UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C.  20549





FORM
10-K


(Mark
One)


[x]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934





For the
fiscal year ended:       December 31,
2008





[
]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.


(Exact
name of registrant as specified in charter)





Nevada                                        20-5506885


State 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 registered


None                                             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
[  ]                      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


Yes
[x]                      No   [   ]





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 [   ]





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-KSB or any amendment to
this Form 10-KSB.    [ ]





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  ̈                                                                                                           Accelerated
filer  ̈


Non-accelerated filer   ̈ (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
[   ]   No [ 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 $0.12 bid and $0.51 ask as of April 14,
2009.  The bid on April 14, 2009, was $0.12 giving the shares held by
non-affiliates a market value of $511,200.  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  April 14, 2009, the Registrant had 11,781,375 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






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 Aforward-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 Outokumpu Oyj 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.





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.  The creation of a Nevada parent corporation was
accomplished as part of Princeton’s ongoing efforts to start seeking equity
investments from outside investors.   Princeton offices and
facilities will continue to be located in Princeton, New
Jersey.   Princeton’s primary focus will continue to be on the
X-ray and Gamma-ray Detectors and Spectroscopy systems, Radioactive Isotope
Identifiers. Our products detect radioactive and other
materials in various environmental settings.





Products





Through
the purchase of the detector business, Princeton acquired X-ray and Gamma-ray
Detectors and Spectroscopy systems, and portable Radioisotope
Identifiers.  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, 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 sensor , Sodium Iodide and Lanthanum
Bromide  scintillators, which are the  key component
in  Gamma-ray detection systems.  We do 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
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 Defender.  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.  This product detects
neutron and gamma radiation from over 100 isotopes. The SAM Defender was
designed to meet the latest American National Standards Institute “ANSI” and
other government standards for portable radiation detection
equipment


We have
added last year a Fixed Installation unit, called Area Monitor, to our product
offering. That products 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.











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


PGTI is
one of the handful of companies worldwide that manufacturers 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.





-
            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.  PGTI
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.







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
chemicals or radiation in packages or small 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.





4


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 chemical detection.  SAM defender, Area
Monitors and as well as  some High Purity Germanium detectors and 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.





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 verses 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 , a publicly held US company,
with a large selection of nuclear detection products and technology ; Canberra
Industries, Inc., a subsidiary of French Areva group, specializing in bigger
nuclear projects and 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 Isotope
Identifiers designed by ICX Technologies.





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.





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.  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 two years improving upon
the technology acquired; further developing products and applications 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.  Two markets we see as new
uses for our products are in the homeland security marketplace where testing for
potential dangerous radiation is becoming an important issue and in the “quality
control” area where testing equipment has become a crucial part of the
manufacturing process.









5


Although
security issues have been around before, there is new focus on the need to be
able to detect various   radioactive isotopes in differing
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 chemicals and radiation are
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.





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 PGTI and affiliate companies.  Campaigns
run on a regular basis will include a tradeshow schedule, direct mail, email and
fax, 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.





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 DC
based DHS (Department of Homeland Security) events, and utilize a lobbyist in
Washington DC 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.  PGTI 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 in government agencies to identify key people in network
solution discussions. Once this person is identified, they will then be
qualified to determine if there is sales potential in their working
group.





2)  Once
the proper Points of Contact have been qualified, an account executive 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, Deportment of Energy, NASA, NIST,
PNNL, Los Alamos National Laboratory, Princeton Plasma Physics Lab, Idaho
National Lab, US Geological Survey, Niagra County Health Dept. and the City of
Englewood NJ.







6


Manufacturing, Supplies, and
Quality Control





PGTI
utilizes a 13,000 square foot facility for the manufacture of gamma-ray and
X-ray detection equipment and associated electronics.  PGTI possesses
equipment for vacuum pumping, thin film deposition, wet chemistry semiconductor
processing, and semiconductor diffusion.  PGTI 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 surface mount
assembly.  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 are currently seeking
re-certification following relocation in the new premises.





Patents, Trademarks, and
Copyrights





PGTI 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.





US Trade Mark #
            Expiration
      Date
            Mark2,768,545
            January
      7, 2010
            EXCALIBUR





Research and
Development





PGTI’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 PGTI’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.


§
            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.






7




§
            Department
      of Commerce Export Administration regulations relating to the sale of
      equipment overseas.


§
            Various
      State and Federal Labor laws.





As of
March 24, 2008, we are currently in compliance with all state and federal
agencies.





Employees





As of
April 7, 2009, we had 10 full time employees and 4  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.  PGTI possesses
equipment for vacuum pumping, thin film deposition, wet chemistry semiconductor
processing, and semiconductor diffusion.   We lease this facility
at a an average rate of $24,896 per month and our lease has a term extending
through March 31, 2011.





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.





ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS





No matter
was submitted to a vote of our Company's stockholders during the fourth quarter
of the period covered by this Annual Report or during the previous two fiscal
years.





