UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q




(Mark
One)





xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED September 30,
2009





oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.





Commission File No. 000-51783





NOVINT
TECHNOLOGIES, INC.





(Exact
name of registrant as specified in its charter)





Delaware
            
            85-0461778(State
      or other jurisdiction of incorporation or
            
            (IRS
      Employer Identificationorganization)
            
            No.)





4601
Paradise Blvd., NW, Suite B


Albuquerque, NM
87114


(Address
of principal executive offices)





(866) 298-4420


(Registrant's telephone number, including area code)





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by section 13 or 15 (d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes  xNo  o





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period than the
registrant was required to submit and post such
files).  Yes oNo  o





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):





Large
      Accelerated filer  o
            Non-Accelerated
      Filer oAccelerated
      Filer o
            Smaller
      Reporting Company x





The
registrant is a shell company (as defined by Rule 12b-2 of the Exchange
Act). Yes  o     No
x




APPLICABLE
ONLY TO CORPORATE ISSUERS:





Indicate
the number of shares outstanding of each issuer's classes of common stock, as of
the latest practicable date: 33,065,397 issued and outstanding as of
November 17, 2009.









NOVINT
TECHNOLOGIES, INC.


TABLE OF
CONTENTS


TO
QUARTERLY REPORT ON FORM 10-Q


FOR
QUARTER ENDED SEPTEMBER 30, 2009




PagePART
      I
            FINANCIAL
      INFORMATIONItem
      1.
            Financial
      Statements
            1Item
      2.
            Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
            2Item
      3.
            Quantitative
      and Qualitative Disclosures About Market Risk
            8Item
      4.
            Controls
      and Procedures
            8PART
      II
            OTHER
      INFORMATIONItem
      1.
            Legal
      Proceedings
            9Item
      2.
            Unregistered
      Sales of Equity Securities and Use of Proceeds
            9Item
      3.
            Defaults
      Upon Senior Securities
            9Item
      4.
            Submission
      of Matters to a Vote of Security Holders
            9Item
      5.
            Other
      Information
            9Item
      6.
            Exhibits
            9Signatures
            10









PART
I - FINANCIAL INFORMATION





ITEM
      1.
            FINANCIAL
      STATEMENTS





Our
financial statements start on the following page, beginning with page
F-1.




1




Novint
Technologies, Inc.
 BALANCE
SHEETS
 
 September
      30, 2009
              
              
              December
      31, 2008(Unaudited)ASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
              
              $
              128,870
              
              
              $
              55,315Accounts
      receivable, net
              
              
              82,774
              
              
              
              57,170Prepaid
      expenses and other current assets
              
              
              126,585
              
              
              
              674,608Inventory
              
              
              1,134,734
              
              
              
              1,333,632Deposit
      on purchase of inventory
              
              
              8,050
              
              
              
              14,722Deposits
              
              
              -
              
              
              
              12,181Total
      current assets
              
              
              1,481,013
              
              
              
              2,147,628PROPERTY
      AND EQUIPMENT, NET
              
              
              349,299
              
              
              
              463,080DEFERRED
      FINANCING COSTS
              
              
              262,912
              
              
              
              362,247PREPAID
      EXPENSES - NET OF CURRENT PORTION
              
              
              1,491,455
              
              
              
              1,020,534SOFTWARE
      DEVELOPMENT COSTS, NET
              
              
              472,299
              
              
              
              585,682INTANGIBLE
      ASSETS, NET
              
              
              413,242
              
              
              
              680,367DEPOSITS,
      NET OF CURRENT PORTION
              
              
              -
              
              
              
              16,042Total
      assets
              
              $
              4,470,220
              
              
              $
              5,275,580LIABILITIES
      AND STOCKHOLDERS' EQUITY (DEFICIT)CURRENT
      LIABILITIES:Accounts
      payable
              
              $
              891,109
              
              
              $
              684,277Accrued
      payroll related liabilities
              
              
              621,376
              
              
              
              939,298Accrued
      expenses
              
              
              626,292
              
              
              
              323,548Accrued
      expenses - related parties
              
              
              65,290
              
              
              
              86,577Deferred
      revenue
              
              
              29,828
              
              
              
              29,662Notes
      payable, net of unamortized debt discount of$35,282
      and $69,952, respectively
              
              
              564,718
              
              
              
              230,040Notes
      payable - original issue discount, net of unamortizeddebt
      discounts of $169,070 and $0, respectively
              
              
              582,618
              
              
              
              -Total
      current liabilities
              
              
              3,381,231
              
              
              
              2,293,402LONG
      TERM LIABILITIES:Convertible
      notes payable, net of unamortized debtdiscount
      of $3,054,682 and $4,132,480, respectively
              
              
              2,107,516
              
              
              
              1,029,718Total
      liabilities
              
              
              5,488,747
              
              
              
              3,323,120COMMITMENTS
      AND CONTINGENCIESSTOCKHOLDERS'
      EQUITY (DEFICIT):Common
      stock, authorized 150,000,000 shares, $0.01par
      value; 33,065,397 and 32,259,131 shares issuedand
      outstanding, respectively
              
              
              330,655
              
              
              
              322,592Additional
      paid-in capital
              
              
              33,340,011
              
              
              
              32,026,387Accumulated
      deficit
              
              
              (34,684,588
              )
              
              
              (30,391,914
              )Accumulated
      other comprehensive loss
              
              
              (4,605
              )
              
              
              (4,605
              )Total
      stockholders' equity (deficit)
              
              
              (1,018,527
              )
              
              
              1,952,460Total
      liabilities and stockholders' equity (deficit)
              
              $
              4,470,220
              
              
              $
              5,275,580


The
accompanying notes are an integral part of these financial
statements.
  F-1




Novint
Technologies, Inc.
 STATEMENTS
OF OPERATIONS
  For
      the Three Months Ended
              
              
              For
      the Nine Months EndedSeptember
      30, 2009
              
              
              September
      30, 2008
              
              
              September
      30, 2009
              
              
              September
      30, 2008(Unaudited)
              
              
              (Unaudited)
              
              
              (Unaudited)
              
              
              (Unaudited)Revenue:Project
              
              $
              241,953
              
              
              $
              4,500
              
              
              $
              477,378
              
              
              $
              50,229Product
              
              
              113,216
              
              
              
              71,649
              
              
              
              223,464
              
              
              
              181,848Total
      revenue
              
              
              355,169
              
              
              
              76,149
              
              
              
              700,842
              
              
              
              232,077Cost
      of goods sold:Project
              
              
              145,253
              
              
              
              3,014
              
              
              
              336,711
              
              
              
              37,141Product
              
              
              193,054
              
              
              
              123,072
              
              
              
              349,596
              
              
              
              316,965Total
      cost of goods sold
              
              
              338,307
              
              
              
              126,086
              
              
              
              686,307
              
              
              
              354,106Gross
      Profit (Loss)
              
              
              16,862
              
              
              
              (49,937
              )
              
              
              14,535
              
              
              
              (122,029
              )Operating
      expensesResearch
      and development
              
              
              38,164
              
              
              
              323,649
              
              
              
              167,837
              
              
              
              918,580General
      and administrative
              
              
              703,020
              
              
              
              1,172,334
              
              
              
              1,892,000
              
              
              
              3,732,968Depreciation
      and amortization
              
              
              147,256
              
              
              
              161,416
              
              
              
              449,944
              
              
              
              379,606Sales
      and marketing
              
              
              80,132
              
              
              
              152,479
              
              
              
              164,443
              
              
              
              378,688Total
      operating expenses
              
              
              968,572
              
              
              
              1,809,878
              
              
              
              2,674,224
              
              
              
              5,409,842Loss
      from operations
              
              
              (951,710
              )
              
              
              (1,859,815
              )
              
              
              (2,659,689
              )
              
              
              (5,531,871
              )Other
      (income) expenseInterest
      income
              
              
              (2
              )
              
              
              (1,521
              )
              
              
              (13
              )
              
              
              (15,312
              )Interest
      expense
              
              
              155,508
              
              
              
              45,880
              
              
              
              410,659
              
              
              
              77,032Debt
      discounts related to notes and convertible debts
              
              
              422,614
              
              
              
              431,264
              
              
              
              1,211,859
              
              
              
              867,087Other
      (income) expense
              
              
              -
              
              
              
              -
              
              
              
              10,480
              
              
              
              (2,207
              )Net
      other (income) expense
              
              
              578,120
              
              
              
              475,623
              
              
              
              1,632,985
              
              
              
              926,600Net
      loss
              
              $
              (1,529,830
              )
              
              $
              (2,335,438
              )
              
              $
              (4,292,674
              )
              
              $
              (6,458,471
              )Loss
      per share, basic and diluted
              
              $
              (0.05
              )
              
              $
              (0.07
              )
              
              $
              (0.13
              )
              
              $
              (0.20
              )Weighted-average
      common sharesoutstanding,
      basic and diluted
              
              
              32,994,745
              
              
              
              32,259,424
              
              
              
              32,648,570
              
              
              
              32,023,821
 
  F-2




Novint
Technologies, Inc.
 STATEMENT
OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
 For
the Nine Months Ended September 30, 2009
 
 AccumulatedAdditional
              
              
              
              
              
              OtherCommon
      Stock
              
              
              Paid-in
              
              
              Accumulated
              
              
              ComprehensiveShares
              
              
              Amount
              
              
              Capital
              
              
              (Deficit)
              
              
              Loss
              
              
              TotalBalances,
      December 31, 2008
              
              
              32,259,131
              
              
              $
              322,592
              
              
              $
              32,026,387
              
              
              $
              (30,391,914
              )
              
              $
              (4,605
              )
              
              $
              1,952,460Common
      stock issued for settlement ofaccrued
      liabilities
              
              
              156,266
              
              
              
              1,563
              
              
              
              33,827
              
              
              
              -
              
              
              
              -
              
              
              
              35,390Common
      stock issued for services and settlement of lease
              
              
              650,000
              
              
              
              6,500
              
              
              
              78,500
              
              
              
              -
              
              
              
              -
              
              
              
              85,000Options
      issued for settlement of accrued liabilities
              
              
              -
              
              
              
              -
              
              
              
              593,354
              
              
              
              -
              
              
              
              -
              
              
              
              593,354Options
      vested for employees services
              
              
              -
              
              
              
              -
              
              
              
              153,647
              
              
              
              -
              
              
              
              -
              
              
              
              153,647Options
      and warrants vested to consultants for services
              
              
              -
              
              
              
              -
              
              
              
              292,993
              
              
              
              -
              
              
              
              -
              
              
              
              292,993Warrants
      issued with note payable
              
              
              -
              
              
              
              -
              
              
              
              161,303
              
              
              
              -
              
              
              
              -
              
              
              
              161,303Net loss
              
              
              -
              
              
              
              -
              
              
              
              
              
              
              
              (4,292,674
              )
              
              
              -
              
              
              
              (4,292,674
              )Balances,
      September 30, 2009 (Unaudited)
              
              
              33,065,397
              
              
              $
              330,655
              
              
              $
              33,340,011
              
              
              $
              (34,684,588
              )
              
              $
              (4,605
              )
              
              $
              (1,018,527
              )
 
