SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
☑ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED For the quarterly period ended March 31, 20092020
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ____ to ____
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
NOVINT TECHNOLOGIES, INC.
(Exact nameName of registrantRegistrant as specifiedSpecified in it charter)
Delaware | 85-0461778 | |
(State or | (IRS Employer Identification No.) | |
100 Merrick Road–Suite 400W | ||
Rockville Center, NY | 11570 | |
(Address of Principal Executive Offices) | (Zip Code) | |
(866) 298-4420 | ||
Registrant’s Telephone Number, including Area Code: |
Securities registered pursuant to Section 12(b) of principal executive offices)
Securities registered pursuant to Section 12(g) of the Act:
Title of each class |
Common Stock, $.0001 Par Value Per Share |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by sectionSection 13 or 15 (d)15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x☒ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period thanthat the registrant was required to submit and post such files). Yes o ☒ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Larger Accelerated Filer ☐ | ||
Non-Accelerated Filer ☒ | ||
Smaller Reporting Company ☒ | ||
Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined byin Rule 12b-2 of the Exchange Act). Yes o☐ No x
On May 13, 2020, the number ofRegistrant had 202,308,728 shares outstanding of each issuer's classes of common stock as of the latest practicable date: 32,942,709 issued and outstanding as of May 11, 2009.
NOVINT TECHNOLOGIES, INC.
QUARTERLY REPORT ON FORM 10-Q
INDEX
Novint Technologies, Inc. | ||||||||
BALANCE SHEETS | ||||||||
March 31, 2009 | December 31, 2008 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 78,632 | $ | 55,315 | ||||
Accounts receivable, net | 78,907 | 57,170 | ||||||
Prepaid expenses and other current assets | 566,407 | 674,608 | ||||||
Inventory | 1,324,834 | 1,333,632 | ||||||
Deposit on purchase of inventory | 14,722 | 14,722 | ||||||
Deposits | 4,040 | 12,181 | ||||||
Total current assets | 2,067,542 | 2,147,628 | ||||||
PROPERTY AND EQUIPMENT, NET | 374,402 | 463,080 | ||||||
DEFERRED FINANCING COSTS | 335,718 | 362,247 | ||||||
PREPAID EXPENSES - NET OF CURRENT PORTION | 1,079,173 | 1,020,534 | ||||||
SOFTWARE DEVELOPMENT COSTS, NET | 555,886 | 585,682 | ||||||
INTANGIBLE ASSETS, NET | 595,810 | 680,367 | ||||||
DEPOSITS, NET OF CURRENT PORTION | - | 16,042 | ||||||
Total assets | $ | 5,008,531 | $ | 5,275,580 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
CURRENT LIABILITIES: | ||||||||
Accounts payable | $ | 914,314 | $ | 684,277 | ||||
Accrued payroll related liabilities | 1,009,521 | 939,298 | ||||||
Accrued expenses | 507,029 | 323,548 | ||||||
Accrued expenses - related parties | 138,928 | 86,577 | ||||||
Deferred revenue | 29,061 | 29,662 | ||||||
Notes payable, net of unamortized debt discount of | 327,807 | 230,040 | ||||||
$72,193 and $69,952, respectively | ||||||||
Notes payable - original issue discount, net of unamortized | 187,441 | - | ||||||
debt discounts of $87,559 and $0, respectively | ||||||||
Total current liabilities | 3,114,101 | 2,293,402 | ||||||
LONG TERM LIABILITIES: | ||||||||
Convertible notes payable, net of unamortized debt | ||||||||
discount of $3,780,006 and $4,132,480, respectively | 1,382,192 | 1,029,718 | ||||||
Total liabilities | 4,496,293 | 3,323,120 | ||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
STOCKHOLDERS' EQUITY: | ||||||||
Common stock, authorized 150,000,000 shares, $0.01 | ||||||||
par value; 32,259,131 and 32,259,131 shares issued | ||||||||
and outstanding, respectively | 322,592 | 322,592 | ||||||
Additional paid-in capital | 32,171,716 | 32,026,387 | ||||||
Accumulated deficit | (31,977,465 | ) | (30,391,914 | ) | ||||
