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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 10-KSB

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
  EXCHANGE ACT OF 1934 
  For the fiscal year ended June 30, 2007

[   ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
  THE SECURITIES EXCHANGE ACT OF 1934 
  For the transition period from [   ] to [   ]

Commission file number 001-32289

HS3 TECHNOLOGIES, INC.(Name of small business issuer in its charter)

|Nevada                                                               | 20-3598613                          
|-------------------------------------------------------------------- | ------------------------------------
|(State or other jurisdiction of incorporation or
      organization) | (I.R.S. Employer Identification No.)
|                                                                     |                                     
|                                                                     |                                     
|1800 Boulder Street, Suite 600, Denver, CO                           | 80211-6400                          
|(Address of principal executive offices)                             | (Zip Code)                          

Issuer's telephone number 303.455.2550

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

|Title of each class | Name of each exchange on which registered
|------------------- | -----------------------------------------
|Nil                 | Nil                                      

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

Common Shares, par value $0.001(Title of class)

Check whether the issuer (1) filed all reports required to be
  filed by Section 13 or 15(d) of the Exchange Act 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 [   ]

Check if there is no disclosure of delinquent filers in response
  to Item 405 of Regulation S-B is not contained in this form, and no disclosure
  will 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 shell
company (as defined in Rule 12-b-2 of the Exchange Act). Yes [ 
 ]   No [X]

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State issuer's revenues for its most recent fiscal year $203,106

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 sold, or the average bid and asked prices of such common
  equity, as of a specified date within 60 days. (See definition of affiliate
  in Rule 12b-2 of the Exchange Act.)

Note: If determining whether a person is an affiliate will involve
  an unreasonable effort and expense, the issuer may calculate the aggregate market
  value of the common equity held by non-affiliates on the basis of reasonable
  assumptions, if the assumptions are stated.

24,816,576 common shares @ $0.08(1)= $1,985,326(1)Average of bid and ask closing prices on September 10, 2007.

(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS)

Check whether the issuer has filed all documents and reports required
  to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
  of securities under a plan confirmed by a court. Yes [   ]  
  No [   ]

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

State the number of shares outstanding of each of the issuer's
classes of equity stock, as of the latest practicable date.

31,470,802 common shares issued and outstanding as of
September 10, 2007

DOCUMENTS INCORPORATED BY REFERENCE

If the following documents are incorporated by reference, briefly
  describe them and identify the part of the Form 10-KSB (e.g., Part I, Part II,
  etc.) into which the document is incorporated: (1) any annual report to security
  holders; (2) any proxy or information statement; and (3) any prospectus filed
  pursuant to Rule 424(b) or (c) of the Securities Act of 1933 (Securities
  Act). The listed documents should be clearly described for identification
  purposes (e.g., annual report to security holders for fiscal year ended December
  24, 1990).

Transitional Small Business Disclosure Format (Check one): Yes
[   ]   No [X].

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PART I

Item
1.           Description of
Business.

This annual report contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These statements
relate to future events or our future financial performance. In some cases, you
can identify forward-looking statements by terminology such as may, should,
 expects, plans, anticipates, believes, estimates, predicts,
potential or continue or the negative of these terms or other comparable
terminology. These statements are only predictions and involve known and unknown
risks, uncertainties and other factors, including the risks in the section
entitled Risk Factors, that may cause our or our industrys actual results,
levels of activity, performance or achievements to be materially different from
any future results, levels of activity, performance or achievements expressed or
implied by these forward-looking statements.

Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. Except as required by
applicable law, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements to conform these
statements to actual results.

Our financial statements are stated in United States Dollars
(US$) and are prepared in accordance with United States Generally Accepted
Accounting Principles.

In this annual report, unless otherwise specified, all dollar
amounts are expressed in United States dollars and all references to common
shares refer to the common shares in our capital stock.

As used in this annual report, the terms we, us, our, and
HS3 mean HS3 Technologies, Inc., unless the context clearly requires
otherwise.

Corporate Overview

The address of our principal executive office is 1800 Boulder
Street, Suite 600, Denver, Colorado 80211-6400. Our telephone number is (303)
455-2550.

Our common stock is quoted on the OTC Bulletin Board under the
symbol HSTH.

Corporate History

We were incorporated under the laws of the State of Nevada on
January 28, 2003 under the name Zeno Inc. Following our incorporation, we
focused our business efforts on establishing our company as an exploration stage
mineral exploration company, with claims on properties located in the Thunder
Bay Mining District in Ontario, Canada.

We were not successful in implementing our business plan or
successful in raising sufficient capital to explore our properties in any
material way. As management of our company investigated opportunities and
challenges involved with financing and exploring our properties, management
realized that the business did not present the best opportunity for our company
to realize value for our shareholders. Accordingly, we abandoned our exploration
plan and focused on the identification of suitable businesses with which to
enter into a business opportunity or business combination.

On or about October 10, 2005, we changed our name to HS3
Technologies, Inc and changed our year end from March 31 to June 30.

On August 31, 2005, we entered into an asset purchase agreement
with IP-Colo, Inc. (IPC). The agreement contemplated acquisition of all of the
assets of IPC. IPC was incorporated pursuant to the laws of the State of
Colorado on December 24, 2004. IPCis in the development stage of
providing advanced wireless technologies, integrated with high-speed internet
via satellite to provide real-time security and monitoring for many
industries.

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The closing of the transactions contemplated in the agreement
and the acquisition by our company of all of the assets of IPC occurred on
November 9, 2005. In accordance with the closing of the agreement, and effective
as of November 9, 2005, we acquired all of the assets of IPC, in exchange for
the issuance by our company of 1,612,520 shares of our common stock to the
shareholders of IPC.

Our company had 77,623,000 shares of common stock issued and
outstanding as of November 9, 2005 immediately prior to the issuance of
1,612,520 shares of common stock in connection with the closing of the agreement
and prior to the cancellation of 9,269,520 shares of common stock that were
outstanding on closing that have been agreed to be cancelled. The former
shareholders of IPC now owns 1,612,520 shares of our common stock, which
represented approximately 2.30% of the issued and outstanding shares of our
common stock on November 9, 2005, and 38,700,480 additional shares of common
stock which represented a further 55.31% of our 69,966,000 issued and
outstanding shares of common stock as of November 9, 2005.

As the shareholders of IPC held 57.6% of our shares of common
stock, and because the business of IPC represents the only business operations
of our company, the acquisition of IPC is deemed to be a reverse acquisition for
accounting purposes. Starting with the periodic report for the quarter in which
the acquisition was consummated, our company will file quarterly and annual
reports based on the June 30, 2005 fiscal year end of IPC. Such financial
statements will depict the operating results of IPC from its inception (December
24, 2004) and our company from November 9, 2005.

The shares of our common stock issued to the shareholders of
IPC pursuant to the agreement and the shares of common stock issued under the
subscription agreement will not be registered with the United States Securities
Exchange Commission or the securities commission of any state in the United
States, and were issued in reliance upon an exemption from registration under
the United States Securities Act of 1933, as amended.

On September 6, 2006, the Company effected a one (1) new for
four (4) old reverse stock split of its authorized, issued and outstanding
stock. As a result, its authorized capital decreased to 50,000,000 shares of
common stock with a par value of $0.001 each and 2,500,000 preferred stock with
a par value of $0.001 each.

Our Current Business

We are engaged in the development and sale of security products
and security services. We plan on utilizing national distributors, independent
sales professionals and local dealers to sell our security products and security
services. Currently, customers are able to purchase our Biometric Door Locks by
contacting our head office located in Denver, Colorado or by contacting one of
our three sales representatives, which are located in various regions throughout
the U.S.A. Our Digital Video Recording Technology, OPIE (Outside Portable
Investigative Equipment), Home Automation Systems, Video Monitoring, Cellular
and Wireless Mesh Networks and Wireless Internet-Linked Satellite Surveillance
Systems are currently under development. In today's environment of global
instability, security threat levels are increasingly creating a growing need for
improved security and real-time surveillance. We plan to bring together our
security products and security services to provide our customers with complete
integrated solutions to mitigate these potential security threats.

We are still in our infancy as a viable commercial entity, and
consequently our focus has been on the identification of market needs, the
development of our security products and security services to meet these needs,
and the branding of our company. We anticipate that the expected growth in
revenues will assist us in attracting additional financing to allow us to add
the needed resources in order to further support the growth of our
operations.

On June 14, 2007 we announced the first phase (25 units)
installation of a proprietary solution for an integrator working with the
Department of Homeland Security for an initial trial. The estimated cost for
each unit is approximately $5,000 per unit. This initial installation is the
first phase of a potential multi-phase contract for additional monitoring units.
The solution combines the use of our biometric access control system along with
DVR and GPS/Cellular technology.

On May 22, 2007 we entered into a partnership agreement with
Wright-Hennepin Cooperative Electric Association, dba WH International Response
Center whereby WH International can purchase our equipment and remote video
monitoring services for WH International dealers. We also agree to refer
traditional alarm monitoring services for

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new dealers to WH International. The initial term of the
partnership agreement shall be for a period of three years, automatically
renewable on an annual basis unless terminated by either party.

On May 14, 2007 we announced the first sale and installation of
the OPIE (Outside Portable Investigative Equipment) system to New Frontier
Energy, Inc., a natural resource company engaged in the business of the
exploration, acquisition and development of oil and gas properties. We installed
the OPIE unit to monitor New Frontier's natural gas wells in the Slater Dome
Field on the Colorado/Wyoming border near Baggs, Wyoming.

On April 19, 2007 we announced that we signed a non-binding
Letter of Intent Agreement to enter into negotiations for the acquisition of
TechAmerica Inc. TechAmerica is a technology company created to provide a "one
stop shop" approach to providing technology solutions to the Quick Serve
Restaurant industry. TechAmerica has regional offices in 10 major US cities and
dispatch points in multiple metropolitan areas. At present, TechAmerica is
servicing major "fast food" franchisees utilizing headset systems, drive thru
video and DVR surveillance, entertainment, games, background music, and
satellite television. As of August 31, 2007, the non binding Letter of Intent
Agreement had not been executed, but negotiations with Tech America remain in
process.

On March 2, 2007 we signed a Master Distributor Agreement with
Autostar Technology Private Limited, to become the exclusive promoter of and
distributor of Autostars biometric access control products in the U.S.A. for a
period of one year ending March 2, 2008. The products included in this agreement
are advanced fingerprint authentication systems, specifically designed to
provide personal identification. Under the terms of the Master Distribution
Agreement all patents, trademarks and copyrights, signs and emblems will remain
the property of Autostar. In addition, we are required to maintain and preserve
the price of the biometric access control products and we may not sell the
biometric access control products at prices lower than we purchased them from
Autostar. Autostar warrants that the biometric access control products will be
free from manufacturing defects for a period of 12 months from the date of
resale to our customers. A copy of the Master Distributor Agreement is attached
as an exhibit in reference with this prospectus.

Target Market

We plan to target the sale of our security products and
security services to three primary customer groups;

- Residential
- Commercial
- Government

Market Growth Strategy

According to Security Industry Association the electronic
security business is a business that constitutes more than $30 billion per year.
This figure climbs to over $100 billion when factoring in ancillary services and
products such as guards, barriers and fences, etc. Many projections forecast
sustained industry growth of 10 to 15 percent annually through the year 2020.
World events are identifying increased use of security products and services
across virtually every segment of society.

We believe that the number of prospective customers for the
security industry is unlimited. With the internet reaching the entire globe we
believe that we will be able to provide our security products and services to
anyone in the world. To reach our market penetration strategy we plan to use a
combination of inside, outside, and independent sales representatives supported
by an aggressive advertising campaign to reach the three different levels of the
security industry: distribution, dealer and end user. We plan to also use an
aggressive advertising campaign to reach the individual business and home owners
to drive business to our dealer network. We also plan on pursuing several
acquisition possibilities that will compliment the current product line and
business model and strengthen our company.

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Principal Products and Services

We plan on utilizing national distributors, independent sales
professionals and local dealers to sell our security products and security
services. Currently, customers are able to purchase our Biometric Door Locks by
contacting our head office located in Denver, Colorado or by contacting one of
our three sales representatives, which are located in various regions throughout
the U.S.A. Our Digital Video Recording Technology, OPIE (Outside Portable
Investigative Equipment), Home Automation Systems, Video Monitoring, Cellular
and Wireless Mesh Networks and Wireless Internet-Linked Satellite Surveillance
Systems are currently under development.

Biometric Door Locks

On February 5, 2007, we introduced our proprietary HS3-100
Series and HS3 -200 Series Biometric Door Lock Products. Unlike conventional
door locks, our Biometric Door Locks uses the touch of a registered fingerprint
to unlock the door instead of keys or cards, which can be stolen or copied.
Users also do not need to remember any passwords or PIN codes. The lock design
has a hi-tech appearance combined with uncompromising style to create a personal
statement of taste and sophistication.

We currently offer the following Biometric Door Locks for
sale;

- HS3-101S
- HS3-113S
- HS3-220 BAC Unit

We are the sole distributor in the USA for Autostars biometric
access control products. We currently offer the following Autostar Biometric
Door Lock Products for sale;

- Touch Star
- Touch Star Mini
- Touch Star SOHO
- Touch Star SOHO PRO

Digital Video Recording Technology

We provide and manufacture DVRs designed to meet the specific
requirements of our customers. We manufacture our DVRs to be integrated with our
logical and physical security specifications.

OPIE (Outside Portable Investigative Equipment)

OPIE is a real time surveillance solution consisting of a
combination of cutting edge video transmission and storage technologies
integrated into a completely mobile platform. OPIE integrates remote video
monitoring, motion detection sensors, proprietary wireless Mesh networking,
satellite and cellular connectivity into a self contained, self sufficient,
mobile platform. The units' unique design allows for the addition of solar
panels and deep cycle batteries, allowing OPIE to function independently of
external AC power restrictions.

Video Monitoring

We offer Video Monitoring and alarm verification services using
our Integrated Security Portal located within our Denver Monitoring Center. We
combine both logical and physical security products that provide video
verification of alarms for our customers.

