U NITED S TATES S ECURITIES A ND E XCHANGE C OMMISSION


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 March 31, 2006




Commission
      File No. 333-42936




**DND
      **T****ECHNOLOGIES****,
      I****NC****.****


(Exact
      name of registrant as specified in its charter)




Nevada
            84-1405298(State
                or other jurisdiction of incorporation or organization)
            (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.
              
              The
                registrant is not a shell company (as defined in Rule 12b-2 of the
                Exchange Act).Number
                of shares outstanding of each of the issuer's classes of common
                equity:Class
            Outstanding
                as of May 16, 2006Common
                stock, $0.001 par value
            26,234,653


The
        issuer is not using the Transitional Small Business Disclosure format.





**DND
      TECHNOLOGIES, INC.**





**Table
      of Contents**




PagePART IFINANCIAL
              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 Conditionand
                Results of Operations
            16Item 3.Controls
              and Procedures
            26PART IIOTHER
              INFORMATION
            27Item 6.Exhibits
              and Reports on Form 8-K
            27SIGNATURES
            28


i


**PART
      I.**  **FINANCIAL
      INFORMATION**





**Item
      1.**   **Financial
      Statements (Unaudited)**





**DND
      TECHNOLOGIES, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      BALANCE SHEET**


**MARCH
      31, 2006**


**(UNAUDITED)**


ASSETSCURRENT
                  ASSETS:Cash
                  and cash equivalents
              
              $
              154,578Accounts
                  receivable, net
              
              
              1,112,954Inventories,
                  net
              
              
              1,501,069Prepaid
                  expenses
              
              
              211,314Total
                  current assets
              
              
              2,979,915PROPERTY
                  AND EQUIPMENT, Net of accumulated depreciation
              
              
              141,667LICENSE
                  AGREEMENTS, Net of accumulated amortization
              
              
              100,000OTHER
              
              
              21,816TOTAL
                  ASSETS
              
              $
              3,243,398LIABILITIES
                  AND STOCKHOLDERS' DEFICITCURRENT
                  LIABILITIES:Notes
                  payable, current portion
              
              $
              1,368,337Capital
                  leases payable, current portion
              
              
              12,392Accounts
                  payable and accrued expenses
              
              
              2,141,329Deposits
                  from customers
              
              
              751,521Payables,
                  Lam Research Corporation
              
              
              3,555,317License
                  and royalty payable, Axcelis
              
              
              1,855,960Amounts
                  due to related party
              
              
              490,936Total
                  current liabilities
              
              
              10,175,792LONG
                  TERM LIABILITIES:Capital
                  leases payable, long term portion
              
              
              23,280STOCKHOLDERS'
                  DEFICIT:Preferred
                  stock, par value, $.001 per share;authorized,
                  10,000,000 shares;issued
                  and outstanding, -0- shares
              
              
              -Common
                  stock, par value, $.001 per share;authorized,
                  50,000,000 shares;issued
                  and outstanding, 26,234,653 shares
              
              
              26,235Paid-in
                  capital
              
              
              2,386,795Accumulated
                  deficit
              
              
              (9,368,704
              )Total
                  stockholders' deficit
              
              
              (6,955,674
              )TOTAL
                  LIABILITIES AND STOCKHOLDERS' DEFICIT
              
              $
              3,243,398





See
      accompanying notes.




1




**DND
      TECHNOLOGIES, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**FOR
      THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005**


**(UNAUDITED)**




**2006**
              
              **2005**REVENUE:Systems
                  and chillers
              
              $
              940,867
              
              $
              2,833,501Parts,
                  assemblies and consumables
              
              
              1,015,721
              
              
              1,509,973Field
                  service and training
              
              
              31,782
              
              
              16,861Total
                  revenue
              
              
              1,988,370
              
              
              4,360,335OPERATING
                  EXPENSES:Cost
                  of revenues
              
              
              1,375,354
              
              
              2,722,139Reserve
                  for slow moving and obsolete inventory
              
              
              (22,636
              )
              
              128,009Research
                  and development
              
              
              62,830
              
              
              21,127Sales
                  and marketing, including license fees,royalties
                  and commissions
              
              
              397,950
              
              
              647,454General
                  and administrative
              
              
              477,568
              
              
              480,614Total
                  operating expenses
              
              
              2,291,066
              
              
              3,999,343INCOME
                  (LOSS) FROM OPERATIONS
              
              
              (302,696
              )
              
              360,992OTHER
                  INCOME (EXPENSE):Gain
                  on settlement of debt
              
              
              0
              
              
              17,500Interest
                  expense
              
              
              (114,327
              )
              
              (83,877
              )OTHER
                  INCOME (EXPENSE)
              
              
              (114,327
              )
              
              (66,377
              )Income
                  (loss) before income tax expense
              
              
              (417,023
              )
              
              294,615INCOME
                  TAX
              
              
              800
              
              
              800NET
                  INCOME (LOSS)
              
              $
              (417,823
              )
              $
              293,815




2




**DND
      TECHNOLOGIES, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS - CONTINUED**


**FOR
      THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005**


**(UNAUDITED)**





**2006**
            
            **2005**NET
                INCOME (LOSS) PER COMMON SHARE:Basic
            
            $
            (.02
            )
            $
            .01Diluted
            
            $
            (.02
            )
            $
            .01WEIGHTED
                AVERAGE NUMBER OF COMMON SHARES OUTSTANDING AND
                SUBSCRIBED:Basic
            
            
            26,234,653
            
            
            23,251,778Diluted
            
            
            26,234,653
            
            
            27,395,825




See
      accompanying notes.




3


**DND
      TECHNOLOGIES, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS' DEFICIT**


**FOR
      THE THREE MONTHS ENDED MARCH 31, 2006**


**(UNAUDITED)**





Common
                Stock
            
            Paid-In
                Capital
            
            Accumulated
                Deficit
            
            TotalShares
            
            AmountBALANCE,
              JANUARY
                1, 2006
            
            
            26,234,653
            
            $
            26,235
            
            $
            2,367,175
            
            $
            (8,950,881
            )
            $
            (6,557,471
            )ISSUANCE
                OF STOCK OPTIONS FOR DIRECTOR COMPENSATION
            
            
            0
            
            
            0
            
            
            19,620
            
            
            0
            
            
            19,620NET
                (LOSS)
            
            
            0
            
            
            0
            
            
            0
            
            
            (417,823
            )
            
            (417,823
            )BALANCE,
              MARCH
                31, 2006
            
            
            26,234,653
            
            $
            26,235
            
            $
            2,386,795
            
            $
            (9,368,704
            )
            $
            (6,955,674
            )





See
      accompanying notes.


