UNITED STATES
SECURITIES AND EXCHANGE COMMISSION  Washington, D.C. 20549


FORM 10-K/A
Amendment No. 1


(Mark One)


x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended: December 31, 2011o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the transition period from ________ to __________


Commission File Number 333-141482


Princeton Security Technologies, Inc.


Nevada

20-5506885State or other jurisdiction of

(I.R.S. Employer I.D. No.)incorporation or organization


303C College Road, Princeton, New Jersey 08540


(Address of principal executive offices)

(Zip Code)


Issuer's telephone number, including area code: 609-924-7310


Securities registered pursuant to section 12(b) of the Act:


Title of each class

Name of each exchange on which registeredNone

N/A


Securities registered pursuant to section 12(g) of the Act:


None


(Title of class)


Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act


Yes o     No x


Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act


x o


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 x     No o


1


Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained herein, and not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 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 that the registrant was required to submit and post such files).


Yes x 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. See definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.


Large Accelerated filer
o
Accelerated filer
oNon-accelerated filer
o
(Do not check if a smaller reporting company) Smaller reporting company
x


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).


Yes o x


State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked prices of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter: The Registrant's shares trade on the OTCBB with $0.25 bid and $0.50 ask. The bid on March 13th, 2012, was $0.25 giving the shares held by non affiliate share holders' market value of $3,620,878. The shares trade very sporadically and the bid price on any given day may not be indicative of the actual price a stockholder could receive for their shares.


As of March 13, 2012, the Registrant had 14,483,513 shares of common stock issued and outstanding.


DOCUMENTS INCORPORATED BY REFERENCE


List hereunder the following documents if incorporated by reference and the part of the Form 10-K (e.g., part I, part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or other information statement; and (3) Any prospectus filed pursuant to rule 424(b) or (c) under the Securities Act of 1933: NONE


EXPLANATORY NOTE
 
 This Amendment No. 1 on Form 10-K/A (the “Amendment”) amends the Annual Report on Form 10-K of Princeton Security Technologies, Inc. for the fiscal year ended December 31, 2011, originally filed with the Securities and Exchange Commission (“SEC”) on March 19, 2012 (the “Original Filing”). This Form 10-K/A does not attempt to modify or update any other disclosures set forth in the Original Filing.  There are no changes to the body of the Form 10K or financial statements.  The purpose of the amendment was to add the audit opinion which was inadvertently dropped out of the report during the edgarization process.


2


PART I


ITEM 1. BUSINESS


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS


This periodic report contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations, business strategies, operating efficiencies or synergies, competitive positions, growth opportunities for existing products, plans and objectives of management. Statements in this periodic report that are not historical facts are hereby identified as forward-looking statements.


Overview


Princeton was founded in February 2005 to acquire the detector and microanalysis business of Outokumpu Oyj. In February 2005, Princeton completed the acquisition of the detector and microanalysis business from a subsidiary of Outokumpu Oyj. As part of the acquisition of the business, Princeton retained the management and scientific staff of the subsidiary's detector business unit to continue to operate the detection and microanalysis business. Additionally, Princeton assumed the lease on the premises occupied by Outokumpu Oyj. The facilities were located in Rocky Hill, New Jersey and served as the company's offices, manufacturing and research facilities. In March 2006, Princeton moved its offices to 303C College Road East, Princeton, New Jersey where its management, manufacturing and research and development are currently located.


As part of the goal in acquiring the detector business, following the acquisition, Princeton divested the Microanalysis business to a subsidiary of Bruker Biosciences Corp. so that management could focus on, what it believed to be, the more profitable detector business within the Homeland Security industry.


In September 2006, Princeton restructured its corporate status by creating a Nevada corporation called Princeton Security Technologies, Inc. to be the holding company of Princeton Gamma Tech Instruments, Inc. Management reincorporated in Nevada and completed a stock exchange making Princeton Gamma Tech Instruments the wholly owned subsidiary of the Nevada corporation. Princeton's primary focus is on the X-ray and Gamma-ray Detectors and Spectroscopy systems, Radioactive Isotope Identifier products. Our products detect radioactive and other nuclear materials in various security and environmental settings.


Products


Through the purchase of the detector business, Princeton acquired X-ray and Gamma-ray Detectors and Spectroscopy systems, and Radioisotope Identifier products. More importantly, we also acquired the management and scientific teams responsible for the development of this technology. Currently we produce both individual detection units as well as component parts for larger units manufactured and sold by other companies.


The uses for our products encompass a variety of industrial, commercial and security concerns ranging from the homeland security need to detect concealed radioactive material, to silicon wafer fabrication companies that use our products and components to analyze silicon wafers for defects.


The nature of our technology allows our products to encompass a variety of uses. Our products typically have three basic technologies that can be combined to create a detection unit or system. Each of our products contains a sensor or a detector, electronic circuitry to process the signal from the sensor and firmware or software to analyze and interpret the processed signal. Princeton has design, development and manufacturing capability in all three technology areas. By focusing on these three core competencies used in detectors and components, we are able to design products for multiple industries and users.


3


As part of our core technology, we have developed the internal capability to produce a high purity germanium radiation detector, Sodium Iodide and Lanthanum Bromide scintillators, which are the key component in Gamma-ray detection systems. We also have an internal capability to process x-ray detectors, as well. These capabilities allow us to compete with the limited number of companies who have the ability to work with these types of sensors. These sensors are most frequently used to detect radioactive isotopes.


Currently, our product line includes the following component and detectors:


