
              967,860General
                  and administrative
              
              
              451,774
              
              
              566,056
              
              
              932,388
              
              
              997,653Total
                  operating expenses
              
              
              890,968
              
              
              1,134,040
              
              
              2,040,163
              
              
              1,997,356INCOME
                  (LOSS) FROM OPERATIONS
              
              
              (158,878
              )
              
              877,849
              
              
              202,114
              
              
              1,375,153OTHER
                  INCOME (EXPENSE):Gain
                  on settlement of debt
              
              
              0
              
              
              0
              
              
              17,500
              
              
              0Lawsuit
                  settlement
              
              
              0
              
              
              0
              
              
              0
              
              
              (140,000
              )Interest
                  expense
              
              
              (87,119
              )
              
              (84,333
              )
              
              (170,996
              )
              
              (178,456
              )OTHER
                  INCOME (EXPENSE)
              
              
              (87,119
              )
              
              (84,333
              )
              
              (153,496
              )
              
              (318,456
              )Income
                  (loss) before incometax
                  expense
              
              
              (245,997
              )
              
              793,516
              
              
              48,618
              
              
              1,056,697INCOME
                  TAX
              
              
              0
              
              
              0
              
              
              800
              
              
              800NET
                  INCOME (LOSS)
              
              $
              (245,997
              )
              $
              793,516
              
              $
              47,818
              
              $
              1,055,897
 
 
 
 2
 
 
 
 
 **DND
        TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **CONDENSED
        CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED**
 **FOR
        THE THREE AND SIX MONTHS ENDED JUNE 30, 2005 AND 2004**
 **(UNAUDITED)**
 
 **Three
                  Months**
              
              **Six
                  Months****2005**
              
              **2004**
              
              **2005**
              
              **2004**NET
                  INCOME PER COMMON SHARE:Basic
              
              $
              (.01
              )
              $
              .03
              
              $
              .00
              
              $
              .05Diluted
              
              $
              N/A
              
              $
              .03
              
              $
              .00
              
              $
              .04WEIGHTED
                  AVERAGE NUMBER OF COMMON SHARES OUTSTANDING AND
                  SUBSCRIBED:Basic
              
              
              24,598,263
              
              
              23,000,000
              
              
              23,928,740
              
              
              23,000,000Diluted
              
              
              N/A
              
              
              26,340,986
              
              
              27,597,320
              
              
              26,340,986
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 See
        accompanying notes.
 
 
 3
  **DND
        TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **CONDENSED
        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT**
 **FOR
        THE THREE AND SIX MONTHS ENDED JUNE 30, 2005**
 **(UNAUDITED)**
 
 Stock
                  Subscribed
              
              Common
                  Stock
              
              Paid-In
                  Capital
              
              Accumulated
                  Deficit
              
              TotalShares
              
              Amount
              
              Shares
              
              AmountBALANCE,
                JANUARY
                  1, 2005
              
              
              1,100,000
              
              $
              55,000
              
              
              23,000,000
              
              $
              23,000
              
              $
              1,957,160
              
              $
              (4,390,519
              )
              $
              (2,355,359
              )COMMON
                  STOCK ISSUED FOR ACCRUED EXPENSES
              
              
              -
              
              
              -
              
              
              365,000
              
              
              365
              
              
              73,135
              
              
              -
              
              
              73,500COMMON
                  STOCK ISSUED FOR PREPAID EXPENSES
              
              
              -
              
              
              -
              
              
              1,190,478
              
              
              1,190
              
              
              248,810
              
              
              -
              
              
              250,000COMMON
                  STOCK ISSUED UPON EXERCISE OF OPTION
              
              
              -
              
              
              -
              
              
              441,675
              
              
              442
              
              
              26,058
              
              
              -
              
              
              26,500COMMON
                  STOCK ISSUED FROM STOCK SUBSCRIBED
              
              
              (1,100,000
              )
              
              (55,000
              )
              
              1,100,000
              
              
              1,100
              
              
              53,900
              
              
              -
              
              
              -NET
                  INCOME
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              47,818
              
              
              47,818BALANCE,
                JUNE
                  30,2005
              
              
              
              
              
              
              
              
              26,097,153
              
              $
              26,097
              
              $
              2,359,063
              
              $
              (4,342,701
              )
              $
              (1,957,541
              )
 
 See
        accompanying notes.
 
 
 4
  **DND
        TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 **FOR
        THE SIX MONTHS ENDED JUNE 30, 2005 AND 2004**
 **(UNAUDITED)**
 
 **2005**
              
              **2004**CASH
                  FLOWS FROM OPERATING ACTIVITIES:Net
                  income
              
              $
              47,818
              
              $
              1,055,897Adjustments
                  to reconcile net income to net cash provided by
                operating
                  activities:
              
              
              89,716
              
              
              89,469DepreciationAmortization
              
              
              276,530
              
              
              272,490Provision
                  for slow moving and obsolete inventories
              
              
              33,571
              
              
              (1,027,997
              )Gain
                  on settlement of debt
              
              
              (17,500
              )
              
              0Loss
                  on disposal of fixed asset
              
              
              0
              
              
              2,349Settlement
                  of lawsuit
              
              
              0
              
              
              140,000Changes
                  in operating assets and liabilities:Accounts
                  receivable
              
              
              1,105,130
              
              
              (450,350
              )Inventories
              
              
              (402,043
              )
              
              (440,845
              )Prepaid
                  expenses and other assets
              
              
              (118,170
              )
              
              (140,071
              )Accounts
                  payable and accrued expenses
              
              
              (1,410,807
              )
              
              214,858Deposits
                  from customers
              
              
              672,834
              
              
              821,549Amounts
                  due to related parties
              
              
              5,819
              
              
              23,109Net
                  cash provided by operating activities
              
              
              282,898
              
              
              560,458CASH
                  FLOWS FROM INVESTING ACTIVITIES:Purchases
                  of property and equipment
              
              
              (6,242
              )
              
              (21,356
              )CASH
                  FLOWS FROM FINANCING ACTIVITIES:Net
                  repayment on line of credit
              
              
              -
              
              
              (4,963
              )Exercise
                  of common stock options
              
              
              26,500
              
              
              -Principal
                  payments on long-term debt
              
              
              (466,639
              )
              
              (298,839
              )Net
                  cash (used) by financing activities
              
              
              (440,139
              )
              
              (303,802
              )NET
                  INCREASE (DECREASE) IN CASH AND CASH EQUIVALANTS
              
              
              (163,483
              )
              
              235,300CASH
                  AND CASH EQUIVALENTS, BEGINNING OF PERIOD
              
              
              316,488
              
              
              157,801CASH
                  AND CASH EQUIVALENTS, END OF PERIOD
              
              $
              153,005
              
              $
              393,101
   5
 
 **DND
        TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **CONDENSED
        CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)**
 **FOR
        THE THREE AND SIX MONTHS ENDED JUNE 30, 2005 AND 2004**
 **(UNAUDITED)**
 
 
 **2005**
              
              **2004**SUPPLEMENTARY
                  DISCLOSURE OF
                CASH
                  FLOW INFORMATION:Cash
                  paid for interest
              
              $
              106,521
              
              $
              169,494Cash
                  paid for taxes
              
              $
              0
              
              $
              0SCHEDULE
                  OF NON-CASH INVESTING
                AND
                  FINANCING ACTIVITIES:Cancellation
                  of capital lease
                and
                  return of asset to vendor
              
              $
              0
              
              $
              9,202Common
                  stock issued for prepaid expenses
              
              $
              250,000
              
              $
              0
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 See
        accompanying notes.
   6
   **DND
        TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
        30, 2005**
 **(UNAUDITED)**
 
