United States SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

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

For the quarterly period ended: March 31, 2007

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

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

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

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

APPLICABLE ONLY TO CORPORATE ISSUERS:

State the number of shares outstanding of each of the issuer’s classes of common equity as of the latest practicable date: As of May 11, 2007 there were 31,159,383 shares of common stock outstanding and no other outstanding classes of a common equity security.

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

 

 

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
Item 1. Financial Statements			2
Item 2. Management’s Discussion and Analysis or Plan of Operation			14
Item 3. Controls and Procedures			18
PART II — OTHER INFORMATION
Item 1. Legal Proceedings			18
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			18
Item 3. Defaults Upon Senior Securities			19
Item 4. Submission of Matters to a Vote of Security Holders			19
Item 5. Other Information			20
Item 6. Exhibits			20
SIGNATURES			25
Exhibit 10.48
Exhibit 10.49
Exhibit 10.50
Exhibit 31
Exhibit 32

PART 1 — FINANCIAL INFORMATION

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.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Software Development Costs

The Company accounts for its software development costs in accordance with Statement of Financial Accounting Standards (SFAS) Number 86, Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed. This statement requires that, once technological feasibility of a developing product has been established, all subsequent costs incurred in developing that product to a commercially acceptable level be capitalized and amortized ratably over the estimated life of the product, which is generally 5 years. The Company has capitalized software development costs in connection with its haptics technology beginning in 2005. Amortization is computed on the straight-line basis over the estimated life (5 years) of the haptics technology. As of March 31, 2007, the Company’s capitalized software development costs totaled $302,773 (net of $103,270 of accumulated amortization). The estimated annual amortization expense related to the capitalized software development cost is approximately $56,000 per year. Amortization expense for the three months ended March 31, 2007 and 2006 totaled $15,813 and $0.

The Company follows Statement of Position (SOP) No. 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use, which requires capitalization of certain costs incurred during the development of internal use software. Through March 31, 2007, 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.

Property and Equipment

Property and equipment are stated at cost. Depreciation on property and equipment is calculated on a straight-line depreciation method over the estimated useful lives of the assets, which range from 3 to 5 years for software and computer equipment, and 5 years for office equipment. Repairs and maintenance costs are expensed as incurred. Depreciation expense was $6,416 and $6,155 for the three months ended March 31, 2007 and 2006, respectively.

Intangible Assets

Intangible assets consist of licensing agreements $260,001 and patents $10,734, and 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 three months ended March 31, 2007 and 2006, the Company recognized amortization expense of approximately $18,959 and $18,542, respectively, related to intangible assets.

Annual amortization of intangible assets remaining at March 31, 2007, is as follows:

Year Ended December 31,
2007			55,209
2008			5,836
2009			5,836
2010			3,335
2011 and after			18,584
Total		$	88,790

Revenue and Cost Recognition

The Company recognizes revenue from the sale of software products under the provisions of SOP 97-2, Software Revenue Recognition, as amended by SOP 98-4 and SOP 98-9. SOP 97-2 generally requires that revenue recognized from software arrangements be allocated to each element of the arrangement based on the relative vendor specific objective evidence of fair values of the elements, such as software products, upgrades, enhancements, post contract customer support, installation or training. Under SOP 97-2, if the determination of vendor specific objective evidence of fair value for each element of the arrangement does not exist, all revenue from the arrangement is deferred until such time that evidence does exist or until all elements of the arrangement are delivered.

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

The Company’s revenue recognition policy is as follows:

Project revenue consists of programming services provided to unrelated parties under fixed-price contracts. Revenues from fixed price programming contracts are recognized in accordance with SOP 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts, and Accounting Research Bulletin (ARB) 45, Long-Term Construction-Type Contracts, using the percentage-of-completion method, measured by the percentage of costs incurred to date compared with the total estimated costs for each contract. The Company accounts for these measurements in the accompanying balance sheets under costs and estimated earnings in excess of billings on contracts and billings in excess of costs and estimated earnings on contracts. Provisions for estimated losses on uncompleted contracts are made and recorded in the period in which the loss is identified.

