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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 10-K

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 
For the fiscal year ended June 30, 2008

[   ] 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]

State issuer's revenues for its most recent fiscal year
$1,245,527

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.)

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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.

common shares @ $0.025(1)=
$785,289

(1)Average of bid and ask closing prices on August
22, 2008.

(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.

39,945,802 common shares issued and outstanding as of August
21, 2008

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

Currently we are primarily focused in the security industry. We
are broadening our focus from a premiere satellite security company to a diverse
organization that will meet the many needs of the security industry with a rich
line of products, integrated solutions, and services that provide customers with
a customized approach to meet all levels of the security industry. According to
Security Industry Association (SIA) 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 have refocused our company and are pleased to announce that
we have expanded our market strategies with a diverse new line of cutting edge
products and services to meet the growing needs of the security industry. To
meet the ever changing needs of the industry, we have launched a combination of
state-of-the art products and services that include digital video recording
technology (DVR), personal biometric identification units, CCTV, video
monitoring centers, cellular networks, wireless mesh network units and wireless
internet-linked satellite surveillance systems. This combination of products
encompasses a total line that we believe will meet many commercial and
residential customer security needs.

We understand that market focus is important. We plan on
meeting the critical needs through customized integration. By integrating
technology, service and people into our programs we can give all of our
customers a substantial benefit while being on the leading edge of the industry.
This plan will also help HS3 forge stronger relationships with our partners and
form better strategic alliances.

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

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Between September 2007 and June 2008 we completed a four-phase
project with a multi-national real estate development company and installed new
security devices, upgraded existing security devices and added access control
points to a Florida resort with over 750 rooms. With the completion of all
phases, we generated more than $600,000 in revenue.

On August 18, 2008, we signed an agreement with the
131-year-old AMERICAN HUMANE ASSOCIATION (AHA). Under AHA's American Humane
Certified(TM) ("AHC"), AHA and HS3 Technologies plan to deploy and fully engage
in the development of a Video Monitoring System ("VMS") that can expand the
observations and augment the compliance with AHC standards for humane care. HS3
Technologies will conduct beta testing through the installation and integration
of five VMS in production facilities and the transportation of animals that
reflect the animal species and sub groups that AHC certifies. Upon successful
completion of the beta testing, AHA, the leading humane certification
organization in the United States, will have a system that can provide expanded,
auditable observations that expands its current system of audits for humane
animal handling. HS3's technologies and integrated development of its
proprietary technology (or real-time analytical technology tools) will expand
the observation frequency and provide cross checks to the behavior of animals in
a variety of situations that may or may not cause improper care to occur. The
parties think this expanded solution can be one of the most successful ways of
identifying an issue and provide immediate corrective action by the parties
involved. It is the focus of these beta projects to give greater insight and
develop a plan of integration that over the next few years will become a
standard part of the American Humane Certified compliance program. The program
eventually will encompass over 15,000 locations in North America.

Under the agreement, HS3 Technologies is scheduled to install 5
beta sites within sixty days for 3 species: Swine, Chicken, and Cattle. The beta
projects for chickens will include one each for broilers and layers. Beta
projects for cattle will include one veal producer and one dairy producer. The
producers chosen for the initial beta testing have both national and
international distribution and represent some of the largest animal protein
producers in the world. HS3 anticipates recurring monthly revenue from
monitoring each location.

In the long-term, our ability to continue as a going concern is
dependent upon successful and sufficient acceptance of our current security
products and solutions by the market. Additionally we expect any new products or
solutions that we may introduce in the future will have positive impact on our
success and our ability to continue as a going concern. The continuing
successful development and sales of our products and services, and finally,
achieving a profitable level of operations will contribute to our ongoing
success

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

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several acquisition possibilities that will compliment the
current product line and business model and strengthen our company.

Principal Products and Services

HS3 Technologies offers a diverse line of cutting-edge
products, services, and customized integrated security solutions that can be
applied to any commercial or residential package. We offer such products as
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,
Remote Video Monitoring and System Management services. We are in the process of
updating our website which will enable customers to purchase online

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.

The units can 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.

Video Monitoring

We offer Video Monitoring and alarm verification services using
our Integrated Security Portal located within our Denver Monitoring Center. We
combine analytical software, network security, alarm monitoring, and video alarm
verification products to provide customers with total security solutions.

Our integrated operating systems provide 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.

Cellular Network and Wireless Mesh Network Units

We have developed 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 wireless mesh network was created to enhance the
satellite Internet connection by increasing connectivity over a broader physical
range.

High Speed Satellite Internet

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.

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Equipment Leasing

We plan to initiate an equipment leasing program with several
equipment leasing companies who will assist us in providing 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. The leasing program also increases the
probability of customer satisfaction and retention.

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 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.

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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 $900,000 during the
twelve-month period ending June 30, 2009 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 are in the process of obtaining a patent on OPIE (Outside
Portable Investigative Equipment)

Marketing

We have engaged professional marketing firms to market our
products nationally and worldwide.

Employees

As of June 30, 2008, we have 4 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 annual 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;

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- 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
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

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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.

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 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

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- 11 -

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 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.

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- 12 -

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.

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.

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- 13 -

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 $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, 2008 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.

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- 14 -

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.

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 4,400 square foot space is leased for $4,400 per month
from a company owned by a major stockholder of the Company, for a 2-year term
that commenced on November 1, 2007. We believe that our principal office will
not be adequate for our needs for the next 2 years.

Item
3.           Legal
Proceedings.

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.

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

On Friday, March 28, 2008 an annual meeting of stockholders of
HS3 Technologies Inc., a Nevada corporation, was held at Suite 600, 1800 Boulder
Street, Denver, Colorado USA 80211. The Meeting was held for the following
purposes:

Elect: Mark Lana  Chief Executive Officer, Treasurer,
Secretary and Director

Elect: Robert A. Morrison  VP, Corporate and Business
Development and Director

Elect: Charles F. Ferris, Ph.D.  Director

Elect: Michael Yinger  Director

Stockholder ratification of the appointment of Weaver &
Martin, LLC as our independent auditors

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 Big Charts a service of MarketWatch and
reflects inter-dealer prices, without retail mark-up, markdown or commission,
and may not necessarily represent actual transactions.