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" of the National
Association of Securities Dealers, Inc. ("NASD") in the first quarter of 2008
under the symbol “PSGY.”  Since the shares have only been reported
since the first quarter of 2008, bid and ask prices are not available for the
prior two years or last quarter.  The bid and ask price since the
trading began has ranged from $0.18 to $1.25.  Bid and ask prices are
inter-dealer quotations as reported do not necessarily reflect transactions,
retail markups, mark downs or commissions.  The Company’s stock trades
very sporadically and the prices may not reflect actual prices if a shareholder
tried to sell shares or a buyer tried to buy  shares. As of April 7,
2009, the bid and ask price for our stock was $0.12and $0.51 and the last
trading price $.50.









8


Quarter
Ended                                     Bid                                                      Ask


March 31,
2009                                  $0.5    
                                                   $0.5


December
2008                                  $0.50                                                      $0.65


September
2008                                 $0.60                                                      $1.05


June
2008                                           $1.05                                                      $1.50


March
2008                                        $1.00                                                      $1.01





Holders.





The
number of record holders of our common stock as of April 7, 2009, was
approximately 60.





Dividends.





We have
not declared any cash dividends on our common stock, and we do not intend to
declare dividends in the foreseeable future.  Management intends to
use all available funds for the development of our product.  There are
no material restrictions limiting, or that are likely to limit, our ability to
pay dividends on our common stock.





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
            1,600,000
            $1.078
            14,865,496Total
            1,600,000
            $1.078
            14,865,496





Recent Sales of Unregistered
Securities.





In
September 2006, Princeton was incorporated for the purpose of acting as the
parent corporation of Princeton Gamma Tech Instruments, Inc.  As part
of this reincorporation, the shareholders of Princeton Gamma Tech Instruments,
Inc. received shares of Princeton for their shares in Princeton Gamma Tech
Instruments, Inc.  Additionally, in 2006, Princeton raised
approximately $765,000 through the sale of shares of its common stock to five
accredited investors.  We incorporated in Nevada with a parent
subsidiary relationship in an effort to provide more corporate flexibility for
future operations.  By having a parent subsidiary relationship, we
feel we can provide flexibility in creating additional subsidiaries to house new
products, offshore sales initiatives and potential new acquisitions if they
should become available.





Use of Proceeds of
Registered Securities.





Proceeds
from the sale of registered securities received during the year ended December
31, 2007, totaled $112,550. These funds were primarily used for operating
capital.







9




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, 2008 and 2007.





ITEM 6. SELECTED FINANCIAL
DATA





Summary of Financial
Information





We had
revenues of $2,504,321 for 2008 and $2,542,825 for 2007.  We had a net
loss of $583,950 for the year ended December 31, 2008.  At December
31, 2008, we had cash and cash equivalents of $40,490 and negative working
capital of $82,445.





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, 2008
              For the Year Ended
                December 31, 2007Revenues
              $         2,504,324
              $               2,542,825General
      and Administrative Expenses
              730,546
              829,721Net
      Loss
              583,950
              642,659Basic
      Income (Loss) per Share
              (0.05)
              (0.06)Diluted
      Income (Loss) per Share
              (0.05)
              (0.06)Weighted
      Average Number of Shares Outstanding
              11,781,375
              11,555,504Weighted
      Average Number of Fully Diluted Shares Outstanding
              11,781,375
              11,555,504BALANCE SHEET
      DATA:December 31, 2008
              December 31, 2007Total
      Current Assets
              $            753,137
              $        1,137,322Total
      Assets
              814,067
              1,212,155Total
      Current Liabilities
              834,582
              648,720Working
      Capital
              (82,445)
              488,602Stockholders’
      Equity (Deficit)
              (20,515)
              563,435







10





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 unaudited Condensed 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,
2008.





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, 2008, every additional one percent of our accounts receivable
that becomes uncollectible would reduce our operating income by approximately
$1,221.





We
account for income taxes in accordance with Statement of Financial Accounting
Standards No. 109, “Accounting for Income Taxes” (“SFAS No.
109).  Under SFAS No. 109, 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.






11




Our Business
Growth




For the
12 month period ending December 31, 2008 our sales decreased to $2,504,321 from
$2,542,825.   Although sales decreased, our net loss decreased to
$583,950 compared to the same 12 months period in 2007 when our net loss was
$642,659.  Our nuclear sales have had the biggest sales volume of all
product categories with the sales of $1,075,272, and the second biggest
category  is the Radioactive Isotope Identifier products with the sale
of 803,482  for the 12 month period. The third largest sales category
are X-ray Detectors. The largest growth for the 12 month period was in
Radioactive Isotope Identifiers, where the sales grew to $803,482 from $502,000,
which is 60% growth. This was due to an enhanced sales distribution as well as
introducing the new product, fixed installation products, to the
market.   Nuclear detectors had a steady growth, due to big
demand from governmental applications. Nuclear products sales grew $129,449 or
13.7% in the 12 month period ending December 31, 2008, compared the same time
period previous year.  We anticipate a significant growth to continue
in our Radioactive Isotope Identifier products in 2009, as our existing and new
products reach the growing market of homeland security as well as introducing
new applications to all market segments.