  F-3
 Novint
Technologies, Inc.
 STATEMENTS
OF CASH FLOWS
 
 For
      the Nine Months EndedSeptember
      30, 2009
                  
                  
                  September
      30, 2008(Unaudited)
                  
                  
                  (Unaudited)Cash
      flows from operating activities:Net
      loss
                  
                  $
                  (4,292,674
                  )
                  
                  $
                  (6,458,471
                  )Adjustments
      to reconcile net loss to net cash provided by (used in)operating
      activitiesDepreciation
      and amortization
                  
                  
                  449,944
                  
                  
                  
                  379,606Amortization
      of debt discount related to warrants issued with debt
                  
                  
                  1,211,859
                  
                  
                  
                  867,087Amortization
      of capitalized finance cost
                  
                  
                  133,429
                  
                  
                  
                  65,722Amortization
      of discount related to original issue discount notes
                  
                  
                  47,736
                  
                  
                  
                  -Loss
      on disposal of assets
                  
                  
                  10,480
                  
                  
                  
                  -Loss
      on assets given to terminated employees
                  
                  
                  15,759
                  
                  
                  
                  -Loss
      on assets provided as part of lease termination
                  
                  
                  43,894
                  
                  
                  
                  -Common
      stock issued for services
                  
                  
                  25,000
                  
                  
                  
                  27,200Common
      stock issued as part of lease settlement
                  
                  
                  60,000
                  
                  
                  
                  -Original
      issue discount note issued for services
                  
                  
                  239,491
                  
                  
                  
                  -Options
      issued to employees and consultant for services
                  
                  
                  446,640
                  
                  
                  
                  734,308Changes
      in operating assets and liabilities:Accounts
      receivable
                  
                  
                  (25,605
                  )
                  
                  
                  52,269Prepaid
      expenses
                  
                  
                  354,127
                  
                  
                  
                  (857,186
                  )Inventory
                  
                  
                  198,898
                  
                  
                  
                  (1,150,187
                  )Deposit
      on purchase of inventory
                  
                  
                  6,672
                  
                  
                  
                  420,705Prepaid
      expenses, net of current
                  
                  
                  (277,025
                  )
                  
                  
                  (854,007
                  )Deposits
                  
                  
                  16,223
                  
                  
                  
                  14,839Accounts
      payable and accrued liabilities
                  
                  
                  819,961
                  
                  
                  
                  (98,452
                  )Accrued
      expenses related party
                  
                  
                  28,462
                  
                  
                  
                  17,401Deferred
      revenues
                  
                  
                  166
                  
                  
                  
                  (15,576
                  )Net
      cash (used in) operating activities
                  
                  
                  (486,563
                  )
                  
                  
                  (6,854,742
                  )Cash
      flows from (to) investing activities:Intangible
      expenditures
                  
                  
                  (10,210
                  )
                  
                  
                  (39,424
                  )Capital
      outlay for software development costs and other intangible
      assets
                  
                  
                  (15,578
                  )
                  
                  
                  (89,056
                  )Property
      and equipment purchases
                  
                  
                  -
                  
                  
                  
                  (132,354
                  )Net
      cash (used in) investing activities
                  
                  
                  (25,788
                  )
                  
                  
                  (260,834
                  )Cash
      flows from (to) financing activities:Cash
      paid for offering costs
                  
                  
                  (34,094
                  )
                  
                  
                  (315,501
                  )Proceeds
      from exercise of options
                  
                  
                  -
                  
                  
                  
                  67,500Proceeds
      from notes payable
                  
                  
                  300,000
                  
                  
                  
                  -Proceeds
      from original issue discount notes
                  
                  
                  320,000Proceeds
      from convertible notes payable
                  
                  
                  -
                  
                  
                  
                  5,235,097Net
      cash provided by financing activities
                  
                  
                  585,906
                  
                  
                  
                  4,987,096Net
      increase (decrease) in cash and cash equivalents
                  
                  
                  73,555
                  
                  
                  
                  (2,128,480
                  )Cash
      and cash equivalents at beginning of period
                  
                  
                  55,315
                  
                  
                  
                  2,704,367Cash
      and cash equivalents at end of period
                  
                  $
                  128,870
                  
                  
                  $
                  575,887Supplemental
      information:Interest
      paid
                  
                  $
                  -
                  
                  
                  $
                  -Income
      taxes paid
                  
                  $
                  -
                  
                  
                  $
                  -Non-cash
      investing and financing activities:Debt
      discount and deferred financing cost related to convertible
      notespayable
      recorded against paid-in capital
                  
                  $
                  -
                  
                  
                  $
                  5,235,097Payment
      of offering costs with 60,000 warrants
                  
                  $
                  -
                  
                  
                  $
                  48,459Conversion
      of convertible debts with common stock
                  
                  $
                  -
                  
                  
                  $
                  72,899Payment
      of accrued liabilities with common stock
                  
                  $
                  34,827
                  
                  
                  $
                  116,900Warrants
      for shares of common stock granted related to issuance of notes
      payable
                  
                  $
                  161,303
                  
                  
                  $
                  -Payment
      of accrued liabilities with notes payable
                  
                  $
                  41,859
                  
                  
                  $
                  -Payment
      of accrued liabilities with warrants
                  
                  $
                  593,354
                  
                  
                  $
                  -


F-4




Novint
Technologies, Inc.
 
 NOTES
TO FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009 AND 2008
 (Unaudited)
  NOTE
1 —BASIS OF PRESENTATION AND NATURE OF BUSINESS
 
 Effective
July 1, 2009, the Company adopted the Financial Accounting Standards Board
(“FASB”) Accounting Standards Codification (“ASC”) 105-10, “Generally Accepted
Accounting Principles.” ASC 105-10 establishes the FASB Accounting Standards
CodificationTM
(“Codification”) as the source of authoritative accounting principles recognized
by the FASB to be applied by nongovernmental entities in the preparation of
financial statements in conformity with GAAP for SEC registrants. All guidance
contained in the Codification carries an equal level of authority. The
Codification supersedes all existing non-SEC accounting and reporting standards.
The FASB will now issue new standards in the form of Accounting Standards
Updates (“ASUs”). The FASB will not consider ASUs as authoritative in their own
right. ASUs will serve only to update the Codification, provide background
information about the guidance and provide the bases for conclusions on the
changes in the Codification. References made to FASB guidance have been updated
for the Codification throughout this document.
 
 Basis
of Presentation
 
 The
unaudited financial statements have been prepared by Novint Technologies, Inc.
(the “Company" or “Novint”), in accordance with generally accepted accounting
principles for interim financial information and with the instructions for Form
10-Q and Regulation S-X as promulgated by the Securities and Exchange
Commission (“SEC”). Accordingly, these financial statements do not include all
of the disclosures required by generally accepted accounting principles in the
United States of America for complete financial statements. These unaudited
interim financial statements should be read in conjunction with the audited
financial statements and the notes thereto included on Form 10-K for the period
ended December 31, 2008. In the opinion of management, the unaudited
interim financial statements furnished herein include all adjustments, all of
which are of a normal recurring nature, necessary for a fair statement of the
results for the interim period presented. The results of the three and nine
months ended September 30, 2009 are not necessarily indicative of the results to
be expected for the full year ending December 31, 2009.
 
 Reclassifications
 
 Certain
prior year amounts were reclassified to conform to the September 30, 2009
presentation.
 
 Nature
of Business
 
 Novint
was originally incorporated in the State of New Mexico in April 1999. On
February 26, 2002, the Company changed its state of incorporation to Delaware by
merging with Novint Technologies, Inc., a Delaware corporation. This merger was
accounted for as a reorganization of the Company. The Company currently is
engaged in the development and sale of 3D haptics products and equipment.
Haptics refers to one’s sense of touch.  The Company’s focus is in the
consumer interactive computer gaming market, but the Company also does project
work in other areas. The Company’s operations are based in New Mexico with sales
of its haptics products primarily to consumers through the Company’s website at
www.novint.com and retail outlets.
 
 Going
Concern and Management’s Plans
 
 These
financial statements have been prepared on a going concern basis, which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. The Company has incurred recurring losses and at
September 30, 2009, had an accumulated deficit of $34,684,588. For the three and
nine months ended September 30, 2009, the Company sustained a net loss of
$1,529,830 and $4,292,674, respectively. These factors, among others, indicate
that the Company may be unable to continue as a going concern for a reasonable
period of time. These 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 may be necessary should the
Company be unable to continue as a going concern. The Company's continuation as
a going concern is contingent upon its ability to obtain additional financing
and to generate revenue and cash flow to meet its obligations on a timely
basis.
  F-5
 
 Novint
Technologies, Inc.
 
 NOTES
TO FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009 AND 2008
 (Unaudited)
  The
Company believes there are several factors in continuing as a going concern. The
Company has dramatically reduced operating expenses and staff during the nine
months in 2009 and will continue do so in areas deemed non-essential during 2009
while maintaining the resources to continue to sell its hardware and software
products. Additionally, in the immediate timeframe, the Company has put more
emphasis on haptics development projects. These projects have historically
generated revenues and expanded the intellectual property portfolio. Next, the
Company is anticipating the release of new top tier games in the second half of
2009, some of which have been released, which should generate additional product
sales.  Lastly, the Company will continue to seek and raise additional
funding through debt or equity financing during the next twelve
months.
 
 NOTE
2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Use
of Estimates
 
 In
preparing financial statements in conformity with accounting principles
generally accepted in the United States of America, management makes estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements as well as the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Significant
estimates include the fair value of the Company’s common stock and the fair
value of options and warrants to purchase common stock, allowances for doubtful
accounts, inventory valuation, return and warranty reserves, accounting for
income taxes and uncertainty in income taxes and depreciation and
amortization.
 
 Software
Development Costs
 
 The
Company accounts for its software development costs in accordance with FASB ASC
985.20, Software-Costs of Computer Software to be Sold, Leased, or Otherwise
Marketed. This codification requires that, once technological feasibility of a
developing product has been established, all subsequent costs incurred in
developing that product to a commercially acceptable level be capitalized and
amortized ratably over the estimated life of the product, which is generally 5
years. The Company has capitalized software development costs in connection with
its haptics technology beginning in 2000. Amortization is computed on the
straight-line basis over the estimated life (5 years) of the haptics technology.
As of September 30, 2009, the Company’s capitalized software development costs
totaled $472,299 (net of $478,754 of accumulated amortization)  The
estimated annual amortization expense related to the capitalized software
development cost is approximately $155,000 per year.  Amortization
expense related to software development costs for the three and nine months
ended September 30, 2009 and 2008 totaled $42,771 and $128,960, and $40,170 and
$117,153, respectively.
 
 The
Company follows FASB ASC 350.40, Intangibles-Goodwill and Other-Internal-Use
Software, which requires capitalization of certain costs incurred during the
development of internal use software. Through September 30, 2009, capitalizable
costs incurred have not been significant for any development projects.
Accordingly, the Company has charged all related costs to research and
development expense in the periods incurred.
 