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- 15 -

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

National Association of Securities Dealers OTC
      Bulletin BoardQuarter Ended(1)
      High
      LowJune 30, 2008
    $0.02
    $0.01March 31, 2008
    $0.05
    $0.02December 31, 2007
    $0.15
    $0.03September 30, 2007
    $0.20
    $0.06June 30, 2007
    $0.35
    $0.07March 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.


On August 21, 2008, the closing price for the common stock as
reported by the quotation service operated by the OTC Bulletin Board was $0.025.

As of August 21, 2008, there were 73 holders of record of our
common stock. As of such date, 39,945,802 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 September 22, 2008, 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 providedRobert A Morrison
    $ 5,000.00
    Received June 29, 2007Robert A Morrison
    $100,000.00
    Received May 19, 2007Robert A Morrison
    $ 31,000.00
    Received December 31, 2005Mark Lana
    $ 5,000.00
    Received July 31, 2007Mark Lana
    $ 15,000.00
    Received August 15, 2007Robert A Morrison
    $ 10,000.00
    Received 09/10/2007Robert A Morrison
    $ 9,000.00
    Received 10/01/2007Charles Ferris
    $ 10,000.00
    Received 10/04/2007Mike Yinger
    $ 1,000.00
    Received 10/10/2007Robert A. Morrison
    $ 30,000.00
    Received 04/25/2008


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- 16 -

On June 6, 2008, we issued 2,500,000 shares of our common stock
in a private placement, at a purchase price of $0.10 per share for gross
proceeds of $250,000 to one subscriber. The shares were issued to one U.S.
person (as that term is defined in Regulation S of the Securities Act of 1933)
relying upon Rule 506 of Regulation D of the Securities Act of 1933.

On June 4, 2008, we issued 1,820,000 shares of our common stock
in a private placement to seven U.S. persons (as that term is defined in
Regulation S of the Securities Act of 1933) relying upon section 4(2) and/or
Rule 506 of Regulation D of the Securities Act of 1933. The stock was issued to
5 employees and 2 board members.

On January 14, 2008 and February 12, 2008 we entered into two
secured financing agreements with Vencore solutions, LLC for $200,000 each. The
loans are for 36 months with a fixed interest rate of 15.499% and a combined
monthly payment of $13,964 (principal plus interest) payable on the
10th of each month. As of June 30, 2008 there is a balance of
$368,693.12 and 31 payments outstanding. The notes are secured by company
assets. The Company has issued Vencore Solutions, LLC a Warrant for the purchase
of 1,000,000 shares of Common Stock at a exercise price of $.12 per share
expiring on January 14, 2013. The warrants were valued, using the Black-Scholes
calculation method, at $16,814. Also, since these were issued in connection with
a loan we booked $16,135 as a loan discount to the note balance to be amortized
to interest expense over the life of the loan.

November 8, 2007, we issued an aggregate of 600,000 shares of
our common stock, valued at $45,000, for services rendered to our company.

On November 6, 2007, we entered into a Warrant Purchase
Agreement with Malibu Holdings, LLC wherein we purchased from Malibu 5,000,000
share purchase warrants that entitled the holder to purchase one share of our
company for each share purchase warrant at an exercise price of $0.12 per share.
As consideration for the purchase, we paid Malibu $70,964 and entered into a
Release with A.B. Goldberg and Malibu Holdings, LLC. After the purchase, Malibu
holds 1,250,000 share purchase warrants with an exercise price of $.12 per share
that expired on September 8, 2008.

On November 5, 2007, we issued 2,500,000 shares of our common
stock in a private placement, at a purchase price of $0.10 per share for gross
proceeds of $250,000 to one subscriber. The shares were one to U.S. person (as
that term is defined in Regulation S of the Securities Act of 1933) relying upon
Rule 506 of Regulation D of the Securities Act of 1933.

On November 1, 2007 we sold 50,000 shares of our common stock
for $5,000.

On September 15, 2007 we issued 35,000 shares of our stock to
Connor Hollis for professional services valued at $3,850 based on the trading
price of our stock on the day the Board authorized the stock to be issued.

We sold 250,000 shares of our stock in the quarter ended September
  30, 2007 for $25,000. The shares were issued February 28, 2008.

On August 15, 2007 we agreed to issue 720,000 shares of our
common stock to Mr. Ferris and Mr. Yinger, Directors of our company, for
services that they have rendered. The valued of the services was $86,400 based
on the trading price of our stock on the day the shares were approved and this
was included as professional fee expense. We also agreed to compensate those
directors and they will receive $25,000 annually. They have the option to
receive cash or stock at a price of $.12 per share. At June 30, 2008 we have
recorded a liability of $45,832 for convertible board fees unpaid and an
offsetting professional fee expense.

Equity Compensation Plan Information

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

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.

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- 17 -

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
    $ ****.16
    NilTotal
    2,500,000
    $****
      .16
    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 And Cash Requirements

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, 2008 was $2,170,606.

We anticipate that we will require up to $5,100,000 for the 12
months ending June 30, 2009 to develop our security solutions 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 and to expand our current monitoring services.

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, product development, and equipment and personnel for
monitoring services.

Personnel Plan

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

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- 18 -

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 loans from
Vencore Solutions, LLC, 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, 2008, we had a working capital deficit of $421,351
compared to working capital deficit of $68,699 at June 30, 2007.

At June 30, 2008, our total current assets were $438,702
compared to total current assets of $214,785 as at June 30, 2007.

At June 30, 2008, our total current liabilities were $860,053
compared to total current liabilities of $283,784 as at June 30, 2007.

At June 30, 2008, we had cash on hand of $130,318 compared to
$984 at June 30, 2007.

For the year ended June 30, 2008, we posted a net loss of
$1,556,448 compared to a net loss of $2,924,327 for the ended June 30, 2007. The
principal components of the loss for the year ended June 30, 2008 were payroll,
marketing, and general and administrative expenses.

For the year ended June 30, 2008, we incurred operating
expenses of $2,170,516 compared to $3,010,407 for the year ended June 30, 2007.

