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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

Form 10-QSB

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

For the quarterly period endedMarch 31, 2008

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
ACT

For the transition period from __________to __________

Commission file number 001-32289

HS3 TECHNOLOGIES,
INC.(Exact name of small business issuer as specified in its
charter)

|Nevada                                                               | 20-3598613                       
|-------------------------------------------------------------------- | ---------------------------------
|(State or other jurisdiction of incorporation or
      organization) | (IRS Employer Identification No.)

1800 Boulder Street, Suite 600, Denver, CO
80211-6400(Address of principal executive offices)

303.455.2550(Issuers telephone number)

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

Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes
[X ] No [ ]

State the number of shares outstanding of each of the issuers
classes of common equity, as of the latest practicable date:

35,625,811 common shares as of May 12, 2008

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

Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). (Check one): Yes [X] No [ ]

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- 2 -

TABLE OF CONTENTS

PART I  FINANCIAL INFORMATION

|        |                                                           | Page
|------- | --------------------------------------------------------- | ----
|Item 1. | Financial Statements                                      | 3   
|Item 2. | Managements Discussion and Analysis or Plan of Operation | 9   
|Item 3. | Controls and Procedures                                   | 20  

PART II  OTHER INFORMATION

|Item 1. | Legal Proceedings                                           | 21
|------- | ----------------------------------------------------------- | --
|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 21
|Item 3. | Defaults Upon Senior Securities                             | 21
|Item 4. | Submission of Matters to a Vote of Security Holders         | 21
|Item 5. | Other Information                                           | 21
|Item 6. | Exhibits                                                    | 21

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- 3 -

|HS3 Technologies, Inc.                                                           |   |                |   |   |                     |  
|-------------------------------------------------------------------------------- | - | -------------- | - | - | ------------------- | -
|                                                                                 |   | (Unaudited)    |   |   | (Audited)           |  
|Condensed
      Consolidated Balance Sheet                                       |   | March 31, 2008 |   |   | June
      30, 2007 |  
|                                                                                 |   |                |   |   |                     |  
|ASSETS                                                                           |   |                |   |   |                     |  
|Current Assets                                                                   |   |                |   |   |                     |  
|Cash and cash equivalents                                                        | $ | 37,358         |   | $ | 984                 |  
|Accounts receivable                                                              |   | 420,499        |   |   | 92,902              |  
|Inventory                                                                        |   | 157,262        |   |   | 98,014              |  
|Deposit on inventory                                                             |   | -              |   |   | 22,885              |  
|Total current assets                                                             |   | 615,119        |   |   | 214,785             |  
|                                                                                 |   |                |   |   |                     |  
|Furniture, fixtures and equipment, net of
      accumulated depreciation of      |   | -              |   |   | -                   |  
|$47,365 and $26,014 respectively                                                 |   | 88,667         |   |   | 102,325             |  
|Total Assets                                                                     | $ | 703,786        |   | $ | 317,110             |  
|                                                                                 |   |                |   |   |                     |  
|                                                                                 |   |                |   |   |                     |  
|                                                                                 |   |                |   |   |                     |  
|LIABILITIES                                                                      |   |                |   |   |                     |  
|Current Liabilities                                                              |   |                |   |   |                     |  
|Accounts payable and accrued liabilities                                         | $ | 555,898        |   | $ | 147,784             |  
|Notes payable - board fees                                                       |   | 33,332         |   |   | -                   |  
|Convertible notes payable                                                        |   | 182,000        |   |   | 136,000             |  
|Venture Capital notes - short term                                               |   | 93,270         |   |   | -                   |  
|Total current liabilities                                                        |   | 864,500        |   |   |                     |  
|Venture Capital notes  long term (less warrant purchase
      discount $13,135) |   | 280,398        |   |   | -                   |  
|Total Liabilities                                                                |   | 1,144,898      |   |   | 283,784             |  
|                                                                                 |   |                |   |   |                     |  
|STOCKHOLDER'S EQUITY (DEFICIT)                                                   |   |                |   |   |                     |  
|Preferred stock, $0.0001 par value, 2,500,000 shares
      authorized            |   | -              |   |   | -                   |  
|None issued or outstanding                                                       |   |                |   |   |                     |  
|Common Stock, $0.0001 par value, 50,000,000 authorized,                          |   |                |   |   |                     |  
|Issued and outstanding 35,625,811 and
      31,470,802                           |   |                |   |   |                     |  
|shares at March 31, 2008 and June 30, 2007 respectively                          |   | 35,626         |   |   | 31,471              |  
|Additional paid in capital                                                       |   | 4,011,979      |   |   | 3,658,713           |  
|Unamortized cost stock and warrants issued for services                          |   | -              |   |   | (281,920            | )
|Accumulated deficit                                                              |   | (4,488,717     | ) |   | (3,374,938          | )
|Total Stockholders' Equity (Deficit)                                             |   | (441,112       | ) |   | 33,326              |  
|                                                                                 |   |                |   |   |                     |  
|Total Liabilities and Stockholders' Equity (Deficit)                             | $ | 703,786        |   | $ | 317,110             |  

