**SECURITIES
        AND EXCHANGE COMMISSION**


**WASHINGTON,
        D.C. 20549**







**FORM
      10-KSB**




x
            **Annual
                Report Pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934**




**For
      the fiscal year ended December 31, 2006**




o
            **Transition
                Report Pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934**




**For
      the transition period from _______________ to
      ___________________.**




**Commission
        File No. 000-51752**




**DND
      TECHNOLOGIES, INC.**


(Name
      of
      Small Business Issuer in Its Charter)







**Nevada**
            **84-1405298**(State
                or other jurisdiction of incorporation)
            (IRS
                Employer Identification No.)





**375
                E. Elliot Rd., Bldg. 6**
              **Chandler,
                Arizona**
            **85225**(Address
                of Principal Executive Offices)
            (Zip
                Code)




**Issuer's
      telephone number, including area code: (480) 892-7020**









**Securities
      registered pursuant to Section 12(b) of the Act: None**




**Securities
      registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.01
      per share**




Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act. o





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter
      period that the registrant was required to file such reports), and (2) has
      been subject to such filing requirements for the past 90 days.


x Yes o No




Check
      if
      disclosure of delinquent filers in response to Item 405 of Regulation S-B is
      not
      contained in this form, and no disclosure will be contained, to the best of
      registrant's knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of this Form 10-KSB or any amendment
      to
      this Form 10-KSB. o




Indicate
      by check mark whether the Registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act): o Yes x No




The
      issuer's total revenues for the fiscal year ended December 31, 2006 were
      $7,090,982.




As
      of
      April 11, 2007, there were 26,234,653 outstanding shares of the issuer's common
      stock, par value $0.001 per share ("Common Stock"), which is the only class
      of
      common stock of the issuer. As of April 11, 2007, the aggregate market value
      of
      the shares of Common Stock held by non-affiliates of the issuer, computed based
      on the closing bid price of the Common Stock as quoted on the OTC Bulletin
      Board, was approximately $161,414.




**Documents
      Incorporated by Reference**




None.




Transitional
      Small Business Disclosure Format: o Yes
       x No







**TABLE
      OF CONTENTS**




**Page**PART
                I
            1Item
                1.
            Description
                ofBusiness
            1Item
                2.
            Property
            9Item
                3.
            Legal
                Proceedings
            9Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            10PART
                II
            10Item
                5.
            Market
                for Common Equity and Related Stockholder Matters
            10Item
                6.
            Management's
                Discussion and Analysis of Financial Condition and Results of
                Operations
            11Item
                7.
            Financial
                Statements
            29Item
                8.
            Changes
                In and Disagreements With Accountants on Accounting and Financial
                Disclosure
            29Item
                8A.
            Controls
                and Procedures
            29Item
                8B.
            Other
                Information
            30PART
                III
            30Item
                9.
            Directors
                and Executive Officers; Corporatate Governance; Compliance with Section
                16(a) of the Exchange Act
            30Item
                10.
            Executive
                Compensation
            32Item
                11.
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            35Item
                12.
            Certain
                Relationships and Related Transactions, and Director
                Independence
            36Item
                13.
            Exhibits,
                Financial Statements and Reports on Form 8-K
            36Item
                14.
            Principal
                Accountant Fees And Services
            37**CONSOLIDATED
                FINANCIAL STATEMENTS AND NOTES**
            **F-1**Report
                of Independent Auditors
            F-1










**PART
      I**




**ITEM
                1.**
              **DESCRIPTIONOF
                  BUSINESS**




**Unless
      the context otherwise requires, "DND", "Company", "we", "us" and "our" refer
      to
      DND Technologies, Inc., and its subsidiary, Aspect Systems, Inc.,
      combined.**




**Overview**




DND
      Technologies, Inc., a Nevada corporation ,
      began
      operations under the name “DND Technologies, Inc.” on August 2, 2002, following
      the merger of a wholly owned subsidiary of Zurickirch Corp., a Nevada
      corporation ,
      with
      Aspect Systems, Inc., an Arizona corporation incorporated in 1990 then named
      “Aspect Semiquip International, Inc.”  (“ASI”).
      Following the merger, ASI became a wholly owned subsidiary of DND. Zurickirch
      was incorporated in Nevada on May 9, 1997 as “Weston Caribbean Corp”. On March
      9, 2000, its name was changed to “Zurickirch Acquisitions, Inc.” and on April
      17, 2000, its name was changed to Zurickirch Corp. Prior
      to
      the merger, Zurickirch began initial marketing studies for its planned business,
      which was to sell specialty health and nutritional products. Zurickirch was
      unsuccessful in launching this business, and began seeking possible merger
      candidates by the end of 2001. The purpose of the merger was to allow DND access
      to the public capital markets and to allow Zurickirch to preserve some
      shareholder value following the failure of its proposed business.




DND,
      through ASI, provides capital equipment to the semiconductor industry for use
      in
      the manufacture of microchip technology, and is a manufacturer and supplier
      of
      parts and contract services to the semiconductor industry. In March of 2001,
      ASI
      acquired Semiquip, Inc. Semiquip, based in Texas, was a supplier of
      reconditioned assemblies, and a provider of service programs specific to major
      semiconductor fabrication equipment used in the manufacture of computer chips
      and other semiconductor devices.




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. ASI is the original equipment manufacturer of Advanced
      AutoEtch equipment previously designed and manufactured by Lam Research. Through
      exclusive license agreements negotiated with Axcelis Technologies, ASI has
      also
      become the original equipment manufacturer of plasma etch and strip products
      manufactured on the ASI MX-1 and ASI MX-10, and the Arista and Arista Dual
      platforms. Additionally, ASI offers new
      and
      refurbished support products including a
      wide array
      of
      sub-assemblies, both consumable and non-consumable repair and process related
      parts, and remanufactured temperature control units that
      are
      designed to maintain critical operating temperatures for the plasma systems.
      Engineering and training services are also made available to its international
      customer base. The most significant portion of ASI revenue, however, is derived
      from the marketing and sale of remanufactured Rainbow and TCP plasma etch
      systems and the ASI MX and Arista system products. ASI has a website located
      at www.aspectsys.com .
      Information on this website is not a part of this report.




**Semiconductor
      Industry Background**




Semiconductor
      chips, also known as integrated circuits, are used in personal computers,
      telecommunication equipment, digital consumer electronics, wireless
      communication products and other applications. Types of semiconductor chips
      include memory chips (which store and retrieve information), microprocessors
      (general purpose logic devices programmable to take instructions from software)
      and "system on chip" devices (which have both logic and memory features). Most
      semiconductor chips are built on wafers of silicon that may be as much as twelve
      inches in diameter. Each semiconductor chip is made up of millions of tiny
      transistors or "switches" to control the functions of the device. The
      transistors are created by forming electrically active regions beneath the
      silicon surface to inhibit or prohibit electrical current flow. Later, metal
      interconnections are formed on top of the silicon that connects the transistor
      components together.




1


Semiconductor
      chip manufacturers utilize many different types of process tools in the making
      of integrated circuits. There are over 300 process steps utilizing over 50
      different types of process tools required in the making of a single device
      like
      a microprocessor. Semiconductor chip manufacturers seek efficiency improvements
      through increased throughput, equipment utilization and higher manufacturing
      yields. Capacity is added by increasing the amount of manufacturing equipment
      in
      existing fabrication facilities and by constructing new fabrication facilities.
      During the period from early 1999 through 2000, semiconductor manufacturers
      met
      the increased demand for chips mostly by building new fabrication facilities,
      and by making additional equipment purchases to expand existing fabrication
      facilities. The significant number of new and expanded fabrication facilities
      coupled with the severe downturn in demand for electronic devices from 2001
      through most of 2003, had a severe adverse impact on the semiconductor industry
      and on suppliers to the semiconductor industry. According to Gartner Dataquest,
      a firm that studies business trends in the chip industry, beginning in late
      2003, demand for semiconductor chips began to revive, which led to increases
      in
      capital expenditures during 2004 and 2005, and continuing into 2006. ****




Over
      the
      past twenty years, the semiconductor industry has grown rapidly as a result
      of
      increasing demand for personal computers, the expansion of the Internet and
      the
      telecommunications industry, and the emergence of new applications in consumer
      electronics. More recently, growth has slowed, and there are signs that the
      industry may be beginning to mature. While unit demand for semiconductor devices
      continues to rise, the average selling prices are declining. There is increasing
      pressure on chipmakers to reduce manufacturing costs while increasing the value
      of their products at the same time. The semiconductor industry has also been
      cyclical in nature over its history, with periods of rapid expansion followed
      by
      periods of over-capacity.




Several
      technological trends characterize semiconductor manufacturing. Perhaps the
      most
      prominent of these trends is increasing density. Moore's Law, first postulated
      in the mid-1960s and still accurate 40 years later, states that the density
      of circuitry on an individual semiconductor chip doubles approximately every
      18 months. Today's advanced devices are being manufactured with line widths
      as small as 0.13 micron and with up to eight layers of interconnect circuitry.
      By increasing circuit density, manufacturers can pack more electronic components
      on a chip and thereby provide higher performance and value. The next generation
      of chips will likely see line widths as small as 90 nanometer (0.09 micron)
      and
      below, requiring even more sophisticated interconnect wiring to keep pace.




Another
      trend worth noting is the transition to copper wiring in place of aluminum
      as
      the primary conductive material in semiconductor devices. Copper has a lower
      electrical resistance value than aluminum, and this provides a number of
      performance advantages. Because of the superior properties of copper, a chip
      made with copper may need only half as many metal layers as one made with
      aluminum. This provides a significant reduction in manufacturing cost. In
      addition, copper wiring produces a significant improvement in device performance
      and a significant reduction in power requirements as compared to aluminum.




A
      similar
      transition is underway to low-k dielectric insulators, which are replacing
      traditional silicon oxide films. Low-k dielectrics are better at limiting the
      capacitance that occurs between metal lines in a device. This quality is
      important to the goal of smaller line widths and increasing component density.
      However, low-k materials are also less stable than silicon oxide, and this
      poses
      a host of new challenges to the semiconductor industry in pursuing its goals
      of
      increased circuit density and, at the same time, lower cost of manufacture
      and
      higher performance and value of the manufactured product.




Periodically,
      and historically every seven or eight years, the semiconductor industry adopts
      a
      larger silicon wafer size to achieve lower manufacturing costs. Semiconductor
      manufacturers can produce more chips on a larger wafer, thus reducing the
      overall manufacturing cost per chip. The majority of wafer fabrication
      facilities today are using wafers with a diameter of 200 mm (8 inches). New
      manufacturing equipment is required to handle 300 mm (12 inches) wafers if
      a
      facility wants to make the transition to these larger wafers. We currently
      supply equipment for the 100 mm to 200 mm markets but management intends to
      offer equipment for processing 300 mm wafers when feasible. The customer base
      for semiconductor manufacturing equipment is also changing. Given the magnitude
      of the investment needed to build a new wafer fabrication facility (often
      referred to as a "fab"), which today exceeds $1 billion and can be as high
      as $3
      billion or more for a new 300 mm fab, contract semiconductor manufacturers,
      or
      foundries, have emerged. Foundries provide out-sourced manufacturing of chips
      for chip designers and device manufacturers who may use foundries for all or
      part of their chip manufacturing requirements. Foundries, which are
      predominantly located in Taiwan and Singapore, have become significant
      purchasers of semiconductor manufacturing equipment. New foundries are being
      built in China to compete with Taiwan and Singapore as more chip production
      is
      being outsourced. China is predicted to be one of the fastest growing regions
      for semiconductor manufacturing. According to Gartner Dataquest, the high cost
      of building a new fab has prompted many companies to seek refurbished equipment,
      which we include in our product offerings, rather than always purchasing new
      (and significantly more expensive) equipment.




2




**Chip
      Industry**




Most
      chips are built on a silicon wafer base and include a variety of circuit
      components, such as transistors and other devices, that are connected by
      multiple layers of wiring (interconnects). As the density of the circuit
      components is increased to enable greater computing power in the same or smaller
      area, the complexity of building the chip also increases, necessitating the
      formation of smaller structures and more intricate wiring schemes. To build
      a
      chip, the transistors, capacitors and other circuit components are first created
      on the surface of the wafer by performing a series of processes to deposit
      and
      remove selected film layers. Similar processes are then used to build the layers
      of wiring structures on the wafer. A typical, simplified process sequence for
      building the wiring portion of copper-based chips involves initially depositing
      a dielectric film layer onto the base layer of circuit components using a
      chemical vapor deposition (CVD) system. An etch system is then used to create
      openings and patterns in the dielectric layer. This etch process defines line
      widths and other microscopic features on integrated circuits, with plasma
      etching utilizing ions and neutral species that react with exposed portions
      of
      the wafer surface to remove dielectric, metal or polysilicon material and
      produce the finely delineated features and patterns of an integrated circuit.
      These etch processes are repeated numerous times during the wafer fabrication
      cycle and are required to manufacture every type of semiconductor device
      produced today. We sell and service a variety of plasma products that are used
      to accomplish the goals of these processes.




Residue
      is then removed through a process called "dry strip" or "ashing." We sell and
      service certain machines that perform the dry strip process. To form the metal
      wiring, openings and patterns etched in the dielectric layer are subsequently
      filled with conducting material using physical vapor deposition (PVD) and/or
      electroplating technologies. A chemical mechanical polishing (CMP) step then
      polishes the wafer to maintain a flat surface for future processing. Additional
      deposition, etch and CMP steps are then performed to build up the layers of
      wiring needed to complete the interconnection of the circuit elements to form
      the chip. Advanced chip designs require about 500 steps involving these and
      other processes to complete the manufacturing of the wafer.




**Our
      Operating Subsidiary**




Organized
      in 1990, our operating subsidiary, ASI, manufactures markets and services
      semiconductor wafer fabrication equipment for the worldwide semiconductor
      industry. Customers for ASI's products include semiconductor integrated circuit
      (or chip) factories or foundries, which either use the chips they manufacture
      in
      their own products or sell them to other companies for use in advanced
      electronic components.




3




**Our
      Market Niche and Growth Strategy**




ASI
      provides new and used equipment, parts and engineering services to the
      semiconductor industry. The semiconductor industry itself has historically
      been
      highly cyclical and capital intensive. Many semiconductor manufacturers are
      now
      choosing to meet increased production demands by upgrading, refurbishing or
      reconfiguring their existing equipment, or by purchasing rebuilt and
      reconfigured current generation products rather than buying new state-of-the-art
      equipment, which is substantially more costly, and oftentimes unnecessary to
      the
      attainment of their immediate goals. As the cost of new equipment continues
      to
      rise, management believes this will cause an increase in the demand for our
      refurbished equipment and services.




In
      November 2002, through a licensing agreement with Lam, ASI was granted OEM
      rights to manufacture and support the Lam AutoEtch and Drytek plasma etch
      products, adding additional sales and market share potential to the AutoEtch
      refurbishing and after market support business upon which ASI had been founded.
      On June 25, 2004, the Company signed an amendment to the November 2002 Asset
      Purchase and License Agreement with Lam Research in an attempt to resolve
      certain contract issues between the two parties. This amendment, among other
      things, restructured the terms of the payment for the inventory purchases made
      as a part of the original agreement. On March 6, 2006, ASI received a
      termination notice from Lam. During
      the second quarter of 2006, the Company filed a lawsuit against Lam as a result
      of long-standing contract disputes between Aspect and Lam. **  ** Management
      is convinced that the complaint is justified, and that the Company
      has suffered substantial damages.  The lawsuit has been removed to
      federal court and a trial date set in December 2007 .
      The
      Company’s going concern issue and pending litigation with Lam have impacted our
      sales, as certain of our customers are now reluctant to order systems from
      us,
      believing that there is a risk that any deposit may be lost if we are unable
      to
      continue operations. This circumstance greatly hampers our ability to capitalize
      on the opportunities of a growing market. As of August 1, 2006, the Company
      has
      not been permitted by Lam to order parts from it.




In
      December 2003, through a similar and exclusive licensing agreement with Axcelis
      Technologies, Inc., ASI gained OEM rights to manufacture and support plasma
      etch
      and strip products manufactured on the ASI MX-1 and ASI MX-10 (formerly Matrix
      System One and Ten) platforms. ASI is now accepting orders for both new and
      refurbished ASI MX-1 and ASI MX-10 products manufactured to original
      manufacturer specifications. On August 2, 2004, the Company entered into an
      additional agreement with Axcelis Technologies, Inc., acquiring an exclusive
      license to manufacture, sell and provide services and parts support for the
      Arista and Arista Dual (formerly Matrix Bobcat and Cheetah) platforms.




We
      intend
      to continue the expansion of our market share through aggressive promotion
      of
      our products and services, and by entering into contracts with other OEMs to
      acquire manufacturing rights to their legacy products.




**Our
      Products and Product Licensing Agreements**




Through
      product development, and evolution of no longer protected technology, ASI has
      become the original equipment provider of the Advanced AutoEtch, (formerly
      manufactured by Lam Research). Through licensing agreements negotiated with
      Axcelis, ASI has also become the original equipment manufacturer of 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, which collectively accounted for approximately 50% of our
      revenue in 2006. 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,
      which accounted for approximately 49% of our revenue in 2006. Engineering and
      training services are also made available to its international customer base,
      and accounted for approximately 1% of revenue in 2006. ****




4




An
      Asset
      Sale and License Agreement with Lam dated November 8, 2002 (the “Lam
      Agreement”), granted additional market access, and certain additional rights to
      manufacture and support the AutoEtch and Drytek plasma etch products, adding
      sales and market share potential to the AutoEtch refurbishing and after market
      support business upon which ASI had been founded. In June 2004, we signed an
      amendment to the Lam Agreement, which, among other things, restructured
      inventory payment terms **,** and
      required us to make a monthly payment of $28,220 until January 1, 2007 and
      a
      monthly payment of $9,404 until January 1, 2006 as payment for past purchases
      under the Lam Agreement. To date, we have
      purchased approximately $ 2.2 million
      of parts under the Lam Agreement. Under the terms of the Agreement, we are
      also
      required to pay approximately $5.3 million as a royalty for the licensed
      intellectual property **.** The
      royalty payment is $56,000 per month and the final payment is due March 15,
      2011. To date, we have paid $1.7 million of the royalty fee. On March 6, 2006,
      ASI received a termination notice from Lam. With the termination of the Lam
      Agreement, our rights to use licensed intellectual property also terminated,
      however, management believes that as the term of the patents underlying the
      licensed intellectual property expired several years ago, the Company does
      not
      need a license to use this intellectual property.  During
      the second quarter of 2006, the Company filed a lawsuit against Lam as a result
      of the long-standing contract disputes between Aspect and Lam. **  ** Management
      is convinced that the complaint is justified, and that the Company
      has suffered substantial damages.  The lawsuit was removed to federal
      court and a trial date set in December 2007. The
      Company’s going concern issue and pending litigation with Lam have impacted our
      sales, as certain of our customers are now reluctant to order systems from
      us,
      believing that there is a risk that any deposit may be lost if we are unable
      to
      continue operations. This circumstance greatly hampers our ability to capitalize
      on the opportunities of a growing market. As of August 1, 2006, the Company
      has
      not been permitted to order parts from Lam.




We
      entered the dry strip product market through our License Agreement with Axcelis (the
      "Axcelis Agreement") **** in
      November 2003. This Agreement granted us an exclusive license to certain patents
      and trade secrets of Axcelis to
      manufacture, use, sell, maintain and service ASI MX-1 and ASI MX-10 dry strip
      semiconductor manufacturing equipment. The agreement provide **s** for a
      one-time license payment of $150,000 plus a quarterly payment equal to 18%
      of
      net revenues from the sale of these products by the Company until $2,750,000
      (the license fee) has been paid and then payment of a declining royalty (from
      10% down to 2%) on related sales over a calendar
      schedule that
      ends December 31, 2010. Our total liability on this agreement as of December
      31,
      2006 is approximately $2.4 million.




On
      August
      2, 2004, the Company entered into an additional agreement with Axcelis,
      acquiring an exclusive license to certain
      patents and trade secrets of Axcelis that we use to **** manufacture,
      sell and provide services and parts support for certain reactive ion etch
      semiconductor manufacturing equipment for wafer sizes up to 200mm formerly
      marketed by Matrix Integrated Systems, Inc. under
      the
      trade names of “Bobcat” and “Cheetah”. The agreement provides for a quarterly
      payment equal to 18% of net revenues from the sale of this product by the
      Company, beginning with the fourth quarter of 2004 and ending December 31,
      2011,
      or until $750,000 (the license fee) has been paid, whichever occurs first,
      and
      payment of a declining royalty (from 10% down to 2%) on related sales over
      a calendar
      schedule that
      ends December 31, 2011. **** Our
      total
      liability on this agreement as of December 31, 2006 is approximately
      $179,000. The
      Axcelis Agreements have allowed us to provide additional products to sell,
      access to a broader area of the market, and were also a significant factor
      in
      our revenue performance in 2006. Sales under the Lam Agreement generated only
      nominal revenue in 2006. These agreements have significantly impacted our
      liquidity through the required payments, although, in the case of the Axcelis
      Agreements, required payments are a percentage of sales of licensed products
      and
      thus do not impact our liquidity to the extent of the Lam payments.