We estimate that our monthly burn rate (cash needs) will be
$425,000.

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.

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

Operating expensesSales and Marketing
    $
    1,250,000Research and
      Development
    
    900,000Consulting and Professional Fees
      and Wages
    
    350,000Product
      Development
    
    350,000Public Relations
    
    250,000Travel and
      Promotion
    
    400,000General and Administrative
    
    1,150,000Total Operating Expenses
    
    2,300,000Working Capital
    
    4,650,000Total
      **$**
      **5, 100,000**


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- 19 -

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 security surveillance 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.

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 incurred losses of $4,931,386 since inception. 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.

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.

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- 20 -

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 and the valuation allowance for our deferred income tax benefit.

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 Firm                                                              
| | ---------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                            
| | Consolidated
      Balance Sheet as of June 30, 2008 and 2007                                                              
| |                                                                                                                            
| | Consolidated
      Statements of Operations for the years ended June 30, 2008 and 2007                                     
| |                                                                                                                            
| | Consolidated
      Statements of Changes in Stockholders Equity (Deficit) for the years
      ended June 30, 2008 and 2007
| |                                                                                                                            
| | Consolidated
      Statements of Cash Flows for the years ended June 30, 2008 and 2007                                     
| |                                                                                                                            
| | Notes
      to the Consolidated Financial Statements                                                                       

---

- 21 -

Report of Independent Registered Public Accounting Firm

Stockholders and Directors HS3 Technologies, Inc.

We have audited the accompanying consolidated balance sheet of
HS3 Technologies, Inc. as of June 30, 2008 and 2007 and the related consolidated
statements of income, stockholders equity, and cash flows for each of the years
in the two-year period ended June 30, 2008. 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 audits.

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

In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
HS3 Technologies, Inc. as of June 30, 2008 and 2007 and the consolidated results
of its operations and cash flows for each of the years in the twoyear period
ended June 30, 2008 in conformity with accounting principles generally accepted
in the United States of America.

The accompanying consolidated 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 has suffered
recurring losses from operations and is dependent upon the continued sale of its
securities or obtaining debt financing for funds to meet its cash requirements.
These factors raise substantial doubt about the Companys ability to continue as
a going concern. Managements plans with regard to these matters are also
described in Note 2. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.



Weaver & Martin, LLC Kansas City, Missouri October
7, 2008

---

- 22 -

HS3 Technologies, Inc.

|Consolidated
      Balance Sheet                                            |   | June
      30, 2008 |   |   | June
      30, 2007 |  
|--------------------------------------------------------------------------- | - | ------------------- | - | - | ------------------- | -
|                                                                            |   |                     |   |   |                     |  
|ASSETS                                                                      |   |                     |   |   |                     |  
|Current Assets                                                              |   |                     |   |   |                     |  
|Cash and cash equivalents                                                   | $ | 130,318             |   | $ | 984                 |  
|Accounts receivable                                                         |   | 215,499             |   |   | 92,902              |  
|Inventory                                                                   |   | 92,885              |   |   | 98,014              |  
|Deposit on inventory                                                        |   | -                   |   |   | 22,885              |  
|Total current assets                                                        |   | 438,702             |   |   | 214,785             |  
|                                                                            |   |                     |   |   |                     |  
|Furniture, fixtures and equipment, net of
      accumulated depreciation of |   | -                   |   |   | -                   |  
|$54,454 and $26,014 respectively                                            |   | 80,880              |   |   | 102,325             |  
|                                                                            |   |                     |   |   |                     |  
|Other assets                                                                |   | 24,500              |   |   | -                   |  
|Total Assets                                                                | $ | 544,082             |   | $ | 317,110             |  
|                                                                            |   |                     |   |   |                     |  
|                                                                            |   |                     |   |   |                     |  
|LIABILITIES                                                                 |   |                     |   |   |                     |  
|Current Liabilities                                                         |   |                     |   |   |                     |  
|Accounts payable                                                            | $ | 215,890             |   | $ | 121,611             |  
|Accrued liabilities                                                         |   | 104,377             |   |   | 26,173              |  
|Accrued liabilities, related party                                          |   | 168,717             |   |   | -                   |  
|Accrued convertible board fees                                              |   | 45,832              |   |   | -                   |  
|Convertible notes payable, related party                                    |   | 212,000             |   |   | 136,000             |  
|Long-term debt, current portion                                             |   | 113,237             |   |   | -                   |  
|Total current liabilities                                                   |   | 860,053             |   |   | 283,784             |  
|Long-term debt                                                              |   | 242,010             |   |   | -                   |  
|                                                                            |   |                     |   |   |                     |  
|Total Liabilities                                                           |   | 1,102,063           |   |   | 283,784             |  
|Commitments and contingencies                                               |   | -                   |   |   | -                   |  
|STOCKHOLDER'S EQUITY (DEFICIT)                                              |   |                     |   |   |                     |  
|Preferred stock, $0.001 par value, 2,500,000 shares
      authorized        |   | -                   |   |   | -                   |  
|None issued or outstanding                                                  |   |                     |   |   |                     |  
|Common Stock, $0.001 par value, 50,000,000 authorized,                      |   |                     |   |   |                     |  
|Issued and outstanding 39,945,802 and
      31,470,802                      |   |                     |   |   |                     |  
|shares at June 30, 2008 and June 30, 2007 respectively                      |   | 39,946              |   |   | 31,471              |  
|Additional paid-in capital                                                  |   | 4,333,459           |   |   | 3,658,713           |  
|Unamortized cost stock and warrants issued for services                     |   | -                   |   |   | (281,920            | )
|Accumulated deficit                                                         |   | (4,931,386          | ) |   | (3,374,938          | )
|Total Stockholders' Equity (Deficit)                                        |   | (557,981            | ) |   | 33,326              |  
|                                                                            |   |                     |   |   |                     |  
|Total Liabilities and Stockholders' Equity (Deficit)                        | $ | 544,082             |   | $ | 317,110             |  

See notes to consolidated financial statements

---

- 23 -

HS3 Technologies, Inc.