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

Emerging Issues Task Force (EITF) 00-10, Accounting for Shipping and Handling Fees and Costs, require amounts billed to a customer in a sales transaction related to shipping and handling, if any, to be classified and accounted for as revenues earned for the goods provided whereas shipping and handling costs incurred by a company are required to be classified as cost of sales. The Company’s costs associated with shipping product items to the Company’s customers are included in the Company’s Cost of Goods Sold. The Company does not charge a separate or additional fee for shipment to their customers, rather this fee is included in the price and, therefore, part of the Company’s product revenue. No provision for sales returns has been provided in these financial statements as the Company has never had a sales return.

EITF 01-14, Income Statement Characterization of Reimbursements Received for “Out-of-Pocket” Expenses Incurred, requires reimbursements received for out-of-pocket expenses incurred while providing services to be characterized in the statements of operations as revenue. The Company’s out-of-pocket expenses incurred in connection with their project revenues are recognized in revenues based on a computed overhead rate that is included in their project labor costs to derive a project price.

In accordance with EITF 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent, the Company recognizes its product sales on a gross basis. The Company is responsible for fulfillment, including the acceptability of the product ordered. The Company has risks and rewards of ownership such as the risk of loss for collection, delivery or returns. Title passes to the customer upon receipt of the product by the customer. In accordance with the Company’s agreement with its customer, further obligation is limited to the terms defined in its warranty.

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

Deferred Revenue As of March 31, 2007, the Company recorded deferred revenue totaling $31,507 related to pre-sale orders on the Falcon product, a gaming haptics hardware device, and related gaming software. The Company will record these pre-sale orders as revenue upon shipment of such products which is anticipated to occur during the second quarter of 2007.

Loss per Common Share

Statement of Financial Accounting Standards No. 128 , Earnings Per Share , (SFAS 128) provides for the calculation of “Basic” and “Diluted” earnings per share. Basic earnings per share includes no dilution and is computed by dividing net loss available to common shareholders by the weighted average number of common shares outstanding for the period. All potentially dilutive securities have been excluded from the computations since they would be antidilutive. However, these dilutive securities could potentially dilute earnings per share in the future. As of March 31, 2007 and 2006, the Company had a total of 26,245,724 and 10,251,338 in potentially dilutive securities, respectively.

Stock Option Plans

The Company adopted SFAS No. 123 (Revised 2004), Share Based Payment (“SFAS No. 123R”), under the modified-prospective transition method on January 1, 2006. SFAS No. 123R requires companies to measure and recognize the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value. Share-based compensation recognized under the modified-prospective transition method of SFAS No. 123R includes share-based compensation based on the grant-date fair value determined in accordance with the original provisions of SFAS No. 123, Accounting for Stock-Based Compensation, for all share-based payments granted prior to and not yet vested as of January 1, 2006 and share-based compensation based on the grant-date fair-value determined in accordance with SFAS No. 123R for all share-based payments granted after January 1, 2006. SFAS No. 123R eliminates the ability to account for the award of these instruments under the intrinsic value method proscribed by Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and allowed under the original provisions of SFAS No. 123.

The Company recognized $393,113 and $88,251 in share-based compensation expense for the three months ended March 31, 2007 and 2006, respectively. The fair value of the stock options was estimated using the Black-Scholes option pricing model. In calculating the fair value of options for stock based compensation for the three months ended March31, 2007 and 2006, the following assumptions were used: closing price of the common stock at the date of grant, risk-free rates ranged from 5.15% to 5.25%, volatility of the options ranged from 73% to 151%, estimated lives of 3 to 10 years and exercise prices ranged from $0.66 to $1.20 per share.