5




As
      part
      of the chip creation process, a light sensitive, polymer-based liquid, called
      photoresist, is spread in a uniformly thin film on the wafer in a pattern
      creating a “stencil” effect. Photostabilization uses ultraviolet light to
      harden, or cure, the photoresist so that it is more effective in maintaining
      the
      desired pattern during the subsequent implant processes and etch steps (in
      which
      the top layer of the surface of the wafer not covered by photoresist is
      removed). After these steps, the photoresist is no longer necessary and must
      be
      removed. The primary means of removing photoresist and residue is a process
      called dry strip or ashing. Our dry strip machines, also called ashers, use
      microwave and rf energy to turn process gases into plasma, which then acts
      to
      clean the surface of the wafer by removing the photoresist and unwanted residue.
      Our dry
      strip
      products ,
      licensed from Axcelis, provide
      a cost effective alternative to purchasing the latest generation equipment
      to
      perform this step in the chip creation process.




In
      2002,
      ASI began manufacturing a proprietary product known as the "Nitrogen Clean
      System" ("NCS"), which provides superior cleaning of wafer fabrication equipment
      as compared to existing high efficiency particulate arresting ("HEPA")
      filtration devices. One of our customers, Texas Instruments, field-tested our
      NCS against competing models and elected to purchase our NCS. The superior
      cleaning ability of the NCS reduces contamination of wafers and increases the
      yield obtained from each wafer. This equipment provides in situ continuous
      cleaning of the reaction chamber that reduces particulates thereby greatly
      extending the uptime between required equipment cleaning cycles. The NCS is
      adaptable to work with etch or chemical vapor deposition equipment producing
      any
      wafer size. We sold and installed our first NCS in 2002, and, as of March 29,
      2007, we had approximately 16 installed units, Eleven of these were installed
      at
      Texas Instruments, two at Micron/Japan and 3 at ST Microelectronics. We
      completed a lengthy qualification trial of our NCS in 2005 with an overseas
      customer and received a purchase order for 4 more units. However, we did
      not receive any new purchase orders for NCS systems in 2006. We
      believe that the NCS provides further diversification of our business, providing
      a proprietary product to the semiconductor market.




**Research
      and Development Activities**




Our
      R&D expenditures were $211,532 during the 2006 fiscal year, and $166,923
      during the 2005 fiscal year. These expenditures were targeted at continued
      development of our NCS application, and enhancements to our existing products.
      R&D expenditures increased in 2006 due to payroll and benefits and an
      increase in product development costs.




The
      market for semiconductor capital equipment is characterized by rapid
      technological change and product innovation. Historically, we have advanced
      our
      technical capability through constant evolutionary improvement of our products,
      and through the benefits gained from relationships with companies like Lam
      and
      Axcelis. The combination of these factors allow us to obtain the benefits of
      newer technologies without having to invest substantial portions of our revenue
      into R&D activities.




**Patents
      and Trademarks**




We
      intend
      to evaluate any technology we develop on a case-by-case basis and pursue legal
      protection for our technology through patent and trade secret protection where
      we believe the benefits of such protection outweigh the associated costs.
      Equipment produced through our outsourcing contracts with companies such as
      Lam
      and Axcelis is covered by whatever OEM patent protection is afforded us via
      license agreements. Our registered United States patents, which are owned by
      our
      subsidiary, Aspect Systems, Inc., jointly with Air Products and Chemicals,
      Inc.,
      are: "Partial clean fluorine thermal cleaning process," Pat. No. 5,868,852
      granted on February 9, 1999 with a term ending in February of 2017, and
      "Diluted nitrogen trifluoride thermal cleaning process", Pat. No. 5,714,011
      granted on February 3, 1998 with a term ending in February of 2015. Our
      management believes that certain aspects of our proprietary technologies are
      no
      longer fully protected by our patents. Our subsidiary, ASI, owns the following
      registered trademark: "ASI Aspect Systems, Inc." We believe that this trademark
      is known and recognized within our market and is valuable to our business.
      We
      intend to vigorously enforce all violations of our trademark as we believe
      the
      goodwill associated with it is important to the development of our business.




6




**Manufacturing**




Our
      manufacturing operation is capable of, and routinely builds, new systems, or
      rebuilds/reconfigures complete plasma systems, for the markets that we serve.
      Most of the assembly and testing of our products is conducted in cleanroom
      environments. Prior to shipping a completed system, customer representatives
      may
      perform acceptance tests at our facility. After passing these acceptance tests,
      the system is vacuum-bagged in a cleanroom environment and prepared for
      shipment.




Certain
      of the components and subassemblies included in our products are obtained from
      a
      single supplier or a limited group of suppliers. We believe that alternative
      sources could be obtained and qualified to supply these products. Nevertheless,
      a prolonged inability to obtain certain components could have an adverse
      short-term effect on our operating results and could unfavorably impact our
      customer relationships.




**Distribution
      Methods**




We
      sell
      new and refurbished equipment and aftermarket support, which includes spare
      parts sales and technical contract services. In fiscal year 2006, spare parts
      and technical services accounted for approximately 46% of our total sales.
      Our
      revenues in 2006 were derived from sales in both the US and overseas, with
      overseas sales accounting for approximately 33% of total revenues. In the U.S.,
      we market and sell our products and services directly over the phone, by mail
      and fax, through in-person sales calls to potential customers, and at trade
      shows. The number of potential customers is limited, as we only sell to
      manufacturers of computer chips, and thus we have the resources to handle
      marketing internally. Our overseas marketing is conducted through marketing
      representatives in Europe and Asia that stock spare parts, employ technicians,
      and call on computer chip manufacturers in their area.




Sales
      of
      equipment are handled similarly, but are supplemented by independent sales
      representatives in the U.S. who visit potential customers to market out
      products, along with other manufacturers' non-competing product
      lines.




**Marketing,
      Sales and Service**




Our
      marketing and sales efforts are focused on building long-term relationships
      with
      our customers. These efforts are supported by a team of product marketing
      professionals, direct sales personnel as well as equipment and process engineers
      that work closely with individual customers to develop solutions to their
      processing needs. After-sales support is an essential element of our marketing
      and sales programs. We maintain ongoing support relationships with our customers
      and have a network of field service personnel in place throughout the United
      States. We believe that comprehensive support programs and close working
      relationships with customers are essential to maintaining our competitiveness
      in
      the marketplace.




**Suppliers
      and Customers**




Our
      major
      supplier in 2005 was Lam, which accounted for approximately 21% of our inventory
      purchases in 2005. In 2006 this amount decreased to 5%. We have no single
      significant suppliers, and are able to change nearly all of our
      suppliers, or acquire nearly all of the needed supplies and parts that are
      intricate to our business from many sources. Our customers include many of
      the
      world's leading semiconductor manufacturers including Intel, Texas Instruments,
      ST Micro, Motorola, National Semiconductor, and On-Semi. In 2006, the Company
      had one customer, RF Micro Devices, accounting for more than 10% of total
      revenue. In 2005, revenue from Taiwan Semiconductor Manufacturing Company and
      QualCom accounted for 14.7% and 13.5%, respectively, of total revenue. Although
      we do not have formal contracts with our customers, all our parts and systems
      sales are covered by customer purchase orders. A material reduction in orders
      from several of our larger customers, due to market or business conditions
      in
      the semiconductor industry, could adversely affect our results of operations
      and
      projected financial condition. Our business depends upon the capital
      expenditures of semiconductor manufacturers, which in turn depend on the current
      and anticipated market demand for integrated circuits and products utilizing
      integrated circuits. During 2001 and 2002, the semiconductor industry
      experienced a marked decline in demand, but the industry began to increase
      capital expenditures in 2003 and 2004, a trend that has continued through 2006
      as the economy began to improve, although capital expenditures remained lower
      than levels in the 1990s.




7




**Acquisition
      Strategy**




An
      important element of our management strategy is to review acquisition prospects
      that would complement our existing products, augment our market coverage and
      distribution ability, or enhance our technological capabilities. As a result,
      we
      may make acquisitions of complementary companies, products or technologies,
      or
      we may reduce or dispose of certain product lines or technologies that no longer
      fit our long-term strategies.




**Competition**




The
      global semiconductor equipment industry is highly competitive and is
      characterized by increasingly rapid technological advancements and demanding
      worldwide service requirements. The Company’s ability to compete depends on its
      ability to commercialize its technology and continually improve its products,
      processes and services, as well as its ability to market new products that
      meet
      constantly evolving customer requirements. Significant competitive factors
      for
      succeeding in the semiconductor manufacturing equipment market include the
      equipment's technical capability, productivity and cost-effectiveness, overall
      reliability, ease of use and maintenance, contamination and defect control,
      and
      the level of technical service and support provided by the vendor. The
      importance of each of these factors varies depending on the specific customer's
      needs and criteria, including considerations such as the customer's process
      application, product requirements, timing of the purchase and particular
      circumstances of the purchasing decision. The pace of technological change
      is
      rapid, with customers continually moving to smaller critical dimensions, larger
      wafer sizes, and adopting new materials for use in semiconductor manufacturing.
      When funds are restricted, many customers will choose to repair existing
      equipment or to acquire refurbished tool sets, rather than purchasing the latest
      generation equipment. Sometimes, existing technology can be adapted to the
      new
      requirements; however, these requirements sometimes create the need for an
      entirely new technical approach. The rapid pace of technological change
      continually creates opportunities for existing competitors and start-ups, and
      can quickly diminish the value of existing technologies.




Competition
      exists for each of the Company’s products, and competitors range from small
      companies that compete with a single product to companies with a large and
      diverse line of semiconductor processing products. Competitors in a given
      technology tend to have different degrees of market presence in the various
      regional markets. Management believes that the Company is a strong competitor
      and that its competitive position is based on the ability of its products and
      services to continue to address customer requirements on a cost effective basis
      and provide services in a timely manner.




8




**Government
      and Environmental Regulations**




Other
      than minimal environmental regulation, we are not subject to governmental
      regulation of our business. We are currently not aware of any pending notices
      of
      violation, fines, lawsuits or investigations arising from environmental matters
      that would have any material effect on our business. As we do no manufacturing,
      only assembly, of our products, we are subject to a minimal number of
      governmental regulations related to the management of hazardous materials,
      including disposal of certain fluids and gases as part of the assembly process.
      We believe that we are in compliance with these regulations and that we have
      obtained all necessary environmental permits to conduct our business. We
      currently have arrangements with local and state authorities that permit us
      to
      dispose of these fluids and gases at minimal cost. Nevertheless, the failure
      to
      comply with present or future regulations could result in fines being imposed
      on
      us, suspension of production, and cessation of our operations or reduction
      in
      our customers' acceptance of our products. These regulations could require
      us to
      alter our current operations, to acquire significant equipment or to incur
      substantial other expenses to comply with environmental regulations. Our failure
      to control the use, sale, transport or disposal of hazardous substances could
      subject us to future liabilities.




**Employees**




DND
      currently has two employees, our CEO and CFO. ASI had a significant lay-off
      in
      September 2006 and coupled with resignations lost 36 employees or over half
      of its workforce during 2006. ASI had approximately 24 full-time employees
      as of December 31, 2006.




**ITEM
                2.**
              **DESCRIPTIONOF
                  PROPERTY**


DND,
      through its subsidiary ASI, currently leases its principal Arizona facility,
      located at 375 East Elliot Road, Chandler, Arizona 85225. This facility consists
      of 23,264 square feet of office and warehouse space on a lease from Teachers
      Insurance and Annuity Corporation, a New York corporation that runs through
      November 30, 2007. ASI also leases a smaller facility in Richardson, Texas
      located at 650 International Parkway, Suite 180. The facility consists of 19,855
      square feet on a lease from TMT Richardson Business Center, Inc., a Delaware
      corporation, that runs through November 30, 2008. Rental payments for both
      facilities for the year ended December 31, 2006 were approximately
      $405,000. **** The
      Company is not affiliated with any of its lessors. The Company's management
      believes that all facilities occupied by the Company are adequate for present
      requirements, and that the Company's current equipment is in good condition
      and
      is suitable for the operations involved.




**ITEM
                3.**
              **LEGAL
                  PROCEEDINGS**




On
      March
      6, 2006, ASI received a termination notice from Lam for ASI's agreements with
      Lam described above. During the second quarter of 2006, the Company filed a
      lawsuit against Lam in Arizona Superior Court, Maricopa County, as a result
      of
      long-standing contract disputes between Aspect and Lam. In the complaint, the
      Company has alleged breach of the agreements by providing parts that were
      inactive, obsolete, non-moving for years, excessive and otherwise worthless
      and
      various misrepresentations by Lam as to the parts to be provided, among other
      claims. Management is convinced that the complaint is justified, and that the
      Company has suffered substantial damages. Shortly after the filing of the
      complaint, the lawsuit was removed to the U.S. District Court for the District
      of Arizona. Discovery has begun in the case and a trial date of December 14,
      2007 has been set. Management believes that Lam is in breach of this agreement,
      and as a result is seeking to write off the remaining amounts owed to Lam.
      If
      the Company is able to write off all or a significant portion of the
      approximately $3.6 million due under the agreement, management believes our
      liquidity would improve. However, there is no assurance that we will be
      successful in the litigation, or that we will be ultimately able to write off
      all or part of the associated debt.




9




On
      April
      6, 2007, a complaint was filed against Aspect Systems, Inc. in the approximate
      amount of $31,000 (plus interest and attorney’s fees) by an ASI sales
      representative for commissions related to sales made between November 1, 2003
      through 2006 in the amount of approximately $628,000. Payment of these
      commissions is expected to be made over the next few months and ASI intends
      to
      terminate its contract with this sales representative shortly.




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


None.




**PART** **II**




**ITEM
                5.**
              **MARKET
                  FOR COMMON
                  EQUITY
                  AND**RELATED**
                  STOCKHOLDER
                  MATTERS**


DND
      had
      26,234,653 shares of common stock outstanding as of April 11, 2007.




On
      the
      date of this report, our common stock was traded on the National Association
      of
      Securities Dealers Automated Quotation System Over the Counter Bulletin Board
      ("OTCBB") under the symbol "DNDT.OB."  There is limited trading activity in
      our securities, and there can be no assurance a regular trading market for
      our
      common stock will be sustained. We began trading on the OTCBB on
      December 15, 2001. There was no trading activity in our stock from
      December 15, 2001 until May of 2002. The following table sets forth, for
      the periods indicated, the bid price range of our common stock.




Period
            
            Low
            
            HighFourth
                Quarter 2006
            
            $
            0.01
            
            $
            0.02Third
                Quarter 2006
            
            $
            0.01
            
            $
            0.03Second
                Quarter 2006
            
            $
            0.02
            
            $
            0.035First
                Quarter 2006
            
            $
            0.036
            
            $
            0.05Fourth
                Quarter 2005
            
            $
            0.04
            
            $
            0.14Third
                Quarter 2005
            
            $
            0.12
            
            $
            0.21Second
                Quarter 2005
            
            $
            0.21
            
            $
            0.40First
                Quarter 2005
            
            $
            0.15
            
            $
            0.32




Such
      market quotations reflect the high and low bid prices as reported by the OTCBB.
      The quotations reflect inter-dealer prices, without retail mark-up, markdown
      or
      commissions and may not necessarily represent actual transactions. There is
      an
      absence of an established trading marking for the Company's common stock, as
      the
      market is limited, sporadic and highly volatile, which may affect the prices
      listed above.




**Number
      of Shareholders**




The
      number of beneficial shareholders of record of the Common Stock of the Company
      as of the close of business on April 11, 2007 was approximately 43.




**Dividend
      Policy**




To
      date,
      the Company has paid no cash dividends on its Common Stock, and does not expect
      to pay cash dividends in the near term. The Company intends to retain future
      earnings to provide funds for operation and growth of its business.




10




**Disclosure
      of Equity Compensation Plans**




The
      Company maintains the 2003 Stock Option Plan (the "Option Plan") and the 2005
      Stock Option Plan (the “2005 Plan”), pursuant to which it may grant equity
      awards to eligible persons. The Option Plan and 2005 Plan allow the Board of
      Directors to grant options to purchase up to 5,000,000 and 3,000,000 shares
      of
      common stock, respectively, to employees, officers, directors, consultants
      and
      advisors of the Company. As of December 31, 2006, options to purchase 4,515,883
      shares had been granted under the Option Plan, none of these granted options
      were exercised during 2006, and 1,161,369 **** of
      these
      granted options were cancelled and expired during 2006. As of December 31,
      2006,
      no options had been granted under the 2005 Plan.




**Plan
                Category**
            
            Number
                of securities to be issued upon exercise of outstanding options,
                warrants
                and rights (#)
            
            Weighted-average
                exercise price of outstanding options, warrants and rights
                ($)
            
            Number
                of securities remaining available for future issuance under equity
                compensation plansEquity
                compensation plans approved by shareholders
            
            
            4,325,883
            
            $
            0.07
            
            
            3,484,117Equity
                compensation plans not approved by shareholders
            
            
            N/A
            
            
            N/A
            
            
            N/ATotal
            
            
            4,325,883
            
            $
            0.07
            
            
            3,484,117




**Recent
      Sales of Unregistered Securities**




None.




**ITEM
                  6.**
            **MANAGEMENT'S
                  DISCUSSION
                  AND ANALYSIS
                  OF FINANCIAL
                  CONDITIONAND
                  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. ASI is the original equipment manufacturer of Advanced
      AutoEtch equipment previously designed and manufactured by Lam Research. Through
      exclusive license agreements negotiated with Axcelis Technologies, ASI has
      also
      become the original equipment manufacturer of 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.
      Additionally, ASI 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 normally
      derived from the marketing and sale of remanufactured Rainbow and TCP plasma
      etch systems and the ASI MX and Arista system products. ASI has a website
      located at www.aspectsys.com .
      Information on this website is not a part of this report.




Even
      though our cash flow problems caused by significant indebtedness have hampered
      our ability to meet sales demands, we have observed a significant increase
      in
      market demand for our subsidiary's products during the past two years. The
      global expansion of chip production companies into emerging parts of the world
      with lower labor costs, particularly China, has caused all semiconductor
      companies to examine more closely how to reduce costs, including through the
      extended use of tool sets. This shift toward ways to reduce costs has lent
      itself to, and our management believes it will continue to lend itself to,
      increasing demand for the products of companies such as ASI. In 2004 we achieved
      record revenues, and management believes we could have matched, or exceeded,
      these revenues in 2005 and into 2006 if our cash flow difficulties had not
      limited our ability to produce our products. Nevertheless we expect demand
      for
      our products to grow unless a significant and prolonged downturn occurs in
      the
      semiconductor industry in the future. Our backlog of orders as of December
      31,
      2006 was approximately $1.3 million.




11




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




Management's
      discussion and analysis of financial condition and results of operations are
      based upon the Company's financial statements. These statements have been
      prepared in accordance with accounting principles generally accepted in the
      United States. These principles require management to make certain estimates,
      judgments and assumptions that affect the reported amounts of assets,
      liabilities, revenues and expenses, and related disclosure of contingent assets
      and liabilities. On an on going basis, we evaluate our estimates based on
      historical experience and various other assumptions that are believed to be
      reasonable under the circumstances, the results of which form the basis for
      making judgments about the carrying values of assets and liabilities that are
      not readily apparent from other sources. Actual results may differ from these
      estimates under different assumptions or conditions.




**Critical
      Accounting Policies and Estimates**




In
      consultation with our Board of Directors, we have identified five accounting
      principles that we believe are key to an understanding of our financial
      statements. These important accounting policies require management's most
      difficult, subjective judgments.




**1.**  **Going
      Concern**




These
      consolidated financial statements are presented on the basis that the Company
      is
      a going concern. Going concern contemplates the realization of assets and the
      satisfaction of liabilities in the normal course of business over a reasonable
      length of time. The Company has incurred a loss of approximately $1,893,000
      through December 31, 2006 with sales down approximately 48% from the prior
      period, has negative working capital of approximately $8,600,000, and is in
      default on its payments on the majority of its term debt. In addition, during
      the year ended December 31, 2006, the Company received a notice of termination
      of its license agreement with Lam. Earlier, Lam entered the refurbishing market
      directly, which has had some impact on the Company’s revenue. Our most
      significant cause of revenue reduction during this year, however, has resulted
      from the action which was taken by the Company against Lam. During
      the second quarter of 2006, the Company filed a lawsuit against Lam as a result
      of long-standing contract disputes between Aspect and Lam . **  ** Management
      is convinced that the complaint
      is justified, and that the
      Company has suffered substantial damages.  The lawsuit
      was removed to federal court and a trial date set in December 2007. The
      Company's going concern issue and pending litigation with Lam have impacted
      our
      sales, as certain of our customers are now reluctant to order systems from
      us,
      believing that there is a risk that any deposit may be lost if we are unable
      to
      continue operations. This circumstance greatly hampers our ability to capitalize
      on the opportunities of a growing market. These factors raise substantial doubt
      as to the Company’s ability to continue as a going concern.




