UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 
 FORM
10-Q
  (Mark
One)
 
 x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED March 31, 2009
 
 o
 TRANSITION 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 it 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  x No  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: 32,942,709 issued and outstanding as of May
11, 2009.
  
 
 NOVINT
TECHNOLOGIES, INC.
 TABLE OF
CONTENTS
 TO
QUARTERLY REPORT ON FORM 10-Q
 FOR
QUARTER ENDED MARCH 31, 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
                    7Item
      4.
                    Controls
      and Procedures
                    7PART
      II
                    OTHER
      INFORMATIONItem
      1.
                    Legal
      Proceedings
                    8Item
      2.
                    Unregistered
      Sales of Equity Securities and Use of Proceeds
                    8Item
      3.
                    Defaults
      Upon Senior Securities
                    8Item
      4.
                    Submission
      of Matters to a Vote of Security Holders
                    8Item
      5.
                    Other
      Information
                    8Item
      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
      SHEETSMarch
      31,
                                          2009
                                        
                                        
                                        December
      31, 2008(Unaudited)ASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
                                        
                                        $
                                        78,632
                                        
                                        
                                        $
                                        55,315Accounts
      receivable, net
                                        
                                        
                                        78,907
                                        
                                        
                                        
                                        57,170Prepaid
      expenses and other current assets
                                        
                                        
                                        566,407
                                        
                                        
                                        
                                        674,608Inventory
                                        
                                        
                                        1,324,834
                                        
                                        
                                        
                                        1,333,632Deposit
      on purchase of inventory
                                        
                                        
                                        14,722
                                        
                                        
                                        
                                        14,722Deposits
                                        
                                        
                                        4,040
                                        
                                        
                                        
                                        12,181Total
      current assets
                                        
                                        
                                        2,067,542
                                        
                                        
                                        
                                        2,147,628PROPERTY
      AND EQUIPMENT, NET
                                        
                                        
                                        374,402
                                        
                                        
                                        
                                        463,080DEFERRED
      FINANCING COSTS
                                        
                                        
                                        335,718
                                        
                                        
                                        
                                        362,247PREPAID
      EXPENSES - NET OF CURRENT PORTION
                                        
                                        
                                        1,079,173
                                        
                                        
                                        
                                        1,020,534SOFTWARE
      DEVELOPMENT COSTS, NET
                                        
                                        
                                        555,886
                                        
                                        
                                        
                                        585,682INTANGIBLE
      ASSETS, NET
                                        
                                        
                                        595,810
                                        
                                        
                                        
                                        680,367DEPOSITS,
      NET OF CURRENT PORTION
                                        
                                        
                                        -
                                        
                                        
                                        
                                        16,042Total
      assets
                                        
                                        $
                                        5,008,531
                                        
                                        
                                        $
                                        5,275,580LIABILITIES
      AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIES:Accounts
      payable
                                        
                                        $
                                        914,314
                                        
                                        
                                        $
                                        684,277Accrued
      payroll related liabilities
                                        
                                        
                                        1,009,521
                                        
                                        
                                        
                                        939,298Accrued
      expenses
                                        
                                        
                                        507,029
                                        
                                        
                                        
                                        323,548Accrued
      expenses - related parties
                                        
                                        
                                        138,928
                                        
                                        
                                        
                                        86,577Deferred
      revenue
                                        
                                        
                                        29,061
                                        
                                        
                                        
                                        29,662Notes
      payable, net of unamortized debt discount of
                                        
                                        
                                        327,807
                                        
                                        
                                        
                                        230,040$72,193
      and $69,952, respectivelyNotes
      payable - original issue discount, net of unamortized
                                        
                                        
                                        187,441
                                        
                                        
                                        
                                        -debt
      discounts of $87,559 and $0, respectivelyTotal
      current liabilities
                                        
                                        
                                        3,114,101
                                        
                                        
                                        
                                        2,293,402LONG
      TERM LIABILITIES:Convertible
      notes payable, net of unamortized debtdiscount
      of $3,780,006 and $4,132,480, respectively
                                        
                                        
                                        1,382,192
                                        
                                        
                                        
                                        1,029,718Total
      liabilities
                                        
                                        
                                        4,496,293
                                        
                                        
                                        
                                        3,323,120COMMITMENTS
      AND CONTINGENCIESSTOCKHOLDERS'
      EQUITY:Common
      stock, authorized 150,000,000 shares, $0.01par
      value; 32,259,131 and 32,259,131 shares issuedand
      outstanding, respectively
                                        
                                        
                                        322,592
                                        
                                        
                                        
                                        322,592Additional
      paid-in capital
                                        
                                        
                                        32,171,716
                                        
                                        
                                        
                                        32,026,387Accumulated
      deficit
                                        
                                        
                                        (31,977,465
                                        )
                                        
                                        
                                        (30,391,914
                                        )Accumulated
      other comprehensive loss
                                        