|                                                           |   | For the Year        |   |   | For the Year        |  
|---------------------------------------------------------- | - | ------------------- | - | - | ------------------- | -
|                                                           |   | Ended               |   |   | Ended               |  
|Consolidated
      Statement of Operations                 |   | June
      30, 2008 |   |   | June
      30, 2007 |  
|                                                           |   |                     |   |   |                     |  
|Net Sales                                                  | $ | 1,245,527           |   | $ | 203,106             |  
|Cost of goods sold                                         |   | 582,977             |   |   | 105,406             |  
|                                                           |   |                     |   |   |                     |  
|Gross profit                                               |   | 662,550             |   |   | 97,700              |  
|Operating Expenses:                                        |   |                     |   |   |                     |  
|Sales & marketing                                          |   | 399,981             |   |   | 12,898              |  
|Professional and consulting                                |   | 337,136             |   |   | 1,469,801           |  
|Stock option expense                                       |   | -                   |   |   | 540,755             |  
|Payroll expense                                            |   | 795,446             |   |   | 487,216             |  
|General and administrative                                 |   | 609,513             |   |   | 480,198             |  
|Depreciation                                               |   | 28,440              |   |   | 19,539              |  
|Total operating expenses                                   |   | 2,170,516           |   |   | 3,010,407           |  
|                                                           |   |                     |   |   |                     |  
|Income (loss) from operations                              |   | (1,507,966          | ) |   | (2,912,707          | )
|Other income (expense)                                     |   |                     |   |   |                     |  
|Interest income                                            |   | 90                  |   |   | 3,380               |  
|Interest expense                                           |   | (48,572             | ) |   | (15,000             | )
|Warrant valuation income (loss)                            |   | -                   |   |   | -                   |  
|Total other income (expense)                               |   | (48,482             | ) |   | (11,620             | )
|                                                           |   |                     |   |   |                     |  
|Net loss                                                   | $ | (1,556,448          | ) | $ | (2,924,327          | )
|                                                           |   |                     |   |   |                     |  
|Net loss per share-basic and diluted                       | $ | (0.05               | ) | $ | (0.13               | )
|                                                           |   |                     |   |   |                     |  
|Weighted average number of common shares
      outstanding |   | 33,820,893          |   |   | 21,783,375          |  

See notes to consolidated financial statements

---

- 24 -

HS3 Technologies, Inc.

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, 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 fiscal year 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        |  
|                                                         |              |  |   |         |  |   |            |   |   |                |   |   |            |   |   |               |  
|Shares issued for cash                                   | 5,300,000    |  |   | 5,300   |  |   | 524,700    |   |   | -              |   |   | -          |   |   | 530,000       |  
|                                                         |              |  |   |         |  |   |            |   |   |                |   |   |            |   |   | -             |  
|Shares issued for services                               | 3,175,000    |  |   | 3,175   |  |   | 204,875    |   |   | 165,920        |   |   | -          |   |   | 373,970       |  
|                                                         |              |  |   |         |  |   |            |   |   |                |   |   |            |   |   |               |  
|Warrants issued for services                             | -            |  |   | -       |  |   | 16,135     |   |   | 116,000        |   |   | -          |   |   | 132,135       |  
|                                                         |              |  |   |         |  |   |            |   |   |                |   |   |            |   |   |               |  
|Purchase of warrants                                     | -            |  |   | -       |  |   | (70,964    | ) |   | -              |   |   | -          |   |   | (70,964       | )
|                                                         |              |  |   |         |  |   |            |   |   |                |   |   |            |   |   |               |  
|Net (loss) for the fiscal year ended June 30,
      2008 | -            |  |   | -       |  |   | -          |   |   | -              |   |   | (1,556,448 | ) |   | (1,556,448    | )
|                                                         |              |  |   |         |  |   |            |   |   |                |   |   |            |   |   |               |  
|Balances as of June 30, 2008                             | 39,945,802   |  | $ | 39,946  |  | $ | 4,333,459  |   | $ | -              |   | $ | (4,931,386 | ) | $ | (557,981      | )

See notes to consolidated financial statements

---

- 25 -

HS3 Technologies, Inc.

|                                                      |   | For the Year        |   |   | For the Year        |  
|----------------------------------------------------- | - | ------------------- | - | - | ------------------- | -
|                                                      |   | Ended               |   |   | ended               |  
|Consolidated
      Statement of Cash Flows            |   | June
      30, 2008 |   |   | June
      30, 2007 |  
|                                                      |   |                     |   |   |                     |  
|Cash flows from operating
      activities:           |   |                     |   |   |                     |  
|Net (loss)                                            | $ | (1,556,448          | ) | $ | (2,924,327          | )
|Adjustments to reconcile net (loss) to net
      cash |   |                     |   |   |                     |  
|provided by (used in) operations:                     |   |                     |   |   |                     |  
|Depreciation and amortization                         |   | 31,538              |   |   | 19,539              |  
|Accretion of interest                                 |   | 2,689               |   |   | -                   |  
|Warrants, stock, and options issued
      for service |   | 489,970             |   |   | 1,866,083           |  
|Stock issued for conversion of note payable           |   | -                   |   |   | 159,182             |  
|(Gain) loss on sale of fixed assets                   |   | -                   |   |   | (1,213              | )
|Changes in operating assets and liabilities:          |   |                     |   |   |                     |  
|Accounts receivable                                   |   | (122,597            | ) |   | (82,957             | )
|Inventory                                             |   | 5,129               |   |   | 14,979              |  
|Deposit on inventory                                  |   | 22,885              |   |   | (14,535             | )
|Accounts payable                                      |   | 94,279              |   |   | 71,939              |  
|Accrued expenses                                      |   | 264,753             |   |   | -                   |  
|Net cash (used in) operating activities               |   | (767,802            | ) |   | (891,310            | )
|                                                      |   |                     |   |   |                     |  
|Cash flow from investing activities                   |   |                     |   |   |                     |  
|Proceeds from sale of fixed assets                    |   | -                   |   |   | 5,200               |  
|Purchase of fixed assets                              |   | (6,593              | ) |   | (45,522             | )
|Net cash from (used in) investing
      activities    |   | (6,593              | ) |   | (40,322             | )
|                                                      |   |                     |   |   |                     |  
|Cash flow from financing activities                   |   |                     |   |   |                     |  
|Proceeds from sale of warrants                        |   | 16,135              |   |   | -                   |  
|Payments on warrants purchased                        |   | (70,964             | ) |   | -                   |  
|Payments on convertible and long-term debt            |   | (50,307             | ) |   | -                   |  
|Stock issued for cash                                 |   | 530,000             |   |   | 919,000             |  
|Proceeds from long-term debt                          |   | 478,865             |   |   | -                   |  
|Net cash flow provided by financing
      activities  |   | 903,729             |   |   | 919,000             |  
|                                                      |   |                     |   |   |                     |  
|                                                      |   |                     |   |   |                     |  
|Increase in cash and cash equivalents                 |   | 129,334             |   |   | (12,632             | )
|                                                      |   |                     |   |   |                     |  
|Cash and cash equivalents, beginning of period        |   | 984                 |   |   | 13,616              |  
|                                                      |   |                     |   |   |                     |  
|Cash and cash equivalents, end of period              | $ | 130,318             |   | $ | 984                 |  
|                                                      |   |                     |   |   |                     |  
|Supplemental cash flow information:                   |   |                     |   |   |                     |  
|Interest paid                                         | $ | 26,135              |   | $ | -                   |  
|Income taxes paid                                     | $ | -                   |   | $ | -                   |  
|                                                      |   |                     |   |   |                     |  
|Non cash financing activities                         |   |                     |   |   |                     |  
|Stock issued for services                             | $ | 208,050             |   |   | -                   |  

