UNITED
        STATES SECURITIES AND EXCHANGE COMMISSION
 Washington,
        D.C. 20549
  FORM
        10-QSB
  Quarterly
        Report of Small Business Issuers under Section 13 or 15(d) of the Securities
        Exchange Act of 1934
 for
        the
        quarterly period ended September 30, 2005
  Commission
        File No. 333-42936
  **DND
        Technologies, Inc.**
 (Exact
        name of registrant as specified in its charter)
  Nevada
                  (State
                    or other jurisdiction of incorporation or organization)
                84-1405298
                  (I.R.S.
                    Employer Identification No.)375
                    E. Elliot Rd., Bldg. 6
                  Chandler,
                    Arizona
                  (Address
                    of principal executive offices)
                85225
                  (Zip
                    Code)Issuer's
                    telephone number, including area code:(480)
                    892-7020(Former
                    name, former address, and former fiscal year, if changed since
                    last
                    report)The
                    issuer has (1) filed all reports required to be filed by Section
                    13 or
                    15(d) of the Exchange Act during the past 12 months (or for such
                    shorter
                    period that the registrant was required to file such reports),
                    and (2)
                    been subject to such filing requirements for the past 90 days.
                  
                  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 November 7, 2005Common
                      stock, $0.001 par value
                  
                  
                  26,234,653
  The
                      issuer is not using the Transitional Small Business Disclosure
                      format.
 
 **Table
            of Contents**
  **DND
        TECHNOLOGIES, INC.**
 
 **Table
        of Contents**
 PagePART
                  I
              FINANCIAL
                  INFORMATION
              1Item
                  1.
              Consolidated
                  Unaudited Financial
                  Statements
              1Condensed
                  Consolidated Unaudited Balance
                  Sheet
              1Condensed
                  Consolidated Unaudited Statements of
                  Operations
              2Condensed
                  Consolidated Unaudited Statements of Stockholders'
                  Deficit
              4Condensed
                  Consolidated Unaudited Statements of Cash
                  Flows
              5Notes
                  to Condensed Consolidated Unaudited Financial
                  Statements
              7Item
                  2.
              Management's
                  Discussion and Analysis of Financial Condition
                  and Results of Operations
              14Item
                  3.
              Controls
                  and Procedures
              27PART
                  II
              OTHER
                  INFORMATION
              28Item
                  6.
              Exhibits
                  and Reports on Form 8-K
              28SIGNATURES
              
              29
 
  **Table
            of Contents**
  **PART
                I.**
              **FINANCIAL
                  INFORMATION**
 
 **Item
                  1.**
                **Financial
                    Statements (Unaudited)**
 **DND
        TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **CONDENSED
        CONSOLIDATED BALANCE SHEET**
 **SEPTEMBER
        30, 2005**
 **(UNAUDITED)**
 ASSETSCURRENT
                  ASSETS:Cash
                  and cash equivalents
              
              $
              157,771Accounts
                  receivable, net
              
              
              1,248,294Inventories,
                  net
              
              
              3,745,076Prepaid
                  expenses
              
              
              425,929Total
                  current assets
              
              
              5,577,070PROPERTY
                  AND EQUIPMENT, Net of accumulated depreciation
              
              
              167,664LICENSE
                  AGREEMENTS, Net of accumulated amortization
              
              
              2,946,615OTHER
              
              
              23,733TOTAL
                  ASSETS
              
              $
              8,715,082LIABILITIES
                  AND STOCKHOLDERS' DEFICITCURRENT
                  LIABILITIES:Notes
                  payable, current portion
              
              $
              1,637,962Capital
                  leases payable, current portion
              
              
              5,009Accounts
                  payable and accrued expenses
              
              
              2,521,497Deposits
                  from customers
              
              
              1,919,128Payables,
                  Lam Research Corporation
              
              
              3,748,174License
                  and royalty payable, Axcelis
              
              
              1,412,055Amounts
                  due to related party
              
              
              561,820Total
                  current liabilities
              
              
              11,805,645LONG
                  TERM LIABILITIES:Capital
                  leases payable, long term portion
              
              
              12,313STOCKHOLDERS'
                  DEFICIT:Preferred
                  stock
              
              
              –Common
                  stock, par value, $.001 per share; authorized, 50,000,000 shares;
                  issued
                  and outstanding, 26,234,653 shares
              
              
              26,235Paid-in
                  capital
              
              
              2,367,175Accumulated
                  deficit
              
              
              (5,496,286
              )Total
                  stockholders' deficit
              
              
              (3,102,876
              )TOTAL
                  LIABILITIES AND STOCKHOLDERS' DEFICIT
              
              $
              8,715,082
 See
        accompanying notes.
   -1-
 **Table
            of Contents**
  **DND
        TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **CONDENSED
        CONSOLIDATED STATEMENTS OF
        OPERATIONS**
 **FOR
        THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2005 AND
        2004**
 **(UNAUDITED)**
 **Three
                  Months**
              
              **Nine
                  Months****2005**
              
              **2004**
              
              **2005**
              
              **2004**REVENUE:Systems
                  and chillers
              
              $
              1,495,749
              
              $
              2,013,849
              
              $
              5,320,466
              
              $
              5,821,950Parts,
                  assemblies and consumables
              
              
              944,310
              
              
              1,335,180
              
              
              3,642,209
              
              
              4,461,965Field
                  service and training
              
              
              33,987
              
              
              104,387
              
              
              138,966
              
              
              197,810Total
                  revenue
              
              
              2,474,046
              
              
              3,453,416
              
              
              9,101,641
              
              
              10,481,725OPERATING
                  EXPENSES:Cost
                  of revenues
              
              
              2,044,447
              
              
              1,866,856
              
              
              6,396,194
              
              
              6,323,324Reserve
                  for slow moving and obsolete inventory
              
              
              127,343
              
              
              (223
              )
              
              160,914
              
              
              (800,891
              )Research
                  and development
              
              
              44,905
              
              
              32,759
              
              
              111,313
              
              
              64,602Sales
                  and marketing, including license fees royalties and
                  commissions
              
              
              842,637
              
              
              715,251
              
              
              1,884,004
              
              
              1,683,111General
                  and administrative
              
              
              436,629
              
              
              484,194
              
              
              1,369,017
              
              
              1,481,847Lawsuit
                  settlement
              
              
              0
              
              
              0
              
              
              0
              
              
              140,000Total
                  operating expenses
              
              
              3,495,961
              
              
              3,098,837
              
              
              9,921,442
              
              
              8,891,993INCOME
                  (LOSS) FROM OPERATIONS
              
              
              (1,021,915
              )
              
              354,579
              
              
              (819,801
              )
              
              1,589,732OTHER
                  INCOME (EXPENSE):Gain
                  on settlement of debt
              
              
              0
              
              
              0
              
              
              17,500
              
              
              0Interest
                  expense
              
              
              (131,670
              )
              
              (83,115
              )
              
              (302,666
              )
              
              (261,571
              )OTHER
                  INCOME (EXPENSE)
              
              
              (131,670
              )
              
              (83,115
              )
              
              (285,166
              )
              
              (261,571
              )Income
                  (loss) before income tax expense
              
              
              (1,153,585
              )
              
              271,464
              
              
              (1,104,967
              )
              
              1,328,161INCOME
                  TAX
              
              
              0
              
              
              0
              
              
              800
              
              
              800NET
                  INCOME (LOSS)
              
              $
              (1,153,585
              )
              $
              271,464
              
              $
              (1,105,767
              )
              $
              1,327,361
 
 
 -2-
 **Table
            of Contents**
  **DND
        TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **CONDENSED
        CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED**
 **FOR
        THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2005 AND
        2004**
 **(UNAUDITED)**
 **Three
                  Months**
              
              **Nine
                  Months****2005**
              
              **2004**
              
              **2005**
              
              **2004**NET
                  INCOME (LOSS) PER COMMON SHARE:Basic
              
              $
              (.04
              )
              $
              .01
              
              $
              (.04
              )
              $
              .06Diluted
              
              $
              N/A
              
              $
              .01
              
              $
              N/A
              
              $
              .05WEIGHTED
                  AVERAGE NUMBER OF COMMON SHARES OUTSTANDING AND
                  SUBSCRIBED:Basic
              
              
              26,121,066
              
              
              23,000,000
              
              
              24,667,546
              
              
              23,000,000Diluted
              
              
              N/A
              
              
              26,637,016
              
              
              N/A
              
              
              26,637,016
 See
        accompanying notes.
 