                                        
                                        (4,605
                                        )
                                        
                                        
                                        (4,605
                                        )Total
      stockholders' equity
                                        
                                        
                                        512,238
                                        
                                        
                                        
                                        1,952,460Total
      liabilities and stockholders' equity
                                        
                                        $
                                        5,008,531
                                        
                                        
                                        $
                                        5,275,580
 The
accompanying notes are an integral part of these financial
statements.
  F-1
  Novint
      Technologies, Inc.STATEMENTS
      OF OPERATIONSFor
      the Three Months EndedMarch
      31, 2009
                                    
                                    
                                    March
      31, 2008(Unaudited)
                                    
                                    
                                    (Unaudited)Revenue:Project
                                    
                                    $
                                    106,874
                                    
                                    
                                    $
                                    27,579Product
                                    
                                    
                                    24,848
                                    
                                    
                                    
                                    44,250Total
      revenue
                                    
                                    
                                    131,722
                                    
                                    
                                    
                                    71,829Cost
      of goods sold:Project
                                    
                                    
                                    88,891
                                    
                                    
                                    
                                    21,187Product
                                    
                                    
                                    45,339
                                    
                                    
                                    
                                    80,802Total
      cost of goods sold
                                    
                                    
                                    134,230
                                    
                                    
                                    
                                    101,989Gross
      loss
                                    
                                    
                                    (2,508
                                    )
                                    
                                    
                                    (30,160
                                    )Operating
      expensesResearch
      and development
                                    
                                    
                                    72,838
                                    
                                    
                                    
                                    313,526General
      and administrative
                                    
                                    
                                    777,899
                                    
                                    
                                    
                                    1,306,282Depreciation
      and amortization
                                    
                                    
                                    153,761
                                    
                                    
                                    
                                    99,147Sales
      and marketing
                                    
                                    
                                    70,136
                                    
                                    
                                    
                                    131,849Total
      operating expenses
                                    
                                    
                                    1,074,634
                                    
                                    
                                    
                                    1,850,804Loss
      from operations
                                    
                                    
                                    (1,077,142
                                    )
                                    
                                    
                                    (1,880,964
                                    )Other
      (income) expenseInterest
      income
                                    
                                    
                                    (8
                                    )
                                    
                                    
                                    (12,252
                                    )Interest
      expense
                                    
                                    
                                    117,812
                                    
                                    
                                    
                                    704Debt
      discounts related to notes and convertible debts
                                    
                                    
                                    380,125
                                    
                                    
                                    
                                    -Other
      (income) expense
                                    
                                    
                                    10,480
                                    
                                    
                                    
                                    (2,207
                                    )Net
      other (income) expense
                                    
                                    
                                    508,409
                                    
                                    
                                    
                                    (13,755
                                    )Net
      loss
                                    
                                    $
                                    (1,585,551
                                    )
                                    
                                    $
                                    (1,867,209
                                    )Loss
      per share, basic and diluted
                                    
                                    $
                                    (0.05
                                    )
                                    
                                    $
                                    (0.06
                                    )Weighted-average
      common sharesoutstanding,
      basic and diluted
                                    
                                    
                                    32,259,131
                                    
                                    
                                    
                                    31,902,829
 The
accompanying notes are an integral part of these financial
statements.
  F-2
  Novint Technologies,
      Inc.STATEMENT OF CHANGES IN
      STOCKHOLDERS’ EQUITYFor the Three Months Ended March
      31, 2009AccumulatedAdditional
                                                                                                                        
                                                                                                                        
                                                                                                                        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
                                                                                                                        )
                                                                                                                        
                                                                                                                        $
                                                                                                                        1,952,460Options vested for employees
      services
                                                                                                                        
                                                                                                                        
                                                                                                                        -
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        -
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        120,466
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        -
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        -
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        120,466Options and warrants vested to
      consultants for services
                                                                                                                        
                                                                                                                        
                                                                                                                        -
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        -
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        (40,801
                                                                                                                        )
                                                                                                                        
                                                                                                                        
                                                                                                                        -
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        -
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        (40,801
                                                                                                                        )Warrants issued with note
      payable
                                                                                                                        
                                                                                                                        
                                                                                                                        -
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        -
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        65,664
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        -
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        -
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        65,664Net loss
                                                                                                                        
                                                                                                                        
                                                                                                                        -
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        -
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        (1,585,551
                                                                                                                        )
                                                                                                                        
                                                                                                                        
                                                                                                                        -
                                                                                                                        
                                                                                                                        
                                                                                                                        
                                                                                                                        (1,585,551
                                                                                                                        )Balances, March 31, 2009
      (Unaudited)
                                                                                                                        
                                                                                                                        
                                                                                                                        32,259,131
                                                                                                                        
                                                                                                                        
                                                                                                                        $
                                                                                                                        322,592
                                                                                                                        
                                                                                                                        
                                                                                                                        $
                                                                                                                        32,171,716
                                                                                                                        
