e10qsb

United States
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB


þ		QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: June 30, 2006


o		TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 000-51783

NOVINT TECHNOLOGIES, INC.

(Name of Small Business Issuer in its Charter)


Delaware		85-0461778

(State of Incorporation)		(IRS Employer ID. No.)

4109 Bryan Avenue NW, Albuquerque, NM		87114

(Address of Principal Executive Offices)		(Zip Code)

Issuer’s telephone number, including area code: (866) 298-4420

Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

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

State the number of shares outstanding of each of the issuer’s classes of common equity as of the latest practicable date: As of August 16, 2006 there were 17,687,427 shares of common stock outstanding and no other outstanding classes of a common equity security.

Novint Technologies, Inc.

BALANCE SHEET
(Continued)


	June 30, 2006
	(Unaudited)

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable	$	180,162
Accrued payroll related liabilities		133,322
Accrued royalties		15,000
Accrued interest		32,219
Accrued research and development liabilities		189,646
Accrued expenses, related party		43,750
Other accrued liabilities		82,597
Convertible Notes payable		358,081
Note payable		200,000

Total current liabilities		1,234,777


COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ EQUITY (DEFICIT):
Preferred stock, Series A: $0.01 par value; authorized 4,000 shares, 0 issued and outstanding		—
Common stock, authorized 50,000,000 shares, $0.01 par value; 17,687,427 issued and outstanding		176,874
Additional paid-in capital		9,039,307
Accumulated deficit		(9,840,989	)
Accumulated other comprehensive loss		(4,605	)

Total stockholders’ equity (deficit)		(629,413	)


Total liabilities and stockholders’ equity (deficit)	$	605,364

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

Novint Technologies, Inc.

STATEMENTS OF OPERATIONS


	For the			For the			For the			For the
	Three Months			Three Months			Six Months			Six Months
	Ended			Ended			Ended			Ended
	June 30, 2006			June 30, 2005			June 30, 2006			June 30, 2005
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Revenue
Project	$	44,494		$	140,524		$	81,350		$	227,805
Product		286			431			2,211			28,361

Total revenue		44,780			140,955			83,561			256,166

Cost of goods sold:
Project		37,888			61,612			63,567			116,744
Product		—			3,653			—			7,933

Total cost of goods sold		37,888			65,265			63,567			124,677

Gross margin		6,892			75,690			19,994			131,489


Costs and expenses
Research and development		73,704			240,620			163,544			651,794
General and administrative		551,963			400,595			1,020,990			919,180
Depreciation and amortization		25,201			28,370			49,898			58,315
Sales and marketing		60,087			19,380			86,435			73,638

Total costs and expenses		710,955			688,965			1,320,867			1,702,927


Loss from operations		(704,063	)		(613,275	)		(1,300,873	)		(1,571,438	)


Other (income) expense
Interest income		—			(2,923	)		—			(2,923	)
Interest expense		167,982			49,337			200,909			49,395


Total other expenses		167,982			46,414			200,909			46,472


Net loss		(872,045	)		(659,689	)		(1,501,782	)		(1,617,910	)

Preferred stock accretion		—			(7,294	)		(170,974	)		(14,384	)


Net loss available to common stockholders	$	(872,045	)	$	(666,983	)	$	(1,672,756	)	$	(1,632,294	)


Loss per share, basic and diluted:
Net loss	$	(0.05	)	$	(0.05	)	$	(0.09	)	$	(0.12	)

Net loss available to common stockholders	$	(0.05	)	$	(0.05	)	$	(0.10	)	$	(0.12	)


Weighted-average common shares outstanding, basic and diluted		17,150,198			14,162,081			16,316,950			14,005,670

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

Novint Technologies, Inc.

STATEMENTS OF CASH FLOWS


	For the
	Six Months Ended
	June 30, 2006			June 30, 2005
	(Unaudited)			(Unaudited)
Cash flows from operating activities:
Net loss	$	(1,501,782	)	$	(1,617,910	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization		49,898			58,314
Common stock issued for services		38,500			290,700
Options issued to employees for services		158,840			—
Options issued to consultants for services		117,349			40,770
Warrants issued to consultants for services		103,789			—
Reprice of warrants previously granted in debt offering		155,748			—
Amortization of unearned compensation		—			103,587
Reserve for contract loss		—			(5,007	)
Changes in operating assets and liabilities:
Accounts receivable		74,215			25,911
Prepaid expenses		(23,685	)		(12,866	)
Deferred financing costs		(70,322	)		—
Accounts payable		109,426			(198,928	)
Accrued liabilities		144,605			448,137
Accrued interest		38,280			—
Accrued royalties		(15,000	)		(15,000	)
Costs and estimated earnings in excess of billings on contracts, net		(23,402	)		(59,855	)
Billings in excess of costs and estimated earnings on contracts, net		(12,670	)		(130,450	)

Net cash used by operating activities		(656,211	)		(1,072,597	)

Cash flows from investing activities:
Property and equipment acquisitions		(15,294	)		(3,354	)

Net cash provided (used) by investing activities		(15,294	)		(3,354	)


Cash flows from financing activities:
Proceeds from notes payable		340,000			—
Repayment of notes payable		(40,000	)		—
Proceeds from sale of common stock		645,000			—
Payment of offering costs		(14,500	)		—

Net cash provided by financing activities		930,500			—


Net increase (decrease) in cash and cash equivalents		258,995			(1,075,951	)

Cash and cash equivalents at beginning of period		42,127			1,329,428


Cash and cash equivalents at end of period	$	301,122		$	253,477


Supplemental information:
Non-cash: Issuance of common stock in connection with accrued research and development liabilities	$	465,000		$	—

Non-cash: Issuance of common stock in connection with note payable and accrued interest	$	983,846		$	—

Research and Development paid with Note Payable	$	—		$	418,436

Fair value accretion on conditionally redeemable, convertible preferred stock	$	170,974		$	7,090

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

PART 1 — FINANCIAL INFORMATION

Item 1. Financial Statements.

Novint Technologies, Inc.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2006 AND 2005 (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-QSB and Regulation S-B 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 include on Form 10-KSB for the period ended December 31, 2005. 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 six months ended June 30, 2006 are not necessarily indicative of the results to be expected for the full year ending December 31, 2006.

Nature of Business

Novint was originally incorporated in the State of New Mexico in April 1999. On February 26, 2002, the Company changed its state of incorporation to Delaware by merging with Novint Technologies, Inc., a Delaware corporation. This merger was accounted for as a reorganization of the Company. Novint’s technology is primarily within the field of haptics (sense of touch) allowing users the ability to use a high fidelity sense of touch in computing. The Company’s efforts primarily are concentrated on the development and marketing of three-dimensional touch hardware and software. The Company plans to expand into the consumer interactive computer gaming market, which is a substantial departure from its previous business of offering product development services and limited sales of haptic technology. The Company’s operations are based in New Mexico with sales primarily to private entities and quasi-governmental agencies in the United States.

Going Concern and Managements Plans

The accompanying financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America, which contemplates continuation of the Company as a going concern. The Company has experienced recurring losses and operated with negative working capital and, as a result, there exists substantial doubt about its ability to continue as a going concern.

Since inception, The Company has incurred net operating losses and other equity charges, which have resulted in an accumulated deficit of $9,840,989 at June 30, 2006. For the six months ended June 30, 2006 and 2005, the Company had net losses of $1,501,782 and $1,617,910, respectively. Since inception, management has raised equity totaling approximately $6.0 million through various private equity transactions and had approximately $301,000 in cash on hand at June 30, 2006.

If the Company is successful in developing its gaming technology and video games business, and in developing partnerships with game publishers and hardware manufacturers, it will need to raise another $9 million in funding to execute its current business plan with respect to its video gaming business. There can be no assurances that the Company will be able to obtain any additional funding on favorable terms, if at all. Borrowing money may involve pledging some or all of the Company’s

assets. Raising additional funds by issuing common stock or other types of equity securities would further dilute the existing shareholders.

Without additional equity infusion or long-term borrowings, there is substantial doubt of the Company’s ability to continue as a going concern. Management believes it will need additional funding to supplement its cash on hand along with revenues from project and product sales to allow the Company to satisfy its short-term obligations and provide enough cash flow for the Company to continue operations. Management has the ability to curtail spending and negotiate or push back payments to third parties or settle such expenditures in stock in the event it experiences cash shortfalls or in the event the next round of funding does not occur or takes significantly longer than anticipated. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence. These factors raise substantial doubt about our ability to continue as a going concern.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 3D touch technology beginning in 2000. Amortization is computed on the straight-line basis over the remaining life (5 years) of the 3D touch technology. As of June 30, 2006 the Company’s unamortized capitalized software was $6,363. The Company has determined that research and development software related costs incurred during 2005 were not capitalizable as the technological feasibility of such products was not yet established. Accordingly, such costs have been expensed as research and development expenses in the period incurred.