Accumulated other comprehensive loss | (4,605 | ) | (4,605 | ) | ||||
Total stockholders' equity | 512,238 | 1,952,460 | ||||||
Total liabilities and stockholders' equity | $ | 5,008,531 | $ | 5,275,580 |
March 31, | December 31, | |||||||
2020 | 2019 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 398,075 | $ | 431,715 | ||||
Prepaid expenses and other current assets | 5,003 | 2,048 | ||||||
Total Current Assets | 403,078 | 433,763 | ||||||
TOTAL ASSETS | $ | 403,078 | $ | 433,763 | ||||
LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
CURRENT LIABILITIES: | ||||||||
Accounts payable and accrued expenses | $ | 660,083 | $ | 640,374 | ||||
Total Current Liabilities | 660,083 | 640,374 | ||||||
TOTAL LIABILITIES | 660,083 | 640,374 | ||||||
STOCKHOLDERS' DEFICIT | ||||||||
Preferred stock, $0.0001 par value; 12,500,000 shares authorized, 0 shares issued and outstanding as of March 31, 2020 and December 31, 2019 | — | — | ||||||
Common stock, $0.0001 par value; 500,000,000 shares authorized, 202,308,728 shares issued and outstanding as of March 31, 2020 and December 31, 2019 | 20,231 | 20,231 | ||||||
Additional paid in capital | 41,059,293 | 41,059,293 | ||||||
Accumulated deficit | (41,336,529 | ) | (41,286,135 | ) | ||||
TOTAL STOCKHOLDERS' DEFICIT | (257,005 | ) | (206,611 | ) | ||||
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ | 403,078 | $ | 433,763 |
The accompanying notes are an integral part of these financial statements.statements
NOVINT TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
Novint Technologies, Inc. | ||||||||
STATEMENTS OF OPERATIONS | ||||||||
For the Three Months Ended | ||||||||
March 31, 2009 | March 31, 2008 | |||||||
(Unaudited) | (Unaudited) | |||||||
Revenue: | ||||||||
Project | $ | 106,874 | $ | 27,579 | ||||
Product | 24,848 | 44,250 | ||||||
Total revenue | 131,722 | 71,829 | ||||||
Cost of goods sold: | ||||||||
Project | 88,891 | 21,187 | ||||||
Product | 45,339 | 80,802 | ||||||
Total cost of goods sold | 134,230 | 101,989 | ||||||
Gross loss | (2,508 | ) | (30,160 | ) | ||||
Operating expenses | ||||||||
Research and development | 72,838 | 313,526 | ||||||
General and administrative | 777,899 | 1,306,282 | ||||||
Depreciation and amortization | 153,761 | 99,147 | ||||||
Sales and marketing | 70,136 | 131,849 | ||||||
Total operating expenses | 1,074,634 | 1,850,804 | ||||||
Loss from operations | (1,077,142 | ) | (1,880,964 | ) | ||||
Other (income) expense | ||||||||
Interest income | (8 | ) | (12,252 | ) | ||||
Interest expense | 117,812 | 704 | ||||||
Debt discounts related to notes and convertible debts | 380,125 | - | ||||||
Other (income) expense | 10,480 | (2,207 | ) | |||||
Net other (income) expense | 508,409 | (13,755 | ) | |||||
Net loss | $ | (1,585,551 | ) | $ | (1,867,209 | ) | ||
Loss per share, basic and diluted | $ | (0.05 | ) | $ | (0.06 | ) | ||
Weighted-average common shares | ||||||||
outstanding, basic and diluted | 32,259,131 | 31,902,829 |
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Revenue | $ | 1,000 | $ | — | ||||
Operating Expenses | ||||||||
Professional fees | 31,200 | 19,893 | ||||||
General and administrative expenses | 20,088 | 20,494 | ||||||
Total Operating Expenses | 51,288 | 40,387 | ||||||
Loss from operations | (50,288 | ) | (40,387 | ) | ||||
Other expense: | ||||||||
Interest expense, net | (106 | ) | (82 | ) | ||||
Total other expense | (106 | ) | (82 | ) | ||||
Loss before provision for income taxes | (50,394 | ) | (40,469 | ) | ||||
Provision for income taxes | — | — | ||||||
Net loss | $ | (50,394 | ) | $ | (40,469 | ) | ||
Net loss per share | ||||||||
Basic and Diluted | $ | (0.00 | ) | $ | (0.00 | ) | ||
Weighted-average common shares outstanding | ||||||||
Basic and Diluted | 202,308,728 | 202,308,728 |
The accompanying notes are an integral part of these financial statements.statements
NOVINT TECHNOLOGIES, INC.
