U.S.
      SECURITIES AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





FORM
      10-KSB





x
            ANNUAL
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934
                for the period ended December 31,
                2006





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 Road, 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





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B is not contained in this form, and no disclosure will be
      contained, to the best of registrant’s knowledge, in definitive proxy or
      information statements incorporated by reference in Part III of this form 10-KSB
      or any amendment to this Form 10-KSB. x





The
      aggregate market value of the common shares (based on the closing price) held
      by
      non-affiliates of the registrant on


March
      9,
      2006 was approximately $3,855,872.





Number
      of
      shares of common stock outstanding as of March 9, 2007: 52,007,884




Number
      of
      shares of preferred stock outstanding as of March 9, 2007:
      2,500,000









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 annual report contains the required audited financial
      statements. We are not required to deliver an annual report to security holders
      and will not voluntarily deliver a copy of the annual 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

















































HOUSERAISING,
      INC.


FORM
      10-KSB





For
      the
      Year ended December 31, 2006





TABLE
      OF
      CONTENTS


PageCautionary
                  Statement and Risk Factors that May Affect Future Results
              
              3PART
                  IITEM
                  1.
              
              
              Business
              
              
              4ITEM
                  2.
              
              
              Property
              
              
              7ITEM
                  3.
              
              
              Legal
                  Proceedings
              
              
              7ITEM
                  4.
              
              
              Submission
                  of Matters to a Vote of Security Holders
              
              
              8PART
                  IIITEM
                  5.
              
              
              Market
                  for Registrants Common Equity and Related Stockholder
                  Matters
              
              
              8ITEM
                  6.
              
              
              Selected
                  Financial Statements
              
              
              12Balance
                    Sheet - December 31, 2006 (audited)
              
              
              13Statements
                    of Operations - Year Ended December 31, 2006 and 2005
                    (audited)
              
              
              14Statements
                    of Cash Flows - Year Ended December 31, 2006 and 2005
                    (audited)
              
              
              15Notes
                    to Financial Statements (audited)
              
              
              17ITEM
                  7.
              
              
              Management’s
                  Discussion and Analysis of Financial Condition and Plan of
                  Operations
              
              
              26ITEM
                  8.
              
              
              Changes
                  in and Disagreements with Accountants on Accounting and Financial
                  Disclosure
              
              
              30ITEM
                  8A.
              
              
              Controls
                  and Procedures
              
              
              30ITEM
                  8B.
              
              
              Other
                  Matters
              
              
              31PART
                  IIIITEM
                  9.
              
              
              Directors,
                  Executive Officers of the Registrant
              
              
              33ITEM
                  10.
              
              
              Executive
                  Compensation
              
              
              33ITEM
                  11.
              
              
              Security
                  Ownership of Certain Beneficial Owners and Management Related Stockholder
                  Matters
              
              
              34ITEM
                  12.
              
              
              Certain
                  Relationships and Related Transactions
              
              
              34ITEM
                  13.
              
              
              Principal
                  Accountant Fees and Services
              
              
              34PART
                  IVITEM
                  14.
              
              
              Exhibits
                  and Reports on Form 8-K
              
              
              35Signatures
              
              
              36





2


**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.




3





**PART
      I**





**ITEM
      1. BUSINESS.**





**General**





HouseRaising,
      Inc., a Delaware corporation, was organized in 1999 by founder Robert V.
      McLemore. Mr. McLemore served as President of the Company until his untimely
      death in November, 2006. HouseRaising’s founder formed the company to develop a
      design/build business process capable of turning complicated pre-sold
      homebuilding projects into predictable experiences for buyers and builders.
      Utilizing four decades of experience in the design/build industry and state
      of
      the art technology, Mr. McLemore turned those experiences into a patent pending
      framework capable of bringing predictability to pre-sold design/build and
      renovation projects. On August 31, 2004, HouseRaising, Inc., merged with
      Technology Connections, Inc., a North Carolina corporation and publicly traded
      company, and Technology Connections, Inc. changed its name to HouseRaising,
      Inc.
      HouseRaising, Inc., a North Carolina corporation (“HRI” or “Company”), is the
      issuer filing this annual report on Form 10-KSB.