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

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- 4 -

HS3 Technologies, Inc.

|                                                                 |   | Three      |   |   | Three      |   |   | Nine       |   |   | Nine       |  
|---------------------------------------------------------------- | - | ---------- | - | - | ---------- | - | - | ---------- | - | - | ---------- | -
|                                                                 |   | Months     |   |   | Months     |   |   | Months     |   |   | Months     |  
|                                                                 |   | Ended      |   |   | ended      |   |   | ended      |   |   | ended      |  
|                                                                 |   | March 31,  |   |   | March 31,  |   |   | March 31,  |   |   | March 31,  |  
|Condensed Consolidated
      Statement of Operations (Unaudited) |   | 2008       |   |   | 2007       |   |   | 2008       |   |   | 2007       |  
|                                                                 |   |            |   |   |            |   |   |            |   |   |            |  
|Net sales                                                        | $ | 37,087     |   | $ | 13,542     |   | $ | 1,246,988  |   | $ | 32,998     |  
|                                                                 |   |            |   |   |            |   |   |            |   |   |            |  
|Cost of goods sold                                               |   | 25,810     |   |   | 8,371      |   |   | 710,151    |   |   | 26,065     |  
|                                                                 |   |            |   |   |            |   |   |            |   |   |            |  
|Gross profit                                                     |   | 11,277     |   |   | 5,171      |   |   | 536,837    |   |   | 6,933      |  
|Operating Expenses:                                              |   |            |   |   |            |   |   |            |   |   |            |  
|Sales & marketing                                                |   | 68,996     |   |   | 91,059     |   |   | 220,902    |   |   | 1,043,118  |  
|Professional and consulting                                      |   | 38,296     |   |   | -          |   |   | 265,665    |   |   | -          |  
|Stock option expense                                             |   | -          |   |   | -          |   |   | 224,443    |   |   |            |  
|                                                                 |   | 211,34     |   |   |            |   |   |            |   |   |            |  
|Payroll expense                                                  |   | 0          |   |   | -          |   |   | 590,454    |   |   | -          |  
|General and administrative                                       |   | 88,351     |   |   | 807,062    |   |   | 275,556    |   |   | 1,131,157  |  
|Depreciation                                                     |   | 5,139      |   |   | -          |   |   | 21,351     |   |   | -          |  
|                                                                 |   |            |   |   |            |   |   |            |   |   |            |  
|Total operating expenses                                         |   | 412,122    |   |   | 898,121    |   |   | 1,598,371  |   |   | 2,174,275  |  
|                                                                 |   |            |   |   |            |   |   |            |   |   |            |  
|                                                                 |   |            |   |   |            |   |   |            |   |   |            |  
|Income (loss) from operations                                    |   | (400,846   | ) |   | (892,950   | ) |   | (1,061,535 | ) |   | (2,167,342 | )
|Other income (expense)                                           |   |            |   |   |            |   |   |            |   |   |            |  
|Interest income                                                  |   | -          |   |   | 869        |   |   | 18         |   |   | 2,943      |  
|                                                                 |   |            |   |   |            |   |   |            |   |   |            |  
|Interest expense                                                 |   | (27,772    | ) |   | -          |   |   | (39,197    | ) |   | (4,606     | )
|Warrant valuation income (loss)                                  |   | -          |   |   | 1,492,950  |   |   | -          |   |   | (683,909   | )
|                                                                 |   |            |   |   |            |   |   |            |   |   |            |  
|Total other income (expense)                                     |   | (27,772    | ) |   | 1,493,819  |   |   | (39,179    | ) |   | (685,572   | )
|                                                                 |   |            |   |   |            |   |   |            |   |   |            |  
|                                                                 |   |            |   |   |            |   |   |            |   |   |            |  
|Net loss                                                         | $ | (428,618   | ) | $ | 600,869    |   |   | (1,100,714 | ) | $ | (2,852,914 | )
|                                                                 |   |            |   |   |            |   |   |            |   |   |            |  
|                                                                 |   |            |   |   |            |   |   |            |   |   |            |  
|Net loss per share-basic and diluted                             | $ | (0.01      | ) | $ | 0.02       |   |   | (0.02      | ) | $ | (0.14      | )
|                                                                 |   |            |   |   |            |   |   |            |   |   |            |  
|Weighted average number of common shares outstanding             |   | 33,810,417 |   |   | 25,520,667 |   |   | 32,735,566 |   |   | 20,936,778 |  