Cellular Network and Wireless Mesh Network Units

We are developing a wireless mesh networking product out of the
need for remote location video monitoring. When conducting video monitoring for
a remote location such as an oil field or power plant, the challenge facing the
satellite Internet connection was that it was very limited in range due to cost
restraints of laying cable. The

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wireless mesh network will be created to enhance the satellite
Internet connection by increasing connectivity over a broader physical range. We
anticipate that our mesh networking system will be self-aware, self healing, and
self propagating, which means that if the user loses one of the access points,
the network will actually reroute traffic around that lost access point. We
believe that we will be able to use this network to go into a location with
satellite uplink and cover a broader range that would be possible if it were
tied to cables.

Wireless Internet-Linked Satellite Surveillance
Systems

We are also capable of providing customers with complete
integrated solutions to high-speed internet and surveillance needs. We plan to
supply high-speed satellite internet access to all locations in the continental
United States. By replacing the need for copper or fiber-optic telephony
equipment in the business or home, customers cost savings can be significant. We
hope to bring service for the first time to areas and industries currently not
able to access high-speed internet cost effectively.

Our integrated operating system provides real-time access
through our satellite network to deliver 24/7 security information that is
available via the internet to authorized personnel, with the proper security
clearance. Additional biometric technology can be added to ensure user identity
interface.

We plan to provide satellite internet broadband access at
high-speeds, web hosting services, the ability to observe activities around
remote facilities with digital IP cameras, as well as advanced biometrics for
time and attendance and access control.

We are nearing completion of a solar powered, standalone video
transmission platform. Easily deployed, the unit will transmit video using our
DVR via satellite or a cellular network to observers at remote locations.
Potentially the units would be used for visually monitoring border security,
utilities such as water storage areas, power transmission towers, oil and gas
pipe lines, construction sites, disaster and first response sites. Our
combination of applications and systems make these units truly unique as they
work in remote or inaccessible locations where there is no access to electric
networks.

Equipment Leasing

We plan to work with several equipment leasing companies who
will assist us to provide customers with a complete leasing program for our
security products. By combining equipment leasing with our security services in
one package deal, we believe it will make it simple for our dealers to complete
the sale by presenting customers with complete security solutions for one
monthly comprehensive fee. The leasing business represents an opportunity for us
to capture significantly more business by removing dealer and end-user
objections. For the end-user, equipment leasing mitigates the high initial
investment in hardware by the end-user that may be cost prohibitive. For this
reason, the leasing program is especially geared towards attracting small
business owners who are unable to spend up to $100,000 in security hardware, but
who are very willing to pay a monthly fee for security product leasing and
monitoring services.

Manufacturing

Manufacturing of our security products has been contracted to
third party manufacturers. We plan to rely on these manufacturers to produce
high quality security products for sale to our customers.

Installation

The installation of our security products has been contracted
out to third parties. We will rely on these installers to install our security
products.

Competition

We will face competition from companies providing a variety of
security products and services. Many of our competitors and potential
competitors have established customer bases, widespread brand recognition and
existing partnerships with other industry participants, as well as substantially
greater financial, technical and marketing

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resources than we do. We expect significant competitive factors
to include: price, service reliability, ease of access and use, transmission
speeds, breadth of service offerings, customer support, brand recognition,
operating experience, and the ability to bundle complementary services. We
expect to encounter a number of challenges in competing with companies already
providing some of the same products and services. Our plans are to stay ahead of
the competition by establishing exclusive relationships for OEM designed and
produced products unique to the industry. Many of these companies have an
entrenched position in the marketplace and lower upfront installation charges
than ours. Increased competition may come in the form of new market entrants,
greater cooperation among our competitors, whether in the form of alliances or
vertical or horizontal integration, or changes in the capabilities of other
companies arising from technological innovations that we cannot foresee.

Regulation

The majority of this industry is in an unregulated format. With
part of our product line related to satellite usage the satellite industry is
highly regulated both in the United States and internationally. We are subject
to the regulatory authority of the U.S. government, primarily through the FCC.
The FCC is the government agency with primary authority in the United States to
regulate and license commercial satellite systems, including those which we will
be dependent upon. FCC rules require that satellite systems avoid interfering
with other authorized users of radio spectrum, and that they comply with FCC
rules governing U.S.-licensed satellite systems in general and Ka-band
geostationary satellite systems in particular. The U.S. Congress has enacted the
Communications Assistance for Law Enforcement Act of 1994, or CALEA, which
requires that any equipment, facilities, and services deployed by
telecommunications carriers meet certain electronic surveillance requirements
identified in the statute. The statute specifically exempts providers of
information services, such as internet service providers. We believe that the
services we intend to offer will not be covered by CALEA. However, the
convergence of technology continues to blur the line between exempt information
services and covered telecommunications services. If we were held to be subject
to the requirements of CALEA, we may have to deploy additional equipment in
order to comply with the statutory obligations, and we could be subject to
monetary civil penalties for failure to comply with the statute or implementing
regulations.

Research and Development

Our research and development efforts are focused on enhancing
our products including: (i) periodic re-design of products and incorporation of
new technologies to improve performance and manufacturability; (ii) design of
new product lines for standard products and additional specialized applications;
and (iii) expansion and the adaptation of existing products to accommodate the
requirements of customer needs. Research and development efforts are conducted
in-house, by contracted consultants and with unique exclusive relationships
developed with some of our suppliers.

We anticipate expending approximately $400,000 during the
twelve-month period ending June 30, 2008 on research and development activities.

Intellectual Property

We own and operate the duly registered internet domain name:
www.HS3Tech.com. The information contained in our website is not part of this
current report.

Patents and Proprietary Technology

We do not currently have any patents in regards to our
technology.

Marketing

To reach our market penetration strategy we plan to use a
combination of inside, outside, and independent sales representatives supported
by an aggressive advertising campaign to reach the three different levels of our
target market; Residential, Commercial and Government.

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Employees

As of June 30, 2007, we have 8 full-time employees and no
part-time employees. Of those employees, none are covered by collective
bargaining agreements. We have 15 subcontractors that we periodically engage as
required.

RISK FACTORS

Much of the information included in this quarterly report
includes or is based upon estimates, projections or other forward-looking
statements. Such forward-looking statements include any projections or
estimates made by us and our management in connection with our business
operations. While these forward-looking statements, and any assumptions upon
which they are based, are made in good faith and reflect our current judgment
regarding the direction of our business, actual results will almost always vary,
sometimes materially, from any estimates, predictions, projections, assumptions,
or other future performance suggested herein. We undertake no obligation to
update forward-looking statements to reflect events or circumstances occurring
after the date of such statements.

Such estimates, projections or other forward-looking
statements involve various risks and uncertainties as outlined below. We
caution readers of this quarterly report that important factors in some cases
have affected and, in the future, could materially affect actual results and
cause actual results to differ materially from the results expressed in any such
estimates, projections or other forward-looking statements. In evaluating us,
our business and any investment in our business, readers should carefully
consider the following factors.

Our new business operations will be subject to a number of
risks and uncertainties, including those set forth below:

Risks Related To Our Business

We will require significant additional financing, the
availability of which cannot be assured, and if we are unable to obtain such
financing, our business may fail.

Our business plan calls for significant expenses necessary to
continue the development of our business and expand our position in the market.
There is no assurance that actual cash requirements will not exceed our
estimates. We may need to raise additional funds to:

- support our planned growth;
- develop or enhance new and existing security products;
- increase our marketing efforts;
- acquire complementary businesses, security products or technologies; and/or
- respond to competitive pressures or unanticipated requirements.

We have not yet achieved sustainable positive cash flows. As
such, we will depend to a large extent on outside capital over the near-term to
fund our capital needs. Such outside capital may be obtained from additional
debt or equity financing. We do not currently have any arrangement for financing
and there is no assurance that capital will be available to meet our operating
costs or, if the capital is available, that it will be on terms acceptable to
us. The issuance of additional equity securities by us would result in a
dilution in the equity interests of our current shareholders. Obtaining
commercial loans, assuming those loans would be available, will increase our
liabilities and future cash commitments. If we are unable to obtain financing in
the amounts and on terms deemed acceptable to us, we may be unable to implement
our business and growth strategies, respond to changing business or economic
conditions, withstand adverse operating results, consummate desired acquisitions
or compete effectively.

We operate in a highly-competitive industry and our failure
to compete effectively may adversely affect our ability to generate
revenue.

We are aware of similar security products and security services
which compete directly with our security products and security services and some
of the companies developing these security products and security services have
significantly greater financial, technical and marketing resources, larger
distribution networks, and generate greater revenue and have greater name
recognition than us. These companies may develop security products superior to

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those of our company. Such competition will potentially affect
our chances of achieving profitability, and ultimately adversely affect our
ability to continue as a going concern.

Some of our competitors conduct more extensive promotional
activities and offer lower prices to customers than we do, which could allow
them to gain greater market share or prevent us from increasing our market
share. In the future, we may need to decrease our prices if our competitors
continue to lower their prices. Our competitors may be able to respond more
quickly to new or changing opportunities, technologies and customer
requirements. To be successful, we must carry out our business plan, establish
and strengthen our brand awareness through marketing, effectively differentiate
our product line from those of our competitors and build our distribution
network. To achieve this we may have to substantially increase marketing and
research and development in order to compete effectively. Such competition will
potentially affect our chances of achieving profitability, and ultimately
adversely affect our ability to continue as a going concern.

Rapid technological changes in our industry could render our
security products or security services non-competitive or obsolete and
consequently affect our ability to generate revenues.

We will derive all of our revenues from the sale of security
products and security services. Such security products and security services are
characterized and affected by rapid technological change, evolving industry
standards and regulations and changing client preferences. Our success will
depend, in significant part, upon our ability to make timely and cost-effective
enhancements and additions to our technology and to introduce new security
products and security services that meet customer demands. We expect new
security products and security services to be developed and introduced by other
companies that compete with our security products and security services. The
proliferation of new and established companies offering similar security
products and security services may reduce demand for our particular security
products and security services. There can be no assurance that we will be
successful in responding to these or other technological changes, to evolving
industry standards or regulations or to new security products and security
services offered by our current and future competitors. In addition, we may not
have access to sufficient capital for our research and development needs in
order to develop new security products and security services.

We could lose our competitive advantages if we are not able
to protect our proprietary technology and intellectual property rights against
infringement, and any related litigation could be time-consuming and
costly.

Our success and ability to compete depends in part on our
proprietary technology incorporated in our security products. If any of our
competitors copy or otherwise gain access to our proprietary technology or
develop similar technologies independently, we would not be able to compete as
effectively. We consider our technologies invaluable to our ability to continue
to develop and maintain the goodwill and recognition associated with our brand.
The measures we take to protect our technologies, and other intellectual
property rights, which presently are based upon registered trade marks in
addition to trade secrets, may not be adequate to prevent their unauthorized
use. Although we rely, in part, on contractual provisions to protect our trade
secrets and proprietary know-how, there is no assurance that these agreements
will not be breached, that we would have adequate remedies for any breach or
that our trade secrets will not otherwise become known or be independently
developed by competitors. Further, the laws of foreign countries may provide
inadequate protection of intellectual property rights. We may need to bring
legal claims to enforce or protect our intellectual property rights. Any
litigation, whether successful or unsuccessful, could result in substantial
costs and a diversion of corporate resources. In addition, notwithstanding any
rights we have secured to our intellectual property, other persons may bring
claims against us claiming that we have infringed on their intellectual property
rights, including claims that our intellectual property rights are not valid.
Adverse determinations in litigation in which we may become involved could
subject us to significant liabilities to third parties, require us to grant
licenses to or seek licenses from third parties and prevent us from
manufacturing and selling our security products. Any claims against us, with or
without merit, could be time-consuming and costly to defend or litigate, divert
our attention and resources, result in the loss of goodwill associated with our
trademarks or require us to make changes to our technologies. Furthermore, we
cannot assure you that any pending patent application made by us will result in
an issued patent, or that, if a patent is issued, it will provide meaningful
protection against competitors or competitor technologies.

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- 11 -

We may not be able to hire and retain qualified personnel to
support our growth and if we are unable to retain or hire such personnel in the
future, our ability to improve our security products and security services and
implement our business objectives could be adversely effected.

To continue our growth, we will need to recruit additional
senior management personnel, including persons with financial and sales
experience. In addition, we must hire, train and retain a significant number of
other skilled personnel, including persons with experience in sales and
marketing. We have encountered competition for these personnel. We may not be
able to find or retain qualified personnel, which will have a material adverse
impact on our business.

We have a history of losses and negative cash flows, which
is likely to continue unless our security products gain sufficient market
acceptance to generate a commercially viable level of sales.

Although we anticipate that we will be able to start generating
increased revenues during the next six months to 12 months, we also expect an
increase in development and operating costs . Consequently, we expect to incur
operating losses and net cash outflows unless and until our existing security
products and security services, and or any new security products that we may
develop or acquire, gain market acceptance sufficient to generate a commercially
viable and sustainable level of sales.

We will rely on a certain number of distributors to
distribute our security products to customers. We could be adversely affected by
an increase in our suppliers prices, a significant decline in our suppliers
financial condition. As a result, our business may fail and investors may lose
their entire investment.

We will rely on a certain number of distributors to distribute
our security products to our customers.We could be adversely affected by
an increase in our distributors prices of distribution services or a significant
decline in our distributors financial condition. If the relationships with any
one of our distributors is terminated and we are not successful in establishing
a relationship with an alternative distributor who offers similar services at
similar prices, our results of operations could be adversely affected, our
business may fail and investors may lose their entire investment.

We will be dependent upon third party manufacturers to
produce our security products. We could be adversely affected by an increase in
our manufacturers services or a significant decline in our manufacturers
financial condition. As a result, our business may fail and investors may lose
their entire investment.