STATEMENTS OF STOCKHOLDERS’ DEFICIT
(Unaudited)
Novint Technologies, Inc. | ||||||||||||||||||||||||
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY | ||||||||||||||||||||||||
For the Three Months Ended March 31, 2009 | ||||||||||||||||||||||||
Accumulated | ||||||||||||||||||||||||
Additional | Other | |||||||||||||||||||||||
Common Stock | Paid-in | Accumulated | Comprehensive | |||||||||||||||||||||
Shares | Amount | Capital | (Deficit) | Loss | Total | |||||||||||||||||||
Balances, December 31, 2008 | 32,259,131 | $ | 322,592 | $ | 32,026,387 | $ | (30,391,914 | ) | $ | (4,605 | ) | $ | 1,952,460 | |||||||||||
Options vested for employees services | - | - | 120,466 | - | - | 120,466 | ||||||||||||||||||
Options and warrants vested to consultants for services | - | - | (40,801 | ) | - | - | (40,801 | ) | ||||||||||||||||
Warrants issued with note payable | - | - | 65,664 | - | - | 65,664 | ||||||||||||||||||
Net loss | - | - | (1,585,551 | ) | - | (1,585,551 | ) | |||||||||||||||||
Balances, March 31, 2009 (Unaudited) | 32,259,131 | $ | 322,592 | $ | 32,171,716 | $ | (31,977,465 | ) | $ | (4,605 | ) | $ | 512,238 |
Three Months Ended March 31, 2019 | ||||||||||||||||||||
Additional | ||||||||||||||||||||
Common Stock | Paid-in | Accumulated | ||||||||||||||||||
Shares | Amount | Capital | (Deficit) | Total | ||||||||||||||||
Balances, December 31, 2018 | 202,308,728 | $ | 20,231 | $ | 41,059,293 | $ | (41,151,958 | ) | $ | (72,434 | ) | |||||||||
Net Loss for the Three Months | — | — | — | (40,469 | ) | (40,469 | ) | |||||||||||||
Balances, March 31, 2019 | 202,308,728 | $ | 20,231 | $ | 41,059,293 | $ | (41,192,427 | ) | $ | (112,903 | ) |
Three Months Ended March 31, 2020 | ||||||||||||||||||||
Additional | ||||||||||||||||||||
Common Stock | Paid-in | Accumulated | ||||||||||||||||||
Shares | Amount | Capital | (Deficit) | Total | ||||||||||||||||
Balances, December 31, 2019 | 202,308,728 | $ | 20,231 | $ | 41,059,293 | $ | (41,286,135 | ) | $ | (206,611 | ) | |||||||||
Net Loss for the Three Months | — | — | — | (50,394 | ) | (50,394 | ) | |||||||||||||
Balances, March 31, 2020 | 202,308,728 | $ | 20,231 | $ | 41,059,293 | $ | (41,336,529 | ) | $ | (257,005 | ) |
The accompanying notes are an integral part of these financial statements.statements
NOVINT TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
Novint Technologies, Inc. | ||||||||
STATEMENTS OF CASH FLOWS | ||||||||
For the Three Months Ended | ||||||||
March 31, 2009 | March 31, 2008 | |||||||
(Unaudited) | (Unaudited) | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (1,585,551 | ) | $ | (1,867,209 | ) | ||
Adjustments to reconcile net loss to net cash provided by (used in) | ||||||||
operating activities | ||||||||
Depreciation and amortization | 153,761 | 99,147 | ||||||
Amortization of debt discount related to warrants issued with debt | 380,125 | - | ||||||
Amortization of capitalized finance cost | 40,397 | - | ||||||
Amortization of discount related to original issue discount notes | 3,222 | - | ||||||
Loss on disposal of assets | 10,480 | - | ||||||
Loss on assets given to terminated employees | 15,759 | - | ||||||
Loss on assets provided as part of lease termination | 43,894 | - | ||||||
Common stock issued for services | - | 7,200 | ||||||
Options issued to employees and consultant for services | 79,665 | 256,710 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (21,737 | ) | 47,550 | |||||
Prepaid expenses | 108,201 | (414,778 | ) | |||||
Inventory | 8,798 | (483,786 | ) | |||||
Deposit on purchase of inventory | - | (135,463 | ) | |||||
Prepaid expenses, net of current | (58,639 | ) | (502,679 | ) | ||||
Deposits | 12,183 | 26,839 | ||||||
Accounts payable and accrued liabilities | 495,741 | 42,190 | ||||||
Accrued expenses related party | 52,351 | 248 | ||||||
Deferred revenues | (601 | ) | (3,273 | ) | ||||
Net cash (used in) operating activities | (261,951 | ) | (2,927,304 | ) | ||||
Cash flows from (to) investing activities: | ||||||||
Intangible expenditures | (7,888 | ) | (22,539 | ) | ||||
Capital outlay for software development costs and other intangible assets | (12,975 | ) | (27,424 | ) | ||||
Property and equipment purchases | - | (77,683 | ) | |||||
Net cash (used in) investing activities | (20,863 | ) | (127,646 | ) | ||||
Cash flows from (to) financing activities: | ||||||||
Cash paid for offering costs | (13,869 | ) | (60,000 | ) | ||||
Proceeds from notes payable | 100,000 | - | ||||||
Proceeds from original issue discount notes | 220,000 | |||||||
Proceeds from convertible notes payable | - | 2,025,000 | ||||||
Net cash provided by financing activities | 306,131 | 1,965,000 | ||||||
Net increase (decrease) in cash and cash equivalents | 23,317 | (1,089,950 | ) | |||||
Cash and cash equivalents at beginning of period | 55,315 | 2,704,367 | ||||||
Cash and cash equivalents at end of period | $ | 78,632 | $ | 1,614,417 | ||||
Supplemental information: | ||||||||
Interest paid | $ | - | $ | - | ||||
Income taxes paid | $ | - | $ | - | ||||
Non-cash investing and financing activities: | ||||||||
Debt discount and deferred financing cost related to convertible notes | ||||||||
payable recorded against paid-in capital | $ | - | $ | 2,025,000 | ||||
Payment of offering costs with 60,000 warrants | $ | - | $ | 41,728 | ||||
Warrants for 430,000 shares of common stock granted related to issuance of notes payable | $ | 65,664 | $ | - |
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (50,394 | ) | $ | (40,469 | ) | ||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses and other current assets | (2,955 | ) | 330 | |||||
Accounts payable and accrued expenses | 19,709 | 13,150 | ||||||
Net cash used in operating activities | (33,640 | ) | (26,989 | ) | ||||
Net decrease in cash | (33,640 | ) | (26,989 | ) | ||||
Cash and cash equivalents, beginning of year | 431,715 | 508,547 | ||||||
Cash and cash equivalents, end of period | $ | 398,075 | $ | 481,558 | ||||
Supplemental cash flow information: | ||||||||
Cash paid for interest | $ | 106 | $ | 163 | ||||
Cash paid for taxes | $ | — | $ | — |
The accompanying notes are an integral part of these financial statements.