  -3-
 **Table
            of Contents**
  **DND
        TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **CONDENSED
        CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
        DEFICIT**
 **FOR
        THE NINE MONTHS ENDED SEPTEMBER 30, 2005**
 **(UNAUDITED)**
 Stock
                  Subscribed
              
              Common
                  Stock
              
              Paid-In
                Capital
              
              Accumulated
                  Deficit
              
              TotalShares
              
              Amount
              
              Shares
              
              AmountBALANCE,
                  JANUARY 1, 2005
              
              
              1,100,000
              
              $
              55,000
              
              
              23,000,000
              
              $
              23,000
              
              $
              1,957,160
              
              $
              (4,390,519
              )
              $
              (2,355,359
              )COMMON
                  STOCK ISSUED FOR ACCRUED EXPENSES
              
              
              –
              
              
              –
              
              
              365,000
              
              
              365
              
              
              73,135
              
              
              –
              
              
              73,500COMMON
                  STOCK ISSUED FOR PREPAID EXPENSES
              
              
              –
              
              
              –
              
              
              1,190,478
              
              
              1,190
              
              
              248,810
              
              
              –
              
              
              250,000COMMON
                  STOCK ISSUED UPON EXERCISE OF OPTION
              
              
              –
              
              
              –
              
              
              579,175
              
              
              580
              
              
              34,170
              
              
              –
              
              
              34,750COMMON
                  STOCK ISSUED FROM STOCK SUBSCRIBED
              
              
              (1,100,000
              )
              
              (55,000
              )
              
              1,100,000
              
              
              1,100
              
              
              53,900
              
              
              –
              
              
              –NET
                  (LOSS)
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (1,105,767
              )
              
              (1,105,767
              )BALANCE,
                  SEPTEMBER 30,2005
              
              
              
              
              
              
              
              
              26,234,653
              
              $
              26,235
              
              $
              2,367,175
              
              $
              (5,496,286
              )
              $
              (3,102,876
              )
 See
        accompanying notes.
 
 
  -4-
 **Table
            of Contents**
  **DND
        TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 **FOR
        THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004**
 **(UNAUDITED)**
 **2005**
              
              **2004**CASH
                  FLOWS FROM OPERATING ACTIVITIES:Net
                  income (loss)
              
              $
              (1,105,767
              )
              $
              1,327,361Adjustments
                  to reconcile net income to net cash provided byoperating
                  activities:Depreciation
              
              
              131,894
              
              
              134,608Amortization
              
              
              414,797
              
              
              408,734Provision
                  for slow moving and obsolete inventories
              
              
              0
              
              
              (800,891
              )Gain
                  on settlement of debt
              
              
              (17,500
              )
              
              0Loss
                  on disposal of fixed asset
              
              
              0
              
              
              2,349Changes
                  in operating assets and liabilities:Accounts
                  receivable
              
              
              1,198,734
              
              
              (468,432
              )Inventories
              
              
              (820,740
              )
              
              (2,347,134
              )Prepaid
                  expenses and other assets
              
              
              (109,209
              )
              
              (41,472
              )Accounts
                  payable and accrued expenses
              
              
              (415,699
              )
              
              1,169,481Deposits
                  from customers
              
              
              816,209
              
              
              1,093,451Amounts
                  due to related parties
              
              
              16,420
              
              
              (6,916
              )Net
                  cash provided by operating activities
              
              
              127,139
              
              
              471,139CASH
                  FLOWS FROM INVESTING ACTIVITIES:Purchases
                  of property and equipment
              
              
              (11,242
              )
              
              (25,123
              )CASH
                  FLOWS FROM FINANCING ACTIVITIES:Net
                  repayment on line of credit
              
              
              –
              
              
              (4,963
              )Exercise
                  of common stock options
              
              
              34,750
              
              
              –Proceeds
                  from issuance of debt
              
              
              525,000
              
              
              –Proceeds
                  from issuance of debt, related party
              
              
              125,000
              
              
              –Principal
                  payments on long-term debt
              
              
              (959,364
              )
              
              (418,183
              )Net
                  cash (used) by financing activities
              
              
              (274,614
              )
              
              (423,146
              )NET
                  INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
              
              
              (158,717
              )
              
              22,870CASH
                  AND CASH EQUIVALENTS, BEGINNING OF PERIOD
              
              
              316,488
              
              
              157,801CASH
                  AND CASH EQUIVALENTS, END OF PERIOD
              
              $
              157,771
              
              $
              180,671
 **(Continued)**
   -5-
 **Table
            of Contents**
  **DND
        TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **CONDENSED
          CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)**
 **FOR
        THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004**
 **(UNAUDITED)**
 **2005**
              
              **2004**SUPPLEMENTARY
                  DISCLOSURE OFCASH
                  FLOW INFORMATION:Cash
                  paid for interest
              
              $
              173,120
              
              $
              225,949Cash
                  paid for taxes
              
              $
              0
              
              $
              0SCHEDULE
                  OF NON-CASH INVESTINGAND
                  FINANCING ACTIVITIES:Cancellation
                  of capital leaseand
                  return of asset to vendor
              
              $
              0
              
              $
              9,202Common
                  stock issued for prepaid and accrued expenses
              