  1.  GENERAL
   **Presentation** - The
        accompanying consolidated financial statements have been prepared without
        audit
        and reflect all adjustments, consisting of normal recurring adjustments,
        which
        are, in the opinion of management, necessary for a fair statement of financial
        position and the results of operations for the interim periods. The statements
        have been prepared in accordance with accounting principles generally accepted
        in the United States of America and pursuant to the rules and regulations
        of the
        Securities and Exchange Commission ("SEC"). Certain information and footnote
        disclosures, normally included in financial statements prepared in accordance
        with accounting principles generally accepted in the United States of America,
        have been condensed or omitted pursuant to such SEC rules and regulations
        Operating results for the six months ended June 30, 2005, are not necessarily
        indicative of the results that may be expected for the year ended December
        31,
        2005. Accordingly, your attention is directed to footnote disclosures found
        in
        the December 31, 2004 Annual Report and particularly to Note 1, which includes
        a
        summary of significant accounting policies.
   **Nature
        of Business and History of Company** - DND
        Technologies, Inc. (the "Company") was organized on May 9, 1997, under the
        laws
        of the state of Nevada. The Company operates as a holding company for subsidiary
        acquisitions. The Company's operating subsidiary is Aspect Systems, Inc.
        (located in Arizona and Texas; hereinafter referred to as "ASI").
   ASI
        also
        owns 100% of ASI Team Asia Ltd. ASI Team Asia Ltd. is inactive and has no
        significant assets or liabilities and has not had any revenue or
        expenses.
   ASI
        is a
        supplier of semiconductor manufacturing equipment and also supplies complete
        after market support of the aforementioned equipment, which currently includes
        Lam AutoEtch, Rainbow, and TCP plasma etch systems, plus a variety of plasma
        etch and strip products manufactured on the ASI MX-1 and ASI MX-10 platforms
        (formerly Matrix System One and Ten), and the Arista and Arista Dual platforms
        (formerly Matrix Bobcat and Cheetah). Elements of support include spare
        parts and
        assemblies, and various engineering services.
   **Principles
        of Consolidation** - The
        consolidated financial statements include the accounts of DND Technologies,
        Inc.
        and its wholly-owned subsidiaries ASI and ASI Team Asia Ltd. All material
        inter-company accounts and transactions have been eliminated.
   **Net
        Income -** Basic
        income per common share is computed by dividing net income available to common
        stockholders by the weighted-average number of common shares outstanding
        during
        the period. Diluted income per common share is computed by dividing net income
        available to common stockholders by the weighted-average number of common
        shares
        outstanding plus an assumed increase in common shares outstanding for
        potentially dilutive securities, which consist of options. Potentially dilutive
        shares are excluded from the computation in loss periods, as their effect
        would
        be anti-dilutive. The dilutive effect of options to acquire common stock
        is
        measured using the treasury stock method. ** The
        dilutive effect of potentially issuable securities was 3,668,580 shares and
        3,340,986 shares for the six months ended June 30, 2005 and 2004,
        respectively.
   **Concentration
        of Risk** -
        Financial instruments which potentially subject the Company to concentrations
        of
        credit risk consist principally of cash and trade accounts receivable.
  7
  The
        Company places its temporary cash investments in reputable financial
        institutions. As of June 30, 2005, the Company had $149,723 deposited in
        one
        banking institution and $115,018 in a second banking institution. Only $100,000
        of the balance at each institution is federally insured.
   Concentration
        of credit risk with respect to trade receivables is limited due to the large
        number of customers comprising the Company's customer base and their dispersion
        across different geographic areas. The Company routinely assesses the financial
        strength of its customers. At June 30, 2005, the Company had one customer
        whose
        balance was 38% of net accounts receivable.
   **Significant
        Customers -** For
        the
        six months ended June 30, 2005, the Company had one customer whose revenues
        exceeded 10% of total revenues at 33% of total revenues. For the six months
        ended June 30, 2004, the Company had one customer whose revenues exceeded
        10% of
        total revenues at 11% of total revenues. Revenues in 2005 and 2004 outside
        the
        United States include  Europe
        5%
        and 17%, and Asia 43% and 8%, respectively.
   **Significant
        Suppliers** - For
        the six months ended June 30, 2005 and 2004, approximately 19% and
        23% **,** respectively, of gross inventory purchases were purchased from Lam. The Company
        expects to have significant purchases of inventory from Lam in the coming
        year.
   **Stock
        Based Compensation** -
        As
        permitted by FAS 123, as amended, the Company accounts for stock options
        issued
        to employees using the intrinsic value method as prescribed by APB 25. Under
        this method no expense is recognized for options issued with an exercise
        price
        equal to or greater than the market price of the stock on the date of grant.
        Expense for options or warrants issued to non-employees is recorded in the
        financial statements at estimated fair value. For options issued to employees
        the Company is subject to proforma disclosures based on the estimated fair
        value
        of the options issued.
   The
        Black-Scholes option-pricing model was developed for use in estimating the
        fair
        value of traded options which have no vesting restrictions and are fully
        transferable. In addition, option valuation models require the input of highly
        subjective assumptions including the expected stock price volatility. Because
        the Company's stock options and warrants have characteristics different from
        those of traded options, and because changes in the subjective input assumptions
        can materially affect the fair value estimate, in management's opinion, the
        existing models do not necessarily provide a reliable single measure of the
        fair
        value of such stock options.
  **Reclassifications** -
        Certain 2004 amounts have been reclassified to conform to 2005
        presentations.
  2.  INVENTORIES
   A
        summary
        of inventories and allowance for obsolescence is as follows:
  Parts
                  and materials
              
              $
              3,759,721Work-in-process
              
              
              1,698,768Allowance
                  for obsolescence
              
              
              (2,147,682Net
                  inventories
              
              $
              3,310,807Allowance
                  for Obsolescence:Balance,
                  January 1, 2005
              
              $
              2,114,111Current
                  Period Provision
              
              
              33,571Balance,
                  June 30, 2005
              
              $
              2,147,682
   8
 3.  LICENSE
        AGREEMENT AND PAYABLES, LAM RESEARCH CORPORATION
   Future
        minimum payments under the agreements are as follows:
  Inventory
              
              LicenseDecember
                  31, 2005
              
              $
              300,992
              
              $
              360,862December
                  31, 2006
              
              
              310,418
              
              
              507,050December
                  31, 2007
              
              
              28,220
              
              
              538,324December
                  31, 2008
              
              
              -
              
              
              571,527December
                  31, 2009
              
              
              -
              
              
              606,777Thereafter
              
              
              -
              
              
              755,368$
              639,630
              
              $
              3,339,908
  The
        Company is currently in default on its payments; accordingly, the full amount
        has been classified as current in the consolidated balance sheet. (See Note
        11.)
   4.  LICENSE
        AND ROYALTY PAYABLE, AXCELIS TECHNOLOGIES, INC.
   The
        license and royalty payable at June 30, 2005 consisted of the
        following:
  License
                  payable
              
              $
              592,721Royalty
                  payable
              
              
              329,288Total
                  license and royalty payable
              
              $
              922,009
  Of
        this
        amount, $293,983 was due April 1, 2005, $333,309 was due July 1, 2005, and
        the
        remaining balance ($294,717) will be due Oct 1, 2005.  The Company
        has not
        made the past due payments due to cash flow issues and is taking measures
        to
        address this deficiency.
   5.
              NOTES
                  PAYABLE
  The
                  Company's term loan to Merrill Lynch bears interest at 2.00% plus
                  the
                  Prime Rate as published in the Wall Street Journal per annum. The
                  loan is
                  due March 2006 with amortized payments over 45 months and a balloon
                  payment due at maturity. The loan also required a loan fee of $11,450.
                  The
                  loan is secured by a first lien on the Company's total assets ($8,554,056
                  as of June 30, 2005) and has been guaranteed by Doug Dixon and
                  the
                  Company.
              
