Summary of NOVINT TECHNOLOGIES INC

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

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

OVERVIEW

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

We have derived revenues from 3D touch hardware sales, 3D touch software sales, and the development of professional applications for our customers. We launched our Falcon product in June 2007, and are selling it in our on-line store and in a number of retailers and other websites. We launched an on-line game store in November 2007. We also have completed a number of professional application contracts with customers who desire custom developed software.

Novint focuses many of its efforts to exploit opportunities in the consumer console and PC interactive games market, and is also looking to expand its efforts in other areas of computer touch in funded projects. Using our haptics technology, games and applications will have the crucial missing "third sense", touch, to human computer interaction. Users will be able to directly and intuitively feel the shape, texture, and physical properties of virtual objects using our computer touch software. Our haptic technology and related hardware for consumers is the primary focus of our operations, but we will continue to develop our professional applications. We will devote much of our resources to further developing the video game market and seeking new business relationships with video game developers and publishers and hardware manufacturers. We began selling our haptic product, the Novint Falcon, in June 2007 through our website at www.novint.com. We currently are selling one haptic hardware product, which is a haptic game controller device called the Novint Falcon marketed in a bundled package that includes several games. In late 2007, we launched an on-line game store where consumers can purchase and download a variety of game titles. In 2008, we launched a pistol grip attachment for the Falcon. Although our sales of the Novint Falcon and games since product launch have been limited, we anticipate sales of the Novint Falcon, the pistol grip, and games to increase resulting from the release of new software and games in 2009. One of the most significant drivers of revenue for Novint will be games and content. This is true not only in the revenue we receive from the games themselves, but largely because this is a criterion we see many of our customers desiring in order to justify the Falcon hardware purchase. For example, if the Novint Falcon has many games available to play on it, a customer can purchase a single piece of hardware and then over time purchase multiple games that give a unique gaming experience, making the initial hardware purchase valuable over a larger amount of time and across a larger number of games. In 2008, we entered into licensing agreements with Valve Software and Electronic Arts among others, and therefore several new AAA level games will soon be supported by the Falcon.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

High-quality financial statements require rigorous application of accounting policies. Our policies are discussed in our financial statements for the quarter ended March 31, 2009 and are considered by management to be critical for an understanding of our financial statements because their application places the most significant demands on management's judgment, with financial reporting results relying on estimation about the effect of matters that are inherently uncertain. We review the accounting policies we use in reporting our financial results on a regular basis. As part of such review, we assess how changes in our business processes and products may affect how we account for transactions. We have not changed our critical accounting policies or practices during 2009. New accounting policies and practices were implemented in 2008 and in 2009 as necessary based on the launch of our haptics product sales in June 2007.

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

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

Our revenue recognition policy is as follows:

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

For project revenue that is not under fixed price programming contracts, the Company recognizes revenues as the services are completed.

Revenue from product sales relates to the sale of the Falcon haptics interface, which is a human-computer user interface (the "Falcon") and related accessories. The Falcon allows the user to experience the sense of touch when using a computer while holding its interchangeable handle. The Falcons are manufactured by an unrelated party. Revenue from the product sales is recognized when the products are shipped to the customer and the Company has earned the right to receive and retain reasonable assured payments for the products sold and delivered. Consequently, if all these revenue from product sales requirements are not met, such sales will be recorded as deferred revenue until such time as all revenue recognition requirements are met.

Emerging Issues Task Force (EITF) 00-10, Accounting for Shipping and Handling Fees and Costs, require amounts billed to a customer in a sales transaction related to shipping and handling, if any, to be classified and accounted for as revenues earned for the goods provided whereas shipping and handling costs incurred by a company are required to be classified as cost of sales.

Arrangements made with certain customers, including slotting fees and co-operative advertising, are accounted for in accordance with EITF No. 01-9, Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor's Products). These incentives are recognized as a reduction in revenue or as a selling, general, and administrative expense, respectively, when payment is made to a customer (or at the time the Company has incurred the obligation, if earlier) unless the Company receives a benefit over a period of time and the Company meets certain other criteria, such as retailer performance, recoverability, and enforceability, in which case the incentive is recorded as an asset and is amortized as a reduction of revenue over the term of the arrangement.