              $
              323,500
              
              $
              0
 See
        accompanying notes.
   -6-
 **Table
            of Contents**
  **DND
        TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL
        STATEMENTS**
 **SEPTEMBER
        30, 2005**
 **(UNAUDITED)**
  1.
              GENERAL
  **Presentation** - The
        accompanying consolidated financial statements have been prepared without
        audit
        and reflect all adjustments, consisting of normal recurring adjustments,
        which
        are, in the opinion of management, necessary for a fair statement of financial
        position and the results of operations for the interim periods. The statements
        have been prepared in accordance with accounting principles generally accepted
        in the United States of America and pursuant to the rules and regulations
        of the
        Securities and Exchange Commission ("SEC"). Certain information and footnote
        disclosures, normally included in financial statements prepared in accordance
        with accounting principles generally accepted in the United States of America,
        have been condensed or omitted pursuant to such SEC rules and regulations.
        Operating results for the nine months ended September 30, 2005, are not
        necessarily indicative of the results that may be expected for the year ended
        December 31, 2005. Accordingly, your attention is directed to footnote
        disclosures found in the December 31, 2004 Annual Report and particularly
        to
        Note 1, which includes a summary of significant accounting policies.
  **Nature
        of Business and History of Company** - DND
        Technologies, Inc. (the "Company") was organized on May 9, 1997, under the
        laws
        of the state of Nevada. The Company operates as a holding company for subsidiary
        acquisitions. The Company's operating subsidiary is Aspect Systems, Inc.
        (located in Arizona and Texas; hereinafter referred to as "ASI").
  ASI
        also
        owns 100% of ASI Team Asia Ltd. ASI Team Asia Ltd. is inactive and has no
        significant assets or liabilities and has not had any revenue or
        expenses.
  ASI
        is a
        supplier of semiconductor manufacturing equipment and also supplies complete
        after market support of the aforementioned equipment, which currently includes
        Lam AutoEtch, Rainbow, and TCP plasma etch systems, plus a variety of plasma
        etch and strip products manufactured on the ASI MX-1 and ASI MX-10 platforms
        (formerly Matrix System One and Ten), and the Arista and Arista Dual platforms
        (formerly Matrix Bobcat and Cheetah). Elements of support include spare
        parts and
        assemblies, and various engineering services.
  **Principles
        of Consolidation** - The
        consolidated financial statements include the accounts of DND Technologies,
        Inc.
        and its wholly-owned subsidiaries ASI and ASI Team Asia Ltd. All material
        inter-company accounts and transactions have been eliminated.
  **Net
        Income (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 2,352,314 shares and
        3,637,016 shares for the nine months ended September 30, 2005 and 2004,
        respectively.
  **Concentration
        of Risk** -
        Financial instruments which potentially subject the Company to concentrations
        of
        credit risk consist principally of cash and trade accounts
        receivable.
  -7-
 **Table
            of Contents**
  The
        Company places its temporary cash investments in reputable financial
        institutions. As of September 30, 2005, the Company had $151,838 placed in
        a
        temporary sweep investment account that was not insured by the Federal Deposit
        Insurance Corporation. These funds are invested by the bank in the JPMorgan
        U.
        S. Treasury Plus Moneymarket Fund - Reserve.
  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 September 30, 2005, the Company had two customers
        whose balance exceeded 10% of gross accounts receivable, at 15% and 12%,
        respectively.
  **Significant
        Customers -** For
        the
        nine months ended September 30, 2005, the Company had one customer whose
        revenues exceeded 10% of total revenues (19%). For the nine months ended
        September 30, 2004, the Company had two customers whose revenues exceeded
        10% of
        total revenues (13% and 12%). Revenues in 2005 and 2004 outside the United
        States include  Europe
        6%
        and 21%, and Asia 44% and 20%, respectively.
  **Significant
        Suppliers** - For
        the nine months ended September 30, 2005 and 2004, approximately 19% and
        23% **,** respectively, of gross inventory purchases were purchased from Lam Research
        Corporation (“Lam”). The Company expects to have significant purchases of
        inventory from Lam in the coming year.
  **Stock
        Based Compensation** -
        As
        permitted by FAS 123, as amended, the Company accounts for stock options
        issued
        to employees using the intrinsic value method as prescribed by APB 25. Under
        this method no expense is recognized for options issued with an exercise
        price
        equal to or greater than the market price of the stock on the date of grant.
        Expense for options or warrants issued to non-employees is recorded in the
        financial statements at estimated fair value. For options issued to employees
        the Company is subject to proforma disclosures based on the estimated fair
        value
        of the options issued.
  The
        Black-Scholes option-pricing model was developed for use in estimating the
        fair
        value of traded options which have no vesting restrictions and are fully
        transferable. In addition, option valuation models require the input of highly
        subjective assumptions including the expected stock price volatility. Because
        the Company's stock options and warrants have characteristics different from
        those of traded options, and because changes in the subjective input assumptions
        can materially affect the fair value estimate, in management's opinion, the
        existing models do not necessarily provide a reliable single measure of the
        fair
        value of such stock options.
  **Reclassifications** -
        Certain 2004 amounts have been reclassified to conform to 2005
        presentations.
  2.
              INVENTORIES
  A
        summary
        of inventories and allowance for obsolescence is as follows:
 Parts
                  and materials
              
              $
              3,805,023Work-in-process
              
              
              2,215,078Allowance
                  for obsolescence
              
              
              (2,275,025
              )Net
                  inventories
              
              $
              3,745,076Allowance
                  for Obsolescence:Balance,
                  January 1, 2005
              
              $
              2,114,111Current
                  Period Provision
              
              
              160,914Balance,
                  September 30, 2005
              
              $
              2,275,025
   -8-
 **Table
            of Contents**
  3.
              LICENSE
                  AGREEMENT AND PAYABLES, LAM RESEARCH
                  CORPORATION
  Future
        minimum payments under the agreements are as follows:
 Inventory
              
              LicenseDecember
                  31, 2005
              
              $
              159,900
              
              $
              242,370December
                  31, 2006
              
              
              338,638
              
              
              507,050December
                  31, 2007
              
              
              28,220
              
              
              538,324December
                  31, 2008
              
              
              –
              
              
              571,527December
                  31, 2009
              
              
              –
              
              
              606,777Thereafter
              
              
              –
              
              
              755,368$
              526,758
              
              $
              3,221,416
  The
        Company is currently in default on its payments; accordingly, the full amount
        has been classified as current in the consolidated balance sheet. The September
        inventory payments in the amount of $37,624 and the July, August and September
        royalty payments totaling $168,000 have not been paid (See Note 14). Although
        the Company’s current tight cash flow has prevented these payments from being
        made, management has assured Lam Research 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 Lam Research will terminate its agreement with the
        Company.
  4.
              LICENSE
                  AND ROYALTY PAYABLE, AXCELIS TECHNOLOGIES,
                  INC.
  The
        license and royalty payable at September 30, 2005 consisted of the
        following:
 License
                  payable
              
              $
              907,750Royalty
                  payable
              
              
              504,305Total
                  license and royalty payable
              
              $
              1,412,055
  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 will be due January 1, 2006, and $490,045
        will
        be due March 1, 2006. Although the Company’s current tight cash flow has
        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.
  -9-
 **Table
            of Contents**
  5.
              NOTES
                  PAYABLE
 The
                    Company's term loan to Merrill Lynch bears interest at 2.00%
                    plus the
                    Prime Rate as published in the Wall Street Journal per annum.
                    The loan is
                    due March 2006 with amortized payments over 45 months and a balloon
                    payment due at maturity. The loan also required a loan fee of
                    $11,450. The
                    loan is secured by a first lien on the Company's total assets
                    ($8,715,082
                    as of September 30, 2005) and has been guaranteed by Doug Dixon
                    and the
                    Company.
                
                $
                823,612On
                      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 are due weekly beginning
                      on October
                      21, 2005 with the final payment of $34,121 due on January 27,
                      2006.
                
                
                300,000Unsecured
                    note due to an individual with interest of $22,500. The note
                    is due
                    October 24, 2005.
                
                
                225,000Unsecured
                    demand note due to an individual with interest accruing at
                    7%
                
                
                289,350Total
                
                $
                1,637,962
  Future
        minimum payments under the notes are as follows:
 December
                  31, 2005
              
              $
              809,223December
                  31, 2006
              
              
              828,739$
              1,637,962
  The
        Company has not made its required payments to Cornell as of November 3, 2005.
        The unsecured note due October 24, 2005 was not paid and is still outstanding
        as
        of November 3, 2005. A late fee of $11,250 is due along with the outstanding
        balance and interest. The balance of notes payable have been reclassified
        to
        current on the balance sheet at September 30, 2005.
  6.
              STANDBY
                  EQUITY DISTRIBUTION AGREEMENT
  The
        Company entered into a Standby Equity Distribution Agreement ("SEDA") with
        Cornell Capital Partners, LP ("Cornell"), dated June, 17, 2005. Pursuant
        to the
        SEDA, at the Company's discretion, it may periodically sell to Cornell shares
        of
        the Company's common stock for a total purchase price of up to $10 million.
        For
        each share of common stock purchased under the SEDA, Cornell will pay 96%
        of the
        lowest closing bid price of the common stock, as quoted by Bloomberg, L.P.,
        on
        the Over-the-Counter Bulletin Board or other principal market on which the
        common stock is traded for the five days immediately following the notice
        date.
        The price paid by Cornell for the stock shall be determined as of the date
        of
        each individual request for an advance under the SEDA. Cornell will also
        retain
        5% of each advance under the SEDA. Cornell's obligation to purchase shares
        of
        stock under the SEDA is subject to certain conditions, including the Company
        obtaining an effective registration statement for shares of the common stock
        sold under the SEDA and is limited to $250,000 per six trading days, provided
        that aggregate advances in any 30-day period shall not exceed $1 million.
        As
        part of this agreement, Cornell received 1,142,858 shares of common stock
        as a
        one-time commitment fee and Monitor Capital, Inc. received 47,620 shares
        of
        common stock as a one-time placement agent fee under a Placement Agent Agreement
        relating to the SEDA, both of which fees are subject to pending registration.
   -10-
 **Table
            of Contents**
  7.
              ACCOUNTS
                  PAYABLE AND ACCRUED EXPENSES
  A
        summary
        of accounts payable and accrued expenses is as follows:
 Trade
                  accounts payable
              
