U.S.
      SECURITIES AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





FORM
      10-QSB





x
            QUARTERLY
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934
              for
                the period ended June 30, 2007





o
            TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934
              for
                the transition period from _______ to
                _______





Commission
      File No. 000-50701





HOUSERAISING,
      INC.


(Exact
      name of small business issuer as specified in its charter)





North
                Carolina
            56-2253025(State
                or other jurisdiction of
            (IRS
                Employer identification No.)incorporation
                or organization)





4801
      East Independence Blvd., Suite 201, Charlotte, North Carolina
      28212


(Address
      of principal executive offices)





(704)
      532-2121


(Issuer's
      telephone number)





Securities
      registered under Section 12(b) of the Act:





NONE





Securities
      registered under Section 12(g) of the Act:





Common
      stock (par value $.001 per share)




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





**APPLICABLE
      ONLY TO CORPORATE ISSUERS**





State
      the
      number of shares outstanding of each of the issuers’ classes of common equity,
      as of the latest practicable date:





Class
                of Stock
            
            Outstanding
                July 31, 2007Common
                Stock ($.001 par value)
            
            
            53,802,843Preferred
                Stock Class A ($.001 par value)
            
            
            1,000,000Preferred
                Stock Class B ($.001 par value)
            
            
            800,000Preferred
                Stock Class C ($.001 par value)
            
            
            700,000







REPORTS
      TO SECURITY HOLDERS





We
      are a
      reporting company under the requirements of the Securities Exchange Act of
      1934
      and will file quarterly, annual and other reports with the Securities and
      Exchange Commission. This quarterly report contains the required audited
      financial statements. We are not required to deliver a quarterly report to
      security holders and will not voluntarily deliver a copy of the quarterly report
      to security holders, except in connection with our annual meeting of
      shareholders. The reports and other information filed by us will be available
      for inspection and copying at the public reference facilities of the Commission,
      100 F Street, N.E., Washington, D.C. 20549.





Copies
      of
      such material may be obtained by mail from the Public Reference Section of
      the
      Commission at 100 F Street, N.E., Washington, D.C. 20549, at prescribed rates.
      Information on the operation of the Public Reference Room may be obtained by
      calling the SEC at 1-800-SEC-0330. In addition, the Commission maintains a
      World
      Wide Website on the Internet at http://www.sec.gov that contains reports, proxy
      and information statements and other information regarding registrants that
      file
      electronically with the Commission.








The
      rest of this page is left intentionally blank





2


HOUSERAISING,
      INC.


FORM
      10-QSB





For
      the
      Quarter ended June 30, 2007





TABLE
      OF
      CONTENTS





PageCautionary
              Statement and Risk Factors that May Affect Future Results
            
            4PART
                IITEM
                1.
            Selected
                Financial Statements
            
            5Balance
                Sheet - June 30, 2007 (unaudited)
            
            5Statements
                of Operations - Three Months Ended June 30, 2007 and 2006
                (unaudited)
            
            6Statements
                of Operations - Six Months Ended June 30, 2007 and 2006
                (unaudited)
            
            7Statements
                of Cash Flows - Six Months Ended June 30, 2007 and 2006
                (unaudited)
            
            8Notes
                to Financial Statements (unaudited)
            
            9ITEM
                2.
            Management’s
                Discussion and Analysis of Financial Condition and Plan of
                Operations
            
            21ITEM
                3.
            Controls
                and Procedures
            
            31PART
                IIITEM
                1.
            Legal
                Proceedings
            
            32ITEM
                2.
            Changes
                in Securities
            
            32ITEM
                3.
            Default
                Upon Senior Securities
            
            33ITEM
                4.
            Submission
                of Matters to a Vote of Security Holders
            
            33ITEM
                5.
            Other
                Information
            
            34ITEM
                6.
            Exhibits
                and Reports on Form 8-K
            
            36Signatures
            
            37





3


**Cautionary
      Statement and Risk Factors that May Affect Future Results**





This
      report and other presentations made by HouseRaising, Inc. (“HRI” or “Company”)
      and its subsidiaries contain “forward-looking statements,” which include
      statements that are predictive in nature, depend upon or refer to future events
      or conditions, and usually include words such as “expects,” “anticipates,”
“intends,” “plans,” “believes,” “will,” “predicts,” “estimates,” “we believe,”
“the Company believes,” “management believes” or similar expressions. In
      addition, any statements concerning future financial performance (including
      future revenues, expenses, earnings or losses or growth rates), ongoing business
      strategies or prospects and possible future actions are also forward-looking
      statements. Forward-looking statements are based on current expectations and
      projections about future events and are subject to risks, uncertainties and
      the
      accuracy of assumptions concerning HRI and its subsidiaries, the performance
      of
      the industries in which it does business and economic and market factors, among
      other things. **These
      forward-looking statements are not guarantees of future
      performance.**





Risks,
      uncertainties and other important factors that could cause actual results to
      differ materially from those in forward-looking statements and from historical
      results include, but are not limited to, the following:




·
            the
                effect of changes in international, national and local economic and
                market
                conditions, especially where our operations are conducted and where
                prospective purchasers of homes
                live;




·
            the
                effects of weather and natural disasters or global developments,
                including
                the effects of terrorist acts and war on terrorism, U.S. presence
                in Iraq
                and Afghanistan, potential conflict or crisis in North Korea or Middle
                East and potential avian flu pandemic, negatively affecting local
                homebuilding industry and adversely affecting new home installation
                market;




·
            the
                timing and extent of changes in interest rates and the shape of the
                yield
                curve;




·
            negative
                trends in residential homebuilding adversely affecting our
                business;




·
            actions
                by competitors that negatively affect us—the homebuilding market is
                extremely competitive, characterized by competition from a number
                of
                homebuilders in each market in which we operate, and there are few
                barriers to entry;




·
            no
                assurance that the Company will be able to recruit quality homebuilders
                and sales personnel in order to meet the goals set forth in its business
                plan and planned rollout of Zone operations, realty/broker, membership
                and
                disaster relief services;




·
            no
                assurance that anticipated acquisitions will materialize and/or be
                successfully integrated into
                operations;




·
            the
                risks of suffering losses that are uninsured—construction defect and home
                warranty claims arising in the ordinary course of business are common
                in
                the homebuilding industry and can be costly; it is possible that
                we may
                not maintain adequate insurance against these claims and may experience
                losses that could hurt our
                business;




·
            the
                effects of changes in accounting principles applicable to HRI and
                its
                subsidiaries;




·
            given
                the prominence of the automated design/build system in HRI’s operations
                and business plan, there is a risk that the automated design/build
                system
                may not completely fill builder needs or generate significant retail
                sales
                in the future;




·
            while
                the company has filed a patent registration to protect its intellectual
                property, until patent pending has been issued, HRI’s technology and
                software are at risk of being copied by
                competitors;




·
            HRI
                is an early stage company and our common stock trades on the
                over-the-counter market and is subject to high volatility; future
                sales of
                common stock could adversely affect the stock
                price;




·
            HRI
                provides S-8 shares as compensation for some services rendered which
                could
                impact stock volatility and future
                issuance;




·
            principal
                stockholders control business affairs which means investors will
                have
                little or no participation in
                business;




·
            the
                risk that an investor in the Company will never see a return on investment
                and the stock may become worthless;




·
            while
                the company has obtained capital through its line of credit with
                Wachovia
                Bank, there is the risk that the Company will be unable to obtain
                additional capital or unable to establish credit arrangements or
                extend
                existing arrangements on satisfactory terms, which would require
                it to
                curtail operations;




·
            to
                the extent additional capital is raised through the sale of equity
                and/or
                convertible debt securities, this could result in dilution to shareholders
                and/or increased debt service;




·
            we
                have never paid dividends and do not intend to pay dividends for
                the
                foreseeable future given need to retain earnings to finance the
                development and expansion of the
                business;




·
            federal
                and state governmental and regulatory actions, such as changes in
                laws,
                rules and regulations applicable to HRI and its subsidiaries (including
                changes in taxation, environmental laws and regulations, immigration
                laws,
                occupational safety and health acts, workmen’s compensation statutes,
                unemployment insurance and governmental fees and assessments);




·
            other
                risks or uncertainties described elsewhere in this report and in
                other
                periodic reports previously and subsequently filed by HRI or its
                predecessor company with the Securities and Exchange Commission
                (SEC).





Forward-looking
      statements speak only as of the date of the report, presentation or filing
      in
      which they are made. Except to the extent required by the federal securities
      laws, HRI and its subsidiaries undertake no obligation to publicly update or
      revise any forward-looking statements, whether as a result of new information,
      future events or otherwise.




4


**PART
      I**





**ITEM
      1. SELECTED FINANCIAL STATEMENTS**




**HouseRaising,
                Inc. and Subsidiaries****Consolidated
                Balance Sheet****June
                30, 2007**




**ASSETS**Current
                Assets:Cash
            
            $
            137,728Securities
                and Escrow
            
            
            11,609Excess
                costs over billings on uncompleted projects
            
            
            226,032Prepaid
                Expenses
            
            
            1,119,444Accounts
                Receivable
            
            
            22,665Total
                Current Assets
            
            
            1,517,478Property
                and Equipment:Property
                and Equipment
            
            
            674,930Accumulated
                Depreciation
            
            
            (218,953
            )Total
                Furniture and Equipment
            
            
            455,977Capitalized
                Software:Capitalized
                Software
            
            
            14,577,344Accumulated
                Depreciation
            
            
            (457,432
            )Total
                Capitalized Software
            
            
            14,119,912Other
                Assets
            
            
            136,986TOTAL
                ASSETS
            
            $
            16,230,353**LIABILITIES
                AND STOCKHOLDERS' EQUITY**Current
                Liabilities:Line
                of Credit
            
            $
            6,274,109Current
                Maturities of Notes Payable
            
            
            20,668Interest
                Payable
            
            
            12,136Accounts
                Payable and Other Payables
            
            
            174,836Total
                Liabilities
            
            
            6,481,749Stockholders'
                EquityPreferred
                Stock Class A-Convertible ($.001 par value; 1,000,000
                authorized;1,000,000
                issued and outstanding)
            
            
            1,000Preferred
                Stock Class B-Convertible ($.001 par value; 800,000
                authorized;800,000
                issued and outstanding)
            
            
            800Preferred
                Stock Class C-Convertible ($.001 par value; 700,000
                authorized;700,000
                issued and outstanding)
            
            
            700Common
                Stock ($.001 par value; 100,000,000 authorized;53,671,423
                issued and outstanding)
            
            
            53,671Common
                Stock Subscribed but not Issued
            
            
            1,589,437Paid
                in Capital
            
            
            19,958,394Retained
                Deficit
            
            
            (11,855,398
            )`Total
                Stockholder’s Equity
            
            
            9,748,604Total
                Liabilities and Stockholders' Equity
            
            $
            16,230,353





5




**HouseRaising,
                Inc. and Subsidiaries****Consolidated
                Statement of Operations****For
                the three months ended June 30, 2007 and 2006**2007
            
            2006**SALES
                AND COST OF SALES**Sales
            
            $
            294,456
            
            $
            233,330Gross
                Profit
            
            
            108,103
            
            
            63,066**OTHER
                REVENUES**Realty
                Income
            
            
            81,546
            
            
            0Other
                Income
            
            
            2,205
            
            
            0Total
                Other Revenues
            
            
            83,751
            
            
            0GROSS
                MARGIN
            
            
            191,854
            
            
            63,066**EXPENSES**Selling,
                general and administrative
            
            
            807,656
            
            
            497,894Consulting,
                professional fees, and salaries--stock based comp
            
            
            365,095
            
            
            289,519Interest
            
            
            119,824
            
            
            47,493Depreciation
            
            
            250,584
            
            
            8,421TOTAL
                EXPENSES
            
            
            1,543,159
            
            
            843,327Net
                Loss
            
            $
            (1,351,305
            )
            $
            (780,261
            )Net
                (loss) per share--basic and fully diluted
            
            
            (0.03
            )
            
            (0.02
            )Weighted
                average shares outstanding
            
            
            52,849,651
            
            
            47,577,610




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





6





**HouseRaising,
                Inc. and Subsidiaries****Consolidated
                Statement of Operations****For
                the six months ended June 30, 2007 and 2006**2007
            
            2006**SALES
                AND COST OF SALES**Sales
            
            $
            314,568
            
            $
            510,966Gross
                Profit
            
            
            128,215
            
            
            129,519**OTHER
                REVENUES**Realty
                Income
            
            
            120,504
            
            
            0Other
                Income
            
            
            6,705
            
            
            0Total
                Other Revenues
            
            
            127,209
            
            
            0GROSS
                MARGIN
            
            
            255,424
            
            
            129,519**EXPENSES**Selling,
                general and administrative
            
            
            1,575,474
            
            
            947,555Consulting,
                professional fees, and salaries--stock based comp
            
            
            946,160
            
            
            431,468Interest
            
            
            265,802
            
            
            78,324Depreciation
            
            
            496,309
            
            
            16,863TOTAL
                EXPENSES
            
            
            3,283,745
            
            
            1,474,210Net
                Loss
            
            $
            (3,028,321
            )
            $
            (1,344,691
            )Net
                (loss) per share--basic and fully diluted
            
            
            (0.06
            )
            
            (0.03
            )Weighted
                average shares outstanding
            
            
            52,309,937
            
            
            46,477,559




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




7





**HouseRaising,
                Inc. and Subsidiaries****Consolidated
                Statements of Cash Flows****For
                the three months ended June 30, 2007 and 2006**2007
            
            2006CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                loss
            
            $
            (3,028,321
            )
            $
            (1,344,691
            )Adjustments
                to reconcile net loss to net cash provided by (used in)operating
                activities:Value
                of Stock issued for services deducted as expenses (non cash
                item)
            
            
            946,160
            
            
            877,178Depreciation
            
            
            496,309
            
            
            16,863(Increase)/Decrease
                in Capitalized Software
            
            
            (425,388
            )
            
            (769,534
            )(Increase)/Decrease
                in Accounts Receivable
            
            
            477,335
            
            
            (157
            )(Increase)/Decrease
                in Excess Costs Over Billings on UncompletedContracts
            
            
            (5,522
            )
            
            (85,754
            )(Increase)/Decrease
                in Other Assets
            
            
            (82,786
            )
            
            -Increase/(Decrease)
                in Interest payable, accounts Payable & other accruals
            
            
            13,330
            
            
            (36,583
            )NET
                CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
            
            
            (1,608,883
            )
            
            (1,342,678
            )CASH
                FLOWS FROM INVESTMENT ACTIVITIES:Investment
                in subsidiary operations
            
            
            (15,000
            )
            
            (17,804
            )Purchase
                of property and equipment
            
            
            (240,892
            )
            
            (26,119
            )NET
                CASH PROVIDED BY (USED IN) INVESTMENT ACTIVITIES
            
            
            (255,892
            )
            
            (43,923
            )CASH
                FLOWS FROM FINANCING ACTIVITIES:Proceeds
                from sale of common stock
            
            
            100,000
            
            
            525,946Reduction
                in Common Stock Subscribed but not Issued
            
            
            (217,825
            )
            
            -Principal
                Reductions on Notes Payable
            
            
            (221,035
            )
            
            -Increase/(Decrease)
                in borrowings on Line of Credit
            
            
            2,222,000
            
            
            643,035NET
                CASH PROVIDED BY (USED IN) INVESTMENT ACTIVITIES
            
            
            1,883,140
            
            
            1,168,981NET
                INCREASE IN CASH ANDCASH
                EQUIVALENTS
            
            
            18,365
            
            
            (217,620
            )CASH
                AND CASH EQUIVALENTS:Beginning
                of Period
            
            
            167,702
            
            
            292,383End
                of period
            
            $
            149,337
            
            $
            74,763SUPPLEMENTAL
                DISCLOSURES OF CASH FLOW INFORMATION:CASH
                PAID DURING THE PERIOD FOR:Interest
            
            $
            265,802
            
            $
            78,324NON-CASH
                OPERATING ACTIVITIES:Value
                of Stock and Warrants issued in exchange for services
            
            $
            946,160
            
            $
            877,178Value
                of Preferred Stock issued in exchange for services
                (prepaid)
            
            $
            1,119,444Value
                of Common Stock issued for additions to Capitalized
                Software
            
            $
            195,000Value
                of Preferred Stock issued for additions to Capitalized
                Software
            
            $
            234,000
            
            $
            78,750NON-CASH
                FINANCING ACTIVITIES:Value
                of Common Stock issued for debt converted to stock
            
            $
            212,401




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




8




**NOTE
      A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**





Business
      Activity —HouseRaising,
      Inc. and Subsidiaries is in the business of selling, designing and managing
      design/build and renovation projects and home building solutions in the
      residential homebuilding market for homebuyers and homebuilders. HouseRaising,
      Inc. merged into Technology Connections, Inc. and changed the name to
      HouseRaising, Inc. (The Company).





