UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-KSB

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

For the fiscal year ended December 31, 2005

OR

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

For the transition period from                      to                     

Commission file number: 000-51783

Issuer’s telephone number (866) 298-4420

Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01 par value per share

Title of each class		Name of each exchange on which registered
[Common Stock, $0.01 par value per share]		None

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

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the 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 o No þ

Explanatory Note: Issuer’s Registration Statement on Form SB-2 was declared effective on February 6, 2006, and subsequently issuer filed a Registration Statement on Form 8A under the Securities and Exchange Act of 1934 registering its common stock.

Check if there is no disclosure of delinquent filings response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. o

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

The issuer’s revenues for the fiscal year ended December 31, 2005 were $362,097.

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of a specified date within the past 60 days. (See definition of affiliate in Rule 12b-2 of the Exchange Act.) None.

Explanatory Note: Issuer’s Registration Statement on Form SB-2 was declared effective on February 6, 2006. Subsequent to that time a public market has not developed for Issuer’s common stock. Issuer’s common stock is not listed, traded or quoted on any national or regional stock exchange, market or quotation system.

Number of Shares outstanding as of March 9, 2006 was 16,841,845

Documents Incorporated By Reference: None

Transitional Small Business Disclosure Format (Check one): Yes o No þ

 

 

NOVINT TECHNOLOGIES, INC.

Report on Form 10-KSB
For the Fiscal Year Ended December 31, 2005

TABLE OF CONTENTS

Item No.				Page
PART I
ITEM 1.		DESCRIPTION OF BUSINESS			1
ITEM 2.		DESCRIPTION OF PROPERTY			21
ITEM 3.		LEGAL PROCEEDINGS			22
ITEM 4.		SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS			22
PART II
ITEM 5.		MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS			22
ITEM 6.		MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION			31
ITEM 7.		FINANCIAL STATEMENTS			35
ITEM 8.		CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES			36
ITEM 8A.		CONTROLS AND PROCEDURES			36
ITEM 8B.		OTHER INFORMATION			36
PART III
ITEM 9.		DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT			37
ITEM 10.		EXECUTIVE COMPENSATION			39
ITEM 11.		SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT			40
ITEM 12.		CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS			41
ITEM 13.		EXHIBITS AND REPORTS ON FORM 8-K			42
ITEM 14.		PRINCIPAL ACCOUNTANT FEES AND SERVICES			44
Exhibit 10.38
Exhibit 10.39
Exhibit 10.40
Exhibit 14
Exhibit 23.1
Exhibit 23.2
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

PART I

discussed interactions with objects displayed by a computer. Further, such interactions currently only exist as part of demonstrations of our technologies and we have no products currently available commercially which a consumer could purchase with which they could engage in such computer interactions and there is no guarantee that these technologies will ever be available to the public.

     We currently derive the majority of our revenue developing professional applications for our customers. We have completed and are currently working on a number of contracts with companies such as Aramco, Lockheed Martin, Chrysler, Chevron, Sandia National Laboratories, and Woods Hole Oceanographic Institute.

     We are also preparing to leverage our 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 software. We have not derived any revenue from the licensure of our technology for consumer console and PC interactive computer games.

     In connection with our strategy to explore opportunities in the consumer console and PC interactive computer games market, we are developing a haptics device designed for game use. Novint has developed the design of a haptic device designed for consumer sales, called the Novint Falcon. The Novint Falcon is expected to be sold at consumer price points, and Novint is currently working to commercialize the Novint Falcon haptic hardware in addition to our 3D touch haptic software. We have acquired rights to the base hardware designs for the Novint Falcon from Force Dimension. As part of the transaction with Force Dimension, Force Dimension has delivered two concept models. Novint has received both concept model prototypes. Novint contracted with a design firm, Lunar Designs, to take the Force Dimension concept models and to design prototypes that could be manufactured for mass sale and distribution. A working prototype from Lunar Designs that can be manufactured for mass sale and distribution was finalized in December of 2005.

Company History & Development of Haptics Technology

     Our computer touch technology allows computer users to realistically feel objects displayed by a computer on a monitor in the same way that the monitor allows people to see what a computer is displaying. A computer user holds onto the handle of a haptic device which can be moved right-left and forwards-backwards like a mouse, but can also be moved up and down. As the haptic device is moved by the user, it controls a cursor or other pointing icon displayed by the computer (much like a mouse controlling a cursor) and when such cursor makes contact with virtual objects displayed by the computer, the computer registers such contact and updates motors in the haptics device (approximately 1000 times a second) creating feedback to the handle of the haptics device and giving a realistic sense of touch in the user’s hand. Arbitrary forces with a given direction, strength and time can also be generated by the haptic device.

     Our computer touch technology encompasses both hardware and software. The hardware component includes designs and development of devices that users can hold or feel to receive the touch sensations.

     The software technology utilizes haptic devices to generate computer touch sensations and interactions. The haptic device technology allows the touch sensations commanded by the software to be felt by users.

Software Technology

     Our software technology originated at Sandia National Laboratories (“Sandia”), a multi-billion dollar government research laboratory, which was one of the earliest pioneers in the human-computer haptics interaction field. We were granted an exclusive license by Sandia that encompasses over five years of pioneering research and development in the field of human-computer haptics interfaces at Sandia. We were the first company in which Sandia received capital stock as part of a licensing agreement. Our CEO, Mr. Tom Anderson was an employee at Sandia. .

     We received a first round of funding of approximately $1,500,000 from Manhattan Scientifics, Inc., a publicly traded technology incubator company (OTCBB: MHTX).

     In May 2001, Manhattan Scientifics acquired Teneo Computing, Inc. (“Teneo”) and caused Teneo to grant to us an exclusive, worldwide license to all of Teneo’s software technology which we have accounted for as an intangible asset. The Teneo license brought a number of customers, additional staff, and added a suite of haptics applications and technology for Novint.

     Our project revenues are currently $331,752 and $144,332 for the years ended December 31, 2005 and 2004, respectively. Our revenues have been from contracts to develop professional applications using our haptics technology, and related haptics devices, for a number of customers, including Chevron, ARAMCO, Woods Hole Oceanographic Institute, Lockheed Martin Perry Technologies, SensAble Technologies, Sandia National Laboratories, Deakin University and Daimler Chrysler Automotive Corporation. Further, we have sold 22 haptics interface systems (hardware) along with its software. We had net losses of $3,386,405 and $2,439,303 for the years ended December 31, 2005 and 2004, due to our continued research and development activities related to development of the gaming technologies and related haptic devices.

Our Haptics Technology

     Our contracts have allowed us to add significantly to our software technology and overall haptics intellectual property.

Hardware Technology

     Novint’s software technology can use a variety of computer touch hardware including third-party professional computer touch hardware from companies such as Force Dimension and SensAble Technologies. In addition, we are developing our own computer touch or haptic hardware for the consumer market. Our consumer haptic hardware is being developed by a team consisting of Novint Technologies, Lunar Designs and Force Dimension.

Third Party Haptic Hardware and Technology

     We had a reseller agreement with SensAble to sell a haptics device called the Phantom System. The software component includes software that interacts with the hardware component to update motors in the haptics device to create the touch sensations. SensAble owns all of the intellectual property rights with respect to the Phantom System. Our reseller agreement with SensAble expired in November 2004. We did not negotiate a renewal of our agreement, however we can continue to purchase the Phantom System directly and repackage it for our customers, according to their specifications. We believe that going forward we may rely less and less on this product as part of our overall sales generation. As such, we do not believe that the absence of a reseller agreement, or any discounts we previously enjoyed on the Phantom System, will affect our business operations or prospects. Historically we have not sold many of these devices and our profits on such sales are very minor relative to the total amount of our revenues.

Novint Haptic Hardware and Technology

     In connection with the development of our computer touch or haptic device, we entered into an agreement on January 5, 2004 with Force Dimension, LLC (“Force Dimension”). The agreement consists of an exclusive Intellectual Property License Agreement (“Agreement”) with Force Dimension, a company in the Haptics hardware technologies and products arena. Certain portions of this Intellectual Property are in turn sub-licensed by Force Dimension from Prodex. The Agreement provides us 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 us. We are obligated to make certain milestone payments to Force Dimension as they complete certain milestones under the Agreement.

     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 costs are being amortized to interest expense through January 5, 2006, the maturity date of this obligation to Force Dimension.

     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.

     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 is recorded as accrued research and development liabilities on the accompanying balance sheet 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.

Current Products & Services

     To date, we have developed professional applications for customers such as Aramco, Lockheed Martin, Chevron, Chrysler and Sandia National Laboratories. These efforts have allowed us to build our intellectual property portfolio. We have derived the majority of our revenue developing professional applications for our customers. We have completed and are currently working on a number of contracts with companies such as Aramco and Lockheed Martin.

     Several of the projects we have completed (such as those with Aramco, Lockheed Martin, and Sandia) may grow into other follow up projects. All of our ongoing work in this market will support itself, and much of the intellectual property and software development developed with respect to these contracts will be applicable towards other applications of our technology.

     We have also released another product, our Novint sono system. Our Novint sono system, which allows a parent to “virtually” touch their baby before he/she is even born, was chosen as one of Time Magazine’s Coolest Technologies of the Year in November of 2002. We have sold one Novint sono system.

     We have sold products to Deakin University and University of New Mexico each for a collection of our applications for demonstration purposes as well as sales to various entities for Phantom Haptics devices. Other than that, our revenue is derived mainly from project contracts.

     In February 2005, we announced the development of an initial prototype of a product to be known as the “Novint Falcon.” We unveiled this prototype at an industry trade show. The product has three-dimensional force feedback capabilities. It will be a hardware device that we anticipate we can license for development by other manufacturers. Novint is currently evaluating a direct manufacturing agreement for production of the Novint Falcon but definitive terms have not yet been reached.

ARAMCO CONTRACT

     Novint was contracted by Aramco to develop an application to apply haptics interaction techniques in the interpretation and understanding of volumetric reservoir modeling for oil exploration. In this ongoing effort, capabilities were added to support and enhance the oil reservoir and well path modeling process. The project is aimed at demonstrating and validating the use of haptics interaction techniques in the interpretation and understanding of volumetric reservoir modeling data.

     During the first year of this contract, Novint’s volumetric modeling program was extended to support Aramco’s process. Aramco’s data is now supported and can be seen and “felt” in real-time in a desktop environment. Our results during the first year and our continued progress has led to the award of yearly contracts. For such contracts, we are further refining Aramco’s modeling program to be able to handle full production level oil reservoir model data sets, adding additional

visualization support to allow oil company personnel to focus on key areas of their models, developing larger data set visualization and multi-modal interaction to include graphics, haptics and sound.

Description of the Aramco Contract Terms:

     A Miscellaneous Technical Services Agreement dated April 10, 2001 was entered into between Novint and Aramco Services Corporation (“ASC”). This Agreement was terminable by each party upon breach of the other. It was also terminable at will by ASC. Under the contract, performance by Novint was made over a six month period to create haptics interactive software device for geologic volume modeling on a desk top environment. The contract provided for six months to deliver a working prototype. The contact provided for multiple delivery dates for alpha version, test versions, beta release and final functional prototype during the six-month performance period. ASC was provided an evaluation right before final payment was made. Payments were made as follows: 25% ($15,962.5) upon signing, 25% upon delivery of an alpha version, 25% upon delivery of a beta version and 25% (for a total of $63,850) upon final delivery and evaluation of the product by ASC. ASC was granted perpetual, nonexclusive license and rights to use the developed software internally. The license includes right to internally enhance software, but no rights to market or sell the software or grant rights to third parties. This contract is paid in full, the work is completed and no further payment or work is pending.

     There was an Addendum to the contract dated July 10, 2002. The Addendum provided for six months for development by Novint of “Phase II” software for the vnp2 software enhancements (developed under the original contract) in the areas of graphics, sounds, and miscellaneous performance. The Addendum provided for delivery of a beta version in the first 12 weeks of performance. Final deliverables were due within 6 months. Payments were made as follows: $17,947 at signing, $17,947 on beta software delivery, and $18,490 on final delivery. ASC was granted perpetual, nonexclusive license and rights to use the developed software internally. The license includes right to internally enhance the software, but no rights to market or sell the software or grant rights to third parties. A total of $54,385 was paid to Novint under the Addendum. This Addendum is paid in full, the work is completed and no further payment or work is pending.

     There was another Addendum to the contract dated August 22, 2003. Performance was due by Novint on December 31, 2003. Novint developed Phase III enhancements to vnp2 software together with select hardware upgrades and configurations. Payments were made under the Addendum as follows: $14,710 at signing, $14,710 at installation of initial workstation, $14,710 at delivery of version 1 of the software upgrades, $14, 710 upon version 2 of the upgrades, and $14,710 at final delivery and evaluation. ASC was granted perpetual, nonexclusive license and rights to use the developed software internally. The license includes right to internally enhance the software, but no rights to market or sell the software or grant rights to third parties. A total of $73,550 was paid to Novint under the Addendum. This Addendum is paid in full, the work is completed and no further payment or work is pending.

     There was a further Addendum dated May 3, 2004. The Addendum provided for the development of improvements on haptics products previously delivered to ASC under the contract and prior Addendums. Novint’s performance extended to January 1, 2005. Payment of $75,000 was made at completion. Improvements were made in the areas of global functionality, graphics, sound and miscellaneous performance of the software. ASC was granted perpetual, nonexclusive license and rights to use the developed software internally. The license includes right to internally enhance the software, but no rights to market or sell the software or grant rights to third parties. A total of $75,000 was paid to Novint under the Addendum. This Addendum is paid in full, the work is completed and no further payment or work is pending.

     There was a further Addendum dated September 8, 2005. The Addendum provided for the enhancement of event monitoring capabilities, enabling Haptic Device button operations, and other general enhancements. Deliverables will include an updated version of the VNP2 software for 32 bit Windows, and an updated user manual detailing the new features. Novint’s performance was extended to January 1, 2006. Payment of $75,000 will be made upon written confirmation of acceptance of work from ASC. Novint received payment in full of $75,000 in February 2006.

LOCKHEED MARTIN CONTRACT

     Novint has ongoing contracts for the last four years with Lockheed Martin to develop a mission planning system for autonomous robotic vehicles. This system allows users to plan, verify, monitor and replay the overall mission for an unmanned underwater vehicle. Our work includes extensions for a data manager which provides the user an integrated view of information from real time sonar sensors. Our system allows the user to control the vehicle and understand its status in a straightforward, easy-to-use manner.

