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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 December 31, 2008

OR

[   ] Transition Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934

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 | (I.R.S. Employer Identification No.)
|organization)                                    |                                     
|                                                 |                                     
|1800 Boulder Street, Suite 600, Denver CO        | 80211-6400                          
|(Address of principal executive offices)         | (Zip Code)                          

(303) 455-2550(Telephone number,
including area code)

Indicate by check mark 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 [   ]

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 [ 
 ]    No [X]

As of February 13, 2009, there were 38,924,411 shares of the
registrants Common Stock issued and outstanding

1

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TABLE OF CONTENTS

|               |                                                                                                                                                        | Page
|-------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------ | ----
|               |                                                                                                                                                        | No. 
|               |                                                                                                                                                        |     
|               | **PART
      I  FINANCIAL INFORMATION**                                                                                                               |     
|               |                                                                                                                                                        |     
|Item
      1.  | Unaudited
      Condensed Consolidated Financial Statements                                                                                            | 4   
|               |                                                                                                                                                        |     
|               | Condensed
      consolidated balance sheets as of December 31, 2008 and June 30, 2008                                                                  | 5   
|               |                                                                                                                                                        |     
|               | Condensed
      consolidated statements of operations for the three and six months ended
      December 31, 2008 and 2007                              | 6   
|               |                                                                                                                                                        |     
|               | Condensed
      consolidated statements of stockholders equity (deficit) for the year
      ended June 30, 2008 and six months ended December 31, 2008 | 7   
|               |                                                                                                                                                        |     
|               | Condensed
      consolidated statements of cash flows for the six months ended December
      31, 2008 and 2007                                        | 8   
|               |                                                                                                                                                        |     
|               | Notes
      to condensed consolidated financial statements                                                                                             | 9   
|               |                                                                                                                                                        |     
|Item
      2.  | Managements
      Discussion and Analysis of Financial Condition and Results of Operations                                                            | 14  
|               |                                                                                                                                                        |     
|Item
      3.  | Quantitative
      and Qualitative Disclosures about Market Risk                                                                                       | 22  
|               |                                                                                                                                                        |     
|Item
      4.  | Controls
      and Procedures                                                                                                                          | 22  
|               |                                                                                                                                                        |     
|               | PART
      II  OTHER INFORMATION                                                                                                                      |     
|               |                                                                                                                                                        |     
|Item 1.        | Legal Proceedings                                                                                                                                      | 23  
|               |                                                                                                                                                        |     
|Item
      1A. | Risk
      Factors                                                                                                                                     | 23  
|               |                                                                                                                                                        |     
|Item
      2.  | Unregistered
      Sales of Equity Securities and Use of Proceeds                                                                                      | 28  
|               |                                                                                                                                                        |     
|Item
      3.  | Defaults
      upon Senior Securities                                                                                                                  | 28  
|               |                                                                                                                                                        |     
|Item
      4.  | Submission
      of Matters to a Vote of Security Holders                                                                                              | 28  
|               |                                                                                                                                                        |     
|Item
      5.  | Other
      Information                                                                                                                                | 28  
|               |                                                                                                                                                        |     
|Item
      6.  | Exhibits                                                                                                                                               | 29  

2

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This
Quarterly 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, including the following:

| | •  | certain statements, including possible or assumed future
      results of operations, in Managements Discussion and Analysis of
      Financial Condition and Results of Operations;                                                                              
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                      
| | •  | any statements contained herein regarding the prospects
      for our business or any of our services;                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                      
| | •  | any statements preceded by, followed by or that include
      the words may, should, believes, expects, anticipates,
      intends, continues, estimates, plans, targets predicts,
      attempts, is scheduled, or similar expressions; and
| |    |                                                                                                                                                                                                                                                                      
| | .• | other statements obtained herein regarding matters that
      are not historical facts.                                                                                                                                                                              

Our
business and results of operation are subject to risk and uncertainties, many of
which are beyond our ability to control or predict. Because of these risks and
uncertainties, actual results may differ materially from those expressed or
implied by forward-looking statements, and investors are cautioned not to place
undue reliance on such statements, which speak only as of the date thereof.
Important factors that could cause actual results to differ materially from our
expectations and may adversely affect our business and results of operations,
include, but are not limited to those risk factors set forth in this report in
Part II. Other Information under the heading Item 1A. Risk Factors.

In
this Quarterly Report, unless otherwise specified, all dollar amounts are
expressed in United Sates 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, and HS3, means HS3
Technologies, Inc., unless the context clearly requires otherwise.

3

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PART 1  FINANCIAL INFORMATION

Item 1. Unaudited Condensed Consolidated Financial
Statements.

The
interim unaudited condensed consolidated financial statements of HS3
Technologies, Inc. as of and for the three and six month period ended December
31, 2008 are included herein beginning on the following page. The accompanying
interim unaudited condensed consolidated financial statements should be read in
conjunction with our consolidated financial statements and related notes for the
year ended June 30, 2008, together with our discussion and analysis of financial
condition and results of operations, included in our Amended Annual Report on
Form 10-K/A filed on February 13, 2009 with the Securities and Exchange
Commission (File No. 001-32289). Our financial statements are stated in United
States dollars (US$) and are prepared in accordance with United States Generally
Accepted Accounting Principles.

The
unaudited condensed consolidated financial statements include the accounts of
HS3 Technologies, Inc. and its wholly-owned subsidiary, ip-Colo. All
inter-company balances and transactions have been eliminated.

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.

