UNITED STATES
SECURITIES 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 1934 ~~For the quarterly period ended September 30, 2011~~

For the quarterly period ended December 31, 2011

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

Commission file number 001-32289

HS3 TECHNOLOGIES, INC. (Exact name of registrant as specified in its charter)

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

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

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

~~N/A~~(303) 455-2550(~~Former~~Telephone ~~name~~number, ~~former address and~~including ~~former~~area ~~fiscal year, if changed since last report~~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 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).
[X] YES [ ] NO

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

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

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~~As byof ~~check~~February ~~mark~~10, ~~whether~~2012, ~~the~~there ~~registrant~~were ~~has submitted electronically and posted on its corporate Web site~~82, ~~if any~~623,836 ~~every~~shares ~~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’s ~~was~~Common ~~required~~Stock toissued ~~submit~~ and ~~post such files)~~outstanding. ~~[ ] YES [ ] NO~~

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.As of November 11, 2011, there were 82,623,836 shares of the registrant’s Common Stock issued and outstanding

TABLE OF CONTENTS

PART 1 – FINANCIAL INFORMATION		4
	Item 1. Financial Statements	4
	ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
	Item 3. Quantitative and Qualitative Disclosures About Market Risks	26
	Item 4. Controls and Procedures	23
PART II - OTHER INFORMATION		24
	Item 1. Legal Proceedings	24
	Item 1A. Risk Factors	24
	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	30
SIGNATURES		31

~~CAUTIONARY~~TABLE ~~STATEMENT~~OF ~~REGARDING~~CONTENTS ~~FORWARD-LOOKING STATEMENTS~~

This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, 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.

PART 1 – FINANCIAL INFORMATION		5
Item 1. Financial Statements.		5
	HS3 Technologies, Inc. Condensed consolidated balance sheets	6
	HS3 Technologies, Inc. Condensed consolidated statement of operations Unaudited	7
	HS3 Technologies, Inc. Condensed consolidated statement of stockholders’ equity (deficit)	8
	HS3 Technologies, Inc. Condensed consolidated statement of cash flows Unaudited	9
	HS3 Technologies, Inc. Notes to condensed consolidated financial statements	10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		17
Item 3. Quantitative and Qualitative Disclosures About Market Risks		29
Item 4. Controls and Procedures		29
PART II - OTHER INFORMATION		29
Item 1. Legal Proceedings.		29
Item 1A. Risk Factors.		30
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		36
Item 3. Defaults Upon Senior Securities		36
Item 4. Mining Safety Disclosures		36
Item 5. Other Information		36
Item 6. Exhibits		36

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

Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.

As used in this quarterly report, the terms “we”, “us”, “our”, “our company” and “HS3,” means HS3 Technologies, Inc. and our wholly-owned subsidiary, ip-Colo, Inc., unless the context clearly requires otherwise.

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”, “our company” and “HS3,” means HS3 Technologies, Inc., unless the context clearly requires otherwise.

PART 1 – FINANCIAL INFORMATION

Item 1. 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 ~~September~~December 3031, 2011, are included herein beginning on the following page. The accompanying interim unaudited condensed ~~consolidated~~ consolidated financial statements should be read in conjunction with our audited ~~consolidated~~ consolidated financial statements and related notes for the year ended June 30, 2011, together with our discussion and analysis of financial condition and results of operations, included in our Annual Report on Form 10-K filed on October 6, 2011 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.

HS3 Technologies, Inc. Condensed consolidated ~~balance~~ balance sheets ~~Unaudited~~

		September 30,			June 30,
		December, 31,			June, 30,
		Unaudited			2011
		2011			2011
		Unaudited			Audited
ASSETS
Current Assets:
Cash and cash equivalents	$	832,~~354~~451		$	13,341
Trade accounts receivables		380,138			351,248
Trade accounts receivable, net of bad debt reserves of $35,000 and $25,000, respectively		154,994			351,248
Other receivables		-1,838			--
Inventory		6664,~~038~~121			62,424
		454,530			427,013
		253,404			427,013
Fixed assets, net of accumulated depreciation of $144,170 and $139,150 respectively		24,065			25,615
Fixed assets, net of accumulated depreciation of $149,214 and $139,150, respectively		19,021			25,615
Other assets, net		-			-
	$	~~478~~272,~~595~~425		$	452,628
LIABILITIES AND EQUITY
Current Liabilities:
Trade accounts payable	$	~~113~~24,~~265~~882		$	103,058
Other accrued liabilities		5423,~~299~~293			25,121
Subordinated notes payable		~~650~~626,000			711,270
Note payable, current portion		150,000			150,000
Long-term debt, current portion		~~12,000~~-			21,000
Other liabilities		-			-
Total Liabilities		~~979~~824,~~564~~175			1,010,449
Stockholders’ Equity (Deficit):
Preferred stock, $0.0001 par value, 2,500,000 shares authorized, none issued or outstanding		-			-
Common Stock, $0.001 par value, 200,000,000 authorized, issued and outstanding 82,623,836 at September 30, 2011 and June 30, 2011, respectively		82,624			82,624
Common Stock, $0.001 par value, 200,000,000 authorized, issued and outstanding 82,623,836 at December 31, 2011 and June 30, 2011 , respectively		82,624			82,624
Additional paid-in capital		6,117,246			6,117,246
Accumulated deficit		(6,~~700~~751,~~839~~620	)		(6,757,691	)
		(500,969	)		(557,821	)
		(551,750	)		(557,821	)
	$	~~478~~272,~~595~~425		$	452,628

5See accompanying notes to condensed consolidated financial statements

~~HS3~~6 ~~Technologies, Inc. Condensed consolidated statement of operations Unaudited~~

		Three months ended September 30,
		2011			2010
Revenue	$	602,213		$	28,129
Cost of goods sold		332,288			2,469
Gross profit		269,925			25,660
Operating Expenses:
Selling, general and administrative		181,538			62,754
Depreciation and amortization		5,019			9,884
Total operating expenses		186,557			72,638
Income(loss) from operations		83,368			(46,978	)
Other income (expense):
Interest expense, net		(26,516	)		(5,186	)
Total other income (expense)		(26,516	)		(5,186	)
Net Income(loss)	$	56,852		$	(52,164	)
Net income(loss) per share-basic and diluted	$	0.0007		$	(0.0008	)
Weighted average number of common shares outstanding		82,623,836			68,116,636

HS3 Technologies, Inc.

Condensed consolidated statement of operations

Unaudited

		Three months ended						Six months ended
		December 31,						December 31,
		2011			2010			2011			2010


Revenue	$	315,145		$	26,816		$	917,358		$	54,945
Cost of goods sold		162,857			19,843			495,145			22,312
Gross profit		152,288			6,973			422,213			32,633

Operating Expenses:
Selling, general and administrative		173,950			132,104			355,488			194,858
Depreciation and amortization		5,044			8,767			10,064			18,651
Total operating expenses		178,994			140,871			365,552			213,509


Income (loss) from operations	$	(26,706	)	$	(133,898	)	$	56,661		$	(180,876	)


Other income (expense):
Interest expense, net		(24,074	)		(4,292	)		(50,590	)		(9,478	)
Forgiveness of debt		-			44,902			-			44,902
Total other income (expense)		(24,074	)		40,610			(50,590	)		35,424

Net income/(loss)	$	(50,780	)	$	( 93,288	)	$	6,071		$	(145,452	)

Net income/(loss) per share-basic and diluted	$	(0.001	)	$	(0.001	)	$	0.000		$	(0.002	)

Weighted average number of common shares outstanding		82,623,836			69,277,506			82,623,836			68,697,071

~~HS3~~See ~~Technologies,~~accompanying ~~Inc.~~notes ~~Condensed~~to condensed consolidated ~~statement of stockholders’ equity (deficit)~~financial statements

					Common								Total
	Common Stock				Stock Owed			Additional		Retained			Stockholders
	Shares		Amount		Not Issued			Paid in		Earnings			Equity
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		-			225,000
Shares issued for conversion of debt	15,500,000		15,500					759,500					775,000
Shares issued for cancellation of debt	5,870,834		5,871					176,125					181,996
Shares issued for services	250,000		250					5,000					5,250
Shares owed for services, not issued					600			23,400					24,000
Net 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 conversion of debt	12,207,200		12,207		-			530,400		-			542,607
Shares issued for services	2,300,000		2,300		(600	)		17,320		-			19,020
Net income	-		-		-			-		29,902			29,902
Balances as of June 30, 2011	82,623,836	$	82,624	$	-		$	6,117,246	$	(6,757,691	)	$	(557,821	)
Shares issued for services	-		-		-			-		-			-
Net income	-		-		-			-		56,852			56,852
Balances as of Sept 30, 2011	82,623,836	$	82,624	$	-		$	6,117,246	$	(6,700,839	)	$	(500,969	)

7HS3 Technologies, Inc. Condensed consolidated statement of stockholders’ equity (deficit)

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

	Common Stock			Common			Additional					Total
	Shares		Amount	Stock Owed			Paid In		Retained			Stockholders’
				Not Issued			Capital		Earnings			Equity
Balance - 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		-			225,000
Shares issued for conversion of debt	15,500,000		15,500				759,500		-			775,000
Shares issued for cancellation of debt	5,870,834		5,871				176,125					181,996
Shares issued for services	250,000		250				5,000					5,250
Shares owed for services, not issued				600			23,400					24,000
Net Loss	-		-				-		(679,788	)		(679,788	)
Balance - June 30, 2010	68,116,636	$	68,117	600		$	5,569,526	$	(6,787,593	)	$	(1,149,350	)
Shares issued for conversion of debt	12,207,200		12,207				530,400					542,607
Shares issued for services	2,300,000		2,300	(600	)		17,320		-			19,020
Net income	-		-	-			-		29,902			29,902
Balance - June 30, 2011	82,623,836	$	82,624	-		$	6,117,246	$	(6,757,691	)	$	(557,821	)
Shares issued for services	-		-	-			-		-			-
Net income	-		-	-			-		6,071			6,071
Balance - December 31, 2011	82,623,836	$	82,624	-		$	6,117,246	$	(6,751,620	)	$	(551,750	)

		Three months ended September 30,
		2011			2010
Cash flows from operating activities:
Net income(loss)	$	56,852		$	(52,164	)
Adjustments to reconcile net loss to net cash provided by (used in) operations:
Depreciation and amortization		5,019			9,884
Accretion of interest		-			1,345
Warrants, stock, and options issued for service		-			-
Changes in operating assets and liabilities:
Accounts and other receivables		(28,890	)		(18,992	)
Inventory		(3,614	)		5,383
Accounts payable and accrued liabilities		39,385			65,631
Net cash (used in) operating activities		68,752			11,087
Cash flow from investing activities:
Additions fixed assets		(3,469	)		(6,064	)
Net cash (used in) investing activities		(3,469	)		(6,064	)
Cash flow from financing activities:
Sale of common stock		-			-
Proceeds (repayments) convertible notes payable		-			-
Proceeds (repayments) subordinated notes payable		(61,270	)		-
Borrowing/repayments revolving credit agreement		-			-
Borrowings (repayments) long-term debt		(9,000	)		(38,051	)
Net cash flow provided by (used in)financing activities		(70,270	)		(38,051	)
Increase (decrease) in cash and cash equivalents		(4,987	)		(33,028	)
Cash and cash equivalents, beginning of period		13,341			34,915
Cash and cash equivalents, end of period	$	8,354		$	1,887
Supplemental cash flow information:
Interest paid	$	25,266			3,841
Income taxes paid	$	-		$	-
Non cash financing activities:
Stock issued for services	$	-		$	-
Stock issued for other accrued liabilities	$	-		$	-

See accompanying notes to condensed consolidated financial statements

~~See~~8 ~~accompanying notes to condensed consolidated financial statements~~

8HS3 Technologies, Inc. Condensed consolidated statement of cash flows Unaudited

HS3 Technologies, Inc.

		Six months ended December 31,
		2011			2010


Cash flows from operating activities:
Net income (loss)	$	6,071		$	(145,452	)

Adjustments to reconcile net loss to net cash provided by (used in) operations:
Depreciation and amortization		10,064			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		194,417			1,177
Inventory		(1,697	)		2,592
Accounts payable and accrued liabilities		(80,005	)		49,254
Net cash (used in) operating activities		128,850			(65,269	)

Cash flow from investing activities:
Additions to furniture, fixtures & equipment		(3,470	)		(6,064	)
Net cash (used in) investing activities		(3,470	)		(6,064	)

Cash flow from financing activities:
Sale of common stock		-			-
Proceeds (repayments) convertible notes payable		-			-
Proceeds (repayments) subordinated notes payable		(85,270	)		75,000
Borrowing/repayments revolving credit agreement		-			80,000
Borrowings (repayments) long-term debt		(21,000	)		(103,713	)
Other accrued liabilities converted to equity		-			-
Net cash flow provided by (used in)financing activities		(106,270	)		51,287

Increase (decrease) in cash and cash equivalents		19,110			(20,046	)
Cash and cash equivalents, beginning of period		13,341			34,915
Cash and cash equivalents, end of period	$	32,451		$	14,869



Supplemental cash flow information:
Interest paid	$	51,840			6,189
Income taxes paid	$	-		$	-

Non cash financing activities:
Stock issued for services	$	-		$	5,820

~~Notes~~See accompanying notes to condensed consolidated financial statements

1.9 ~~SUMMARY OF SIGNIFICANT ACCOUNTING POLICES~~

~~(a)~~HS3 ~~Nature~~Technologies, ofInc. ~~Business~~Notes to condensed consolidated financial statements

~~HS3 Technologies, Inc~~1. ~~(“HS3”~~SUMMARY ~~or the~~OF ~~“Company”)~~SIGNIFICANT ~~was~~ACCOUNTING ~~incorporated~~POLICES in Nevada on January 28, 2003. Prior to a name change in October 2005, the Company was known as Zeno, Inc. The Company also changed its fiscal year end from March 31 to June 30. In November 2005, the Company acquired ip-Colo, Inc., in a reorganization, a development stage corporation (herein referred to as “ip-Colo”). On the date of the reorganization, the Company, a non-operating entity without any assets or liabilities, was to provide advanced wireless technologies integrated with high-speed internet, via satellite, and to provide real-time security and monitoring for many industries.

We offer a diverse line of cutting edge products, services and customized integrated security solutions 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~~a), ~~personal biometric~~Nature ~~identification units, CCTV, video monitoring, cellular and wireless mesh networks and wireless internet-linked satellite surveillance systems. This combination~~ of ~~products~~Business ~~encompasses a total line that we believe will meet many commercial, agricultural, governmental, and residential customer security needs.~~

HS3 Technologies, Inc. (b“HS3” or the “Company”) ~~Basis~~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 ~~presentation~~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 ~~use~~to ofprovide ~~estimates~~real-time security and monitoring for many industries.

The ~~accompanying~~Company ~~unaudited condensed~~provides ~~consolidated~~a ~~financial~~diverse line ~~statements~~of incutting ~~this~~edge ~~Quarterly~~products ~~Report~~and onservices ~~Form 10-Q have been prepared pursuant~~ to meet the ~~rules~~growing ~~and~~needs ~~regulations~~ of the ~~Securities~~ ~~and~~security ~~Exchange Commission~~industry. ~~Accordingly,~~To ~~these~~meet ~~statements~~the ~~reflect~~ever ~~adjustments (consisting~~changing ~~only~~needs of ~~normal~~the ~~recurring entries)~~industry, ~~which~~we ~~in our opinion, are~~have ~~necessary~~launched ~~for~~ a ~~fair~~combination ~~presentation~~ of state-of-the ~~financial~~art ~~results~~products ~~for the interim periods presented. Certain information~~ and ~~notes~~services ~~normally~~that ~~included in annual~~include ~~financial~~digital ~~statements~~video ~~have~~recording ~~been~~technology ~~condensed~~(DVR), inpersonal orbiometric ~~omitted from these interim~~identification ~~financial~~units, ~~statements~~CCTV, ~~pursuant~~video tomonitoring ~~such~~centers, ~~rules~~cellular ~~and~~networks, ~~regulations.~~wireless ~~These~~mesh ~~condensed~~network ~~consolidated~~units ~~financial statements should be read in conjunction with the consolidated financial statements~~ and ~~related~~wireless ~~notes~~internet-linked ~~for~~satellite ~~the~~surveillance ~~year~~systems. ~~ended June 30,~~This ~~2011,~~combination ~~together with our discussion and analysis~~ of ~~financial~~products ~~condition~~encompasses ~~and results~~a oftotal ~~operations,~~line ~~included~~that inwe ~~our~~believe ~~Annual~~will ~~Report~~meet ~~on Form 10-K filed on~~many ~~October~~commercial, 5agricultural, ~~2011~~governmental, ~~with Securities~~ and ~~Exchange~~residential ~~Commission.~~customer security needs.

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

The ~~preparation~~accompanying ofunaudited condensed consolidated financial statements in ~~accordance~~this ~~with~~Quarterly ~~United~~Report ~~States~~on ~~generally~~Form 10-Q ~~accepted~~have ~~accounting principles~~been ~~requires~~prepared ~~management~~pursuant to ~~make~~the ~~estimates~~rules and ~~assumptions~~regulations ~~that~~of ~~affect~~ the ~~reported~~ ~~amounts of assets~~ Securities and ~~liabilities~~Exchange atCommission. ~~the~~Accordingly, ~~date~~these ofstatements ~~the~~reflect ~~financial~~adjustments ~~statements~~(consisting ~~and~~only ~~the reported amounts~~ of ~~revenue~~normal ~~and~~recurring ~~expenses~~entries), which in ~~the~~our ~~reporting~~opinion, are ~~period.~~necessary ~~The~~for ~~Company~~a ~~regularly~~fair ~~evaluates~~presentation ~~estimates~~of ~~and~~the ~~assumptions~~financial ~~related~~results tofor the interim ~~useful~~periods ~~life~~presented. ~~and~~Certain ~~recoverability~~information ofand ~~long-lived~~notes ~~assets,~~normally ~~stock-based~~included ~~compensation~~in annual ~~and~~financial ~~deferred~~statements ~~income~~have ~~tax~~been ~~asset~~condensed ~~valuation~~in ~~allowances.~~or ~~The~~omitted ~~Company~~from ~~bases~~these ~~its~~interim ~~estimates~~financial ~~and~~statements ~~assumptions~~pursuant onto ~~current~~such ~~facts,~~rules ~~historical~~and ~~experience~~regulations. ~~and~~These ~~various~~condensed ~~other~~consolidated ~~factors~~financial ~~that~~statements itshould ~~believes to~~ be ~~reasonable~~read ~~under~~in ~~the~~conjunction ~~circumstances,~~with the ~~results~~consolidated offinancial ~~which~~statements ~~form~~and ~~the~~related ~~basis~~notes for ~~making~~the ~~judgments~~year ~~about~~ended ~~the~~June ~~carrying values~~30, of2011, ~~assets~~together ~~and~~with ~~liabilities and~~ the ~~accrual~~discussion ~~of costs~~ and ~~expenses~~analysis ~~that~~of ~~are~~financial ~~not readily~~condition ~~apparent from other sources. The actual~~ and results ~~experienced~~of byoperations, ~~the Company~~included ~~may~~in ~~differ~~our ~~materially~~Annual ~~and~~Report ~~adversely~~on ~~from~~Form ~~the~~10-K ~~Company’s~~filed ~~estimates. To the~~on ~~extent~~October ~~there~~6, ~~are~~2011 ~~material~~with ~~differences~~Securities ~~between the estimates~~ and ~~the~~Exchange ~~actual results, future results of operations will be affected~~Commission.

