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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2008

or

[   ] 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.(Exact name of registrant as specified in its charter)

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

303.455.2550(Registrants telephone
number, including area code)

N/A(Former name, former address
and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 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. [X] YES  
 [   ] NO

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a small
reporting company. See the definitions of large accelerated filer,
accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act

Large accelerated filer [   ]
    
    Accelerated
      filer                 [  
      ]Non-accelerated filer   [   ]
    (Do not check if a smaller
      reporting company)
    Smaller reporting company [X]


Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act) [   ]
YES    [X] NO

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant has filed all documents and reports
required to be filed by Sections 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 ISSUERS

Indicate the number of shares outstanding of each of the
issuers classes of common stock, as of the latest practicable
date.39,945,802 common shares issued and outstanding as of November 11, 2008

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PART 1  FINANCIAL INFORMATION

Item 1. Financial Statements.

Our unaudited interim consolidated financial statements for the
nine month period ended September 30, 2008 form part of this quarterly report.
They are stated in United States Dollars (US$) and are prepared in accordance
with United States generally accepted accounting principles.

2

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HS3 Technologies, Inc.

|                                                                            |   | (Unaudited)        |   |   | (Audited)           |  
|--------------------------------------------------------------------------- | - | ------------------ | - | - | ------------------- | -
|Condensed Consolidated
      Balance Sheet                                  |   | September 30, 2008 |   |   | June
      30, 2008 |  
|                                                                            |   |                    |   |   |                     |  
|ASSETS                                                                      |   |                    |   |   |                     |  
|Current Assets                                                              |   |                    |   |   |                     |  
|Cash and cash equivalents                                                   | $ | 4,134              |   | $ | 130,318             |  
|Accounts receivable                                                         |   | 21,668             |   |   | 215,499             |  
|Inventory                                                                   |   | 103,916            |   |   | 92,885              |  
|Total current assets                                                        |   | 129,718            |   |   | 438,702             |  
|                                                                            |   |                    |   |   |                     |  
|Furniture, fixtures and equipment, net of accumulated depreciation
      of |   | -                  |   |   | -                   |  
|$61,542 and $26,014
      respectively                                      |   | 73,792             |   |   | 80,880              |  
|                                                                            |   |                    |   |   |                     |  
|Other assets                                                                |   | 22,166             |   |   | 24,500              |  
|Total Assets                                                                | $ | 225,676            |   | $ | 544,082             |  
|                                                                            |   |                    |   |   |                     |  
|                                                                            |   |                    |   |   |                     |  
|                                                                            |   |                    |   |   |                     |  
|LIABILITIES                                                                 |   |                    |   |   |                     |  
|Current Liabilities                                                         |   |                    |   |   |                     |  
|Accounts payable                                                            | $ | 123,240            |   | $ | 215,890             |  
|Accrued liabilities                                                         |   | 111,651            |   |   | 104,377             |  
|Accrued liabilities, related party                                          |   | 220,669            |   |   | 168,717             |  
|Accrued convertible board fees                                              |   | 58,332             |   |   | 45,832              |  
|Convertible notes payable, related party                                    |   | 224,000            |   |   | 212,000             |  
|Value of stock owed not issued                                              |   | 12,000             |   |   | -                   |  
|Long-term debt, current portion                                             |   | 118,893            |   |   | 113,237             |  
|Total current liabilities                                                   |   | 868,785            |   |   | 860,053             |  
|Long-term debt                                                              |   | 209,735            |   |   | 242,010             |  
|                                                                            |   |                    |   |   |                     |  
|Total Liabilities                                                           |   | 1,078,520          |   |   | 1,102,063           |  
|Commitments and contingencies                                               |   | -                  |   |   | -                   |  
|STOCKHOLDERS 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 shares at September 30, 2008              |   |                    |   |   |                     |  
|And June 30, 2008                                                           |   | 39,946             |   |   | 39,946              |  
|Additional paid-in capital                                                  |   | 4,333,459          |   |   | 4,333,459           |  
|Accumulated deficit                                                         |   | (5,226,249         | ) |   | (4,931,386          | )
|Total Stockholders' Equity (Deficit)                                        |   | (852,844           | ) |   | (557,981            | )
|                                                                            |   |                    |   |   |                     |  
|Total Liabilities and Stockholders' Equity (Deficit)                        | $ | 225,676            |   | $ | 544,082             |  