Property and Equipment

Property and equipment are stated at cost. Depreciation on property and equipment is calculated on a straight-line depreciation method over the estimated useful lives of the assets, which range from 3 to 5 years for software and computer equipment, and 5 years for office equipment. Repairs and maintenance costs are expensed as incurred. Depreciation expense was $12,108 and $21,230 for the six months ended June 30, 2006 and 2005, respectively.

Intangible Assets

Intangible assets, which consist of licensing agreements ($880,000), capitalized software development costs ($7,071) and patents ($10,734), are carried at cost less accumulated amortization. Amortization is computed using the straight-line method over the economic life of the assets, which range between 3 and 12 years. For the six months ended June 30, 2006 and 2005, the Company recognized amortization expense of approximately $37,790 and $37,084, respectively, related to intangible assets.

Annual amortization of intangible assets remaining at June 30, 2006, are as follows:


Year Ended December 31,
2006		37,790
2007		73,088
2008		3,914
2009		3,914
2010 and after		17,766

Total	$	136,472

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.

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.

Revenue from product sales relates to the sale of the Phantom haptics interface, which is a human-computer user interface (the Phantom). The Phantom allows the user to experience sensory information when using a computer and its handle and is the approximate size and shape of a writing instrument. Phantoms are manufactured by an unrelated party and are shipped directly to the customer.

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. The Company does not charge a separate or additional fee for shipment to their customers, rather this fee is included in the price and, therefore, part of the Company’s product revenue. No provision for sales returns has been provided in these financial statements as the Company has never had a sales return.

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 warranty from the Company’s supplier. This warranty guarantees that the supplier’s products shall be free from manufacturing defects. The supplier agrees to provide, free of charge, replacements for any components found to be defective within 1 year of delivery. The Company’s customers also have the option of purchasing a Maintenance Renewal, which extends the supplier’s warranty coverage for the following year. The Company’s supplier handles all administration and actual repairs provided for under the basic and renewal programs and, therefore, the Company has not recorded a warranty accrual. To date, the Company’s customers have not purchased a Maintenance Renewal.

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 June 30, 2006 and 2005, the Company had a total of 11,484,763 and 10,326,338 in potentially dilutive securities, respectively.

Stock Option Plans

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. SFAS No. 123R eliminates the ability to account for the award of these instruments under the intrinsic value method proscribed by Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and allowed under the original provisions of SFAS No. 123. Prior to the adoption of SFAS No. 123R, the Company accounted for their stock option plans using the intrinsic value method in accordance with the provisions of APB Opinion No. 25 and related interpretations.

Primarily as a result of adopting SFAS No. 123R, the Company recognized $158,140 in share-based compensation expense for the six months ended June 30, 2006. The impact of this share-based compensation expense on the Company’s basic and diluted earnings per share was $0.00 per share. The fair value of our stock options was estimated using the Black-Scholes option pricing model. For purposes of pro forma disclosure, the estimated fair value of the options is amortized to expense over the option’s vesting period. The following is the pro forma expense for the six months ended June 30, 2005:


Net loss available to common shareholders, as reported	$	(1,632,294	)
Add: Stock-based employee compensation expense included in reported net income		103,587
Deduct: Total stock-based employee compensation expense determined under fair value-based method for all awards		(161,795	)

Pro forma net loss available to common shareholders	$	(1,690,502	)

Loss available to common shareholders per share, basic and diluted:
As reported	$	(0.12	)
Pro forma	$	(0.12	)

In calculating the fair value of options for the above disclosure, the following assumptions were used for stock options issued during the six months ended June 30, 2005: fair market value of $1.00 per share, risk-free rates ranged from 1.73% to 3.66%, volatility of the options ranged from 73% to 91%, estimated lives of 3 to 10 years and exercise prices ranged from $0.66 to $1.00 per share.

In addition, FSP FAS 123(R)-1, Classification and Measurement of Freestanding Financial Instruments Originally Issued in Exchange for Employee Services under FASB Statement No. 123(R), provides additional guidance regarding the accounting treatment for freestanding financial instruments originally issued as employee compensation. Specifically, this instrument would be subject to the recognition and measurement provisions of SFAS 123(R) throughout the instrument’s life, provided the terms of the instrument are not modified after the rights conveyed by the instrument no longer are dependent on whether the holder is an employee.

The guidance in this FSP supersedes FSP EITF 00-19-1, Application of EITF Issue No. 00-19 to Freestanding Financial Instruments Originally Issued as Employee Compensation, and amends SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. This FSP is effective upon initial adoption of SFAS 123(R).

Research and Development

Research and development costs are expensed as incurred and amounted to $163,544 and $651,794 for the six months ended June 30, 2006 and 2005, respectively. Research and development costs primarily relate to costs incurred for development of haptics interface gaming technology prior to the technological feasibility of such technology.

Reclassification

Certain amounts in the prior period financial statements have been reclassified for comparative purposes to conform to the presentation in the current period financial statements.

Recent Accounting Pronouncements

The Company has adopted all accounting pronouncements issued before June 30, 2006, which are applicable to the Company.

In May 2005, Financial Accounting Standards Board (FASB) issued SFAS 154, Accounting Changes and Error Corrections. This Statement replaces APB Opinion No. 20, Accounting Changes, and SFAS 3, Reporting Accounting Changes in Interim Financial Statements, and changes the requirements for the accounting for and reporting of a change in accounting principle. SFAS 154 differentiates between retrospective application and restatement. This Statement is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. Early adoption is permitted for accounting changes and corrections of errors made in fiscal years beginning after the date this Statement is issued. SFAS 154 does not change the transition provisions of any existing accounting pronouncements, including those that are in a transition phase of the effective date of this Statement. The adoption of the provisions of SFAS 154 did not have an impact on its financial condition or results of operations.

In February 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments — an amendment of FASB Statements No. 133 and 140” (“SFAS No. 155”). SFAS No. 155 allows financial instruments that contain an embedded derivative and that otherwise would require bifurcation to be accounted for as a whole on a fair value basis, at the holders’ election. SFAS No. 155 also clarifies and amends certain other provisions of SFAS No. 133 and SFAS No. 140. This statement is effective for all financial instruments acquired or issued in fiscal years beginning after September 15, 2006. The Company does not believe the adoption of SFAS No. 155 will have any impact on the Company’s financial position or results of operations.

In March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets — an amendment of FASB Statement No. 140” (“SFAS No. 156”). SFAS No. 156 provides guidance on the accounting for servicing assets and liabilities when an entity undertakes an obligation to service a financial asset by entering into a servicing contract. This statement is effective for the first fiscal year beginning after September 15, 2006. The Company does not believe the adoption of SFAS No. 156 will have any impact on the Company’s financial position or results of operations.

NOTE 3 — COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS ON CONTRACTS AND BILLINGS IN EXCESS OF COSTS AND ESTIMATED EARNINGS ON CONTRACTS

Costs and estimated earnings in excess of billings on contracts consisted of the following at June 30, 2006:


Costs and estimated earnings incurred on uncompleted contracts	$	68,678
Billings on uncompleted contracts		( 45,276	)

Costs and estimated earnings in excess of billings on uncompleted contracts	$	23,402

Billings in excess of costs and estimated earnings on contracts consisted of the following at:


Billings on uncompleted contracts	$	—
Costs and estimated earnings incurred on uncompleted contracts		—

Billings in excess of costs and estimated earnings on uncompleted contracts	$	—

NOTE 4 — INTANGIBLE ASSETS

Intangible assets consisted of the following at June 30,2006:


Licensing agreements	$	880,000
Patent		10,734
Software development costs		7,071
Less accumulated amortization		(761,333	)

	$	136,472

NOTE 5 — NOTES PAYABLE

During the year ended December 31, 2005, management executed a number of bridge loans. The first loan for $200,000 has an original due date of March 7, 2006 and a stated interest rate of 20% or $20,000 for the first six months outstanding. The note has the option to extend for one year under certain conditions with an interest rate of 12%. These conditions have been met and the due date of this note is September 8, 2006. The remaining bridge loans ranged from $15,000 to $450,000. These notes were originally due one year from the date of issuance at a stated interest rate of 12%. During the six months ended June 30,2006, $825,000 of outstanding principal balance and $35,624 of accrued interest was settled through issuance of 1,250,002 shares of the Company’s common stock. The second group of loans in the amount of $825,000 were secured by the personal guaranty agreement of the Company’s President and CEO and by a pledge of up to 1,250,000 shares of common stock of the Company owned by him. The balance on these notes were paid for with Novint stock. The $200,000 loan is outstanding and is reflected in total in the amount of $200,000 in the accompanying balance sheet as notes payable. Accrued interest in the amount of $32,219 related to this notes payable is recorded in the accompanying balance sheet.