12




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




**2.**  **Inventory**




Inventory
      is valued at the lower of cost or market. Cost includes raw materials, freight,
      labor and manufacturing overhead. Inventory with no sales or usage within the
      prior 12 months and inventory on hand, in excess of a 12-month supply, is
      considered excessive and slow-moving and, accordingly, fully reserved. We review
      our inventory reserves on a quarterly basis and adjust them for the full
      carrying value of obsolete, excessive and slow-moving inventory.




**3.**  **License
      Agreements**




The
      Company has license agreements, which are being amortized using the
      straight-line method over the life of the contracts with 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.




**5.**  **Impairment
      of Long-Lived Assets**




The
      Company continually reviews the recoverability of the carrying value of
      long-lived assets using the methodology prescribed in Statement of Financial
      Accounting Standards (SFAS) 144, "Accounting for the Impairment and Disposal
      of
      Long-Lived Assets." The Company also reviews long-lived assets and the related
      intangible assets for impairment whenever events or changes in circumstances
      indicate that the carrying value of such assets may not be recoverable. Upon
      such an occurrence, recoverability of these assets is determined by comparing
      the forecasted undiscounted net cash flows to which the assets relate, to the
      carrying amount. If the asset is determined to be unable to recover its carrying
      value, then intangible assets, if any, are written down first, followed by
      the
      other long-lived assets to fair value. Fair value is determined based on
      discounted cash flows, appraised values or management's estimates, depending
      on
      the nature of the assets. No impairment was recognized in the year ended
      December 31, 2006.




13




*The
      Year Ended December 31, 2006 Compared To The Year Ended December 31,
      2005.*




**Selected
      Financial Information**




**Year
                Ended****12/31/2006**
            
            **12/31/2005**
            
            **Increase**
              **(Decrease)**Statements
                of OperationsTotal
                Revenue
            
            $
            7,090,982
            
            $
            13,753,725
            
            $
            (6,662,743
            )Cost
                of Revenue:Costs
                of revenues
            
            
            5,313,598
            
            
            10,112,924
            
            
            (4,799,326
            )Reserve
                for slow moving andobsolete
                inventory
            
            
            198,539
            
            
            258,850
            
            
            (60,311
            )Research
                and development
            
            
            211,532
            
            
            166,923
            
            
            44,609Sales
                and marketing, includinglicensing
                fees, royalties andcommissions
            
            
            1,539,905
            
            
            2,514,769
            
            
            (974,864
            )General
                and administrative
            
            
            1,333,280
            
            
            1,814,614
            
            
            (481,334
            )Impairment
                of license agreement
            
            
            0
            
            
            2,705,013
            
            
            (2,705,013
            )Loan
                fee expense
            
            
            0
            
            
            295,094
            
            
            (295,094
            )Total
                Operating Expenses
            
            
            8,596,854
            
            
            17,868,187
            
            
            (9,271,333
            )Income
                (Loss) from Operations
            
            
            (1,505,872
            )
            
            (4,114,462
            )
            
            2,608,590Other
                Income (Expense):Gain
                on sale of assets
            
            
            29,046
            
            
            0
            
            
            29,046Gain
                on settlement of debt
            
            
            0
            
            
            17,500
            
            
            (17,500
            )Interest
                Expense
            
            
            (415,224
            )
            
            (462,600
            )
            
            47,376Income
                (Loss) Before Income Tax Expense
            
            
            (1,892,050
            )
            
            (4,559,562
            )
            
            2,667,512Income
                Tax Expense
            
            
            800
            
            
            800
            
            
            0Net
                Income (Loss)
            
            $
            (1,892,850
            )
            $
            (4,560,362
            )
            $
            2,667,512Net
                Income (Loss) Per ShareBasic
                and diluted
            
            
            (0.07
            )
            
            (0.18
            )
            
            0.11




14




**Results
      of Operations**




Our
      revenue decrease of $6,662,743, or 48%, to $7,090,982 in the year ended December
      31, 2006 from $13,753,725 in the year ended December 31, 2005, was primarily
      due
      to a decrease in systems/chiller sales of $5,325,829 and a decrease in the
      parts, assemblies, and consumables category of $1,304,410. System sales are
      down
      due to 2006 having nine less system sales than 2005 and a change in the product
      mix which resulted in a lower per unit sales price during 2006. The reduction
      in
      the number of systems sold was due to a combination of our inability to take
      new
      orders due to cash flow problems and delays in filling orders. The decrease
      in
      parts, assemblies, and consumables sales is primarily due to our tight cash
      flow
      situation and the increased funding needs for system sales. For example, we
      have
      had to defer some parts, assemblies, and consumables purchases, and therefore
      the related sales, to future periods. Our sales break down by segment is as
      follows:




**December
                31, 2006**
            
            **December
                31, 2005**
            
            **Increase**
              **(Decrease)**Systems
                and chillers
            
            $
            3,847,317
            
            $
            9,173,146
            
            $
            (5,325,829
            )Parts,
                assemblies and consumables
            
            
            3,074,036
            
            
            4,378,446
            
            
            (1,304,410
            )Field
                service and training
            
            
            169,629
            
            
            202,133
            
            
            (32,504
            )$
            7,090,982
            
            $
            13,753,725
            
            $
            (6,662,743
            )




**Cost
      of Revenues**




Our
      cost
      of revenues decreased $4,799,326 or 47% to $5,313,598 in the year ended December
      31, 2006 from $10,112,924 in the year ended December 31, 2005. This decrease
      is
      directly related to the 48% decrease in total revenue for the year ended
      December 31, 2006. Our cost of revenues as a percentage of revenues for the
      year
      ended December 31, 2006, and December 31, 2005, was 74% in both years.




**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 year ended December 31, 2006, we recorded a $198,539 increase to the
      reserve due to an analysis of inventory items. In the year ended December 31,
      2005, we recorded a $258,850 increase in our reserve.




**Research
      and Development**




Research
      and development costs increased $44,609 or 27%, to $211,532 in the year ended
      December 31, 2006 from $166,923 in the year ended December 31, 2005. The
      increase is primarily related to increases in payroll and employee benefits
      in
      the amount of $39,791 and an increase of $28,975 related to product development.
      These increases were offset by a $20,110 decrease in product development expense
      on the NCS (Nitrogen Clean System) product line. We
      normally do not incur significant research and development expenses.




**Sales
      and Marketing**




Sales
      and
      marketing costs decreased $974,864 to $1,539,905 in the year ended December
      31,
      2006 from $2,514,769 in the year ended December 31, 2005. This decrease is
      due
      to: a) the decrease in our commission expenses of $254,702 or 58% to $181,530
      during the year ended December 31, 2006 from $436,233 during the year ended
      December 31, 2005 which is a direct result of our reduced sales as mentioned
      above, b) a decrease in payroll and employee benefits in the amount of $143,185
      or 29% to $351,169 during the year ended December 31, 2006 from $494,354 during
      the year ended December 31, 2005 as headcount decreased, and c) a decrease
      of
      $523,551 in the Lam royalty expense during the year ended December 31, 2006
      from
      $523,551 at the end of year 2005 to -0- in the year ended December 31, 2006
      which was due to the impairment and write-off of this asset at the end of
      2005.




15




**General
      and Administrative**




**Year
                Ended****12/31/2006**
            
            **12/31/2005**
            
            **Increase**
              **(Decrease)**General
                and AdministrativeSalaries
                and wages
            
            $
            619,744
            
            $
            1,093,716
            
            $
            (473,972
            )Professional
                fees
            
            
            283,736
            
            
            198,467
            
            
            85,269Occupancy
                Expense, less amount allocated to Cost of Revenue
            
            
            186,128
            
            
            193,978
            
            
            (7,850
            )Depreciation,
                less amount allocated to Cost of Revenue
            
            
            8,975
            
            
            114,761
            
            
            (105,786
            )Other
                general and administrative expenses
            
            
            234,697
            
            
            213,692
            
            
            21,005Total
                General and Administrative
            
            $
            1,333,280
            
            $
            1,814,614
            
            $
            (481,334
            )




Salaries
      and wages decreased $473,972 or 43% to $619,744 in the year ended December
      31,
      2006 as compared to $1,093,716 in the year ended December 31, 2005. This
      decrease is primarily the result of a decrease in general and administrative
      headcount and management’s decision to not immediately replace the employees.




Professional
      fees increased $85,269 or 43%, to $283,736 in the year ended December 31, 2006
      from $198,467 in the year ended December 31, 2005, primarily due to increased
      litigation costs associated with the Lam lawsuit ($63,000) and a $20,000
      increase in other consulting fees.




Depreciation
      expense decreased in the year ending December 31, 2006 primarily due to certain
      assets becoming fully depreciated and/or retired.




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 increased $21,005 or 10%, to $234,697 in
      the
      year ended December 31, 2006 from $213,692 in the year ended December 31, 2005.
      The increased expenses are primarily attributable to increased expenses related
      to franchise tax penalty expense ($26,412) and finance charges ($17,081). These
      increases were partially offset by the reduced expenses related to travel and
      entertainment ($22,819).




**Impairment
      of License Agreement**




**** In
      December 2005, we determined our license agreement with Lam Research Corporation
      (“Lam”) to be fully impaired and recognized a $2,705,013 impairment charge. This
      impairment is due to our strained relations as a
      result of the long-standing contract disputes between Aspect and
      Lam.  On
      March
      6, 2006, ASI received a contract termination notice from Lam, and during
      the second quarter of 2006, the Company filed a lawsuit against
      Lam.




16




**Loan
      Fees Expense**




**** We
      incurred $295,094 during 2005 in fees associated with obtaining debt. This
      included 1,190,478 shares of our common stock valued at $250,000 issued in
      the
      second quarter of 2005 in connection with a Standby Equity Distribution
      Agreement (SEDA) with Cornell Capital Partners, LP. The amount was initially
      capitalized in our financial statements, but during the fourth quarter of 2005,
      it became apparent that the SEDA agreement was not going to be finalized and,
      accordingly, we expensed the fee.




**Gain
      on Disposal of Assets**




During
      the year ended December 31, 2006, we sold assets from our Texas location that
      were no longer necessary to our day to day operations. These assets were fully
      depreciated, therefore the cash received during the sale of $29,046 represents
      a
      gain on sale.




**Gain
      on Settlement of Debt**




In
      February 2005, we issued 100,000 shares of common stock for payment of
      approximately $15,000 of legal services received during the year ended December
      31, 2004. During June 2004, the Board of Directors negotiated with a law firm
      to
      obtain their acceptance of 100,000 shares as payment in full for this debt.
      On
      July 6, 2004, the Board of Directors formalized the resolution to issue these
      shares which at that time had an aggregate fair value of $20,500; as such we
      recorded the shares at the full market value and a $5,500 loss on settlement
      of
      debt. This loss was offset by a $23,000 gain resulting from the forgiveness
      of
      accrued interest expense after we made the final $100,000 payment on an
      unsecured note payable.




**Interest
      Expense**




Interest
      expense for the year ended December 31, 2006 ($415,224) has decreased over
      the
      comparable period of 2005 ($462,600) by $47,376 due primarily to the repayment
      of certain loans.




**Net
      Income (Loss)**




As
      a
      result of the foregoing, we had a net loss of $1,892,850 for the year ended
      December 31, 2006, compared to a net loss of $4,560,362 for the year ended
      December 31, 2005.




**Capital
      Resources**




**Year
                Ended**Working
                Capital
            
            **12/31/2006**
            
            **12/31/2005**
            
            **Favorable
                (Unfavorable)**Current
                Assets
            
            $
            818,938
            
            $
            3,736,104
            
            $
            (2,917,166
            )Current
                Liabilities
            
            
            (9,447,326
            )
            
            (10,555,434
            )
            
            1,108,108Deficit
                Working Capital
            
            $
            (8,628,388
            )
            $
            (6,819,330
            )
            $
            (1,809,058
            )Long-term
                Debt
            
            $
            (11,211
            )
            $
            (26,544
            )
            $
            15,333Stockholders'
                (Deficit)
            
            $
            (8,430,701
            )
            $
            (6,557,471
            )
            $
            (1,873,230
            )




17




During
      the year ended December 31, 2006 and 2005, we were in default of our payment
      terms on the majority of our term debt. As a result, the approximately $2.5
      million of term debt due beyond twelve months was classified as a current
      liability in the consolidated balance sheet.




Included
      in current liabilities is a total of $2,598,523 that is owed to Axcelis for
      license and royalty fees.  Also included in current liabilities is a total
      of $3,555,317 in inventory payments and license and royalty fees owed to Lam.
      Of
      this amount, approximately $1,282,000 was past due as of December 31, 2006,
      and
      the remainder is future payments which are classified as current due to these
      past due payments. Although
      our current tight cash flow has prevented these payments from being made, we
      have assured Axcelis that our delinquent payments will be made as soon as
      possible and management has no reason to believe as of the date of this filing
      that Axcelis will terminate any of its agreements with the Company. However,
      on
      March 6, 2006, ASI received a termination notice from Lam. During
      the second quarter of 2006, the Company filed a lawsuit against Lam as a result
      of long-standing contract disputes between Aspect and Lam . **  ** Management
      is confident that the complaint
      is justified, and that
      the
      Company has suffered substantial damages. The
      lawsuit has been removed to federal court and a trial date has been set for
      December 2007.





On
      May 1,
      2006, we received an agreement from Cornell Capital to extend the repayment
      terms of their bridge loan agreement. Under the new agreement, we are required
      to make 12 monthly payments, commencing May 1, 2006, in the amount of $12,500
      to
      Cornell and a final balloon payment in the amount of $204,107 on May 1, 2007.
      We
      have not made certain of these required payments, and management intends to
      attempt to make the past due payments over the next few months, but does not
      anticipate being able to make the balloon payment due on May 1, 2007. Management
      will attempt to renegotiate the terms of the balloon payment with Cornell
      Capital, but there can be no assurance that we will be successful in doing
      so.




The
      Company's term loan dated May 14, 2004 to Merrill Lynch was renegotiated as
      a
      forbearance agreement during July 2006. Under the new agreement, the Company
      is
      required to make monthly payments, commencing August 1, 2006, in the amount
      of
      $24,958 plus interest (at prime + 4%), and a final balloon payment is due April
      30, 2007. The loan continues to be secured by a first lien on the Company's
      total assets ($1,027,836 as of December 31, 2006) and has been guaranteed by
      Doug Dixon, Chairman and CEO, and the Company. We are currently in default
      on
      our agreement with Merrill Lynch and are seeking to negotiate an amendment
      to
      our forbearance agreement to extend our payment deadlines but we may not be
      successful in doing so.




**Statements
      of Cash Flows Select Information**




**Year
                Ended****12/31/2006**
            
            **12/31/2005**Net
                Cash Provided (Used) By:Operating
                Activities
            
            $
            288,786
            
            $
            (172,764
            )Investing
                Activities
            
            
            29,046
            
            
            (21,242
            )Financing
                Activities
            
            
            (703,924
            )
            
            269,816




**Operating
      Activities**




For
      the
      year ended December 31, 2006, cash provided by operating activities of $288,786
      was primarily attributed to net loss from operations of $(1,892,850) offset
      by a
      decrease in accounts receivable of $980,114 and a decrease in inventories of
      $1,274,646. These decreases were partially offset by a decrease in accounts
      payable and accrued expenses of $11,785, a decrease in deposits from customers
      of $317,419 and a decrease in the amounts due to related parties of
      $170,475.




18




For
      the
      year ended December 31, 2005, cash used by operating activities of $172,764
      was
      primarily attributed to a decrease in accounts receivable in the amount of
      $1,003,608 as well as an $892,623 decrease in inventories. These amounts were
      offset by our net loss of $4,560,362, our decrease in customer deposits, prepaid
      expenses and other assets in the amount of $670,147 and $44,252, respectively,
      and a reduction in our accounts payable and accrued expenses of $742,945. During
      the year ended December 31, 2005 our non-cash reconciling items included our
      issuance of common stock in payment of $250,000 of loan fees, an increase in
      our
      provision for slow moving and obsolete inventories by $258,850 and depreciation
      and amortization expense of $172,409 and 553,062, respectively and the
      impairment of the license agreement in the amount of $2,705,013.




**Investing
      Activities**




During
      the year ended December 31, 2006, we sold assets from our Texas location that
      were no longer necessary to our day-to-day operations and recorded a gain of
      $29,046 from the sale.




During
      the year ended December 31, 2005 cash was used by investing activities for
      purchases of equipment in the amount of $21,242.




We
      currently have no material commitments for capital expenditures.




**Financing
      Activities**




Financing
      activities in the year ended December 31, 2006 used $703,924 in cash flows
      as
      compared to a provision of $269,816 in the year ended December 31, 2005.




During
      the year ended December 31, 2006, we received $80,000 from the issuance of
      debt
      to a related party and made principal payments in the amount of $600,174 and
      $183,750 on our long-term debt and related party debt,
      respectively.




In
      the
      year ended December 31, 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
      year ended December 31, 2005, these receipts and proceeds were offset by our
      repayment of long-term debt in the amount of $393,684 and our repayment of
      debt
      to a related party in the amount of $21,250.




**Liquidity
      and Capital Resources**




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 repaid in March 2005), two additional term loans totaling $525,000
      (of which one for $225,000 was paid in January 2006 and as of December 31,
      2006,
      $87,500 has been paid on the other), a $125,000 loan from a related party (which
      was repaid in July 2006) and three loans totaling $80,000 from a related party
      (all were taken and repaid in 2006). The Company's term loan dated May 14,
      2004
      to Merrill Lynch had a balance of $579,326 as of December 31, 2006, and was
      renegotiated as a forbearance agreement during July 2006. Under the new
      agreement, the Company is required to make monthly payments, commencing August
      1, 2006, in the amount of $24,958 plus interest (at prime + 4%), and a final
      balloon payment is due April 30, 2007. The loan continues to be secured by
      a
      first lien on the Company's total assets ($1,027,836 as of December 31, 2006)
      and has been guaranteed by Doug Dixon, Chairman and CEO, and the Company. We
      are
      currently in default of our agreement with Merrill Lynch and will be working
      to
      attempt to renegotiate our final balloon payment.




19




On
      November 8, 2002, we entered into a non-exclusive license for several of Lam’s
      patents and other intellectual property, which was later amended on June 25,
      2004. The Company and Lam are in mutual default on this agreement and no
      payments have been made to Lam since 2005.




In
      November 2003, we entered into an agreement with Axcelis and acquired an
      exclusive license to all future manufacturing, sales, service, and parts support
      for certain dry strip semiconductor manufacturing equipment now marketed under
      the trade names MX-1 and MX-10 (formerly Matrix System One and System Ten).
      This
      agreement provides for the one time payment of a license fee of $150,000 plus
      18% of net revenues (from these sales) per quarter until a $2,750,000 license
      fee has been paid. Of the $2,750,000 license fee, approximately $1,905,000
      has
      been expensed and $1,602,000 of the expensed amount remains to be paid. This
      agreement also calls for a royalty fee to be paid on all related sales through
      December 31, 2010 on a declining calendar schedule from 10% to 2%; the balance
      to be paid on this is approximately $817,000.




On
      August
      2, 2004, we entered into an additional agreement with Axcelis acquiring an
      exclusive license to manufacture, sell and provide services and parts support
      for certain reactive ion etch semiconductor manufacturing equipment for wafer
      sizes up to 200mm now marketed under the ASI trade name Arista and Arista Dual
      (formerly Matrix Bobcat and Cheetah). This agreement provides for a quarterly
      payment equal to 18% of net revenues from the sale of this product by the
      Company, beginning with the fourth quarter of 2004 and ending December 31,
      2011,
      or until $750,000 (the license fee) has been paid, whichever occurs first.
      Of
      the $750,000 license fee, approximately $115,800 has been expensed and the
      full
      amount remains to be paid. **** This
      agreement also calls for a royalty fee to be paid on all related sales through
      December 31, 2011 on a declining calendar schedule from 10% down to 2%; the
      balance to be paid on this is approximately $63,000.




As
      of
      December 31, 2006, we continued to remain past due on certain payments to both
      Lam and Axcelis. Past due payments to Lam totaled approximately $1,282,000
      as of
      December 31, 2006, and past due payments to Axcelis totaled approximately
      $1,856,000 on that date. Although our current tight cash flow has prevented
      these payments from being made, we have assured Axcelis that our delinquent
      payments will be made as soon as possible and management has no reason to
      believe as of the date of this filing that Axcelis will terminate any of its
      agreements with the Company. The Company is in litigation with Lam and
      management believes that Lam is in breach of its non-exclusive license
      agreement, and as a result, is seeking to write off the remaining amounts owed
      to Lam. If the Company is able to write off all or a significant portion of
      the
      approximately $3.6 million due under this Agreement, our liquidity would
      improve. However, there is no assurance that we will be successful in the
      litigation, or that we will be ultimately able to write off all or part of
      the
      associated debt. On August 1, 2006, Lam notified ASI by letter that it would
      no
      longer sell spare parts to ASI due to the pending litigation. Management
      believes that the impact of this will be minimal, as most spare parts can be
      obtained from sources other than Lam, but there are a few spare parts that
      can
      only be obtained from Lam.