                                                                                                                        
                                                                                                                        $
                                                                                                                        (31,977,465
                                                                                                                        )
                                                                                                                        
                                                                                                                        $
                                                                                                                        (4,605
                                                                                                                        )
                                                                                                                        
                                                                                                                        $
                                                                                                                        512,238
  The accompanying notes are an integral
part of these financial statements.
  F-3
  Novint Technologies,
      Inc.STATEMENTS OF CASH
      FLOWSFor the Three Months
      EndedMarch 31,
    2009
                                                                    
                                                                    
                                                                    March 31,
    2008(Unaudited)
                                                                    
                                                                    
                                                                    (Unaudited)Cash flows from operating
      activities:Net
    loss
                                                                    
                                                                    $
                                                                    (1,585,551
                                                                    )
                                                                    
                                                                    $
                                                                    (1,867,209
                                                                    )Adjustments to reconcile net
      loss to net cash provided by (used in)operating
      activitiesDepreciation and
      amortization
                                                                    
                                                                    
                                                                    153,761
                                                                    
                                                                    
                                                                    
                                                                    99,147Amortization of debt discount
      related to warrants issued with debt
                                                                    
                                                                    
                                                                    380,125
                                                                    
                                                                    
                                                                    
                                                                    -Amortization of capitalized
      finance cost
                                                                    
                                                                    
                                                                    40,397
                                                                    
                                                                    
                                                                    
                                                                    -Amortization of discount related
      to original issue discount notes
                                                                    
                                                                    
                                                                    3,222
                                                                    
                                                                    
                                                                    
                                                                    -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
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    7,200Options issued to employees and
      consultant for services
                                                                    
                                                                    
                                                                    79,665
                                                                    
                                                                    
                                                                    
                                                                    256,710Changes in operating assets and
      liabilities:Accounts
      receivable
                                                                    
                                                                    
                                                                    (21,737
                                                                    )
                                                                    
                                                                    
                                                                    47,550Prepaid
      expenses
                                                                    
                                                                    
                                                                    108,201
                                                                    
                                                                    
                                                                    
                                                                    (414,778
                                                                    )Inventory
                                                                    
                                                                    
                                                                    8,798
                                                                    
                                                                    
                                                                    
                                                                    (483,786
                                                                    )Deposit on purchase of
      inventory
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    (135,463
                                                                    )Prepaid expenses, net of
      current
                                                                    
                                                                    
                                                                    (58,639
                                                                    )
                                                                    
                                                                    
                                                                    (502,679
                                                                    )Deposits
                                                                    
                                                                    
                                                                    12,183
                                                                    
                                                                    
                                                                    
                                                                    26,839Accounts payable and accrued
      liabilities
                                                                    
                                                                    
                                                                    495,741
                                                                    
                                                                    
                                                                    
                                                                    42,190Accrued expenses related
      party
                                                                    
                                                                    
                                                                    52,351
                                                                    
                                                                    
                                                                    
                                                                    248Deferred
      revenues
                                                                    
                                                                    
                                                                    (601
                                                                    )
                                                                    
                                                                    
                                                                    (3,273
                                                                    )Net cash (used in) operating
      activities
                                                                    
                                                                    
                                                                    (261,951
                                                                    )
                                                                    
                                                                    
                                                                    (2,927,304
                                                                    )Cash flows from (to)
      investing activities:Intangible
      expenditures
                                                                    
                                                                    
                                                                    (7,888
                                                                    )
                                                                    
                                                                    
                                                                    (22,539
                                                                    )Capital outlay for software
      development costs and other intangible assets
                                                                    
                                                                    
                                                                    (12,975
                                                                    )
                                                                    
                                                                    
                                                                    (27,424
                                                                    )Property and equipment
      purchases
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    (77,683
                                                                    )Net cash (used in) investing
      activities
                                                                    
                                                                    
                                                                    (20,863
                                                                    )
                                                                    
                                                                    
                                                                    (127,646
                                                                    )Cash flows from (to)
      financing activities:Cash paid for offering
      costs
                                                                    
                                                                    
                                                                    (13,869
                                                                    )
                                                                    
                                                                    
                                                                    (60,000
                                                                    )Proceeds from notes
      payable
                                                                    
                                                                    
                                                                    100,000
                                                                    
                                                                    
                                                                    
                                                                    -Proceeds from original issue
      discount notes
                                                                    
                                                                    
                                                                    220,000Proceeds from convertible
      notes payable
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    2,025,000Net cash provided by
      financing activities
                                                                    
                                                                    
                                                                    306,131
                                                                    
                                                                    
                                                                    
                                                                    1,965,000Net increase (decrease) in
      cash and cash equivalents
                                                                    
                                                                    
                                                                    23,317
                                                                    
                                                                    
                                                                    
                                                                    (1,089,950
                                                                    )Cash and cash equivalents at
      beginning of period
                                                                    