NOTE 6 — CONVERTIBLE NOTES PAYABLE

On March 22, 2005, the Company executed a convertible promissory note in the amount of $123,222 to Lunar Design for the costs incurred during January 2005 associated with contracted research and development efforts. The terms of the promissory note include payment due March 22, 2006, in part or in whole in cash during the time prior to maturity date. In accordance with the agreement, since the promissory note was not paid in full in cash at the promissory note’s maturity date, during the second quarter of 2006, the Company converted the unpaid balance of the note into 123,222 shares of the Company’s common stock which equated to the price per share equal to the last sale price of the Company’s common stock on the maturity date, or on the last business day prior to the maturity date. Additional promissory notes in the amount of $358,081 with the same terms were executed for the costs incurred during the year ended December 31, 2005. These additional notes are due throughout the year ended December 31, 2006.

NOTE 7 — 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 connection with a private placement closed in 2004, the Company committed to issue 304,900 warrants for an overallotment agreement with a consulting group for private placement services. The warrants will have an exercise price of $1.00 per share and will have a six-month term. The date of issue will be coincident with the date of Novint’s IPO. The Company’s registration statement was declared effective on February 6, 2006 and in conjunction with its effectiveness, the Company granted the above options.

The Company has a licensing agreement with Sandia National Laboratories (“Sandia”), which initially developed Flight, the precursor to the Company’s 3D touch technology (the technology) and employed the Company’s founder. The licensing agreement provides the Company the right to utilize the technology exclusively for a period of 12 years and non-exclusively in perpetuity and places certain restrictions on its use as well as requires the Company to pay a 1.5 percent royalty fees to Sandia in connection with any income earned based upon the technology. Additionally, under the original agreement, the Company is obligated to pay to Sandia on a semi-annual basis annual minimum earned royalties of $6,000 in 2001, $14,000 in 2002, $24,000 in 2003 and $30,000 from 2004 through 2011. The agreement was amended on June 29, 2005, modifying the royalty payment terms such that the Company will pay royalties of $40,000 for 2001 and 2002, $24,000 in 2003, 30,000 shares of the Company’s Common Stock in 2004, and $30,000 for 2005. Novint had paid all cash amounts due and issued the agreed shares of common stock for its obligations through 2004 as of December 31, 2005. During the six months ended June 30, 2006 the Company issued 30,000 shares of common stock to Sandia in settlement of the 2005 fees. As of June 30, 2006 the Company had accrued $15,000 in royalty fees owed to Sandia under the royalty agreement.

The Company has an agreement with Lunar Design, a product design firm, to design and develop its haptics game controller. The current statement of work outlines the delivery of a final prototype in August 2005 as well as provides for additional projects as agreed to by the parties through 2006. The prototype was delivered in October 2005. In addition, Lunar Design will provide support for the Company’s manufacturing partner for design problems or other trade-offs encountered in creating the manufacturing prototype. Estimated project costs for the prototype will range between approximately $542,000 and $634,000 and will be billed on a time-and-materials basis. Lunar Design has agreed to accept payment in the form of cash, promissory note or Novint common stock. As of June 30, 2006 the Company had made payments to Lunar Design for incurred costs of approximately $424,000 under this agreement. At June 30, 2006, the Company has recorded accrued research and development liabilities in the accompanying balance sheet due to Lunar Design of $189,646 and convertible notes payable in the amount of $358,081.

Such costs have been expensed as research and development expenses.

On January 5, 2004, the Company entered into an exclusive Intellectual Property License Agreement (Agreement) with Force Dimension, a company in the haptics hardware technologies and products field. The Agreement provides the Company with a sublicense to a hardware patent and an assignment of a pending patent from Force Dimension. The Agreement, in turn, provides Force Dimension a security interest and a general lien in the assigned patent as well as an irrevocable, exclusive license in the patent that has been assigned to the Company. On May 10, 2005, the Company amended its contract with Force Dimension, Inc. to provide for: a license fee in the amount of $15,000 due on the effective date; the payment of a milestone payment in the amount of $50,000 within ten days of the contract amendment’s effective date; a license fee in the amount of $50,000 within 30 days of the Company’s IPO; and a support and license fee in the amount of $455,000 due no later than January 5, 2006, for all technical and support services rendered to the Company during such time period for total payments of $620,000.

In addition, the Company was to issue 250,000 shares of the Company’s common stock within 30 days of the contract amendment’s effective date as consideration for extending the payment terms of the agreement. These shares of stock were issued to Force Dimension on May 12, 2005, and have been accounted for as a financing cost related to a modification of Novint’s payment terms. The fair value of the stock issued is $250,000 and is reflected as interest expense in the amount of $245,968 for the year ended December 31, 2005, and as a deferred financing cost in the amount of $4,032 in the balance sheet at December 31, 2005. The deferred financing cost were amortized to interest expense by January 5, 2006, the maturity date of this obligation to Force Dimension.

During the year ended December 31, 2004, the Company paid $15,000 to Force Dimensions for the license fee in the amount of $15,000 due on the effective date. During 2005, Novint paid $140,000 to Force Dimension, representing a portion of the $50,000 milestone payment originally due to Force Dimension upon or before Novint’s receipt of the Second Deliverable as described in the original agreement, the $50,000 milestone payment due on the amendment’s effective date, and $50,000 representing a portion of the licensing fees due. The Second Deliverable was received by Novint on December 30, 2004. The remaining amount of $465,000 due to Force Dimensions was recorded as accrued research and development liabilities as of December 31, 2005.

On March 9, 2006 the Company issued 607,500 shares of its common stock to Force Dimensions in full satisfaction of the remaining $465,000 owed as of December 31, 2005.

The Agreement requires Novint to pay up to $15 million to Force Dimension, including the amounts above, on a per unit of Licensed Product basis for license fees, royalties and a percentage of product sales after the product becomes technologically feasible. In addition, Novint is entitled to 5% license fees/royalties for any licensed products sold related to the sublicense granted to Force Dimension by Novint. Novint has not recorded any fees related to such arrangement. This Agreement shall terminate upon Novint’s payment in total of $15,000,000 to Force Dimension and payment in full of any other obligations arising pursuant to the terms and conditions of this Agreement.

Effective May 1, 2006, the Company entered into negotiations for a consultant agreement with AF Double Eagle (“Consultant”) whereby Consultant will become a full time employee of the Company approximately 6 months after the effective date of the agreement. The Company and Consultant may transition to Consultant becoming a full time employee earlier upon mutual consent. In accordance with the agreement, Consultant will assist the Company in revenue generation, strategic partnering, strategic planning, funding process and general corporate operations.

Compensation arrangements to the consultant are as follows:

Cash compensation — The Company will pay Consultant $10,000 at the beginning of each month as compensation for these services.

Equity compensation — Subject to applicable law, and the Company’s stock option plan, and consistent with the Company’s usual option grant terms, The Company will grant to Consultant options to purchase 1,213,930 shares of the Company’s common stock. The options shall have an exercise price of $1.00 per share, and shall be exercisable for 7 years from the date of grant. These options were granted to Consultant on May 1, 2006, and the Company calculated the initial value of the options using the Black-Scholes model based on the following assumptions: a risk-free rate of 5.15%, volatility of 137%, estimated life of 10 years and a fair market value of $1.40 per share.

If the Company sells shares of its common stock in a sale or sales cumulating at least $3,000,000 net proceeds to the Company before May 1, 2007, and the average per share price of such sale or sales (the “Average Price”) is less than $1.00, then the Company shall issue additional options on substantially the same terms, such that the total number of options, including previous options plus newly issued options, times the Average Price equals $1,213,930. .

The options shall initially be unvested. The Company, Consultant, and Foley anticipate that vesting of options will continue in connection with employment. If such employment is not entered for any or no reason, then any options unvested at the termination of this Agreement shall be forfeited to the Company.

Option Group A. Options equal to 5/7th’s of consultant’s total number of options shall vest monthly over five years, with the first such installment vesting June 1, 2006. If at any time the number of options vested shall be determined, the number vested according to the preceding monthly installment schedule shall be rounded to the nearest whole number of options.

Option Group B. Options equal to 1/7th of consultant’s total number of options shall vest on the close of a sale of equity in the Company to a Consultant Source totalling not less than $1,000,000 net proceeds to the Company, or on the vesting of Option Group C, whichever first occurs. A “Consultant Source” is a party that Consultant first introduces to the Company (i.e., the Company had no relationship with the party prior to Consultant’s introduction), and who purchases equity in the Company in a transaction in which Consultant actively participates in communications and negotiations, and who purchase equity in the Company prior to the termination of this Agreement.

Option Group C. Options equal to 1/7th of consultant’s total number of options shall vest on the date that The Company’s cumulative product sales total either (a) 100,000 units of Falcon interface units (not including end effectors or other accessories sold apart from a base unit) or (b) $20,000,000 in revenue to The Company.