When
      this
      section uses the words “the company,” "we," "us," and "our," it refers to
      HouseRaising, Inc. and its subsidiaries, unless the context otherwise requires.
      The Company’s principal executive offices are located at 4801 East Independence
      Boulevard, Suite 201, Charlotte, North Carolina 28212. Its telephone number
      is
      (704) 532-2121.





**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 $11 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.





**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.





4




***(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.





***(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.





5




**The
      HR Builder Story:**





Throughout
      the country, custom homebuyers will continue to purchase lots and build primary
      and secondary homes. They are building in resort areas, on special lots
      purchased in the mountains and in coastal areas where they design and build
      the
      home of their dreams. Additionally, families living in urban and suburban areas
      throughout America will continue to locate further and further away from large
      metropolitan areas. Developers are finding customers to purchase lots in golf
      course communities developed in rural areas, which entail drives of close to
      an
      hour from the city.





If
      you
      help a builder of custom homes save money on purchasing materials, you assist
      him in reducing the costs of a project. However, in addition to those savings,
      if you help him learn how to embrace and overcome the many obstacles in the
      custom-home business you have provided the builder a pathway to success. By
      combining the needs of many small builders into a national membership
      organization, business opportunities occur that were never available before.
      When these things occur, HouseRaising has helped a small builder create a career
      that can last a lifetime.





**“A
      Builder’s Home”:**





HouseRaising
      is a place where builders go to find solutions, to get support, to share ideas
      and to gain knowledge. Creative builders seeking to build special homes for
      caring families come to HouseRaising for support and assistance. Today,
      HouseRaising is that team leader- operating as a 21st Century company focused
      on
      recreating the proud tradition of organizing groups of experts helping customers
      design and build unique homes “for all the right reasons.”





**Is
      HouseRaising a Technology Company or a Homebuilding
      Company?:**





HouseRaising
      is the combination of a technology company and a homebuilding company that
      has
      developed into a service company that provides and manages projects through
      a
      proprietary process. In return for allowing HouseRaising to manage their
      projects, owners receive a home completed at a fair price...HR Economies of
      ScaleTM, designed and built to a higher degree of excellence...HR PowerHouse
      SpecificationsTM, and an experience that can be enjoyed by both the buyers and
      the builder...HRI Seal of Excellence AwardTM. Regardless of the price, style or
      location of the home under contract, the management process and quality demands
      are the same. Turning custom homebuilding into organized and manageable projects
      is aided by HouseRaising’s management platform vendors providing expert products
      and services.





**Who
      Pays HRI?:**





HouseRaising
      creates revenues from managing custom home and renovation projects and those
      revenues are part of and are included in the sales price of the homes. As
      builders and HR-USA join to co-manage pre-sold projects, HRI is paid by the
      homebuyers as part of the total price due the builder as specified in 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 homebuilders, 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.





6




**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 is enjoying record sales and has done so for close to
      a
      decade. Moderate interest rates coupled with population growth, forming millions
      of new households each year has created record profits for the nation’s largest
      builders. HouseRaising’s research indicates the current level of homebuilding
      throughout America is sustainable as long as interest rates stay between 6%
      and
      7%. Based on our experience, 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. Whatever
      the outcome of interest rates and the economy, it is obvious that custom
      homebuilding should remain brisk for the foreseeable future.





**ITEM
      2. PROPERTY.**





We
      do not
      own any property nor do we have any contracts or options to acquire any property
      in the future. Our corporate headquarters is currently located at 4801 E.
      Independence Blvd., Charlotte, NC 28212, pursuant to an annual agreement. The
      Company also utilizes this space for subsidiary operations, including
      HouseRaisingAcademy, HouseRaisingRealty and HouseRaisingMembership and a sales
      and display center to support operations in North and South
      Carolina.