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

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- 5 -

HS3 Technologies, Inc.

|                                                                 |   | Nine Months    |   |   | Nine Months    |  
|---------------------------------------------------------------- | - | -------------- | - | - | -------------- | -
|                                                                 |   | ended          |   |   | ended          |  
|Condensed
      Consolidated Statement of Cash Flows (Unaudited) |   | March 31, 2008 |   |   | March 31, 2007 |  
|                                                                 |   |                |   |   |                |  
|Cash flows from operating
      activities:                      |   |                |   |   |                |  
|Net (loss)                                                       | $ | (1,100,714     | ) | $ | (3,207,237     | )
|Adjustments to reconcile net (loss) to net
      cash            |   |                |   |   |                |  
|provided by (used in) operations:                                |   |                |   |   |                |  
|Depreciation                                                     |   | 21,351         |   |   | 8,500          |  
|Warrants, stock, and options issued for service                  |   | 437,375        |   |   | 659,759        |  
|Warrant valuation loss (income)                                  |   | -              |   |   | 2,176,859      |  
|Changes in other current assets and liabilities:                 |   |                |   |   |                |  
|Increase in accounts receivable                                  |   | (327,597       | ) |   | 5,149          |  
|Inventory                                                        |   | (59,248        | ) |   | (15,852        | )
|Deposit on Inventory                                             |   | 22,885         |   |   | 8,350          |  
|Accounts payable and accrued liabilities                         |   | 408,114        |   |   | (25,187        | )
|Net cash (used in) operating activities                          |   | (597,834       | ) |   | (389,659       | )
|                                                                 |   |                |   |   |                |  
|Cash flow from investing activities                              |   |                |   |   |                |  
|Purchase of fixed assets                                         |   | (7,693         | ) |   | (1,291         | )
|Net cash from (used in) investing
      activities               |   | (7,693         | ) |   | (1,291         | )
|                                                                 |   |                |   |   |                |  
|Cash flow from financing activities                              |   |                |   |   |                |  
|Sale of common stock                                             |   | 280,000        |   |   | 474,000        |  
|Acquisition of stock warrants                                    |   | (70,964        | ) |   | -              |  
|Proceeds from convertible note payable                           |   | 46,000         |   |   | 15,000         |  
|Proceeds from venture capital
      financing                    |   | 386,865        |   |   | -              |  
|Net cash flow provided by financing activities                   |   | 641,901        |   |   | 489,000        |  
|                                                                 |   |                |   |   |                |  
|                                                                 |   |                |   |   |                |  
|Increase in cash and cash
      equivalents                      |   | 36,374         |   |   | 98,050         |  
|                                                                 |   |                |   |   |                |  
|Cash and cash equivalents, beginning of
      period             |   | 984            |   |   | 13,616         |  
|                                                                 |   |                |   |   |                |  
|Cash and cash equivalents, end of period                         | $ | 37,358         |   | $ | 111,666        |  
|                                                                 |   |                |   |   |                |  
|Supplemental cash flow information:                              |   |                |   |   |                |  
|Interest paid                                                    | $ | -              |   | $ | -              |  
|Income taxes paid                                                | $ | -              |   | $ | -              |  