The
      Company provides a proprietary turnkey home design and build management system
      that it markets to regional homebuilders. Its customers are principally located
      in the Southeast USA with a current concentration in North and South Carolina
      and the Gulf Coast.





The
      following is a list of all subsidiaries of the Company:


HouseRaisingAcademy,
      LLC (N.C. LLC)—8/9/2005 owned 100% by HouseRaising, Inc.


HouseRaisingMembership,
      LLC (N.C. LLC)—6/23/2006 owned 100% by HouseRaising, Inc.


HouseRaisingRealty,
      LLC (N.C. LLC)—12/12/2006 owned 100% by HouseRaising, Inc.


HouseRaising
      Disaster Relief, LLC (N.C. LLC)—6/15/2006 owned 100% by HouseRaising,
      Inc.


HouseRaisingUSA,
      LLC (Delaware LLC)—7/22/2003 owned 100% by HouseRaising, Inc.


HouseRaising
      of Georgia, LLC (G.A. LLC)—11/20/2006 owned 100% by HouseRaisingUSA,
      LLC


HouseRaising
      of Independence, LLC (N.C. LLC)—10/17/2006 owned 100% by HouseRaisingUSA, LLC
      [formerly known as


HouseRaising
      of the Carolinas, LLC]


HouseRaising
      of the Gulf Coast, LLC (M.S. LLC)—10/24/2006 owned 100% by HouseRaisingUSA,
      LLC


HouseRaising
      of Louisiana, LLC (L.A. LLC)—1/13/2006 owned 100% by HouseRaisingUSA,
      LLC


Trojan
      Custom Homes, LLC (L.A. LLC)—2/2/2007 owned 50% by HouseRaising of Louisiana,
      LLC


HouseRaising
      of the Carolinas, LLC (N.C. LLC)—5/23/2003 owned 100% by HouseRaising, Inc.
      [formerly known as


HouseRaising
      of Greater Charlotte, LLC]


Barrow-Hundley
      Homes, LLC (N.C. LLC)—1/30/2007 owned 50% by HouseRaising of the Carolinas,
      LLC


David
      Steele Homes, LLC (S.C. LLC)—3/22/07 owned 50% by HouseRaising of the Carolinas,
      LLC


Freeman
      Custom Homes, LLC (S.C. LLC)—3/12/07 owned 50% by HouseRaising of the Carolinas,
      LLC


Goodin
      Homes, LLC (N.C. LLC)—11/27/2006 owned 50% by HouseRaising of the Carolinas,
      LLC


Harris
      Homes, LLC (N.C. LLC)—1/30/2007 owned 50% by HouseRaising of the Carolinas,
      LLC


Hawn
      Homes, LLC (N.C. LLC)—1/30/2007 owned 50% by HouseRaising of the Carolinas,
      LLC


HouseRaising
      of Charleston, LLC (S.C. LLC)—2/23/2005 owned 100% by HouseRaising of the
      Carolinas, LLC


HouseRaising
      of Columbia, LLC (S.C. LLC)—2/23/2005 owned 100% by HouseRaising of the
      Carolinas, LLC


HouseRaising
      of Greenville, LLC (S.C. LLC)—2/23/2005 owned 100% by HouseRaising of the
      Carolinas, LLC


HouseRaising
      of Myrtle Beach, LLC (S.C. LLC)—2/23/2005 owned 100% by HouseRaising of the
      Carolinas, LLC


J.
      Stanley Homes, LLC (S.C. LLC)—PENDING owned 50% by HouseRaising of the
      Carolinas, LLC


McClennan
      Homes, LLC (N.C. LLC)—PENDING owned 50% by HouseRaising of the Carolinas,
      LLC


R.A.
      Lawrence Homes, LLC (S.C. LLC)—4/24/07 owned 50% by HouseRaising of the
      Carolinas, LLC


Robinson
      Custom Homes LLC (N.C. LLC)—3/9/07 owned 50% by HouseRaising of the Carolinas,
      LLC


R.S.
      Stover Homes, LLC (N.C. LLC)—PENDING owned 50% by HouseRaising of the Carolinas,
      LLC


West
      Custom Homes, LLC (N.C. LLC)—2/9/2007 owned 50% by HouseRaising of the
      Carolinas, LLC


White
      Homes, LLC (S.C. LLC)—2/13/2007 owned 50% by HouseRaising of the Carolinas,
      LLC





Some
      of
      these limited liability companies provide managerial services to the Company’s
      homebuilding operations. These limited liability companies operate within
      specific guidelines and operating procedures established by HouseRaising, Inc.
      documents and each homebuilder is required to be properly licensed. Each custom,
      design and built home is financed in the name of the homebuyer.





In
      2003,
      the Company formed 2 subsidiary companies, HouseRaising of Greater Charlotte,
      LLC (which subsequently changed its name to HouseRaising of the Carolinas,
      LLC)
      and HouseRaisingUSA, LLC for organizing and owning the regional limited
      liability companies which have been formed from 2005 to present. In 2005, the
      Company formed HouseRaisingAcademy, LLC to develop and manage the Company’s
      internet based E-Learning and Homebuilder Management System (named System C)
      which was completed at the end of 2006. In mid-2006, the Company formed two
      companies: HouseRaising Disaster Relief, LLC in response to the needs of various
      financial, insurance and government entities to respond to the rebuilding needs
      following disaster situations, such as occurred in the Gulf Coast, and
      HouseRaisingMembership, LLC as a means of providing custom home builders various
      services, including insurance, as part of their affiliation with HouseRaising.
      In late-2006, the Company formed HouseRaisingRealty, LLC in response to the
      need
      of homebuyers to not only build a new home, but also be able to secure a lot
      for
      the new home and sell their existing home. In late-2006, the Company formed
      HouseRaising of the Gulf Coast, LLC which serves as the zone operation for
      the
      Louisiana, Mississippi and Gulf Coast region. Numerous agreements have also
      been
      signed as 50% partnerships under the zone entities of HouseRaising of the
      Carolinas, LLC and HouseRaising of the Gulf Coast, LLC.




9




**NOTE
      A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)**





Cash
      and Cash Equivalents —For
      purposes of the Consolidated Statement of Cash Flows, the Company considers
      liquid investments with an original maturity of three months or less to be
      cash
      equivalents.





Management’s
      Use of Estimates —The
      preparation of consolidated 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 and disclosures of contingent assets and liabilities
      at
      the date of consolidated financial statements and the reported amounts of
      revenues and expenses during the reporting period. Actual results could differ
      from those estimates.





Revenue
      Recognition —The
      Company’s revenue is derived primarily from 1) providing general management of
      construction for new homes and renovation projects which reflect the home’s
      contract price, and 2) design and build management services (sales and service
      fee) to homebuilders and homebuyers on a percentage of such home’s contract
      price. In no event would the company record more than the home’s contract price
      for consolidation purposes in the event the company provides both general
      management and design/build services to the same project. Approximately 60%
      of
      the sales and service fee (which is typically 10% of the home’s contract price)
      is recognized in the initial construction stage. The balance of the Company’s
      management fee, approximately 40% of the sales and service fee is recognized
      at
      closing. Revenues and profits from general management of construction contracts
      are recognized on the completed-contract method and therefore when the project
      is completed (or closed). This method is used because financial position and
      results of operations do not vary significantly from those which would result
      from use of percentage-of-completion method and is conservative. A contract
      is
      considered complete when all costs except insignificant items have been incurred
      and the installation is operating according to specifications or has been
      accepted by the customer. Contract costs include all direct materials and labor
      costs and those indirect costs related to contract performance, such as indirect
      labor, supplies, tools, repairs, and depreciation costs. General and
      administrative costs are charged to expense as incurred. Costs in excess of
      amounts billed are classified as current assets under costs in excess of
      billings on uncompleted contracts. Billings in excess of costs are classified
      under current liabilities as billings in excess of costs on uncompleted
      contracts.





Comprehensive
      Income (Loss) —The
      Company adopted Financial Accounting Standards Board Statement of Financial
      Accounting Standards (SFAS) No. 130, *“Reporting
      Comprehensive Income”* ,
      which
      establishes standards for the reporting and display of comprehensive income
      and
      its components in the consolidated financial statements. There were no items
      of
      comprehensive income (loss) applicable to the Company during the periods covered
      in the consolidated financial statements.





Capitalized
      Software —Certain
      capitalized software assets have been contributed to the Company from related
      entities under common ownership and control. The capitalized software assets
      include certain external direct costs of materials and services consumed in
      developing internal-use software (System C) for home plans and designs, and
      operating systems and policies for homebuilders. These costs include payroll
      and
      payroll-related costs for employees and contractors who are directly associated
      with and who devote time to the internal-use computer software project (to
      the
      extent of the item spent directly on the project) during the application
      development stage. Training costs, data conversion costs, internal costs for
      upgrades and enhancements, and internal costs incurred for maintenance are
      all
      expensed as incurred. General and administrative costs and overhead costs are
      also expensed as incurred. The Company commenced amortizing Capitalized Software
      (System-C) during the first quarter of 2007. The Capitalized Software will
      be
      amortized on a straight-line basis over the estimated economic life of the
      asset
      (determined to be 15 years) at a quarterly expense of approximately
      $229,000.





S-8
      Share Payments —The
      Company currently provides S-8 registered shares as compensation for many
      services rendered as a means of conserving cash until it obtains adequate debt
      or equity financing. The Company accrues the value of services rendered as
      an
      expense or capital expenditure (when it is readily determinable and meets the
      tests under FASB 123) instead of the stock price at the time the shares are
      transferred. Employees, consultants and vendors that receive such shares
      understand that there is risk associated with the volatility of the share
      price.





Advertising
      Costs —Advertising
      costs are expensed as incurred. The Company does not incur any direct-response
      advertising costs.





Net
      Loss per Common Share —Statement
      of Financial Accounting Standard (SFAS) No. 128 requires dual presentation
      of
      basic and diluted earnings per share (EPS) with a reconciliation of the
      numerator and denominator of the EPS computations. Basic earnings per share
      amounts are based on the weighted average shares of common stock outstanding.
      If
      applicable, diluted earnings per share would assume the conversion, exercise
      or
      issuance of all potential common stock instruments such as options, warrants
      and
      convertible securities, unless the effect is to reduce a loss or increase
      earnings per share. This presentation has been adopted for the period presented.
      There were no adjustments required to net loss for the period presented in
      the
      computation of diluted earnings per share.





10





**NOTE
      A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)**





Income
      Taxes —Income
      taxes are provided in accordance with Statement of Financial Accounting
      Standards (SFAS) No. 109, *“Accounting
      for Income Taxes.”* A
      deferred tax asset or liability is recorded for all temporary differences
      between financial and tax reporting and net operating
      loss-carryforwards.





Deferred
      tax assets are reduced by a valuation allowance when, in the opinion of
      management, it is more likely than not that, and some portion or the entire
      deferred tax asset will not be realized. Deferred tax assets and liabilities
      are
      adjusted for the effect of changes in tax laws and rates on the date of
      enactment.





Fair
      Value of Financial Instruments —The
      carrying amounts reported in the consolidated balance sheet for cash, accounts
      receivable and payable approximate fair value based on the short-term maturity
      of these instruments.





Accounts
      Receivable —Accounts
      deemed uncollectible are written off in the year they become uncollectible.
      During 2006, Accounts Receivable in the amount of $22,918 were deemed
      uncollectible and written off to bad debt expense.





Impairment
      of Long-Lived Assets —The
      Company evaluated the recoverability of its property and equipment, and other
      assets in accordance with Statements of Financial Accounting Standards (SFAS)
      No. 144, *“Accounting
      for the Impairment or Disposal of Long-Lived Assets”* which
      requires recognition of impairment of long-lived assets in the event the net
      book value of such assets exceeds the estimated future undiscounted cash flows
      attributable to such assets or the business to which such intangible assets
      relate.





Property
      and Equipment —Property
      and equipment is stated at cost. Depreciation is provided by the straight-line
      method over the estimated economic life of the property and equipment remaining
      from five to seven years.





Recent
      Accounting Pronouncements —In
      May
      2005, the Financial Accounting Standards Board issued Statement of Financial
      Accounting Standards (SFAS) No. 154 *“Accounting
      Changes and Error Corrections - a replacement of APB Opinion No. 20 and FASB
      Statement No. 3.”* This
      Statement replaces APB Opinion No. 20, “Accounting Changes”, and FASB Statement
      No. 3, “Reporting Accounting Changes in Interim Financial Statements” and
      changes the requirements for the accounting for and reporting of a change in
      accounting principle. This Statement applies to all voluntary changes in
      accounting principle.  It also applies to changes required by an accounting
      pronouncement in the unusual instance that the pronouncement does not include
      specific transition provision. When a pronouncement includes specific transition
      provisions, those provisions should be followed. The Company has no transactions
      that would be subject to SFAS 154.





In
      February 2006, the Financial Accounting Standards Board (FASB) issued Statement
      of Financial Accounting Standards (SFAS) No. 155, Accounting for Certain Hybrid
      Instruments-an amendment of FASB Statements No. 133 and 140. SFAS 155 allows
      financial instruments that have embedded derivatives to be accounted for as
      a
      whole if the holder elects to account for the whole instrument on a fair value
      basis. SFAS 155 eliminates the need to bifurcate the derivative from its host,
      as previously required under Statement of Financial Accounting Standards No.
      133, Accounting for Derivative Instruments and Hedge Accounting. SFAS 155 also
      amends SFAS 133 by establishing a requirement to evaluate interests in
      securitized financial assets to determine whether they are free standing
      derivatives or whether they contain embedded derivatives that require
      bifurcation. SFAS 155 is effective for all hybrid financial instruments acquired
      or issued by the Company on or after January 1, 2007. The Company does not
      anticipate any material impact to its financial condition or results of
      operations as a result of the adoption of SFAS 155.





In
      March
      2006, the Financial Accounting Standards Board issued Statement of Financial
      Accounting Standards (SFAS) No. 156, *“Accounting
      for Servicing of Financial Assets”* .
      SFAS
      156 addresses the accounting for recognized servicing assets and servicing
      liabilities related to certain transfers of the servicer’s financial assets and
      for acquisitions or assumptions of obligations to service financial assets
      that
      do not relate to the financial assets of the servicer and its related parties.
      SFAS 156 requires that all recognized servicing assets and servicing liabilities
      are initially measured at fair value, and subsequently measured at either fair
      value or by applying an amortization method for each class of recognized
      servicing assets and servicing liabilities. SFAS 156 is effective in fiscal
      years beginning after September 15, 2006. The adoption of SFAS 156 is not
      expected to have a material impact on our consolidated financial
      statements.





In
      June
      2006, the FASB issued FIN 48, “Accounting for Uncertainty in Income Taxes—an
      interpretation of FASB No. 109. This Interpretation clarifies the accounting
      for
      uncertainty in income taxes recognized in an enterprise’s financial statements
      in accordance with FASB No. 109, “Accounting for Income Taxes”. This
      interpretation prescribes recognition of threshold and measurement attribute
      for
      the financial statement recognition and measurement of a tax position taken
      or
      expected to be taken in a tax return. This interpretation also provides guidance
      on derecognition, classification, interest and penalties, accounting in interim
      periods, disclosure, and transition. This interpretation is effective for fiscal
      years beginning after December 15, 2006. Earlier application is permitted if the
      entity has not yet issued interim or annual financial statements for that fiscal
      year. The adoption of this standard is not expected to have a material effect
      on
      the Company’s results of operations or financial position.