              $
              1,407,099Accrued
                  commissions
              
              
              264,971Accrued
                  payroll
              
              
              280,481Product
                  warranty provision
              
              
              244,102Accrued
                  interest
              
              
              267,437Lawsuit
                  payable
              
              
              10,000Sales
                  and state income taxes payable
              
              
              47,407Total
                  Accounts Payable and Accrued Expenses
              
              $
              2,521,497
 
 8.
              INCREASE
                  IN AUTHORIZED SHARES
  On
        July
        25, 2005, the Company filed an Information Statement with the SEC stating
        that
        the Board of Directors and certain shareholders consented to an amendment
        of the
        Company's Articles of Incorporation to increase the authorized shares of
        common
        stock to 100,000,000.
  9.
              COMMON
                  STOCK
  During
        the nine months ended September 30, 2005, the Company issued the following
        shares of common stock:
  ·
              265,000
                  shares of common stock, with an aggregate fair value of $53,000,
                  were
                  issued February 15, 2005, in payment of $53,000 of accrued expenses.
 
 ·
              100,000
                  shares of common stock, with an aggregate fair value of $20,500,
                  were
                  issued February 15, 2005, in payment of $15,000 of accrued legal
                  fees.
                  Accordingly, the Company recorded a $5,500 loss on settlement of
                  debt.
 
 ·
              1,190,478
                  shares of common stock, with an aggregate fair value of $250,000,
                  were
                  issued June 17, 2005, to two unrelated entities, in payment of
                  $250,000 of
                  loan fees. (See Note 6.)
  10.
              RELATED
                  PARTY TRANSACTIONS
  Amounts
        Due to Related Party
  The
        Company has the following amounts due to its Chairman at September 30,
        2005:
 Notes
                  payable at 7.0%
              
              $
              120,000Note
                  payable plus interest of $12,500 due October 24, 2005
              
              
              125,000Accrued
                  interest on notes payable
              
              
              60,728Accrued
                  salaries
              
              
              256,092Total
                  Amount Due To Related Party
              
              $
              561,820
   -11-
 **Table
            of Contents**
  The
        amounts due to the Chairman are delinquent and payable on demand. The note
        due
        October 24, 2005 was not paid and is still outstanding as of November 3,
        2005. A
        late fee of $6,250 is due along with the outstanding balance and
        interest.
  11.
              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.
  12.
              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. Vesting
        terms of the options range from immediate to four years.
  On
        June
        15, 2005, the Board of Directors and stockholders approved the DND Technologies,
        Inc. 2005 Stock Option Plan, which permits the Board of Directors to grant,
        for
        a ten year period, options to purchase up to 3,000,000 shares of its common
        stock to directors, employees and consultants. The Plan is administered by
        the
        Board of Directors. The administrators have the authority and discretion,
        subject to the provisions of the Plan, to select persons to whom stock options
        will be granted, to designate the number of shares to be covered by each
        option,
        to specify the type of consideration to be paid, and to establish all other
        terms and conditions of each option. Options granted under the Plan will
        not
        have a term that exceeds ten years from date of grant. The stock subject
        to the
        Plan and issuable upon exercise of options granted under the Plan are shares
        of
        the Company's common stock, $.001 par value, which may be either unissued
        or
        treasury shares. The exercise price is no less than 100% of the fair market
        value of the shares at the date of the grant of the options, as specified
        by the
        Board of Directors.
  A
        summary
        of the option activity for the nine months ended September 30, 2005, pursuant
        to
        the terms of the DND Technologies, Inc. 2003 Stock Option Plan is as
        follows:
 Weighted
                AverageOptions
                  outstanding at January 1, 2005
              
              
              4,234,226
              
              $
              .06Granted
              
              
              635,000
              
              $
              .06Exercised
              
              
              (579,175
              )
              $
              .06Cancelled
                  and expired
              
              
              (179,168
              )
              $
              .06Options
                  outstanding at September 30, 2005
              
              
              4,110,883
   -12-
 **Table
            of Contents**
 3,272,945
          options are exercisable at September 30, 2005.
  Information
        regarding stock options outstanding as of September 30, 2005 is as
        follows:
 Price
              
              $
              .06Weighted
                  average exercise price
              
              $
              .06Weighted
                  average remaining contractual life
              
              
              8
                  years 3 months
  For
        purposes of proforma disclosures, the estimated fair value of the options
        granted in 2003 is amortized to expense over the options' vesting periods.
        The
        Company's proforma information follows:
 **Three
                  Months Ended**
              
              **Nine
                  Months Ended****September
                  30,**
              
              **September
                  30,****2005**
              
              **2004**
              
              **2005**
              
              **2004**Net
                  income (loss):As
                  reported
              
              $
              (1,153,585
              )
              $
              271,464
              
              $
              (1,105,767
              )
              $
              1,327,361Proforma
              
              $
              (1,164,840
              )
              $
              266,125
              
              $
              (1,139,531
              )
              $
              1,311,343Net
                  Income per common stock share:Basic:As
                  reported
              
              $
              (.04
              )
              $
              .01
              
              $
              (.04
              )
              $
              .06Proforma
              
              $
              (.04
              )
              $
              .01
              
              $
              (.05
              )
              $
              .06Diluted:As
                  reported
              
              
              N/A
              
              $
              .01
              
              
              N/A
              
              $
              .05Proforma
              
              
              N/A
              
              $
              .01
              
              
              N/A
              
              $
              .05
  13.
              GOING
                  CONCERN
  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 $1,000,000
        in
        the current quarter with sales down approximately 13% from the prior year,
        has
        negative working capital of approximately $6,200,000, and is in default on
        the
        majority of its term debt. These factors raise substantial doubt as to the
        Company’s ability to continue as a going concern.
  Management’s
        plan to eliminate the going concern situation include, but are not limited
        to
        the payment of the Lam, Axcelis and Cornell payments via improved cash flow
        management and cost savings and the creation of additional sales and profits
        from the sale of its new Axcelis products. The Company is also continuing
        to
        work on finalizing the Cornell Standby Equity Distribution Agreement which
        would
        allow access to needed capital funds.
  14.
              SUBSEQUENT
                  EVENTS
  The
        Lam
        royalty ($56,000) for July, 2005, was paid on October 17, 2005. (See Note
        3)
   -13-
 **Table
            of Contents**
  **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 Lam
        AutoEtch 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 Rainbow and TCP plasma etch systems and the
        ASI
        MX and Arista system products. ASI has a website located at www.aspectsys.com.
  We
        have
        experienced a significant increase in market demand for our subsidiary's
        products during the past two years, while attempting to recover from the
        effects
        of the prior two years, during which the semiconductor industry experienced
        its
        worst recession to date, according to industry sources.  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 managment believes we could have matched these revenues
        in
        2005 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.
  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 in-turn
        are forced to defer repayment of obligations to creditors or service providers
        and forego additional sales opportunities. Management has entered into a
        financing arrangement with Cornell Capital to help alleviate these cash flow
        issues and provide us with the opportunity to accept more orders. Without
        this
        additional financing, we believe it will be difficult to further expand our
        business.
  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.
  -14-
 **Table
            of Contents**
  **Critical
        Accounting Policies and Estimates**
  In
        consultation with our Board of Directors, we have identified four accounting
        principles that we believe are key to an understanding of our financial
        statements. These important accounting policies require management's most
        difficult, subjective judgments.
  **1.** **Going
        Concern**
  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 $1,000,000
        in
        the current quarter with sales down approximately 13% from the prior year,
        has
        negative working capital of approximately $6,200,000, and is in default on
        its
        payments on the majority of its term debt. 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 payment of the Lam and Axcelis payments via improved cash flow management
        and cost savings and the creation of additional sales and profits from the
        sale
        of its new Axcelis products. The Company is also continuing to work on
        finalizing the Cornell Standby Equity Distribution Agreement, which would
        allow
        access to needed capital.
  **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. Inventory on hand, in excess of a
        12-month supply, is considered excessive and slow-moving. 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.** **License
        Agreements**
  The
        Company has license agreements, which are being amortized using the
        straight-line method over the life of the contract with Lam (8 years) and
        Axcelis Technologies, Inc. ("Axcelis") (7 years).
  **4.** **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.
  -15-
 **Table
            of Contents**
  *The
        Three Months Ended September 30, 2005 Compared To The Three Months Ended
        September 30, 2004.*
  **Selected
        Financial Information**
 **Three
                  Months Ended****09/30/2005**
              