Research and Development

Research and development costs are expensed as incurred and amounted to $235,570 and $89,840 for the three months ended March 31, 2007 and 2006, respectively.

Recent Accounting Pronouncements

The Company has adopted all accounting pronouncements issued before March 31, 2007, which are applicable to the Company.

In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109” (FIN 48), which clarifies the accounting for uncertainty in tax positions. This Interpretation requires that we recognize in our financial statements the benefit of a tax position if that position is more likely than not of being sustained on audit, based on the technical merits of the position. The provisions of FIN 48 become effective as of the beginning of the 2007 fiscal year, with the cumulative effect of the change in accounting principle recorded as an adjustment to opening retained earnings. The adoption of the provisions of FIN 48 did not have an impact on its financial condition or results of operations.

In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (SAB 108), which addresses how to quantify the effect of financial statement errors. The provisions of SAB 108 become effective as of the end of its 2007 fiscal year. The adoption of the provisions of SAB 108 did not have an impact on its financial condition or results of operations.

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

NOTE 5 — CONVERTIBLE NOTES PAYABLE

During 2005, the Company executed convertible promissory notes in the amount of $358,081 to Lunar Design for the costs incurred during 2005 associated with contracted research and development efforts. The promissory notes were non-interest bearing, past their maturity dates (maturity dates varied throughout 2006) and were due on demand. If the promissory notes were not paid in full in cash at the promissory notes’ maturity date, the Company was to 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. Subsequent to the maturity dates, the Company negotiated with Lunar regarding conversion terms and during the quarter ended March 31, 2007, the Company converted the entire remaining balance totaling $358,081 of the promissory note balance into 232,627 shares of common stock and agreed to issue an additional 77,313 shares valued at $81,178 to cover a portion of $141,532 as settlement , which has been accrued for and recorded as interest expense during the three months ended March 31, 2007.

NOTE 6 — 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.

NOTE 7 — STOCKHOLDERS’ EQUITY

On February 14, 2007, the Company approved an increase (subject to stockholder approval) in the authorized shares of common stock from 50,000,000 shares to 150,000,000 shares and to cancel the 4,000 authorized Series A Preferred Stock.

Conditionally Redeemable, Convertible Preferred Stock

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

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

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

Sale of Common Stock and Warrant

During January 2007, the Company sold 500,000 shares of common stock and warrants for 500,000 shares of common stock to 8 investors for a total of $500,000. The warrants have an exercise price of $1.00 per share and life of five years.

Unit Subscription Agreement

On March 5, 2007, the Company entered into a Unit Subscription Agreement (the “Agreement”) with 42 accredited investors (the “Purchasers”) pursuant to which the Company issued and sold $9,000,000 of Units, at a price of one dollar per Unit. Each Unit consists of one share of common stock, , and one five-year warrant to purchase one share of common stock at an exercise price of $1.50. Accordingly, an aggregate of 9,000,000 shares of its common stock, and warrants to purchase 9,000,000 shares of common stock were issued (the “Financing”). The Financing closed on March 5, 2007. Under the terms of the Unit Subscription Agreement the Company may sell an additional 1,000,000 Units for $1,000,000 to a strategic investor, of which the Company closed on the sale of 580,000 units for $580,000 on May 11, 2007 and closed the Unit Subscription Agreement on any further sales. Gross proceeds from the Financing to the Company were $9,000,000, of which $320,010 was paid to certain individuals who served as placement agents for the transaction and approximately $50,000 was paid to counsel for the Purchasers in connection with the transaction. In addition, the Company had netted a previously capitalized deferred offering cost totaling $54,354 towards the gross proceeds from the Financing. Mr. Tom Anderson, the Company’s Chief Executive Officer, invested $25,000 in the Financing.