4

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HS3 Technologies, Inc. Condensed consolidated balance
sheets

|                                                              |   | December 31, |   |   | June 30,   |  
|------------------------------------------------------------- | - | ------------ | - | - | ---------- | -
|                                                              |   | 2008         |   |   | 2008       |  
|ASSETS                                                        |   |              |   |   |            |  
|                                                              |   |              |   |   |            |  
|Current Assets:                                               |   |              |   |   |            |  
|Cash and cash equivalents                                     | $ | 16,851       |   | $ | 130,318    |  
|Trade accounts receivable                                     |   | 12,220       |   |   | 215,499    |  
|Inventory                                                     |   | 114,987      |   |   | 92,885     |  
|                                                              |   | 144,058      |   |   | 438,702    |  
|Furniture, fixtures and equipment, net of accumulated         |   |              |   |   |            |  
|depreciation of $68,696 and
      $54,454 respectively        |   | 68,211       |   |   | 80,880     |  
|Other assets, net                                             |   | 19,834       |   |   | 24,500     |  
|                                                              | $ | 232,103      |   | $ | 544,082    |  
|                                                              |   |              |   |   |            |  
|                                                              |   |              |   |   |            |  
|                                                              |   |              |   |   |            |  
|LIABILITIES AND EQUITY                                        |   |              |   |   |            |  
|                                                              |   |              |   |   |            |  
|                                                              |   |              |   |   |            |  
|Current Liabilities:                                          |   |              |   |   |            |  
|Trade accounts payable                                        | $ | 81,745       |   | $ | 215,890    |  
|Other accrued liabilities                                     |   | 420,303      |   |   | 290,926    |  
|Convertible notes payable                                     |   | 494,000      |   |   | 212,000    |  
|Long-term debt, current portion                               |   | 122,974      |   |   | 113,237    |  
|                                                              |   | 1,119,022    |   |   | 832,053    |  
|                                                              |   |              |   |   |            |  
|Long-term debt                                                |   | 182,811      |   |   | 242,010    |  
|Other long-term liabilities                                   |   | 28,000       |   |   | 28,000     |  
|Total Liabilities                                             |   | 1,329,833    |   |   | 1,102,063  |  
|                                                              |   |              |   |   |            |  
|                                                              |   |              |   |   |            |  
|Stockholders Equity (Deficit):                               |   |              |   |   |            |  
|Preferred stock, $0.0001 par
      value, 2,500,000 shares    |   |              |   |   |            |  
|authorized, none issued
      or outstanding                  |   | -            |   |   | -          |  
|Common Stock, $0.001 par
      value, 50,000,000 authorized,  |   |              |   |   |            |  
|issued and outstanding
      40,745,802 and 39,945,802 shares |   |              |   |   |            |  
|at
      December 31, 2008 and June 30, 2008, respectively    |   | 40,746       |   |   | 39,946     |  
|Additional paid-in capital                                    |   | 4,344,659    |   |   | 4,333,459  |  
|Accumulated deficit                                           |   | (5,483,135   | ) |   | (4,931,386 | )
|                                                              |   | (1,097,730   | ) |   | (557,981   | )
|                                                              | $ | 232,103      |   | $ | 544,082    |  

See accompanying notes to condensed consolidated financial
statements

5

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HS3 Technologies, Inc. Condensed consolidated statement
of operations

|                                     |   | Three months ended December 31, |   |   | Six months ended December 31, |  
|------------------------------------ | - | ------------------------------- | - | - | ----------------------------- | -
|                                     |   | 2008                            |   |   | 2007                          |  
|                                     |   |                                 |   |   |                               |  
|                                     |   |                                 |   |   |                               |  
|Revenue                              | $ | 33,925                          |   | $ | 1,056,273                     |  
|Cost of goods sold                   |   | 11,733                          |   |   | 644,410                       |  
|Gross profit                         |   | 22,192                          |   |   | 411,863                       |  
|                                     |   |                                 |   |   |                               |  
|Operating Expenses:                  |   |                                 |   |   |                               |  
|Selling, general and administrative  |   | 249,407                         |   |   | 556,301                       |  
|Depreciation and amortization        |   | 11,821                          |   |   | 8,097                         |  
|Total operating expenses             |   | 261,228                         |   |   | 564,398                       |  
|                                     |   |                                 |   |   |                               |  
|Loss from operations                 |   | (239,036                        | ) |   | (152,535                      | )
|                                     |   |                                 |   |   |                               |  
|Other income (expense):              |   |                                 |   |   |                               |  
|Interest income                      |   | 1                               |   |   | 18                            |  
|Interest expense                     |   | (17,851                         | ) |   | (6,075                        | )
|Total other income (expense)         |   | (17,850                         | ) |   | (6,057                        | )
|                                     |   |                                 |   |   |                               |  
|Net loss                             | $ | (256,886                        | ) | $ | (158,592                      | )
|                                     |   |                                 |   |   |                               |  
|Net loss per share-basic and diluted | $ | (0.006                          | ) | $ | (0.005                        | )
|                                     |   |                                 |   |   |                               |  
|Weighted average number of common    |   |                                 |   |   |                               |  
|shares outstanding                   |   | 40,745,802                      |   |   | 32,571,454                    |  

See accompanying notes to condensed consolidated financial
statements

6

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HS3 Technologies, Inc.Condensed consolidated
statement of stockholders equity (deficit)

|                                 |  |                    |  |   |         |  |   |            |   |   | Unamortized    |   |   |            |   |   |              |  
|-------------------------------- |  | ------------------ |  | - | ------- |  | - | ---------- | - | - | -------------- | - | - | ---------- | - | - | ------------ | -
|                                 |  |                    |  |   |         |  |   |            |   |   | Cost           |   |   |            |   |   | Total        |  
|                                 |  |                    |  |   |         |  |   | Additional |   |   | Stock/Warrants |   |   | Retained   |   |   | Stockholders |  
|                                 |  | Common
      Stock |  |   | Paid-in |  |   | Issued for |   |   | Earnings       |   |   | Equity     |  
|                                 |  | Shares             |  |   | Amount  |  |   | Capital    |   |   | Service        |   |   | (Deficit)  |   |   | (Deficit)    |  
|Balances as of June 30, 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                         |  | -                  |  |   | -       |  |   | -          |   |   | -              |   |   | (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     | )
|Shares issued for cash           |  | -                  |  |   | -       |  |   | -          |   |   | -              |   |   | -          |   |   | -            |  
|Shares issued for services       |  | 800,000            |  |   | 800     |  |   | 11,200     |   |   | -              |   |   | -          |   |   | 12,000       |  
|Net loss                         |  | -                  |  |   | -       |  |   | -          |   |   | -              |   |   | (551,749   | ) |   | (551,749     | )
|Balances as of December 31, 2008 |  | 40,745,802         |  | $ | 40,746  |  | $ | 4,344,659  |   | $ | -              |   | $ | (5,483,135 | ) | $ | (1,097,730   | )