Results of
Operations






Total
sales decreased $38,504 for the comparable 12 month period in 2008 from
2007.  Our gross profit margins decreased due to some higher than
anticipated cost in both Nuclear and X-ray detector products
group.  However, we were able to control operating expenses better,
thereby reducing expenses for the year ended December 31, 2008, to $1,397,213
from $1,566,761 for the 2007 year end.   As a result of the
reduced expenses our net loss narrowed to $583,950 for the calendar year 2008
from a net loss of $642,659 for the same period in 2007.






The
narrowing of our loss was a reflection of the efforts to reduce our operating
expenses, as well as move more profitable products from the research and
development stage and early stage commercialization into market.. As we have had
a chance to work on new applications, we will be able to reduce cost of goods
sold and increase our gross profit margin.  We are hopeful, as our new
applications gain more acceptance we are able to increase sales, improve cost of
goods sold, and increase our gross margin.  We still will need
increased sales to reach profitability and cover all of our operating
cost.






We
anticipate general and administrative expenses to remain at present levels or
higher in the future.  General and administrative expenses decreased
from $829,721 for calendar year 2007 to $730,546 for the calendar year
2008.  This reduction reflects the strong restructuring efforts of our
management staff.  We expect general and administrative expenses to
increase in 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 operating cost.We will be
dependent on sales to increase before we will be able to cover ongoing
cost.  Until we are able to increase sales, we may have to seek
additional financing to fund operations.







Off Balance Sheet
Arrangements.





We had no
off balance sheet arrangements during the year ended December 31,
2008.





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(T).  CONTROLS AND PROCEDURES





Evaluation
of Disclosure Controls and Procedures





Our
management, which consists of one person and with the assistance of an outside
CPA firm, 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 CFO 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 President and CFO, 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.  This evaluation was made in light of the fact the Company
has no operations or revenue and limited cash on hand.







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, 2008.  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.   Further, our management considered the current
operations and revenue, the limited cash on hand and the use of an outside
auditors.  Based on this evaluation, our management concluded that, as of
December 31, 2008, our internal control over financial reporting was
effective.  However, management recognized the weaknesses of
inadequate segregation of duties consistent with control objectives due to our
small size and limited resources but believes our established controls helps
mitigate this potential weakness.





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.





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:





Name
              Age
              Position
              Director SinceJuhani
      Taskinen
              52
              CEO,
      Director
              2005David
      Brown
              36
              Director
              2005









13




The term
of office of each director is one year and until his or her successor is elected
at the annual shareholders' meeting and is qualified, subject to removal by the
shareholders.  The term of office 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.  Upon the closing
of this offering, however, we will form an audit and compensation
committee.  We currently have two independent directors 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 director.




Juhani Taskinen
--Mr. Taskinen is the founder of Princeton Gamma-Tech Instruments, Inc.,
and is our Chief Executive Officer and Chairman of the Board of Princeton
Security Technologies, Inc.  Mr. Taskinen has been the President of
Finn-Partners, Inc. since 1993.  Finn-Partners, Inc. is a management
consulting and investment firm that specializes in management and financial
consulting in the merger and acquisition field.  Mr. Taskinen was also
a Senior Advisor for Lehman Brothers in Scandinavia during 2003-2004, and also
held executive positions within Nokia Corporation prior to founding
Finn-Partners, Inc.   Mr. Taskinen holds a BSc (economics) as
well as an MBA from Pepperdine University.






David Brown
-- Mr. Brown joined us in March 2005 as an investor and in April 2005
became a member of our board of directors. Mr. Brown has been the President of
Berkeley Nucleonics Corporation since 1993. Berkeley Nucleonics specializes in
nuclear detection products and instruments for Federal agencies, such as the US
Secret Service, FBI, and Department of Defense as well as to the Homeland
Security market. Berkeley Nucleonics has grown steadily during Mr. Brown’s
presidency and has also expanded to international market.  Mr. Brown
holds a BA in Entrepreneurial Management from San Francisco State
University.




Trupti
Mehta  - Ms. Mehta joined company in September 2007 and is our
Principal Accounting Officer.  Prior to joining the Company she was
the Finance Manager with Innovative Folding Cartons Co. Inc.  Ms.
Mehta holds a Bachelors Degree in Accounting from the University of Bombay,
India.





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. We
have not yet set the day for our first annual meeting of shareholders following
this offering. 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.









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 first quarter of 2008.





Nominating
Committee.





We have
not established a Nominating Committee because we believe that our three member
Board of Directors is 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, 2008 (collectively referred to as the "Named Executives").  No
other executive officer serving during 2006 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
              2008
              0
              0
              0
              0
              0
              66,000
              66,0002007
              --
              --
              --
              $655
              --
              $144,000
              $144,6652006
              --
              --
              --
              $8,666
              --
              $101,918
              $110,584





Juhani
Taskinen’s consulting company, Finn-Partners, Inc., received $101,918 in
consulting revenue from Princeton in 2006, $144,000 in 2007 and $66,000 in 2008;
additionally Finn-Partners has accumulated $66,000 in unpaid compensation
of  Mr.Taskinen.  Mr. Cox received contributions to his 401k
of $4,200 in 2006.  We anticipate paying Mr. Taskinen similar
compensation through Finn-Partners in upcoming periods as Mr. Taskinen continues
to serve as our CEO.