See notes to consolidated financial statements

---

- 26 -

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

These financial statements and related
notes are presented in accordance with accounting principles generally accepted
in the United States. The Companys fiscal year-end is June 30.

(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 financial statements
in accordance with United States generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses in the reporting period. The
Company regularly evaluates estimates and assumptions related to the useful life
and recoverability of long-lived assets, stock-based compensation and deferred
income tax asset valuation allowances. The Company bases its estimated and
assumptions on current facts, historical experience and various other factors
that it believes to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and
liabilities and the accrual of costs and expenses that are not readily apparent
from other sources. The actual results experienced by the Company may differ
materially and adversely from the Companys estimates. To the extent there are
material differences between the estimates and the actual results, future
results of operations will be affected.

(e) Cash and Cash Equivalents

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

---

- 27 -

1. Significant Accounting Policies (continued)

(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.

(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 $40,042 and $4,427 research
and development cost for years ended June 30, 2008 and June 30, 2007,
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.

---

- 28 -

1. Significant Accounting Policies (continued)

(n) Concentration of Credit Risk

We sell products to customers in
diversified industries and geographical regions. 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, 2008.

(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 May 2008, the Financial Accounting
Standards Board (FASB) issued SFAS No. 163, Accounting for Financial
Guarantee Insurance Contracts  An interpretation of FASB Statement No. 60.
SFAS No. 163 requires that an insurance enterprise recognize a claim liability
prior to an event of default when there is evidence that credit deterioration
has occurred in an insured financial obligation. It also clarifies how Statement
60 applies to financial guarantee insurance contracts, including the recognition
and measurement to be used to account for premium revenue and claim liabilities,
and requires expanded disclosures about financial guarantee insurance contracts.
It is effective for financial statements issued for fiscal years beginning after
December 15, 2008, except for some disclosures about the insurance enterprises
risk-management activities. SFAS No. 163 requires that disclosures about the
risk-management activities of the insurance enterprise be effective for the
first period beginning after issuance. Except for those disclosures, earlier
application is not permitted. The adoption of this statement is not expected to
have a material effect on the Companys financial statements.

In May 2008, the FASB issued SFAS No.
162, The Hierarchy of Generally Accepted Accounting Principles. SFAS No. 162
identifies the sources of accounting principles and the framework for selecting
the principles to be used in the preparation of financial statements of
nongovernmental entities that are presented in conformity with generally
accepted accounting principles in the United States. It is effective 60 days
following the SECs approval of the Public Company Accounting Oversight Board
amendments to AU Section 411, The Meaning of Present Fairly in Conformity With
Generally Accepted Accounting Principles. The adoption of this statement is not
expected to have a material effect on the Companys financial statements In
March 2008, the Financial Accounting Standards Board (FASB) issued SFAS No.
161, Disclosures about Derivative Instruments and Hedging Activities  an
amendment to FASB Statement No. 133. SFAS No. 161 is intended to improve
financial standards for derivative instruments and hedging activities by
requiring enhanced disclosures to enable investors to better understand their
effects on an entity's financial position, financial performance, and cash
flows. Entities are required to provide enhanced disclosures about: (a) how and
why an entity uses derivative instruments; (b) how derivative instruments and
related hedged items are accounted for under Statement 133 and its related
interpretations; and (c) how derivative instruments and related hedged items
affect an entitys financial position, financial performance, and cash flows. It
is effective for financial statements issued for fiscal years beginning after
November 15, 2008, with early adoption encouraged. The Company is currently
evaluating the impact of SFAS No. 161 on its financial statements, and the
adoption of this statement is not expected to have a material effect on the
Companys financial statements.

In December 2007, the Financial
Accounting Standards Board (FASB) issued SFAS No. 141 (revised 2007),
Business Combinations. This statement replaces SFAS No. 141 and defines the
acquirer in a business combination as the entity that obtains control of one or
more businesses in a business combination and establishes the acquisition date
as the date that the acquirer achieves control. SFAS 141 (revised 2007) requires
an acquirer to recognize the assets acquired, the liabilities assumed, and any
non-controlling interest in the acquired at the acquisition date, measured at
their fair values as of that date. SFAS 141

---

- 29 -

1. Significant Accounting Policies (continued)

(revised 2007) also requires the
acquirer to recognize contingent consideration at the acquisition date, measured
at its fair value at that date. This statement is effective for fiscal years,
and interim periods within those fiscal years, beginning on or after December
15, 2008. Earlier adoption is prohibited. The adoption of this statement is not
expected to have a material effect on the Company's financial statements.