See accompanying notes to condensed consolidated financial
statements

7

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HS3 Technologies, Inc.Condensed consolidated
statement of cash flows

|                                                 |   | Six months ended December 31, |  
|------------------------------------------------ | - | ----------------------------- | -
|                                                 |   | 2008                          |  
|                                                 |   |                               |  
|                                                 |   |                               |  
|Cash flows from operating activities:            |   |                               |  
|Net loss                                         | $ | (551,749                      | )
|                                                 |   |                               |  
|Adjustments to reconcile net loss to net cash    |   |                               |  
|provided by (used in) operations:                |   |                               |  
|Depreciation and amortization                    |   | 18,909                        |  
|Accretion of interest                            |   | 2,690                         |  
|Warrants, stock, and options issued for service  |   | 12,000                        |  
|Changes in operating assets and liabilities:     |   |                               |  
|Accounts receivable                              |   | 203,279                       |  
|Inventory                                        |   | (22,102                       | )
|Deposit on inventory                             |   | -                             |  
|Accounts payable and accrued liabilities         |   | (4,768                        | )
|Net cash (used) in operating activities          |   | (341,741                      | )
|                                                 |   |                               |  
|Cash flow from investing activities:             |   |                               |  
|Purchase of fixed assets                         |   | (1,573                        | )
|Net cash (used in) investing activities          |   | (1,573                        | )
|                                                 |   |                               |  
|Cash flow from financing activities:             |   |                               |  
|Sale of common stock                             |   | -                             |  
|Acquisition of stock warrants                    |   | -                             |  
|Proceeds from convertible notes
      payable    |   | 282,000                       |  
|Borrowings (repayments) long-term debt           |   | (52,153                       | )
|Net cash flow provided by financing activities   |   | 229,847                       |  
|                                                 |   |                               |  
|Increase (decrease) in cash and cash equivalents |   | (113,467                      | )
|Cash and cash equivalents, beginning of period   |   | 130,318                       |  
|Cash and cash equivalents, end of period         | $ | 16,851                        |  
|                                                 |   |                               |  
|                                                 |   |                               |  
|Supplemental cash flow information:              |   |                               |  
|Interest paid                                    | $ | 24,651                        |  
|Income taxes paid                                | $ | -                             |  
|                                                 |   |                               |  
|Non cash financing activities:                   |   |                               |  
|Stock issued for services                        | $ | 12,000                        |  

See accompanying notes to condensed consolidated financial
statements

8

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HS3 Technologies, Inc.

Notes to condensed consolidated financial statements

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICES

(a) Nature of Business

HS3
Technologies, Inc. (HS3 or the Company) was incorporated in Nevada on
January 28, 2003. 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. In November 2005, the Company acquired ip-Colo, Inc., in a reorganization, a
development stage corporation (herein referred to as ip-Colo). On the date of
the reorganization, the Company, a non-operating entity without any assets or
liabilities, was to provide advanced wireless technologies integrated with
high-speed internet, via satellite, and to provide real-time security and
monitoring for many industries.

We
provide a diverse 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, governmental, and residential customer security
needs.

Effective
February 1, 2009, we signed a ten (10) year agreement with the 131-year-old
American Humane Association (AHA"). HS3 and AHAs relationship is to create a
Video Monitoring System (VMS) which will become a standard part of the
American Humane Certified (AHC) program, which is a voluntary fee-based
program available to producers, processors and haulers of animals raised for
food. The AHC program provides independent third-party verification that those
businesses treat the animals in their care humanely. Pursuant to the AHA
agreement, we will provide the installation, integration, and monitoring of
production facilities and the transportation of animals that reflect the animal
species and sub groups that AHC certifies. For the term of the agreement, we
will be paid a recurring monthly monitoring and equipment license fee for all
monitoring locations attached to the agreement.

(b) Basis of presentation and use of estimates

The
accompanying unaudited condensed consolidated financial statements in this
Quarterly Report on Form 10-Q have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Accordingly, these
statements reflect adjustments (consisting only of normal recurring entries),
which in our opinion, are necessary for a fair presentation of the financial
results for the interim periods presented. Certain information and notes
normally included in annual financial statements have been condensed in or
omitted from these interim financial statements pursuant to such rules and
regulations. These condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and related notes for the
year ended June 30, 2008, together with our discussion and analysis of financial
condition and results of operations, included in our Annual Report on Form 10-K
filed on October 7, 2008 with Securities and Exchange Commission.

Our
accounting and financial reporting policies conform to accounting principles and
practices generally accepted in the United States of America. The accompanying
consolidated financial statements include the accounts of HS3 and its controlled
subsidiaries. All significant inter-company accounts and transactions have been
eliminated in the preparation of the accompanying condensed consolidated
financial statements.

9

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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 estimates 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.

(c) Cash and cash equivalents

We
consider all short-term investments with a remaining maturity of three months or
less at the date of purchase to be cash equivalents.

(d) 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
estimated useful lives (3-5 years). Expenditures for maintenance and repairs are
charged to expense.

(e) 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.

(f) 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.

(g) 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.

(h) 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.