4


**DND
      TECHNOLOGIES, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**FOR
      THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005**


**(UNAUDITED)**





**2006**
            
            **2005**CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                income (loss)
            
            $
            (417,823
            )
            $
            293,815Adjustments
                to reconcile net income (loss) to net cash provided by operating
                activities:Depreciation
                and Amortization
            
            
            18,214
            
            
            47,199Amortization
                of licenses
            
            
            6,704
            
            
            138,265Issuance
                of stock options for director compensation
            
            
            19,620
            
            
            0Legal
                expenses and late fees paid by the issuance of debt
            
            
            80,164
            
            
            0Provision
                for slow moving and obsolete inventories
            
            
            0
            
            
            128,009Gain
                on settlement of debt
            
            
            0
            
            
            (17,500
            )Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            330,467
            
            
            472,035Inventories
            
            
            289,794
            
            
            530,575Prepaid
                expenses and other assets
            
            
            (101,792
            )
            
            (155,940
            )Accounts
                payable and accrued expenses
            
            
            (418,991
            )
            
            (941,254
            )Deposits
                from customers
            
            
            318,749
            
            
            (349,913
            )Amounts
                due to related parties
            
            
            (38,841
            )
            
            2,852Net
                cash provided by operating activities
            
            
            86,265
            
            
            148,143CASH
                FLOWS FROM INVESTING ACTIVITIES:Purchases
                of property and equipment
            
            
            0
            
            
            (6,242
            )CASH
                FLOWS FROM FINANCING ACTIVITIES:Exercise
                of common stock options
            
            
            0
            
            
            9,000Principal
                payments on long-term debt
            
            
            (302,735
            )
            
            (200,713
            )Principal
                payments on debt, related party
            
            
            (21,250
            )
            
            0Net
                cash (used) by financing activities
            
            
            (323,985
            )
            
            (191,713
            )NET
                (DECREASE) IN CASH AND CASH EQUIVALENTS
            
            
            (237,720
            )
            
            (49,812
            )CASH
                AND CASH EQUIVALENTS, BEGINNING OF PERIOD
            
            
            392,298
            
            
            316,488CASH
                AND CASH EQUIVALENTS, END OF PERIOD
            
            $
            154,578
            
            $
            266,676





**(Continued)**




5


**DND
      TECHNOLOGIES, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS (CONTINUED)**


**FOR
      THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005**


**(UNAUDITED)**





**2006**
            
            **2005**SUPPLEMENTARY
                DISCLOSURE OF
              CASH
                FLOW INFORMATION:Cash
                paid for interest
            
            $
            52,768
            
            $
            71,254Cash
                paid for taxes
            
            $
            0
            
            $
            0SCHEDULE
                OF NON-CASH INVESTING
              AND
                FINANCING ACTIVITIES:Common
                stock issued for accrued and current period
              expenses
            
            $
            0
            
            $
            73,500





See
      accompanying notes.


6


**DND
      TECHNOLOGIES, INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**MARCH
      31, 2006**


**(UNUADITED)**




1.  GENERAL




**Presentation** - The
      interim consolidated financial statements of DND Technologies, Inc. and
      Subsidiaries (the "Company") are condensed and do not include some of the
      information necessary to obtain a complete understanding of the financial data.
      Management believes that all adjustments, consisting of normal recurring
      adjustments, which are, in the opinion of management , necessary
      for a fair presentation of results have been included in the unaudited
      consolidated financial statements for the interim period presented. Operating
      results for the three months ended March 31, 2006 are not necessarily indicative
      of the results that may be expected for the year ended December 31, 2006.
      Accordingly, your attention is directed to footnote disclosures found in the
      December 31, 2005 Annual Report and particularly to Note 1, which includes
      a
      summary of significant accounting policies.





These
      financial statements are presented on the basis that the Company is a going
      concern. Going concern contemplates the realization of assets and the
      satisfaction of liabilities in the normal course of business over a reasonable
      length of time. The Company has incurred a loss of approximately $418,000 in
      the
      current quarter and a loss of $4,600,000 in the year ended December 31, 2005.
      Revenues are down approximately 54% from the prior year, the Company has
      negative working capital of approximately $7,200,000, and is in default on
      the
      majority of its term debt. In addition, the Company received a notice of
      termination of its license agreement with Lam Research Corporation (“Lam”). The
      termination of the license agreement is not expected to have a material impact
      on future sales. The parts purchased pursuant to the Lam Agreement are not
      typically purchased from Lam, but from certain of the Company's other vendors.
      The parts that the Company historically has purchased directly from Lam are
      for
      the support of Rainbow and TCP products, which are not covered by the Lam
      Agreement. Furthermore, when the Company initially entered into the license
      agreement with Lam, being a Lam-approved supplier of certain equipment helped
      the Company establish relationships with certain customers. If Lam enters into
      a
      similar arrangement with a new company, it is possible that this could have
      a
      material impact on future sales to the extent the new Lam-approved supplier
      is
      able to persuade the Company's existing customers to change suppliers; however,
      management believes that its relationships with its customers are strong enough
      to minimize this risk. These factors raise substantial doubt as to the Company’s
      ability to continue as a going concern. The consolidated financial statements
      do
      not include any adjustments relating to the recoverability and classification
      of
      recorded asset amounts or the amounts and classification of liabilities that
      might be necessary should the Company be unable to continue as a going concern.
      The Company's continuation as a going concern is dependent upon its ability
      to
      generate sufficient cash flow to meet its obligations on a timely basis, to
      obtain additional financing or refinancing as may be required, and ultimately
      to
      attain successful operations.




**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.




7




**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 (Loss) Per Share -** Basic
      income (loss) 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 4,639,216 **** shares
      and 4,350,725 **** shares
      for the three months ended March 31, 2006 and 2005, respectively.




**Concentration
      of Risk** -
      Financial instruments which potentially subject the Company to concentrations
      of
      credit risk consist principally of cash and trade accounts receivable.




The
      Company places its temporary cash investments in reputable financial
      institutions.




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 March 31, 2006, the Company had two customers
      whose balances exceeded 10% of gross accounts receivable, comprising 33% and
      12%, respectively.




**Significant
      Customers -** For
      the
      three months ended March 31, 2006, the Company had three customers whose
      revenues exceeded 10% of total revenues (21%, 14% and 11%). For the three months
      ended March 31, 2005, the Company had three customers whose revenues exceeded
      10% of total revenues, comprising 32%, 17% and 14% of total revenues,
      respectively. Revenues in 2006 and 2005 outside the United States
      include  Europe
      9%
      and 6%, and Asia 7% and 31%, respectively.