The accompanying notes are an integral part of these condensed
  consolidated financial statements

3

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HS3 Technologies, Inc.

|                                                                 |   | Three Months       |   |   | Three Months       |  
|---------------------------------------------------------------- | - | ------------------ | - | - | ------------------ | -
|                                                                 |   | Ended              |   |   | Ended              |  
|Condensed Consolidated
      Statement of Operations (Unaudited) |   | September 30, 2008 |   |   | September 30, 2007 |  
|Net Sales                                                        | $ | 83,380             |   | $ | 153,628            |  
|Cost of goods sold                                               |   | 33,275             |   |   | 39,931             |  
|Gross profit                                                     |   | 50,105             |   |   | 113,697            |  
|Operating Expenses:                                              |   |                    |   |   |                    |  
|Sales & marketing                                                |   | 50,875             |   |   | 46,594             |  
|Professional and consulting                                      |   | 57,570             |   |   | 118,256            |  
|Stock option expense                                             |   | -                  |   |   | 224,443            |  
|Payroll expense                                                  |   | 122,212            |   |   | 125,371            |  
|General and administrative                                       |   | 82,337             |   |   | 99,072             |  
|Depreciation                                                     |   | 7,088              |   |   | 8,115              |  
|Total operating expenses                                         |   | 320,082            |   |   | 621,851            |  
|                                                                 |   |                    |   |   |                    |  
|Income (loss) from operations                                    |   | (269,977           | ) |   | (508,154           | )
|Other income (expense)                                           |   |                    |   |   |                    |  
|Interest expense                                                 |   | (24,886            | ) |   | (5,350             | )
|Total other income (expense)                                     |   | (24,886            | ) |   | (5,350             | )
|                                                                 |   |                    |   |   |                    |  
|Net loss                                                         | $ | (294,863           | ) | $ | (513,504           | )
|                                                                 |   |                    |   |   |                    |  
|Net loss per share-basic and diluted                             | $ | (0.01              | ) | $ | (0.02              | )
|Weighted average number of common shares outstanding             |   | 39,945,802         |   |   | 32,195,701         |  

The accompanying notes are an integral part of these condensed
  consolidated financial statements

4

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HS3 Technologies, Inc.