11


**NOTE
        A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)**
 
 Recent
        Accounting Pronouncement (cont’d)


In
      September 2006, the FASB issued Statement No. 157, “Fair Value Measurements”.
      This Statement defines fair value, establishes a framework for measuring fair
      value in generally accepted accounting principles (GAAP), and expands
      disclosures about fair value measurements. This statement applies under other
      accounting pronouncements that require or permit fair value measurements, the
      Board having previously concluded in those accounting pronouncements that fair
      value is the relevant measurement attribute. Accordingly, SFAS No. 157 does
      not
      require any new fair value measurements. However, for some entities, the
      application of SFAS No. 157 will change current practice. This Statement is
      effective for fiscal years beginning after November 15, 2007, and all interim
      periods within those fiscal years. Earlier application is permitted if the
      entity has not yet issued interim or annual financial statements for that fiscal
      year. Early adoption of this standard is not expected to have a material effect
      on the Company’s results of operations or its financial position, but the
      Company is evaluating the Statement to determine what impact, if any, it will
      have on the Company.





In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      No.
      158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement
      Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R)” (“SFAS 158”).
      This statement requires balance sheet recognition of the funded status, which
      is
      the difference between the fair value of plan assets and the benefit obligation,
      of pension and postretirement benefit plans as a net asset or liability, with
      an
      offsetting adjustment to accumulate other comprehensive income in shareholders’
equity. In addition, the measurement date, the date at which plan assets and
      the
      benefit obligation are measured, is required to be the company’s fiscal year
      end. The Company currently Company is currently evaluating the Statement to
      determine what impact, if any, it will have on the Company.





**NOTE
      B—SUPPLEMENTAL CASH FLOW INFORMATION**





Supplemental
      disclosures of cash flow information for the years ended December 31, 2006
      and
      2005 are summarized as follows:





CASH
      PAID
      DURING THE YEARS FOR INTEREST AND INCOME TAXES:




**2006**
            
            **2005**Income
                Tax
            
            $
            -
            
            $
            -Interest
            
            $
            224,212
            
            $
            96,180




NON-CASH
      FINANCING ACTIVITIES:





**2006**
            
            **2005**Common
                stock issued for services
            
            $
            2,172,653
            
            $
            2,944,726




**NOTE
      C—INCOME TAXES**





Due
      to
      the operating loss and the inability to recognize an income tax benefit there
      from, there is no provision for current or deferred federal or state income
      taxes for the years ended December 31, 2006 and 2005.





Deferred
      income taxes reflect the net tax effects of temporary differences between the
      carrying amounts of assets and liabilities for financial reporting purposes
      and
      the amount used for federal and state income tax purposes.





The
      Company’s total deferred tax asset, calculated using federal and state effective
      tax rates, as of December 31, 2006 is as follows:





Total
                Deferred Tax Asset
            
            $
            1,277,000Valuation
                Allowance
            
            
            (1,277,000
            )Net
                Deferred Tax Asset
            
            $
            -




12




**NOTE
      C—INCOME TAXES (CONT’D)**





The
      reconciliation of income taxes computed at the federal statutory income tax
      rate
      to total income taxes for the years ended December 31, 2006 and 2005 is as
      follows:





**2006**
            
            **2005**Income
                tax computed at the federal statutory rate
            
            
            34
            %
            
            34
            %State
                income tax, net of federal tax benefit
            
            
            4
            %
            
            4
            %Total
            
            
            38
            %
            
            38
            %Valuation
                allowance
            
            
            -38
            %
            
            -38
            %Total
                deferred tax asset
            
            
            0
            %
            
            0
            %







Because
      of the Company’s lack of earnings history, the deferred tax asset has been fully
      offset by a valuation allowance. The valuation allowance increased (decreased)
      by $314,000 and $447,000 in 2006 and 2005, respectively. No tax benefits have
      been recorded for the nondeductible (tax) expenses (stock for services) totaling
      $5,467,379.





The
      Company has the following carryforwards available at December 31,
      2006:





**Amount**
            
            **Expiration**$
            729,624
            
            
            202251,002
            
            
            2023577,196
            
            
            20241,176,315
            
            
            2025826,705
            
            
            2026$
            3,360,842





**NOTE
      D—INSURANCE PROCEEDS AND RELATED ACCOUNTS RECEIVABLE**





In
      November 2006, the Company realized $500,000 in insurance proceeds payment
      as a
      result of the death of Robert V. McLemore, former President and founder of
      the
      Company. The payment was not received in 2006, so the Company booked an Accounts
      Receivable as the offset to the income realized. The cash payment was received
      in January 2007.





**NOTE
      E—SEGMENT REPORTING**





In
      June
      1997, the Financial Accounting Standards Board issued Statement of Financial
      Accounting Standards No. 131, *“Disclosures
      about Segments of an Enterprise and Related Information.”* This
      statement requires companies to report information about operating segments
      in
      interim and annual consolidated financial statements. It also requires segment
      disclosures about products and services, geographic areas and major customers.
      The Company determined that it did not have any separately reportable operating
      segments as of December 31, 2006 and 2005.





**NOTE
      F—EQUITY**





During
      2006, the Company issued 6,183,992 shares of its 100,000,000 authorized, $.001
      par Common Stock for various services, additions to Capitalized Software, and
      debt converted to equity, valued at $2,157,785.




During
      2006, the Company issued 800,000 shares of its 800,000 authorized, $.001 par
      stock Class B Preferred Stock for various services to 2 major shareholders,
      valued at $2,000,000.





During
      2005, the Company issued 8,125,652 shares of its 100,000,000 authorized, $.001
      par Common Stock for various services, valued at $5,151,871.





The
      following provides details of the restricted stock transactions for various
      services, additions to capitalized software and debt converted to equity. These
      transactions have been recorded according to FAX 123R.





Closing
                Price on**RESTRICTED
                SHARES**
            
            
            
            Issue
                Date
            
            Value
                of
            
            Basis
                forDate
                Issued
            
            
            Recipient
            
            #
                Shares
            
            Yahoo!
                Finance
            
            Transaction
            
            Valuation5/1/2007
            
            (f)
            Various
                individuals (Gift)
            
            26,000
            
            0.25
            
            6,500
            
            Share
                price5/1/2007
            
            (g)
            K.
                Michno
            
            27,207
            
            0.28
            
            7,500
            
            Value
                of Services6/6/2007
            
            (h)
            J.
                O'Connor
            
            25,000
            
            0.25
            
            6,250
            
            Value
                of Services6/6/2007
            
            (h)
            E.
                McLemore
            
            25,000
            
            0.25
            
            6,250
            
            Value
                of Services6/6/2007
            
            (h)
            D.
                Fogel
            
            25,000
            
            0.25
            
            6,250
            
            Value
                of Services6/6/2007
            
            (h)
            R.
                Burroughs
            
            25,000
            
            0.25
            
            6,250
            
            Value
                of ServicesShares
                Issued:
            
            153,207
            
            Quarter
                Total:
            
            39,000





(f)-1000
                shares for 26 independent contracts as holiday bonus(g)
                IR/Consulting expense for Karen Michno for quarter(h)-Director
                payment for 2nd quarter, 2007




13




The
      following provides details of the S-8 stock transactions for various services
      and additions to capitalized software. These transactions have been recorded
      according to FAX 123R.





**FREE
                TRADING STOCK**
            
            
            
            Closing
                Price onExpense/
            
            
            
            
            
            Issue
                Date
            
            Value
                of
            
            Basis
                forDate
                Issued
            
            Capital
            
            Recipient
            
            #
                Shares
            
            Yahoo!
                Finance
            
            Transaction
            
            Valuation4/9/2007
            
            Exp
            
            H.
                Martin
            
            62,711
            
            0.19
            
            11,915
            
            Value
                of Services5/11/2007
            
            Exp
            
            G.
                Wessling
            
            718,073
            
            0.24
            
            140,854
            
            Value
                of Services5/11/2007
            
            Cap
            
            R.
                V. McLemore Estate
            
            404,807
            
            0.26
            
            107,500
            
            Value
                of Contract5/11/2007
            
            Exp
            
            C.
                Carriker
            
            94,721
            
            0.22
            
            20,417
            
            Value
                of Services5/11/2007
            
            Cap
            
            G.
                Neerings
            
            96,653
            
            0.22
            
            20,833
            
            Value
                of Services5/11/2007
            
            Exp
            
            R.
                von Gnechten
            
            133,367
            
            0.23
            
            30,243
            
            Value
                of ServicesShares
                Issued:
            
            1,510,332
            
            Quarter
                Total
            
            331,762




**CONVERTIBLE
      PREFERRED STOCK**





As
      of the
      end of the fiscal quarter ended June 30, 2007, we had three authorized and
      outstanding series of Convertible Preferred Stock, as follows: (i) 1,000,000
      shares of issued and outstanding Class A Voting Convertible Preferred Stock;
      (ii) 800,000 shares of issued and outstanding Class B Voting Convertible
      Preferred Stock; and (iii) 700,000 shares of issued and outstanding Class C
      Voting Convertible Preferred Stock.. The terms and conditions of each series
      of
      Convertible Preferred Stock are as follows:





1.
            **Class
                A Voting Convertible Preferred Stock, $.001 par value**-
                Each share of the 1,000,000 issued and outstanding shares of Class
                A
                Voting Preferred Stock (the “Class A Preferred Stock”) is convertible, at
                the option of the holder, at any time after five years from the date
                of
                issuance thereof, into ten (10) shares of fully paid and non-assessable
                shares of common stock. The holders are not entitled to receive any
                dividend on the shares of Class A Preferred Stock. The holders are
                entitled to a liquidation preference in the amount of $1.00 per share
                of
                Class A Preferred Stock. The holders of Class A Preferred Stock are
                entitled to a class vote on any merger, sale of assets, combination
                or
                reorganization involving the corporation, or other fundamental corporation
                transaction involving the corporation, with the holders of Class
                A
                Preferred Stock having one vote per share. On all other matters,
                the Class
                A Preferred Stock votes with the common stockholders as one combined
                class, with the holders of the Class A Preferred Stock having ten
                (10)
                votes per share of such stock owned.. The corporation has agreed
                that it
                shall not, without the consent of the majority of the holders of
                Class A
                Preferred Stock: 1) take any action which would either alter, change
                or
                affect the rights, preferences, privileges or restrictions of the
                Class A
                Preferred Stock or increase the number of shares of such series or
                designate any other series of Preferred Stock; 2) increase the size
                of any
                equity incentive plan(s) or arrangements; 3) make fundamental changes
                to
                the business of the corporation; 4) make any changes to the terms
                of the
                Class A Preferred Stock or to the corporation’s articles of incorporation
                or By-Laws, including by designation of any stock; 5) create any
                new class
                of shares having preferences over or being on a parity with the Class
                A
                Preferred Stock as to dividends or assets, subject to certain exceptions;
                6) accrue any indebtedness in excess of $20,000,000; 7) make any
                change in
                the size or number of authorized directors; 8) repurchase any of
                the
                corporation’s common stock; 9) sell, convey or otherwise dispose of, or
                create or incur any mortgage, lien, charge or encumbrance on or security
                interest in or pledge of, or sell or lease back, all or substantially
                all
                of the property or business of the corporation or more than 50% of
                the
                stock of the corporation; 10) make any payment of dividends or other
                distributions or any redemption or repurchase of common stock or
                options
                or warrants to purchase common stock of the corporation or 11) make
                any
                sale of additional Class A Preferred Stock. Finally, the holders
                of Class
                A Preferred Stock and common stock voting together on combined class
                shall
                be entitled to elect the directors comprising the Board of Directors
                (and
                to fill any vacancies with respect thereto). Waivers of these covenants
                have been routinely granted, inasmuch as Robert V. McLemore, the late
                President of the corporation, and the Robert V. McLemore Family Trust,
                together own 612,123 shares of Class A Preferred Stock, representing
                61.2%
                of the outstanding shares.




14




2.
            **Class
                B Voting Convertible Preferred Stock, $.001 par value**-
                Each share of the 800,000 issued and outstanding shares of Class
                B Voting
                Preferred Stock (the “Class B Preferred Stock”) is convertible, at the
                option of the holder, at any time after three years from the date
                of
                issuance thereof, into ten (10) shares of fully paid and non-assessable
                shares of common stock. The holders are not entitled to receive any
                dividend on the shares of Class B Preferred Stock. The holders are
                entitled to a liquidation preference in the amount of $1.00 per share
                of
                Class B Preferred Stock. The holders of Class B Preferred Stock are
                entitled to a class vote on any merger, sale of assets, combination
                or
                reorganization involving the corporation, or other fundamental corporation
                transaction involving the corporation, with the holders of Class
                B
                Preferred Stock having one vote per share. On all other matters,
                the Class
                B Preferred Stock votes with the common stockholders as one combined
                class, with the holders of the Class B Preferred Stock having ten
                (10)
                votes per share of such stock owned.. The corporation has agreed
                that it
                shall not, without the consent of the majority of the holders of
                Class B
                Preferred Stock: 1) take any action which would either alter, change
                or
                affect the rights, preferences, privileges or restrictions of the
                Class B
                Preferred Stock or increase the number of shares of such series or
                designate any other series of Preferred Stock; 2) make fundamental
                changes
                to the business of the corporation; 3) make any changes to the terms
                of
                the Class B Preferred Stock or to the corporation’s articles of
                incorporation or By-Laws, including by designation of any stock;
                4) create
                any new class of shares having preferences over or being on a parity
                with
                the Class B Preferred Stock as to dividends or assets, subject to
                certain
                exceptions; 5) accrue any indebtedness in excess of $30,000,000;
                6)
                repurchase any of the corporation’s common stock; 7) sell, convey or
                otherwise dispose of, or create or incur any mortgage, lien, charge
                or
                encumbrance on or security interest in or pledge of, or sell or lease
                back, all or substantially all of the property or business of the
                corporation or more than 50% of the stock of the corporation; 8)
                make any
                sale of additional Class B Preferred Stock. Finally, the holders
                of Class
                B Preferred Stock and common stock voting together on combined class
                shall
                be entitled to elect the directors comprising the Board of Directors
                (and
                to fill any vacancies with respect thereto). Waivers of these covenants
                have been routinely granted, inasmuch as Robert V. McLemore, the
                late
                President of the corporation, and Gregory J. Wessling, the Chairman
                and
                CEO of the corporation, together own 7,000,000 shares of the Class
                B
                Preferred Stock, representing 87.5% of the outstanding
                shares.





3.
            **Class
                C Voting Convertible Preferred Stock, $.001 par value**-
                Each share of the 700,000 issued and outstanding shares of Class
                C Voting
                Preferred Stock (the “Class C Preferred Stock”) is convertible, at the
                option of the holder, at any time after three years from the date
                of
                issuance thereof, into ten (10) shares of fully paid and non-assessable
                shares of common stock. The holders are not entitled to receive any
                dividend on the shares of Class C Preferred Stock. The holders are
                entitled to a liquidation preference in the amount of $1.00 per share
                of
                Class C Preferred Stock. The holders of Class C Preferred Stock are
                entitled to a class vote on any merger, sale of assets, combination
                or
                reorganization involving the corporation, or other fundamental corporation
                transaction involving the corporation, with the holders of Class
                C
                Preferred Stock having one vote per share. On all other matters,
                the Class
                C Preferred Stock votes with the common stockholders as one combined
                class, with the holders of the Class C Preferred Stock having ten
                (10)
                votes per share of such stock owned.. The corporation has agreed
                that it
                shall not, without the consent of the majority of the holders of
                Class C
                Preferred Stock: 1) take any action which would either alter, change
                or
                affect the rights, preferences, privileges or restrictions of the
                Class C Preferred Stock or increase the number of shares of such
                series or designate any other series of Preferred Stock; 2) make
                fundamental changes to the business of the corporation; 3) make any
                changes to the terms of the Class C Preferred Stock or to the
                corporation’s articles of incorporation or By-Laws, including by
                designation of any stock; 4) create any new class of shares having
                preferences over or being on a parity with the Class C Preferred
                Stock as
                to dividends or assets, subject to certain exceptions; 5) accrue
                any
                indebtedness in excess of $30,000,000; 6) repurchase any of the
                corporation’s common stock; 7) sell, convey or otherwise dispose of, or
                create or incur any mortgage, lien, charge or encumbrance on or security
                interest in or pledge of, or sell or lease back, all or substantially
                all
                of the property or business of the corporation or more than 50% of
                the
                stock of the corporation; 8) make any payment of dividends or other
                distributions or any redemption or repurchase of common stock or
                options
                or warrants to purchase common stock of the corporation; or 9) make
                any
                sale of additional Class C Preferred Stock. Finally, the holders
                of Class
                C Preferred Stock and common stock voting together on combined class
                shall
                be entitled to elect the directors comprising the Board of Directors
                (and
                to fill any vacancies with respect thereto). Waivers of these covenants
                have been routinely granted, inasmuch as Gregory J. Wessling, Chairman,
                CEO and President of the corporation owns 500,000 shares of Class
                C
                Preferred Stock, representing 71.4% of the issued and outstanding
                shares
                of Class C Preferred Stock.