-
Category 1: Radioactive Isotope Identifier Products.The current product is termed the SAM Radioactive Isotope Identifiers (RIID). This hand-held instrument is a self-contained radiation detector, low-noise signal processor, and user interface. Our proprietary analysis software provides an intuitive color display suitable for both First Responders as well as more technically trained Health Physicists. This product and product versions are mainly used for large homeland security market applications, as well as for environmental, industrial and medical purposes. Last year a common application was to detect radioactive isotope leaks coming from Nuclear Power plants as a result of Fukushima nuclear power plant disaster in Japan. The Company has customized its RIID to detect such isotopes according to the required specifications from the local Health authorities. This product detects neutron and gamma radiation from over 100 isotopes. The SAM was designed to meet the latest American National Standards Institute "ANSI" and other government standards for portable radiation detection equipment.We previously introduced a Fixed Installation unit, called Area Monitor, to our product offering. That product is being offered and used in e.g. building security applications, hospitals, industrial applications and generally in security applications where an identified area or facility needs to be secured. A new application is a vehicle and cargo Portal monitoring for security purposes. Area Monitors can also be used to detect the Radioactive Isotopes coming from Nuclear Power plants as well as measuring the Radiation level in the food items e.g. water, milk, vegetables, fish, beef etc.-
Category 2: Nuclear/ Gamma-ray detectors and spectrometers:Princeton is one of the handful of companies worldwide that manufactures High Purity Germanium Detectors and associated electronics and software for the most sensitive and accurate detection and analysis of radioactive samples in a laboratory environment. A typical application is the measurement of very low-levels of radioisotopes in soil, water or geological samples to determine the efficacy of radioactive waste cleanup or to conduct geophysics research. This type of lab-based instrumentation is also used by the nuclear power industry for on-line monitoring. Customers include Federal and State governmental authorities, research laboratories and large corporations.We introduced last year a new version of High Purity Germanium detector system with a Sterling cooler. This system is more customer friendly and eliminates the usage of Liquid Nitrogen in the detector cooling procedure.-
Category 3: X-ray detectors and spectrometers.These products address the research and industrial analysis need in the Microanalysis or XRF market. The Microanalysis Market is the branch of industry and scientific research that requires the non-destructive analysis of materials on a sub-millimeter dimensional scale.The non-destructive testing of materials by X-ray analysis utilizes a range of detector products from small hand-held units to large systems installed on a Synchrotron and used for the fundamental research of materials. Princeton supplies both detector components as an OEM supplier and also complete X-ray spectrometer systems. Applications include quality control (e.g., for Silicon wafer fabrication), fundamental material research (e.g., on a synchrotron), and industrial control and monitoring, (e.g., engine wear analysis). A typical application is analyzing various metals for quality or research purposes. Company's core competence is high end Silicon Drift Detectors and other custom design x-ray detectors.


4


Markets


The market for our products is broad and encompasses both industrial, commercial and security concerns. Although our products are sold world-wide, current emphasis by the United States government on homeland security measures leads us to believe the US market will be strong for many of our detectors.


Our hand held and fixed installation detectors have the ability to check for various radiation in packages, containers or environmental areas. This will allow them to be used for multiple purposes including use by homeland security companies in checking for items such as dirty bombs.


Homeland Security market generally includes: law enforcement authorities, first responders, HAZMAT teams, governmental agencies and companies that work with such agencies. This is a growing marketplace particularly in the realm of radiation and special nuclear material detection. SAM Isotope Identifier, Area Monitors and as well as some High Purity Germanium detectors are targeting this segment, which is sizeable enough to support several players.


Additionally, we produce components that are used by other companies in larger detection units in multiple discipline areas. Both Gamma-ray and X-ray detectors and systems are considered to be a part of analytical instruments market segments. Our products and systems address needs for a smaller market segment within the analytical instruments marketplace aimed at industrial and research usage.


The recent Nuclear Power plant crisis in Japan has resulted in an increased level of interest in radiation detection related to the Nuclear Power plants. This market is currently very significant. Due to the leaked isotopes, which are extremely dangerous for people living close to those areas, coming from Nuclear Power plants we see that our products have a huge potential to detect such isotopes; whether RIIDs, Fixed Area Monitors or High Purity Germanium based systems are being deployed in such circumstances. This market has been there for decades but not until recently it has become more critical due to serious recent Nuclear Power plant problems in Japan.


Competition


The environment for our products and services is intensely competitive. Although the complexity of the products we produce limits the number of companies we compete with, the companies with competing technology are generally larger and often subsidiaries or divisions of very large multinational companies. Our competitors' size and association with large multinational companies creates advantages over us in the ability to access potential customers. Many potential customers already purchase products either directly from our competitors or from another subsidiary of these large multinational companies creating natural inroads to sales that we do not possess.


Given our relative size versus our competitors, we often have to seek niche markets for our products or focus on selling components to be used in our competitors' larger detection units. We believe, however, that our technology and experience in the detection industry allows us to be competitive in our markets. However, until we have more funding, we will be limited in our ability to expand our market penetration and to be able to introduce new products.


We believe our main competitors are ICX Technologies , recently acquired by a publicly held US company Flir Systems Inc., with a large selection of radiation detection products and technology; Canberra Industries, Inc., a subsidiary of French Areva group, specializing in larger nuclear projects and Radiation Identifying detector technology to the Homeland Security market; Ortec, a division of Ametek (Advanced Measurement Technology, Inc.), offering nuclear detection products to the Homeland Security market and Thermo Fisher Scientific, a large US based publicly held company, which sells radiation detection as well as other Homeland Security technology products.


In addition to the above competitors, there are several other companies that offer competing products in each of our market segments. Given the complexity of our products, we do not foresee substantial new competitors entering the broad market but instead see the current competitors becoming more aggressive as the markets continue to expand.


5


Future Growth Plans and Markets


By purchasing complex technology developed over the last thirty years, we believe we have the capability to enter into a growing marketplace in the Homeland Security as well as overall detector field. We are hopeful we can provide improved focus to products and related technology that was not receiving the attention or funding it required while operating as a subsidiary of a large multinational company whose primary focus was moving in another direction. We have spent the last four years improving upon the technology acquired; further developing new innovative products and refocusing our strategy on the growing need for sophisticated and dedicated detection units and components. We are hopeful this focus will allow us to be at the forefront of increased spending on detection devices for the commercial and homeland security markets. Three markets we see as new uses for our products are in the homeland security marketplace where there is a continuous need for dangerous radioactive and nuclear material to be identified by several authorities; Nuclear power plant market and in the "quality control" area where testing equipment has become a crucial part of the manufacturing process.


Although security issues have been around before, there is a new and on-going need to be able to detect various radioactive isotopes in different security and environmental settings. This marketplace is expanding throughout the world. This need is being created not only from the fear of terrorism but also from the expansion of the use of various chemicals and radiation in the manufacturing environments and the need to assure radiation is not being released inadvertently into the environment. We have created several detectors and related components aimed directly at this need and will continue to work on the development of even more sophisticated devices for this expanding market.


The past Nuclear Power plant crisis in Japan has resulted in an increased level of interest in radiation detection related to the Nuclear Power plants. Due to the leaked isotopes, which are extremely dangerous for people living close to those areas, coming from Nuclear Power plants we see that our products have a potential to detect such isotopes; whether RIIDs , Fixed Area Monitors or High Purity Germanium based systems are being deployed in such circumstances. This market has been there for decades but not until last year has it become more critical due to serious recent Nuclear Power plant problems in Japan. Therefore we believe that this market will provide company real growth opportunities.


As manufacturers continue to create more complex products relying heavily on automation, we believe that they will continue to require products such as detectors and testing equipment capable of evaluating the quality of the products produced. We have seen this in the silicon wafer fabrication process where we currently provide component parts to help detect any defects in the chips. Another new application for us is the detection of radioactive raw material in a manufacturing process within a marble industry or steel industry. We believe these "quality control" products will continue to see increasing demand and the use of our products will expand.


Princeton's plan of operation going forward consists of a two tier approach including a marketing strategy and a sales strategy.