Description of Lockheed Martin Purchase Orders:

     Novint has ten purchase orders and amendments thereto with Lockheed Martin dated June 11, 2002, November 27, 2002, February 7, 2003, June 28, 2004, December 22, 2004, April 1, 2005,April 4, 2005, April 21, 2005, February 16, 2006 and March 3, 2006. Eight of these Purchase Orders have been completed and paid in full.

     Development and delivery of software under the purchase orders was for AUV defense mission and planning under specifications agreed to between the parties. The Purchase Orders also provided for the further customization and upgrade of delivered AUV software. Over the course of the Purchase Orders an aggregate of $131,774 was paid by Lockheed Martin to Novint. Novint has fully performed the first seven purchase orders and delivered the purchased software and upgrades required thereunder. No other payment is due or owing on the completed Purchase Orders.

     A Purchase Order was entered into with Lockheed Martin for the development and delivery of a Data Manager and Review Software (DMRS) dated April 21, 2005. The application will be used to investigate the undersea hulls of naval ships to flag any anomalies. The project work has been finished. The Purchase Order amount is $153,865. Novint fully performed this purchase order during 2005 and was paid in full. A Purchase Order was entered into with Lockheed Martin to provide engineering services for specific haptic related projects on February 16, 2006. That Purchase Order is “open” as to amount, and Novint will bill Lockheed Martin periodically for such services at a rate of $96 per hour. A Purchase Order was entered into with Lockheed Martin to enhance certain mission planning and evaluation software on March 23, 2006. The amount of the Purchase Order is $6,100. Performance is ongoing under the February 16 and March 23 Purchase Orders and no amounts have been paid to Novint under such Purchase Orders to date.

CHRYSLER CONTRACT

     Novint was contracted by DaimlerChrysler Corporation to develop a haptics interaction module for DaimlerChrysler Corporation’s Conceptual Rendering System (CRS). Utilizing a large-scale haptics device, the haptics interaction module adds touch feedback to DaimlerChrysler’s virtual car prototyping capabilities and enables more cost effective and realistic design and evaluation of car ergonomics prior to the manufacture of physical models.

Description of the DaimlerChrysler Purchase Order:

     Novint had a Purchase Order with DaimlerChrysler dated December 13, 2001. The Purchase Order relates to the development and delivery by Novint of a small car platform virtual reality software system. The Purchase Order has been fully performed by Novint and no further work is pending. DaimlerChrysler has paid an aggregate of $63,000, in full and no further payment or performance is due or owing.

CHEVRON CONTRACT

     Novint was contracted by Chevron to apply haptics interaction to boundary models of important geophysical structures based on seismic and other empirical oil field data. The haptics interaction allows modelers to quickly and precisely designate the location of surfaces, feel as well as see their extent and shape, and directly modify them using their sense of touch.

Description of Chevron Statement of Work:

     Novint had a Statement of Work with Chevron dated May 7, 2001. The contract concerned the development and installation of a haptics interface for the GOCAD V2.0 software used to represent geological entities and formations. Deliverables were due under the contract as follows: (i) within one week of commencement specifications finalized; (ii) within two weeks of commencement final statement of work specifications delivered by Novint; (iii) technical implementation to commence within three weeks of commencement; (iv) initial prototypes for NT operating stations installed in June 2001; (v) within three months of commencement, beta type of software installed and performing; and (vi) within four months of commencement, delivery of final release to Chevron. The amount due from Chevron for completion of the work was $70,000 that was paid in full. The amount was paid in $25,000 installments upon the signing of the agreement and upon delivery of the intial prototype, beta type and then final delivery and completion. The Company retained all rights associated with the developed software. Chevron’s sole right is a license to use the software internally at Chevron for evaluation and demonstration purposes. The agreement has been paid in full and no further performance is due from the Company or Chevron.

SANDIA NATIONAL LABORATORIES CONTACT

     Novint was contracted by Sandia Laboratories to develop an architectural walkthrough application. This application allows users to load in large scale, detailed architectural models and to explore their design using our haptic software technology. Haptics technology is used in both the user interface to this application and to allow the user to feel the digital models to get a more precise understanding of their nature and extent. In addition, various touch-enabled programs can be launched as the user navigates in the digital realm.

     As a second phase to this contract, we have developed an application, known as Layout, which allows digital objects to be quickly, and unambiguously arranged and placed. Layout was developed for Sandia National Laboratories to aid in the interior layout of buildings. Architectural objects, such as chairs, can be picked up and placed in a touch-enabled manner. The user can feel the shape and weight of these objects and when they collide with other objects in the environment. Using our technology for the placement of 3D digital objects means that objects can be organized much faster than when using a mouse and it also means that their placement in the environment can be much more precise. The user merely has to reach out, “grab” an object and place it to get the job done — just as in the physical world. For example, a user can pick up a virtual vase and place it on a virtual table and know that it is properly placed since he or she will feel the vase placement on the table.

     In addition, Novint is developing applications for Sandia with which users can arrange all of their electronic components onto a virtual printed circuit board effectively using their sense of touch. Hundreds of electronic parts such as transistors and capacitors can be represented using this application, and each component displays physical properties that make its placement intuitive and realistic. Users will feel collisions between objects that are positioned too closely to one another, feedback that helps ensure proper circuit assembly. This application also allows users to conduct simulated voltage tests that verify the successful operation of their virtual design once completed.

     Finally, Novint is developing applications for Sandia to help researchers analyze computational data, such as the detonation of test weaponry or the examination of the effects of a catastrophic fire. This application allows scientists to explore complex data sets—sometimes containing hundreds of variables that are generated from experimental simulations. With this application, users can represent data graphically with 3D surfaces, then use their sense of touch to “feel through” the data set. Because the program is touch-based, this application can represent variables such as temperature or pressure with physical phenomena like viscosity and vibration, allowing users to understand data using more than just their sight.

Description of the Sandia Purchase Orders:

     Novint had a Purchase Order with Sandia National Laboratories (“Sandia”) dated September 19, 2001 in the amount of $50,437. The Purchase Order related to the development of a multimodal layout and visualization prototype — a form of haptics desktop device with specified software features. The work was to be completed by December 15, 2001. The contract provided for periodic milestones and payments as follows: $10,000 upon project concept review, $17,500 upon demonstration of progress, $12,500 upon delivery of preliminary program executables, $1,470 upon delivery of user documents in “word” compatible format, $1058 upon delivery of source code, $3,890 upon demonstration of certain functionalities and $4,018 upon final report and delivery. The contract was timely performed in full by Novint and Sandia has paid in full. There is no further payment or performance due under the contract.

     Novint had a second Purchase Order with Sandia dated February 7, 2002 in the amount of $44,237. Work under the Purchase Order was to be completed by May 2, 2002. The Purchase Order related to the enhancement and further development of the software developed under the September 19, 2001 Purchase Order, including continued development of a multimodal layout and visualization prototype, specifically a standard multimodal file format and refinements to Sandia’s specified layout applications. The contract provided for periodic milestones and payments as follows: $6,635 on commencement and proposal review, $6,635 on delivery of preliminary draft concept papers, $13,271 on delivery of source code and build scripts, $2,211 on delivery of final version of file format, $15,040 upon delivery of refinements to layout application and source code and build scripts, and $442 on delivery of written summary of multimodal file format. The contract was timely performed in full by Novint and Sandia has paid in full. There is no further payment or performance due under the contract.

     Novint had a third Purchase Order with Sandia dated February 18, 2003 in the amount of $149,808. The Purchase Order related to the development of a distributed component architecture (“DCA”) to allow rapid development of design simulators for use by Sandia on a desktop environment. Work under the Purchase Order included DCA architecture as well as the 3D Electronic Component Layout (“ECL”) application example. The work was to be completed by July 21, 2003. The contract provided for periodic milestones and payments as follows: $14,981 upon commencement, $22,471 upon agreement to specific layout task specifications, $29,962 upon layout software user interface and function verification, $22,417 upon

DCA preliminary design delivery, $37,452 upon DCA and Layout software progress updates, $22,471 upon final delivery of DCA and layout software. The contract was timely performed in full by Novint and Sandia has paid in full. There is no further payment or performance due under the contract.

     Novint had a fourth Purchase Order with Sandia dated March 12, 2004 in the amount of $132,890. The Purchase Order related to creating enhancements to the DCA software created under the third Purchase Order. Enhancements included refinements to the 3D ECL application and development of the Multivariate, Multimodal Data Visualization (MMDV) application. Work was to be completed by August 16, 2004. The contract provided for periodic milestones and payments as follows: $29,192 upon delivery of 3DECL applications, $13,269 upon delivery of “MMDV” project plan, $26,538 upon delivery of MMDV prototype, $37,153 upon delivery of MMDV revised prototype, and $26,538 upon delivery of final MMSV version. The contract was timely performed in full by Novint and Sandia has paid in full. There is no further payment or performance due under the contract.

     In connection with each of the above Purchase Orders, Novint granted to Sandia the right to use the developed software and technology internally and to enhance and develop the software internally. It is a perpetual, royalty free right to use and develop the software. The license rights granted also include the right for Sandia to distribute the software, in executable form only, to third parties. Novint retains sole rights of ownership and commercial distribution for all software in source code form and its derivative works. Sandia cannot distribute the software in source code form outside of Sandia. Accordingly, Novint has no right to receive any royalties or other payments on any enhancement developed and used by Sandia.

WOODS HOLE OCEANOGRAPHIC INSTITUTE CONTRACT

     Novint was contracted by Woods Hole Oceanographic Institute (WHOI) to integrate haptics interaction into undersea exploration systems (i.e., underwater vehicles). We have developed a prototype 3D touch-enabled mission rehearsal system (i.e., simulation) for underwater vehicle operations.

PURCHASE ORDERS

Description of the Deakin University Purchase Order:

     Novint had a Purchase Order with Deakin University dated April 16, 2003 in the amount of $131,196. The Purchase Order concerned the delivery and installation of a phantom haptics interface and related software and drivers. Novint has completed delivery under this Purchase Order and Deakin University has paid in full. No further payment or performance is due or owing.

Description of University of New Mexico Purchase Order:

     Novint had a Purchase Order with the University of New Mexico dated March 16, 2004 in the amount of $47,176. The Purchase Order concerned the delivery and installation of a phantom desktop with and related software, together with certain device drivers. Novint has completed delivery under this Purchase Order and University of New Mexico has paid in full. No further payment or performance is due or owing.

Description of Robarts Research Purchase Order:

     Novint had a Purchase Order with Robarts Research dated September 24, 2004 in the amount of $50,200. The Purchase Order relates to the delivery and installation of a phantom haptic interface and related software and device drivers. Novint has completed the delivery under this Purchase Order and Robarts Research has paid in full. No further payment or performance is due or owing.

SALES OF CURRENT PRODUCTS

     We are actively marketing for other projects through interactions at trade shows, through our web site, our reputation as a leader in 3D haptics, and through leads generated from friends of Novint.

PRODUCTS AND SERVICES IN DEVELOPMENT: INTERACTIVE COMPUTER GAMING

     We are currently preparing to leverage our 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 software as well as general haptic effects.

OPPORTUNITIES IN THE INTERACTIVE COMPUTER GAME MARKET

     The interactive computer game market is a very large and rapidly growing market. According to 60 Minutes: “Cyber Athlete ‘Fatal1ty’” (aired January 22, 2006) the global game industry in 2007 is projected to be $35 billion. The three primary gaming console companies are Sony (Playstation 3), Microsoft (Xbox 360), and Nintendo (Revolution). Novint anticipates developing games for the Sony and Microsoft platforms. Novint is pioneering a new category of 3D touch products for the consumer video game market and we expect our touch technology will be applicable to many different platforms and genres of video games.

OUR INTERACTIVE COMPUTER GAMING STRATEGY

     Our interactive computer gaming strategy is based upon the creation of a fundamentally new way users interact when playing interactive computer games — adding the sense of touch. The introduction of games incorporating the sense of touch involves development of both hardware and software. We anticipate licensing our haptics enabled hardware designs to a number of hardware manufacturers to gain support for the technology. At the same time, we anticipate licensing our computer touch software to a number of game publishers to create many haptics enabled video games or licensing games developed by us to game publishers for distribution. We have not, however, entered into any such licenses at the present time. Novint is exploring initial manufacturing agreements to create an install base of the hardware to help in our licensing efforts.

HARDWARE

     We are currently planning to exploit new opportunities in the consumer interactive computer game market. This opportunity is only recently possible because of the development of our new low-cost three-dimensional haptics interaction device, the Novint Falcon, that works with our existing computer touch software. We have discussed manufacturing hardware with hardware manufacturing consultants and a hardware manufacturer and we believe that the hardware based on the Force Dimension designs can be manufactured at a cost of approximately $25-$35 per unit, as currently designed in volumes of 1 million units or more. Thus, we believe that this device may retail for under $100, bringing it within reach to a large number of consumers. We believe that initially, in lower volumes, the Novint Falcon will retail for $150 to $200. Of course, the final manufacturing and retail price will be dependent on the final device design and specifications we choose to market and sell.

     We anticipate that eventually all hardware will be manufactured and sold by third parties such as Sony, Microsoft, Logitech, Interact, Kensington, etc., under licensing agreements with us, although we are currently evaluating a direct manufacturing contract. No such contracts or licensing agreements, however, have been entered into with such companies to date. It is our intent to encourage a number of manufacturers to embrace and license the technology and, thereby, preemptively establish ourselves as the de facto haptics standard in the industry.

SOFTWARE

     We anticipate that software titles will be published in one of two forms: (i) those that may be played with traditional mice, joysticks, gamepads, etc., as well as our 3D/6D haptics controllers to enhance the game play; or those that may be played only with our devices (initially reserved for selected titles in which transcendent game play and experiential dimensions are delivered). Software platform compatibility will conform to the hardware compatibility discussed above.

     We anticipate that our computer touch software will be licensed to third party publishers and developers. We anticipate two broad types of licenses. The first category is one in which we license the haptics technology to a publisher so that their development team can add the sense of touch into a game. In this type of license, we will provide our computer touch software and within it, the interface to the applicable hardware. In many cases, we will aid in the development of the game. The second category of games is one in which we are the primary developer, where we take on the creation of the game. These games may still be licensed to a publisher, as the publisher’s distribution channels are utilized for sales, but we anticipate that we will receive a higher royalty on these games given the higher level of control and involvement.

     We anticipate that over time, as we grow, the majority of all games developed will be published by 3rd party publishers, and will be distributed through their distribution channels. As described above, we will either aid another developer in incorporating haptics into the game, or we will act as the game developer. To achieve the introductory library of games, we anticipate employing a two-pronged development strategy wherein we will: (i) support third party publishers or developers by providing developmental API/toolsets (the programming interface used by programmers to create programs) and our resident experts to assist their developer teams and, in selected cases, an advance on all or a portion of the development funding; and (ii) serve as the developer for initial haptics-only titles, many of which will be distributed by 3 ^rd party publishers.