15





**NOTE
      G—WARRANTS**





The
      following table shows warrants that have been issued by the
      Company:





**#
                shares**
            
            **Price
                per Share**
            
            **Exercise
                Date**
            
            **Expiration
                Date****PPM
                warrants****issued:**500,000
            
            $0.50
            
            08/18/06
            
            08/18/10250,000
            
            $0.50
            
            09/09/06
            
            09/09/10190,000
            
            $0.50
            
            03/17/07
            
            03/17/1275,000
            
            $0.50
            
            03/14/07
            
            03/14/11100,000
            
            $0.50
            
            03/14/07
            
            04/30/1160,000
            
            $0.50
            
            03/23/07
            
            03/23/11100,000
            
            $0.50
            
            04/20/07
            
            04/20/11226,892
            
            $0.50
            
            05/15/07
            
            05/15/11500,000
            
            $0.50
            
            06/19/07
            
            06/19/11200,000
            
            $0.50
            
            01/08/08
            
            01/08/12**2,201,892****Various
                warrants****issued:**300,000
            
            $0.90
            
            05/13/05
            
            05/13/0920,000
            
            $0.50
            
            06/13/05
            
            06/13/10750,000
            
            $0.50
            
            06/23/06
            
            06/23/16750,000
            
            $0.50
            
            06/23/07
            
            06/23/17750,000
            
            $0.50
            
            06/23/08
            
            06/23/18750,000
            
            $0.50
            
            06/23/09
            
            06/23/1920,000
            
            $0.60
            
            07/13/05
            
            07/13/09950,000
            
            $0.90
            
            05/13/05
            
            05/13/102,584
            
            $1.24
            
            04/15/05
            
            04/15/102,584
            
            $1.24
            
            04/15/05
            
            04/15/106,000
            
            $1.24
            
            03/04/05
            
            03/04/106,000
            
            $1.24
            
            03/04/05
            
            03/04/10**4,307,168**





16




**NOTE
      G—WARRANTS (CONT’D)**





The
      following table shows the future warrants to consultants, independent
      contractors and employees that the Company will issue as of
      6/30/07:





**#
                shares**
            
            **Price
                per Share**
            
            **Exercise
                Date**
            
            **Expiration**
              **Date**
            
            **Vesting
                Term (yrs)**
            
            **Warrants
                vesting per year**
            
            **Warrants
                Vested as of**
              **12/31/06**
            
            **Warrants
                Vesting as of**
              **6/30/07**300,000
            
            $1.00
            
            01/08/03
            
            01/08/08
            
            5
            
            60,000
            
            240,000
            
            0100,000
            
            $0.50
            
            04/19/04
            
            04/19/09
            
            5
            
            20,000
            
            40,000
            
            20,000100,000
            
            $1.50
            
            11/01/04
            
            11/01/09
            
            5
            
            20,000
            
            40,000
            
            0100,000
            
            $1.50
            
            11/01/04
            
            11/01/09
            
            5
            
            20,000
            
            40,000
            
            05,000
            
            $1.24
            
            03/04/05
            
            03/04/10
            
            5
            
            1,000
            
            1,000
            
            1,0005,000,000
            
            $0.50
            
            Special
            
            06/23/15
            
            4
            
            1,250,000
            
            1,250,000
            
            05,000,000
            
            $0.50
            
            Special
            
            09/01/14
            
            4
            
            1,250,000
            
            1,250,000
            
            0500,000
            
            $1.75
            
            04/07/05
            
            04/07/15
            
            5
            
            100,000
            
            100,000
            
            100,000833,333
            
            $0.50
            
            02/01/07
            
            02/01/17
            
            2
            
            --
            
            833,333
            
            02,000,000
            
            $0.50
            
            02/01/07
            
            02/01/17
            
            3
            
            666,667
            
            0
            
            0800,000
            
            $0.50
            
            02/01/07
            
            02/01/17
            
            2
            
            --
            
            800,000
            
            01,200,000
            
            $0.50
            
            02/01/07
            
            02/01/17
            
            3
            
            400,000
            
            0
            
            0400,000
            
            $0.50
            
            02/01/07
            
            02/01/17
            
            2
            
            --
            
            400,000
            
            01,200,000
            
            $0.50
            
            02/01/07
            
            02/01/17
            
            3
            
            400,000
            
            0
            
            080,000
            
            $0.50
            
            10/31/05
            
            10/31/15
            
            5
            
            16,000
            
            16,000
            
            0200,000
            
            $0.50
            
            01/03/05
            
            01/13/15
            
            5
            
            40,000
            
            40,000
            
            40,00025,000
            
            $0.50
            
            01/01/05
            
            01/01/15
            
            5
            
            5,000
            
            10,000
            
            025,000
            
            $1.00
            
            01/01/05
            
            01/01/15
            
            5
            
            5,000
            
            10,000
            
            0250,000
            
            $0.50
            
            01/01/05
            
            01/01/15
            
            5
            
            50,000
            
            100,000
            
            0250,000
            
            $1.00
            
            01/01/05
            
            01/01/15
            
            5
            
            50,000
            
            100,000
            
            0250,000
            
            $0.50
            
            01/01/05
            
            01/01/15
            
            5
            
            50,000
            
            100,000
            
            0250,000
            
            $1.00
            
            01/01/05
            
            01/01/15
            
            5
            
            50,000
            
            100,000
            
            0250,000
            
            $0.50
            
            08/01/06
            
            08/01/16
            
            5
            
            50,000
            
            0
            
            0200,000
            
            $0.50
            
            05/08/06
            
            05/08/16
            
            4
            
            50,000
            
            0
            
            50,00040,000
            
            $0.00
            
            07/24/00
            
            N/A
            
            4
            
            --
            
            40,000
            
            050,000
            
            $1.20
            
            2003
            
            N/A
            
            5
            
            10,000
            
            40,000
            
            0250,000
            
            $0.50
            
            11/08/06
            
            11/08/16
            
            5
            
            50,000
            
            0
            
            0100,000
            
            $0.50
            
            01/02/07
            
            01/02/17
            
            5
            
            20,000
            
            0
            
            0500,000
            
            $0.50
            
            01/02/07
            
            01/02/17
            
            5
            
            100,000
            
            0
            
            0200,000
            
            $0.50
            
            12/02/06
            
            12/02/16
            
            5
            
            40,000
            
            0
            
            010,000
            
            N/A
            
            12/02/06
            
            12/02/16
            
            5
            
            2,000
            
            0
            
            0**21,468,333**




The
      fair
      value of each award is estimated on the date of vesting using the Black-Scholes
      option valuation model which uses the principal assumptions: expected volatility
      of 7%, expected dividends of 0%, expected terms of 10 years and risk-free
      interest rate of 4.5%. The expected volatility rate was estimated based on
      the
      daily historical volatility of the Company’s common stock over the previous 12
      month period. The expected term was estimated based on a simplified method,
      as
      allowed under SEC Staff Accounting Bulletin No. 107, averaging the vesting
      term
      and original contractual terms. The risk-free interest rate for periods within
      the contractual life of the option is based on U.S. Treasury securities. The
      pre-vesting forfeiture rate used for the period ended June 30, 2007 was assumed
      to be zero. As required under SFAS No. 123(R), we will adjust the estimated
      forfeiture rate to our actual experience. Management will continue to assess
      the
      assumptions and methodologies used to calculate estimated fair value of
      share-based compensation. Circumstances may change and additional data may
      become available over time, which could result in changes to these assumptions
      and methodologies, and thereby materially impact our fair value
      determination.




17





**NOTE
      H--NON-QUALIFIED STOCK COMPENSATION PLAN**





On
      July
      13, 2007, the Company adopted a 2007 Non-qualified Stock Compensation Plan
      (Stock Plan) where the Company may compensate key employees, advisors, and
      consultants by issuing them shares of its capital stock or options to purchase
      shares of its capital stock in exchange for services rendered and to be rendered
      and thereby conserve the Company’s cash resources. The Company has reserved
      3,500,000 shares of its $.001 par value Common Stock for these purposes. The
      Stock Plan will not exceed 30% of its outstanding common stock at any given
      time.





**NOTE
      I—COMMITMENTS/LEASES**





On
      November 1, 2005, HouseRaising entered into a Lease Agreement, extendable by
      the
      Company, whereby the Company agreed to lease the entire second floor at
      Independence Tower (approximately 11,000 square feet) located at 4801 E.
      Independence Boulevard, Charlotte, NC for an annual rent obligation of
      approximately $100,000. HouseRaising will utilize this additional space for
      estimators and designers recruited to support the Company’s Gulf Coast
      initiative and a sales and product display center to support operations in
      North
      and South Carolina. The space will continue to serve as corporate headquarters
      for HouseRaising, Inc. and HouseRaisingAcademy, which include the Company’s
      consolidation of its acquisition of LearnBytes, LLC, and the operations of
      HouseRaisingUSA, LLC (and its various subsidiaries), HouseRaisingMembership,
      LLC, HouseRaising Disaster Relief, LLC and HouseRaisingRealty, LLC.





Future
      minimum rental payments as of December 31, 2006 are as follows:





**Year**
            
            **Annual
                Amount**2007
            
            
            100,0002008
            
            
            100,0002009
            
            
            100,0002010
            
            
            100,0002011
            
            
            100,000





On
      November 27, 2006, HouseRaising of the Gulf Coast, LLC (“HR-Gulf Coast”), a
      subsidiary of HouseRaising, Inc., entered into a Lease Agreement with CSC
      Investments, LLC whereby HR-Gulf Coast agreed to lease space at 4024 and 4030
      (A-C) Canal Street, New Orleans, Louisiana to accommodate the Company’s new
      design center and continue its expansion efforts for its Gulf Coast operations
      in New Orleans. The Company entered into a five year agreement, commencing
      December 1, 2006 and expiring November 30, 2011 with a five year option to
      lease
      approximately 10,000 square feet for an annual rent of approximately $144,000.
      After the 36 th month of
      the lease, the Landlord can increase rent up to 2% annually. The Company will
      utilize this space for sales and product design center to support building
      and
      disaster relief operations in Louisiana, and provide space for builders,
      estimators and designers recruited to support the Company’s Gulf Coast
      operations. HouseRaising of the Gulf Coast, LLC also has established a small
      business office location in Gulfport, MS.





Future
      minimum rental payments as of December 31, 2006 are as follows:





**Year**
            
            **Annual
                Amount**2007
            
            
            144,0002008
            
            
            144,0002009
            
            
            144,2402010
            
            
            149,8182011
            
            
            140,080




In
      December 2005, the Company entered into a lease agreement for computer
      equipment. The monthly payments are $2,298.75 per month for 48 months starting
      June, 2006.





18




Future
      minimum rental payments as of December 31, 2006 are as follows:





**Year**
            
            **Annual
                Amount**2007
            
            
            27,5852008
            
            
            27,5852009
            
            
            27,5852010
            
            
            13,793





In
      October 2005, the Company entered into a lease agreement for computer hardware
      and software. The monthly payments are $560.68 per month for 24 months beginning
      December, 2005.





Future
      minimum rental payments as of December 31, 2006 are as follows:





**Year**
            
            **Annual
                Amount**2007
            
            
            6,167





In
      September 2005, the Company entered into a lease agreement for computer hardware
      and software. The monthly payments are $248.53 per month for 24 months beginning
      November, 2005.





Future
      minimum rental payments as of December 31, 2006 are as follows:





**Year**
            
            **Annual
                Amount**2007
            
            
            2,485





In
      May,
      2006, the company entered into a lease agreement for computer hardware and
      software. The monthly payments are $121.00 per month for 48 months beginning
      June, 2006.





Future
      minimum rental payments as of December 31, 2006 are as follows:





**Year**
            
            **Annual
                Amount**2007
            
            
            1,4522008
            
            
            1,4522009
            
            
            1,4522010
            
            
            726





**NOTE
      J—NOTES PAYABLE**





**Notes
      payable at June 30, 2007 consist of the following:**





Unsecured
                note payable to an unrelated party.Bearing
                8% interest.
            
            $
            5,640Unsecured
                note payable to an unrelated party.Bearing
                8% interest.
            
            $
            13,177Unsecured
                note payable to an unrelated party.Bearing
                0% interest.
            
            $
            1,851
                **Total
                Current Portion
            
            $
            20,668




19





**NOTE
      J—NOTES PAYABLE (CONT’D)**





*
On
      the 0%
      interest bearing notes, the Company imputed interest on the notes using a rate
      of 6%. The effects of these notes are included in the consolidated financial
      statements therein.





In
      February, 2007 the Company came to an debt to equity conversion agreement with
      its final bridge lender, which resulted in the issuance of 424,801 shares of
      common stock in exchange for a reduction of $212,401 in bridge loans and
      accumulated interest which eliminated the Secured note payable to an unrelated
      part in the amount of $155,000 bearing an interest rate of 15%.





**NOTE
      K—LINE OF CREDIT**





The
      Company has five separate lines of credit with Wachovia Bank, NA which total
      $8,100,000. The Company obtained a line of credit in the amount of $1,350,000
      with Wachovia Bank, NA. The interest rate on the line of credit is equal to
      1-month LIBOR plus 2.75%. All interest and principal are due on demand. In
      addition, the Company obtained a line of credit in the amount of $1,250,000
      with
      Wachovia Bank, NA with an interest rate of 1-month LIBOR plus 2.35% with all
      interest and principal due on September 30, 2007. In addition, the Company
      obtained an annually renewable line of credit in the amount of $4,000,000 with
      Wachovia Bank, NA with an interest rate of 1-month LIBOR plus 1.55% with a
      no-call provision and with all interest and principal due on February 8, 2008.
      In addition, the Company obtained a line of credit in the amount of $1,000,000
      with Wachovia Bank, NA with an interest rate equal to 1-month LIBOR plus 2.50%
      with all interest and principal due on May 31, 2008. In addition, the Company
      obtained a line of credit in the amount of $500,000 with Wachovia Bank, NA
      with
      an interest rate of 1-month LIBOR plus 2.35% with all interest and principal
      due
      on July 31, 2008. The Company’s total Line of Credit outstanding as of June 30,
      2007 was $6,274,109.





**NOTE
      L—NET LOSS PER COMMON SHARE**





The
      Company’s reconciliation of the numerators and denominators of the basic and
      fully diluted loss per share is as follows:








**For
                the Period Ended June 30, 2007****Income**
            
            **Shares**
            
            **Per-Share****(Numerator)**
            
            **(Denominator)**
            
            **Amount****Net
                Income/(Loss)**
            
            $
            (3,028,321
            )**Basic
                EPS**Income
                available to common stockholders
            
            
            (3,028,321
            )
            
            52,309,937
            
            $
            (0.06
            )**Effect
                of Dilutive Securities**Warrants
            
            
            -
            
            
            -Convertible
                preferred stock
            
            
            -
            
            
            -**Diluted
                EPS**Net
                Income/(Loss)
            
            $
            (3,028,321
            )
            
            52,309,937
            
            $
            (0.06
            )





20


**ITEM
      2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF
      OPERATIONS.**





**Management’s
      Discussion and Analysis of Financial Condition and Results of Operations for
      June 30, 2007**





*(The
      following discussion should be read in conjunction with the Financial Statements
      and related notes thereto included elsewhere in this section.)*





**HIGHLIGHTS
      OF RECENT ACTIVITIES**





·
            Signed
                agreements to build and develop approximately $24.8 million in new
                homes
                and remodeling contracts expected to be built over the next 12-24
                months,
                which is $21.8 million higher than a year ago and $18.8 million higher
                than year-end.