In addition, if after three years Consultant has not vested the 2/7ths options from Group B and C then whatever portion unvested will vest as if it had been part of the group A options. Therefore, on the third anniversary, 3/5ths of the total unvested options will vest and the remaining 2/5ths will vest over the next two years.

Consultant an amount equal to 20% of the gross revenue to the Company of any Consultant Sales, where Consultant Sales are sales of the Company products to parties that were first introduced to the Company by Consultant but only for so long as Consultant is actively promoting and driving sales to the party and actively managing the relationship with the party.

Although this consulting agreement has not been signed, the Company has paid and continues to pay Consultant under the terms of the agreement and the options were considered granted on May 1, 2006 and the Company has recorded $37,900 as consulting expense related to the options granted.

NOTE 8 — STOCKHOLDERS’ EQUITY

Conditionally Redeemable, Convertible Preferred Stock

On April 20, 2000, in connection with the license agreement with Sandia, the Company issued all 4,000 authorized shares of Series A conditionally redeemable, convertible preferred stock at $0.25 per share. The preferred stock was convertible into fully paid and non-assessable common stock as follows: at the holder’s option based on the conversion price in effect on the conversion date or automatically upon the closing of an IPO, which would result in 447,300 shares of common stock. The conversion price shall be (i) the subscription price ($100,000 when expressed as an aggregate amount or $25.00 per share when expressed on a per-share basis) divided by (ii) the conversion price in effect on the conversion date. Additionally, the Company is obligated to redeem the preferred shares, if there is no IPO or initial sale within 10 years from the issue date.

In connection with the effectiveness of the Company’s registration statement, on February, 6 2006 the Company issued 447,300 shares of common stock to Sandia for the conversion of the preferred stock in accordance with the agreement.

Accordingly, the Company accreted the fair value of the common stock conversion to retained earnings through the conversion date of February 6, 2006. When the Company was approved for public filing, it recognized an additional charge of $170,974 to retained earnings of the converted shares at the fair value as compared to the IPO price. The fair value of the stock on February 6, 2006 was estimated to be $1.00 per share.

Stock Options

In March 2004, the Board of Directors approved the adoption of the 2004 Stock Incentive Plan. A total of 3,500,000 shares of common stock have been reserved for issuance under this plan. The Company has issued options to purchase shares of common stock to employees and various consultants for payment of services.

Option activity during the six months ended June 30, 2006 is summarized in the following table:


	Shares				Weighted-
	Under		Price per		Average
	Option		Share		Exercise Price
Options outstanding at 12/31/05		8,003,341	$	0.01-$0.66	$	0.26
Granted		1,768,830	$	1.00	$	1.00
Exercised		55,505	$	0.01-$0.66	$	0.07
Canceled		—		—	$	—

Options outstanding at 6/30/06		9,716,666	$	0.01-$0.66	$	0.39

Exercisable at 6/30/06		6,411,236	$	0.01-$1.00	$	0.20

The following summarizes certain information regarding outstanding options at June 30, 2006:


	Outstanding						Exercisable
					Weighted
			Weighted-		Average				Weighted
			Average		Remaining				Average
*Exercise*			Exercise		Contractual				Exercise
*Price*	Number		Price		Life (years)		Number		Price
$0.01		287,911	$	0.01		2.05		287,911	$	0.01
$0.05		4,600,000	$	0.05		5.96		4,600,000	$	0.05
$0.50		1,173,031	$	0.50		7.64		498,031	$	0.50
$0.66		1,886,894	$	0.66		8.20		720,394	$	0.66
$1.00		1,768,830	$	1.00		4.73		304,900	$	1.00

Total		9,716,666	$	0.39		7.10		6,411,236	$	0.20

NOTE 9 — EQUITY TRANSACTIONS

On April 1, 2004, the Company committed to issue 250,000 shares of common stock at $1.00 per share to a consultant for future services. The consultant will receive stock as follows: 50,000 shares per quarter as long as the consultant is still providing services to the Company, up to a total of 250,000 shares, beginning April 1, 2004. As of June 30, 2005, all 250,000 shares had been issued, of which 100,000 shares were issued during the six months ended June 30, 2005. The Company has recognized $100,000 in consulting expense related to this issuance during the six months ended June 30, 2005.

In March 2005, the Company issued 2,500 shares of common stock to an advisory board member for services performed. The stock was valued at $0.66 per share for total consideration of $1,650. Consulting expense of $1,650 was recorded in the Company’s operations during the three months ended March 31, 2005.

During 2005 the Company issued 45,000 shares of common stock for legal services to be provided. The value of the share issued was $29,700 the value of the services to be performed. This amount was recorded as a prepaid expense and is being amortized as expenses are incurred. As of June 30, 2006 and 2005 the Company has amortized $23,521 and $9,334, respectively of this amount as legal expense.

The Company also issued 10,000 shares of common stock to an employee for services rendered during the second quarter of 2005. The fair value of the services was $10,000 and is included in common stock at December 31, 2005, and recorded as compensation expense during the six months ended June 30, 2005.

In March 2006, the Company issued 200,329 shares of common stock to original private placement investors as compensation for delays in obtaining approval for public filing.

The Company issued 6,000 shares of common stock to a consultant for services rendered during the first quarter of 2006. The fair value of the services was $6,000 and is included in common stock at June 30, 2006, and recorded as consulting expense for the six months ended June 30, 2006.

In March 2006, the Company issued 2,500 shares of common stock to an advisory board member for services performed. The stock was valued at $1.00 per share for total consideration of $2,500. Consulting expense of $2,500 was recorded in the Company’s operations for the six months ended June 30, 2006.

In April 2006, the Company sold 500,000 shares of common stock and 250,000 warrants to purchase common stock to an unrelated party for $500,000. The warrants have an exercise price per share of $2.00. The purchase price of the common stock is subject to adjustment as follows: In the event, that after the date of the agreement, the Company shall complete an offering of securities on or before April 1, 2007 which results in gross proceeds to the Company of not less than $3,000,000, and if such offering is conducted at a price per share of common stock of $1.11 per share or less, then, the purchase price per share of common stock shall be automatically adjusted to equal 90% of the issue price.

In May 2006, an employee exercised options to purchase 50,505 shares of common stock under the cashless provision of such option. As a result of the cashless provision,in exchange for the 50,505 options with an exercise price of $0.01 and a fair value of common stock on the date of exercise of $1.00, the employee received 50,000 shares of common stock.

In May 2006, the Company sold 145,000 shares of common stock and 72,500 warrants to purchase common stock to unrelated parties for cash proceeds of $130,500, net of offering costs of $14,500. The warrants have an exercise price per share of $2.00.

In June 2006, the Company issued 30,000 shares of common stock to Sandia in settlement of $30,000 due for 2005 royalty fees, and 123,222 shares of common stock to Lunar Design in settlement of a note payable in the amount of $123,222 for research and development activities performed on the company’s behalf.

In June 2006, an employee exercised options to purchase 5,000 shares of common stock under the cashless provision of such option. As a result of the cashless provion, in exchange for the 5,000 options with an exercise price of $0.66 and a fair value of common stock on the date of exercise of $1.25, the employee received 2,360 shares of common stock.

On June 10, 2004, the Company granted 50,000 options to a consultant to purchase common stock at an exercise price of $0.66 per share for future consulting services. The options have a 5-year annual vesting provision. At June 30, 2006, the Company calculated the value of these options using the Black-Scholes model based on the following assumptions: a risk-free rate of 5.15%, volatility of 137%, estimated life of 10 years and a fair market value of $1.40 per share. At June 30, 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 4.81%, volatility of 100%, estimated life of 10 years and a fair market value of $1.00 per share. The vesting schedules are prorated over the reporting period, and approximately $10,811 and $3,425 was recorded as consultant expense during the six months ended June 30, 2006 and 2005, respectively.

In January 2005, The Company granted 10,000 options to an advisory board member at an exercise price of $0.66. Expense recorded in connection with these options totaled approximately $2,580 for the year ended December 31, 2005. These options have a semi-annual vesting period over 4 years. At June 30, 2006, The Company calculated the value of these options using the Black-Scholes model based on the following assumptions: a risk-free rate of 5.15 volatility of 137%, estimated life of 10 years and a fair market value of $1.40 per share. The following assumptions were used in calculating the initial fair value of these options: risk-free rate of 4.24%, volatility of 73%, contractual term of 10 years, exercise price of $0.66 per share and fair market value of $1.00 per share. The vesting schedules are prorated over the reporting period, and approximately $1,625 and $1,362 was recorded as consultant expense during the six months ended June 30, 2006 and 2005, respectively.