Our marketing strategy includes a number of defined processes, and will leverage existing marketing plans from Princeton and affiliate companies. Campaigns run on a regular basis will include a tradeshow schedule, direct mail, email, telemarketing and direct sales calls, user groups and radiation detection workshops. Furthermore, our marketing efforts will also introduce a one-to-one customer driven outline to address the network and support needs of each customer.


We intend to prioritize customer service and make it a key component of our marketing programs. We believe that providing our customers with what they want, when and how they want it, has been fundamental in the development of our reputations in the industry.


Because we want to develop close working relationships with our customers, we want to establish accounts in as personable a way as possible. It is for this reason that we will overwhelmingly emphasize in-person sales visits.


6


We will closely integrate all of our marketing and sales efforts to project a consistent image of our company and a consistent positioning of our products and services. Furthermore, to support our marketing initiatives and effect legislative actions, we plan to participate in several Washington, D.C. based DHS (Department of Homeland Security) events directly or indirectly via our partners and consultants, and utilize a lobbyist in Washington, D.C. with contacts in the security business.


Our sales strategy includes focusing initial efforts on the top level decision maker or influencer at each targeted government agency. Princeton will also work with DHS to determine which government agencies are appropriate for immediate deployment of advanced technology.


We plan to use the following business development strategies:


1)
Use internal contacts or existing customer base within government agencies to identify new opportunities. Once a new opportunity or person is being identified we can determine if the potential new sales opportunity will be handled directly or by our OEM partners or representatives.2)
Once the proper Points of Contact have been qualified, an account executive or our partners will present the technology and overcome sales objections. During this time the sales person will confirm the details of the opportunity, if any. Onsite demonstrations will be critical in customer acceptance.3)
Onsite demonstrations will include an account executive and possibly a sales engineer. We currently sell to several state and federal agencies including the Environmental Protection Agency, Department of Energy, NASA, National Institute of Standards and Technology , Pacific Northwest National Laboratory, Los Alamos National Laboratory, Princeton Plasma Physics Lab, Idaho National Lab, US Geological Survey and The Savannah River Company.


Manufacturing, Supplies, and Quality Control


Princeton utilizes a 13,000 square foot facility for the manufacture of gamma-ray and X-ray detection equipment and associated electronics. Princeton possesses equipment for vacuum pumping, thin film deposition, wet chemistry semiconductor processing, and semiconductor diffusion. Princeton holds NRC radioactive material licenses for all typical radioactive sources used for the test and calibration of gamma-ray detectors, and carries an inventory of over 60 sources for this purpose. Electronics assembly is mostly outsourced but with small-scale in-house capability including full assembly and testing of our manufactured instrumentation. Our radiation detector manufacturing equipment is suitable and adequate for the current manufacturing plans. Other manufacturing requirements resulting from business expansion, such as electronic modules, will be outsourced.


We gained ISO 9001:2000 Quality Control certifications in 2004, and will be seeking re-certification in the event of a major contract requirement.


Patents, Trademarks, and Copyrights


Princeton Gamma-Tech Instruments, Inc owns the following patents and trademarks on file with the United States Patent & Trademark Office:


US Patent #

Expiration Date

Title5,349,193

May 20, 2013

Highly sensitive nuclear spectrometer apparatus and method.5,393,982

May 20, 2013

Highly sensitive nuclear spectrometer apparatus and method.5,608,222

April 7, 2015

Analog to digital conversion technique for spectroscopy.


7


Research and Development


Princeton's engineering and technical staff have over 200 years combined experience in gamma-ray and X-ray spectroscopy including detector development, signal processing and firmware/software development. Engineering modeling tools include detector simulation software, graphic display simulators, Computer Aided Design packages for electronics and mechanical assembly, and a suite of firmware development tools.


In addition to Princeton's own R&D staff, it regularly uses subcontracting in software, hardware and design tasks related to new and existing product development projects.


Regulation and Environmental Compliance


Due to the nature of PGTI's business, we are required to comply with the following agencies in order to conduct operations:


●
Nuclear Regulatory Commission licenses for the possession and distribution of radioactive sources used for testing and calibrating equipment has been taken over by New Jersey Department of Environmental Protection.●
OSHA (Occupational and Safety Health Administration) regulations relating to the handling and use of hazardous chemicals.●
EPA (Environmental Protection Agency) regulations relating to the storage, use and disposal of hazardous substances.●
Department of Commerce Export Administration regulations relating to the sale of equipment overseas.●
Various State and Federal Labor laws.


As of March 13, 2012, we are currently in compliance with all state and federal agencies.


Employees


As of March 13, 2012 we had 14 full-time and 3 part-time employees. None of our employees are represented under a collective bargaining agreement. We believe our relations with our employees to be good.


Reports to Security Holders.


You may read and copy any materials that we file with the Securities and Exchange Commission at the Securities and Exchange Commission's public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may also find all of the reports that we have filed electronically with the Securities and Exchange Commission at their Internet site www.sec.gov.


ITEM 2. PROPERTIES


PGTI utilizes a 13,000 square foot facility for the manufacture of gamma-ray and X-ray detection equipment and associated electronics. Princeton possesses equipment for vacuum pumping, thin film deposition, wet chemistry semiconductor processing, and semiconductor diffusion. We lease this facility at an average rate of $24,566 per month which includes electricity. Our lease has a term extending through March 31, 2015.


ITEM 3. LEGAL PROCEEDINGS


We are not a party to any pending legal proceeding. To the knowledge of our management, no federal, state or local governmental agency is presently contemplating any proceeding against us. No director, executive officer or other person who may be deemed to be our "affiliate" or who is the owner of record or beneficially of more than five percent of our common stock is a party adverse to us or has a material interest adverse to us in any proceeding.


8


ITEM 4. MINE SAFETY DISCLOSURES


Not applicable to Princeton Security Technologies, Inc.


PART II


ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES


Our common stock commenced to trade on the "OTC Bulletin Board" in the first quarter of 2008 under the symbol "PSGY." The bid and ask price since the trading began has ranged from $0.04 to $1.25. Trading prices are inter-dealer quotations as reported do not necessarily reflect transactions, retail markups, mark downs or commissions. As of March 13, 2012, the bid and ask price for our stock was $0.25and $0.50 and the last trading price $0.5.


Quarter Ended

High Price

Low PriceDecember 2011

$
0.40

$
0.16September 2011

$
0.25

$
0.17June 2011

$
0.51

$
0.20March 2011

$
0.75

$
0.05December 2010

$
0.10

$
0.05September 2010

$
0.18

$
0.02June 2010

$
0.19

$
0.01March 2010

$
1.01

$
0.05


Holders.


The number of record holders of our common stock as of March, 2012, was 62.


Dividends.


We have declared a cash dividend of $.01 on our common stock. Based on future growth, we intend to continue declaring dividends of a minimum $.01 per annum.


Securities Authorized for Issuance under Equity Compensation Plans.


