----

----

| NevadaState or other jurisdiction ofincorporation or organization | 20-5506885(I.R.S. Employer I.D. No.) |
|-------------------------------------------------------------------|--------------------------------------|

| Title of each classNone | Name of each exchange on which registeredN/A |
|-------------------------|----------------------------------------------|

----

----

----

| -   | Category 1: Radioactive Isotope Identifier Products. |
|---------------|------------------------------------------------------|

| -   | Category 2: Nuclear/ Gamma-ray detectors and spectrometers: |
|---------------|-------------------------------------------------------------|

| -   | Category 3: X-ray detectors and spectrometers. |
|---------------|------------------------------------------------|

----

----

----

| US Patent # | Expiration Date     | Title                                                       |
|-------------|---------------------|-------------------------------------------------------------|
| 5,349,193   | 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.    |

----

| §   | Nuclear Regulatory Commission licenses for the possession and distribution of radioactive sources used for testing and calibrating equipment. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------|

| §   | 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. |
|--------------------|---------------------------------------|

----

| Quarter Ended  | High Price | Low Price |
|----------------|------------|-----------|
| March 31, 2011 | $0.70      | $0.05     |
| December 2010  | $0.10      | $0.05     |
| September 2010 | $0.18      | $0.05     |
| June 2010      | $0.19      | $0.01     |
| March 2010     | $0.05      | $0.05     |
| December 2009  | $1.01      | $1.01     |
| September 2009 | $0.40      | $0.40     |
| June 2009      | $0.51      | $0.51     |
| March 2009     | $0.50      | $0.50     |

----

|     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                                                                                             | 0                                                                                                                                               |
| Equity compensation plans not approved by security holders | 1,600,000                                                                                               | $1.078                                                                                        | 15,643,513                                                                                                                                      |
| Total                                                      | 1,600,000                                                                                               | $1.078                                                                                        | 15,643,513                                                                                                                                      |

|                                                        |   | For the Year EndedDecember 31, 2010 |       |   | For the Year EndedDecember 31, 2009 |   |
|-------------------------------------------------------------|--------|-------------------------------------|------------|--------|-------------------------------------|--------|
| Revenues                                                    |   | $                                   | 2,565,512  |   |                                | $      | 2,036,643 |   |
| General and Administrative Expenses                         |   |                                | 629,885    |   |                                |   | 619,618 |   |
| Net Profit (Loss)                                           |   |                                | 44,700     |   |                                |   | (420,823 | ) |
| Basic Income (Loss) per Share                               |   |                                | .003       |   |                                |   | (0.03 | ) |
| Diluted Income (Loss) per Share                             |   |                                | .003       |   |                                |   | (0.03 | ) |
| Weighted Average Number of Shares Outstanding               |   |                                | 13,771,332 |   |                                |   | 12,119,932 |   |
| Weighted Average Number of Fully Diluted Shares Outstanding |   |                                | 13,771,332 |   |                                |   | 12,119,932 |   |
|  BALANCE SHEET DATA:                                   |   |                                |       |   |                                |   |   |   |
|                                                        |   | December 31, 2010                   |       |   | December 31, 2009                   |   |
| Total Current Assets                                        |   | $                                   | 615,025    |   |                                | $      | 519,180 |   |
| Total Assets                                                |   |                                | 639,621    |   |                                |   | 548,154 |   |
| Total Current Liabilities                                   |   |                                | 479,381    |   |                                |   | 461,614 |   |
| Working Capital                                             |   |                                | 135,644    |   |                                |   | 57,566 |   |
| Stockholders’ Equity (Deficit)                        |   |                                | 160,239    |   |                                |   | 86,540 |   |

----

----

----

----

| Name                     | Age      | Position                                            | Director Since |
|--------------------------|----------|-----------------------------------------------------|----------------|
| Juhani Taskinen          | 54       | CEO, Director                                       | 2005           |
| David Brown              | 39       | Director                                            | 2005           |
| Trupti Mehta   |  52 | Principal Financial Officer     | 2007           |