     Given the state of the Novint Falcon development, we expect to approach a number of game developers and publishers. We have had initial meetings and expect our discussions with developers and publishers to continue. Our goal is to enter into several agreements with game publishers and developers, to create additional games that will use our 3D touch technology. We also intend to approach hardware manufacturers to license our hardware technology. Finally, we also intend to have discussions with console manufacturers, who we believe will see our technology as a competitive advantage against other consoles.

     In addition, we are continuing to develop and refine our haptics technologies for gaming use by producing initial games to be packaged with the Novint Falcon, technology demonstrations and sample programs, and an Application Programming Interface (API) to be used with 3 ^rd party developers and publishers. Novint has been and is continuing to develop software used to demonstrate basic, fundamental gameplay incorporating haptics technology. For example, Novint has developed software that demonstrate what it would feel like to throw a basketball, catch a baseball, swordplay, etc. in virtual reality. This software forms the basis of Novint’s gaming software and is used to prove the concept of using haptics technology for video game play to game publishers and developers.

COMPETITION

     In the past 8 years we believe that there have been approximately a dozen companies involved in haptics hardware and/or software development. Most of these companies are hardware developers. We have been focusing many of our efforts on software development, and we believe that will maintain our lead in the field in software. With respect to hardware, we believe the consumer release of the Novint Falcon (targeted to be under $100 to consumers) will be a significant event in the field of haptics, and will give us a strong competitive advantage in our licensing strategy. We believe that none of our potential hardware competitors have any experience with a consumer 3D haptics enabled device. 3D haptics hardware devices available now retail for approximately $2000 to $15,000. Most of these companies are potential partners.

	•		SensAble Technologies (www.sensable.com) is a haptics hardware and software developer. Their first product was the Phantom haptics interface. Their primary application focus is their computer aided design product called Freeform, which they are selling to Product Designers. We have performed software development contracts with SensAble.
	•		Immersion Corporation (www.immersion.com) is primarily a 2D haptics (a Haptic computer interaction in which forces are mechanically displayed to a user in 2 directions of movement; examples are force feedback joysticks and force feedback mice) hardware company. Immersion is a public company, which has acquired other haptics device companies. Over the past 4 years they have acquired Cybernet, Haptech and Virtual Technologies. Immersion also purchased HT Medical, which is now called Immersion Medical.
	•		Reach In Technologies (www.reachin.se) is a Swedish based haptics software company focused on developing medical and oil/gas applications. They have not been aggressive in their growth and their markets, and we believe that they will not emerge as a competitor.
	•		MPB (www.mpb-technologies.ca/space/p_freedom6s.html) is a Canadian based haptics hardware company that has developed an interesting high end 3D haptics hardware device, the Freedom 6.
	•		Microsoft has several haptic devices that simply vibrate and rumble, such as the control pads for their Xbox systems. We believe our technology offers more features and provides a richer haptic experience for the user.
	•		Force Dimension (www.forcedimension.com), in Switzerland, has unveiled their haptics hardware device, the Delta. Force Dimension has been a partner of Novint and helped to develop the Novint Falcon.

	•		FCS Robotics (www.fcs-cs.com/robotics/) developed a large workspace haptics device called the HapticMaster. This is another high-end device that can be used with our software.
	•		Logitech sells haptics mice, wheels, and joysticks that they licensed from Immersion and that are primarily used for gaming. Logitech’s haptics products are two-dimensional and do not offer as many features as our products will.

INTELLECTUAL PROPERTY

Novint owns the following issued and pending patent applications:

1. Human-Computer Interface Including Efficient Three-Dimensional Controls. U.S. Patent 6,727,924 issued 4/27/2004. Claims a technology that allows efficient and intuitive interaction in a three-dimensional world with familiar two-dimensional controls. This patent application describes an intuitive type of haptics control object that allows developers to create toolbars and other common types of interface objects. These toolbars are easily accessible and greatly improve user-interface issues related to problems associated with depth perception of a 3D cursor. The patent was assigned by Tom Anderson to Novint on February 13, 2004, recorded with the USPTO February 23, 2004.

2. Coordinating Haptics with Visual Images in a Human-Computer Interface. U.S. Patent Application pending, some claims already allowable. PCT and foreign counterparts also filed. Claims a method for efficiently generating haptics models for use with existing images, without requiring the cost of generating a three dimensional model. The claimed method can effectively add a haptics dimension to the large volume of existing visual content. Assigned by Jake Jones to Novint dated September 26, 2001, recorded with USPTO December 7, 2001.

3. Human-Computer Interfaces Incorporating Haptics. U.S. Provisional Patent Application 60/431,060. Provides an early priority date for several later utility patent applications. This provisional patent application describes a number of haptics techniques particularly applicable to computer games.

4. Human-Computer Interfaces Incorporating Haptics and Path-Based Interaction. U.S. Patent Application pending, some claims already allowable. PCT counterpart also filed. Claims a number of methods and apparatuses related to communication with a user, with specific application to computer games. Examples are drawn from a variety of games, each of which has been implemented to utilize 3 dimensional positional input devices with force feedback.

5. Force Frames in Animation, US Patent application pending. Claims methods for utilizing haptics in computer animation. Assigned by Tom Anderson to Novint on February 13, 2004, recorded with USPTO February 23, 2004.

6. Human-Computer Interface Including Efficient Three-Dimensional Controls. Continuation application of U.S. Patent 6,727,924, 10/831,682 filed 4/22/2004. Claims a technology that allows efficient and intuitive interaction in a three-dimensional world with familiar two-dimensional controls. This patent application describes an intuitive type of haptics control object that allows developers to create toolbars and other common types of interface objects. These toolbars are easily accessible and greatly improve user-interface issues related to problems associated with depth perception of a 3D cursor. Assigned by Tom Anderson to Novint on February 13, 2004, recorded with USPTO February 23, 2004.

7. Human-Computer Interface Incorporating Personal and Application Domains. U.S. Patent 6,724,400 issued 4/20/2004. Claims variations on the user interface. Assigned by Tom Anderson to Novint on February 13, 2004, recorded with USPTO February 23, 2004.

8. Computer Interface Methods and Apparatuses. U.S. Provisional Patent Application 60/681,007. Describes many interface technologies and methods of particular importance to three-dimensional and haptic-enabled computer games.

9. Human-Computer Interface Incorporating Personal and Application Domains. Continuation of U.S. Patent 6,724,400, filed 3/16/2004. Claims variations on the user interface.

COPYRIGHTS

We own copyrights in application software and application development tools, including:

1. e-Touch, copyright 2000, 2001, 2002, 2003 Novint Technologies, Inc.

2. Novint sono software

TRADEMARKS

We own the following trademarks:

1. NOVINT, on the Federal Principal Register, number 2512087. Branding for multiple products and services.

2. Novint logo, common law trademark. Branding for multiple products and services.

3. E-TOUCH, application for federal Principal Register, 76/061,390. Intended branding for the haptics software products.

4. e-Touch logo, application for federal Principal Register, 78/037,119. Intended branding for the haptics software products.

5. NOVINT FALCON, application for federal Principal Register, 78/561,954.

DOMAIN NAMES.

We own 145 domain names related to our branding strategy.

PATENTS FROM THE SANDIA LICENSE:

1. Multidimensional Display Controller. U.S. Patent 6,208,349 issued 3/27/2001. Claims a control technology allowing intuitive control of multidimensional displays. This patent application was submitted based on the usage of a two handed interface, where the user’s second hand can be used to manipulate the user’s viewpoint within the environment while allowing the user’s first hand to control navigation.

2. Multidimensional Navigational Controller, U.S. Patent Application pending. Claims a control technology allowing intuitive navigation through multidimensional spaces. This patent application describes a variety of navigation techniques and control objects that utilize haptics. Navigation in a virtual environment is a significant problem. Sandia did a study examining the benefits of haptically controlled navigation and the results were statistically significant that users were better able to navigate through three separate environments with haptics feedback compared with mouse-based interactions.

3. Human Computer Interfaces. U.S. Provisional Patent Application. Provides an early priority date for several later utility patent applications. This provisional patent application describes 34 additional potentially patentable concepts.

4. Human-computer Interface. U.S. Patent 6,833,826. Claims a haptics technology that allows intuitive interaction with boundaries between interface domains. This patent application describes a specific type of haptics object that enables transitions between separate domains by breaking through it.

5. Human-Computer Interface Incorporating Personal and Application Domains. U.S. Patent 6,724,400 issued 4/20/2004. Claims a user interface that provides consistent, intuitive control interface to any application. This patent application describes mechanisms for the concept of a personal space. This is a valuable and core component of e-Touch, our professional Application Programming Interface, and allows users to customize their own personal space while intuitively allowing interaction with a variety of applications or virtual environments.

6. Human-Computer Interface Incorporating Personal and Application Domains. U.S. Patent Application pending. Continuation of the previous issued patent, claims variations on the user interface.

7. Human-Computer Interface Including Haptically Controlled Interactions. U.S. Patent Application allowed. Claims an interface technique that allows haptics control of common interface operations. This patent application describes several scrolling and zooming techniques based around haptics interaction.

8. Navigation and Viewing in a Multidimensional Space. Two continuation applications of U.S. patent 6,954,899 and others. Claims specific variations on multidimensional navigation techniques.

Assigned to Novint, subject to certain obligations of Novint under the agreement with Force Dimension :

European Patent Office Application Serial No. 03016030.3, filed July 15, 2003 entitled “Parallel Kinematics Mechanism.” Counterparts in U.S., Japan, and Canada pending. The invention relates in general to movement transmission, and for

example, to a device or assembly for transmitting a movement using a parallel kinematics mechanism, to a haptic device or system or a force-reflecting control interface, such as a hand controller for computers, game consoles, simulators or other systems, and to a movement transmission device for a parallel kinematics manipulator or a parallel kinematics measuring system.

Licensed to Novint under the license with Force Dimension (patents licensed by Force Dimension from Prodex):

Other License Agreements .

MANHATTAN SCIENTIFICS — We are parties to a License and Royalty Agreement with Manhattan Scientifics dated May 16, 2001, one of our shareholders. We had a prior license agreement with Manhattan Scientifics that provided the initial funding of our development of a web browser and content creation tools to which Manhattan Scientifics had an exclusive license from us for specific internet fields of use. No royalties ever became due under the original agreement by either party and no marketable technologies were ever developed. Under our current agreement with Manhattan Scientifics we granted Manhattan Scientifics an exclusive sub license of our haptics technology, within a specified field of use for “Teneo” and other technologies. Under the agreement, Manhattan Scientifics granted to us, a license to use the “Teneo” technology that relates to dental training interfaces and oil and gas visualization applications. Manhattan Scientifics also assigned back to us the internet fields of use that were the subject of the first (prior) agreement. No royalties have been paid by either party pursuant to this license to date. No marketable technologies have yet been developed under this agreement The agreement provides that we would pay to Manhattan Scientifics 5% of the net revenues we derive from the use or sale of the “Teneo” technology. In addition, the agreement provides that Manhattan Scientifics will pay to us 5% of the net revenues they derive the use of sale of the technology that is the subject of the sub license granted to them. No such revenues have been derived by either party and accordingly, no royalty payments are due or owing by either party. The term of the license granted under the current agreement is intended to be perpetual. In connection with our agreements with Manhattan Scientifics, Manhattan Scientifics has received an aggregate of 4,067,200 shares of Novint common stock, and Novint has received an aggregate of 1,000,000 shares of Manhattan Scientifics’ common stock.

Teneo License — We license: (i) Virtual Reality Dental Training System Software; and (ii) Voxel Notepad Software, from Teneo Computing, Inc., a company acquired by one of our shareholders, Manhattan Scientifics. There are currently no patents covering either the Virtual Reality Dental Training System Software or the Voxel Notepad Software. We believe that the Harvard School of Dentistry filed or will file a patent covering the Virtual Reality Dental Training System Software or the Voxel Notepad Software. In addition to Teneo’s current license, Teneo had an exclusive right to get a license for any patents issued to Harvard School of Dentistry for the Virtual Reality Dental Training System Software or the Voxel Notepad Software. Novint decided to let this exclusive right lapse and currently have no plans to pursue such a license.

GOVERNMENTAL REGULATION

     We are not aware of any specific government regulations governing our services.

RESEARCH AND DEVELOPMENT

     Research and development expenses were $1,341,170 and $737,837 for the years ended December 31, 2005 and 2004, respectively.

EMPLOYEES

     As of March 15, 2006 we had 10 full time employees and 4 consultants.

     We have an employment agreement with our CEO, Tom Anderson. Under such agreement, he is entitled to an annual base salary of $150,000 per year and cash bonus to be determined by Novint, is subject to confidentiality provisions and is entitled to a severance of one year base salary if he is terminated by Novint without cause.

     We also have an employment agreement with our CTO, Walter Aviles. Under such agreement, he was originally granted options to purchase 400,000 shares of Novint’s common stock, but options to purchase 200,000 shares were cancelled, he is entitled to an annual base salary of $155,000 per year and cash bonus to be determined by Novint, is subject to confidentiality provisions and is entitled to a severance of two months base salary if he is terminated by Novint without cause.

     Recruiting efforts will continue as we bring our products to market.

Risk Factors

      An investment in the common stock involves a high degree of risk. In addition to the other information in this report, the following risk factors should be considered carefully in evaluating the Company and its business. This Report contains forward-looking statements. All forward-looking statements are inherently uncertain as they are based on current expectations and assumptions concerning future events or future performance of the Company. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. Forward-looking statements usually contain the words “estimate,” “anticipate,” “believe,” “plan,” “expect,” or similar expressions, and are subject to numerous known and unknown risks and uncertainties. In evaluating such statements, prospective investors should review carefully various risks and uncertainties identified in this report, including the matters set below and in the Company’s other SEC filings. These risks and uncertainties could cause the Company’s actual results to differ materially from those indicated in the forward-looking statements. The Company undertakes no obligation to update or publicly announce revisions to any forward-looking statements to reflect future events or developments.

THE MARKET FOR HAPTICS-ENABLING TECHNOLOGIES AND HAPTICS-ENABLED PRODUCTS IS AT AN EARLY STAGE AND IF MARKET DEMAND DOES NOT DEVELOP, NOVINT MAY NOT ACHIEVE OR SUSTAIN REVENUE GROWTH.