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

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

The Company's customers are provided a one (1) year limited warranty on the Falcon. This warranty guarantees that the products shall be free from defects in material and workmanship. Additionally, the Company offers its customers of the Falcon a 30 day money back guarantee. The Company continually evaluates its reserve accounts for both the limited warranty and 30 day money back guarantee based on its historical activities.

IMPAIRMENT - In accordance with Statement of Financial Accounting ("SFAS") 144, Accounting for the Impairment or Disposal of Long-Lived Assets, we review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

SOFTWARE DEVELOPMENT COSTS - We account for our software development costs in accordance with SFAS 86, Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed. This statement requires that, once technological feasibility of a developing product has been established, all subsequent costs incurred in developing that product to a commercially acceptable level be capitalized and amortized ratably over the estimated life of the product, which is 5 years. We have capitalized software development costs in connection with our haptic software beginning in 2000. Amortization is computed on the straight-line basis over the estimated life (5 years) of the haptics technology.

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

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

Stock options and warrants issued to consultants and other non-employees as compensation for services provided to the Company are accounted for based on the fair value of the services provided or the estimated fair market value of the option or warrant, whichever is more reliably measurable in accordance with SFAS 123 and Emerging Issues Task Force No. 96-18, Accounting for Equity Investments That are Issued to Other Than Employees for Acquiring or in Conjunction with Selling Goods or Services, including related amendments and interpretations. The related expense is recognized over the period the services are provided.

RECENT ACCOUNTING PRONOUNCEMENTS

The Company has adopted all recently issued accounting pronouncements. The adoption of the accounting pronouncements, including those not yet effective is not anticipated to have a material effect on the financial position or results of operations of the Company.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2009 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
2008.

REVENUES. During the three months ended March 31, 2009, we had revenues of $131,722 as compared to revenues of $71,829 during the three months ended March 31, 2008, an increase of approximately 83%. During the three months ended March 31, 2009, our revenues were derived from the development of professional applications for customers totaling $106,874 and the sale of our haptics technology products totaling $24,848. Our sales of our haptics technology products decreased 44% from 2008, while our revenues from the development of professional applications increased 288% as we placed more emphasis on our professional applications during the quarter. We will continue to provide development of professional applications and in 2009 we expect to grow this part of our business similarly to how we have in the past. Much of our focus will remain on the video game business, but we expect to place more emphasis on professional applications in our Advanced Products Group than we had from 2006 to 2008.

COST OF GOODS SOLD AND GROSS PROFIT (LOSS). Cost of goods sold, which consists of the cost of the haptics technology products sold, materials purchased for resale to customers, the direct labor incurred for delivering on projects, warehousing and freight costs, and inventory write-downs were $134,230 for the three months ended March 31, 2009, compared to $101,989 for the three months ended March 31, 2008. Our overall gross loss percentage was approximately (2)% for the three months ended March 31, 2009, compared to a gross loss percentage of (42)% for the three months ended March 31, 2008. For the three months ended March 31, 2009, our gross profit from our development of professional applications approximated 17%, a slight decrease from a gross profit of 23% for the first quarter of 2008. Our gross loss experienced from the sale of our haptics technology product in the first quarter of 2009 was (82)%, an improvement from 2008 when the gross loss percentage was (83)%. Our gross loss experienced from the sales of our haptics technology product continues to be impacted by our high warehousing and fulfillment costs. This is a primary reason we reevaluated our distribution channels in this quarter. Warehousing costs for the three months ended March 31, 2009 and 2008 were $23,282 and $21,919, respectively.