----

----

| Name and Principal Position |  Year |  Salary |  Bonus | StockAwards | OptionAwards | Non-Equity Incentive Plan Compensation |  All Other Compensation |  Total |
|-----------------------------|------------|--------------|-------------|-------------|--------------|----------------------------------------|------------------------------|-------------|
| Juhani Taskinen, CEO        | 2010       | 0            | 0           | 0           | 0            | 0                                      | $168,000                     | $168,000    |
|                        | 2009       | --           | --          | --          | 0            | --                                     | $144,000                     | $144,000    |
|                        | 2008       | --           | --          | --          | 0            | --                                     | $132,000                     | $132,000    |

| Option Awards                                                                      |   | Stock Awards                                                                                                  |
|------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------|
|              Name |   |        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 ($) |   |             OptionExpiration Date |   |    Number of Shares or Units of Stock That Have Not Vested (#) |   |   |    Market Value of Shares or Units of Stock That Have Not Vested ($) |   |   |  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                                                               |   |                                                                                                          | 350,00030,000 |   |   |   | -0-  |   |   |   | -0-  |   |   |   | $1.10$1.10 |   |  12/31/20119/30/2012 |   |   | -0--0- |   |   |   | -0--0- |   |   |   | -0--0- |   |   |   | -0--0- |   |
|  David Brown                                                             |   |                                                                                                          | 350,00030,000 |   |   |   | -0--0- |   |   |   | -0--0- |   |   |   | $1.10$1.10 |   |  12/31/201112/31/2012 |   |   | -0--0- |   |   |   | -0--0- |   |   |   | -0--0- |   |   |   | -0--0- |   |

|     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              |   |                            | --     |   |                   |   | --      |                    |   |   | -                                          |   |   |                                             | --     |   |                             |   | --     |                        |   |   | $168,000 |   |   |   | $168,000 |   |
| David Brown                  |   |                            | --     |   |                   |   | $10,000 |                    |   |   | -                                          |   |   |                                             | --     |   |                             |   | --     |                        |   |   | - |   |   |   | $10,000 |   |

----

|    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                                                                                 | 0                                                                                                                                         |
| Equity compensation plans not approved by security holders | 1,600,000                                                                                         | $1.078                                                                            | 15,643513                                                                                                                                 |
| Total                                                      | 1,600,000                                                                                    | $1.078                                                                            | 15,643,513                                                                                                                                |

----

|    Name and Address of Beneficial Owner                         |   Amount and Nature ofBeneficial Owner |   Percentage of OutstandingCommon stock |
|--------------------------------------------------------------------------------|--------------------------------------------------|---------------------------------------------------|
| Principal ShareholdersFinn-Partners, Inc./Juhani Taskinen / family             |  5,636,000                                  |  40.13%                                      |   |
|                                                                           |                                             |                                              |   |
| Third Letter Corporation                                                       | 1,600,000                                        | 11.39%                                            |   |
|  San Rafael California                                                    |                                             |                                              |   |
| Mikko Maijala                                                                  | 2,000,000                                        | 14.24%                                            |   |
|  Espoo Finland                                                            |                                             |                                              |   |
| Ascendiant Capital Group, LLC                                                  | 970,000                                          | 6.91%                                             |   |
|  Irvine California                                                   |                                             |                                              |   |
| Officers and Directors                                                         |                                             |                                              |   |
| Juhani Taskinen                                                                | 5,636,000                                        | 40.13%                                            |   |
| David Brown                                                                    | 1,600,000                                        | 11.39%                                            |   |
| All directors and executive officers of the Company as a group (2 individuals) | 7,236,000                                        | 51.52%                                            |   |

| Fee category               | 2010                                    | 2009                              |
|----------------------------|-----------------------------------------|-----------------------------------|
| Audit fees            | $21,000                            | $21,000                      |
| Audit-related fees    | $     --  | $    --  |
| Tax fees         | $4,000                   | $4,000                  |
| All other fees   | $     --  | $     -- |
| Total fees                 | $25,000             | $25,000       |

----

| ExhibitNumber |  Description                          |
|---------------|--------------------------------------------|
| 3.2      | Articles of Incorporation             |
| 3.3           | Bylaws                                |
| 31.1     | 302 Certification of Juhani Taskinen  |
| 31.2     | 302 Certification of CFO              |
| 32.1     | 906 Certification-CEO                 |
| 32.1          | 906 Certification-CFO                      |

----

----

----

| Report of Independent Registered Public Accounting Firm   | 1  |
|----------------------------------------------------------------|---------|
| Consolidated Financial Statements                         |    |
| Consolidated Balance Sheets                                    | 2       |
| Consolidated Statements of Operations                          | 3       |
| Consolidated Statement of Stockholders’ Equity (Deficit) | 4       |
| Consolidated Statements of Cash Flows                          | 5       |
| Notes to Consolidated Financial Statements                     | 6       |