|                                                                 |   | Three Months       |   |   | Three Months       |  
|---------------------------------------------------------------- | - | ------------------ | - | - | ------------------ | -
|                                                                 |   | Ended              |   |   | Ended              |  
|Condensed Consolidated
      Statement of Cash Flows (Unaudited) |   | September 30, 2008 |   |   | September 30, 2007 |  
|                                                                 |   |                    |   |   |                    |  
|Cash flows from operating activities:                            |   |                    |   |   |                    |  
|Net (loss)                                                       | $ | (294,863           | ) | $ | (513,504           | )
|Adjustments to reconcile net (loss) to net
      cash            |   |                    |   |   |                    |  
|provided by (used in) operations:                                |   |                    |   |   |                    |  
|Depreciation and amortization                                    |   | 9,422              |   |   | 8,115              |  
|Accretion of interest                                            |   | 1,345              |   |   | -                  |  
|Warrants, stock, and options issued for
      service            |   | 12,000             |   |   | 314,693            |  
|Changes in operating assets and liabilities                      |   |                    |   |   |                    |  
|Accounts receivable                                              |   | 193,831            |   |   | (32,088            | )
|Inventory                                                        |   | (11,031            | ) |   | (27,757            | )
|Deposit on inventory                                             |   | -                  |   |   | 22,885             |  
|Accounts payable                                                 |   | (92,650            | ) |   | 167,388            |  
|Accrued expenses                                                 |   | 71,726             |   |   | -                  |  
|Net cash (used in) operating activities                          |   | (110,220           | ) |   | (60,268            | )
|                                                                 |   |                    |   |   |                    |  
|Cash flow from investing activities                              |   |                    |   |   |                    |  
|Purchase of fixed assets                                         |   | -                  |   |   | (772               | )
|Net cash (used in) investing activities                          |   | -                  |   |   | (772               | )
|                                                                 |   |                    |   |   |                    |  
|Cash flow from financing activities                              |   |                    |   |   |                    |  
|Payments on convertible and long-term
      debt                 |   | (27,964            | ) |   | -                  |  
|Stock issued for cash                                            |   | -                  |   |   | 25,000             |  
|Proceeds from convertible note payable                           |   | 12,000             |   |   | 45,000             |  
|Net cash flow provided by (used in) financing activities         |   | (15,964            | ) |   | 70,000             |  
|                                                                 |   |                    |   |   |                    |  
|                                                                 |   |                    |   |   |                    |  
|Increase (decrease ) in cash and cash equivalents                |   | (126,184           | ) |   | 8,960              |  
|                                                                 |   |                    |   |   |                    |  
|Cash and cash equivalents, beginning of period                   |   | 130,318            |   |   | 984                |  
|                                                                 |   |                    |   |   |                    |  
|Cash and cash equivalents, end of period                         | $ | 4,134              |   | $ | 9,944              |  
|                                                                 |   |                    |   |   |                    |  
|                                                                 |   |                    |   |   |                    |  
|Supplemental cash flow information:                              |   |                    |   |   |                    |  
|                                                                 |   |                    |   |   |                    |  
|Interest paid                                                    | $ | 13,928             |   | $ | -                  |  
|                                                                 |   |                    |   |   |                    |  
|Income taxes paid                                                | $ | -                  |   | $ | -                  |  
|                                                                 |   |                    |   |   |                    |  
|                                                                 |   |                    |   |   |                    |  
|Non cash financing activities                                    |   |                    |   |   |                    |  
|                                                                 |   |                    |   |   |                    |  
|Stock issued for services                                        | $ | -                  |   | $ | 90,250             |  

The accompanying notes are an integral part of these condensed
  consolidated financial statements

5

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HS3 Technologies, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

September 30, 2008

1. ORGANIZATION AND BUSINESS

Interim Financial Statements

The accompanying unaudited condensed consolidated financial statements
  of HS3 Technologies, Inc. (the Company or HS3) have
  been prepared in accordance with the instructions to quarterly reports on 10-Q.
  In the opinion of Management, all adjustments (which include only normal recurring
  adjustments) necessary to present fairly the financial position, results of
  operations and changes in financial position at September 30, 2008, and for
  all periods presented have been made. Certain information and footnote data
  necessary for fair presentation of financial position and results of operations
  in conformity with accounting principles generally accepted in the United Sates
  have been condensed or omitted. It is therefore suggested that these unaudited
  condensed consolidated financial statements be read in conjunction with the
  summary of significant accounting policies and notes to financial statements
  included in the Companys Annual Report on Form 10-KSB for the year ended
  June 30, 2008.. The results of operations for the interim period are not necessarily
  indicative of the results to be expected for a full year.

Organization

HS3 Technologies, Inc. was incorporated in Nevada on January
  28, 2003, and herein is referred to as the Company. Prior to a name
  change in October 2005, the Company was known as Zeno, Inc. The Company also
  changed its fiscal year end from March 31 to June 30.

On November 9, 2005, the Company 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,
  the Company was a non-operating entity without any assets or liabilities.

Immediately prior to the reorganization, the Company 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 Company
  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,
  the Company 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 the Company is treated as the acquiree
  for accounting purposes, even though it was 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. Since the accounting acquiree,
  the Company, was previously inoperative, goodwill was not recorded.

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.

Basis of Presentation

The financial statements include our wholly-owned subsidiary.
  All significant inter-company transactions and balances have been eliminated.