In December 2007, the FASB issued SFAS
No. 160, Non-controlling Interests in Consolidated Financial Statements
Liabilities an Amendment of ARB No. 51. This statement amends ARB 51 to
establish accounting and reporting standards for the Non-controlling interest in
a subsidiary and for the deconsolidation of a subsidiary. This statement is
effective for fiscal years, and interim periods within those fiscal years,
beginning on or after December 15, 2008. Earlier adoption is prohibited. The
adoption of this statement is not expected to have a material effect on the
Company's financial statements

In February 2007, the Financial
Accounting Standards Board (FASB) issued SFAS No. 159, The Fair Value Option
for Financial Assets and Financial Liabilities  Including an Amendment of FASB
Statement No. 115. This statement permits entities to choose to measure many
financial instruments and certain other items at fair value. Most of the
provisions of SFAS No. 159 apply only to entities that elect the fair value
option. However, the amendment to SFAS No. 115 Accounting for Certain
Investments in Debt and Equity Securities applies to all entities with
available-for-sale and trading securities. SFAS No. 159 is effective as of the
beginning of an entitys first fiscal year that begins after November 15, 2007.
Early adoption is permitted as of the beginning of a fiscal year that begins on
or before November 15, 2007, provided the entity also elects to apply the
provision of SFAS No. 157, Fair Value Measurements. The adoption of this
statement is not expected to have a material effect on the Company's financial
statements.

(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 effect 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. Convertible Notes Payable Related Party

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
    $
    100,000Robert A Morrison
    
    31,000Mark Lana
    
    12,000Mark Lana
    
    15,000Robert A Morrison
    
    9,000Robert A Morrison
    
    4,000Charles Ferris
    
    10,000Mike Yinger
    
    1,000Robert A. Morrison
    
    30,000Total
    $
    212,000


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- 30 -

4. Common Stock

Stock transactions in fiscal 2007:

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.

In fiscal 2007, we entered into unsecured short-term promissory
notes for $115,000. The stated interest was 8% annually and was due May 9, 2007.
Both notes along with accrued interest of $8,182 were converted into 1,231,811
shares of our common stock.

In fiscal 2007, we sold 8,362,500 shares of our common stock at
$.08 per share and 2,500,000 shares of our common stock at $.10 per share for
total proceeds of $919,000.

We issued 1,760,000 shares of our stock to consultants for
services provided. The value of the services was based on the value of our stock
on the date of the agreement and totaled $982.448. We expensed $458,880 as
professional fees in the year ended June 30, 2007 and $165,920 in the year ended
June 30, 2008.

Stock transactions in fiscal 2008:

In fiscal 2008 we sold 5,300,000 shares of our common stock for
$.10 per share for total proceeds of $530,000.

In fiscal 2008 we issued 3,175,000 shares of our common stock
for services rendered to us. The value of the services was based on the fair
market value of our stock on the day the agreements were consummated and the
share price ranged from $.04 to $.10 per share. The total amount of expense for
employees and directors was $204,200 and for professional fees was $3,850 for a
total amount of $208,050. In fiscal 2008 we recorded as expense a total of
$373,970 for stock issued for services from unexpired services of fiscal 2007
that were used in fiscal 2008 of $165,920 and for fiscal 2008 expense of
$208,050. At June 30, 2008 there was no remaining expense for services.

Convertible board fees accrued at June 30, 2008 totalled
$45,832. This may be converted into common stock at the Directors option at
$0.12 or the rate of the last conversion agreement.

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. At June 30, 2008 we had granted
2,500,000 options under this plan.

Option and warrant transactions in fiscal 2007:

We granted 2,500,000 options in the year ended June 30, 2007.
The options were fully vested. We measured the compensation cost of the options
based on the vesting and the market value as determined by the Black-Scholes
pricing model.

For the year ended June 30, 2007, we included as expense
$540,755 relating to the value of vested options.

The fair value of each option award is estimated on the date of
grant using the assumptions noted in the following table. Volatility is based on
the historical volatility of stock trading, expected term was the estimated
exercise period, risk free rate was the rate of a U.S. Treasury instrument of
the time period in which the options would be outstanding, and dividend rate was
estimated to be zero as we cannot assume that there will be any future
dividends.

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- 31 -

Weighted average expected volatility
    
    206.64%Weighted average expected term (in years)
    
    5Weighted average expected dividends
    
    0%Weighted average risk free rate
    
    3.00%


The weighted average grant date fair value of the options
granted in the year ended June 30, 2007 was $0.16

In the year ended June 30, 2007, we granted warrants to
purchase 7,250,000 shares of our common stock as payment for services rendered.
The warrants have a weighted average exercise price of $.17 per warrant and
expire between December 2007 and September 2008. The fair value of the warrants
based on the Black-Scholes pricing model totaled $982,448 (approximately $0.14
per warrant). The following assumptions were used in the valuation: weighted
average stock price-$.16; weighted average exercise price-$.12; weighted average
life- 2 years; weighted average volatility- 120%; weighted average yield-3.0% .
In fiscal 2007 we expensed $670,689 and in fiscal 2008 we expensed $116,000
relating to these services.

Option and warrant transactions in fiscal 2008:

We purchased and cancelled 5,000,000 of the outstanding
warrants for $70,964.

We sold debentures in fiscal 2008 consisting of long-term debt
and warrants. The number of warrants sold was 1,000,000 with an exercise price
of $.12 and a term of 5 years. The warrants were valued based on the
B;ack-Scholes pricing model and the cost was allocated based on the ration of
the fair market value of the warrants and the fair market value of the long-term
debt. The total amount allocated to the warrants was $16,135. The assumptions
used in valuing the warrants were: stock price $.13; exercise price $.12; life-5
years; volatility101.17%; dividend yield 0% and the yield of a risk free
investment 3.08% .