As part of the terms of the Agreement, the Company entered into an Investor Rights Agreement among the Purchasers pursuant to which the Company has agreed to file a registration statement to register for resale the shares of common stock sold in the Financing, including the shares of common stock underlying the warrants, within 55 days following the closing of the Financing. Subject to certain exceptions, in the event the registration statement is not filed within such 55 day period or does not become effective within certain time periods set forth in the Investor Rights Agreement, the Company would be required to pay each purchaser in the Financing an amount in cash equal to 0.0333% of the sum of (i) the purchase amount paid by the Purchaser and (ii) the amount paid upon exercise of the warrants for each day the filing or effectiveness of the registration statement is delayed and, pursuant to the terms of the warrants, the Purchasers would be entitled to exercise their warrants pursuant to a cashless exercise formula. In addition, the Company has agreed not to grant any registration rights that are senior to the registration rights of the Purchasers for a period of two years from the closing date without the prior written consent of a majority of the Purchasers. The filing timeline to file a registration statement had been extended to May 30, 2007 which the Company believes it will be able to file the registration statement timely and become effective within the time prescribed in the Investors Rights Agreement and accordingly no accrual is considered necessary with regards to any potential penalties associated with a delayed filing and effectiveness. The Company has considered the provisions of FSP 00-19-1 in its assessment of the penalty provisions and accrual.

NOTE 8 — RELATED PARTIES

On February 18, 2004, the Company granted to a significant shareholder for future services 125,000 options to purchase common stock at an exercise price of $0.66 per share. The options have a 5-year annual vesting provision. Options granted to consultants are valued each reporting period to determine the amount to be recorded as consultant expense in the respective period. As the options vest, they will be valued one last time on the vesting date and an adjustment will be recorded for the difference between the value already recorded and the current value on date of vesting. At March 31, 2007, the Company calculated the value of the options using the Black-Scholes model based on the following assumptions: a risk-free rate of 5.15%, volatility of 151%, estimated life of 10 years and a fair market value of $1.38 per share. At March 31, 2004, the Company calculated the initial value of the options using the Black-Scholes model based on the following assumptions: a risk-free rate of 4.05%, volatility of 91%, estimated life of 10 years and a fair market value of $1.00 per share. The vesting schedule is prorated over the reporting period, and $13,809 and $3,413, respectively, was recorded as consultant expense during the three months ended March 31, 2007 and 2006.

In March 2004, Normandie New Mexico Corporation, which is owned by the Chief Executive Officer (CEO) of Manhattan Scientific (a significant shareholder) who is also a member of the Company’s Board of Directors, entered into an agreement with the Company to provide consulting services in relation to business development and marketing support. Fees per the agreement are $6,250 per month. For the three months ended March 31, 2007 and 2006, the Company had paid $-0- and $-0-, respectively, for these services. As of March 31, 2007, the Company owed $90,625to Normandie New Mexico under the agreement.

On June 10, 2004, the Company granted 250,000 options to purchase common stock to one of the member of the Company’s Board of Directors for future consulting services at an exercise price of $0.66 per share. The options have a 5-year annual vesting provision. At June 30, 2004, the Company calculated the initial value of these options using the Black-Scholes model based on the following assumptions: a risk-free rate of 4.81%, volatility of 100%, estimated life of 10 years and a fair market value of $1.00 per share. At March 31, 2007, the Company calculated the value of the options using the Black-Scholes model based on the following assumptions: a risk-free rate of 5.15%, volatility of 151%, estimated life of 10 years and a fair market value of $1.38 per share. The vesting schedule is prorated over the reporting period, and approximately $26,000 and $8,000, respectively, was recorded as consultant expense during the three months ended March 31, 2007 and 2006.

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

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 of 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.

I. 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, The Falk Group and Woods Hole Oceanographic Institute.

Although we continue our operations in professional applications for our customers, we will begin to focus more of our attention in leveraging 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. Our haptic technology and related hardware for consumers will become the focus of our operations which we will devote majority of our resources to further developing, seeking new business relationships in the video game software developers and hardware manufacturers. We believe our haptic technology will be ready to market to consumers in latter part of the 2 ^nd quarter of 2007 possibly generating revenues in the 2nd quarter of 2007.