Outstanding
Equity Awards At Fiscal Year-End


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 ($)
              Option
      Expiration Date
              Number
      of Shares or Units of Stock That Have Not Vested (#)
              Market
      Value of Shares or Units of Stock That Have Not Vested ($)
              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
              350,000
                30,000
              -0-
              -0-
              $1.10
                $1.10
              12/31/2011
                9/30/2012
              -0-
                -0-
              -0-
                -0-
              -0-
                -0-
              -0-
                -0-David
      Brown
              350,000
                30,000
              -0-
                -0-
              -0-
                -0-
              $1.10
                $1.10
              12/31/20011
                12/31/20012
              -0-
                -0-
              -0-
                -0-
              -0-
                -0-
              -0-
                -0-


_________________________


The
directors received 350,000 stock options on December 31, 2006, and 30,000 stock
options on September 30, 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 2008.





No other
compensation arrangements exist between Princeton and our
Directors.





Directors
Compensation





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
            --
            --
            -
            --
            --
            $66,000
            $66,000David
      Brown
            --
            --
            -
            --
            --
            =
            0


________________________


On
December 31, 2006, each director received stock options to purchase 350,000
shares of common stock at an exercise price of $1.10 per share.  On
September 30, 2007, each director received stock options to purchase 30,000
shares of common stock at an exercise price of $1.10 per share.  All
options are fully vested.  The options are exercisable for a period of
five years.





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 no compensation in 2008, $2,771 in 2007 and $55,000 in 2006 in cash
related to his marketing and sales work on our behalf.  Mr. Brown is
involved in the marketing and sales for the Homeland Security
marketplace.





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.





Securities Authorized for
Issuance under Equity Compensation Plans.







17


Equity Compensation Plan
Information


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
            1,600,000
            $1.078
            14,865,496Total
            1,600,000
            $1.078
            14,865,496








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





The
following table sets forth, as of April 2, 2008, 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).





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
11,781,375  shares of common stock outstanding as of April 7, 2008,
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 Shareholders
              Finn-Partners,
      Inc.
            5,640,000
            47.87%36
      Lyndhurst, Newport Beach, CA 92660Third
      Letter Corporation
            1,600,000
            13.58%2955
      Kerner Blvd #2 San Rafael CA 94901Mikko
      Maijala
            2,000,000
            16.98%Hietaniementie
      14 A 02160 Espoo FinlandAscendiant
      Capital Group, LLC
            970,000
            8.23%18881
      Von Karman Ave, Irvine CA 92612Officers and DirectorsJuhani
      Taskinen
            5,640,000
            47.87%David
      Brown
            1,600,000
            13.58%All
      directors and executive officers of the Company as a group (2
      individuals)
            7,240,000
            61.45%


_______________________


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.





18


ITEM
13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE





Transactions with Related
Persons.





We
believe that all purchases from or transactions with affiliated parties were on
terms and at prices substantially similar to those available from unaffiliated
third parties.  As part of the formation of Princeton, the founders,
which consist of members of our board of directors, received eight million
(8,000,000) shares of common stock for five hundred thousand dollars
($500,000).  Additionally, as part of the change of parent domicile to
Nevada, Princeton issued 1,500,000 shares of common stock to several individuals
and companies, including Ascendiant Capital Group, LLC which has engaged in
consulting services for Princeton.





Except as
indicated 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.





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.





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, 2008, and December 31,
2007:





Fee
category                                2008                      
2007


Audit
fees                             
   $8,052                     $9,940





Audit-related
fees                    $     --                      $    --





Tax
fees                                    
$4,400                     $2,500





All other
fees                            $     --                      $   --





Total
fees                                 
$12,452                   $12,440





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-QSB or services that are
normally provided by our principal accountants in connection with statutory and
regulatory filings or  engagements.







19




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               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






20





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:
April 15,
2009                                                                                     By
Juhani
Taskinen


Juhani
Taskinen, CEO, President and


Chairman
of the


Board of
Directors





Date:  April
15,
2009                                                                                     By
________________________________


Trupti Mehta, Principal
Accounting


Officer





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:
April 15,
2009                                                                                     By
David
Brown


David
Brown, Director




21


Princeton Security Technologies,
Inc.





Consolidated
Financial Statements





For the
Years Ended December 31, 2008 and 2007





F -
1


Princeton
Security Technologies, Inc.





Consolidated
Financial Statements





For the
Years Ended December 31, 2008 and 2007





F -
2


Princeton
Security Technologies, Inc.





Consolidated
Financial Statements





For the
Years Ended December 31, 2008 and 2007








Contents





Report of
Independent Registered Public Accounting Firm  4





Consolidated
Financial Statements





Consolidated Balance Sheets     5


Consolidated Statements of
Operations      6


Consolidated Statement of Stockholders’
Equity  7


Consolidated Statements of Cash
Flows     8


Notes to Consolidated Financial
Statements   9




F -
3


























Douglas
W. Child, CPA
 Marty D.
Van Wagoner, CPA
 J. Russ
Bradshaw, CPA
 William
R. Denney, CPA
 Roger B.
Kennard, CPA
 Russell
E. Anderson, CPA
 Scott L.
Farnes








Report
of Independent Registered Public Accounting Firm








To the
Board of Directors


Princeton
Security Technologies, Inc.