On
      July
      22, 2005, we entered into a promissory note with Cornell Capital for $300,000.
      The loan originally called for interest to accrue at 12% with payments in the
      amount of $20,000 to be made weekly beginning October 21, 2005 with the final
      payment of $34,121 due on January 27, 2006. On May 1, 2006, we received an
      agreement from Cornell to extend the repayment terms of the bridge loan
      agreement. Under the new agreement, we are required to make 12 monthly payments,
      commencing May 1, 2006, in the amount of $12,500 to Cornell and a final balloon
      payment in the amount of $204,107 on May 1, 2007. **** We
      have
      not made certain of these required payments, and management intends to
      attempt to make the past due payments over the next few months, but does not
      anticipate being able to make the balloon payment due on May 1, 2007. Management
      will attempt to renegotiate the terms of the balloon payment with Cornell
      Capital, but there can be no assurance that we will be successful in doing
      so.




20




On
      August
      24, 2005 we entered into a promissory note with our Chief Executive Officer,
      Mr.
      Dixon, and received $125,000. The loan had an interest fee of $12,500, was
      due
      October 24, 2005 and was secured by a lien on the inventories and accounts
      receivable of ASI that was subordinate to the lien held by Merrill Lynch. This
      note was repaid in July 2006.




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




On
      February 1, 2006, the Company received $10,000 from one of the Company’s
      employees under a promissory note. The note called for interest in the amount
      of
      $1,000 and the principal balance, to be due no later than March 31, 2006. This
      note was repaid March 17, 2006.




On
      April
      25, 2006, the Company received $40,000 from one of the Company’s employees under
      a promissory note. The note called for interest in the amount of $4,000 and
      the
      principal balance, to be due no later than July 25, 2006. This note was repaid
      in August 2006.




On
      October 11, 2006, the Company received $30,000 from one of the Company’s
      employees under a promissory note. The note called for interest in the amount
      of
      $1,500 and the principal balance, to be due no later than November 30, 2006.
      This note was repaid November 13, 2006.




The
      Company's current tight cash flow and our lawsuit filed against Lam have
      prevented us from making required payments on the majority of our debt. As
      of
      December 31, 2006, the majority of this debt is comprised of approximately
      $3,600,000 owed to Lam and $2,600,000 owed to Axcelis.




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 December 31, 2006, we had $6,206 in cash on
      hand.   Our amount of cash on hand can vary significantly from
      day-to-day due to the nature of our business, which consists of significant
      cash
      expenditures to purchase the parts and components needed to assemble the systems
      that comprise the majority of our revenues and an often significant delay
      between these expenditures and payment from our customers for the systems,
      which
      does not occur until after delivery. As a result, we manage our cash flow
      closely to meet our required production shipping dates, debt obligations and
      expense commitments, and will continue to do so until we have either established
      a cash reserve large enough to self finance the cost of producing systems in
      advance of receiving any payments or have outside financing to accomplish the
      same result. Our debt obligations remain a priority in our cash flow planning,
      and we do not have plans or commitments for significant capital expenditures
      in
      the near future.




**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 include, among others,
      the Risk Factors below.*




21




*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 common stock. 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.
      If
      any of the following risks actually occur, our business could be harmed.**




**We
      Are In Litigation With Lam**




On
      March
      6, 2006, ASI received a termination notice from Lam. As of April 13, 2007,
      we
      were past due on certain payments to Lam under our license agreement with them.
      Past due payments to Lam totaled $1,282,000 as of December 31, 2006. During
      the
      second quarter of 2006, the Company filed a lawsuit against Lam as a result
      of
      long-standing contract disputes between Aspect and Lam. Management is convinced
      that the complaint is justified, and that the Company has suffered substantial
      damages. The lawsuit has been removed to federal court and a trial date has
      been
      set in December 2007. Management believes that Lam is in breach of this
      agreement, and as a result is seeking to write off the remaining amounts owed
      to
      Lam. If the Company is able to write off all or a significant portion of the
      approximately $3.6 million due under the agreement, management believes that
      our
      liquidity would improve. However, there is no assurance that we will be
      successful in the litigation, or that we will be ultimately able to write off
      all or part of the associated debt.




**Our
      Dispute With Lam Has Hurt Sales**




On
      August
      1, 2006, management was notified that Lam would no longer sell spare parts
      to
      the Company due to the pending litigation. Earlier, Lam entered the refurbishing
      market directly. These actions have had some impact on the Company’s revenue.
      Our most significant cause of revenue reduction during this year, however,
      resulted from the litigation undertaken by the Company against Lam .  The
      Company’s going concern issue and pending litigation with Lam have impacted our
      sales, as certain of our customers are now reluctant to order systems from
      us,
      believing that there is a risk that any deposit may be lost if we are unable
      to
      continue operations. This circumstance greatly hampers our ability to capitalize
      on the opportunities of a growing market. The Company’s failure to remain an
      approved Lam reseller coupled with its ongoing litigation with Lam has hurt
      sales dramatically contributing to a large decrease in revenues.




22




**We
      Are Past Due On Certain Payments To Axcelis For License And Royalty Fees**




We
      are
      past due on certain payments to Axcelis totaling approximately $1.85 million
      for
      license and royalty fees as of December 31, 2006. While management believes
      the
      license is beneficial to both parties and Axcelis has to date been willing
      to
      provide us with additional time to make these payments, Axcelis could terminate
      our license agreements with it upon ninety days written notice, although we
      would have the ninety day notice period in which to make the past due payments
      and avoid termination. Management is exploring payment options, but it is
      unlikely it could become current on its obligations to Axcelis within a 90
      day
      period. This
      delinquency is now over two years old.




**We
      Are In Default On Our Term Loan With Merrill Lynch, Which Is Secured
      By A First Lien On All Of Our Assets**




We
      have a
      term loan, with a principal balance of approximately $579,326 at December 31,
      2006, with Merrill Lynch Business Financial Services, Inc. that is secured
      by a
      first lien on our total assets, which were equal to approximately $1,027,836
      at
      December 31, 2006. Payments in the monthly amount of $24,958 were due commencing
      August 1, 2006 with a final balloon on April 30, 2007. We are in default on
      this
      term loan and Merrill Lynch could foreclose on certain of our assets making
      it
      difficult to continue our operations without restructuring our business.
      Management believes it is more likely that repayment terms will be renegotiated
      than foreclosure on assets which may be difficult to liquidate in a timely
      manner.




**If
      We Fail To Maintain An Effective System Of Internal Controls, We May Not Be
      Able
      To Accurately Report Our Financial Results Or Prevent Fraud**




Effective
      internal controls are necessary for us to provide reliable financial reports
      and
      effectively prevent fraud. We have discovered, and may in the future discover,
      areas of our internal controls that need improvement. By letter dated May 10,
      2005, our external auditors brought to our attention a need to increase
      segregation of critical accounting duties, improve oversight of the financial
      accounting and reporting process by our principal accounting officer, establish
      a documented system of internal controls and ensure consistency in the
      application of standard costs. Since May 2005, we have begun taking action
      to
      remediate and improve our internal controls. We believed that these efforts
      would strengthen our internal controls and address the concerns of our auditors.
      However, management has identified certain significant deficiencies with respect
      to inadequate reconciliation of certain financial statement accounts and lack
      of
      sufficient review of these accounts and related journal entries. The Company
      is
      addressing staffing levels and its reconciliation and review process and making
      recommendations to the Board in the second quarter of 2007. Any failure to
      implement required new or improved controls, or difficulties encountered in
      their implementation, could cause us to fail to meet our reporting obligations.
      Inferior internal controls could also cause investors to lose confidence in
      our
      reported financial information, which could have a negative effect on the
      trading price of our stock.




**Future
      Sales By Cornell Capital Partners And Its Affiliates May Adversely Affect Our
      Stock Price**




Sales
      of
      the 1,190,478 shares of our common stock held by Cornell Capital Partners and
      its affiliates in the public market during 2006 and 2007 could lower the market
      price of our common stock. Sales may also make it more difficult for use to
      sell
      equity securities or equity-related securities in the future at a time and
      price
      that our management deems acceptable or at all.




**Cyclical
      Downturns Are Prevalent In The Semiconductor Industry And May Adversely Affect
      Our Future Sales And Operating Results**




Our
      business depends predominantly on the capital expenditures of semiconductor
      manufacturers, which in turn depend on current and anticipated market demand
      for
      integrated circuits and the products that use them. The semiconductor industry
      has historically been very cyclical and has experienced periodic downturns
      that
      have had a material adverse effect on the demand for semiconductor processing
      equipment, including the
      etch
      and strip equipment
      that we market. However,
      during downturns, our replacement parts are generally in higher demand, due to the
      cost
      effectiveness of repairing existing equipment instead of buying new equipment.




23




During
      periods of reduced and declining demand, we must be able to quickly and
      effectively align our costs with prevailing market conditions, as well as
      motivate and retain key employees. In particular, our inventory levels during
      periods of reduced demand have at times reached higher-than-necessary levels
      relative to the current levels of production demand. During periods of rapid
      growth, we must be able to acquire and develop sufficient capacity to meet
      customer demand, and hire and assimilate a sufficient number of qualified
      people. We cannot give assurances that our future sales will
      not decline if
      downturns or slowdowns in the rate of capital investment in the semiconductor
      industry occur in the future.




**The
      Semiconductor Industry Is Intensely Competitive And Capital-Intensive And We
      May
      Not Be Able To Compete Effectively In Markets Where Our Competitors Have More
      Resources**




We
      face
      substantial competition in the industry, both from potential new entrants into
      the market and established competitors. Some of these companies may have greater
      financial, marketing, technical or other resources than we do, as well as
      broader product lines, greater customer service capabilities, or larger and
      more
      established sales organizations and customer bases. Remaining competitive in
      the
      market depends in part upon our ability to offer  desired systems
      and services , at
      competitive prices on a timely basis.




Lam
      has
      endorsed certain of our competitors as a result of our litigation with it and
      we
      believe our competition will increase as these new competitors gain credibility
      in the market.




Our
      customers must incur substantial expenditures to install and integrate capital
      equipment into their semiconductor production lines. Once a manufacturer has
      selected another vendor's capital equipment, the manufacturer is generally
      reliant upon that equipment vendor for the specific production line application
      in question. Accordingly, we may experience difficulty in selling a product
      to a
      particular customer for a significant period of time when that customer has
      selected a system from a manufacturer we do not have a relationship with. In
      addition, sales of our systems depend in significant part upon a prospective
      customer's decision to increase manufacturing capacity, which typically involves
      a significant capital commitment. From time to time, we have experienced delays
      in finalizing system sales following initial system qualification. Due to these
      and other factors, our systems may have a lengthy sales cycle, during which
      we
      may expend substantial funds and management effort.




**The
      Semiconductor Industry Is Based On Rapidly Changing Technology,** **And
      We Rely Primarily On Our Licensors To Develop Products Our Customers Find
      Satisfactory**




We
      rely
      heavily on the development of new and improved products by companies such as
      Axceli s
      from
      which we obtain systems and parts, and we seek to maintain close relationships
      with our customers in order to remain responsive to their product needs. In
      addition, we engage in development and improvement of the products we
      manufacture. As is typical in the semiconductor capital equipment market, we
      have experienced delays from time to time in the introduction of and certain
      technical difficulties with certain of our products and product
      enhancements.




Our
      success in acquiring or developing and then selling systems depends upon a
      variety of factors. These include product selection, timely and efficient
      completion of product design and development, timely and efficient
      implementation of assembly processes, product performance in the field, and
      effective sales and marketing. There can be no assurance that we will be
      successful in selecting, developing, acquiring, and marketing new products,
      or
      in enhancing our existing products. In addition, we could incur substantial
      unanticipated costs to ensure the functionality and reliability of our future
      product introductions early in their product life cycles. If new products have
      reliability or quality problems, reduced orders, or higher manufacturing costs,
      then delays in collecting accounts receivable and additional service and
      warranty expenses may result. Any of these events could materially adversely
      affect our business, financial condition or results of operations.




24




**We
      Are Subject To Risks Relating To Product Concentration And Lack Of Product
      Revenue Diversification Which May Adversely Affect Our Business And Operating
      Results**




We
      derive
      a substantial percentage of our revenues (approximately
      50% in 2006) from our etch and strip products, which consist of approximately
      20
      different models ,
      and we
      expect these products to continue to account for a large percentage of our
      revenues in the near term. Continued market acceptance of our primary products
      is, therefore, critical to our future success. Because
      of this product concentration, a
      decline
      in demand for even a limited number of our products that
      is
      not offset by increasing demand for other products
      or our
      inability to rely on revenues derived from unrelated operations would
      likely result in a decline in our revenues and operating results.




**We
      May Experience Supply Shortages Which Would Adversely Affect Our Ability To
      Meet
      Customer Demands**




We
      use
      numerous suppliers to obtain parts, components, sub-assemblies and final
      products. Although we make reasonable efforts to ensure that such parts are
      available from multiple suppliers, certain key parts (including
      proprietary software for our etch products that is only available from Lam
      and
      certain robots that are available only from a limited number of suppliers) may
      only
      be obtained from a single or limited source. Certain
      suppliers, from which we obtain parts that are available from other sources,
      are thinly
      capitalized, independent companies that generate significant portions of their
      business from us and a small group of other companies in the semiconductor
      industry. We seek to reduce our dependence on the limited group of sources.
      However, disruption or termination of certain of those suppliers could occur
      and
      certain of our competitors , have
      experienced supply shortages in the past. Such disruptions could have an adverse
      effect on our operations. A prolonged inability to obtain certain parts could
      have a material adverse effect on our business, financial condition or results
      of operations because
      of an inability to meet customer demands on time. As of August 1, 2006, we are no
      longer able to acquire parts from Lam some of which we cannot obtain elsewhere.




**We
      Are Subject To Risks Relating To Lengthy Sales Cycles, Which May** **Require
      The Expenditure Of** **Substantial Funds and Management Effort**




Our
      customers must incur substantial expenditures to install and integrate capital
      equipment into their semiconductor production lines. Once a manufacturer has
      selected another vendor’s capital equipment, the manufacturer is generally
      reliant upon that equipment vendor for the specific production line application
      in question. Accordingly, we may experience difficulty in selling a product
      to a
      particular customer for a significant period of time when that customer has
      selected a system from a manufacturer with whom we do not have a relationship.
      In addition, sales of our systems depend in significant part upon a prospective
      customer’s decision to increase manufacturing capacity which typically involves
      a significant capital commitment. From time to time, we have experienced delays
      in finalizing system sales following initial system qualification. Due to these
      and other factors, our systems may have a lengthy sales cycle, during which
      we
      may expend substantial funds and management effort.




**We
      Are Exposed To The Risks Of Operating A Global Business; As A Result, Our
      Business May Be Adversely Affected By Global Political And Economic
      Instability**




In
      2006,
      approximately 33% of our revenues resulted from sales outside the U.S., with
      an
      increasing percentage of sales to customers headquartered in Asia. Managing
      our
      global operations presents challenges, including periodic regional economic
      downturns, trade balance issues, varying business conditions and demands,
      political instability, variations in enforcement of intellectual property and
      contract rights in different jurisdictions, differences in the ability to
      develop relationships with suppliers and other local businesses, changes in
      U.S.
      and international laws and regulations, including U.S. export restrictions,
      fluctuations in interest and currency exchange rates, the ability to provide
      sufficient levels of technical support in different locations, cultural
      differences, shipping delays, and terrorist acts or acts of war, among other
      risks. Many of these challenges are present in China, which we believe
      represents a large potential market for semiconductor equipment and where we
      anticipate opportunity for growth. Global uncertainties with respect to: (i)
      economic growth rates in various countries; (ii) the sustainability of demand
      for electronics products; (iii) capital spending by semiconductor manufacturers;
      (iv) price weakness for certain semiconductor devices; and (v) political
      instability in regions where we have operations, such as Asia, may also affect
      our business, financial condition and results of operations.




25




**We
      Are Exposed To Risks As A Result Of Ongoing Changes In The Semiconductor
      Industry Which May Adversely Affect Our Ability To Operate
      Successfully**




Ongoing
      changes in the semiconductor industry, including more complex technology
      requirements, the growth in Asia, increasing pressure on semiconductor
      manufacturers to allocate resources to activities that enhance their competitive
      advantage, the increasing significance of consumer electronics as a driver
      for
      demand for semiconductors and the related focus on lower costs, have
      in -  turn
      resulted in the increasing importance of spare parts and service as a growing
      percentage of semiconductor equipment suppliers’ business. These changes are
      also requiring semiconductor manufacturing equipment suppliers to provide
      increasing levels of process integration support. If we do not successfully
      manage the risks resulting from these changes in the semiconductor industry,
      our revenues
      could decline and our business,
      financial condition and results of operations could be materially and adversely
      affected.




**We
      Operate In** **An** **Industry
      With A** **Highly
      Concentrated Customer Base** **And
      Therefore The Loss Of Several Customers May Cause A Significant Decline In
      Revenues**




The
      semiconductor industry has a highly concentrated customer base. There
      are
      only about 200 semiconductor device manufacturers in the industry, and only about 15% of those manufacturers will
      be
      purchasing equipment at any given time. In
      2006,
      one customer accounted for 10% or more of our total revenue, and historically
      orders from a
      relatively limited number of semiconductor manufacturers have accounted for,
      and in
      future
      periods likely
      will account
      for, a substantial portion of our net sales, which may lead customers to demand
      pricing and other terms less favorable to us. If current customers delay, cancel
      or do not place orders, we may not be able to replace these orders with new
      orders due to
      the limited number of customers available in the industry .
      As our
      products are configured to customer specifications, changing, rescheduling
      or
      canceling orders may result in significant and often non-recoverable costs.
      The
      resulting fluctuations in the amount of or terms for orders could have a
      material adverse effect on our  working
      capital, cash flow and ultimately revenues and profitability.




**Our
      Auditors Have Expressed Doubt About Our Ability To Continue As A Going
      Concern**




Our
      ability to continue as a going concern is an issue raised as a result of the
      Company’s operating loss in the year ended December 31, 2006, its negative
      working capital of over $8 million, and its default on payments on the majority
      of its term debt. We continue to experience net operating losses. Our ability
      to
      continue as a going concern is subject to our ability to negotiate extended
      payment terms for our term debt, generate a profit, and obtain necessary funding
      from outside sources, including obtaining additional funding from the sale
      of
      our securities, increasing sales or obtaining loans and grants from various
      financial institutions where possible. The going concern issue increases the
      difficulty in meeting such goals and there can be no assurances that such
      methods will prove successful.




**Our
      Ability To Raise Additional Financing Is Uncertain Which May Adversely Impact
      Our** **Ability
      To Continue And Expand** **Business
      Operations**




We
      currently anticipate that our available cash resources combined with our
      anticipated revenues will meet any working
      capital needs, but not repayment of debt, through
      the quarter ended June 30, 2007. However,
      we face repayment obligations of approximately $ 9.4 million
      during 2007,
      which includes all liabilities. Our
      projected revenues will not permit us to repay our obligations. Although we
      have
      been actively searching for available capital, we do not have any current
      arrangements for additional outside sources of financing and we cannot provide
      any assurance that such financing will be available.




26




**Our
      Common Stock Is Deemed To Be “Penny Stock,” Which May Make It More Difficult For
      Investors To Sell Their Shares Due To Suitability
      Requirements**




Our
      common stock is deemed to be “penny stock” as that term is defined in Rule
      3a51-1 promulgated under the Securities Exchange Act of 1934, as amended. These
      requirements may reduce the potential market for our common stock by reducing
      the number of potential investors. This may make it more difficult for investors
      in our common stock to sell shares to third parties or to otherwise dispose
      of
      them. This could cause our stock price to decline. Penny stocks are
      stock:




·
            With
                a price of less than $5.00 per
                share;




·
            That
                are not traded on a “recognized” national exchange;




·
            Whose
                prices are not quoted on the NASDAQ automated quotation system (NASDAQ
                listed stock must still have a price of not less than $5.00 per share);
                or




·
            In
                issuers with net tangible assets less than $2 million (if the issuer
                has
                been in continuous operation for at least three years) or $5 million
                (if
                in continuous operation for less than three years), or with average
                revenues of less than $6 million for the last three years.




Broker/dealers
      dealing in penny stocks are required to provide potential investors with a
      document disclosing the risks of penny stocks. Moreover, broker/dealers are
      required to determine whether an investment in a penny stock is a suitable
      investment for a prospective investor.




**Our
      Common Stock May Be Affected By Limited Trading Volume And May Fluctuate
      Significantly, Which May Affect Our Shareholders’ Ability To Sell Shares Of Our
      Common Stock**




Currently,
      only a limited trading market exists for DND common stock. Our common stock
      trades on the Over-the-Counter (“OTC”) Bulletin Board under the symbol
“DNDT.OB.” The Over-the-Counter (“OTC”) Bulletin Board is a limited market and
      subject to substantial restrictions and limitations in comparison to the NASDAQ
      system. Any broker/dealer that makes a market in our stock or other person
      that
      buys or sells our stock could have a significant influence over its price at
      any
      given time. We cannot assure our shareholders that a market for our stock will
      be sustained. There is no assurance that our shares will have any greater
      liquidity than shares that do not trade on a public market. Our common stock
      has
      experienced, and is likely to experience in the future, significant price and
      volume fluctuations, which could adversely affect the market price of our common
      stock without regard to our operating performance. In addition, we believe
      that
      factors such as quarterly fluctuations in our financial results and changes
      in
      the overall economy or the condition of the financial markets could cause the
      price of our common stock to fluctuate substantially. These fluctuations may
      also cause short sellers to enter the market from time to time in the belief
      that we will have poor results in the future. We cannot predict the actions
      of
      market participants and, therefore, can offer no assurances that the market
      for
      our stock will be stable or appreciate over time. These factors may negatively
      impact our shareholders’ ability to sell shares of our common
      stock.