As a cost efficiency measure, we do not plan to manufacture our
own security products but contract such manufacturing to third parties. We could
be adversely affected by an increase in our manufacturers prices of
manufacturing services or a significant decline in our manufacturers financial
condition. If the relationships with any one of our manufacturers is terminated
and we are not successful in establishing a relationship with an alternative
manufacturer who offers similar services at similar prices, our results of
operations could be adversely affected, our business may fail and investors may
lose their entire investment.

The limitation of any one of our manufactures available
manufacturing capacity due to significant disruption in their manufacturing
operation could have a material adverse effect on sales revenue and results of
operations and financial condition.

We will be dependent upon third party manufacturers to produce
our security products. If production at any one of our manufacturers
manufacturing plant is disrupted for any number of reasons, manufacturing yields
may be adversely affected and we may be unable to meet our customers
requirements. Consequently, our customers may purchase security products from
our competitors. This could result in a significant loss of revenues and damage
to our customer relationships, which could materially adversely affect our
business, results of operations or financial condition.

Unless we can establish significant sales of our current
security products and security services, our potential revenues may be
significantly reduced.

We expect that a substantial portion, if not all, of our future
revenue will be derived from the sale of our security products and security
services. We expect that these security product and security services and their
extensions and

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- 12 -

derivatives will account for a majority, if not all, of our
revenue for the foreseeable future. The successful introduction and broad market
acceptance of our security products - as well as the development, introduction
and market acceptance of any future enhancements - are, therefore, critical to
our future success and our ability to generate revenues. Unfortunately, there
can be no assurance that we will be successful in marketing our current product
offerings, or any new product offerings, applications or enhancements. Failure
to achieve broad market acceptance of our security products, as a result of
competition, technological change, or otherwise, would significantly harm our
business.

There is a high risk of business failure due to the fact
that we have not commenced commercial operations.

Although we are in the initial stages of developing and
implementing the commercialization of our security products and security
services, there is no assurance that we will be able to successfully develop
sales of our security products and security services. Thus we have no way of
evaluating whether we will be able to operate the business successfully, and
there is no assurance that we will be able to achieve profitable operations.

Potential investors should be aware of the difficulties
normally encountered in developing and commercializing new security products and
the high rate of failure of such enterprises. The likelihood of success must be
considered in light of the problems, expenses, difficulties, complications and
delays encountered in connection with the commercialization process that we plan
to undertake. These potential problems include, but are not limited to,
unanticipated problems relating to development, manufacture and financing of our
security products. If we are unsuccessful in addressing these risks, our
business will most likely fail.

If we fail to effectively manage our growth our future
business results could be harmed and our managerial and operational resources
may be strained.

As we proceed with the commercialization of our security
products and security services, we expect to experience significant and rapid
growth in the scope and complexity of our business. We will need to add staff to
market our security services, manage operations, handle sales and marketing
efforts and perform finance and accounting functions. We will be required to
hire a broad range of additional personnel in order to successfully advance our
operations. This growth is likely to place a strain on our management and
operational resources. The failure to develop and implement effective systems,
or to hire and retain sufficient personnel for the performance of all of the
functions necessary to effectively service and manage our potential business, or
the failure to manage growth effectively, could have a materially adverse effect
on our business and financial condition.

Our security products and security services may become
obsolete and unmarketable if we are unable to respond adequately to rapidly
changing technology and customer demands.

Our industry is characterized by rapid changes in technology
and customer demands. As a result, our security products and security services
may quickly become obsolete and unmarketable. Our future success will depend on
our ability to adapt to technological advances, anticipate customer demands,
develop new security products and security services and enhance our current
security products and security services on a timely and cost-effective basis.
Further, our security products and security services must remain competitive
with those of other companies with substantially greater resources. We may
experience technical or other difficulties that could delay or prevent the
development, introduction or marketing of new security products and security
services or enhanced versions of existing security products and security
services. Also, we may not be able to adapt new or enhanced security products or
security services to emerging industry standards, and our new security products
or security services may not be favorably received.

Demand for our security products and security services might
be insufficient for us to become profitable.

We cannot predict with certainty the potential consumer demand
for our security products or security services or the degree to which we will
meet that demand. If demand for our security products or security services does
not develop as expected and achieve consumer market acceptance, we might not be
able to generate enough revenue to become profitable or to sustain our
operations. We plan to target the sale of our security products and security
services to three primary customer groups; residential, commercial and
government. We have based our strategy to target these consumers on a number of
assumptions, some or all of which could prove to be incorrect. Even if markets
for our service develop, we could achieve a smaller share of these markets than
we currently anticipate.

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- 13 -

Risks Related To Our Common Stock

A decline in the price of our common stock could affect our
ability to raise further working capital and adversely impact our
operations.

A prolonged decline in the price of our common stock could
result in a reduction in the liquidity of our common stock and a reduction in
our ability to raise capital. Because our operations have been financed through
the sale of equity securities, a decline in the price of our common stock could
be especially detrimental to our liquidity and our continued operations. Any
reduction in our ability to raise equity capital in the future would force us to
reallocate funds from other planned uses and would have a significant negative
effect on our business plans and operations, including our ability to develop
new products and continue our current operations. If the stock price declines,
there can be no assurance that we can raise additional capital or generate funds
from operations sufficient to meet our obligations. We believe the following
factors could cause the market price of our common stock to continue to
fluctuate widely and could cause our common stock to trade at a price below the
price at which you purchase your shares of common stock:

- actual or anticipated variations in our quarterly operating results;
- announcements of new services, products, acquisitions or strategic
  relationships by us or our competitors;
- changes in accounting treatments or principles;
- changes in earnings estimates by securities analysts and in analyst
  recommendations; and
- general political, economic, regulatory and market conditions.

The market price for our common stock may also be affected by
our ability to meet or exceed expectations of analysts or investors. Any failure
to meet these expectations, even if minor, could materially adversely affect the
market price of our common stock.

If we issue additional shares of common stock in the future,
it will result in the dilution of our existing shareholders.

Our certificate of incorporation authorizes the issuance of
50,000,000 shares of common stock. Our board of directors has the authority to
issue additional shares of common stock up to the authorized capital stated in
the certificate of incorporation. Our board of directors may choose to issue
some or all of such shares of common stock to acquire one or more businesses or
to provide additional financing in the future. The issuance of any such shares
of common stock will result in a reduction of the book value or market price of
the outstanding shares of our common stock. If we do issue any such additional
shares of common stock, such issuance also will cause a reduction in the
proportionate ownership and voting power of all other shareholders. Further, any
such issuance may result in a change of control of our corporation.

If a market for our shares of common stock does not develop,
shareholders may be unable to sell their shares of common stock.

There is currently a limited market for our common stock, which
trades through the Over-the-Counter Bulletin Board quotation system. Trading of
stock through the Over-the-Counter Bulletin Board is frequently thin and highly
volatile. There is no assurance that a sufficient market will develop in the
stock, in which case it could be difficult for shareholders to sell their
stock.

Trading of our stock may be restricted by the Securities and
Exchange Commissions penny stock regulations which may limit a stockholders
ability to buy and sell our stock.

The Securities and Exchange Commission has adopted regulations
which generally define penny stock to be any equity security that has a market
price (as defined) less than $5.00 per share or an exercise price of less than
$5.00 per share, subject to certain exceptions. Our securities are covered by
the penny stock rules, which impose additional sales practice requirements on
broker-dealers who sell to persons other than established customers and
accredited investors. The term accredited investor refers generally to
institutions with assets in excess of $5,000,000 or individuals with a net worth
in excess of $1,000,000 or annual income exceeding $200,000 or

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- 14 -

$300,000 jointly with their spouse. The penny stock rules
require a broker-dealer, prior to a transaction in a penny stock not otherwise
exempt from the rules, to deliver a standardized risk disclosure document in a
form prepared by the Securities and Exchange Commission which provides
information about penny stocks and the nature and level of risks in the penny
stock market. The broker-dealer also must provide the customer with current bid
and offer quotations for the penny stock, the compensation of the broker-dealer
and its salesperson in the transaction and monthly account statements showing
the market value of each penny stock held in the customers account. The bid and
offer quotations, and the broker-dealer and salesperson compensation
information, must be given to the customer orally or in writing prior to
effecting the transaction and must be given to the customer in writing before or
with the customers confirmation. In addition, the penny stock rules require
that prior to a transaction in a penny stock not otherwise exempt from these
rules, the broker-dealer must make a special written determination that the
penny stock is a suitable investment for the purchaser and receive the
purchasers written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in and limit the marketability of, our common stock.

The National Association of Securities Dealers Inc., or
NASD, has adopted sales practice requirements, which may limit a stockholders
ability to buy and sell our shares of common stock.

In addition to the penny stock rules described above, the
NASD has adopted rules requiring that in recommending an investment to a
customer, a broker-dealer must have reasonable grounds for believing that the
investment is suitable for that customer. Prior to recommending speculative
low-priced securities to their non-institutional customers, broker-dealers must
make reasonable efforts to obtain information about the customers financial
status, tax status, investment objectives and other information. Under
interpretations of these rules, the NASD believes that there is a high
probability that speculative low-priced securities will not be suitable for at
least some customers.

The NASD requirements make it more difficult for broker-dealers
to recommend that their customers buy our common stock, which may limit our
shareholders ability to buy and sell our stock and which may have an adverse
effect on the market for our shares of common stock.

Other Risks

Trends, Risks and Uncertainties.

We have sought to identify what we believe to be the most
significant risks to our business, but we cannot predict whether, or to what
extent, any such risks may be realized nor can we guarantee that we have
identified all possible risks that might arise. Investors should carefully
consider all of the risk factors before making an investment decision with
respect to our common stock.

We may be unable to continue as a going concern in which
case our securities will have little or no value.

Our independent auditors have noted in their report concerning
our financial statements as of June 30, 2007 that we have incurred substantial
losses since inception, which raises substantial doubt abut our ability to
continue as a going concern. In the event we are not able to continue operations
you will likely suffer a complete loss of your investment in our securities. See
our auditors report on our consolidated financial statements elsewhere in this
Form 10-KSB.

Our By-laws contain provisions indemnifying our officers and
directors against all costs, charges and expenses incurred by them.

Our By-laws contain provisions with respect to the
indemnification of our officers and directors against all costs, charges and
expenses, including an amount paid to settle an action or satisfy a judgment,
actually and reasonably incurred by him, including an amount paid to settle an
action or satisfy a judgment in a civil, criminal or administrative action or
proceeding to which he is made a party by reason of his being or having been one
of our directors or officers.

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- 15 -

Item
2.           Description
of Property.

Principal Offices

Our principal offices are located at 1800 Boulder Street, Suite
600, Denver, Colorado 80211-6400. Our telephone number at our principal office
is (303) 455-2550. The 4,000 square foot space is leased for $4,000 per month
for a 3 year term that commenced on October 1, 2005. We believe that our
principal office will be adequate for our needs for the next 1 year at which
point we will need to expand into additional office space at the same location.
It is anticipated that we will need up to 4000 square feet of additional space.

Item
3.           Legal
Proceedings.

Other than as set out below, we know of no material, active or
pending legal proceedings against our company, nor are we involved as a
plaintiff in any material proceeding or pending litigation. There are no
proceedings in which any of our directors, officers or affiliates, or any
registered or beneficial shareholder, is an adverse party or has a material
interest adverse to our interest.

During the year ended June 30, 2007, certain of our
stockholders requested that our company hold an annual meeting of stockholders.
This requisition led to an order by the courts that our company hold an annual
meeting. In satisfaction of the court order, our company held an annual meeting
of our stockholders on August 14, 2007.

Item
4.           Submissions
of Matters to a Vote of Security Holders.

On August 14, 2007, at an annual meeting of our stockholders,
Michael Yinger, Charles F. Ferris, Mark Lana and Robert A. Morrison were elected
directors of our company and Weaver & Martin, LLC were ratified as our
independent auditors for the ensuing year.

PART II

Item
5.           Market for
Common Equity and Related Stockholder Matters.

Our Common stock is quoted on the OTC Bulletin Board under the
Symbol HSTH. Our stock was originally approved for trading on the OTC Bulletin
Board under the symbol ZNNO. On November 25, 2005 our symbol was changed to
HSTT in connection with a change of name. On September 6, 2006 our symbol was
changed to HSTH in connection with a forward stock split.

The following table reflects the high and low bid information
for our common stock obtained from Stockwatch and reflects inter-dealer prices,
without retail mark-up, markdown or commission, and may not necessarily
represent actual transactions.

The high and low bid prices of our common stock for the periods
indicated below are as follows:

National Association of Securities DealersOTC Bulletin BoardQuarter Ended(1)
      High
      LowJune 30, 2007
    $0.35
    $0.077March 31, 2007
    $0.45
    $0.13December 31, 2006
    $0.95
    $0.24September 30, 2006
    $0.39
    $0.05June 30, 2006
    $1.28
    $0.32March 31, 2006
    $2.64
    $1.04December 31, 2005
    $4.52
    $2.08September 30, 2005
    $n/a
    $n/a


(1)
    Our common stock received approval for quotation on July
      20, 2005. The first trade occurred on October 12,
2005.


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- 16 -

On September 10, 2007, the closing price for the common stock
as reported by the quotation service operated by the OTC Bulletin Board was
$0.08.

As of September 10, 2007, there were 78 holders of record of
our common stock. As of such date, 31,470,802 common shares were issued and
outstanding.

Our common shares are issued in registered form. Empire Stock
Transfer Inc., 7251 West Lake Mead Boulevard, Suite 300, Las Vegas, Nevada
89128-8351 (Telephone: (775) 562-4091; Facsimile: (775) 974-1444) is the
registrar and transfer agent for our common shares.

Dividend Policy

We have not paid any cash dividends on our common stock and
have no present intention of paying any dividends on the shares of our common
stock. Our current policy is to retain earnings, if any, for use in our
operations and in the development of our business. Our future dividend policy
will be determined from time to time by our board of directors.