Princeton,
New Jersey





We have
audited the accompanying consolidated balance sheets of Princeton Security
Technologies, Inc. (the Company) as of December 31, 2008 and 2007, and the
related consolidated statements of operations, stockholders’ equity 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). 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 also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements, 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 the Company as of December
31, 2008 and 2007, 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, PLLC


Child,
Van Wagoner & Bradshaw, PLLC


Salt Lake
City, Utah


April 15,
2009









1284
W. Flint Meadow Dr. #D
 Kaysville,
Utah 84037
 Telephone
801.927.1337
 Facsimile
801.927.1344
    5296
S. Commerce Dr. #300
 Salt
Lake City, Utah 84107
 Telephone
801.281.4700
 Facsimile
801.281.4701
    Suite
A, 5/F
 Max
Share Centre
 373
King’s Road
 North
Point, Hong Kong
 Telephone
852.21.555.333
 Facsimile
852.21.165.222
   www.cpaone.net






F -
4




PRINCETON
SECURITY TECHNOLOGIES, INC.


CONSOLIDATED
BALANCE SHEETS


December
31, 2008 and 2007





ASSETS
              2008
              
              2007CurrentCash
              $
              40,490
              
              $
              81,179Accounts
      receivable (net of allowance for doubtful accounts of $16,426 and $26,533,
      respectively)
              
              196,847
              
              
              297,779Inventory
              
              460,741
              
              
              724,731Prepaid
      Expenses
              
              54,059
              
              
              33,633Total
      Current Assets
              
              752,137
              
              
              1,137,322Property,
      plant & equipment (net of depreciation of $1,353,231 and $1,328,878,
      respectively)
              
              50,480
              
              
              74,833Deposits
              
              11,450
              
              
              -Total
      Assets
              $
              814,067
              
              $
              1,212,155LIABILITIES & STOCKHOLDERS'
      EQUITYCurrent
      liabilitiesAccounts
      payable and accrued liabilities
              $
              554,972
              
              $
              506,790Accrued
      other liabilities
              
              438
              
              
              15,775Accrued
      payroll expenses
              
              9,747
              
              
              -Accrued
      vacation expenses
              
              25,443
              
              
              44,481Deferred
      service contract revenue
              
              -
              
              
              583Deferred
      sales revenue
              
              31,679
              
              
              81,091Total
      Current Liabilities
              
              622,279
              
              
              648,720Notes
      payable
              
              212,303
              
              
              -Total
      Liabilities
              
              834,582
              
              
              648,720Stockholders'
      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; 11,781,375 shares in
      2008 and 11,781,375 shares in 2007 issued and outstanding
              
              11,781
              
              
              11,781Additional
      paid-in capital
              
              1,406,959
              
              
              1,406,959Retained
      earnings (deficit)
              
              (1,439,255)
              
              
              (855,305)Total
      Stockholders’ Equity
              
              (20,515)
              
              
              563,435Total
      Liabilities and Stockholders’ Equity
              $
              814,067
              
              $
              1,212,155See
      Notes to Consolidated Financial
Statements.









F -
5


PRINCETON
SECURITY TECHNOLOGIES, INC.


CONSOLIDATED
STATEMENTS OF OPERATIONS


For the
Years Ended December 31, 2008 and 2007





2008
              
              2007RevenuesSales
      (net of returns)
              $
              2,504,321
              
              $
              2,542,825Costs
      of goods sold
              
              1,664,992
              
              
              1,623,894Gross
      Profit
              
              839,329
              
              
              918,931ExpensesDepreciation
      and amortization
              
              24,354
              
              
              23,700Selling
      and marketing
              
              251,346
              
              
              321,975General
      and administrative
              
              730,546
              
              
              829,721Research
      and development
              
              390,967
              
              
              391,3651,397,213
              
              
              1,566,761Loss
      from operations
              
              (557,884)
              
              
              (647,830)Other
      income/(expenses)
              
              -
              
              
              5,171Loss
      on currency translation
              
              (26,066)
              
              
              -Provision
      for income taxes
              
              -
              
              
              -Net
      income (loss)
              $
              (583,950)
              
              $
              (642,659)Basic
      and diluted net income (loss) per share of common stock
              $
              (0.05)
              
              $
              (0.06)Weighted
      average number of common shares
              
              11,781,375
              
              
              11,555,504See
      Notes to Consolidated Financial
Statements.








F -
6


PRINCETON
SECURITY TECHNOLOGIES, INC.


CONSOLIDATED
STATEMENT OF STOCKHOLDERS’ EQUITY


For the
Years Ended December 31, 2008 and 2007





Common
      stock
              
              Additional
      paid-in capital
              
              Retained
      earnings (deficit)
              
              Total
      stockholders’ equityShares
              
              AmountBalance
      at December 31, 2006
              11,500,000
              
              $
              11,500
              
              $
              1,281,112
              
              $
              (212,646)
              
              $
              1,079,966Stock
      options granted on September 30, 2007
              -
              
              
              -
              
              
              13,578
              
              
              -
              
              
              13,578Stock
      issued for cash on October 20, 2007
              281,375
              
              
              281
              
              
              112,269
              
              
              -
              
              
              112,550Net
      loss for the year
              -
              
              
              -
              
              
              -
              
              
              (642,659)
              
              
              (642,659)Balance
      at December 31, 2007
              11,781,375
              
              
              11,781
              
              
              1,406,959
              
              
              (855,305)
              
              
              563,435Net
      loss for the year
              -
              
              
              -
              
              
              -
              
              
              (583,950)
              
              
              (583,950)Balance
      at December 31, 2008
              11,781,375
              
              $
              11,781
              
              $
              1,406,959
              
              $
              (1,439,255)
              
              $
              (20,515)See
      Notes to Consolidated Financial
Statements.