              $
              898,486Unsecured
                  demand note due to an individual with interest accruing at
                  7%
              
              
              289,350Total
              
              $
              1,187,836
  Future
        minimum payments under the notes are as follows:
  December
                  31, 2005
              
              $
              439,097December
                  31, 2006
              
              
              748,739$
              1,187,836
   9
  The
        Company is in default of the Merrill Lynch term loan covenant relating
        to
        "Aggregate Collateral Value".  This covenant requires a minimum $600,000
        aggregate collateral value as of the end of each month.  As of June
        30,
        2005 the calculation was approx $3,000 short of the minimum amount. 
        Based
        on the fact that for the prior six months, the average of these calculations
        was
        approx $956,000, Merrill Lynch has issued a waiver of the
        covenant as of August 3, 2005 for the month ended June 30, 2005. (See Note
        11.)
   6.  ACCOUNTS
        PAYABLE AND ACCRUED EXPENSES
   A
        summary
        of accounts payable and accrued expenses is as follows:
  Trade
                  accounts payable
              
              $
              1,100,313Accrued
                  commissions
              
              
              166,388Accrued
                  payroll
              
              
              164,560Product
                  warranty provision
              
              
              424,545Accrued
                  interest
              
              
              240,734Lawsuit
                  payable
              
              
              40,000Sales
                  and state income taxes payable
              
              
              60,389$
              2,196,929
 
 7.  COMMON
        STOCK
  During
        the six months ended June 30, 2005, the Company issued the following shares
        of
        common stock:
  ·
              265,000
                  shares of common stock, with an aggregate fair value of $53,000,
                  were
                  issued February 15, 2005, in payment of $53,000 of accrued expenses.
 
 ·
              100,000
                  shares of common stock, with an aggregate fair value of $20,500,
                  were
                  issued February 15, 2005, in payment of $15,000 of accrued legal
                  fees.
                  Accordingly, the Company recorded a $5,500 loss on settlement of
                  debt.
 
 ·
              1,190,478
                  shares of common stock, with an aggregate fair value of $250,000,
                  were
                  issued June 17, 2005, to two unrelated entities, in payment of
                  $250,000 of
                  loan fees. (See Note 11.)
  8.  RELATED
        PARTY TRANSACTIONS
   Amounts
        Due to Related Party
   The
        Company has the following amounts due to its Chairman at June 30,
        2005:
  Notes
                  payable at 7.0%
              
              $
              120,000Accrued
                  interest on notes payable
              
              
              50,127Accrued
                  salaries
              
              
              256,092Total
                  Amount Due To Related Party
              
              $
              426,219
 
 The
        amounts due to the Chairman are delinquent and payable on demand.
  10
 9.  GAIN
        ON
        SETTLMENT OF DEBT
   In
        February 2005, the Company issued 100,000 shares of common stock for payment
        of
        approximately $15,000 of legal services received during the year ended December
        31, 2004. The shares had an aggregate fair value of $20,500; accordingly,
        the
        Company recorded a $5,500 loss on settlement of debt. This loss was offset
        by a
        $23,000 gain resulting from the forgiveness of accrued interest expense after
        the Company made the final $100,000 payment on an unsecured note payable.
   10.  EMPLOYEE
        STOCK OPTIONS
   On
        August
        11, 2003, the Board of Directors and stockholders approved the DND Technologies,
        Inc. Stock Option Plan, which permits the Board of Directors to grant, for
        a ten
        year period, options to purchase up to 5,000,000 shares of its common stock
        to
        directors, employees and consultants. The Plan is administered by the Board
        of
        Directors. The administrators have the authority and discretion, subject
        to the
        provisions of the Plan, to select persons to whom stock options will be granted,
        to designate the number of shares to be covered by each option, to specify
        the
        type of consideration to be paid, and to establish all other terms and
        conditions of each option. Options granted under the Plan will not have a
        term
        that exceeds ten years from date of grant.
   The
        stock
        subject to the Plan and issuable upon exercise of options granted under the
        Plan
        are shares of the Company's common stock, $.001 par value, which may be either
        unissued or treasury shares.
   The
        exercise price is no less than 100% of the fair market value of the shares
        at
        the date of the grant of the options, as specified by the Board of
        Directors.
   Vesting
        terms of the options range from immediate to four years.
   On
        June
        15, 2005, the Board of Directors and stockholders approved the DND Technologies,
        Inc. 2005 Stock Option Plan, which permits the Board of Directors to grant,
        for
        a ten year period, options to purchase up to 3,000,000 shares of its common
        stock to directors, employees and consultants. The Plan is administered by
        the
        Board of Directors. The administrators have the authority and discretion,
        subject to the provisions of the Plan, to select persons to whom stock options
        will be granted, to designate the number of shares to be covered by each
        option,
        to specify the type of consideration to be paid, and to establish all other
        terms and conditions of each option. Options granted under the Plan will
        not
        have a term that exceeds ten years from date of grant.
   The
        stock
        subject to the Plan and issuable upon exercise of options granted under the
        Plan
        are shares of the Company's common stock, $.001 par value, which may be either
        unissued or treasury shares.
   The
        exercise price is no less than 100% of the fair market value of the shares
        at
        the date of the grant of the options, as specified by the Board of
        Directors.
   A
        summary
        of the option activity for the six months ended June 30, 2005, pursuant to
        the
        terms of the Plan is as follows:
  Weighted
                  AverageOptions
                  outstanding at January 1, 2005
              
              
              4,234,226
              
              $
              .06Granted
              
              
              635,000
              
              $
              .06Exercised
              
              
              (441,675
              )
              $
              .06Cancelled
                  and expired
              
              
              (133,501
              )
              $
              .06Options
                  outstanding at June 30, 2005
              
              
              4,294,050
   11
  3,314,299
        shares are exercisable at June 30, 2005.
   Information
        regarding stock options outstanding as of June 30, 2005 is as
        follows:
  Price
              
              
              $.06Weighted
                  average exercise price
              
              
              $.06Weighted
                  average remaining contractual life
              
              
              9
                  years 2 months
  For
        purposes of proforma disclosures, the estimated fair value of the options
        granted in 2003 is amortized to expense over the options' vesting periods.
        The
        Company's proforma information follows:
  Net
                  income:As
                  reported
              
              $
              47,818Proforma
              
              $
              31,629Net
                  Income per common stock share:Basic:As
                  reported
              
              $
              .00Proforma
              
              $
              .00Diluted:As
                  reported
              
              $
              .00Proforma
              
              $
              .00
  11.  SUBSEQUENT
        EVENTS
   On
        July
        5, 2005, the Company entered into a Standby Equity Distribution Agreement
        ("SEDA") with Cornell Capital Partners, LP ("Cornell") dated as of June,
        17,
        2005. Pursuant to the SEDA, at the Company's discretion, it may periodically
        sell to Cornell shares of the Company's common stock for a total purchase
        price
        of up to $10 million. For each share of common stock purchased under the
        SEDA,
        Cornell will pay 96% of the lowest volume weighted average price of the common
        stock, as quoted by Bloomberg, L.P., on the Over-the-Counter Bulletin Board
        or
        other principal market on which the common stock is traded for the five days
        immediately following the notice date. The price paid by Cornell for the
        stock
        shall be determined as of the date of each individual request for an advance
        under the SEDA. Cornell will also retain 5% of each advance under the SEDA.
        Cornell's obligation to purchase shares of stock under the SEDA is subject
        to
        certain conditions, including the Company obtaining an effective registration
        statement for shares of the common stock sold under the SEDA and is limited
        to
        $250,000 per five trading days, provided that aggregate advances in any 30-day
        period shall not exceed $1 million. As part of this agreement, Cornell received
        1,142,858 shares of common stock as a one-time commitment fee and Monitor
        Capital, Inc. received 47,620 shares of common stock as a one-time placement
        agent fee under a Placement Agent Agreement relating to the SEDA, both of
        which
        fees are subject to pending registration.
  As
        of
        August 3, 2005, the Company was granted a loan covenant waiver by Merrill
        Lynch
        and therefore, retained its current status on the Merrill Lynch term loan
        and is
        now in compliance with the loan covenants.
  On
        August
        9, 2005, Lam was paid $187,458 which represents April and May 2005 royalty
        payments and May and June inventory payments. The June royalty and July
        inventory payments are scheduled to be paid August 15, 2005, and at that
        point,
        all past due amounts with Lam will have been paid (See Note 3).
   On
        July
        25, 2005, the Company filed an Information Statement with the SEC stating
        that
        the Board of Directors and certain shareholders consented to an amendment
        of the
        Company's Articles of Incorporation to increase the authorized shares of
        common
        stock to 100,000,000.
  