·
            Signed
                agreements for $8.5 million in new homes and remodeling contracts
                expected
                to be built over the next 12 months, which is $5.5 million higher
                than a
                year ago and $2.5 million higher than year-end;


·
            Signed
                development agreement that will generate approximately $16.3 million
                in
                new home construction (see Part II, Item 5 Other Matters) and realty
                sales
                commissions, which is 100% higher than a year ago and
                year-end.


·
            Signed
                operating agreements with more than ten (10) experienced homebuilders
                (Series 200 level) to develop local operations to build approximately
                10-20 homes annually; HouseRaising obtains signed sales agreement
                with
                customer and then the Company and builder operate a new jointly-owned
                limited liability company to build the new homes generatingservice
                fees and profits on completed projects (these home sales are not
                included
                in the $24.8 million figure noted above);


·
            Successfully
                launched HouseRaisingRealty, LLC to assist homebuyers in disposing
                of
                their existing homes or acquiring lots for their new custom homes.
                The
                company closed sales transactions over $2,888,051 generating $81,546
                in
                new revenues for the quarter and sales transactions year-to-date
                over
                $4,278,051 generating $120,504 in new revenues for the year versus
                none in
                the same period last year. As of the filing of this report,
                HouseRaisingRealty has:


·
            Closed
                additional sales transactions totaling $670,000 after the end of
                the
                quarter which will generate approximately $20,000 in commission income
                to
                the Company;


·
            Pending
                sales transactions totaling approximately $5.6 million which will
                generate
                approximately $185,000 in commission income to the Company;
                and


·
            Active
                listings for sales of approximately $3.5 million.


·
            As
                a result of the company fully implementing its business plan and
                starting
                to depreciate its Capitalized Software (System-C), the company had
                a net
                loss for the quarter of $1.35 million, up from $780,000 for the same
                period last year:


·
            For
                the quarter, the Company had $229,000 in additional depreciation
                expense
                for its Capitalized Software;


·
            The
                company is fully operational in the Gulf Coast, having leased and
                built
                out 10,000 square feet for the New Orleans Design Center/Offices
                and
                secured its builder’s license.


·
            Cultivated
                pipeline of interested prospective Builder Associate relationships
                (Series
                100 level to build approximately 3 custom homes a year) totaling
                more than
                80 individuals which are at various stages of discussions with the
                Company
                on establishing a relationship (there is no guaranty; however, these
                individuals will sign agreements).





**As
                of August 14, 2007**
            
            **As
                of August 14, 2006****Total
                Revenues**
            
            $441,777
            
            $510,966**Gross
                Margins**
            
            255,424
            
            129,519**HouseRaising
                Zone Operations**Signed
                contracts (new, remodel &development)
            
            $24.8
                million
            
            $3.0
                millionSales
                (closed contracts)
            
            $314,568
                (6-30-07)
            
            $510,966
                (6-30-06)**HouseRaisingRealty**Realty
                Income (commissions)
            
            $120,504
                (6-30-07)
            
            0
                (6-30-06)Closed
                sales transactions thru 6/30/07
            
            $4,278,051
                (6-30-07)
            
            0
                (6-30-06)Closed
                transactions since 6/30/07
            
            $670,000
                ($20k commissions)
            
            0
                (0)Pending
                sales transactions
            
            $5.6
                million (~$185k commissions)
            
            0
                (0)Active
                listings
            
            $3.5
                million
            
            0**HouseRaisingMembership**Series
                200 builders (10-20 homes each)
            
            10+
            
            0





21




**EXECUTIVE
      OVERVIEW & STRATEGY**





HouseRaising,
      Inc. is a fully operational company in the business of selling, designing and
      managing design/build and renovation projects and homebuilding solutions in
      the
      residential homebuilding market for homebuyers and homebuilders. HouseRaising’s
      core business is to create revenues and profits by building
      and constructing design/build residential homes and remodels
      throughuse of its proprietary software functioning exclusively
      within the custom homebuilding arena. The Company owns a proprietary invention
      created to alter and improve the way custom homes are designed and built. The
      invention serves to connect hundreds of small builders and thousands of vendors
      to homebuyers in a revolutionary process. The invention has been developed
      into
      internal-use software. This management software is used as a tool to define
      3,400 tasks in the designing and building process and as a school to cause
      precise steps to be performed in each task. In early 2005, the company filed
      US
      and International patent applications on its invention and started producing
      revenues utilizing the software in 2006.





On
      February 19, 2004, HouseRaising executed an Agreement and Plan of Merger (“the
      Merger”) to which HRI agreed to merge with and into Technology Connections, Inc.
      This transaction was structured as a reverse acquisition whereby the existing
      shareholders of HouseRaising obtained control of Technology Connections, Inc.
      and the resulting entity agreed to change its name to HouseRaising, Inc.. On
      August 31, 2004, the Merger was consummated when Articles of Merger were filed
      by the parties with the Secretary of State of North Carolina.





HouseRaising’s
      principal focus is implementing its business plan. Beginning in 2004,
      HouseRaising commenced sales of new home and renovation projects utilizing
      a
      manual version of the system through an operating subsidiary which confirmed
      its
      business model. In 2005, the Company focused its attention on completing its
      management software system, starting to use the system to manage new home and
      renovation projects and develop an operating team to implement its business
      plan.





In
      2006,
      the Company has commenced rolling out its Custom Homebuilding Operations in
      the
      Carolinas and Gulf Coast region, started marketing Builder memberships and
      affiliated Homebuilding Services. In addition, the Company customized a version
      of its software to facilitate managing disaster relief projects for the Gulf
      Coast region. The Company has established offices in Gulfport, Mississippi
      and
      New Orleans, Louisiana, where it has built out a design center and engaged
      executives to implement its programs in this region. In late 2006, the Company
      formed a real estate brokerage operation to help customers sell their home
      and
      purchase a lot to build a new home. The Company is rapidly increasing home
      sales
      in the Carolinas and Gulf Coast region and has signed more than ten operating
      agreements with experienced homebuilders to establish partnerships which are
      expected to rapidly increase custom homes sales in these regions (each
      partnership will seek to build ten to twenty custom homes annually). The company
      also has engaged numerous independent builder relationships that seek to build
      approximately three custom homes annually. The Company fully expects to continue
      engaging homebuilders in this capacity as its marketing efforts with
      homebuilders expand.





**How
      We Do It:**





HouseRaising
      was created to take advantage of the invention its founder designed to
      revolutionize the way custom homebuilding conducts business. Custom homebuilding
      is where homeowners purchase a lot and later design and build their dream home
      utilizing custom builders. It is generally accepted that about 9 out of every
      10
      companies that build custom homes eventually suffer financial losses and most
      of
      them fail. It is also commonly known that most homebuyers call the custom
      homebuilding experience a nightmare. Despite these terrible statistics, over
      500,000 families design and build custom homes each year, selecting a builder
      from a pool of approximately 250,000 builders nationally.





The
      old
      way homebuilders and buyers operate within the design/build industry is flawed.
      Extensive research into the design build industry has exposed that during the
      designing and building stages, each and every custom home project confronts
      1,269 critical problem points. HouseRaising owns these proprietary research
      materials. The issue is that builders and buyers are not aware of the critical
      problem areas and thus do little to nothing to prepare for handling them.
      Operating independently and on their own, experience has shown that builders
      and
      homebuyers cannot effectively solve these problems.





At
      a cost
      of over $14 million, HouseRaising developed 4 decades and thousands of custom
      homebuilding experiences into a management system and support process. The
      HouseRaising system represents a tried and proven method that provides users
      a
      way to manage the 1,269 critical problem points and emotional issues faced
      in
      every design/build project. Regardless of the price, style or location of the
      home under contract, the management process is the same. Through contracts,
      forms, reports and online educational components, the software automatically
      assigns precise steps and procedures that each party will follow. The 3,400
      task
      process functions behind the scenes to address and solve issues that caused
      the
      problems, thus allowing homebuyers and builders to build homes in a financially
      sound manner and as an enjoyable experience. HouseRaising’s system helps
      builders and homebuyers work together to build a home without the normal
      misunderstandings and conflicts created by unaddressed problems.




22





**Customer
      Value Proposition:**





HouseRaising
      reduces the cost of unique homes through its patent-pending Design & Price
      ModuleTM and management system. Additional savings occur from HouseRaising’s
      network of affiliated vendors on the national, zone and local levels. By
      combining the needs of thousands of small builders and homebuyers, HRI produces
      economies of scale that reduce direct and indirect costs of the project.
      Depending on the design structure selected by the homeowners, System C can
      lower
      the home’s total costs by up to 10%.





**HRI
      Revenue Streams:**





Due
      to
      technological advantages designed into its software, HouseRaising is a
      multi-faceted company with operating revenues from five separate sources and
      marketing strategies. Each revenue source serves the design/build segment of
      the
      homebuilding industry.





At
      the
      end of the day, HouseRaising creates revenues from managing custom home and
      renovation projects and those revenues are part of and included in the sales
      price of the homes. Portions of those revenues come from design/build and
      renovation projects, where we earn profits as the builder of the home. In
      projects where we act as general manager of the project and not the builder,
      we
      earn a set fee for providing management services. In addition to the revenues
      described above, our management platform vendors provide technical services
      such
      as sales and design consulting, architectural services, vendor coordinating
      services, financing and cash flow management services and managing construction
      and closing related issues. These platform vendors are compensated separately
      and are direct costs to the project. In providing these in-house vendors,
      HouseRaising is able to improve the quality of those services at lower costs
      compared to outside vendors. Similarly HouseRaising also creates revenues by
      offering services to governing agencies as well as directly to families and
      builders involved in disaster rebuilding efforts. Our realty brokerage operation
      earns commissions in helping customers sell their home, buy vacant land and/or
      buy a new home.





***(1)
      Revenues from Custom Homebuilding Operations:*** Operating within zone territories through a wholly-owned subsidiary,
      HouseRaisingUSA, LLC, HRI designs and builds custom homes and renovations for
      homeowners. The company has sales efforts underway in the Carolinas and the
      Gulf
      Coast. HouseRaising has identified an additional 30 potential zone locations
      nationally. Revenues represent the sales price of these projects as completed.
      Operating outside of established zone territories, HouseRaising performs the
      role of general manager of projects through associate builder relationships.
      On
      a national level, associate builders contract to have HouseRaising design,
      price
      and manage home projects with its system. The Company has established several
      operating programs that allow homebuilders to serve as builder partners as
      described below:




·
            Series
                100: Builder Associate Relationships (3-5 custom homes
                annually)




·
            Series
                200: Local Builder-Partner Relationships (5-20 custom homes
                annually)




·
            Series
                300: Regional Builder-Partner Relationships (30-50 custom homes
                annually)




·
            Series
                400: Zone Builder-Partner Relationships (100-300 custom homes
                annually)





The
      Company has recently signed operating agreements with experienced homebuilders
      to develop local operations in Charlotte, Wilmington, Albemarle, Calabash,
      Harrisburg and Mooresville, North Carolina; Beaufort and Sunset (near
      Charleston), Columbia and Greenville, South Carolina; Gulfport, Mississippi
      and
      Abita Springs, Baton Rouge and Kenner, Louisiana





***(2)
      Revenues from Realty Services:*** Operating within zone territories through a wholly-owned subsidiary,
      HouseRaisingRealty, LLC, HRI provides complete real estate brokerage services
      to
      help customers sell their existing home and secure a vacant lot as necessary
      and
      then build a new home through other HRI subsidiaries. HRI will generate
      additional income through commissions on such transactions.





***(3)
      Revenues from Disaster Relief Services:*** HouseRaising creates revenues by offering consulting services to governing
      agencies, as well as directly to families and builders involved in disaster
      rebuilding efforts. For a fee, our consultants develop sketches of workable
      plans, create detailed specifications, determine new building code requirements
      and assist in arranging financing for rebuilding homes. It is expected that
      a
      percentage of the consulting engagements will then become project management
      engagements whereby HouseRaising performs the role of general manager. This
      revenue stream represents consulting fees and fees charged as a percentage of
      the sales price of the project.





***(4)
      Revenues from Builder-Memberships:*** HouseRaising creates revenues by offering membership opportunities to the
      approximate 250,000 licensed homebuilders operating in the United States through
      a wholly-owned subsidiary, HouseRaisingMembership, LLC. HouseRaising believes
      that 25,000 homebuilders could reasonably become members and benefit from
      educational materials and financial advantages. Members receive savings through
      insurance programs and from economies of scale created by HouseRaising’s vendor
      relationships. This Internet-based revenue stream represents the price builders
      pay HouseRaising for memberships.




23





***(5)
      Revenues from HouseRaisingAcademy (“HRA”):*** HRA is a
      wholly-owned subsidiary that was formed through the acquisition of assets and
      intellectual capital of LearnBytes, LLC in mid-2005. HRA is focused on
      developing and managing HouseRaising’s unique managed service software. The
      Academy’s team of specialists and IT experts manage the Academy as a “tool” and
      a “school” utilized by HouseRaising entities on all projects. HRA receives a
      service fee on the price of all design/build projects. There will also be
      opportunities to earn fees through certifying builders and through seminar
      fees
      from both homebuyers and homebuilders who want to learn more about the custom
      homebuilding industry via the Internet.





**Market
      Potential:**





Management
      estimates that there is a substantial market for its design/build services,
      which will be accessed through affiliated relationships with small, hands-on
      builders who commit to conduct the business of building homes the HouseRaising
      way. The design/build sector of the homebuilding market represents about 500,000
      of the 1.6 million single-family homes built annually in the U.S. While the
      total number of single-family homes does fluctuate year-to-year depending on
      economic conditions, the design/build sector has remained very stable. Of the
      500,000 custom-home projects built by approximately 250,000 small builders
      in
      America each year, every one of them could benefit from HouseRaising’s managed
      services. A 1% share of this market equals approximately $2.5 billion in home
      sales. HouseRaising’s software system was built to serve at least a 1% market
      share of custom home projects.





**Who
      Pays HRI?:**





HouseRaising
      creates revenues from managing and building custom home and renovation projects.
      HRI is paid by the homebuyers as part of the total price of the design/build
      or
      renovation contract. All vendors operating in Management Platforms or providing
      products or services to the project are paid from the construction loan and
      down
      payment provided by homebuyers.





**HouseRaising’s
      trademark: “Straight, Level & Square®”:**





HouseRaising,
      Inc.’s trademark, “Straight, Level & Square®” stands for both the way the
      company deals with homebuyers, builders and vendors, and the quality of the
      products and services it provides. HouseRaising improves the quality of the
      home
      and provides better services. This combination reduces the cost of designing
      and
      building unique homes by up to 10%.





**Competition:**





The
      homebuilding business is highly competitive and fragmented. However,
      HouseRaising’s competition is not the large national home builders; we compete
      with the small craftsman or craftswoman builders that bid against other small
      builders for projects provided by customers. Currently, we know of no companies
      developing the type affiliations and support structure HouseRaising offers
      small
      builders.





**Regulation
      and Environmental Matters:**





Since
      HouseRaising does not develop subdivisions or communities, the company is less
      effected by environmental and regulation matters. We are subject to various
      local, state and federal statutes, ordinances, rules and regulations concerning
      zoning, building designs, construction and similar matters. In addition, we
      are
      subject to various licensing, registration and filing requirements in connection
      with construction, advertising and sale of design/build projects in our regional
      operations. We are also subject to a variety of local, state and federal
      statutes, ordinances, rules and regulations concerning protection of public
      health and the environment. We maintain a policy of engaging engineers and
      environmental consultants to evaluate certain sites located in environmental
      sensitive areas.





**Outlook
      for Homebuilding is Positive:**





The
      homebuilding industry has moderated the past couple years after enjoying record
      sales for close to a decade. Moderate interest rates coupled with population
      growth, forming millions of new households created record profits for the
      nation’s largest builders. HouseRaising’s research indicates that despite the
      recent decline in home sales nationally, that the custom homebuilding sector
      of
      the industry has shown resounding resilience of constructing about 500,000
      homes
      a year regardless of whether or not the overall industry has gone up or down.
      Furthermore, the markets HouseRaising serve (namely, the Carolinas and the
      Gulf
      Coast) remain very attractive. Whatever the outcome of interest rates and the
      economy, it is obvious that custom homebuilding should remain brisk for the
      foreseeable future.