**Significant
      Suppliers** –
For
      the
      three months ended March 31, 2006 and 2005, approximately 7% and 22% **,** respectively, of gross inventory purchases were purchased from Lam Research
      Corporation (“Lam”). During the three months ended March 31, 2006, the Company
      received a notice of termination of its license agreement with Lam. However,
      the
      parts purchased pursuant to the Lam Agreement are not typically purchased from
      Lam, but from certain of the Company's other vendors. The parts that the Company
      historically has purchased directly from Lam are for the support of Rainbow
      and
      TCP products, which are not covered by the Lam Agreement. Therefore, the Company
      may continue to have significant purchases of inventory from Lam.




**Use
      of Estimates** –
      The preparation
      of consolidated financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      certain estimates and assumptions that affect the reported amounts and timing
      of
      revenues and expenses, the reported amounts and classification of assets and
      liabilities, and disclosures of contingent assets and liabilities. These
      estimates and assumptions are based on the Company’s historical results as well
      as management’s future expectations. The Company’s actual results could vary
      materially from management’s estimates and assumptions.




8




**Disclosure
      About Fair Value of Financial Instruments** - The
      Company estimates that the fair value of all financial instruments as of March
      31, 2006, as defined by FASB 107, does not differ materially from the aggregate
      carrying values of its financial instruments recorded in the accompanying
      consolidated balance sheet. The estimated fair value amounts have been
      determined by the Company using available market information and appropriate
      valuation methodologies. Considerable judgment is required in interpreting
      market data to develop the estimates of fair value, and accordingly, the
      estimates are not necessarily indicative of the amounts that the Company could
      realize in a current market exchange.




**Stock
      Based Compensation** -  Effective
      January 1, 2006, the Company adopted Statement of Financial Accounting
      Standards (“SFAS”) No. 123(R), “Share-Based Payment: An Amendment of FASB
      Statements No. 123 and 95” using the modified prospective method. Under
      this method, compensation cost is recognized on or after the effective date
      for
      the portion of outstanding awards, for which the requisite service has not
      yet
      been rendered, based on the grant date fair value of those awards. Prior to
      January 1, 2006, the Company accounted for employee stock options using the
      intrinsic value method in accordance with Accounting Principles Board (“APB”)
      Opinion No. 25 (“APB No. 25”), “Accounting for Stock Issued to
      Employees,” and adopted the disclosure only alternative of SFAS No. 123.
 For stock-based awards issued on or after January 1, 2006, the
      Company recognizes the compensation cost on a straight-line basis over the
      requisite service period for the entire award. Measurement and attribution
      of
      compensation cost for awards that are unvested as of the effective date of
      SFAS No. 123(R) are based on the same estimate of the grant-date or
      modification-date fair value and the same attribution method used previously
      under SFAS No. 12. During the three months ended March 31, 2006, the
      Company issued 600,000 options to purchase the Company’s common stock to four
      members of the Company’s Board of Directors. For the three months ended March
      31, 2006, the Company recorded an expense of $19,620 relating to the estimated
      fair value of the stock options using the Black-Scholes option-pricing
      model.




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.




In
      accordance with SFAS No. 148, and as required by SFAS 123(R), the required
      pro forma disclosure, for periods prior to adoption of SFAS 123(R), is shown
      below for the three months ended March 31, 2005:


Net
                  income:As
                  reported
              
              $
              293,815Proforma
              
              $
              290,163Net
                  Income per common stock share:Basic:As
                  reported
              
              $
              .01Proforma
              
              $
              .01Diluted:As
                  reported
              
              $
              .01Proforma
              
              $
              .01




9






**Recently
      Issued Accounting Pronouncements** –




There
      are
      no accounting standards with pending adoptions that have any applicability
      to
      the Company.





**Reclassifications** –
Certain
      2005 amounts have been reclassified to conform to 2006
      presentations.




2.  ACCOUNTS
      RECEIVABLE




A
      summary
      of accounts receivable is as follows:




Accounts
                receivable
            
            $
            1,139,794Allowance
                for doubtful accounts
            
            
            (26,840
            )Net
                accounts receivable
            
            $
            1,112,954




3.  INVENTORIES




A
      summary
      of inventories is as follows:




Parts
                and materials
            
            $
            2,916,705Work-in-process
            
            
            681,966Allowance
                for obsolescence
            
            
            (2,097,602
            )Net
                inventories
            
            $
            1,501,069




4.  PROPERTY
      AND EQUIPMENT




Property
      and equipment and accumulated depreciation at March 31, 2005 consist
      of:




Office
                furniture, fixtures and equipment
            
            $
            364,981Leasehold
                improvements
            
            
            444,669Machinery
                and equipment
            
            
            369,944Laboratory
                tools
            
            
            35,843Software
            
            
            10,0001,225,437Less
                accumulated depreciation
            
            
            (1,083,770
            )Total
                property and equipment
            
            $
            141,667




5.  LICENSE
      AGREEMENT AND PAYABLES, LAM RESEARCH CORPORATION




In
      November 2002, ASI entered into an asset purchase and licensing agreement with
      Lam. Under the agreement, ASI purchased approximately $2.1 million of inventory
      from Lam and entered into a licensing agreement requiring payments totaling
      $5,376,000 (payable in 96 equal monthly installments of $56,000). ASI recorded
      the payable after imputing interest at 6%.


10




On
      June
      25, 2004, the Company signed an amendment to the November 2002 Asset Purchase
      and License Agreement with Lam that calls for payments on the inventory
      purchases. The spares inventory payment plan calls for 30 monthly installment
      payments of $28,220 beginning August 1, 2004 and ending 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. The product group inventory payment plan calls
      for
      18 monthly installments of $9,404 beginning August 1, 2004 and ending January
      1,
      2006.




Future
      minimum payments under the agreements are as follows:




**Inventory**
            ****
            **License**December
                31, 2006
            
            $
            385,666
            
            $
            669,435December
                31, 2007
            
            
            28,220
            
            
            538,324December
                31, 2008
            
            
            -
            
            
            571,527December
                31, 2009
            
            
            -
            
            
            606,777December
                31, 2010
            
            
            -
            
            
            755,368$
            413,886
            
            $
            3,141,431




The
      Company is currently in default on its payments; accordingly, the full amount
      has been classified as current in the consolidated balance sheet. The November
      2005 through March 2006 inventory payments in the amount of approximately
      $169,000 and the September 2005 through March 2006 license payments totaling
      $392,000 have not been paid. During the three months ended March 31, 2006,
      the
      Company was notified that Lam is terminating the agreement. Management is
      currently negotiating the terms of a settlement, and intends to aggressively
      pursue all legal claims against Lam for certain misrepresentations and defaults
      by Lam under the license agreement should satisfactory settlement not be
      reached. As a result, the Company recognized a full impairment if the license
      agreement in the amount of $2,705,013 at December 31, 2005.