6

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Going Concern

The accompanying condensed consolidated financial statements
  have been prepared assuming that we will continue as a going concern. The Company
  generated a net loss from operations of $278,806 for the three months ended
  September 30, 2008 and had a Stockholders deficit of $836,787 as of September
  30, 2008. Our ability to continue as a going concern is dependent upon attaining
  additional working capital to develop our business operations. We intend to
  use borrowings and security sales to mitigate the affects of our cash position;
  however, no assurance can be given that debt or equity financing, if and when
  required, will be available. The financial statements do not include any adjustments
  relating to the recoverability and classification of recorded assets and classification
  of liabilities that might be necessary should we be unable to continue in existence.

Notes Payable

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
      $
      186,000.00Mark L. Lana
      $
      27,000.00Charles Ferris
      $
      10,000.00Mike Yinger
      $
      1,000.00


In the year ended June 30, 2008 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 and the period ended September 30, 2008 we recorded
  $2,689 and $1,345, respectively as additional interest expense. At September
  30, 2008 we had $12,101 discount remaining to be amortized into interest. The
  value of the debenture at September 30, 2008 was $340,729. The current portion
  of the debt was $118,893 after discount ($123,271 principal owed) and long term
  after discount was $209,735 (total principal owed in fiscal 2009 is $166,718
  and in fiscal 2010 $83,359).

Options and Warrants

1,250,000 share purchase warrants with an exercise price of $.12
  per share expired on September 8, 2008.

At September 30, 2008 we had 2,500,000 options outstanding with
  an exercise price of $.16 per share that expire on March 22, and April 11, 2012.

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 Black-Scholes
  pricing model and the cost was allocated based on the ratio 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% .

Common Stock

7

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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 September 30, 2008 we have recorded a
  liability of $58,332 for convertible board fees unpaid and an offsetting professional
  fee expense.

Related Parties

The Company leases office space from a company owned by a major
  stockholder. Rent expense under this lease was $13,200 and $12,000 for the three
  months ended September 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 above.
  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 $220,669 and -0- as of September 30, 2008 and 2007 respectively. This includes
  accrued rent of $75,354 and accrued salaries of $145,315.

Subsequent Events

Our company has been provided with certain loans from related
  parties, as set forth below. We have 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.

|From              | Amount of Loan | Date funds provided     
|----------------- | -------------- | ------------------------
|Robert A Morrison | $10,000.00     | Received October 1, 2008

On October 24, 2008, our company received a loan in the amount
  of $200,000 from a private investor . The loan is unsecured and has no fixed
  repayment terms. We have agreed to pay 15% interest per annum or issue shares
  at $0.10 for conversion of the loan, at the election of the investor.

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. As of September 30, 2008 the shares had not been
  issued. We valued the 800,000 based on the quoted trade price on August 15,
  2008, and recorded $12,000 as a current liability and consulting expense.

8

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

FORWARD-LOOKING STATEMENTS

This quarterly report contains forward-looking statements.
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, 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 unaudited financial statements are stated in United States
Dollars (US$) and are prepared in accordance with United States Generally
Accepted Accounting Principles. The following discussion should be read in
conjunction with our financial statements and the related notes that appear
elsewhere in this quarterly report. The following discussion contains
forward-looking statements that reflect our plans, estimates and beliefs. Our
actual results could differ materially from those discussed in the forward
looking statements. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed below and elsewhere in this
quarterly report.

In this quarterly report, unless otherwise specified, all
dollar amounts are expressed in United States dollars. All references to "CDN$"
refer to Canadian dollars and all references to "common shares" refer to the
common shares in our capital stock.

As used in this quarterly report, the terms "we", "us", "our",
"our company" and HS3 mean HS3 Technologies, Inc., unless otherwise indicated.

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
focussed 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 focussed 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.

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. IPC was 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.

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.

9

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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. At November 9,
2005, the former shareholders of IPC owned 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 has filed quarterly and annual
reports based on the June 30, 2005 fiscal year end of IPC. Such financial
statements 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, we effected a one (1) new for four (4)
old reverse stock split of our authorized, issued and outstanding stock. As a
result, our 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.