----

|  |            REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To The Board of DirectorsPrinceton Security Technologies, Inc.Princeton, New Jersey We have audited the accompanying consolidated balance sheets of Princeton Security Technologies, Inc. (the Company) and subsidiaries as of December 31, 2010 and 2009, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting, as a basis for designing audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Princeton Security Technologies, Inc. and subsidiaries as of December 31, 2010 and 2009, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.  /s/ Child, Van Wagoner & Bradshaw, PLLCChild, Van Wagoner & Bradshaw, PLLCSalt Lake City, UtahApril 12, 2011  |
|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| PRINCETON SECURITY TECHNOLOGIES, INC.                                                                                                                                                       |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| CONSOLIDATED BALANCE SHEETS                                                                                                                                                                 |
|                                                                                                                                                                                        |   |   |   |   |   |   |
|                                                                                                                                                                                        | December 31, 2010 |   |   | December 31, 2009 |   |
| ASSETS                                                                                                                                                                                      |   |   |   |   |   |   |
| Current Assets                                                                                                                                                                              |   |   |   |   |   |   |
| Cash                                                                                                                                                                                        |   | $ | 39,567 |   |   | $ | 21,333 |   |
| Accounts receivable (net of allowance for doubtful accounts of $0 for 2010 and $16,426 for Dec 31 2009)                                                                                     |   |   | 225,827 |   |   |   | 265,006 |   |
| Other receivables                                                                                                                                                                           |   |   | 1,030 |   |   |   | - |   |
| Inventory                                                                                                                                                                                   |   |   | 289,872 |   |   |   | 199,949 |   |
| Prepaid expenses                                                                                                                                                                            |   |   | 58,729 |   |   |   | 32,892 |   |
|                                                                                                                                                                                        |   |   |   |   |   |   |   |   |
| Total Current Assets                                                                                                                                                                        |   |   | 615,025 |   |   |   | 519,180 |   |
|                                                                                                                                                                                        |   |   |   |   |   |   |   |   |
| Property, plant & equipment (net of accumulated depreciation of $1,398,115 and $1,375,337 respectively)                                                                                 |   |   | 24,596 |   |   |   | 28,374 |   |
| Other assets                                                                                                                                                                                |   |   | - |   |   |   | 600 |   |
|                                                                                                                                                                                        |   |   |   |   |   |   |   |   |
| Total Assets                                                                                                                                                                                |   | $ | 639,621 |   |   | $ | 548,154 |   |
|                                                                                                                                                                                        |   |   |   |   |   |   |   |   |
| LIABILITIES                                                                                                                                                                                 |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                        |   |   |   |   |   |   |   |   |
| Accounts payable                                                                                                                                                                            |   | $ | 178,074 |   |   | $ | 321,701 |   |
| Accrued other liabilities                                                                                                                                                                   |   |   | - |   |   |   | 534 |   |
| Accrued expenses                                                                                                                                                                            |   |   | 48,526 |   |   |   | 10,500 |   |
| Accrued Related Party Expenses                                                                                                                                                              |   |   | 36,000 |   |   |   | - |   |
| Accrued vacation expenses                                                                                                                                                                   |   |   | 33,647 |   |   |   | 27,594 |   |
| Credit Line advances                                                                                                                                                                        |   |   | 23,684 |   |   |   | 38,878 |   |
| Deferred sales revenue                                                                                                                                                                      |   |   | 159,450 |   |   |   | 62,407 |   |
|                                                                                                                                                                                        |   |   |   |   |   |   |   |   |
| Total Current Liabilities                                                                                                                                                                   |   |   | 479,381 |   |   |   | 461,614 |   |
|                                                                                                                                                                                        |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                        |   |   |   |   |   |   |   |   |
| Total Liabilities                                                                                                                                                                           |   |   | 479,381 |   |   |   | 461,614 |   |
|                                                                                                                                                                                        |   |   |   |   |   |   |   |   |
| STOCKHOLDERS’ EQUITY (DEFICIT)                                                                                                                                                        |   |   |   |   |   |   |   |   |
| Preferred stock; $.001 par value, 10,000,000 shares authorized; no shares issued and outstanding                                                                                            |   |   | - |   |   |   | - |   |
| Common stock; $.001 par value, 90,000,000 shares authorized; 14,043,513 and 13,703,513 shares issued and outstanding as of December  31, 2010 and December 31, 2009, respectively |   |   | 14,043 |   |   |   | 13,703 |   |
| Additional paid-in capital                                                                                                                                                                  |   |   | 1,961,575 |   |   |   | 1,932,915 |   |
| Retained earnings (deficit)                                                                                                                                                                 |   |   | (1,815,378 | ) |   |   | (1,860,078 | ) |
|                                                                                                                                                                                        |   |   |   |   |   |   |   |   |
| Total Stockholders’ Equity                                                                                                                                                            |   |   | 160,240 |   |   |   | 86,540 |   |
|                                                                                                                                                                                        |   |   |   |   |   |   |   |   |
| Total Liabilities and Stockholders’ Equity                                                                                                                                            |   | $ | 639,621 |   |   | $ | 548,154 |   |
|                                                                                                                                                                                        |   |   |   |   |   |   |   |   |
| See notes to Consolidated Financial Statements.                                                                                                                                             |