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

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|- 6 -                                                                 
|----------------------------------------------------------------------
|                                                                      
|HS3 Technologies, Inc.                                                
|                                                                      
|NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (UNAUDITED)
|                                                                      
|March 31, 2008                                                        

1. Organization and Business

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

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

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

As a consequence of the reorganization, the former ip-Colo
shareholders owned approximately 57.6% of the resultant 69,966,000 outstanding
shares of the Company common stock. The reorganization was recorded as a
recapitalization effected by a reverse acquisition wherein the Company is
treated as the acquiree for accounting purposes, even though it was the legal
acquirer. Accordingly, the results of operations included in the financial
statements consist solely of the accounting acquirer, ip-Colo since its December
24, 2004 inception and the Company from the date of reorganization. Since the
accounting acquiree, the Company, was previously inoperative, goodwill was not
recorded.

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

2. Basis of Presentation

The unaudited condensed financial statements have been prepared
in accordance with United States generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and
reflect all adjustments which, in the opinion of management, are necessary for a
fair presentation. All such adjustments are of a normal recurring nature. The
results of operations for the interim period are not necessarily indicative of
the results to be expected for a full year. Certain amounts in the prior year
statements have been reclassified to conform to the current year presentations.
The statements should be read in conjunction with the financial statements and
footnotes thereto included in our Form 10-KSB for the year ended June 30,
2007.

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

3. Going Concern

The accompanying condensed consolidated financial statements
have been prepared assuming that we will continue as a going concern. The
Company generated a net loss from operations of $428,618 and $$1,100,714,
respectively, for the three and nine months ended March 31, 2008 and had a
Stockholders deficit of $441,112 as of March 31, 2008. Our ability to continue
as a going concern is dependent upon attaining profitable operations based on
the development of products that can be sold. We intend to use borrowings and
security sales to mitigate the affects of our cash position; however, no
assurance can be given that debt or equity financing, if and when required, will
be

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- 7 -

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.

4. Notes Payable

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

From
    
    Amount of LoanRobert A Morrison
    $
    144,000.00Mark L. Lana
    $
    27,000.00Charles Ferris
    $
    10,000.00Mike Yinger
    $
    1,000.00


On January 14, 2008 and February 12, 2008 we entered into two
secured financing agreements with Vencore solutions, LLC for $200,000 each. The
loans are for 36 months with a fixed interest rate of 15.499% and a combined
monthly payment of $13,964 (principal plus interest) payable on the 10thof each month. As of March 31, 2008 there is a balance of $386,803.17 and
34 payments outstanding. The notes are secured by company assets.

The Company has issued Vencore Solutions, LLC a Warrant for the
purchase of 1,000,000 shares of Common Stock at a exercise price of $.12 per
share expiring on January 14, 2013.

5. Options and Warrants

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

At March 31, 2008 we had 2,500,000 options outstanding with an
exercise price of $.16 per share that expire on March 22, and April 11,
2012.

As stated in Note 4 we also have 1,000,000 warrants at an
exercise price of $.12 per share that expire on January 14, 2013. The warrants
were valued, using the Black-Scholes calculation method, at $16,814. Also, since
these were issued in connection with a loan we booked $13,135 as a loan discount
to the note balance to be amortized to interest expense over the life of the
loan.

6. Common Stock

On August 15, 2007 we agreed to issue 720,000 shares of our
common stock to Mr. Ferris and Mr. Yinger, Directors of our company, for
services that they have rendered. The valued of the services was $86,400 based
on the trading price of our stock on the day the shares were approved and this
was included as professional fee expense. We also agreed to compensate those
directors and they will receive $25,000 annually. They have the option to
receive cash or stock at a price of $.12 per share. At March 31, 2008 we have
recorded a liability of $33,332 for convertible board fees unpaid and an
offsetting professional fee expense.