24




**RESULTS
      OF OPERATIONS FOR THE QUARTER ENDED JUNE 30, 2007**





A
      breakdown of Company revenue streams for the quarter ended June 30, 2007 is
      provided below:





For
                Quarter Ending
              June
                30, 2007**HOUSERAISING
                REVENUE STREAM:****Revenues
                from Custom Homebuilding Operations:**
            
            $
            294,456**Revenues
                from Realty Services:**
            
            
            81,547**Revenues
                from Disaster Relief Services:**
            
            
            0**Revenues
                from Builder-Memberships:**
            
            
            1,000**Revenues
                from HouseRaisingAcademy:**
            
            
            0**Other
                Revenues:**
            
            
            1,205**TOTAL
                REVENUES**
            
            $
            378,207




**SALES
      AND COST OF SALES**





**Sales**


The
        Company had Sales (new home and renovation design/build sales) of $294,456
        for
        the three months ending June 30, 2007, compared to $233,330 for the same
        period
        in 2006. The s ales
        increase is principally due to the completion of two renovation projects
        and
        service fees generated from new projects signed during the quarter compared
        to
        the same period in 2006. As of the filing of this report, the Company has
        new
        contracts (new home, renovation and development contracts) totaling
        approximately $24,800,000 in sales that are projected to be completed over
        the
        next 12-24 months, which reflects a $21,800,000 increase from the number
        reported in our Quarterly Report on 10-QSB for the period ending June 30,
        2006
        and reflects $18,800,000 increase from the Annual Report on 10-KSB for the
        period ending December 31, 2006. Included in these figures is a development
        contract the company signed in late July to build and sell approximately
        31 new
        homes totaling approximately $16.3 million in revenue over the next 12-24
        months
        (see Part II, Item 5 for details). All sales were from unrelated third parties
        and were made primarily to new home buyers and remodeling work.


Included
      in the sales are service fee revenues from pre-sold projects including sales
      commissions, architectural design fees, engineering fees, and a series of
      project coordinating expenses charged to each design/build project. These fees
      are built into the projects total price with Homebuyers paying these charges
      at
      the beginning of construction. The fees are a direct cost to the project. Going
      forward we would expect sales and service fee revenue to continue to grow
      commensurate with increases in new contract sales.





In
      addition, the Company has recently signed operating agreements with experienced
      homebuilders to develop local operations in Charlotte, Wilmington, Albemarle,
      Calabash, Harrisburg, Pineville and Hickory, North Carolina; Beaufort and
      Summerville/Sunset (near Charleston), Charleston, Columbia and Greenville,
      South
      Carolina; Abita Springs, Baton Rouge and Kenner, Louisiana which is expected
      to
      rapidly increase custom homes sales in these regions and consistent with
      implementing our business plan.





On
      average new home construction projects are completed within 9 months and
      remodeling projects are completed within 3 months. The Company reports sales
      based on the contract amount due for design and build projects in the quarter
      in
      which the sale is completed, closed and approved.





**Cost
      of Sales**





The
      cost
      of design/build sales represents all direct costs in building a new home or
      remodeling project, including sticks and bricks, labor and builder costs and
      management fees charged to the project (as described under sales and service
      fees above).





**Gross
      Profit**





HouseRaising’s
      gross profit represents the difference between sales and service fee revenue
      and
      cost of sales. The Company earns profits as the net difference of project’s
      sales price and total costs including fees. The company conducts design/build
      projects with various affiliated builder relationships. Costs associated with
      in-house builder relationships are part of the projects total costs and
      HouseRaising’s profit is the difference in the sales price and all direct costs
      and fees. In an affiliated builder relationship the company shares profits
      with
      the builder, which is accounted for as a cost to the project.




25





HouseRaising’s
      gross profit was $108,103 for the three months ending June 30, 2007 compared
      to
      $63,066 for the same period in 2006 which reflects the completion of new home
      construction and remodeling projects and service fees generated from new
      projects signed during the quarter compared to the same period in 2006. The
      profit margin for the projects was more than 20%. Management would expect the
      Company’s gross profits to grow as we obtain and complete new construction and
      remodeling work in the Carolinas and Gulf Coast in 2007 and continue the
      roll-out of the Company’s membership and new real estate brokerage
      operation.





**OTHER
      REVENUES**





The
      Company earned $83,751 in other income for the period ending June 30, 2007,
      principally as a result of successfully launching HouseRaisingRealty, LLC to
      assist homebuyers in selling their existing homes or acquiring lots for their
      new custom homes and thus generating realty commissions. The company also
      receives marketing fees associated with the Company’s contractual relationship
      with SunTrust Mortgage.





The
      company closed realty sales transactions of over $2,888,051 generating $81,546
      in new revenues for the first quarter versus none in the same period last year.
      As of the filing of this report and after quarter end, HouseRaisingRealty has
      closed additional sales transactions totaling over $670,000 which will generate
      approximately $20,000 in commission income which will be reported in the next
      quarter, pending sales transactions totaling approximately $5,600,000 which
      will
      generate approximately $185,000 in commission income to the Company and has
      active listings for sales of approximately $3,500,000. Management expects these sales levels to continue to increase as the company
      builds its brokerage operation.





The
      company will also earn approximately $12,000 a year from its agreement with
      SunTrust and expects membership fees will increase substantially as the company
      continues to implement its design/build and renovation sales program as part
      of
      its business plan.





**EXPENSES**





Total
      expenses for the quarter ended June 30, 2007 was $1,543,159 compared to $843,327
      for the same period in 2006. The increase in expenses was due principally to
      the
      company implementing its business plan and incurring $229,000 in depreciation
      for its Capitalized Software (which reflects full-implementation of its System-C
      management system). The Company has expanded operations in the Carolinas (North
      and South Carolina), launched new operations in the Gulf Coast, launched new
      brokerage operations in the Carolinas and expanded its membership program which
      has attracted a substantial number of new builder relationships.





Selling,
      general and administrative expenses were higher for the three months ending
      June
      30, 2007 versus 2006, increasing from $497,894 in 2006 to $807,656 in 2007.
      These expenses reflect costs related to developing HouseRaising’s Carolinas and
      Gulf Coast zone operations, the Company’s realty brokerage operation, the
      Company membership program and disaster relief operations, including
      advertising, costs for personnel and contractors who are directly associated
      with and who devote time to selling, designing and building pre-sold homes
      and
      renovation projects in the Carolinas and Gulf Coast regions, commission sales
      personnel for its realty brokerage operation in the Carolinas and
      builder-memberships nationally and disaster relief services in the Gulf Coast
      region. These expenses also include general business and executive management
      services to raise capital for implementation of its business plan and previously
      committed payments for services provided to the company.





The
      company also paid a portion of its consulting, professional and salaries in
      stock-based compensation which increased from $289,519 in the first quarter
      of
      2006 to $365,095 for the same period in 2007. This includes $72,222 as
      3/36 th amortization of compensation to a principal executive in exchange for a personal
      guarantee with Wachovia that extended an additional $4 million line of credit
      to
      the Company on February 9, 2007 as reported on SEC Form 8-K (as further
      described under Other Events in this filing). In addition, these expenses also
      include consulting fees for business consulting services and investor relations
      expenses.





The
      Company had depreciation expense in the amount of $250,584 in the first quarter
      of 2007 compared to 8,421 in 2006. The large increase from prior year reflects
      the company commencing depreciation on its Capitalized Software (System-C)
      at a
      rate of approximately $229,000 per quarter and an increase in the company’s
      investment in property and equipment, particularly its design center in
      Charlotte. The Company expects to depreciate the company’s System-C over a
      15-year period.




26





The
      Company had interest expense of $119,824 for the period ending June 30, 2007
      compared to $47,493 for the same period in 2006. The interest recorded in the
      second quarter, 2007 was principally for the company’s line of credit with
      Wachovia Bank. The interest recorded in 2006 was principally to reimburse bridge
      lenders to HouseRaising. Going forward the level of interest expense will be
      based principally on the Wachovia line of credit drawn.





**INCOME
      / LOSSES**





The
      net
      loss for the quarter ended June 30, 2007 was $1,351,305 versus a net loss of
      $780,261 in the same period in 2006. The increase in net losses is directly
      attributable to commencing depreciation for its Capitalized Software (System-C)
      in the amount of $229,000 and fully implementing its business plan: expanding
      operations in the Carolinas (North and South Carolina), launching new operations
      in the Gulf Coast, launching new brokerage operations in the Carolinas and
      expanding its membership program which has attracted a substantial number of
      new
      builder relationships.


Future
        income/losses will depend on the success of implementing the company’s business
        plan in 2007. The company does already have approximately $ 24,800,000
        of new home, remodeling and development contracts for 2007 which is a
        $21,800,000 increase from last year at this time and $18,800,000 increase
        from
        the end of year. The Company also has a new realty brokerage operation which
        will generate fee income for helping customers sell their existing home and
        buy
        vacant land to build a new home, and has signed operating agreements with
        experienced homebuilders to develop local operations in Charlotte, Wilmington,
        Albemarle, Calabash, Harrisburg, \Pineville and Hickory, North Carolina;
        Beaufort and Summerville/Sunset (near Charleston), Charleston, Columbia and
        Greenville, South Carolina; Abita Springs, Baton Rouge and Kenner, Louisiana
        which is expected to rapidly increase custom homes sales in these regions
        and
        consistent with implementing our business plan.





**Impact
      of Inflation.**





We
      believe that inflation has had a negligible effect on operations since
      inception. We believe that we can offset inflationary increases in the cost
      of
      labor by increasing sales and improving operating efficiencies.








**RESULTS
      OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2007**





A
      breakdown of Company revenue streams for the six-month period ending June 30,
      2007 is provided below:





**HOUSERAISING
                REVENUE STREAM:**
            
            For
                Six Months Ending
              June
                30, 2007**Revenues
                from Custom Homebuilding Operations:**
            
            $
            314,568**Revenues
                from Realty Services:**
            
            
            120,504**Revenues
                from Disaster Relief Services:**
            
            
            0**Revenues
                from Builder-Memberships:**
            
            
            1,500**Revenues
                from HouseRaisingAcademy:**
            
            
            0**Other
                Revenues:**
            
            
            5,205**TOTAL
                REVENUES**
            
            $
            441,777




**SALES
      AND COST OF SALES**





**Sales**


The
        Company had Sales (new home and renovation design/build sales) of $314,568
        for
        the six months ending June 30, 2007, compared to $510,966 for the same period
        in
        2006. The s ales
        decrease is principally due to an unanticipated delay in obtaining the Company’s
        builder’s license in Louisiana in the first quarter and a resulting delay in a
        number of in-process new construction and remodeling projects that will not
        be
        completed until after the end of the second quarter of 2007. The sales recorded
        is principally due to the completion of renovation projects and service fees
        generated from new projects signed during the period compared to the same
        period
        in 2006. As of the filing of this report, the Company has new contracts (new
        home, renovation and development contracts) totaling approximately $24,800,000
        in sales that are projected to be completed over the next 12-24 months, which
        reflects a $21,800,000 increase from the number reported in our Quarterly
        Report
        on 10-QSB for the period ending June 30, 2006 and reflects $18,800,000 increase
        from the Annual Report on 10-KSB for the period ending December 31, 2006.
        Included in these figures is a development contract the company signed in
        late
        July to build and sell approximately 31 new homes totaling approximately
        $16.3
        million in revenue over the next 12-24 months (see Part II, Item 5 for details).
        All sales were from unrelated third parties and were made primarily to new
        home
        buyers and remodeling work.


27





Included
      in the sales are service fee revenues from pre-sold projects including sales
      commissions, architectural design fees, engineering fees, and a series of
      project coordinating expenses charged to each design/build project. These fees
      are built into the projects total price with Homebuyers paying these charges
      at
      the beginning of construction. The fees are a direct cost to the project. Going
      forward we would expect sales and service fee revenue to continue to grow
      commensurate with increases in new contract sales.





In
      addition, the Company has recently signed operating agreements with experienced
      homebuilders to develop local operations in Charlotte, Wilmington, Albemarle,
      Calabash, Harrisburg, Pineville and Hickory, North Carolina; Beaufort and
      Summerville/Sunset (near Charleston), Charleston, Columbia and Greenville,
      South
      Carolina; Abita Springs, Baton Rouge and Kenner, Louisiana which is expected
      to
      rapidly increase custom homes sales in these regions and consistent with
      implementing our business plan.





On
      average new home construction projects are completed within 9 months and
      remodeling projects are completed within 3 months. The Company reports sales
      based on the contract amount due for design and build projects in the quarter
      in
      which the sale is completed, closed and approved.





**Cost
      of Sales**





The
      cost
      of design/build sales represents all direct costs in building a new home or
      remodeling project, including sticks and bricks, labor and builder costs and
      management fees charged to the project (as described under sales and service
      fees above).





**Gross
      Profit**





HouseRaising’s
      gross profit represents the difference between sales and service fee revenue
      and
      cost of sales. The Company earns profits as the net difference of project’s
      sales price and total costs including fees. The company conducts design/build
      projects with various affiliated builder relationships. Costs associated with
      in-house builder relationships are part of the projects total costs and
      HouseRaising’s profit is the difference in the sales price and all direct costs
      and fees. In an affiliated builder relationship the company shares profits
      with
      the builder, which is accounted for as a cost to the project.





HouseRaising’s
      gross profit was $128,215 for the six months ending June 30, 2007 compared
      to
      129,519 for the same period in 2006 which reflects the completion of new home
      construction and remodeling projects and service fees generated from new
      projects signed during the period compared to the same period in 2006. The
      profit margin for the projects was more than 20%. Management would expect the
      Company’s gross profits to grow as we obtain and complete new construction and
      remodeling work in the Carolinas and Gulf Coast in 2007 and continue the
      roll-out of the Company’s membership and real estate brokerage
      operation.





**OTHER
      REVENUES**





The
      Company earned $127,209 in other income for the six-month period ending June
      30,
      2007, principally as a result of successfully lauching HouseRaisingRealty,
      LLC
      to assist homebuyers in selling their existing homes or acquiring lots for
      their
      new custom homes and thus generating realty commissions. The company also
      receives marketing fees associated with the Company’s contractual relationship
      with SunTrust Mortgage.





The
      company closed realty sales transactions of over $4,278,051 generating $120,504
      in new revenues for the six-month period versus none in the same period last
      year. As of the filing of this report and after quarter end, HouseRaisingRealty
      has closed additional sales transactions totaling over $670,000 which will
      generate approximately $20,000 in commission income which will be reported
      in
      the next quarter, pending sales transactions totaling approximately $5,600,000
      which will generate approximately $185,000 in commission income to the Company
      and has active listings for sales of approximately $3,500,000. Management expects these sales levels to continue to increase as the company
      builds its brokerage operation.





The
      company will also earn approximately $12,000 a year from its agreement with
      SunTrust and expects membership fees will increase substantially as the company
      continues to implement its design/build and renovation sales program as part
      of
      its business plan.




28





**EXPENSES**





Total
      expenses for the six-months ended June 30, 2007 was $3,283,745 compared to
      $1,474,210 for the same period in 2006. The increase in expenses was due
      principally to the company implementing its business plan and incurring $496,000
      in depreciation for its Capitalized Software (which reflects full-implementation
      of its System-C management system) and one-time expense of approximately
      $350,000 for securing financing and long-term management agreements in the
      first
      quarter and an accrual of $108,000 in the second quarter. The Company has
      expanded operations in the Carolinas (North and South Carolina), launched new
      operations in the Gulf Coast, launched new brokerage operations in the Carolinas
      and expanded its membership program which has attracted a substantial number
      of
      new builder partnerships.