 Property
and Equipment
 
 Property
and equipment is stated at cost. Depreciation on property and equipment is
calculated on a straight-line depreciation method over the estimated useful
lives of the assets, which range from 3 to 5 years for software and
computer equipment, and 5 years for office equipment. Repairs and
maintenance costs are expensed as incurred. Depreciation expense was $12,040 and
$43,648, and $26,468 and $77,487 for the three and nine months ended September
30, 2009 and 2008, respectively.
  F-6
  Novint
Technologies, Inc.
 
 NOTES
TO FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009 AND 2008
 (Unaudited)
 
 Intangible
Assets
 
 Intangible
assets consist of licensing agreements of $1,245,543 and patents of $50,917, and
are carried at cost less accumulated amortization of $883,218 at September 30,
2009.  Amortization is computed using the straight-line method over
the economic life of the assets, which range between 3 and 20 years. For the
three and nine months ended September 30, 2009 and 2008, the Company recognized
amortization expense of approximately $92,445 and $277,336, and $94,778 and
$184,966, respectively, related to intangible assets.
 
 Annual
amortization of intangible assets remaining at September 30, 2009, is as
follows:
  For
      the twelve months ending September 30,2010
              
              $
              255,7082011
              
              
              113,5532012
              
              
              5,1912013
              
              
              2,4412014
      and thereafter
              
              
              36,349Total
              
              $
              413,242
 
 In August
2008, the Company entered into a licensing agreement for several games, with a
guaranteed minimum royalty of $100,000.  In March 2009, the Company
signed an amendment to reduce the minimum royalty to $15,000 for a total of two
games.  The Company has accrued for the $15,000 as of December 31,
2008.  This amount was paid in March 2009.
 
 The
Company follows the FASB ASC 350.30, Intangibles-Goodwill and Other-General
Intangibles Other than Goodwill. FASB ASC 350.30 requires intangible assets to
be tested for impairment. The Company performs a periodic review of its
identified intangible assets to determine if facts and circumstances exist which
indicate that the useful life is shorter than originally estimated or that the
carrying amount of assets may not be recoverable. If such facts and
circumstances exist, the Company assesses the recoverability of identified
intangible assets by comparing the projected undiscounted net cash flows
associated with the related asset or group of assets over the remaining lives
against the respective carrying amounts. Impairment, if any, is based on the
excess of the carrying amount over the fair value of those assets. After an
impairment loss is recognized, the adjusted carrying amount shall be its new
accounting basis. No impairment loss was recorded during the three and nine
months ended September 30, 2009 or 2008.
 
 Revenue
and Cost Recognition
 
 The
Company recognizes revenue from the sale of software products under the FASB ASC
985.605, Software-Software Revenue Recognition, which generally requires
that revenue recognized from software arrangements be allocated to each element
of the arrangement based on the relative vendor specific objective evidence of
fair values of the elements, such as software products, upgrades, enhancements,
post contract customer support, installation or training. Under FASB ASC
985.605, if the determination of vendor specific objective evidence of fair
value for each element of the arrangement does not exist, all revenue from the
arrangement is deferred until such time that evidence does exist or until all
elements of the arrangement are delivered.
  F-7
 Novint
Technologies, Inc.
 
 NOTES
TO FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009 AND 2008
 (Unaudited)
 
 The
Company’s revenue recognition policy is as follows:
 
 Project
revenue consists of programming services provided to unrelated parties under
fixed-price contracts. Revenues from fixed price programming contracts are
recognized in accordance with FASB ASC 605.35, Revenue
Recognition-Construction-Type and Production-Type Contracts, using the
percentage-of-completion method, measured by the percentage of costs incurred to
date compared with the total estimated costs for each contract. The Company
accounts for these measurements in the accompanying balance sheets under costs
and estimated earnings in excess of billings on contracts, and billings in
excess of costs and estimated earnings on contracts. Provisions for estimated
losses on uncompleted contracts are made and recorded in the period in which the
loss is identified.  As of September 30, 2009 the Company had $8,297
in costs and earnings in excess of billings which is included in prepaid
expenses and other current assets on the accompanying balance
sheet.  As of December 31, 2008 the Company did not have any costs and
estimated earnings in excess of billings on contracts or any billings in excess
of costs and estimated earnings on contracts.
  For
project revenue that is not under fixed price programming contracts, the Company
recognizes revenues as the services are completed.
 
 Revenue
from product sales relates to the sale of the Falcon haptics interface, which is
a human-computer user interface (the “Falcon”) and related accessories. The
Falcon allows the user to experience the sense of touch when using a computer,
while holding its interchangeable handle. The Falcons are manufactured by an
unrelated party. Revenue from product sales is recognized when the products are
shipped to the customer and the Company has earned the right to receive and
retain reasonable assured payments for the products sold and delivered.
Consequently, if all these revenue from product sales requirements are not met,
such sales will be recorded as deferred revenue until such time as all revenue
recognition requirements are met.
 
 As of
September 30, 2009 and December 31, 2008, the Company had recorded $29,828 and
29,662, respectively, of deferred revenue, which represents fees received for
product and project revenues that have not met all revenue recognition
requirements.
 
 FASB ASC
605.45, Revenue Recognition-Principal Agent Considerations, require amounts
billed to a customer in a sales transaction related to shipping and handling, if
any, to be classified and accounted for as revenues earned for the goods
provided whereas shipping and handling costs incurred by a company are required
to be classified as cost of sales. The Company’s costs associated with shipping
product items to the Company’s customers are included in the Company’s Cost of
Goods Sold, which for the three and nine months ended September 30, 2009 and
2008 approximated $59,358 and $89,086, and $2,531 and $27,436,
respectively.
 
 Arrangements
made with certain customers, including slotting fees and co-operative
advertising, are accounted for in accordance with FASB ASC 605.50, Revenue
Recognition-Customer Payments and Incentives. These incentives are recognized as
a reduction in revenue or as a selling, general, and administrative expense,
respectively, when payment is made to a customer (or at the time the Company has
incurred the obligation, if earlier) unless the Company receives a benefit over
a period of time and the Company meets certain other criteria, such as retailer
performance, recoverability and enforceability, in which case the incentive is
recorded as an asset and is amortized as a reduction of revenue over the term of
the arrangement.
 
 FASB ASC
605.45, Revenue Recognition-Principal Agent Considerations, requires
reimbursements received for out-of-pocket expenses incurred while providing
services to be characterized in the statements of operations as revenue. The
Company’s out-of-pocket expenses incurred in connection with their project
revenues are recognized in revenues based on a computed overhead rate that is
included in their project labor costs to derive a project price.
  F-8
 
 Novint
Technologies, Inc.
 
 NOTES
TO FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009 AND 2008
 (Unaudited)
  In
accordance with FASB ASC 605.45, Revenue Recognition-Principal Agent
Considerations, the Company recognizes its product sales on a gross basis. The
Company is responsible for fulfillment, including the acceptability of the
product ordered. The Company has risks and rewards of ownership such as the risk
of loss for collection, delivery or returns. Title passes to the customer upon
receipt of the product by the customer. In accordance with the Company’s
agreement with its customer, further obligation is limited to the terms defined
in its warranty.
 
 The
Company’s customers are provided a one (1) year limited warranty on the Falcon.
This warranty guarantees that the products shall be free from defects in
material and workmanship. Additionally, the Company offers its customers of the
Falcon a 30 day money back guarantee. The Company continually evaluates its
reserve accounts for both the limited warranty and 30 day money back guarantee
based on its historical activities. As of September 30, 2009 and December 31,
2008, the Company has accrued $15,000 and $17,000, respectively, as warranty
reserve.
 
 Loss
per Common Share
 
 FASB ASC
260, Earnings Per Share, provides for the calculation of “Basic” and “Diluted”
earnings per share. Basic earnings per share includes no dilution and is
computed by dividing net loss available to common shareholders by the weighted
average number of common shares outstanding for the period. All potentially
dilutive securities have been excluded from the computations since they would be
antidilutive. However, these dilutive securities could potentially dilute
earnings per share in the future. As of September 30, 2009 and 2008, the Company
had a total of 16,481,809 and 12,736,867 in potentially dilutive
securities, respectively.
 
 Stock-Based
Compensation
 
 The
Company adopted FASB ASC 718, Compensation-Stock Compensation. FASB ASC 718
requires companies to measure and recognize the cost of employee services
received in exchange for an award of equity instruments based on the grant-date
fair value. Share-based compensation recognized under the modified-prospective
transition method of FASB ASC 718 includes share-based compensation based on the
grant-date fair value for all share-based payments granted prior to and not yet
vested as of January 1, 2006 and share-based compensation based on the
grant-date fair-value determined in accordance with FASB ASC 718 for all
share-based payments granted after January 1, 2006.
 
 The
Company recognized $10,969 and $153,647, and $115,927 and $353,033 in employee
share-based compensation expense for the three and nine months ended September
30, 2009 and 2008, respectively. The fair value of the stock options was
estimated using the Black-Scholes option pricing model.   In
calculating the fair value of options for stock based compensation for the three
and nine months ended September 30, 2009, the following assumptions were used:
closing price of the common stock at the date of grant, risk-free rates ranging
from 4.00% to 5.25%, volatility of the options ranging from 73% to 157%,
estimated lives of 3 to 10 years and exercise prices ranging from $0.20 to $1.06
per share.  In calculating the fair value of options for stock based
compensation for the three and nine months ended September 30, 2008, the
following assumptions were used: closing price of the common stock at the date
of grant, risk-free rates ranging from 4.00% to 5.25%, volatility of the options
ranging from 73% to 157%, estimated lives of 3 to 10 years and exercise prices
ranging from $0.66 to $1.20 per share.
 
 Stock
options and warrants issued to consultants and other non-employees as
compensation for services provided to the Company are accounted for based on the
fair value of the services provided or the estimated fair market value of the
option or warrant, whichever is more reliably measurable in accordance with FASB
ASC 505.50, Equity-Based Payments to Non-Employees. The related expense is
recognized over the period the services are provided. For the three and nine
months ended September 30, 2009 and 2008, stock options and warrants issued to
consultants and other non-employees as compensation for services that vested
during those periods totaled $286,472 and $292,993, and $99,219 and $381,219,
respectively.
  F-9
  Novint
Technologies, Inc.
 
 NOTES
TO FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009 AND 2008
 (Unaudited)
 
 Research
and Development
 
 Research
and development costs are expensed as incurred and amounted to $38,164 and
$167,837, and $323,649 and $918,580 for the three and nine months ended
September 30, 2009 and 2008, respectively.
 
 Recently
Issued Accounting Pronouncements
 
 In May
2009, the FASB issued SFAS No. 165, “Subsequent Events,” codified in FASB ASC
Topic 855-10-05, which provides guidance to establish general standards of
accounting for and disclosures of events that occur after the balance sheet date
but before financial statements are issued or are available to be issued. SFAS
No. 165 also requires entities to disclose the date through which subsequent
events were evaluated as well as the rationale for why that date was selected.
SFAS No. 165 is effective for interim and annual periods ending after June 15,
2009, and accordingly, the Company adopted this pronouncement during the second
quarter of 2009. SFAS No. 165 requires that public entities evaluate subsequent
events through the date that the financial statements are issued. The Group has
evaluated subsequent events through November 23, 2009.
 
 The
Company has adopted all recently issued accounting codifications.  The
adoption of the accounting codifications, including those not yet effective, is
not anticipated to have a material effect on the financial position or results
of operations of the Company.
 