----

| PRINCETON SECURITY TECHNOLOGIES, INC.           |   |
|-------------------------------------------------|--------|
| CONSOLIDATED STATEMENTS OF OPERATIONS           |   |
|                                            |   |   |   |   |   |   |
|                                            |   | For the Year Ended December 31, |   |
|                                            |   | 2010 |   |   | 2009 |   |
| Revenues                                        |   |   |   |   |   |   |
| Sales (net of returns)                          |   | $ | 2,565,512 |   |   | $ | 2,036,643 |   |
| Costs of goods sold                             |   |   | 1,319,577 |   |   |   | 1,236,039 |   |
| Gross Profit                                    |   |   | 1,245,935 |   |   |   | 800,604 |   |
|                                            |   |   |   |   |   |   |   |   |
| Expenses                                        |   |   |   |   |   |   |   |   |
| Depreciation and amortization                   |   |   | 22,778 |   |   |   | 22,106 |   |
| Selling and marketing                           |   |   | 246,109 |   |   |   | 95,909 |   |
| General and administrative                      |   |   | 629,885 |   |   |   | 619,618 |   |
| Research and development                        |   |   | 304,262 |   |   |   | 344,220 |   |
| Total Expenses                                  |   |   | 1,203,034 |   |   |   | 1,081,853 |   |
|                                            |   |   |   |   |   |   |   |   |
| Profit from operations                          |   |   | 42,901 |   |   |   | (281,249 | ) |
|                                            |   |   |   |   |   |   |   |   |
| Other income/(expenses)                         |   |   | (2,782 | ) |   |   | (139,574 | ) |
| Gain on extinguishment of Liabilities           |   |   | 4,581 |   |   |   | - |   |
| Provision for income taxes                      |   |   | - |   |   |   | - |   |
|                                            |   |   |   |   |   |   |   |   |
| Net Profit                                      |   | $ | 44,700 |   |   | $ | (420,823 | ) |
|                                            |   |   |   |   |   |   |   |   |
| Net Profit per share of common stock            |   | $ | 0.00 |   |   | $ | (0.03 | ) |
|                                            |   |   |   |   |   |   |   |   |
| Weighted average number of common shares        |   |   | 13,771,332 |   |   |   | 12,119,932 |   |
|                                            |   |   |   |   |   |   |   |   |
| See notes to Consolidated Financial Statements. |

----

|  PRINCETON SECURITY TECHNOLOGIES, INC.              |
|----------------------------------------------------------|
| Consolidated Statement Of Stockholders ' Equity(Deficit) |
| For the Year ended December 31, 2010 and 2009            |
|                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                     |   | Common Stock |   |   |   |   |   |   |   |   |   |   |
|                                                     |   | Shares |   |   | 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 |   |   |   | - |   |   |   | 92,250 |   |
|                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock Issued for conversion of debt                      |   |   | 1,578,138 |   |   |   | 1,578 |   |   |   | 434,050 |   |   |   | - |   |   |   | 435,628 |   |
|                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Loss for the year                                    |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (420,823 | ) |   |   | (420,823 | ) |
|                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance at December 31, 2009                             |   |   | 13,703,513 |   |   |   | 13,703 |   |   |   | 1,932,915 |   |   |   | (1,860,078 | ) |   |   | 86,540 |   |
|                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock Issued for Services                                |   |   | 340,000 |   |   |   | 340 |   |   |   | 28,660 |   |   |   | - |   |   |   | 29,000 |   |
|                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Income for the year                                  |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 44,700 |   |   |   | 44,700 |   |
|                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance at December 31, 2010                             |   |   | 14,043,513 |   |   | $ | 14,043 |   |   | $ | 1,961,575 |   |   | $ | (1,815,378 | ) |   | $ | 160,240 |   |
|                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   See notes to Consolidated Financial Statements.   |