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- 8 -

7. Related Parties

The Company leases office space from a company owned by a major
stockholder. Rent expense under this lease was $13,200 and $12,000 for the three
months ended March 31, 2008 and 2007, respectively.

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

HS3 Technologies, Inc. has engaged Pythia, Inc. to create a
detailed mapping (skills by position) of its organization from the Board of
Directors down through all functional positions. The intent of this mapping is
to provide a linkage with HS3s goals and the tasks necessary to complete them.
Pythias professional services fees for the project are $45,000. This amount is
discounted based on the assumption that HS3 will compensate Pythia via common
stock (using an agreed upon price of $.12/share). One of our board members is
President and COO of Pythia, Inc.

On March 25, 2008 one of our board members filed Form 3
(Initial Statement of Beneficial Ownership of Securities) disclosing 3,377,113
of common shares owned and 900,000 stock options exercisable at .1667 and
expiring 03/12/2012.

8. Subsequent Events

Our company has been provided with certain loans from related
parties, as set forth below. We have agreed to pay 15% interest per year or
issue shares at $0.12 for conversion of the loans, at the discretion of the
provider of the loan.

|From              | Amount of Loan | Date funds provided    
|----------------- | -------------- | -----------------------
|Robert A Morrison | $30,000.00     | Received April 25, 2008

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Item 2. Managements Discussion and Analysis or Plan of
Operation

FORWARD-LOOKING STATEMENTS

This quarterly report contains forward-looking statements as
that term is defined in the Private Securities Litigation Reform Act of 1995.
These statements relate to future events or our future financial performance. In
some cases, you can identify forward-looking statements by terminology such as
may, should, expects, plans, anticipates, believes, estimates,
predicts, potential or continue or the negative of these terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors, including the risks in the
section entitled Risk Factors, that may cause our or our industrys actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements.

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

Our financial statements are stated in United States dollars
and are prepared in accordance with United States Generally Accepted Accounting
Principles. In this quarterly report, unless otherwise specified, all dollar
amounts are expressed in United States dollars. All references to shares of
common stock refer to the common shares in our capital stock.

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

Corporate History

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

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

On or about October 10, 2005, we changed our name to HS3
Technologies, Inc.

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

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

Our company had 77,623,000 shares of common stock issued and
outstanding as of November 9, 2005 immediately prior to the issuance of
1,612,520 shares of common stock in connection with the closing of the agreement
and prior to the cancellation of 9,269,520 shares of common stock that were
outstanding on closing that have been agreed to be cancelled. At November 9,
2005, the former shareholders of IPC owned 1,612,520 shares of our common stock,
which represented approximately 2.30% of the issued and outstanding shares of
our common stock on November 9,

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- 10 -

2005, and 38,700,480 additional shares of common stock which
represented a further 55.31% of our 69,966,000 issued and outstanding shares of
common stock as of November 9, 2005.

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

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

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

Current Business

Currently we are primarily focused in the security industry. We
are broadening our focus from a premiere satellite security company to a diverse
organization that will meet the many needs of the security industry with a rich
line of products, integrated solutions, and services that provide customers with
a customized approach to meet all levels of the security industry. According to
Security Industry Association (SIA) the electronic security business is a
business that constitutes more than $30 billion per year. This figure climbs to
over $100 billion when factoring in ancillary services and products such as
guards, barriers and fences, etc. Many projections forecast sustained industry
growth of 10 to 15 percent annually through the year 2020. World events are
identifying increased use of security products and services across virtually
every segment of society.

We have refocused our company and are pleased to announce that
we have expanded our market strategies with a diverse new line of cutting edge
products and services to meet the growing needs of the security industry. To
meet the ever changing needs of the industry, we have launched a combination of
state-of-the art products and services that include digital video recording
technology (DVR), biometric access control (door locks), personal biometric
identification units, CCTV, video monitoring centers, cellular networks,
wireless mesh network units and wireless internet-linked satellite surveillance
systems. This combination of products encompasses a total line that we believe
will meet many commercial and residential customer security needs.