Selling,
      general and administrative expenses were higher for the six months ending June
      30, 2007 versus 2006, increasing from $947,555 in 2006 to $1,575,474 in 2007.
      These expenses reflect costs related to developing HouseRaising’s Carolinas and
      Gulf Coast zone operations, the Company’s realty brokerage operation, the
      Company membership program and disaster relief operations, including
      advertising, costs for personnel and contractors who are directly associated
      with and who devote time to selling, designing and building pre-sold homes
      and
      renovation projects in the Carolinas and Gulf Coast regions, commission sales
      personnel for its realty brokerage operation in the Carolinas and
      builder-memberships nationally and disaster relief services in the Gulf Coast
      region. These expenses also include general business and executive management
      services to raise capital for implementation of its business plan and previously
      committed payments for services provided to the company.





The
      company also paid a portion of its consulting, professional and salaries in
      stock-based compensation which increased from $431,468 in the first six-months
      of 2006 to $946,160 for the same period in 2007. This includes a one-time
      payment of Convertible Preferred Stock Class C valued at approximately $286,000
      as compensation to two executive personnel in exchange for signing a long-term
      management agreement as reported on January 11, 2007 on SEC Form 8-K and
      $180,555 as 5/36 th amortization of compensation to a principal executive in exchange for a personal
      guarantee with Wachovia that extended an additional $4 million line of credit
      to
      the Company on February 9, 2007 as reported on SEC Form 8-K (as further
      described under Other Events in this filing). The Company does not expect to
      issue any additional convertible preferred stock in the foreseeable future.
      Without the one time payment and accrual, stock based compensation in 2007
      would
      be lower for the period and comparable to stock-based compensation in 2006.
      In
      addition, these expenses also include consulting fees for business consulting
      services and investor relations expenses.





The
      Company had depreciation expense in the amount of $496,309 in the first
      six-months of 2007 compared to 16,863 in 2006. The large increase from prior
      year reflects the company commencing depreciation on its Capitalized Software
      (System-C) at a rate of approximately $229,000 per quarter and an increase
      in
      the company’s investment in property and equipment, particularly its design
      center in Charlotte. The Company expects to depreciate the company’s System-C
      over a 15-year period.





The
      Company had interest expense of $265,802 for the six-month period ending June
      30, 2007 compared to $78,324 for the same period in 2006. The increase includes
      a one-time payment of $60,000 for a back-up standby letter of credit for the
      financing with Wachovia (as further described under Other Events in this filing)
      and interest related to equity for debt swap with our final bridge lender.
      In
      2003, HouseRaising completed a debt offering to a select group of accredited
      investors, which provided cash of $507,727 to HouseRaising, Inc. In November,
      2004, the Company completed an equity-for-debt swap which reimbursed these
      investors for their debts and converted much of the outstanding debt to
      restricted shares in the company. In the first quarter of 2007, the company
      completed equity for debt swap with its final bridge lender in the amount of
      $155,000 plus accrued interest of $57,401. The interest recorded in 2007 was
      principally for the company’s line of credit with Wachovia Bank, the standby
      letter of credit and additional accrued interest associated with the equity
      for
      debt swap. The interest recorded in 2006 was principally to reimburse bridge
      lenders to HouseRaising. Going forward the level of interest expense will be
      based principally on the Wachovia line of credit drawn.





**INCOME
      / LOSSES**





The
      net
      loss for the six-month period ended June 30, 2007 was $3,028,321 versus a net
      loss of $1,344,691 in the same period in 2006. The increase in net losses is
      directly attributable to commencing depreciation for its Capitalized Software
      (System-C) in the amount of $496,309, one-time expenditures totaling about
      $466,000 to secure a line of credit for financing and long-term management
      agreements and additional expenses to fully implement its business plan:
      expanding operations in the Carolinas (North and South Carolina), launching
      new
      operations in the Gulf Coast, launching new brokerage operations in the
      Carolinas and expanding its membership program which has attracted a substantial
      number of new builder relationships.


The
        Company had Sales (new home and renovation design/build sales) of $314,568
        for
        the six months ending June 30, 2007, compared to $510,966 for the same period
        in
        2006. The s ales
        decrease is principally due to an unanticipated delay in obtaining the Company’s
        builder’s license in Louisiana in the first quarter and a resulting delay in a
        number of in-process new construction and remodeling projects that will not
        be
        completed until after the end of the second quarter of 2007. The sales recorded
        is principally due to the completion of renovation projects and service fees
        generated from new projects signed during the period compared to the same
        period
        in 2006. As of the filing of this report, the Company has new contracts (new
        home, renovation and development contracts) totaling approximately $24,800,000
        in sales that are projected to be completed over the next 12-24 months, which
        reflects a $21,800,000 increase from the number reported in our Quarterly
        Report
        on 10-QSB for the period ending June 30, 2006 and reflects $18,800,000 increase
        from the Annual Report on 10-KSB for the period ending December 31, 2006.
        Included in these figures is a development contract the company signed in
        late
        July to build and sell approximately 31 new homes totaling approximately
        $16.3
        million in revenue over the next 12-24 months (see Part II, Item 5 for details).
        All sales were from unrelated third parties and were made primarily to new
        home
        buyers and remodeling work.




29





**Liquidity
      and Capital Resources**





Cash
      flows used in operations were $1,608,883 for the six months ended June 30,
      2007
      versus $1,342,678 for the same period in 2006. This reflects a net increase
      in
      cash used by operations of $266,205 principally due to the increase in net
      loss
      for the period which was offset by the collection of a key-man life insurance
      policy in the amount of $500,000, an increase in the value of stock issued
      for
      services for the six months, increase in depreciation for the period and
      decrease in expenditures on capitalized software.





Cash
      flows used in investment activities were $255,892 and $43,923 for the six-months
      ended June 30, 2007 and 2006, respectively. This was principally due to
      investments in property and equipment for the company, including the company’s
      design center in Charlotte and New Orleans, and an investment a principal
      subsidiary for start-up expenses.





Cash
      flows provided by financing activities were $1,883,140 and $1,168,981,
      respectively, for the six-months ended June 30, 2007 and 2006. The increase
      is
      principally due to an increase in borrowings on the line of credit with Wachovia
      Bank which was reduced by a decrease in common stock subscribed but not issued
      as a result of the issuance or other settlement of such obligations and payment
      of its secured demand note payable to a related party. The company no longer
      has
      any debt obligations to outside bridge lenders and has paid off its secured
      demand note payable to a related party.





We
      had
      cash on hand of $149,337 and a working capital deficit of $4,964,271 as of
      June
      30, 2007, although most of this deficit is from the bank loan with Wachovia
      which on February 9, 2007 extended an additional line of credit in the amount
      of
      $4 million to the Company (as further described under Other Events in this
      filing) which can be extended and has a no-call provision which is sufficient
      to
      fund our operations through the next twelve months.


Going
        forward we will rely substantially on new revenue from our business development
        efforts and an
        $8.1
        million the line of credit from Wachovia bank to sustain our business for
        the
        next twelve months. The company has approximately $24,800,000 of new home,
        remodeling and development contracts for 2007, a new real estate brokerage
        operation that has already generated new income (and is cash flow positive
        as of
        the end of the first quarter of 2007) with pending sales transaction of
        $5,600,000 and listings of $3,500,000 (on which the company would earn a
        sales
        commission), a new design/build zone operation in the Gulf Coast with a new
        10,000 square foot design center open for business in New Orleans in an area
        that needs to rebuild approximately 40,000 homes, and a pipeline of prospective
        new design/build customers in the Carolinas and Gulf Coast which is consistent
        with implementing our business plan. The company has completed its capitalized
        software and fully implemented which we would expect to be used for generating
        new design/build sales in the Carolinas and the Gulf Coast. The Company has
        signed operating agreements with more than ten (10) experienced homebuilders
        to
        develop local operations in Charlotte, Wilmington, Albemarle, Calabash,
        Harrisburg, \Pineville and Hickory, North Carolina; Beaufort and
        Summerville/Sunset (near Charleston), Charleston, Columbia and Greenville,
        South
        Carolina; Abita Springs, Baton Rouge and Kenner, Louisiana which is expected
        to
        rapidly increase custom homes sales in these regions and consistent with
        implementing our business plan. Actual sales will be recorded upon completion
        of
        each project while sales and service revenue will be recorded as earned.
        To
        date, the company has had investors willing to contribute equity to finance
        on-going operations. However, such parties are under no legal obligation
        to
        provide us with future capital infusions.





The
      Company expects to use funds from home building and realty brokerage operations
      and bank funding primarily to expand sales and marketing efforts of its
      homebuilding operations (new home, renovation and development sales) in the
      Carolinas (covering North and South Carolina) and the Gulf Coast region,
      implementing marketing and sales for its membership and independent builder
      programs in the southeast and eventually nationally and implementing marketing
      and sales for its realty brokerage operations. The Company may also consider
      selective acquisition opportunities that may assist in the successful
      implementation of its business plan (see Part II Item 5 Other Matters for
      further discussion on this item).





Overall,
      we have funded our cash needs from inception through June 30, 2007 with a series
      of debt and equity transactions. The Company’s principal source of working
      capital in 2007 was a line of credit established with Wachovia Bank, the sales
      of the company’s Private Placement Memorandum to accredited investors,
      commitments from vendors to develop HouseRaising’s software system in exchange
      for shares of stock, and fee revenues and profits from existing new home and
      renovation sales. In addition, some Management and independent contractors
      providing services to the company have agreed to accept shares as a means of
      paying for critical services to implement its business plan. We have not entered
      into any commitments for significant capital expenditures, except the on-going
      software development project previously mentioned.




30





Demand
      for our services will be dependent on, among other things, market acceptance
      of
      our services, the real estate market in general, and general economic
      conditions, which are cyclical in nature, particularly in the markets we serve.
      Inasmuch as a major portion of our activities is the receipt of revenues from
      the sales of new home services, our business operations may be adversely
      affected by our competitors and prolonged recessionary periods. The Company
      does
      believe that its principle operations are in attractive markets, the Carolinas
      and Gulf Coast region, and that the custom home building sector is less impacted
      by overall economic conditions, but there is no guarantee this will remain
      so
      going forward. The company has provided a detailed list of risks and cautionary
      statements at the beginning of this document.





**ITEM
      3. CONTROLS AND PROCEDURES**





*Quarterly
      Evaluation of Controls* .
      As of
      the end of the period covered by this quarterly report on Form 10-QSB, we
      evaluated the effectiveness of the design and operation of our disclosure
      controls and procedures ("Disclosure Controls"). This evaluation (“Evaluation”)
      was performed by our Chairman, Chief Executive Officer and President, Gregory
      J.
      Wessling (“CEO”), our Chief Financial Officer, Richard A. von Gnechten (“CFO”)
      and our Chief Administrative Officer, Christine M. Carriker. In addition, we
      have discussed these matters with our securities counsel. In this section,
      we
      present the conclusions of our CEO and CFO based on and as of the date of the
      Evaluation with respect to the effectiveness of our Disclosure
      Controls.





*CEO
      and CFO Certifications* .
      Attached to this annual report, as Exhibits 31.1 through 31.3, are certain
      certifications of the CEO and CFO, which are required in accordance with the
      Exchange Act and the Commission's rules implementing such section (the "Rule
      13a-15(e)/15d-15(e) Certifications"). This section of the annual report contains
      the information concerning the Evaluation referred to in the Rule
      13a-15(e)/15d-15(e) Certifications. This information should be read in
      conjunction with the Rule 13a-15(e)/15d-15(e) Certifications for a more complete
      understanding of the topic presented.





*Disclosure
      Controls* .
      Disclosure Controls and procedures are those controls and procedures designed
      with the objective of ensuring that information required to be disclosed in
      our
      reports filed with the Commission under the Exchange Act, such as this quarterly
      report, is recorded, processed, summarized and reported within the time period
      specified in the Commission's rules and forms. In addition, Disclosure controls
      and procedures include controls and procedures designed to ensure that
      information required to be disclosed by us in the reports that we file or submit
      under the Exchange Act is accumulated and communicated to our management,
      including our principal executive officer, principal financial officer, and
      chief administrative officer, or persons performing similar functions, as
      appropriate to allow timely decisions regarding required disclosure.





*Limitations
      on the Effectiveness of Controls* .
      Our
      management does not expect that our Disclosure Controls will prevent all error
      and all fraud. A control system, no matter how well developed and operated,
      can
      provide only reasonable, but not absolute assurance that the objectives of
      the
      control system are met. Further, the design of the control system must reflect
      the fact that there are resource constraints, and the benefits of controls
      must
      be considered relative to their design and monitoring costs. Because of the
      inherent limitations in all control systems, no evaluation of controls can
      provide absolute assurance that all control issues and instances of fraud,
      if
      any, within the Company have been detected. These inherent limitations include
      the realities that judgments in decision-making can be faulty, and that
      breakdowns can occur because of simple error or mistake. Additionally, controls
      can be circumvented by the individual acts of some persons, by collusion of
      two
      or more people, or by management override of the control. The design of a system
      of controls also is based in part upon certain assumptions about the likelihood
      of future events, and there can be no assurance that any design will succeed
      in
      achieving its stated objectives under all potential future conditions. Over
      time, control may become inadequate because of changes in conditions, or because
      the degree of compliance with the policies or procedures may deteriorate.
      Because of the inherent limitations in a cost-effective control system,
      misstatements due to error or fraud may occur and not be detected.





*Scope
      of the Evaluation* .
      The CEO
      and CFO's evaluation of our Disclosure Controls included a review of the
      controls' (i) objectives, (ii) design, (iii) implementation, and (iv) the effect
      of the controls on the information generated for use in this quarterly report.
      In the course of the Evaluation, the CEO and CFO sought to identify data errors,
      control problems, acts of fraud, and they sought to confirm that appropriate
      corrective action, including process improvements, was being undertaken. This
      type of evaluation is done on a quarterly basis so that the conclusions
      concerning the effectiveness of our controls can be reported in our quarterly
      reports on Form 10-QSB and annual reports on Form 10-KSB. The overall goals
      of
      these various evaluation activities are to monitor our Disclosure Controls,
      and
      to make modifications if and as necessary. Our intent in this regard is that
      the
      Disclosure Controls will be maintained as dynamic systems that change (including
      improvements and corrections) as conditions warrant.





*Conclusions.* Based
      upon the Evaluation, our disclosure controls and procedures are designed to
      provide reasonable assurance of achieving our objectives. Our CEO and CFO have
      concluded that our disclosure controls and procedures are effective at that
      reasonable assurance level to ensure that material information relating to
      the
      Company is made known to management, including the CEO and CFO, particularly
      during the period when our periodic reports are being prepared, and that our
      Internal Controls are effective at that assurance level to provide reasonable
      assurance that our financial statements are fairly presented inconformity with
      accounting principals generally accepted in the United States. Additionally,
      there has been no change in our Internal Controls that occurred during our
      most
      recent fiscal quarter that has materially affected, or is reasonably likely
      to
      affect, our Internal Controls.




31





**PART
      II**





**ITEM
      1. LEGAL PROCEEDINGS.**





**In
      the matter of Nite Capital, LP, Plaintiff v. Robert V. McLemore and
      HouseRaising, Inc., Defendants, 05C 3757:**





On
      May 3,
      2006, Nite Capital, LP (“Nite”) re-filed its complaint against Robert V.
      McLemore, the late President of HouseRaising (“McLemore”) and HouseRaising, in
      the Circuit Court of the Nineteenth Judicial Circuit for Lake County, Illinois.
      The re-filed complaint essentially makes the same allegations and demands the
      same relief as an earlier complaint filed in federal court in Illinois.
      HouseRaising filed a motion for dismissal based on lack of jurisdiction, but
      this filing was denied on October 18, 2006. Consistent with time requirements
      of
      Illinois law, HouseRaising filed a response to the complaint in Circuit Court
      on
      November 7, 2006. A copy of a Form 8-K, filed with the Commission on July 19,
      2005, reporting the filing of the initial complaint by Nite in the U.S. District
      Court for the Northern District of Illinois, Eastern Division, against McLemore
      and HouseRaising, describes the litigation in more detail and is hereby
      incorporated by reference. That complaint was voluntarily dismissed on a motion
      made by Nite on April 12, 2006. The case currently pending in the Nineteenth
      Judicial Circuit for Lake County, Illinois is in the discovery phase.