     The market for our haptics-enabling technologies, and our licensees’ haptics-enabled products is at an early stage. If Novint and its licensees are unable to develop demand for haptics-enabling technologies and haptics-enabled products, we may not achieve or sustain revenue growth. We cannot accurately predict the growth of the markets for these technologies and products, the timing of product introductions or the timing of commercial acceptance of these products.

     Even if our haptics-enabling technologies and our licensees’ haptics-enabled products are ultimately widely adopted, widespread adoption may take a long time to occur. The timing and amount of royalties and product sales that we receive will depend on whether the products marketed achieve widespread adoption and, if so, how rapidly that adoption occurs. We expect that we will need to pursue extensive and expensive marketing and sales efforts to educate prospective licensees and end users about the uses and benefits of our technologies and to persuade software developers to create software that utilizes our technologies.

CURRENTLY 100% OF OUR REVENUE IS DERIVED FROM A FEW CUSTOMERS AND WE COULD EXPERIENCE SUBSTANTIAL LOSSES IF A SINGLE CUSTOMER STOPS CONDUCTING BUSINESS WITH US.

     Currently, 100% of our revenues are derived from a few customers. Until and unless we secure customer relationships with substantially more customers, it is likely that we will experience periods during which we will be highly dependent on a limited number of customers. Dependence on a few customers will make it difficult to satisfactorily negotiate attractive prices for our products and will expose us to the risk of substantial losses if a single dominant customer stops conducting business with us. During the years ended December 31, 2004 and 2005, our revenues were derived from four key customers. The following is a list of customers representing 10% or more of our revenues for the years ended December 31, 2005 and 2004:

WE ANTICIPATE THAT OUR EXPENSES WILL DRAMATICALLY INCREASE TO EXECUTE OUR BUSINESS PLAN. THUS WE MAY EXPERIENCE LOSSES IN THE NEAR FUTURE AND MAY NOT ACHIEVE OR MAINTAIN PROFITABILITY.

     Our operating losses were $2,250,288 and $3,113,722, respectively, for the 12 month periods ended December 31, 2004 and 2005,. Our accumulated deficit as of December 31, 2004 and 2005 was $4,752,221 and $8,168,232, respectively. Our operating expenses totaled $3,296,657 for the 12 month period ended December 31, 2005, compared to $2,309,003 for the 12 month period ended December 31, 2004. We anticipate that our expenses will dramatically increase as we continue to leverage our computer touch technology and to acquire rights to a new 3D haptics interaction device to exploit opportunities in the consumer console and PC interactive computer gaming industry. If our revenues do not grow significantly or if our operating expenses exceed expectations, we may not achieve or maintain profitability.

OUR HISTORICAL FINANCIAL INFORMATION DOES NOT REFLECT OUR CURRENT PRIMARY BUSINESS STRATEGY FOR ACHIEVING REVENUE GROWTH. HISTORICALLY, OUR PRIMARY BUSINESS IS CONTRACTING FOR THE DEVELOPMENT OF PROFESSIONAL APPLICATIONS OF OUR TECHNOLOGIES FOR OUR CUSTOMERS. HOWEVER, OUR PRIMARY STRATEGY FOR ACHIEVING GROWTH IS DEVELOPMENT OF OUR TECHNOLOGIES FOR COMPUTER GAMING USE.

     Historically, we have derived the substantial majority of our revenue from development contracts. For the 12 month periods ended December 31, 2005 and 2004, 91% and 54%, respectively, of our revenues were from development contracts. While we anticipate that royalty revenue from licensing our technologies and sales of products that we plan to develop will constitute an increasing portion of our revenue, such royalty and sales revenue may not increase and may decrease in the future. Accordingly, we cannot predict our future revenues based on historical financial information.

WE ARE EXPLORING DIRECT MANUFACTURING CONTRACTS AND DIRECT SOFTWARE DEVELOPMENT; THESE ARE AREAS IN WHICH WE HAVE LITTLE EXPERIENCE.

     Although we expect that much of our growth will come from licensing our hardware and software technology and intellectual property, we are exploring direct manufacturing contracts, and we are developing our own initial game programs to be packaged with the Novint Falcon. We do not have experience or a track record for creating interactive video and computer games. We cannot be sure that the games we develop will appeal to consumers or enhance the sales of the Novint Falcon. In addition, if we were to move forward with direct manufacturing of our products, there will be additional risks such as cash flow management, financing materials, and coordinating product distribution either internally or by contract, all of which we have no experience in. If we expend significant resources on these initiatives and are not successful, our business and results of operations could be negatively impacted and the value of our securities could decline.

DEMAND FOR PRODUCTS THAT INCORPORATE OUR TECHNOLOGIES ARE GENERALLY SEASONAL AND FAILURE TO DELIVER PRODUCTS TO TAKE ADVANTAGE OF YEAR END HOLIDAY SEASON DEMAND COULD SUBSTANTIALLY IMPACT ROYALTY REVENUE GENERATED, IF ANY, FROM PRODUCTS THAT INCORPORATE OUR TECHNOLOGIES.

     Peak demand for products that incorporate our technologies, especially in the gaming market, typically occurs in the third and fourth calendar quarters as a result of increased demand during the year-end holiday season. If our licensees do not succeed in shipping licensed products in a timely fashion or fail to achieve strong sales in the second half of the calendar year, we would not receive related royalty revenue. We do not control or influence the degree to which our licensees promote our technologies or the prices at which they sell products incorporating our technologies. As a result, products incorporating our technologies may not be brought to market, achieve commercial acceptance or generate meaningful royalty revenue for us.

IF INDUSTRY LEADERS DO NOT ADOPT OUR TECHNOLOGIES, IT MAY BE DIFFICULT FOR US TO EXECUTE OUR BUSINESS STRATEGIES AND WE MAY NOT ACHIEVE REVENUE GROWTH.

     An important part of our strategy is to penetrate new markets by targeting licensees that are leaders in those markets. This strategy is designed to encourage other participants in those markets to also adopt our technologies. If a high profile industry participant adopts our technologies for one or more of their products but fails to achieve success with those products, other industry participants’ perception of our technologies could be adversely affected. Likewise, if a market leader adopts and achieves success with a competing technology, our revenue growth could be limited and other potential licensees may not license our technologies. Finally, if no industry participant adopts our technologies at all, we may not be able to achieve any revenue growth from licensing our technologies.

A SIGNIFICANT PORTION OF OUR INTELLECTUAL PROPERTY RIGHTS IS BASED ON OUR LICENSE FROM SANDIA. FAILURE TO COMPLY WITH THE TERMS OF THE SANDIA LICENSE MAY TERMINATE OR MAKE SUCH LICENSE NONEXCLUSIVE WHICH MAY RESULT IN A MATERIAL NEGATIVE IMPACT ON OUR BUSINESS AND REVENUES.

     A significant portion of our intellectual property rights are based on our license from Sandia National Laboratories (“Sandia”) which is the holder of our preferred stock. The Sandia license is a 12 year exclusive license for human-computer haptics interfaces. Sandia has the right to reduce our rights granted pursuant to the Sandia license (e.g., make rights non-exclusive) if we breach the provisions of the Sandia license or fail to meet the $30,000 per year minimum royalties set forth in the Sandia license. Failure to comply with such terms of the Sandia license may result in a material negative impact on our business and revenues.

IF WE FAIL TO PROTECT AND ENFORCE OUR INTELLECTUAL PROPERTY RIGHTS OR IF LICENSORS WHO LICENSE INTELLECTUAL PROPERTY RIGHTS TO US FAILS TO PROTECT AND ENFORCE SUCH LICENSORS’ INTELLECTUAL PROPERTY RIGHTS, OUR ABILITY TO LICENSE OUR TECHNOLOGIES AND TO GENERATE REVENUES WOULD BE IMPAIRED.

     Our business depends on generating revenues by licensing our intellectual property rights and by selling products that incorporate our technologies. In addition, a substantial portion of our intellectual properties are licensed from Sandia, one of our stockholders. If our company or Sandia is not successful in protecting and enforcing their respective intellectual property rights, our ability to obtain future licenses and royalty revenue could be impaired. In addition, if a court limits the

scope, declares unenforceable or invalidates any of our or Sandia’s intellectual properties, current licensees may refuse to make royalty payments or may themselves choose to challenge one or more of our intellectual property rights. Also it is possible that:

     - Sandia’s or our patents may not be broad enough to protect our proprietary rights;

     - Sandia’s or our patents could successfully be challenged by one or more third parties, which could result in our or Sandia’s loss of the right to prevent others from exploiting the inventions claimed in those patents;

     - current and future competitors may develop alternative technologies that are not covered by Sandia’s patents; and

     - effective patent protection may not be available in every country in which our licensees do business.

     Our company and Sandia also rely on licenses, confidentiality agreements and copyright, trademark and trade secret laws to establish and protect their proprietary rights. It is possible that:

     - laws and contractual restrictions may not be sufficient to prevent misappropriation of our or Sandia’s technologies or deter others from developing similar technologies;

     - “shrinkwrap” and “clickwrap” license agreements upon which we will rely to protect some of our software will not be signed by the user and may not be enforceable under the laws of all jurisdictions;

     - other companies may claim common law trademark rights based upon state or foreign laws that precede federal registration of our trademarks;

     - current federal laws that prohibit software copying provide only limited protection from software pirates, and effective trademark, copyright and trade secret protection may be unavailable or limited in some foreign countries; and

     - policing unauthorized use of our products and trademarks is difficult, expensive and time-consuming, particularly overseas.

IF WE ARE UNABLE TO DEVELOP NEW LICENSE RELATIONSHIPS, OUR REVENUE GROWTH MAY BE LIMITED.

     A big part of our projected revenue growth depends on our ability to enter into license arrangements. Particularly with respect to those licenses which involve the implementation of our hardware components or software games, we face numerous risks in obtaining new licenses on terms consistent with our business objectives and in maintaining, expanding and supporting our relationships with our current licensees. These risks include:

     - the lengthy and expensive process of building a relationship with potential licensees;

     - the fact that we may compete with the internal design teams of potential licensees;

     - difficulties in persuading consumer product manufacturers to work with us, to rely on us for critical technology and to disclose to us proprietary product development and other strategies; and

     - difficulties in persuading potential licensees to bear development costs to incorporate our technologies into their products.

THE POTENTIAL HIGHER COST OF HAPTICS-ENABLED PRODUCTS MAY INHIBIT OR PREVENT OUR TECHNOLOGIES FROM ACHIEVING MARKET ACCEPTANCE. FAILURE TO ACHIEVE MARKET ACCEPTANCE WILL SIGNIFICANTLY LIMIT OUR REVENUE GROWTH IN OUR COMPUTER GAMING BUSINESS.

     Haptics-enabled products are likely to be more expensive to consumers than products that are not Haptic-enabled. The greater expense of products containing our technologies may be a significant barrier to their widespread adoption and success in consumer markets.

WHILE WE HAVE NOT ENTERED INTO ANY LICENSES THAT GENERATE ROYALTY REVENUE, IF AND WHEN WE DO ENTER INTO SUCH LICENSES, A SMALL NUMBER OF LICENSEES MAY ACCOUNT FOR A LARGE PORTION OF OUR ROYALTY REVENUE.

     While we have not entered into any licenses that generate royalty revenue, a significant portion of our royalty revenue may be derived from a small number of licensees. If any of such limited group of licensees fails to achieve anticipated sales volumes, our results of operations may be adversely affected.

OUR TECHNOLOGIES MUST WORK WITH MICROSOFT’S OR OTHER COMPANY’S OPERATING SYSTEM SOFTWARE, THUS OUR COSTS COULD INCREASE AND OUR REVENUES COULD DECLINE IF MICROSOFT OR SUCH OTHER COMPANY MODIFIES THEIR OPERATING SYSTEM SOFTWARE.

     Our hardware and software technology must be compatible with operating system software, including Microsoft’s or their similar company’s entertainment applications programming interface. Any modifications, additions or deletions by Microsoft or another company’s operating system could require us to modify our technologies and could cause delays in the release of products by our licensees. If Microsoft or another company modifies their software products in ways that limit the use of our other licensees’ products, our costs could be increased and our revenues could decline.

WE WILL DEPEND ON THIRD PARTY MANUFACTURERS TO PRODUCE AND DISTRIBUTE HAPTICS INTERFACE HARDWARE DEVICES. ANY DELAYS IN DELIVERY OF THE HAPTICS INTERFACE HARDWARE DEVICES, QUALITY PROBLEMS OR COST INCREASES WITH RESPECT TO SUCH MANUFACTURERS COULD CAUSE US TO LOSE CUSTOMERS AND COULD ADVERSELY AFFECT OUR REVENUE FROM OUR GAMING BUSINESS.

     We will depend on third party manufacturers to produce and distribute haptics interface hardware devices such as game controllers. We will have limited control over delivery schedules, quality assurance, manufacturing capacity, yields, costs and misappropriation of our intellectual property. Any delays in delivery of the haptics interface hardware devices, quality problems or cost increases could cause us to lose customers and could adversely affect our relationships with our licensees.

IF WE ARE UNABLE TO IMPROVE, AND REDUCE THE COST OF, OUR TECHNOLOGIES, COMPANIES MAY NOT INCORPORATE OUR TECHNOLOGIES INTO THEIR PRODUCTS AND OUR REVENUE GROWTH MAY BE IMPAIRED.

     Our success will depend on our ability to improve, and reduce the cost of, our technologies and to introduce these technologies to the marketplace in a timely and cost effective manner. If our development efforts are not successful or are significantly delayed, companies may not incorporate our technologies into their products and our revenue growth may be impaired.

WE MAY BECOME INVOLVED IN COSTLY AND TIME CONSUMING LITIGATION OVER PROPRIETARY RIGHTS WHICH MAY DELAY BRINGING PRODUCTS INCORPORATING OUR TECHNOLOGIES TO MARKET AND ADVERSELY AFFECTING OUR REVENUE FROM OUR GAMING BUSINESS.

     We attempt to avoid infringing known proprietary rights of third parties. We have not, however, conducted and do not conduct comprehensive patent searches to determine whether aspects of our technology infringe patents held by third parties. Third parties may hold, or may in the future be issued, patents that could be infringed by our products or technologies. Any of these third parties might make a claim of infringement against us with respect to our products and technologies. In November 2000, we received a letter from Immersion Corporation, a competitor public company which has greater financial resources than we do, asserting that some of our technologies, or those of our licensees, may infringe their intellectual property rights. Although this matter has not resulted in litigation to date, any of these notices, or additional notices that we could receive in the future from this or other companies, could lead to litigation. We might also elect to enforce our intellectual property rights against third parties, which could result in litigation.