6.  LICENSE
      AND ROYALTY PAYABLE, AXCELIS TECHNOLOGIES, INC.




In
      November 2003, the Company entered into an agreement with Axcelis acquiring
      an
      exclusive license to all future manufacturing, sales, service, and parts support
      for certain dry strip semi-conductor manufacturing equipment now marketed under
      the ASI 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.




In
      August
      2004, the Company 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
      sized up to 200mm now marketed under the ASI tradename 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 over
      a
      period of time that ends December 31, 2011. The license and royalty payable
      at
      March 31, 2006 consisted of the following:




License
                payable
            
            $
            1,204,264Royalty
                payable
            
            
            651,696Total
                license and royalty payable
            
            $
            1,855,960




11




Of
      this
      amount, $293,983 was due April 1, 2005, $333,309 was due July 1, 2005, $228,007
      was due October 1, 2005, $66,711 was due January 1, 2006, $490,045 was due
      April
      1, 2006, $218,497 will be due July 1, 2006, and $225,408 will be due on October
      1, 2006. Although the Company’s current tight cash flow prevented these payments
      from being made, management has assured Axcelis that the 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 its agreements
      with the Company.




7. 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 was
                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 ($3,243,398
                as of March 31, 2006) and has been guaranteed by Doug Dixon, Chairman
                and
                CEO, and the Company.
            
            $
            778,987On
                July 22, 2005 the Company entered into a Bridge Loan Agreement with
                Cornell Capital Partners LP (“Cornell”). The loan calls for interest at
                12%. Payments in the amount of $20,000 were due weekly beginning
                on
                October 21, 2005; the final payment of $34,121 was due on January
                27,
                2006.
            
            
            300,000Unsecured
                demand note due to an individual with interest accruing at
                7%
            
            
            289,350Total
            
            $
            1,368,337




The
      Company has not made the required balloon payment to Merrill Lynch and is
      therefore in default on the term loan. The Company has recorded additional
      legal
      fees, late fees and costs in the amount of $80,164 due to Merrill Lynch in
      relation to the term loan. (See Note 14.)




The
      Company has not made the required payments to Cornell and is therefore in
      default on the bridge loan agreement. (See Note 14.)




8. ACCOUNTS
      PAYABLE AND ACCRUED EXPENSES




A
      summary
      of accounts payable and accrued expenses is as follows:




Trade
                accounts payable
            
            $
            986,863Accrued
                commissions
            
            
            231,151Accrued
                payroll
            
            
            245,858Product
                warranty provision
            
            
            313,311Accrued
                interest
            
            
            352,916Sales
                and state income taxes payable
            
            
            11,230Total
                Accounts Payable and Accrued Expenses
            
            $
            2,141,329




12




9.  RELATED
      PARTY TRANSACTIONS




Amounts
      Due to Related Party




The
      Company has the following amounts due to its Chairman and CEO at March 31,
      2006:




Notes
                payable at 7.0%
            
            $
            120,000Note
                payable plus interest and late fee due October 24, 2005
            
            
            82,500Accrued
                interest on notes payable
            
            
            70,493Accrued
                salaries
            
            
            217,943Total
                Amount Due To Related Party
            
            $
            490,936





The
      amounts due to the Chairman are delinquent and payable on demand.




10. 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. These shares had an aggregate fair value of $20,500; as such we
      recorded the shares at the full market value and 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.




11.  EMPLOYEE
      STOCK OPTIONS




On
      August
      11, 2003, the Board of Directors and stockholders approved the DND Technologies,
      Inc. 2003 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. As
      of
      December 31, 2005 all vesting periods were accelerated and all options are
      fully
      vested.




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.


13




A
      summary
      of the option activity for the three months ended March 31, 2006 and 2005,
      pursuant to the terms of the DND Technologies, Inc. 2003 Stock Option Plan
      is as
      follows:




**2006**
            ****
            **2005****Weighted
                Average**
            ****
            ****
            ****
            **Weighted
                Average**Options
                outstanding at beginning of the period
            
            
            3,915,883
            
            $
            .05
            
            
            4,234,226
            
            $
            .06Granted
            
            
            600,000
            
            $
            .04
            
            
            400,000
            
            $
            .17Exercised
            
            
            -0-
            
            $
            .07
            
            
            (150,000
            )
            $
            .06Cancelled
                and expired
            
            
            (140,000
            )
            $
            .07
            
            
            (133,501
            )
            $
            .06Options
                outstanding at end of the period
            
            
            4,375,883
            
            
            
            
            
            4,350,725




4,639,216
      options are exercisable at March 31, 2006 (includes 263,333 options that were
      cancelled at March 31, 2006, but can be exercised for a period of six months
      after cancellation).




Information
      regarding stock options outstanding as of March 31, 2006 is as
      follows:




Price
            
            $
            .05Weighted
                average exercise price
            
            $
            .07Weighted
                average remaining contractual life
            
            
            7
                years 10 months




13.  401(k)
      PLAN




In
      January 2005, the Company sponsored a qualified defined contribution benefit
      plan covering substantially all employees. Under this plan, employees may
      contribute a percentage of their annual compensation to the plan up to certain
      maximums, as defined by the plan and by the Internal Revenue Service (“IRS”).
      Currently, the Company matches a percentage of employee contributions in cash.
      During the three months ended March 31, 2006, the Company made contributions
      in
      the amount of $13,317.




14.  MANAGEMENT
      PLANS




Management’s
      plan to eliminate the going concern situation include, but are not limited
      to,
      the renegotiation of payment terms on the Axcelis, Merrill Lynch and Cornell
      debt, improved cash flow management, aggressive cost reductions and the creation
      of additional sales and profits across its product lines. In addition,
      management believes that it will be able to significantly reduce its payables
      to
      Lam based on settlement negotiations, arbitration or mediation.




15. SUBSEQUENT
      EVENTS




**Term
      Loan –
      Merrill Lynch -** On
      April
      24, 2006, the Company received a Proposal for Extension of Existing Term Loan
      from Merrill Lynch. The proposal was not a commitment by Merrill Lynch but
      rather a proposal to proceed with a formal credit review. The Company has
      historically been able to work with Merrill Lynch to establish alternate payment
      terms and management believes that extending payment terms on the term loan
      would be more beneficial to both parties than foreclosure on the assets securing
      the term loan.


14




**Bridge
      Loan Agreement - Cornell Capital Partners, LP (“Cornell”) -** On
      May 1,
      2006, the Company received an agreement from Cornell to extend the repayment
      terms of the bridge loan agreement. Under the new agreement, the Company is
      required to make 12 monthly payments, commencing May 1, 2006, in the amount
      of
      $12,500 to Cornell and a final balloon payment in the amount of $204,107 on
      May
      1, 2007.