10

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(i) Income Taxes

The
Company has adopted SFAS No. 109, Account 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 expect to reverse.

(j) Equity-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.

(k) 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
collectability 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 December 31, 2008.

(l) 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.

(m) Reclassifications

Certain
amounts in the prior periods have been reclassified to conform to the current
periods presentation

2. GOING CONCERN

The
accompanying condensed 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 us obtaining 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.

11

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3. OTHER ACCRUED LIABILITIES

Other
accrued liabilities are as follows:

| |                            |   | December 31, |  |   | June 30, | 
| | -------------------------- | - | ------------ |  | - | -------- | 
| |                            |   | 2008         |  |   | 2008     | 
| |                            |   |              |  |   |          | 
| | Accrued board fees         | $ | 70,832       |  | $ | 45,832   | 
| | Accrued rent, officer      |   | 99,705       |  |   | 62,154   | 
| | Accrued salaries, officers |   | 173,542      |  |   | 106,563  | 
| | Accrued interest           |   | 53,399       |  |   | 38,075   | 
| | Payroll liabilities        |   | 21,719       |  |   | 30,609   | 
| | Sales tax payable          |   | 1,106        |  |   | 7,693    | 
| |                            | $ | 420,303      |  | $ | 290,926  | 

Board
fees to the two independent board of directors are $25,000 annually and they
have the option to receive cash or convert into common stock at $0.12 per share
or the rate of the last conversion agreement.

The
Company leases office space from a company owned by an officer and stockholder.
Rent and operating expenses under this lease was $15,598 and $38,189 for the
three and six months ended December 31, 2008, respectively.

Accrued
interest represents interest on the convertible notes payable.

4. CONVERTIBLE NOTES PAYABLE

The
Company has been provided with the following unsecured loans from officers and
directors or private investors pursuant to debt conversion agreements. All
principle and interest are due on demand or are converted 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.

|From                    |  | Amount of Loans |  | Interest Rate |  | Conversion Price/Share
|----------------------- |  | --------------- |  | ------------- |  | ----------------------
|Officers and Directors: |  |                 |  |               |  |                       
|Robert A Morrison       |  | $196,000        |  | 12%;15%       |  | $.12                  
|Mark L. Lana            |  | 27,000          |  | 15%           |  | $.12                  
|Charles Ferris          |  | 10,000          |  | 15%           |  | $.12                  
|Mike Yinger             |  | 1,000           |  | 15%           |  | $.12                  
|                        |  | 234,000         |  |               |  |                       
|Private Investors       |  | 260,000         |  | 15%           |  | $.10                  
|                        |  | $494,000        |  |               |  |                       

12

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5. LONG-TERM DEBT

During
fiscal year ended June 30, 2008 the Company, pursuant to a loan and security
agreement, entered into two (2) $200,000 promissory notes. In addition, the
Company issued to the lender a warrant for the purchase of one million
(1,000,000) shares of common stock at a purchase price of $.12 per share with an
expiration date of five (5) years after the commencement date of the first
loan.

The
notes have an interest rate of 15.499% and mature in three (3) years from the
commencement date, and are collateralized with the Companys personal property
as defined in the loan and security agreement. For the three and six months
ended December 31, 2008, we recorded $8,571 and $26,178, respectively as
interest expense pursuant to the notes.

Each
note also has a final payment fee of $14,000 that is due on the earlier to occur
of the maturity date or prepayment. These fees are being amortized over the life
of the loans with the obligation reflected in other long-term liabilities. For
the six-months ended December 31, 2008, we expensed $4,666.

The $400,000 proceeds were allocated to each instrument based on the fair market
value of each based on the Black-Scholes pricing model. The assumptions used in
valuing the warrants were: stock price $.13; exercise price $.12, life  5
years; volatility 101.17%; dividend yield 0%; and the yield of a risk free
investment 3.08% . 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 accreted into interest expense based on the straight line method
over the three (3) year life of the loans. For year ended June 30, 2008 and the
period ended December 31, 2008 we recorded $2,690 and $2,690 respectively as
additional interest expense. At December 31, 2008 we had $10,756 discount
remaining to be amortized into interest. The value of the loans at December 31,
2008 was $316,541. The current portion of the debt was $122,974 after discount
($127,300 principal owed) and long term after discount was $182,811 (total
principal owed in fiscal 2010 is $137,489 and in fiscal 2011 $117,851).

6.COMMON STOCK

During fiscal year ended June 30, 2008 we: (a) sold 5,300,000 shares of our
common stock for $.10 per share for total cash proceeds of $530,000; (b) issued
3,175,000 shares of our common stock for services rendered to us; (c) purchased
and cancelled 5,000,000 of the outstanding warrants for $70,964 and (d) issued
1,000,000 warrants in conjunction with our long-term debt.

On
August 15, 2008 the Company entered into a six (6) month Financial
Communications Consulting Agreement with Wall Street Resources, Inc. to provide
written analytical coverage and consultation 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 which has been accrued for. We valued the
800,000 shares based on the quoted trade price on August 15, 2008 ($0.015) and
recorded $12,000 as advertising/promotion/IR expense. In addition, 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. At December 31, 2008, $10,500 has been accrued and included in trade
accounts payable.

Pursuant
to the 2005 Stock Option Plan, the Board of Directors had granted 2,500,000
options under the plan. At December 31, 2008, 1,500,000 options are outstanding
which expire in March 2012.

1,250,000
and 1,000,000 share purchase warrants with an exercise price of $.12 per share
expired on September 8, 2008 and December 4, 2008, respectively.

13

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7. SUBSEQUENT EVENTS

On
January 30, 2009, we executed a common share purchase agreement wherein we
acquired 2,821,391 of our common shares from a shareholder for $56,427.