     Any intellectual property litigation, whether brought by us or by others, could result in the expenditure of significant financial resources and the diversion of management’s time and efforts. In addition, litigation in which we are accused of infringement may cause product shipment delays, require us to develop non-infringing technology or require us to enter into royalty or license agreements even before the issue of infringement has been decided on the merits. If any litigation were not resolved in our favor, we could become subject to substantial damage claims from third parties and indemnification claims

from our licensees. Our company and/or our licensee could be enjoined from the continued use of the technology at issue without a royalty or license agreement. Royalty or license agreements, if required, might not be available on acceptable terms, or at all. If a successful claim of infringement were made against us and we could not develop non-infringing technology or license the infringed or similar technology on a timely and cost-effective basis, our expenses would increase and our revenues could decrease.

WE PROJECT RAPID GROWTH AND CHANGE IN OUR BUSINESS, AND OUR FAILURE TO MANAGE THIS COULD HARM OUR BUSINESS AND NEGATIVELY AFFECT OUR STRATEGY OF STARTING AND GROWING OUR GAMING BUSINESS.

     Any future periods of rapid growth may place significant strains on our managerial, financial, engineering and other resources. The rate of any future expansion, in combination with our complex technologies, may demand an unusually high level of managerial effectiveness in anticipating, planning, coordinating and meeting our operational needs as well as the needs of our licensees.

PRODUCT LIABILITY CLAIMS, INCLUDING CLAIMS RELATING TO ALLEGED REPETITIVE STRESS INJURIES, COULD BE TIME-CONSUMING AND COSTLY TO DEFEND, AND COULD EXPOSE US TO LOSS.

     Claims that consumer products have flaws or other defects that lead to personal or other injury are common in the computer peripherals industry. In particular, manufacturers of peripheral products, such as computer mice, have in the past been subject to claims alleging that use of their products has caused or contributed to various types of repetitive stress injuries, including carpal tunnel syndrome. We have not experienced any product liability claims to date. Although we seek to limit our exposure to product liability claims by using certain provisions in licensing agreements, existing or future laws or unfavorable judicial decisions could limit or invalidate such provisions. If products sold by us or by our licensees cause personal injury, financial loss or other injury to us or our licensees’ customers, the customers, or our licensees, may seek damages or other recovery from us. These claims would be time-consuming and expensive to defend, distracting to management and could result in substantial damages. In addition, the assertion of these claims, even if unsuccessful, could damage our reputation or that of our licensees or their products. This damage could limit the market for our licensees’ haptics-enabled products and harm our results of operations.

WE ANTICIPATE RAISING ADDITIONAL CAPITAL IN THE FUTURE. FAILURE TO RAISE SUFFICIENT CAPITAL WILL LIMIT OUR ABILITY TO OPERATE AND EXPAND OUR BUSINESS.

     We anticipate raising additional funds through public or private financing, strategic relationships or other arrangements in the near future to carry out our business strategy. We cannot be certain that any financing will be available on acceptable terms, or at all, and our failure to raise capital when needed could limit our ability to expand our business. Additional equity financing may be dilutive to the holders of our common stock, and debt financing, if available, may involve restrictive covenants. Moreover, strategic relationships, if necessary to raise additional funds, may require that we relinquish valuable rights.

OUR EXECUTIVE OFFICERS, DIRECTORS AND MAJOR STOCKHOLDERS HAVE SIGNIFICANT CONTROL OVER US, WHICH MAY LEAD TO CONFLICTS WITH OTHER STOCKHOLDERS OVER CORPORATE GOVERNANCE MATTERS.

     Our current directors, officers and more than 10% stockholders will, as a group, beneficially own approximately 57.94% of our outstanding common stock. Acting together, these stockholders would be able to significantly influence all matters that our stockholders vote upon, including the election of directors and mergers or other business combinations.

     In addition, two major shareholders of Novint, Manhattan Scientifics and Tom Anderson, are both contractually obligated pursuant to a shareholder’s agreement to vote their shares to retain Novint’s current board members as Novint’s board of directors and such directors may elect another director without stockholder approval. Tom Anderson is also the CEO of Novint and Marvin Maslow, a director of Novint, is the CEO of Manhattan Scientifics. As a result, these controlling shareholders will be able to significantly influence decisions affecting Novint’s operations and capital structure. This control may have the effect of delaying or preventing changes in control or changes in management, or limiting the ability of Novint’s other stockholders to approve transactions that they may deem to be in their best interest such as the sale or other disposition of Novint’s products or businesses to another entity.

     Provisions in our Delaware certificate of incorporation and bylaws may have the effect of delaying or preventing a change of control or changes in our management. These provisions could limit the price that investors might be willing to pay in the future for shares of our common stock.

A SUBSTANTIAL PORTION OF OUR BUSINESS STRATEGY IS TO DEVELOP HAPTICS ENABLED DEVICES FOR USE IN THE COMPUTING GAMING INDUSTRY AND TO DEVELOP OUR OWN INTERACTIVE COMPUTER GAMING PRODUCTS WHICH INCORPORATES OUR TECHNOLOGIES. SUCH INDUSTRY IS HIGHLY VOLATILE AND COMPETITIVE.

     The interactive computer gaming industry has historically been a volatile and highly dynamic industry affected by changing technology, limited hardware platform life cycles, hit products, competition, component supplies, seasonality, consumer spending and other economic trends. Such industry is also intensely competitive. Interactive computer gaming products typically have life spans of only 3 to 12 months. In addition, the market is crowded with a large number of titles competing for limited shelf space at retail. Our future success will depend in large part on companies that will develop games requiring the use of our technologies to develop and introduce new competitive products on a timely basis and to get those products distributed widely at retail. To compete successfully, new products must adapt to new hardware platforms and emerging industry standards, provide additional functionality and be successfully distributed in numerous changing worldwide markets. If our company or companies that will develop games requiring the use of our technologies were unable, due to resource constraints or technological or other reasons, to successfully develop and distribute such products in a timely manner, this inability would have a material adverse effect on our operating results and our financial condition.

DEVELOPMENT OF SUCCESSFUL INTERACTIVE COMPUTER GAMING PRODUCTS IS HIGHLY UNPREDICTABLE AND COMPLEX AND IS SUBJECT TO PLATFORM CHANGES. FAILURE TO MANAGE THE DEVELOPMENT OF SUCH GAMING PRODUCTS OR TO ANTICIPATE SUCH PLATFORM CHANGES MAY SIGNIFICANTLY IMPACT OUR REVENUE GROWTH FROM OUR GAMING BUSINESS.

     Product development schedules are difficult to predict because they involve creative processes, use of new development tools for new platforms and the learning process, research and experimentation associated with development for new technologies. Products frequently include a large amount of content and are complex, time-consuming and costly to develop. A large portion of the interactive computer games that we will produce or that will use our technologies will be designed to be played on proprietary video game platforms such as those owned by Sony, Microsoft, and Nintendo. The success of our products is significantly affected by market acceptance of the new video game hardware systems and the life span of older hardware platforms, and our ability to accurately predict these factors with respect to each platform. In many cases, we will have expended a large amount of development and marketing resources on products designed for new video game systems that have not yet achieved large installed bases or will have continued product development for older hardware platforms that may have shorter life cycles than we expected. Conversely, if we did not choose to develop for a platform that achieves significant market acceptance, or discontinues development for a platform that has a longer life cycle than expected, our revenue growth may be adversely affected.

SUCCESS OF INTERACTIVE COMPUTER GAMES ARE INCREASINGLY HITS DRIVEN, THE MARKET FOR SUCH GAMES IS HIGHLY UNPREDICTABLE AND DEVELOPMENT OF NEW CONTENT IS INHERENTLY RISKY AND EXPENSIVE.

     Interactive computer games have become increasingly “hits” driven. Additional marketing and advertising funds are required to drive and support “hit” products, particularly television advertising. There can be no assurance that we will be able to produce “hit” titles, or that advertising for any product will increase sales sufficiently to recoup those advertising expenses. Whether games will become hits are highly dependent on consumer tastes and moods and are highly unpredictable. Development of new content is inherently risky and expensive. We cannot assure that products will be developed on time, in a cost effective manner, or that they will be commercially successful.

OBTAINING A LICENSE FROM HARDWARE MANUFACTURERS WILL BE REQUIRED TO PUBLISH ANY INTERACTIVE COMPUTER GAME TITLES. WE HAVE NOT OBTAINED SUCH LICENSE AND MAY NOT BE ABLE TO OBTAIN SUCH LICENSE ON ACCEPTABLE TERMS, OR AT ALL.

     We will be required to obtain a license to develop and publish titles for each hardware platform for which we will develop and publish titles. Hardware manufacturers, including Sony (PlayStation, PlayStation2, and Playstation 3), Nintendo (GameCube and Revolution) and Microsoft (Xbox and Xbox 360) require that we obtain approval for the publication of new games. Such manufactures are large companies with substantial financial resources and will be able to impose a very manufacturer favored agreement. We cannot assure that we will be able to obtain such licenses on acceptable terms, or at all.

OUR OFFICERS, DIRECTORS AND EMPLOYEES HAVE NO EXPERIENCE IN THE INTERACTIVE COMPUTER GAMING INDUSTRY AND MAY NOT BE ABLE TO OPERATE THIS BUSINESS EFFECTIVELY. FAILURE TO OPERATE OUR COMPUTER GAMING BUSINESS WILL SIGNIFICANTLY EFFECT OUR REVENUE GROWTH AND RESULTS OF OPERATIONS.

     Offering and developing interactive computer games is a substantial departure from our current business of offering product development services and limited sales of haptics devices. Our officers, directors and employees have no experience in developing, producing, pricing, marketing, selling, or distributing interactive computer games and will rely on its ability to employ persons that have such experience to carry out its business strategy with respect to developing interactive computer games. Because of our inexperience in this area, we may not be effective in achieving success that may otherwise be attainable by more experience.

WE MAY BE UNABLE TO INCREASE SALES OF OUR NOVINT SONO PRODUCT

     Our Novint sono product is new and, as a result, many ultrasound centers do not carry our products. To increase sales of our Novint sono and Babylight Gems, we must, in addition to convincing ultrasound providers of the utility of our products, persuade them to include our products as part of their services. If these ultrasound providers are unwilling to budget for the Novint sono system or the demands of selling Babylight Gems, we may not be able to increase sales of Novint sono or Babylight Gems products at a satisfactory rate. If we are unable to increase sales of our Novint sono or Babylight Gems products, our results of operations and financial condition may be adversely affected.

REDUCED SPENDING BY CORPORATE RESEARCH AND DEVELOPMENT DEPARTMENTS MAY ADVERSELY AFFECT SALES OF OUR PROFESSIONAL APPLICATIONS BUSINESS.

     To date, we have derived the majority of our revenues developing professional applications for customers such as Aramco, Lockheed Martin, Chevron, Chrysler and Sandia. We believe that the current economic downturn has led to a reduction in such corporations’ budgets for research and development in several sectors, including the automotive and aerospace sectors, which use our services and products. Sales of our services and products may be adversely affected by these cuts in corporate research and development budgets.

THE MARKET FOR OUR COMMON STOCK, EVEN IF REGISTERED UNDER THE SECURITIES ACT, MAY NOT BE LIQUID.

     Even if our common stock is registered under the Securities Act, it may be thinly traded compared to larger more widely known companies. Thinly traded common stock can be more volatile than stock trading in an active public market. We cannot predict the extent to which an active public market for its common stock will develop or be sustained. Further, there is no assurance that our common stock may be listed on any stock exchange or even qualify to be quoted on the over-the-counter bulletin board. Failure to do so may make it very difficult to sell our common stock.

OUR PRIOR EXTERNAL AUDITORS DETERMINED THAT A MATERIAL WEAKNESS RELATED TO OUR INTERNAL CONTROLS AND PROCEDURES EXISTED

     As part of the December 31, 2004 and 2003 audits, we were advised by our former independent registered public accounting firm, Grant Thornton LLP, that there were certain material weaknesses in internal controls and procedures related to the financial reporting process at December 31, 2004, and through the interim periods reviewed through September 30, 2005. As a result, for the year ended December 31, 2004, audit and review of quarterly financial information through September 30, 2005, Grant Thornton LLP proposed, and Novint recorded, numerous adjusting journal entries and additional disclosures to correct the financial statements. Management believes that it has taken sufficient steps necessary to correct its internal control and procedures related to the financial reporting process. The Company’s current independent registered public accounting firm, AJ Robbins PC, has not notified the Company of any material weaknesses in internal controls and procedures related to the financial reporting process at December 31, 2005.

     In June 2000, we entered into a Research and Development contract to provide to Manhattan Scientifics, Inc. (Manhattan), a publicly-traded company located in New York, a license and rights to sublicense haptics technology. Coincident with the contract agreement, we entered into an exchange transaction with Manhattan that was finalized in May 2001, whose terms provided that Manhattan would receive 4,067,200 shares of our stock, and we would receive 1,000,000 shares of Manhattan stock. In addition, we obtained from Manhattan exclusive ownership of the worldwide intellectual property rights and associated obligations of Teneo, a privately owned company previously acquired by Manhattan.

     We do not anticipate investing in real estate or interests in real estate, real estate mortgages, or securities of or interests in persons primarily engaged in real estate activities. We currently have no formal investment policy, and we do not intend to undertake investments in real estate as a part of our normal operations.

selling pressure on Novint’s common stock resulting in a lower price for such stock. Other than the common stock being registered for the selling shareholders in this offering, we have no agreement with any shareholder to register our securities.

Holders

     We currently have 107 record holders of our common stock.

Dividends

     We have not paid any cash dividends and we currently intend to retain any future earnings to fund the development and growth of our business. Any future determination to pay dividends on our common stock will depend upon our results of operations, financial condition and capital requirements, applicable restrictions under any credit facilities or other contractual arrangements, and such other factors deemed relevant by our Board of Directors.

Securities Authorized for Issuance Under Equity Compensation Plans

     Set forth in the table below is information regarding awards made through compensation plans or arrangements through December 31, 2005, the most recently completed fiscal year.

     In March 2004, we established the 2004 Stock Incentive Plan (“Plan”). The Plan was approved by our Board of Directors and security holders holding a majority of the shares of our common stock outstanding. The purpose of the Plan is to grant stock and stock options to purchase our common stock to our employees and key consultants. The total amount of shares subject to the Plan is 3,500,000 shares.