Plan Category

Number of Securities to be issued upon exercise of outstanding options, warrants and rights

Weighted-average exercise price of outstanding options, warrants and rights

Number of securities remaining available for future issuance under equity compensation plans excluding securities reflected in column (a)(a)

(b)

(c)Equity compensation plans approved by security holders


0


0


0Equity compensation plans not approved by security holders


386,000

$
1.02


14,869,513Total

$
386,000


1.02


14,869,513


9


Recent Sales of Unregistered Securities.


There were no sales of Unregistered Securities in the years 2010 and 2011.


Use of Proceeds of Registered Securities.


There were no sales of Registered Securities in the years 2010 and 2011.


Purchases of Equity Securities by Us and Affiliated Purchasers.


There were no purchases of our equity securities by us or any affiliated purchasers during the calendar year ended December 31, 2011.


ITEM 6. SELECTED FINANCIAL DATA


The following table shows selected summarized financial data for the Company at the dates and for the periods indicated. The data should be read in conjunction with the financial statements and notes included herein beginning on page F-1.


STATEMENT OF OPERATIONS DATA


For the Year Ended December 31, 2010

For the Year Ended December 31, 2009Revenues

$
4,157,675

$
2,565,512General and Administrative Expenses


758,120


629,885Net Profit (Loss)


495,599


44,700Basic Income (Loss) per Share


.04


.00Diluted Income (Loss) per Share


.04


.00Weighted Average Number of Shares Outstanding


14,144,238


13,771,332Weighted Average Number of Fully Diluted Shares Outstanding


14,144,238


13,771,332


BALANCE SHEET DATA


December 31, 2010

December 31, 2009Total Current Assets

$
1,253,337

$
615,025Total Assets


1,288,250


639,621Total Current Liabilities


702,646


479,381Working Capital


550,691


135,644Stockholders' Equity


585,604


160,240


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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.


Plan of Operation.


General


Certain statements in this Report constitute "forward-looking statements." Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Factors that might cause such a difference include, among others, uncertainties relating to general economic and business conditions; industry trends; changes in demand for our products and services; uncertainties relating to customer plans and commitments and the timing of orders received from customers; announcements or changes in our pricing policies or that of our competitors; unanticipated delays in the development, market acceptance or installation of our products and services; changes in government regulations; availability of management and other key personnel; availability, terms and deployment of capital; relationships with third-party equipment suppliers; and worldwide political stability and economic growth. The words "believe", "expect", "anticipate", "intend" and "plan" and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made.


Critical Accounting Policies and Estimates


The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from these estimates under different assumptions or conditions. The Company believes there have been no significant changes during the year ended December 31, 2011.


The Company's accounting policies are more fully described in Note 1 of the consolidated financial statements. As discussed in Note 1, the preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions about the future events that affect the amounts reported in the consolidated financial statements and the accompanying notes. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual differences could differ from these estimates under different assumptions or conditions. The Company believes that the following addresses the Company's most critical accounting policies.


We recognize revenue in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 104, "Revenue Recognition" ("SAB 104"). Under SAB 104, revenue is recognized at the point of passage to the customer of title and risk of loss, when there is persuasive evidence of an arrangement, the sales price is determinable, and collection of the resulting receivable is reasonably assured. We recognize revenue as services are provided with specific long lead time orders.


Our allowance for doubtful accounts is maintained to provide for losses arising from customers' inability to make required payments. If there is deterioration of our customers' credit worthiness and/or there is an increase in the length of time that the receivables are past due greater than the historical assumptions used, additional allowances may be required. For example, at December 31, 2011, every additional one percent of our accounts receivable that becomes uncollectible would reduce our operating income by approximately $2,034


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We account for income taxes in accordance with FASB ASC Topic 740, "Accounting for Income Taxes" (ASC Topic 740). Under ASC Topic 740, deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets will be reflected on the balance sheet when it is determined that it is more likely than not that the asset will be realized. A valuation allowance has currently been recorded to reduce our deferred tax asset to $0.


Our Business Growth


For the 12 month period ending December 31, 2011 our sales increased to $4,157,675 from $2,565,512. With the increased sales, our Net Profit was $495,599 compared to a Net Profit of $44,700 for the same 12 month period in 2010. Our Radioactive Isotope Identifiers had the biggest sales volume of all product categories with the sales of $3,078,159, and the second biggest category is the Nuclear products with the sale of $622,424 for the 12 month period. The third largest sales category is X-ray Detectors. The largest growth for the 12 month period was in Radioactive Isotope Identifiers, where the sales grew to $3,078,159 from $1,294,504 which represents 138% growth. This was due to enhanced sales distribution as well as introducing the new and more competitive products and applications to the market, as well as expanding more aggressively into the new geographical markets such as China.


The Company expects the growth to continue in the year 2012. Most of the growth will come from Radioactive Isotope Identifier products. We also expect X-Ray Detectors to generate a reasonable amount of growth in Sales. We expect the Nuclear Products to generate a moderate growth or remain at the same level as year 2011.


Results of Operations


Total sales increased $1,592,161 for the comparable 12 month period in 2011 from 2010. Our Operating expenses increased by 24% for the year ended December 31, 2011, to $1,490,014 from $1,203,034 for the 2010 year end. We had a net profit of $495,599 for the calendar year 2011 compared to $44,700 for the same period in 2010.


The profit was a reflection of the efforts to control our operating expenses, as well as move more profitable products from the research and development stage and early stage commercialization into market. We still will need increased sales to reach profitability and cover all of our operating cost.


General and administrative expenses increased 20% from $629,885 for calendar year 2010 to $758,120 for the calendar year 2011. Marketing expenses increased 41% from $246,109 to $347,002 in the year 2011 and our Research and Development expenses increased 24% from $304,262 to $376,727 in the year 2011. We expect our expenses to increase in the future as we expand our sales revenues and our operations.


Since we are in the initial phases of product sales for some new products, we are hopeful sales will increase and be able to cover somewhat increased operating cost.


Off Balance Sheet Arrangements


We had no off balance sheet arrangements during the year ended December 31, 2011.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


The financial statements of the Company are set forth immediately following the signature page to this Form 10-K.


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE


The Company has had no disagreements with its certified public accountants with respect to accounting practices or procedures or financial disclosure.


12


ITEM 9A. CONTROLS AND PROCEDURES


Evaluation of Disclosure Controls and Procedures


Our management, which consists of our President /CEO and Principal Financial Officer evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our President and Principal Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective such that the information required to be disclosed by us in reports filed under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (ii) accumulated and communicated to our management, including our CEO and Principal Financial Officer, as appropriate to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected; however, our CEO and Principal Financial Officer believes our controls and procedures provide reasonable assurance as set forth above..


Management's Annual Report on Internal Control over Financial Reporting


Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States.


Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.


