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UNITED STATESSECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X]Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934For the quarterly period ended
December 31, 2010

OR

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

Commission file number001-32289

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)

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

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 ]

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

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

Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such
files).[   ] YES [   ] NO

As of February 14, 2011, there were 69,316,636 shares of the
registrants Common Stock issued and outstanding

1



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TABLE OF CONTENTS

PART I  FINANCIAL INFORMATION

|                                  |                                                                                                                                                                  | Page
|--------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----
|                                  |                                                                                                                                                                  | No. 
|Item 1.                           | Unaudited
      Condensed Consolidated Financial Statements                                                                                                      | 4   
|                                  | Condensed consolidated
      balance sheets as of December 31, 2010 and June 30, 2010                                                                            | 5   
|                                  | Condensed
      consolidated statements of operations for the three months and six months
      ended December 31, 2010 and 2009                                 | 6   
|                                  | Condensed consolidated
      statements of stockholders equity (deficit) for the years ended June 30,
      2010 and 2009 and six months ended December 31, 2010 | 7   
|                                  | Condensed
      consolidated statements of cash flows for the three months and six months
      ended December 31, 2010 and 2009                                 | 8   
|                                  | Notes to condensed
      consolidated financial statements                                                                                                       | 9   
|Item 2.                           | Managements
      Discussion and Analysis of Financial Condition and Results of Operations                                                                      | 13  
|Item 3.                           | Quantitative and Qualitative
      Disclosures about Market Risk                                                                                                 | 23  
|Item 4 .                          | Controls and Procedures                                                                                                                                          | 23  
|                                  |                                                                                                                                                                  |     
|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                                                                                                | 29  
|Item 3.                           | Defaults
      upon Senior Securities                                                                                                                            | 29  
|Item 4                            | [Removed and Reserved]                                                                                                                                           | 29  
|Item 5.                           | Other
      Information                                                                                                                                          | 29  
|Item 6.                           | Exhibits                                                                                                                                                         | 29  

2

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report contains forward-looking statements
including, but not limited to 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 month and six month
period ended December 31, 2010, are included herein beginning on the following
page. The accompanying interim unaudited condensed consolidated financial
statements should be read in conjunction with our audited consolidated financial
statements and related notes for the year ended June 30, 2010, together with our
discussion and analysis of financial condition and results of operations,
included in our Annual Report on Form 10-K filed on September 29, 2010 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 our wholly-owned subsidiary,
ip-Colo, Inc. 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,   |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ------------ | - | - | ---------- | -
|                                                                                                                                                                                    |   | 2010         |   |   | 2010       |  
|                                                                                                                                                                                    |   | Unaudited    |   |   | Audited    |  
|ASSETS                                                                                                                                                                             
|                                                                                                                                                                                    |   |              |   |   |            |  
|Current Assets:                                                                                                                                                                     |   |              |   |   |            |  
|Cash and cash equivalents                                                                                                                                                           | $ | 14,869       |   | $ | 34,915     |  
|Trade accounts receivable                                                                                                                                                           |   | 15,185       |   |   | 8,449      |  
|Other receivable                                                                                                                                                                    |   | -            |   |   | 7,913      |  
|Inventory                                                                                                                                                                           |   | 83,453       |   |   | 86,045     |  
|                                                                                                                                                                                    |   | 113,507      |   |   | 137,322    |  
|Furniture, fixtures and equipment, net of
      accumulated    depreciation of $127,356 and
      $114,538 respectively                                                             |   | 27,768       |   |   | 34,522     |  
|Other assets, net                                                                                                                                                                   |   | -            |   |   | 5,833      |  
|                                                                                                                                                                                    | $ | 141,275      |   | $ | 177,677    |  
|                                                                                                                                                                                    |   |              |   |   |            |  
|                                                                                                                                                                                    |   |              |   |   |            |  
|                                                                                                                                                                                    |   |              |   |   |            |  
|LIABILITIES AND EQUITY                                                                                                                                                             
|                                                                                                                                                                                    |   |              |   |   |            |  
|                                                                                                                                                                                    |   |              |   |   |            |  
|Current Liabilities:                                                                                                                                                                |   |              |   |   |            |  
|Trade accounts payable                                                                                                                                                              | $ | 122,929      |   | $ | 114,393    |  
|Other accrued liabilities                                                                                                                                                           |   | 535,828      |   |   | 495,110    |  
|Subordinated notes payable                                                                                                                                                          |   | 655,500      |   |   | 580,500    |  
|Note payable, current portion                                                                                                                                                       |   | 80,000       |   |   | -          |  
|Long-term debt, current
      portion                                                                                                                                               |   | 36,000       |   |   | 109,024    |  
|Other liabilities                                                                                                                                                                   |   | -            |   |   | 28,000     |  
|Total
      Liabilities                                                                                                                                                             |   | 1,430,257    |   |   | 1,327,027  |  
|                                                                                                                                                                                    |   |              |   |   |            |  
|                                                                                                                                                                                    |   |              |   |   |            |  
|Stockholders Equity (Deficit):                                                                                                                                                     |   |              |   |   |            |  
|Preferred stock, $0.0001
      par value, 2,500,000 shares
      authorized,       none issued or
      outstanding                                                                 |   | -            |   |   | -          |  
|Common stock owed, not issued, 0 shares
      at December 31, 2010       and
      600,000 shares at June 30, 2010                                                                  |   | -            |   |   | 600        |  
|Common Stock, $0.001 par
      value, 200,000,000
      authorized,       issued and
      outstanding 69,316,636 at December 31,
      and       68,116,636 at June 30,
      2010 |   | 69,317       |   |   | 68,117     |  
|Additional paid-in capital                                                                                                                                                          |   | 5,574,746    |   |   | 5,569,526  |  
|Accumulated deficit                                                                                                                                                                 |   | (6,933,045   | ) |   | (6,787,593 | )
|                                                                                                                                                                                    |   | (1,288,982   | ) |   | (1,149,350 | )
|                                                                                                                                                                                    | $ | 141,275      |   | $ | 177,677    |  