Recent Sales of Unregistered Securities

     On February 6, 2006, our initial Registration Statement on Form SB-2 was declared effective by the Securities and Exchange Commission. The Registration Statement registered for sale common stock of the company by the selling security holders named therein. The company has not and will not receive any proceeds of the sale of common stock under the Registration Statement as all such proceeds, if any, will be for the account of the selling security holders named therein.

     We have sold or issued the following securities not registered under the Securities Act by reason of the exemption afforded under Section 4(2) of the Securities Act of 1933 (the “Act”), during the last three years. Except as stated below, no underwriting discounts or commissions were payable with respect to any of the following transactions. The offer and sale of the following securities was exempt from the registration requirements of the Securities Act under Rule 506 insofar as (1) except as stated below, each of the investors was accredited within the meaning of Rule 501(a); (2) the transfer of the securities were restricted by the company in accordance with Rule 502(d); (3) there were no more than 35 non-accredited investors in any transaction within the meaning of Rule 506(b), after taking into consideration all prior investors under Section 4(2) of the Securities Act within the twelve months preceding the transaction; and (4) none of the offers and sales were effected through any general solicitation or general advertising within the meaning of Rule 502(c).

     In October 2002, we signed a one year promissory note for $100,000. In conjunction with this note, we issued 150,000 shares of common stock to the note holder in lieu of interest. The recipient of the shares was Murray Kelly. We relied upon the exemption from registration as set forth in Section 4(2) of the Act for the issuance of these shares. The investor 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 Act. In addition, there was no general solicitation or advertising for the

acquisition of our shares. All certificates for our shares contain a restrictive legend. The investor was permitted access to our management for the purpose of acquiring investment information. Based upon written and oral representations of the investor, and the investor’s general dealings with development companies, we deem the investor sophisticated for the purposes of Section 4(2) of the Act.

          In November 2002, we issued a total of 40,000 shares of our common stock to Sandia as repayment of its 2001 and 2002 royalty dues in the amount of $20,000. We relied upon the exemption from registration as set forth in Section 4(2) of the Act for the issuance of these shares. Sandia is an Accredited Investors as defined in the Act who took its 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 acquisition of our shares. All certificates for our shares contain a restrictive legend. The investor was permitted access to our management for the purpose of acquiring investment information and due to the investor’s status as Accredited, we deem the investor sophisticated for the purposes of Section 4(2) of the Act.

          In December 2002, we issued an aggregate of 42,727 shares of its common stock in connection with option exercises at $0.01 per share. The recipients of the shares were Walt Aviles, Ed Barris and Peter Mattern. We relied upon the exemption from registration as set forth in Section 4(2) of the Act for the issuance of these shares. All of the persons exercising options took their shares for investment purposes without a view to distribution and had access to information concerning Novint and our business prospects, as required by the Act. In addition, there was no general solicitation or advertising for the purchase of our shares. All certificates for our shares contain a restrictive legend. At the time of the issuance of the underlying options, we deemed all such investors sophisticated for purposes of Section 4(2) of the Act and had not factual basis upon which to change our determination at the time of exercise.

          During 2003, we issued options to purchase an aggregate of 87,122 shares of our common stock with exercise price of ranging from $0.50 to $0.66 per share to Lem Hunter and Arthurine Breckenridge, our employee and consultant as partial compensation for providing services to Novint. We relied upon the exemption from registration as set forth in Section 4(2) of the Act for the issuance of these options. Both Mr. Hunter and Mr. Breckenridge took their 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 acquisition of the options or the purchase of our shares upon exercise. All certificates for our shares contain a restrictive legend. The investors were permitted access to our management for the purpose of acquiring investment information. Due to the investors’ status as employees and consultants and their dealings with development companies generally, we deem the investors sophisticated for the purposes of Section 4(2) of the Act.

          In January 2003, we issued 3,788 shares of common stock to Tim Butler, a consultant, as compensation for providing services to Novint. Novint determined that the value of the services provided was approximately $189. We relied upon the exemption from registration as set forth in Section 4(2) of the Act for issuance of these shares. Mr. Butler who took his 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 acquisition of our shares. All certificates for our shares contain a restrictive legend. The investor was permitted access to our management for the purpose of acquiring investment information. Due to the investor’s status as a consultant and his dealings with development companies generally, we deem the investor sophisticated for the purposes of Section 4(2) of the Act.

          On May 19, 2003, we issued 3,030 shares of our common stock to Jackson Kelly and Nikki Kelly, two former consultants, as compensation for providing services to Novint. Novint determined that the value of the services provided was approximately $151. We relied upon the exemption from registration as set forth in Section 4(2) of the Act for the issuance of these shares. All of the investors were Accredited Investors as defined in the Securities Act who took their 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 purchase of our shares. All certificates for our shares contain a restrictive legend. The investors were permitted access to our management for the purpose of acquiring investment information. Due to the investors’ status as a former consultants and their dealings with development companies generally, we deem the investors sophisticated for the purposes of Section 4(2) of the Act.

          On August 31, 2003, we issued warrants to purchase 300,000 shares of common stock to Richardson & Patel, a law firm for services rendered in connection with a private placement at an exercise price of $0.50 per share. Of the total number issued, 150,000 warrants are immediately vested with the remaining warrants vesting on the first anniversary of the date of the agreement. We relied upon the exemption from registration as set forth in Section 4(2) of the Act for the issuance of these warrants. The law firm is an Accredited Investor as defined in the Securities Act who took the option 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 acquisition of the option.

The investor was permitted access to our management for the purpose of acquiring investment information and due to the investor’s status as Accredited, we deem the investor sophisticated for the purposes of Section 4(2) of the Act.

          On September 30, 2003, we issued 22,727 shares of our common stock to Gerald Grafe, a consultant, as compensation for providing services to Novint. Novint determined that the value of the services provided was approximately $15,000. We relied upon the exemption from registration as set forth in Section 4(2) of the Act for the issuance of these shares. Mr. Grafe who took his 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 acquisition of our shares. All certificates for our shares contain a restrictive legend. The investor was permitted access to our management for the purpose of acquiring investment information. Due to the investor’s status as a consultant and his dealings with development companies generally, we deem the investor sophisticated for the purposes of Section 4(2) of the Act.

          On September 30, 2003, we issued 37,879 shares of our common stock to Richardson & Patel, LLP, a law firm, as compensation for providing legal services to Novint. Novint determined that the value of the services provided was approximately $25,000. We relied upon the exemption from registration as set forth in Section 4(2) of the Act for the issuance of these shares. All of the investors were Accredited Investors as defined in the Securities Act who took their 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 purchase of our shares. All certificates for our shares contain a restrictive legend. The investor was permitted access to our management for the purpose of acquiring investment information and due to the investor’s status as Accredited, we deem the investor sophisticated for the purposes of Section 4(2) of the Act.

          On October 1, 2003, we issued an aggregate of 71,972 shares of our common stock to Scott Bach, Ed Barsis, Mike Cadigan and Allan Hisey, directors and consultants, as compensation for providing services to Novint. Novint determined that the value of the services provided was approximately $47,501. We relied upon the exemption from registration as set forth in Section 4(2) of the Act for the issuance of these shares. All of the service providers took their 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 acquisition of our shares. All certificates for our shares contain a restrictive legend. The investors were permitted access to our management for the purpose of acquiring investment information. Due to the investors’ status as directors and consultants and their dealings with development companies generally, we deem the investors sophisticated for the purposes of Section 4(2) of the Act.

          On October 9, 2003, as consideration for granting a one year repayment extension on the October 2002 $100,000 note, we issued an additional 50,000 shares of our common stock to the note holder. The recipient of the shares was Murray Kelly. We relied upon the exemption from registration as set forth in Section 4(2) of the Act for the issuance of these shares. The note holder who took his 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 acquisition of our shares. All certificates for our shares contain a restrictive legend.

          On November 15, 2003, we issued 100,000 shares of our common stock to Bob Kramer, a consultant, as compensation for providing services to Novint. Novint determined that the value of the services provided was approximately $66,000. We relied upon the exemption from registration as set forth in Section 4(2) of the Act for the issuance of these shares. Mr. Kramer took his 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 acquisition of our shares. All certificates for our shares contain a restrictive legend. The investor was permitted access to our management for the purpose of acquiring investment information. Due to the investor’s status as a consultant and his dealings with development companies generally, we deem the investor sophisticated for the purposes of Section 4(2) of the Act.

          In November 2003, we issued 500,000 warrants in connection with a loan at an exercise price of $0.50 per share. The recipient of the warrants was Hunter World Markets, Inc. The warrants vested immediately. We relied upon the exemption from registration as set forth in Section 4(2) of the Act for the issuance of these shares. The warrant holder was an Accredited Investors as defined in the Securities Act who took their 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 acquisition of the warrant. During 2003, we issued an aggregate of 115,008 shares of its common stock in connection with option exercises at $0.01 per share. We relied upon the exemption from registration as set forth in Section 4(2) of the Act for the issuance of these shares. All of the warrant holders

took their 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 purchase of our shares. All certificates for our shares contain a restrictive legend. The investor was permitted access to our management for the purpose of acquiring investment information and due to the investor’s status as Accredited, we deem the investor sophisticated for the purposes of Section 4(2) of the Act.

          In September 2003, we sold 378,788 shares of our unregistered restricted common stock to an individual accredited investor. The recipient of the shares was Jan Arnette. The per share sale price was $0.66 per share. This investor received a right to purchase another 378,788 shares of our unregistered restricted common stock at an exercise price of $0.66 per share which was exercised in January 2004. As a result, another 378,788 shares of our unregistered restricted common stock were issued pursuant to the exercise of such right. We relied upon the exemption from registration as set forth in Section 4(2) of the Act for the issuance of these shares. The investor took his 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 purchase of our shares. All certificates for our shares contain a restrictive legend. The investor was permitted access to our management for the purpose of acquiring investment information. Based upon written and oral representations of the investor, and the investor’s general dealings with development companies, we deem the investor sophisticated for the purposes of Section 4(2) of the Act.

          On February 19, 2004 we completed an initial closing of a financing transaction in which we sold 2,140,000 shares of our common stock to select institutional and individual Accredited Investors, in order to raise a total of $2,140,000. On May 5, 2004, we completed the final closing of this financing transaction in which we sold an additional 909,000 shares of our common stock to select institutional and individual accredited investors, in order to raise an additional $909,000. The per share offering price was $1.00 per share. The investors also received warrants to purchase an aggregate of 1,524,500 shares of common stock at an exercise price of $2.00 per share. The placement agent for this private placement received fees in the amount of $304,680. We relied upon the exemption from registration as set forth in Section 4(2) of the Act and Rule 506 of Regulation D promulgated under such Act for the issuance of these shares. The investors were permitted access to our management for the purpose of acquiring investment information and due to the investors’ status as Accredited, we deem the investors sophisticated for the purposes of Section 4(2) of the Act.

          In February, 2004, we issued options to purchase 1,205,000 shares of common stock to various employees with an exercise price of $0.66 per share and a 5-year annual vesting provision. The recipients of the options were Jonathon Miller, Walt Aviles and Nick Brown. During 2005, 83,333 of these options were cancelled due to Nick Brown no longer being employed by Novint. We relied upon the exemption from registration as set forth in Section 4(2) of the Act for the issuance of these options. The warrant holder is an Accredited Investor as defined in the Securities Act who took the warrant 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 acquisition of the warrant. The investor was permitted access to our management for the purpose of acquiring investment information. Due to the investors’ status as a consultants and their dealings with development companies generally, we deem the investors sophisticated for the purposes of Section 4(2) of the Act.

          In March, 2004, we issued a warrant to purchase 200,000 shares of our common stock to a consultant as compensation for providing services to Novint with an exercise price of $1.00 per share. The recipient of the warrant was Corporate Advisors Group. We relied upon the exemption from registration as set forth in Section 4(2) of the Act for the issuance of these options. The warrant holder is an Accredited Investor as defined in the Securities Act who took the warrant 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 acquisition of the warrant. The investor was permitted access to our management for the purpose of acquiring investment information. Due to the investors’ status as a consultants and their dealings with development companies generally, we deem the investors sophisticated for the purposes of Section 4(2) of the Act.

          In April 2004 we committed to issue 250,000 shares of common stock at $1.00 per share to a consultant for future services. The recipient of the shares was Jack Harrod. The consultant will receive stock as follows: 50,000 shares per quarter as long as the consultant is still providing services to Novint, up to a total of 250,000 shares, beginning April 1, 2004. As of December 31, 2005 all 250,000 shares had been issued. 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 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 June 2004, Novint granted 500,000 options at an exercise price of $0.66 per share, with a 5-year annual vesting provision, to purchase common stock to an employee. The recipient of the option was Tom 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 July 2004 we committed to issue 10,000 shares of common stock at $1.00 per share to an employee for future services. The recipient of the shares was Mark Benak. The shares have vested. 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 July 2004 we granted 50,000 options at an exercise price of $0.66 per share, with a 5-year annual vesting provision, to purchase common stock to an employee. The recipient of the options was Mark Benak. During 2005, 30,000 of these options were cancelled due to Mark Benak longer being employed by the Company. 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 August 2004 we granted 50,000 options at an exercise price of $0.66 per share, with a 5-year annual vesting provision, to purchase common stock to an employee. The recipient of the options was Annette Radcliffe. 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 October 2004 we issued 160,000 shares of common stock at $1.00 per share to consultants for services. The recipients of the shares were Dean Danielson and Neil Krull. 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 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 shareholders were permitted access to our management for the purpose of acquiring investment information. Due to the shareholders’ status as consultants and their dealings with development companies generally, we deem the shareholders sophisticated for the purposes of Section 4(2) of the Act.

          In November 2004 we granted 230,000 options at an exercise price of $.66 per share, with a 5-year annual vesting provision, to purchase common stock to employees. The recipients of the options were George Lancaster, Daryl Lee, and Marc Midura. During 2005, 45,000 of these options were cancelled due to George Lancaster no longer being employed by Novint. We relied upon the exemption from registration as set forth in Section 4(2) of the Act for the issuance of these options. 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 shareholders were permitted access to our management for the purpose of acquiring investment information. Due to the shareholders’ status as an employees and their dealings with development companies generally, we deem the shareholders sophisticated for the purposes of Section 4(2) of the Act.

          In December 2004, we granted 500,000 options to purchase shares of common stock at $.66 per share and a 5-year annual vesting provision to an employee. The recipient of the options was Antonia Chappell. 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 her dealings with development companies generally, we deem the shareholder sophisticated for the purposes of Section 4(2) of the Act.