F -
7




PRINCETON
SECURITY TECHNOLOGIES, INC.


CONSOLIDATED
STATEMENTS OF CASH FLOWS


For the
Years Ended December 31, 2008 and 2007


2008
              
              2007Cash
      flow from operating activitiesNet
      income (loss)
              $
              (583,950)
              
              $
              (642,659)Depreciation
      and amortization
              
              24,354
              
              
              23,700Provision
      for inventory reserves
              
              -
              
              
              (183,127)Options
      expense issued as compensation
              
              -
              
              
              13,578Provision
      for bad debt allowance
              
              (10,107)
              
              
              -Change
      in non-cash working capital items:Inventory
              
              263,991
              
              
              7,778Accounts
      receivable
              
              177,927
              
              
              211,807Prepaid
      expenses
              
              (31,876)
              
              
              17,181Other
      receivables
              
              (66,888)
              
              
              3,354Accounts
      payable
              
              48,182
              
              
              (162,948)Accrued
      payroll
              
              -
              
              
              (42,043)Accrued
      vacation expenses
              
              -
              
              
              (10,221)Accrued
      expenses
              
              (24,629)
              
              
              (18,543)Deferred
      services contracts
              
              (583)
              
              
              583Deferred
      sales
              
              (49,413)
              
              
              40,170Accrued
      warranty expenses
              
              -
              
              
              (20,314)Cash
      flow used in operating activities
              
              (252,992)
              
              
              (761,704)Cash
      flow from investing activitiesPurchase
      of property and equipment
              
              -
              
              
              (8,240)Cash
      flow provided by (used in) investing activities
              -
              
              
              (8,240)Cash
      flow from financing activitiesProceeds
      from sale of common stock
              
              -
              
              
              112,550Proceeds
      from notes payable
              
              212,303
              
              
              -Cash
      flow provided by financing activities
              
              212,303
              
              
              112,550Effect
      of rate change on cash
              
              -
              
              
              -Increase
      in cash position
              
              (40,689)
              
              
              (657,394)Cash
      position at beginning of period
              
              81,179
              
              
              738,573Cash
      position at end of period
              $
              40,490
              
              $
              81,179Supplemental
      disclosure of cash flow information:Cash
      paid for:Interest
              $
              -
              
              $
              -Income
      taxes
              $
              -
              
              $
              -See
      Notes to Consolidated Financial
Statements.







F -
8


PRINCETON
SECURITY TECHNOLOGIES, INC.


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


December
31, 2008 and 2007





Note
      1
            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.





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.





Business
Activity


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.





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.





Depreciation
and amortization


Depreciation
and amortization have been provided in amounts sufficient to relate the costs of
depreciable assets to operations over their estimated useful
lives.  The assets are depreciated using the straight line
method.  The lives vary from 3 to 7 years.





Cash
and Cash Equivalents


The
Company considers all highly liquid debt instruments with an original maturity
of three months or less to be cash equivalents.





Currency


The
functional currency of the Company’s former subsidiary, Princeton Gamma-Tech
(UK) Limited is the British Pound. Assets and liabilities of the subsidiary in
the accompanying consolidated financial statements are translated to United
States dollars at current exchange rates and income statement accounts are
translated at the average rates prevailing during the period. Related
translation adjustments are reported as other comprehensive income (loss), a
component of stockholders’ equity.








F -
9


PRINCETON
SECURITY TECHNOLOGIES, INC.


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)


December
31, 2008 and 2007





Note
      1
            Summary
      of Significant Accounting Policies
(continued)





Earnings
Per Share


The
Company accounts for earnings per share under the provisions of Statement of
Financial Accounting Standards (SFAS) No. 128, "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.





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.





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.





Recently
Issued Accounting Pronouncements


In
February 2007, the FASB issued Statement No. 159, “The Fair Value Option for Financial
Assets and Financial Liabilities - Including an amendment to FASB Statement No.
115”. This statement permits companies to choose to measure many
financial instruments and other items at fair value. The objective is to improve
financial reporting by providing entities with the opportunity to mitigate
volatility in reported earnings caused by measuring related assets and
liabilities differently without having to apply complex hedge accounting
provisions. This Statement is expected to expand the use of fair value
measurement of accounting for financial instruments. This statement applies to
all entities, including not for profit. The fair value option established by
this statement permits all entities to measure eligible items at fair value at
specified election dates. This statement is effective as of the beginning of an
entity’s first fiscal year that begins after November 15, 2007.  The
Company is currently assessing the impact adoption of SFAS No. 159 will have on
its consolidated financial statements.




