 NOTE
3 – PREPAID ASSETS
 
 As of
September 30, 2009, prepaid expenses totaling $1,609,743 principally consist of
prepayments towards marketing costs, insurance premiums, rents and royalties.
Prepayments on royalties comprise a significant portion of the prepaid expenses
at September 30, 2009 totaling $1,578,591 of which $1,491,455 is considered
long-term portion due to the length of the related license and royalty
agreements and the expected realization.
 
 NOTE
4 — INTANGIBLE ASSETS
 
 Intangible
assets consisted of the following at September 30, 2009:
 
 Licensing
      agreements
              
              $
              1,245,543Patent
              
              
              50,917Less
      accumulated amortization
              
              
              (883,218
              )$
              413,242
 NOTE
5 – NOTES PAYABLE
 
 In
December 2008, the Company issued two promissory notes totaling $300,000 secured
by all of the Company’s intellectual property, annual interest rate of eight
percent (8%), principal and interest due at maturity, and maturity date of
December 4, 2009.  If the notes are not paid back by the maturity
date, then Novint will have the right but not the obligation to refinance the
notes with new notes equaling the interest and principal from the first note,
with a new maturity date of December 4, 2010 and an annual interest rate of
eight percent (8%). The new notes are convertible into common stock at a rate of
$0.50/share.  Additionally, the Company issued each note holder a
detachable warrant for 150,000 shares of the Company’s common stock for a total
of 300,000 shares.  The Company has accounted for the warrants to
purchase 300,000 shares under FASB ASC 470.20, Debt with Conversion and Other
Options, as additional consideration to the promissory notes payable with
an estimated fair value of $100,962 valued using the Black-Scholes option
pricing model under the following assumptions: stock price volatility of 119%;
risk free interest rate of 2.24%; dividend yield of 0% and 5 year
term.  The face amount of the promissory notes of $300,000 was
proportionately allocated to debt and the estimated fair value of the warrants
in the amounts of $224,460 and $75,540, respectively.  The allocable
estimated fair value of the warrants totaling $75,540 has been accounted for as
a debt discount that is being amortized and treated as interest expense over the
term of the promissory notes.  For the three and nine months ended
September 30, 2009, the Company’s debt discount amortization expense totaled
$19,041 and $56,500, respectively.  The remaining unamortized debt
discount at September 30, 2009 totaled $13,452.
  F-10
  Novint
Technologies, Inc.
 
 NOTES
TO FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009 AND 2008
 (Unaudited)
 
 In
January 2009, the Company issued a promissory note totaling $100,000 secured by
all of the Company’s intellectual property, annual interest rate of eight
percent (8%), principal and interest due at maturity, and maturity date of
December 4, 2009.  If the note is not paid back by the maturity date,
then Novint will have the right but not the obligation to refinance the note
with a new note equaling the interest and principal from the first note, with a
new maturity date of December 4, 2010 and an annual interest rate of eight
percent (8%). The new note would be convertible into common stock at a rate of
$0.50/share.  Additionally, the Company issued the note holder a
detachable warrant for 100,000 shares of the Company’s common
stock.  The Company has accounted for the warrant to purchase 100,000
shares under FASB ASC 470.20, Debt with Conversion and Other Options as
additional consideration to the promissory note payable with an estimated fair
value of $37,479 valued using the Black-Scholes option pricing model under the
following assumptions: stock price volatility of 117%; risk free interest rate
of 2.24%; dividend yield of 0% and 5 year term.  The face amount of
the promissory notes of $100,000 was proportionately allocated to debt and the
estimated fair value of the warrants in the amounts of $72,738 and $27,262,
respectively.  The allocable estimated fair value of the warrants
totaling $27,262 has been accounted for as a debt discount that is being
amortized and treated as interest expense over the term of the promissory
notes.  For the three and nine months ended September 30, 2009, the
Company’s debt discount amortization expense totaled $7,741 and $21,793,
respectively.  The remaining unamortized debt discount at September
30, 2009 totaled $5,469.
 
 In June
2009, the Company issued a promissory note totaling $200,000 secured by all of
the Company’s intellectual property, annual interest rate of eight percent (8%),
principal and interest due at maturity, and maturity date of September 18,
2010.  If the note is not paid back by the maturity date, then Novint
will have the right but not the obligation to refinance the note with a new note
equaling the interest and principal from the first note, with a new maturity
date of December 4, 2010 and an annual interest rate of ten percent (10%). The
new note would be convertible into common stock at a rate of $0.50/share and for
every two shares issued on conversion of the convertible note, the holder would
receive a warrant to purchase one share of common stock at an exercise price of
$0.50 per share.  Additionally, the Company issued the note holder a
detachable warrant for 300,000 shares of the Company’s common
stock.  The Company has accounted for the warrant to purchase 300,000
shares under FASB ASC 470.20, Debt with Conversion and Other Options, as
additional consideration to the promissory note payable with an estimated fair
value of $30,299 valued using the Black-Scholes option pricing model under the
following assumptions: stock price volatility of 148%; risk free interest rate
of 2.24%; dividend yield of 0% and 5 year term.  The face amount of
the promissory notes of $300,000 was proportionately allocated to debt and the
estimated fair value of the warrants in the amounts of $173,687 and $26,313,
respectively.  The allocable estimated fair value of the warrants
totaling $26,312 has been accounted for as a debt discount that is being
amortized and treated as interest expense over the term of the promissory
notes.  For the three and nine months ended September 30, 2009, the
Company’s debt discount amortization expense totaled $8,803 and $9,951,
respectively.  The remaining unamortized debt discount at September
30, 2009 totaled $16,361.
 
 NOTE
6 – ORIGINAL ISSUE DISCOUNT NOTES PAYABLE
 
 During
February and March 2009, the Company received $220,000 for three promissory
notes totaling $275,000 with 150% warrant coverage.  The notes are
secured by all of the Company’s assets and intellectual property, no stated
interest rate, principal due February 2010.  These notes are
considered original issue discount notes whereby the discount (difference
between the face value of the notes of $275,000 and amounts actually received of
$220,000) will be amortized over the lives of the notes. For the three and nine
months ended September 30, 2009, the Company amortized interest expense totaled
$13,750 and $32,292, respectively.  The remaining unamortized original
issue discount at September 30, 2009 totaled $22,708.  If the notes
are prepaid, the exercise price of the warrants will adjust to the fair market
value of the Company’s stock at the time of prepayment, subject to a floor of
$0.02 and a ceiling of $1.00. If an investor sells any shares of our common
stock during 120 days prior to the maturity date of the note, the strike price
will automatically reset to $2.00. If the notes are not paid back by the
maturity date, then the Company will have the right but not the obligation
to refinance the notes with new notes equaling the principal and accrued
interest from the first note, with a new maturity date one year later and
an annual interest rate of five percent (5%). The new note would be convertible
into common stock at a rate of $0.0625/share on the principal balance only. The
conversion rate is subject to change based upon the provision in the
note.
  F-11
  Novint
Technologies, Inc.
 
 NOTES
TO FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009 AND 2008
 (Unaudited)
 
 The
Company has accounted for the 150% warrants coverage to purchase 330,000 shares
under FASB ASC 470.20, Debt with Conversion and Other Options, as
additional consideration to the promissory notes payable with an estimated fair
value of $44,677 valued using the Black-Scholes option pricing model under the
following assumptions: stock price volatility ranging from 122% to 142%; risk
free interest rate of 2.24%; dividend yield of 0% and 5 year
term.  The face amount of the promissory notes of $275,000 was
proportionately allocated to debt and the estimated fair value of the warrants
in the amounts of $236,597 and $38,403, respectively.  The allocable
estimated fair value of the warrants totaling $38,403 has been accounted for as
a debt discount that is being amortized and treated as interest expense over the
term of the promissory notes.  For the three and nine months ended
September 30, 2009, the Company’s debt discount amortization expense totaled
$9,691 and $21,899, respectively.  The remaining unamortized debt
discount at September 30, 2009 totaled $16,504.
 
 In April
2009, the Company received $50,000 for a promissory note totaling $62,500 with
150% warrant coverage.  The note is secured by all of the Company’s
assets and intellectual property, no stated interest rate, principal due April
2010.  The note is considered original issue discount note whereby the
discount (difference between the face value of the note of $62,500 and amount
actually received of $50,000) will be amortized over the life of the note. For
the three and nine months ended September 30, 2009, the Company amortized
interest expense totaled $4,167 and $6,771, respectively.  The
remaining unamortized original issue discount at September 30, 2009 totaled
$5,729.  If the note is prepaid, the exercise price of the warrants
will adjust to the fair market value of the Company’s stock at the time of
prepayment, subject to a floor of $0.02 and a ceiling of $1.00. If the investor
sells any shares of our common stock during 120 days prior to the maturity date
of the note, the strike price will automatically reset to $2.00. If the note is
not paid back by the maturity date, then the Company will have the right but not
the obligation to refinance the notes with new a note equaling the
principal and accrued interest from the first note, with a new maturity
date one year later and an annual interest rate of five percent (5%). The new
note would be convertible into common stock at a rate of $0.0625/share on the
principal balance only.
 
 The
conversion rate is subject to change based upon the provision in the
note.  The Company has accounted for the 150% warrant coverage to
purchase 75,000 shares under FASB ASC 470.20, Debt with Conversion and Other
Options, as additional consideration to the promissory notes payable with
an estimated fair value of $6,889 valued using the Black-Scholes option pricing
model under the following assumptions: stock price volatility of 148%; risk free
interest rate of 2.24%; dividend yield of 0% and 5 year term.  The
face amount of the promissory notes of $62,500 was proportionately allocated to
debt and the estimated fair value of the warrants in the amounts of $56,295 and
$6,205, respectively.  The allocable estimated fair value of the
warrants totaling $6,205 has been accounted for as a debt discount that is being
amortized and treated as interest expense over the term of the promissory
notes.  For the three and nine months ended September 30, 2009, the
Company’s debt discount amortization expense totaled $2,429 and $4,489,
respectively.  The remaining unamortized debt discount at September
30, 2009 totaled $1,716.
 
 In June
2009, the Company issued three promissory notes totaling $184,375 for services
received with values totaling $147,500, no stated interest rate, principal due
at maturity, and maturity date of September 2010.  These notes are
considered original issue discount notes whereby the discounts (difference
between the face value of the note of $184,375 and amount actually received of
$147,500) will be amortized over the lives of these notes. For the three and
nine months ended September 30, 2009, the Company amortized interest expense
totaled $9,219 and $10,243, respectively.  The remaining unamortized
original issue discount at September 30, 2009 totaled
$26,632.  Additionally, the Company issued the note holders detachable
warrants totaling 221,250 shares of the Company’s common stock.  The
Company has accounted for the warrants to purchase 221,250 shares under FASB ASC
470.20, Debt with Conversion and Other Options, as additional consideration
to the promissory note payable with an estimated fair value of $22,330 valued
using the Black-Scholes option pricing model under the following assumptions:
stock price volatility of 149%; risk free interest rate of 2.24%; dividend yield
of 0% and 5 year term.  The face amount of the promissory notes of
$184,375 was proportionately allocated to debt and the estimated fair value of
the warrants in the amounts of $164,457 and $19,918,
respectively.  The allocable estimated fair value of the warrants
totaling $19,918 has been accounted for as a debt discount that is being
amortized and treated as interest expense over the term of the promissory
notes.  For the three and nine months ended September 30, 2009, the
Company’s debt discount amortization expense totaled $6,626 and $7,172,
respectively  The remaining unamortized debt discount at September 30,
2009 totaled $12,746.
  F-12
 
 Novint
Technologies, Inc.
 