Effective
February 1, 2009, we signed a ten (10) year agreement with the 131-year-old
American Humane Association (AHA"). HS3 and AHAs relationship is to create a
Video Monitoring System (VMS) which will become a standard part of the
American Humane Certified (AHC) program, which is a voluntary fee-based
program available to producers, processors and haulers of animals raised from
food. The AHC program provides independent third-party verification that those
businesses treat the animals in their care humanely. Pursuant to the AHA
agreement, we will provide the installation, integration, and monitoring of
production facilities and the transportation of animals that reflect the animal
species and sub groups that AHC certifies. For the term of the agreement, we
will be paid a recurring monthly monitoring and equipment license fee for all
monitoring locations attached to the agreement.

In
conjunction with the execution of the agreement with AHA, we entered into an
additional $500,000 loan with a private investor pursuant to a debt conversion
agreement effective February 1, 2009. The loan bears interest at 15% and a
conversion price of $.10 per share and is due on demand or converted at the
option of the private investor. The loan proceeds will be used to purchase
equipment for the roll out of the monitoring locations pursuant to the agreement
with AHA and for other general working capital requirements

On
February 1, 2009, we entered into a eleven (11) month Financial Consulting
Agreement with a third party. We issued the third party 1,000,000 shares of our
common stock for services rendered to us.

Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations

Critical Accounting Polices and Estimates

The
following discussion and analysis of the results of operations and financial
condition should be read in conjunction with the accompanying unaudited
condensed consolidated financial statements.

A
summary of the significant accounting polices that we have adopted and followed
in the preparation of our condensed consolidated financial statements is
detailed in our consolidated financial statements for the year ended June 30,
2008, included in our Amended Annual Report on Form 10-K/A filed on February 13,
2009 (see Note 1 of Notes to the consolidated financial statements

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.

14

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Corporate History

We
were incorporated under the laws of the State of Nevada on January 28, 2003
under the name Zeno, Inc. On November 9, 2005, we closed on an asset purchase
agreement with IP-Colo, Inc. (IPC) wherein we acquired all of the assets of IPC.
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. On or about October 10, 2005, we changed our
name to HS3 Technologies, Inc.

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.

During
fiscal year ended June 30, 2007 we: (a) sold 10,862,500 shares of our common
stock for total cash proceeds of $919,000; (b) issued 1,760,000 shares of our
common stock for services rendered to us; (c) issued 1,356,811 shares in
conversion of notes; and (d) issued 7,250,000 warrants for services rendered to
us.

During fiscal year ended June 30, 2008 we: (a) sold 5,300,000 shares of our
common stock for $.10 per share for total cash proceeds of $530,000; (b) issued
3,175,000 shares of our common stock for services rendered to us; (c) purchased
and cancelled 5,000,000 of the outstanding warrants for $70,964 and (d) issued
1,000,000 warrants in conjunction with our long-term debt.

On
  August 15, 2008 we entered into a six (6) month Financial Communications
  Consulting Agreement with Wall Street Resources, Inc. to provide written
  analytical coverage and consultation matters concerning corporate finance and
  investor communications. We 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 addition, we will pay the consultant
  at a rate of $2,500 per month during the term of the agreement.

On
January 30, 2009, we executed a common shares purchase agreement wherein we
acquired 2,821,391 of our common shares from a shareholder for $56,427.

Effective
February 1, 2009, we signed a ten (10) year agreement with the 131-year-old
American Humane Association (AHA"). HS3 and AHAs relationship is to create a
Video Monitoring System (VMS) which will become a standard part of the
American Humane Certified (AHC) program, which is a voluntary fee-based
program available to producers, processors and haulers of animals raised from
food. The AHC program provides independent third-party verification that those
businesses treat the animals in their care humanely. Pursuant to the AHA
agreement, we will provide the installation, integration, and monitoring of
production facilities and the transportation of animals that reflect the animal
species and sub groups that AHC certifies. For the term of the agreement, we
will be paid a recurring monthly monitoring and equipment license fee for all
monitoring locations attached to the agreement.

In
conjunction with the execution of the agreement with AHA, we entered into an
additional $500,000 loan with a private investor pursuant to a debt conversion
agreement effective February 1, 2009. The loan bears interest at 15% and a
conversion price of $.10 per share and is due on demand or converted at the
option of the private investor. The loan proceeds will be used to purchase
equipment for the roll out of the monitoring locations pursuant to the agreement
with AHA and for other general working capital requirements

On
February 1, 2009, we entered into a eleven (11) month Financial Consulting
Agreement with a third party. We issued the third party 1,000,000 shares of our
common stock for services rendered to us.

15

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Current Business

Currently
we are primarily focused in the security industry. 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 by providing a single source portal
to our customers with products and services in combinations that complete the
security and monitoring matrix. 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. Our monitoring center in Denver, Colorado serves as a single point
integrated security solutions portal, where it combines our proprietary
analytical software, network security, alarm monitoring and video products.

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 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.

In
the long-term, our ability to continue as a going concern is dependent upon
successful and sufficient acceptance of our current security products, services
and solutions by the market. Additionally we expect any new products or services
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.

After
successful beta testing of three (3) beta sites and thirteen (13) monitoring
locations, we entered into a ten (10) year agreement with the American Humane
Association, pursuant to which we are to install and integrate Video Monitoring
Systems in production, transportation and slaughter facilities to reflect the
animal species and sub groups that the American Human Certified certifies
allowing AHA to have a system that can provide real-time analytical technology
tools and increase observation frequency . We, in conjunction with AHA, will
roll out our products and services for those producers and processors as part of
the AHC program. The agreement initially commences with 436 monitoring locations
(including the 13 betas) and will be expanded, pursuant to contractual
addendums, as AHA, the producers and our Company determines planned
roll-outs.

Corporate Strategy

Our
Company integrates technology, services and people into solutions that enhance
the level of security protection and surveillance services. Our Companys goal
is to become a security portal, with cutting-edge technology applications and
solutions specifically tailored to meet the security needs of government,
commercial and residential customers.