**We
      Are Subject To Price Volatility Due To Our Operations Materially Fluctuating;
      As
      A Result, Any Quarter-To-Quarter Comparisons In Our Financial Statements May
      Not
      Be Meaningful**




As
      a
      result of the evolving nature of the markets ,
      consisting of sales of our products and services to semiconductor manufacturers in the
      U.S., Europe and Asia, in which
      we compete, as well as the current nature of the public markets and our current
      financial condition, we believe that our operating results may fluctuate
      materially, as a result of which quarter-to-quarter comparisons of our results
      of operations may not be meaningful. If in some future quarter, whether as
      a
      result of such a fluctuation or otherwise, our results of operations fall below
      the expectations of securities analysts and investors, the trading price of
      our
      common stock would likely be materially and adversely affected. You should
      not
      rely on our results of any interim period as an indication of our future
      performance. Additionally, our quarterly results of operations may fluctuate
      significantly in the future as a result of a variety of factors as
      described in this “Risk Factors” section ,
      many of
      which are outside our control.




27




**We
      Could Fail To Attract or Retain Key Personnel** **And Will Be Harmed If Any Or All Of Them Leave**




Our
      success largely depends on the efforts and abilities of key executives and
      consultants, particularly Mr.
      Douglas Dixon, our Chief Executive Officer ,
      and Mr.
      Dennis Key, our Chief Financial Officer and Chief Executive Officer of
      ASI .
      The
      loss of the services of Mr. Dixon and Mr. Key could materially harm our business
      because of their
      relationships within the semiconductor industry and in particular with Lam
      (where Mr. Dixon and Mr. Key were previously employed) and because of the
      cost
      and time necessary to locate and
      train a replacement who may
      not be able to continue these relationships within the semiconductor
      industry .
      Such a
      loss would also divert management attention away from operational
      issues .
      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 .




**Environmental,
      Health And Safety Laws May Restrict Our Operations**




We
      are
      subject to local laws and regulations in various regions in which we operate,
      including the European Union ("EU"). In particular, two current EU directives
      may have a material impact on our business. The first is the Restriction of
      Certain Hazardous Substances Directive ("RoHS"), which restricts the
      distribution of certain substances, including lead, within the EU and is
      effective July 1, 2006. In addition to eliminating and/or reducing the level
      of
      specified hazardous materials from our products, we will also be required to
      maintain and publish a detailed list of all chemical substances in our products.
      We are starting to see requests from our customers, including some of our major
      customers, for RoHS-compliant products. We are in the process of compiling
      RoHS-compliant information on our products as well as procuring RoHS-compliant
      material and information from our suppliers.





The
      second directive is the Waste Electrical and Electronic Equipment Directive
      ("WEEE"), which was effective August 13, 2005 in certain jurisdictions and
      requires covered manufacturers or importers to recycle or dispose of all
      products manufactured or imported into the EU by a party which is subject to
      the
      directive at its own expense at the end of the products' useful lives. It is
      our
      current position and interpretation of the WEEE directive that our products
      are
      not directly covered by or such as to require to our direct compliance with
      the
      directive. We believe our end customers bear the responsibility for WEEE
      directive compliance for the products and/or systems in which our products
      are
      components.





There
      are
      certain risks we face in complying with, or seeking to conduct our business
      in
      connection with, the RoHS and WEEE directives, which include but are not limited
      to the following:





*
      For
      RoHS





*
      We may
      be unable to procure appropriate RoHS-compliant material in sufficient quantity
      and quality and/or may be unable to incorporate it into our manufacturing
      processes without compromising quality and/or impacting our cost
      structure;





*
      We may
      not be able to sell non-compliant product into the EU or to any customer whose
      end product will be sold into the EU, which may result in reduced
      sales;





28




*
      We may
      face additional excess and obsolete inventory risk related to non-compliant
      inventory that we may continue to hold for which there is reduced demand and
      that we may need to write down.





*
      For
      WEEE





*
      We may
      be determined by applicable national regulatory agencies which implement the
      WEEE directive that certain of our products are directly covered under the
      WEEE
      directive, making us directly responsible for WEEE compliance for such
      products.





*
      Our
      customers may refuse to agree to contractual language which allocates and
      assigns WEEE responsibility, or demand that we undertake WEEE responsibilities
      independent of regulatory interpretation.





We
      are
      unable to estimate at this time the cost of compliance, if any, with either
      EU
      directive. Compliance and non-compliance with these laws may have a material
      adverse impact on our net sales and operating results.




**ITEM
                7.**
              **FINANCIAL
                  STATEMENTS**


The
      information required by this Item is submitted as a separate section of this
      Form 10-KSB. See Item 13.




**ITEM
                  8.**
            **CHANGES
                INAND
                DISAGREEMENTS
                WITH
                ACCOUNTANTS
                ON ACCOUNTINGAND
                FINANCIAL
                DISCLOSURE**




None.


**ITEM
                8A.**
              **CONTROLS
                  AND PROCEDURES**





(a)  Under
      the
      supervision and with the participation of our management, including our
      principal executive officer and principal financial officer, we conducted an
      evaluation of the design and operation of our disclosure controls and
      procedures, as such term is defined under Rules 13a-14(c) and 15d-14(c)
      promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
      Act"), within 90 days prior to the filing date of this report. Based on
      that evaluation, our principal executive officer and our principal financial
      officer concluded that our disclosure controls and procedures were not effective
      to ensure that information required to be disclosed in reports filed or
      submitted under the Exchange Act is accumulated and communicated to the
      Company’s management, including its chief executive and principal financial
      officer, as appropriate to allow timely decisions regarding required disclosure.
      Although the evaluation did not detect any material weaknesses in the Company’s
      system of internal accounting controls over financial reporting, management
      identified certain significant deficiencies with respect to inadequate
      reconciliation of certain financial statement accounts and a lack of sufficient
      review of those accounts and related journal entries. The Company is addressing
      its staffing levels and its reconciliation and review process and will make
      recommendations to the Board in the second quarter of 2007.





Notwithstanding
      management’s assessment that our internal control over financial reporting
      was ineffective as of December 31, 2006 and the significant deficiencies
      described above, management believes that the financial statements included
      in
      this Annual Report on Form 10-KSB correctly present our financial
      condition, results of operations and cash flows for the fiscal years covered
      thereby in all material respects.




29




(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, 2006, our management received a letter from
      the
      Company's independent auditors on May 10, 2006 that identified certain
      weaknesses in our internal control over financial reporting to address primarily
      four issues: 1) Our subsidiary’s Vice President of Operations is now reviewing
      all standard unit cost changes to prevent adjustments to the valuation of
      inventory items without proper approval. In addition, with the transfer of
      Texas
      accounting transactions to Arizona, the software package which allowed negative
      inventory balances to occur in the past has been discontinued. 2) Due to our
      limited accounting headcount, which is sometimes typical of smaller companies,
      and which impacts our ability to segregate duties to some degree, we will
      continue to monitor our financial data very closely through the use of various
      trended subsidiary reports, statements, and a detailed and departmentalized
      chart of accounts to ensure all transactions are properly recorded. 3) Although
      our commission accrual process remains the same, increased emphasis will be
      placed on the review of the existing systems group gross profit report which
      details commission expense by system. 4) Upper management will increase their
      communication of any unusual transactions and subsequent events to the personnel
      responsible for financial accounting and disclosure to ensure the proper
      accounting and disclosure on a timely basis. ****




Beginning
      with the Company’s first fiscal year ending after December 15, 2007,
      Section 404 of the Sarbanes-Oxley Act of 2002 will require us to include
      management's report on our internal control over financial reporting in our
      Annual Report on Form 10-K. The internal control report must contain
      (1) a statement of management's responsibility for establishing and
      maintaining adequate internal control over our financial reporting, (2) a
      statement identifying the framework used by management to conduct the required
      evaluation of the effectiveness of our internal control over financial
      reporting, and (3) management's assessment of the effectiveness of our
      internal control over financial reporting as of the end of our most recent
      fiscal year, including a statement as to whether or not our internal control
      over financial reporting is effective. For the year ended December 31, 2008,
       a statement that our registered independent public accounting firm has
      issued an attestation report on management's assessment of our internal control
      over financial reporting will be required.




In
      order
      to achieve compliance with Section 404 within the prescribed period,
      management is planning to commence a Section 404 compliance project to
      assess the adequacy of our internal control over financial reporting, remediate
      any control deficiencies that may be identified, validate through testing that
      controls are functioning as documented, and implement a continuous reporting
      and
      improvement process for internal control over financial reporting. At this
      time,
      management is assessing the proper parameters of a Section 404 compliance
      project in light of emerging guidance from the SEC on such
      parameters.


**ITEM
                8B.**
              **OTHER
                  INFORMATION**




There
      were no items required to be disclosed in a report on Form 8-K during the fourth
      quarter of the fiscal year ended December 31, 2006.




**PART** **III**




**ITEM
                  9.**
            **DIRECTORS
                  AND EXECUTIVEOFFICERS;
                  CORPORATE
                  GOVERNANCE;
                  COMPLIANCE
                  WITH
                  SECTION
                  16(A)
                  OF
                  THE EXCHANGE
                  ACT**




The
      following table sets forth the names and positions of our executive officers
      and
      directors. Our directors are elected at our annual meeting of stockholders
      and
      serve for one year or until successors are elected and qualify. Our Board of
      Directors appoints our officers, and their terms of office are at the discretion
      of the Board of Directors, except to the extent governed by an employment
      contract. There
      is
      no family relationship between any of our executive officers and directors.




30




As
      of  April
      11,
      2007 ,
      our
      directors and executive officers, their age, positions and the dates of their
      initial election or appointment as directors or executive officers are as
      follows:




**Name**
            
            **Age**
            
            **Position**
            
            **Tenure**Douglas
                N. Dixon
            
            64
            
            CEO,
                President, and Chairman
            
            Since
                August 2002.G.
                Dennis Key*
            
            64
            
            CFO,
                Secretary and Director
            
            Since
                August 2003.Lowell
                W. Giffhorn*
            
            60
            
            Director,
                Chair of Audit Committee
            
            Since
                August 2002.Ronny
                Baker
            
            61
            
            Controller
            
            Since
                August 2002.




*
            Directors
                currently serving as members of the Company's Audit
                Committee.




**Douglas
      N. Dixon** has been
      the CEO/President and Chairman of DND since the Company’s formation, and was a
      co-founder of ASI. Mr. Dixon's experience in the semiconductor capital
      equipment industry goes back to 1966 when he started with Fairchild
      Semiconductor. Later, Mr. Dixon was employee number 25 at Applied Materials
      (today AMAT is the largest supplier of "chip-gear" in the world) and went on
      to
      be a co-founder of Gemini Research, a chip-gear firm that was acquired by Lam
      Research in 1988. Mr. Dixon stayed on with Lam for two years in sales
      management before leaving in 1990 to co-found ASI. Mr. Dixon is a US Navy
      Veteran having served with a flight squadron on the aircraft carrier USS Hancock
      while stationed near Asia in the 1960s.




**G.
      Dennis Key** is the
      CFO of DND, and the President/CFO/CEO of ASI. Prior to January 1, 2004, Mr.
      Key
      served as the President of the Texas Division of Aspect Semiquip International,
      and then since July of 2003, as President of Aspect Systems, Inc. He served
      as
      the Vice President, Worldwide Sales and Field Operations for Lam Research,
      Inc.
      from 1992 to 1996. Mr. Key was also previously employed as Vice-President,
      Sales
      and Marketing of Varian Corporation 1997 to 1998, and in a consulting role
      as
      Vice-President, Business Development for GlobiTech, Inc. from 2000-2002. Mr.
      Key
      began serving as a director of DND in August of 2003, began serving as Secretary
      of DND in January of 2004 and began serving as DND’s CFO in November of
      2003.




**Lowell
      W. Giffhorn** since
      October 2005, Mr. Giffhorn has served as the Chief Financial Officer and since
      December 2005, as a member of the Board of Directors of Brendan Technologies,
      Inc., a publicly held developer and marketer of computational analytical
      software products for the laboratory testing industry. Since July 2005, Mr.
      Giffhorn also serves as the Chief Financial Officer of Imagenetix, Inc., a
      publicly held nutritional supplement company. Mr. Giffhorn was the Chief
      Financial Officer from May 1997 to June 2005 and was a member of the Board
      of
      Directors from 1998 to April 2006 for Patriot Scientific Corp., a publicly
      held
      microprocessor and intellectual property company. From June 1992 to August
      1996
      and from September 1987 to June 1990 he was the CFO of Sym-Tek Systems, Inc.
      and
      Vice President of Finance for its successor, Sym-Tek, Inc., a publicly traded
      supplier of capital equipment to the semiconductor industry. Mr. Giffhorn
      obtained a M.B.A. degree from National University in 1976 and he obtained a
      B.S.
      in Accountancy from the University of Illinois in 1969.




**Ronny
      Baker** has
      served as Controller of ASI since October of 2001, and as Controller of DND
      since September, 2002. Prior to October of 2001, Mr. Baker held accounting
      positions with ASI and Semiquip, Inc. beginning in October of 2000. From June
      1999 to June 2001, Mr. Baker was Controller of Dallas Hospitality Co. which
      managed a conference center and cafeteria in an office tower in Dallas. From
      1978 to 1998 and from 1972 to 1978, Mr. Baker held various accounting
      positions with Southland Corp and Monsanto Chemical respectively. Mr. Baker
      also served in the U.S. Air Force from 1968 to 1972.




31




There
      have been no material changes to the procedures by which our shareholders may
      recommend nominees to the Board of Directors during our last fiscal year.




**Committees
      of the Board of Directors**




Our
      Board
      has a standing Audit Committee and previously had a standing Compensation
      Committee. The entire Board now serves as the Compensation Committee.




***Audit
      Committee.*** **** The
      Audit
      Committee is responsible for assisting the Board of Directors in monitoring
      and
      oversight of (1) the integrity of the Company's financial statements and its
      systems of internal accounting and financial controls and (2) the independence
      and performance of the Company's independent auditors. The Audit Committee,
      which met four times during 2006, is composed of one employee director and
      one
      other director, who was determined by the Board to be an independent director.
      During 2006, the Audit Committee consisted of Mr. Giffhorn (Chairman) and
      Mr. Key.




The
      Board
      of Directors has determined that Mr. Giffhorn is an audit committee
      financial expert as defined in Item 401 of Regulation S-B promulgated by the
      Securities and Exchange Commission. The Board's conclusions regarding the
      qualifications of Mr. Giffhorn as an audit committee financial expert were
      based on his service as a chief financial officer of a public company and his
      degrees in accounting and business administration.




**Code
      of Ethics**




DND
      has
      set forth its policy on ethical behavior in a document called "Code of Business
      Conduct and Ethics." This policy applies to the members of our Board of
      Directors and all employees, including (but not limited to) our principal
      executive officer, principal financial officer, principal accounting officer
      or
      controller and persons performing similar functions. This policy comprises
      written standards that are reasonably designed to deter wrongdoing and to
      promote the behavior described in Item 406 of Regulation S-B promulgated by
      the Securities and Exchange Commission. No waivers of the Code were granted
      in
      2006.




**Section
      16(a) Beneficial Ownership Reporting Compliance**




Section
      16(a) of the Exchange Act requires the Company's directors, executive officers
      and persons who own more than 10% of the Company's Stock (collectively,
      "Reporting Persons") to file with the SEC initial reports of ownership and
      changes in ownership of the Company's Common Stock. Reporting Persons are
      required by SEC regulations to furnish the Company with copies of all Section
      16(a) reports they file. To the Company's knowledge, based solely on its review
      of the copies of such reports received or written representations from certain
      Reporting Persons that no other reports were required, the Company believes
      that
      during its fiscal year ended December 31, 2006, all Reporting Persons complied
      with all applicable filing requirements, except as follows: Lowell Giffhorn
      (two
      Form 4s); Dennis Key (one Form 4); and Doug Dixon (one Form 4).




**ITEM
                  10.**
            **EXECUTIVE
                  COMPENSATION**




**Summary
      of Cash and Certain Other Compensation**




The
      following table provides certain summary information concerning the compensation
      earned by the Company's Chief Executive Officer and each of the Company's other
      most highly compensated executive officers, for services rendered in all
      capacities to the Company and its subsidiaries for the fiscal years ended
      December 31, 2004, 2005, and 2006. No
      executive officers of the Company or its subsidiary, other than those included
      below, received compensation in excess of $100,000 during the fiscal year ended
      December 31, 2006.  The
      following information includes the dollar value of base salaries, bonus awards,
      stock options granted and certain other compensation, if any, whether paid
      or
      deferred. The listed individuals shall be hereinafter referred to as the "Named
      Officers."





32




SUMMARY
      COMPENSATION TABLE




Name
                  and Principal Position
              
              Year
              
              Salary
                  ($)
              
              Bonus
                  ($)
              
              Option
                    Awards
                  ($)
              
              All
                    Other Compen-sation
                  ($)
              
              Total
                  ($)Douglas
                  N. Dixon (CEO)(1)
              
              2006
              
              150,000
              
              0
              
              5,250
              
              16,340
                  (2)
              
              171,5902005
              
              150,000
              
              24,068
              
              0
              
              14,165(3)
              
              188,2332004
              
              150,000
              
              0
              
              0
              
              15,745(4)
              
              165,745G.
                  Dennis Key (CFO; CEO and CFO of ASI)
              
              2006
              
              150,000
              
              0
              
              5,250
              
              16,340
                    (2)
              
              171,5902005
              
              150,000
              
              37,500
              
              0
              
              14,165(3)
              
              201,6652004
              
              150,000
              
              0
              
              0
              
              15,745(4)
              
              165,745





(1)
            Effective
                January 1, 2004, Mr. Dixon resigned as CEO of Aspect Systems, Inc,
                the
                Company's subsidiary. He remains CEO of the
                Company.


(2)
            Represents
                $9,740 for insurance premiums and $6,600 for automobile allowance.


(3)
            Represents
                  $7,565 for insurance premiums and $6,600 for automobile allowance.


(4)
            Represents
                $9,145 for insurance premiums and $6,600 for automobile
                allowance.







OUTSTANDING
      EQUITY AWARDS AT FISCAL YEAR-END




**Option
                  Awards**
              
              **Stock
                  Awards****Name**
              
              **Number
                  of Securities Underlying Unexercised Options Exercisable**
                **(#)**
              
              **Number
                  of Securities Underlying Unexercised Options Unexercisable**
                **(#)**
              
              **Equity
                  Incentive Plan Awards: Number of Securities Underlying Unexercised
                  Unearned Options**
                **(#)**
              
              **Option
                  Exercise Price**
                **($)**
              
              **Option
                  Expiration Date**
              
              **Number
                  of Shares that Have Not Vested (#)**
              
              **Market
                  Value of Shares that Have Not Vested**
                **($)**
              
              **Equity
                  Incentive Plan Awards: Number of Unearned Shares That Have Not
                  Vested**
                **(#)**
              
              **Equity
                  Incentive Plan Awards: Market Value of Unearned Shares That Have
                  Not
                  Vested ($)****(a)**
              
              **(b)**
              
              **(c)**
              
              **(d)**
              
              **(e)**
              
              **(f)**
              
              **(g)**
              
              **(h)**
              
              **(i)**
              
              **(j)**Douglas
                  N. Dixon
              
              
              375,000
              
              
              NA
              
              
              NA
              
              $
              .06
              
              
              8/11/13
              
              
              NA
              
              $
              -
              
              
              NA
              
              $
              -150,000
              
              
              NA
              
              
              NA
              
              $
              .035
              
              
              1/28/16
              
              
              NA
              
              $
              -
              
              
              NA
              
              $
              -G.
                  Dennis Key
              
              
              1,050,000
              
              
              NA
              
              
              NA
              
              $
              .06
              
              
              8/11/13
              
              
              NA
              
              $
              -
              
              
              NA
              
              $
              -150,000
              
              
              NA
              
              
              NA
              
              $
              .035
              
              
              1/28/16
              
              
              NA
              
              $
              -
              
              
              NA
              
              $
              -




33




**Employment
      Agreements and Termination of Employment**




DND
      has
      entered into an employment agreement with its CFO, G. Dennis Key, dated July
      1,
      2003. The agreement with Mr. Key provides for Mr. Key's employment as President
      and CEO of ASI, and also provides for Mr. Key's appointment to the Board of
      Directors of both the Company and ASI. This agreement is terminable by Mr.
      Key
      with cause only upon 30 days written notice, and by the Company with cause
      only
      upon 14 days written notice. Under the agreement, Mr. Key receives an
      annual base salary equal to $150,000, and receives certain benefits and bonuses
      as described in the agreement.