F -
10








PRINCETON
SECURITY TECHNOLOGIES, INC.


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)


December
31, 2008 and 2007





Note
      1
            Summary
      of Significant Accounting Policies
(continued)





Recently
Issued Accounting Pronouncements (continued)




In
December 2007, theFASB issued SFAS No. 141R,
"Business Combinations" ("SFAS No. 141R"). SFAS No. 141R amends
SFAS 141 and provides revised guidance for recognizing and measuring
identifiable assets and goodwill acquired, liabilities assumed, and any
noncontrolling interest in the acquiree. It also provides disclosure
requirements to enable users of the financial statements to evaluate the nature
and financial effects of the business combination. It is effective for fiscal
years beginning on or after December 15, 2008 and will be applied
prospectively. We are currently evaluating the impact of adopting SFAS
No. 141R on our consolidated financial statements.






In
December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in
Consolidated Financial Statements — an amendment of ARB No. 51" ("SFAS
No. 160”). SFAS No. 160 requires that ownership interests in subsidiaries held
by parties other than the parent, and the amount of consolidated net income, be
clearly identified, labeled, and presented in the consolidated financial
statements. It also requires once a subsidiary is deconsolidated, any retained
noncontrolling equity investment in the former subsidiary be initially measured
at fair value. Sufficient disclosures are required to clearly identify and
distinguish between the interests of the parent and the interests of the
noncontrolling owners. It is effective for fiscal years beginning on or after
December 15, 2008 and requires retroactive adoption of the presentation and
disclosure requirements for existing minority interests. All other requirements
shall be applied prospectively. We are currently evaluating the impact of
adopting SFAS No. 160 on our consolidated financial statements.




In March
2008, FASB issued Financial Accounting Standards No. 161, “Disclosure about Derivative
Instruments and Hedging Activities - an amendment to FASB Statement No.
133.” The use and complexity of derivative instruments and hedging
activities have increased significantly over the past several years.
Constituents have expressed concerns that the existing disclosure requirements
in FASB Statement No. 133, “Accounting for Derivative
Instruments and Hedging Activities,” do not provide adequate information
about how derivative and hedging activities affect an entity’s financial
position, financial performance, and cash flows. Accordingly, this Statement
requires enhanced disclosures about an entity’s derivative and hedging
activities and thereby improves the transparency of financial reporting. This
Statement is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008.




In May
2008, the FASB issued Statement No. 162, “The Hierarchy of Generally Accepted
Accounting Principles.”  This statement identifies the sources
of accounting principles and the framework for selecting the principles to be
used in the preparation of financial statements of nongovernmental entities that
are presented in conformity with generally accepted accounting principles (GAAP)
in the United States (the GAAP hierarchy).  This statement is
effective 60 days following the SEC’s approval of the Public Company Accounting
Oversight Board amendments to AU Section 411, “the Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles.”





In May
2008, the FASB issued Statement No. 163“Accounting for Financial Guarantee
Insurance Contracts—an interpretation of FASB Statement No.
60.”The premium revenue recognition approach for a financial
guarantee insurance contract links premium revenue recognition to the amount of
insurance protection and the period in which it is provided. For purposes of
this statement, the amount of insurance protection provided is assumed to be a
function of the insured principal amount outstanding, since the premium received
requires the insurance enterprise to stand ready to protect holders of an
insured financial obligation from loss due to default over the period of the
insured financial obligation.  This Statement is effective for
financial statements issued for fiscal years beginning after December 15,
2008.





In April
2008, the FASB issued FSP 142-3, “Determination of the Useful Life of Intangible
Assets”, (FSP 142-3). FSP 142-3 amends the factors that should be considered in
developing renewal or extension assumptions used to determine the useful life of
a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible
Assets”. FSP 142-3 is effective for fiscal years beginning after December 15,
2008. The Company does not expect the adoption of FSP 142-3 will have a material
impact on the Company’s consolidated financial position, results of operations
and cash flows.





In June
2008, the FASB ratified EITF Issue No. 08-3, “Accounting for Lessees for
Maintenance Deposits Under Lease Arrangements” (EITF 08-3). EITF 08-3 provides
guidance for accounting for nonrefundable maintenance deposits. It also provides
revenue recognition accounting guidance for the lessor. EITF 08-3 is effective
for fiscal years beginning after December 15, 2008. The Company does not expect
the adoption of EITF Issue No. 08-3 will have a material impact on the Company’s
consolidated financial position, results of operations and cash
flows.





Fair
Value of Financial Instruments


The
Financial Accounting Standards Board (“FASB”) issued Statement of Financial
Accounting Standards No. 107 (“SFAS 107”), Disclosure About Fair Value of
Financial Instruments. SFAS 107 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.














F -
11





PRINCETON
SECURITY TECHNOLOGIES, INC.


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)


December
31, 2008 and 2007





Note
      1
            Summary
      of Significant Accounting Policies
(continued)





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. The current year produced a deferred tax asset
of approximately $204,383.  This is being fully offset with a
valuation allowance for the same amount.





Other


The
Company paid no dividends in 2008 or 2007.