II. CRITICAL ACCOUNTING POLICIES AND ESTIMATES

High-quality financial statements require rigorous application of accounting policies. Our policies are discussed in our financial statements for the quarter ended March 31, 2007, 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 2007. However, we are evaluating how improvements in processes and other changes in haptics technology and our emerging video games business may impact revenue recognition policies in the future.

REVENUE AND COST RECOGNITION — We recognize revenue from the sale of software products under the provisions of SOP 97-2, Software Revenue Recognition, as amended by SOP 98-4 and SOP 98-9. SOP 97-2 generally requires that revenue recognized from software arrangements be allocated to each element of the arrangement based on the relative vendor specific objective evidence of fair values of the elements, such as software products, upgrades, enhancements, post contract customer support, installation, or training. Under SOP 97-2, if the determination of vendor specific objective evidence of fair value for each element of the arrangement does not exist, all revenue from the arrangement is deferred until such time that evidence does exist or until all elements of the arrangement are delivered.

Our revenue recognition policy is as follows:

Project revenue consists of programming services provided to unrelated parties under fixed-price contracts. Revenues from fixed price programming contracts are recognized in accordance with Statement of Position (SOP) 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts, and Accounting Research Bulletin (ARB) 45, Long-Term Construction-Type Contracts, using the percentage-of-completion method, measured by the percentage of costs incurred to date compared with the total estimated costs for each contract. Novint accounts for these measurements on the balance sheet under costs and estimated earnings in excess of billings on contracts and billings in excess of costs and estimated earnings on contracts. Provisions for estimated losses on uncompleted contracts are made and recorded in the period in which the loss is identified.

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.

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.

STOCK BASED COMPENSATION — We account for stock based compensation in accordance with SFAS 123(R), Share-Based Payment which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors, including employee stock options and employee stock purchases, related to a Employee Stock Purchase Plan based on the estimated fair values. We have used stock option awards in the past and continue to use them as a means of rewarding our employees and directors for their continued commitment and efforts in helping us execute our overall business plans.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2007 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2006

REVENUES. During the three months ended March 31, 2007, we had revenues of $128,731 as compared to revenues of $38,781 during the three months ended March 31, 2006, a increase of approximately 232%. During the three months ended March 31, 2007, our revenues were derived from the development of professional applications for customers. In 2006, we redirected much of our attention in the development and completion of our haptics technology and hardware platforms for consumers, however, we still generated revenues during both periods from developing professional applications, with more contracts occurring in 2007 than in 2006. We will still continue to provide development of professional applications in future years but not at the level as prior years since we believe our future growth will be centered around our haptics technology and hardware platform for consumers.

COST OF GOODS SOLD AND GROSS PROFIT (LOSS). Cost of Goods Sold, which consists of materials purchased for resale to customers and the direct labor incurred for delivering on projects, were $107,481 for the three months ended March 31, 2007, compared to $25,679 for the three months ended March 31, 2006. Our average gross profit percentage on contract activity was approximately 17% for the three months ended March 31, 2007, compared to 51% for the three months ended March 31, 2006. The decrease in gross profit percentage resulted as the contracts in 2007 required contracted labor to complete the project, resulting in a lower margin.

RESEARCH AND DEVELOPMENT EXPENSES Research and development totaled $235,570 for the three months ended March 31, 2007 compared to $89,840 for the three months ended March 31, 2006, an increase of $145,730 or 162%. Our research and development for 2007 increased as development was completed for the various software applications of our haptics technology.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses totaled $1,551,290 for the three months ended March 31, 2007, compared to $469,027 for the three months ended March 31, 2006 , an increase of $1,082,263 or 231%. The increase in general and administrative expenses compared to the prior year was primarily related to the activity to prepare for the launch of haptic technology sales. Business and professional fees increased approximately $831,000 for business development consulting during 2007. Payroll and other overhead expenses increase approximately $240,000 as we prepared to bring our haptic technology out to market during latter part of the 2 ^nd quarter of 2007.