See accompanying notes to condensed consolidated financial
statements

5

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HS3 Technologies, Inc. Condensed consolidated statement
of operations Unaudited

Three months ended December 31,
    
    
    Six months ended December 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenue
    $
    26,816
    
    $
    37,220
    
    $
    54,945
    
    $
    63,876Cost of goods sold
    
    7,211
    
    
    9,361
    
    
    9,680
    
    
    13,978Gross profit
    
    19,605
    
    
    27,859
    
    
    45,265
    
    
    49,898Operating Expenses:Selling, general and administrative
    
    99,834
    
    
    65,852
    
    
    162,588
    
    
    361,091Depreciation and amortization
    
    8,767
    
    
    11,530
    
    
    18,651
    
    
    22,728Total operating
      expenses
    
    108,601
    
    
    77,382
    
    
    181,239
    
    
    383,819Loss from operations
    
    (88,996
    )
    
    (49,523
    )
    
    (135,974
    )
    
    (333,921
    )Other income (expense):Interest expense, net
    
    (4,292
    )
    
    (33,229
    )
    
    (9,478
    )
    
    (89,185
    )Total other income
      (expense)
    
    (4,292
    )
    
    (33,229
    )
    
    (9,478
    )
    
    (89,185
    )Net
      loss
    $
    (93,288
    )
    $
    ( 82,752
    )
    $
    (145,452
    )
    $
    (423,106
    )Net loss per share-basic and diluted
    $
    (0.001
    )
    $
    (0.002
    )
    $
    (0.002
    )
    $
    (0.009
    )Weighted average number of
      common    shares outstanding
    
    69,277,506
    
    
    54,472,342
    
    
    68,697,071
    
    
    48,234,072


See accompanying notes to condensed consolidated financial
statements

6

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

Common
    
    
    
    
    
    
    
    
    TotalStock Owed
    
    
    Additional
    
    
    Retained
    
    
    StockholdersCommon
    
    
    Stock
    
    
    Not Issued
    
    
    Paid-in
    
    
    Earnings
    
    
    EquityShares
    
    
    Amount
    
    
    
    
    
    Capital
    
    
    (Deficit)
    
    
    (Deficit)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/       cancellation of debt
    
    2,050,000
    
    
    2,050
    
    
    
    
    
    51,542
    
    
    -
    
    
    53,592Net loss
    
    -
    
    
    -
    
    
    
    
    
    -
    
    
    (1,176,419
    )
    
    (1,176,419
    )Balances as of June 30, 2009
    
    41,995,802
    
    $
    41,996
    
    $
    -
    
    $
    4,385,001
    
    $
    (6,107,805
    )
    $
    (1,680,808
    )Shares issued for cash
    
    4,500,000
    
    
    4,500
    
    
    
    
    
    220,500
    
    
    -
    
    
    225,000Shares issued for conversion
      of debt
    
    15,500,000
    
    
    15,500
    
    
    
    
    
    759,500
    
    
    
    
    
    775,000Shares issued for cancellation of debt
    
    5,870,834
    
    
    5,871
    
    
    
    
    
    176,125
    
    
    
    
    
    181,996Shares issued for services
    
    250,000
    
    
    250
    
    
    
    
    
    5,000
    
    
    
    
    
    5,250Shares owed for services, not issued
    
    
    
    
    
    
    
    600
    
    
    23,400
    
    
    
    
    
    24,000Net loss
    
    -
    
    
    -
    
    
    
    
    
    -
    
    
    (679,788
    )
    
    (679,788
    )Balances as of June 30, 2010
    
    68,116,636
    
    $
    68,117
    
    $
    600
    
    $
    5,569,526
    
    $
    (6,787,593
    )
    $
    (1,149,350
    )Shares issued for services
    
    1,200,000
    
    
    1,200
    
    
    (600
    )
    
    5,220
    
    
    -
    
    
    5,820Net loss
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    (145,452
    )
    
    (145,452
    )Balances as of December 31, 2010
    
    69,316,636
    
    $
    69,317
    
    $
    -
    
    $
    5,574,746
    
    $
    (6,933,045
    )
    $
    (1,288,982
    )


See accompanying notes to condensed consolidated financial
statements

7

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HS3 Technologies, Inc.Condensed consolidated
statement of cash flows Unaudited