 NOTES
TO FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009 AND 2008
 (Unaudited)
 
 During
July 2009 and September 2009, the Company issued four promissory notes totaling
$229,813 for services received with values totaling $133,850 and cash of
$50,000, no stated interest rate, principal due at maturity, and maturity dates
ranging from July 2010 through September 2010.  These notes are
considered original issue discount notes whereby the discounts (difference
between the face value of the note of $229,813 and value actually received of
$183,850) will be amortized over the lives of these notes. For the three and
nine months ended September 30, 2009, the Company amortized interest expense
totaled $2,466 and $2,466, respectively.  The remaining unamortized
original issue discount at September 30, 2009 totaled
$43,497.  Additionally, the Company issued the note holders detachable
warrants totaling 275,775 shares of the Company’s common stock.  The
Company has accounted for the warrants to purchase 275,775 shares under FASB ASC
470.20, Debt with Conversion and Other Options, as additional consideration
to the promissory note payable with an estimated fair value of $54,084 valued
using the Black-Scholes option pricing model under the following assumptions:
stock price volatility of 155%; risk free interest rate of 2.24%; dividend yield
of 0% and 5 year term.  The face amount of the promissory notes of
$229,813 was proportionately allocated to debt and the estimated fair value of
the warrants in the amounts of $186,611 and $43,202,
respectively.  The allocable estimated fair value of the warrants
totaling $43,202 has been accounted for as a debt discount that is being
amortized and treated as interest expense over the term of the promissory
notes.  For the three and nine months ended September 30, 2009, the
Company’s debt discount amortization expense totaled $3,048 and $3,048,
respectively  The remaining unamortized debt discount at September 30,
2009 totaled $40,154.
 
 NOTE
7 – CONVERTIBLE NOTES PAYABLE
  In March
2008, the Company closed on a $2,025,000 private placement of debt securities
under Regulation D promulgated under the Securities Act of 1933 pursuant to
the terms of a subscription agreement among the Company and the subscribers’
signatory thereto (the "Subscription Agreement"). From April 2008 through
September 2008, the Company closed an additional $3,210,097 for an aggregate
Subscription Agreement amount of $5,235,097.  Each Subscriber acquired an
unsecured convertible note in the principal amount invested and a warrant to
purchase shares of the Company’s common stock with an exercise price of $1.00
per share.  In each case, the number of shares of common stock underlying
the warrant equals the principal amount of the unsecured convertible note. Each
warrant is exercisable for a term of five (5) years.  The unsecured
convertible notes have a three (3) year maturity, require payment of principal
and interest in full on the maturity date, and accrue interest at a rate of
seven percent (7%) beginning on the first anniversary of their respective
dates of issuance. At the option of the holder, principal outstanding under a
note may be converted into common stock at the conversion rate then in
effect, initially $1.00 per share. Upon conversion, the holder will receive
common stock at the conversion price of $1.00 per share and additional warrants
to purchase shares of common stock at an exercise price of $1.50 per
share.  The number of shares of common stock underlying the additional
warrants shall equal one-half (1/2) the principal and interest amounts
converted.  The additional warrants shall be exercisable for a term of five
(5) years.  Certain existing shareholders of the Company are entitled to
purchase notes and warrants under the terms of the Subscription Agreement and
the Company was required to create a second offering of these notes and
warrants. The Company has recorded $459,073 as deferred financing costs
associated with the closing that occurred on September 9, 2008. This amount
represents $197,049 for legal expenses associated with the private placement,
$149,403 paid to an investment banking company and $112,621 for the value of
warrants to purchase 143,403 shares of the Company’s common stock at $1.00 per
share for 5 years owed to the same investment banking company. These amounts are
being amortized to interest expense over the term of the notes.
 
 The
Company has determined the convertible debenture contains a beneficial
conversion feature and qualifies for treatment under FASB ASC 470.20, Debt with
Conversion and Other Options. The estimated fair value of the detachable
warrants of $4,462,663 has been determined using Black-Scholes option pricing
model using the following assumptions: stock price volatility of 124% to 125%,
risk free interest rate of 3.77%; dividend yield of 0% and 3 year term. The face
amount of the convertible debenture of $5,235,097 was proportionately allocated
to the debenture and the warrants in the amount of $2,849,425 and $2,385,672,
respectively. The convertible debentures’ proportionate allocated value of
$2,849,425 was then further allocated between the debenture and the beneficial
conversion feature, and the entire remaining value of $2,849,425 was allocated
to the beneficial conversion feature. The beneficial conversion feature of
$2,849,425 was allocated to the stock due upon conversion of $2,058,623 and the
warrants due upon conversion of $790,802.  In accordance with FASB ASC
470.20, the beneficial conversion feature attributed to the warrants due upon
conversion of $790,802 is recorded as a debt discount and will not be amortized
until the notes are converted at which time the entire discount will be
expensed.  The combined total value of the initial warrant and
beneficial conversion feature attributed to the stock of $4,444,295 has been
accounted for as a debt discount that is being amortized and treated as interest
expense over the term of the convertible debenture under the effective interest
method.  For the three and nine months ended September 30, 2009 and
2008, the Company’s debt discount amortization expense totaled $357,128 and
$1,086,414, and $431,264, and $867,087, respectively.  The remaining
unamortized debt discount at September 30, 2009 totaled $3,054,682.
  F-13
  Novint
Technologies, Inc.
 
 NOTES
TO FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009 AND 2008
 (Unaudited)
  As the
notes are non-interest bearing for the first year, the Company has imputed
interest for the first year.  The Company recorded interest expense of
$64,578 and $185,043, for the three and nine months ended September 30,
2009.  As of September 30, 2009 and December 31, 2008 the Company
accrued interest of $357,630 and $174,904, respectively.
 
 NOTE
8 – STOCKHOLDERS’ EQUITY (DEFICIT)
 
 In
February 2009, the Board of Directors granted employees and directors 6,850,000
options to purchase shares of common stock at an exercise price of $.10 per
share as compensation for prior services.  The options vest upon grant, and
the expense for these options, totaling $582,102, was recorded in the year ended
December 31, 2008.   The Board of Directors also granted
consultants 700,000 options to purchase shares of common stock at an exercise
price of $.10 per share as compensation for future services.  These options
vest equally every nine months for two years following the grant.
 
 Also in
February 2009, the Board of Directors granted 100,000 options to purchase shares
of common stock at an exercise price of $1.00 per share to a consultant for past
services, of which $4,389 of the total value of $6,089 was for services
performed during 2008.  The remaining $1,700 was recorded as expense
during the nine months ended September 30, 2009.  The Board of
Directors also approved and the Company issued 250,000 restricted shares of
common stock to a consultant for consulting services and recorded an expense for
the six month ended June 30, 2009 with a value totaling $25,000.  The
shares were issued in May 2009.
 
 In May
2009, the Company issued 31,266 shares of common stock to a consultant for
compensation relating to accounting services with a total value of
$7,890.  8,578 of these shares valued at $4,260 were for services
rendered and recorded in 2008. 22,688 of these shares valued at $3,630 were for
services rendered in the first quarter of 2009.
 
 In May
2009, the Company issued 25,000 shares of common stock to a consultant for
services previously performed with a total value of
$12,500.   This amount was accrued for as of December 31,
2008.
 
 In May
2009, the Company issued 400,000 shares of common stock as part of the lease
settlement for the New Mexico office with a total value of $60,000.
 
 In
September 2009, the Company issued 100,000 shares of common stock to various
consultants for services previously rendered with a total value of
$15,000.
 
 NOTE
9 — COMMITMENTS AND CONTINGENCIES
 
 From time
to time, in the normal course of business, the Company is subject to routine
litigation incidental to its business. Although there can be no assurances as to
the ultimate disposition of any such matters, it is the opinion of management,
based upon the information available at this time, that there are no matters,
individually or in the aggregate, that will have a material adverse effect on
the results of operations and financial condition of the Company.
 
 In
February 2009, the Company received a notice of breach of one of their licensing
agreements.  The Company does not plan to cure this breach.  The
remaining obligation under this agreement of $200,000 related to the breach will
remain as a liability, and all of the prepaid royalties were expensed in
2008.
  F-14
 
 Novint
Technologies, Inc.
 
 NOTES
TO FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009 AND 2008
 (Unaudited)
  In
February 2009, the Company terminated many of its employees in order to reduce
expenses and have retained the personnel necessary to continue key operations to
maintain sales.   The Company does not anticipate or expect any
additional expenses related to the termination other than amounts earned up
through the date of termination.  Included in accrued payroll related
liabilities on the accompanying balance sheet as of September 30, 2009 is
$77,680 related to potential severance liabilities owed to these terminated
employees.  As part of the terminations, the Company allowed the
terminated employees to keep their computer equipment with a net book value of
$15,579 and accelerated the vesting of certain options.
  On March
1, 2009, the Company signed a lease termination agreement for the headquarter
office.  The Company paid $30,000, forfeited the security deposit of
approximately $11,000, transferred title to assets (office furniture, leasehold
improvements and a vehicle) with a net book value of $43,894, and issued 400,000
shares of common stock with a fair value of $60,000 in exchange for termination
of the original lease obligation and use of one small office and 1500 square
feet of storage rent free for at least nine months. The shares issued have a
provision limiting sales to a percentage of volume.
  In June
2009, the Company signed deferred compensation agreements with five employees
and consultants.  After February 2010, if the Company has not already
paid the deferred compensation in cash, the employee or consultant may request
the deferred compensation to be paid, and the Company will issue shares of
common stock, with the number of shares to be issued to be equal to the deferred
compensation amount divided by .05.  As of September 30, 2009, the
deferred compensation amount is $286,477.
  In
September 2009, the Company signed a one-year agency agreement with a company to
be a referring agent for the Falcon product and to develop a direct response
television (DRTV) relationship.  Compensation under this agreement
includes: (i) a 50% commission will be paid based on the sales of referred
customers who purchase the Falcon at full retail price, (ii) stock valued at
$25,000 is due upon signing for a best effort sales and marketing relationship
to secure a DRTV relationship, and (iii) stock with a value of $50,000 will be
issued if an agreement for DRTV is reached. The Company has accrued $25,000 at
September 30, 2009 to the referring agent for the initial stock payment due as
the stock has yet to be issued. The Company expects that the commission paid per
unit will be renegotiated in the future. The initial commission was developed to
establish a track record in our initial direct consumer marketing
efforts.
 NOTE
10 — RELATED PARTIES
 
 On
February 18, 2004, the Company granted to a significant shareholder, for future
services, 125,000 options to purchase common stock at an exercise price of $0.66
per share. The options have a 5-year annual vesting provision. Options granted
to consultants are valued each reporting period to determine the amount to be
recorded as consultant expense in the respective period. As the options vest,
they will be valued one last time on the vesting date and an adjustment will be
recorded for the difference between the value already recorded and the current
value on date of vesting.   The remaining options were fully
vested on February 18, 2009 and the Company calculated the value of the options
using the Black-Scholes model based on the following assumptions: a risk-free
rate of 2.24%, volatility of 120%, estimated life of 10 years and a fair market
value of $0.20 per share. At March 31, 2004, the Company calculated the initial
value of the options using the Black-Scholes model based on the following
assumptions: a risk-free rate of 4.05%, volatility of 91%, estimated life of 10
years and a fair market value of $1.00 per share. The vesting schedule is
prorated over the reporting period, and $0 and $(1,651), and $12,210 and
$12,148, respectively, was recorded as consultant expense during the three and
nine months ended September 30, 2009 and 2008.  The options were fully
vested on February 18, 2009.
 