All
of the products and services, including biometric access control, satellite
remote monitoring, and DVRS are all security related. Unlike many of the
security companies that focus exclusively on the hardware sales side of the
business, our Companys value proposition is to use our proprietary products to
generate recurring revenue for our Company in the form of monitoring fees. We
view the installation of our hardware products as the entry vehicle into a
long-term technological relationship with our customers. We continually enhance
our existing products by periodically re-designing them to accommodate to the
requirement of our customer needs.

Research
indicates that the video surveillance market is poised for explosive growth
driven in part by step up security measures according to government mandates in
the coming years, a desire for heightened security, the need to replace existing
and aging infrastructures as well as the transition from an analog based
industry to a digital one.

We
intend to focus our attention on our recently signed agreement with AHA which
certifies the animal cycle from birth-to-death. There are two primary
facilities that are critical in this process; the growing house and the
slaughter house. We estimate that the number of large growing houses and
slaughter houses suitable for our services and technology are approximately
10,000 and 300 respectively.

16

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Two
additional markets that we plan to explore with our products and services are
(1) the food and safety stage of the business which would take the food from
death to dinner table which is a stage critical for not only ensuring food
safety for the consumers, but also to avoid expensive beef and poultry recalls
and theft, which cost beef and poultry companies millions of dollars each year
and (2) the off-site storage market..

Results of Operations

Three Months Ended December 31, 2008 and 2007

Revenue and Cost of goods sold.

We
derive revenue from our operations by charging monthly fees for providing
integrated equipment, monitoring, labor and other technology services as well as
equipment sales to our customers. Our revenue and cost of goods sold for the
three month period ended December 31, 2008 and 2007 are outlined in the table
below:

| |                              |   | Three months ended |  
| | ---------------------------- | - | ------------------ | -
| |                              |   | December 31,       |  
| |                              |   | 2008               |  
| |                              |   |                    |  
| | VMS Revenue:                 |   |                    |  
| | Equipment license fees       | $ | 1,859              |  
| | Monitoring                   |   | 1,230              |  
| | Domain/business hosting fees |   | 1,266              |  
| | Other                        |   | -                  |  
| |                              | $ | 4,355              |  
| |                              |   |                    |  
| | Other Revenue:               |   |                    |  
| | Equipment sales              | $ | 19,931             |  
| | IT Services                  |   | 9,639              |  
| | Other                        |   | -                  |  
| |                              | $ | 29,570             |  
| |                              |   |                    |  
| |                              |   |                    |  
| | Revenue                      | $ | 33,925             |  
| |                              |   |                    |  
| | Cost of goods sold           |   | (11,733            | )
| |                              | $ | 22,192             |  

Our
revenues for the three month period ended December 31, 2008 decreased as
compared to the comparative period in 2007 as a result of our temporarily
suspending marketing efforts for our products and services in order to focus
exclusively on the American Humane Association beta testing and consummation and
ultimate roll-out and implementation of the agreement.

During
the three months ended December 31, 2007, we had approximately $650,000 of sales
to Nickelodeon pursuant to an agreement, which never developed into a monitoring
arrangement for our Company.

Our
gross profit percent on equipment sales was 41% and 29% for the three months
ended December 31, 2008 and 2007, respectively

17

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Selling, general and administrative expenses.

Our
selling, general and administrative expenses for the three month period ended
December 31, 2008 and 2007 are outlined in the table below:

| |                                       |   | Three
      months ended |  
| | ------------------------------------- | - | ------------------------ | -
| |                                       |   | December 31,             |  
| |                                       |   |                          |  
| |                                       |   | 2008                     |  
| | Wages & employee benefits             | $ | 168,708                  |  
| | Contract services                     |   | 23,085                   |  
| | Computer network services             |   | 791                      |  
| | Accounting, audit and tax expenses    |   | 4,250                    |  
| | Rent                                  |   | 13,200                   |  
| | Legal                                 |   | (9,529                   | )
| | Board fees                            |   | 12,500                   |  
| | Telephone                             |   | 5,194                    |  
| | Travel, meals and entertainment       |   | 9,475                    |  
| | Research & development                |   | -                        |  
| | Stock transfer/shareholder/proxy fees |   | 884                      |  
| | Insurance                             |   | 720                      |  
| | Computer server/other                 |   | 152                      |  
| | Utilities                             |   | 2,399                    |  
| | Advertising/promotion/IR              |   | 18,316                   |  
| | Other expenses                        |   | (738                     | )
| | Bad debt expense                      |   | -                        |  
| |                                       | $ | 249,407                  |  

Selling,
  general and administrative expenses for the three month period ended December
  31, 2008 decreased by 55% as compared to the comparative period in 2007 primarily
  as a result of our management making a concentrative effort to reduce such costs.

Contract
services for the three months ended December 31, 2008 decreased as compared to
the comparative period in 2007 primarily as a result of the inclusion in 2007 of
$45,000 of stock issued for services rendered to a third party and $44,691 to a
former officer for services.

Advertising/promotion/IR
expenses for the three months ended December 31, 2008 increased as compared to
the comparative period in 2007 primarily as a result of a payment of $8,000 to
Wall Street Resources pursuant to our Financial Communications Consulting
Agreement and $3,000 for a web site development project.

Other
expenses for the three months ended December 31, 2007 includes $57,000 of
amortization cost of warrants issued late in 2006.