|                                                                                      |   | Six months ended December 31, |  
|------------------------------------------------------------------------------------- | - | ----------------------------- | -
|                                                                                      |   | 2010                          |  
|                                                                                      |   |                               |  
|                                                                                      |   |                               |  
|Cash flows from operating
      activities:                                           |   |                               |  
|Net loss                                                                              | $ | (145,452                      | )
|                                                                                      |   |                               |  
|Adjustments to reconcile net loss to net cash provided by
      (used in) operations: |   |                               |  
|Depreciation and amortization                                                         |   | 18,651                        |  
|Accretion of interest                                                                 |   | 2,689                         |  
|Warrants, stock, and options
      issued for service                                 |   | 5,820                         |  
|Changes in operating assets and liabilities:                                          |   |                               |  
|Accounts and other receivables                                                        |   | 1,177                         |  
|Inventory                                                                             |   | 2.592                         |  
|Accounts payable and accrued
      liabilities                                        |   | 49,254                        |  
|Net cash (used in) operating activities                                               |   | (65,269                       | )
|                                                                                      |   |                               |  
|Cash flow from investing activities:                                                  |   |                               |  
|Additions to furniture,
      fixtures & equipment                                    |   | (6,064                        | )
|Net cash (used in) investing activities                                               |   | (6,064                        | )
|                                                                                      |   |                               |  
|Cash flow from financing activities:                                                  |   |                               |  
|Sale of common stock                                                                  |   | -                             |  
|Proceeds (repayments) convertible notes
      payable                                 |   | -                             |  
|Proceeds (repayments)
      subordinated notes payable                                |   | 75,000                        |  
|Borrowing/repayments revolving credit
      agreement                                 |   | 80,000                        |  
|Borrowings (repayments)
      long-term debt                                          |   | (103,713                      | )
|Other accrued liabilities converted to
      equity                                   |   | -                             |  
|Net cash flow provided by (used
      in)financing activities                         |   | 51,287                        |  
|                                                                                      |   |                               |  
|Increase (decrease) in cash and cash
      equivalents                                |   | (20,046                       | )
|Cash and cash equivalents, beginning of period                                        |   | 34,915                        |  
|Cash and cash equivalents, end of period                                              | $ | 14,869                        |  
|                                                                                      |   |                               |  
|                                                                                      |   |                               |  
|Supplemental cash flow information:                                                   |   |                               |  
|Interest paid                                                                         | $ | 6,189                         |  
|Income taxes paid                                                                     | $ | --                            |  
|                                                                                      |   |                               |  
|                                                                                      |   |                               |  
|Non cash financing activities:                                                        |   |                               |  
|Stock issued for services                                                             | $ | 5,820                         |  
|Stock issued for other accrued
      liabilities                                      | $ | -                             |  
|Stock issued for convertible notes payable                                            | $ | -                             |  
|Subordinated notes
      payable issued for
      convertible       notes payable     | $ | -                             |  

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.

The Company provides 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,
agricultural, governmental, and residential customer security needs.

(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, 2010, together with our discussion and analysis of financial
condition and results of operations, included in our Annual Report on Form 10-K
filed on September 29, 2010 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.

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.

9

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(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 component parts 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.. 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.

(i) Income Taxes

We 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 an extended period of time the value (if material) is amortized
over the life of the period that services are performed.

10

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(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,
2010.

(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/or security sales to mitigate the affects of our cash position; however, no
assurance can be given that debt or equity financing, if and when required, will
be available. The financial statements do not include any adjustments relating
to the recoverability and classification of recorded assets and classification
of liabilities that might be necessary should we be unable to continue in
existence.

3.OTHER ACCRUED LIABILITIES

Other accrued liabilities are as follows:

December 31 ,
    
    
    June 30,2010
    
    
    2010Accrued board fees
    $
    158,332
    
    $
    133,332Accrued salaries, officers
    
    80,000
    
    
    80,000Accrued liabilities, related parties
    
    76,535
    
    
    61,505Accrued interest
    
    218,176
    
    
    218,176Payroll liabilities
    
    1,984
    
    
    1,569Sales tax payable
    
    801
    
    
    528$
    535,828
    
    $
    495,110


Board fees to the two independent board of directors are
$25,000 annually which is being deferred until the Company has the ability to
pay at which time the board members have the option to receive cash or convert
into common stock at the rate of $0.12 or the rate of the last conversion
agreement.

The Company leases office space from a company owned by an
officer/director. The Company has accrued $76,535 as a related party liability.

Accrued interest represents interest on the subordinated notes
payable and up to the time (November 24, 2009) in which the convertible notes
payable were converted into equity.

11

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4.SUBORDINATED NOTES PAYABLE

At December 31, 2010, the following subordinated notes payable
are outstanding: The notes bear interest at 12% and are on a month to month
term. No interest is being accrued on these notes since June 30, 2010.

| | William S. Dickey  | $ | 575,000 | 
| | ------------------ | - | ------- | 
| | Robert A. Morrison |   | 80,500  | 
| |                    | $ | 655,500 | 

5. LONG-TERM DEBT

In February and March 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
months ended December 31, 2010, we recorded $1,735 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 three-months ended December 31, 2010, we
amortized $1,555.

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.

On December 30, 2010 the Company entered into a loan payment
modification/settlement agreement with the lender in which we paid $65,000 as a
one-time payment and will pay a remaining balance of $36,000 as the settlement
of the outstanding balance and accrued interest on these notes. The discount on
the notes was accrued into interest expense through the date of the settlement
agreement. For the six months ended December 31, 2010 we recorded $2,689 as
additional interest expense and amortized $5,833 of other assets. The lender
also subordinated to our subordinated notes payable. The $36,000 will be paid at
$3,000 a month through January 10, 2012 at zero interest.

6.NOTE PAYABLE

On December 17, 2010, the Company entered into a one year
promissory note with a commercial bank. The note is a revolving line of credit,
wherein the Company can receive advances up to $250,000. The note bears interest
at 3.85% and is guaranteed pursuant to a Guaranty Fee Agreement between William
S. Dickey and the Company, wherein the Company pays Mr. Dickey a monthly fee of
$1,250 to provide the guaranty. At December 31, 2010 the Company had $80,000
outstanding on this line of credit.

7. COMMON STOCK

During fiscal year ended June 30, 2009 we: (a) issued 1,800,000
shares of our common stock for financial services rendered to us (valued at
$32,000) and (b) issued 250,000 shares of our common stock for cancellation of
$21,592 of accounts payable to a third party.