 12
  **ITEM
        2.**  **MANAGEMENT'S
        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
        OPERATIONS**
   Aspect
        Systems, Inc, ("ASI") a wholly owned subsidiary of DND Technologies, Inc,
        ("DND"
        or the "Company") is a supplier and provider of new and used semiconductor
        equipment and after-market support of semiconductor manufacturing equipment
        which currently includes Lam Research Corp. ("Lam") AutoEtch, Rainbow, and
        TCP
        plasma etch systems, and plasma etch and strip products manufactured on the
        ASI
        MX-1 and ASI MX-10 (formerly Matrix System One and Ten), and the Arista and
        Arista Dual (formerly Matrix Bobcat and Cheetah) platforms. Elements of support
        range from a full line of spare parts and assemblies to various engineering
        services. ASI also offers a wide variety of sub-assembly repair services
        and
        reconditioning/refurbishing of an array of temperature control units used
        in the
        semiconductor industry.
   Management's
        discussion and analysis of results of operations and financial condition
        are
        based upon the Company's financial statements. These statements have been
        prepared in accordance with accounting principles generally accepted in the
        United States of America. These principles require management to make certain
        estimates, judgments and assumptions that affect the reported amounts of
        assets,
        liabilities, revenues and expenses, and related disclosure of contingent
        assets
        and liabilities. On an on going basis, we evaluate our estimates based on
        historical experience and various other assumptions that are believed to
        be
        reasonable under the circumstances, the results of which form the basis for
        making judgments about the carrying values of assets and liabilities that
        are
        not readily apparent from other sources. Actual results may differ from these
        estimates under different assumptions or conditions.
   **Critical
        Accounting Policies and Estimates**
   In
        consultation with our Board of Directors, we have identified four accounting
        principles that we believe are key to an understanding of our financial
        statements. These important accounting policies require management's most
        difficult, subjective judgments.
   **1.**  **Inventory**
   Inventory
        is valued at the lower of cost or market. Cost includes raw materials, freight,
        labor and manufacturing overhead. Inventory with no sales or usage within
        the
        prior 12 months is considered obsolete. Inventory on hand, in excess of a
        12
        month supply, is considered excessive and slow-moving. We review our reserves
        on
        a quarterly basis and adjust them for the full carrying value of obsolete,
        excessive and slow-moving inventory.
   **2.**  **License
        Agreements**
   The
        Company has license agreements, which are being amortized using the
        straight-line method over the life of the contract with Lam (8 years) and
        Axcelis Technologies, Inc. ("Axcelis") (7 years).
   **3.**  **Revenue
        Recognition**
   The
        Company recognizes revenue when persuasive evidence of an arrangement exists,
        title transfer has occurred, the price is fixed or readily determinable,
        and
        collectibility is probable. Sales are recorded net of sales discounts. The
        Company recognizes revenue in accordance with Staff Accounting Bulletin No.
        101,
        "Revenue Recognition in Financial Statements," (SAB 101). Our revenues are
        recorded under two categories:
  13
  Product
        sales - The Company recognizes revenue from product sales when the goods
        are
        shipped and title passes to its customers.
   Service
        income - The Company recognizes revenue from service income when services
        are
        performed.
  4.  **Reclassifications**
   Certain
        2004 amounts have been reclassified to conform to 2005
        presentations.
   *The
        Three Months Ended June 30, 2005 Compared To The Three Months Ended June
        30,
        2004.*
   **Selected
        Financial Information**
  **Three
                  Months Ended****06/30/2005**
              
              **06/30/2004**
              
              **Increase**
                **(Decrease)**Statements
                  of OperationsTotal
                  Revenue
              
              $
              2,267,260
              
              $
              3,737,534
              
              $
              (1,470,274
              )Cost
                  of Revenue:Costs
                  of revenues
              
              
              1,629,608
              
              
              2,526,313
              
              
              (896,705
              )Reserve
                  for slow moving andobsolete
                  inventory
              
              
              (94,438
              )
              
              (800,668
              )
              
              706,230Total
                  Cost of Revenues
              
              
              1,535,170
              
              
              1,725,645
              
              
              (190,475
              )Percentage
                  of Sales
              
              
              68
              %
              
              46
              %Gross
                  Profit
              
              
              732,090
              
              
              2,011,889
              
              
              (1,279,799
              )Percentage
                  of Sales
              
              
              32
              %
              
              54
              %Operating
                  Expenses:Research
                  and development
              
              
              45,281
              
              
              16,656
              
              
              28,625Sales
                  and marketing
              
              
              393,913
              
              
              551,328
              
              
              (157,415
              )General
                  and administrative
              
              
              451,774
              
              
              566,056
              
              
              (114,282
              )Total
                  Operating Expenses
              
              
              890,968
              
              
              1,134,040
              
              
              (243,072
              )Income
                  (Loss) from Operations
              
              
              (158,878
              )
              
              877,849
              
              
              (1,036,727
              )Other
                  (Expense):Interest
                  Expense
              
              
              (87,119
              )
              
              (84,333
              )
              
              2,786Income
                  Before Income Tax Expense
              
              
              (245,997
              )
              
              793,516
              
              
              (1,039,513
              )Income
                  Tax Expense
              
              
              0
              
              
              0
              
              
              0Net
                  Income (Loss)
              
              $
              (245,997
              )
              $
              793,516
              
              $
              (1,039,513
              )Net
                  Income (Loss) Per ShareBasic
              
              
              (.01
              )
              
              .03
              
              
              (.04
              )Diluted
              
              
              N/A
              
              
              .03
              
              
              N/A
  **Results
        of Operations**
   Our
        revenue decrease of $1,470,274, or 39%, was primarily due to a decrease in
        system sales of $1,105,183. We delivered 5 systems in the second quarter
        of 2004
        but only 3 systems in the second quarter of 2005. This decrease in system
        sales
        during the second quarter of 2005 is due to one customer extending its original
        second quarter delivery date into the fourth quarter of 2005 and in 3 instances
        we had to delay shipments until the third quarter due to production
        difficulties. Due to our tight cash flow situation and the increased funding
        needs for system sales, we have had to defer some parts, assemblies, and
        consumables purchases, and therefore the related sales, to future periods
        resulting in a decrease of $409,471 in sales of these items. Our sales break
        down by segment is as follows:
  14
  **June
                  30, 2005**
              
              **June
                  30, 2004**
              
              **Increase**
                **Decrease**Systems
                  and chillers
              
              $
              991,216
              
              $
              2,096,399
              
              $
              (1,105,183
              )Parts,
                  assemblies
                and
                  consumables
              