18

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Six Months Ended December 31, 2008 and 2007

Revenue and Cost of goods sold:

We
derive revenue from our operations by charging monthly fees for providing
integrated equipment, monitoring, labor and other technology services as well as
equipment sales to our customers. Our revenue and cost of goods sold for the six
month period ended December31, 2008 and 2007 are outlined in the table below:

| |                              |   | Six months ended |  
| | ---------------------------- | - | ---------------- | -
| |                              |   | December 31,     |  
| |                              |   | 2008             |  
| |                              |   |                  |  
| | VMS Revenue:                 |   |                  |  
| | Equipment license fees       | $ | 1,859            |  
| | Monitoring                   |   | 1,230            |  
| | Domain/business hosting fees |   | 2,898            |  
| | Other                        |   | -                |  
| |                              | $ | 5,987            |  
| |                              |   |                  |  
| |                              |   |                  |  
| | Other Revenue:               |   |                  |  
| | Equipment sales              | $ | 69,194           |  
| | IT Services                  |   | 41,839           |  
| | Other                        |   | 285              |  
| |                              | $ | 111,318          |  
| |                              |   |                  |  
| | Revenue                      | $ | 117,305          |  
| |                              |   |                  |  
| | Cost of goods sold           |   | (45,008          | )
| |                              | $ | 72,297           |  

Our
revenues for the six month period ended December 31, 2008 decreased as compared
to the comparative period in 2007 as a result of our Company temporarily
suspending marketing efforts for our products and services in order to focus
exclusively on the American Humane Association beta testing and consummation and
ultimate roll-out and implementation of the agreement.

During
the six months ended December 31, 2007, we had approximately $725,000 of sales
to Nickelodeon pursuant to an agreement, which never developed into a monitoring
arrangement for our Company.

Our
gross profit percent on equipment sales was 35% and 33% for the six months ended
December 31, 2008 and 2007, respectively.

19

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Selling, general and administrative expenses.

Our
  selling, general and administrative expenses for the six month period ended
  December 31, 2008 and 2007 are outlined in the table below:

| |                                       |   | Six months ended |  
| | ------------------------------------- | - | ---------------- | -
| |                                       |   | December 31      |  
| |                                       |   | 2008             |  
| | Wages & employee benefits             | $ | 290,920          |  
| | Contract services                     |   | 68,426           |  
| | Computer network services             |   | 26,538           |  
| | Accounting, audit and tax expenses    |   | 27,625           |  
| | Rent                                  |   | 26,400           |  
| | Legal                                 |   | (1,681           | )
| | Board fees                            |   | 25,000           |  
| | Telephone                             |   | 11,244           |  
| | Travel, meals and entertainment       |   | 12,466           |  
| | Research and development              |   | -                |  
| | Stock transfer/shareholder/proxy fees |   | 959              |  
| | Insurance                             |   | 5,177            |  
| | Computer server/other                 |   | 152              |  
| | Utilities                             |   | 5,016            |  
| | Advertising/promotion/IR              |   | 33,324           |  
| | Other expenses                        |   | 21,219           |  
| | Bad debt expenses                     |   | 9,616            |  
| |                                       | $ | 562,401          |  

Selling,
general and administrative expenses for the six month period ended December 31,
2008 decreased by 52% as compared to the comparative period in 2007 primarily as
a result of our management making a concentrative effort to reduce such costs.

Contract
services for the six months ended December 31, 2008 decreased as compared to the
comparative period in 2007 primarily as a result of the inclusion in 2007 of
$135,250 of stock issued for services to the independent directors and two third
parties and $67,150 to a former officer for services.

Advertising/promotion/IR
expenses for the six months ended December 31, 2008 increased as compared to the
comparative period in 2007 primarily as a result of payments of $22,500
(including stock issued for services) to Wall Street Resources, pursuant to our
Financial Communications Consulting Agreement and $3,000 for a web site
development project.

Other
expenses for the six months ended December 31, 2007 includes $282,000 of
amortization cost of warrants issued late in 2006.

20

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Liquidity and Capital Resources

Our
primary liquidity needs are to fund our working capital requirements and future
capital expenditures. Our ability to continue as a going concern is dependent
upon us obtaining 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, due to current conditions in the debt and equity
markets, no assurance can be given that debt or equity financing, if and when
required, will be available.

| | Working Capital           |   |              |   |   |          |   |  |            |  
| | ------------------------- | - | ------------ | - | - | -------- | - |  | ---------- | -
| |                           |   |              |   |   |          |   |  |            |  
| |                           |   |              |   |   |          |   |  | Percentage |  
| |                           |   | December 31, |   |   | June 30, |   |  | Increase/  |  
| |                           |   | 2008         |   |   | 2008     |   |  | Decrease   |  
| |                           |   |              |   |   |          |   |  |            |  
| | Current Assets            | $ | 144,058      |   | $ | 438,702  |   |  | (67%       | )
| | Current
      Liabilities |   | 1,119,022    |   |   | 832,053  |   |  | 35%        |  
| | Working Capital (deficit) | $ | (974,964     | ) | $ | (393,351 | ) |  | 148%       |  

| | Cash Flows                                                     |   | Six
      months ended |  
| | -------------------------------------------------------------- | - | ---------------------- | -
| |                                                                |   | December 31,           |  
| |                                                                |   | 2008                   |  
| |                                                                |   |                        |  
| | Net cash (used in) operating activities                        | $ | (341,741               | )
| | Net cash (used in) by investing activities                     |   | (1,573                 | )
| | Net cash flow provided by (used in) financing
      activities |   | 229,847                |  
| | Increase (decrease) in cash and cash equivalents               | $ | (113,467               | )

Our
cash on hand at December 31, 2008 was $16,851. We have made a concentrated
effort over the prior twelve months to reduce our selling, general and
administrative expenses, which currently have a cash burn rate of approximately
$75,000 to $85,000 per month. In conjunction with the execution of the agreement
with AHA, the Company entered into an additional $500,000 loan with a private
investor pursuant to a debt conversion agreement effective February 1, 2009. The
loan bears interest at 15% and a conversion price of $.10 per share and is due
on demand or converted at the option of the private investor. The loan proceeds
will be used to purchase equipment for the roll out of the monitoring locations
pursuant to the agreement with AHA and for other general working capital
requirements

Until
the time period that the initial monitoring locations, pursuant to the AHA
contract, are on revenue, we may need to raise additional working capital to
fund our current business activities. We will plan to raise the additional
capital needed to meet these immediate short-term needs primarily through
borrowings from officers, directors or private investors or possibly through a
private placement of our securities.