MARCH 31, 2009 AND 2008
(Unaudited)
NOTE 1 —BASIS– DESCRIPTION OF PRESENTATION AND NATURE OF BUSINESS
Novint Technologies, Inc. (the “Company” or “Novint”), in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Regulation S-X as promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, these financial statements do not include all of the disclosures required by generally accepted accounting principles in the United States of America for complete financial statements. These unaudited interim financial statements should be read in conjunction with the audited financial statements and the notes thereto included on Form 10-K for the period ended December 31, 2008. In the opinion of management, the unaudited interim financial statements furnished herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim period presented. The results of the three months ended March 31, 2009 are not necessarily indicative of the results to be expected for the full year ending December 31, 2009.
Nature of Business
The Company currently is engaged in the development and sale of 3D haptics products and equipment. Haptics refers to one’s sense of touch. The Company’s focus is in the consumer interactive computer gaming market, but the companyCompany also does project work in other areas. The Company’s operations are based in New Mexico with sales of its haptics products primarily to consumers through the Company’s website at www.novint.com and retail outlets.
Going Concern and Management’s Plans
These financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred recurring losses and at March 31, 2009,2020, had an accumulated deficit of $31,977,465.$41,336,529. For the three monthsperiod ended March 31, 2009,2020, the Company sustained a net loss of $1,585,551.$50,394. These factors, among others, indicate that the Company may be unable to continue as a going concern for a reasonable period of time.the next twelve months from the date the financial statements were issued. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that may be necessary should the Company be unable to continue as a going concern. The Company'sCompany’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.
NOTE 2 —– SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management makesto make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosuresdisclosure of contingent assets and liabilities at the date of the financial statements as well asand the reported amounts of revenues and expenses during the reporting period. The most significant estimates and assumptions made in the preparation of the financial statements relate to accrued royalties and contingent consideration. Actual results could differ from those estimates. Significant estimates
Basis of Presentation
The accompanying unaudited condensed financial statements were prepared using generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, these unaudited condensed financial statements do not include the fair value ofall information or notes required by generally accepted accounting principles for annual financial statements and should be read in conjunction with the Company’s common stockannual financial statements included within the Company’s Special Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC on May 5, 2020.
In the opinion of management, the unaudited condensed financial statements included herein contain all adjustments necessary to present fairly the Company’s financial position and the fair valueresults of optionsits operations and warrants to purchase common stock, allowances for doubtful accounts, inventory valuation, return and warranty reserves, accounting for income taxes, and uncertainty in income taxes and depreciation and amortization.
Cash and 2008 totaled $42,771 and $37,758, respectively.
The Company follows Statementconsiders all highly liquid investments purchased with maturities of Position (SOP) No. 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use, which requires capitalization of certain costs incurred during the development of internal use software. Through March 31, 2009, capitalizable costs incurred have not been significant for any development projects. Accordingly, the Company has charged all related costs to research and development expense in the periods incurred.
For the twelve months ending March 31, | ||||
2010 | $ | 370,977 | ||
2011 | 178,950 | |||
2012 | 8,958 | |||
2013 | 2,325 | |||
2014 and thereafter | 34,600 | |||
Total | $ | 595,810 |
Revenue and Cost Recognition
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), and has since issued amendments thereto (collectively referred to as “ASC 606”). The Company recognizes revenue from the salecore principle 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 requiresASC 606 is 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.
Revenue from product sales relates to the sale of the Falcon haptics interface,3D Touch Haptic Controller (the “Falcon”), 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 isare 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 salesrecognition requirements are not met, such sales will be recorded as deferred revenue until such time as all revenue recognition requirements are met.
Accounts Receivable
Accounts receivable are stated at the amounts management expects to collect. An allowance for doubtful accounts is recorded based on a combination of historical experience, aging analysis and information on specific accounts. Account balances are written off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Management has determined that $0 allowance is required at March 31, 20092020 and December 31, 2008,2019.
Income Taxes
The Company accounts for its income taxes under the Company recorded $29,061provisions of ASC Topic 740, “Income Taxes”. The method of accounting for income taxes under ASC 740 is an asset and 29,662, respectively,liability method which requires recognition of deferred revenue, which represents fees receivedtax assets and liabilities for product and project revenuesthe expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not met all revenue recognition requirements.
Fair Value of Financial Instruments
The Company follows the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) for disclosures about fair value of its financial instruments and to measure the fair value of its financial instruments. The FASB ASC establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The three levels of fair value hierarchy are described below:
Level 1 | Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. |
Level 2 | Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. |
Level 3 | Pricing inputs that are generally observable inputs and not corroborated by market data. |
Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.