In
      November, 2006, HouseRaising of the Gulf Coast, LLC, a subsidiary of
      HouseRaising, Inc. that operates in Mississippi and Louisiana, leased space
      at
      4024 and 4030 (A-C) Canal Street, New Orleans, Louisiana under a 5-year rental
      agreement for a sales and product design center to support building and disaster
      relief operations in Louisiana and provide space for builders and designers
      service the company’s Gulf Coast initiative. The Company also maintains an
      office at 14116 Customs Blvd., Suite 112, Gulfport, Mississippi for our
      Mississippi homebuilding license.





**ITEM
      3. 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.





**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.





7





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





None.





**PART
      II**





**ITEM
      5. MARKET FOR REGISTRANTS’ COMMON EQUITY AND RELATED STOCKHOLDER
      MATTERS**





As
      reported on SEC Form 8-K on September 26, 2005 the company commenced a private
      offering of common stock and warrants in an amount equal to approximately $3.5
      million that is intended to be exempt from registration pursuant to Rule 506
      of
      Regulation D under the Securities Act of 1933, as amended (‘the Act’). Neither
      the shares of common stock sold nor the shares underlying the warrants are
      entitled to any registration rights and the investors will rely on Rule 144
      under the Act in order to sell the shares of common stock on the
      Over-the-Counter Bulletin Board after satisfying the Rule’s one-year holding
      period and other requirements.





In
      2006,
      the Company offered its bridge lenders the opportunity to convert their
      outstanding notes payable into shares of common stock and warrants on the same
      terms as the Company’s Private Placement Memorandum. Five of the company’s
      initial bridge lenders agreed to this conversion whereby the Company issued
      651,892 shares of common stock and an equal amount of warrants in exchange
      for a
      reduction of $325,946 in bridge loans and accrued interest. Each of the bridge
      lenders is an accredited investor as defined in Rule 501(a) of Regulation D
      under the Act. The Company believes that such offering is exempt from
      registration pursuant to Rule 506 under Regulation D.





On
      August
      10, 2006, the Board of Directors of the Registrant met and authorized the entry
      into three amendments to existing employment agreements with Gregory J.
      Wessling, Director, Chairman and Chief Executive Officer, Robert V. McLemore,
      Director, President and Founder, and Grant Neerings, Director, Chief Technology
      Officer and President of HouseRaisingAcademy, LLC. All of the three directors
      abstained from voting on the matters considered by the Board of Directors
      described herein, and the amendments and all additional matters described herein
      were approved by the unanimous vote of the five remaining directors. The Company
      filed a Form 8-K with the SEC on August 16, 2006 describing this matter which
      included a copy of the Articles of Amendment establishing the Class B
      Convertible Preferred Stock which is incorporated herein by
      reference.





Mr.
      Wessling, Mr. McLemore and Mr. Neerings all agreed to an amendment to their
      employment agreements which increased the term to five years. In return, the
      Board of Directors authorized the issuance of a bonus to Mr. Wessling of 200,000
      shares of a new series of Class B Convertible Preferred Stock in consideration
      of his agreement to amend his employment agreement. The Board also cited as
      additional consideration the fact that Mr. Wessling had recently co-signed
      a
      $1,000,000 promissory note with Wachovia Bank in favor of the Registrant. The
      Board finally noted Mr. Wessling’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. McLemore of 500,000
      shares of Class B Convertible Preferred Stock in consideration of his agreement
      to amend his employment agreement. The Board also cited as additional
      consideration the fact that Mr. McLemore had recently co-signed a $1,000,000
      promissory note with Wachovia Bank in favor of the Registrant. In addition,
      Mr.
      McLemore agreed to assign all right, title and interest that he owned in two
      copyrighted applications for System C, the custom design-build computer
      management software that is at the heart of the Registrant’s business plan. The
      Board further noted Mr. McLemore’s record of exceptional service as further
      consideration for the bonus.