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), biometric access control (door locks), 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 relationship 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

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

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Certified. The Video Monitoring System will expand the
observations and augment the compliance of the American Human Certified for
humane care.

We are to install and integrate five Video Monitoring Systems
in production and transportation facilities and conduct beta testing to reflect
the animal species and sub groups that the American Human Certified certifies.
Upon successful completion of the beta testing, AHA will have a system that can
provide real-time analytical technology tools and increase observation
frequency.

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.

Market Growth Strategy

The Company has recently entered into an exclusive agreement
with the AHA to provide third party video audit services. HS3 will deploy a
video monitoring system that will expand the observations and augment the
compliance with American Humane Certified (AHC) standards for humane care. HS3
will contract with American Human Associations customers directly for video
monitoring services and equipment rentals.

Under the agreement, we are scheduled to install five beta
sites within sixty days for three species; Swine, Chicken, and Cattle. We
anticipate recurring revenue of $250 per month from monitoring each
location.

Upon successful completion of the beta testing, the AHA will
have a system that can provide expanded, auditable observations that enhances
its current system of audits for humane animal handling. If beta testing and
solution roll-out proceeds as anticipated, the program eventually will encompass
over 9,900locations in North America. Following initial beta testing, HS3 will
begin rolling out its video surveillance and monitoring solution stages. Stage
I, which is expected to include 30 sites, will take an estimated 15 days to
complete. Stage II and III, which are also expected to include 30 sites each,
will take an estimated 5 days to complete. For each house, the Company expects
to deploy on average 15 cameras, 3 DVRs, and one mobile DVR. Combined, we
estimate that each house will require approximately $8,000 in capital for
hardware. With between 25-30 growing/processing or slaughter houses per site,
the capital cost per site approximates $200,000.

We also plan on aggressively pursuing several acquisition
possibilities that will compliment the current product line and business model
and strengthen the company.

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

- Residential
- Commercial
- Government

Manufacturing

Manufacturing of our products will be contracted to third
parties. These contract manufacturers have expertise in the manufacturing of
products such as ours. We will rely on these contract manufacturers to produce
high quality products for sale to our customers.

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Results of Operations

Three month Summary ending September 30, 2008 and 2007

| |                    |   | Three Months Ended |  
| | ------------------ | - | ------------------ | -
| |                    |   | September 30       |  
| |                    |   | 2008               |  
| | Revenue            | $ | 83,380             |  
| | Operating Expenses | $ | 320,082            |  
| | Net Loss           | $ | (294,863           | )

Expenses

Our operating expenses for the three month periods ended
September 30, 2008 and September 30, 2007 are outlined in the table below:

| |                             |   | Three Months Ended | 
| | --------------------------- | - | ------------------ | 
| |                             |   | June 30            | 
| |                             |   | 2008               | 
| | Sales & marketing           | $ | 50,875             | 
| | Professional and consulting | $ | 57,570             | 
| | Stock option expense        | $ | Nil                | 
| | Payroll expense             | $ | 122,212            | 
| | General and administrative  | $ | 82,337             | 
| | Depreciation                | $ | 7,088              | 

Operating expenses for the three months ended September 30, 2008,
  decreased by 48% as compared to the comparative period in 2007 primarily as
  a result of a decrease professional and consulting fees and stock option expenses.

Revenue

We currently anticipate that revenues will commence and increase
  in the long-term as we increase our sales and marketing activities and introduce
  new products relating to biometric security products and monitoring services.
  We expect to keep our operating costs to a minimum until cash is available through
  operating or financing activities. We are not in a position to predict whether
  we will be able to generate sufficient sales revenues to meet operating expenses.
  We plan to expand our sales force and reduce our general and administrative
  expenses. To date our sales revenues have been minimal.