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

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

On September 25, 2007, we signed a contract for the first phase
of a four-phase project with a multi-national real estate development company to
install new security devices, upgrade existing security devices and to add
access control points to a Florida resort with over 750 rooms. With the
completion of all phases, we generated more than $600,000 in equipment and
services revenues.

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On October 2, 2007, we signed a new contract with a Florida
resort hotel for the upgrade and installation of new RFID door locks throughout
the hotel. We anticipate generating up to $500,000 in hardware related
revenue.

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

Market Growth Strategy

The number of prospective customers for the security industry
is unlimited. With the internet reaching the entire globe we are able to provide
its products and services to anyone in the world.

Our strategy for internal growth starts with our building a
sales force that consists of inside, outside/external sales representatives, and
independent representatives. Each set of representatives will be responsible for
different sectors of the market.

To reach our market penetration strategy we will use a
combination of inside, outside, and independent sales representatives supported
by an aggressive advertising campaign to reach the three different levels of the
security industry: distribution, dealer and end user. We will also use an
aggressive advertising campaign to reach the individual business and home owners
to drive business to our dealer network.

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

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

- Residential
- Commercial
- Government

Manufacturing

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

Competition

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

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- 12 -

Regulation

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

Research and Development

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

Intellectual Property

Our company owns and operates the duly registered internet
domain name: www.HS3Tech.com. The information contained in our website is not
part of this current report.

Employees

As of March 31, 2008, we have 8 full-time employees and no
part-time employees. Of those employees, none are covered by collective
bargaining agreements. We have 15 subcontractors that we periodically engage as
required.

Description of Property

Our principal executive offices are located at 1800 Boulder
Street  Suite 600, Denver, Colorado, USA 80211. The 4,400 square foot space is
leased for $4,400 per month from a company owned by a major stockholder of the
Company, for a 3-year term that commenced on October 1, 2005. We believe that
our principal office will not be adequate for our needs for the next 3
years.

Critical Accounting Policies

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

We base our assumptions and estimates on historical experience
and other sources that we believe to be reasonable at the time. Actual results
may vary from our estimates due to changes in circumstances, weather, politics,
global

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- 13 -

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.

Plan of Operation And Cash Requirements

Results of Operations

Three months ended March 31, 2008 compared to three months
ended March 31, 2007

Net revenues for the three months ended March 31, 2008 were
$37,087 compared to net revenues for the three months ended March 31, 2007 of
$13,542. Operating expenses for the three months ended March 31, 2008 were
$412,122, compared to operating expenses for the three months ended March 31,
2007 of $898,121. Our operating expenses for the three month ended March 31,
2008 consists of general & administrative expenses in the amount of
$88,351(2007 - $807,062) and sales and marketing fees in the amount of $68,996
(2006 - $91,059).During the three months ended March 31, 2008, we realized a
loss from operations of $428,618, compared to a loss from operations of $892,950
for the three months ended March 31, 2007.

Nine months ended March 31, 2008 compared to nine months
ended March 31, 2007

Net revenues for the nine months ended Mach 31, 2008 were
$1,246,988 compared to net revenues for the nine months ended Mach 31, 2007 of
$32,998. Operating expenses for the nine months ended March 31, 2008 were
$1,598,371 (compared to operating expenses for the nine months ended Mach 31,
2007 of $2,174,275. Our operating expenses for the nine months ended March 31,
2008 consists of general & administrative expenses in the amount of
$1,111,804 (2006 - $1,131,157) and sales and marketing fees in the amount of
$486,567 (2007 -$1,043,118).During the nine months ended March 31, 2008, we
realized a loss from operations of $1,061,535, compared to a loss from
operations of $2,167,342 for the nine months ended March 31, 2007.