12

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During fiscal year ended June 30, 2010 we: (a) issued 4,500,000
shares of our common stock for $225,000 which was used to repay $150,000 of
convertible and subordinated notes payable; (b) issued 15,000,000 shares of our
common stock to convert $775,000 of convertible notes payable; (c) issued
5,870,834 shares of our common stock to two officers for cancellation of
$181,996 of accrued salaries, and (d) issued 250,000 shares of our common stock
for services rendered to us.

On February 28, 2010 the Board voted to issue 600,000 shares of
our common stock for financial consulting services rendered to us effective
February 1, 2010. We valued the 600,000 shares based on the quoted trade price
on February 1, 2010 ($.04) and recorded $24,000 as contract services expense. As
of September 30, 2010, these shares are owed, but not issued. These shares were
issued on October 4, 2010.

On October 4, 2010 the Board voted to issue 600,000 share of
our common stock for financial consulting services rendered to us. We valued the
600,000 shared based on the quoted trade price on October 4, 2010 ($.0097) and
recorded $5,820 as contract services expense.

Pursuant to the 2005 Stock Option Plan, the Board of Directors
had granted 2,500,000 options under the plan. At December 31, 2010, 1,500,000
options (with an exercise price of $.1667) are outstanding which expire in March
2012.

8. SUBSEQUENT EVENTS

Management has evaluated subsequent events through the date
which the financial statements were available for issue. There are no subsequent
events related to the financial statements.

13

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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, 2010, included in our Annual Report on Form 10-K filed on
September 29, 2010.

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.

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 November 4, 2009, at the annual and special meeting of
stockholders of our company, our authorized capital increased to 200,000,000
shares of common stock with a par value of $0.001.

During fiscal year ended June 30, 2010 we: (a) sold 4,500,000
shares of our common stock for total cash proceeds of $225,000; issued 850,000
shares of our common stock for services rendered to us; and (c) issued
21,370,834 shares of our common stock for cancellation of convertible notes
payable and other payables due our officers and directors. Of the 850,000 shares
of our common stock issued for services rendered to us, the last 600,000 shares
were issued on October 4, 2010.

Current Business

The Company has expanded its technical installation service
with a focus on the Quick Serve Restaurant market (QSR).

An agreement recently signed with the master provider of
technical and installation services to an internationally renowned QSR chain has
refocused the Companys efforts toward the services required by the QSR. To date
the Companys installation teams have successfully completed installations in
ten states from coast to coast servicing multiple sites within each market. The
teams have provided the position of Clean-up team provider to our service
offering. Clean-up teams are responsible for resolving technical and
installation issues left unfinished by other services providers. We are very
comfortable becoming the expert and lead provider of choice to the QSR. It is
our ability to acquire highly qualified individuals and allowing them to excel
within the Companys structure that continues to keep the Companys in the
forefront of providing exceptional service.

There are over 18,000 locations that will require installation
and service over the next two years. Our challenge is to reach a sufficient
number of 3-man service teams that have the capability of servicing 144
locations per week. The Company charges approximately $1,600 to $4,000 per
installation. Cost efficiencies are continuing to be realized as the number of
HS3 installations increase.

14

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The company has recently increased services offered to the
expanding self- storage market. Teams trained to service the QSR market have the
ability to install systems and provide service to self- storage customers.
Installing video cables and cameras, and providing video analytics through our
remote video monitoring and data center fill a need lacking with-in the self-
storage industry.

The Company anticipates the addition of these two service
markets will substantially improve our outlook in the near future.

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), video monitoring centers, biometric access control, personal
biometric identification units, cellular and 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 customer
security needs. Our monitoring center in Denver, Colorado serves as a single
point security solutions portal, integrating our proprietary analytical
software, network security, and video products.

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 various customers. All of the products and services, including
biometric access control, satellite remote monitoring, and DVRs are security
related. Unlike many security companies that focus exclusively on security
hardware sales, our companys value proposition is to offer proprietary products
to generate recurring revenue for our company in the form of monitoring and
equipment licensing 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 our customer needs.

We are primarily an intellectual capital company. Our company
both develops HS3 proprietary technology, and acquires and integrates
appropriate industry technology to provide surveillance solutions customized to
the requirements of our customers. Our established mission is to be:

The trusted security architect providing vision
when it matters.

As a security architect, we provide professional architectural,
design and engineering to develop system solutions for our customers as desired
by our customers. This concept is the foundation of our intellectual capital and
core competencies. We use intellectual capital of our employees and the
surveillance industry to architect and design solutions that provide customers
vision and situational awareness. This acquired knowledge is transformed to
innovations that are proprietary to our company. This occurs in part, through:

- Increased knowledge of new solutions and industry advancements
- Developing new systems
- Product and application enhancements
- Applications of new components
- Designing new, proprietary software

15

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We have a sustainable competitive advantage in our ability to
merge existing technology with the latest innovations in satellite broadband
service, IP hardware, proprietary software, and access control security
products. We have the expertise, capacity, staff, and ability to monitor sites
located anywhere in the United States and Canada. Our Denver monitoring facility
has access to 1.7 Terabytes per second of ground-based internet capability for
interfacing purposes. We developed the technologies, proved the concepts, and
started implementation, and market penetration. We have focused on the rural and
farm animal/production market to date. There are six primary markets where our
technology can excel in providing greater access, better performance and lower
cost:

- Producers of Animal Products
- Homeland Security
- Hospitality
- Petroleum Industry
- Educational Facilities
- Construction Projects
- Self-Storage Facilities

PRODUCERS OF ANIMAL PRODUCTS:

As the developer and architect of a video monitoring system
(VMS) and surveillance program, we have refined the capabilities of our
satellite video product and other surveillance technologies including their
implementation. We also have the ability to provide service to remote areas
underserved by high speed internet or cable providers.