Our management evaluated the effectiveness of our internal control over financial reporting as of December 31, 2011. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control - Integrated Framework. Based on this evaluation, our management concluded that, as of December 31, 2011, our internal control over financial reporting was effective.


This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Security and Exchange Commission that permit the Company to provide only management's report in this annual report.


Changes in internal control over financial reporting


There have been no changes in internal control over financial reporting that occurred during the last fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the internal control over financial reporting.


ITEM 9B. OTHER INFORMATION


None


PART III


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS AND COPRORATE GOVERNANCE


The following table sets forth the name, age, and position of each executive officer and director and the term of office of each director of Princeton:


13


Name

Age

Position

Director SinceJuhani Taskinen

55

CEO, Director

2005David Brown

40

Director

2005Trupti Mehta

53

Principal Financial Officer

2007


The term for each officer is for one year and until a successor is elected at the annual meeting of the board of directors and is qualified, subject to removal by the board of directors.


Princeton does not have a standing audit, nominating or compensation committee. The size of Princeton's board has not permitted the board of directors to divide up some of the corporate governance provisions. It is anticipated as our business expands, that board of director committees will be formed. At this time, however, the exact timing and the nature of such committees is unknown. We will form an audit and compensation committee. We currently have one independent director and will seek additional directors with financial and accounting knowledge to serve on these committees. At this time we do not know of any persons who will be nominated.


Biographical information


Set forth below is certain biographical information with respect to Princeton's existing officer and directors.


Juhani Taskinen --


David Brown --


Trupti Mehta


There are no family relationships among our officers and directors.


Our current directors are Messrs. Taskinen and Brown. Under our bylaws, directors are elected annually at the annual meeting of shareholders to hold office for one year or until their successors are duly elected and qualified. Board vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority vote of the directors then in office, even if less than a quorum, or by a sole remaining director. The executive officers are appointed by the Board and serve at their discretion.


Term of Office


The terms of office of the current directors shall continue until the annual meeting of stockholders, which has been scheduled by the Board of Directors to be held in June of each year. The annual meeting of the Board of Directors immediately follows the annual meeting of stockholders, at which executive officers for the coming year are elected. We believe our directors' business experience, particularly, the time spent in our industry qualifies them as directors of the Company.


14


Significant Employees


There are no significant employees.


Family Relationships


There are no family relationships between any of our directors or executive officers.


Involvement in Certain Legal Proceedings


During the past five years, none of our present or former directors, executive officers or persons nominated to become directors or executive officers:


(1) Filed a petition under the federal bankruptcy laws or any state insolvency law, nor had a receiver, fiscal agent or similar officer appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;


(2) Was convicted in a criminal proceeding or named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);


(3) Was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him or her from or otherwise limiting his involvement in any type of business, securities or banking activities;


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


Compliance with Section 16(a) of the Exchange Act


To our knowledge, during our past fiscal year and since then, all filings required to be made by members of management or others pursuant to Section 16(a) of the Exchange Act, have been duly filed.


Code of Ethics


We are in the process of establishing a code of ethics and should have it in place during the third quarter of 2012.


Nominating Committee


We have not established a Nominating Committee because we believe that our two Board of Directors members are able to effectively manage the issues normally considered by a Nominating Committee.


If we do establish a Nominating Committee, we will disclose this change to our procedures by which shareholders may recommend nominees to our board of directors.


Audit Committee


We do not have an Audit Committee separate from our Board of Directors because of our present limited operations.


15


ITEM 11. EXECUTIVE COMPENSATION


SUMMARY COMPENSATION TABLE


The following table sets forth, for the fiscal years indicated, all compensation awarded to, earned by or paid to Princeton's Chief Executive Officer and each of the other executive officers that were serving as executive officers at December 31, 2011 (collectively referred to as the "Named Executives"). No other executive officer serving during 2011 received compensation greater than $100,000.


Summary Compensation Table


Name and Principal Position

Year

Salary

Bonus

Stock
Awards

Option
Awards

Non-Equity Incentive Plan Compensation

All Other Compensation

TotalJuhani Taskinen, CEO


2011


-


-


-


-


-

$
203,000

$
203,0002010


-


-


-


-


-

$
168,000

$
168,000Trupti Mehta


2011

$
103,000




$
8,600










$
111,600


______________


Outstanding Equity Awards At Fiscal Year-End


Option Awards







Stock AwardsName

Number of securities underlying unexercised Options (#) Exercisable

Number of Securities Underlying Unexercised Options (#) Unexercisable

Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)

Option Exercise Price ($)

Option Expiration Date

Number of Shares or Units of Stock That Have Not Vested (#)

Market Value of Shares or Units of Stock That Have Not Vested ($)

Equity Incentive Plan Awards: Number of Unearned Shares Units or Other Rights That Have Not Vested (#)

Equity Incentive Plan Awards Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (#)Juhani Taskinen


30,000


-


-

$
1.10


12/31/2012


-


-


-


-David Brown


30,000


-


-

$
1.10


12/31/2012


-


-


-


-


_______________
The directors received 30,000 stock options on December 31, 2007. All options are for a term of 5 years and have an exercise price of $1.10 per share. There are no limitations on exercise by the option holders. All options are non-assignable.


16


Outstanding Equity Awards.


See the heading "Compensation of Directors" below. Also, see the heading "Securities Authorized for Issuance Under Equity Compensation Plans" in Part II, Item 5, above.


Board of Directors Compensation


Each director may be paid his expenses, if any, of attendance at each meeting of the board of directors. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefore. We did not compensate our directors for service on the Board of Directors during fiscal 2011.


No other compensation arrangements exist between Princeton and our Directors.


Directors Compensation for year 2011


Name


Fees Earned or Paid in Cash ($)

Stock Awards ($)

Option Awards ($)

Non-Equity Incentive Plan Compensation ($)

Non-Qualified Deferred Compensation Earnings ($)

All Other Compensation ($)

Total ($)Juhani Taskinen


-


-


-


-


-


-

$
203,000David Brown




$
21,000


-

$
20,000


-


-

$
41,000


_______________
The dollar amount of the option awards was determined using the Black-Scholes calculation relying on a current stock price of $1.10 per share and a discount rate of 4.35%.


Mr. Brown received $41,000 in compensation in 2011, via Third Letter Corporation, Mr. Brown is involved in the marketing and sales for the Homeland Security marketplace.


Finn Partners was paid a Bonus of $25,000 in 2011. David Brown was paid a bonus of $20,000 in 2011.


Changes in Control.


Princeton does not have any employment contracts with our executive officers. No other compensatory plan or arrangements exist between Princeton and our executive officers that results or will result from the resignation, retirement or any other termination of such executive officer's employment with Princeton or from a change-in-control of the Company.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS


The following table sets forth, as of December 31, 2011, the names, addresses and number of shares of common stock beneficially owned by all persons known to the management of Princeton to be beneficial owners of more than 5% of the outstanding shares of common stock, and the names and number of shares beneficially owned by all directors of Princeton and all executive officers and directors of Princeton as a group (except as indicated, each beneficial owner listed exercises sole voting power and sole dispositive power over the shares beneficially owned).