A summary of stock option and warrants is as follows:

Weighted
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    ExerciseOptions
    
    
    Price
    
    
    Warrants
    
    
    PriceOutstanding 07/01/06
    
    -
    
    
    -
    
    
    -
    
    
    -Granted
    
    2,500,000
    
    $
    0.16
    
    
    7,250,000
    
    $
    0.17Canceled
    
    -
    
    
    -
    
    
    -
    
    
    -Exercised
    
    -
    
    
    -
    
    
    -
    
    
    -Outstanding 06/30/07
    
    2,500,000
    
    $
    0.16
    
    
    7,250,000
    
    $
    0.17Granted
    
    -
    
    
    -
    
    
    1,000,000
    
    $
    0.02Canceled
    
    -
    
    
    -
    
    
    5,000,000
    
    $
    0.12Outstanding 06/30/08
    
    2,500,000
    
    $
    0.16
    
    
    3,250,000
    
    $
    0.25


6. Related Parties

The Company leases office space from a company owned by a major
stockholder. Rent expense under this lease was $51,200 and $48,000 for the years
ended June 30, 2008 and 2007, 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.

In addition, the Company owes two of its officers accrued
liabilities of $168,717 and -0- as of June 30, 2008 and 2007 respectively. This
includes accrued rent of $62,154 and accrued salaries of $106,563.

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- 32 -

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 $4,930,000 of net operating loss carry-forwards which expire in
2026-2028. The net deferred tax is as follows:

June 30, 2008
    
    
    June 30, 2007Non-current deferred tax asset (liabilities):Net operating loss
      carry-forward
    $
    1,133,900
    
    $
    545,000Valuation allowance
    
    (1,133,900
    )
    
    (545,000
    )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, 2008
    
    March 31, 2007Statuary tax rate
    34.%
    
    34.0%Change in valuation allowance
    (34.0%)
    
    (34.0%)Effective tax rate
    0.0%)
    
    0.0%)


8. Long-Term Debt

We sold debentures consisting of a $400,000 debt instrument
that matures in 3 years and 1,000,000 warrants at an exercise price of $.12 per
share for total proceeds of $400,000. We allocated the proceeds to each
instrument based on the fair market value of each. We determined the fair value
of the note and interest to be $400,000 and the fair market value of the
warrants to be $16,814. We allocated the proceeds to each based on the
respective percentages of total value. The value of the notes was $383,865 and
the warrants $16,135. The discount on the notes will be amortized into interest
expense based on the straight line method over the life of the loan. For the
year ended June 30, 2008 we recorded $2,689 as additional interest expense. At
June 30, 2008 we had $13,446 discount remaining to amortized into interest. The
value of the debenture at June 30, 2008 was $ 368,693. The current portion of
the debt was $113,237 after discount ($118,616 principal owed) and long term
after discount was $242,010 (total principal owed in fiscal 2010 is $166,718 and
in fiscal 2011 $83,359).

In connection with the loan we had loan fees of $28,000. At
June 30, 2008 we expensed $3,500 of the fees for a balance of $24,500.

9. 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.

|Robert Morrison | $12,000.00 | received September 16, 2008
|--------------- | ---------- | ---------------------------
|Robert Morrison | $10,000.00 | received October 1, 2008   

On August 15, 2008 the Company entered into a Financial
Communications Consulting Agreement with Wall Street Resources, Inc. to provide
written analytical coverage and consultation in matters concerning corporate
finance and investor communications. The Company agreed to issue the Consultant
a Commencement Bonus payable in the form of 800,000 shares of the Companys
144 restricted Common Stock and $3,000 in cash. Additionally, the Company will
pay the Consultant at a rate of $2,500 per month during the term of the
agreement which is due on the 15th of each month with payments
accruing until the Company raises in excess of $500,000 or becomes cash flow
positive.

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- 33 -

On August 14, 2008, we entered into an agreement with the
American Humane Association (AHA), pursuant to which we plan to engage in the
development of a Video Monitoring System under the AHAs American Human
Certified. The Video Monitoring System will expand the observations and augment
the compliance of the American Human Certified for humane care.

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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.

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, 2008. 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 of 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 22, 2008, our directors and executive officers,
their age, positions held, and duration of such, are as follows:

Name
      Position Held with our Company
      Age
      Date First Elected or AppointedMark Lana
    Chief Executive Officer,
      Treasurer, Secretary President and Director
    54
    November 9, 2005Robert A. Morrison
    Chief Operations Officer and Director
    43
    June
      18, 2007Charles F. Ferris
    Director
    61
    August 14, 2007Michael Yinger
    Director
    51
    August 14, 2007


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- 35 -

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, President, Treasurer,
Secretary and Director

Mr. Lana was appointed as Chief Executive Officer on November
9, 2005 and as a member of our board of directors on November 21, 2005. He
assumed the duties of President on July 1, 2008.

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, Chief Operations Officer and Director

Mr. Morrison was appointed as President and Director on June
18, 2007. He resigned as President March 4, 2008 and was appointed Chief of
corporate and business development. He assumed the function of Chief Operations
Officer effective July 1, 2008

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.

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.

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- 36 -

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
    39


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.

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- 37 -

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.

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.

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- 38 -

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, 2008, all filing requirements
applicable to its officers, directors and greater than ten percent beneficial
owners were complied with.

Item 9a.    Controls and Procedures.

Conclusion Regarding the Effectiveness of Disclosure
Controls and Procedures

****We maintain a set of disclosure controls and procedures designed to
ensure that information required to be disclosed by us in the reports filed
under the Securities Exchange Act, is recorded, processed, summarized and
reported with the time periods specified by the Commissions rules and forms.
Disclosure controls are also designed with the objective of ensuring that this
information is accumulated and communicated to our management, including our
chief executive officer and board of directors, as appropriate, to allow timely
decisions regarding required disclosure. In view of our restatement of the
financial statements for the quarter ended December 31, 2006, management
reevaluated its disclosure controls and deemed them ineffective. During the
fiscal year ended 2008, we made the following changes in our disclosure controls
and procedures to increase their effectiveness: having an appropriate company
official review transactions recorded in our books prior to posting,
reemphasizing proper posting of transactions, having an independent accountant
review transactions for compliance with applicable guidance, reviewing our chart
of accounts to ensure that account classifications are in place, ensuring
accounting personnel attend continuing training,. We evaluated the effectiveness
of our disclosure controls and procedures (as defined in Rule 13a-15(e) under
the Securities Exchange Act of 1934, as amended) as of the end of the period
covered by this report. As a result of this evaluation, we concluded that our
disclosure controls and procedures were not effective due to the omission in our
original filing of required disclosure, specifically our Report on Internal
Control over Financial Reporting.