                                                                    
                                                                    55,315
                                                                    
                                                                    
                                                                    
                                                                    2,704,367Cash and cash equivalents at
      end of period
                                                                    
                                                                    $
                                                                    78,632
                                                                    
                                                                    
                                                                    $
                                                                    1,614,417Supplemental
      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
                                                                    
                                                                    $
                                                                    -
                                                                    
                                                                    
                                                                    $
                                                                    2,025,000Payment of
      offering costs with 60,000 warrants
                                                                    
                                                                    $
                                                                    -
                                                                    
                                                                    
                                                                    $
                                                                    41,728Warrants
      for 430,000 shares of common stock granted related to issuance of notes
      payable
                                                                    
                                                                    $
                                                                    65,664
                                                                    
                                                                    
                                                                    $
                                                                    -
  The accompanying notes are an integral
part of these financial statements.
  F-4
  Novint
Technologies, Inc.
 
 NOTES
TO FINANCIAL STATEMENTS
 MARCH
31, 2009 AND 2008
 (Unaudited)
  NOTE
1 —BASIS OF PRESENTATION AND NATURE OF BUSINESS
 
 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 months ended
March 31, 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 March 31, 2009
presentation.
 
 Nature
of Business
 
 The
Company 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
March 31, 2009, had an accumulated deficit of $31,977,465. For the three months
ended March 31, 2009, the Company sustained a net loss of $1,585,551. 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.
 
 The
Company believes there are several factors in continuing as a going concern. The
Company has dramatically reduced operating expenses and staff in the first
quarter of 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 on releasing new top tier games in the first half of
2009, which should generate additional product sales.  Lastly, the
Company will seek to raise additional funding through debt or equity financing
during the next twelve months.
  F-5
 
 Novint
Technologies, Inc.
 
 NOTES
TO FINANCIAL STATEMENTS
 MARCH
31, 2009 AND 2008
 (Unaudited)
  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 Statement
of Financial Accounting Standards (SFAS) Number 86, Accounting for the 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 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 March 31, 2009, the
Company’s capitalized software development costs totaled $555,886 (net of
$392,564 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 months ended March 31, 2009 and 2008
totaled $42,771 and $37,758, respectively.
 
 The
Company follows Statement of Position (SOP) No. 98-1, Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use, which requires
capitalization of certain costs incurred during the development of internal use
software. Through March 31, 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 $18,544 and
$24,170 for the three months ended March 31, 2009 and 2008,
respectively.
 
 Intangible
Assets
 
 Intangible
assets consist of licensing agreements of $1,245,543 and patents of $48,595 and
are carried at cost less accumulated amortization of $698,328 at March 31,
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 months ended March 31, 2009 and 2008, the Company recognized amortization
expense of approximately $92,446 and $37,219, respectively, related to
intangible assets.
  F-6
  Novint
Technologies, Inc.
 
 NOTES
TO FINANCIAL STATEMENTS
 MARCH
31, 2009 AND 2008
 (Unaudited)
 
 Annual
amortization of intangible assets remaining at March 31, 2009 is as
follows:
  For
      the twelve months ending March 31,2010
                        
                        $
                        370,9772011
                        
                        
                        178,9502012
                        
                        
                        8,9582013
                        
                        
                        2,3252014
      and thereafter
                        
                        
                        34,600Total
                        
                        $
                        595,810
 
 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 provisions of SFAS 142, Goodwill and Other Intangible
Assets. SFAS 142 requires intangible assets to be tested for impairment in
accordance with SFAS 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of, which has been superseded by SFAS 144,
Accounting for the Impairment or Disposal of Long-Lived Assets. 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 months ended March 31, 2009 or 2008.
 
 Revenue
and Cost Recognition
 
 The
Company recognizes revenue from the sale of software products under the
provisions of SOP 97-2, Software Revenue Recognition, as amended by SOP 98-4 and
SOP 98-9. SOP 97-2 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 SOP 97-2, 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.
 
 SOP 97-2
was amended in December 1998 by SOP 98-9, Modification of SOP 97-2 Software
Revenue Recognition with Respect to Certain Transactions. SOP 98-9 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.
  F-7
 
 Novint
Technologies, Inc.
 
 NOTES
TO FINANCIAL STATEMENTS
 MARCH
31, 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 SOP 81-1, Accounting for Performance of
Construction-Type and Certain Production-Type Contracts, and Accounting Research
Bulletin (ARB) 45, Long-Term Construction-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 March 31, 2009 and 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 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.
 
 As of
March 31, 2009 and December 31, 2008, the Company recorded $29,061 and 29,662,
respectively, of deferred revenue, which represents fees received for product
and project revenues that have not met all revenue recognition
requirements.
 
 Emerging
Issues Task Force (EITF) 00-10, Accounting for Shipping and Handling Fees
and Costs, 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 months ended March 31,
2009 and 2008 approximated $6,509 and $8,140, respectively.
 