SALES AND MARKETING EXPENSE Sales and marketing expense totaled $93,352 for the three months ended March 31, 2007 compared to $26,348 for the three months ended March 31, 2006, a increase of $67,004 or 254%. The increase was primarily contributed trade show expenses and professional fees for a public relations firm. We anticipated such expenses to increase during 2007 as we bring our haptic technology out to market during latter part of the 2 ^nd quarter of 2007.

LOSS FROM OPERATIONS: We had a Loss from Operations of $1,900,150 for the three months ended March 31, 2007, compared to a Loss from Operations of $596,810 for the three months ended March 31, 2006. Our operating losses have increased as a result of the increase in our operating expenses as described above.

NET LOSS. We had a net loss of $2,016,199, or $0.09 per share, for the three months ended March 31, 2007, compared to $800,711, or $0.04 per share, for the three months ended March 31, 2006. Our net losses increased as a result of the increase in our operating expenses as described above. Additionally, our interest expense increased $110,757, but this was offset by an increase in interest income of $27,635.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2007, the Company, the Company had total current assets of $8,913,786 and total current liabilities of $1,038,631, resulting in a working capital surplus of $7,875,155. As of March 31, 2007, the Company had cash totaling $8,368,921. Our cash flows to operating activities for the three months ended March 31, 2007 was $1,058,534. Our cash flows to investing activities for the three months ended March 31, 2007 was $15,639. Our cash flows from financing activities for the three months ended March 31, 2007 was $9,187,626. Overall, the Company’s cash flows for the three months ended March 31, 2007, netted a surplus of $8,113,453. During the three months ended March 31, 2007, the Company raised approximately $9,663,000 from the sale of shares of common stock with warrants through an equity agreement and exercise of stock purchase warrants. The equity agreement allows for the sale of an additional $1,000,000 common stock and warrants to a strategic investor, which the Company closed on the sale of 580,000 units for $580,000 on May 11, 2007. This recent equity raised should allow the Company to further develop its haptics technology, and seek and develop strategic partnerships with game publishers and hardware manufacturers that will utilize the Company’s haptics technology. The Company believes that it has sufficient capital and existing equity financing arrangements, as result of the equity raise, to sustain its operations beyond twelve months and execute its current business plans with respect to the haptics technology.

In January 2007, we issued 500,000 shares of common stock at a price per share of $1.00, together with Common Stock Purchase Warrants to purchase 500,000 shares of common stock at an exercise price of $1.50 per share, exercisable until February 2012. The eight recipients of the common stock and warrants were accredited investors within the meaning of Regulation D of the Securities Act. We relied upon the exemption from registration as set forth in Section 4(2) of the Securities Act for the issuance of these securities. The holders took the securities for investment purposes without a view to distribution and had access to information concerning Novint and our business prospects, as required by the Securities Act. In addition, there was no general solicitation or advertising for the issuance of the securities. The holders were permitted access to our management for the purpose of acquiring investment information. Due to the holders’ status as accredited investors and their dealings with development companies generally, we deem the holders sophisticated for the purposes of Section 4(2) of the Securities Act.

In February 2007, we issued 13,621 shares of common stock to an employee pursuant to the cashless exercise of 25,000 stock options. The recipient of the shares was Antonia Chappell. We relied upon the exemption from registration as set forth in Section 4(2) of the Securities 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 Securities Act.

In February 2007, we issued a total of 197,700 shares of common stock to four individuals in payment of consulting services rendered. We relied upon the exemption from registration as set forth in Section 4(2) of the Securities 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 companies similar to ours, we deem the shareholders sophisticated for the purposes of Section 4(2) of the Securities Act.