~~(c)~~ The ~~Cash~~Company’s accounting and financial ~~cash~~reporting ~~equivalents~~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.

WeThe ~~consider~~preparation ~~all~~of ~~short-term~~financial ~~investments~~statements in accordance with aUnited ~~remaining~~States ~~maturity~~generally ofaccepted ~~three~~accounting principles ~~months~~requires ormanagement ~~less~~to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial ~~purchase~~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 ~~cash~~reasonable ~~equivalents~~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.

~~(d)~~10 ~~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~~c). ~~Expenditures~~Cash ~~for maintenance~~ and ~~repairs~~cash ~~are~~equivalents ~~charged to expense.~~

~~(e)~~ The ~~Inventory~~Company considers all short-term investments with a remaining maturity of three months or less at the date of purchase to be cash equivalents.

~~Inventory~~(d) ~~consists~~Furniture, ofFixtures ~~finished goods purchased from third-party manufacturers~~ and ~~component~~Equipment ~~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.~~

9 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.

(fe) ~~Long-lived~~Inventory ~~Assets~~

~~Long-lived~~Inventory ~~assets~~consists ~~are~~of ~~reviewed~~finished ~~for~~goods ~~impairment~~purchased ~~whenever~~from ~~events~~third-party ormanufacturers ~~changes~~and incomponent ~~circumstances~~parts ~~indicate~~and ~~that~~is ~~the~~valued ~~carrying~~at ~~amount~~the ~~may~~lower ~~not be recoverable, in accordance with Financial Accounting Standards Board (“FASB”) Statement~~ of ~~Financial~~average ~~Accounting~~cost ~~Standards (“SFAS”) No. 144, Accounting for the Impairment~~ or ~~Disposal of Long-Lived Assets~~market. ~~An impairment~~Average ~~loss~~cost ~~would~~is bedetermined ~~recognized~~using ~~when~~ the ~~carrying amount of an asset exceeds~~ ~~the~~first-in, ~~estimated~~first-out ~~undiscounted~~method ~~future cash flows expected to result from the use~~ of ~~the~~ ~~asset and its eventual disposition~~accounting.

(gf) ~~Loss~~Long-lived ~~Per~~Assets ~~Share~~

~~Basic~~Long-lived ~~and~~assets ~~diluted~~are ~~earnings (loss)~~reviewed ~~per~~for ~~share~~impairment ~~are~~whenever ~~computed~~events ~~using~~or changes in circumstances indicate that the carrying ~~weighted~~amount ~~average~~may ~~number~~not ofbe ~~shares~~recoverable, ~~outstanding~~in accordance with Financial Accounting ~~during~~Standards ~~the~~Board ~~period~~(“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. ~~Diluted~~144, ~~earnings~~Accounting ~~per~~for ~~share~~the ~~gives~~Impairment ~~effect~~or toDisposal ~~all~~of ~~potential~~Long-Lived Assets. An ~~diluted~~impairment ~~common~~loss ~~shares~~would ~~outstanding~~be ~~during~~recognized when the ~~period.~~carrying Inamount ~~periods~~ of ~~net~~an ~~loss,~~asset exceeds ~~there~~the ~~are~~estimated noundiscounted ~~diluted~~future ~~earnings~~cash ~~per~~flows ~~share~~expected ~~since~~to result from the ~~result~~use ~~would~~of the beasset ~~anti-dilutive~~and its eventual disposition.

(hg) ~~Financial~~Loss ~~Instruments~~Per Share

~~The~~Basic ~~fair~~and ~~value~~diluted ofearnings ~~financial~~(loss) ~~instruments~~per isshare ~~determined~~are atcomputed ausing ~~specific~~the ~~point~~weighted inaverage ~~time,~~number ~~based~~of onshares ~~relevant~~outstanding ~~information~~during ~~about~~the ~~financial~~period. ~~markets~~Diluted ~~and~~earnings ~~specific~~per ~~financial~~share ~~instruments.~~gives Aseffect ~~these~~to all potential ~~estimates~~diluted ~~are~~common ~~subjective~~shares inoutstanding ~~nature,~~during ~~involving~~the ~~uncertainties~~period. ~~and~~In ~~matters~~periods of ~~significant~~ ~~judgment~~net loss, there ~~they~~are ~~cannot~~no bediluted ~~ascertained~~earnings ~~with~~per ~~precision.~~share ~~Changes~~since ~~in assumptions~~the ~~can~~result ~~significantly~~would ~~affect estimated fair values~~be anti-dilutive.

~~The~~(h) ~~carrying~~Financial ~~value~~Instruments ~~of cash and cash equivalents, accounts payable and accrued liabilities approximate their fair value because of the short-term nature of these instruments.~~

~~(i)~~ The ~~Income~~fair ~~Taxes~~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 ~~Company~~carrying ~~follows~~value ~~ASC subtopic 740-10 (formerly Statement~~ of ~~Financial~~cash ~~Accounting Standard No. 109, (“Accounting for Income Taxes”) for recording the provision for income taxes. ASC 740-10 requires the use of the asset~~ and ~~liability method of accounting for~~ ~~income~~cash ~~taxes. Under the asset and liability method~~equivalents, ~~deferred~~accounts ~~tax~~payable ~~assets~~ and ~~liabilities~~ ~~are~~accrued ~~computed based upon the difference between the financial statement and income tax basis of assets and~~ liabilities ~~using~~approximate ~~the enacted~~their ~~marginal~~fair ~~tax~~value ~~rate~~because applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability each period. If available evidence suggests that it is more likely than not that some portion of ~~all of~~ the ~~deferred~~ ~~tax~~short-term ~~assets~~nature will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of ~~change.~~these instruments.

~~Deferred~~11 income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse.

(ji) ~~Equity-Based~~Income ~~Compensation~~Taxes

~~Common~~The ~~stock,~~Company ~~warrants,~~follows ~~and~~ASC subtopic ~~options~~740-10 ~~issued~~(formerly ~~for~~Statement ~~services~~of ~~are~~Financial ~~accounted~~Accounting Standard No. 109, (“Accounting for ~~based~~Income onTaxes”) for recording the ~~fair~~provision ~~market~~for ~~value~~income attaxes. ACS 740-10 requires the ~~date~~use of the ~~services~~asset ~~are~~and ~~performed~~liability method of accounting for income taxes. IfUnder the ~~awards~~asset and liability method , deferred tax assets and liabilities are computed based onupon athe ~~vesting~~difference ~~period~~ between the ~~fair~~financial statement ~~market~~and ~~value~~income tax basis of assets and liabilities using the ~~awards~~enacted marginal istax ~~determined~~rate asapplicable ~~vesting~~when the related asset or liability is ~~earned~~expected to be realized or settled. IfDeferred ~~the services~~income tax expenses or benefits are tobased beon the ~~performed~~changes ~~over~~in anthe ~~extended~~asset or liability each period. If available evidence suggests that it is more likely than not that some portion of ~~time,~~all of the deferred ~~value~~tax assets will not be realized, a valuation allowance is ~~amortized~~ ~~over~~required to reduce the ~~life~~deferred oftax assets to the ~~period~~amount that ~~services~~is more likely than not to be realized. Future changes in such valuation allowance are ~~performed~~included in the provision for deferred income taxes in the period of change.

~~(k)~~ Deferred ~~Concentration~~income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of ~~Credit~~assets and ~~Risk~~liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current on the periods in which the temporary differences are expected to reverse.

We(j) ~~sell~~Equity-Based ~~products~~Compensation 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 write off or 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 write off receivables when we believe an amount is not collectible. We have approximately $16,000 reserves for bad debt as of September 30, 2011.

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 (lif material) ~~Revenue~~is ~~Recognition~~amortized over the life of the period that services are performed.

We(k) ~~record~~Concentration ~~revenue when persuasive evidence~~ of anCredit ~~arrangement~~Risk ~~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.~~

10 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. The Company’s policies require it to record specific reserves if the Company becomes aware of anything that would cause it to question a specific customer’s inability to meet their financial obligations to the Company. The Company will write off receivables when it believes an amount is not collectible. The Company has $35,000 reserves for bad debts at December 31, 2011.

(ml) ~~Recent~~Revenue ~~Pronouncements~~Recognition

InThe ~~January~~Company ~~2010,~~records ~~FASB~~revenue ~~issued ASU~~when ~~No.~~persuasive ~~2010-06~~evidence ~~– Improving Disclosures about Fair Value Measurements. This update provides amendments to Subtopic 820-10 that requires new disclosure as follows: 1) Transfers in and out~~ of ~~Levels~~an 1arrangement and 2. A reporting entity should disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers. 2) Activity in Level 3 fair value measurements. In the reconciliation for fair value measurements using significant unobservable inputs (Level 3)exists, aservices ~~reporting entity~~have ~~should~~been ~~present~~rendered ~~separately information about purchases, sales, issuances,~~or ~~and~~product ~~settlements~~delivery ~~(that~~has isoccurred, on a gross basis rather than as one net number). This update provides amendments to Subtopic 820-10 that clarifies existing disclosures as follows: 1) Level of disaggregation. A reporting entity should provide fair value measurement disclosures for each class of assets and liabilities. A class is often a subset of assets or liabilities within a line item in the ~~statement~~sales ofprice ~~financial position. A reporting entity needs~~ to ~~use judgment in determining~~ the ~~appropriate~~customer ~~classes~~is offixed assets and liabilities. 2) Disclosures about inputs and valuation techniques. A reporting entity should provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements. Those disclosures are required for fair value measurements that fall in either Level 2 or ~~Level 3. The new disclosures and clarifications of existing disclosures are~~ ~~effective for interim and annual reporting periods beginning after December 15~~determinable, ~~2009,~~ ~~except for the disclosures about purchases, sales, issuances,~~ and ~~settlements~~ incollectability ~~the~~is ~~roll~~reasonably ~~forward of activity in Level 3 fair value measurements~~assured. These disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The adoption of this ASU did not have a material impact on the Company’s financial statements.

In12 February 2010, FASB issued ASU No. 2010-9 - Amendments to Certain Recognition and Disclosure Requirements. This update addresses certain implementation issues related to an entity’s requirement to perform and disclose subsequent-events procedures, removes the requirement that public companies disclose the date of their financial statements in both issued and revised financial statements. According to the FASB, the revised statements include those that have been changed to correct an error or conform to a retrospective application of U.S. GAAP. The amendment is effective for interim and annual reporting periods in fiscal year ending after June 15, 2010. The adoption of this ASU did not have a material impact on the Company’s financial statements.

~~In December 2010, the FASB issued Accounting Standards Update No. 2010-29, Disclosure of Supplementary Pro Forma Information for Business Combinations~~ (~~Topic 805~~m)~~—Business~~ ~~Combinations (ASU~~Recent ~~2010-29),~~Pronouncements to improve consistency in how the pro forma disclosures are calculated. Additionally, ASU 2010-29 enhances the disclosure requirements and requires description of the nature and amount of any material, nonrecurring pro forma adjustments directly attributable to a business combination. ASU 2010-29 is effective for us in fiscal 2011 and should be applied prospectively to business combinations for which the acquisition date is after the effective date. Early adoption is permitted. The adoption of the ASU did not have a material impact on the Company’s financial statements.

In ~~May,~~January ~~2011~~2010, ~~The~~ FASB issued ASU ~~2011~~No. 2010-4,06 ~~Amendments~~– toImproving ~~Achieve~~Disclosures ~~Common~~about Fair Value ~~Measurement~~Measurements. ~~and~~This ~~Disclosure~~update ~~Requirements~~provides amendments to Subtopic 820-10 that requires new disclosure as follows: 1) Transfers in ~~U.S.~~and ~~GAAP~~out of Levels 1 and ~~IFRS~~2. ~~The~~A ~~objective~~reporting entity should disclose separately the amounts of ~~this~~significant ~~amendment~~transfers isin ~~to achieve~~and ~~common~~out of Level 1 and Level 2 fair value ~~measurement~~measurements and ~~disclosure~~describe ~~requirements~~the reasons for the transfers. 2) Activity in ULevel 3 fair value measurements.S ~~GAAP~~In the reconciliation for fair value measurements using significant unobservable inputs (Level 3), a reporting entity should present separately information about purchases, sales, issuances, and ~~IFRS~~settlements (that is, on a gross basis rather than as one net number). This update ~~amendment~~provides isamendments to ~~ensure~~Subtopic 820-10 that clarifies existing disclosures as follows: 1) Level of disaggregation. A reporting entity should provide fair value ~~has~~measurement ~~the~~disclosures ~~same~~for ~~meaning~~each inclass of assets and Uliabilities.S A class is often a subset of assets or liabilities within a line item in the statement of financial position. ~~GAAP~~A reporting entity needs to use judgment in determining the appropriate classes of assets and ~~IFRS~~liabilities. 2) Disclosures about inputs and ~~that~~valuation ~~their~~techniques. ~~respective~~A reporting entity should provide disclosures about the valuation techniques and inputs used to measure fair value ~~measurement~~for both recurring and ~~disclosure~~ ~~requirements~~nonrecurring fair value measurements. Those disclosures are ~~the~~required ~~same~~for fair value measurements that fall in either Level 2 or Level 3. ~~This~~The ~~guidance~~new isdisclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the ~~first~~disclosures about purchases, sales, issuances, and ~~quarter~~settlements in the roll forward of ~~2012~~activity in Level 3 fair value measurements. These ~~The~~disclosures ~~Company~~are ~~does~~effective ~~not~~for ~~expect~~fiscal ~~that~~years ~~this~~beginning ~~authoritative~~after ~~guidance~~December 15, ~~will~~2010, and for interim periods within those fiscal years. The adoption of this ASU did not have ~~any~~a material ~~effect~~impact on the Company’s financial statements.

~~The~~In ~~Company~~February ~~has~~2010, ~~considered~~FASB ~~all~~issued ASU ~~new~~No. ~~accounting~~2010-9 ~~pronouncements~~- Amendments to Certain Recognition and ~~has~~Disclosure ~~concluded~~Requirements. ~~that~~This update ~~there~~addresses ~~are~~certain noimplementation ~~new~~issues related to an entity’s ~~pronouncements~~requirement ~~that~~to ~~may~~perform ~~have~~and adisclose ~~material~~subsequent-events ~~impact~~procedures, onremoves ~~results~~the requirement that public companies disclose the date of ~~operations,~~their financial statements in both issued and revised financial ~~condition~~statements. According to the FASB, the revised statements include those that have been changed to correct an error or ~~cash~~conform ~~flows~~to a retrospective application of U.S. GAAP. The amendment is effective for interim and annual reporting periods in fiscal year ending after June 15, ~~based~~2010. The adoption of this ASU did not have a material impact on ~~current~~the Company’s ~~information~~financial statements.

In December 2010, the FASB issued Accounting Standards Update No. 2010-29, Disclosure of Supplementary Pro Forma Information for Business Combinations (nTopic 805)—Business ~~Reclassifications~~Combinations (ASU 2010-29), to improve consistency in how the pro forma disclosures are calculated. Additionally, ASU 2010-29 enhances the disclosure requirements and requires description of the nature and amount of any material, nonrecurring pro forma adjustments directly attributable to a business combination. ASU 2010-29 is effective for us in fiscal 2011 and should be applied prospectively to business combinations for which the acquisition date is after the effective date. Early adoption is permitted. The adoption of the ASU did not have a material impact on the Company’s financial statements.

~~Certain~~In ~~amounts~~May, in2011, ~~the~~The ~~prior~~FASB issued ASU ~~periods~~2011-4, ~~have~~Amendments ~~been~~to ~~reclassified~~Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. The objective of this amendment is to achieve ~~conform~~common fair value measurement and disclosure requirements in U.S GAAP and IFRS. This amendment is to ensure that fair value has the ~~current~~same ~~period~~meaning in U.S. GAAP and IFRS and that their respective fair value measurement and disclosure requirements are the same. This guidance is effective for the first quarter of 2012. The Company does not expect that this authoritative guidance will have any material effect on the Company’s ~~presentation~~ financial statements.

2. The ~~GOING~~Company ~~CONCERN~~has considered all new accounting pronouncements and has concluded that there are no new pronouncements that may have a material impact on results of operations, financial condition, or cash flows, based on current information.

~~The~~(n) 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 from our revolving line of credit facility, equity sales and/or further shareholder loans and advances from related parties 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 as a going concern. Reclassifications

11 Certain amounts in the prior periods have been reclassified to conform to the current period’s presentation.

3.13 ~~FIXED ASSETS~~

~~Fixed~~2. ~~assets~~GOING ~~consisted of the following:~~ CONCERN

		September 30,			June 30,
		2011			2011
Computer hardware	$	122,448		$	118,978
Leasehold improvements		10,500			10,500
Opie/VMS installed		11,295			11,295
Vehicles		23,992			23,992
		168,235			164,765
Accumulated depreciation		(144,170	)		(139,150	)
	$	24,065		$	25,615

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 from our revolving line of credit facility, equity sales and/or further shareholder loans and advances from related parties to mitigate the effects 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 as a going concern.

~~During~~3. ~~the~~FIXED ~~quarter~~ASSETS ~~ended September 30, 2011, and 2010, depreciation expense was $5,019 and $7,550 respectively.~~

4.Fixed ~~OTHER~~assets ~~ACCRUED~~consisted ~~LIABILITIES~~of the following:

Other accrued liabilities are as follows:

		December 31,			June 30,
		2011			2011

Computer hardware	$	122,448		$	118,978
Leasehold improvements		10,500			10,500
Opie/VMS installed		11,295			11,295
Vehicles		23,992			23,992
		168,235			164,765
Accumulated depreciation		(149,214	)		(139,150	)
	$	19,021		$	25,615

		September 30,		June 30,
		2011		2011
Accrued board fees	$	12,500	$	-
Accrued interest		-		-
Payroll liabilities		39,247		25,081
Sales tax payable		2,552		40
	$	54,299	$	25,121

During the six-months ended December 31, 2011 and 2010, depreciation expense was $10,064 and $14,315, respectively.