              
              1,187,926
              
              
              1,597,397
              
              
              (409,471
              )Field
                  service and training
              
              
              88,118
              
              
              43,738
              
              
              44,380$
              2,267,260
              
              $
              3,737,534
              
              $
              (1,470,274
              )
  **Cost
        of Revenues**
   Our
        cost
        of revenues decreased $896,705 or 35%. This decrease is directly related
        to the
        39% decrease in total revenue for the three months ended June 30, 2005. Our
        cost
        of revenues, for recurring operations, as a percentage of revenues for the
        three
        months ended June 30, 2005 was 72% as compared to 68% for the three months
        ended
        June 30, 2004.
   **Cost
        of Revenues - Reserve for Slow Moving and Obsolete
        Inventory**
   Our
        cost
        of revenues - reserve for slow moving and obsolete inventory is the change
        in
        our analysis of the need for a slow-moving and obsolete inventory reserve.
        Based
        on our analysis in the three months ended June 30, 2005, we recorded a $94,438
        decrease to the reserve due to an analysis of inventory items. In the three
        months ended June 30, 2004, we recorded a $962,758 decrease in our reserve
        primarily as a result of signing an amendment to the November 2002 Lam Asset
        Purchase and License Agreement and re-valuing the corresponding inventory.
        This
        amount was offset in the three months ended June 30, 2004 by a $162,090 increase
        to the reserve due to an analysis of all other inventory items, resulting
        in a
        net decrease of $800,668.
   **Research
        and Development**
   Research
        and development costs increased $28,625 or 172% in the three months ended
        June
        30, 2005. The increase is primarily related to an increase in payroll and
        employee benefits in the amount of $6,100, and an increase of $19,400 related
        to
        R&D expense on the NCS (Nitrogen Clean System) product line. We normally do
        not incur significant research and development expenses.
   **Sales
        and Marketing**
   Sales
        and
        marketing costs decreased $157,415 or 29% in the three months ended June
        30,
        2005. The decrease is a direct result of the 39% decrease in revenues we
        experienced during the three months ended June 30, 2005. Accordingly, we
        also
        experienced a decrease in commissions of $62,565, or 53%, from $118,895 in
        the
        three months ended June 30, 2004 to $56,330 in the three months ended June
        30,
        2005. Our expense related to the Axcelis license and associated royalty
        decreased $94,413, or 57%, from $166,481 in the three months ended June 30,
        2004
        to $72,068 in the three months ended June 30, 2005 **.**
   15
 **General
        and Administrative**
  **Three
                  Months Ended****06/30/2005**
              
              **06/30/2004**
              
              **Increase**
                **(Decrease)**General
                  and AdministrativeSalaries
                  and wages
              
              $
              264,548
              
              $
              273,563
              
              $
              (9,015
              )Professional
                  fees
              
              
              44,018
              
              
              101,961
              
              
              (57,943
              )Occupancy
                  Expense, less amount allocated to Cost of Revenue
              
              
              45,439
              
              
              47,579
              
              
              (2,140
              )Other
                  general and administrative expenses
              
              
              97,769
              
              
              142,953
              
              
              (45,184
              )Total
                  General and Administrative
              
              $
              451,774
              
              $
              566,056
              
              $
              (114,282
              )
  Salaries
        and wages decreased $9,015 in the three months ended June 30, 2005 as compared
        to the three months ended June 30, 2004. This decrease was caused by a $37,000
        accrual adjustment in the second quarter of 2004. Without this adjustment,
        payroll and benefits for the 2 nd quarter
        of 2005 would have been up by approximately $28,000 which is due to increased
        headcount.
   Occupancy
        expense represents our costs to lease, occupy, and maintain our leased
        facilities in Arizona and Texas.  These costs, which consist primarily
        of
        rent, repair and maintenance, utilities, security, insurance and janitorial
        services, are allocated between cost of revenue and operating expenses based
        upon the square footage utilized by each category.
   Professional
        fees decreased $57,943 or 57% in 2005 primarily due to a $41,000 decrease
        in
        legal expenses from litigation ultimately settled by the Company.
   Other
        general and administrative expenses decreased $45,184 or 32%. The decreased
        expenses are primarily attributable to decreases in non capitalizable equipment
        of $7,000, office supplies/equipment of $8,000, repair and maintenance of
        $5,000, travel and entertainment expense of $7,000, and computer
        hardware/software expense of $3,000.
   **Net
        Income (Loss)**
   Primarily
        as a result of the foregoing we had a net loss of $245,997 for the three
        months
        ended June 30, 2005, compared to net income of $793,516 for the three months
        ended June 30, 2004.
   *The
        Six Months Ended June 30, 2005 Compared To The Six Months Ended June 30,
        2004.*
   **Selected
        Financial Information**
  **Six
                  Months Ended****06/30/2005**
              
              **06/30/2004**
              
              **Increase**
                **(Decrease)**Statements
                  of OperationsTotal
                  Revenue
              
              $
              6,627,595
              
              $
              7,028,309
              
              $
              (400,714
              )Cost
                  of Revenue:Costs
                  of revenues
              
              
              4,351,747
              
              
              4,456,468
              
              
              (104,721
              )Reserve
                  for slow moving andobsolete
                  inventory
              
              
              33,571
              
              
              (800,668
              )
              
              834,239Total
                  Cost of Revenues
              
              
              4,385,318
              
              
              3,655,800
              
              
              729,518Percentage
                  of Sales
              
              
              66
              %
              
              52
              %Gross
                  Profit
              
              
              2,242,277
              
              
              3,372,509
              
              
              (1,130,232
              )Percentage
                  of Sales
              
              
              34
              %
              
              48
              %Operating
                  Expenses:Research
                  and development
              
              
              66,408
              
              
              31,843
              
              
              34,565Sales
                  and marketing
              
              
              1,041,367
              
              
              967,860
              
              
              73,507General
                  and administrative
              
              
              932,388
              
              
              997,653
              
              
              (65,265
              )Total
                  Operating Expenses
              
              
              2,040,163
              
              
              1,997,356
              
              
              42,807Income
                  from Operations
              
              
              202,114
              
              
              1,375,153
              
              
              (1,173,039
              )Other
                  Income (Expense):Gain
                  on settlement of debt
              
              
              17,500
              
              
              0
              
              
              17,500Lawsuit
                  settlement
              
              
              0
              
              
              (140,000
              )
              
              140,000Interest
                  Expense
              
              
              (170,996
              )
              
              (178,456
              )
              
              7,460Income
                  Before Income Tax Expense
              
              
              48,618
              
              
              1,056,697
              
              
              (1,008,079
              )Income
                  Tax Expense
              
              
              800
              
              
              800
              
              
              0Net
                  Income
              
              $
              47,818
              
              $
              1,055,897
              
              $
              (1,008,079
              )Net
                  Income Per ShareBasic
              
              
              .00
              
              
              .05
              
              
              (.05
              )Diluted
              
              
              .00
              
              
              .04
              
              
              (.04
              )
   16
 **Results
        of Operations**
   Our
        revenue decrease of $400,714, or 6%, was due to a decrease in sales from
        our
        parts, assemblies, and consumables category. Due to our tight cash flow
        situation and the increased funding needs for system sales, we have had to
        defer
        some parts, assemblies, and consumables purchases, and therefore the related
        sales, to future periods. Our sales break down by segment is as
        follows:
  **June
                  30, 2005**
              
              **June
                  30, 2004**
              
              **Increase**
                **Decrease**Systems
                  and chillers
              
              $
              3,824,717
              
              $
              3,835,800
              
              $
              (11,083
              )Parts,
                  assemblies and consumables
              