 In March
2004, Normandie New Mexico Corporation, which is owned by the former Chief
Executive Officer (CEO) of Manhattan Scientific (a significant shareholder) who
is also a member of the Company’s Board of Directors, entered into an agreement
with the Company to provide consulting services in relation to business
development and marketing support. Fees per the agreement are $6,250 per month.
For the three and nine months ended September 30, 2009 and 2008, the Company had
paid $0 and $0, and $50,000 and $50,000, respectively for these
services.  Amounts totaling $62,500 owed as of June 30, 2009 were
settled during the three months ended June 30, 2009 by the issuance of an
original issue discount note payable in the amount of $78,125 and the issuance
of five year warrants to purchase 93,750 shares of common stock at an exercise
price of $1.00.  See Note 5.  An additional $18,750 is owed
as of September 30, 2009 and is included in accrued expenses related party on
the accompanying balance sheet.
 
 On June
10, 2004, the Company granted 250,000 options to purchase common stock to one of
the members of the Company’s Board of Directors for future consulting services
at an exercise price of $0.66 per share. The options have a 5-year annual
vesting provision. At June 30, 2004, the Company calculated the initial value of
these options using the Black-Scholes model based on the following assumptions:
a risk-free rate of 4.81%, volatility of 100%, estimated life of 10 years and a
fair market value of $1.00 per share. The remaining options were fully vested on
June 10, 2009 and the Company calculated the value of the options using the
Black-Scholes model based on the following assumptions: a risk-free rate of
2.24%, volatility of 151%, estimated life of 10 years and a fair market value of
$0.10 per share. The vesting schedule is prorated over the reporting period, and
approximately $0 and ($7,832), and $7,614 and $33,699, respectively, was
recorded as consulting expense during the three and nine months ended September
30, 2009 and 2008.
  F-15
  Novint
Technologies, Inc.
 
 NOTES
TO FINANCIAL STATEMENTS
 SEPTEMBER
30, 2009 AND 2008
 (Unaudited)
 
 On
March 9, 2006 the Company granted 250,000 options to purchase common stock
to an employee, who is the brother of the Company’s Chief Executive Officer, at
an exercise price of $1.00 per share. The options have a ten year term and a
vesting schedule of 50,000 shares per year beginning March 9, 2007. At
March 9, 2006, the Company calculated the initial value of the options
using the Black-Scholes model based on the following assumptions: a risk-free
rate of 4.86%, volatility of 36%, estimated life of 10 years and a fair
market value of $1.00 per share.   The vesting schedule is
prorated over the reporting period, and approximately $7,135 and $21,405, and
$7,135 and $21,405, respectively, was recorded as consulting expense during the
three and nine months ended September 30, 2009 and 2008.
 
 In
November 2006, the Company granted 1,500,000 options to purchase common stock to
one of the members of the Company’s Board of Directors for future consulting
services at an exercise price of $0.90 per share. The options have a 2-year
annual vesting provision which 750,000 these options vested immediately. At
December 31, 2006, the Company calculated the initial value of these options
using the Black-Scholes model based on the following assumptions: a risk-free
rate of 5.15%, volatility of 146%, estimated life of 10 years and a fair market
value of $1.05 per share. The vesting schedule is prorated over the reporting
period, and approximately $0 (fully vested as of December 31, 2008) and $2,089
and $122,745, respectively, was recorded as consultant expense during the three
and nine months ended September 30, 2009 and 2008.
 
 On July
23, 2007, the Company entered into a perpetual employment agreement with an
individual who is related with the Chief Executive Officer through family
marriage.  Under the agreement, the employee is entitled to an annual
base salary of $68,000 per year and cash bonus to be determined by the Company,
is subject to confidentiality provisions and is entitled to a severance equal to
this employee’s base salary for a two week period if this employee is terminated
by the Company without cause.  Additionally, the employment agreement
granted this employee an option for 25,000 shares of common stock with an
exercise price of $0.95 per share which vests over a five-year
period.  In October 2008, this employee was terminated, and 15,000 of
the options were cancelled.  As of September 30, 2009, there is an
accrual of $2,672 for the severance pay that has not yet been
issued.
 
 One of
the members of the Company’s Board of Directors provides legal services to
Company.  Total legal expense incurred by the Company for such legal
services by this director totaled $20,832 and $24,835, and $88,938 and $120,250
for the three and nine months ended September 30, 2009 and 2008,
respectively.  At the beginning of 2008, the Company granted this board
member options to purchase 100,000 shares of common stock with an exercise price
of $.89 per share for service performed and to be performed in relation to the
Company’s patents.  As of September 30, 2009, 10,709 options had
vested and the Company has recorded $5,344 in expense related to these vested
options.  In September 2009, in satisfaction of $50,000 owed for legal
services previously accrued, the Company issued an original issue discount note
payable in the amount of $62,500 and the issuance of five year warrants to
purchase 75,000 shares of common stock at an exercise price of
$1.00.  See Note 6.
  NOTE 11 — SUBSEQUENT
EVENTS
  The Company has evaluated events and
transactions that occurred between October 1, 2009 and November 23, 2009, which
is the date the financial statements were issued for possible disclosure or
recognition in the financial statements. The Company has determined that there
were no such events that warrant disclosure or recognition in the financial
statements.


F-16




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




Statements
included in this management’s discussion and analysis of financial condition and
results of operations, and in future filings by the Company with the SEC, in the
Company’s press releases and in oral statements made with the approval of an
authorized executive officer that are not historical or current facts are
“forward-looking statements” and are subject to certain risks and uncertainties
that could cause actual results to differ materially from historical earnings
and those presently anticipated or projected. You are cautioned not to place
undue reliance on any such forward-looking statements, which speak only as of
the date made. The following important factors, among others, in some cases have
affected and in the future could affect the Company’s actual results and could
cause the Company’s actual financial performance to differ materially from that
expressed in any forward-looking statement: (i) the extremely competitive
conditions that currently exist in the market for companies similar to the
Company and (ii) lack of resources to maintain the Company’s good standing
status and requisite filings with the SEC. The foregoing list should not be
construed as exhaustive, and the Company disclaims any obligation subsequently
to revise any forward-looking statements to reflect events or circumstances
after the date of such statements or to reflect the occurrence of anticipated or
unanticipated events. The following discussion should be read in conjunction
with our financial statements and their explanatory notes included as part of
this report.
 
 OVERVIEW
 
 We were
initially incorporated in the State of New Mexico as Novint Technologies, Inc.
in April 1999. On February 26, 2002, we changed our state of incorporation to
Delaware by merging into Novint Technologies, Inc., a Delaware corporation. We
have no subsidiaries and operate our business under Novint Technologies,
Inc.  We are a haptics technology company (haptics refers to your
sense of touch). We develop, market, and sell applications and technologies that
allow people to use their sense of touch to interact with
computers.
 
 We have
derived revenues from 3D touch hardware sales, 3D touch software sales, and the
development of professional applications for our customers. We launched our
Falcon product in June 2007, and are selling it primarily on our on-line store.
We launched an on-line game store in November 2007. We also have completed a
number of professional application contracts with customers who desire custom
developed software.
 
 Novint
focuses many of its efforts to exploit opportunities in the consumer console and
PC interactive games market, and is also looking to expand its efforts in other
areas of computer touch in funded projects. Using our haptics technology, games
and applications will have the crucial missing “third sense”, touch, to human
computer interaction. Users will be able to directly and intuitively feel the
shape, texture, and physical properties of virtual objects using our computer
touch software.  Our haptic technology and related hardware for
consumers is the primary focus of our operations, but we will continue to
develop our professional applications.  We will devote much of our
resources to further developing the video game market and seeking new business
relationships with video game developers and publishers and hardware
manufacturers.  We will also continue to perform project work across a
variety of professional applications.
  We began
selling our haptic product, the Novint Falcon, in June 2007 through our website
at www.novint.com.  We currently are selling one haptic hardware
product, which is a haptic game controller device called the Novint Falcon
marketed in a bundled package that includes several games. In late 2007, we
launched an on-line game store where consumers can purchase and download a
variety of game titles.  In 2008, we launched a pistol grip attachment
for the Falcon.  Although our sales of the Novint Falcon and games
since product launch have been limited, sales of the Novint Falcon, the pistol
grip, and games have begun to increase resulting from the release of new
software and games in 2009. One of the most significant drivers of revenue for
Novint will be games and content. This is true not only in the revenue we
receive from the games themselves, but largely because this is a criterion we
see many of our customers desiring in order to justify the Falcon hardware
purchase. For example, if the Novint Falcon has many games available to play on
it, a customer can purchase a single piece of hardware and then over time
purchase multiple games that give a unique gaming experience, making the initial
hardware purchase valuable over a larger amount of time and across a larger
number of games. In 2008, we entered into licensing agreements with Valve
Software and Electronic Arts among others. Support for the Orange Box, Counter
Strike: Source, Battlefield 2, and Left 4 Dead were recently
released.
  2
 
 CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
 
 Effective
July 1, 2009, the Company adopted the Financial Accounting Standards Board
(“FASB”) Accounting Standards Codification (“ASC”) 105-10, “Generally Accepted
Accounting Principles.” ASC 105-10 establishes the FASB Accounting Standards
CodificationTM
(“Codification”) as the source of authoritative accounting principles recognized
by the FASB to be applied by nongovernmental entities in the preparation of
financial statements in conformity with GAAP for SEC registrants. All guidance
contained in the Codification carries an equal level of authority. The
Codification supersedes all existing non-SEC accounting and reporting standards.
The FASB will now issue new standards in the form of Accounting Standards
Updates (“ASUs”). The FASB will not consider ASUs as authoritative in their own
right. ASUs will serve only to update the Codification, provide background
information about the guidance and provide the bases for conclusions on the
changes in the Codification. References made to FASB guidance have been updated
for the Codification throughout this document.
 
 High-quality
financial statements require rigorous application of accounting policies. Our
policies are discussed in our financial statements for the quarter ended
September 30, 2009 and are considered by management to be critical for an
understanding of our financial statements because their application places the
most significant demands on management’s judgment, with financial reporting
results relying on estimation about the effect of matters that are inherently
uncertain. We review the accounting policies we use in reporting our financial
results on a regular basis. As part of such review, we assess how changes in our
business processes and products may affect how we account for transactions. We
have not changed our critical accounting policies or practices during 2009. New
accounting policies and practices were implemented in 2008 and in 2009 as
necessary based on the launch of our haptics product sales in June
2007.
 