Within a climate of increasing concerns over food safety,
security and animal welfare a tremendous market is evolving. We have developed
surveillance products primarily video, to address these issues in the livestock
production industry and to a lesser extent the food processing industry. Our
solutions are developed to convey to consumers a sense of confidence in the
quality of the food they eat, and that the producer has incorporated appropriate
stewardship in animal production processes. For the producer this provides risk
mitigation, enhanced production and value added branding.

Through the combined use of proprietary technology, including
innovations, video analytics, and digital video recorders (DVR) the Company has
developed state-of-the-art wireless, internet linked cellular, and satellite
linked surveillance systems. We are in a unique position to be the first company
with national surveillance capabilities, to provide an independent
3rd party monitoring verification system to the public that increases
their level of confidence in fundamentally important industries. Our
surveillance and monitoring provides these assurances with a certified humane
brand, whether acquired or created and generated in house.

Animal protein producers desire increased market share that
hold margins while requiring value in programs they utilize. Our true measures
of value can be assessed through increased profits and the realization of risk
mitigation.

Our surveillance program allows:

- Producers to demonstrate stewardship with archived video.
- Producers to employ HS3 as a third party independent verifier of video for
  the establishment and certification labeling of food products at the market
  shelf, i.e. the logo/brand assures consumer that the food they purchased for
  their family has been raised humanely and handled safely.
- Producers to monitor animal behavior at remote locations and improve
  production efficiencies including herd disease awareness.
- Management to assure employees work within standards required to maintain
  the highest levels of risk mitigation and animal stewardship.
- Rebuttal to undercover video by animal activist groups.

Our companys VMS and surveillance program provide the above
criteria with a very low cost of entry that was modeled after a typical cable TV
system. The equipment is provided to the producers who pay a monthly equipment
license fee with requisite subscription fees for monitoring services. To further
lower barriers of entry, our program removes the high front end equipment costs
to the producers.

16

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We intend to enter and penetrate into the animal welfare,
protein and production business by contracting with various producers,
associations, and/or companies that can use our surveillance services as a part
of any value-added welfare/stewardship and production brand that they choose. As
the architect of the surveillance system, we are able to provide specific
elements (as designed & tailored by the producer/company) of our monitoring
services to customers while maintaining ownership of the proprietary VMS system.

Over the prior year, we have determined proof of a market and
penetration concept of the technology and also of our business model. Our
strategy is to maintain market penetration with us as a vendor to
associations/producers and/or companies desiring various certification programs.
We are attempting to seize this initiative in the livestock arena because there
is a significant opportunity to expand our service to meet the needs of
additional protein producers in pork, beef, poultry, and dairy industries.

HOMELAND SECURITY:

We have installed (on a beta test) remote video products for
the U.S. Coast Guard, enabling the monitoring of and relaying of the physical
location of freight trains at ports of entry. The product relays GPS and live
video over a cellular network.

Our covert deployment system is one of the products developed
that is technologically advanced. The covert deployment system allows the
utilization of cellular technology and provides a physically small footprint for
loss prevention operations. These systems utilize SMS messaging for alerting and
motion detection or other triggers to activate video that records perpetrators
on the enclosed drive, simultaneously sending attached photos to our secured
portal. It is estimated there are 13,000 active train locomotives currently in
the United States spread over 7 companies. Homeland Security is concerned about
the risk to the public should a locomotive and its cargo become hijacked or
compromised. We have developed and deployed a biometric access control system
which limits access to the locomotive. In addition, we implemented GPS and video
monitoring transmitted in real-time over a cellular network to a centralized
monitoring center. We have completed beta testing on 28 locomotives with good
results and feedback and are awaiting customer feedback.

HOSPITALITY:

As in Americas schools, security for the hospitality industry
is becoming increasingly important. Hotels are trending toward increasing guest
security measures as a result of injury and liability litigation. Additionally
hotel operators are becoming more concerned with improving general security for
guests. Our internet protocol surveillance system enhances and augments the
hotels ability to monitor the hotels perimeter and access to guest areas.

We provide hotels a reliable source for web hosting. An
ancillary advantage of our video monitoring system is the ability for the hotel
to offer their video on web sites as an inexpensive, effective advertising tool.

PETROLEUM INDUSTRY:

The petroleum industry spends millions of dollars and man hours
monitoring oil and gas wells throughout the country. Many oil and gas wells are
in remote areas and, aside from typical maintenance and production monitoring,
there is a constant threat of vandalism, sabotage and product theft. Today, all
monitoring of wells requires that an employee be physically present at a well to
perform necessary inspections. We are working with industry leaders to eliminate
this labor-intensive process. After installation of our petroleum surveillance
package, customers can monitor their assets from anywhere in the world using the
internet. In addition, we have, and continue to form strategic alliances with
providers of complementary monitoring products that mesh with our satellite
products and provide well operators with real-time information to enhance well
production.

We have researched, developed and installed a remote monitoring
device called OPIE an Outdoor Portable Investigative
Equipment surveillance vehicle. The device has been used to successfully
monitor gas wells in remote Wyoming for three years. The original concept having
been proven to the customer, an oil and gas producer, has expressed desire in
purchasing additional OPIEs for their expansion to new fields.

17

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EDUCATIONAL FACILITIES:

Even in todays high-speed world, there are numerous school
districts - rural and urban - waiting for high-speed internet access and video
monitoring. We can provide the services required for maintaining and improving
security.

The Federal Government has mandated schools comply with the
Homeland Security Act, which in part requires video surveillance. With our
system installed, security information is available via the internet and our
secured portal to individuals with the proper security clearance.