 Arrangements
made with certain customers, including slotting fees and co-operative
advertising, are accounted for in accordance with EITF No. 01-9, Accounting for
Consideration Given by a Vendor to a Customer (Including a Reseller of the
Vendor's Products). 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.
 
 EITF
01-14, Income Statement Characterization of Reimbursements Received for
“Out-of-Pocket” Expenses Incurred, 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
 MARCH
31, 2009 AND 2008
 (Unaudited)
  In
accordance with EITF 99-19, Reporting Revenue Gross as a Principal versus Net as
an Agent, 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 March 31, 2009 and December 31, 2008,
the Company accrued $15,000 and $17,000, respectively, as warranty
reserve.
 
 Loss
per Common Share
 
 Statement
of Financial Accounting Standards No. 128, Earnings Per Share, (SFAS
128) 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 March 31, 2009 and December 31, 2008, the Company had a total
of 10,047,109 and 10,783,473, respectively, in potentially dilutive
securities.
 
 The
Company adopted SFAS No. 123 (Revised 2004), Share Based Payment (“SFAS
No. 123R”), under the modified-prospective transition method on
January 1, 2006. SFAS No. 123R 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 SFAS
No. 123R includes share-based compensation based on the grant-date fair
value determined in accordance with the original provisions of SFAS
No. 123, Accounting for Stock-Based Compensation, 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 SFAS No. 123R for all share-based payments granted after
January 1, 2006.
 
 The
Company recognized $120,466 and $122,139 in employee share-based compensation
expense for the three months ended March 31, 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 months ended March 31, 2009, the
following assumptions were used: closing price of the common stock at the date
of grant, risk-free rates ranged from 4.00% to 5.25%, volatility of the options
ranged from 73% to 157%, estimated lives of 3 to 10 years, and exercise prices
ranged from $0.66 to $1.06 per share.  In calculating the fair value
of options for stock-based compensation for the three months ended March 31,
2008, the following assumptions were used: closing price of the common stock at
the date of grant, risk-free rates ranged from 5.00% to 5.25%, volatility of the
options ranged from 73% to 157%, estimated lives of 3 to 10 years, and exercise
prices ranged 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 SFAS
123 and Emerging Issues Task Force No. 96-18, Accounting for Equity Investments
That are Issued to Other Than Employees for Acquiring or in Conjunction with
Selling Goods or Services, including related amendments and
interpretations. The related expense is recognized over the period the services
are provided. For the three months ended March 31, 2009 and 2008, stock options
and warrants issued to consultants and other non-employees as compensation for
services that vested during those periods totaled $(40,801) and $134,571,
respectively.
  F-9
  Novint
Technologies, Inc.
 
 NOTES
TO FINANCIAL STATEMENTS
 MARCH
31, 2009 AND 2008
 (Unaudited)
 
 Research
and Development
 
 Research
and development costs are expensed as incurred and amounted to $72,838 and
$313,526 for the three months ended March 31, 2009 and 2008,
respectively.
 
 Recently
Issued 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.
 
 NOTE
3 – PREPAID ASSETS
 
 As of
March 31, 2009, prepaid expenses totaling $1,645,580 principally consist of
prepayments towards marketing costs, insurance premiums, rents, and royalties of
which $1,079,173 is considered the long-term portion. Prepayments on royalties
comprise a significant portion of the prepaid expenses at March 31, 2009
totaling $1,583,566 of which $1,079,173 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 March 31, 2009:
 
 Licensing
      agreements
                    
                    $
                    1,245,543Patent
                    
                    
                    48,595Less
      accumulated amortization
                    
                    
                    (698,328
                    )$
                    595,810
 
 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 at an annual interest rate of
eight percent (8%), with principal and interest due at maturity and a maturity
date of December 4, 2009.  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 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 Accounting Principles Board Opinion No. 14,
“Accounting for Convertible Debt and Debt Issued with Stock Purchase
Warrants,” 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 months ended March 31,
2009, the Company’s debt discount amortization expense totaled
$18,626.  The remaining unamortized debt discount at March 31, 2009
totaled $51,326.
 
 F-10
 
 Novint
Technologies, Inc.
 
 NOTES
TO FINANCIAL STATEMENTS
 MARCH
31, 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 Accounting Principles Board Opinion No. 14, “Accounting for
Convertible Debt and Debt Issued with Stock Purchase Warrants,” 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 months ended March 31, 2009, the Company’s debt
discount amortization expense totaled $6,395.  The remaining
unamortized debt discount at March 31, 2009 totaled $20,867.
 