15




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




Aspect
      Systems, Inc., a
      wholly-owned subsidiary of DND Technologies, Inc. is a global
      provider of specialized equipment, parts and support services to the
      semiconductor industry. Through licensing agreements negotiated with Lam and
      Axcelis, ASI has become the original equipment manufacturer of
      AutoEtch equipment originally designed by Lam 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. ASI
      also
      offers new
      and
      refurbished support products including a
      wide array
      of
      sub-assemblies, both consumable and non-consumable repair and process related
      parts, and remanufactured temperature control units that
      are
      designed to maintain critical operating temperatures for the plasma systems.
      Engineering and training services are also made available to its international
      customer base. The most significant portion of ASI revenue, however, is derived
      from the marketing and sale of remanufactured Rainbow and TCP plasma etch
      systems and the ASI MX and Arista system products. ASI has a website located
      at
      www.aspectsys.com.




Even
      though our cash flow problems caused by significant indebtedness have hampered
      our ability to meet demand, we have experienced a significant increase in market
      demand for our subsidiary's products during the past two years. The global
      expansion of chip production companies into emerging parts of the world with
      lower labor costs, particularly China, has caused all semiconductor companies
      to
      examine more closely how to reduce costs, including through the extended use
      of
      tool sets. This shift toward ways to reduce costs has lent itself to, and our
      management believes it will continue to lend itself to, increasing demand for
      the products of companies such as ASI. In 2004 we achieved record revenues,
      and
      management believes we could have matched these revenues in 2005 and into 2006
      if our cash flow difficulties had not limited our ability to produce our
      products. Nevertheless we expect demand for our products to continue to grow
      unless a significant and prolonged downturn occurs in the semiconductor industry
      in the future. Our current backlog of orders is approximately $3.5
      million.




As
      we
      experience increased system sales, which normally require large up-front
      payments, we strive to manage our cash flow in order to meet the demands of
      custom orders, our debt obligations and expense commitments. Our plan of
      continuously improving our production and reporting systems will aid in this
      effort. With expanding revenue comes the related problem of attaining sufficient
      cash flow to purchase the required parts to assemble our systems. Our business
      periodically faces significant ongoing cash flow issues particularly when we
      receive substantial orders because of the amount of time between our purchase
      of
      parts, assembly and delivery of products and payment for those products. When
      equipment orders are postponed or payment from customers is delayed, we are
      forced to defer repayment of obligations to creditors or service providers
      and
      forego additional sales opportunities. We
      continue to pursue various financing alternatives but have not been successful
      in obtaining badly needed capital. As a result, our cash flow shortage has
      caused us to suffer significant shipping delays and loss of revenues from orders
      we could not fill on a timely basis.




Management's
      discussion and analysis of financial condition and results of operations are
      based upon the Company's financial statements. These statements have been
      prepared in accordance with accounting principles generally accepted in the
      United States. 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.


16




**Critical
      Accounting Policies and Estimates**




In
      consultation with our Board of Directors, we have identified three 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.**   **Going
      Concern**




These
      consolidated financial statements are presented on the basis that the Company
      is
      a going concern. Going concern contemplates the realization of assets and the
      satisfaction of liabilities in the normal course of business over a reasonable
      length of time. The Company has incurred a loss of approximately $418,000 in
      the
      current period with sales down approximately 54% from the prior period, has
      negative working capital of approximately $7,200,000, and is in default on
      its
      payments on the majority of its term debt. In addition, during the three months
      ended March 31, 2006, the Company received a notice of termination of its
      license agreement with Lam. The termination of the license agreement is not
      expected to have a material impact on future sales, however, when the Company
      initially entered into the license agreement with Lam, being a Lam-approved
      supplier of certain equipment helped the Company establish relationships with
      certain customers. If Lam enters into a similar arrangement with a new company,
      it is possible that this could have a material impact on future sales to the
      extent the new Lam-approved supplier is able to persuade the Company's existing
      customers to change suppliers; however, management believes that its
      relationships with its customers are strong enough to minimize this risk. These
      factors raise substantial doubt as to the Company’s ability to continue as a
      going concern.




Management’s
      plans to eliminate the going concern situation include, but are not limited
      to,
      the renegotiation of payment terms on the Lam, Axcelis, Cornell and Merrill
      Lynch debt, improved cash flow management, aggressive cost reductions and the
      creation of additional sales and profits across its product lines. In addition,
      management believes that it will be able to significantly reduce its payables
      to
      Lam based on settlement negotiations, arbitration or mediation, but there is
      no
      assurance that this will occur.




**2.**   **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 and inventory on hand, in excess of
      a
      12-month supply, is considered excessive and slow-moving and, accordingly,
      fully
      reserved. We review our inventory reserves on a quarterly basis and adjust
      them
      for the full carrying value of obsolete, excessive and slow-moving inventory.




**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.
      104,
      "Revenue Recognition," ("SAB 104"). Our revenues are recorded under two
      categories:




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.


17




*The
      Three Months Ended March 31, 2006 Compared To The Three Months Ended March
      31,
      2005.*




**Selected
      Financial Information**




**Three
                  Months Ended****03/31/2006**
              
              **03/31/2005**
              
              **Increase**
                **(Decrease)**Statements
                  of OperationsTotal
                  Revenue
              
              $
              1,988,370
              
              $
              4,360,335
              
              $
              (2,371,965
              )Cost
                  of Revenue:Costs
                  of revenues
              
              
              1,375,354
              
              
              2,722,139
              
              
              (1,346,785
              )Reserve
                  for slow moving andobsolete
                  inventory
              
              
              (22,636
              )
              
              128,009
              
              
              (150,645
              )Research
                  and development
              
              
              62,830
              
              
              21,127
              
              
              41,703Sales
                  and marketing, including
                licensing
                  fees, royalties and
                commissions
              
              
              397,950
              
              
              647,454
              
              
              (249,504
              )General
                  and administrative
              
              
              477,568
              
              
              480,614
              
              
              (3,046
              )Total
                  Operating Expenses
              
              
              2,291,066
              
              
              3,999,343
              
              
              (1,708,277
              )Income
                  (Loss) from Operations
              
              
              (302,696
              )
              
              360,992
              
              
              (663,688
              )Other
                  Income (Expense):Gain
                  on settlement of debt
              
              
              0
              
              
              17,500
              
              
              (17,500
              )Interest
                  Expense
              
              
              (114,327
              )
              
              (83,877
              )
              
              (30,450
              )Income
                  (Loss) Before Income Tax Expense
              
              
              (417,023
              )
              
              294,615
              
              
              (711,638
              )Income
                  Tax Expense
              
              
              800
              
              
              800
              
              
              0Net
                  Income
              
              $
              (417,823
              )
              $
              293,815
              
              $
              (711,638
              )Net
                  Income Per ShareBasic
              
              
              (0.02
              )
              