~~Board fees to the two independent board of directors are $25,000 annually~~4. ~~The~~OTHER ~~board~~ACCRUED ~~members~~LIABILITIES 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. Subsequent to September 30, 2011, we paid approximately $33,000 and $8,000 of the payroll liabilities and board fees, respectively.

5. SUBORDINATED NOTES PAYABLE

Other accrued liabilities are as follows:		December 31,		June 30,
		2011		2011

Accrued board fees	$	12,500	$	-
Payroll liabilities		6,045		25,081
Sales tax payable		4,748		40
	$	23,293	$	25,121

~~Subordinated~~Board ~~notes~~fees ~~payable~~to the two independent ~~outstanding~~directors are as$25,000 ~~follows:\~~each annually. 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 accrued board fees represent the board fees for the quarter ended December 31, 2011.

		September 30, 2011		June 30, 2011
William S. Dickey	$	500,000	$	550,000
Robert A Morrison		68,000		75,000
Charles Ferris		17,000		18,770
Michael Yinger		25,000		27,500
Greg Dickey		20,000		20,000
Mira Fine		20,000		20,000
	$	650,000	$	711,270

~~Expense on these notes bear interest at 12% and are on a month to month term~~5. ~~The~~SUBORDINATED ~~Company~~NOTES ~~recorded~~PAYABLE ~~$20,898 interest for the quarter ended September 30, 2011.~~

At December 31, 2011, the following subordinated notes payable are outstanding. The notes bear interest at 12% and are on a month to month term. The Company recorded $40,278 interest for the six-months ended December 31, 2011, associated with these subordinated notes.

6. LONG-TERM DEBT

William S. Dickey	$	480,000
Robert A. Morrison		66,000
Charles Ferris		16,000
Michael Yinger		24,000
Greg Dickey		20,000
Mira Fine		20,000
	$	626,000

~~In February and March 2008 the Company, pursuant to a loan and security agreement, entered into two (2) $200,000 promissory notes~~6. InLONG-TERM 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 had an interest rate of 15.499% and matured in three (3) years from the commencement date, and were collateralized with the Company’s personal property as defined in the loan and security agreement. Each note also had a final payment fee of $14,000 that was due on the earlier to occur of the maturity date or prepayment. DEBT

OnIn ~~December~~February ~~30,~~and ~~2010~~March ~~the~~2008 ~~Company~~the ~~entered~~Company, ~~into~~pursuant to a loan ~~payment~~and ~~modification/settlement~~security agreement, ~~with~~entered into two (2) $200,000 promissory notes. In addition, the Company issued to the lender ina ~~which~~warrant wefor ~~paid~~the ~~$65~~purchase of one million (1,000,000) asshares of common stock at a purchase ~~one-time~~price ~~payment~~of ~~and~~$.12 ~~will~~per ~~pay~~share awith ~~remaining~~an ~~balance~~expiration date of ~~$36,000~~ asfive (5) years after the ~~settlement~~commencement date of the ~~outstanding~~first ~~balance~~loan. ~~and~~The ~~accrued~~notes had an interest ~~on these~~rate ~~notes~~of 15.499% ~~The~~and ~~lender~~matured ~~also~~in ~~subordinated~~three to(3) ~~our~~years ~~subordinated~~from ~~notes~~the ~~payable.~~commencement ~~The $36~~date,~~000~~ ~~will~~and bewere collateralized ~~paid~~with atthe ~~$3,000~~Company’s personal property as defined in the loan and security agreement. Each note also had a ~~month~~final ~~starting~~payment ~~February~~fee 10of $14,000 ~~2011~~that ~~through~~was ~~January~~due ~~10,~~on ~~2012~~the atearlier ~~zero~~to ~~interest.~~occur of the maturity date or prepayment.

7 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. ~~NOTE~~The ~~PAYABLE~~discount on the notes was accrued into interest expense through the date of the settlement agreement. For the six months ended December 31, 2010 the Company 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. As of December 31, 2011, one $3,000 payment remained and is included in trade payables and was subsequently paid off on January 8, 2012.

~~On December 17, 2010, the Company entered into a one year promissory note with a commercial bank~~7. ~~The~~NOTE ~~note~~PAYABLE 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 September 30, 2011 the Company had $150,000 outstanding on this line of credit. Subsequent to September 30, 2011, we have borrowed an additional $30,000 under the line of credit. We are currently having discussions with the commercial bank to extend the maturity date of the promissory note for another year.

8 On December 17, 2011, the Company entered into a one year promissory note with a commercial bank. ~~INCOME~~The ~~TAXES~~note is a revolving line of credit, wherein the Company can receive advances up to $150,000. The note bears interest at approximately 4.00% 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 $750 to provide the guaranty. At December 31, 2011 the Company had $150,000 outstanding on this line of credit and no unused capacity available.

~~The Company follows ASC subtopic 740-10 (formerly Statement of Financial Accounting Standard No~~8. ~~109, (“Accounting~~INCOME ~~for~~TAXES Income Taxes”) for recording the provision for income taxes. ASC 740-10 requires the use of the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability each period. If available evidence suggests that it is more likely than not that some portion of all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change.

~~Deferred~~The ~~income~~Company ~~taxes~~follows ~~may~~ASC ~~arise~~subtopic ~~from~~740-10 ~~temporary~~(formerly ~~differences~~Statement ~~resulting~~of ~~from~~Financial ~~income~~Accounting ~~and~~Standard ~~expense~~No. ~~items~~109, (“Accounting ~~reported~~for Income Taxes”) for recording the provision for income taxes. ~~financial~~ASC ~~accounting~~740-10 requires the use of the asset and ~~tax~~liability ~~purposes~~method inof ~~different~~accounting ~~periods~~for income taxes. ~~Deferred~~Under ~~taxes~~the ~~are~~asset and liability method, deferred tax assets and ~~classified~~liabilities asare ~~current~~computed orbased ~~non-current,~~upon ~~depending~~the ondifference between the ~~classification~~financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be ~~which~~realized ~~they~~or ~~relate~~settled. Deferred ~~taxes~~income ~~arising~~tax ~~from~~expenses ~~temporary differences~~or ~~that~~benefits are ~~not~~based ~~related~~on the tochanges anin the asset or liability ~~are~~each ~~classified~~period. asIf available evidence ~~current~~suggests orthat ~~non-current~~it ~~depending~~is onmore likely than not that some portion of all of the deferred ~~periods~~tax inassets ~~which~~will not be realized, a valuation allowance is required to reduce the ~~temporary~~deferred tax assets to the amount that is more likely than not to be ~~differences~~realized. Future changes in such valuation allowance are ~~expected~~included toin ~~reverse~~the provision for deferred income taxes in the period of change.

As15 of June 30, 2011, the Company has net operating loss carry-forwards which may or may not be used to reduce future income taxes payable. Current Federal Tax Law limits the amount of loss available to offset against future taxable income when a substantial change in ownership occurs. Therefore, the amount available to offset future taxable income may be limited. A valuation allowance has been recorded to reduce the net benefit recorded in the financial statements related to this deferred asset. The valuation allowance is deemed necessary as a result of the uncertainty associated with the ultimate realization of these deferred tax assets.

13Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse.

9At June 30, 2011, the Company has approximately a $4,000,000 net operating loss carry-forward which may or may not be used to reduce future income taxes payable. ~~COMMON~~Current ~~STOCK~~Federal Tax Law limits the amount of loss available to offset against future taxable income when a substantial change in ownership occurs. Therefore, the amount available to offset future taxable income may be limited. A valuation allowance has been recorded to reduce the net benefit recorded in the financial statements related to this deferred asset. The valuation allowance is deemed necessary as a result of the uncertainty associated with the ultimate realization of these deferred tax assets.

~~During~~9. ~~fiscal~~COMMON ~~year~~STOCK 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 15,500,000 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.

OnDuring ~~October~~fiscal 4,year ended June 30, 2010 the ~~Board voted~~Company: to(a) ~~issue~~issued ~~600~~4,500,000 shares of our common stock for ~~financial consulting~~$225,000 ~~services~~which ~~rendered~~was used to ~~us.~~repay We$150,000 ~~valued~~of ~~the~~convertible ~~600~~and subordinated notes payable; (b) issued 15,000,000 shares ~~based~~of onour ~~the~~common ~~quoted~~stock ~~trade~~to convert $775,000 of ~~price~~convertible onnotes ~~October~~payable; 4(c) issued 5,870,834 ~~2010~~shares (of our common stock to two officers for cancellation of $~~.0097)~~181,996 of accrued salaries, and ~~recorded~~(d) $5issued 250,~~820~~000 asshares of our common stock for services ~~expense.~~ rendered to the Company.

OnDuring ~~April~~fiscal 1,year ended June 30, 2011 the ~~Board~~Company: ~~voted~~(a) issued 12,207,200 shares of our common stock for ~~and~~conversion ~~the~~of ~~company~~$542,607 ~~issued~~of various accrued liabilities ($.04445) , (b) issued 600,000 ~~shared~~shares of our common stock to an employee ( $.012) ~~We valued~~, ~~the~~(c) ~~600~~issued 500,000 shares ~~based~~of onour ~~the~~common ~~quoted~~stock ~~trade~~pursuant ~~price~~to ona ~~April~~teaming 1,and ~~2011~~employment agreement with Wizard Works Security Systems Inc and Chester A. Gilliam ( $0.012), and ~~recorded~~(d) issued $71, 200,000 asshares of our common stock for services ~~expense~~rendered to the Company ($.025).

OnThe ~~April~~Company ~~27,2011~~has ~~our~~cancelled ~~company~~its ~~entered~~2005 ~~into~~Stock aOption ~~teaming~~Plan ~~agreement~~ and ~~employment~~has ~~agreement~~adopted with Chester A. Gilliam and his company WizardWorks Security Systems Inc. (the “Subcontractor”). Under the agreement the Subcontractor will provide us with products and services set out in the agreement (the “Program”) over a ~~three~~new ~~(3)~~10 year ~~period~~2012 ~~and~~Stock ~~the company~~Option ~~will~~Plan ~~compensate~~at its ~~the~~annual ~~Subcontractor~~meeting ~~for~~on ~~participation~~January in30, ~~the~~2012. ~~Program~~At ~~by providing~~June ~~up to a $360~~30,~~000~~ ~~bonus~~2011 ~~and~~there ~~the~~are ~~company issued on March~~ 1, ~~2011 500~~000,000 ~~shares~~outstanding ofwarrants ~~our~~at ~~company’s~~a ~~common~~strike ~~stock~~price ~~pursuant~~of ~~to the agreement~~$.120 Weand ~~valued~~expiring ~~the 500,000~~in ~~shares~~February ~~based on the quoted trade price on March 1, 2011 ($~~2013.~~012) and~~ ~~recorded~~There ~~$6,000~~are asno outstanding stock ~~for services expense~~options.

~~Pursuant to the 2005 Stock Option Plan, the Board of Directors had granted 2,500,000 options under the plan of which 1,300,000 were outstanding as of March 31, 2011~~10. ~~Effective~~CONCENTRATIONS ~~June~~AND ~~24,~~CONTINGENCIES ~~2011, the Board accepted the cancellation of the 1,300,000 stock options from three (3) employees, (with an exercise price of $.1667 per share) which were to expire on March 22, 2012.~~

10 The Company leases its office premises on a month to month basis from an officer of the Company. ~~CONCENTRATIONS~~The ~~AND~~Company incurs ~~CONTINGENCIES~~monthly utilities and trash removal. In addition, pursuant to the teaming agreement, the Company leases from Chester Gilliam the use of his shop premises for $400 per month. Sales to one major customer represented approximately 86% of revenue for the six-months ended December 31, 2011 and approximately 44% of accounts receivable outstanding at December 31, 2011.

~~We lease our office premises on a month to month basis from an officer of the company~~11. WeSUBSEQUENT ~~incur~~EVENTS monthly utilities and trash removal. In addition, pursuant to the teaming agreement, we lease from the subcontractor the use of his shop premises for $400 per month. Sales to one major customer represented 94% of revenue and 74% of accounts receivables for the quarter ended September 30, 2011.

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

~~Management~~16 ~~has evaluated subsequent events through the date these financial statements were issued and has determined that there are no transactions that need to be recorded or disclosed.~~

14Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

~~ITEM~~Critical 2.Accounting ~~Management’s~~Polices ~~Discussion~~ and ~~Analysis of Financial Condition and Results of Operations~~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.

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~~Basis ~~History~~of presentation and use of estimates

WeThe ~~were~~accompanying ~~incorporated~~unaudited condensed ~~under~~consolidated ~~the laws~~financial ofstatements ~~the~~in ~~State~~this ofQuarterly ~~Nevada~~Report on ~~January~~Form 10-Q ~~28,~~have ~~2003~~been ~~under~~prepared pursuant to the ~~name~~rules ~~Zeno,~~and ~~Inc.~~regulations Onof the Securities ~~November~~and 9,Exchange ~~2005~~Commission. Accordingly, wethese ~~closed~~statements onreflect anadjustments (consisting ~~asset~~only ~~purchase~~of ~~agreement~~normal ~~with~~recurring ~~IP-Colo~~entries), ~~Inc.~~which in our opinion, are ~~(IPC)~~necessary ~~wherein~~for wea ~~acquired~~fair ~~all~~presentation of the ~~assets~~financial ofresults ~~IPC~~for the interim periods presented. ~~IPC~~Certain ~~was~~information inand ~~the~~notes ~~development~~normally included in annual ~~stage~~financial ofstatements ~~providing~~have ~~advanced~~been ~~wireless~~condensed ~~technologies,~~in ~~integrated~~or ~~with~~omitted ~~high-speed~~from these interim ~~internet~~financial ~~via~~statements ~~satellite~~pursuant to ~~provide~~such ~~real-time~~rules ~~security~~and regulations. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and ~~monitoring~~related notes for ~~many~~the year ended June 30, ~~industries.~~2011, Ontogether orwith ~~about~~the ~~October~~discussion ~~10,~~and ~~2005~~analysis of financial condition and results of operations, weincluded ~~changed~~in our ~~name~~Annual toReport ~~HS3~~on Form 10-K filed on ~~Technologies~~October 6, ~~Inc.~~2011 with Securities and Exchange Commission.

On Our ~~September~~company’s 6,accounting ~~2006, we effected one~~and ~~(1)~~financial ~~new~~reporting ~~for~~policies ~~four~~conform ~~(4)~~to ~~old~~accounting ~~reverse~~principles ~~stock~~and ~~split~~practices generally ofaccepted ~~our~~in ~~authorized,~~the ~~issued~~United ~~and outstanding~~States ~~stock~~of America. AsThe aaccompanying consolidated ~~result,~~financial ~~our~~statements ~~authorized~~include ~~capital~~the ~~decreased~~accounts ~~to 50,000,000 shares~~ of ~~common~~HS3 ~~stock~~and ~~with~~its acontrolled subsidiaries. ~~par~~All ~~value~~significant ofinter-company ~~$0.001~~accounts ~~each~~ and ~~2,500,000~~transactions ~~preferred~~have been ~~stock~~eliminated ~~with~~in athe ~~par~~preparation ~~value~~ of ~~$0.001~~the ~~each.~~accompanying condensed consolidated financial statements.

~~Effective~~ The ~~February~~preparation 1,of ~~2009, we signed~~financial astatements ~~ten~~in ~~(10)~~accordance ~~year agreement~~ with ~~the~~United ~~130~~States ~~year~~generally ~~old~~accepted ~~American Humane Association~~accounting ~~(AHA).~~principles ~~HS3~~requires ~~and~~management ~~AHA’s relationship was~~ to ~~create~~make aestimates ~~Video~~and ~~Monitoring~~assumptions ~~System~~that ~~which~~affect the ~~was~~reported ~~anticipated~~amounts byof ~~AHA~~assets toand ~~become~~liabilities aat ~~standard~~the ~~part~~date of the ~~American Humane~~financial ~~Certified™~~statements ~~program(AHC),~~and ~~which~~the isreported aamounts ~~voluntary~~of ~~fee-based~~revenue ~~program~~and ~~available~~expenses ~~to producers,~~in ~~processors~~the ~~and~~reporting period. ~~haulers~~Our ofcompany ~~animals~~regularly ~~raised~~evaluates ~~for~~estimates ~~food.~~and ~~The~~assumptions ~~AHC~~related ~~program~~to the ~~provides~~useful ~~independent~~life ~~third-party~~and ~~verification~~recoverability ~~that~~of ~~those~~long-lived ~~businesses~~assets, ~~treat~~stock-based ~~and~~compensation ~~care~~and ~~for~~deferred ~~their~~income ~~animals~~tax ~~humanely.~~asset ~~Pursuant~~valuation toallowances. ~~the~~Our ~~AHA~~company ~~agreement,~~bases weits estimates ~~were~~and ~~to provide~~assumptions ~~the~~on ~~installation,~~current ~~integration~~facts, ~~and~~historical ~~monitoring~~experience ofand ~~production facilities~~various ~~and~~other ~~the~~factors ~~transportation~~that ofit ~~animals~~believes to ~~ensure~~be ~~the~~reasonable ~~husbandry~~under ~~and~~the ~~transportation~~circumstances, of the results ~~animals~~of ~~conforms~~which toform ~~AHC~~the ~~certification~~basis ~~standards.~~for ~~Effective~~making ~~February~~judgments ~~28, 2010,~~about ~~AHA~~the ~~terminated~~carrying ~~the~~values of ~~agreement~~assets ~~claiming~~and ~~that~~liabilities and the ~~Company’s~~accrual ~~showing~~ of ~~a marketing~~costs ~~video~~and ofexpenses ~~animals~~that atare anot readily ~~trade~~apparent ~~show~~from ~~without~~other ~~AHA~~sources. ~~written~~The ~~permission~~actual ~~was~~results anexperienced by our ~~incurable~~company ~~breach~~may ofdiffer ~~the~~materially ~~contract.~~and ~~The~~adversely ~~Company~~from ~~believes~~our ~~the~~estimates. ~~termination~~To bythe ~~AHA~~extent ~~was~~there aare ~~breach~~material ofdifferences between the ~~agreement~~estimates and onthe ~~April~~actual 30results, future ~~2010,~~results ~~the~~of ~~parties~~operations ~~entered~~will ~~into~~be ~~a Settlement Agreement And Mutual Release~~affected.