Providing schools with satellite broadband access to the
internet at megabytes-per-second speeds, web hosting services, and the ability
to observe activities in and around the school with digital cameras make our
Company a uniquely positioned provider. Our advanced technology and low cost of
entry structure allows us to offer education facilities products meeting
requirements of Homeland Security.

CONSTRUCTION PROJECTS:

HS3 is working with 3 national construction companies to
provide remote video security deploying the companies OPIE product. When
installed, OPIE provides recurring revenue through live video monitoring of
remote job sites. Captured video is transmitted to the Denver monitoring center
for analytics and event classification. Management is confident that the
increasing need for remote security will continue, and open untapped markets for
our proprietary cost effective solution. Uniquely positioned the Company feels
the market for our OPIE technology will continue to grow for years to come.

HS3 is continuing to work with a National Livestock trailer
manufacturing company to provide its proprietary video technology in trailers
that monitor animal welfare and handling during transportation, loading, and
unloading. The Company is in the second year of deploying this technology and
has reached a threshold where its ready for this market. HS3 has the technology
and capability to provide the solution to the livestock industry, solving
transportation monitoring requirements.

SELF-STORAGE FACILITIES:

Over the last 30 years the self-storage industry has typically
employed part-time guard services to randomly check their properties during off
hours. HS3 has a solution that offers continuous surveillance utilizing the
Companies technology and Denver monitoring center to provide 24/7/365
monitoring, improving both monitoring and reduced costs.

RESULTS OF OPERATIONS:

Three Months Ended December 31, 2010 and 2009

Revenue and cost of goods sold.

We derive revenue from our operations by charging monthly fees
for providing integrated equipment, monitoring, hosting, 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, 2010 and 2009
are outlined in the table below:

|                                  |   | Three months ended | 
|--------------------------------- | - | ------------------ | 
|                                  |   | December 31,       | 
|                                  |   | 2010               | 
|                                  |   |                    | 
|Contract Revenue:                 |   |                    | 
|Equipment license/monitoring fees | $ | 5,194              | 
|QSR                               |   | 3,680              | 
|Domain/business hosting fees      |   | 919                | 
|Other                             |   | -                  | 
|                                  |   | 9,793              | 

18

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|                         |   | Three months ended |  
|------------------------ | - | ------------------ | -
|                         |   | December 31,       |  
|                         |   | 2010               |  
|                         |   |                    |  
|Other Revenue:           |   |                    |  
|Equipment sales          |   | 11,893             |  
|IT Services              |   | 5,130              |  
|Other                    |   | -                  |  
|                         |   | 17,023             |  
|                         |   |                    |  
|Revenue                  |   | 26,816             |  
|                         |   |                    |  
|Cost
      of goods sold |   | (7,211             | )
|                         | $ | 19,605             |  

19

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Selling, general and administrative expenses.

Our selling, general and administrative expenses for the three
month period ended December 31, 2010 and 2009 are outlined in the table below:

|                                                   |   | Three months ended |  
|-------------------------------------------------- | - | ------------------ | -
|                                                   |   | December 31, 2010  |  
|                                                   |   |                    |  
|                                                   |   | 2010               |  
|Wages & employee benefits                          | $ | 41,977             |  
|QSR related expenses                               |   | 12,631             |  
|Contract services                                  |   | 6,560              |  
|Board Fees                                         |   | 25,000             |  
|Accounting, audit and tax expenses                 |   | 14,250             |  
|Legal                                              |   | 562                |  
|Stock transfer/shareholder/proxy/filing
      fees |   | 995                |  
|Other professional fee/filings                     |   | 1,494              |  
|Rent                                               |   | (218               | )
|Utilities                                          |   | 4,578              |  
|Computer network services                          |   | 333                |  
|Computer server/internet fees                      |   | 491                |  
|Advertising/domain registration                    |   | 55                 |  
|Telephone                                          |   | 3,515              |  
|Travel, meals and entertainment                    |   | 1,214              |  
|Research & development                             |   | 1,008              |  
|Insurance                                          |   | 4,602              |  
|Other expenses                                     |   | (19,213            | )
|                                                   | $ | 99,834             |  

Selling, general and administrative expenses is up
quarter over quarter due to the correction of the over accrual in wages upon the
conversion of the liability into equity. Other expenses included $21,556 of bad
debts written off, offset by approximately $45,000 gain on the settlement of our
long term debt.

Six Months Ended December 31, 2010 and 2009

Revenue and Cost of goods sold.

We derive revenue from our operations by charging monthly fees
for providing integrated equipment, monitoring, hosting, 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 December 31, 2010 and 2009 are
outlined in the table below:

|                                  |   | Six months ended | 
|--------------------------------- | - | ---------------- | 
|                                  |   | December 31,     | 
|                                  |   | 2010             | 
|                                  |   |                  | 
|Contract Revenue:                 |   |                  | 
|Equipment license/monitoring fees | $ | 20,248           | 
|QSR                               |   | 3,680            | 
|Domain/business hosting fees      |   | 1,831            | 
|Other                             |   | -                | 
|                                  | $ | 25,759           | 
|                                  |   |                  | 
|Other Revenue:                    |   |                  | 
|Equipment sales                   | $ | 12,561           | 
|IT Services                       |   | 16,625           | 
|                                  | $ | 29,186           | 

20

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|                         |   | Six months ended |  
|------------------------ | - | ---------------- | -
|                         |   | December 31,     |  
|                         |   | 2010             |  
|                         |   |                  |  
|Revenue                  | $ | 54,945           |  
|                         |   |                  |  
|Cost of goods
      sold |   | (9,680           | )
|                         | $ | 45,265           |  

Our contract revenues for the six month period ended December
31, 2010 decreased as compared to the comparative period in 2009 as we have
started to focus on the QSR part of our business.