Pursuant
      to a separate agreement, Mr. Key has an option to acquire 4,933,333 out of
      the DND shares owed by Mr. Dixon. The exercise price of such options is $1
      per
      share. On September 1, 2005, ASI entered into a consulting agreement with Mr.
      Dixon that terminates on November 30, 2006. The consulting services being
      provided include various sales and marketing services valued at $24,100.




**Director
      Compensation**




Members
      of the Board of Directors do not generally receive any cash compensation for
      their service as Directors but Mr. Giffhorn was awarded stock options in 2005
      and 2006 as compensation for Board service. All expenses incurred by directors
      for meeting attendance or out of pocket expenses connected directly with their
      Board representation are reimbursed by DND.




Director
      liability insurance may be provided to all members of the Board of Directors.
      DND has not yet obtained such insurance and is currently checking into specifics
      for available cost and coverage. A specific time frame to obtain the insurance
      has not been set. No differentiation is made in the compensation of "outside
      directors" and those employees of DND serving in that capacity.




**Director
      Compensation**




**Name**
            
            **Fees**
              **Earned**
              **or
                Paid**
              **in
                Cash**
              **($)**
            
            **Stock**
              **Awards**
              **($)**
            
            **Option
                Awards**
              **($)**
            
            **Non-Equity**
              **Incentive
                Plan**
              **Compensation**
              **($)**
            
            **Nonqualified
                Deferred Compensation Earnings**
              **($)**
            
            **All
                Other**
              **Compensation**
              **($)**
            
            **Total**
              **($)****(a)**
            
            **(b)**
            
            **(c)**
            
            **(d)**
            
            **(e)**
            
            **(f)**
            
            **(g)**
            
            **(h)**Douglas
                N. Dixon(1)
            
            $
            0
            
            $
            0
            
            $
            0
            
            $
            0
            
            $
            0
            
            $
            0
            
            $
            0G.
                Dennis Key(1)
            
            
            -
            
            
            -
            
            
            0
            
            
            -
            
            
            -
            
            
            -
            
            
            0Lowell
                Giffhorn
            
            
            -
            
            
            -
            
            
            5,250
            (2)
            
            -
            
            
            -
            
            
            -
            
            
            5,250





(1)
            Mr.
                Dixon and Mr. Key did not receive any compensation for their service
                as
                directors during our fiscal year ended December 31, 2006. All compensation
                received for their service as officers of the Company are reflected
                in the
                Summary Compensation Table above.


(2)
            As
                of December 31, 2006, Mr. Giffhorn held options to purchase 250,000
                shares
                of our common stock.





34




**ITEM
                  11.**
            **SECURITY
                  OWNERSHIP
                  OF CERTAIN
                  BENEFICIAL
                  OWNERS
                  AND MANAGEMENT
                  AND RELATED
                  STOCKHOLDER
                  MATTERS**




As
      of
      April 11, 2007, there were 26,234,653 common shares outstanding. The following
      tabulates holdings of shares of DND by each person who, subject to the above,
      as
      of April 11, 2007, holds of record or is known by management to own beneficially
      more than 5.0% of the common shares and, in addition, by all directors and
      officers of DND individually and as a group.




SHARE
                OWNERSHIP AS OF APRIL 11, 2007Name
                and Address of
              Beneficial
                Owner(1)
            
            Amount
                of
              Common
                Shares Owned
            
            Options
                Exercisable Within 60 Days of April 11, 2007
            
            Total
                Shares Beneficially Owned
            
            Percent
                of
              Common
                Shares Owned(2)Douglas
                Dixon, Chairman of the Board, Chief Executive Officer and
                President
            
            
            14,025,000
            
            
            675,000
            
            
            14,700,000
            
            
            54.6
            %G.
                Dennis Key, Chief Financial Officer and Director
            
            
            1,100,000
            
            
            6,283,333
            (3)
            
            7,383,333
            
            
            22.7
            %Lowell
                Giffhorn, Director
            
            
            260,000
            
            
            400,000
            
            
            660,000
            
            
            2.5
            %Ronny
                Baker, Controller
            
            
            10,000
            
            
            100,000
            
            
            110,000
            
            
            *All
                Officers and Directorsas
                a group (4 persons)
            
            
            15,395,000
            
            
            2,525,000
            
            
            17,920,000
            
            
            62.3
            %





*
            Less
                than one percent of the outstanding Common
                Stock.





(1)
            Except
                as otherwise noted, the address for each of these individuals is
                c/o DND
                Technologies, Inc., 375 E. Elliot Road, Bldg. 6, Chandler, Arizona
                85225.




(2)
            Percentage
                ownership is based on 26,234,653 shares of Common Stock outstanding
                on
                April 11, 2007. Shares of Common Stock subject to stock options which
                are
                currently exercisable or will become exercisable within 60 days after
                April 11, 2007 are deemed outstanding for computing the percentage
                ownership of the person or group holding such options, but are not
                deemed
                outstanding for computing the percentage ownership of any other person
                or
                group.




(3)
            In
                addition to options to purchase 1,200,000 shares granted to him under
                the
                2003 Option Plan, Mr. Key has an immediately exercisable option to
                acquire
                4,933,333 shares out of the DND shares owed by Mr. Dixon. The exercise
                price of such options is $1 per share. These 4,933,333 shares are
                included
                in both Mr. Dixon’s and Mr. Key’s number and percent of common stock
                beneficiary owned, but are only included once in the calculation
                of common
                stock beneficially owned by all officers and directors as a group.




35




**ITEM
                12.**
              **CERTAIN
                  RELATIONSHIPS
                  AND RELATED
                  TRANSACTIONS,
                  AND
                  DIRECTOR
                  INDEPENDENCE**


On
      December 31, 1997 and March 6, 1998, the Company borrowed a total of $120,000
      from Douglas Dixon through two promissory notes. These notes are unsecured
      and
      were due on December 31, 1998. The notes have not been repaid and are accruing
      interest at 7%, compounded daily, with accrued interest totaling approximately
      $69,000 at December 31, 2006. The notes are payable on demand, and, while it
      is
      unlikely that Mr. Dixon will require payment in the foreseeable future, if
      he
      were to do so, the Company may have difficulty repaying the notes immediately.
      On August 24, 2005, the Company borrowed $125,000 from Mr. Dixon through a
      promissory note, which was repaid during 2006. During the past two years, no
      other amounts have been loaned to DND by officers, directors or major
      shareholders of the Company.




Using
      the
      standards of the NASDAQ Capital Market, which listing standards are not
      applicable to the Company, the Company's Board has determined that only Mr.
      Giffhorn would qualify under such standards as an independent director. Mr.
      Giffhorn would meet the NASDAQ Capital Market listing standards for independence
      both as a director and as a member of the Audit Committee. No other directors
      would be independent. The Company did not consider any relationship or
      transaction between itself and Mr. Giffhorn not already disclosed in this report
      in making this determination.


**ITEM
                13.**
              ****EXHIBITS,
                  FINANCIAL
                  STATEMENTS
                  AND REPORTS
                  ON FORM 8-K****




(a)
            The
                following documents are filed as part of this
                report:




Page
                  Number1.
              Financial
                  Statements:Report
                  of Independent Auditors
              F-1Consolidated
                  Balance Sheets at December 31, 2006
              F-2Consolidated
                  Statements of Operations for each of the two yearsended
                  December 31, 2006
              F-3Consolidated
                  Statements of Stockholders' Deficit for each of the two
                  yearsended
                  December 31, 2006
              F-4Consolidated
                  Statements of Cash Flows for each of the two yearsended
                  December 31, 2006
              F-5Notes
                  to Consolidated Financial Statements
              F-7Exhibits
                  included or incorporated herein: See Exhibit Index.




36




**INDEPENDENT
      REGISTERED PUBLIC ACCOUNTING FIRM**


To
        the
        Board of Directors and Stockholders of
 DND
        Technologies, Inc.:
 
 We
        have
        audited the accompanying consolidated balance sheet of DND Technologies,
        Inc.
        (the “Company”) as of December 31, 2006 and the related consolidated statements
        of operations, stockholders’ equity, and cash flows for the years ended December
        31, 2006 and 2005. These consolidated financial statements are the
        responsibility of the Company’s management. Our responsibility is to express an
        opinion on these financial statements based on our audits.
 
 We
        conducted our audits in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audit to obtain reasonable assurance about whether the financial
        statements are free of material misstatement. An audit includes examining,
        on a
        test basis, evidence supporting the amounts and disclosures in the financial
        statements. An audit also includes assessing the accounting principles used
        and
        significant estimates made by management, as well as evaluating the overall
        financial statement presentation. We believe that our audits provide a
        reasonable basis for our opinion.
 
 In
        our
        opinion, the accompanying consolidated financial statements present fairly,
        in
        all material respects, the financial position of the Company as of December
        31,
        2006, and the results of its operations and its cash flows for the years
        ended
        December 31, 2006 and 2005 in conformity with accounting principles generally
        accepted in the United States.
 
 The
        accompanying consolidated financial statements have been prepared assuming
        that
        the Company will continue as a going concern. As discussed in the notes to
        the
        financial statements, the Company has incurred a loss of approximately
        $1,893,000 in the current year, has negative working capital of approximately
        $8,600,000, and is in default on the majority of its term debt. These matters
        raise substantial doubt about the Company’s ability to continue as a going
        concern. Management’s plans concerning these matters are also described in the
        notes to the consolidated financial statements. The consolidated financial
        statements do not include adjustments that might result from the outcome
        of this
        uncertainty.
 
 /s/
        Farber Hass Hurley & McEwen LLP
 February
        28, 2007
 Camarillo,
        California
  F-1
  **DND
        TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        BALANCE SHEET**
 **DECEMBER
        31, 2006**
 ASSETSCURRENT
                    ASSETS:Cash
                    and cash equivalents
                
                $
                6,206Accounts
                    receivable, net
                
                
                463,307Inventories,
                    net
                
                
                317,677Prepaid
                    expenses
                
                
                31,748Total
                    current assets
                
                
                818,938PROPERTY
                    AND EQUIPMENT, Net of accumulated depreciation
                
                
                103,153LICENSE
                    AGREEMENTS, Net of accumulated amortization
                
                
                83,929OTHER
                
                
                21,816TOTAL
                    ASSETS
                
                $
                1,027,836LIABILITIES
                    AND STOCKHOLDERS' DEFICITCURRENT
                    LIABILITIES:Notes
                    payable, current portion
                
                $
                1,081,176Capital
                    leases payable, current portion
                
                
                14,183Accounts
                    payable and accrued expenses
                
                
                1,805,972Deposits
                    from customers
                
                
                115,353Payables,
                    Lam Research Corporation
                
                
                3,555,317License
                    and royalty payable, Axcelis
                
                
                2,598,523Amounts
                    due to related party
                
                
                276,802Total
                    current liabilities
                
                
                9,447,326LONG
                    TERM LIABILITIES:Capital
                    leases payable, long term portion
                
                
                11,211STOCKHOLDERS'
                    DEFICIT:Preferred
                    stock, par value, $.001 per share;authorized,
                    10,000,000 shares;issued
                    and outstanding, -0- shares
                
                
                -Common
                    stock, par value, $.001 per share;authorized,
                    50,000,000 shares;issued
                    and outstanding, 26,234,653 shares
                
                
                26,235Paid-in
                    capital
                
                
                2,386,795Accumulated
                    deficit
                
                
                (10,843,731
                )Total
                    stockholders' deficit
                
                
                (8,430,701
                )TOTAL
                    LIABILITIES AND STOCKHOLDERS' DEFICIT
                
                $
                1,027,836
 
 See
        accompanying notes.
  F-2
  **DND
        TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF OPERATIONS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2006 AND 2005**
 **2006**
                
                **2005**REVENUE:Systems
                    and chillers
                
                $
                3,847,317
                
                $
                9,173,146Parts,
                    assemblies and consumables
                
                
                3,074,036
                
                
                4,378,446Field
                    service and training
                
                
                169,629
                
                
                202,133Total
                    revenue
                
                
                7,090,982
                
                
                13,753,725OPERATING
                    EXPENSES:Cost
                    of revenues
                
                
                5,313,598
                
                
                10,112,924Reserve
                    for slow moving and obsolete inventory
                
                
                198,539
                
                
                258,850Research
                    and development
                
                
                211,532
                
                
                166,923Sales
                    and marketing, including license fees,royalties
                    and commissions
                
                
                1,539,905
                
                
                2,514,769General
                    and administrative
                
                
                1,333,280
                
                
                1,814,614Impairment
                    of license agreement
                
                
                0
                
                
                2,705,013Loan
                    fees
                
                
                0
                
                
                295,094Total
                    operating expenses
                
                
                8,596,854
                
                
                17,868,187INCOME
                    (LOSS) FROM OPERATIONS
                
                
                (1,505,872
                )
                
                (4,114,462
                )OTHER
                    INCOME (EXPENSE):Gain
                    on sale of assets
                
                
                29,046
                
                
                0Gain
                    on settlement of debt
                
                
                0
                
                
                17,500Interest
                    expense
                
                
                (415,224
                )
                
                (462,600
                )OTHER
                    INCOME (EXPENSE)
                
                
                (386,178
                )
                
                (445,100
                )Income
                    (loss) before income tax expense
                
                
                (1,892,050
                )
                
                (4,559,562
                )INCOME
                    TAX
                
                
                800
                
                
                800NET
                    INCOME (LOSS)
                
                $
                (1,892,850
                )
                $
                (4,560,362
                )NET
                    INCOME (LOSS) PER COMMON SHARE:Basic
                    and diluted
                
                $
                (.07
                )
                $
                (.18
                )WEIGHTED
                    AVERAGE NUMBER OF COMMON SHARESOUTSTANDING
                    AND SUBSCRIBED:Basic
                    and diluted
                
                
                26,234,653
                
                
                25,062,543
  See
        accompanying notes.
 
 F-3
  **DND
        TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF STOCKHOLDERS' DEFICIT**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2006 AND 2005**
 
 Stock
                  Subscribed
              
              Common
                  Stock
              
              Paid-In
              
              AccumulatedShares
              
              Amount
              
              Shares
              
              Amount
              
              Capital
              
              Deficit
              
              TotalBALANCE,JANUARY
                  1, 2005
              
              
              1,100,000
              
              $
              55,000
              
              
              23,000,000
              
              $
              23,000
              
              $
              1,957,160
              
              $
              (4,390,519
              )
              $
              (2,355,359
              )COMMON
                  STOCKISSUED
                  FORACCRUEDEXPENSES
              
              
              -
              
              
              -
              
              
              365,000
              
              
              365
              
              
              73,135
              
              
              -
              
              
              73,500COMMON
                  STOCKISSUED
                  FORPREPAIDEXPENSES
              
              
              -
              
              
              -
              
              
              1,190,478
              
              
              1,190
              
              
              248,810
              
              
              -
              
              
              250,000COMMON
                  STOCKISSUED
                  UPONEXERCISE
                  OFOPTIONS
              
              
              -
              
              
              -
              
              
              579,175
              
              
              580
              
              
              34,170
              
              
              -
              
              
              34,750COMMON
                  STOCKISSUED
                  FROMSTOCKSUBSCRIBED
              
              
              (1,100,000
              )
              
              (55,000
              )
              
              1,100,000
              
              
              1,100
              
              
              53,900
              
              
              -
              
              
              -NET
                  (LOSS)
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (4,560,362
              )
              
              1,235,022BALANCE,DECEMBER
                  31, 2005
              
              
              -
              
              
              -
              
              
              26,234,653
              
              
              26,235
              
              
              2,367,175
              
              
              (8,950,881
              )
              
              (6,557,471
              )ISSUANCE
                  OF STOCKOPTIONS
                  FORDIRECTORCOMPENSATION
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              19,620
              
              
              -
              
              
              19,620NET
                  (LOSS)
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (1,892,850
              )
              
              (1,892,850
              )BALANCE,DECEMBER
                  31, 2006
              
              
              -
              
              
              -
              
              
              26,234,653
              
              $
              26,235
              
              $
              2,386,795
              
              $
              (10,843,731
              )
              $
              (8,430,701
              )
 
 See
        accompanying notes.
  F-4
  **DND
        TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2006 AND 2005**
 
 **2006**
              
              **2005**CASH
                  FLOWS FROM OPERATING ACTIVITIES:Net
                  income (loss)
              
              $
              (1,892,850
              )
              $
              (4,560,362
              )Adjustments
                  to reconcile net income (loss) to net cash (used) provided by operating
                  activities:Depreciation
                  and Amortization
              
              
              56,728
              
              
              172,409Amortization
                  of licenses
              
              
              22,775
              
              
              553,062Issuance
                  of stock options for director compensation
              
              
              19,620
              
              
              0Legal
                  expenses and late fees paid by the issuance of debt
              
              
              80,164
              
              
              0Provision
                  for slow moving and obsolete inventories
              
              
              198,539
              
              
              258,850Impairment
                  of license agreement
              
              
              0
              
              
              2,705,013Common
                  stock issued for payment of loan fees, expensed
              
              
              0
              
              
              250,000Gain
                  on sale of asset
              
              
              (29,046
              )
              
              0Gain
                  on settlement of debt
              
              
              0
              
              
              (17,500
              )Changes
                  in operating assets and liabilities:Accounts
                  receivable
              
              
              980,114
              
              
              1,003,608Inventories
              
              
              1,274,646
              
              
              892,623Prepaid
                  expenses and other assets
              
              
              77,775
              
              
              (44,252
              )Accounts
                  payable and accrued expenses
              
              
              (11,785
              )
              
              (742,945
              )Deposits
                  from customers
              
              
              (317,419
              )
              
              (670,147
              )Amounts
                  due to related parties
              
              
              (170,475
              )
              
              26,877Net
                  cash provided (used) by operating activities
              
              
              288,786
              
              
              (172,764
              )CASH
                  FLOWS FROM INVESTING ACTIVITIES:Purchases
                  of property and equipment
              
              
              0
              
              
              (21,242
              )Proceeds
                  from the sale of assets
              
              
              29,046
              
              
              0Net
                  cash provided (used) by investing activities
              
              
              29,046
              
              
              (21,242
              )CASH
                  FLOWS FROM FINANCING ACTIVITIES:Exercise
                  of common stock options
              
              
              0
              
              
              34,750Proceeds
                  from issuance of debt
              
              
              0
              
              
              525,000Proceeds
                  from issuance of debt, related party
              
              
              80,000
              
              
              125,000Principal
                  payments on long-term debt
              
              
              (600,174
              )
              
              (393,684
              )Principal
                  payments on debt, related party
              
              
              (183,750
              )
              
              (21,250
              )Net
                  cash provided (used) by financing activities
              
              
              (703,924
              )
              
              269,816NET
                  INCREASE IN CASH AND CASH EQUIVALENTS
              
              
              (386,092
              )
              
              75,810CASH
                  AND CASH EQUIVALENTS, BEGINNING OF YEAR
              
              
              392,298
              
              
              316,488CASH
                  AND CASH EQUIVALENTS, END OF YEAR
              
              $
              6,206
              
              $
              392,298
 
 **(Continued)**
  F-5
  **DND
        TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS (CONTINUED)**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2006 AND 2005**
 
 **2006**
              
              **2005**SUPPLEMENTARY
                  DISCLOSURE OFCASH
                  FLOW INFORMATION:Cash
                  paid for interest
              
              $
              127,508
              
              $
              198,339Cash
                  paid for taxes
              
              $
              0
              
              $
              0SCHEDULE
                  OF NON-CASH INVESTINGAND
                  FINANCING ACTIVITIES:Common
                  stock issued for accrued and current periodexpenses
              
              $
              0
              
              $
              323,500Acquisition
                  of fixed asset through capital lease
              
              $
              0
              
              $
              22,732
  See
        accompanying notes.
  F-6
  **DND
        TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **DECEMBER
        31, 2006**
  1.  GENERAL
  **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
        Advanced 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.
  **Basis
        of Presentation and**  **Principles
        of Consolidation** - 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 $1,893,000
        for
        the year ended December 31, 2006 and a loss of approximately $4,560,000 (which
        includes a $2,705,013 charge for impairment of the Lam license agreement)
        in the
        year ended December 31, 2005. Revenues for the year ended December 31, 2006
        are
        down approximately 48% from the prior year; the Company has negative working
        capital of approximately $8,600,000, and is in default on the majority of
        its
        term debt. In addition, on March 6, 2006, the Company received a notice of
        termination of its license agreement with Lam Research Corporation (“Lam”). The
        termination of the license agreement is currently troublesome but not expected
        to have long term material impact on sales. The parts purchased pursuant
        to the
        Lam Agreement are not typically purchased from Lam, but from certain of the
        Company's other vendors. The parts that the Company historically purchased
        directly from Lam are for the support of Rainbow and TCP products, which
        were
        not covered by the Lam Agreement. Earlier, Lam entered the refurbishing market
        directly, which has had some impact on the Company’s revenue. The Company’s most
        significant cause of revenue reduction during this year, however, is defined
        by
        the action which was taken by the Company against Lam. During
        the second quarter of 2006, the Company filed a lawsuit against Lam as a
        result
        of long-standing contract disputes between Aspect and Lam . **  ** Management
        is confident that the complaint
        is justified, and that
        the
        Company has suffered substantial damages. Recently,
        the lawsuit was removed to federal court and Lam has filed a motion to dismiss,
        challenging the adequacy of the non-contract causes of action. The Company
        is
        vigorously opposing the motion to dismiss. The
        Company’s going concern issue and pending litigation with Lam have impacted the
        Company’s sales, as certain of the Company’s customers are now reluctant to
        order systems, believing that there is a risk that any deposit may be lost
        if
        the Company is unable to continue operations. This circumstance greatly hampers
        the Company’s ability to capitalize on the opportunities of a growing market.
        The Company and Lam are currently in discussions to seek an amicable resolution
        of the mutual defaults that have occurred under both the original and the
        amended agreement, although management cannot be certain that these discussions
        will result in a favorable resolution. These factors raise substantial doubt
        as
        to the Company’s ability to continue as a going concern. The consolidated
        financial statements do not include any adjustments relating to the
        recoverability and classification of recorded asset amounts or the amounts
        and
        classification of liabilities that might be necessary should the Company
        be
        unable to continue as a going concern. The Company's continuation as a going
        concern is dependent upon its ability to generate sufficient cash flow to
        meet
        its obligations on a timely basis, to obtain additional financing or refinancing
        as may be required, settlement of the Lam lawsuit in favorable terms to the
        Company, and ultimately to attain profitable operations.
  F-7
 