NOTE 10 —WARRANTS

A summary of the status of the total number of warrants as of June 30, 2006 and December 31, 2005, and changes during the six months ended June 30, 2006 is presented in the tables below:


	June 30, 2006
				Wtd Avg
	Shares			Ex Price
Outstanding at December 31, 2005		3,138,000		$	1.29
Granted		397,500			2.00
Exercised		—			—
Forfeited		(—	)		—
Outstanding at June 30, 2006		3,535,500			1.38

Exercisable at June 30, 2006		3,285,500			1.37

Weighted average fair value of warrants granted	$	1.62		$

A summary of outstanding warrants as of June 30, 2006, the range of exercise prices, the weighted-average exercise price, the weighted-average remaining contractual life, the amount of warrants currently exercisable and the weighted-average exercise price of warrants currently exercisable is as follows:


	Warrants Outstanding						Warrants Exercisable
			Weighted-
			Average		Weighted-				Weighted-
	Number		Remaining		Average		Number		Average
*Range of*	Outstanding at		Contractual		Exercise		Exercisable		Exercise
Exercise Prices	6/30/06		Life		Price		at 6/30/06		Price
$0.00 to $0.25		600,000	7.26 years		$	0.25		600,000	$	0.25
$0.26 to $0.50		250,000		7.35		0.50		250,000		0.50
$0.51 to $1.00		838,500		4.45		1.00		588,500		1.00
$1.01 to $2.00		1,847,000		2.64		2.00		1,847,000		2.00

$0.25 to $2.00		3,535,500						3,285,500

In April 2006, the Company modified the exercise price of 250,000 warrants issued in November 2003 from $.50 per share to $.25 per share, effective February 6, 2006. In November 2003, Novint issued a warrant for the purchase of 500,000 shares of Novint’s common stock in conjunction with a $500,000 promissory note that matured in May 2004. The warrant, which expires in November 2013, provides for the purchase of 250,000 shares of Novint’s common stock at an exercise price of $.50 per share. The Company calculated the original fair value of the warrant to be approximately $183,000 using the Black-Scholes model based on the following assumptions: a risk-free rate of 4.31%, volatility of 86%, contractual life of 10 years and a common stock fair market value of $0.66 per share. At June 30, 2006, Novint calculated the value of these warrants on the effective date using the Black-Scholes model based on the following assumptions: a risk-free rate of 5.15%, volatility of 137%, estimated life of 10 years and a fair market value of $1.00 per share. The impact of this modification was an increase in fair value by approximately $156,000. This amount was recorded as interest expense during the six months ended June 30, 2006 since the original grant of warrants was in connection with the issuance of debt.

In April 2006, the Company granted warrants to purchase 50,000 shares of common stock to a consultant for services provided. The warrants vest immediately, and have an exercise price of $0.25 per share. The Company calculated the fair value of the warrant to be approximately $49,000 using the Black-Scholes model based on the following assumptions: a risk-free rate of 4.55%, volatility of 137%, contractual life of 10 years and a common stock fair market value of $1.00 per share. The value of these warrants was recorded as consulting expense during the six months ended June 30, 2006.

On June 14, 2006 the Company to granted 25,000 warrants to purchase Company stock to a consultant in exchange for services rendered during 2006. The warrants vest immediately and have an exercise price of $1.00 per share. The Company calculated the fair value of the warrants to be approximately $54,000 using the Black-Scholes model based on the following assumptions: a risk-free rate of 5.05%, volatility of 137%, contractual life of 3 years and a common stock fair market value of $2.50 per share. The value of these warrants was recorded as consulting expenses during the six months ended June 30, 2006.

NOTE 11 — 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 June 30, 2006, the Company calculated the value of the options using the Black-Scholes model based on the following assumptions: a risk-free rate of 5.15%, volatility of 137%, estimated life of 10 years and a fair market value of $1.40 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 approximately $14,068 and $8,933, respectively, was recorded as consultant expense during the six months ended June 30, 2006 2005.

In March 2004, Normandie New Mexico Corporation, which is owned by Manhattan’s Chief Executive Officer (CEO), 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 six months ended June 30, 2006 and 2005, the Company had paid $0 and $37,500, respectively, for these services. As of June 30, 2006, 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 Manhattan’s CEO for future consulting services at an exercise price of $0.66 per share. The options have a 5-year annual vesting provision. The Company calculated the value of these options using the Black-Scholes model based on the following assumptions: a risk-free rate of 4.81%, volatility of 100%, estimated life of 10 years and a fair market value of $1.00 per share. The vesting schedule is prorated over the reporting period, and approximately $52,875 and $17,091, respectively, was recorded as consultant expense during the six months ended June 30, 2006 and 2005.

On November 30, 2004, the Company established an Advisory Board who will provide assistance and consultation to the Company management on matters for which the Advisory Board members possess special knowledge, expertise and experience. the Company will appoint up to 10 Advisory Board members who shall receive either 10,000 shares of he Company stock or 10,000 options to purchase the Company stock at the Advisory Board member’s preference. As of June 30, 2006 20,000 options and 15,000 common shares were issued to these Advisory Board members.

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 June 30, 2006, the Company calculated the value of the options using the Black-Scholes model based on the following assumptions: a risk-free rate of 5.15%, volatility of 137%, estimated life of 10 years and a fair market value of $1.40 per share. 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 $12,952 was recorded as share-based compensation expense during the six months ended June 30, 2006 and is included in the $158,140 in share-based compensation expense as reported on the accompanying statement of cash flows for the six months ended June 30, 2006.

NOTE 12 — SUBSEQUENT DISCLOSURE

On May 31, 2006, the Company entered into a subscription agreement with an investor to issue 100,000 shares of common stock at $1.00 per share and warrants to purchase 50,000 shares of common stock at an exercise price of $2.00 per share, provided the companies common stock has traded at or above $1.00 per share for 10 consecutive days of the initial quotation and trading date of the Company’s securities on The Over the Counter Bulletin Board. Subsequent to June 30, 2006 the Company has not received payment for the stock nor has the stock been issued. Accordingly, this transaction has not been reflected in the accompanying financial statements for the period ended June 30, 2006.

On June 6, 2006, the Company entered into a subscription agreement with an investor to issue 250,000 shares of common stock at $1.00 per share and warrants to purchase 125,000 shares of common stock at an exercise price of $2.00 per share, provided the companies common stock has traded at or above $1.00 per share for 10 consecutive days of the initial quotation and trading date of the Company’s securities on The Over the Counter Bulletin Board. This transaction has not been reflected in the accompanying financial statements for the period ended June 30, 2006. Subsequent to June 30, 2006 the Company received $250,000 as payment for the stock.

Subsequent to June 30, 2006 the Company’s board of directors approved the issuance of 600 shares of common stock to a consultant for services performed, 50,000 shares of common stock to a shareholder for services to be performed and granted options to purchase 150,000 shares of common stock each to a shareholder and a consultant for services to be performed.

Item 2. Management’s Discussion and Analysis or Plan of Operation.

Note Regarding Forward-Looking Statements

The statements contained in this Management’s Discussion and Analysis that are not historical in nature are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those indicated in the forward-looking statements. In some cases, you can identify forward-looking statements by our use of words such as “may,” “will,” “should,” “could,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative or other variations of these words, or other comparable words or phrases. Factors that could cause or contribute to such differences include, but are not limited to, the fact that we are a start-up company; we need to raise funds to meet business plan projections; we are dependent on upon emerging technology for our business model; our ability to successfully expand our employee base, sales force and marketing program; changes in our customers’ requirements or tastes; the risks that competition, technological change or evolving customer preferences could adversely affect the sale of our products; and other factors identified from time to time in the Company’s reports filed with the Securities and Exchange Commission, including, but not limited to our Annual Report on Form 10-KSB filed on or about April 17, 2006.

Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements or other future events. Moreover, neither we nor anyone else assumes responsibility for the accuracy and completeness of forward-looking statements. We are under no duty to update any of our forward-looking statements after the date of this report. You should not place undue reliance on forward-looking statements.

MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following discussion of the financial condition and results of operations of the Company should be read in conjunction with the consolidated financial statements and related notes, which are included herein. This report contains forward-looking statements that involve risks and uncertainties. The Company’s actual results could differ materially from those indicated in the forward-looking statements.

OVERVIEW

Novint was initially incorporated in the State of New Mexico as Novint Technologies, Inc., in April 1999. On February 26, 2002, the state of incorporation was changed to Delaware by merging into Novint Technologies, Inc., a Delaware corporation. There are no subsidiaries, and business operates under Novint Technologies, Inc. Novint is a haptics technology company (haptics refers to your sense of touch), which develops, markets and sells applications and technologies that allow people to use their sense of touch to interact with computers.

To date, Novint has derived the majority of its revenues from developing professional applications for its customers. The Company has completed a number of contracts with companies such as Aramco, Lockheed Martin, Chrysler, Chevron, Sandia National Laboratories and Woods Hole Oceanographic Institute.