RESEARCH AND DEVELOPMENT EXPENSES. Research and development totaled $72,838 for the three months ended March 31, 2009 compared to $313,526 for the three months ended March 31, 2008, a decrease of $240,688 or 77%. During the first quarter of 2008, we focused on the development of games for use with the Falcon. In the first quarter of 2009, we have decreased the rate of development of new software associated with the haptics technology product to match the release schedule of our games.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses totaled $777,899 for the three months ended March 31, 2009, compared to $1,306,282 for the three months ended March 31, 2008, a decrease of $528,383 or 40%. In 2009, we are reorganizing our infrastructure to significantly reduce our costs, while still continuing to market the product. The decrease in general and administrative expenses compared to the prior year was primarily related to this reorganization. Business and professional fees decreased approximately $355,000, royalty expense decreased approximately $21,000, rent increased $136,000 as we reached an agreement for an early termination of an office lease, and payroll and other overhead expenses decreased approximately $288,000 largely due to a reduction in the number of employees.

DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization expense totaled $153,761 for the three months ended March 31, 2009 compared to $99,147 for the three months ended March 31, 2008, an increase of $54,614 or 55%. This expense increased between the two periods as a result of an increase in our investment in fixed assets, intangibles, and capitalized software and hardware.

SALES AND MARKETING EXPENSE. Sales and marketing expense totaled $70,136 for the three months ended March 31, 2009 compared to $131,849 for the three months ended March 31, 2008, a decrease of $61,713 or 47%. In 2009, we had fewer co-op marketing programs with retailers as we refocused our distribution channels.

LOSS FROM OPERATIONS. We had a loss from operations of $1,077,142 for the three months ended March 31, 2009, compared to a loss from operations of $1,880,964 for the three months ended March 31, 2008. Our net losses have decreased $803,822 primarily as a result of the decrease in our operating expenses as described above.

NET LOSS. We had a net loss of $1,585,551, or $0.05 per share, for the three months ended March 31, 2009, compared to $1,867,209, or $0.06 per share, for the three months ended March 31, 2008. There was a decrease in the net loss of $281,658, which is a result of a decrease in the loss from operations of approximately $803,000, a decrease in interest income of approximately $12,000, a net increase in interest expense and debt discount related to convertible debt of approximately $497,000, and an increase in other expense of approximately $13,000.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2009, we had a total cash balance of $78,632. Our cash flow from operating activities for the three months ended March 31, 2009 resulted in a deficit of $261,951 compared with a deficit of $2,927,304 in the same period of the prior year. This decrease in the deficit from operating activities of approximately $2,665,000 was a result of an increase in payables and accrued expenses and an overall increase in non-cash reconciling items. Our cash flow from investing activities for the three months ended March 31, 2009 resulted in a deficit of $20,863 compared with a deficit of $127,646 in the same period of the prior year, representing less investment in fixed assets and investments in games through both licensing and internal development. Our cash flow from financing activities for the three months ended March 31, 2009 resulted in a surplus of $306,131 from the issuance of notes payable compared to a surplus of $1,965,000 in the same period of the prior year from the net proceeds from convertible notes payable. Overall, our cash increased by $23,317 during the three months ended March 31, 2009.

The financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company incurred recurring losses and, at March 31, 2009, had an accumulated deficit of $31,977,465. For the three months ended March 31, 2009, the Company sustained a net loss of $1,585,551. These factors, among others, indicate that the Company may be unable to continue as a going concern for a reasonable period of time. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that may be necessary should the Company be unable to continue as a going concern. The Company's continuation as a going concern is contingent upon its ability to obtain additional financing and to generate revenue and cash flow to meet its obligations on a timely basis.

The Company believes there are several factors in continuing as a going concern. The Company has dramatically reduced operating expenses and staff in the first quarter of 2009 and will continue do so in areas deemed non-essential during 2009, while maintaining the resources to continue to sell our hardware and software products. Additionally, in the immediate timeframe, the Company has put more emphasis on haptics development projects. These projects have historically generated revenues and expanded the intellectual property portfolio. The Company will be releasing new AAA games in the first half of 2009, which should generate additional product sales. Lastly, the Company will seek to raise additional funding through debt or equity financing during the next twelve months.

Contractual Obligations

We have an operating lease for our office located in San Diego, California that expires on July 31, 2009. The monthly rent for this location is $4,040.

Off-Balance Sheet Arrangements

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