Note
      2
            Business
      acquisitions





On
September 18, 2006, the Company acquired all the outstanding shares of Princeton
Gamma-Tech Instruments, Inc.  in exchange for 9,300,000 shares of its
common stock.  This acquisition is being treated as a recapitalization
of PGTI.  All financial statements have been restated to reflect this
recapitalization as of the earliest date of the financial
statements.





On
February 19, 2005, PGTI acquired all the outstanding shares of Princeton
Gamma-Tech (UK) Limited, a company operating in the United
Kingdom.  On November 18, 2005, the assets and operations of Princeton
Gamma-Tech (UK) Limited were sold as part of a larger sale of PGTI’s
micro-analyzer business division.  This entity (without assets or
operations) was sold on December 28, 2006.








F -
12


PRINCETON
SECURITY TECHNOLOGIES, INC.


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)


December
31, 2008 and 2007





Note
      3
            Disposition
      of business segment





On
November 18, 2005, PGTI sold its micro-analyzer business division to another
company for $1,450,000 plus a performance amount up to $435,000.  This
disposition included assets, operations, intellectual knowledge and client
database.  The sale also included the assets and operations of
Princeton Gamma-Tech (UK) Limited as mentioned in note 2 above.  All
assets were sold at book value and the remainder has been recorded as net gain
from sale of discontinued operations.  The statements of cash flows
show the effects on cash from discontinued operations with a decrease in cash
from operating activities of $75,000 in 2006 and $883,846 in 2005 for the net
gain from the sale of discontinued operations and an increase in cash from
investing activities of $75,000 in 2006 and $1,450,000 for the proceeds from the
sale of discontinued operations.  There was no effect on cash from
financing activities relating to the discontinued operations.  All
proceeds of the sale had been received by year-end, except the performance
amount.  The sale agreement had a reserve for performance that would
be based on the performance of the sold assets and operations for the next 12
months.  The performance would be evaluated based on set criteria and
the final sale price established at the end of the 12 months, or October
2006.  The reserve amount could range from nothing up to a maximum of
$435,000.  The actual performance reserve of $75,000 was received in
November 2006.





Note
      4
            Commitments





(1)
            The Company entered into a new 61
      month lease agreement for office space on January 9, 2006, expiring March
      31, 2011.


(2)
            The Company entered into a 38
      month lease for a mail machine on January 2006.  It requires a
      quarterly payment of $444.00 until March
2009.





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





2009
            $    321,9222010
            324,7252011
            81,181Totals
            $
      727,828









F -
13


PRINCETON
SECURITY TECHNOLOGIES, INC.


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (continued)


December
31, 2008 and 2007





Note
      5
            Stockholder’s
      Equity





On
February 25, 2005, PGTI issued 8,000,000 shares of common stock for $500,000 in
cash.





On
September 4, 2006, PGTI issued 1,300,000 shares of common stock for $515,585 in
cash.  $25,837 in fees was associated with this issuance and was paid
to unrelated parties. A total of $489,748 in funds was received by
PGTI.





On
September 8, 2006 PST issued 1,500,000 shares of common stock for $15,000 in
cash.





On
December 20, 2006, PST issued 700,000 shares of common stock for $286,017 in
cash.  $26,017 in fees was associated with this issuance and was paid
to two parties.  $11,917 was paid to a related party for their efforts
in finding and securing the investor.  A total of $260,000 in funds
was received by the Company.





On
December 31, 2006, the Company issued 1,110,000 stock options to various members
of the board of directors and key employees in accordance with the stock option
incentive plan that was ratified on October 20, 2006.  These options
are fully vested and carry a 5 year term.  1,050,000 options have an
exercise price of $1.10 and 60,000 options have an exercise price of
$1.00.  The Company recognized a $13,578 expense as compensation in
2007 related to the issuance of these options in accordance with SFAS123R using
the following assumptions:





Stock
      Price
            $0.408
            
            Volatility
            30.38%Exercise
      Prices
            $1.00
      and $1.10
            
            Discount
      Rate
            4.35%Term
            5
      Years





On
September 30, 2007, the Company issued 500,000 stock options to various members
of the board of directors and key employees in accordance with the stock option
incentive plan that was ratified on October 20, 2006.  These options
are fully vested and carry a 5 year term.  90,000 options have an
exercise price of $1.10 and 410,000 options have an exercise price of
$1.00.  The Company recognized a $27,864 expense as compensation in
2006 related to the issuance of these options in accordance with SFAS123R using
the following assumptions:





Stock
      Price
            $0.408
            
            Volatility
            29.38%Exercise
      Prices
            $1.00
      and $1.10
            
            Discount
      Rate
            4.35%Term
            5
      Years





On
October 20, 2007, the Company issued 281,375 shares of common stock for $112,550
in cash.





Note
      6
            Notes
      Payable





On July
21, 2008, the Company borrowed $153,920 on a short-term note payable with a term
on 90 days.  It carried an interest rate of 24% .  It also
carried an option to convert the debt to equity for 10% of the outstanding
shares of common stock as of 7/21/08.  The note was not paid back upon
its due date and the Company is currently in negotiations with the lender
regarding its payback.  The lender has chosen not to exercise its
right to convert the debt to stock.  The balance along with accrued
interest at December 31, 2008 is $169,506.