While Novint continues to develop professional applications for its customers, the Company also is preparing to leverage its computer touch technology to exploit opportunities in the consumer console and PC interactive computer games market. Using our haptics technology, games and applications will have the crucial missing “third sense” 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 hardware and software.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

High-quality financial statements require rigorous application of accounting policies. Our policies are discussed in our audited financial statements for the year ended December 31, 2005, 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 2005 or through August 18, 2006. However, we are evaluating how improvements in processes and other changes in haptics technology and our emerging video games business may impact revenue recognition policies in the future.

REVENUE AND COST RECOGNITION — We recognize 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.

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 Statement of Position (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. Novint accounts for these measurements on the balance sheet 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.

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 income statement as revenue. Novint’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.

IMPAIRMENT — In accordance with 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.

ACCOUNTS RECEIVABLE — We utilize the allowance method for accounts receivable valuation, providing for allowances for estimated uncollectible accounts receivable. Our financial instruments that are exposed to concentration of credit risk consist primarily of uninsured cash, cash equivalents and available-for-sale securities held at commercial banks and institutions primarily in the United States and trade receivables from our customers. We routinely assess the financial strength of our customers as part of our consideration of accounts receivable collectibility by performing credit evaluations of customers. Trade receivables are not collateralized. We generally grant credit terms to most customers ranging from 30 to 90 days.

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 and in connection with our gaming technology beginning in 2006. Amortization is computed on the straight-line basis over the remaining life (five years) of our software platform.

INTANGIBLES — Effective January 1, 2002, we adopted 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. We perform a periodic review of our 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 do exist, we assess the recoverability of identified intangible assets by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their remaining lives against their 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.

RECENT ACCOUNTING PRONOUNCEMENTS

In May 2005, Financial Accounting Standards Board (FASB) issued SFAS 154, Accounting Changes and Error Corrections. This Statement replaces APB Opinion No. 20, Accounting Changes, and SFAS 3, Reporting Accounting Changes in Interim Financial Statements, and changes the requirements for the accounting for and reporting of a change in accounting principle. SFAS 154 differentiates between retrospective application and restatement. This Statement is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. Early adoption is permitted for accounting changes and corrections of errors made in fiscal years beginning after the date this Statement is issued. SFAS 154 does not change the transition provisions of any existing accounting pronouncements, including those that are in a transition phase of the effective date of this Statement. The adoption of the provisions of SFAS 154 did not have an impact on its financial condition or results of operations.

RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2006 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2005.

REVENUES. During the three months ended June 30, 2006, Novint had revenues of $44,780 as compared to revenues of $140,955 during the three months ended June 30, 2005, a decrease of approximately 68.2%. The decrease primarily results from additional contract activities during the three months ended June 30, 2005. During the three months ended June 30, 2006, Novint had four employees working on three contracts while, during the three months ended June 30, 2005, the Company had eight employees working on three major contracts. Timing of contracts is not within a specified time period during the year so quarterly comparisons may not validly represent annual activity.

COST OF GOODS SOLD AND GROSS PROFIT (LOSS). Cost of goods sold, which consists of materials purchased for resale to customers and the direct labor incurred for delivering on projects, were $37,888 for the three months ended June 30, 2006, compared to $65,265 for the three months ended June 30, 2005. Novint’s average gross profit percentage on contract activity was approximately 14.8% for the three months ended June 30, 2006, compared to 56.2% for the three months ended June 30, 2005. The decrease in gross profit percentage resulted due to an unusually high profit percentage on one fixed price contract in 2005. This higher profit percentage was a result of actual costs incurred being lower than those projected during contract negotiations.

OPERATING EXPENSES. Operating expenses totaled $710,955 for the three months ended June 30, 2006, compared to $688,965 for the three months ended June 30, 2005, an increase of approximately $22,000 or 3%, which is reasonably comparable.

LOSS FROM OPERATIONS: Novint had a loss from operations of $704,063 for the three months ended June 30, 2006, compared to a loss from operations of $613,275 for the three months ended June 30, 2005. Net losses were slightly higher as a result of the high profit percentage earned on one major contract in 2005.

NET LOSS. Novint had a net loss of $872,045, or $0.05 per share, for the three months ended June 30, 2006, compared to $659,689, or $0.05 per share, for the three months ended June 30, 2005. Interest expense increased during the six months ended June 30, 2006 as a result of the impact of repricing warrants originally issued in connection with a debt financing transaction. We believe that net losses may increase in the short term until labor efforts and associated costs are refocused on

contracted and revenue-generating activities and until gaming technology is successfully marketed.

SIX MONTHS ENDED JUNE 30, 2006 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2005.

REVENUES. During the six months ended June 30, 2006, Novint had revenues of $83,561 as compared to revenues of $256,167 during the six months ended June 30, 2005, a decrease of approximately 67.3%. The decrease primarily results from additional contract activities during the six months ended June 30, 2005. During the six months ended June 30, 2006, Novint had four employees working on three contracts while, during the six months ended June 30, 2005, the Company had eight employees working on three major contracts. Timing of contracts is not within a specified time period during the year so semi-annual comparisons may not validly represent annual activity. In addition, during the six months ended June 30, 2005, one haptic interface device was sold for $27,000 while no such sales occurred in the first six months of 2006.

COST OF GOODS SOLD AND GROSS PROFIT (LOSS). Cost of goods sold, which consists of materials purchased for resale to customers and the direct labor incurred for delivering on projects, were $63,567 for the six months ended June 30, 2006, compared to $124,677 for the six months ended June 30, 2005. Novint’s average gross profit percentage on contract activity was approximately 21.9% for the six months ended June 30, 2006, compared to 48.8% for the six months ended June 30, 2005. The decrease in gross profit percentage resulted due to an unusually high profit percentage on one fixed price contract in 2005. This higher profit percentage was a result of actual costs incurred being lower than those projected during contract negotiations.

OPERATING EXPENSES. Operating expenses totaled $1,320,867 for the six months ended June 30, 2006, compared to $1,702,927 for the six months ended June 30, 2005, a decrease of approximately $382,000 or 22.4%. Included in the decrease is approximately $500,000 in research and development expenditures attributable to our current efforts to develop computer gaming technology. Beginning in 2006, research and development efforts tapered off as the Company completed design and development of the hardware gaming technologies. During the six months ended June 30, 2006, Novint had two less full time equivalent employees (FTE’s) than during the six months ended June 30, 2005. Offsetting the decrease in research and development expenses, legal fees related to public filing increased during the six months ended June 30, 2006.

LOSS FROM OPERATIONS: Novint had a loss from operations of $1,300,873 for the six months ended June 30, 2006, compared to a loss from operations of $1,571,438 for the six months ended June 30, 2005. Net losses have decreased as a result of the decrease in operating expenses as described above.

NET LOSS. Novint had a net loss of $1,501,782, or $0.09 per share, for the six months ended June 30, 2006, compared to $1,617,910, or $0.12 per share, for the six months ended June 30, 2005. Interest expense increased during the three months ended June 30, 2006 as a result of the impact of repricing warrants originally issued in connection with a debt financing transaction. We believe that net losses may increase in the short term until labor efforts and associated costs are refocused on contracted and revenue-generating activities and until gaming technology is successfully marketed.

LIQUIDITY AND CAPITAL RESOURCES

Novint closed a funding round in February and May of 2004 in which we raised $3,049,000. We have used a significant portion of the sources of cash to pay off certain liabilities including notes payable, offering costs and salaries. However, if we are successful in developing our gaming technology and video games business, and in developing partnerships with game publishers and hardware manufacturers, we will need to raise approximately another $9 million in funding to execute our current business plan with respect to our video games business. There can be no assurances that we will be able to obtain any additional financing on favorable terms, if at all. Borrowing money may involve pledging some or all of our assets. Raising additional funds by issuing common stock or other types of equity securities would further dilute our existing shareholders

Since inception, Novint has incurred net operating losses and other equity charges, which have resulted in an accumulated deficit of $9,840,989 at June 30, 2006 and $8,168,232 at December 31, 2005. For the six months ended June 30, 2006 and the year ended December 31, 2005, Novint had net losses totaling $1,501,782 and $3,386,405, respectively. Since inception, management has raised equity totaling approximately $6.0 million through various private equity transactions and has approximately $301,000 in cash on hand at June 30, 2006. Without additional equity infusion or long term borrowings, there is substantial doubt as to the Company’s ability to continue as a going concern. Management believes they will need additional funding to supplement their cash on hand along with revenues from project and product sales to allow Novint to satisfy its short term obligations and provide enough cash flow for Novint to continue operations. Management has the ability

to curtail spending and negotiate or push back payments to third parties, or settle such expenditures in stock in the event they experience cash shortfalls or in the event the next round of funding does not occur or takes significantly longer than anticipated.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

In March 2006, the Company issued 6,000 shares of common stock to Ralph Anderson, a consultant, for services rendered during the first quarter of 2006. We relied upon the exemption from registration as set forth in Section 4(2) of the Act for the issuance of these securities. The shareholders took the securities for investment purposes without a view to distribution and had access to information concerning Novint and our business prospects, as required by the Securities Act. In addition, there was no general solicitation or advertising for the issuance of the options. The shareholders were permitted access to our management for the purpose of acquiring investment information. Due to the shareholders’ status as employees and consultants and their dealings with development companies generally, we deem the shareholders sophisticated for the purposes of Section 4(2) of the Act

In March 2006, the Company issued 1,250,002 shares of common stock to various investors in repayment of promissory notes issued during the year ended December 31, 2005. We relied upon the exemption from registration as set forth in Section 4(2) of the Act for the issuance of these securities. The shareholders took the securities for investment purposes without a view to distribution and had access to information concerning Novint and our business prospects, as required by the Securities Act. In addition, there was no general solicitation or advertising for the issuance of the options. The shareholders were permitted access to our management for the purpose of acquiring investment information. Due to the shareholders’ status as employees and consultants and their dealings with development companies generally, we deem the shareholders sophisticated for the purposes of Section 4(2) of the Act.