OnLoss ~~November~~Per ~~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.~~ Share

~~During~~ Basic ~~fiscal~~and ~~year~~diluted ~~ended~~earnings ~~June~~(loss) per ~~30,~~share ~~2011~~are ~~we:~~computed ~~(a)~~using ~~issued~~the ~~1,700,000 shares~~weighted average number of ~~our~~shares ~~common~~outstanding during ~~stock~~the ~~for~~period. ~~services~~Diluted ~~rendered~~earnings toper ~~us;~~share ~~and~~gives ~~(b)~~effect ~~issued~~to all potential ~~12,207,200~~diluted common shares ofoutstanding ~~our~~during ~~common~~the ~~stock~~period. ~~for~~In ~~conversion~~periods of ~~accrued~~net ~~board fees~~loss, ~~accrued~~there ~~interest,~~are ~~accrued~~no ~~salaries~~diluted ~~and~~earnings ~~accrued~~per ~~rent~~share ~~due~~since ~~our~~the ~~officers,~~result ~~directors and~~would ~~largest shareholder~~be anti-dilutive.

~~Current~~17 ~~Business~~

~~Our~~Corporate ~~company~~History ~~has expanded its technical installation service with a focus on the Quick Serve Restaurant market (QSR).~~

~~Effective~~We ~~December~~were ~~10,~~incorporated ~~2010~~under wethe ~~entered~~laws ~~into~~of athe ~~master~~State ~~subcontract~~of ~~agreement~~Nevada ~~with~~on ~~Insight~~January ~~Direct USA~~28, ~~Inc.,~~2003 ~~an Illinois~~under ~~corporation,~~the ~~and~~name ~~its affiliate Calence~~Zeno, ~~LLC~~Inc. ~~dba~~On November ~~Insight~~9, ~~Networking~~2005, ~~a Delaware~~we ~~limited~~closed ~~liability~~on ~~corporation.~~an ~~Pursuant~~asset topurchase ~~the~~ agreement, ~~our~~with ~~company~~IP-Colo, Inc. ~~will~~(IPC) bewherein awe ~~master~~acquired ~~provider~~all of ~~technical~~the ~~and~~assets ~~installation~~of ~~services to an internationally renowned QSR chain~~IPC. ~~Our~~IPC ~~company’s~~was ~~efforts~~in ~~have~~the ~~been refocused~~development ~~toward~~stage ~~the~~of ~~services~~providing ~~required~~advanced bywireless ~~the~~technologies, ~~QSR.~~integrated ~~Under the terms of the agreement~~ with high-speed ~~Insight~~internet ~~our~~via ~~company~~satellite ~~will~~to provide ~~Insight~~real-time ~~with~~security ITand ~~services~~monitoring ~~set~~for ~~forth in any~~many ~~statement of work issued by Insight~~industries. ~~Each~~On ~~statement~~or ofabout ~~work~~October is10, a2005, ~~separate agreement~~we ~~that~~changed ~~identifies~~our aname ~~specific scope of work~~ to ~~be performed by our~~HS3 ~~company~~Technologies, Inc.

15 On September 6, 2006, we effected one new for four 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 $.001 each and 2,500,000 shares of preferred stock with a par value of $.001 each.

~~Under~~ On November 4, 2009, at the annual ~~agreement~~and special meeting of stockholders of our company’s, our stockholders ~~duties~~approved ~~include:~~an increase in our authorized capital to 200,000,000 shares of common stock with a par value of $0.001. The increase became effective with the Nevada Secretary of State on November 30, 2009.

• Effective ~~participating~~February in1, ~~meetings~~2009, ~~with~~we signed ~~Insight~~a ~~and~~ten ~~clients~~year ~~for~~agreement ~~whom~~with wethe ~~are~~American ~~performing~~Humane ~~services;~~Association •(“AHA”). ~~keeping~~Our company’s ~~Insight~~relationship ~~informed~~with asAHA was to ~~progress~~create ~~and~~a ~~any~~Video ~~delays~~Monitoring inSystem ~~our~~which was ~~services;~~anticipated •by ~~providing~~AHA ~~Insight~~to ~~with~~become ~~any~~a ~~operational~~standard ~~information,~~part onof ~~request,~~their ~~including~~American ~~time~~Humane Certified ~~sheets~~program (“AHC”), ~~installation~~which ~~scripts,~~was ~~performance~~a ~~logs,~~voluntary ~~survey~~fee-based ~~information~~program available to producers, orprocessors ~~inventory~~and ~~records~~haulers ~~related~~of animals raised for food. The AHC program was to ~~its~~provide ~~performance;~~independent •third-party ~~make~~verification athat ~~good~~those ~~faith~~businesses ~~effort~~treat and care for their animals humanely. Pursuant to ~~reach~~the ~~mutually~~AHA ~~acceptable~~agreement, ~~provisions~~we were to provide the installation, integration and ~~adjustments~~monitoring ~~with~~of ~~any~~production ~~statement~~facilities and the transportation of ~~work~~animals to ~~meet~~ensure ~~client~~the ~~requirements~~husbandry and ~~expectations;~~transportation •of the ~~ensure~~animals conform to AHC certification standards. Effective February 28, 2010, AHA terminated the agreement claiming that our ~~employees,~~company’s ~~contractors~~showing ~~and~~of ~~agents~~a ~~conduct~~marketing video ~~themselves~~of inanimals at a ~~professional~~trade ~~manner~~show ~~and~~without ~~comply~~AHA’s ~~with~~written ~~reasonable~~permission ~~requests~~was ~~and~~an incurable ~~standard~~breach ~~procedures~~of ~~and~~the ~~policies~~agreement. ~~concerning~~Our ~~working~~company ~~hours,~~believed ~~safety~~that the termination by AHA was a breach of the agreement and ~~security~~on ~~rules~~April ~~applicable~~30, to2010, ~~those~~the ~~working~~parties atentered into ~~Insight~~a orsettlement ~~any~~agreement ~~client’s~~and ~~facilities~~mutual release.

~~Prices~~During ~~for~~fiscal ~~services~~year ~~will~~ended beJune 30, ~~mutually~~2011 ~~agreed~~we: ~~upon~~(a) ~~and~~issued ~~set~~12,207,200 ~~forth~~shares inof ~~any~~our ~~statement~~common ofstock ~~work~~for orconversion ~~purchase order~~of ~~issued~~accrued ~~against~~board ~~such~~fees, ~~statement~~accrued ofinterest, ~~work.~~accrued ~~Insight~~salaries ~~will~~and ~~pay~~accrued ~~all~~rent ~~undisputed~~due ~~invoices~~to ~~within~~our 30officers, ~~days~~directors ofand ~~receipt~~largest ofshareholder, ~~invoices~~and ~~from~~(b) issued 2,300,000 shares of our ~~company~~common ~~and~~stock ~~shall~~for ~~receive~~services arendered 3%to us or in conjunction with the ~~discount~~teaming onand ~~any~~employment ~~invoices~~agreement ~~paid~~with ~~within~~Chester 10Gilliam ~~days~~and ofWizard ~~receipt~~Works.

~~The~~Current ~~agreement~~Business is effective until terminated on (i) 45 days prior written notice by either party to the other (ii) if either party becomes insolvent, enters bankruptcy, reorganization or other similar proceedings, admits in writing its inability to pay debts, or makes or attempts to make an assignment for the benefit of creditors.

Our company ishas ~~providing~~expanded ~~labor;~~its ~~trained~~technical installation ~~teams to install cable, network upgrades of point of sale terminals, install software, and upgrade servers and cameras. The~~ service ~~that our~~with ~~company~~a isfocus ~~providing~~on ~~is necessary for~~ the ~~QSR~~Quick toServe ~~meet~~Restaurant ~~federally mandated~~market ~~Payment Card Industry Data Security Standards compliant requirements assembled by the Payment Card Security Standards Council~~(QSR).

ToEffective ~~date~~December ~~our~~10, ~~company’s~~2010, we ~~installation~~entered ~~teams~~into ~~have~~a ~~successfully~~master ~~completed~~subcontract ~~installations~~agreement inwith ~~states~~Insight ~~from coast~~Direct toUSA, ~~coast~~Inc., ~~servicing~~an Illinois ~~multiple~~corporation, ~~sites~~and ~~within~~its ~~each~~affiliate ~~market.~~Calence, ~~The~~LLC ~~teams~~dba ~~have provided~~Insight ~~the~~Networking, ~~position~~a Delaware oflimited ~~“clean-up~~liability ~~team”~~corporation. ~~provider~~Pursuant to ~~our~~the ~~service~~agreement, ~~offering.~~our company ~~Clean-up~~will ~~teams~~be ~~are~~a ~~responsible~~master ~~for~~provider ~~resolving~~of technical and installation ~~issues left~~services ~~unfinished~~to byan internationally ~~other~~renowned ~~services~~QSR ~~providers~~chain. WeOur ~~are~~company’s ~~very~~efforts ~~comfortable~~have ~~becoming~~been refocused toward the ~~“expert”~~services ~~and~~required ~~lead~~by ~~provider~~the ofQSR. ~~choice~~Under to the ~~QSR.~~terms Itof isthe agreement with Insight our ~~ability~~company towill provide Insight with IT services set forth in any ~~acquire~~statement ~~highly~~of ~~qualified~~work ~~individuals~~issued ~~and~~by ~~allowing~~Insight. ~~them~~Each tostatement ~~excel~~of ~~within~~work ~~our company’s~~is ~~structure~~a separate agreement that ~~continues~~identifies toa ~~keep~~specific ~~our~~scope ~~company’s~~of inwork ~~the~~to ~~forefront~~be ~~of providing~~performed ~~exceptional~~by ~~service~~our company.

~~Insight~~Under ~~estimates substantial locations for~~ the ~~QSR~~agreement will require Payment Card Industry Data Security Standards compliant installation and services to point of sale terminals over the next two years. To complete the estimated number of installations over the period, HS3 will need to train and deploy sufficient numbers of four-man service teams to install approximately 4 locations per week. We currently have five four-man teams deployed. HS3 technicians complete the two day training and testing at a facility in our ~~Denver monitoring center. Between 10 and 16 qualified candidates~~company’s ~~participate~~duties ~~in each training session with approximately 95% qualifying as “Team members”. Two additional staff will be required to supervise the field teams .~~ include:

~~Our~~participating ~~company~~in ~~has~~meetings ~~recently increased~~with ~~services~~Insight ~~offered to the expanding self- storage market. Teams trained to service the QSR market have the ability to install systems~~ and ~~provide service~~clients tofor ~~self-~~whom ~~storage~~we ~~customers. Installing video cables and cameras, and~~are ~~providing~~ performing ~~video analytics through our remote video monitoring and data center~~services; ~~fill a need lacking with-in the self- storage industry.~~
~~Our~~keeping ~~company~~Insight ~~anticipates~~informed ~~the~~as ~~addition of~~to ~~these~~progress ~~two~~and ~~service~~any ~~markets~~delays ~~will~~in ~~substantially improve~~ our ~~outlook in the near~~services; ~~future.~~
Onproviding ~~April~~Insight ~~27, 2011 our company entered into a teaming agreement and employment agreement~~ with ~~Chester~~any ~~A. Gilliam~~operational ~~and~~information, ~~his~~on ~~company~~request, ~~WizardWorks Security Systems Inc. (the “Subcontractor”).~~including ~~Under~~ time ~~the~~sheets, ~~agreement~~installation ~~the~~scripts, ~~Subcontractor~~performance ~~will~~logs, ~~provide~~survey ~~us with products and services set out in the agreement (the “Program”) and our company will compensate the Subcontractor for participation in the Program by providing a $360~~information,~~000~~ ~~bonus and~~or ~~the~~ inventory ~~concurrent~~records ~~issuance~~related ofto ~~500,000~~its ~~shares~~performance; ~~of our company’s common stock as follows:~~

~~The~~18 $360,000 bonus will be divided into three annual installments equal to the lesser of $120,000 per annum or 50% of the revenue received from WizardWorks accounts during that period. The Program bonus will be paid at the end of each calendar quarter. If during any quarter the total revenue received from WizardWorks accounts is less than $60,000, the installment for that quarter will be calculated to minimally equal 50% of the total revenues received from WizardWorks. If over the three year term the amount paid to WizardWorks is less than $360,000 this agreement will continue for one year increments until paid. Our company has the sole right to accelerate payments to reach the agreed $360,000 at any time during the term.

~~The~~make ~~issuance~~a ofgood ~~500,000~~faith ~~shares~~effort ofto ~~our~~reach ~~company’s~~mutually ~~common~~acceptable ~~stock~~provisions ~~on execution~~and adjustments with any statement of ~~the~~work ~~Agreement;~~to meet client requirements and expectations;
Inensure ~~consideration~~that ~~for the above,~~ our ~~company~~ ~~will receive~~employees, ~~record,~~contractors and ~~dispense~~agents ~~all~~conduct ~~revenue~~themselves ~~from~~in ~~WizardWorks as of~~a ~~January~~ professional 1,manner ~~2011~~ and ~~may~~comply ~~invoice~~with ~~customers~~reasonable ~~under~~requests ~~the~~and ~~WizardWorks name or our~~standard ~~company’s~~ procedures ~~name.~~and Atpolicies ~~the~~concerning ~~completion~~working ~~of the bonus payments~~hours, ~~our~~safety ~~company~~and ~~has~~security ~~the~~rules ~~right~~ applicable to ~~assume~~those ~~the~~working ~~WizardWorks~~at ~~name~~Insight ~~and~~or ~~logo~~any ~~for $1.00. Our company will pay the Subcontractor $400 per month rent for the uses of the Subcontractor~~client’s ~~premises.~~ ~~Upon~~facilities ~~thirty day written notice we may vacate premises, remove all equipment and terminate the rental arrangement.~~

16 Prices for services will be mutually agreed upon and set forth in any statement of work or purchase order issued against such statement of work. Insight will pay all undisputed invoices within 30 days of receipt of invoices from our company and shall receive a 3% discount on any invoices paid within 10 days of receipt.

WeThe ~~have~~agreement ~~expanded~~is ~~our~~effective ~~market~~until ~~strategies~~terminated ~~with~~on a(i) ~~diverse~~45 ~~new~~days ~~line~~prior ofwritten ~~cutting~~notice ~~edge products and services to meet the growing needs of the security industry~~ by ~~providing~~either aparty ~~single source portal~~ to ~~our customers with products and services in combinations that complete~~ the ~~security~~ ~~and~~other ~~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~~ii), if ~~video~~either ~~monitoring~~party ~~centers, biometric~~becomes ~~access control~~insolvent, ~~personal~~enters ~~biometric identification units~~bankruptcy, ~~cellular~~reorganization ~~and wireless~~or ~~mesh network units and wireless internet-linked satellite surveillance~~other ~~systems.~~similar ~~This~~proceedings, ~~combination~~admits ofin ~~products~~writing ~~encompasses~~its ainability ~~total~~to ~~line~~pay ~~that~~debts, weor ~~believe will~~makes ~~meet many customer security needs. Our monitoring center in Denver,~~or ~~Colorado~~attempts ~~serves~~to asmake aan ~~single~~assignment ~~point~~for ~~security~~the ~~solutions~~benefit ~~portal,~~of ~~integrating our proprietary analytical software, network security, and video products~~creditors.

Our company ~~integrates technology,~~is ~~services~~providing ~~and people into solutions that enhance the level of~~labor; ~~security~~trained ~~protection~~installation ~~and~~teams ~~surveillance services. Our company’s goal is~~ to ~~become~~install ~~a security portal~~cable, ~~with~~network ~~cutting-edge~~upgrades ~~technology applications and solutions specifically tailored to meet the security needs~~ of ~~various~~point ~~customers. All~~ of ~~the~~ ~~products and services~~sale terminals, ~~including~~install ~~biometric access control~~software, ~~satellite remote monitoring,~~ and ~~DVRs~~upgrade ~~are~~servers ~~security~~and ~~related~~cameras. ~~Unlike~~The ~~many~~service ~~security companies~~ that ~~focus exclusively on security hardware sales,~~ our company’s ~~value~~is ~~proposition~~providing is to ~~offer~~necessary ~~proprietary products to generate recurring revenue~~ for ~~our company in~~ the ~~form~~QSR ofto ~~monitoring~~meet ~~and~~federally ~~equipment licensing fees. We view the installation of~~mandated ~~our~~Payment ~~hardware~~Card ~~products~~Industry asData ~~the~~Security ~~entry~~Standards ~~vehicle~~(PCI) ~~into~~compliant ~~a long-term technological~~requirements ~~relationship~~assembled ~~with our customers. We continually enhance our existing products~~ by ~~periodically~~ ~~re-designing~~the ~~them~~Payment toCard ~~accommodate~~Security ~~our~~Standards ~~customer needs~~Council.

WeTo ~~are~~date ~~primarily~~our ancompany’s installation ~~intellectual~~teams have successfully completed installations in most states from ~~capital~~coast ~~company~~to coast servicing multiple sites within each market. ~~Our~~The ~~company~~teams ~~both~~have provided ~~develops~~the ~~HS3’s~~position ~~proprietary~~of ~~technology,~~“clean-up ~~and~~team” provider to our service offering. ~~acquires~~Clean-up teams are responsible for resolving technical and ~~integrates~~installation ~~appropriate~~issues left ~~industry~~unfinished ~~technology~~by toother ~~provide~~services ~~surveillance~~providers. We are very comfortable becoming ~~solutions~~the ~~customized~~“expert” and lead provider of choice to the ~~requirements~~QSR. ofIt is our ~~customers.~~ability ~~Our~~to acquire ~~established~~highly qualified individuals and allowing them to excel within our ~~mission~~company’s isstructure that continues to ~~be:~~keep our company’s in the forefront of providing exceptional service.

~~“The~~ Insight ~~trusted~~estimates ~~security~~over ~~architect~~18,000 locations ~~providing~~for ~~vision~~the QSR will require PCI compliant installation and services to ~~when~~point itof ~~matters~~sale terminals over the next two years of which we believe we will get a portion of. To complete the installations over the period, we will deploy sufficient numbers of three to four man service teams to install 80 to 120 locations per week. Our company anticipates deploying 20 teams to handle the requested number of installations per week. Our technicians complete a two-day training and testing at a facility in our Denver monitoring center. Between 10 and 16 qualified candidates participate in each training session with approximately 95% qualifying as “Team members”. Two additional staff will be required to supervise the field teams.