The carrying amounts of the Company’s financial assets and liabilities, including cash, inventory, prepaid expenses, accounts payable, accrued expenses, payroll and related liabilities, and advances approximate their fair values because of the short maturity of these instruments.
Recently Issued Accounting Pronouncements
The Company has reviewed the recent accounting pronouncements issued by the FASB, including its 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 costAmerican Institute of sales. The Company’s costs associated with shipping product items to the Company’s customers are included in the Company’s cost of goods sold, which for the three months ended March 31, 2009 and 2008 approximated $6,509 and $8,140, respectively.
NOTE 3 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses are as follows:
|
| March 31, |
|
| December 31, |
| ||
|
| 2020 |
|
| 2019 |
| ||
Trade payables |
| $ | 106,338 |
|
| $ | 99,486 |
|
Accrued expenses |
|
| 8,113 |
|
|
| 7,756 |
|
Accrued royalties |
|
| 545,632 |
|
|
| 533,132 |
|
Total accounts payable and accrued expenses |
| $ | 660,083 |
|
| $ | 640,374 |
|
NOTE 4 – 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 financial position or results of operations and financial condition of the Company.
The Company has licensing agreements with various parties providing gaming software. These licensing agreements have royalty fees ranging from 5% to 50% of either gross or net revenue, and a flat per user end fee of $0.50. Under one or more of these agreements, there was an annual aggregate minimum payment due of $50,000 which has been recorded as accrued royalties but remains unpaid. Accrued royalty fees as of March 31, 2009, prepaid expenses totaling $1,645,580 principally consist2020 and December 31, 2019, was $545,632 and $533,132, respectively. If contested, the Company may be found to be in breach of prepayments towards marketing costs, insurance premiums, rents,obligations to pay these amounts (although the Company believes this obligation is no longer ongoing), thus the remaining obligation under this agreement will remain as a liability.
NOTE 5 – INCOME TAXES
The Company files corporate income tax returns in the United States (Federal), in New Mexico and royaltiesin New York. The Company is subject to federal, state and local income tax examinations by tax authorities for the tax years 2015 through 2018.
As of December 31, 2019, the Company had federal and state net operating loss carry forwards of $33.8 million and $0.5 million, respectively. Federal net operating losses generated prior to January 1, 2018, amounting to $33.7 million, and may be offset against future taxable income, subject to limitation under IRC Section 382, which $1,079,173 is consideredbegin to expire in 2022 if not utilized prior to that date, and fully expire during various years through 2037 for federal purposes. Net operating losses generated after January 1, 2018, amounting to $0.3 million, are limited to 80% utilization of current year income and no longer have an expiration. State net operating loss carryforwards will begin to expire in 2034 through 2039.
Other than minimum taxes, the long-term portion. Prepayments on royalties comprisecompany does not incur a significant portion ofprovision for income taxes because the prepaid expenses at March 31, 2009 totaling $1,583,566 of which $1,079,173 is considered long-term portionCompany has historically incurred operating losses and maintains a full valuation allowance against its net deferred tax assets due to the lengthuncertainty surrounding the realizability of the related licensebenefit, based on a more likely than not criteria and royalty agreementsin consideration of available positive and negative evidence.
On December 22, 2017, the Tax Cuts and Jobs Act (“The Act”), was signed into law by President Trump. The Act includes a number of provisions, including the lowering of the U.S. corporate tax rate from 34 percent to 21 percent, effective January 1, 2018 and the expected realization.
Licensing agreements | $ | 1,245,543 | ||
Patent | 48,595 | |||
Less accumulated amortization | (698,328 | ) | ||
$ | 595,810 |
NOTE 76 – STOCKHOLDERS’ EQUITY
Preferred Stock
The Company is currently authorized to issue up to 12,500,000 shares of $0.0001 par value preferred stock. No shares of preferred stock are currently outstanding. The Board of Directors granted employeesmay designate the authorized but unissued shares of the Preferred Stock with such rights and privileges as the board of directors 6,850,000 optionsmay determine. As such, the board of directors may issue preferred shares and designate the conversion, voting and other rights and preferences without notice to purchasethe shareholders and without shareholder approval.
Common Stock
The Company is currently authorized to issue up to 500,000,000 shares of $0.0001 par value common stock. All issued shares of common stock at an exercise priceare entitled to vote on a 1 share/1 vote basis.
The Company had 202,308,728 shares of $.10 per share as compensation for prior services. The options vest upon grant,common stock issued and the expense for these options, totaling $582,102, was recorded in the year ended December 31, 2008. As the options have not been issued, the value remains in accrued payroll liabilities on the accompanying balance sheetoutstanding as of March 31, 2009. 2020 and December 31, 2019.
NOTE 7 – SUBSEQUENT EVENTS
The Board of Directors also granted consultants 700,000 options to purchase shares of common stockCompany has evaluated subsequent events through the date these financial statements were issued.