In March 2006, we issued 607,500 shares of common stock to Force Dimension in full payment of amounts outstanding on our contract. We relied upon the exemption from registration as set forth in Section 4(2) of the Act for the issuance of these securities. The shareholders took the securities for investment purposes without a view to distribution and had access to information concerning Novint and our business prospects, as required by the Securities Act. In addition, there was no general solicitation or advertising for the issuance of the options. The shareholders were permitted access to our management for the purpose of acquiring investment information. Due to the shareholders’ status as employees and consultants and their dealings with development companies generally, we deem the shareholders sophisticated for the purposes of Section 4(2) of the Act.

In March 2006, we also issued 200,329 shares of common stock to our private placement investors in recognition of delays in meeting specified filing obligations. We relied upon the exemption from registration as set forth in Section 4(2) of the Act for the issuance of these securities. The shareholders took the securities for investment purposes without a view to distribution and had access to information concerning Novint and our business prospects, as required by the Securities Act. In addition, there was no general solicitation or advertising for the issuance of the options. The shareholders were permitted access to our management for the purpose of acquiring investment information. Due to the shareholders’ status as employees and consultants and their dealings with development companies generally, we deem the shareholders sophisticated for the purposes of Section 4(2) of the Act.

In March 2006, we converted 4,000 shares of preferred stock to 447,300 shares of common stock in accordance with the terms of the conversion options of the original issue of stock to Sandia Corporation. We relied upon the exemption from registration as set forth in Section 4(2) of the Act for the issuance of these securities. The shareholders took the securities for investment purposes without a view to distribution and had access to information concerning Novint and our business prospects, as required by the Securities Act. In addition, there was no general solicitation or advertising for the issuance of the options. The shareholders were permitted access to our management for the purpose of acquiring investment

information. Due to the shareholders’ status as employees and consultants and their dealings with development companies generally, we deem the shareholders sophisticated for the purposes of Section 4(2) of the Act.

In March 2006, we granted 250,000 options at an exercise price of $1.00 per share, with a 5-year annual vesting provision, to purchase common stock to an employee. The recipient of the options was Bill Anderson. We relied upon the exemption from registration as set forth in Section 4(2) of the Act for the issuance of these options. The shareholder took the options for investment purposes without a view to distribution and had access to information concerning Novint and our business prospects, as required by the Securities Act. In addition, there was no general solicitation or advertising for the issuance of the options. The shareholder was permitted access to our management for the purpose of acquiring investment information. Due to the shareholder’s status as an employee and his dealings with development companies generally, we deem the shareholder sophisticated for the purposes of Section 4(2) of the Act.

In April 2006, we issued 500,000 shares of common stock at a price per share of $1.00, together with a Common Stock Purchase Warrant to purchase 250,000 shares of common stock at an exercise price of $2.00 per share, exercisable until April 1011. The recipient of the common stock and warrant was an accredited investor within the meaning of the Securities Act. We relied upon the exemption from registration as set forth in Section 4(2) of the Act for the issuance of these securities. The holder took the securities for investment purposes without a view to distribution and had access to information concerning Novint and our business prospects, as required by the Securities Act. In addition, there was no general solicitation or advertising for the issuance of the securities. The holder was permitted access to our management for the purpose of acquiring investment information. Due to the holder’s status as accredited and his dealings with development companies generally, we deem the holder sophisticated for the purposes of Section 4(2) of the Act.

In April 2006, we issued a warrant to purchase 50,000 shares of common stock at an exercise price of $0.25 per share, exercisable until April 2011, to Todd Ficeto in exchange for services rendered to the Company. In addition, we reduced the exercise price from $0.50 to $0.25 per share on a warrant to purchase 250,000 shares of common stock previously issued to the Todd Ficeto. We relied upon the exemption from registration as set forth in Section 4(2) of the Act for the issuance of these shares. The shareholder took the warrants for investment purposes without a view to distribution and had access to information concerning Novint and our business prospects, as required by the Securities Act. In addition, there was no general solicitation or advertising for the issuance of the options. The shareholder was permitted access to our management for the purpose of acquiring investment information. Due to the shareholder’s status as a consultant and his dealings with development companies generally, we deem the shareholder sophisticated for the purposes of Section 4(2) of the Act.

In May 2006, we issued 145,000 shares of common stock at a price per share of $1.00, together with Common Stock Purchase Warrants to purchase 72,500 shares of common stock at an exercise price of $2.00 per share, exercisable until May 1011. The three recipients of the common stock and warrants were accredited investors within the meaning of the Securities Act. We relied upon the exemption from registration as set forth in Section 4(2) of the Act for the issuance of these securities. The holders took the securities for investment purposes without a view to distribution and had access to information concerning Novint and our business prospects, as required by the Securities Act. In addition, there was no general solicitation or advertising for the issuance of the securities. The holders were permitted access to our management for the purpose of acquiring investment information. Due to the holders’ status as accredited and their dealings with development companies generally, we deem the holders sophisticated for the purposes of Section 4(2) of the Act.

In May 2006, we issued 50,000 shares of common stock to an employee pursuant to the cashless exercise of 50,505 stock options. The recipient of the shares was Bill Anderson. We relied upon the exemption from registration as set forth in Section 4(2) of the Act for the issuance of these shares. The shareholder took the shares for investment purposes without a view to distribution and had access to information concerning Novint and our business prospects, as required by the Securities Act. In addition, there was no general solicitation or advertising for the issuance of the shares. The shareholder was permitted access to our management for the purpose of acquiring investment information. Due to the shareholder’s status as an employee and his dealings with development companies generally, we deem the shareholder sophisticated for the purposes of Section 4(2) of the Act.

In June 2006, we issued 30,000 shares of common stock to Sandia Corporation as payment for royalties due under a License Agreement. We relied upon the exemption from registration as set forth in Section 4(2) of the Act for the issuance of these shares. The shareholders took the options for investment purposes without a view to distribution and had access to

information concerning Novint and our business prospects, as required by the Securities Act. In addition, there was no general solicitation or advertising for the issuance of the options. The shareholder was permitted access to our management for the purpose of acquiring investment information. Due to the shareholder’s status as a consultant and its dealings with development companies generally, we deem the shareholder sophisticated for the purposes of Section 4(2) of the Act.

In June 2006, we granted a warrant to purchase 25,000 shares of common stock at an exercise price of $1.00 per share, exercisable until June 2009, to Security Research Associates, Inc. pursuant to a modification to a placement agent agreement. We relied upon the exemption from registration as set forth in Section 4(2) of the Act for the issuance of these shares. The shareholder took the warrants for investment purposes without a view to distribution and had access to information concerning Novint and our business prospects, as required by the Securities Act. In addition, there was no general solicitation or advertising for the issuance of the options. The shareholder was permitted access to our management for the purpose of acquiring investment information. Due to the shareholder’s status as a consultant and its dealings with development companies generally, we deem the shareholder sophisticated for the purposes of Section 4(2) of the Act.

In June 2006, we issued 2,360 shares of common stock to an employee pursuant to the cashless exercise of 5,000 stock options. We relied upon the exemption from registration as set forth in Section 4(2) of the Act for the issuance of these shares. The shareholder took the shares for investment purposes without a view to distribution and had access to information concerning Novint and our business prospects, as required by the Securities Act. In addition, there was no general solicitation or advertising for the issuance of the shares. The shareholder was permitted access to our management for the purpose of acquiring investment information. Due to the shareholder’s status as an employee and his dealings with development companies generally, we deem the shareholder sophisticated for the purposes of Section 4(2) of the Act.

In June 2006, we issued 123,222 shares of common stock to Lunar Design in settlement of notes payable for research and development services. We relied upon the exemption from registration as set forth in Section 4(2) of the Act for the issuance of these shares. The shareholders took the options for investment purposes without a view to distribution and had access to information concerning Novint and our business prospects, as required by the Securities Act. In addition, there was no general solicitation or advertising for the issuance of the options. The shareholder was permitted access to our management for the purpose of acquiring investment information. Due to the shareholder’s status as a consultant and its dealings with development companies generally, we deem the shareholder sophisticated for the purposes of Section 4(2) of the Act.