AsOur acompany ~~security~~has ~~architect, we~~recently ~~provide~~increased ~~professional~~services ~~architectural,~~offered ~~design and engineering~~ to ~~develop~~the ~~system solutions~~expanding ~~for~~self- ~~our~~storage ~~customers~~market. asTeams ~~desired~~trained to byservice ~~our~~the ~~customers.~~QSR ~~This~~market ~~concept~~have is the ~~foundation~~ ofability ~~our~~to ~~intellectual~~install ~~capital~~systems and ~~core competencies. We use~~provide ~~intellectual~~service ~~capital of our employees and the surveillance industry~~ to ~~architect and~~self- ~~design~~storage ~~solutions~~customers. ~~that~~Installing ~~provide~~video ~~customers~~cables ~~vision~~ and ~~situational~~cameras, ~~awareness.~~and ~~This~~providing ~~acquired~~video ~~knowledge~~analytics isthrough ~~transformed~~our toremote ~~innovations~~video ~~that~~monitoring ~~are~~and ~~proprietary~~data tocenter ~~our~~fill ~~company.~~a ~~This~~need ~~occurs~~lacking with-in ~~part,~~the ~~through:~~self- storage industry.

• To ~~Increased~~penetrate ~~knowledge~~this ofself ~~new~~storage market, ~~solutions~~on April 27, 2011, our company entered into a teaming agreement and employment ~~industry~~agreement ~~advancements~~with •Chester ~~Developing~~A. ~~new~~Gilliam ~~systems~~and •his ~~Product~~company Wizard Works Security Systems, Inc. (the “Subcontractor”). Under the agreement, the Subcontractor will provide us with customers, products and ~~application~~services ~~enhancements~~as •set ~~Applications~~out in the agreement ( the “Program”) and our company will compensate the Subcontractor for participation in the Program by providing up to $360,000 in bonus opportunity over three years . Upon execution of ~~new~~the ~~components~~teaming •and employment ~~Designing~~agreement, ~~new~~Mr. Gilliam became an employee of our company and was awarded 500,000 ~~proprietary~~shares ~~software~~of our common stock.

WeOur ~~have~~company aanticipates ~~sustainable competitive advantage in our ability to merge existing technology with~~ the ~~latest~~ ~~innovations~~addition inof ~~satellite broadband service, IP hardware, proprietary software, and access control security products. We have~~ the ~~expertise,~~teaming ~~capacity,~~agreement ~~staff,~~ and ~~ability to monitor sites located anywhere in~~ the ~~United~~QSR ~~States~~opportunities ~~and~~will ~~Canada. Our~~improve ~~Denver monitoring facility has access to 1.7 terabytes per second of~~our ~~ground-based~~outlook ~~internet~~in ~~capability for interfacing purposes. We developed~~ the ~~technologies,~~ ~~proved the concepts, and started implementation, and market penetration~~future. ~~We have focused on the rural and farm animal/production market to date. The following are markets where our technology can excel in providing greater access, better performance and lower cost:~~

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

~~PRODUCERS~~ We OFhave ~~ANIMAL~~expanded ~~PRODUCTS:~~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.

AsOur ~~the~~company ~~developer~~integrates technology, services and ~~architect~~people into solutions that enhance the level of security protection and surveillance services. Our company’s goal is to become a security ~~video~~portal, ~~monitoring~~with ~~system~~cutting-edge ~~(VMS)~~technology applications and ~~surveillance~~solutions specifically ~~program,~~tailored weto ~~have~~meet ~~refined~~the security needs of various customers. All of the products and services, including biometric access control, satellite remote ~~capabilities~~monitoring, ofand DVRs are security related. Unlike many security companies that focus exclusively on security hardware sales, our ~~satellite~~company’s ~~video~~value ~~product~~proposition ~~and~~is to ~~other~~offer ~~surveillance~~proprietary ~~technologies~~products to generate recurring revenue for our company in ~~including~~the ~~their~~form ~~implementation~~of monitoring and equipment licensing fees. We ~~also~~view ~~have~~the installation of our hardware products as the ~~ability~~entry tovehicle ~~provide~~into ~~service~~a tolong-term technological ~~remote~~relationship ~~areas~~with ~~underserved~~our customers. We continually enhance our existing products by periodically ~~high~~re-designing ~~speed~~them ~~internet~~to oraccommodate ~~cable~~our ~~providers.~~customer needs.

~~Within~~We aare ~~climate~~primarily ofan ~~increasing~~intellectual ~~concerns~~capital ~~over food safety, security and animal welfare a tremendous market is evolving~~company. WeOur ~~have~~company ~~developed~~both ~~surveillance~~develops ~~products~~HS3 ~~primarily~~proprietary ~~video~~technology, ~~to address~~and ~~these~~acquires ~~issues~~and inintegrates ~~the~~appropriate ~~livestock production~~ industry ~~and~~technology to aprovide ~~lesser extent the~~surveillance ~~food processing industry. Our~~ solutions ~~are~~customized ~~developed~~ to ~~convey to consumers a sense of confidence in~~ the ~~quality~~requirements of ~~the~~our ~~food they eat, and that the producer has incorporated appropriate stewardship in animal production processes~~customers. ~~For~~Our ~~the~~established ~~producer~~mission ~~this~~is ~~provides~~to ~~risk mitigation, enhanced production and value added branding.~~ be:

~~Through~~“The ~~the~~trusted ~~combined use of~~security ~~proprietary~~architect ~~technology,~~providing ~~including~~vision ~~innovations,~~when ~~video~~it ~~analytics, and DVR’s our company has developed state-of-the-art wireless, internet linked cellular, and satellite linked surveillance systems~~matters.” ~~We are in a unique position to be the first~~

17 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:

~~company~~Increased ~~with~~knowledge ~~national surveillance capabilities, to provide an independent third party monitoring verification system to the public that increases their level~~ of ~~confidence~~new insolutions ~~fundamentally important industries. Our surveillance~~ and ~~monitoring~~industry ~~provides these assurances with a certified humane~~advancements ~~brand, whether acquired or created and generated in house.~~
~~Animal~~Developing ~~protein~~new ~~producers desire~~systems ~~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~~Product ~~surveillance~~and ~~program~~application ~~allows:~~ enhancements
•Applications ~~Producers to demonstrate stewardship with archived video. • Producers to employ HS3 as a third party independent verifier~~ of ~~video~~new 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.components
~~Our~~Designing 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 entrynew, ~~our~~ ~~program~~proprietary ~~removes~~software ~~the high front end equipment costs to the producers.~~

We ~~intend~~have a sustainable competitive advantage in our ability to ~~enter~~merge ~~and~~existing ~~penetrate into~~technology with the ~~animal~~latest innovations ~~welfare~~in satellite broadband service, ~~protein~~IP hardware, proprietary software, and ~~production~~access ~~business~~control bysecurity ~~contracting~~products. ~~with various~~We ~~producers~~have the expertise, ~~associations~~capacity, staff, and~~/or~~ ~~companies~~ability ~~that~~to ~~can~~monitor ~~use~~sites ~~our~~located ~~surveillance services~~anywhere asin athe ~~part~~United ofStates ~~any~~and ~~value-added~~Canada. Our ~~welfare/stewardship~~Denver ~~and~~monitoring ~~production~~facility ~~brand that~~has ~~they~~access ~~choose~~to 1.7 Asterabytes ~~the~~per ~~architect~~second of ground-based ~~the~~internet ~~surveillance~~capability ~~system,~~for weinterfacing ~~are~~purposes. ~~able~~We todeveloped the ~~provide~~technologies, ~~specific~~proved ~~elements~~the ~~(as~~concepts, ~~designed~~and started implementation, and ~~tailored~~market penetration. byWe have focused on the ~~producer~~rural and farm animal/~~company)~~production ofmarket to ~~our~~date. ~~monitoring~~There ~~services~~are tosix ~~customers~~primary ~~while~~markets ~~maintaining~~where ~~ownership~~our oftechnology ~~the~~can excel in providing ~~proprietary~~greater ~~VMS~~access, ~~system.~~better performance and lower cost:

~~Over~~Producers ~~the prior years, we have determined proof~~ of aAnimal ~~market and penetration concept of the technology and also~~Products of our business model. Our strategy is to attain market penetration with HS3 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~~Homeland ~~SECURITY:~~ Security
~~We have installed remote video~~Hospitality ~~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~~Petroleum ~~covert deployment system is~~Industry 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.
~~HOSPITALITY:~~Educational Facilities
AsConstruction ~~in America’s schools, security~~Projects 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.
WeSelf-Storage ~~provide~~Facilities 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~~20 ~~INDUSTRY:~~

~~The~~PRODUCERS ~~petroleum~~OF ~~industry~~ANIMAL ~~spends millions~~PRODUCTS: 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

18 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.

~~continue~~ Within toa ~~form~~climate ~~strategic~~of ~~alliances~~increasing concerns ~~with~~over ~~providers~~food ofsafety, security and animal welfare a tremendous market is ~~complementary~~evolving. ~~monitoring~~We have developed surveillance products ~~that~~primarily ~~mesh~~video, ~~with~~to ~~our~~address these ~~satellite~~issues ~~products~~in the livestock production industry and to a lesser extent the ~~provide~~food ~~well~~processing ~~operators~~industry. ~~with~~Our ~~real-time~~solutions ~~information~~are developed to ~~enhance~~convey ~~well~~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.

WeThrough ~~have~~the ~~researched~~combined use of proprietary technology, ~~developed~~including innovations, video analytics, and ~~installed~~ aDVRs ~~remote~~our company ~~monitoring~~has ~~device~~developed ~~called~~state-of-the-art ~~“OPIE”~~wireless, aninternet ~~Outdoor~~linked ~~Portable~~cellular, and ~~Investigative~~satellite ~~Equipment~~linked surveillance ~~vehicle~~systems. ~~The~~We ~~device~~are ~~has~~in ~~been~~a ~~used~~unique position to ~~successfully~~ ~~monitor~~be ~~gas~~the first ~~wells~~company inwith ~~remote~~national ~~Wyoming~~surveillance ~~for~~capabilities, ~~three~~to ~~years.~~provide ~~The~~an ~~original~~independent ~~concept~~third ~~having~~party ~~been~~monitoring ~~proven~~verification system to the ~~customer,~~public anthat ~~oil~~increases ~~and~~their level ~~gas~~of ~~producer,~~confidence ~~has expressed~~in ~~desire~~fundamentally inimportant ~~purchasing~~industries. ~~additional~~Our ~~OPIEs~~surveillance ~~for~~and monitoring ~~their~~provides ~~expansion~~these toassurances ~~new~~with a “certified humane” brand, whether ~~fields~~acquired or created and generated in house.

~~EDUCATIONAL~~ Animal ~~FACILITIES:~~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.

~~Even~~Our insurveillance ~~today’s high-speed world,~~program ~~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.~~ allows:

~~The~~Producers ~~federal~~to ~~government~~demonstrate ~~has mandated~~stewardship ~~schools comply~~ with ~~the~~archived ~~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~~Producers ~~schools~~to ~~with~~employ ~~satellite broadband~~HS3 ~~access~~as toa ~~the~~third ~~internet~~party atindependent ~~megabytes-per-second~~verifier ~~speeds,~~of ~~web~~video ~~hosting~~for ~~services, and~~ the ~~ability~~establishment toand ~~observe~~“certification” ~~activities~~labeling inof ~~and~~food ~~around~~products at the ~~school with~~market ~~digital~~ shelf, ~~cameras make our company a uniquely positioned provider~~i.e. ~~Our~~the ~~advanced technology~~logo/brand ~~and~~assures ~~low~~consumer ~~cost~~that ofthe ~~entry~~food ~~structure~~they ~~allows~~purchased usfor their tofamily ~~offer~~has ~~education facilities~~been ~~products~~raised ~~meeting~~humanely ~~requirements~~and ofhandled ~~Homeland Security~~safely.
~~CONSTRUCTION~~Producers ~~PROJECTS:~~to monitor animal behavior at remote locations and improve production efficiencies including herd disease awareness.
WeManagement ~~are working with three national construction companies~~ to ~~provide~~assure ~~remote~~employees ~~video~~work ~~security~~within ~~deploying~~standards ~~the company’s~~required ~~OPIE product. When installed, OPIE provides recurring revenue through live video monitoring of remote job sites. Captured video is transmitted~~ to ~~the~~maintain ~~Denver monitoring center for analytics and event classification. Management is confident that~~ the ~~increasing~~highest ~~need~~levels ~~for~~of ~~remote~~risk ~~security~~mitigation ~~will continue,~~ and ~~open untapped~~animal ~~markets for our proprietary cost effective solution~~stewardship. ~~Uniquely~~ ~~positioned our company feels the market for our OPIE technology will continue to grow for years to come.~~
WeRebuttal ~~are continuing~~ to ~~work~~undercover ~~with a national livestock trailer manufacturing company to provide its proprietary~~ video ~~technology~~by ~~in trailers that monitor~~ animal ~~welfare~~activist ~~and handling during transportation, loading, and unloading~~groups. We are in the second year of deploying this technology and has reached a threshold where it‘s ready for this market. We have the technology and capability to provide the solution to the livestock industry, solving transportation monitoring requirements.

~~SELF-STORAGE~~ Our ~~FACILITIES:~~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.

~~Over~~ We ~~the~~intend ~~last~~to 30enter ~~years~~and penetrate into the ~~self-storage~~animal ~~industry~~welfare, ~~has~~protein ~~typically~~and production business by contracting with ~~employed~~various ~~part-time~~producers, ~~guard~~associations, and/or companies that can use our surveillance services toas ~~randomly~~a ~~check~~part ~~their~~of ~~properties~~any ~~during~~value-added ~~off~~welfare/stewardship and production brand ~~hours.~~that Wethey ~~have~~choose. aAs ~~solution~~the ~~that~~architect ~~offers~~of ~~continuous~~the surveillance ~~utilizing~~system, ~~our~~we are able to ~~company’s~~provide ~~technology~~specific ~~and~~elements ~~Denver~~(as ~~monitoring~~designed ~~center~~and totailored ~~provide~~by 24the producer/~~7/365~~company) of our monitoring, ~~improving~~services ~~both~~to ~~monitoring~~customers ~~and~~while ~~reduced~~maintaining ~~costs.~~ownership of the proprietary VMS system.

~~RESULTS~~ Over OFthe ~~OPERATIONS:~~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.

~~Three~~21 ~~Months Ended September 30, 2011 and 2010~~

~~Revenue~~HOMELAND ~~and~~SECURITY: ~~cost of goods sold~~

We ~~primarily~~have ~~derive~~installed ~~revenue from our operations by~~ (i)on ~~providing~~a ~~technical installation services to the QSR~~beta ~~market and (ii~~test) byremote ~~charging~~video ~~monthly~~products ~~fees~~ for ~~providing~~the ~~integrated~~U.S. ~~equipment, monitoring,~~Coast ~~hosting~~Guard, ~~labor~~enabling ~~and~~the ~~other~~monitoring ~~technology services as well as equipment~~of ~~sales~~and torelaying ~~our~~of ~~customers.~~the ~~Our~~physical ~~revenue~~location ~~and cost~~ of ~~goods~~freight ~~sold~~trains ~~for~~at ~~the~~ports ~~three~~of ~~month~~entry. The ~~period~~product ~~ended~~relays ~~September~~GPS ~~30, 2011~~ and ~~2010~~live ~~are~~video ~~outlined~~over ina ~~the~~cellular ~~table~~network. ~~below:~~

19 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 seven 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.

		Three months ended
		September 30,
		2011			2010
Contract Revenue:
Equipment license/monitoring fees	$	950		$	15,078
QSR		564,518			-
Revenue sharing from Teaming Agreement		9,999			-
Domain/business hosting fees		778			912
Other (discounts taken)		(13,253	)		-
		562,992			15,990
Other Revenue:
Equipment sales		39,121			668
IT Services		100			11,495
Other		-			(24	)
		39,221			12,139
Revenue		602,213			28,129
Cost of goods sold - Equipment		(26,140	)		(2,469	)
Cost of goods sold – QSR		(306,148	)		-
	$	269,925		$	25,660

HOSPITALITY:

~~Contract~~ As ~~revenues~~in America’s schools, security for the ~~quarter ended~~hospitality ~~September~~industry ~~30,~~is ~~2011~~becoming ~~increased~~increasingly asimportant. ~~compared~~Hotels toare trending ~~the~~toward ~~comparative~~increasing ~~period~~guest insecurity ~~2010~~ measures as wea ~~started~~result toof ~~focus~~injury onand liability ~~the~~litigation. ~~quick~~Additionally ~~serve~~hotel ~~restaurants~~operators ~~(QSR)~~are ~~part~~becoming ofmore ~~our business~~concerned ~~starting~~with inimproving ~~December,~~general ~~2010~~security ~~and~~for ~~the~~guests. ~~start~~Our ~~effective~~internet ~~January~~protocol 1,surveillance system ~~2011~~enhances ofand ~~our revenue~~augments ~~sharing~~the ~~from~~hotel’s ~~our~~ability ~~teaming~~to ~~agreement.~~monitor ~~During~~ the ~~quarter ended September~~hotel’s ~~30,~~perimeter ~~2011,~~and weaccess ~~serviced~~to ~~154~~guest ~~quick service restaurant locations~~areas.

~~Selling,~~ We ~~general~~provide ~~and~~hotels ~~administrative~~a ~~expenses~~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.

~~Our~~PETROLEUM ~~selling, general and administrative expenses for the three month period ended September 30, 2011 and 2010 are outlined in the table below~~INDUSTRY:

20 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.

		Three months ended
		September 30,
		2011			2010
Wages & employee benefits	$	122,188		$	27,116
Other contract labor/equipment		5,710			-
Board fees		12,500			-
Stock for services		-			-
Accounting, audit and tax expenses		8,000			11,250
Legal		4,646			925
Stock transfer/shareholder/proxy/filing fees		450			470
Professional fees/filings		3,430			-
Rent		1,200			-
Utilities		6,215			4,277
Computer network services		-			387
Computer server/internet fees		796			456
Advertising/domain registration		1,360			159
Telephone		1,437			5,384
Travel, meals and entertainment		1,402			2,891
Sales & marketing & R&D		-			1,117
Insurance		4,562			7,005
Postage/printing		343			343
Bank service charges		2,143			262
Office/computer supplies		2,701			1,026
Automobile expenses		3.022			996
Dues & subscriptions		-			55
Taxes/licenses & permits		-			4,368
Penalties & interest		373			407
Bad debt expense		-			-
Other misc. expenses/(income)		(940	)		(6,140	)
	$	181,538		$	$ 62,754

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.

~~Selling,~~EDUCATIONAL ~~general~~FACILITIES: and administrative expenses increased during the three month period ended September 30, 2011 as compared to the three month period ended September 30, 2010 due primarily to higher wages and employee benefits as we restarted paying our executive officers due to the company’s better operating performance.