Recent Sales of Unregistered Securities

Effective August 28, 2007, our company has been provided with
certain loans from related parties, as set forth below. We had agreed to pay 15%
interest per year or issue shares at $0.12 for conversion of the loans, at the
discretion of the provider of the loan. If we conduct an offering at a lower
priced conversion, the below notes may be converted at the lower conversion
rate. All principle and interest are due on demand.

|From              | Amount of Loan | Date funds provided       
|----------------- | -------------- | --------------------------
|                  |                |                           
|Robert A Morrison | $ 5,000.00     | received June 29, 2007    
|Robert A Morrison | $100,000.00    | received May 19, 2007     
|Robert A Morrison | $ 31,000.00    | received December 31, 2005
|Mark Lana         | $ 15,000.00    | received July 31, 2007    
|Mark Lana         | $ 15,000.00    | received August 15, 2007  

On April 4, 2007, we issued an aggregate of 3,731,811 shares of
our common stock for services rendered to our company to two (2) U.S. persons
(as that term is defined in Regulation S of the Securities Act of 1933) relying
on the exemptions from registration provided by Section 4(2) of the Securities
Act of 1933 and upon Rule 506 of Regulation D of the Securities Act of 1933.

On April 11, 2007 and March 20, 2007, we granted options to
purchase an aggregate of 2,500,000 shares of our common stock to four (4)
employees at an exercise price of $.15 and nine (9) employees and consultants at
an exercise price of $.16 per share, (the price of our stock on the grant date)
exercisable until April 11, 2012 and March 20, 2012. The options were issued to
nine (9) U.S. persons (as that term is defined in Regulation S of the Securities
Act of 1933) relying on the exemptions from registration provided by Section
4(2) of the Securities Act of 1933 and upon Rule 506 of Regulation D of the
Securities Act of 1933.

On March 26, 2007, we closed a private placement for the
issuance of 8,362,500 common shares raising gross proceeds of $669,000. Each
common share was issued at a purchase price of $0.08. We issued all of the
8,362,500 common shares to 22 U.S. persons relying on the exemptions from
registration provided by Section 4(2) of the Securities Act of 1933 and upon
Rule 506 of Regulation D of the Securities Act of 1933.

Equity Compensation Plan Information

We have no long-term incentive plans, other than the Stock
Option Plan described below.

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- 17 -

Stock Option Plan

On November 9, 2005, the Company adopted the 2005 Stock Option
Plan for its directors and employees, reserving a total of 2,500,000 shares of
its common stock for issuance pursuant to grants to be made under the stock
option plan. As of June 30, 2007, 2,500,000 options have been granted to
employees and consultants of our company and no options were available for
future grant under this plan.

The purpose of the 2005 Stock Option Plan is to retain the
services of valued key employees and consultants of our company and such other
persons as shall be select in accordance with the 2005 Stock Option Plan, and to
encourage such persons to acquire a greater proprietary interest in our company,
thereby strengthening their incentive to achieve the objectives of the
shareholders of our company, and to serve as an aid and inducement in the hiring
of new employees and to provide an equity incentive to consultants.

The exercise price of shares subject to any option must be at
least 100% of the fair market value of the shares on the date of grant. The
maximum term of any stock option is 5 years from the date the option is granted.
The 2005 Stock Option Plan shall terminate on November 9, 2015.

The following table summarizes certain information regarding
our equity compensation plan as at April 16, 2007:

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)Equity compensation plans approved by security holders
    N/A
    $ N/A
    N/AEquity compensation plans not approved by security holders
    2,500,000
    ($71,929)
    NilTotal
    2,500,000
    $ ($71,929)
    Nil


Item
6.           Plan of
Operation.

Overview

You should read the following discussion of our financial
condition and results of operations together with the audited financial
statements and the notes to audited financial statements included elsewhere in
this filing prepared in accordance with accounting principles generally accepted
in the United States. This discussion contains forward-looking statements that
reflect our plans, estimates and beliefs. Our actual results could differ
materially from those anticipated in these forward-looking statements.

Plan of Operations

Our operating expenses consist mostly of sales, marketing, and
general and administrative expenses. The amount incurred by our company for the
year ended June 30, 2007 was $2,341,249, of which $1,866,083 were non cash
costs.

We anticipate that we will require up to $2,500,000 for the 12
months ending June 30, 2008 to develop our biometric security technology
products and monitoring services and provide for the expansion and adaptation of
existing products to accommodate the requirements of customer needs. We may be
required to hire additional sales and marketing, management, and technical
personnel.

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- 18 -

Purchase of Significant Equipment

We do anticipate the purchase of significant equipment during
the next twelve-month period. This could include equipment for increased
bandwidth requirements, and equipment for monitoring services.

Personnel Plan

We anticipate significant changes in the number of employees
during the next twelve-month period.

Off-Balance Sheet Arrangements

There are no off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that is material to
investors.

Our principal capital resources have been through the
subscription and issuance of common stock, although we have also used
stockholder loans and advances from related parties.

Financial Condition, Liquidity and Capital Resources

Our principal capital resources have been through the issuance
of common stock, although we may use shareholder loans, advances from related
parties, or borrowing in the future.

At June 30, 2007, we had a working capital deficit of $68,999
compared to working capital deficit of $530,940 at June 30, 2006.

At June 30, 2007, our total current assets were $214,785
compared to total current assets of $144,905 as at June 30, 2006.

At June 30, 2007, our total current liabilities were $283,784
compared to total current liabilities of $675,845 as at June 30, 2006.

At June 30, 2007, we had cash on hand of $984 compared to
$13,616 as at June 30, 2006.

For the year ended June 30, 2007, we posted a net loss of
$2,924,327 compared to a net loss of $444,770 for the ended June 30, 2006. The
principal components of the loss for the year ended June 30, 2007 were sales and
marketing and general and administrative expenses.

For the year ended June 30, 2007, we incurred operating
expenses of $3,010,407 compared to $462,826 for the year ended June 30, 2006.

We estimate that our monthly burn rate (cash needs) will be
$210,000.

Cash Requirements

We will require additional funds to implement our growth
strategy in research and development, and sales and marketing primarily. These
funds may be raised through equity financing, debt financing, or other sources,
which may result in further dilution in the equity ownership of our shares.
There is still no assurance that we will be able to maintain operations at a
level sufficient for an investor to obtain a return on his investment in our
common stock. Further, we may continue to be unprofitable.

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- 19 -

Estimated Funding Required During the Twelve Month Period
Ending June 30, 2008

Operating expensesSales and
      Marketing
    $
    600,000Research and
      Development
    
    400,000Consulting and
      Professional Fees and Wages
    
    200,000Product
      Development
    
    200,000Public Relations
    
    100,000Travel and
      Promotion
    
    200,000General and
      Administrative
    
    600,000Total Operating Expenses
    
    2,300,000Working Capital
    
    200,000Total
    $
    2,500,000


We currently anticipate that revenues will commence and
increase in the long-term as we increase our sales and marketing activities and
introduce new products relating to biometric security products and monitoring
services. We expect to keep our operating costs to a minimum until cash is
available through operating or financing activities. We anticipate that we will
start generating revenues from security solutions and monitoring services within
the next three months, however, we are not in a position to predict whether we
will be able to generate sufficient sales revenues to meet operating expenses.

There can be no assurance that additional financing will be
available to us when needed or, if available, that it can be obtained on
commercially reasonable terms. If we are not able to obtain the additional
financing on a timely basis, if and when it is needed, we will be forced to
scale down or perhaps even cease the operation of our business.

Going Concern

We have historically incurred losses and have incurred losses
of $3,369,097 for the two years ending June 30, 2007. Because of these
historical losses, we will require additional working capital to develop our
business operations.

We intend to raise additional working capital through private
placements, public offerings, bank financing and/or advances from related
parties or shareholder loans.

The continuation of our business is dependent upon obtaining
further financing and achieving a break even or profitable level of operations.
The issuance of additional equity securities by us could result in a significant
dilution in the equity interests of our current or future stockholders.
Obtaining commercial loans, assuming those loans would be available, will
increase our liabilities and future cash commitments.

There are no assurances that we will be able to either (i)
achieve a level of revenues adequate to generate sufficient cash flow from
operations; or (ii) obtain additional financing through either private
placements, public offerings and/or bank financing necessary to support our
working capital requirements. To the extent that funds generated from operations
and any private placements, public offerings and/or bank financing are
insufficient, we will have to raise additional working capital. No assurance can
be given that additional financing will be available, or if available, will be
on terms acceptable to us. If adequate working capital is not available we may
not increase our operations.

These conditions raise substantial doubt about our ability to
continue as a going concern. The financial statements do not include any
adjustments relating to the recoverability and classification of asset carrying
amounts or the amount and classification of liabilities that might be necessary
should we be unable to continue as a going concern.

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- 20 -

APPLICATION OF CRITICAL ACCOUNTING POLICIES

Our financial statements and accompanying notes are prepared in
accordance with generally accepted accounting principles in the United States.
Preparing financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenue and
expenses. These estimates and assumptions are affected by managements
application of accounting policies. We believe that understanding the basis and
nature of the estimates and assumptions involved with the following aspects of
our financial statements is critical to an understanding of our financials.

We base our assumptions and estimates on historical experience
  and other sources that we believe to be reasonable at the time. Actual results
  may vary from our estimates due to changes in circumstances, weather, politics,
  global economics, mechanical problems, general business conditions and other
  factors. Our significant estimates are related to the valuation of warrants
  and options.

Item
7.           Financial
Statements.

Our financial statements are stated in United States dollars
(US$) and are prepared in accordance with United States Generally Accepted
Accounting Principles.

The following consolidated financial statements are filed as
part of this annual report:

Report of Independent
      Registered Public Accounting FirmBalance SheetStatements of OperationsStatements of Changes in
      Stockholders' Equity (Deficit)Statements of Cash FlowsNotes to the
      Consolidated Financial Statements


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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders
  HS3 Technologies, Inc.

We have audited the accompanying balance sheet of HS3 Technologies,
  Inc. as of June 30, 2007 and the related statements of operations, changes in
  shareholders’ equity and cash flows for the year ended June 30, 2007.
  These financial statements are the responsibility of the Company's management.
  Our responsibility is to express an opinion on these financial statements based
  on our audit.

We conducted our audit in accordance with auditing standards
  of the Public Company Accounting Oversight Board (United States). Those standards
  require that we plan and perform the audit to obtain reasonable assurance about
  whether the financial statements are free of material misstatement. An audit
  includes examining, on a test basis, evidence supporting the amounts and disclosures
  in the financial statements. An audit also includes assessing the accounting
  principles used and significant estimates made by management, as well as evaluating
  the overall financial statement presentation. We believe that our audit provides
  a reasonable basis for our opinion.

In our opinion, the financial statements referred to above
  present fairly, in all material respects, the financial position of HS3 Technologies,
  Inc. as of June 30, 2007, and the results of their operations and their cash
  flows for the year then ended in conformity with accounting principles generally
  accepted in the United States.

The accompanying financial statements have been prepared assuming
  that the Company will continue as a going concern. As discussed in Note 1 to
  the financial statements, the Company has suffered losses from inception that
  raise substantial doubt about the Company's ability to continue as a going concern.
  Management's plans in regard to these matters are also discussed in Note 1.
  The financial statements do not include any adjustments that might result from
  the outcome of this uncertainty.



/S/
  Weaver & Martin, LLC
  Kansas City, Missouri
  October 9, 2007

---



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors HS3 Technologies, Inc.
Denver, Colorado

We have audited the accompanying consolidated balance sheet of
HS3 Technologies, Inc. as of June 30, 2006 and the related consolidated
statements of operations, stockholders equity (deficit), and cash flows for the
year ended June 30, 2006. These financial statements are the responsibility of
the Companys management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the 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 audit 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 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 audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of HS3
Technologies, Inc. as of June 30, 2006, and the results of its operations and
its cash flows for the year then ended, in conformity with accounting principles
generally accepted in the United States of America.

The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
2 to the financial statements, the Companys lack of revenues and operating
losses raise substantial doubt about its ability to continue as a going concern.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.

Gordon, Hughes & Banks, LLP

Greenwood Village, Colorado September 18, 2006

---

- 20 -

|HS3 Technologies, Inc.                                                      |   |                     |   |   |                    |  
|--------------------------------------------------------------------------- | - | ------------------- | - | - | ------------------ | -
|                                                                            |   |                     |   |   |                    |  
|Consolidated
      Balance Sheet                                            |   | June
      30, 2007 |   |   | June
      30,2006 |  
|                                                                            |   |                     |   |   |                    |  
|ASSETS                                                                      |   |                     |   |   |                    |  
|Current Assets                                                              |   |                     |   |   |                    |  
|Cash and cash equivalents                                                   | $ | 984                 |   | $ | 13,616             |  
|Accounts receivable                                                         |   | 92,902              |   |   | 9,946              |  
|Inventory                                                                   |   | 98,014              |   |   | 112,993            |  
|Deposit on inventory                                                        |   | 22,885              |   |   | 8,350              |  
|Total current assets                                                        |   | 214,785             |   |   | 144,905            |  
|                                                                            |   |                     |   |   |                    |  
|Furniture, fixtures and equipment, net of
      accumulated depreciation of |   |                     |   |   |                    |  
|$26,014 and $7,688 respectively                                             |   | 102,325             |   |   | 80,329             |  
|Total Assets                                                                | $ | 317,110             |   | $ | 225,234            |  
|                                                                            |   |                     |   |   |                    |  
|                                                                            |   |                     |   |   |                    |  
|                                                                            |   |                     |   |   |                    |  
|LIABILITIES                                                                 |   |                     |   |   |                    |  
|Current Liabilities                                                         |   |                     |   |   |                    |  
|Accounts payable and accrued liabilities                                    | $ | 147,784             |   | $ | 75,845             |  
|Convertible debenture                                                       |   |                     |   |   | 500,000            |  
|Convertible notes payable                                                   |   | 136,000             |   |   | 100,000            |  
|                                                                            |   |                     |   |   |                    |  
|Total current liabilities                                                   |   | 283,784             |   |   | 675,845            |  
|                                                                            |   |                     |   |   |                    |  
|STOCKHOLDER'S EQUITY (Deficit)                                              |   |                     |   |   |                    |  
|Preferred stock, $0.0001 par value, 2,500,000 shares
      authorized       |   |                     |   |   |                    |  
|None issued or outstanding                                                  |   |                     |   |   |                    |  
|Common stock, $0.0001 par value, 50,000,000 authorized,                     |   |                     |   |   |                    |  
|31,470,802 and 17,491,491 shares issued and
      outstanding, respectively |   | 31,471              |   |   | 17,492             |  
|Additional paid in capital                                                  |   | 3,658,713           |   |   | (17,492            | )
|Unamortized cost of stock and warrants
      issued for services            |   | (281,920            | ) |   |                    |  
|Retained earnings (deficit)                                                 |   | (3,374,938          | ) |   | (450,611           | )
|Total Stockholders' Equity (Deficit)                                        |   | 33,326              |   |   | (450,611           | )
|                                                                            |   |                     |   |   |                    |  
|**Total Liabilities and Stockholders'
      Equity (Deficit)**              | $ | 317,110             |   | $ | 225,234            |  