In August 2006, we granted 300,000 options at an exercise price of $1.00 per share, with a 5-year annual vesting provision, to purchase common stock to two consultants. The recipients of the options were Dean Danielson and Walt Zierman, each receiving 150,000 options. The recipients of the options were accredited investors within the meaning of the Securities Act. We relied upon the exemption from registration as set forth in Section 4(2) of the Act for the issuance of these options. The shareholder took the options for investment purposes without a view to distribution and had access to information concerning Novint and our business prospects, as required by the Securities Act. In addition, there was no general solicitation or advertising for the issuance of the options. The shareholders were permitted access to our management for the purpose of acquiring investment information. Due to the shareholders’ status as accredited and their dealings with development companies generally, we deem the shareholders sophisticated for the purposes of Section 4(2) of the Act.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Submission of Matters to a Vote of Security Holders.

None.

Item 5. Other Information.

Effective May 1, 2006, the Company began negotiations to enter into a Consulting and Independent Contractor Agreement (“Consulting Agreement”) with AF Double Eagle (“AF”) whereby Aiden Foley (“Foley”), AF’s sole employee (together, “Consultant”), will perform executive services for the Company with a view to becoming a full time employee of the Company approximately 6 months after the effective date of the Consulting Agreement. The Company and Consultant may transition to Consultant becoming a full time employee earlier upon mutual consent. In accordance with the agreement,

Consultant will assist the Company in revenue generation, strategic partnering, strategic planning, funding process and general corporate operations.

Compensation arrangements to Consultant are as follows:

Cash compensation — The Company will pay Consultant $10,000 at the beginning of each month as compensation for these services.

Equity compensation — Subject to applicable law, and the Company’s 2004 Stock Incentive Plan, and consistent with the Company’s usual option grant terms, the Company will grant to Consultant options to purchase 1,213,930 shares of the Company’s common stock. The options shall have an exercise price of $1.00 per share, and shall be exercisable for 7 years from the date of grant. These options were granted to Consultant on May 1, 2006, and the Company calculated the initial value of the options using the Black-Scholes model based on the following assumptions: a risk-free rate of 5.15%, volatility of 137%, estimated life of 10 years and a fair market value of $1.40 per share.

These options have the following vesting terms:

Option Group A. Options equal to 5/7th’s of consultant’s total number of options shall vest monthly over five years, with the first such installment vesting June 1, 2006.

Option Group B. Options equal to 1/7th of consultant’s total number of options shall vest on the close of a sale of equity in the Company to a Consultant Source totaling not less than $1,000,000 net proceeds to the Company, or on the vesting of Option Group C, whichever first occurs. A “Consultant Source” is a party that Consultant first introduces to the Company (i.e., the Company had no relationship with the party prior to Consultant’s introduction), and who purchases equity in the Company in a transaction in which Consultant actively participates in communications and negotiations, and who purchase equity in the Company prior to the termination of this Agreement.

Option Group C. Options equal to 1/7th of Consultant’s total number of options shall vest on the date that the Company’s cumulative product sales total either (a) 100,000 units of Falcon interface units (not including end effectors or other accessories sold apart from a base unit) or (b) $20,000,000 in revenue to the Company.

Bonus compensation — The Company will pay to Consultant an amount equal to 4% of the net proceeds to the Company of any sale of equity to a Consultant Source closing before the termination of this Agreement. The Company will pay to Consultant an amount equal to 20% of the gross revenue to the Company of any Consultant Sales, where Consultant Sales are sales of the Company products to parties that were first introduced to the Company by Consultant but only for so long as Consultant is actively promoting and driving sales to the party and actively managing the relationship with the party.

Although this consulting agreement has not been signed, the Company has paid and continues to pay Consultant under the terms of the agreement and the options were considered granted on May 1, 2006.

Item 6. Exhibits

ITEM 13. EXHIBITS


Number		Description

3.1*		Articles of Incorporation

3.2*		Bylaws

3.3*		Articles of Merger

3.4*		Certificate of Merger

4.1*		Articles of Incorporation (See Exhibit 3.1)

4.2 **		Form of Common Stock Purchase Warrant, April 2006.

10.1*		License Agreement with Sandia; Amendments

10.2*		Lease for 9620 San Mateo

10.3*		Employment Agreement with Tom Anderson

10.4*		Employment Agreement with Walter Aviles

10.5*		2004 Incentive Stock Plan

10.6*		Shareholders Agreement

10.7*		Lock Up Agreement

10.8*		Miscellaneous Technical Services Agreement between Aramco Services Company and Novint Technologies, Inc.

10.9*		Contract Addendum between Aramco Services Company and Novint Technologies, Inc.

10.10*		Amendment to Contract between Aramco Services Company and Novint Technologies, Inc.

10.11*		Amendment to Contract between Aramco Services Company and Novint Technologies, Inc.

10.12*		Statement of Work between Chevron Corporation and Novint Technologies, Inc.

10.13*		Purchase Order from DaimlerChrylser Corporation

10.14*		Purchase Order # 94059 from LockheedMartin Corporation

10.15*		Purchase Order # 96996 from LockheedMartin Corporation

10.16*		Purchase Order # 97860 from LockheedMartin Corporation

10.17*		Purchase Order # Q50601685 from LockheedMartin Corporation

10.18*		Purchase Order # QQ060592 from LockheedMartin Corporation

10.19*		Purchase Order # Q50608809 from LockheedMartin Corporation

10.20*		Purchase Order #24232 from Sandia National Laboratories

10.21*		Purchase Order #27467 from Sandia National Laboratories

10.22*		Purchase Order #117339 from Sandia National Laboratories

10.23*		Purchase Order #250810 from Sandia National Laboratories

10.24*		Undersea Exploration Modeling Agreement between Woods Hole Oceanographic Institute and Novint Technologies, Inc.


Number		Description

10.25*		Purchase Order for Lunar Design, Inc. dated April 7, 2005

10.26*		Sublicense Agreement between Manhattan Scientifics and Novint Technologies, Inc.

10.27*		License and Royalty Agreement between Manhattan Scientifics and Novint Technologies, Inc.

10.28*		Research Development and License Agreement between Manhattan Scientifics and Novint Technologies, Inc.

10.29*		Intellectual Property License Agreement with Force Dimension LLC

10.30*		Purchase Order with Lockheed Martin dated April 1, 2005

10.31*		Purchase Order with Lockheed Martin dated April 4, 2005

10.32*		Purchase Order with Lockheed Martin dated April 21, 2005

10.33*		Purchase Order with Deakin University dated April 6, 2004

10.34*		Purchase Order with Robarts Research dated September 24, 2004

10.35*		Purchase Order with University of New Mexico dated March 16, 2004

10.36*		Amendment to Agreement with Force Dimension Dated May 5, 2005

10.37*		Amendment to contract between Aramco Services Company and Novint Technologies, Inc.

10.36#		Purchase Order with Lockheed Martin dated February 16, 2006

10.37#		Amendment to Intellectual Property License Agreement with Force Dimension LLC dated March 9, 2006

10.38#		Purchase Order with Lockheed Martin dated March 3, 2006

10.39		Form of Subscription Agreement for Securities, April 2006.

14#		Code of Ethics

31		Certification Pursuant To Section 302 Of The Sarbanes-Oxley Act Of 2002

32		Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002


*		Filed with the Issuer’s Registration Statement on Form SB-2 on May 17, 2004, and as subsequently amended, and incorporated herein by reference.

#		Filed with the Issuer’s Annual Report on Form 10-KSB, filed with the Commission on April 17, 2006, and incorporated herein by reference.

**		Filed with the Issuer’s Periodic Report on Form 10-QSB, filed with the Commission on May 22, 2006, and incorporated herein by reference.

All other exhibits are filed herewith.


	June 30, 2006
	(Unaudited)

ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	301,122
Prepaid expenses and other current assets		31,838
Accounts receivable, net		925
Deferred financing costs		74,354
Costs and estimated earnings in excess of billings on contracts		23,402

Total current assets		431,641


PROPERTY AND EQUIPMENT:
Office equipment		48,841
Software		7,246
Computer equipment		213,555

		269,642

Less: Accumulated depreciation		232,391

Net property and equipment		37,251


INTANGIBLE ASSETS, NET		136,472


Total assets	$	605,364


	NOVINT TECHNOLOGIES,INC.
	By:	/s/ TOM ANDERSON
		Tom Anderson
		Chief Executive Officer , President and Chief Financial Officer August 21, 2006

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PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
Item 2. Management’s Discussion and Analysis or Plan of Operation
Item 3. Controls and Procedures
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits
ITEM 13. EXHIBITS
SIGNATURES
EXHIBIT 31
EXHIBIT 32