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

~~Our~~ The ~~primary~~Federal ~~liquidity~~Government ~~needs are to~~has ~~fund~~mandated ~~our~~schools ~~working~~comply ~~capital~~with ~~requirements~~the ~~and~~Homeland ~~future~~Security ~~capital~~Act, ~~expenditures.~~which ~~Our ability~~in topart ~~continue as a going concern is dependent upon obtaining additional~~requires ~~working~~video ~~capital to develop our business operations~~surveillance. WeWith ~~intend to use borrowings from~~ our ~~revolving~~system ~~line of credit~~installed, ~~equity~~security ~~sales~~information ~~and~~is /available via orthe ~~further~~internet ~~shareholder loans~~ and ~~advances~~our ~~from~~secured ~~related~~portal ~~parties~~ to ~~mitigate~~individuals with the ~~affects~~proper ~~of our cash~~security ~~current position~~clearance.

Working Capital							Percentage
		September 30,			June 30,		Increase/
		2011			2011		(Decrease)
Current Assets	$	454,530		$	427,013		6%
Current Liabilities		979,564			1,010,449		3%
Working Capital (deficit)	$	(525,034	)	$	(583,436	)	10%

Cash Flows		Three months ended
		September 30,			September 30,
		2011			2010
Net cash (used in) operating activities	$	68,752		$	11,087
Net cash (used in) by investing activities		(3,469	)		(6,064	)
Net cash flow provided by (used in) financing activities		(70,270	)		(38,051	)
	$	(4,987	)	$	(33,028	)

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.

21CONSTRUCTION PROJECTS:

~~Our~~ We ~~cash~~are onworking ~~hand~~with ~~at September~~three ~~30,~~national ~~2011~~construction ~~was~~companies ~~approximately~~to ~~$8,000.~~provide Weremote ~~have~~video ~~made~~security adeploying ~~concentrated~~our company’s ~~effort~~OPIE ~~over~~product. ~~the~~When installed, OPIE provides recurring revenue through ~~past~~live ~~year~~video tomonitoring ~~continue~~of toremote ~~reduce~~job ~~our~~sites. ~~selling,~~Captured ~~general~~video ~~and~~is ~~administrative expenses,~~transmitted ~~which~~to ~~currently~~the Denver ~~have~~monitoring acenter ~~cash~~for ~~burn~~analytics ~~rate~~and ofevent ~~approximately~~classification. ~~$60,000~~Management ~~per~~is ~~month.~~confident Inthat the ~~future~~increasing weneed ~~anticipate~~for ~~relying~~remote onsecurity ~~cash~~will ~~flows~~continue, ~~from~~and ~~operations~~open untapped ~~and~~markets for our ~~revolving~~ ~~line~~proprietary ofcost ~~credit~~effective ~~facility~~solution. ~~for~~Uniquely positioned, ~~the~~our ~~purpose~~company offeels ~~proceeding~~the ~~with~~market for our ~~plan~~OPIE oftechnology will continue ~~operations~~to grow.

As We are continuing to work with a national ~~“smaller~~livestock ~~reporting~~trailer manufacturing company” to provide its proprietary video technology in trailers that monitor animal welfare and handling during transportation, weloading, and unloading. Our company is in the second year of ~~are~~deploying ~~not~~this ~~required~~technology and has reached a threshold where it is ready for this market. We have the technology and capability to provide ~~tabular~~the ~~disclosure~~solution ~~obligations.~~to the livestock industry, solving transportation monitoring requirements.

~~Going~~SELF-STORAGE ~~Concern~~FACILITIES:

~~Until~~ Over ~~year~~the ~~ended~~last ~~June~~ 30, ~~2011,~~years ~~we have~~the ~~incurred~~self-storage ~~losses~~industry ~~since~~has ~~our~~typically ~~inception.~~employed ~~Because~~part-time ofguard ~~these~~services ~~historical losses, we~~to ~~may~~randomly ~~require~~check ~~additional~~their ~~working~~properties ~~capital~~during ~~and~~off ~~long term capital to develop our business operations~~hours. WeHS3 ~~intend~~has toa ~~use~~solution ~~borrowings~~that ~~from our revolving line of~~offers ~~credit~~continuous ~~facility,~~surveillance ~~equity~~utilizing ~~sales~~our ~~and/or~~company’s ~~future~~technology ~~shareholder loans~~ and ~~advances~~Denver ~~from~~monitoring ~~related~~center ~~parties~~ to ~~mitigate~~provide ~~the~~24/7/365 ~~affects~~monitoring, ofimproving ~~our~~both ~~cash~~monitoring ~~position.~~and reduced costs.

~~The~~RESULTS ~~continuation~~OF ofOPERATIONS: our business is dependent upon us maintaining and achieving a break even or profitable level of operations. There are no assurances that we will be able to either (i) maintain a level of revenues adequate to break even and generate sufficient cash flow from operations; or (ii) obtain additional financing to support our working capital requirements. To the extent that funds generated from operations and debt financing are insufficient, we will have to raise additional capital through equity offerings. No assurance can be given that additional debt financing or equity infusion will be available, or if available, will be on terms acceptable to us. If adequate working capital is not available, we may not be able to increase our operations.

~~These~~Three ~~conditions~~Months ~~raise~~Ended ~~substantial doubt~~December ~~about~~31, ~~our~~2011 ~~ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability~~ and ~~classification~~2010 ~~of recorded assets and classification of liabilities that might be necessary should we be unable to continue as a going concern.~~

~~Critical~~Revenue ~~Accounting~~and ~~Policies~~Cost of Goods Sold.

~~Our~~We ~~financial~~primarily ~~statements~~derive ~~and~~revenue from ~~accompanying~~our ~~notes~~operations ~~are~~by ~~prepared~~(a) inproviding ~~accordance~~technical ~~with~~installation ~~generally~~services ~~accepted~~to ~~accounting principles in~~ the ~~United States. Preparing financial statements requires~~QSR ~~management~~market toand ~~make~~(b) ~~estimates~~by ~~and~~charging ~~assumptions~~monthly ~~that~~fees ~~affect~~for ~~the~~providing ~~reported~~integrated ~~amounts of~~equipment, ~~assets~~monitoring, ~~liabilities~~hosting, ~~revenue~~labor and ~~expenses.~~other ~~These~~technology ~~estimates~~services ~~and~~as ~~assumptions~~well ~~are~~as equipment ~~affected~~sales byto ~~management’s~~our ~~application of accounting policies~~customers. WeOur ~~believe~~revenue ~~that understanding the basis~~ and ~~nature~~cost of ~~the~~goods ~~estimates~~sold ~~and~~for ~~assumptions involved with~~ the ~~following~~three ~~aspects~~month period ofended ~~our~~December ~~financial~~31, ~~statements~~2011 isand ~~critical~~2010 toare ~~an understanding~~outlined ofin ~~our~~the ~~financials.~~table below:

We23 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.

Basis of presentation and use of estimates

		Three months ended
		December 31,
		2011			2010

Contract Revenue:
QSR	$	247,210		$	3,680
Equipment license/monitoring fees		-			5,194
Revenue sharing from Teaming Agreement		-			-
Domain/business hosting fees		654			919
Other ( discounts taken )		(9,877	)		-
	$	237,987		$	9,793

Other Revenue:
Equipment sales & IT services	$	77,158		$	17,023
Other		-			-
	$	77,158		$	17,023

Total Revenue	$	315,145		$	26,816

Cost of goods sold		(162,857	)		(19,843	)
	$	152,288		$	6,973

~~The~~Contract ~~accompanying~~revenues ~~unaudited condensed~~for ~~consolidated~~the ~~financial~~quarter ~~statements~~ended inDecember ~~this~~31, ~~quarterly report on Form~~2011 ~~10-Q~~increased ~~have~~as ~~been~~compared ~~prepared pursuant~~ to the ~~rules~~comparable ~~and~~period ~~regulations~~in of2010 ~~the~~as ~~Securities and~~we ~~Exchange~~started ~~Commission. Accordingly, these statements reflect adjustments (consisting only of normal recurring entries), which~~ in ~~our opinion, are~~December ~~necessary~~2010 ~~for~~servicing ~~a fair presentation of~~ the ~~financial~~QSR ~~results~~market. ~~for~~During the ~~interim periods~~quarter ~~presented.~~ended ~~Certain~~December ~~information~~31, ~~and~~2011, ~~notes~~we serviced ~~normally~~113 ~~included~~QSR inlocations, ~~annual financial~~the ~~statements~~majority ~~have~~of ~~been~~which ~~condensed~~were in orOctober ~~omitted~~2011. ~~from these interim~~The ~~financial~~November ~~statements pursuant to such rules~~ and ~~regulations.~~December ~~These~~2011 ~~condensed consolidated~~QSR ~~financial~~activity ~~statements~~dropped ~~should~~off be(21 ~~read~~locations) inas ~~conjunction with the~~Insight ~~consolidated~~slowed ~~financial~~its ~~statements~~flow and ~~related~~activity ~~notes~~to ~~for~~us. ~~the~~To ~~year~~mitigate ~~ended~~this ~~June~~slow 30down, ~~2011,~~ ~~together~~we ~~with~~focused on providing our ~~discussion~~goods and ~~analysis~~services ofto ~~financial~~other ~~condition~~customers and ~~results~~ ofas ~~operations,~~a ~~included~~result inthe ~~our Annual Report on Form 10-K filed on~~increase ~~October~~in 6,equipment ~~2011~~sales ~~with~~and ~~Securities~~intellectual ~~and~~technology ~~Exchange~~services ~~Commission~~occurred.

~~Our~~Selling, ~~accounting~~General and ~~financial reporting~~Administrative ~~policies conform to accounting principles and practices generally accepted in the United States of America~~Expenses. ~~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. Our ~~company regularly evaluates estimates and assumptions related to the useful life and recoverability of long-lived assets~~selling, ~~stock-based~~general ~~compensation~~ and ~~deferred income tax asset valuation allowances. Our company bases its~~ ~~estimates~~administrative ~~and~~expenses ~~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~~three ~~values of~~month ~~assets~~period ~~and~~ended ~~liabilities~~December ~~and~~31, ~~the~~2011 ~~accrual of costs~~ and ~~expenses that are not~~ ~~readily~~2010 ~~apparent from other sources. The actual results experienced by our company may differ materially and adversely from our company’s estimates. To the extent there~~ are ~~material~~outlined ~~differences~~in ~~between~~ the ~~estimates~~table ~~and the actual results, future results of operations will be affected.~~ below:

2224

Loss Per Share

		Three months ended
		December 31,

		2011			2010

Wages and employee benefits	$	87,502		$	41,977
Other contract labor/equipment		-			740
Board fees		12,500			25,000
Stock for services		-			5,820
Accounting ,audit and tax expenses		20,610			14,250
Legal		5,448			562
Stock transfer/shareholder/proxy/filing fees		315			995
Professional fees/filings		2,189			1,494
Rent		800			(218	)
Utilities		4,586			4,578
Computer network services		296			333
Computer server/internet fees		706			491
Advertising/domain registration		3,210			55
Telephone		1,750			3,515
Travel, meals and entertainment		3,887			1,214
Sales & marketing & R&D		791			1,008
Insurance		14,148			4,602
Postage/printing		602			1,736
Bank service fees		461			1,101
Office/computer supplies		1,942			853
Automobile expenses		1,161			1,546
Dues & Subscriptions		-			129
Taxes/licenses & permits		66			163
Penalties & interest		13,086			-
Bad debt expense		1,865			21,556
Other expenses/(income)		(3,971	)		(1,396	)
	$	173,950		$	132,104

~~Basic~~Selling, ~~and~~general ~~diluted earnings (loss)~~and ~~per~~administrative ~~share~~expenses ~~are~~increased ~~computed~~quarter ~~using~~over ~~the~~quarter ~~weighted~~due ~~average~~primarily ~~number~~to ~~of shares outstanding~~the ~~during~~annual ~~the~~payment ~~period.~~for ~~Diluted~~our ~~earnings~~general ~~per~~liability ~~share~~insurance ~~gives~~and ~~effect~~a tofull ~~all~~quarter ~~potential diluted common shares outstanding during the period. In periods~~ of ~~net loss,~~paying ~~there~~our ~~are~~employees noas ~~diluted~~opposed ~~earnings~~to ~~per~~the ~~share~~2010 ~~since~~quarter ~~the~~when ~~result~~our ~~would~~officers bewere ~~anti-dilutive.~~not getting paid.

~~Concentration~~Six ofMonths ~~Credit~~Ended ~~Risk~~December 31, 2011 and 2010

WeRevenue ~~sell products to customers in diversified industries~~ and ~~geographical~~Cost ~~regions. We continually evaluate the creditworthiness~~ of ~~our~~Goods ~~customers~~Sold. We evaluate the collectability of accounts receivable on a combination of factors. Our policies require us to write off or 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 write off receivables when we believe an amount is not collectible. We have approximately $16,000 reserves for bad debt as of September 30, 2011.

~~Off-Balance~~ We ~~Sheet~~primarily ~~Arrangements~~derive revenue from our operations by (a) providing technical installation services to the QSR market and (b) 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, 2011 and 2010 are outlined in the table below:

We25 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.

		Six months ended
		December 31,
		2011			2010

Contract Revenue:
QSR	$	811,729		$	3,680
Equipment license/monitoring fees		950			20,248
Revenue sharing from Teaming Agreement		9,999			-
Domain/business hosting fees		1,431			1,831
Other ( discounts taken )		(23,129	)		-
	$	800,980		$	25,759

Other Revenue:
Equipment sales & IT services	$	116,278		$	29,186
Other		100			-
	$	116,378		$	29,186

Total Revenue	$	917,358		$	54,945

Cost of goods sold		(495,145	)		(22,312	)
	$	422,213		$	32,633

Our contract revenues for the six month period ended December 31, 2011 increased as compared to the comparative period in 2010 due to four months (July through October 2011) of servicing the QSR market. During the six months ended December 31, 2011, we serviced 267 QSR locations. The increase in equipment sales and IT services period over period was due to increasing our activity to other customers while the Insight QSR activity slowed.

Selling, General and Administrative Expenses.

Our selling, general and administrative expenses for the six month period ended December 31, 2011 and 2010 are outlined in the table below:

		Six months ended
		December 31,
		2011			2010

Wages & employee benefits	$	209,689		$	69,093
Other contract labor/equipment		5,710			740
Board fees		25,000			25,000
Stock for services		-			5,820
Accounting, audit and tax expenses		28,610			25,500
Legal		10,094			1,486
Stock transfer/shareholder/proxy fees		764			1,465
Professional fees/filings		5,619			1,494
Rent		2,000			(218	)
Utilities		10,801			8,855
Computer network services		296			720
Computer server/internet fees		1,502			947
Advertising/domain registration		4,570			214
Telephone		3,188			8,899
Travel, meals and entertainment		5,289			4,105
Sales & marketing & R&D		791			2,124
Insurance		18,710			11,607
Postage/printing		944			2,078
Bank service fees		2,604			1,363
Office/computer supplies		4,643			1,879
Automobile expenses		4,184			2,542
Dues & subscriptions		-			184
Taxes/licenses & permits		66			4,531
Penalties & interest		13,459			407
Bad debt expense		1,865			21,556
Other expenses/(income)		(4,910	)		(7,533	)
	$	355,488		$	194,858

Selling, general and administrative expenses for the six month period ended December 31, 2011 increased as compared to the comparative period in 2010 primarily due to our company’s restoration of payment to our officers due to the increase in the business operations and results, the execution of the teaming and employment agreement and the hiring of Mr. Gilliam pursuant to the teaming and employment agreement.

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 from our revolving line of credit, equity sales and/or further shareholder loans and advances to mitigate the effects 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/
		2011			2011		(Decrease)

Current Assets	$	253,404		$	427,013		(40.6%	)
Current Liabilities		824,175			1,010,449		18.4%
Working Capital (deficit)	$	(570,771	)	$	(583,436	)	2.2%

Cash Flows		Six months ended
		December 31,			December 31,
		2011			2010

Net cash (used in) operating activities	$	128,850		$	(65,269	)
Net cash (used in) by investing activities		(3,470	)		(6,064	)
Net cash flow provided by (used in) financing activities		(106,270	)		51,287
Increase (decrease) in cash and cash equivalents	$	19,110		$	(20,046	)

Our cash on hand at December 31, 2011 was approximately $32,000. 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 $40,000 to $60,000 per month. In the short term we anticipate relying on cash flows from operations and our revolving line of credit facility and managing our expenses for the purpose of proceeding with our plan of operations.

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.

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

Going Concern

Because of our historical losses, we may require additional working capital and long term capital to develop our business operations. We intend to use borrowings from our revolving line of credit facility, equity sales and/or future shareholder loans and advances from related parties to mitigate the effects of our cash position.

The continuation of our business is dependent upon us maintaining a break even or profitable level of operations. There are no assurances that we will be able to either (i) maintain a level of revenues adequate to break even and generate sufficient cash flow from operations; or (ii) obtain additional financing to support our working capital requirements. To the extent that funds generated from operations and debt financing are insufficient, we will have to raise additional capital through equity offerings. No assurance can be given that additional debt financing or equity infusion will be available, or if available, will be on terms acceptable to us. If adequate working capital is not available, we may not be able to 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 recorded assets and classification of liabilities that might be necessary should we be unable to continue as a going concern.

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

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities and 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 president (our principal executive officer, principal financial officer and ~~principle~~ principal accounting officer) to allow for timely decisions regarding required disclosure.

As of the end of our quarter covered by this report, we carried out an evaluation, under the supervision and with the participation of our president (our principal executive officer, principal financial officer and ~~principle~~ principal accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our president (our principal executive officer, principal financial officer and ~~principle~~ principal accounting officer) concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this quarterly report.

Changes in Internal ~~Control~~Controls ~~over~~Over Financial Reporting

~~There~~ During ~~have~~the ~~been~~period covered by this report there were no changes in our internal ~~controls~~control over financial reporting ~~that occurred during our quarter ended September 30, 2011~~ that ~~have~~ materially affected, or are reasonably likely to materially affect, our ~~internal~~ ~~controls~~internal control 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, ~~executive~~ officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our interest.

~~Item~~29 ~~1A. Risk Factors~~

~~Much~~Item ~~of the information included in this report includes or is based upon estimates, projections or other “forward-looking statements”~~1A. ~~Such~~Risk ~~forward-looking statements include any projections or estimates made by us and our management in connection with our business operations~~Factors. 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~~ Much ~~new~~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 bealmost always ~~subject~~vary, sometimes materially, from any estimates, predictions, projections, assumptions, or other future performance suggested herein. We undertake no obligation to aupdate ~~number~~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, ~~including~~in ~~those~~the ~~set~~future, ~~forth~~could materially ~~below:~~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.