              **09/30/2004**
              
              **Increase**
                **(Decrease)**Statements
                  of OperationsTotal
                  Revenue
              
              $
              2,474,046
              
              $
              3,453,416
              
              $
              (979,370
              )Operating
                  Expenses:Costs
                  of revenues
              
              
              2,044,447
              
              
              1,866,856
              
              
              177,591Reserve
                  for slow moving and obsolete inventory
              
              
              127,343
              
              
              (223
              )
              
              127,566Research
                  and development
              
              
              44,905
              
              
              32,759
              
              
              12,146Sales
                  and marketing, includinglicense
                  fees, royalties andcommissions
              
              
              842,637
              
              
              715,251
              
              
              127,386General
                  and administrative
              
              
              436,629
              
              
              484,194
              
              
              (47,565
              )Total
                  Operating Expenses
              
              
              3,495,961
              
              
              3,098,837
              
              
              397,124Income
                  (Loss) from Operations
              
              
              (1,021,915
              )
              
              354,579
              
              
              (1,376,494
              )Other
                  (Expense):Interest
                  Expense
              
              
              (131,670
              )
              
              (83,115
              )
              
              48,555Income
                  Before Income Tax Expense
              
              
              (1,153,585
              )
              
              271,464
              
              
              (1,425,049
              )Income
                  Tax Expense
              
              
              0
              
              
              0
              
              
              0Net
                  Income (Loss)
              
              $
              (1,153,585
              )
              $
              271,464
              
              $
              (1,425,049
              )Net
                  Income (Loss) Per ShareBasic
              
              
              (0.04
              )
              
              0.01
              
              
              (0.05
              )Diluted
              
              
              N/A
              
              
              0.01
              
              
              N/A
  **Results
        of Operations**
  Our
        revenue decrease of $979,370, or 28%, from $3,453,416 in the three months
        ended
        September 30, 2004 to $2,474,046 in the three months ended September 30,
        2005,
        was primarily due to a decrease in system sales of $518,100 and a decrease
        in
        parts, assemblies, and consumable sales of $390,870. We delivered five systems
        in the third quarter of 2005 compared to four systems in the third quarter
        of
        2004. However, due to product mix changes, the average sales price per system
        in
        2005 decreased by approximately $176,000 per system. In 2005 all system sales
        were from the MX-1 and MX-10 category whereas in 2004 only 50% were from
        that
        category. This category typically has lower unit sales prices. Due to our
        tight
        cash flow situation and the increased funding needs for system sales, we
        have
        had to defer some parts, assemblies, and consumables purchases, and therefore
        the related sales, to future periods resulting in a decrease of $390,870
        in
        sales of these items. Our sales break down by segment is as
        follows:
 **September
                  30,**
                **2005**
              
              **September
                  30,**
                **2004**
              
              **Increase**
                **(Decrease)**Systems
                  and chillers
              
              $
              1,495,749
              
              $
              2,013,849
              
              $
              (518,100
              )Parts,
                  assembliesand
                  consumables
              
              
              944,310
              
              
              1,335,180
              
              
              (390,870
              )Field
                  service and training
              
              
              33,987
              
              
              104,387
              
              
              (70,400
              )$
              2,474,046
              
              $
              3,453,416
              
              $
              (979,370
              )
   -16-
 **Table
            of Contents**
  **Cost
        of Revenues**
  Our
        cost
        of revenues increased $177,591 or 10%, from $1,866,856 in the third quarter
        of
        2004 to $2,044,447 in the third quarter of 2005. Our cost of revenues as
        a
        percentage of revenues for the three months ended September 30, 2005 was
        83% as
        compared to 54% for the three months ended September 30, 2004. This increase
        in
        the cost of revenue percentage for the third quarter of 2005 was caused by
        several unusual circumstances occurring at the same time. The lack of available
        core parts/assemblies caused us to incur higher than planned manufacturing
        costs
        to meet previously quoted sales requirements, applied labor costs remain
        higher
        than normal due to training of production personnel on the new MX-1 and MX-10
        systems, and we incurred additional costs in obtaining the needed expertise
        for
        training and to facilitate the final completion of the required bill of
        materials and production process notes necessary to fabricate the new systems.
        Going forward, our management expects this percentage to return to historical
        levels.
  **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 September 30, 2005, we recorded a $127,343 increase
        to
        the reserve due to an analysis of inventory items. In the three months ended
        September 30, 2004, we recorded a $223 decrease in our reserve.
  **Research
        and Development**
  Research
        and development costs increased $12,146 or 37%, from $32,759 in the three
        months
        ended September 30, 2004 to $44,905 in the three months ended September 30,
        2005. The increase is primarily related to an increase in payroll and employee
        benefits in the amount of $21,477 offset by a $9,331 decrease in product
        development costs and miscellaneous research and development costs. We normally
        do not incur significant research and development expenses.
  **Sales
        and Marketing**
  Sales
        and
        marketing costs increased $127,386 or 18%, from $715,251 in the three months
        ended September 30, 2004 to $842,637 in the three months ended September
        30,
        2005. This is a result of the 65% increase in expense related to the Axcelis
        license and associated royalty which increased $196,062, or 65%, from $299,340
        in the three months ended September 30, 2004 to $495,402 in the three months
        ended September 30, 2005. The license and royalty fees increase in direct
        proportion to the increase in sales of this product category. This increase
        was
        partially offset by the decrease in our commission expenses of $48,923 or
        37%
        from $132,541 during the three months ended September 30, 2004 to $83,618
        during
        the three months ended September 30, 2005. This decrease in our commission
        expense was a direct result of our reduced system sales as mentioned
        above.
  -17-
 **Table
            of Contents**
  **General
        and Administrative**
 **Three
                  Months Ended****09/30/2005**
              
              **09/30/2004**
              
              **Increase**
                **(Decrease)**General
                  and AdministrativeSalaries
                  and wages
              
              $
              294,039
              
              $
              239,232
              
              $
              54,807Professional
                  fees
              
              
              37,174
              
              
              47,857
              
              
              (10,683
              )Occupancy
                  Expense, less amount allocated to Cost of Revenue
              
              
              54,366
              
              
              58,745
              
              
              (4,379
              )Depreciation,
                  less amount allocated to Cost of Revenue
              