          In January 2005, we granted 75,000 options to purchase common stock at $0.66 per share and a 5-year annual vesting provision to an employee and 10,000 options to purchase common stock at $0.66 per share and a 4-year annual vesting provision to an advisory board member for consulting services. The recipients of the options were Bill Anderson and Eric Hansen. We relied upon the exemption from registration as set forth in Section 4(2) of the Act for the issuance of these options. 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 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 2005, we granted 100,000 options to purchase common stock at $0.66 per share to an employee and a 4-year annual vesting provision. The recipients of the options were Jonathan Miller and Peter Thomas. We relied upon the exemption from registration as set forth in Section 4(2) of the Act for the issuance of these options. 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 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 2005, we issued a warrant to purchase 100,000 shares of our common stock to our legal counsel, Richardson & Patel, LLP as part of a fee agreement for providing legal services to Novint during 2004 with an exercise price of $1.00 per share. We relied upon the exemption from registration as set forth in Section 4(2) of the Act for the issuance of these options. The warrant holder is an Accredited Investor as defined in the Securities Act who took the warrant 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 acquisition of the warrant. The investor was permitted access to our management for the purpose of acquiring investment information. Due to the investors’ status as service providers and their dealings with development companies generally, we deem the investors sophisticated for the purposes of Section 4(2) of the Act.

          In June 2005, Novint issued 2,500 shares of common stock to Peter Thomas, a consultant for services performed. The stock was valued at $0.66 per share for total consideration of $1,650. An additional 2,500 shares of common stock were issued on March 1, 2006 and the company committed to issue an additional 2,500 shares each on September 1, 2006 and March 1, 2007. 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 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 shareholders were permitted access to our management for the purpose of acquiring investment information. Due to the shareholders’ status as consultants and their dealings with development companies generally, we deem the shareholders sophisticated for the purposes of Section 4(2) of the Act.

          In May 2005, we issued 117,400 shares of common stock to certain consultants in exchange for services rendered during the first quarter of 2005 and for services to be rendered. The recipients of the shares were Coleman Brand Worx, Gerald Grafe, Brad Carvey, Rob Shaw, Jan Easton Carrasco, Brenda Brown, Claire Bauder and Sandia National Laboratories. We relied upon the exemption from registration as set forth in Section 4(2) of the Act for the issuance of these options. 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 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 May 2005, we issued 32,400 shares of common stock to certain consultants in exchange for services rendered during the second quarter of 2005 and for services to be rendered. The recipients of the shares were Allan Hisey, Ed Barsis, Peter Mattern, Gerald Grafe, and Glyn 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 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 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 May 2005, we issued 10,000 shares of common stock to Mark Benak, an employee for services rendered during the second quarter of 2005. We relied upon the exemption from registration as set forth in Section 4(2) of the Act for the issuance of these options. 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 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 May 2005, we issued 250,000 shares of common stock to Force Dimension in connection with an amendment to our contract. We relied upon the exemption from registration as set forth in Section 4(2) of the Act for the issuance of these options. 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 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 May 2005, we granted 28,636 non-qualified options to purchase Company stock to certain related parties and consultants at an exercise price of $.66 per share for services rendered during the second quarter of 2005. The recipients of the options were Steven Maslow, Arline Pranitz and Lem Hunter. We relied upon the exemption from registration as set forth in Section 4(2) of the Act for the issuance of these options. 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 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 May 2005, we granted 25,000 options to purchase Company stock to Antonia Chappell, an employee, for services rendered during the second quarter of 2005. We relied upon the exemption from registration as set forth in Section 4(2) of the Act for the issuance of these options. 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 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.

          The Company issued 15,000 shares of common stock to Mark Betti, an advisory board member, for services rendered during the third quarter of 2005. We relied upon the exemption from registration as set forth in Section 4(2) of the Act for the issuance of these options. 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 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 August 2005, the Company issued 500 shares of common stock to Hector Reyes, a consultant for services rendered during the third quarter of 2005. We relied upon the exemption from registration as set forth in Section 4(2) of the Act for the issuance of these options. 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 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 6,000 shares of common stock to Ralph Anderson, a member of our audit committee. We relied upon the exemption from registration as set forth in Section 4(2) of the Act for the issuance of these options. 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 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 options. 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 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 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 options. 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 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 granted 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 options. 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 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 options. 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 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, Novint 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.

ITEM 6. MANAGEMENT’S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION

           Statements included in this management’s discussion and analysis of financial condition and results of operations, and in future filings by the company with the securities and exchange commission, in the company’s press releases and in oral statements made with the approval of an authorized executive officer which are not historical or current facts are “forward-looking statements” and are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. You are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The following important factors, among others, in some cases have affected and in the future could affect the company’s actual results and could cause the company’s actual financial performance to differ materially from that expressed in any forward-looking statement: (i) the extremely competitive conditions that currently exist in the market for companies similar to the company and (ii) lack or resources to maintain the company’s good standing status and requisite filings with the securities and exchange commission. The foregoing list should not be construed as exhaustive and the company disclaims any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. The following discussion should be read in conjunction with our financial statements and their explanatory notes included as part of this annual report.

OVERVIEW

          We were initially incorporated in the State of New Mexico as Novint Technologies, Inc. in April 1999. On February 26, 2002, we changed our state of incorporation to Delaware by merging into Novint Technologies, Inc., a Delaware corporation. We have no subsidiaries and operate our business under Novint Technologies, Inc. We are a haptics technology company (haptics refers to your sense of touch). We develop, market and sell applications and technologies that allow people to use their sense of touch to interact with computers.

          To date, we have derived the majority of our revenues developing professional applications for our customers. We have completed a number of contracts with companies such as Aramco, Lockheed Martin, Chrysler, Chevron, Sandia National Laboratories, and Woods Hole Oceanographic Institute.

          While we are continuing to expand on our professional applications for our customers, we are also currently preparing to leverage our 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 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 March 15, 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.

          SOP 97-2 was amended in December 1998 by SOP 98-9, Modification of SOP 97-2 Software Revenue Recognition with Respect to Certain Transactions. SOP 98-9 clarified what constitutes vendor specific objective evidence of fair value and introduced the concept of the “residual method” for allocating revenue to elements in a multiple element arrangement.

          Our revenue recognition policy is as follows:

          Project revenue consists of programming services provided to unrelated parties under fixed-price contracts. Revenues from fixed price programming contracts are recognized in accordance with 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.

          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 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. Novint’s costs associated with shipping inventory items to Novint’s customers are included in Novint’s Cost of Goods Sold amount. Novint 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 Novint’s product revenue. No provision for sales returns has been provided in these financial statements, as Novint 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 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.

          In accordance with EITF 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent, Novint recognizes its product sales on a gross basis. Novint is responsible for fulfillment, including the acceptability of the product ordered. Novint 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.

          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. Amortization is computed on the straight-line basis over the remaining life (five years) of our software platform.

          INTERNAL USE SOFTWARE — We have adopted Statement of Position (SOP) No. 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use, during 2001, which requires capitalization of certain costs incurred during the development of internal use software. On a quarterly basis, we perform a review of our software expenditures to determine if any should be capitalized.

          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 Company is in the process of determining what impact, if any, the adoption of the provisions of SFAS 154 will have on its financial condition or results of operations.

          In December 2004, the FASB issued SFAS 153, Exchange of Nonmonetary Assets, an amendment of APB Opinion No. 29 . This Statement amends APB 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. The Statement also revises the definition of an exchange and added additional scope exceptions. SFAS 153 is effective prospectively for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. Earlier application

is permitted. The Company is in the process of determining what impact, if any, the adoption of the provisions of SFAS 153 will have on its financial condition or results of operations.

          In December 2004, the Financial Accounting Standards Board issued SFAS 123 (revised 2004), Share-Based Payments (Statement 123(R)). This Statement requires that the costs of employee share-based payments be measured at fair value on the awards grant date using an option-pricing model and recognized in the financial statements over the requisite service period. SFAS 123(R) supersedes APB 25, Accounting for Stock Issued to Employees and its related interpretations, and eliminates the alternative to use APB 25’s intrinsic value method of accounting, which the Company is currently using. SFAS 123(R) allows for two alternative transition methods. The first method is the modified prospective application whereby compensation cost for the portion of awards for which the requisite service has not yet been rendered that are outstanding as of the adoption date will be recognized over the remaining service period. The compensation cost for that portion of awards will be based on the grant-date fair value of those awards as calculated for pro forma disclosures under SFAS 123, as originally issued. All new awards and awards that are modified, repurchased, or cancelled after the adoption date will be accounted for under the provisions of Statement 123(R). The second method is the modified retrospective application, which requires that the Company restate prior period financial statements. The modified retrospective application may be applied either to all prior periods or only to prior interim periods in the year of adoption of this Statement. Novint is currently determining which transition method it will adopt and is evaluating the impact Statement 123(R) will have on its financial position, results of operations, EPS and cash flows when the Statement is adopted. SFAS 123(R) is effective for Novint for the first interim or annual reporting period of the Company’s first fiscal year beginning on or after December 15, 2005.

          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, Applilcationa 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 Heding Activities. This FSP is effective upon initial adoption of SFAS 123(R).

PART III

           Marvin Maslow . Marvin Maslow is the first board member after Tom Anderson, and is the CEO of our principal investor, Manhattan Scientifics. Mr. Maslow has provided a strong guiding hand in our early growth. From June 1990 through September 1996, Mr. Maslow served as chief executive officer of Projectavision, Inc., a company he co-founded to develop and market video projection technology. Since November 1996, Mr. Maslow has served as chief executive officer and chairman of the board of Tamarack Storage Devices, Inc. From 1999 through 2002, Mr. Maslow served as a director of NMXS.com, Inc. For more than 20 years, Mr. Maslow has been President of Normandie Capital Corp., a private investment and consulting company. Mr. Maslow is credited with the starting up and financing of more than 20 enterprises during his career. Mr. Maslow received an A.A.S. degree from the Rochester Institute of Technology in 1957 and an honorable discharge from the U.S. Army Signal Corps in 1963. Mr. Maslow is the Chairman of the Board of Manhattan Scientifics, Inc., a publicly traded company which is also one of our shareholders.

           Dr. Edwin Barsis . Dr. Edwin H. Barsis is a partner in BMV Associates, a consulting firm he co-founded in 1995 that specializes in managerial consulting, technology assessment and business development. Clients include new business ventures, large and small commercial corporations and the US government. Previously, during a 26-year career at Sandia National Laboratories, Dr. Barsis held positions on the technical staff and in senior management where he was responsible for building and directing technical groups, managing the corporation’s R&D investments and business development. He graduated from Cornell University with B.S., M.S., and Ph.D. degrees in Engineering Physics; and subsequently served as a Captain in the US Army from 1967 to 1969.

Family Relationships

          There are no family relationships among the directors and executive officers.

Involvement in Certain Legal Proceedings

          None of the directors or executive officers has, during the past five years:

          (a) Had any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

          (b) Been convicted in a criminal proceeding or subject to a pending criminal proceeding;

          (c) Been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities, futures, commodities or banking activities; and

          (d) Been found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

Compliance with Section 16(a) of The Exchange Act

          Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors, and persons who own more than ten percent of our common stock to file reports of ownership and change in ownership with the Securities and Exchange Commission and the exchange on which the common stock is listed for trading. Executive officers, directors and more than ten percent stockholders are required by regulations promulgated under the Exchange Act to furnish us with copies of all Section 16(a) reports filed. To the Company’s knowledge, based solely on review of the copies of such reports furnished to the Company and written representation that no other reports were required, the Company’s officers, directors and greater than ten percent (10%) shareholders complied with all applicable Section 16(a) filing requirements since the date our Registration Statement on Form SB-2 was declared effective — February 6, 2006.

Audit Committee

          We currently have a separately designated Audit Committee. Our audit committee is comprised of Mr. Marvin Maslow, a director and Mr. Ralph Anderson, who is not a director, or employee, or consultant to the company. We believe Mr. Anderson is a “financial expert” as that term is defined by the SEC.

The purposes of the audit committee are:

- to oversee the quality and integrity of the financial statements and other financial information we provide to any governmental body or the public;
- to oversee the independent auditors’ qualifications and independence;
- to oversee the performance of our independent auditors;
- to oversee our systems of internal controls regarding finance,
- accounting, legal compliance and ethics that management and the Board of Directors has established or will establish in the future;
- to establish procedures for the receipt, retention and treatment of employees and executives;
- complaints regarding accounting, internal controls, and other auditing matters and for the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters;
- to provide an open avenue of communication among the independent auditors, financial and senior management, the internal auditing department, and the board of directors, always emphasizing that the independent auditors are accountable to the audit committee; and
- to perform such other duties as are directed by the board of directors.

Code of Ethics

          The Company adopted a Code of Business Conduct and Ethics as of March 31, 2006, which applies to all employees, including the Company’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.

common stock held by the named executive officers at December 31, 2005. During the year ended December 31, 2004, Walt Aviles exercised options for 20,000 shares at an exercise price of $0.01 per share.

LONG-TERM INCENTIVE PLAN AWARDS

          We do not currently have any long term incentive plans.

COMPENSATION OF DIRECTORS

          Directors do not generally receive cash compensation for their services as directors, but are to be reimbursed for expenses incurred in attending board meetings. There is no expressed cap for such expenses and Novint will reimburse all such reasonable expenses incurred by its directors. In 2003, Mr. Edwin Barsis, a current director, and Mr. Scott L. Bach, a former director of Novint, each received 15,152 shares of Novint’s common stock for services as directors of Novint.

EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS

          We have an employment agreement with our CEO, Tom Anderson. Under such agreement, he is entitled to an annual base salary of $150,000 per year and cash bonus to be determined by Novint, is subject to confidentiality provisions and is entitled to a severance of one year base salary if he is terminated by Novint without cause. This agreement does not provide provisions covering a change in control of Novint. The commencement date of this agreement is March, 2004.

          We also have an employment agreement with our CTO, Walter Aviles. Under such agreement, he was originally granted options to purchase 400,000 shares of Novint’s common stock, but options to purchase 200,000 shares were cancelled, he is currently entitled to an annual base salary of $155,000 per year and cash bonus to be determined by Novint, is subject to confidentiality provisions and is entitled to a severance of two months base salary if he is terminated by Novint without cause. This agreement does not provide provisions covering a change in control of Novint. The commencement date of this agreement is November 11, 2000.

employee. Mr. Anderson is Tom Anderson’s brother. Tom Anderson is our Chief Executive Officer. Based on the value of the common stock on the date of grant, the dollar value of the shares underlying the options was $75,000.

     In May 2005, we issued 5,000 shares of common stock to Ed Barsis, our Director, for consulting services. Based on the value of the common stock on the date of grant, the dollar value of the shares was $5,000.