The
      Board
      of Directors authorized the issuance of a bonus to Mr. Neerings of 100,000
      shares of Class B Convertible Preferred Stock in consideration of his agreement
      to amend his employment agreement. The Board also cited as additional
      consideration Mr. Neerings’ record of exceptional service to the Registrant and
      his instrumental role in developing the Registrant’s System C.





The
      Class
      B 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 B Convertible Preferred Stock has a class vote. In addition to any other
      rights provided by law, the Registrant shall not without first obtaining the
      affirmative vote or written consent of the holders of a majority of the
      outstanding shares of Class B Convertible Preferred, 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 Registrant.





8




The
      Board
      of Directors also emphasized that the issuance of 800,000 shares of Class B
      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 issuance would
      also
      lessen the dilutive impact on management’s stake of certain financings that were
      under consideration.





The
      offering of the Class B 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 three 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 B 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 B 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.





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.





9




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.





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.








Our
      stock
      is qualified for quotation on the Over-the-Counter Bulletin Board under the
      symbol "HRAI", formerly “TLGY” in 2003. During the 2005 through 2006 period, the
      Company's common stock traded on the Over-the-Counter Bulletin Board. The range
      of high and low bid quotations for the Common Stock for the two most recently
      completed fiscal years and the current fiscal year are provided below. The
      volume of trading in the Company's Common Stock has been limited and the bid
      prices as reported may not be indicative of the value of the Common Stock or
      of
      the existence of an active trading market. These over-the-counter market
      quotations were provided by the Over-the-Counter Bulletin Board and may not
      necessarily represent actual transactions; they reflect inter-dealer prices
      without retail markup, markdown or commissions.


2005
                  Fiscal Year
              
              High
                  Bid
              
              Low
                  BidFirst
                  Quarter
              
              $
              3.05
              
              $
              1.15Second
                  Quarter
              
              $
              1.50
              
              $
              0.27Third
                  Quarter
              
              $
              0.74
              
              $
              0.30Fourth
                  Quarter
              
              $
              0.64
              
              $
              0.252006
                  Fiscal Year
              
              
              High
                  Bid
              
              
              Low
                  BidFirst
                  Quarter
              
              $
              0.59
              
              $
              0.18Second
                  Quarter
              
              $
              0.46
              
              $
              0.26Third
                  Quarter
              
              $
              0.50
              
              $
              0.21Fourth
                  Quarter
              
              $
              0.51
              
              $
              0.24




The
      number of holders of record of the Company's common stock as of March 9, 2007
      is
      131. It is estimated that there over 1500 holders
      of the Company’s common stock in street name.





BECAUSE
      OUR STOCK IS CONSIDERED A PENNY STOCK ANY INVESTMENT IN OUR STOCK IS CONSIDERED
      TO BE A HIGH-RISK INVESTMENT AND IS SUBJECT TO RESTRICTIONS ON
      MARKETABILITY.





Our
      Shares are "penny stocks" within the definition of that term as contained in
      the
      Securities Exchange Act of 1934, which are generally equity securities with
      a
      price of less than $5.00. Our shares will then be subject to rules that impose
      sales practice and disclosure requirements on certain broker-dealers who engage
      in certain transactions involving a penny stock. Under the penny stock
      regulations, a broker-dealer selling penny stock to anyone other than an
      established customer or "accredited investor" must make a special suitability
      determination for the purchaser and must receive the purchaser's written consent
      to the transaction prior to the sale, unless the broker-dealer is otherwise
      exempt. Generally, an individual with a net worth in excess of $1,000,000 or
      annual income exceeding $200,000 individually or $300,000 together with his
      or
      her spouse is considered an accredited investor.