              
              28,679
              
              
              29,381
              
              
              (702
              )Other
                  general and administrative expenses
              
              
              22,371
              
              
              108,979
              
              
              (86,608
              )Total
                  General and Administrative
              
              $
              436,629
              
              $
              484,194
              
              $
              (47,565
              )
 Salaries
        and wages increased $54,807 to $294,039 in the three months ended September
        30,
        2005 as compared to $239,232 in the three months ended September 30, 2004.
        This
        increase was the result of increased headcount (approximately $41,000) and
        payroll rate increases, which were effective in August 2005 (approximately
        $14,000).
  Professional
        fees decreased $10,683 or 22%, from $47,857 in the three months ended September
        30, 2004 to $37,174 in the three months ended September 30, 2005, primarily
        due
        to a decrease in consulting services related to securing financing.
  Occupancy
        expense represents our costs to lease, occupy, and maintain our leased
        facilities in Arizona and Texas.  These costs, which consist primarily
        of
        rent, repair and maintenance, utilities, security, insurance and janitorial
        services, are allocated between cost of revenue and operating expenses based
        upon the square footage utilized by each category.
  Other
        general and administrative expenses decreased $86,608 or 79%, from $108,979
        in
        the third quarter of 2004 to $22,371 in the third quarter of 2005. The decreased
        expenses are the result of our efforts to reduce general and administrative
        costs in order to conserve cash and are primarily from reductions in office
        equipment and supplies ($11,800), network maintenance and computer hardware
        and
        software ($24,500) and a gain from reversals of accrued accounts payable
        determined no longer valid ($50,000).
  **Interest
        Expense**
  Interest
        expense for the third quarter of 2005 has increased by $48,555, to $131,670
        from
        $83,115 in the third quarter of 2004, due to the new loans which are discussed
        in the second paragraph of the Liquidity and Capital Resources
        section.
  **Net
        Income (Loss)**
  As
        a
        result of the foregoing, we had a net loss of $1,153,585 for the three months
        ended September 30, 2005, compared to net income of $271,464 for the three
        months ended September 30, 2004.
  -18-
 **Table
            of Contents**
  *The
        Nine Months Ended September 30, 2005 Compared To The Nine Months Ended September
        30, 2004.*
  **Selected
        Financial Information**
 **Nine
                  Months Ended****09/30/2005**
              
              **09/30/2004**
              
              **Increase**
                **(Decrease)**Statements
                  of OperationsTotal
                  Revenue
              
              $
              9,101,641
              
              $
              10,481,725
              
              $
              (1,380,084
              )Cost
                  of Revenue:Costs
                  of revenues
              
              
              6,396,194
              
              
              6,323,324
              
              
              72,870Reserve
                  for slow moving and obsolete inventory
              
              
              160,914
              
              
              (800,891
              )
              
              961,805Research
                  and development
              
              
              111,313
              
              
              64,602
              
              
              46,711Sales
                  and marketing, includinglicensing
                  fees, royalties andcommissions
              
              
              1,884,004
              
              
              1,683,111
              
              
              200,893General
                  and administrative
              
              
              1,369,017
              
              
              1,481,847
              
              
              (112,830
              )Total
                  Operating Expenses
              
              
              9,921,442
              
              
              8,751,993
              
              
              1,169,449Income
                  (Loss) from Operations
              
              
              (819,801
              )
              
              1,729,732
              
              
              (2,549,533
              )Other
                  Income (Expense):Gain
                  on settlement of debt
              
              
              17,500
              
              
              0
              
              
              (17,500
              )Lawsuit
                  settlement
              
              
              0
              
              
              (140,000
              )
              
              (140,000
              )Interest
                  Expense
              
              
              (302,666
              )
              
              (261,571
              )
              
              41,095Income
                  (Loss) Before Income Tax Expense
              
              
              (1,104,967
              )
              
              1,328,161
              
              
              (2,433,128
              )Income
                  Tax Expense
              
              
              800
              
              
              800
              
              
              0Net
                  Income
              
              $
              (1,105,767
              )
              $
              1,327,361
              
              $
              (2,433,128
              )Net
                  Income Per ShareBasic
              
              
              (0.04
              )
              
              0.06
              
              
              (0.10
              )Diluted
              
              
              N/A
              
              
              0.05
              
              
              N/A
  **Results
        of Operations**
  Our
        revenue decrease of $1,380,084, or 13%, from $10,481,725 in the nine months
        ended September 30, 2004 to $9,101,641 in the nine months ended September
        30,
        2005, was primarily due to a decrease in sales from our parts, assemblies,
        and
        consumables category of $819,756 and a decrease in systems/chiller sales
        of
        $501,484. 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/chiller category is down due to a change in product mix. Although
        we
        sold more systems in 2005, the average sales price per system was down by
        approximately $93,000 per system. This change in product mix resulted in
        the
        MX-1 and MX-10 and Arista systems category (which overall carry lower sales
        prices) comprising 43% of the total in 2005 versus 21% in 2004. Our sales
        break
        down by segment is as follows:
 **September
                  30,**
                **2005**
              
              **September
                  30,**
                **2004**
              
              **Increase**
                **(Decrease)**Systems
                  and chillers
              
              $
              5,320,466
              
              $
              5,821,950
              
              $
              (501,484
              )Parts,
                  assemblies and consumables
              
              
              3,642,209
              
              
              4,461,965
              
              
              (819,756
              )Field
                  service and training
              
              
              138,966
              
              
              197,810
              
              
              (58,844
              )$
              9,101,641
              
              $
              10,481,725
              
              $
              (1,380,084
              )
   -19-
 **Table
            of Contents**
  **Cost
        of Revenues**
  Our
        cost
        of revenues increased $72,870 or 1%, from $6,323,324 in 2004 to $6,396,194
        in
        2005. Our cost of revenues as a percentage of revenues for the nine months
        ended
        September 30, 2005 was 70% as compared to 60% for the nine months ended
        September 30, 2004. These increases are the result of increased cost of revenues
        for the third quarter of 2005 (see Cost of Revenue discussion in the three
        month
        comparison period for details). As we continue to take steps to strengthen
        our
        sales of systems and chillers, we are also working to cut unnecessary costs
        and
        decrease overall cost of sales.
  **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 first nine months of 2005, we recorded a $160,914 increase to the
        reserve
        due to an analysis of inventory items. In the nine months ended September
        30,
        2004, we recorded a $800,891 decrease in our reserve. This was primarily
        as a
        result of signing an amendment to the November 2002 Lam Asset Purchase and
        License Agreement, resulting in a $962,758 decrease in our payable to Lam
        which
        was offset by a $161,867 increase to the reserve due to an analysis of all
        other
        inventory items.
  **Research
        and Development**
  Research
        and development costs increased $46,711 or 72%, from $64,602 in the nine
        months
        ended September 30, 2004 to $111,313 in the nine months ended September 30,
        2005. The increase is primarily related to increases in payroll and employee
        benefits in the amount of $29,555 and an increase of $20,110 related to R&D
        expense on the NCS (Nitrogen Clean System) product line. We normally do not
        incur significant research and development expenses.
  **Sales
        and Marketing**
  Sales
        and
        marketing costs increased $200,893 or 12%, from $1,683,111 in the nine months
        ended September 30, 2004 to $1,884,004 in the nine months ended September
        30,
        2005. This is a result of the 50% increase in expense related to the Axcelis
        license and associated royalty which increased $267,536 from $533,299 in
        the
        nine months ended September 30, 2004 to $800,835 in the nine months ended
        September 30, 2005 as we increased sales of this particular line of products.
        This increase was partially offset by the decrease in our commission expenses
        of
        $53,317 or 16% from $339,842 during the nine months ended September 30, 2004
        to
        $286,525 during the nine months ended September 30, 2005. This decrease in
        our
        commission expense was a direct result of our reduced sales as mentioned
        above.
  -20-
 **Table
            of Contents**
  **General
        and Administrative**
 **Nine
                  Months Ended****09/30/2005**
              
              **09/30/2004**
              
              **Increase**
                **(Decrease)**General
                  and AdministrativeSalaries
                  and wages
              
              $
              833,548
              
              $
              705,607
              
              $
              127,941Professional
                  fees
              
              
              154,454
              
              
              231,502
              
              
              (77,048
              )Occupancy
                  Expense, less amount allocated to Cost of Revenue
              
              
              154,216
              
              
              166,427
              
              
              (12,211
              )Depreciation,
                  less amount allocated to Cost of Revenue
              
