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Univ. of Toledo College of Law

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Tuesday, March 10, 2009

HS3 Technologies Settles Reverse Merger Charges

The SEC issued an Order Instituting Cease-and-Desist Proceedings Pursuant to Section 8A of the Securities Act of 1933, Making Findings, and Imposing a Cease-and-Desist Order against HS3 Technologies, Inc. (HS3).  The Order finds that, prior to a November 2005 reverse merger, HS3 was named Zeno, Inc. (Zeno) and ostensibly operated as an exploration-stage mining company, based in Vancouver, British Columbia, Canada. In August 2004, Zeno filed a Form SB-2/A amended registration statement with the Commission on behalf of shareholders seeking to resell restricted shares that they had bought directly from Zeno. In its registration statement, Zeno represented that the sale of shares would occur without the involvement of underwriters, and that Zeno would not receive any proceeds from the sale of these shares. In the November 2005 reverse merger, Zeno merged with a privately-held biotech startup, adopted the startup's business plan, replaced its own management with the startup's management, and changed its name to HS3.

The Order further finds that a stock promotion firm orchestrated the reverse merger as part of an agreement with the biotech startup to take the startup public and raise funds for implementation of its business plan. The stock promotion firm and its associates acted as underwriters for a distribution of shares listed in the Form SB-2/A registration statement by acquiring the majority of the shares listed in the registration statement and selling these shares to a network of investors, transferring $500,000 of the proceeds to HS3, in October 2005. HS3 participated in, and shared in the proceeds of, an unregistered distribution of its shares because the distribution that took place differed materially from the proposed sale of shares that HS3, under its previous name, Zeno, had registered with the Commission. No other registration statements were filed or in effect that applied to the distributed shares, and no exemption from registration applied. HS3 failed to verify whether the distribution of shares and its receipt of proceeds complied with representations made by prior management in the August 2004 Form SB-2/A.

Based on the above, the Order requires HS3 to cease and desist from committing or causing any violations and any future violations of Sections 5(a) and 5(c) of the Securities Act. HS3 consented to the issuance of the Order without admitting or denying the findings. In the Matter of HS3 Technologies, Inc.
(Rel. 33-9014; File No. 3-13404)

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