See notes to consolidated financial
statements

---

- 21 -

HS3 Technologies, Inc.

|                                                           |   | For the Year        |   |   | For the Year        |  
|---------------------------------------------------------- | - | ------------------- | - | - | ------------------- | -
|                                                           |   | ended               |   |   | ended               |  
|Consolidated
      Statement of Operations                 |   | June
      30, 2007 |   |   | June
      30, 2006 |  
|                                                           |   |                     |   |   |                     |  
|Net Sales                                                  | $ | 203,106             |   | $ | 42,409              |  
|                                                           |   |                     |   |   |                     |  
|Cost of Goods Sold                                         |   | 105,406             |   |   | 23,099              |  
|                                                           |   |                     |   |   |                     |  
|Gross Profit                                               |   | 97,700              |   |   | 19,310              |  
|                                                           |   |                     |   |   |                     |  
|Operating Expenses:                                        |   |                     |   |   |                     |  
|Payroll Expense                                            |   | 487,216             |   |   | -                   |  
|Stock Option Expense                                       |   | 540,755             |   |   | -                   |  
|Professional Fees Expense                                  |   | 1,469,801           |   |   | -                   |  
|Sales & Marketing                                          |   | 12,898              |   |   | 53,415              |  
|General and Administrative                                 |   | 480,198             |   |   | 401,723             |  
|Depreciation                                               |   | 19,539              |   |   | 7,688               |  
|Total Operating Expenses                                   |   | 3,010,407           |   |   | 462,826             |  
|                                                           |   |                     |   |   |                     |  
|Income (Loss) From Operations                              |   | (2,912,707          | ) |   | (443,516            | )
|                                                           |   |                     |   |   |                     |  
|Other Income (Expense)                                     |   |                     |   |   |                     |  
|Interest Income                                            |   | 3,380               |   |   | 1,203               |  
|Interest and Other Expense                                 |   | (15,000             | ) |   | (2,457              | )
|Total Other Income (Expense)                               |   | (11,620             | ) |   | (1,254              | )
|                                                           |   |                     |   |   |                     |  
|Net loss                                                   | $ | (2,924,327          | ) | $ | (444,770            | )
|                                                           |   |                     |   |   |                     |  
|Net loss per share-basic and diluted                       | $ | (0.01               | ) | $ | (0.04               | )
|                                                           |   |                     |   |   |                     |  
|Weighted Average Number of Common Shares
      Outstanding |   | 21,783,375          |   |   | 11,869,333          |  
|                                                           |   |                     |   |   |                     |  
|See notes
      to consolidated financial statements       |   |                     |   |   |                     |  

---

- 22 -

HS3 Technologies, Inc.

|Condensed Consolidated Statement of Stockholders' Equity |              |  |   |         |  |   |            |   |  |                |   |   |            |   |   |               |  
|-------------------------------------------------------- | ------------ |  | - | ------- |  | - | ---------- | - |  | -------------- | - | - | ---------- | - | - | ------------- | -
|(Deficit)                                                |              |  |   |         |  |   |            |   |  | Unamortized    |   |   |            |   |   |               |  
|                                                         |              |  |   |         |  |   |            |   |  | Cost           |   |   |            |   |   | Total         |  
|                                                         |              |  |   |         |  |   | Additional |   |  | Stock/Warrants |   |   | Retained   |   |   | Stockholders' |  
|                                                         | Common Stock |  |   | Paid-in |  |   | Issued for |   |  | Earnings       |   |   | Equity     |  
|                                                         | Shares       |  |   | Amount  |  |   | Capital    |   |  | Service        |   |   | (Deficit)  |   |   | (deficit)     |  
|Balances as of June 30, 2005                             | 625,000      |  |   | 625     |  |   | 1,375      |   |  |                |   |   | (5,841     | ) |   | (3,841        | )
|                                                         |              |  |   |         |  |   |            |   |  |                |   |   |            |   |   |               |  
|Effect of recapitalization                               | 16,866,491   |  |   | 16,867  |  |   | (18,867    | ) |  |                |   |   | -          |   |   | (2,000        | )
|Net (loss) for the year ended June 30, 2006              | -            |  |   | -       |  |   | -          |   |  | -              |   |   | (444,770   | ) |   | (444,770      | )
|                                                         |              |  |   |         |  |   |            |   |  |                |   |   |            |   |   |               |  
|Balances as of June 30, 2006                             | 17,491,491   |  |   | 17,492  |  |   | (17,492    | ) |  | -              |   |   | (450,611   | ) |   | (450,611      | )
|                                                         |              |  |   |         |  |   |            |   |  |                |   |   |            |   |   |               |  
|Issuance of shares in conversion of debenture            | 125,000      |  |   | 125     |  |   | 499,875    |   |  | -              |   |   | -          |   |   | 500,000       |  
|                                                         |              |  |   |         |  |   |            |   |  |                |   |   |            |   |   |               |  
|Issuance of shares in conversion of notes                | 1,231,811    |  |   | 1,232   |  |   | 121,949    |   |  | -              |   |   | -          |   |   | 123,181       |  
|                                                         |              |  |   |         |  |   |            |   |  |                |   |   |            |   |   | -             |  
|Shares issued for cash                                   | 10,862,500   |  |   | 10,862  |  |   | 908,138    |   |  | -              |   |   | -          |   |   | 919,000       |  
|                                                         |              |  |   |         |  |   |            |   |  |                |   |   |            |   |   | -             |  
|Shares issued for services                               | 1,760,000    |  |   | 1,760   |  |   | 623,040    |   |  | (165,920       | ) |   | -          |   |   | 458,880       |  
|                                                         |              |  |   |         |  |   |            |   |  |                |   |   |            |   |   | -             |  
|Warrants issued for services                             | -            |  |   | -       |  |   | 982,448    |   |  | (116,000       | ) |   | -          |   |   | 866,448       |  
|                                                         |              |  |   |         |  |   |            |   |  |                |   |   |            |   |   | -             |  
|Options issued to employees                              | -            |  |   | -       |  |   | 540,755    |   |  | -              |   |   | -          |   |   | 540,755       |  
|                                                         |              |  |   |         |  |   |            |   |  |                |   |   |            |   |   |               |  
|Net (loss) for the period ended June 30, 2007            | -            |  |   | -       |  |   | -          |   |  | -              |   |   | (2,924,327 | ) |   | (2,924,327    | )
|                                                         |              |  |   |         |  |   |            |   |  |                |   |   |            |   |   |               |  
|                                                         |              |  |   |         |  |   |            |   |  |                |   |   |            |   |   |               |  
|Balances as of June 30, 2007                             | 31,470,802   |  | $ | 31,471  |  | $ | 3,658,713  |   |  | (281,920       | ) | $ | (3,374,938 | ) | $ | 33,326        |  

See notes to consolidated financial
statements

---

- 23 -

|HS3 Technologies, Inc.                                |   |                     |   |   |                     |  
|----------------------------------------------------- | - | ------------------- | - | - | ------------------- | -
|                                                      |   | For the Year        |   |   | For the Year        |  
|                                                      |   | Ended               |   |   | Ended               |  
|Consolidated
      Statement of Cash Flows            |   | June
      30, 2007 |   |   | June
      30, 2006 |  
|                                                      |   |                     |   |   |                     |  
|Cash flows from operating activities:                 |   |                     |   |   |                     |  
|Net (loss)                                            | $ | (2,924,327          | ) | $ | (444,770            | )
|Adjustments to reconcile net (loss) to net cash       |   |                     |   |   |                     |  
|provided by (used in) operations:                     |   |                     |   |   |                     |  
|Depreciation                                          |   | 19,539              |   |   | 7,688               |  
|Warrants, stock, and options issued
      for service |   | 1,866,083           |   |   | -                   |  
|Gain on sale of fixed assets                          |   | (1,213              | ) |   | -                   |  
|Effect of recapitalization                            |   | -                   |   |   | (2,000              | )
|Changes in other current assets and liabilities:      |   |                     |   |   |                     |  
|Increase in accounts receivable                       |   | (82,957             | ) |   | (9,018              | )
|Inventory                                             |   | 14,979              |   |   | (112,993            | )
|Deposit on Inventory                                  |   | (14,535             | ) |   | (8,850              | )
|Accounts Payable and accrued liabilities              |   | 71,939              |   |   | 75,845              |  
|Net cash used in operating activities                 |   | (1,050,492          | ) |   | (494,098            | )
|                                                      |   |                     |   |   |                     |  
|Cash flow from investing activities                   |   |                     |   |   |                     |  
|Proceeds from sale of fixed assets                    |   | 5,200               |   |   | -                   |  
|Purchase of fixed assets                              |   | (45,522             | ) |   | (88,017             | )
|Net cash from investing activities                    |   | (40,322             | ) |   | (88,017             | )
|                                                      |   |                     |   |   |                     |  
|Cash flow from financing activities                   |   |                     |   |   |                     |  
|Proceeds from convertible debenture                   |   | -                   |   |   | 500,000             |  
|Sale of Common Stock                                  |   | 919,000             |   |   | -                   |  
|Advance from Shareholder                              |   | -                   |   |   | (7,310              | )
|Proceeds from note payable                            |   | 159,182             |   |   | 100,000             |  
|Net cash flow provided by financing
      activities  |   | 1,078,182           |   |   | 592,690             |  
|                                                      |   |                     |   |   |                     |  
|                                                      |   |                     |   |   |                     |  
|Increase in cash and cash equivalents                 |   | (12,632             | ) |   | 10,575              |  
|                                                      |   |                     |   |   |                     |  
|Cash and cash equivalents, beginning of period        |   | 13,616              |   |   | 3,041               |  
|                                                      |   |                     |   |   |                     |  
|Cash and cash equivalents, end of period              | $ | 984                 |   | $ | 13,616              |  
|                                                      |   |                     |   |   |                     |  
|Supplemental cash flow information:                   |   |                     |   |   |                     |  
|Interest paid                                         |   | -                   |   |   |                     |  
|Income taxes paid                                     |   | -                   |   |   | -                   |  
|Non cash financing activities:                        |   |                     |   |   | -                   |  
|Warrants and stock issued for services                | $ | 1,605,488           |   | $ | -                   |  
|Conversion of convertible notes                       |   | 615,000             |   |   | -                   |  
|Options
      issued for services                     |   | 540,755             |   |   | -                   |  

See notes to consolidated financial
statements

---

- 20 -

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Significant Accounting Policies

(a) Description of Business

On November 9, 2005, we acquired
ip-Colo, Inc., in a reorganization, a development stage corporation organized in
Colorado on December 24, 2004 (herein referred to as ip-Colo). On the date of
the reorganization, we were a non-operating entity without any assets or
liabilities.

Immediately prior to the
reorganization, we had a total of 77,623,000 shares of issued and outstanding
common stock. The reorganization was entered into pursuant to an Asset Purchase
Agreement whereby the we issued 1,612,520 shares of common stock to the
shareholders of ip-Colo for all of the previously issued and outstanding common
stock of ip-Colo. Concurrently, we cancelled 9,269,520 shares of common stock
outstanding upon agreement with shareholders.

As a consequence of the reorganization,
the former ip-Colo shareholders owned approximately 57.6% of the resultant
69,966,000 outstanding shares of the Company common stock. The reorganization
was recorded as a recapitalization effected by a reverse acquisition wherein we
are treated as the acquiree for accounting purposes, even though we were the
legal acquirer. Accordingly, the results of operations included in the financial
statements consist solely of the accounting acquirer, ip-Colo since its December
24, 2004 inception and the Company from the date of reorganization.

On September 6, 2006, we effected a one
(1) new for four (4) old reverse stock split of its authorized, issued and
outstanding stock. As a result, its authorized capital decreased to 50,000,000
shares of common stock with a par value of $0.001 each and 2,500,000 preferred
stock with a par value of $0.001 each.

(b) Basis of Presentation

We are no longer a development stage
  company.(c) Principles of Consolidation

The consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiary, ip-Colo.
All inter-company balances and transactions have been eliminated.

(d) Accounting Estimates

The preparation of these consolidated
financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses and related disclosures. Actual results could differ from those
estimates and assumptions.

(e) Cash and Cash Equivalents

Cash equivalents comprise certain
highly liquid instruments with a maturity of three months or less when
purchased.

(f) Furniture, Fixtures and Equipment

Furniture, fixtures and equipment are
recorded at historical cost, net of accumulated depreciation. Depreciation is
computed using the straight-line method based on the estimated useful lives (3-5
years) . Expenditures for maintenance and repairs are charged to expense.

(g) Inventory

Inventory consists of finished goods
purchased from third-party manufacturers and is valued at the lower of average
cost or market. Average cost is determined using the first-in, first-out method
of accounting.

---

- 21 -

1. Significant Accounting Policies (continued)

(h) Long-lived Assets

Long-lived assets are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable, in accordance with the Financial
Accounting Standards Board (FASB) Statement of Financial Accounting Standard
(SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets. An impairment loss would be recognized when the carrying amount of
an asset exceeds the estimated undiscounted future cash flows expected to result
from the use of the asset and its eventual disposition.