Until
      his
      death, Mr. McLemore maintained his previously stated position that Nite Capital
      defaulted on the underlying contract and that he and HouseRaising are not at
      fault. As previously stated, the terms of the contract at issue were disputed
      by
      the Defendants, and HouseRaising reports that it was not even a party to the
      alleged contract. The Defendants have engaged Sugar, Friedberg and Felsenthal,
      LLP, counsel admitted to practice law in state court in Illinois and the U.S.
      District Court for the Northern District of Illinois, and intend to vigorously
      defend this action. The Company believes the claims against it amount to a
      thinly disguised effort to insert HouseRaising into a dispute over a contract
      between two private parties. It is unclear what will happen as a result of
      the
      recent death of Mr. McLemore, other than that Mr. McLemore’s representative has
      been substituted as a defendant for him. The parties expect to have a mandatory
      arbitration in this case in September, 2007, although there can be no assurance
      that it will be settled.





**Background:**


In
      November 2004, Robert V. McLemore, the late President and Founder of
      HouseRaising, entered into a personal contract whereby he agreed to sell Nite
      Capital, LP, an investment firm based in Chicago, Illinois, a certain number
      of
      shares of his personal stock in return for Nite Capital’s agreement not to sell
      the shares for a set period of time and not to short sell the shares. It was
      Mr.
      McLemore’s belief that Nite Capital defaulted on this contract, and, as a
      result, McLemore refused to complete the transaction until a review of the
      short
      selling activities of Nite Capital and its principals could be completed. In
      connection with such review, HouseRaising filed a complaint with the NASD which
      requested an investigation into what management termed a “wave of coordinated
      naked short selling” in HouseRaising’s common stock over a three month period of
      time. Management of HouseRaising believes that this coordinated effort may
      have
      violated NASD rules, as well as applicable federal securities laws. These
      matters have yet to be determined by a court of law.





**ITEM
      2. CHANGES IN SECURITIES.**





On
      April
      11, 2007, the Company announced that the company’s board of directors authorized
      management to purchase up to $100,000 of the company’s shares of common stock
      over the next six months. The Company will work with Wachovia Securities, Inc.,
      the broker-dealer subsidiary of Wachovia Bank, on all repurchases which will
      be
      made strictly pursuant to the requirements of Rule 10b-18. The source of funding
      for the purchases will come from cash flow. For the period ending June 30,
      2007,
      the company had not made any repurchases. It has made repurchases subsequent
      to
      that date, which will be reported in the third quarter report.





In
      February, 2007, the Company agreed to an equity-for-debt conversion in which
      its
      final bridge lender converted its outstanding notes payable into shares of
      common stock. The Company issued 424,801 shares of common stock in exchange
      for
      a reduction of $155,000 in debt and $57,400.62 in accrued interest. The bridge
      lender is an accredited investor as defined in Rule 501(a) of Regulation D
      under
      the Act. This conversion will be reflected on the Company’s 1 st quarter,
      2007 financial statements. The Company believes that such offering is exempt
      from registration pursuant to Rule 506 under Regulation D.




32





On
      January 11, 2007, the Board of Directors of the Registrant met and authorized
      the entry into three amendments to existing management agreements with Christine
      M. Carriker, Director, Secretary/Treasurer and Chief Administrative Officer,
      Richard A. von Gnechten, Chief Financial Officer and Grant Neerings, Director,
      Chief Technology Officer and President of HouseRaisingAcademy, LLC. Ms. Carriker
      and Mr. Neerings, since they are Directors, abstained from voting on the matters
      affecting them considered by the Board of Directors. The amendments described
      herein with respect to Ms. Carriker and Mr. Neerings were approved by the
      unanimous vote of the six remaining directors, and the amendments described
      herein with respect to Mr. von Gnechten were approved by a unanimous vote of
      all
      seven directors.





Ms.
      Carriker and Mr. von Gnechten agreed to an amendment to their management
      agreements which increased the term to five years.





The
      Board
      of Directors authorized the issuance of a bonus to Ms. Carriker of 100,000
      shares of Class C Convertible Preferred Stock and 400,000 options in
      consideration of her agreement to amend her management agreement. The options
      have an exercise price of $0.50 and a 10-year exercise period. All previously
      granted options, which had an exercise price of $1.25, were withdrawn. The
      Board
      also cited as additional consideration Ms. Carriker’s record of exceptional
      service to the Registrant as further consideration for the bonus.





The
      Board
      of Directors authorized the issuance of a bonus to Mr. von Gnechten of 100,000
      shares of Class C Convertible Preferred Stock and 833,334 options in
      consideration of his agreement to amend his management agreement. The options
      have an exercise price of $0.50 and a 10-year exercise period. All previously
      granted options, which had an exercise price of $1.00, were withdrawn. The
      Board
      also cited as additional consideration Mr. von Gnechten’s record of exceptional
      service to the Registrant as further consideration for the bonus.





The
      Board
      of Directors authorized the issuance of a bonus to Mr. Grant Neerings of 800,000
      options. The options have an exercise price of $0.50 and a 10-year exercise
      period. All previously granted options, which had a range of exercise prices
      from $0.50 to $1.00, were withdrawn. The Board also cited as additional
      consideration Mr. Neering’s continued record of exceptional service to the
      Registrant as further consideration for the bonus.





The
      Class
      C Convertible Preferred Stock is convertible after three years from the date
      of
      issuance into ten (10) shares of common stock, and it votes on an “as converted”
basis with the common stock on all matters except to approve any merger, sale
      of
      assets, combination or reorganization involving the Registrant, or other
      fundamental corporate transaction involving the Registrant, in which case the
      Class C Convertible Preferred Stock has a class vote.





The
      Board
      of Directors also emphasized that the issuance of 200,000 shares of Class C
      Convertible Preferred Stock to the Registrant’s insiders would tend to have an
      anti-takeover effect, and enable management to focus on implementing its
      business plan without losing control of the Registrant.





The
      offering of the Class C Convertible Preferred Stock is intended to be exempt
      from registration pursuant to Section 4(2) of the Securities Act of 1933, as
      amended. The facts relied on by the issuer to make the exemption available
      include: (1) the issuances were isolated private transactions which did not
      involve a public offering; (2) there were only two offerees, (3) the offerees
      have agreed to the imposition of a restrictive legend on the face of the stock
      certificate representing their shares, to the effect that they will not convert
      the shares of Class C Convertible Preferred Stock into common stock, and resell
      the stock unless their shares are registered or an exemption from registration
      is available; (4) the offerees were sophisticated investors; (5) there were
      no
      subsequent or contemporaneous public offerings of the stock; (6) the certificate
      for the shares of Class C Convertible Preferred Stock were not broken down
      into
      smaller denominations; and (7) the negotiations for the sale of the stock took
      place directly between the offerees and our management.





**ITEM
      3. DEFAULT UPON SENIOR SECURITIES.**





None.





**ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**





None.





33




**ITEM
      5. OTHER MATTERS**





Part
      of
      HouseRaising, Inc.’s strategy is to build its business through the merger or
      acquisition of existing homebuilders and technology companies that will benefit
      our application service business. It is reasonable to expect that such activity
      is an ongoing part of HRI’s business development efforts. At any given time the
      company could be in process of analyzing or negotiating an offer in connection
      with such a transaction. However, any discussion or speculation on specific
      transactions is only conjecture until such time that a definite agreement is
      signed and announced in an SEC filing and press relese. It is possible that
      no
      transactions will take place at all.





**Development
      Agreement**


On
        July
        18, 2007, HouseRaising entered into a letter of agreement (“development
        agreement”) with a developer for purposes of developing property and building
        approximately 31 single family homes on a property located in Catawba County,
        North Carolina. The developer will bring forward the property and secure
        a loan
        to pay for development improvements, including curb and gutter and a front
        entrance, as per a contract with a land grading and development company.
        It is
        expected that the average price of a lot in this development will be between
        $95,400 and $106,000 (with some lots costing more and some less) and the
        average
        price of a new home built by HouseRaising between $400,000 and $600,000 (with
        some homes costing more and some less). The developer will enter into an
        exclusive right to sell listing agreement with HouseRaisingRealty, a Company
        subsidiary. HouseRaisingRealty will receive a sales commission for the sales
        of
        the lots. The Company will earn a management fee for services provided and
        a
        profit on the construction of new homes in the development when they are
        completed. It is expected that this development will have a 12-24 month sales
        time period and will generate approximately $16.3 million in gross sales
        when it
        is completed.




**Affiliation
      Agreements**





On
      June
      28, 2006, the Registrant and SunTrust Mortgage (“SunTrust Mortgage”) entered
      into a Strategic Agreement pursuant to which SunTrust will be the mortgage
      lender of choice to the Registrant for the making and/or refinancing of
      construction loans in connection with the building of custom homes for the
      Registrant’s customers and for the making of permanent residential mortgage
      loans in connection with the financing of those homes. In addition, the
      Registrant will provide selected marketing services to Sun Trust Mortgage
      related to the co-marketing arrangement In return, SunTrust has agreed to
      develop a fixed rate product for qualifying customers of the Registrant and
      has
      granted the Registrant a non-exclusive license to use the SunTrust name and
      logo
      in the Registrant’s advertising for the purpose of indicating the availability
      of loan financing by SunTrust to qualified applicants. In addition, SunTrust
      has
      agreed to identify and/or create a group of SunTrust employees who will be
      tasked with assisting the Registrant’s sales staff in providing Registrant’s
      customers with all aspects of the mortgage loan process.





Under
      the
      Strategic Agreement, the Registrant is responsible for, among other things,
      paying for marketing, services and goods related to the Strategic Agreement
      and
      SunTrust, in return, will compensate Registrant with a nominal amount equivalent
      to the fair market value of such marketing, services and goods.





The
      Strategic Agreement commences on the effective date and will continue thereafter
      in six (6) month increments, subject to termination by either party, with or
      without cause, upon delivery of thirty (30) days written notice to the other
      party.





Each
      party to the Strategic Agreement has agreed to indemnify and hold harmless
      the
      other party, it’s affiliates and their respective directors, officers,
      employees, agents and subcontractors from and against, among other things,
      any
      action or threatened action, suit or proceeding arising out of or as a result
      of, the indemnifying party’s performance under the Agreement and against any and
      all claims, expenses, losses or damages (including reasonable attorneys’ fees)
      that result from the actions or inaction of the indemnifying party.





**Other
      Events**





On
      February 9, 2007, HouseRaising and Wachovia Bank, N.A. (“Wachovia”), entered
      into a loan agreement (the “Agreement”) pursuant to which Wachovia agreed to
      make a new operating line of credit in the amount of $4 million available to
      the
      Registrant. The new operating line of credit will be secured by a standby letter
      of credit procured by a pledge of securities having a value of not less than
      $5.4 million by Gregory J. Wessling, Chairman, Chief Executive Officer and
      President of the Registrant.





As
      an
      inducement for Mr. Wessling to agree to enter into the standby letter of credit,
      the Registrant agreed to issue Mr. Wessling 500,000 shares of the Registrant’s
      Series C Convertible Preferred Stock, which have a ten to one conversion rate
      into whole shares of restricted common stock three years after issuance. As
      a
      further inducement for Mr. Wessling to enter into the standby letter of credit,
      eight shareholders (including Wessling), who are affiliates of the Registrant
      holding 52,472,835 of the Registrant’s total combined voting power of 70,769,282
      shares, or 74.1% of the Registrant’s total combined voting power, entered into a
      shareholders’ agreement, dated February 9, 2007 (the “Shareholders’ Agreement”).
      The Shareholders’ Agreement provides that the shareholders will not, for a
      period of three years, vote their shares in favor of any issue that could have
      an “adverse effect” (as defined) on any other party to the agreement without the
      prior written consent of the other party. In addition, the shareholders agreed,
      for a period of three years, to grant each other and the Registrant certain
      rights of first refusal in connection with any proposed sale of their shares
      to
      a third party. Finally, the shareholders agreed for a period of three years
      to
      give each other shareholder the right to sell their shares on a pro rata basis
      in the event that any shareholder proposes to enter into certain private sale
      transactions. Lastly, the Robert V. McLemore Family, the Robert V. McLemore
      Family Trust and the Estate of Robert V. McLemore have agreed, for a period
      of
      three years, to continue a pledge arrangement with Wachovia with respect to
      6,704,040 shares which have been pledged to Wachovia as collateral security
      for
      certain of the operating lines of credit.




34





The
      Shareholders’ Agreement is intended to provide, among other things, stability to
      the Registrant’s management during the period that Mr. Wessling is a party to
      the standby letter of credit and has exposed his assets to considerable
      financial risk in order to procure the new operating line of credit for the
      Registrant with Wachovia. Nonetheless, certain provisions of the Shareholders’
Agreement could have an anti-takeover effect and could impede a change in
      control of the Registrant as a result of the voting agreement and the buy-sell
      provisions contained therein. All of the shares that are subject to the
      Shareholders’ Agreement are owned by affiliates.




35


**ITEM
      6. EXHIBITS AND REPORTS ON FORM 8-K**





**(a)
      Reports on Form 8-K**





Subsequent
      to December 31, 2006, the Company filed the following Current Reports on Forms
      8-K with the SEC as follows:





Dated
                (filing date)
            
            Items
                ReportedApril
                11, 2007 (April 11, 2007)
            
            Form
                8-K Other Events





**(b)
      Exhibits**





Exhibits
      for HouseRaising and its subsidiaries are listed below.





**INDEX
      TO EXHIBITS**





The
      exhibits designated by an asterisk (*) are filed herein. The exhibits not so
      designated are incorporated by reference to the indicated filing.





Exhibit
                No.
            
            Descriptions2.1.1
            
            Agreement
                and Plan of Merger, dated February 19, 2004 (incorporated by reference
                from Exh. 2 to the Definitive Information Statement filed on August
                10,
                2004)3.1
            
            Articles
                of Incorporation (incorporated by reference from Exh.3 of Form SB-2
                filed
                April 11, 2002)3.2
            
            Articles
                of Amendment to Articles of Incorporation to Change Name (incorporated
                by
                reference from Exh. 3 to the Definitive Information Statement filed
                August
                10, 2004)3.3
            
            Bylaws
                of HouseRaising, Inc. (incorporated by reference from Exh.3 to Form
                SB-2
                filed April 11, 2002)3.4
            
            Articles
                of Amendment for Class A Voting Convertible Preferred Stock (incorporated
                by reference from Exh. 4 to the Definitive Information Statement
                filed
                August 10, 2002)3.5
            
            Articles
                of Amendment for Class B Voting Convertible Preferred Stock (incorporated
                by reference to Exh. 10 to Form 8-K filed on August 16,
                2006)3.6
            
            Articles
                of Amendment for Class C Voting Convertible Preferred Stock (incorporated
                by reference to Exh. 10 to Form 8-K filed on January 22,
                2007)31.1
            
            Rule
                13a-15(e)/15d-15(e) Certification of Gregory J. Wessling, Chairman
                and
                Chief Executive Officer*31.2
            
            Rule
                13a-15(e)/15d-15(e) Certification of Richard A. von Gnechten, Chief
                Financial Officer*31.3
            
            Rule
                13a-15(e)/15d-15(e) Certification of Christine M. Carriker,
                Secretary/Treasurer, SVP & Chief Administrative
                Officer*32.1
            
            Section
                1350 Certification of Gregory J. Wessling, Chairman and Chief Executive
                Officer*32.2
            
            Section
                1350 Certification of Richard A. von Gnechten, Chief Financial
                Officer*32.3
            
            Section
                1350 Certification of Christine M. Carriker, Secretary/Treasurer,
                SVP and
                Chief Administrative Officer*







*-Filed
      herewith





-signature
      page follows-




36





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.




HOUSERAISING,
                INC.
              (Registrant)Date: August 14, 2007
            
            /s/
              Gregory J. WesslingGregory
              J. WesslingChairman
                of the Board and
              Chief
                Executive Officer
              (Principal
                Executive Officer)





Date: August 14, 2007
            
            /s/
                Richard A. von GnechtenRichard
              A. von GnechtenChief
                  Financial Officer
                (Principal
                  Financial Officer)  Date: August 14, 2007
              
              /s/
                    Christine M. CarrikerChristine
                M. CarrikerSecretary/Treasurer,
                      SVP &
                    Chief
                      Administrative Officer
                    (Principal
                      Accounting Officer)





37