Liquidity and Financial Condition

|Working Capital           |   |           |   |   |          |   |  |            |  
|------------------------- | - | --------- | - | - | -------- | - |  | ---------- | -
|                          |   | At        |   |   | At       |   |  | Percentage |  
|                          |   | Sept. 30, |   |   | June 30, |   |  | Increase/  |  
|                          |   | 2008      |   |   | 2008     |   |  | Decrease   |  
|Current Assets            | $ | 129,718   |   | $ | 438,702  |   |  | (70%       | )
|Current Liabilities       | $ | 868,785   |   | $ | 860,053  |   |  | 1%         |  
|Working Capital (deficit) | $ | (739,067  | ) | $ | (421,351 | ) |  | 75%        |  

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|Cash Flows                                                     |   |               |   |   |               |  
|-------------------------------------------------------------- | - | ------------- | - | - | ------------- | -
|                                                               |   | Three Months  |   |   | Three Months  |  
|                                                               |   | Ended         |   |   | Ended         |  
|                                                               |   | September 30, |   |   | September 30, |  
|                                                               |   | 2008          |   |   | 2007          |  
|Net cash (used in) operating activities                        | $ | (110,220      | ) | $ | (60,268       | )
|Net cash (used in) by investing activities                     | $ | Nil           |   | $ | (772          | )
|Net cash flow provided by (used in)
      financing activities | $ | (15,964       | ) | $ | 70,000        |  
|Increase (decrease) in cash and cash equivalents               | $ | (126,184      | ) | $ | 8,960         |  

In the next twelve months we anticipate spending $1,060,000 on
research and development, $1,560,000 on sales and marketing and $1,415,000 on
administrative expenses. Our cash on hand at September 30, 2008 was $4,134. We
plan to raise additional capital required to meet immediate short-term needs and
to meet the balance of our estimated funding requirements for the twelve months,
primarily through the private placement of our securities.

We are not aware of any known trends, demands, commitments,
events or uncertainties that will result in or that are reasonably likely to
result in our liquidity increasing or decreasing in any material way.

Future Financings

We will require additional financing in order to enable us to
proceed with our plan of operations, as discussed above, including approximately
$5,980,000 over the next 12 months to pay for our ongoing expenses. These
expenses include sales and marketing, research and development, manufacturing
and engineering, and general and administrative expenses. These cash
requirements are in excess of our current cash and working capital resources.
Accordingly, we will require additional financing in order to continue
operations and to repay our liabilities. There is no assurance that any party
will advance additional funds to us in order to enable us to sustain our plan of
operations or to repay our liabilities.

We anticipate continuing to rely on equity sales of our common
stock in order to continue to fund our business operations. Issuances of
additional shares will result in dilution to our existing stockholders. There is
no assurance that we will achieve any additional sales of our equity securities
or arrange for debt or other financing to fund our planned business activities.

We presently do not have any arrangements for additional
financing for the expansion of our exploration operations, and no potential
lines of credit or sources of financing are currently available for the purpose
of proceeding with our plan of operations.

Contractual Obligations

As a smaller reporting company, we are not required to
provide tabular disclosure obligations.

Going Concern

We anticipate that additional funding will be required in the
form of equity financing from the sale of our common stock. At this time, we
cannot provide investors with any assurance that we will be able to raise
sufficient funding from the sale of our common stock or through a loan from our
directors to meet our obligations over the next twelve months. We do not have
any arrangements in place for any future debt or equity financing.

Off-Balance Sheet Arrangements

We have 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
stockholders.

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Critical Accounting Policies

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

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

Item 3. Quantitative Disclosures About Market Risks.

As a smaller reporting company, we are not required to
provide the information required by this Item.

Item 4. Controls and Procedures.

We maintain disclosure controls and procedures that are
designed to ensure that information required to be disclosed in our reports
filed under the Securities Exchange Act of 1934, as amended, is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms, and that such information
is accumulated and communicated to our management, including our principal
executive officer and principal accounting and financial officer (our chief
executive officer) to allow for timely decisions regarding required disclosure.
In designing and evaluating our disclosure controls and procedures, our
management recognizes that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the
desired control objectives, and our management is required to apply its judgment
in evaluating the cost-benefit relationship of possible controls and procedures.