We may be at an exercise price of $.10 per sharerisk as compensation for future services. These options vest equally every six months for two years following the grant.
9
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the audited Financial Statements and accompanying notes thereto included in the Company’s Annual Report on Form 10-K as of and for the fiscal year ended December31, 2019. Unless otherwise noted, all the financial information in this Report is financial information for the Company.
General
The Company currently is engaged in the development and sale of 3D haptics products and equipment. Haptics refers to one’s sense of touch. The Company’s focus is in the consumer interactive computer gaming market, but the Company also does project work in other areas. The Company’s operations are based in New Mexico with sales of its haptics products primarily to consumers through retail outlets.
Results of Operations for the Three Months Ended March 31, 2020 and 2019
Revenues
|
| Three months ended March 31, |
| |||||||||
|
| 2020 |
|
| 2019 |
|
| Change |
| |||
Revenue |
| $ | 1,000 |
|
| $ | — |
|
| $ | 1,000 |
|
The Company recorded $1,000 of revenue for the three-month period ended March 31, 2020 and no revenue during the three-month period ended March 31, 2019. The Company expects to continue to incur significant expenses and operating losses for the foreseeable future. The Company’s net losses may fluctuate significantly from quarter to quarter and year to year.
Operating Expenses
|
| Three months ended March 31, |
| |||||||||
|
| 2020 |
|
| 2019 |
|
| Change |
| |||
Revenue |
| $ | 51,288 |
|
| $ | 40,387 |
|
| $ | 10,901 |
|
Operating expenses increased by $10,901 or 27% due to an increase in professional fees of $11,307 and a decrease in general and administrative expenses of $406. The increase in professional fees is primarily due to additional costs of being a current reporting company.
Other Expense
|
| Three months ended March 31, |
| |||||||||
|
| 2020 |
|
| 2019 |
|
| Change |
| |||
Revenue |
| $ | 106 |
|
| $ | 82 |
|
| $ | 24 |
|
Other expense was for services performed during 2008. The remaining $1,700 was recorded as expense$106 during the three months ended March 31, 2009. The Board of Directors also approved the issuance of 250,000 restricted shares of common stock to a consultant for consulting services. As the shares have not been issued, the value $37,500 has been accrued for and is included in accrued expenses on the accompanying balance sheet as of March 31, 2009.
Liquidity and 2008,Capital Resources
The following table summarizes select balance sheet and working capital amounts as at March 31, 2020 and December 31, 2019:
|
| As of |
|
| As of |
|
|
|
| |||
|
| March 31, |
|
| December 31, |
|
|
|
| |||
|
| 2020 |
|
| 2019 |
|
| Change |
| |||
Cash |
| $ | 398,075 |
|
| $ | 431,715 |
|
| $ | (33,640 | ) |
Working capital deficit |
| $ | (257,005 | ) |
| $ | (206,611 | ) |
| $ | (50,394 | ) |
At March 31, 2020, the Company paid $0had working capital deficit of approximately $257,005. Accumulated deficit amounted to $41,336,529 and $25,000, respectively,$41,286,135 at March 31, 2020 and December 31, 2019, respectively. Net loss for these services.the three months ended March 31, 2020 and 2019 was $50,394 and $40,469, respectively. Net cash used in operating activities was $33,640 and $26,989 for the three months ended March 31, 2020 and 2019, respectively. Operations since inception have been funded primarily with the proceeds from equity and debt offerings. As of March 31, 2009,2020, the Company owed $43,750had cash of $398,075.
The Company’s management has evaluated whether there is substantial doubt about the Company’s ability to Normandie New Mexico under the agreement.
There is no assurance that the Black-Scholes model based onCompany will be successful in any capital-raising efforts that it may undertake to fund operations during 2020. The Company anticipates that it will continue to issue equity and/or debt securities as a source of liquidity, until it begins to generate positive cash flow to support its operations. Any future sales of securities to finance operations will dilute existing stockholders’ ownership. The Company cannot guarantee when or if it will generate positive cash flow.
The audit report prepared by our independent registered public accounting firm relating to the Company’s consolidated financial statements for the year ended December 31, 2019 included an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern.
Cash Flow Activities
The following assumptions: a risk-free ratetable summarizes the Company’s cash flows for the periods set forth below:
|
| Three months ended March 31, |
| |||||||||
|
| 2020 |
|
| 2019 |
|
| Change |
| |||
Net cash used in operating activities |
| $ | (33,640 | ) |
| $ | (26,989 | ) |
| $ | 6,651 |
|
Net cash used in operating activities for the three months ended March 31, 2020 was $33,640 compared with net cash used in operating activities of 2.24%, volatility of 120%, estimated life of 10 years, and a fair market value of $0.20 per share.$26,989 for the three months ended March 31, 2019. The vesting schedule is prorated over the reporting period, and approximately $(8,910) and $14,000 was recorded as consulting expensenet cash used in operating activities during the three months ended March 31, 20092020, was primarily due to a net loss of $50,394 partial offset by increase of $19,709 in accounts payable and 2008, respectively.