Changes in Internal Control

****There****are no changes in our internal control over
financial reporting that occurred during our most recent fiscal year that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.

Managements Report on Internal Control over Financial
Reporting

****Our management is responsible for establishing and maintaining adequate
internal control over financial reporting (as defined in Rule 13a-15(f) under
the Securities Exchange Act of 1934, as amended). These internal controls are
designed to provide reasonable assurance that the reported financial information
is presented fairly, that disclosures are adequate and that the judgment
inherent in the preparation of financial statements is reasonable.

****Our management does not expect that our disclosure controls or internal
controls over financial reporting will prevent all errors or all instances of
fraud. A control system, no matter how well designed and operated, can provide
only reasonable, not absolute, assurance that the control systems objectives
will be met. Further, the design

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- 39 -

of a control system must reflect the fact there are resource
constraints, and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within our company have been detected. These inherent
limitations include the realities that judgments in decision-making can be
faulty, and that breakdowns can occur because of simple error or mistake.
Because of the inherent limitation of a cost-effective control system,
misstatements due to error or fraud may occur and not be detected.

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, 2008 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, 2008, 2007 and 2006, are set out in the following summary
  compensation table:

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, President, Treasurer and Secretary
      2008 
        2007 
        2006
      $125,000 
        $125,000 
        $ 85,000
      Nil 
        Nil 
        Nil
      $14,400 
        Nil 
        Nil
      Nil 
        $43,260 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      Nil 
        Nil 
        Nil
      $139,400 
        $168,260 
        NilRobert A. 
        Morrison(2)President
      2008 
        2007 
        2006
      $115,000 
        $115,000 
        N/A
      Nil 
        Nil 
        N/A
      Nil 
        Nil 
        N/A
      $33,340 
        $151,411 
        N/A
      Nil 
        N/A 
        N/A
      Nil 
        N/A 
        N/A
      Nil 
        N/A 
        N/A
      $148,340 
        $266,411 
        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 
        Nil


|(1) | Mr. Lana was appointed President and Chief Executive
      Officer on November 9, 2005 and resigned as President on June 18, 2007. He
      assumed the duties of President on July 1, 2008.                                                             
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                          
|(2) | Mr. Morrison was appointed President on June 18, 2007. He
      resigned as President March 4, 2008 and was appointed Chief of corporate
      and business development. He assumed the function of Chief Operations
      Officer effective July 1, 2008
|    |                                                                                                                                                                                                                                                          
|(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.                                                                                                                                                

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- 40 -

*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
2008.

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
      900,000
      900,000
      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, 2008.

On August 15, 2007 we agreed to issue 720,000 shares of our
common stock to Mr. Ferris and Mr. Yinger, Directors of our company, for
services that they have rendered. The valued of the services was $86,400 based
on the trading price of our stock on the day the shares were approved and this
was included as professional fee expense. We also agreed to compensate those
directors and they will receive $25,000 annually. They have the option to
receive cash or stock at a price of $.12 per share. At June 30, 2008 we have
recorded a liability of $45,832 for convertible board fees unpaid and an
offsetting professional fee expense.

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.

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.

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- 41 -

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

As of August 21, 2008, there were 39,945,802 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 August
21, 2008 through the exercise of any stock option or other right. Unless
otherwise noted, we 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
    2,937,113(2)
    7.35%Robert A. Morrison 1800 Boulder
      Street, Suite 600 Denver, CO 80211
    4,277,113(3)
    10.70%Chuck Ferris 11612 E. 2ndAve Aurora, CO 80010
    660,000
    1.65%Michael Yinger 10940 S. Parker Road,
      Suite 151 Parker, CO 80134
    660,000
    1.65%Lougene Baird PO Box 5035
      Kailua, HI 96745
    2,192,949
    5.48%Jens Dalsgaard 171 De3l Oro Lagoon
      Novato, CA 94949
    2,500,000
    7.94%DQ Investment Group 6130 S. Elm Ct.
      Centennial, CO 80121
    5,000,000
    12.51%Directors and Executive Officers as a group (4
      people)
    8,534,226 common shares
    21.30%


|(1) | Based on 39,945,802 shares of common stock issued and
      outstanding as of August 21, 2008. 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 900,000 stock options currently exercisable or
      exercisable within 60 days.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

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- 42 -

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.

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 (incorporated by reference from our Annual Report on Form 10- KSB filed on October 10, 2007).                                                                                                                                  
|               |                                                                                                                                                                                                                                                                    
|(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).                                                                                             

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- 43 -

|(31)  | Section 302 Certifications                           
|----- | -----------------------------------------------------
|      |                                                      
|31.1* | Section 302 Certification
      (Robert A. Morrison).
|      |                                                      
|31.2* | Section 302 Certification
      (Mark Lana).         
|      |                                                      
|(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, 2008 and June 30, 2007:

|Services       | 2008    | 2007   
|-------------- | ------- | -------
|Audit fees     | $35,000 | $20,000
|Tax fees       | $Nil    | $Nil   
|All other fees | $Nil    | $Nil   
|               |         |        
|Total fees     | $35,000 | $20,000

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, 2008 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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- 44 -

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          
Chief Operations Officer and
Director           Principal
Executive Officer          
Date: October 7, 2008.



By:    /s/ Mark Lana         
Mark Lana           Chief
Executive Officer, Treasurer, Secretary and
Director          
Principal Accounting Officer and Principal Financial
Officer           Date:
October 7, 2008.



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          
Chief Operations Officer and
Director           Principal
Executive Officer          
Date: October 7, 2008.



By:    /s/ Mark Lana         
Mark Lana           Chief
Executive Officer, Treasurer, Secretary and
Director          
Principal Accounting Officer and Principal Financial
Officer           Date:
October 7, 2008.



By:    /s/ Charles F.
Ferris         
Charles F.
Ferris          
Director           Date:
October 7, 2008.



By:    /s/ Michael Yinger         
Michael Yinger          
Director           Date:
October 7, 2008.

---