Purchase of Significant Equipment

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

Personnel Plan

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

Off-Balance Sheet Arrangements

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

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

Cash Requirements

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

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- 14 -

Estimated Funding Required During the Twelve
      Month Period Ending March 31, 2009Operating expensesSales and
      Marketing
    $
    1,080,000Research and Development
    
    775,000Consulting and
      Professional Fees and Wages
    
    300,000Product Development
    
    300,000Public Relations
    
    195,000Travel and Promotion
    
    350,000General and
      Administrative
    
    1,000,000Total Operating Expenses
    
    4,000,000Working Capital
    
    375,000Total
    $
    4,375,000


We currently anticipate that revenues will commence and
increase in the long-term as we increase our sales and marketing activities and
introduce new products relating to biometric security products and monitoring
services. We expect to keep our operating costs to a minimum until cash is
available through operating or financing activities.

We are not in a position to predict whether we will be able to
generate sufficient sales revenues to meet operating expenses. We plan to expand
our sales force and reduce our general and administrative expenses. To date our
sales revenues have been minimal.

Going Concern

We have historically incurred losses and have incurred losses
to date of $4,488,717 Because of these historical losses, we will require
additional working capital to develop our business operations.

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

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

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

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

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RISK FACTORS

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

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

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

RISKS RELATED TO OUR BUSINESS

We will require significant additional financing, the
availability of which cannot be assured, and if our company is 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 products;
- increase our marketing efforts;
- acquire complementary businesses, products or technologies; and/or
- respond to competitive pressures or unanticipated requirements.

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

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

We are aware of similar security products and security services
which compete directly with our security products and security services and some
of the companies developing these security products and security services have
significantly greater financial, technical and marketing resources, larger
distribution networks, and generate greater revenue and have greater name
recognition than us. These companies may develop security products superior to
those of our company. Such competition will potentially affect our chances of
achieving profitability, and ultimately adversely affect our ability to continue
as a going concern.

Some of our competitors conduct more extensive promotional
activities and offer lower prices to customers than we do, which could allow
them to gain greater market share or prevent us from increasing our market
share. In the

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future, we may need to decrease our prices if our competitors
continue to lower their prices. Our competitors may be able to respond more
quickly to new or changing opportunities, technologies and customer
requirements. To be successful, we must carry out our business plan, establish
and strengthen our brand awareness through marketing, effectively differentiate
our product line from those of our competitors and build our distribution
network. To achieve this we may have to substantially increase marketing and
research and development in order to compete effectively. Such competition will
potentially affect our chances of achieving profitability, and ultimately
adversely affect our ability to continue as a going concern.

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

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

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

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

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

To continue our growth, we will need to recruit additional
senior management personnel, including persons with financial and sales
experience. In addition, we must hire, train and retain a significant number of
other skilled personnel, including persons with experience in sales and
marketing. We have encountered competition for these

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- 17 -

personnel. We may not be able to find or retain qualified
personnel, which will have a material adverse impact on our business.

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

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

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

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

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

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

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

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

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

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

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- 18 -

acceptance of our security products, as a result of
competition, technological change, or otherwise, would significantly harm our
business.

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

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

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

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

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

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

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

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

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

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RISKS RELATED TO OUR COMMON STOCK

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

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

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

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

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

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

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

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

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

The Securities and Exchange Commission has adopted regulations
which generally define penny stock to be any equity security that has a market
price (as defined) less than $5.00 per share or an exercise price of less than
$5.00 per share, subject to certain exceptions. Our securities are covered by
the penny stock rules, which impose additional sales practice requirements on
broker-dealers who sell to persons other than established customers and
accredited investors. The term accredited investor refers generally to
institutions with assets in excess of $5,000,000 or individuals with a net worth
in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly
with their spouse. The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise

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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, FINRA
has adopted rules requiring that in recommending an investment to a customer, a
broker-dealer must have reasonable grounds for believing that the investment is
suitable for that customer. Prior to recommending speculative low-priced
securities to their non-institutional customers, broker-dealers must make
reasonable efforts to obtain information about the customers financial status,
tax status, investment objectives and other information. Under interpretations
of these rules, 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 our
shareholders ability to buy and sell our stock and which may have an adverse
effect on the market for our shares of common stock.