(i) Research and Development Costs

The Company expenses research and
development costs as incurred. The Company incurred $4,427 and $0 research and
development cost for years ended June 30, 2007 and June 30, 2006,
respectively.

(j) Loss Per Share

Basic and diluted earnings (loss) per
share are computed using the weighted average number of shares outstanding
during the period. Diluted earnings per share gives effect to all potential
diluted common shares outstanding during the period. In periods of net loss,
there are no diluted earnings per share since the result would be
anti-dilutive.

(k) Financial Instruments

The fair value of financial instruments
is determined at a specific point in time, based on relevant information about
financial markets and specific financial instruments. As these estimates are
subjective in nature, involving uncertainties and matters of significant
judgment, they cannot be ascertained with precision. Changes in assumptions can
significantly affect estimated fair values.

The carrying value of cash and cash
equivalents, accounts payable and accrued liabilities approximate their fair
value because of the short-term nature of these instruments.

(l) Income Taxes

The Company has adopted SFAS No. 109,
Accounting for Income Taxes, which requires the Company to recognize deferred
tax liabilities and assets for the expected future tax consequences of events
that have been recognized in the Companys consolidated financial statements and
tax returns using the liability method. Under this method, deferred tax
liabilities and assets are determined based on the temporary differences between
the consolidated financial statements and tax bases of assets and liabilities
using enacted tax rates in effect in the years in which the differences are
expected to reverse.

(m) Stock-Based Compensation

Common stock, warrants and options
issued for services are accounted for based on the fair market value at the date
the services are performed. If the awards are based on a vesting period the fair
market value of the awards is determined as vesting is earned. If the services
are to be performed over a period of time the value is amortized over the life
of the period that services are performed.

(n) Concentration of Credit Risk

We sell products to customers in
diversified industries and geographical regions. In 2007 one customer
represented 65% of our revenue. We continually evaluate the creditworthiness of
our customers. We evaluate the collectibility of accounts receivable on a
combination of factors. Our policies require us to record specific reserve if we
become aware of anything that would cause us to question a specific customers
inability to meet their financial obligations to us. We will record a specific
reserve for bad debts to reduce a related receivable when we believe an amount
is not collectible. We do not have any reserves for bad debt at June 30, 2007.

---

- 22 -

1. Significant Accounting Policies (continued)

(o) Revenue Recognition

We record revenue when persuasive
evidence of an arrangement exists, services have been rendered or product
delivery has occurred, the sales price to the customer is fixed or determinable,
and collectability is reasonably assured.

(p) Effect of Recent Accounting
Pronouncements

In September 2006, the Securities and
Exchange Commission staff (SEC) issued SAB 108. SAB 108 was issued to provide
consistency to how companies quantify financial statement misstatements. SAB 108
establishes an approach that requires companies to quantify misstatements in
financial statements based on effects of the misstatements on both the
consolidated balance sheet and statement of operations and the related financial
statement disclosures. Additionally, companies must evaluate the cumulative
effect of errors existing in prior years that previously had been considered
immaterial. We adopted SAB 108 in connection with the preparation of our annual
financial statements for the year ended June 30, 2007 and found no adjustments
necessary.

In September 2006, the FASB issued SFAS
No. 157, Fair Value Measurements(SFAS No.157). SFAS No. 157 defines
fair value, establishes a framework for measuring fair value in generally
accepted accounting principles and expands disclosures about fair value
measurements. SFAS No. 157 does not require any new fair value measurements,
rather, its application will be made pursuant to other accounting pronouncements
that require or permit fair value measurements. SFAS No. 157 is effective for
financial statements issued for fiscal years beginning after November 15, 2007,
and interim periods within those years. The provisions of SFAS No. 157 are to be
applied prospectively upon adoption, except for limited specified exceptions. We
are evaluating the requirements of SFAS No. 157 and do not expect the adoption
to have a material impact on our consolidated balance sheet or statement of
operations.

In June 2006, the Financial Accounting
Standards Board (FASB) issued interpretation No. 48, Accounting for
Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109 (FIN
48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized
in a companys financial statements in accordance with FASB Statement No. 109,
Accounting for Income Taxes. It prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement of
a tax position taken or expected to be taken in a tax return. FIN 48 also
provides guidance on de-recognition, classification, interest and penalties,
accounting in interim periods, disclosure and transition. FIN 48 is effective
for fiscal years beginning after December 15, 2006 and will be adopted by us on
July 1, 2007. We do not expect the adoption of FIN 48 to have a material impact
on our consolidated balance sheet or statement of operations.

(q) Reclassifications

Certain reclassifications have been
made to prior periods to conform to current presentation.

2. Going Concern

The accompanying consolidated financial statements have been
prepared assuming that we will continue as a going concern. Our ability to
continue as a going concern is dependent upon attaining profitable operations
based on the development of products that can be sold. We intend to use
borrowings and security sales to mitigate the affects of our cash position,
however, no assurance can be given that debt or equity financing, if and when
required, will be available. The financial statements do not include any
adjustments relating to the recoverability and classification of recorded assets
and classification of liabilities that might be necessary should we be unable to
continue in existence.

3. Notes Payable

---

- 23 -

Our company has been provided with certain loans from related
parties, as set forth below. We had agreed to pay 15% interest per year or issue
shares at $0.12 for conversion of the loans, at the discretion of the provider
of the loan. If we conduct an offering at a lower priced conversion, the below
notes may be converted at the lower conversion rate. All principle and interest
are due on demand.

From
    Amount of LoanRobert A Morrison
    $ 5,000.00Robert A Morrison
    $100,000.00Robert A Morrison
    $ 31,000.00


4. Common Stock

On October 10, 2005, we received total gross proceeds of
$500,000 and issued a convertible debenture, convertible into 125,000 shares of
common stock at the option of the Company once the value of the Companys common
stock exceeds $4.00 per share. Interest was to accrue and be paid in full at 5%
per annum if the acquisition of ip-Colo, Inc. did not occur within 120 days of
the closing of the debenture. The acquisition of ip-Colo, Inc. did occur on
November 9, 2005 or within 29 days of the closing of the debenture. Thus, no
interest was due or payable. Further, the fair value of the Companys stock did
exceed $4.00 per share as quoted on the Over-the-Counter Bulletin Board in
November 2005. On October 13, 2006, we converted the outstanding debenture using
a conversion price of $4.00 per share into 125,000 shares of common stock.

On May 9, 2006, we entered into an unsecured short-term
promissory note for $100,000. The note bears interest at 8% annually and was due
in full on May 9, 2007. On August 8, 2006, we entered into an unsecured
short-term promissory note for $15,000. The note bears interest at 8% annually
and is due in full on August 8, 2007. On April 4, 2007 both notes along with
accrued interest of $8,182 were converted into 1,231,811 shares of our common
stock.

On August 23, 2006 and September 19, 2006, we entered into two
stock subscriptions aggregating $50,000 and $24,000, respectively. Under these
subscriptions, on December 12, 2006, we issued 925,000 shares of common stock at
a purchase price of $0.08 per share. In addition, between September 24, 2006 and
November 1, 2006, we completed a series of equity stock subscription placements
aggregating $400,000. Under the subscriptions, on December 12, 2006, we issued
5,000,000 shares of common stock at a purchase price of $0.08 per share.

On February 1, 2007 we completed a private placement
aggregating $250,000. Under the subscription, on April 4, 2007, we issued
2,500,000 shares of common stock at a purchase price of $.10 per share.

On March 22, 2007, we completed a series of private placements
aggregating $195,000. Under the subscriptions, we issued 2,437,500 shares of
common stock at a purchase price of $0.08 per share to six employees.

On October 1, 2006, we issued 800,000 shares of common stock,
valued at $248,000, using the price of our shares at the date of our agreement,
to Ice Cold Stocks to provide advisory and consulting services to the Company in
conjunction with the Companys development of its marketing plan and business
plan and goals. The services were for one year. We have $62,000 remaining as
unamortized cost of stock and warrants issued for services and have expensed as
professional fees $186,000 for the year ended June 30, 2007.

On December 4, 2006, we entered into an agreement with Redwood
Consultants LLC, a business communications consulting firm for market
communications, investor relations and strategic planning services. We issued
870,000 shares of common stock to the consulting firm, valued at $348,000, using
the price of our shares at the date of our agreement and 1,000,000 warrants (see
warrants and options). The agreement was for a one year period and we have
$103,920 remaining as unamortized cost of stock and warrants issued for services
and have expensed as professional fees $243,210 for the year ended June 30,
2007.

On January 22, 2007 the Company issued 90,000 shares of common
stock, valued at $28,800, using the price of our shares at the date of our
agreement, to Wall Street Resources, Inc. to provide written analytical coverage
and

---

- 24 -

consultation in matters concerning corporate finance and
investor communications. We have expensed as professional fees $28,800 for the
year ended June 30, 2007.

5. Options and Warrants

The Board of Directors has approved a Stock Option Plan (the
Plan) authorizing the issuance of a total of 2,500,000 shares pursuant to which
directors, officers, employees of the Company are eligible to receive grants of
options for the Companys common stock. Each stock option entities its holder to
purchase one common share of the Company.

On March 20, 2007 and April 11, 2007, we granted options to
purchase an aggregate of 2,500,000 shares of our common stock to nine (9)
employees and consultants at an exercise price of $0.1667 and $.15 per share,
(the price of our stock on the grant date) exercisable until March 20, 2012 and
April 11, 2007. The value of the options was $540,755 and we recorded this as
Stock Option Expense. The options were valued using the Black-Scholes pricing
model with a common stock price of $0.1667 and $0.15, five-year term, volatility
of 206.64% and a yield of 3%.

We issued 6,250,000 warrants to Malibu Holdings, LLC in
connection with financial advisory services they provided us. The value of the
warrants was $670,689 based on the Black-Scholes pricing model using the
assumptions of stock price on the date of the agreement $.16, Exercise
Price$.12, Term is 2 years, Yield is 3% and volatility of 120.13% . We expensed
as professional fees $670,689 for the year ended June 30, 2007.

A summary of stock option and warrants is as follows:

Average
    
    
    
    
    
    AverageOptions
    
    
    Price
    
    
    Warrants
    
    
    PriceOutstanding 07/01/05
    
    -
    
    
    -
    
    
    -
    
    
    -Granted
    
    -
    
    
    -
    
    
    -
    
    
    -Cancelled
    
    -
    
    
    -
    
    
    -
    
    
    -Exercised
    
    -
    
    
    -
    
    
    -
    
    
    -Outstanding 06/30/06
    
    -
    
    
    -
    
    
    -
    
    
    -Outstanding 07/01/06
    
    -
    
    
    -
    
    
    -
    
    
    -Granted
    
    2,500,000
    
    $
    0.16
    
    
    7,250,000
    
    $
    0.17Cancelled
    
    -
    
    
    -
    
    
    -
    
    
    -Exercised
    
    -
    
    
    -
    
    
    -
    
    
    -Outstanding 06/30/07
    
    2,500,000
    
    $
    0.16
    
    
    7,250,000
    
    $
    0.17


6. Related Parties

The Company leases office space from a company owned by a major
stockholder. Rent expense under this lease was $48,000 and $35,500 for the years
ended June 30, 2007 and 2006, respectively.

As described in Note 3 in the accompanying footnotes, our
company has been provided with certain loans from related parties, as set forth
below. We had agreed to pay 15% interest per year or issue shares at $0.12 for
conversion of the loans, at the discretion of the provider of the loan. If we
conduct an offering at a lower priced conversion, the below notes may be
converted at the lower conversion rate. All principle and interest are due on
demand

7. Income Taxes

Deferred income taxes are determined based on the tax effect of
items subject to different treatment between book and tax bases. There is
approximately $1,602,000 of net operating loss carry-forwards which expire in
2021-2022. The net deferred tax is as follows:

---

- 25 -

June 30, 2007
    
    
    June 30, 2006Non-current deferred tax asset (liabilities):Net operating loss carry-forward
    $
    545,000
    
    $
    153,000Valuation allowance
    
    (545,000
    )
    
    (153,000
    )Total deferred tax net
    $
    -
    
    $
    -


A reconciliation of the provision for income taxes to the
statutory federal rate for continuing operations is as follows:

March 31, 2007
    
    
    March 31, 2006Statuary tax rate
    
    34.0%
    
    
    34.0%Change in valuation allowance
    
    (34.0%
    )
    
    (34.0%
    )Effective tax rate
    
    0.0%
    )
    
    0.0%
    )


8. Subsequent Events

We obtained loans from a related party, as set forth below. We
had agreed to pay 15% interest per year or issue shares at $0.12 for conversion
of the loans, at the discretion of the provider of the loan. If we conduct an
offering at a lower priced conversion, the below notes may be converted at the
lower conversion rate. All principle and interest are due on demand.

Mark Lana
    $15,000.00
    received July 31, 2007Mark Lana
    $15,000.00
    received August 15, 2007


---

- 20 -

Item
8.           Changes In and
Disagreements With Accountants on Accounting and Financial Disclosure.

On July 27, 2007, we decided to engage new auditors as our
independent accountants to audit our financial statements. Our Board of
Directors approved the change of accountants to Weaver & Martin, LLC, an
independent registered firm of Certified Public Accountants. Accordingly, we
dismissed Gordon Hughes & Banks, LLP on July 27, 2007.

During our two most recent fiscal years, and any subsequent
interim periods preceding the change in accountants, there were no disagreements
with Gordon Hughes & Banks, LLP, on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope procedure. The
report on the financial statements prepared by Gordon Hughes & Banks, LLP,
for either of the last two years did not contain an adverse opinion or a
disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit
scope or accounting principals, except that Gordon Hughes & Banks, LLP
expressed in their report substantial doubt about our ability to continue as a
going concern. The decision to change accountants was based on the determination
by the Board of Directors that such a step was necessary in order that our
auditors be located in the same city as our head offices and as such be more
accessible to the company.

