Summary of PRINCETON SECURITY TECHNOLOGIES, INC.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

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 Plan of Operations provided below, including information regarding the Company's financial condition, results of operations, business strategies, operating efficiencies or synergies, competitive positions, growth opportunities, and the plans and objectives of management. The statements made as part of the Plan of Operations that are not historical facts are hereby identified as "forward-looking statements."

Business of the Company

Corporate Information

Princeton Security Technologies, Inc. ("Princeton" or the "Company") a Nevada corporation is the parent company of Princeton Gamma Tech Instruments, Inc. ("PGTI") which develops and manufactures detection equipment used in the homeland security and industrial marketplaces. When used herein Princeton or the Company includes PGTI. PGTI is a Princeton, New Jersey based corporation founded in February 2005. PGTI acquired all the business assets for its Detector and Microanalysis systems from a subsidiary of a global stainless steel company, Outokumpu Oyj, in February 2005. Since then, PGTI has restructured its operation, sold its undesired Microanalysis business to a subsidiary of Bruker Biosciences Corp., and focused its efforts towards the detector business and its existing homeland security and industrial marketplaces.

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.

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 product is being offered and used in e.g. building security applications, hospitals , industrial applications and generally in security applications where an identified area or facility needs to be secured.

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

PGTI is one of the handful of companies worldwide that manufactures High Purity Germanium Detectors and associated electronics and software for the most sensitive and accurate detection and analysis of radioactive samples in a laboratory environment. A typical application is the measurement of very low-levels of radioisotopes in soil, water or geological samples to determine the efficacy of radioactive waste cleanup or to conduct geophysics research. This type of lab-based instrumentation is also used by the nuclear power industry for on-line monitoring. Customers include Federal and State governmental authorities, research laboratories and large corporations.

- 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.

Discussion and Analysis of Financial Condition and Results of Operations

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 period ended March 31, 2009.

The Company's accounting policies are more fully described in Note 1 of the December 31, 2008 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 March 31, 2009, every additional one percent of our accounts receivable that becomes uncollectible would reduce our operating income by approximately $2,762.

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.

Our Business Growth

For the quarter ended March 31, 2009 our sales decreased to $496,188 from $704,908 for the quarter ended March 31, 2008. Our gross profit decreased to $200,433 compared to the same period in 2008 when gross profits was $304,620. Our Radioactive Isotope Identifier products sales had the biggest sales volume of all product categories, totaling about 70% of the total sales ; the balance of our sales are evenly split between X-ray Detector sales and Nuclear Detectors products sales. The largest growth in the quarter ended March 31, 2009, was Radioactive Isotope Identifier Products, due to a new product introduction of Area Monitor and its applications, which is primarily being sold to the Homeland Security market. We anticipate growth across our product line in 2009, as our existing and new products reach the growing market segments of homeland security and material research.

Results of Operations

Total sales decreased for the comparable quarterly periods in March 31, 2009 from 2008. Our gross profit decreased by 34.2% compared to the same period in 2008. However, we were able to control expenses better reducing expenses for the quarter ended March 31, 2009, to $237,367 from $336,722 for the quarter ended March 31, 2008. As a result of lower sales revenue our net loss was $47,486 for the quarter ended March 31, 2009 from a net loss of $31,930 for the same period in 2008.

The increased loss was a reflection of the lower sales revenue and decreased expenses. We continue to invest in our research and development activities which partially affects our ability to increase net profit. As we have had a chance to work on our production efforts, we have been able to reduce cost of goods sold. We are hopeful, as our R&D will generate new products we are able to increase sales as well as improve the profitability, which can be reached with moderately higher sales revenue.

We anticipate general and administrative expenses to remain at present levels or higher in the future. General and administrative expenses decreased from $174,070 for the quarter ended March 31, 2008 to $136,272 for the quarter ended March 31, 2009. This reduction reflects the lowered salaries and reduction of administrative staff. We expect general and administrative expenses to remain on this level in future quarters, however if the sales revenue increases we may have to expand 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.

Seasonality and Cyclicality

In our business, we have experienced lower sales volume during the past years in the beginning of the first quarter as well as summer months in general. We believe this trend may continue in the future, as well.

Liquidity and Capital Resources

Historically, we have financed our working capital requirements through internally generated funds and sales of equity and debt securities. Since inception through March 31, 2008, we raised approximately $1.42 million from the sale of equity securities. As we continue to expand our operations, we anticipate seeking additional capital through the sale of equity securities. Our goal is to position Princeton to be able to raise larger amounts of equity capital through the public markets or through private investments. At this time we do not know the extent of the overall financing we will need in the future. Financing will depend on how well our products are received in the marketplace.

At March 31, 2009, we had working capital deficit of $128,011. A component of our current liabilities as of March 31, 2009, was our accounts payable of $549,819. We feel we will be able to service ongoing payables with current revenue and existing capital. However, our current assets consist of only $21,493 in cash, $198,468 in accounts receivable and our inventory is $329,884 so we will be dependent on collecting accounts receivable and selling our inventory to cover ongoing payables. We may be forced to seek additional debt or equity capital to cover any liquidity issues that may arise as we try and increase sales and collect on accounts receivable.

We anticipate losses to continue for the year but to be reduced as our sales begin to expand. However, it is our goal to increase marketing and sales which will require additional capital beyond any revenue anticipated. In the future, we may issue additional debt or equity securities to satisfy our cash needs. Any debt incurred or issued may be secured or unsecured, at a fixed or variable interest rates and may contain other terms and conditions that our board of directors deems prudent. Any sales of equity securities may be at or below existing market prices. We cannot assure you that we will be successful in generating sufficient capital to adequately fund our liquidity needs.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements as of March 31, 2009.

Forward-looking Statements

The Private Securities Litigation Reform Act of 1995 (the "Act") provides a safe harbor for forward-looking statements made by or on behalf of our Company. Our Company and our representatives may from time to time make written or oral statements that are "forward-looking," including statements contained in this Quarterly Report and other filings with the Securities and Exchange Commission and in reports to our Company's stockholders. Management believes that all statements that express expectations and projections with respect to future matters, as well as from developments beyond our Company's control including changes in global economic conditions are forward-looking statements within the meaning of the Act. These statements are made on the basis of management's views and assumptions, as of the time the statements are made, regarding future events and business performance. There can be no assurance; however, that management's expectations will necessarily come to pass. Factors that may affect forward-looking statements include a wide range of factors that could materially affect future developments and performance, including the following:

Changes in Company-wide strategies, which may result in changes in the types or mix of businesses in which our Company is involved or chooses to invest; changes in U.S., global or regional economic conditions, changes in U.S. and global financial and equity markets, including significant interest rate fluctuations, which may impede our Company's access to, or increase the cost of, external financing for our operations and investments; increased competitive pressures, both domestically and internationally, legal and regulatory developments, such as regulatory actions affecting environmental activities, the imposition by foreign countries of trade restrictions and changes in international tax laws or currency controls; adverse weather conditions or natural disasters, such as hurricanes and earthquakes, labor disputes, which may lead to increased costs or disruption of operations.

This list of factors that may affect future performance and the accuracy of forward-looking statements is illustrative, but by no means exhaustive. Accordingly, all forward-looking statements should be evaluated with the understanding of their inherent uncertainty.