 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.
  **Cash
        and Cash Equivalents** - For
        purposes of the statement of cash flows, the Company considers all highly
        liquid
        debt instruments purchased with an original maturity of three months or less
        to
        be cash equivalents.
  **Accounts
        Receivable** -
        Accounts receivable are reported at the customers’ outstanding balances less any
        allowance for doubtful accounts. Interest is not accrued on overdue accounts
        receivable. ASI does require advance payments on certain orders of large
        systems, which are classified as “Deposits from customers” in the accompanying
        balance sheet.
  **Allowance
        for Doubtful Accounts** - The
        allowance for doubtful accounts on accounts receivable is charged to income
        in
        amounts sufficient to maintain the allowance for uncollectible accounts at
        a
        level management believes is adequate to cover any probable losses. Management
        determines the adequacy of the allowance based on historical write-off
        percentages and information collected from individual customers. Accounts
        receivable are charged off against the allowance when collectibility is
        determined to be permanently impaired (bankruptcy, lack of contact, age of
        account, etc.)
  **Inventory** -
        Inventory is valued at the lower of cost or market. Cost is determined on
        the
        first-in, first-out method. Cost includes raw material, labor and manufacturing
        overhead. Inventory with no sales or usage within the prior 12 months and
        inventory in excess of a 12 month supply, is considered excessive and
        slow-moving and, accordingly, fully reserved (see Note 3). The reserves are
        evaluated on a quarterly basis and adjusted for the full carrying value of
        obsolete, excessive and slow-moving inventory.
  **License
        Agreements** - The
        Company has license agreements, which are being amortized using the
        straight-line method over the life of the contracts with Axcelis Technologies,
        Inc. (“Axcelis”) (7 years). See Note 6.
  **Property
        and Equipment** -
        Property and equipment are stated at cost. Major renewals and improvements
        are
        charged to the asset accounts while replacements, maintenance and repairs,
        which
        do not improve or extend the lives of the respective assets, are expensed.
        At
        the time property and equipment are retired or otherwise disposed of, the
        assets
        and related accumulated depreciation accounts are relieved of the applicable
        amounts. Gains or losses from retirements or sales are credited or charged
        to
        income.
  Depreciation
        is provided for by the accelerated and straight-line methods over the following
        estimated useful lives:
 Office
                    furniture, fixtures and equipment
                
                
                5-7
                    YearsLeasehold
                    improvements and capital leases
                
                
                Term
                    of leaseMachinery
                    and equipment
                
                
                7
                    YearsLaboratory
                    tools
                
                
                7
                    YearsSoftware
                
                
                3
                    Years
  F-8
  **Long
        Lived Assets** - The
        Company reviews its long-lived assets for impairment whenever events or changes
        in circumstances indicate that the historical cost-carrying value of an asset
        may no longer be appropriate. The Company assesses recoverability of the
        carrying value of an asset by estimating the future net cash flows expected
        to
        result from the asset, including eventual disposition. If the future net
        cash
        flows are less than the carrying value of the asset, an impairment loss is
        recorded equal to the difference between the asset’s carrying value and fair
        value. The Company did not record any impairment loss in the year ended December
        31, 2006. However, due to the termination of the Lam agreement (see Note
        5), the
        Company recognized an impairment loss for the unamortized value as of December
        31, 2005 ($2.7 million) of its Lam license agreement.
  **Product
        Warranty Provision** - ASI
        provides a warranty provision on sales of its systems to cover anticipated
        repairs and/or replacement. This warranty ranges from ninety days to twelve
        months from date of acceptance and varies in amount accrued per
        system.
  A
        summary
        of the warranty liability is as follows:
 Balance
                    January 1, 2006
                
                $
                398,039Addition
                    to warranty liability
                
                
                237,192Expired
                    warranties
                
                
                (225,543
                )Payment
                    of warranty costs
                
                
                (157,355
                )Balance,
                    December 31, 2006
                
                $
                252,333
  **Preferred
        Stock** - The
        Company has approved the creation of a Preferred Stock. As of this date,
        no
        terms or rights attributable to this stock have been created.
  **Revenue
        Recognition Policy** - 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 in Financial Statements,” (SAB 104). Revenues are recorded
        under two categories:
  Product
        sales - The Company recognizes revenue when the goods are shipped and title
        passes to its customers.
  Service
        income - The Company recognizes revenue from service income when services
        are
        performed and completed.
  **Shipping
        and Handling Costs** - The
        Company’s policy is to classify shipping and handling costs as part of cost of
        goods sold in the statement of operations.
  **Advertising** - The
        Company expenses all advertising as incurred. For the years ended December
        31,
        2006 and 2005, the Company charged to operations $0 and $576,
        respectively.
  **Research
        and Development Costs** - Costs
        incurred in research and development are expensed as incurred.
  **Income
        Taxes** -
        Provisions for income taxes are based on taxes payable or refundable for
        the
        current year and deferred taxes on temporary differences between the amount
        of
        the taxable income and pretax financial income and between the tax basis
        of
        assets and liabilities and their reported amounts in the financial statements.
        Deferred tax assets and liabilities are included in the financial statements
        at
        currently enacted income tax rates applicable to the period in which the
        deferred tax assets and liabilities are expected to be realized or settled
        as
        prescribed in FASB Statement No. 109, “Accounting for Income Taxes”. As changes
        in tax laws or rates are enacted, deferred tax assets and liabilities are
        adjusted through the provision for income taxes.
  F-9
  **Net
        Income (Loss) Per Share -** Basic
        income (loss) per common share is computed by dividing net income available
        to
        common stockholders by the weighted-average number of common shares outstanding
        during the period. Diluted income per common share is computed by dividing
        net
        income available to common stockholders by the weighted-average number of
        common
        shares outstanding plus an assumed increase in common shares outstanding
        for
        potentially dilutive securities, which consist of options. Potentially dilutive
        shares are excluded from the computation in loss periods, as their effect
        would
        be anti-dilutive. The dilutive effect of options to acquire common stock
        is
        measured using the treasury stock method. ** The
        dilutive effect of potentially issuable securities was 4,325,883 shares and
        2,198,677 shares for the years ended December 31, 2006 and 2005,
        respectively.
  **Concentration
        of Risk** -
        Financial instruments which potentially subject the Company to concentrations
        of
        credit risk consist principally of cash and trade accounts receivable.
  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 December 31, 2006, the Company had three customers
        whose balances exceeded 10% of gross accounts receivable, 27%, 11% and 10%,
        respectively.
  **Significant
        Customers -** For
        the
        year ended December 31, 2006, the Company had one customer whose revenues
        exceeded 10% of total revenues (14%). For the year ended December 31, 2005,
        the
        Company had two customers whose revenues exceeded 10% of total revenues (15%
        and
        13%). Revenues in 2006 and 2005 outside the United States include  Europe
        15% and 5%, and Asia 18% and 29%, respectively.
  **Significant
        Suppliers** - For
        the year ended December 31, 2006 and 2005, approximately 5% and 21% **,** respectively, of gross inventory purchases were purchased from Lam Research
        Corporation (“Lam”). On March 6, 2006, the Company received a notice of
        termination of its license agreement with Lam. However, the parts purchased
        pursuant to the Lam Agreement are not typically purchased from Lam, but from
        certain of the Company's other vendors. The parts that the Company historically
        has purchased directly from Lam are for the support of Rainbow and TCP products,
        which were not covered by the Lam Agreement.
  **Use
        of Estimates** - The
        preparation of consolidated financial statements in conformity with accounting
        principles generally accepted in the United States of America requires
        management to make certain estimates and assumptions that affect the reported
        amounts and timing of revenues and expenses, the reported amounts and
        classification of assets and liabilities, and disclosures of contingent assets
        and liabilities. These estimates and assumptions are based on the Company’s
        historical results as well as management’s future expectations. The Company’s
        actual results could vary materially from management’s estimates and
        assumptions.
  **Disclosure
        About Fair Value of Financial Instruments** - The
        Company estimates that the fair value of all financial instruments as of
        December 31, 2006, as defined by FASB 107, does not differ materially from
        the
        aggregate carrying values of its financial instruments recorded in the
        accompanying consolidated balance sheet. The estimated fair value amounts
        have
        been determined by the Company using available market information and
        appropriate valuation methodologies. Considerable judgment is required in
        interpreting market data to develop the estimates of fair value, and
        accordingly, the estimates are not necessarily indicative of the amounts
        that
        the Company could realize in a current market exchange.
  F-10
  **Stock
        Based Compensation** - Effective January 1, 2006, the Company adopted SFAS No. 123(R),
“Share-Based Payment: An Amendment of FASB Statements No. 123 and 95” using
        the modified prospective method. Under this method, compensation cost is
        recognized on or after the effective date for the portion of outstanding
        awards,
        for which the requisite service has not yet been rendered, based on the grant
        date fair value of those awards. Prior to January 1, 2006, the Company
        accounted for employee stock options using the intrinsic value method in
        accordance with Accounting Principles Board (“APB”) Opinion No. 25 (“APB
        No. 25”), “Accounting for Stock Issued to Employees,” and adopted the
        disclosure only alternative of SFAS No. 123. For stock-based awards issued
        on or after January 1, 2006, the Company recognizes the compensation cost
        on a straight-line basis over the requisite service period for the entire
        award.
        Measurement and attribution of compensation cost for awards that are unvested
        as
        of the effective date of SFAS No. 123(R) are based on the same
        estimate of the grant-date or modification-date fair value and the same
        attribution method used under SFAS No. 123.
  On
        November 10, 2005, the Financial Accounting Standards Board (“FASB”) issued
        FASB Staff Position No. FAS 123(R)-3 “Transition Election Related to
        Accounting for Tax Effects of Share-Based Payment Awards.” The Company has
        elected to adopt the alternative transition method provided in the FASB Staff
        Position for calculating the tax effects of stock-based compensation pursuant
        to
        SFAS 123(R). The alternative transition method includes simplified methods
        to
        establish the beginning balance of the additional paid-in capital pool (“APIC
        pool”) related to the tax effects of employee stock-based compensation, and to
        determine the subsequent impact on the APIC pool and Consolidated Statements
        of
        Cash Flows of the tax effects of employee stock-based compensation awards
        that
        are outstanding upon adoption of SFAS 123(R). As the Company is currently
        in a
        net operating loss position and has placed valuation allowances on its net
        deferred tax assets, there is no net impact on the Company’s APIC pool related
        to stock-based compensation for the year ended December 31,
        2006.
  Had
        the
        compensation costs for the Company’s options been determined based on the fair
        value at the grant date, rather than the intrinsic-value-method, the proforma
        amounts would be as follows. Included in the proforma stock-based compensation
        expense for the year ended December 31, 2005 in the table below is the expense
        associated with the Company’s decision to accelerate all of its stock options
        during the year ended December 31, 2005. The Company believes that no further
        compensation expense will be required in future periods associated with the
        affected options.
  The
        pro
        forma amount for the year ended December 31, 2005 does not include a tax
        benefit on the stock compensation due to the deferred income tax valuation
        allowance recorded by the Company in the period.
  Net
                  income (loss):As
                  reported
              
              $
              (4,560,362
              )Proforma
              
              $
              (4,700,442
              )Net
                  Income per common stock share:Basic
                  and diluted:As
                  reported
              
              $
              (.18
              )Proforma
              
              $
              (.19
              )
  The
        Company estimated the fair value of each stock option at the grant date using
        the Black-Scholes option pricing model based on the following
        assumptions:
  Year
                  Ended December 31,2006
              
              2005Risk-free
                  interest rate
              
              
              4.5
              %
              
              5
              %Volatility
              
              
              100.39
              %
              
              200
              %Option
                  life, years
              
              
              10
              
              
              10Dividends
              
              
              -0-
              
              
              -0-Fair
                  value of options granted
              
              $
              19,620
              
              $
              104,000Weighted-average
                  estimated values of options granted
              
              $
              0.0327
              
              $
              0.16
  F-11
  **Recently
        Issued Accounting Pronouncements** -
  In
        February 2007, the FASB issued SFAS No. 159, which permits entities to choose
        to
        measure many financial instruments and certain other items at fair value.
        SFAS
        No. 159 also includes an amendment to SFAS No. 115, “Accounting for Certain
        Investments in Debt and Equity Securities” which applies to all entities with
        available-for-sale and trading securities. This Statement is effective as
        of the
        beginning of an entity’s first fiscal year that begins after November 15, 2007.
        The Company is assessing the impact of SFAS No. 159 and has not determined
        whether it will have a material impact on the Company’s results of operations or
        financial position.
  In
        September 2006, the FASB issued SFAS No. 157, “Fair Value
        Measurements.” The Statement defines fair value, establishes a framework for
        measuring fair value in generally accepted accounting principles and expands
        disclosures about fair value measurements, and does not require any new fair
        value measurements. This Statement applies under other accounting pronouncements
        that require or permit fair value measurements. The Statement is effective
        for
        the fiscal years beginning after November 15, 2007. The Company is
        assessing SFAS No. 157 and has not determined the impact the adoption of
        SFAS No. 157 will have its results of operations or financial
        position.
  In
        June 2006, the FASB issued FASB Interpretation No. 48, “Accounting for
        Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109”
(FIN 48). The interpretation clarifies the accounting for uncertainty in
        income
        taxes recognized in a company’s financial statements in accordance with SFAS
        No. 109, “Accounting for Income Taxes.” Specifically, the pronouncement
        prescribes a recognition threshold and a measurement attribute for the financial
        statement recognition and measurement of a tax position taken or expected
        to be
        taken in a tax return. The interpretation also provides guidance on the related
        de-recognition, classification, interest and penalties, accounting for interim
        periods, disclosure and transition of uncertain tax positions. The
        interpretation is effective for fiscal years beginning after December 15,
        2006. The Company is assessing FIN 48 and has not determined the impact that
        the
        adoption of FIN 48 will have on its consolidated financial
        statements.
 
 **Reclassifications** -
        Certain 2005 amounts have been reclassified to conform to 2006
        presentations.
  2.  ACCOUNTS
        RECEIVABLE
  A
        summary
        of accounts receivable and allowance for doubtful accounts is as
        follows:
  Accounts
                  receivable
              
              $
              490,373Allowance
                  for doubtful accounts
              
              
              (27,066
              )Net
                  accounts receivable
              
              $
              463,307
  F-12
  3.  INVENTORIES
  A
        summary
        of inventories and allowance for obsolescence is as follows:
 Parts
                    and materials
                
                $
                2,447,971Work-in-process
                
                
                16,036Allowance
                    for obsolescence
                
                
                (2,146,329
                )Net
                    inventories
                
                $
                317,677
  Allowance
                    for Obsolescence:Balance,
                    January 1, 2006
                
                $
                2,320,032Current
                    Period Provision
                
                
                198,539Adjustment
                    to Reserve
                
                
                (372,242
                )Balance,
                    December 31, 2006
                
                $
                2,146,329
  4.  PROPERTY
        AND EQUIPMENT
  Property
        and equipment and accumulated depreciation at December 31, 2006 consist
        of:
  Office
                  furniture, fixtures and equipment
              
              $
              364,981Leasehold
                  improvements
              
              
              444,669Machinery
                  and equipment
              
              
              288,601Laboratory
                  tools
              
              
              35,843Software
              
              
              10,0001,144,094Less
                  accumulated depreciation
              
              
              (1,040,941
              )Total
                  property and equipment
              
              $
              103,153
  5.  LICENSE
        AGREEMENT AND PAYABLES, LAM RESEARCH CORPORATION
  The
        Company is currently in default on its payments due to Lam Research Corporation
        (“Lam”); accordingly, the full amount has been classified as a current liability
        in the consolidated balance sheet. On March 6, 2006, the Company was notified
        that Lam had terminated the agreement. During
        the second quarter of 2006, the Company filed a lawsuit against Lam as a
        result
        of long-standing contract disputes between Aspect and Lam. **  ** Management
        is convinced that the complaint is justified, and that the Company
        has suffered substantial damages.  Recently, the lawsuit was removed
        to federal court and Lam has filed a motion to dismiss, challenging the adequacy
        of the non-contract causes of action. The Company is vigorously opposing
        the
        motion to dismiss .
        The
        Company’s going concern issue and pending litigation with Lam have impacted the
        Company’s sales, as certain of the Company’s customers are now reluctant to
        order systems from the Company, believing that there is a risk that any deposit
        may be lost if the Company is unable to continue operations. This circumstance
        greatly hampers the Company’s ability to capitalize on the opportunities of a
        growing market. The Company and Lam are currently in discussions to seek
        an
        amicable resolution of the mutual defaults that have occurred under both
        the
        original and the amended agreement, although management cannot be certain
        that
        these discussions will result in a favorable resolution. As a result, the
        Company recognized a full impairment of the license agreement in the amount
        of
        $2,705,013 at December 31, 2005.
  F-13
  6.  LICENSE
        AND ROYALTY PAYABLE, AXCELIS TECHNOLOGIES, INC.
  In
        November 2003, the Company entered into an agreement with Axcelis acquiring
        an
        exclusive license to all future manufacturing, sales, service, and parts
        support
        for certain dry strip semi-conductor manufacturing equipment now marketed
        under
        the ASI trade names MX-1 and MX-10 (formerly Matrix System One and System
        Ten).
        The agreement provides for the one time payment of a license fee of $150,000
        plus 18% of net revenues (from these sales) per quarter until a $2,750,000
        fee
        has been paid and a declining royalty (from 10% down to 2%) on related sales
        through December 31, 2010.
  In
        August
        2004, the Company entered into an additional agreement with Axcelis acquiring
        an
        exclusive license to manufacture, sell and provide services and parts support
        for certain reactive ion etch semiconductor manufacturing equipment for wafer
        sized up to 200mm now marketed under the ASI trade name Arista and Arista
        Dual
        (formerly Matrix Bobcat and Cheetah). The agreement provides for a quarterly
        payment equal to 18% of net revenues from the sale of this product by the
        Company, beginning with the fourth quarter of 2004 and ending December 31,
        2011,
        or until $750,000 (the license fee) has been paid, whichever occurs first,
        and
        payment of a declining royalty (from 10% down to 2%) on related sales over
        a
        period of time that ends December 31, 2011.
  Estimated
        amortization of the prepaid license fee is as follows:
  December
                  31, 2007
              
              $
              21,428December
                  31, 2008
              
              
              21,428December
                  31, 2009
              
              
              21,428Thereafter
              
              
              19,645$
              83,929
  The
        license and royalty payable at December 31, 2006 consisted of the
        following:
  License
                  payable
              
              $
              1,718,346Royalty
                  payable
              
              
              880,177Total
                  license and royalty payable
              
              
              2,598,523
  The
        Company is currently in default on its payments; accordingly, the full amount
        has been classified as a current liability in the consolidated balance sheet.
  7.  NOTES
        PAYABLE
  The
                  Company's term loan dated May 14, 2004 to Merrill Lynch was renegotiated
                  during July 2006. Under the new agreement, the Company is required
                  to make
                  monthly payments, commencing August 1, 2006, in the amount of $24,958
                  plus
                  interest (at prime + 4%), and a final balloon payment is due April
                  30,
                  2007. The loan continues to be secured by a first lien on the Company's
                  total assets ($1,027,836 as of December 31, 2006) and has been
                  guaranteed
                  by Doug Dixon, Chairman and CEO, and the Company. The Company is
                  currently
                  in default on its agreement.
              
              $
              579,326On
                  July 22, 2005 the Company entered into a Bridge Loan Agreement
                  with
                  Cornell Capital Partners LP (“Cornell”). The loan calls for interest at
                  12%. On May 1, 2006 the loan was renegotiated, under the new agreement,
                  the Company is required to make 12 monthly payments, commencing
                  May 1,
                  2006, in the amount of $12,500 to Cornell and a final balloon payment
                  in
                  the amount of $204,107 on May 1, 2007.
              