We provided Gordon Hughes & Banks, LLP with a copy of the
Current Report on Form 8-K prior to its filing with the SEC, and requested that
they furnish us with a letter addressed to the SEC stating whether they agree
with the statements made in the Current Report on Form 8-K, and if not, stating
the aspects with which they do not agree. A copy of the letter provided from
Gordon Hughes & Banks, LLP is incorporated by reference in this registration
statement from our Form 8-K filed on July 27, 2007.

Item
8A.          Disclosure Controls
and Procedures

As required by Rule 13a-15 under the Exchange Act, we have
carried out an evaluation of the effectiveness of the design and operation of
our company's disclosure controls and procedures as of the end of the period
covered by this annual report, being June 30, 2007. This evaluation was carried
out under the supervision and with the participation of our company's
management, including our company's president and our chief executive officer.
Based upon that evaluation, our company's president and our chief executive
officer concluded that our company's disclosure controls and procedures are
effective as at the end of the period covered by this report. There have been no
changes in our company's internal controls or in other factors, which could
affect internal controls subsequent to the date we carried out our evaluation.

Disclosure controls and procedures are controls and other
procedures that are designed to ensure that information required to be disclosed
in our company's reports filed or submitted under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the
Securities and Exchange Commission's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed in our company's reports filed
under the Exchange Act is accumulated and communicated to management, including
our company's president, as appropriate, to allow timely decisions regarding
required disclosure.

Item
8B.          Other Information

None.

PART III

Item
9.           Directors,
Executive Officers, Promoters and Control Persons; Compliance with Section 16(a)
of the Exchange Act.

Directors and Executive Officers, Promoters and Control
Persons

As at September 10, 2007, our directors and executive officers,
their age, positions held, and duration of such, are as follows:

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- 21 -

Name
      Position Held with our Company
      Age
      Date First Elected or
      AppointedMark Lana
    Chief Executive Officer,
      Treasurer, Secretary and Director
    53
    November 9, 2005Robert A. Morrison
    President and Director
    42
    June 18, 2007Charles F. Ferris
    Director
    60
    August 14, 2007Michael Yinger
    Director
    50
    August 14, 2007


Business Experience

The following is a brief account of the education and business
experience of directors and executive officers during at least the past five
years, indicating their principal occupation during the period, and the name and
principal business of the organization by which they were employed.

Mark Lana, Chief Executive Officer, Treasurer, Secretary
and Director

Mr. Lana was appointed as President and Chief Executive Officer
on November 9, 2005 and as a member of our board of directors on November 21,
2005.

Mr. Lana has been an entrepreneur for over 30 years. He owned
and operated several multi-unit and corporate extended stay hotels each with a
staff of over 10 people in the Denver metro area for the past 20 years. He was
involved in the housing industry and built, remodeled and refurbished single
family and multi-unit dwellings. Mr. Lana has been involved in developing
markets and putting together the financing for commercial real estate
transactions and acquisitions. He has been involved with software development
for medical transcription services and for payroll efficiencies in the
hotel/motel labor market. During the 1990's Mr. Lana was able to develop a
system of medical records transcriptions that enabled records to be transcribed
at several remote locations and then be centrally transmitted back to the
hospital/clinic. His software applications were used by the Denver medical
profession for use in delivering radiology reports to medical facilities and
physician's offices from remote locations.

Robert A. Morrison, President and Director

Mr. Morrison was appointed as President and Director on June
18, 2007.

For the past 15 years Mr. Morrison has been the owner of RAM
Enterprises Inc, a computer networking consulting company that designs, builds
and maintains computer networks for various enterprises. Mr. Morrison was a
director of ID-Confirm Inc. from December 12, 2004 to January 5, 2007 and was
its President, Chief Executive Officer from September 12, 2005 to June 13, 2006,
Chief Financial Officer from November 16, 2004 to July 22, 2005 and Chief
Technology Officer from July 13, 2006 to January 5, 2007.

Charles F. Ferris, Director

Dr. Ferris was elected as a director on August 14, 2007.

Dr. Ferris is the Founder and President of Strategic Science
LLC. He is a specialist on advanced topics in biotechnology, business
management, and technology-based economic development. He provides strategic
guidance to technology companies in the areas of scientific, business and
corporate development, and is passionate about applying these backgrounds to
optimize health and wellness outcomes. His professional career has also resulted
in significant relationships with many academic, scientific, tech-policy and
business opinion leaders. Dr. Ferris previously served as the Director of
Biosciences Programs for the State of Colorados science and technology
development agency. The agency was formed to promote public/private consortia
and foster research excellence, technology transfer and technology-based
business development.

---

- 22 -

As a retired Lieutenant Colonel from the U.S. Army, Dr. Ferris
has an extensive background and training in military medical capabilities and
protocols as well as chemical, radiation and biological defense. Dr. Ferris
served as Chair of both the Letterman Army Institutional Review Committee and
the Animal Care and Use Committee.

A resident of Colorado since 1983, Dr. Ferris has been involved
in biological sciences research and business activities for over 20 years. His
particular expertise is in the convergence of basic science and emerging
technologies and taking these to market.

Dr. Ferris earned both his B.S. (animal science) and M.S.
(reproductive physiology) from The Ohio State University, his M.B.A. from the
University of Colorado and his Ph.D. (reproductive physiology) from Utah State
University.

Dr. Ferris has graduated from numerous Army military medical
courses and schools, including the Command and General Staff College.

Michael Yinger, Director

Mr. Yinger was elected as a director on August 14, 2007.

Mr. Yinger is a seasoned senior executive, with experience
creating, building, and managing organizations, providing strategic advice via
Board of Directors membership, both in the US and internationally. Over the
course of his career, Mr. Yinger has delivered positive results (sales growth of
10-20% in a down market), dealt with senior level clients (CxO level), and
established efficient organizations and partnerships in a number of different
industries, within startups and established companies. He is well versed in
business management consulting, including outsourcing (domestically and
internationally) and business/integration. Mr. Yinger has direct experience
managing technical as well as strategic initiatives, in traditional or matrix
management environments.

Committees of the Board

Audit Committee

We do not have an Audit Committee, our entire board of
directors performs the functions of an Audit Committee. The current size of our
board of directors does not facilitate the establishment of a separate
committee.

Nominating Committee

We do not have a Nominating Committee, our entire board of
director performs the functions of a Nominating Committee and oversees the
process by which individuals may be nominated to our board of directors.

The current size of our board of directors does not facilitate
the establishment of a separate committee. We hope to establish a separate
Nominating Committee consisting of independent directors, if the number of our
directors is expanded.

Compensation Committee

We do not have a compensation committee.

Significant Employees

Our significant employees, their ages and positions held are as
follows:

Name
    Position Held with our
      Company
    AgeScott Annis
    Chief Technology Officer
    38


---

- 23 -

Scott Annis  Chief Technology Officer

Mr. Annis is responsible for the strategic rollout of HS3
Technologies solutions including site-surveys, deployment, implementation,
liaison with WildBlue Communication technicians and maintenance of customer
installations. Mr. Annis brings over 25 years of experience working with
computers, servers, networks, wireless networking and routers. Prior to joining
HS3 Technologies, Mr. Annis founded Nanuke Systems, Inc., a full-service
Internet solutions firm. Nanuke Systems provides website and email hosting,
wireless Internet access and network design, services and repair. Nanuke Systems
specializes in the design, development and implementation of remote access
solutions for large corporations. Mr. Annis also attended the University of
Colorado at Boulder's Aerospace Engineering Program.

Family Relationships

There are no family relationships between any director or
executive officer.

Involvement in Certain Legal Proceedings

Our sole director and executive officer, promoters or control
persons have not been involved in any of the following events during the past
five years:

1. any bankruptcy petition filed by or
against any business of which such person was a general partner or executive
officer either at the time of the bankruptcy or within two years prior to that
time;

2. any conviction in a criminal
proceeding or being subject to a pending criminal proceeding (excluding traffic
violations and other minor offences);

3. being subject to any order,
judgment, or decree, not subsequently reversed, suspended or vacated, of any
court of competent jurisdiction, permanently or temporarily enjoining, barring,
suspending or otherwise limiting his involvement in any type of business,
securities or banking activities; or

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

Code of Ethics

On September 10, 2007, our board of directors adopted a Code of
Ethics and Business Conduct that applies to, among other persons, our company's
chief executive officer, president and chief financial officer (being our
principal executive officer, principal financial officer and principal
accounting officer), as well as persons performing similar functions. As
adopted, our Code of Ethics and Business Conduct sets forth written standards
that are designed to deter wrongdoing and to promote:

1. ****honest and ethical conduct, including the ethical handling of actual or
apparent conflicts of interest between personal and professional relationships;

2. ****full, fair, accurate, timely, and understandable disclosure in reports
and documents that we file with, or submit to, the Securities and Exchange
Commission and in other public communications made by us;

3. ****compliance with applicable governmental laws, rules and regulations;

4. ****the prompt internal reporting of violations of the Code of Ethics and
Business Conduct to an appropriate person or persons identified in the Code of
Ethics and Business Conduct; and

5.****
accountability for adherence to the Code of Ethics and Business Conduct.

---

- 24 -

Our Code of Ethics and Business Conduct requires, among other
things, that all of our company's senior officers commit to timely, accurate and
consistent disclosure of information; that they maintain confidential
information; and that they act with honesty and integrity.

In addition, our Code of Ethics and Business Conduct emphasizes
that all employees have a responsibility for maintaining financial integrity
within our company, consistent with generally accepted accounting principles,
and federal and state securities laws. Any employee who becomes aware of any
incidents involving financial or accounting manipulation or other
irregularities, whether by witnessing the incident or being told of it, must
report it to our company. Any failure to report such inappropriate or irregular
conduct of others is to be treated as a severe disciplinary matter. It is
against our company policy to retaliate against any individual who reports in
good faith the violation or potential violation of our company's Code of Ethics
and Business Conduct by another.

Our Code of Ethics and Business Conduct is being filed with the
Securities and Exchange Commission as Exhibit 14.1 to this annual report on Form
10-KSB. We will provide a copy of the Code of Ethics and Business Conduct to any
person without charge, upon request. Requests can be sent to: HS3 Technologies
Inc., Suite 600, 1800 Boulder Street, Denver, CO 80211-6400.

Audit Committee Financial Expert

Our board of directors has determined that it does not have a
member of the audit committee that qualifies as an audit committee financial
expert as defined in Item 401(e) of Regulation S-B.

We believe that our entire board of directors is capable of
analyzing and evaluating financial statements that present a breadth and level
of complexity of accounting issues that are generally comparable to the breadth
and complexity of the issues reasonably expected to be raised by our company. In
addition, we believe that retaining an independent director who would qualify as
an audit committee financial expert would be overly costly and burdensome and
is not warranted in our circumstances given the early stages of our development
and the fact that we have not generated revenues to date.

Section 16(a) Beneficial Ownership Compliance

Section 16(a) of the Securities Exchange Act requires our
executive officers and directors, and persons who own more than 10% of our
common stock, to file reports regarding ownership of, and transactions in, our
securities with the Securities and Exchange Commission and to provide us with
copies of those filings. Based solely on our review of the copies of such forms
received by us, or written representations from certain reporting persons, we
believe that during fiscal year ended June 30, 2007, all filing requirements
applicable to its officers, directors and greater than ten percent beneficial
owners were complied with.

Item
10.          Executive
Compensation.

The particulars of compensation paid to the following persons:

- our principal executive officer;
- each of our two most highly compensated executive officers who were serving
  as executive officers at the end of the year ended June 30, 2007 who had total
  compensation exceeding $100,000; and
- up to two additional individuals for whom disclosure would have been
  provided under (b) but for the fact that the individual was not serving as our
  executive officer at the end of the most recently completed financial year,
  who we will collectively refer to as the named executive officers, of our
  years ended June 30, 2007, 2006 and 2005, are set out in the following summary
  compensation table:

---

- 25 -

SUMMARY COMPENSATION TABLEName and
        Principal Position
      Year
      Salary
        ($)
      Bonus
        ($)
      Stock Awards ($)
      Option
        Awards ($)
      Non-Equity Incentive
        Plan Compensa- tion ($)
      Change in Pension Value and Nonqualified Deferred Compensation
        Earnings ($)
      All Other
        Compensa- tion ($)
      Total
        ($)Mark Lana(1)Chief Executive Officer, Treasurer and Secretary
      2007 
        2006 
        2005
      $125,000 
        $85,000 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      $43,260 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      $168,260 
        Nil 
        NilRobert A. 
        Morrison(2)President
      2007 
        2006 
        2005
      $115,000 
        N/A 
        N/A
      $Nil 
        N/A 
        N/A
      Nil 
        N/A 
        N/A
      $151,411 
        N/A 
        N/A
      Nil 
        N/A 
        N/A
      Nil 
        N/A 
        N/A
      Nil 
        N/A 
        N/A
      $266,411 
        N/A 
        N/ALougene Baird(3)former Chief Operating Officer and Secretary
      2007 
        2006 
        2005
      N/A 
        Nil 
        Nil
      N/A 
        Nil 
        Nil
      N/A 
        Nil 
        Nil
      N/A 
        Nil 
        Nil
      N/A 
        Nil 
        Nil
      N/A 
        Nil 
        Nil
      N/A 
        Nil 
        Nil
      N/A 
        Nil 
        NilBonnie 
        McNamara(4)former Chief Financial Officer
      2007 
        2006 
        2005
      N/A 
        Nil 
        Nil
      N/A 
        Nil 
        Nil
      N/A 
        Nil 
        Nil
      N/A 
        Nil 
        Nil
      N/A 
        Nil 
        Nil
      N/A 
        Nil 
        Nil
      N/A 
        Nil 
        Nil
      N/A 
        Nil 
        NilFrank McGill(5)former President
        and Chief Executive Officer
      2007 
        2006 
        2005
      N/A 
        N/A 
        Nil
      N/A 
        N/A 
        Nil
      N/A 
        N/A 
        Nil
      N/A 
        N/A 
        Nil
      N/A 
        N/A 
        Nil
      N/A 
        N/A 
        Nil
      N/A 
        N/A 
        Nil
      N/A 
        N/A 
        NilLinda Smith(6)former Chief Financial Officer and Treasurer
      2007 
        2006 
        2005
      N/A 
        N/A 
        Nil
      N/A 
        N/A 
        Nil
      N/A 
        N/A 
        Nil
      N/A 
        N/A 
        Nil
      N/A 
        N/A 
        Nil
      N/A 
        N/A 
        Nil
      N/A 
        N/A 
        Nil
      N/A 
        N/A 
        Nil


|(1) | Mr. Lana was appointed President and Chief Executive
      Officer on November 9, 2005 and resigned as President on June 18,
    2007.    
|--- | ------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                           
|(2) | Mr. Morrison was appointed President on June 18,
    2007                                                                                 
|    |                                                                                                                                           
|(3) | Ms. Baird was appointed Chief Operating Officer and
      Secretary on November 9, 2005 and resigned as an officer on March 8,
      2006.
|    |                                                                                                                                           
|(4) | Ms. McNamara was appointed Chief Financial Officer on
      March 14, 2006 and resigned on June 13, 2006.                                 
|    |                                                                                                                                           
|(5) | Mr. McGill resigned as President and Chief Executive
      Officer on November 9, 2005.                                                   
|    |                                                                                                                                           
|(6) | Ms. Smith resigned as Chief Financial Officer and
      Treasurer on November 9, 2005                                                     

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth for each named executive officer
certain information concerning the outstanding equity awards as of June 30
2007.