17


For purposes of this table, information as to the beneficial ownership of shares of common stock is determined in accordance with the rules of the Securities and Exchange Commission and includes general voting power and/or investment power with respect to securities. Except as otherwise indicated, all shares of our common stock are beneficially owned, and sole investment and voting power is held, by the person named. For purposes of this table, a person or group of persons is deemed to have "beneficial ownership" of any shares of common stock, which such person has the right to acquire within 60 days after the date hereof. The inclusion herein of such shares listed beneficially owned does not constitute an admission of beneficial ownership.


All percentages are calculated based upon a total number of 14,483,513 shares of common stock outstanding as of December 31, 2011, plus, in the case of the individual or entity for which the calculation is made, that number of options or warrants owned by such individual or entity that are currently exercisable or exercisable within 60 days.


Name and Address of Beneficial Owner

Amount and Nature of
Beneficial Owner

Percentage of Outstanding
Common stockPrincipal ShareholdersFinn-Partners, Inc./Juhani Taskinen / family


5,676,000


39.18
%Third Letter Corporation (David Brown) San Rafael California


1,512,000


10.43
%Mikko Maijala /OY Chemec Espoo Finland


3,178,138


21.94
%Officers and DirectorsJuhani Taskinen


5,676,000


39.18
%David Brown


1,512,000


10.43
%All directors and executive officers of the Company as a group (2 individuals)


7,188,000


49.63
%


______________
Juhani Taskinen is an owner and principal of Finn-Partners, Inc. Mr. Taskinen has voting and investment control over the shares held in Finn-Partners, Inc. through his relationship as the principal of Finn-Partners.


David Brown is an owner and principal of Third Letter Corporation. Mr. Brown has voting and investment control over the shares held in Third Letter Corporation through his relationship as the principal of Third Letter Corporation.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE


Transactions with Promoters and Control Persons


Except as outlined above, there have been no material transactions, series of similar transactions or currently proposed transactions, to which our Company was or is to be a party, in which the amount involved exceeded $60,000 and in which any director or executive officer, or any security holder who is known to us to own of record or beneficially more than five percent of our common stock, or any member of the immediate family of any of the foregoing persons, or any promoter or founder had a material interest.


18


ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES


The following is a summary of the fees billed to us by our principal accountants during the calendar years ended December 31, 2011, and December 31, 2010


Fee category

2011

2010Audit fees

$
28,500

$
21,000Audit-related fees

$
-

$
-Tax fees

$
4,200

$
4,000All other fees

$
-

$
-Total fees

$
32,700

$
25,000


Audit fees. Consists of fees for professional services rendered by our principal accountants for the audit of our annual financial statements and the review of financial statements included in our Forms 10-Q or services that are normally provided by our principal accountants in connection with statutory and regulatory filings or engagements.


Audit-related fees. Consists of fees for assurance and related services by our principal accountants that are reasonably related to the performance of the audit or review of our financial statements and are not reported under "Audit fees."


Tax fees. Consists of fees for professional services rendered by our principal accountants for tax compliance, tax advice and tax planning.


All other fees. Consists of fees for products and services provided by our principal accountants, other than the services reported under "Audit fees," "Audit-related fees" and "Tax fees" above.


Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors.


We do not have an Audit Committee; therefore, there is no Audit Committee policy in this regard. However, we do require approval in advance of the performance of professional services to be provided us by our principal accountant. Additionally, all services rendered by our principal accountant are performed pursuant to a written engagement letter between us and the principal accountant.


ITEM 15. EXHIBITS, Financial Statement Schedules.


Exhibit Number

Description3.2

Articles of Incorporation3.3

Bylaws31.1

302 Certification of Juhani Taskinen31.2

302 Certification of CFO32.1

906 Certification-CEO32.1

906 Certification-CFO


19


SIGNATURES


In accordance with Section 13 or 15(d) of the Securities Exchange Act, the Company caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.




PRINCETON SECURITY TECHNOLOGIES, INC.Date: March 20, 2012
By
Juhani TaskinenJuhani Taskinen, CEO, President andChairman of theBoard of DirectorsDate: March 20, 2012
By
Trupti MehtaTrupti Mehta, Principal FinancialOfficer


In accordance with the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


Date: March 20, 2012
By
David BrownDavid Brown, Director


20


PRINCETON SECURITY TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS


December 31, 2011

December 31, 2010ASSETSCurrent AssetsCash

$
431,301

$
39,567Accounts receivable -net of allowance


203,430


225,827Other receivables


6,921


1,030Inventory


575,310


289,872Prepaid expenses


36,375


58,729Total Current Assets


1,253,337


615,025Property, plant & equipment (net of accumulated depreciation of $1,406,279 and $1,398,115 respectively)


34,913


24,596Total Assets

$
1,288,250

$
639,621LIABILITIESAccounts payable

$
166,121

$
178,074Accrued expenses


66,944


48,526Accrued related party expenses


-


36,000Accrued vacation expenses


43,950


33,647Credit line advances


-


23,684Deferred revenue


425,631


159,450Total Current Liabilities


702,646


479,381Total Liabilities


702,646


479,381STOCKHOLDERS' EQUITYPreferred stock; $.001 par value, 10,000,000 shares authorized; no shares issued and outstanding


-


-Common stock; $.001 par value, 90,000,000 shares authorized; 14,483,513 and 14,043,513 shares issued and outstanding as of December 31, 2011 and December 31, 2010, respectively


14,483


14,043Additional paid-in capital


2,035,735


1,961,575Retained earnings


(1,464,614
)

(1,815,378
)Total Stockholders' Equity


585,604


160,240Total Liabilities and Stockholders' Equity

$
1,288,250

$
639,621


See notes to Audited Consolidated Financial Statements.


F-1


Princeton Security Technologies, Inc
CONSOLIDATED STATEMENTS OF OPERATIONS


For the Year Ended December 31,2011

2010RevenuesSales (net of returns)

$
4,157,675

$
2,565,512Costs of goods sold


2,167,618


1,319,577Gross Profit


1,990,057


1,245,935ExpensesDepreciation and amortization


8,165


22,778Selling and marketing


347,002


246,109General and administrative


758,120


629,885Research and development


376,727


304,262Total Expenses


1,490,014


1,203,034Profit from operations


500,043


42,901Other income/(expenses)


(4,444
)

(2,782
)Gain on extinguishment of Liabilities


4,581Provision for income taxes


-


-Net Profit


495,599


44,700Net Profit per share of common stock


0.04


0.00Weighted average number of common shares


14,144,238


13,771,332


See notes to Audited Consolidated Financial Statements.