 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, with no stated
interest rate and principal due in 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 months
ended March 31, 2009, the Company amortized interest expense totaled
$3,222.  The remaining unamortized original issue discount at March
31, 2009 totaled 51,778.  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.  The Company has accounted for the
150% warrants coverage to purchase 330,000 shares under Accounting Principles
Board Opinion No. 14, “Accounting for Convertible Debt and Debt Issued with
Stock Purchase Warrants,” 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 months ended March 31, 2009, the Company’s debt
discount amortization expense totaled $2,622.  The remaining
unamortized debt discount at March 31, 2009 totaled $35,781.
  F-11
  Novint
Technologies, Inc.
 
 NOTES
TO FINANCIAL STATEMENTS
 MARCH
31, 2009 AND 2008
 (Unaudited)
 
 NOTE
6 – CONVERTIBLE NOTES PAYABLE
  In March
2008, the Company closed a $2,025,000 private placement of debt securities under
Regulation D promulgated under the Securities Act of 1933, as amended,
pursuant to the terms of a subscription agreement among the Company and the
subscribers’ signatory thereto (the "Subscription Agreement"). From April 2008
through June 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 recorded $459,073 as deferred financing costs associated
with the closing that occurred on June 9, 2008. This amount represents $197,049
for legal expenses associated with the private placement, of which $117,855
remains accrued for at March 31, 2009 and December 31, 2008, $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 Emerging Issues Task Force
No. 00-27 and 00-19. 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 a 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 EITF
00-27, 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 months ended March 31, 2009 and 2008, the
Company’s debt discount amortization expense totaled $352,482 and $0,
respectively.  The remaining unamortized debt discount at March 31,
2009 totaled $3,780,006.
 
 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
$60,239 related to these convertible notes for the three months ended March 31,
2009.  As of March 31, 2009 and December 31, 2008, the Company accrued
interest of $235,143 and $174,904, respectively.
  F-12
  Novint
Technologies, Inc.
 
 NOTES
TO FINANCIAL STATEMENTS
 MARCH
31, 2009 AND 2008
 (Unaudited)
 
 NOTE
7 – STOCKHOLDERS’ EQUITY
 
 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.  As the options have not been issued, the value remains
in accrued payroll liabilities on the accompanying balance sheet as of March 31,
2009.  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 six
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 three months ended March 31, 2009.  The Board of Directors
also approved the issuance of  250,000 restricted shares of common
stock to a consultant for consulting services.  As the shares have not
been issued, the value $37,500 has been accrued for and is included in accrued
expenses on the accompanying balance sheet as of March 31, 2009.
 
 NOTE
8 — 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.
 
 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 will issue
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 six months. The shares issued
have a provision limiting sales to a percentage of volume.  As the
shares have not been issued, the value of $60,000 is included as accrued
expenses on the accompanying balance sheet as of March 31, 2009.
 
 In
February 2009, the Company terminated many of its employees in order to reduce
expenses.  They 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 March 31,
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 $15,759 and accelerated the vesting of certain
options.
  F-13
  Novint
Technologies, Inc.
 
 NOTES
TO FINANCIAL STATEMENTS
 MARCH
31, 2009 AND 2008
 (Unaudited)
 
 NOTE
9 — 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.   At March 31, 2009, 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 $(1,651) and
$4,890 was recorded as consultant expense during the three months ended March
31, 2009 and 2008, respectively.
 
 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 months ended March 31, 2009 and 2008, the Company paid $0 and
$25,000, respectively, for these services.  As of March 31, 2009, the
Company owed $43,750 to Normandie New Mexico under the agreement.
 
 On June
10, 2004, the Company granted 250,000 options to purchase common stock to one of
the member 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. At March 31, 2009, 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. The vesting schedule is
prorated over the reporting period, and approximately $(8,910) and $14,000 was
recorded as consulting expense during the three months ended March 31, 2009 and
2008, respectively.
 
 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 $7,135 was
recorded as consulting expense during the three months ended March 31, 2009 and
2008, respectively.
 
 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 $61,496
was recorded as consultant expense during the three months ended March 31, 2009
and 2008, respectively.
 
 F-14
 Novint
Technologies, Inc.
 
 NOTES
TO FINANCIAL STATEMENTS
 MARCH
31, 2009 AND 2008
 (Unaudited)
 
 On July
23, 2007, the Company entered into a perpetual employment agreement with an
individual related to the Chief Executive Officer.  Under the
agreement, he was 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 was entitled to a severance equal to this employee’s base salary for a two
week period if this employee was 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 March 31, 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 $34,047 and $32,829 for the three months ended
March 31, 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 March 31, 2009,
10,709 options had vested, and the Company recorded $5,344 in expense related to
these vested options.
 
 NOTE
10 — SUBSEQUENT EVENTS
 
 In May
2009, the Company issued 8,578 shares of common stock to a director of the
Company for compensation.  The Company recorded $4,260 in Accrued
Expenses, Related Parties as of March 31, 2009 for these shares.
 
 In May
2009, the Company issued 25,000 shares of common stock to a consultant as
compensation.  The Company recorded $12,500 in Accrued Expenses as of
March 31, 2009 for these shares.
 
