The accompanying notes are an integral part of these financial statements.

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The accompanying notes are an integral part of these financial statements.

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HVAC CONTROLS & SPECIALTIES, INC.

Notes to Financial Statements

June 30, 2011

NOTE 1 - CONDENSED FINANCIAL STATEMENTS

The accompanying financial statements have been prepared by the Company without audit.  In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at June 30, 2011, and for all periods presented herein, have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted.  The results of operations for the periods ended June 30, 2011 and 2010 are not necessarily indicative of the operating results for the full year.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 during the reporting period. Actual results could differ from those estimates.

Recent Accounting Pronouncements

The Company has evaluated recent accounting pronouncements and their adoption has not had or is not expected to have a material impact on the Company’s financial position, or statements.

NOTE 3 - RELATED PARTY NOTES PAYABLE

On August 2, 2007 (Note 1) and December 12, 2007 (Note 2), the Company entered into loan agreements with its sole shareholder.  Note 1 has an original principal balance of $79,750, is secured by the equipment of the Company, bears interest at 6%, and is due 10 years from issuance. Note 2 had an original principal balance of $51,534, is secured by the equipment of the Company, bears interest at 7% and is due five years from issuance.  Each note bears interest at 6% and 7%, respectively, and is unsecured.  Principal payments are at the discretion of the Company’s shareholder.

For the years ended December 31, 2010 and 2009, the Company paid $5,054 and $6,946 in interest related to these notes, respectively. The combined balance owed to the Company’s sole shareholder under these notes was $69,918 and $87,564, respectively.  

NOTE 4 - SUBSEQUENT EVENT

On September 7, 2011, the Company was acquired by Blue Earth, Inc. (“BBLU”). Pursuant to the terms and conditions of an Agreement and Plan of Merger (the “Plan”), BBLU purchased all of the capital stock of Company for a Purchase Price of $15,012,010 (the “Purchase Price”).  BBLU issued to the two shareholders of the Company an aggregate of 4,500,000 shares of restricted common stock, valued at $3.00 per share.  The shares are subject to a lock-up period whereby 1,000,000 of the shares are eligible for sale beginning one year from the closing date and the remaining 3,500,000 shares are eligible for sale commencing two years from the Closing Date.  The Company’s stockholders had previously acquired all of the shares of the Company owned by a former stockholder for $1,512,010 evidenced by a promissory note. BBLU paid the Company’s stockholders $10.00 and other good and valuable consideration for the right to assume payment to the former stockholder. BBLU has made two payments and will continue to make payments for up to 30 months to the former stockholder.  These shares are currently held in escrow and BBLU has the right to vote the shares while they are in escrow.

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