~~Risks~~ Our ~~Related~~new Tobusiness ~~Our~~operations ~~Business~~will be subject to a number of risks and uncertainties, including those set forth below:

WeRisks ~~will~~Related ~~require~~To ~~significant~~Our ~~additional~~Business ~~financing, the availability of which cannot be assured, and if we are unable to obtain such financing, our business may fail.~~

~~Our~~We ~~business~~will ~~plan~~require ~~calls for~~ significant ~~expenses~~additional ~~necessary~~financing, tothe ~~continue~~availability ~~the~~of ~~development~~which ofcannot ~~our~~be ~~business~~assured, and ~~expand~~if ~~our~~we ~~position~~are inunable ~~the~~to ~~market.~~obtain such ~~There~~financing, ~~is no assurance that actual cash requirements will not exceed~~ our ~~estimates.~~ Webusiness may ~~need~~fail. ~~to raise additional funds to:~~

•Our ~~support~~business ~~our~~plan ~~planned~~calls ~~growth;~~for •significant ~~develop~~expenses ornecessary ~~enhance~~to continue ~~new~~the ~~and~~development ~~existing~~of ~~security~~our ~~products;~~business •and ~~increase~~expand our ~~marketing~~position ~~efforts;~~in •the ~~acquire~~market. There ~~complementary~~is ~~businesses,~~no ~~security~~assurance ~~products~~that oractual ~~technologies;~~cash ~~and/or~~requirements •will ~~respond~~not exceed our estimates. We may need to ~~competitive~~raise ~~pressures~~additional orfunds ~~unanticipated~~to: ~~requirements.~~

Wesupport ~~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~~planned 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.~~
Wedevelop ~~operate~~or inenhance anew ~~highly-competitive industry~~ and ~~our~~existing ~~failure to~~security ~~compete effectively may adversely affect our ability to generate revenue.~~products;
Weincrease ~~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~~efforts; 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~~acquire ofcomplementary ~~our competitors conduct more extensive promotional activities and offer lower prices to customers than we do~~businesses, ~~which~~security ~~could~~products ~~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~~/or ~~requirements.~~
24respond to competitive pressures or unanticipated requirements.

ToWe behave ~~successful~~not yet achieved sustainable positive cash flows. As such, we ~~must~~will ~~carry~~depend ~~out~~to a large extent on outside capital over the near-term to fund our ~~business~~capital ~~plan,~~needs. Such outside capital may be obtained from additional ~~establish~~debt and ~~strengthen~~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 ~~brand~~costs ~~awareness~~or, ~~through~~if ~~marketing~~the capital is available, ~~effectively~~that it will be on terms ~~differentiate~~acceptable ~~our~~to ~~product~~us. ~~line~~The ~~from~~issuance ~~those~~of additional equity securities by us would result in a dilution in the equity interests of our ~~competitors~~current ~~and~~shareholders. Obtaining ~~build~~commercial ~~our~~loans, assuming those loans would be available, will ~~distribution~~increase ~~network.~~our Toliabilities ~~achieve~~and ~~this~~future cash commitments. If we ~~may~~are ~~have~~unable to ~~substantially increase~~obtain ~~marketing~~financing ~~and~~in ~~research~~the amounts and ~~development~~on interms ~~order~~deemed acceptable to ~~compete~~us, ~~effectively.~~we ~~Such competition~~may ~~will~~be ~~potentially~~unable to ~~affect~~implement our ~~chances~~business ofand ~~achieving~~growth ~~profitability~~strategies, ~~and~~respond to changing business or ~~ultimately~~economic ~~adversely~~conditions, ~~affect~~withstand ~~our~~adverse ~~ability~~operating toresults, ~~continue~~consummate asdesired acquisitions aor ~~going~~compete ~~concern~~effectively.

~~Rapid~~We ~~technological~~operate ~~changes~~ in ~~our~~a highly-competitive industry ~~could~~and ~~render~~ our failure ~~security~~to ~~products~~compete oreffectively ~~services~~may ~~non-competitive~~adversely ~~or obsolete and consequently~~ affect our ability to generate ~~revenues~~revenue.

We ~~will~~are ~~derive~~aware ~~all~~ of ~~our~~similar ~~revenues from the sale, licensing or leasing of our~~ security products and services. ~~Such security products and~~which ~~services~~compete ~~are~~directly ~~characterized~~with ~~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~~and ~~meet~~some ~~customer~~of ~~demands.~~the companies Wedeveloping ~~expect~~these ~~new~~ security products and services tohave besignificantly greater ~~developed~~financial, technical and ~~introduced~~marketing byresources, ~~other~~larger ~~companies~~distribution ~~that~~networks, ~~compete~~and ~~with~~generate ~~our~~greater ~~security~~revenue ~~products~~ and ~~services.~~have ~~The~~greater ~~proliferation~~name ofrecognition ~~new~~than ~~and~~us. ~~established~~These companies ~~offering~~may ~~similar~~develop security products ~~and~~superior ~~services~~to ~~may reduce~~those ~~demand~~of ~~for~~ our ~~particular security products and services~~ company. ~~There~~Such ~~can~~competition ~~be no assurance that we~~ will bepotentially ~~successful~~affect inour ~~responding~~chances toof ~~these or other~~achieving ~~technological changes~~profitability, ~~to evolving industry standards or regulations or to new security products~~ and ~~services~~ultimately ~~offered~~adversely byaffect our ~~current~~ability ~~and future competitors. In addition, we may not have access~~ to ~~sufficient~~continue ~~capital~~as ~~for our research and~~a ~~development~~going ~~needs in order to develop new security products and services~~concern.

We30 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~~Some ~~success~~of ~~and~~our ~~ability~~competitors toconduct ~~compete~~more ~~depends~~extensive inpromotional activities ~~part~~and onoffer ~~our proprietary~~lower ~~technology~~prices ~~incorporated~~to incustomers ~~our~~than ~~security~~we ~~products.~~do, Ifwhich ~~any~~could ~~of our~~allow ~~competitors~~them ~~copy~~to ~~or otherwise~~ gain ~~access~~greater tomarket ~~our~~share ~~proprietary technology~~ or ~~develop~~ ~~similar~~prevent ~~technologies~~us ~~independently,~~from weincreasing ~~would~~our ~~not be able to compete as~~market ~~effectively~~share. WeIn ~~consider~~the ~~our~~future, ~~technologies~~we ~~invaluable~~may toneed ~~our ability~~ to ~~continue to~~decrease ~~develop~~our ~~and~~prices ~~maintain~~if ~~the goodwill and recognition associated with~~ our ~~brand.~~competitors ~~The~~continue ~~measures we take~~ to ~~protect~~lower ~~our~~their ~~technologies,~~prices. ~~and~~Our ~~other~~competitors ~~intellectual property~~may ~~rights,~~be ~~which~~able ~~presently~~to ~~are~~respond ~~based upon registered trademarks in~~more ~~addition~~quickly to ~~trade~~new ~~secrets,~~or ~~may~~changing ~~not~~opportunities, betechnologies ~~adequate~~and ~~to prevent their unauthorized~~customer ~~use~~requirements.

~~Although~~To webe ~~rely~~successful, inwe ~~part,~~must oncarry ~~contractual~~out ~~provisions to protect~~ our ~~trade~~business ~~secrets and proprietary know-how~~plan, ~~there is no assurance that these~~ ~~agreements~~establish ~~will~~and ~~not~~strengthen ~~be breached, that we would have adequate remedies for any breach or that~~ our ~~trade~~brand ~~secrets~~awareness ~~will~~through ~~not otherwise become known or be independently developed by competitors. Further~~marketing, ~~the laws of foreign countries~~effectively ~~may~~differentiate ~~provide inadequate protection of intellectual property rights. We may need to bring legal claims to enforce or protect~~ our ~~intellectual~~product ~~property~~line ~~rights. Any~~from ~~litigation,~~those ~~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~~competitors ~~property,~~and ~~other~~build ~~persons may bring~~our ~~claims~~distribution ~~against us claiming that we have infringed on their intellectual property rights, including claims that our intellectual property rights are not valid~~network. ~~Adverse~~ ~~determinations~~To inachieve ~~litigation~~this ~~in which~~ we may ~~become~~have ~~involved could subject us~~ to ~~significant~~substantially ~~liabilities to third parties, require us to grant~~increase ~~licenses~~marketing toand orresearch ~~seek licenses from third parties~~ and ~~prevent~~development usin ~~from manufacturing~~order ~~and~~to ~~selling~~compete ~~our security products~~effectively. ~~Any claims against us, with or~~Such ~~without~~competition ~~merit,~~will ~~could~~potentially beaffect ~~time-consuming~~our ~~and~~chances ~~costly~~of toachieving ~~defend or litigate~~profitability, ~~divert~~and ~~our~~ultimately ~~attention~~adversely ~~and~~affect ~~resources, result in the loss of goodwill associated with~~ our ~~trademarks~~ orability ~~require us~~ to ~~make~~continue ~~changes~~as ~~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~~going ~~is issued, it will provide meaningful protection against competitors or competitor technologies~~concern.

WeRapid ~~may~~technological ~~not~~changes bein ~~able~~our toindustry ~~hire~~could ~~and~~render ~~retain qualified personnel to~~our ~~support~~security ~~our~~products ~~growth~~or ~~and~~services ifnon-competitive ~~we are unable to retain~~ or ~~hire~~obsolete ~~such~~and ~~personnel in the~~consequently ~~future,~~affect our ability to ~~improve~~generate ~~our security products and services and implement our business objectives could be adversely effected~~revenues.

ToWe ~~continue~~will toderive ~~grow~~all of our revenues from the sale, welicensing ~~will~~or leasing ~~need~~of toour ~~recruit~~security ~~additional~~products ~~senior~~and services. Such security products and ~~management~~services ~~personnel~~are characterized and affected by rapid technological change, ~~including~~evolving industry ~~persons~~standards ~~with~~and ~~financial~~regulations and ~~sales~~changing ~~experience~~client preferences. InOur success ~~addition~~will depend, wein ~~must~~significant ~~hire~~part, ~~train~~upon our ability to make timely and cost-effective ~~retain~~enhancements aand ~~significant~~additions ~~number~~to ofour ~~other~~technology ~~skilled~~and to introduce new ~~personnel,~~security ~~including~~products ~~persons~~and services that meet customer demands. We expect new security products and services to be developed and introduced by other companies that compete with ~~experience~~our insecurity ~~sales~~products and ~~marketing~~services. WeThe ~~have~~proliferation of new ~~encountered~~and ~~competition~~established companies offering similar security products and services may reduce demand for ~~these~~our ~~personnel~~particular security products and services. WeThere ~~may~~can ~~not~~be no assurance that we will be ~~able~~successful in responding to ~~find~~these or other ~~retain~~technological ~~qualified~~changes, ~~personnel~~to evolving industry standards or regulations or to new security products and services offered by our current and future competitors. In addition, ~~which~~we may not have aaccess ~~material~~to ~~adverse~~sufficient ~~impact~~capital onfor our research and ~~business~~development needs in order to develop new security products and services.

We ~~have~~could alose ~~history~~our ofcompetitive ~~losses~~advantages ~~and~~if ~~negative~~we ~~cash~~are ~~flows,~~not ~~which~~able ~~is likely~~ to ~~continue~~protect ~~unless~~ our ~~security~~proprietary ~~products~~technology ~~gain~~and ~~sufficient~~intellectual ~~market~~property rights against ~~acceptance~~infringement, toand ~~generate~~any arelated ~~commercially~~litigation ~~viable~~could ~~level~~be oftime-consuming ~~sales.~~and costly.

~~Although~~Our wesuccess ~~anticipate~~and ~~that~~ability weto ~~will~~compete bedepends ~~able~~in topart ~~start~~on ~~generating~~our ~~increased~~proprietary ~~revenues~~technology ~~during~~incorporated ~~the~~in ~~next~~our 12security ~~months,~~products. weIf ~~also~~any ~~expect~~of anour competitors ~~increase~~copy ~~in development~~or ~~and~~otherwise ~~operating~~gain ~~costs.~~access ~~Consequently~~to our proprietary technology or develop similar technologies independently, we ~~expect~~would not be able to ~~incur~~compete ~~operating~~as ~~losses~~effectively. ~~and~~We ~~net~~consider ~~cash~~our ~~outflows~~technologies ~~unless~~invaluable ~~and~~to ~~until~~ our ~~existing~~ability ~~security~~to ~~products~~continue to develop and ~~services,~~ maintain the goodwill and orrecognition ~~any~~associated ~~new~~with ~~security~~our ~~products~~brand. The ~~that~~measures we ~~may~~take ~~develop~~to orprotect ~~acquire~~our technologies, ~~gain~~and other intellectual ~~market~~property ~~acceptance~~rights, ~~sufficient~~which topresently ~~generate~~are abased ~~commercially~~upon ~~viable~~registered ~~and~~trademarks ~~sustainable~~in ~~level~~addition ofto ~~sales~~trade secrets, may not be adequate to prevent their unauthorized use.

25Although 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.

We31 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.

AsWe amay ~~quality~~not ~~assurance~~be ~~and~~able ~~efficiency measure, we plan~~ to ~~manufacture~~ ~~our~~hire ~~own security products~~ and ~~additionally~~retain ~~contract~~qualified ~~some manufacturing~~personnel to support ~~third~~our ~~parties.~~growth Weand ~~could~~if bewe ~~adversely~~are ~~affected~~unable byto anretain ~~increase in our manufacturer’s prices of manufacturing services~~ or ahire ~~significant~~such ~~decline~~personnel in ~~our~~ ~~manufacturer’s financial condition. If~~ the future, ~~relationships~~our ~~with~~ability ~~any~~to ~~one~~improve of our ~~manufacturers~~ issecurity ~~terminated~~products and ~~we are not successful in establishing a relationship with an alternative manufacturer who offers similar~~ services ~~at similar~~and ~~prices,~~ implement our ~~results~~business ofobjectives ~~operations~~ could be adversely ~~affected, our business may fail and investors may lose their entire investment~~effected.

~~The~~To ~~limitation~~continue ofto ~~any~~grow, ~~one~~we ofwill ~~our~~need ~~manufacturers~~to ~~available~~recruit additional senior ~~manufacturing~~management ~~capacity~~personnel, ~~due~~including topersons ~~significant~~with ~~disruption~~financial inand ~~their~~sales ~~manufacturing~~experience. In ~~operation~~addition, ~~could~~we ~~have~~must hire, train and retain a ~~material~~significant ~~adverse~~number ~~effect~~of onother ~~sales~~skilled personnel, ~~revenue~~including persons with experience in sales and ~~results~~marketing. ofWe have ~~operations~~encountered ~~and~~competition ~~financial~~for ~~condition~~these personnel. We may not be able to find or retain qualified personnel, which may have a material adverse impact on our business.

We ~~will~~have bea ~~dependent~~history ~~upon third party manufacturers to produce some~~ of ~~our~~losses ~~security~~and ~~products.~~negative Ifcash ~~production~~flows, ~~at any one of our manufacturers~~which ~~manufacturing plant~~ is ~~disrupted~~likely ~~for any number of reasons, manufacturing yields may be adversely affected and we may be unable~~ to ~~meet~~continue ~~our~~unless ~~customer’s requirements. Consequently,~~ our ~~customers may purchase~~ security products ~~from our~~and ~~competitors.~~services ~~This~~gain ~~could~~sufficient market ~~result~~acceptance ~~in a significant loss of revenues and damage~~ to ~~our~~generate ~~customer~~a ~~relationships,~~commercially ~~which~~viable ~~could~~level ~~materially adversely affect our business, results~~ of ~~operations or financial condition~~revenues.

~~Unless~~As revenues increase, we ~~can~~will ~~establish~~expect ~~significant~~an ~~sales~~increase ofin ~~our~~development and ~~current~~operating costs. Consequently, we expect to incur operating losses and net cash outflows unless and until our existing security products and services, ~~our~~and or ~~potential~~any ~~revenues~~new security products that we may bedevelop ~~significantly~~or acquire, gain market ~~limited.~~acceptance sufficient to generate a commercially viable and sustainable level of revenues.

We ~~expect~~may ~~that~~be adependent ~~substantial~~upon ~~portion,~~third ifparty ~~not~~manufacturers ~~all, of our future~~to ~~revenue~~produce ~~will be derived from the licensing of~~ our security products ~~and services~~. We ~~expect~~could ~~that~~be ~~these~~adversely ~~security~~affected ~~products~~by ~~and~~an ~~services~~increase ~~and their~~in ~~extensions~~our ~~and~~manufacturers’ ~~derivatives~~services ~~will~~or ~~account for~~ a ~~majority,~~significant ifdecline 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~~manufacturers’ ~~offerings,~~financial ~~or any new product offerings, applications or enhancements~~condition. ~~Failure to~~As ~~achieve broad market acceptance of our security products, as~~ a result ~~of competition~~, ~~technological~~our ~~change,~~business ormay ~~otherwise,~~fail ~~would~~and ~~significantly~~investors ~~harm~~may ~~our~~lose ~~business~~their entire investment.

~~There~~As is a ~~high~~quality ~~risk~~assurance ofand ~~business~~efficiency ~~failure~~measure, ~~due~~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 ~~fact~~relationships with any one of our ~~that~~manufacturers is terminated and we ~~have~~are not ~~commenced~~successful ~~commercial~~in ~~operations~~establishing a relationship with ~~positive~~an ~~cash~~alternative ~~flow.~~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.

~~Although~~The welimitation ~~are in the early stages~~ of ~~developing~~any ~~and implementing~~one ~~the commercialization~~ of our ~~security~~manufactures ~~products and services, there~~available ismanufacturing nocapacity ~~assurance~~due ~~that we will be able~~ to ~~successfully~~significant ~~develop~~disruption ~~sales~~in oftheir ~~our~~manufacturing ~~security~~operation ~~products~~could ~~and services. Thus we~~ have noa ~~way~~material ofadverse ~~evaluating~~effect ~~whether~~on ~~we will~~sales berevenue ~~able to operate the business successfully,~~ and ~~there~~results ~~is no assurance~~of ~~that~~operations weand ~~will~~financial ~~be able to achieve profitable operations~~condition.