Net cash used in operating activities for the three months ended March 9, 2006, the Company granted 250,000 options to purchase common stock to an employee, who is the brother of the Company’s Chief Executive Officer, at an exercise price of $1.00 per share.31, 2019 was $26,989. The options have a ten year term, and a vesting schedule of 50,000 shares per year beginning March 9, 2007. At March 9, 2006, the Company calculated the initial value of the options using the Black-Scholes model based on the following assumptions: a risk-free rate of 4.86%, volatility of 36%, estimated life of 10 years and a fair market value of $1.00 per share. The vesting schedule is prorated over the reporting period, and approximately $7,135 and $7,135 was recorded as consulting expensenet cash used in operating activities during the three months ended March 31, 20092019, was primarily due to a net loss of $40,469 partial offset by increase of $13,150 in accounts payable and 2008, respectively.
Effects of Inflation
We do not believe that inflation has had a material impact on our business, sales, or operating results during the Company granted 1,500,000 optionsperiods presented.
Off-Balance Sheet Arrangements
We currently do not have any off-balance sheet arrangements or financing activities with special-purpose entities.
Critical Accounting Policies
Critical accounting policies are those policies which are both important to purchase common stock to onethe presentation of a company’s financial condition and results and require management’s most difficult, subjective or complex judgments, often as a result of the membersneed to make estimates about the effect of the Company’s Board of Directors for future consulting services at an exercise price of $0.90 per share. The optionsmatters that are inherently uncertain. There have a 2-year annual vesting provision which 750,000 these options vested immediately. At December 31, 2006, the Company calculated the initial value of these options using the Black-Scholes model based on the following assumptions: a risk-free rate of 5.15%, volatility of 146%, estimated life of 10 years, and a fair market value of $1.05 per share. The vesting schedule is prorated over the reporting period, and approximately $0 (fully vested as of December 31, 2008) and $61,496 was recorded as consultant expensebeen no recent significant changes to our accounting policies during the three months ended March 31, 20092020. For a further discussion of our critical accounting policies, see our Annual Report on Form 10-K for the fiscal year ended December 31, 2019
Certain Factors That May Affect Future Results of Operations
The Securities and 2008, respectively.
1. Disclosure Controls and Procedures
We maintain disclosure controls and procedures (Disclosure Controls) within the meaning of Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Our Disclosure Controls are designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act, such as this Quarterly Report on Form 10-Q, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Our Disclosure Controls are also designed to ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our Disclosure Controls, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily applied its judgment in evaluating and implementing possible controls and procedures. As of the end of the period covered by this report,Quarterly Report on Form 10-Q, we carried out an evaluation,evaluated the effectiveness of the design and operation of our Disclosure Controls, which was done under the supervision and with the participation of our management, including our Chief Executive Officer and ChiefPrincipal Financial Officer, ofOfficer. Based on the effectiveness of the design and operationevaluation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon that evaluation,Disclosure Controls, our Chief Executive Officer and ChiefPrincipal Financial Officer has concluded that, as of March 31,2020, our Disclosure Controls were not effective due to a material weakness in the Company’s internal control over financial reporting as disclosed below.
2. Internal Control Over Financial Reporting
Based on our assessment as of March 31,2020, management concluded that our disclosureinternal control over financial reporting was not effective due to a material weakness related to the following: (1) we lack a sufficient number of employees to properly segregate duties and provide adequate review of the preparation of the financial statements and (2) we lack sufficient independent directors on our Board of Directors to maintain Audit and other committees consistent with proper corporate governance standards. We have limited financial resources and only one employee. The lack of personnel is a weakness because it could lead to improper classification of items and other failures to make the entries and adjustments necessary to comply with U.S. GAAP. Accordingly, management’s assessment is that the Company’s internal controls and proceduresover financial reporting were not effective as of the endMarch 31, 2020. A “material weakness” is a deficiency, or a combination of the applicable period to ensure that the information required to be disclosed by the Company in reports that it files or submits under the Exchange Act (i) is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.
3.Change in Internal Control over Financial Reporting
Except as described above, there were no changechanges in our internal control over financial reporting that occurred during our most recent fiscal quarterthe three months ended March 31, 2020 that hashave materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.
None
Not required to be provided by smaller reporting companies.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
None.
Item 4. MINE SAFETY DISCLOSURES
None.
None.