     In August and September 2005, the company obtained a bridge loan from ten individual investors in the principal amount of $525,000. The loan will accrue interest at the rate of 12% per annum. The loan is secured by the personal guaranty agreement of our President and Chief Executive Officer, Mr. Tom Anderson, and is further secured by a pledge of up to 795,455 shares of common stock of the company owned by him. No payments are due on the loan until August 2006. The value of the pledged shares is equal to approximately $795,455 (based on a value of $1.00 per share), which adequately secures the obligations and any related costs for interests, fees or collections on default.

     In March 2006, Novint 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 Mr. Bill Anderson, an employee. Mr. Bill Anderson is Mr. Tom Anderson’s brother. Mr. Tom Anderson is our Chief Executive Officer. Based on the value of the common stock on the date of grant, the dollar value of the shares underlying the options was $250,000. In addition, Mr. Bill Anderson’s compensation was increased to its current level of $75,000.

All other exhibits are filed herewith.

		PAGE
CONSOLIDATED FINANCIAL STATEMENTS
Reports of Independent Registered Public Accounting Firms			F-2
Balance Sheet as of December 31, 2005			F-4
Statements of Operations for the years ended December 31, 2005 and 2004			F-6
Statements of Changes in Stockholders’ equity (deficit) for the years ended December 31, 2005 and 2004			F-7
Statements of Cash Flows for the years ended December 31, 2005 and 2004			F-8
Notes to financial statements			F-9

AJ. ROBBINS, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
216 SIXTEENTH STREET
SUITE 600
DENVER, COLORADO 80202

Accountants and Business Advisors

The accompanying notes are an integral part of this financial statement.

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

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

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

NOVINT TECHNOLOGIES, INC.

Fair Value of Financial Instruments

The Company’s financial instruments, including cash and cash equivalents, accounts receivable, accrued liabilities, accounts payable and notes payable are carried at historical cost, which approximates their fair value because of the short-term maturities or repayment terms of these instruments. Marketable equity securities are carried at fair value.

Advertising Costs

Advertising is expensed as incurred. The Company did not incur advertising expense in 2005 and 2004.

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 e-touch™ beginning in 2000. Amortization is computed on the straight-line basis over the remaining life (5 years) of the e-touch™ platform. As of December 31, 2005 and 2004, the Company’s capitalized software development costs, net of amortization, totaled zero . The Company has determined that research and development software related costs incurred during 2005 and 2004 are not capitalizable as the technological feasibility of such products has not yet been 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. The Company follows Statement of Position (SOP) No. 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use, which requires capitalization of certain costs incurred during the development of internal use software. Through December 31, 2005, capitalizable costs incurred have not been significant for any development projects. Accordingly, the Company has charged all costs to research and development expense in the periods incurred. Depreciation expense was $49,359 and $62,791 for the years ended December 31, 2005 and 2004, respectively.

Intangible Assets

Intangible assets, which consist of licensing agreements ($880,000) 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 years ended December 31, 2005

NOVINT TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

and 2004, the Company recognized amortization expense of approximately $74,167 and $92,000, respectively, related to intangible assets.

The Company follows the provisions of SFAS 142, Goodwill and Other Intangible Assets. SFAS 142 requires intangible assets to be tested for impairment in accordance with SFAS 121, Accounting for the Impairment of Long-Lived Assets and for Long- Lived Assets to Be Disposed Of, which has been superseded by SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The Company performs a periodic review of its identified intangible assets to determine if facts and circumstances exist which indicate that the useful life is shorter than originally estimated or that the carrying amount of assets may not be recoverable. If such facts and circumstances exist, The Company assesses the recoverability of identified intangible assets by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over the remaining lives against the respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. After an impairment loss is recognized, the adjusted carrying amount shall be its new accounting basis. No impairment loss was recorded in 2005 or 2004. Annual amortization of intangible assets remaining at December 31, 2005, are as follows:

Year Ended December 31,
2006			74,167
2007			71,666
2008			2,500
2009			2,500
2010 and after			16,358
Total		$	167,191

Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of

In accordance with SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets, The Company reviews its 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. No impairment loss was recorded in 2005 or 2004.

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.

NOVINT TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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.

NOVINT TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income Taxes

In accordance with SFAS 109, Accounting for Income Taxes, the Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

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 December 31, 2005 and 2004, the Company had a total of 10,251,338 and 9,891,338, respectively, in potentially dilutive securities.

Stock Option Plans

The Company applies the intrinsic value-based method of accounting prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, (APB 25) and related interpretations in accounting for the recognition and measurement of its fixed-plan stock options. As such, unearned compensation is recorded on the date of grant if the current market price of the underlying stock exceeds the exercise price and is amortized over the service period. For the years ended December 31, 2005 and 2004, amortization of unearned compensation approximates $196,000 and $93,000, respectively.

SFAS 123, Accounting for Stock-Based Compensation , established accounting and disclosure requirements using a fair value-based method of accounting for stock-based employee compensation plans. As permitted by SFAS 123, the Company has elected to continue to apply the intrinsic value-based method of accounting described above and has adopted the disclosure-only requirements of SFAS l23. In accordance with the provisions of SFAS 148, Accounting for Stock-Based Compensation—Transition and Disclosure , the Company has disclosed the effect on net income and earnings per share if the fair value-based method had been applied to all outstanding and unvested awards in each period. The following table illustrates the effect on net loss to common stockholders if the Company had applied the fair value-recognition provisions of SFAS 123 to all stock-based employee compensation for the years ended December 31, 2005 and 2004. Net loss per share has been calculated after the accretion of the preferred stock:

NOVINT TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

In calculating the fair value of options for the above pro forma disclosure, the following assumptions were used for stock options issued during the years of 2005 and 2004: 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 $0.50 to $0.66 per share.

Research and Development

Research and development costs are expensed as incurred and amounted to $1,341,710 and $737,873 for the years ended December 31, 2005 and 2004, 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.

Recent Accounting Pronouncements

The Company has adopted all accounting pronouncements issued before December 31, 2005, 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 Company is in the process of determining what impact, if any, the adoption of the provisions of SFAS 154 will have on its financial condition or results of operations.

In December 2004, the FASB issued SFAS 153, Exchange of Nonmonetary Assets, an amendment of APB Opinion No. 29 . This Statement amends APB 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. The Statement also revises the definition of an exchange and added additional scope exceptions. SFAS 153 is effective prospectively for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. Earlier application is permitted. The Company is in the process of determining what impact, if any, the adoption of the provisions of SFAS 153 will have on its financial condition or results of operations.

In December 2004, the FASB issued SFAS 123 (revised 2004), Share-Based Payments (SFAS 123(R)). This Statement requires that the costs of employee share-based payments be measured at fair value on the award’s grant date using an option-pricing model and recognized in the financial statements over the requisite service period. SFAS 123(R) supersedes APB 25, Accounting for Stock Issued to Employees , and its related interpretations, and eliminates the alternative to use APB 25’s intrinsic value-method of accounting, which the Company currently is using. SFAS 123(R) allows for two alternative transition methods. The first method is the modified prospective application whereby compensation cost for the portion of awards for which the requisite service has not yet been rendered that are outstanding as of the adoption date will be recognized over the remaining service period. The compensation cost for that portion of awards will be based on the grant-date fair value of those awards as calculated for pro forma disclosures under SFAS 123, as originally issued. All new awards and awards that are modified, repurchased or cancelled after the adoption date will be accounted for under the provisions of SFAS 123(R). The second method is the modified retrospective application, which requires that the Company restate prior-period financial statements. The modified retrospective application may be applied either to all prior periods or

NOVINT TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

only to prior interim periods in the year of adoption of this Statement. The Company currently is determining which transition method it will adopt and is evaluating the impact SFAS 123(R) will have on its financial position, results of operations, EPS and cash flows when the Statement is adopted. SFAS 123(R) is effective for the Company for the first interim or annual reporting period of the Company’s first fiscal year that begins on or after December 15, 2005.

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). The Company is in the process of determining what impact, if any, the adoption of the provisions of FSP FAS 123(R)-1 will have on its financial condition or results of operations.

Reclassifications

Certain reclassifications have been made to the 2004 balances in order to conform to the 2005 presentation.

NOTE 3 — MARKETABLE EQUITY SECURITIES

At December 31, 2005 and 2004, the Company held 8,284 shares of Manhattan Scientifics, Inc. (Manhattan) common stock. There were no services paid with Manhattan marketable equity securities during the year ended December 31, 2005.

As of December 31, 2005 and 2004, the marketable equity securities had an original cost of $5,102, gross unrealized losses of $4,605 and a fair value of $497. There have been no substantial changes in the fair value of such securities during 2005. The Company’s marketable equity securities are carried at fair value and are included in prepaid and other current assets in the accompanying financial statements.

There were no sales of marketable securities during the years ended December 31, 2005 or 2004.

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

NOVINT TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004

NOTE 6 — NOTES PAYABLE (Continued)

are also secured by the personal guaranty of the Company’s President and CEO and by a pledge of common stock of the Company owned by him. Subsequent to December 31, 2005, $525,000 of the $725,000 in notes payable outstanding were paid in full with the issuance of 1,250,002 shares of the Company’s common stock.

NOTE 7 — 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. If the promissory note is not paid in full in cash at the promissory note’s maturity date, the Company will convert the unpaid balance of the note into shares of the Company’s common stock at 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.

Deferred income taxes reflect the tax consequences on future years for differences between the tax basis of assets and liabilities and their basis for financial reporting purposes. Temporary differences giving rise to the current deferred tax asset and liability primarily relate to accrual-to-cash adjustments as the Company follows the accrual basis of accounting for financial reporting but the cash basis for tax purposes. The other major temporary timing differences giving rise to the non-current deferred tax asset are net operating loss carryforwards. The temporary differences giving rise to the non-current deferred tax liability consist of the software costs that have been capitalized for financial reporting purposes but are deductible for tax reporting purposes.

Deferred income taxes reflect the tax consequences on future years of differences between the tax basis of assets and liabilities and their basis for financial reporting purposes. Deferred tax assets and liabilities are as follows:

NOTE 10 — 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. As of December 31, 2005 the Company was currently undergoing IPO procedures, these warrants are not deemed outstanding as of December 31, 2005. 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 e-TouchTM (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

NOVINT TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004

NOTE 10 — COMMITMENTS AND CONTINGENCIES (Continued)

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. As of December 31, 2005 the Company had accrued $30,000 in royalty fees owed to Sandia under the royalty agreement.

The Sandia agreement also allows for sublicensure of the technology to others, which was provided to Manhattan Scientifics, Inc. (Manhattan), one of the Company’s shareholders, under an agreement dated June 24, 2000. This agreement was superseded by the Final License and Royalty Agreement dated May 16, 2001, through which, Manhattan acquired all of the shares of Teneo. Manhattan then entered into an agreement with the Company concerning Teneo’s intellectual property. The agreement between the Company and Manhattan, also dated May 16, 2001, grants an exclusive right to all of the intellectual property previously held by Teneo and grants Manhattan an exclusive right to all Novint intellectual property within a particular Field of Use.

Under this agreement, Novint is entitled to a 5% royalty on net revenues derived from such sublicense. Any previous agreements granting the Company’s intellectual property to Manhattan were superseded.

From the date of the agreement through December 31, 2005, the Company had not earned or received royalties associated with this 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 December 31, 2005, the Company had made payments to Lunar Design for incurred costs of approximately $424,000 under this agreement. At December 31, 2005, 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 $481,303.

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

NOVINT TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004

NOTE 10 — COMMITMENTS AND CONTINGENCIES (Continued)

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 are being amortized to interest expense through January 5, 2006, the maturity date of this obligation to Force Dimension.

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.

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 is recorded as accrued research and development liabilities on the accompanying balance sheet 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.

The Company has an employment agreement with the CEO. Under such agreement, he is entitled to an annual base salary of $150,000 per year and cash bonus to be determined by the Company, is subject to confidentiality provisions and is entitled to a severance of one year base salary if he is terminated by the Company without cause.

The Company also has an employment agreement with the CTO. Under such agreement, he was originally granted options to purchase 400,000 shares of the Company’s common stock, but options to purchase 200,000 shares were cancelled. He is entitled to an annual base salary of $155,000 per year and cash bonus to be determined by the Company, is subject to confidentiality provisions and is entitled to a severance of two months base salary if he is terminated by the Company without cause.

NOTE 11 — STOCKHOLDERS’ EQUITY

F-21

NOVINT TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005 AND 2004

NOTE 11 — STOCKHOLDERS’ EQUITY (Continued)

If there is no IPO, the Company shall repurchase the number of shares of preferred stock as the holders thereof may from time to time request but in any 12-month period, not more than 10% of the largest number of shares of preferred stock that have ever been outstanding at an amount per share equal to the redemption price. The redemption price is the greater of (a) the subscription price, and (b) that portion of the fair market value of the Company, as determined in good faith by the Board of Directors, corresponding to the number of shares of common stock to which the shares of preferred stock to be redeemed would convert according to the conversion provisions.

Accordingly, the Company is accreting the fair value of the common stock conversion to retained earnings over the 10-year life of the preferred stock. If an IPO occurs, the Company will recognize an additional charge to retained earnings of the converted shares at the fair value as compared to the IPO price. The fair value of the preferred stock as of December 31, 2005 is $447,300 of which $170,974 is unaccreted. The accreted portion of the fair value of the preferred stock of $276,326 is recorded on the accompanying balance sheet as of December 31, 2005. The fair value of the stock at December 31, 2005 was estimated to be $1.00 per share.

Upon conversion, the preferred stock will be reclassified to common stock outstanding. The holders of the issued and outstanding shares of preferred stock shall have no voting rights. In all respects regarding dividends or distributions of any kind to holders of common stock, holders of preferred stock shall have the rights, privileges and share in all respects as if such holders had converted the preferred stock to the number of shares of common stock corresponding to their conversion provisions. In the event of any voluntary or involuntary liquidation, dissolution or other winding up of the Company, the holders of the preferred stock shall be entitled to be paid the subscription price of all outstanding shares of preferred stock, in cash or in property or both, at the election of the Board of Directors, taken at its fair value as determined by the Board of Directors prior to any distribution to the holders of common stock.

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.

Common Stock

As of May 2005, the Company was authorized to issue 25,000 shares of common stock or grants of non-statutory stock options (at the election of the grantee) to certain consultants and advisory board members for future services at an exercise price of $.66 per share. In addition, the Company was authorized to issue 152,450 additional shares of its stock to its private placement memorandum investors. As of December 31, 2005, these shares had not been issued by the Company, and no financial impact has been recorded on the accompanying balance sheets.

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.