              
              86,771
              
              
              86,972
              
              
              (201
              )Other
                  general and administrative expenses
              
              
              140,028
              
              
              291,339
              
              
              (151,311
              )Total
                  General and Administrative
              
              $
              1,369,017
              
              $
              1,481,847
              
              $
              (112,830
              )
 General
        and administrative salaries and wages increased $127,941 or 18% to $833,548
        in
        the nine months ended September 30, 2005 as compared to $705,607 in the nine
        months ended September 30, 2004. This increase is primarily the result of
        an
        increase in general and administrative headcount by four employees.
  Professional
        fees decreased in 2005 in the amount of $77,048 or 33%, from $231,502 in
        2004 to
        $154,454 in 2005, primarily due to a $69,487 decrease in legal expenses from
        litigation ultimately settled by the Company.
  Occupancy
        expense represents our costs to lease, occupy, and maintain our leased
        facilities in Arizona and Texas.  These costs, which consist primarily
        of
        rent, repair and maintenance, utilities, security, insurance and janitorial
        services, are allocated between cost of revenue and operating expenses based
        upon the square footage utilized by each category.
  Other
        general and administrative expenses decreased $151,311 or 52%, from $291,339
        in
        2004 to $140,028 in 2005. The decreased expenses are primarily attributable
        to
        reduced expenses in the following areas: Travel and Entertainment Expense
        ($8,600), Office Equipment and Supplies ($19,400), Repair and Maintenance
        ($6,100), Other Employee Benefits ($7,100), Network Maintenance and Computer
        Hardware and Software ($31,000). In addition, Other Income was up in 2005
        due to
        401K Plan forfeitures ($10,700), and a gain from reversals of accounts payable
        determined no longer valid ($50,000).
  **Lawsuit
        Settlement**
  In
        April
        2004, the Company settled litigation with a former employee, which provided
        for
        the payment of $140,000 in installments of $10,000 per month beginning September
        2004. This settlement has now been fully paid. (See further discussion below
        under "Liquidity and Capital Resources.")
  **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.  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.
  -21-
 **Table
            of Contents**
  **Interest
        Expense**
  Interest
        expense for the nine months ended September 30, 2005 ($302,666) has increased
        over the comparable period of 2004 ($261,571) by $41,095 due primarily to
        the
        new loans discussed in the second paragraph of the Liquidity and Capital
        Resources section.
  **Net
        Income (Loss)**
  As
        a
        result of the foregoing, we had a net loss of $1,105,767 for the nine months
        ended September 30, 2005, compared to net income of $1,327,361 for
        the nine
        months ended September 30, 2004.
  **Capital
        Resources**
 **Nine
                  Months Ended**Working
                  Capital
              
              **09/30/2005**
              
              **09/30/2004**
              
              **Favorable
                  (Unfavorable)**Current
                  Assets
              
              $
              5,577,070
              
              $
              5,150,557
              
              $
              426,513Current
                  Liabilities
              
              
              (11,805,645
              )
              
              (6,693,249
              )
              
              (5,112,396
              )Deficit
                  Working Capital
              
              $
              (6,228,575
              )
              $
              (1,542,692
              )
              $
              (4,685,883
              )Long-term
                  Debt
              
              $
              (12,313
              )
              $
              (4,416,735
              )
              $
              4,404,422Stockholders'
                  (Deficit)
              
              $
              (3,102,876
              )
              $
              (2,263,020
              )
              $
              (839,856
              )
  During
        the nine months ended September 30, 2005, we were in default of our payment
        terms on the majority of our term debt. As a result, the approximately $2.7
        million of term debt due beyond twelve months was classified as current in
        the
        consolidated balance sheet. During September 2004 we were in compliance with
        the
        payment terms of the majority of our term debt.
  Included
        in current liabilities is a total of $1,412,055, which is owed to Axcelis
        for
        license and royalty fees.  Of this amount, $293,983 was due April
        1, 2005,
        $333,309 was due July 1, 2005, $228,007 was due October 1, 2005, $66,711
        will be
        due January 1, 2006, and $490,045 will be due March 1, 2006. Also included
        in
        current liabilities is a total of $3,748,174 in license and royalty fees
        owed to
        Lam. Of this amount, $205,624 was past due as of September 30, 2005, and
        the
        remainder are 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 and Lam 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 or Lam will terminate any of their agreements with the
        Company.
  **Statements
        of Cash Flows Select Information**
  **Nine
                  Months Ended****09/30/2005**
              
              **09/30/2004**Net
                  Cash Provided (Used) By:Operating
                  Activities
              
              $
              127,139
              
              $
              471,139Investing
                  Activities
              
              
              (11,242
              )
              
              (25,123
              )Financing
                  Activities
              
              
              (274,614
              )
              