F-2


PRINCETON SECURITY TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the year ended December 31, 2011 and 2010


2011

2010Cash flow from operating activitiesNet income/(loss)

$
495,599

$
44,700Depreciation and amortization


8,165


22,778Provision for inventory reserves


(17,526
)Provision for allowance on accounts receivable


(16,426
)Stock issued for services and compensation


74,600


23,000Change in operating assets and liabilitiesAccounts receivable


22,397


55,604Other receivables


(5,891
)

(430
)Inventory


(285,438
)

(72,396
)Prepaid expenses


22,354


(25,837
)Accounts payable


(11,953
)

(137,627
)Accrued expenses


28,720


43,545Accrued Related Party Expenses


(36,000
)

36,000Deferred revenue


266,181


97,043Cash flow provided by operating activities


578,734


52,428Cash flow from investing activitiesPurchase of property and equipment


(18,481
)

(19,000
)Cash flow used in investing activities


(18,481
)

(19,000
)Cash flow from financing activitiesLines of Credit


(23,684
)

(15,194
)Dividend Paid


(144,835
)

-Cash flow provided by financing activities


(168,519
)

(15,194
)Increase/(decrease) in cash position


391,734


18,234Cash position at beginning of period


39,567


21,333Cash position at end of period

$
431,301

$
39,567Supplemental disclosure of cash flow information:Cash paid for:Interest expense


-


-Stock Issued for retirement of debt


-


6,000Income taxes


-


-


See notes to Audited Consolidated Financial Statements.


F-3


PRINCETON SECURITY TECHNOLOGIES, INC.
Consolidated Statement Of Stockholders ' Equity(Deficit)
For the Year ended December 31, 2011 and 2010


Common StockShares

Amount

Additional 
Paid-in 
capital

Retained earnings 
(deficit)

Total stockholders' equity (deficit)Balance at December 31,2008


11,781,375

$
11,781

$
1,406,959

$
(1,439,255
)
$
(20,515
)Stock Issued for Services


344,000


344


91,906


-


92,250Stock Issued for conversion of debt


1,578,138


1,578


434,050


-


435,628Net Loss for the year


-


-


-


(420,823
)

(420,823
)Balance at December 31, 2009


13,703,513


13,703


1,932,915


(1,860,078
)

86,540Stock Issued for Services


340,000


340


28,660


-


29,000Net Income for the year


-


-


-


44,700


44,700Balance at December 31, 2010


14,043,513

$
14,043

$
1,961,575

$
(1,815,378
)
$
160,240Stock Issued for Services


440,000


440


74,160





74,600Dividend Paid











(144,835
)

(144,835
)Net Income for the year











495,599


495,599Balance at December 31, 2011


14,483,513

$
14,483

$
2,035,735

$
(1,464,614
)
$
585,604


See notes to Financial Statements.


F-4


PRINCETON SECURITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2011 and 2010


Note 1 Organization


Princeton Security Technologies, Inc. (the Company) was incorporated on September 8, 2006 in the State of Nevada. The Company is the holding company of Princeton Gamma-Tech Instruments, Inc. (PGTI). PGTI was incorporated on February 16, 2005 in the State of New Jersey. On February 19, 2005, PGTI purchased the assets and assumed the liabilities of Princeton Gamma-Tech, Inc. This acquisition included the assets, liabilities, operations, clients and intellectual property of Princeton Gamma-Tech, Inc., including its wholly-owned subsidiary in the United Kingdom, Princeton Gamma-Tech (UK) Limited. On December 28, 2006, Princeton Gamma-Tech (UK) Limited was sold. The assets and operations of Princeton Gamma-Tech (UK) Limited were sold the previous year. The Company has elected a fiscal year end of December 31st.


Princeton Gamma-Tech Instruments, Inc. is a leading supplier of X-ray and Gamma-ray Detectors and Spectroscopy systems, portable Radioisotope Identifiers, and portable Chemical Analyzers. The Company serves a broad customer base in scientific research, industrial materials analysis, and Homeland Security. The Company operates a full customer service and support program, backed by a modern manufacturing and service facility.


Note 2 Summary of Significant Accounting Policies


This summary of significant accounting policies of Princeton Security Technologies, Inc. (the "Company") is presented to assist in understanding the Company's financial statements. The financial statements and notes are representations of the Company's management who are responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements, which are stated in U.S. Dollars.


Principles of consolidation


The consolidated financial statements include the accounts of the Company and its subsidiary. All inter-company accounts and transactions have been eliminated in consolidation.


Use of Estimates in the preparation of the financial statements


The preparation of the Company's financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in these financial statements and accompanying notes. Actual results could differ from those estimates.


Fair Value of Financial Instruments


The Financial Accounting Standards Board ("FASB") issued ASC Topic 825, Disclosure About Fair Value of Financial Instruments. ASC Topic 825 requires disclosure of fair value information about financial instruments when it is practicable to estimate that value. The carrying amount of the Company's cash and cash equivalents, accounts receivable, prepaid expenses and other current expenses, and the current portions of notes payable approximate their estimated fair values due to their short-term maturities.


Concentrations of Risk


At December 31, 2011 approximately 67% of the Accounts Receivable was from foreign customers. Amongst the domestic customers, the Company had one customer that accounted for 14% and another customer that accounted for 11% of the accounts receivable. The Company performs ongoing credit evaluations of its customers' financial condition and generally requires advance payments from its customers.


Cash and Cash Equivalents


F-5


PRINCETON SECURITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS (Continued)
December 31, 2011 and 2010


The Company considers all highly liquid debt instruments with an original maturity of three months or less to be cash equivalents. The Company maintains cash and cash equivalents at various financial institutions in New Jersey. Accounts at each institution are insured by the Federal Deposit Corporation up to $250,000. At December 31, 2011 the Company's uninsured cash balance was $78,894. The Company has not experienced any significant losses on cash and cash equivalents.


Accounts Receivable and Allowance for Doubtful Accounts


Most of our Customers have agreements of Payment of a portion of the total Sale on acknowledgement of the Order. Our normal allowance for doubtful debts would be 1% of total receivables.


Inventory


The Company maintains an inventory comprised of raw materials used to make detectors and spectroscopy systems, radioisotope identifiers and chemical analyzers, work in process and finished goods, as well as service parts. Inventory is recorded at lower of cost or market and is reconciled annually at the close of each fiscal year. The Company periodically analyzes its inventory for potential impairment, assessing the appropriateness of turnover rates and recoverability of costs based on sales cycles and standard holding time for each item. Obsolete and slow moving inventory was written off during the year.


Property, Plant and Equipment


The Company capitalizes property, plant and equipment and depreciates the cost of these items over their useful lives. The useful lives run from 3 to 7 years. The cost is expensed equally over the useful life of each item.