Our gross profit percent on equipment sales was 23% for the six
months ended December 31, 2010 as compared to 30% for the 2009 comparable
six-month period.

Selling, general and administrative expenses.

Our selling, general and administrative expenses for the six
month period ended December 31, 2010 and 2009 are outlined in the table below:

|                                      |   | Six months ended |  
|------------------------------------- | - | ---------------- | -
|                                      |   | December 31,     |  
|                                      |   |                  |  
|                                      |   | 2010             |  
|                                      |   |                  |  
|Wages & employee benefits             | $ | 69,093           |  
|QSR related expenses                  |   | 12,631           |  
|Contract services                     |   | 6,560            |  
|Board Fees                            |   | 25,000           |  
|Accounting, audit and tax expenses    |   | 25,500           |  
|Legal                                 |   | 1,486            |  
|Stock transfer/shareholder/proxy fees |   | 1,465            |  
|Other professional fees/filings       |   | 1,494            |  
|Rent                                  |   | (218             | )
|Utilities                             |   | 8,855            |  
|Computer network services             |   | 720              |  
|Computer server/internet fees         |   | 947              |  
|Advertising/domain registration       |   | 214              |  
|Telephone                             |   | 8,899            |  
|Travel, meals and entertainment       |   | 4,105            |  
|Research & development                |   | 2,124            |  
|Insurance                             |   | 11,607           |  
|Other expenses                        |   | (17,894          | )
|                                      | $ | 162,588          |  

Selling, general and administrative expenses for the six month
period ended December 31, 2010 decreased by 55% as compared to the comparative
period in 2009 as our management continues to make a concentrative effort to
reduce such costs until top-line revenue can support our business operations.

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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 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 and/or equity financing,
if and when required, will be available.

Working Capital

|                          |   |              |   |   |            |   |  | Percentage |  
|------------------------- | - | ------------ | - | - | ---------- | - |  | ---------- | -
|                          |   | December 31, |   |   | June 30,   |   |  | Increase/  |  
|                          |   | 2010         |   |   | 2010       |   |  | (Decrease) |  
|                          |   |              |   |   |            |   |  |            |  
|Current Assets            | $ | 113,507      |   | $ | 137,322    |   |  | (17.3%     | )
|Current Liabilities       |   | 1,430,257    |   |   | 1,327,027  |   |  | 7.8%       |  
|Working Capital (deficit) | $ | (1,316,750   | ) | $ | (1,189,705 | ) |  | (10.6%     | )

|Cash
      Flows                                               |   | Six months ended |  
|-------------------------------------------------------------- | - | ---------------- | -
|                                                               |   | December 31,     |  
|                                                               |   | 2010             |  
|                                                               |   |                  |  
|Net cash (used in) operating activities                        | $ | (65,269          | )
|Net cash (used in) by investing activities                     |   | (6,064           | )
|Net cash flow provided by (used in)
      financing activities |   | 51,287           |  
|Increase (decrease) in cash and cash equivalents               | $ | (20,046          | )

Our cash on hand at December 31, 2010 was approximately
$15,000. We have made a concentrated effort over the past year to continue to
reduce our selling, general and administrative expenses, which currently have a
cash burn rate of approximately $20,000 to $30,000 per month. Until the time
period that additional contracts are on revenue, we will 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
and/or equity issuance.

Over the long term we will require additional funds in order to
hire additional contractors and book travel arrangements far enough in advance
to utilize discount rates, as well as any other expansions into newer markets
for us, will require additional financing. We anticipate relying on cash flows
from operations, equity offerings, 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 a third party to provide new
equity and/or debt financing.

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
our obtaining additional working capital to develop business operations. We
intend to use borrowings and equity 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.

22

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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

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our
management, including our principal executive officer and the principal
financial officer, we have conducted an evaluation of the effectiveness of the
design and operation of our disclosure controls and procedures, as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as
of the end of the period covered by this report. Based on this evaluation, our
principal executive officer and principal financial officer concluded as of
September 30, 2010 that our disclosure controls and procedures were effective.

Changes in Internal Controls Over Financial Reporting

There have been no changes in our internal controls over
financial reporting that occurred during the quarter ended December 31, 2010
that have materially or are reasonably likely to materially affect, our internal
controls over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

We know of no material, existing or pending legal proceedings
against our company, nor are we involved as a plaintiff in any material
proceeding or pending litigation. There are no proceedings in which any of our
directors, officers or affiliates, or any registered or beneficial stockholder,
is an adverse party or has a material interest adverse to our interest.

Item 1A. Risk Factors.

Much of the information included in this report includes or is
based upon estimates, projections or other forward-looking statements. Such
forward-looking statements include any projections or estimates made by us and
our management in connection with our business operations. While these
forward-looking statements, and any assumptions upon which they are based, are
made in good faith and reflect our current judgment regarding the direction of
our business, actual results will almost always vary, sometimes materially, from
any estimates, predictions, projections, assumptions, or other future
performance suggested herein. We undertake no obligation to update
forward-looking statements to reflect events or circumstances occurring after
the date of such statements. Such estimates, projections or other
forward-looking statements involve various risks and uncertainties as outlined
below. We caution readers of this report that important factors in some cases
have affected and, in the future, could materially affect actual results and
cause actual results to differ materially from the results expressed in any such
estimates, projections or other forward-looking statements. In evaluating us,
our business and any investment in our business, readers should carefully
consider the following factors.

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

23

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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 and 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.

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, licensing or
leasing of our 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.

24

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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.