              (423,146
              )
   -22-
 **Table
            of Contents**
  **Operating
        Activities**
  For
        the
        nine months ended September 30, 2005, cash provided by operating activities
        of
        $127,139 was primarily attributed to a decrease in accounts receivable in
        the
        amount of $1,198,734 as well as $816,209 received as customer deposits. These
        amounts were offset by our net loss of $1,105,767, our increase in inventories
        and prepaid expenses and other assets in the amount of $963,654 and $109,209,
        respectively. We also reduced our accounts payable and accrued expenses by
        $415,699.
  For
        the
        nine months ended September 30, 2004, cash provided by operating activities
        of
        $471,139 was primarily attributed to income from operations, an increase
        in
        accounts payable and accrued expenses of $1,029,481, and an increase in deposits
        from customers in the amount of $1,093,451. These increases were partially
        offset by an increase in accounts receivable of $468,432 and an increase
        in
        inventories of $3,148,025.
  **Investing
        Activities**
  During
        the nine months ended September 30, 2005 and 2004, cash was used by investing
        activities for purchases of equipment in the amounts of $11,242 and $25,123,
        respectively.
  We
        currently have no material commitments for capital expenditures.
  **Financing
        Activities**
  Financing
        activities in the nine months ended September 30, 2005 used a total of $274,614
        as compared to $423,146 in the nine months ended September 30, 2004.
  In
        the
        nine months ended September 30, 2005, we received $34,750 as the result of
        the
        exercise of options as well as $525,000 from the proceeds of new debt issuances,
        and $125,000 from the proceeds of new debt issuance with a related party.
        During
        the nine months ended September 30, 2005, these receipts and proceeds were
        offset by our repayment of long-term debt in the amount of $959,364.
  During
        the nine months ended September 30, 2004, we used $4,963 to repay our line
        of
        credit and $418,183 to repay long-term debt.
  **Liquidity
        and Capital Resources**
  Although
        sales for the three months ended September 30, 2005 were down from September
        30,
        2004 by $929,370, and sales for the nine months ended September 30, 2005
        compared to the nine months ended September 30, 2004 were down by $1,380,084,
        we
        currently have booked system orders for approximately $3.8 million dollars
        of
        system sales that management believes will be shipped and delivered during
        the
        remainder of 2005.  If these systems are shipped and delivered during
        2005
        and our expenses for the remainder of 2005 are comparable to our expenses
        during
        2004, management believes our financial results for 2005 will reflect a slight
        improvement over our current position, excluding the potential for additional
        sales being booked this year.  In addition, the
        increased accounts receivable dollars from the upcoming system sales
        and
        potential funding which may be received from the Cornell SEDA
        (see discussion below in this section), if any, will all help to relieve
        the strain on our current cash flow.
  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,
        and a $125,000 loan from a related party. Our subsidiary's restructured term
        loan (the "New Loan") with Merrill Lynch Business Financial Services, Inc.
        ("Merrill Lynch") had a balance of $823,612 as of September 30, 2005, requires
        payments over a term of 17 months at an interest rate of two percent (2%)
        plus
        the prime rate with principal amortized over a 45-month period and a balloon
        payment in February 2006, resulting in payments ranging from $31,819 to $29,632
        per month. 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.
  -23-
 **Table
            of Contents**
  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 $3.2 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 $2,447,000
        remains to be paid in cash. 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.
        We
        have made no cash payments on the $750,000 license fee and this 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
        November 7, 2005, we were past due on certain payments to both Lam and Axcelis.
        Past due payments to Lam totaled $149,624 on November 7, 2005, and past due
        payments to Axcelis totaled $855,299 on that date. Although our current tight
        cash flow has prevented these payments from being made, we have assured Axcelis
        and Lam 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
        or Lam will terminate any of their agreements with the Company.
  On
        April
        30, 2004, a former employee and the Company settled counter-claims against
        each
        other arising from the employee's prior association with the Company. We
        recorded, in 2004, an expense of the entire settlement payable to the employee
        of $140,000. Payments in the amount of $10,000 per month began September
        1, 2004
        and continued until October 1, 2005, without interest. This settlement has
        now
        been fully paid.
  -24-
 **Table
            of Contents**
  On
        July
        5, 2005, we entered into a Standby Equity Distribution Agreement (the "SEDA")
        with Cornell Capital Partners, LP ("Cornell") dated as of June, 17, 2005.
        Pursuant to the SEDA, once our pending registration statement becomes effective,
        if at all, we may, at our discretion, periodically sell to Cornell shares
        of our
        common stock for a total purchase price of up to $10 million. For each share
        of
        common stock purchased under the SEDA, Cornell will pay 96% of the lowest
        volume
        weighted average price of the common stock, as quoted by Bloomberg, L.P.,
        on the
        Over-the-Counter Bulletin Board or other principal market on which the common
        stock is traded for the five days immediately following the notice date.
        The
        price paid by Cornell for the stock will be determined as of the date of
        each
        individual request for an advance under the SEDA. Cornell will also retain
        5% of
        each advance under the SEDA. Cornell's obligation to purchase shares of stock
        under the SEDA is subject to certain conditions, including us obtaining an
        effective registration statement for shares of the common stock sold under
        the
        SEDA and is limited to $250,000 per five trading days, provided that aggregate
        advances in any 30-day period shall not exceed $1 million. As part of this
        agreement, Cornell has received 1,142,858 shares of common stock as a one-time
        commitment fee and Monitor Capital, Inc. has received 47,620 shares of common
        stock as a one-time placement agent fee under a Placement Agent Agreement
        relating to the SEDA, and all of these shares are subject to pending
        registration.
  On
        July
        22, 2005, we entered into a promissory note with Cornell and received $300,000.
        The loan calls for interest to accrue at 12% with payments in the amount
        of
        $20,000 to made weekly beginning October 21, 2005 with the final payment
        of
        $34,121 due on January 27, 2006.   Once our pending registration
        statement is effective, if ever, this note will be partially secured by the
        escrow of 9,765,625 shares of our common stock.  As of November 7,
        2005, we
        had not made any required payments to Cornell under the promissory note,
        and as
        a result were in default under this loan.
  On
        August
        25, 2005 we entered into a promissory note with M. Lynn Brewer and received
        $225,000. The loan accrues interest at 10% 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. As of November 7, 2005, this note had not been
        repaid and was still outstanding. If the note is not repaid (including payment
        of a $11,250 late fee) by November 23, 2005, we will be in default and ownership
        of the 3,000,000 shares securing the note would be transferred from Mr. Dixon
        to
        the note holder.
  On
        August
        25, 2005 we entered into a promissory note with our Chief Executive Officer,
        Mr.
        Dixon, and received $125,000. The loan accrues interest at 10%, 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 November
        7,
        2005, this note had not been repaid and was still outstanding. If the note
        is
        not repaid (including payment of a $6,250 late fee) by November 23, 2005,
        we
        will be in default.
  Although
        our current tight cash flow has prevented us from making our required payments
        on these loans, management is working with Cornell and the two individual
        lenders to establish alternate payment terms.
  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 September 30, 2005, we had $157,771 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
        often 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.
  -25-
 **Table
            of Contents**
  **CAUTIONARY
        NOTE REGARDING FORWARD-LOOKING STATEMENTS AND RISK FACTORS**
  *The
        Company's Form 10-KSB, any Form 10-QSB or any Form 8-K of the Company or
        any
        other written or oral statements made by or on behalf of the Company may
        contain
        forward-looking statements which reflect the Company's current views with
        respect to future events and financial performance. The words "believe,"
        "expect," "anticipate," "intends," "estimate," "forecast," "project," and
        similar expressions identify forward-looking statements. All statements other
        than statements of historical fact are statements that could be deemed
        forward-looking statements, including any statements of the plans, strategies
        and objectives of management for future operations; any statements concerning
        proposed new products, services, developments or industry rankings; any
        statements regarding future economic conditions or performance; any statements
        of belief; and any statements of assumptions underlying any of the
        foregoing.*  *Such
        "forward-looking statements" are subject to risks and uncertainties set forth
        from time to time in the Company's SEC reports and are generally set forth
        below
        and particularly discussed in the Company's Form 10-KSB for the year ended
        December 31, 2004.*
  *Readers
        are cautioned not to place undue reliance on such forward-looking statements
        as
        they speak only of the Company's views as of the date the statement was made.
        The Company undertakes no obligation to publicly update or revise any
        forward-looking statements, whether as a result of new information, future
        events or otherwise.*
  **Risk
        Factors**
  **You
        should consider the following discussion of risks as well as other information
        regarding our operations. The risks and uncertainties described below are
        not
        the only ones. Additional risks and uncertainties not presently known to
        us or
        that we currently deem immaterial also may impair our business operations.**
  ·
              We
                  are in default on a majority of our term debt as a result of failure
                  to
                  make certain required payments, including payments to Lam and Axcelis
                  under our license agreements with them. While both Axcelis and
                  Lam have to
                  date been willing to provide us with additional time to make payments,
                  either Lam or Axcelis could terminate our license agreements with
                  them
                  upon notice (ninety days written notice is required from Axcelis,
                  while
                  Lam could terminate immediately following the notice being given).
                  If a
                  notice period is required or voluntarily given, 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 proceeds
                  from the Cornell SEDA, funds from operations, or funds from other
                  sources.
 
 ·
              Our
                  term loan with Merrill Lynch, which is due in March 2006, 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.
 
 ·
              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.
  -26-
 **Table
            of Contents**
  ·
              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, other than the Cornell SEDA,
                  is
                  uncertain.
 
 ·
              There
                  is a limited market for our common stock.
 
 ·
              Our
                  common stock is subject to penny stock regulation.
 
 ·
              We
                  are subject to increasing costs of compliance with the Sarbanes-Oxley
                  Act
                  of 2002 and must maintain high margins to pay for these ongoing
                  expenses
                  required of public companies.
 
 **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 September 30, 2005. 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.
  -27-
 **Table
            of Contents**
  (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 and our Form 10-QSB filed on August
        15,
        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:
  10.20
              Promissory
                  Note, dated July 23, 2005, by and between DND Technologies, Inc.
                  and
                  Cornell Capital Partners, LP
  10.21
              Promissory
                  Note, dated August 24, 2005, by and between DND Technologies, Inc.
                  and
                  Douglas N. Dixon
  10.22
              Promissory
                  Note, dated August 25, 2005, by and between DND Technologies, Inc.
                  and M.
                  Lynn Brewer
  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:
  On
        July
        7, 2005, the Company filed a Current Report on Form 8-K announcing its entry
        into a Standby Equity Distribution Agreement with Cornell Capital Partners,
        LP,
        dated as of June 17, 2005.
  
  -28-
 **Table
            of Contents**
  SIGNATURES
 
 In
        accordance with the requirements of the Exchange Act, the registrant caused
        this
        report to be signed on its behalf by the undersigned, thereunto duly
        authorized.
 
 **DND
                TECHNOLOGIES, INC., a Nevada corporation**Date: November
                14, 2005
              By:
              /s/ Douglas
                N. DixonDouglas
                N. Dixon, Chief Executive Officer
 By:
              /s/ G.
                Dennis KeyG.
                Dennis Key, Chief Financial Officer
 
  -29-