 REVENUE
AND COST RECOGNITION — We recognize revenue from the sale of software products
under FASB ASC 985.605, Software-Software Revenue Recognition, which generally
requires that revenue recognized from software arrangements be allocated to each
element of the arrangement based on the relative vendor specific objective
evidence of fair values of the elements, such as software products, upgrades,
enhancements, post contract customer support, installation, or training.
Under FASB ASC 985.605, if the determination of vendor specific objective
evidence of fair value for each element of the arrangement does not exist, all
revenue from the arrangement is deferred until such time that evidence does
exist or until all elements of the arrangement are delivered.
 
 FASB ASC
985.605 clarified what constitutes vendor specific objective evidence of fair
value and introduced the concept of the “residual method” for allocating revenue
to elements in a multiple element arrangement.
 
 Our
revenue recognition policy is as follows:
 
 Project
revenue consists of programming services provided to unrelated parties under
fixed-price contracts. Revenues from fixed price programming contracts are
recognized in accordance with FASB ASC 605.35, Revenue
Recognition-Construction-Type and Production-Type Contracts, using the
percentage-of-completion method, measured by the percentage of costs incurred to
date compared with the total estimated costs for each contract. The Company
accounts for these measurements in the accompanying balance sheets under costs
and estimated earnings in excess of billings on contracts, and billings in
excess of costs and estimated earnings on contracts. Provisions for estimated
losses on uncompleted contracts are made and recorded in the period in which the
loss is identified.
 
 For
project revenue that is not under fixed price programming contracts, the Company
recognizes revenues as the services are completed.
 
 Revenue
from product sales relates to the sale of the Falcon haptics interface, which is
a human-computer user interface (the “Falcon”) and related accessories. The
Falcon allows the user to experience the sense of touch when using a computer
while holding its interchangeable handle. The Falcons are manufactured by an
unrelated party. Revenue from the product sales is recognized when the products
are shipped to the customer and the Company has earned the right to receive and
retain reasonable assured payments for the products sold and delivered.
Consequently, if all these revenue from product sales requirements are not met,
such sales will be recorded as deferred revenue until such time as all revenue
recognition requirements are met.
 
 FASB ASC
605.45, Revenue Recognition-Principal Agent Considerations, require amounts
billed to a customer in a sales transaction related to shipping and handling, if
any, to be classified and accounted for as revenues earned for the goods
provided whereas shipping and handling costs incurred by a company are required
to be classified as cost of sales.
  3
 
 Arrangements
made with certain customers, including slotting fees and co-operative
advertising, are accounted for in accordance with FASB ASC 605.45. These
incentives are recognized as a reduction in revenue or as a selling, general,
and administrative expense, respectively, when payment is made to a customer (or
at the time the Company has incurred the obligation, if earlier) unless the
Company receives a benefit over a period of time and the Company meets certain
other criteria, such as retailer performance, recoverability, and
enforceability, in which case the incentive is recorded as an asset and is
amortized as a reduction of revenue over the term of the
arrangement.
 
 FASB ASC
605.45, requires reimbursements received for out-of-pocket expenses incurred
while providing services to be characterized in the statements of operations as
revenue. The Company’s out-of-pocket expenses incurred in connection with their
project revenues are recognized in revenues based on a computed overhead rate
that is included in their project labor costs to derive a project
price.
 
 FASB ASC
605.45, the Company recognizes its product sales on a gross basis. The Company
is responsible for fulfillment, including the acceptability of the product
ordered. The Company has risks and rewards of ownership such as the risk of loss
for collection, delivery, or returns. Title passes to the customer upon receipt
of the product by the customer. In accordance with the Company’s agreement with
its customer, further obligation is limited to the terms defined in its
warranty.
 
 The
Company’s customers are provided a one (1) year limited warranty on the Falcon.
This warranty guarantees that the products shall be free from defects in
material and workmanship. Additionally, the Company offers its customers of the
Falcon a 30 day money back guarantee. The Company continually evaluates its
reserve accounts for both the limited warranty and 30 day money back guarantee
based on its historical activities.
 
 SOFTWARE
DEVELOPMENT COSTS — We account for our software development costs in accordance
with FASB ASC 985.20, Software-Costs of Computer Software to be Sold, Leased, or
Otherwise Marketed. This statement requires that, once technological feasibility
of a developing product has been established, all subsequent costs incurred in
developing that product to a commercially acceptable level be capitalized and
amortized ratably over the estimated life of the product, which is 5 years. We
have capitalized software development costs in connection with our haptic
software beginning in 2000. Amortization is computed on the straight-line basis
over the estimated life (5 years) of the haptics technology.
 
 The
Company follows ASC 350.40, Intangibles-Goodwill and Other-Internal-Use
Software, which requires capitalization of certain costs incurred during the
development of internal use software.
 
 STOCK
BASED COMPENSATION – We account for stock based compensation in accordance with
SFAS FASB ASC 718, Compensation-Stock Compensation, which requires the
measurement and recognition of compensation expense for all share-based payment
awards made to employees and directors, including employee stock options and
employee stock purchases, related to a Employee Stock Purchase Plan based on the
estimated fair values.  We have used stock option awards in the past
and continue to use them as a means of rewarding our employees and directors for
their continued commitment and efforts in helping us execute our overall
business plans.
 
 Stock
options and warrants issued to consultants and other non-employees as
compensation for services provided to the Company are accounted for based on the
fair value of the services provided or the estimated fair market value of the
option or warrant, whichever is more reliably measurable in accordance with FASB
ASC 505.50, Equity-Based Payments to Non-Employees. The related expense is
recognized over the period the services are provided.
  4
 
 RECENT
ACCOUNTING PRONOUNCEMENTS
 
 The
Company has adopted all recently issued accounting pronouncements. The adoption
of the accounting pronouncements, including those not yet effective is not
anticipated to have a material effect on the financial position or results of
operations of the Company.
 
 RESULTS
OF OPERATIONS
 
 THREE
MONTHS ENDED SEPTEMBER 30, 2009 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30,
2008.
 
 REVENUES.
During the three months ended September 30, 2009, we had revenues of $355,169 as
compared to revenues of $76,149 during the three months ended September 30,
2008, an increase of approximately 366%. During the three months ended September
30, 2009, our revenues were derived from the development of professional
applications for customers totaling $241,953 and the sale of our haptics
technology products totaling $113,216.  Our sales of our haptics
technology products increased 58% from 2008, while our revenues from the
development of professional applications increased 5,277% as we continued to
place emphasis on our professional applications during the
quarter.  We will continue to provide development of professional
applications, and in 2009 we expect to grow this part of our business similarly
to how we have in the past.  Much of our focus will remain on the
video game business, but we expect to place more emphasis on professional
applications in our Advanced Products Group than we had from 2006 to
2008.
 
 COST OF
GOODS SOLD AND GROSS PROFIT (LOSS). Cost of goods sold, which consists of the
cost of the haptics technology products sold, materials purchased for resale to
customers, the direct labor incurred for delivering on projects, warehousing and
freight costs, and inventory write-downs were $338,307 for the three months
ended September 30, 2009, compared to $126,086 for the three months ended
September 30, 2008.  Our overall gross profit percentage was
approximately 5% for the three months ended September 30, 2009, compared to a
gross loss percentage of (66)% for the three months ended September 30,
2008.  For the three months ended September 30, 2009, our gross profit
from our development of professional applications approximated 40%, an increase
from a gross profit of 33% for the third quarter of 2008, due to securing more
profitable contracts in the quarter. Our gross loss experienced from the sale of
our haptics technology product in the third quarter of 2009 was (71)%, a slight
improvement from 2008 when the gross loss percentage was (72)%.  Our
gross loss experienced from the sales of our haptics technology product
continues to be impacted by the reorganization of our distribution systems to
drive cost effectiveness, as well as some promotional pricing that we had in the
quarter. In the
three months ended September 30, 2009, the Company incurred one-time charges of
approximately $32,000 relocating the majority of the inventory to a new
warehouse location in New Mexico.  Additionally, there was an
inventory write-down of approximately $28,500 related to costs for sales of
games.By the end of September, we had completed the reorganization of
our distribution systems, and will be able to operate at a lower cost than in
the past.   Warehousing costs for the three months ended
September 30, 2009 and 2008 were $13,456 and $41,676, respectively.
 
 RESEARCH AND DEVELOPMENT
EXPENSES.  Research and development totaled $38,164 for the three
months ended September 30, 2009 compared to $323,649 for the three months ended
September 30, 2008, a decrease of $285,485 or 88%.  During 2008, we
focused on the development of games for use with the Falcon.  In 2009,
we decreased the rate of development of new software associated with the haptics
technology product to match the release schedule of our games.
 
 GENERAL
AND ADMINISTRATIVE EXPENSES. General and administrative expenses totaled
$703,020 for the three months ended September 30, 2009, compared to $1,172,334
for the three months ended September 30, 2008, a decrease of $469,314 or
40%.  In 2009, we are reorganizing our infrastructure to significantly
reduce our costs, while still continuing to market our product. The
decrease in general and administrative expenses compared to the prior year was
primarily related to this reorganization.  Business and professional
fees increased approximately $188,000 to assist with operational issues and
sales and marketing, while insurance expense decreased $55,000, royalty expense
increased approximately $1,000, rent decreased $33,000, and payroll and other
overhead expenses decreased approximately $570,000 largely due to a reduction in
the number of our employees.
  5
 
 DEPRECIATION
AND AMORTIZATION EXPENSE.   Depreciation and amortization expense
totaled $147,256 for the three months ended September 30, 2009 compared to
$161,416 for the three months ended September 30, 2008, a decrease of $14,160 or
9%.  This expense decreased between the two periods as a result of a
reduction in fixed assets as we restructured in the beginning of
2009.
 
 SALES AND
MARKETING EXPENSE.  Sales and marketing expense totaled $80,132 for
the three months ended September 30, 2009 compared to $152,479 for the three
months ended September 30, 2008, a decrease of $72,347 or 47%.  In
2009, we had fewer co-op marketing programs with retailers as we refocused our
distribution channels, and there was a general reduction in marketing efforts as
we restructured our infrastructure. We did promotional programs this quarter to
stimulate sales of the Falcon product.
 
 LOSS FROM
OPERATIONS.  We had a loss from operations of $951,710 for the three
months ended September 30, 2009, compared to a loss from operations of
$1,859,815 for the three months ended September 30, 2008. Our net losses have
decreased $908,105 primarily as a result of the increase in project revenue and
the decrease in our operating expenses as described above.
 
 NET LOSS.
We had a net loss of $1,529,830, or $0.05 per share, for the three months ended
September 30, 2009, compared to $2,335,438, or $0.07 per share, for the three
months ended September 30, 2008. There was a decrease in the net loss of
$805,608, which is a result of a decrease in the loss from operations of
approximately $908,105, a decrease in interest income of approximately $1,000,
and a net increase in interest expense and debt discount related to convertible
debt of approximately $101,000.
 
 NINE
MONTHS ENDED SEPTEMBER 30, 2009 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30,
2008.
 