              0.01
              
              
              (0.03
              )Diluted
              
              
              (0.02
              )
              
              0.01
              
              
              (0.03
              )




**Results
      of Operations**




Our
      revenue decrease of $2,371,965, or 54%, to $1,988,370 in the three months ended
      March 31, 2006 from $4,360,335 in the three months ended March 31, 2005, was
      primarily due to a decrease in sales from our parts, assemblies, and consumables
      category of $494,252 and a decrease in systems/chiller sales of $1,892,634.
      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. The systems category is
      down
      due to a change in product mix and the quantity of systems shipped. There were
      seven systems shipped in the first quarter of 2005 and only four in the first
      quarter of 2006. This change in product mix is a result of the MX-1 and MX-10
      and Arista systems category (which overall carry lower sales prices) comprising
      76% of the total in the first quarter of 2006 versus 22% in the first quarter
      of
      2005. Our sales break down by segment is as follows:


18




**March
                31, 2006**
            
            **March
                31, 2005**
            
            **Increase**
              **(Decrease)**Systems
                and chillers
            
            $
            940,867
            
            $
            2,833,501
            
            $
            (1,892,634
            )Parts,
                assemblies and consumables
            
            
            1,015,721
            
            
            1,509,973
            
            
            (494,252
            )Field
                service and training
            
            
            31,782
            
            
            16,861
            
            
            14,921$
            1,988,370
            
            $
            4,360,335
            
            $
            (2,371,965
            )




**Cost
      of Revenues**




Our
      dollar amount of cost of revenues decreased $1,346,785 or 49%, to $1,375,354
      in
      2006 from $2,722,139 in 2005, while our cost of revenues as a percentage of
      revenues increased 7% to 69% in 2006 from 62% in 2005. The dollar decrease
      in
      cost of revenues is primarily made up of an approximate $1,162,000 decrease
      due
      to the sales reduction and an approximate $135,000 decrease in warranty expense
      due to the lower quantity of system shipments made in the first quarter of
      2006
      versus 2005. The spreading of other semi-fixed departmental cost of sales
      dollars over a much lower sales level has resulted in the cost of revenues
      as a
      percentage of sales being higher in 2006.




**Reserve
      for Slow Moving and Obsolete Inventory**




Our
      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 March 31, 2006, we recorded a $22,636 decrease to
      the
      reserve due to an analysis of inventory items. In the three months ended March
      31, 2005, we recorded a $128,009 increase in our reserve due to an analysis
      of
      inventory items **.**




**Research
      and Development**




Research
      and development costs increased $41,703 or 197%, to $62,830 in the three months
      ended March 31, 2006 from $21,127 in the three months ended March 31, 2005.
      The
      increase is primarily related to increases in payroll and employee benefits
      in
      the amount of $29,525 and an increase of $12,564 related to outside engineering
      and in-house expenses for product development. Although we have added another
      person to our R&D department to increase development of our own parts, we
      normally do not incur significant research and development expenses.




**Sales
      and Marketing**




Sales
      and
      marketing costs decreased $249,504 to $397,950 in the three months ended March
      31, 2006 from $647,454 in the three months ended March 31, 2005. This decrease
      is due to the decrease in our commission expenses of $101,537 or 69% to $45,040
      during the three months ended March 31, 2006 from $146,577 during the three
      months ended March 31, 2005. This decrease in our commission expense was a
      direct result of our reduced sales as mentioned above. We also experienced
      a
      decrease in payroll and employee benefits in the amount of $13,029 or 10% to
      $115,865 during the three months ended March 31, 2006 from $128,894 during
      the
      three months ended March 31, 2005 as employee commissions decreased due to
      lower
      sales.


19




**General
      and Administrative**





**Three
                Months Ended****03/31/2006**
            
            **03/31/2005**
            
            **Increase**
              **(Decrease)**General
                and AdministrativeSalaries
                and wages
            
            $
            193,986
            
            $
            262,687
            
            $
            (68,701
            )Professional
                fees
            
            
            147,208
            
            
            71,281
            
            
            75,927Occupancy
                Expense, less amount allocated to Cost of Revenue
            
            
            45,751
            
            
            52,925
            
            
            (7,174
            )Issuance
                of stock options for director compensation
            
            
            19,620
            
            
            0
            
            
            19,620Depreciation
                Expense, less amount allocated to Cost of Revenue
            
            
            5,128
            
            
            29,075
            
            
            (23,947
            )Other
                general and administrative expenses
            
            
            65,875
            
            
            64,646
            
            
            1,229Total
                General and Administrative
            
            $
            477,568
            
            $
            480,614
            
            $
            (3,046
            )




Salaries
      and wages decreased $68,701 or 26% to $193,986 in the three months ended March
      31, 2006 as compared to $262,687 in the three months ended March 31, 2005.
      This
      decrease is primarily the result of a decrease in general and administrative
      headcount and management’s decision to not immediately replace these employees.




Professional
      fees increased $75,927 or 107%, to $147,208 in 2006 from $71,281 in 2005,
      primarily due to additional work required on our required filings and amounts
      owed to Merrill Lynch relating to our term loan agreement default and extension
      proceedings.




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.




**Gain
      on Settlement of Debt**




In
      February 2005, we issued 100,000 shares of common stock for payment of
      approximately $15,000 of legal services received during the year ended December
      31, 2004. During June 2004, the Board of Directors negotiated with a law firm
      to
      obtain their acceptance of 100,000 shares as payment in full for this debt.
      On
      July 6, 2004, the Board of Directors formalized the resolution to issue these
      shares, which at that time had an aggregate fair value of $20,500; as such
      we
      recorded the shares at the full market value and 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.




**Interest
      Expense**




Interest
      expense for the three months ended March 31, 2006 ($114,327) has increased
      over
      the comparable period of 2005 ($83,877) by $30,450 due primarily to the new
      loans acquired in the fourth quarter of 2005.


20




**Net
      Income (Loss)**




As
      a
      result of the foregoing, we had a net loss of $417,823 for the three months
      ended March 31, 2006, compared to net income of $293,815 for the three months
      ended March 31, 2005.




**Capital
      Resources**




**Three
                Months**Working
                Capital
            
            **03/31/2006**
            
            **03/31/2005**
            
            **Favorable
                (Unfavorable)**Current
                Assets
            
            $
            2,979,915
            
            $
            4,748,081
            
            $
            (1,768,166
            )Current
                Liabilities
            
            
            (10,175,792
            )
            
            (7,027,519
            )
            
            (3,148,273
            )Deficit
                Working Capital
            
            $
            (7,195,877
            )
            $
            (2,279,438
            )
            $
            (4,916,439
            )Long-term
                Debt
            
            $
            (23,280
            )
            $
            (3,193,845
            )
            $
            3,170,565Stockholders'
                (Deficit)
            
            $
            (6,955,674
            )
            $
            (1,979,044
            )
            $
            (4,976,630
            )




As
      of
      March 31, 2006, we were in default of our payment terms on the majority of
      our
      term debt. As a result, the approximately $2.5 million of term debt due beyond
      twelve months was classified as current in the consolidated balance
      sheet.