In
      addition, the penny stock regulations require the broker-dealer to:




·
            deliver,
                prior to any transaction involving a penny stock, a disclosure schedule
                prepared by the Securities and Exchange Commission relating to the
                penny
                stock market, unless the broker-dealer or the transaction is otherwise
                exempt;




10




·
            Disclose
                commissions payable to the broker-dealer and the Registered Representative
                and current bid and offer quotations for the securities;




·
            Send
                monthly statements disclosing recent price information with respect
                to the
                penny stock held in a customer's account, the account's value and
                information regarding the limited market in penny
                stocks;





Because
      of these regulations, broker-dealers may encounter difficulties in their attempt
      to sell shares of our common stock, which may affect the ability of selling
      shareholders or other holders to sell their shares in the secondary market
      and
      have the effect of reducing the level of trading activity in the secondary
      market. These additional sales practice and disclosure requirements could impede
      the sale of our securities. In addition, the liquidity of our securities may
      be
      decreased, with a corresponding decrease in the price of our securities. Our
      shares in all probability will be subject to such penny stock rules and our
      shareholders will, in all likelihood, find it difficult to sell their
      securities.





Dividend
      Policy:




All
      shares of common stock are entitled to participate proportionally in dividends
      if our Board of Directors declares them out of the funds legally available.
      These dividends may be paid in cash, property or additional shares of common
      stock. We have not paid any dividends since our inception and presently
      anticipate that all earnings, if any, will be retained for development of our
      business. Any future dividends will be at the discretion of our Board of
      Directors and will depend upon, among other things, our future earnings,
      operating and financial condition, capital requirements, and other
      factors.





Series
      A
      Convertible Preferred Stock:




We
      have
      issued and outstanding 1,000,000 shares of Series A Convertible Preferred Stock,
      which are held entirely by affiliates of the Company. Each share of Series
      A
      Convertible Preferred Stock is convertible after five years from the original
      date of issuance into 10 shares of common stock, and it votes together with
      the
      common stock on all matters on an as converted basis. The Series A Convertible
      Preferred Stock is entitled to such dividends as may be declared by the Board
      of
      Directors on the common stock, from time to time, on an as converted
      basis.





Series
      B
      Convertible Preferred Stock:




We
      have
      issued and outstanding 800,000 shares of Series B Convertible Preferred Stock,
      which are held entirely by affiliates of the Company. Each share of Series
      B
      Convertible Preferred Stock is convertible after three years from the original
      date of issuance into 10 shares of common stock, and it votes together with
      the
      common stock on all matters on an as converted basis. The Series B Convertible
      Preferred Stock is entitled to such dividends as may be declared by the Board
      of
      Directors on the common stock, from time to time, on an as converted
      basis.





Series
      C
      Convertible Preferred Stock:




We
      have
      issued and outstanding 700,000 shares of Series C Convertible Preferred Stock,
      which are held entirely by affiliates of the Company. Each share of Series
      C
      Convertible Preferred Stock is convertible after three years from the original
      date of issuance into 10 shares of common stock, and it votes together with
      the
      common stock on all matters on an as converted basis. The Series C Convertible
      Preferred Stock is entitled to such dividends as may be declared by the Board
      of
      Directors on the common stock, from time to time, on an as converted
      basis.





11


**ITEM
      6. SELECTED FINANCIAL STATEMENTS**





**INDEPENDENT
      AUDITOR’S REPORT**








To
      the
      Board of Directors and Stockholders


HouseRaising,
      Inc. and Subsidiaries


4801
      East
      Independence Blvd, Ste. 200


Charlotte,
      NC 28212





I
      have
      audited the accompanying consolidated balance sheet of HouseRaising, Inc. and
      Subsidiaries as of December 31, 2006, and the related consolidated statements
      of
      operations, stockholders’ equity and comprehensive income, and cash flows for
      the years ended December 31, 2006 and 2005. These financial statements are
      the
      responsibility of the company’s management. My responsibility is to express an
      opinion on these financial statements based on my audits.





I
      conducted my audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that I
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. An audit includes examining,
      on a
      test basis, evidence supporting the amounts and disclosures in the financial
      statements. An audit also includes assessing the accounting principles used
      and
      significant estimates made by management, as well as evaluating the overall
      financial statement presentation. I believe that my audits provide a reasonable
      basis for my opinion.