 REVENUES.
During the nine months ended September 30, 2009, we had revenues of $700,842 as
compared to revenues of $232,077 during the nine months ended September 30,
2008, an increase of approximately 202%. During the nine months ended September
30, 2009, our revenues were derived from the development of professional
applications for customers totaling $477,378 and the sale of our haptics
technology products totaling $223,464.  Our sales of our haptics
technology products increased 23% from 2008, while our revenues from the
development of professional applications increased 850% as we placed emphasis on
our professional applications during 2009 while we were restructuring our
distribution channels for the haptics product.  We will continue to
provide development of professional applications, and in 2009 we expect to grow
this part of our business similarly to how we have in the past.  Much
of our focus will remain on the video game business, but we expect to place more
emphasis on professional applications in our Advanced Products Group than we had
from 2006 to 2008.
 
 COST OF
GOODS SOLD AND GROSS PROFIT (LOSS). Cost of goods sold, which consists of the
cost of the haptics technology products sold, materials purchased for resale to
customers, the direct labor incurred for delivering on projects, warehousing and
freight costs, and inventory write-downs were $686,307 for the nine months ended
September 30, 2009, compared to $354,106 for the nine months ended September 30,
2008.  Our overall gross profit percentage was approximately 2% for
the nine months ended September 30, 2009, compared to a gross loss percentage of
(53)% for the nine months ended September 30, 2008.  For the nine
months ended September 30, 2009, our gross profit from our development of
professional applications approximated 29%, an increase from a gross profit of
26% for the first nine months of 2008, due to securing more profitable contracts
in 2009. Our gross loss experienced from the sale of our haptics technology
product for the nine months ended September 20, 2009 was (56)%, an improvement
from 2008 when the gross loss percentage was (74)%.  Our gross loss
experienced from the sales of our haptics technology product continues to be
impacted by the reorganization of our distribution systems to drive cost
effectiveness, as well as some promotional pricing. In the
three months ended September 30, 2009, the Company incurred one-time charges of
approximately $32,000 relocating the majority of the inventory to a new
warehouse location in New Mexico.  Additionally, there was an
inventory write-down of approximately $28,500 related to costs for sales of
games. By
the end of September, we had completed the reorganization of our distribution
systems, and we will be able to operate at a lower cost than in the
past.   Warehousing costs for the nine months ended September 30,
2009 and 2008 were $55,199 and $106,416, respectively.
  6
 
 RESEARCH AND DEVELOPMENT
EXPENSES.  Research and development totaled $167,837 for the nine
months ended September 30, 2009 compared to $918,580 for the nine months ended
September 30, 2008, a decrease of $750,743 or 82%.  During 2008, we
focused on the development of games for use with the Falcon.  In 2009,
we have decreased the rate of development of new software associated with the
haptics technology product to match the release schedule of our
games.
 
 GENERAL
AND ADMINISTRATIVE EXPENSES. General and administrative expenses totaled
$1,892,000 for the nine months ended September 30, 2009, compared to $3,732,968
for the nine months ended September 30, 2008, a decrease of $1,840,968 or
49%.  In 2009, we are reorganizing our infrastructure to significantly
reduce our costs, while still continuing to market our product. The
decrease in general and administrative expenses compared to the prior year was
primarily related to this reorganization.  Business and professional
fees decreased approximately $418,000, insurance expense decreased $113,000,
royalty expense decreased approximately $31,000, rent increased approximately
$75,000 as we reached an agreement for an early termination of an office lease
in the first quarter of 2009, and payroll and other overhead expenses
decreased approximately $1,354,000 largely due to a reduction in the number of
employees.
 
 DEPRECIATION
AND AMORTIZATION EXPENSE.   Depreciation and amortization expense
totaled $449,944 for the nine months ended September 30, 2009 compared to
$379,606 for the nine months ended September 30, 2008, an increase of $70,338 or
19%.  This expense increased between the two periods as a result of an
increase in our investment in fixed assets, intangibles, and capitalized
software and hardware in late 2008.
 
 SALES AND
MARKETING EXPENSE.  Sales and marketing expense totaled $164,443 for
the nine months ended September 30, 2009 compared to $378,688 for the nine
months ended September 30, 2008, a decrease of $214,245 or 57%.  In
2009, we had fewer co-op marketing programs with retailers as we refocused our
distribution channels, and there was a general reduction in marketing efforts as
we restructured our infrastructure.
 
 LOSS FROM
OPERATIONS.  We had a loss from operations of $2,659,689 for the nine
months ended September 30, 2009, compared to a loss from operations of
$5,531,871 for the nine months ended September 30, 2008. Our net losses have
decreased $2,872,182 primarily as a result of the increase in project revenue
and the decrease in our operating expenses as described above.
 
 NET LOSS.
We had a net loss of $4,292,674, or $0.13 per share, for the nine months ended
September 30, 2009, compared to $6,458,471, or $0.20 per share, for the nine
months ended September 30, 2008. There was a decrease in the net loss of
$2,165,797, which is a result of a decrease in the loss from operations of
approximately $2,872,000, a decrease in interest income of approximately
$15,000, a net increase in interest expense and debt discount related to
convertible debt of approximately $678,000, and an increase in other expenses of
$13,000.
 
 LIQUIDITY
AND CAPITAL RESOURCES
 
 As of
September 30, 2009, we had a total cash balance of $128,870.  Our cash
flow from operating activities for the nine months ended September 30, 2009
resulted in a deficit of $486,563 compared with a deficit of $6,854,742 in the
same period of the prior year.  This decrease in the deficit from
operating activities of approximately $6,368,179 was a result of a reduction in
operating losses and fewer investments in prepaid expenses and
inventory.  Our cash flow from investing activities for the nine
months ended September 30, 2009 resulted in a deficit of $25,788 compared with a
deficit of $260,834 in the same period of the prior year, representing less
investment in fixed assets and investments in games through both licensing and
internal development. Our cash flow from financing activities for the nine
months ended September 30, 2009 resulted in a surplus of $585,906 from the
issuance of notes payable compared to a surplus of $4,987,096 in the same period
of the prior year primarily from the net proceeds from convertible notes
payable.  Overall, our cash increased by $73,555 during the nine
months ended September 30, 2009.
 
 The
financial statements have been prepared on a going concern basis, which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. The Company has incurred recurring losses and at
September 30, 2009, had an accumulated deficit of $34,684,588. For the three and
nine months ended September 30, 2009, the Company sustained a net loss of
$1,529,830 and $4,292,674, respectively. These factors, among others, indicate
that the Company may be unable to continue as a going concern for a reasonable
period of time. These 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 may be necessary should the
Company be unable to continue as a going concern. The Company's continuation as
a going concern is contingent upon its ability to obtain additional financing
and to generate revenue and cash flow to meet its obligations on a timely
basis.
  7
 
 The
Company believes there are several factors in continuing as a going concern. The
Company has dramatically reduced operating expenses and staff during the nine
months in 2009 and will continue do so in areas deemed non-essential during 2009
while maintaining the resources to continue to sell its hardware and software
products. Additionally, in the immediate timeframe, the Company has put more
emphasis on haptics development projects. These projects have historically
generated revenues and expanded the intellectual property portfolio. Next, the
Company is anticipating the release of new top tier games in the second half of
2009, which should generate additional product sales.  Lastly, the
Company will continue to seek and raise additional funding through debt or
equity financing during the next twelve months.


Contractual
Obligations





We do not
currently have fixed contractual obligations or commitments that include future
estimated payments.





Off-Balance
Sheet Arrangements





We do not
have any off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures, or capital resources that is material to our
investors.





ITEM
      3.
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





Not
applicable.





ITEM
      4.
            CONTROLS
      AND PROCEDURES





Disclosure
Controls and Procedures





As of the
end of the period covered by this report, we carried out an evaluation, under
the supervision and with the participation of our management, including our
Chief Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures, as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”).  Based upon that evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures were effective as of the end of the applicable period to
ensure that the information required to be disclosed by the Company in reports
that it files or submits under the Exchange Act (i) is recorded, processed,
summarized, and reported within the time periods specified in Securities and
Exchange Commission rules and forms and (ii) is accumulated and communicated to
our management, including our Chief Executive Officer and Chief Financial
Officer, as appropriate to allow timely decisions regarding required
disclosures.





Changes
in Internal Control over Financial Reporting





There was
no change in our internal control over financial reporting during our most
recent fiscal quarter that has materially affected, or is reasonably likely to
materially affect, our internal control over financial
reporting.




8




PART
II - OTHER INFORMATION





ITEM
      1.
            LEGAL
      PROCEEDINGS





There
have been no material developments during the quarter ended September 30, 2009
in any material pending legal proceedings to which the Company is a party or of
which any of our property is the subject.





ITEM
      2.
            UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS




On
September 3, 2009, we issued 10,000 restricted shares of common stock to Grant
Bettingen, Inc for compensation related to securing funding for the company,
with a value of $1,500.  We relied on Section 4(2) of the Securities
Act of 1933, as amended, as providing an exemption from registration under the
Act.





On
September 3, 2009, we issued 40,000 restricted shares of common stock to Frank
Bua for compensation related to securing funding for the company, with a value
of $6,000.  We relied on Section 4(2) of the Securities Act of 1933,
as amended, as providing an exemption from registration under the
Act.





On
September 3, 2009, we issued 50,000 restricted shares of common stock to Grace
Holdings, Inc for compensation related to securing funding for the company, with
a value of $7,500.  We relied on Section 4(2) of the Securities Act of
1933, as amended, as providing an exemption from registration under the
Act.




ITEM
      3.
            DEFAULTS
      UPON SENIOR SECURITIES





None.





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





None.





ITEM
      5.
            OTHER
      INFORMATION




(a)
            None.




(b)
            There
      were no changes to the procedures by which security holders may recommend
      nominees to our board of directors.




ITEM
      6.
            EXHIBITS





Exhibit
              Number
            
            Description3.1
            
            Amended
      and Restated Certificate of Incorporation, as currently in effect
      (3)3.2
            
            Amended
      and Restated Bylaws, as currently in effect (2)3.3
            
            Articles
      of Merger (1)


3.4
            
            Certificate
      of Merger (1)31.1
            
            Section 302
      Certification by the Corporation’s Chief Executive Officer
    *31.2
            
            Section 302
      Certification by the Corporation’s Chief Financial Officer
    *32.1
            
            Section 906
      Certification by the Corporation’s Chief Executive Officer and Chief
      Financial Officer *







*
            Filed
      herewith.





(1)
            Filed
      on May 17, 2004 as an exhibit to our Registration Statement on Form SB-2,
      and incorporated herein by
reference.





(2)
            Filed
      on March 1, 2007 as an exhibit to our Current Report on Form 8-K, and
      incorporated herein by reference.





(3)
            Filed
      on June 21, 2007 as an exhibit to our Current Report on Form 8-K, and
      incorporated herein by reference.





9




SIGNATURES





In
accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.




NOVINT
      TECHNOLOGIES, INC.(Registrant)Date:
      November 23, 2009
            By:
            /s/
      Tom AndersonTom
      AndersonChief
      Executive Officer, President, and Chief
              Financial
      Officer




10