              
              212,500Unsecured
                  demand note due to an individual with interest accruing at
                  7%
              
              
              289,350Total
              
              $
              1,081,176
 
 F-14
  8.  CAPITAL
        LEASE PAYABLE
  The
        Company leases various assets under capital leases. The leases require thirteen
        to sixty monthly payments that vary from $286 to $785, including interest
        at 6%
        to 15%. The leases mature at various dates through November 2008. The assets
        have an original cost of $52,373 and a net book value of $28,356 at December
        31,
        2006.
  Future
        minimum lease payments under the leases at December 31, 2006 are as
        follows:
  December
                  31, 2007
              
              $
              16,428December
                  31, 2008
              
              
              12,199Total
              
              
              28,627Less
                  amount representing interest
              
              
              (3,233
              )25,394Less
                  current portion
              
              
              (14,183
              )Long-term
                  portion
              
              $
              11,211
  9.  ACCOUNTS
        PAYABLE AND ACCRUED EXPENSES
  A
        summary
        of accounts payable and accrued expenses is as follows:
  Trade
                  accounts payable
              
              $
              681,913Accrued
                  commissions
              
              
              120,976Accrued
                  payroll
              
              
              192,708Product
                  warranty provision
              
              
              252,333Accrued
                  interest
              
              
              545,770Sales
                  and state income taxes payable
              
              
              12,272Total
                  Accounts Payable and Accrued Expenses
              
              $
              1,805,972
 
 F-15
  10.  RELATED
        PARTY TRANSACTIONS
  Amounts
        Due to Related Party
  The
        Company has the following amounts due to its Chairman and CEO at December
        31,
        2006:
  Notes
                  payable at 7.0%
              
              $
              120,000Accrued
                  interest on notes payable
              
              
              68,921Accrued
                  salaries
              
              
              87,881Total
                  Amount Due To Related Party
              
              $
              276,802
  11.  INCOME
        TAXES
  Provision
        (Benefit)
 
 The
        provision for income taxes for the year ended December 31, 2006 and 2005
        represents primarily California franchise taxes and consists of the
        following:
 2006
                
                2005Current
                
                $
                800
                
                $
                800Deferred
                
                $
                0
                
                $
                0
  The
        Company’s income tax (benefit) provision differs from the amount computed by
        applying the Federal statutory rate to (loss) income before (benefit from)
        provision for income taxes. Reconciliation to the statutory federal income
        tax
        rate is as follows for the years ended December 31, 2006 and 2005.
 2006
                
                2005Statutory
                    federal incometax
                    (benefit) provision
                
                $
                (765,200
                )
                $
                (1,417,700
                )State
                    income taxes, net offederal
                    benefit
                
                
                800
                
                
                800Adjustment
                    (utilization) of deferred taxasset
                
                
                765,200
                
                
                1,417,700$
                800
                
                $
                800
  Deferred
        Tax Components
 
 Significant
        components of the Company’s deferred tax assets are as follows at December 31,
        2006:
  Net
                  operating loss carryforwards
              
              $
              3,294,700Timing
                  difference for expense deductions
              
              
              896,5004,191,200Less
                  valuation allowance
              
              
              (4,191,200
              )Net
                  deferred tax asset
              
              $
              0Summary
                  of valuation allowance:Balance,
                  January 1, 2006
              
              $
              3,532,415Increase
                  in valuation allowance
              
              
              658,785Balance,
                  December 31, 2006
              
              $
              4,191,200
  F-16
  In
        assessing the realizability of deferred tax assets, management considers
        whether
        it is more likely than not that some portion or the entire deferred tax asset
        is
        dependent upon the generation of future taxable income during the periods
        in
        which those temporary differences become deductible. Management considers
        the
        scheduled reversal of deferred tax liabilities, projected future taxable
        income
        and tax planning strategies in making this assessment.
  The
        Company has the following net operating loss carryforwards:
 
 Year
                  of Loss
              
              Expiration
                  Date
              
              TotalDecember
                  31, 2002
              
              
              December
                  31, 2022
              
              $
              330,724December
                  31, 2003
              
              
              December
                  31, 2023
              
              
              2,939,347December
                  31, 2005
              
              
              December
                  31, 2025
              
              
              4,169,616December
                  31, 2006
              
              
              December
                  31, 2026
              
              
              2,250,456$
              9,690,143
  12.  COMMITMENTS
        AND CONTINGENCIES
  Real
        Estate Leases
 
 The
        Company leases its Arizona and Texas facilities under operating leases which
        require monthly payments of $14,424 and $9,762 and expire in November 2007
        and
        November 2008, respectively. Rent expense for the years ended December 31,
        2006
        and 2005 was $404,966 and $428,341, respectively.
 
 Future
        minimum lease payments on the real estate leases are as follows:
 
 December
                  31, 2007
              
              $
              299,000December
                  31, 2008
              
              
              112,000$
              411,000
  13.  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 the
        Company 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.
  F-17
  14.  EMPLOYEE
        STOCK OPTIONS
  On
        August
        11, 2003, the Board of Directors and stockholders approved the DND Technologies,
        Inc. 2003 Stock Option Plan, which permits the Board of Directors to grant,
        for
        a ten year period, options to purchase up to 5,000,000 shares of its common
        stock to directors, employees and consultants. The Plan is administered by
        the
        Board of Directors. The administrators have the authority and discretion,
        subject to the provisions of the Plan, to select persons to whom stock options
        will be granted, to designate the number of shares to be covered by each
        option,
        to specify the type of consideration to be paid, and to establish all other
        terms and conditions of each option. Options granted under the Plan will
        not
        have a term that exceeds ten years from date of grant. The
        stock
        subject to the Plan and issuable upon exercise of options granted under the
        Plan
        are shares of the Company's common stock, $.001 par value, which may be either
        unissued or treasury shares. The exercise price is no less than 100% of the
        fair
        market value of the shares at the date of the grant of the options, as specified
        by the Board of Directors. As
        of
        December 31, 2005 all vesting periods have been accelerated and all options
        are
        fully vested.
  On
        June
        15, 2005, the Board of Directors and stockholders approved the DND Technologies,
        Inc. 2005 Stock Option Plan, which permits the Board of Directors to grant,
        for
        a ten year period, options to purchase up to 3,000,000 shares of its common
        stock to directors, employees and consultants. The Plan is administered by
        the
        Board of Directors. The administrators have the authority and discretion,
        subject to the provisions of the Plan, to select persons to whom stock options
        will be granted, to designate the number of shares to be covered by each
        option,
        to specify the type of consideration to be paid, and to establish all other
        terms and conditions of each option. Options granted under the Plan will
        not
        have a term that exceeds ten years from date of grant. The stock subject
        to the
        Plan and issuable upon exercise of options granted under the Plan are shares
        of
        the Company's common stock, $.001 par value, which may be either unissued
        or
        treasury shares. The exercise price is no less than 100% of the fair market
        value of the shares at the date of the grant of the options, as specified
        by the
        Board of Directors. The Company has not issued any options from this
        plan.
  During
        the years ended December 31, 2006 and 2005, the Company recognized $19,620
        and
        $0 of expense in the income statement for options issued to
        non-employees.
  For
        the
        years ended December 31, 2006 and 2005, the total options available for
        exercise, the weighted average exercise price, and the fair value of stock
        options was as follows:
  2006
              
              2005Total
                  options available for exercise
              
              
              4,325,883
              
              
              4,045,466Weighted
                  average exercise price
              
              $
              .07
              
              $
              .06Fair
                  value of options
              
              $
              200,247
              
              $
              224,233
  Included
        in the total options available for exercise are 971,369 and 129,583 options
        that
        were cancelled at December 31, 2006 and 2005, respectively, but can be exercised
        for a period of six months after cancellation.
  F-18
  A
        summary
        of the option activity for the years ended December 31, 2006 and 2005, pursuant
        to the terms of the DND Technologies, Inc. 2003 Stock Option Plan is as
        follows:
  2006
              
              2005Weighted
                  Average
              
              
              
              Weighted
                  AverageOptions
                  outstanding at beginning of the year
              
              
              3,915,883
              
              $
              .05
              
              
              4,234,226
              
              $
              .06Granted
              
              
              600,000
              
              $
              .035
              
              
              635,000
              
              $
              .16Exercised
              
              
              -
              
              
              -
              
              
              (579,175
              )
              $
              .06Cancelled
                  and expired
              
              
              (1,161,369
              )
              $
              .02
              
              
              (374,168
              )
              $
              .07Options
                  outstanding at end of the year
              
              
              3,354,514
              
              
              
              
              
              3,915,883
  Information
        regarding stock options outstanding as of December 31, 2006 is as
        follows:
  Price
              
              $
              .07Weighted
                  average exercise price
              
              $
              .07Weighted
                  average remaining contractual life
              
              
              7
                  years 2 months
  15.  401(k)
        PLAN
  In
        January 2005, the Company sponsored a qualified defined contribution benefit
        plan covering substantially all employees. Under this plan, employees may
        contribute a percentage of their annual compensation to the plan up to certain
        maximums, as defined by the plan and by the Internal Revenue Service (“IRS”).
        Currently, the Company matches a percentage of employee contributions in
        cash.
        During the years ended December 31, 2006 and 2005, the Company made
        contributions in the amount of $49,671 and $43,443 ,
        respectively. Also during the years ended December 31, 2006 and 2005, the
        Company incurred administrative costs associated with the plan in the amount
        of
        $0 and $0, respectively.
  16.  MANAGEMENT
        PLANS
  The
        consolidated financial statements do not include any adjustments relating
        to the
        recoverability and classification of recorded asset amounts or the amounts
        and
        classification of liabilities that might be necessary should the Company
        be
        unable to continue as a going concern. The Company’s continuation as a going
        concern is dependent upon its ability to generate sufficient cash flow to
        meet
        its obligations on a timely basis, to obtain additional financing or refinancing
        as may be required, and ultimately to attain profitable operations.
  Management’s
        plan to eliminate the going concern situation include, but are not limited
        to,
        the renegotiation of payment terms on the Axcelis payable, improved cash
        flow
        management, aggressive cost reductions, settlement of the Lam lawsuit in
        favorable terms to the Company, and the creation of additional sales and
        profits
        across its product lines.
  17.  SUBSEQUENT
        EVENTS (UNAUDITED)
  On
        January 27, 2007, the Company’s Board of Directors approved the issuance of
        150,000 shares of common stock to each of the board members for their continued
        service.
  F-19
  During
        March 2007, the Company fell in default on its payments to Cornell
        Capital.
  During
        March 2007, the Company made the necessary payments to bring the loan with
        Merrill Lynch current. However, the Company is still in default of certain
        provisions of the loan. Merrill Lynch has not made any demand for remediation
        of
        the defaulted provisions and no demand for payment has occurred.
  During
        April 2007, the Company received notice that its President, Mr. Dennis Key,
        is
        required to appear in a lawsuit involving one of the Company’s sales
        representatives, Mr. Sam Wanger.
  F-20




(b)
            Reports
                on Form 8-K:




None.


**ITEM
                14.**
              **PRINCIPAL
                  ACCOUNTANT
                  FEES
                  AND SERVICES**




The
      following table presents fees for professional services rendered by Farber
      Hass
      Hurley & McEwen LLP for the audit of the Company's annual consolidated
      financial statements for fiscal 2006 and 2005, and fees billed for other
      services rendered by Farber Hass Hurley & McEwen LLP:




**2006**
            
            **2005**Audit
                Fees
            
            $
            60,000
            
            $
            83,282Audit
                related fees
            
            $
            29,175
            
            $
            2,245Tax
                Fees
            
            $
            5,500
            
            $
            -0-All
                other fees
            
            $
            -0-
            
            $
            -0-**Total
                Fees**
            
            **$**
            **94,675**
            
            **$**
            **85,527**




The
      audit
      committee pre-approves all auditing and permitted non-audit services to be
      performed for the Company by its independent auditor, including the fees and
      terms of those services.




37


**SIGNATURES**




In
      accordance with Section 13 or 15(d) 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 corporationBy:
            /s/
              Douglas N. DixonDouglas
                N. Dixon
              Chief
                Executive Officer and Director




**POWER
      OF ATTORNEY**




KNOW
      ALL
      PERSONS BY THESE PRESENTS, that each person whose signature appears below
      constitutes and appoints Douglas N. Dixon, his/her attorney-in-fact, with the
      power of substitution, for him/her in any and all capacities, to sign any
      amendments to this Report on Form 10-K, and to file the same, with Exhibits
      thereto and other documents in connection therewith with the Securities and
      Exchange Commission, hereby ratifying and confirming all that said
      attorney-in-fact, or substitute or substitutes may do or cause to be done by
      virtue hereof.




Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed below by the following persons on behalf of the Registrant and in the
      capacities and on the dates indicated:




**Signature**
            
            **Title**
            
            **Date**/s/
                Douglas N. Dixon
              
              Douglas
                N. Dixon
            
            Chief
                Executive Officer and Director
            
            April
                16, 2007/s/
                G. Dennis Key
              G.
                Dennis Key
            
            Chief
                Financial Officer and Director
            
            April
                16, 2007/s/
                Lowell W. Giffhorn
              
              Lowell
                W. Giffhorn
            
            Director
            
            April
                16, 2007





38


**EXHIBIT
      INDEX**




**Exhibit
                No.**
            
            **Description**
            
            **Location**


2.1
            
            Agreement
                and Plan of Reorganization, dated May 15, 2002, between ASI,ZurickirchCorp. and John Chris Kirch
            
            Incorporated
                by reference, filed with the Company’s Current Report on Form
                8-K/A
                on September 27, 20022.2
            
            First
                Amendment to Agreement and Plan of Reorganization, dated August,
                2,
                2002
            
            Incorporated
                by reference, filed with the Company’s Current Report on Form
                8-K/A
                on September 27, 20023.1
            
            Restated
                Articles of Incorporation
            
            Incorporated
                by reference, filed with the Company’s Form 8-A on January 23,
                20063.2
            
            Restated
                Bylaws
            
            Incorporated
                by reference, filed with the Company’s Form SB-2 on August 3,
                20004.1
            
            2003
                Stock Option Plan
            
            Incorporated
                by reference, filed with the Company’sFormS-8onAugust
                21, 20034.2
            
            2005
                Stock Option Plan
            
            Incorporated
                by reference, filed with the Company's Form S-8 on July 1,
                200510.1
            
            Asset
                Sale and License Agreement, dated November 8, 2002, between Lam Research
                Corporation and Aspect Systems, Inc.
            
            Incorporated
                by reference, filed with the Company’s Form 10-KSB on April 15,
                200310.2
            
            Employment
                Agreement, dated June 1, 2001, between Aspect SemiQuip International,
                Inc.
                and Douglas Dixon
            
            Incorporated
                by reference, filed with the Company’s Form 10-KSB on January 27,
                200410.5
            
            Employment
                Agreement, dated July 1, 2003, betweenAspect
                Systems, Inc.
                and G.Dennis Key
            
            Incorporated
                by reference, filed with the Company’s Form 10-KSB on April 14,
                200410.6
            
            License
                Agreement, dated November 3, 2003, between Axcelis Technologies,
                Inc. and
                Aspect Systems, Inc.
            
            Incorporated
                by reference, filed with the Company’s Form 10-KSB on April 14,
                200410.7
            
            First
                Amendment to Lease, dated March 10, 2000, between Aspect Systems,
                Inc. and
                Teachers Insurance and Annuity Association
            
            Incorporated
                by reference, filed with the Company’s Form 10-KSB on April 14,
                200410.8
            
            Second
                Amendment to Lease, dated February 23, 2004, between Aspect Systems,
                Inc.
                and Teachers Insurance and Annuity Association
            
            Incorporated
                by reference, filed with the Company’s Form 10-KSB on April 14,
                2004




39




**Exhibit
                  No.**
              
              **Description**
              
              **Location**


10.9
            
            Agreement
                on Outstanding Aspect Payables, dated June 25, 2004, between Aspect
                Systems, Inc. and Lam Research Corporation
            
            Incorporated
                by reference, filed with the Company’s Form Current Report on 8-K on
                August 17, 200410.10
            
            License
                Agreement, dated August 2, 2004, between AspectSystems,
                Inc. and Axcelis Technologies, Inc.
            
            Incorporated
                by reference, filed with the Company’s Form 10-QSB on August 18,
                200410.11
            
            Term
                Loan and Security Agreement, dated May 14, 2004, between Aspect Systems,
                Inc. and Merrill Lynch Business Financial Services, Inc.
            
            Incorporated
                by reference, filed with the Company’s Current Report on Form 8-K onDecember17, 200410.12
            
            Security
                Agreement, dated May 14, 2004, between DND Technologies, Inc. and
                Merrill
                Lynch Business Financial Services, Inc.
            
            Incorporated
                by reference, filed with the Company’s Current Report on Form 8-K onDecember17, 200410.13
            
            Unconditional
                Guaranty by Douglas N. Dixon, dated May 14, 2004
            
            Incorporated
                by reference, filed with the Company’s Current Report on Form 8-K onDecember17, 200410.14
            
            Unconditional
                Guaranty by DND Technologies, Inc., dated May 14, 2004
            
            Incorporated
                by reference, filed with the Company’s Form 8-K onDecember17, 200410.15
            
            Waiver
                of Covenant Compliance from Merrill Lynch Business Financial Services,
                Inc., dated August 3, 2005
            
            Incorporated
                by reference, filed with the Company's Form 10-QSB on August 15,
                200510.16
            
            Standby
                Equity Distribution Agreement, dated June 17, 2005, by and between
                Cornell
                Capital Partners, LP and DND Technologies, Inc.
            
            Incorporated
                by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K
                as filed with the Securities and Exchange Commission on July 7,
                200510.17
            
            Registration
                Rights Agreement, dated June 17, 2005, by and between Cornell Capital
                Partners, LP and DND Technologies, Inc.
            
            Incorporated
                by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K
                as filed with the Securities and Exchange Commission on July 7,
                200510.18
            
            Placement
                Agent Agreement, dated June 17, 2005, by and between Cornell Capital
                Partners, LP and DND Technologies, Inc.
            
            Incorporated
                by reference to Exhibit 99.3 to the Company’s Current Report on Form 8-K
                as filed with the Securities and Exchange Commission on July 7,
                200510.19
            
            Escrow
                Agreement, dated June 17, 2005, by and among DND Technologies Inc.,
                Cornell Capital Partners, LP and David Gonzalez, Esq.
            
            Incorporated
                by reference to Exhibit 99.4 to the Company’s Current Report on Form 8-K
                as filed with the Securities and Exchange Commission on July 7,
                2005




40


**Exhibit
                  No.**
              
              **Description**
              
              **Location**


10.20
            
            Promissory
                Note, dated July 23, 2005, by and between DND Technologies, Inc.
                and
                Cornell Capital Partners, LP
            
            Incorporated
                by reference, filed with the Company’s Form 10-QSB on November 14,
                200510.21
            
            Promissory
                Note, dated August 24, 2005, by and between DND Technologies, Inc.
                and
                Douglas N. Dixon
            
            Incorporated
                by reference, filed with the Company’s Form 10-QSB on November 14,
                200510.22
            
            Promissory
                Note, dated August 25, 2005, by and between DND Technologies, Inc.
                and M.
                Lynn Brewer
            
            Incorporated
                by reference, filed with the Company’s Form 10-QSB on November 14,
                200510.23
            
            Consulting
                Agreement, dated September 1, 2005, by and between DND Technologies,
                Inc.
                and Douglas N. Dixon
            
            Incorporated
                by reference, filed with the Company’s Form 10-KSB on April 17,
                200610.24
            
            Proposal
                for Extension of Existing Term Loan, dated April 24, 2006, from Merrill
                Lynch Business Financial Services, Inc.
            
            Incorporated
                by reference, filed with the Company's Form 10-QSB on May 19,
                200610.25
            
            Letter
                Agreement, dated May 1, 2006, by and between DND Technologies, Inc.
                and
                Cornell Capital Partners, LP
            
            Incorporated
                by reference, filed with the Company's Form 10-QSB on May 19,
                200610.26
            
            Termination
                Letter from Lam Research Corp., dated June 1, 2006
            
            Incorporated
                by reference, filed with the Company's Form 8-K on June 13,
                200610.27
            
            Forbearance
                Agreement, dated July 17, 2006 by and among Merrill Lynch Business
                Financial Services, Inc., the Company, Aspect Systems, Inc. and Douglas
                N.
                Dixon
            
            Incorporated
                by reference, filed with the Company's Form 10-QSB on August 14,
                200710.28
            
            Letter
                Agreement dated March 14, 2007 by and among Merrill Lynch Business
                Financial Services, Inc., the Company, Aspect Systems, Inc. and Douglas
                N.
                Dixon.
            
            Filed
                herewith14
            
            Code
                of Ethics
            
            Incorporated
                by reference, filed with the Company’s Form 10-KSB on April 14,
                200421.1
            
            Subsidiaries
                of the Company
            
            Filed
                herewith




41
 
 **Exhibit
                    No.**
                
                **Description**
                
                **Location**


31.1
            
            Rule
                13(a)-14(a)/15d-14(a) Certification of Principal Executive
                Officer
            
            Filed
                herewith31.2
            
            Rule
                13(a)-14(a)/15d-14(a) Certification of Principal Financial
                Officer
            
            Filed
                herewith32
            
            Section
                1350 Certifications
            
            Filed
                herewith





42