EXHIBIT INDEX
XBRL Taxonomy Extension Calculation Linkbase Document (submitted electronically herewith). | |||
XBRL Taxonomy Extension Label Linkbase Document (submitted electronically herewith). | |||
XBRL Taxonomy Extension Presentation Linkbase Document (submitted electronically herewith). | |||
XBRL Taxonomy Extension Definition Linkbase Document (submitted electronically herewith). | |||
Amend and Restated Certificate of Incorporation* | |||
3.2 (6) | Amended and Restated Bylaws* | ||
3.3 (1) | Articles of Merger* | ||
3.4 (1) | Certificate of Merger* | ||
4.1 (1) | Articles of Incorporation (See Exhibit 3.1) * | ||
4.2 (3) | Form of Common Stock Purchase Warrant, April | ||
4.3 (7) | Form | ||
10.1 (1) | License Agreement with Sandia; Amendments* | ||
10.2 (1) | Lease for 9620 San Mateo* | ||
10.3 (1) | Employment Agreement with Tom Anderson* | ||
10.4 (1) | Employment Agreement with Walter Aviles* | ||
10.5 (10) | Amended and | ||
10.6 (1) | Shareholders Agreement* |
10.7 (1) | Lock Up Agreement* | |
10.8 (1) | Miscellaneous Technical Services Agreement between Aramco Services Company and Novint Technologies, Inc.* | |
10.9 (1) | Contract Addendum between Aramco Services Company and Novint Technologies, Inc.* | |
10.10 (1) | Amendment to Contract between Aramco Services Company and Novint Technologies, Inc.* | |
10.11 (1) | Amendment to Contract between Aramco Services Company and Novint Technologies, Inc.* | |
10.12 (1) | Statement of Work between Chevron Corporation and Novint Technologies, Inc.* | |
10.13 (1) | Purchase Order from DaimlerChrylser Corporation* | |
10.14 (1) | Purchase Order # 94059 from LockheedMartin Corporation* | |
10.15 (1) | Purchase Order # 96996 from LockheedMartin Corporation* | |
10.16 (1) | Purchase Order # 97860 from LockheedMartin Corporation* | |
10.17 (1) | Purchase Order # Q50601685 from LockheedMartin Corporation* | |
10.18 (1) | Purchase Order # QQ060592 from LockheedMartin Corporation* | |
10.19 (1) | Purchase Order # Q50608809 from LockheedMartin Corporation* | |
10.20 (1) | Purchase Order # 24232 from Sandia National Laboratories* | |
10.21 (1) | Purchase Order # 27467 from Sandia National Laboratories* | |
10.22 (1) | Purchase Order # 117339 from Sandia National Laboratories* | |
10.23 (1) | Purchase Order # 250810 from Sandia National Laboratories* | |
10.24 (1) | Undersea Exploration Modeling Agreement between Woods Hole Oceanographic Institute and Novint Technologies, Inc.* | |
10.25 (1) | Purchase Order for Lunar Design, Inc. dated April 7, 2005* | |
10.26 (1) | Sublicense Agreement between Manhattan Scientifics and Novint Technologies, Inc.* |
10.27 (1) | License and Royalty Agreement between Manhattan Scientifics and Novint Technologies, Inc.* | |
10.28 (1) | Research Development and License Agreement between Manhattan Scientifics and Novint Technologies, Inc.* | |
10.29 (1) | Intellectual Property License Agreement with Force Dimension LLC* | |
10.30 (1) | Purchase Order with Lockheed Martin dated April 1, 2005* | |
10.31 (1) | Purchase Order with Lockheed Martin dated April 4, 2005* | |
10.32 (1) | Purchase Order with Lockheed Martin dated April 21, 2005* | |
10.33 (1) | Purchase Order with Deakin University dated April 6, 2004* | |
10.34 (1) | Purchase Order with Robarts Research dated September 24, 2004* | |
10.35 (1) | Purchase Order with University of New Mexico dated March 16, 2004* | |
10.36 (1) | Amendment to Agreement with Force Dimension Dated May 5, 2005* | |
10.37 (1) | Amendment to contract between Aramco Services Company and Novint Technologies, Inc* | |
10.38 (2) | Purchase Order with Lockheed Martin dated February 16, 2006* | |
10.39 (2) | Amendment to Intellectual Property License Agreement with Force Dimension LLC dated March 9, 2006* | |
10.40 (2) | Purchase Order with Lockheed Martin dated March 3, 2006* | |
10.41 (3) | Form of Subscription Agreement for Securities, April 2006* | |
10.42 (4) | Board of Directors Agreement between V. Gerald Grafe and Novint Technologies, Inc.* | |
10.44 (5) | Manufacturing Agreement dated December 19, 2006 by and between Novint Technologies, Inc. and VTech Communications Ltd.* | |
10.45 (5) | Novint Purchase Order 1056. (Portions of this exhibit have been omitted pursuant to a request for confidential treatment.) * | |
10.46 (7) | Form of Unit Subscription Agreement, March 2007* | |
10.47 (7) | Form of Investor Rights Agreement, March 2007* | |
10.48 (8) | Amendment No. 1 to Unit Subscription Agreement dated March 2, 2007* | |
10.49 (8) | Amendment No. 2 to Unit Subscription Agreement dated March 30, 2007* |
10.50 (8) | Amendment No. 1 to Investor Rights Agreement dated March 30, 2007* | |
10.51 (10) | Purchase Order with The Falk Group, LLC dated January 16, 2007* | |
10.52 (11) | Tournabout Intellectual Property Acquisition Agreement dated July 17, 2007* | |
10.53 (12) | Lease Agreement dated May 29, 2007* | |
10.54 (12) | Lease Agreement dated June 21, 2007* |
14 (2) | Code of Ethics* |
* Previously filed with Section 13 or 15(d)the SEC as indicated, and hereby incorporated herein by reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.