              
              2,697,899
              
              
              3,099,086
              
              
              (401,187
              )Field
                  service and training
              
              
              104,979
              
              
              93,423
              
              
              11,556$
              6,627,595
              
              $
              7,028,309
              
              $
              (400,714
              )
  **Cost
        of Revenues**
   Our
        cost
        of revenues decreased $104,721 or 2%. This decrease is directly related to
        the
        6% decrease in total revenue for the six months ended June 30, 2005. Our
        cost of
        revenues as a percentage of revenues for the six months ended June 30, 2005
        was
        66% as compared to 63% for the six months ended June 30, 2004.
   **Cost
        of Revenues - Reserve for Slow Moving and Obsolete
        Inventory**
   Our
        cost
        of revenues - reserve for slow moving and obsolete inventory is the change
        in
        our analysis of the need for a slow-moving and obsolete inventory reserve.
        Based
        on our analysis in the first six months of 2005, we recorded a $33,571 increase
        to the reserve due to an analysis of inventory items. In the six months ended
        June 30, 2004, we recorded a $962,758 decrease in our reserve primarily as
        a
        result of signing an amendment to the November 2002 Lam Asset Purchase and
        License Agreement and re-valuing the corresponding inventory. This amount
        was
        offset in the six months ended June 30, 2004 by a $162,090 increase to the
        reserve due to an analysis of all other inventory items, resulting in a net
        decrease of $800,668.
   **Research
        and Development**
   Research
        and development costs increased $34,565 or 109% in the six months ended June
        30,
        2005. The increase is primarily related to increases in payroll and employee
        benefits in the amount of $8,867, outside contractor expenses for product
        development work in the amount of $6,748 and an increase of $19,400 related
        to
        R&D expense on the NCS (Nitrogen Clean System) product line. We normally do
        not incur significant research and development expenses.
   17
 **Sales
        and Marketing**
   Sales
        and
        marketing costs increased $73,507 or 8% in the six months ended June 30,
        2005.
        This increase is primarily related to the increase in the Axcelis license
        and
        royalty expense of $71,474 due to increased sales of these products for the
        six
        month period ending June 30, 2005.
   **General
        and Administrative**
  **Six
                  Months Ended****06/30/2005**
              
              **06/30/2004**
              
              **Increase**
                **(Decrease)**General
                  and AdministrativeSalaries
                  and wages
              
              $
              527,235
              
              $
              465,393
              
              $
              61,842Professional
                  fees
              
              
              115,299
              
              
              183,076
              
              
              (67,777
              )Occupancy
                  Expense, less amount allocated to Cost of Revenue
              
              
              96,369
              
              
              96,951
              
              
              (582
              )Other
                  general and administrative expenses
              
              
              193,485
              
              
              252,233
              
              
              (58,748
              )Total
                  General and Administrative
              
              $
              932,388
              
              $
              997,653
              
              $
              (65,265
              )
  Salaries
        and wages increased $61,842 or 13% in the six months ended June 30, 2005
        as
        compared to the six months ended June 30, 2004. This increase is primarily
        the
        result of an increase in general and administrative headcount by four employees,
        which increased our payroll and benefits.
   Professional
        fees decreased in 2005 in the amount of $67,777 or 37% primarily due to a
        $75,000 decrease in legal expenses from litigation ultimately settled by
        the
        Company. This was offset by a $7,000 increase in accounting audit expense
        due to
        increased reporting requirements.
   Occupancy
        expense represents our costs to lease, occupy, and maintain our leased
        facilities in Arizona and Texas.  These costs, which consist primarily
        of
        rent, repair and maintenance, utilities, security, insurance and janitorial
        services, are allocated between cost of revenue and operating expenses based
        upon the square footage utilized by each category.
   Other
        general and administrative expenses decreased $58,748 or 23%. The decreased
        expenses are primarily attributable to a $31,000 increase in other income
        items
        during 2005 ($11,000 from 401K plan forfeitures and $23,000 from the forgiveness
        of accrued interest expense after we made the final $100,000 payment on an
        unsecured note payable). Other items contributing to the decrease were
        reductions in non-capitalizable equipment of $7,000 and office
        supplies/equipment expense of $8,000.
  18
 **Lawsuit
        Settlement**
  In
        April
        2004, the Company settled litigation with a former employee, which provided
        for
        the payment of $140,000 in installments of $10,000 per month beginning September
        2004. (See further discussion below under "Liquidity and Capital Resources.")
   **Gain
        on Settlement of Debt**
   In
        February 2005, the Company issued 100,000 shares of common stock for payment
        of
        approximately $15,000 of legal services received during the year ended December
        31, 2004. The shares had an aggregate fair value of $20,500; accordingly,
        we
        recorded a $5,500 loss on settlement of debt. This loss was offset by a $23,000
        gain resulting from the forgiveness of accrued interest expense after we
        made
        the final $100,000 payment on an unsecured note payable.
   **Net
        Income**
   Primarily
        as a result of the foregoing we had net income of $47,818 for the six months
        ended June 30, 2005, compared to $1,055,897 for the six months ended June
        30,
        2004.
   **Capital
        Resources**
  **Six
                  Months Ended**Working
                  Capital
              
              **06/30/2005**
              
              **06/30/2004**
              
              **Favorable
                  (Unfavorable)**Current
                  Assets
              
              $
              5,240,599
              
              $
              3,637,177
              
              $
              1,603,422Current
                  Liabilities
              
              
              (10,500,058
              )
              
              (5,504,696
              )
              
              (4,995,362
              )Deficit
                  Working Capital
              
              $
              (5,259,459
              )
              $
              (1,867,519
              )
              $
              (3,391,940
              )Long-term
                  Debt
              
              $
              (11,539
              )
              $
              (4,668,132
              )
              $
              4,656,593Stockholders'
                  (Deficit)
              
              $
              (1,957,541
              )
              $
              (2,534,484
              )
              $
              576,943
  During
        the six months ended June 30, 2005, we were in default of our payment terms
        on
        the amounts owed to Lam. As a result, the entire debt of $3,979,538 was
        classified as current in the consolidated balance sheet. During June 2004
        we
        were in compliance with the payment terms of the amounts owed to Lam and
        therefore the amounts were recorded as being split between current ($500,902)
        and long term ($3,221,416).
   We
        were
        also in default of our Merrill Lynch loan covenant relating to "Aggregate
        Collateral Value".  This covenant requires a minimum $600,000 aggregate
        collateral value as of the end of each month.  At June 30, 2005, the
        calculation was approximately $3,000 short of the minimum amount. 
        Based on
        the fact that for the prior six months, the average of these calculations
        was
        approximately $956,000, Merrill Lynch has issued a waiver of the
        covenant for this as of August 3, 2005 for the June 30, 2005
        violation.
   Included
        in current liabilities is a total of $922,009 which is owed to Axcelis for
        license and royalty fees.  Of this amount, $293,983 was due April
        1, 2005,
        $333,309 was due July 1, 2005, and the remainder ($294,717) will be due Oct
        1,
        2005.  Although our current tight cash flow has prevented these payments
        from being made, we have assured Axcelis that our delinquent payments will
        be
        made as soon as possible and management has no reason to believe as of the
        date
        of this filing that Axcelis will terminate either of our agreements with
        Axcelis..
   19
 **Statements
        of Cash Flows Select Information**
  **Six
                  Months Ended****06/30/2005**
              
              **06/30/2004**Net
                  Cash Provided (Used) By:Operating
                  Activities
              
              $
              282,898
              
              $
              560,458Investing
                  Activities
              
              
              (6,242
              )
              
              (21,356
              )Financing
                  Activities
              
              
              (440,139
              )
              