As of September 30, 2008, the end of the three month period
covered by this report, we carried out an evaluation, under the supervision and
with the participation of our management, including our president, of the
effectiveness of the design and operation of our disclosure controls and
procedures. Based on the foregoing, our president concluded that our disclosure
controls and procedures were effective as of the end of the period covered by
this quarterly report.

There have been no changes in our internal controls over
financial reporting that occurred during the quarter ended September 30, 2008
that have materially affected, or are reasonably likely to materially affect,
our internal controls over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

We know of no material, existing 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.

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Item 1A. Risk Factors.

Risks Related To Our Business

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

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

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

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

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

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

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

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

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

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

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

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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 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.

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

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

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

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

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

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

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;

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- changes in accounting treatments or principles;
- changes in earnings estimates by securities analysts and in analyst
  recommendations; and
- general political, economic, regulatory and market conditions.

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

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

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

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

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

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

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

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The Financial Industry Regulatory Authority, or FINRA, has
adopted sales practice requirements which may also limit a stockholder's ability
to buy and sell our stock.

In addition to the "penny stock" rules described above, FINRA
has adopted rules that require 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, FINRA believes that there is a high probability that speculative
low priced securities will not be suitable for at least some customers. FINRA
requirements make it more difficult for broker-dealers to recommend that their
customers buy our common stock, which may limit your ability to buy and sell our
stock and have an adverse effect on the market for our shares.

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 about 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.

Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds

None.

Item 3. Defaults Upon Senior Securities.

None.

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

None.

Item 5. Other Information

None.

Item 6. Exhibits.

Exhibits required by Item 601 of Regulation S-K

|Exhibit | Description                                                                                                                      
|------- | ---------------------------------------------------------------------------------------------------------------------------------
|Number  |                                                                                                                                  
|        |                                                                                                                                  
|(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).

20

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|Exhibit | Description                                                                                                                                                                                                                                                        
|------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  |                                                                                                                                                                                                                                                                    
|        |                                                                                                                                                                                                                                                                    
|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
        Installment 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).                                                                                            
|        |                                                                                                                                                                                                                                                                    
|10.6    | Warrant Purchase
        Agreement dated November 6, 2007 (incorporated by reference from our Current
        Report on Form 8-K filed on November 20, 2007).                                                                                                      
|        |                                                                                                                                                                                                                                                                    
|10.7    | Agreement with
        the American Humane Association (incorporated by reference from our Current
        Report on Form 8-K filed on August 14, 2008)                                                                                                            
|        |                                                                                                                                                                                                                                                                    
|(14)    | Code of Ethics                                                                                                                                                                                                                                                     
|        |                                                                                                                                                                                                                                                                    
|14.1    | Code of Ethics
        and Business Conduct (incorporated by reference from our Annual Report
        on Form 10-KSB filed on October 10, 2007).                                                                                                                   
|        |                                                                                                                                                                                                                                                                    
|(31)    | Section 302
        Certifications                                                                                                                                                                                                                                 
|        |                                                                                                                                                                                                                                                                    
|31.1    | Section
        302 Certification (filed herewith).                                                                                                                                                                                                                
|        |                                                                                                                                                                                                                                                                    
|(32)    | Section 906
        Certification                                                                                                                                                                                                                                  
|        |                                                                                                                                                                                                                                                                    
|32.1    | Section
        906 Certification (filed herewith).                                                                                                                                                                                                                

21

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.

|                         | HS3
      TECHNOLOGIES, INC.                           
|------------------------ | -------------------------------------------------------
|                         | (Registrant)                                           
|                         |                                                        
|                         |                                                        
|Dated: November 14, 2008 | */s/ Mark Lana*                                        
|                         | Mark Lana                                              
|                         | Chief Executive Officer and Director                   
|                         | (Principal Executive Officer, Principal
      Financial
|                         | Officer and Principal Accounting Officer)              

22

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