---

- 26 -

Option Awards
      Stock AwardsName
      Number
        of Securities Underlying Unexercised
        Options Exercisable
      Number
        of Securities Underlying Unexercised
        Options Unexercisable
      Equity Incentive Plan Awards: Number of Securities
        Underlying Unexercised Unearned Options
      Option Exercise Price
      Option Expiration Date
      Number
        of Shares or Units of Stock
        that Have NotVested
      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 VestedMark Lana
      200,000
      200,000
      Nil
      $0.1667
      March 20, 2012
      Nil
      Nil
      Nil
      NilRobert Morrison
      700,000
      700,000
      Nil
      $0.1667
      March 20, 2012
      Nil
      Nil
      Nil
      Nil


Compensation of Directors

We reimburse our directors for expenses incurred in connection
with attending board meetings. We have not paid any director's fees or other
cash compensation for services rendered as a director since our inception to
June 30, 2007.

We have no formal plan for compensating our directors for their
service in their capacity as directors, although such directors are expected in
the future to receive stock options to purchase common shares as awarded by our
board of directors or (as to future stock options) a compensation committee
which may be established. Directors are entitled to reimbursement for reasonable
travel and other out-of-pocket expenses incurred in connection with attendance
at meetings of our board of directors. Our board of directors may award special
remuneration to any director undertaking any special services on our behalf
other than services ordinarily required of a director. No director received
and/or accrued any compensation for their services as a director, including
committee participation and/or special assignments.

Long-Term Incentive Plans

There are no arrangements or plans in which we provide pension,
retirement or similar benefits for directors or executive officers, except that
our directors and executive officers may receive stock options at the discretion
of our board of directors. We do not have any material bonus or profit sharing
plans pursuant to which cash or non-cash compensation is or may be paid to our
directors or executive officers, except that stock options may be granted at the
discretion of our board of directors.

We have no plans or arrangements in respect of remuneration
received or that may be received by our executive officers to compensate such
officers in the event of termination of employment (as a result of resignation,
retirement, change of control) or a change of responsibilities following a
change of control, where the value of such compensation exceeds $60,000 per
executive officer.

Item
11.          Security
Ownership of Certain Beneficial Owners and Management.

As of September 10, 2007, there were 31,470,802 shares of our
common stock outstanding. The following table sets forth certain information
known to us with respect to the beneficial ownership of our common stock as of
that date by (i) each of our directors, (ii) each of our executive officers, and
(iii) all of our directors and executive officers as a group. Except as set
forth in the table below, there is no person known to us who beneficially owns
more than 5% of our common stock. The number of shares beneficially owned is
determined under rules of the Securities and Exchange Commission and the
information is not necessarily indicative of beneficial ownership for any other
purpose. Under such rules, beneficial ownership includes any shares as to which
the individual has the sole or shared voting power or investment power and any
shares which the individual has the right to acquire within 60 days of September
10, 2007 through the exercise of any stock option or other right. Unless
otherwise noted, we

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believe that each person has sole investment and voting power
(or shares such powers with his or her spouse) with respect to the shares set
forth in the following table:

Name and Address of Beneficial Owner
      Amount and Nature of Beneficial Ownership
      Percent of Class(1)Mark Lana 1800 Boulder Street, Suite 600
      Denver, CO 80211
    2,577,113(2)
    8.19%Robert A. Morrison 1800 Boulder Street, Suite
      600 Denver, CO 80211
    4,077,113(3)
    12.95%Chuck Ferris 11612 E. 2ndAve Aurora, CO 80010
    Nil
    0.00%Michael Yinger 10940 S. Parker Road, Suite 151
      Parker, CO 80134
    Nil
    0.00%Lougene Baird PO Box 5035 Kailua, HI
      96745
    2,192,949
    6.97%Jens Dalsgaard 171 De3l Oro Lagoon
      Novato, CA 94949
    2,500,000
    7.94Directors and Executive Officers as a group (4
      people)
    6,654,226 common shares
    21.14%


|(1) | Based on 31,470,802 shares of common stock issued and
      outstanding as of August 31, 2007. Except as otherwise indicated, we
      believe that the beneficial owners of the common stock listed above, based
      on information furnished by such owners, have sole investment and voting
      power with respect to such shares, subject to community property laws
      where applicable. Beneficial ownership is determined in accordance with
      the rules of the Securities and Exchange Commission and generally includes
      voting or investment power with respect to securities. Shares of common
      stock subject to options or warrants currently exercisable or exercisable
      within 60 days are deemed outstanding for the purposes of computing the
      percentage ownership of the person holding such options or warrants, but
      are not deemed outstanding for the purposes of computing the percentage
      ownership of any other person.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(2) | Include 200,000 stock options currently exercisable or
      exercisable within 60 days                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(3) | Include 700,000 stock options currently exercisable or
      exercisable within 60 days.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

Changes in Control

We are unaware of any contract or other arrangement the
operation of which may at a subsequent date result in a change of control of our
company.

Item
12.          Certain Relationships
and Related Transactions.

Except as disclosed herein, there have been no transactions or
proposed transactions in which the amount involved exceeds the lesser of
$120,000 or one percent of the average of our total assets at year-end for the
last three completed fiscal years in which any of our directors, executive
officers or beneficial holders of more than 5% of the outstanding shares of our
common stock, or any of their respective relatives, spouses, associates or
affiliates, has had or will have any direct or material indirect interest.

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- 28 -

Item
13.          Exhibits

Exhibits required by Item 601 of Regulation S-B

|Exhibit Number | Description                                                                                                                                                                                                                                                        
|-------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               |                                                                                                                                                                                                                                                                    
|(3)            | Articles
        of Incorporation and Bylaws                                                                                                                                                                                                                       
|               |                                                                                                                                                                                                                                                                    
|3.1            | Articles of
        Incorporation (incorporated by reference from our Registration Statement
        on Form SB-2 filed on August 2, 2004).                                                                                                                        
|               |                                                                                                                                                                                                                                                                    
|3.2            | By-laws (incorporated
        by reference from our Registration Statement on Form SB-2 filed on August
        2, 2004).                                                                                                                                          
|               |                                                                                                                                                                                                                                                                    
|(4)            | Instruments
        Defining the Rights of Security Holders, Including Indentures                                                                                                                                                                                  
|               |                                                                                                                                                                                                                                                                    
|4.1            | 2005 Stock Option
        Plan of HS3 Technologies, Inc. (incorporated by reference from our Current
        Report on Form 8-K filed on November 10, 2005).                                                                                                       
|               |                                                                                                                                                                                                                                                                    
|(10)           | Material
        Contracts                                                                                                                                                                                                                                         
|               |                                                                                                                                                                                                                                                                    
|10.1           | Share Purchase
        Agreement dated March 5, 2005 among Zeno Inc., Linda Smith, Acropolis
        Investment Holdings, LLC and Gregory S. Yanke Law Corporation (incorporated
        by reference from our Current Report on Form 8-K filed on March 10, 2005).
|               |                                                                                                                                                                                                                                                                    
|10.2           | Asset Purchase
        Agreement dated August 31, 2005, between Zeno Inc. and IP-Colo, Inc. (incorporated
        by reference from our Current Report on Form 8-K filed on September 16,
        2005).                                                           
|               |                                                                                                                                                                                                                                                                    
|10.3           | Surveillance
        Instalment and Training Agreement dated December 20, 2005 (incorporated
        by reference from our Current Report on Form 8-K filed December 23, 2005).                                                                                    
|               |                                                                                                                                                                                                                                                                    
|10.4           | Partnership
        Agreement with Wright-Hennepin Cooperative Electric Association (incorporated
        by reference from our Current Report on Form 8-K filed on June 11, 2007).                                                                                
|               |                                                                                                                                                                                                                                                                    
|10.5           | Distribution
        Agreement with Autostar Technology Private Limited. (incorporated by reference
        from our Current Report on Form 8-K filed on April 4, 2007).                                                                                           
|               |                                                                                                                                                                                                                                                                    
|(16)           | Code of Ethics                                                                                                                                                                                                                                                     
|               |                                                                                                                                                                                                                                                                    
|16.1*          | Code
        of Ethics and Business Conduct                                                                                                                                                                                                                        
|               |                                                                                                                                                                                                                                                                    
|(16)           | Letter on
        Change in Certifying Accountant                                                                                                                                                                                                                  
|               |                                                                                                                                                                                                                                                                    
|16.1           | Letter
        from Gordon Hughes & Banks, LLP regarding change in certifying accountant
        (incorporated by reference from our Form 8-K filed on July 30, 2007).                                                                                             
|               |                                                                                                                                                                                                                                                                    
|(31)           | Section 302
        Certifications                                                                                                                                                                                                                                 
|               |                                                                                                                                                                                                                                                                    
|31.1*          | Section
        302 Certification (Robert A. Morrison).                                                                                                                                                                                                            
|               |                                                                                                                                                                                                                                                                    
|31.2*          | Section
        302 Certification (Mark Lana).                                                                                                                                                                                                                     

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- 29 -

|(32)  | Section 906 Certification                            
|----- | -----------------------------------------------------
|      |                                                      
|32.1* | Section 906 Certification
      (Robert A. Morrison).
|      |                                                      
|32.2* | Section 906 Certification
      (Mark Lana).         

*Filed herewith

Item
14.          Principal Accountant
Fees and Services

The following table sets forth the fees billed to the Company
for professional services rendered by the Company's independent registered
public accounting firm, for the years ended June 30, 2007 and June 30, 2006:

|Services       | 2007    | 2006   
|-------------- | ------- | -------
|Audit fees     | $20,000 | $46,552
|Tax fees       | $Nil    | $Nil   
|All other fees | $Nil    | $Nil   
|               |         |        
|Total fees     | $20,000 | $46,552

Audit Fees. Consist of fees billed for professional
services rendered for the audits of our financial statements, reviews of our
interim consolidated financial statements included in quarterly reports,
services performed in connection with filings with the Securities and Exchange
Commission and related comfort letters and other services that are normally
provided by Weaver and Martin LLC for the fiscal year ended June 30, 2007 and
Gordon Hughes & Banks, LLP for the fiscal year ended June 30, 2006 in
connection with statutory and regulatory filings or engagements.

Tax Fees. Consist of fees billed for professional
services for tax compliance, tax advice and tax planning. These services include
assistance regarding federal, state and local tax compliance and consultation in
connection with various transactions and acquisitions.

We do not use Weaver and Martin LLC, for financial information
system design and implementation. These services, which include designing or
implementing a system that aggregates source data underlying the financial
statements or generates information that is significant to our financial
statements, are provided internally or by other service providers. We do not
engage Weaver and Martin LLC to provide compliance outsourcing services.

Effective May 6, 2003, the Securities and Exchange Commission
adopted rules that require that before Weaver and Martin LLC is engaged by us to
render any auditing or permitted non-audit related service, the engagement be:

- approved by our audit committee (the functions of which are performed by
  our entire board of directors); or
- entered into pursuant to pre-approval policies and procedures established
  by the board of directors, provided the policies and procedures are detailed
  as to the particular service, the board of directors is informed of each
  service, and such policies and procedures do not include delegation of the
  board of directors' responsibilities to management.

Our entire board of directors pre-approves all services
provided by our independent auditors. All of the above services and fees were
reviewed and approved by our sole director either before or after the respective
services were rendered.

Our board of directors have considered the nature and amount
  of fees billed by Weaver and Martin LLC and believe that the provision of services
  for activities unrelated to the audit is compatible with maintaining Weaver
  and Martin LLCs independence.

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- 30 -

SIGNATURES

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

HS3 TECHNOLOGIES INC.

By:   */s/ Robert A. Morrison*
           Robert A. Morrison 
           President and Director 
           Principal Executive Officer 
           Date: October 10, 2007.



By:   */s/ Mark Lana*
           Mark Lana 
           Chief Executive Officer,
  Treasurer, Secretary and Director 
           Principal Accounting Officer
  and Principal Financial Officer 
           Date: October 10, 2007.

Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.

By:   */s/ Robert A. Morrison*
           Robert A. Morrison 
           President and Director 
           Principal Executive Officer 
           Date: October 10, 2007.



By:   */s/ Mark Lana*
           Mark Lana 
           Chief Executive Officer,
  Treasurer, Secretary and Director 
           Principal Accounting Officer
  and Principal Financial Officer 
           Date: October 10, 2007.



By:   */s/ Charles F. Ferris*
           Charles F. Ferris 
           Director 
           Date: October 10, 2007.



By:   */s/ Michael Yinger*
           Michael Yinger 
           Director 
           Date: October 10, 2007.

---