 In May
2009, the Company issued 400,000 shares of common stock as part of the lease
settlement for the New Mexico office.  The Company recorded $60,000 in
Accrued Expenses as of March 31, 2009 for these shares.
 
 In May
2009, the Company issued 250,000 shares of common stock to a consultant as
compensation.  The Company recorded $37,500 in Accrued Expenses as of
March 31, 2009 for these shares.
 
 In April
2009, the Company received $50,000 for a promissory note totaling $62,500 with
150% warrant coverage.  The exercise price on the warrants was $1.00/share
with a 5 year term. The notes are secured with the Company’s assets and
intellectual property, no stated interest rate, with principal and interest due
February 2010. This note is considered an original issue discount note whereby
the discount will be amortized over the life of the note. 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 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 note is not paid back by the maturity date,
then the Company will have the right but not the obligation to refinance
the note with a new 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.
  In May
2009, the Company entered into an agreement whereby a portion of their inventory
stored at a vendor location will be held as collateral until the outstanding
balance of $32,613 is paid.  As of March 31, 2009, the amount outstanding
was $31,076.
 F-15
  
 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 in our on-line store and in a
number of retailers and other websites. 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 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,
we anticipate sales of the Novint Falcon, the pistol grip, and games 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, and therefore
several new AAA level games will soon be supported by the Falcon.
  2
  CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
 
 High-quality
financial statements require rigorous application of accounting policies. Our
policies are discussed in our financial statements for the quarter ended March
31, 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 the provisions of Statement of Position (“SOP”) 97-2, Software Revenue
Recognition, as amended by SOP 98-4 and SOP 98-9. SOP 97-2 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 SOP 97-2, 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.
 
 SOP 97-2
was amended in December 1998 by SOP 98-9, Modification of SOP 97-2 Software
Revenue Recognition with Respect to Certain Transactions. SOP 98-9 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 SOP 81-1, Accounting for Performance of
Construction-Type and Certain Production-Type Contracts, and Accounting Research
Bulletin 45, Long-Term Construction-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.
 
 Emerging
Issues Task Force (EITF) 00-10, Accounting for Shipping and Handling Fees
and Costs, 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.
 
 Arrangements
made with certain customers, including slotting fees and co-operative
advertising, are accounted for in accordance with EITF No. 01-9, Accounting for
Consideration Given by a Vendor to a Customer (Including a Reseller of the
Vendor's Products). 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.
  3
  EITF
01-14, Income Statement Characterization of Reimbursements Received for
“Out-of-Pocket” Expenses Incurred, 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.
 
 In
accordance with EITF 99-19, Reporting Revenue Gross as a Principal versus Net as
an Agent, 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.
 
 IMPAIRMENT
— In accordance with Statement of Financial Accounting (“SFAS”) 144, Accounting
for the Impairment or Disposal of Long-Lived Assets, we review our long-lived
assets for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. Recoverability of assets
to be held and used is measured by a comparison of the carrying amount of an
asset to future net cash flows expected to be generated by the asset. If such
assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceeds the
fair value of the assets. Assets to be disposed of are reported at the lower of
the carrying amount or fair value less costs to sell.
 
 SOFTWARE
DEVELOPMENT COSTS — We account for our software development costs in accordance
with SFAS 86, Accounting for the 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 Statement of Position (SOP) No. 98-1, Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use, 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 123(R), Share-Based Payment, 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 SFAS
123 and Emerging Issues Task Force No. 96-18, Accounting for Equity Investments
That are Issued to Other Than Employees for Acquiring or in Conjunction with
Selling Goods or Services, including related amendments and
interpretations. 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 MARCH 31, 2009 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
2008.
 
 REVENUES.
During the three months ended March 31, 2009, we had revenues of $131,722 as
compared to revenues of $71,829 during the three months ended March 31, 2008, an
increase of approximately 83%. During the three months ended March 31, 2009, our
revenues were derived from the development of professional applications for
customers totaling $106,874 and the sale of our haptics technology products
totaling $24,848.  Our sales of our haptics technology products
decreased 44% from 2008, while our revenues from the development of professional
applications increased 288% as we placed more 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 $134,230 for the three months
ended March 31, 2009, compared to $101,989 for the three months ended March 31,
2008.  Our overall gross loss percentage was approximately (2)% for
the three months ended March 31, 2009, compared to a gross loss percentage of
(42)% for the three months ended March 31, 2008.  For the three months
ended March 31, 2009, our gross profit from our development of professional
applications approximated 17%, a slight decrease from a gross profit of 23% for
the first quarter of 2008. Our gross loss experienced from the sale of our
haptics technology product in the first quarter of 2009 was (82)%, an
improvement from 2008 when the gross loss percentage was (83)%.  Our
gross loss experienced from the sales of our haptics technology product
continues to be impacted by our high warehousing and fulfillment
costs.  This is a primary reason we reevaluated our distribution
channels in this quarter.  Warehousing costs for the three months
ended March 31, 2009 and 2008 were $23,282 and $21,919,
respectively.
 