Item 3. Controls and Procedures

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

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

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

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

We know of no material, existing or pending legal proceedings
against our company, nor are we involved as a plaintiff in any material
proceeding or pending litigation. There are no proceedings in which any of our
directors, officers or affiliates, or any registered or beneficial stockholder,
is an adverse party or has a material interest adverse to our interest. The
outcome of open unresolved legal proceedings is presently indeterminable. Any
settlement resulting from resolution of these contingencies will be accounted
for in the period of settlement. We do not believe the potential outcome from
these legal proceedings will significantly impact our financial position,
operations or cash flows.

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

None.

Item 3. Defaults Upon Senior Securities

None.

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

Our annual meeting of stockholders was held on March 28, 2008,
to elect Mark Lana, Robert A. Morrison, Charles F. Ferris and Michael Yinger as
directors of our company and to ratify the appointment of Weaver & Martin,
LLC as the independent auditors of our company.

There were 19,556,814 votes for and -0- votes against the election
  of Mark Lana, Robert A. Morrison, Charles F. Ferris and Michael Yinger as directors
  of our company.

There were 19,556,814 votes for and-0- votes against the appointment
  of Weaver & Martin, LLC as the independent auditors for our company.

Item 5. Other Information

Item 6. Exhibits.

Exhibits required by Item 601 of Regulation S-B

|Exhibit | Description                                                                                                                                             
|------- | --------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  |                                                                                                                                                         
|(3)     | Articles of Incorporation and Bylaws                                                                                                                    
|3.1     | Articles of Incorporation (incorporated by reference from
      our Registration Statement on Form SB-2 filed on August 2, 2004).                       
|3.2     | By-laws (incorporated by reference from our Registration
      Statement on Form SB-2 filed on August 2, 2004).                                         
|(4)     | Instruments Defining the Rights of Security Holders,
      Including Indentures                                                                         
|4.1     | 2005 Stock Option Plan of HS3 Technologies, Inc.
      (incorporated by reference from our Current Report on Form 8-K filed on
      November 10, 2005).

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|Exhibit | Description                                                                                                                                                                                                                                                        
|------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  |                                                                                                                                                                                                                                                                    
|(10)    | Material Contracts                                                                                                                                                                                                                                                 
|10.1    | Share Purchase Agreement dated
        March 5, 2005 among Zeno Inc., Linda Smith, Acropolis Investment Holdings,
        LLC and Gregory S. Yanke Law Corporation (incorporated by reference from
        our Current Report on Form 8-K filed on March 10, 2005).
|10.2    | Asset Purchase
        Agreement dated August 31, 2005, between Zeno Inc. and IP-Colo, Inc. (incorporated
        by reference from our Current Report on Form 8-K filed on September 16,
        2005).                                                           
|10.3    | Surveillance Instalment and Training
        Agreement dated December 20, 2005 (incorporated by reference from our
        Current Report on Form 8-K filed December 23, 2005).                                                                                    
|10.4    | Partnership Agreement
        with Wright-Hennepin Cooperative Electric Association (incorporated by
        reference from our Current Report on Form 8-K filed on June 11, 2007).                                                                                
|10.5    | Distribution Agreement with Autostar
        Technology Private Limited (incorporated by reference from our Current
        Report on Form 8-K filed on April 4, 2007).                                                                                            
|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).                                                                                                      
|(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.                                                                                                                   
|(16)    | Letter on Change in Certifying
        Accountant                                                                                                                                                                                                                  
|16.1    | Letter from Gordon,
        Hughes, & Banks, Chartered Accountants regarding change in certifying
        accountant (incorporated by reference from our Form 8-K/A filed on July
        20, 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

In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

HS3 TECHNOLOGIES, INC.

|By: /s/ Mark Lana                                 | 
|------------------------------------------------- | 
|Mark Lana                                         | 
|Chief Executive Officer and Director              | 
|(Principal Executive Officer, Principal Financial | 
|Office and Principal Accounting Officer)          | 

Dated May 14, 2008

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