----

| PRINCETON SECURITY TECHNOLOGIES, INC.             |   |
|---------------------------------------------------|--------|
| CONSOLIDATED STATEMENTS OF CASH FLOWS             |   |
| For the Years Ended December 31, 2010 and 2009    |   |
|                                              |   |   |   |   |   |   |
|                                              |   | 2010 |   |   | 2009 |   |
| Cash flow from operating activities               |   |   |   |   |   |   |
| Net income/(loss)                                 |   | $ | 44,700 |   |   | $ | (420,823 | ) |
| Depreciation and amortization                     |   |   | 22,778 |   |   |   | 22,106 |   |
| Provision for inventory reserves                  |   |   | (17,526 | ) |   |   | 26,000 |   |
| Provision for allowance on accounts receivable    |   |   | (16,426 | ) |   |   | - |   |
| Stock issued for services                         |   |   | 23,000 |   |   |   | 92,250 |   |
| Change in operating assets and liabilities        |   |   |   |   |   |   |   |   |
|   Accounts receivable                   |   |   | 55,604 |   |   |   | (145,990 | ) |
|   Other receivables and deposits        |   |   | (430 | ) |   |   | 77,831 |   |
|   Inventory                             |   |   | (72,396 | ) |   |   | 234,792 |   |
|   Prepaid expenses                      |   |   | (25,837 | ) |   |   | 32,017 |   |
|   Accounts payable                      |   |   | (116,820 | ) |   |   | (33,271 | ) |
|   Accrued expenses                      |   |   | 5,898 |   |   |   | 54,703 |   |
|   Warranty expenses                     |   |   | 37,646 |   |   |   | 10,500 |   |
|   Deferred sales                        |   |   | 97,043 |   |   |   | 30,728 |   |
| Cash flow provided by operating activities        |   |   | 37,234 |   |   |   | (19,157 | ) |
|                                              |   |   |   |   |   |   |   |   |
|                                              |   |   |   |   |   |   |   |   |
| Cash flow used in investing activities            |   |   |   |   |   |   |   |   |
|   Purchace of property and equipment    |   |   | (19,000 | ) |   |   | - |   |
| Cash flow from investing activities               |   |   | (19,000 | ) |   |   | - |   |
|                                              |   |   |   |   |   |   |   |   |
| Cash flow from financing activities               |   |   | - |   |   |   | - |   |
|                                              |   |   |   |   |   |   |   |   |
| Increase/(decrease) in cash position              |   |   | 18,234 |   |   |   | (19,157 | ) |
|                                              |   |   |   |   |   |   |   |   |
| Cash position at beginning of period              |   |   | 21,333 |   |   |   | 40,490 |   |
|                                              |   |   |   |   |   |   |   |   |
| Cash position at end of period                    |   | $ | 39,567 |   |   | $ | 21,333 |   |
|                                              |   |   |   |   |   |   |   |   |
| Supplemental disclosure of cash flow information: |   |   |   |   |   |   |   |   |
| Cash paid for:                                    |   |   |   |   |   |   |   |   |
| Interest expense                                  |   | $ | - |   |   | $ | 21,788 |   |
| Income taxes                                      |   | $ | - |   |   | $ | - |   |
| Stock Issued for retirement of debt               |   | $ | 6,000 |   |   | $ | 435,628 |   |
|                                              |   |   |   |   |   |   |   |   |
| See notes to Consolidated Financial Statements.   |   |

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| 2011   |   |  $   200,000            |
|--------|--------|---------------------------------------------|
| 2012   |   |       294,791 |
| 2013   |   |       320,769 |
| 2014   |   |       346,747 |
| 2015   |   |       372,725 |
|   |   |                                        |
| Total  |   |  $1,535,032                            |

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