              (303,802
              )
  **Operating
        Activities**
   For
        the
        six months ended June 30, 2005, cash provided by operating activities of
        $282,898 was primarily attributed to net income of $47,818, a decrease in
        accounts receivable of $1,105,130 (resulting from collections on significant
        shipments made in the quarter ended December 31, 2004) and an increase in
        deposits from customers of $672,834. These amounts were offset by an increase
        in
        inventories of $402,043, prepaid expenses and other assets of $118,170, and
        a
        decrease in accounts payable and accrued expenses of $1,410,807.
   For
        the
        six months ended June 30, 2004, $560,458 cash was provided by operating
        activities. This was primarily due to net income of $1,055,897, an increase
        of
        $821,549 in customer deposits and an increase of $214,858 in accounts payable
        and accrued expenses which were offset by an increase in accounts receivable
        of
        $450,350, an increase in inventories of $440,845 and an increase in prepaid
        expenses and other assets of $140,071.
   **Investing
        Activities**
   During
        the six months ended June 30, 2005 and 2004, cash was used by investing
        activities for purchases of equipment in the amounts of $6,242 and $21,356,
        respectively.
   We
        currently have no material commitments for capital expenditures.
   **Financing
        Activities**
   Financing
        activities in the six months ended June 30, 2005 used a total of $440,139
        as
        compared to $303,802 in the six months ended June 30, 2004. In the six months
        ended June 30, 2005, $446,639 was used for the repayment of long-term debt,
        as
        compared to $298,839 in the six months ended June 30, 2004. In the six months
        ended June 30, 2005 we received $26,500 from the issuance of common stock
        options.
   **Liquidity
        and Capital Resources**
   Although
        sales for the three months ended June 30, 2005 were down from June 30, 2004
        by
        $1,470,274, and sales for the year ended June 30, 2005 compared to the year
        ended June 30, 2004 were down by $400,714, we currently have booked system
        orders for approximately 6 million dollars of system sales that management
        believes will be shipped and delivered during the remainder of 2005. 
        If
        these systems are shipped and delivered during 2005 and our expenses for
        the
        remainder of 2005 are comparable to our expenses during 2004, management
        believes our financial results for 2005 would be in line with those for 2004,
        excluding the potential for additional sales being booked this year. 
        In
        addition, the positive cash flow continuing to be produced
        by our
        operating activities, the increased accounts receivable dollars from
        the
        upcoming system sales and the funding to be received from the Cornell SEDA
        (see discussion below in this section) will all help to relieve the
        strain
        on our current cash flow.
  20
  To
        date,
        we have financed our business with cash from our operating activities, a
        bank
        line of credit that has been restructured into a term loan and a loan for
        $200,000. This $200,000 loan was paid in full in March 2005. Our subsidiary's
        restructured term loan with Merrill Lynch Business Financial Services, Inc.
        (the
        "New Loan") had a balance of $898,486 as of June 30, 2005, requires payments
        over a term of 17 months at an interest rate of two percent (2%) plus the
        prime
        rate with principal amortized over a 45 month period and a balloon payment
        upon
        the expiration of the term. The New Loan is guaranteed by both DND Technologies,
        Inc. and Douglas Dixon, our Chief Executive Officer, and is secured by a
        first
        lien on our total assets.
   Our
        Asset
        Sale and License Agreement with Lam, dated November 8, 2002, granted
        us a
        non-exclusive license to several of Lam's patents and other intellectual
        property, which enables us to sell, import, repair and distribute products
        using
        this licensed intellectual property. To date, we have purchased approximately
        $2.2 million in product under the Agreement, and we are required to pay
        approximately $5.3 million over the term (of which approximately $3.3 million
        remains to be paid) as a fee for the licensed intellectual property.
   On
        June
        25, 2004, the Company signed an amendment to the November 2002 Asset Purchase
        and License Agreement with Lam, which, among other things, restructured the
        terms of payment for the inventory purchases made as a part of the original
        agreement. Under the new terms, we will pay a revised balance of $871,596
        for
        the original inventory purchases in 30 equal installment payments of $28,220,
        which began on August 1, 2004 and end January 1, 2007, with an additional
        payment of $90,000 that was due and paid on September 30, 2004. An additional
        inventory transfer of $65,000 took place in August 2004, and was added to
        this
        outstanding balance for a total of $936,596.
   On
        April
        30, 2004, a former employee and the Company settled counter-claims against
        each
        other arising from the employee's prior association with the Company. We
        recorded, in 2004, an expense of the entire settlement payable to the employee
        of $140,000. Payments in the amount of $10,000 per month began September
        1, 2004
        and continue until October 1, 2005, without interest.
   In
        November 2003, we entered into an agreement with Axcelis and acquired an
        exclusive license to all future manufacturing, sales, service, and parts
        support
        for certain dry strip semiconductor manufacturing equipment now marketed
        under
        the trade names MX-1 and MX-10 (formerly Matrix System One and System Ten).
        The
        agreement provides for the one time payment of a license fee of $150,000
        plus
        18% of net revenues (from these sales) per quarter until a $2,750,000 fee
        has
        been paid and a declining royalty (from 10% down to 2%) on related sales
        through
        December 31, 2010.
   On
        August
        2, 2004, we entered into an additional agreement with Axcelis acquiring an
        exclusive license to manufacture, sell and provide services and parts support
        for certain reactive ion etch semiconductor manufacturing equipment for wafer
        sizes up to 200mm now marketed under the ASI trade name Arista and Arista
        Dual
        (formerly Matrix Bobcat and Cheetah). The agreement provides for a quarterly
        payment equal to 18% of net revenues from the sale of this product by the
        Company, beginning with the fourth quarter of 2004 and ending December 31,
        2011,
        or until $750,000 (the license fee) has been paid, whichever occurs first,
        and
        payment of a declining royalty (from 10% down to 2%) on related sales through
        December 31, 2011.
   On
        July
        5, 2005, we entered into a Standby Equity Distribution Agreement ("SEDA")
        with
        Cornell Capital Partners, LP ("Cornell") dated as of June, 17, 2005. Pursuant
        to
        the SEDA, at our discretion, we may periodically sell to Cornell shares of
        our
        common stock for a total purchase price of up to $10 million. For each share
        of
        common stock purchased under the SEDA, Cornell will pay 96% of the lowest
        volume
        weighted average price of the common stock, as quoted by Bloomberg, L.P.,
        on the
        Over-the-Counter Bulletin Board or other principal market on which the common
        stock is traded for the five days immediately following the notice date.
        The
        price paid by Cornell for the stock will be determined as of the date of
        each
        individual request for an advance under the SEDA. Cornell will also retain
        5% of
        each advance under the SEDA. Cornell's obligation to purchase shares of stock
        under the SEDA is subject to certain conditions, including us obtaining an
        effective registration statement for shares of the common stock sold under
        the
        SEDA and is limited to $250,000 per five trading days, provided that aggregate
        advances in any 30-day period shall not exceed $1 million. As part of this
        agreement, Cornell has received 1,142,858 shares of common stock as a one-time
        commitment fee and Monitor Capital, Inc. has received 47,620 shares of common
        stock as a one-time placement agent fee under a Placement Agent Agreement
        relating to the SEDA, and these fees are subject to pending registration.
   21
 Our
        future cash requirements and the adequacy of available funds will depend
        on many
        factors, including the pace at which we expand our business generally, and
        our
        inventory in particular, the general state of the economy, which impacts
        the
        amount of money that may be spent for computer related purchases, and
        maintaining sufficient gross profit margins to service our substantial
        indebtedness.
   **CAUTIONARY
        NOTE REGARDING FORWARD-LOOKING STATEMENTS AND RISK FACTORS**
   *The
        Company's Form 10-KSB, any Form 10-QSB or any Form 8-K of the Company or
        any
        other written or oral statements made by or on behalf of the Company may
        contain
        forward-looking statements which reflect the Company's current views with
        respect to future events and financial performance. The words "believe,"
        "expect," "anticipate," "intends," "estimate," "forecast," "project," and
        similar expressions identify forward-looking statements. All statements other
        than statements of historical fact are statements that could be deemed
        forward-looking statements, including any statements of the plans, strategies
        and objectives of management for future operations; any statements concerning
        proposed new products, services, developments or industry rankings; any
        statements regarding future economic conditions or performance; any statements
        of belief; and any statements of assumptions underlying any of the
        foregoing.*  *Such
        "forward-looking statements" are subject to risks and uncertainties set forth
        from time to time in the Company's SEC reports and are generally set forth
        below
        and particularly discussed in the Company's Form 10-KSB for the year ended
        December 31, 2004.*
   *Readers
        are cautioned not to place undue reliance on such forward-looking statements
        as
        they speak only of the Company's views as of the date the statement was made.
        The Company undertakes no obligation to publicly update or revise any
        forward-looking statements, whether as a result of new information, future
        events or otherwise.*
   **Risk
        Factors**
   **You
        should consider the following discussion of risks as well as other information
        regarding our operations. The risks and uncertainties described below are
        not
        the only ones. Additional risks and uncertainties not presently known to
        us or
        that we currently deem immaterial also may impair our business operations.**
  ·
              We
                  are past due on certain payments to Axcelis for license and royalty
                  fees.
                  While management believes the license is beneficial to both parties
                  and
                  Axcelis has to date been willing to provide us with additional
                  time to
                  make these payments, Axcelis could terminate our license agreements
                  with
                  it upon ninety days written notice, although we would have the
                  ninety day
                  notice period in which to make the past due payments and avoid
                  termination. Management is exploring payment options, which may
                  include
                  use of proceeds from the Cornell SEDA, funds from operations, or
                  funds
                  from other sources.
   22
 