Included
      in current liabilities is a total of $1,855,960 that 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, $228,007 was due October 1, 2005, $66,711 was
      due
      January 1, 2006, $490,045 was due April 1, 2006, $218,497 will be due July
      1,
      2006, and 225,408 will be due October 1, 2006. Also included in current
      liabilities is a total of $3,555,317 in inventory payments and license and
      royalty fees owed to Lam. Of this amount, approximately $561,000 was past due
      as
      of March 31, 2006, and the remainder is future payments which were classified
      as
      current due to these past due payments. 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 any of its agreements with the Company. However,
      on
      March 6, 2006, ASI received a termination notice from Lam. The Company and
      Lam
      are currently in discussions to seek an amicable resolution of the mutual
      defaults that have occurred under both the original and the amended agreement,
      although management is not certain that these discussions will result in a
      favorable resolution. Mediation is scheduled for June 13, 2006.




As
      of
      March 31, 2006, we were also in default on our debt to Merrill Lynch
      Business Financial Services ($778,987) and Cornell Capital Partners, LP
      ($300,000). On April 24, 2006, we received a Proposal for Extension of Existing
      Term Loan from Merrill Lynch. The proposal was not a commitment by Merrill
      Lynch
      but rather a proposal to proceed with a formal credit review. The Company has
      historically been able to work with Merrill Lynch to establish alternate payment
      terms, and management believes that extending payment terms on the term loan
      would be more beneficial to both parties than foreclosure on the assets securing
      the term loan. On May 1, 2006, we received an agreement from Cornell to extend
      the repayment terms of the bridge loan agreement. Under the new agreement,
      we
      are required to make 12 monthly payments, commencing May 1, 2006, in the amount
      of $12,500 to Cornell and a final balloon payment in the amount of $204,107
      on
      May 1, 2007.




21




**Statements
      of Cash Flows Selected Information**




**Three
                Months Ended****03/31/06**
            
            **03/31/05**Net
                Cash Provided (Used) By:Operating
                Activities
            
            $
            86,265
            
            $
            148,143Investing
                Activities
            
            
            -0-
            
            
            (6,242
            )Financing
                Activities
            
            
            (323,985
            )
            
            (191,713
            )




**Operating
      Activities**




For
      the
      three months ended March 31, 2006, cash provided by operating activities of
      $86,265 was primarily attributed to a decrease in accounts receivable in the
      amount of $330,467, a $289,794 decrease in inventories as well as an increase
      of
      $318,749 in customer deposits. These amounts were offset by our net loss of
      $417,823, our increase of prepaid expenses and other assets in the amount of
      $101,792, and a reduction in our accounts payable and accrued expenses of
      $418,991. During the three months ended March 31, 2006 our non-cash reconciling
      items included depreciation and amortization expense of $18,214 and $6,704,
      respectively and the issuance of stock options for director compensation in
      the
      amount of $19,620. We also paid $80,164 of legal expenses and late fees through
      the issuance of debt.




For
      the
      three months ended March 31, 2005, cash provided by operating activities of
      $148,143 was primarily attributed to income from operations of $293,815, a
      decrease in accounts receivable of $472,035 (resulting from collections on
      significant shipments made in the quarter ended December 31, 2004) and a
      decrease in inventories of $530,575 (resulting from shipments early in the
      quarter ended March 31, 2005). These amounts were offset by an increase in
      prepaid expenses and other assets of $155,940, a decrease in accounts payable
      and accrued expenses of $941,254 and a decrease in deposits from customers
      of
      $349,913.




**Investing
      Activities**




During
      the three months ended March 31, 2006 and 2005, cash was used by investing
      activities for purchases of equipment in the amounts of $-0- and $6,242,
      respectively.




We
      currently have no material commitments for capital expenditures.




**Financing
      Activities**




Financing
      activities in the three months ended March 31, 2006 used $323,985 in cash flows
      as compared to $191,713 used in the three months ended March 31, 2005.




In
      the
      three months ended March 31, 2006, $302,735 and $21,250 was used for the
      repayment of long-term debt and related party debt, respectively, as compared
      to
      $200,713 in the three months ended March 31, 2005 in which we also received
      $9,000 from the exercise of common stock options.




**Liquidity
      and Capital Resources**




Although
      sales for the three months ended March 31, 2006 were down from March 31, 2005
      by
      $2,371,965, our sales backlog at March 31, 2006 was approximately $3.5 million.
      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, a loan for
      $200,000 (which was paid in full in March 2005), additional term loans totaling
      $525,000 (of which $225,000 was paid in January 2006), and a $125,000 loan
      from
      a related party (of which $42,500 has been repaid). Our subsidiary's
      restructured term loan (the "New Loan") with Merrill Lynch Business Financial
      Services, Inc. ("Merrill Lynch") had a balance of $778,987 as of March 31,
      2006,
      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 in February 2006. The New Loan is guaranteed by both the Company
      and Douglas Dixon, our Chief Executive Officer, and is secured by a first lien
      on our total assets. We are in default on our debt to Merrill Lynch ($778,987)
      and are negotiating extended payment terms. On April 24, 2006, we received
      a
      Proposal for Extension of Existing Term Loan from Merrill Lynch. The proposal
      was not a commitment by Merrill Lynch but rather a proposal to proceed with
      a
      formal credit review. The Company has historically been able to work with
      Merrill Lynch to establish alternate payment terms and management believes
      that
      extending payment terms on the term loan would be more beneficial to both
      parties than foreclosure on the assets securing the term loan.




22




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 this agreement, and we are required to pay
      approximately $5.3 million over the term (of which approximately $3.1 million
      remains to be paid) as a fee for the licensed intellectual property. Monthly
      payments of the license fee are $56,000 and the final payment is due March
      15,
      2011.




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.




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).
      This
      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 license
      fee has been paid. Of the $2,750,000 license fee, approximately $1,401,000
      has
      been expensed and $1,098,000 of the expensed amount remains to be paid. This
      agreement also calls for a royalty fee to be paid on all related sales through
      December 31, 2010 on a declining calendar schedule from 10% to 2%.




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). This 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.
      Of
      the $750,000 license fee, approximately $106,000 has been expensed and the
      full
      amount remains to be paid. **** This
      agreement also calls for a royalty fee to be paid on all related sales through
      December 31, 2011 on a declining calendar schedule from 10% down to 2%.