~~Potential~~We ~~investors~~will ~~should~~ be ~~aware~~dependent ofupon ~~the~~third ~~difficulties normally~~party ~~encountered~~manufacturers into ~~developing~~produce some ~~and~~of ~~commercializing~~our ~~new~~ security products. ~~and the~~If ~~high~~production ~~rate~~at ofany ~~failure~~one of ~~such~~our ~~enterprises.~~manufacturers manufacturing ~~The~~plant ~~likelihood~~is ofdisrupted ~~success~~for ~~must~~any ~~be considered~~number ~~in light~~ of ~~the problems~~reasons, ~~expenses,~~manufacturing ~~difficulties,~~yields may ~~complications~~be ~~and delays~~adversely ~~encountered~~affected inand ~~connection~~we ~~with~~may ~~the~~be ~~commercialization~~unable ~~process~~to ~~that~~meet weour ~~plan~~customer’s ~~to undertake~~requirements. ~~These~~Consequently, ~~potential~~our ~~problems~~customers ~~include,~~may ~~but~~purchase ~~are~~security ~~not~~products ~~limited to,~~from ~~unanticipated~~our ~~problems~~competitors. ~~relating~~This tocould ~~development,~~result ~~manufacture~~in ~~and~~a ~~financing~~significant loss of ~~our security~~revenues ~~products.~~and Ifdamage to weour ~~are~~customer ~~unsuccessful~~relationships, inwhich ~~addressing~~could ~~these~~materially ~~risks,~~adversely affect our business, ~~will~~results ~~most~~of ~~likely~~operations ~~fail.~~or financial condition.

IfUnless we ~~fail~~can toestablish ~~effectively~~significant ~~manage~~sales ~~our~~of ~~growth~~ our ~~future~~current ~~business~~security ~~results~~products ~~could be harmed~~ and services, our ~~managerial~~potential ~~and~~revenues ~~operational resources~~ may be ~~strained~~significantly limited.

AsWe weexpect ~~proceed~~that ~~with~~a substantial portion, if not all, of our future revenue will be derived from the ~~commercialization~~licensing of our security products and services,. weWe expect tothat ~~experience~~these ~~significant~~security products and ~~rapid~~services ~~growth~~and intheir ~~the~~extensions ~~scope~~ and ~~complexity~~derivatives ofwill ~~our~~account ~~business.~~for Wea ~~will~~majority, ~~need~~if tonot ~~add~~all, ~~staff~~of ~~to market~~ our revenue ~~security~~for ~~services,~~the ~~manage~~foreseeable ~~operations,~~future. ~~handle~~The ~~sales~~successful introduction and ~~marketing~~broad ~~efforts and~~market ~~perform~~acceptance ~~finance~~of ~~and~~our ~~accounting~~security ~~functions.~~products We- ~~will~~as bewell ~~required~~as tothe ~~hire~~development, ~~a broad~~introduction ~~range~~and market acceptance of ~~additional~~any ~~personnel~~future inenhancements ~~order~~- toare, ~~successfully~~therefore, ~~advance~~critical to our ~~operations. This~~future ~~growth~~success isand ~~likely~~our ability to ~~place~~generate arevenues. ~~strain~~Unfortunately, onthere can ~~our~~be ~~management~~no ~~and~~assurance ~~operational resources.~~that ~~The~~we ~~failure~~will tobe ~~develop~~successful ~~and~~in ~~implement~~marketing ~~effective~~our ~~systems~~current product offerings, or toany ~~hire and~~new ~~retain~~product ~~sufficient~~offerings, ~~personnel~~applications ~~for~~or ~~the~~enhancements. ~~performance~~Failure to ofachieve ~~all~~broad ofmarket ~~the~~acceptance ~~functions necessary~~of toour ~~effectively~~security ~~service~~products and ~~manage our potential business~~services, oras ~~the~~a ~~failure~~result toof ~~manage~~competition, ~~growth~~technological ~~effectively~~change, ~~could~~or ~~have~~otherwise, awould ~~materially adverse effect on~~significantly harm our business operations and ~~financial~~cash ~~condition~~flow.

~~Our~~32 ~~security products and services may become obsolete and unmarketable if we are unable to respond adequately to rapidly changing technology and customer demands~~

~~Our~~There ~~industry~~ is ~~characterized by rapid changes in technology and customer demands. As~~ a ~~result,~~high ~~our~~risk ~~security~~of ~~products~~business ~~and~~failure ~~services~~due ~~may quickly become obsolete and unmarketable. Our future success will depend on our ability~~ to ~~adapt~~the ~~to technological advances, anticipate customer demands, develop~~fact ~~new~~that ~~security~~we ~~products~~have ~~and~~not ~~services~~commenced ~~and~~commercial ~~enhance~~operations ~~our current security products and services on a timely and cost-effective basis. Further, our security products and services must remain competitive~~ with ~~those~~positive ofcash ~~other companies with substantially greater resources~~flow. ~~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,~~

26There is no assurance that we will be able to successfully develop and maintain 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 sustainable and profitable operations.

wePotential ~~may~~investors ~~not~~should be ~~able~~aware toof ~~adapt~~the ~~new~~difficulties normally orencountered ~~enhanced~~in developing and commercializing new security products or and services 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 are undertaking. These potential problems include, but are not limited to, ~~emerging~~unanticipated ~~industry~~problems ~~standards~~relating to development, manufacture and financing of our ~~new~~ security products or and services ~~may~~and ~~not~~maintaining bebusiness development ~~favorably received~~initiatives. If we are unsuccessful in addressing these risks, our business will most likely fail.

~~Demand~~If ~~for~~we fail to effectively manage our ~~security~~growth ~~products~~our ~~and~~future business ~~services~~results ~~might~~could be ~~insufficient~~ ~~for~~harmed usand toour ~~become~~managerial ~~profitable~~and operational resources may be strained.

WeAs ~~cannot~~we ~~predict~~proceed with ~~certainty~~ the ~~potential~~commercialization ~~consumer~~of ~~demand for~~ our security products orand services, orwe ~~the~~expect ~~degree~~ to ~~which~~experience wesignificant ~~will~~growth ~~meet~~in ~~that~~the scope ~~demand~~and complexity of our business. IfWe ~~demand~~will ~~for~~need ~~our~~to ~~security~~add ~~products~~staff orto market our security services, domanage ~~not~~operations, ~~develop~~handle ~~as expected~~sales and ~~achieve~~marketing ~~consumer~~efforts ~~market~~and ~~acceptance,~~perform finance weand ~~might~~accounting ~~not~~functions. We will be ~~able~~required to ~~generate~~ ~~enough~~hire ~~revenue~~a tobroad ~~become~~range ~~profitable~~of additional orpersonnel in order to ~~sustain~~successfully advance our operations. WeThis ~~plan~~growth is likely to ~~target~~place ~~the~~a ~~sale~~strain ofon our ~~security~~management ~~products~~ and ~~services~~operational ~~to four primary~~resources. ~~customer~~The ~~groups;~~failure ~~agricultural,~~to ~~commercial,~~develop ~~government,~~ and ~~residential.~~implement Weeffective ~~have based~~systems, ~~our~~or ~~strategy~~ to ~~target~~hire ~~these~~and ~~consumers~~retain sufficient onpersonnel afor ~~number~~the performance of ~~assumptions, some or~~ all of ~~which~~the ~~could~~functions ~~prove~~necessary to effectively beservice ~~incorrect.~~and ~~Even~~manage ifour ~~markets~~potential ~~for~~business, ~~our~~or ~~service~~the failure to manage ~~develop~~growth effectively, we could ~~achieve~~have a ~~smaller~~materially ~~share~~adverse ofeffect ~~these~~on ~~markets~~our ~~than~~business ~~we currently~~and ~~anticipate.~~financial condition.

~~Risks~~Our ~~Related~~security Toproducts ~~Our~~and ~~Common~~services ~~Stock~~may become obsolete and unmarketable if we are unable to respond adequately to rapidly changing technology and customer demands.

AOur ~~decline~~industry is characterized by rapid changes in ~~the~~technology and ~~price~~customer ofdemands. As a result, our ~~common~~security ~~stock~~products ~~could~~and ~~affect~~services may quickly become obsolete and unmarketable. Our future success will depend on our ability to ~~raise~~adapt ~~further~~to ~~working~~technological ~~capital~~advances, anticipate customer demands, develop new security products and ~~adversely~~services ~~impact~~and enhance our ~~operations~~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.

ADemand ~~prolonged~~for ~~decline in the price of~~ our ~~common~~security ~~stock~~products ~~could result in a reduction in the liquidity of our common stock~~ and aservices ~~reduction~~might ~~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~~insufficient infor ~~our ability to raise equity capital in the future would force~~ us to ~~reallocate~~ ~~funds~~become ~~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~~profitable. 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:

•We ~~actual~~cannot orpredict ~~anticipated~~with ~~variations~~certainty inthe potential consumer demand for our ~~quarterly~~security ~~operating~~products ~~results;~~or •services ~~announcements~~or ofthe ~~new~~degree ~~services,~~to ~~products,~~which ~~acquisitions~~we orwill ~~strategic~~meet ~~relationships~~that demand. byIf usdemand orfor our ~~competitors;~~security •products ~~changes~~or inservices ~~accounting~~do ~~treatments~~not develop as expected and achieve consumer market acceptance, we might not be able to generate enough revenue to become profitable or ~~principles;~~to •sustain ~~changes~~our inoperations. ~~earnings~~We plan ~~estimates~~to bytarget ~~securities~~the ~~analysts~~sale of our security products and inservices ~~analyst~~to ~~recommendations~~four primary customer groups; agricultural, commercial, government, and •residential. ~~general~~We ~~political~~have based our strategy to target these consumers on a number of assumptions, ~~economic~~some or all of which could prove to be incorrect. Even if markets for our service develop, ~~regulatory~~we ~~and~~could ~~market~~achieve ~~conditions~~a smaller share of these markets than we currently anticipate.

~~The~~33 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.

IfRisks weRelated ~~issue~~To ~~additional~~Our ~~shares~~Common ofStock ~~common stock in the future, it will result in the dilution of our existing shareholders~~

~~Subsequent~~A todecline 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. Ifcould weaffect ~~do issue any such additional~~our ~~shares~~ability ofto ~~common~~raise ~~stock,~~further ~~such~~working ~~issuance~~capital ~~also will cause a reduction in the proportionate ownership~~ and ~~voting~~adversely ~~power~~impact ~~of all other shareholders. Further, any such issuance may result in a change of control of~~ our ~~corporation~~ operations.

IfOn December 9, 2011 the Depository Trust Clearing Corporation (DTCC) placed a ~~market~~chill ~~for~~on our company’s stock and removed the ability for HS3 Technologies Inc. to trade electronically on the “Over the Counter Bulletin Board” (OTCBB). Management understands the DTCC decision was based on actions taken by the Security Exchange Commission (SEC) against the Regency Group. The SEC has no concerns or actions against HS3 Technologies Inc. that we are aware of or that have been communicated to us. The SEC’s ruling determined that Regency Group, the original holder of the certain shares in the predecessor entity (ZENO, which eventually became HS3Technologies Inc.) distributed shares in violation of ~~common~~the ~~stock~~Securities Act of 1933, as amended, and as a result the validity of such transfers are in question. Given that the SEC ruling that gave rise to the DTCC concerns does not ~~develop~~involve any action or finding against our company, management believes the chill by the ~~shareholders~~DTCC ~~may~~was bean ~~unable~~error toand ~~sell~~is ~~their~~working ~~shares~~to ofrectify ~~common~~that ~~stock~~position.

~~There~~A isprolonged ~~currently~~decline ain ~~limited~~the ~~market~~price ~~for~~of our common stock, ~~which~~could ~~trades~~result ~~through~~in ~~the~~a ~~Over-~~reduction in the~~-Counter~~ ~~Bulletin~~liquidity ~~Board~~of ~~quotation~~our ~~system.~~common ~~Trading~~stock ofand a reduction in ~~stock~~our ability to raise capital. Because our operations have been financed through the sale of equity securities, a decline in the ~~Over-~~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~~-Counter~~ ~~Bulletin~~future ~~Board~~would isforce ~~frequently~~us ~~thin~~to reallocate funds from other planned uses and ~~highly~~would have a significant negative ~~volatile~~effect on our business plans and operations, including our ability to develop new products and services and continue our current operations. ~~There~~If isthe stock price declines, there can be no assurance that awe can raise additional capital or generate funds from operations sufficient ~~market~~to ~~will~~meet ~~develop~~our inobligations. ~~the~~We believe the following factors could cause the market price of our common stock, into continue ~~which~~to ~~case~~fluctuate itwidely and could because ~~difficult~~our ~~for~~common ~~shareholders~~stock to ~~sell~~trade ~~their~~at ~~stock~~a price below the price at which you purchase your shares of common stock:

~~Trading~~actual ofor ~~our~~anticipated ~~stock~~variations ~~may~~in ~~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~~quarterly .operating results;
27announcements of new services, products, acquisitions or strategic relationships by us or our competitors;
~~The~~changes 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~~accounting oftreatments ~~$5,000,000~~ or ~~individuals with a net worth~~principles; 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~~changes ~~Financial~~in ~~Industry~~earnings ~~Regulatory~~estimates ~~Authority,~~by orsecurities ~~FINRA,~~analysts ~~has adopted~~and ~~sales~~in ~~practice requirements, which may limit a stockholder’s ability to~~analyst ~~buy~~ recommendations; and ~~sell our shares of common stock.~~
Ingeneral ~~addition to the “penny stock” rules described above~~political, ~~the FINRA has adopted rules that require that in recommending an investment to a customer~~economic, aregulatory 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~~conditions.

~~Other~~The ~~Risks~~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.

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

WeSubsequent ~~have~~to ~~sought~~shareholder toapproval ~~identify~~at ~~what~~our weNovember ~~believe~~4, to2009 annual bemeeting, our certificate of incorporation authorizes the ~~most~~issuance of ~~significant~~200,000,000 ~~risks~~shares of common stock. Our board of directors has the authority to issue ~~our~~additional ~~business,~~shares ~~but~~of wecommon ~~cannot~~stock ~~predict~~up ~~whether,~~to orthe authorized capital stated in the certificate of incorporation. Our board of directors may choose to ~~what~~issue ~~extent,~~some ~~any~~or all of such ~~risks~~shares ~~may~~of becommon ~~realized~~stock ~~nor~~to ~~can~~acquire weone ~~guarantee~~or ~~that~~more webusinesses ~~have~~or ~~identified~~to ~~all~~provide ~~possible~~additional ~~risks~~financing ~~that~~in ~~might~~the ~~arise~~future. ~~Investors~~The ~~should~~issuance ~~carefully~~of any such shares ~~consider~~of ~~all~~common stock will result in a reduction of the ~~risk~~book ~~factors~~value ~~before~~or ~~making~~market anprice ~~investment~~of the ~~decision~~outstanding ~~with respect~~shares toof 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.

We34 ~~may be unable to continue as a going concern in which case our securities will have little or no value.~~

~~Our~~If ~~independent~~a ~~auditors~~market ~~have~~for ~~noted in their report concerning~~ our ~~financial~~shares ~~statements as~~ of ~~June~~common ~~30,~~stock ~~2011~~does ~~that~~not ~~we have incurred substantial losses since inception~~develop, ~~which raises substantial doubt about our ability to~~ ~~continue~~shareholders asmay abe ~~going~~unable ~~concern. In the event we are not able~~ to ~~continue~~sell ~~operations you~~their ~~will~~shares ~~likely suffer a complete loss~~ of ~~your~~common ~~investment in our securities~~stock.

~~Our~~There ~~By-laws~~is ~~contain~~currently ~~provisions~~a ~~indemnifying~~limited market for our ~~officers~~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 ~~directors~~volatile. ~~against~~There ~~all~~is ~~costs~~no assurance that a sufficient market will develop in the stock, ~~charges~~in ~~and~~which ~~expenses~~case ~~incurred~~it bycould ~~them.~~be difficult for shareholders to sell their stock.

~~Our~~Trading ~~By-laws contain provisions with respect to the indemnification~~ of our ~~officers~~stock ~~and~~may ~~directors~~be ~~against~~restricted ~~all~~by ~~costs,~~the ~~charges~~Securities and ~~expenses,~~Exchange ~~including~~Commission’s anpenny ~~amount~~stock ~~paid~~regulations towhich ~~settle~~may anlimit ~~action or satisfy~~ a ~~judgment,~~stockholder’s ~~actually~~ability ~~and reasonably incurred by him, including an amount paid~~ to ~~settle~~buy ~~an action~~and orsell ~~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~~stock.

28The 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, 2011 that we have incurred substantial losses since inception, which raises substantial doubt about our ability to continue as a going concern.

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

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~~Mining ~~and~~Safety ~~Reserved]~~Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

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).
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).
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	Master Subcontract Agreement effective December 10, 2010 with Insight Direct USA, Inc. (incorporated by reference from our Current Report on Form 8-K filed April 28, 2011).
10.9	Teaming Agreement and Employment Agreement dated February 1, 2011 with Chester Gilliam (incorporated by reference from our Current Report on Form 8-K filed April 28, 2011).
(21)	Subsidiaries of the Registrant
21.1	ip-Colo, Inc.
(31)	Rule 13a-14(a)/15d-14(a) Certifications
31.1*	Section 302 Certification under the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer.
(32)	Section 1350 Certifications
32.1*	Section 906 Certification under the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer.

3036

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 Installment and Training Agreement dated December 20, 2005 (incorporated by reference from our Current Report on Form 8-K filed December 23, 2005).
10.4	Partnership Agreement with Wright-Hennepin Cooperative Electric Association (incorporated by reference from our Current Report on Form 8-K filed on June 11, 2007).
10.5	Distribution Agreement with Autostar Technology Private Limited (incorporated by reference from our Current Report on Form 8-K filed on April 4, 2007).
10.6	Warrant Purchase Agreement dated November 6, 2007 (incorporated by reference from our Current Report on Form 8-K filed on November 20, 2007).
10.7	Agreement with the American Humane Association (incorporated by reference from our Current Report on Form 8-K filed on August 14, 2008).
10.8	Master Subcontract Agreement effective December 10, 2010 with Insight Direct USA, Inc. (incorporated by reference from our Current Report on Form 8-K filed April 28, 2011).
10.9	Teaming Agreement and Employment Agreement dated February 1, 2011 with Chester Gilliam (incorporated by reference from our Current Report on Form 8-K filed April 28, 2011).
(21)	Subsidiaries of the Registrant
21.1	Ip-Colo, Inc.
(31)	Rule 13a-14(a)/15d-14(a) Certifications
31.1*	Section 302 Certification under the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer.
(32)	Section 1350 Certifications
32.1 *	Section 906 Certification under the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer.
101**	Interactive Data File
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

*	Filed herewith.

**	Furnished herewith. Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of any registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise are not subject to liability under those sections.

SIGNATURES

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

	HS3 TECHNOLOGIES, INC.
	(Registrant)
Dated: November 14, 2011	/s/ Mark Lana
Dated: February 10, 2012	/s/ Mark Lana
	Mark Lana
	Chief Executive Officer and Director
	(Principal Executive Officer, Principal Financial
	Officer and Principal Accounting Officer)

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