 ·
              We
                  depend on Dennis Key, our CFO and CEO of ASI, and his relationships
                  within
                  the semiconductor industry. His loss would seriously disrupt our
                  operations. Our CEO, Douglas Dixon, is gradually decreasing his
                  involvement with the Company in anticipation of retirement. We
                  anticipate
                  that Mr. Dixon's relationships within the semiconductor industry
                  will be
                  continued by Mr. Key.
 
 ·
              Demand
                  for our products is subject to cyclical downturns in the semiconductor
                  industry.
 
 ·
              We
                  are subject to the risks associated with the intensely competitive
                  and
                  capital-intensive nature of the semiconductor
                  industry.
 
 ·
              We
                  are subject to risks relating to product concentration and lack
                  of product
                  revenue diversification.
 
 ·
              The
                  semiconductor industry is based on rapidly changing
                  technology.
 
 ·
              We
                  may experience supply shortages.
 
 ·
              We
                  are exposed to the risks of operating a global
                  business.
 
 ·
              We
                  are exposed to risks associated with a highly concentrated customer
                  base.
 
 ·
              We
                  are exposed to risks associated with our acquisition strategy.
 
 ·
              In
                  the past, our independent accountants have expressed uncertainty
                  about our
                  ability to continue as a going
                  concern.
 
 ·
              Our
                  ability to raise additional financing, other than the Cornell SEDA,
                  is
                  uncertain.
 
 ·
              There
                  is a limited market for our common stock.
 
 ·
              Our
                  common stock is subject to penny stock regulation.
 
 ·
              We
                  are subject to increasing costs of compliance with the Sarbanes-Oxley
                  Act
                  of 2002 and must maintain high margins to pay for these ongoing
                  expenses
                  required of public companies.
   23
 **ITEM
        3.**  **CONTROLS
        AND PROCEDURES**
   (a)  Under
        the
        supervision and with the participation of our management, including our
        principal executive officer and principal financial officer, we conducted
        an
        evaluation of the design and operation of our disclosure controls and
        procedures, as such term is defined under Rules 13a-14(c) and 15d-14(c)
        promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
        Act"), within 90 days of the filing date of this report. Based on
        that
        evaluation, our principal executive officer and our principal financial officer
        concluded that the design and operation of our disclosure controls and
        procedures were effective in timely alerting them to material information
        required to be included in the Company's periodic reports filed with the
        SEC
        under the Securities Exchange Act of 1934, as amended. The design of any
        system
        of controls is based in part upon certain assumptions about the likelihood
        of
        future events, and there can be no assurance that any design will succeed
        in
        achieving its stated goals under all potential future conditions, regardless
        of
        how remote.
   (b)  There
        have been no changes in our internal control over financial reporting identified
        in connection with the evaluation that occurred during the last fiscal quarter
        that have materially affected, or that are reasonably likely to materially
        affect, our internal control over financial reporting. However, as disclosed
        in
        our Form 10-QSB filed on May 16, 2005, our management received a letter from
        the
        Company's independent auditors on May 10, 2005 that identified certain
        weaknesses in our internal control over financial reporting. Our management
        has
        begun to implement changes to our internal control over financial reporting
        to
        address primarily two issues discovered in the course of their evaluation
        of our
        internal control during the last fiscal quarter. Our subsidiary's new Vice
        President of Operations, hired in July 2005, is exploring ways to improve
        our
        inventory accounting software to prevent adjustments to the valuation of
        items
        without proper approval or identification that a change has been made and
        to
        improve the tracking of our inventory at foreign locations. We are also working
        to improve our internal control through increased segregation of critical
        duties
        among the members of our accounting staff and improved oversight of the
        financial accounting and reporting process by our principal accounting officer.
   **PART
        II - OTHER INFORMATION**
   **ITEM
        4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**
  On
        June
        16, 2005, a written consent in lieu of special meeting was executed by
        shareholders holding 15,828,406 shares of the Company's common stock, or
        67.3%
        of the outstanding voting stock, as of that date. This consent approved the
        amendment and restatement of the Company's Articles of Incorporation (i)
        to
        increase the number of authorized shares of Common Stock of the Company to
        100,000,000; (ii) to provide for adoption, amendment or repeal of the Company's
        bylaws solely by the Board of Directors; (iii) to provide for the taking
        of
        actions by written consent in lieu of a meeting without restrictions beyond
        those contained in Nevada law; (iv) to provide for the approval of holders
        of a
        simple majority of the Company's voting stock to amend the Company's Articles;
        and (v) to make certain other changes to the Articles.
  **ITEM
        5. OTHER INFORMATION**
   On
        June
        15, 2005, Ernie Recsetar resigned from his position as a director of the
        Company.
   **ITEM
        6. EXHIBITS AND REPORTS ON FORM 8-K**
   (a)  Exhibits:
  10.15
              Waiver
                  of Covenant Compliance from Merrill Lynch Business Financial Services,
                  Inc., dated August 3,
                  2005
 31.1
                  Rule
                        13a-14(a)/15d-14(a) Certification of Principal Executive
                        Officer
 31.2
                        Rule
                              13a-14(a)/15d-14(a) Certification of Principal Financial
                              Officer
 32
                          Section
                              1350 Certifications
  24
 (b)  Reports
        on Form 8-K:
   On
        July
        7, 2005, the Company filed a Current Report on Form 8-K announcing its entry
        into a Standby Equity Distribution Agreement with Cornell Capital Partners,
        LP,
        dated as of June 17, 2005.
  
 25
 SIGNATURES
 
 In
        accordance with the requirements of the Exchange Act, the registrant caused
        this
        report to be signed on its behalf by the undersigned, thereunto duly
        authorized.
 
 DND
                TECHNOLOGIES, INC., a Nevada corporationDated: August
                12, 2005
              By:
              /s/ Douglas
                N. DixonDouglas
                N. Dixon, CEO, President and Chairman
   26