Over
the long term we will require additional funds in order to acquire equipment,
install and monitor additional monitoring locations pursuant to the AHA
contract, as well as any other expansions into newer markets for us, will
require additional financing. We anticipate relying on cash flows from
operations and debt financing for such expansion. We presently do not have any
arrangements for additional financing for the expansion of our operations, and
no potential lines of credit or sources of financing are currently in place for
the purpose of proceeding with our plan of operations.

We
have initiated discussions with third parties to provide either equipment
leasing financing or traditional debt financing through a revolving credit
facility.

21

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Contractual Obligations

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

Going Concern

Our ability to continue as a going concern is dependent upon us
obtaining 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.

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.

Item 3. Quantitative and Qualitative 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 December 31, 2008, the end of the six month period
covered by this report, we carried out an evaluation, under the supervision and
with the participation of our management, including our chief executive officer,
of the effectiveness of the design and operation of our disclosure controls and
procedures. Based on the foregoing, our chief executive officer concluded that
our disclosure controls and procedures were effective as of the end of the
period covered by this quarterly report.

Notwithstanding the foregoing, there can be no assurance that
the Companys disclosure controls and procedures will detect or uncover all
failures of persons within the Company to disclose material information
otherwise required to be set forth in the Companys periodic reports. There are
inherent limitations to the effectiveness of any system of disclosure controls
and procedures, including the possibility of human error and the circumvention
or overriding of the controls and procedures. Accordingly, even effective
disclosure controls and procedures can only provide reasonable, not absolute,
assurance of achieving their control objectives.

There have been no changes in our internal controls over
financial reporting that occurred during the quarter ended December 31, 2008
that have materially affected, or are reasonably likely to materially affect,
our internal controls over financial reporting.

22

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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.

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 services which
compete directly with our security products and services and some of the
companies developing these security products and 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.

23

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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 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 services. Such security products and 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 services that meet customer demands. We expect new security
products and services to be developed and introduced by other companies that
compete with our security products and services. The proliferation of new and
established companies offering similar security products and services may reduce
demand for our particular security products and 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 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 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 services and implement
our business objectives could be adversely effected.

24

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To continue to grow, 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 will
encounter 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 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 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 profitable operations.

Although we are in the initial stages of developing and
implementing the commercialization of our security products and services, there
is no assurance that we will be able to successfully develop sales of our
security products and 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.

25

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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 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 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 services and enhance our current security products and
services on a timely and cost-effective basis. Further, our security products
and 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 services or enhanced versions of existing
security products and services. Also, we may not be able to adapt new or
enhanced security products or services to emerging industry standards, and our
new security products or services may not be favorably received.

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

We cannot predict with certainty the potential consumer demand
for our security products or services or the degree to which we will meet that
demand. If demand for our security products or 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 services to three primary
customer groups; commercial, government, and residential. 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:

26

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

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

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

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

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

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

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

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

27

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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

On February 1, 2009, we entered into a $500,000 loan with a private
  investor pursuant to a debt conversion agreement. The loan bears interest at
  15% and a conversion price of $.10 per share and is due on demand or converted
  at the option of the private investor. The loan was issued to a US person pursuant
  to the exemption from registration provided for under Rule 506 of Regulation
  D, promulgated under the United States Securities Act of 1933, as amended.

On February 1, 2009, we entered into a eleven (11) month
Financial Consulting Agreement with a third party. We issued the third party
1,000,000 shares of our common stock for services rendered to us. The shares
were issued to a US person pursuant to the exemption from registration provided
for under Rule 506 of Regulation D, promulgated under the United States
Securities Act of 1933, as amended.

Item 3. Defaults Upon Senior Securities

None.

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

None.

Item 5. Other Information

On January 30, 2009, we executed a common shares purchase
agreement wherein we acquired 2,821,391 of our common shares from a shareholder
for $56,427.

28

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Effective February 1, 2009, we signed a ten (10) year agreement
with the 131-year-old American Humane Association (AHA"). HS3 and AHAs
relationship is to create a Video Monitoring System (VMS) which will become a
standard part of the American Humane Certified (AHC) program, which is a
voluntary fee-based program available to producers, processors and haulers of
animals raised from food. The AHC program provides independent third-party
verification that those businesses treat the animals in their care humanely.
Pursuant to the AHA agreement, we will provide the installation, integration,
and monitoring of production facilities and the transportation of animals that
reflect the animal species and sub groups that AHC certifies. For the term of
the agreement, we will be paid a recurring monthly monitoring and equipment
license fee for all monitoring locations attached to the agreement.

In conjunction with the execution of the agreement with AHA, we
entered into an additional $500,000 loan with a private investor pursuant to a
debt conversion agreement effective February 1, 2009. The loan bears interest at
15% and a conversion price of $.10 per share and is due on demand or converted
at the option of the private investor. The loan proceeds will be used to
purchase equipment for the roll out of the monitoring locations pursuant to the
agreement with AHA and for other general working capital requirements

On February 1, 2009, we entered into a eleven (11) month
Financial Consulting Agreement with a third party. We issued the third party
1,000,000 shares of our common stock for services rendered to us.

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).                                                                                                                            
|        |                                                                                                                                                                                                                                                              
|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).                                                                                          

29

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

30

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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: February 23, 2009 | */s/
      Mark Lana*                                  
|                         | Mark Lana                                              
|                         | Chief Executive Officer and Director                   
|                         | (Principal Executive Officer, Principal
      Financial
|                         | Officer and Principal Accounting Officer)              

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