As
      of
      April 26, 2006, we continued to remain past due on certain payments to both
      Lam
      and Axcelis. Past due payments to Lam totaled approximately $561,000 as of
      March
      31, 2006, and past due payments to Axcelis totaled $922,010 on that date.
      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 any of its agreements with the Company.
      However, on March 6, 2006, ASI received a termination notice from Lam. The
      Company and Lam are currently in discussions to seek an amicable resolution
      of
      the mutual defaults that have occurred under both the original and the amended
      agreement, although management is not certain that these discussions will result
      in a favorable resolution. Mediation is scheduled for June 13, 2006. Management
      believes that Lam is in breach of this agreement, and as a result is seeking
      to
      write off the remaining amounts owed to Lam. If the Company is able to write
      off
      all or a significant portion of the approximately $3.7 million due under the
      agreement, our liquidity would improve significantly. However, there is no
      assurance that we will be successful in obtaining agreement from Lam to make
      this write-off and the Company could incur substantial expenses to arbitrate
      its
      ongoing dispute with Lam’s breach of performance under the agreement.




23




On
      July
      22, 2005, we entered into a promissory note with Cornell for $300,000. The
      loan
      calls for interest to accrue at 12% with payments in the amount of $20,000
      to be
      made weekly beginning October 21, 2005 with the final payment of $34,121 due
      on
      January 27, 2006. On May 1, 2006, we received an agreement from Cornell to
      extend the repayment terms of the bridge loan agreement. Under the new
      agreement, we are required to make 12 monthly payments, commencing May 1, 2006,
      in the amount of $12,500 to Cornell and a final balloon payment in the amount
      of
      $204,106.85 on May 1, 2007.




On
      August
      24, 2005 we entered into a promissory note with our Chief Executive Officer,
      Mr.
      Dixon, and received $125,000. The loan has an interest fee of $12,500, was
      due
      October 24, 2005 and is secured by a lien on the inventories and accounts
      receivable of ASI that is subordinate to the lien held by Merrill Lynch. As
      of
      February 28, 2006, $42,500 has been repaid and the Company is in default on
      the
      balance, which includes a late fee of $6,250.




On
      August
      25, 2005 we entered into a promissory note with M. Lynn Brewer and received
      $225,000. The loan has an interest fee of $22,500 and was due October 24, 2005.
      The note is secured by 3,000,000 shares of our common stock, owned by our Chief
      Executive Officer, Mr. Dixon. This note was repaid in January 2006.




Although
      our current tight cash flow has prevented us from making our required payments
      on the majority of our term debt, management is working with the lenders to
      establish alternate payment terms. As of May 15, 2006, our total amount in
      default was $4,428,744 (which does not include past due amounts not in default),
      consisting of approximately $3,600,000 due to Lam, approximately $779,000 due
      to
      Merrill Lynch and approximately $94,000 due to Doug Dixon.




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. As of March 31, 2006, we had $154,578 in cash on hand.  
Our amount of cash on hand can vary significantly from day-to-day due to the
      nature of our business, which consists of significant cash expenditures to
      purchase the parts and components needed to assemble the systems that comprise
      the majority of our revenues and an often significant delay between these
      expenditures and payment from our customers for the systems, which does not
      occur until after delivery. As a result, we manage our cash flow closely to
      meet
      our required production shipping dates, debt obligations and expense
      commitments, and will continue to do so until we have either established a
      cash
      reserve large enough to self finance the cost of producing systems in advance
      of
      receiving any payments or have outside financing to accomplish the same result.
      Our debt obligations remain a priority in our cash flow planning, and we do
      not
      have plans or commitments for significant capital expenditures in the near
      future.




24




**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, 2005.*




*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
                have received a termination notice from Lam and may not be able to
                reach
                an amicable resolution of the mutual defaults under our agreements
                with
                Lam.





·
            We
                are in default on a majority of our term debt, consisting of $4,428,744
                as
                of May 15, 2006 (which does not include past due amounts not in default),
                as a result of failure to make certain required payments. The amount
                in
                default includes approximately $3,600,000 due to Lam, approximately
                $779,000 due to Merrill Lynch and approximately $94,000 due to Doug
                Dixon.





·
            We
                are past due on certain payments to Axcelis. While Axcelis has to
                date
                been willing to provide us with additional time to make payments,
                Axcelis
                could terminate our license agreements with it upon ninety days written
                notice. We would have that notice period in which to make the past
                due
                payments and avoid termination. Management is exploring payment options,
                which may include use of funds from operations or funds from other
                sources.





·
            Our
                term loan with Merrill Lynch, which is past due, is secured by a
                first
                lien on all of our assets.





·
            In
                the past, our auditors have identified certain weaknesses in our
                internal
                control over financial reporting and we have taken and are continuing
                to
                take specific steps to address these issues.





·
            Future
                sales of common stock by Cornell Capital Partners and its affiliates
                may
                adversely affect our stock price.




25




·
            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, and we may
                not be
                able to compete effectively in markets where our competitors have
                more
                resources.





·
            We
                are subject to risks relating to product concentration and lack of
                product
                revenue diversification.





·
            The
                semiconductor industry is based on rapidly changing technology, and
                we
                rely primarily on our licensors to develop products our customers
                find
                satisfactory.





·
            We
                may experience supply shortages, which would adversely affect our
                ability
                to meet customer demands.





·
            We
                are exposed to the risks of operating a global
                business.





·
            We
                are subject to risks relating to lengthy sales cycles, which may
                require
                the expenditure of substantial funds and management
                effort.





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





·
            We
                are exposed to risks associated with our acquisition strategy.





·
            Our
                independent accountants have expressed uncertainty about our ability
                to
                continue as a going concern.





·
            Our
                ability to raise additional financing is
                uncertain.





·
            Environmental,
                health and safety laws may restrict our operations, particularly
                within
                the European Union.





·
            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.





**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"), as of March 31, 2006. 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 Exchange Act. 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.




26




(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
      is
      in the process of implementing changes to our internal control over financial
      reporting to address primarily two issues. 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
      6. EXHIBITS AND REPORTS ON FORM 8-K**




(a)  Exhibits:




10.24
            Proposal
                for Extension of Existing Term Loan, dated April 24, 2006, from Merrill
                Lynch Business Financial Services,
                Inc.




10.25
            Letter
                Agreement, dated May 1, 2006, by and between DND Technologies, Inc.
                and
                Cornell Capital Partners, LP




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




(b)  Reports
      on Form 8-K:




None.




27


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.





Dated:
                May 18, 2006DND
                TECHNOLOGIES, INC., a Nevada corporationBy
            /s/
              Douglas N. DixonDouglas
                N. Dixon, Chief Executive Officer




By
            /s/
              G.
              Dennis KeyG.
                  Dennis Key, Chief Financial
                  Officer


28