Revenue Recognition


The Company recognizes revenue in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 104, "Revenue Recognition" ("SAB 104"). Under SAB 104, revenue is recognized at the point of passage to the customer of title and risk of loss, when there is persuasive evidence of an arrangement, the sales price is determinable, and collection of the resulting receivable is reasonably assured. We recognize revenue as services are provided. Revenues are reflected net of coupon discounts.


Revenues received as advances on acknowledged sales orders are termed as Deferred Revenue.


Income taxes


The Company is subject to United States income taxes.


Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. The measurement of deferred tax assets is reduced, if necessary, by a valuation allowance for any tax benefits for which future realization is uncertain.


Note 3 Recently Issued Accounting Pronouncements


The Company has reviewed the Accounting Standards Updates through 2011-2012 and have evaluated their effect on the Company's financial statements. Currently, no accounting standards updates materially affect the Company's financial reporting.


F-6


PRINCETON SECURITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS (Continued)
December 31, 2011 and 2010Note 4 Inventory


Year-end inventory values:


2011

2010Raw Materials

$
375,899

$
269,484Work in Progress


33,874


5,047Finished Goods


165,537


23,815Reserve for Obsolete Inventory


-


(8,474
)Total Inventory

$
575,310

$
289,872


No obsolete and slow moving inventory was written off as of December 31, 2011.


Note 5 Property, Plant & Equipment As of December 31:


2011

2010Computers and Equipment

$
1,365,362

$
1,346,881Leashold improvements


75,830


75,830Total


1,441,192


1,422,711Accumulated Depreciation


(1,406,279
)

(1,398,115
)Total Property, Plant & Equipment

$
34,913

$
24,596


Depreciation and amortization expense for the years-ended December 31, 2011 and 2010 were $8,165 $22,778, respectively. No depreciation was allocated to cost of goods sold for either year-end.


Note 6 Accrued Related party expenses


There were no Accrued Related Party Expenses as of December 31, 2011. At December 31,2010 the Accrued Related Party Expenses were $36,000. The Chief Executive of the Company was paid a Bonus in the amount of $36,000 per the Minutes of the Meeting of the Board of Directors held on February 10, 2011.


Note 7 Line of Credit


The Company has no outstanding Notes Payable. The Company does have a standing Line of Credit worth $400,000, at an interest rate of Prime plus 1% floating with a floor rate of 6.75%, with The Bank of Princeton. The Line of Credit dated August 10, 2011 matures on August 10, 2012 is available as of March 13, 2012. The description of collateral is UCC lien on all Business Assets.


Note 8 Stockholder's Equity


F-7


PRINCETON SECURITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS (Continued)
December 31, 2011 and 2010


In 2010, the Company issued 340,000 shares of common stock out of which 60,000 were in payment of a debt and 280,000 were issued to its employees in accordance with an agreement between such employee and the Company.


In 2011, the Company issued 440,000 shares of common stock out of which 50,000 were in payment of a service and 390,000 were issued to employees.


The Company issued a dividend of $.01 per share in December 2011.


Earnings Per Share


The Company accounts for earnings per share under the provisions of ASC Topic 260, "Earnings Per Share", which requires a dual presentation of basic and diluted earnings per share. Basic earnings per share excludes dilution and is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share is computed assuming the conversion of convertible preferred stock and the exercise or conversion of common stock equivalent shares, if dilutive, consisting of unissued shares under options and warrants. Basic and diluted losses are the same as the inclusion of unissued warrants and options in the denominator would be anti-dilutive.


Securities Authorized for Issuance under Equity Compensation Plans.


Plan Category

Number of Securities to be issued upon exercise of outstanding options, warrants and rights (a)

Weighted-average exercise price of outstanding options, warrants and rights (b)

Number of securities remaining available for future issuance under equity compensation plans excluding securities reflected in column (a)(c)Equity compensation plans approved by security holders


0


0


0Equity compensation plans not approved by security holders


386,000

$
1.02


14,869,513Total


386,000

$
1.02


Note 9 Provision for Income Taxes


ASC 740 requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. In the Company's opinion, it is uncertain whether they will generate sufficient taxable income in the future to fully utilize the net deferred tax asset. Accordingly, a valuation allowance equal to the deferred tax asset has been recorded. The total deferred tax asset is calculated by multiplying a 44% combined marginal tax rate by the cumulative NOL of $1,235,280. The total valuation allowance is equal to the total deferred tax asset which includes various temporary differences.


The tax effects of significant items comprising the Company's net deferred taxes as of December 31, 2011 and 2010 were as follows:


F-8


PRINCETON SECURITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS (Continued)
December 31, 2011 and 2010


2011

2010Cumulative NOL

$
1,235,280

$
1,702,758Deferred Tax assets:(35% Federal, 9% New Jersey)Net operating loss carry forwards


543,523


749,214Depreciation


15,454


23,804Research and Development Credit


169,251


126,915Warranty Reserve


11,831


21,184Vacation Adjustment


19,338


14,805Inventory Adjustment


22,313


24,051Inventory Reserve


3,729


3,729Valuation allowance


(785,439
)

(963,702
)$
-

$
-


The income tax provision differs from the amount of income tax determined by applying the combined U.S. federal and state income tax rates of 44% to pretax income from continuing operations for the years ended December 31, 2011 and 2010 due to the following:


2011

2010Reconcilation of tax rate:Tax Effect of Book Income (loss)Federal (35%)

$
173,460

$
15,645State (9%)


44,604


4,023Utilization of NOLS Previously Charged off Against Valuation Allowance


(205,690
)

(70,246
)Increase in Research Credits


(42,336
)

(21,770
)Net Increase in Valuation Allowance due toIncrease in Separate Company NOLSResearch Credits and Other Items


27,428


68,533Non-Deductible Meals and Entertainment and Other Items


2,534


3,815Net Provision

$
-

$
-


The Company's net operating loss carry forwards of approximately $1,235,280 expire in various years through 2030.


F-9


PRINCETON SECURITY TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FIANCIAL STATEMENTS (Continued)
December 31, 2011 and 2010


In July, 2006, the FASB issued ASC 740, Accounting for Uncertainty in Income Taxes which clarifies the accounting for uncertainty in tax positions taken or expected to be taken in a return. ASC 740 provides guidance on the measurement, recognition, classification and disclosure of tax positions, along with accounting for the related interest and penalties. ASC 740 became effective as of January 1, 2007 and had no impact on the Company's financial statements.


Note 10 Commitments


The Company entered into a new 58 month lease agreement for office space on March 1, 2011, expiring March 31, 2015.


The Company is required to make minimum lease payments over the remaining terms of the leases as follows:


2012

$
294,7912013


320,7692014


346,7472015


372,725Total

$
1,335,032


Note 11 Subsequent Events


The Company has evaluated subsequent events from the balance sheet date through the date of this filing, and determined there are no other events that require disclosure.




F-10