 RESEARCH AND DEVELOPMENT
EXPENSES.  Research and development totaled $72,838 for the three
months ended March 31, 2009 compared to $313,526 for the three months ended
March 31, 2008, a decrease of $240,688 or 77%.  During the first
quarter of 2008, we focused on the development of games for use with the
Falcon.  In the first quarter of 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
$777,899 for the three months ended March 31, 2009, compared to $1,306,282 for
the three months ended March 31, 2008, a decrease of $528,383 or
40%.  In 2009, we are reorganizing our infrastructure to significantly
reduce our costs, while still continuing to market the 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 $355,000, royalty expense decreased approximately
$21,000, rent increased $136,000 as we reached an agreement for an early
termination of an office lease, and payroll and other overhead expenses
decreased approximately $288,000 largely due to a reduction in the number of
employees.
 
 DEPRECIATION
AND AMORTIZATION EXPENSE.   Depreciation and amortization expense
totaled $153,761 for the three months ended March 31, 2009 compared to $99,147
for the three months ended March 31, 2008, an increase of $54,614 or
55%.  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.
  5
  SALES AND
MARKETING EXPENSE.  Sales and marketing expense totaled $70,136 for
the three months ended March 31, 2009 compared to $131,849 for the three months
ended March 31, 2008, a decrease of $61,713 or 47%.  In 2009, we had
fewer co-op marketing programs with retailers as we refocused our distribution
channels.
 
 LOSS FROM
OPERATIONS.  We had a loss from operations of $1,077,142 for the three
months ended March 31, 2009, compared to a loss from operations of $1,880,964
for the three months ended March 31, 2008. Our net losses have decreased
$803,822 primarily as a result of the decrease in our operating expenses as
described above.
 
 NET LOSS.
We had a net loss of $1,585,551, or $0.05 per share, for the three months ended
March 31, 2009, compared to $1,867,209, or $0.06 per share, for the three months
ended March 31, 2008. There was a decrease in the net loss of $281,658, which is
a result of a decrease in the loss from operations of approximately $803,000, a
decrease in interest income of approximately $12,000, a net increase in interest
expense and debt discount related to convertible debt of approximately $497,000,
and an increase in other expense of approximately $13,000.
 
 LIQUIDITY
AND CAPITAL RESOURCES
 
 As of
March 31, 2009, we had a total cash balance of $78,632.  Our cash flow
from operating activities for the three months ended March 31, 2009 resulted in
a deficit of $261,951 compared with a deficit of $2,927,304 in the same period
of the prior year.  This decrease in the deficit from operating
activities of approximately $2,665,000 was a result of an increase in payables
and accrued expenses and an overall increase in non-cash reconciling
items.  Our cash flow from investing activities for the three months
ended March 31, 2009 resulted in a deficit of $20,863 compared with a deficit of
$127,646 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 three months ended
March 31, 2009 resulted in a surplus of $306,131 from the issuance of notes
payable compared to a surplus of $1,965,000 in the same period of the prior year
from the net proceeds from convertible notes payable.  Overall, our
cash increased by $23,317 during the three months ended March 31,
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 incurred recurring losses and, at
March 31, 2009, had an accumulated deficit of $31,977,465. For the three months
ended March 31, 2009, the Company sustained a net loss of $1,585,551. These
factors, among others, indicate that the Company may be unable to continue as a
going concern for a reasonable period of time. The 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.
 
 The
Company believes there are several factors in continuing as a going concern. The
Company has dramatically reduced operating expenses and staff in the first
quarter of 2009 and will continue do so in areas deemed non-essential during
2009, while maintaining the resources to continue to sell our 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. The Company
will be releasing new AAA games in the first half of 2009, which should generate
additional product sales. Lastly, the Company will seek to raise additional
funding through debt or equity financing during the next twelve
months.
 
 6
  Contractual
Obligations
 
 We have
an operating lease for our office located in San Diego, California that expires
on July 31, 2009.  The monthly rent for this location is
$4,040.
 
 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.
  7
  PART
II - OTHER INFORMATION
 
 ITEM
      1.
              LEGAL
      PROCEEDINGS
 
 There
have been no material developments during the quarter ended March 31, 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
 
 None.
  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.
 
 8
  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)10.1
                      
                      Form
      of Subscription Agreement (4)10.2
                      
                      Form
      of Secured Note (4)10.3
                      
                      Form
      of Convertible Note (4)10.4
                      
                      Form
      of Warrant (4)10.5
                      
                      Form
      of Intercreditor Agreement (4)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.(4)
              Filed
      on April 16, 2009 as an exhibit to our Annual Report on Form 10-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:
      May 15, 2009
                  By:
                  /s/
      Tom AndersonTom
      AndersonChief
      Executive Officer, President, and Chief Financial
  Officer
  10