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 have
encountered competition for these personnel. We may not be able to find or
retain qualified personnel, which may 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 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 may 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 quality assurance and efficiency measure, we plan to
manufacture our own security products and additionally contract some
manufacturing to third parties. We could be adversely affected by an increase in
our manufacturers prices of manufacturing services or a significant decline in
our manufacturers 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.

25

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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
some of 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 customers
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
limited.

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

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

Although we are in the early 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.

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 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.

26

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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 do 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 four primary
customer groups; agricultural, 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:

- 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.

Subsequent to shareholder approval at our November 4, 2009
annual meeting, our certificate of incorporation authorizes the issuance of
200,000,000 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.

27

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

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

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

The Securities and Exchange Commission has adopted regulations
which generally define penny stock to be any equity security that has a market
price (as defined) less than $5.00 per share or an exercise price of less than
$5.00 per share, subject to certain exceptions. Our securities are covered by
the penny stock rules, which impose additional sales practice requirements on
broker-dealers who sell to persons other than established customers and
accredited investors. The term accredited investor refers generally to
institutions with assets in excess of $5,000,000 or individuals with a net worth
in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly
with their spouse. The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document in a form prepared by the Securities and
Exchange Commission which provides information about penny stocks and the nature
and level of risks in the penny stock market. The broker-dealer also must
provide the customer with current bid and offer quotations for the penny stock,
the compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customers account. The bid and offer quotations, and the broker-dealer and
salesperson compensation information, must be given to the customer orally or in
writing prior to effecting the transaction and must be given to the customer in
writing before or with the customers confirmation. In addition, the penny stock
rules require that prior to a transaction in a penny stock not otherwise exempt
from these rules, the broker-dealer must make a special written determination
that the penny stock is a suitable investment for the purchaser and receive the
purchasers written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in and limit the marketability of, our common stock.

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

In addition to the penny stock rules described above, the
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, 2010 that we have incurred substantial
losses since inception, which raises substantial doubt abut our ability to
continue as a going concern.

28

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In the event we are not able to continue operations you will
likely suffer a complete loss of your investment in our securities.

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

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

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

None

Item 3. Defaults Upon Senior Securities

None.

Item 4. [Removed and Reserved]

Item 5. Other Information

Item 6. Exhibits

Exhibits required by Item 601 of Regulation S-K

|Exhibit Number | Description                                                                                                                                                                                                                                                  
|-------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3)            | Articles of Incorporation
      and Bylaws                                                                                                                                                                                                                   
|3.1            | Articles of Incorporation (incorporated by
      reference from our Registration Statement on Form SB-2 filed on August 2,
      2004).                                                                                                                      
|3.2            | By-laws (incorporated by
      reference from our Registration Statement on Form SB-2 filed on August 2,
      2004).                                                                                                                                        
|3.3            | Certificate of Change filed with the Nevada
      Secretary of State on December 1, 2009 and filed on Form 10-Q on February
      12,2010.                                                                                                                   
|(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).                                                                                 

---

|Exhibit | Description                                                                                                                                                                                                      
|------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  |                                                                                                                                                                                                                  
|        |                                                                                                                                                                                                                  
|10.4    | Partnership Agreement with Wright-Hennepin Cooperative
      Electric Association (incorporated by reference from our Current Report on
      Form 8-K filed on June 11, 2007).                                  
|10.5    | Distribution Agreement with Autostar Technology Private
      Limited (incorporated by reference from our Current Report on Form 8-K
      filed on April 4, 2007).                                              
|10.6    | Warrant Purchase Agreement dated November 6, 2007
      (incorporated by reference from our Current Report on Form 8-K filed on
      November 20, 2007).                                                        
|10.7    | Agreement with the American Humane Association
      (incorporated by reference from our Current Report on Form 8-K filed on
      August 14, 2008)                                                              
|10.8    | Subordinated Loan Agreement with our company and Robert
      A. Morrison dated November 6, 2009 (incorporated by reference from our
      Current Report on Form 8-K filed on December 20, 2009).               
|10.9    | Debt Settlement and Subscription Agreement with our
      company and Robert A. Morrison dated November 6, 2009 (incorporated by
      reference from our Current Report on Form 8-K filed on December 20, 2009).
|10.10   | Debt Settlement and Subscription Agreement with our
      company and Mark L. Lana dated November 6, 2009 (incorporated by reference
      from our Current Report on Form 8-K filed on December 20, 2009).      
|10.11   | Debt Settlement and Subscription Agreement with our
      company and William S. Dickey dated November 6, 2009 (incorporated by
      reference from our Current Report on Form 8-K filed on December 20, 2009). 
|10.12   | Subordinated Loan Agreement between our company and
      William S. Dickey dated November 6, 2009 (incorporated by reference from
      our Current Report on Form 8-K filed on December 20, 2009).             
|10.13   | Debt Settlement and Subscription Agreement with our
      company and Greg Dickey dated November 6, 2009 (incorporated by reference
      from our Current Report on Form 8-K filed on December 20, 2009).       
|10.14   | Debt Settlement and Subscription Agreement with our
      company and Charles F. Ferris dated November 6, 2009 (incorporated by
      reference from our Current Report on Form 8-K filed on December 20, 2009). 
|10.15   | Debt Settlement and Subscription Agreement with our
      company and Mike Yinger dated November 6, 2009 (incorporated by reference
      from our Current Report on Form 8-K filed on December 20, 2009).       
|(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).                                                                                                                                                                      

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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 16, 2011 | /s/
      Mark Lana                                    
|                         | Mark Lana                                              
|                         | Chief Executive Officer and Director                   
|                         | (Principal Executive Officer, Principal
      Financial
|                         | Officer and Principal Accounting Officer)              

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