In February 2007, we issued 232,627 shares of common stock to Lunar Design in satisfaction of an accrued liability related to the conversion of a note payable. We relied upon the exemption from registration as set forth in Section 4(2) of the Securities 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 its dealings with development companies generally, we deem the shareholder sophisticated for the purposes of Section 4(2) of the Securities Act.

In February 2007, we issued 9,260 shares of common stock to Dejobaan Games as payment for the acquisition of software. We relied upon the exemption from registration as set forth in Section 4(2) of the Securities 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 dealings with development companies generally, we deem the shareholder sophisticated for the purposes of Section 4(2) of the Securities Act.

In March 2007, we issued 300,000 shares of common stock to Todd M. Ficeto pursuant to an exercise of warrants at a purchase price of $0.25 per share. The recipient of the common stock was an accredited investor within the meaning of Regulation D of the Securities Act. We relied upon the exemption from registration as set forth in Section 4(2) of the Act for the issuance of these 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 accredited investor and his dealings with development companies generally, we deem the shareholder sophisticated for the purposes of Section 4(2) of the Securities Act.

Item 3. Defaults Upon Senior Securities

None.

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

None.

Item 5. Other Information

Pursuant to that certain Unit Subscription Agreement entered into among Novint and 42 accredited investors on February 23, 2007, as amended on March 2, 2007 and March 30, 2007 (the “Unit Subscription Agreement”), Novint issued and sold an additional $580,000 of Units, at a price of $1.00 per Unit, to four of the original 42 accredited investors (the “Purchasers”). Each Unit consists of one share of common stock and one five-year warrant to purchase one share of common stock at an exercise price of $1.50 per share. The additional financing closed on May 11, 2007 (the “Second Closing”). The Unit Subscription Agreement was amended on March 2, 2007 to extend the date of the First Closing to March 6, 2007 and was further amended on March 30, 2007 to, among other things, extend the date of the Second Closing to May 11, 2007. Gross proceeds from the additional financing were $580,000. There were no commissions paid in connection with the additional financing. The net proceeds of the additional financing will be used by Novint for general working capital purposes.

As part of the terms of the Unit Subscription Agreement, Novint entered into an Investor Rights Agreement, as amended (the “Investor Rights Agreement”), with the Purchasers whereby Novint has agreed to file a registration statement to register for resale the shares of common stock sold in the financing, including the shares of common stock underlying the warrants, by May 31, 2007. Subject to certain exceptions, in the event the registration statement is not filed by May 31, 2007, or does not become effective within certain time periods set forth in the Investor Rights Agreement, Novint would be required to pay each Purchaser in the First and Second Closing an amount in cash equal to 0.0333% of the sum of (i) the purchase amount paid by the Purchaser and (ii) the amount paid upon exercise of the warrants for each day the filing or effectiveness of the registration statement is delayed and, pursuant to the terms of the warrants, the Purchasers would be entitled to exercise their warrants pursuant to a cashless exercise formula. In addition, the Registrant has agreed not to grant any registration rights that are senior to the registration rights of the Purchasers for a period of two years from the closing date without the prior written consent of a majority of the Purchasers.

The foregoing description of the Unit Subscription Agreement, the Investor Rights Agreement, and the warrants does not purport to be complete and is qualified in its entirety by the exhibits attached to the Company’s Current Report on Form 8-K filed with the SEC on March 9, 2007 as well as Amendment No. 1 to the Unit Subscription Agreement attached hereto as Exhibit 10.48, Amendment No. 2 to the Unit Subscription Agreement attached hereto as Exhibit 10.49 and Amendment No. 1 to the Investor Rights Agreement attached hereto as Exhibit 10.50.

All other exhibits are filed herewith.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		NOVINT TECHNOLOGIES, INC.
		By:	/s/ TOM ANDERSON
			Tom Anderson
			Chief Executive Officer, President and Chief
			Financial Officer
			May 15, 2007

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