In
      my
      opinion, the financial statements referred to above present fairly, in all
      material respects, the financial position of HouseRaising, Inc. and Subsidiaries
      as of December 31, 2006, and the results of its operations and its cash flows
      for the years ended December 31, 2006 and 2005 in conformity with accounting
      principles generally accepted in the United States of America.





Traci
      J.
      Anderson, CPA


Huntersville,
      NC


April
      2,
      2007





12




**HouseRaising,
                Inc. and Subsidiaries****Consolidated
                Balance Sheet****December
                31, 2006**




**ASSETS**Current
                Assets:Cash
            
            $
            167,702Excess
                costs over billings on uncompleted projects
            
            
            220,510Accounts
                Receivable
            
            
            500,000Total
                Current Assets
            
            
            888,212Property
                and Equipment:Property
                and Equipment
            
            
            434,038Accumulated
                Depreciation
            
            
            (180,076
            )Total
                Furniture and Equipment
            
            
            253,962Other
                Assets:Other
                Assets
            
            
            54,200Capitalized
                Software
            
            
            13,722,956Total
                Other Assets
            
            
            13,777,156TOTAL
                ASSETS
            
            $
            14,919,330**LIABILITIES
                AND STOCKHOLDERS' EQUITY**Current
                Liabilities:Line
                of Credit
            
            $
            4,052,109Current
                Maturities of Notes Payable
            
            
            391,842Interest
                Payable
            
            
            98,963Accounts
                Payable and Other Payables
            
            
            251,595Total
                Liabilities
            
            
            4,794,509Stockholders'
                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)
            
            
            800Common
                Stock ($.001 par value; 100,000,000 authorized;50,769,282
                issued and outstanding)
            
            
            50,769Common
                Stock Subscribed but not Issued
            
            
            1,807,262Paid
                in Capital
            
            
            17,089,684Retained
                Deficit
            
            
            (8,824,694
            )Total
                Stockholders' Equity
            
            
            10,124,821Total
                Liabilities and Stockholders' Equity
            
            $
            14,919,330




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




13





**HouseRaising,
                Inc. and Subsidiaries****Consolidated
                Statement of Operations****For
                the years ended December 31, 2006 and
                2005**




2006
            
            2005**SALES
                AND COST OF SALES**Sales
            
            $
            1,249,221
            
            $
            584,466Cost
                of Sales
            
            
            978,701
            
            
            497,685Gross
                Profit
            
            
            270,520
            
            
            86,781**OTHER
                REVENUES**Other
                Income
            
            
            23,578
            
            
            188Total
                Other Revenues
            
            
            23,578
            
            
            188**EXPENSES**Selling,
                general and administrative
            
            
            1,318,767
            
            
            1,133,371Consulting,
                professional fees, and salaries--stock based compensation
            
            
            2,172,654
            
            
            2,944,726Bad
                Debt Expense
            
            
            22,918
            
            
            -Interest
            
            
            224,212
            
            
            96,180Depreciation
            
            
            54,905
            
            
            33,686TOTAL
                EXPENSES
            
            
            3,793,456
            
            
            4,207,963Net
                Loss from Operations
            
            
            (3,499,358
            )
            
            (4,120,994
            )**OTHER
                COMPREHENSIVE INCOME**Insurance
                Proceeds Realized
            
            
            500,000
            
            
            -Net
                Loss
            
            $
            (2,999,358
            )
            $
            (4,120,994
            )Net
                (loss) per share--basic and fully diluted
            
            
            (0.06
            )
            
            (0.10
            )Weighted
                average shares outstanding
            
            
            48,183,225.00
            
            
            40,467,025.00




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





14




**HouseRaising,
                Inc. and Subsidiaries****Consolidated
                Statements of Cash Flows****For
                the years ended December 31, 2006 and
                2005**




2006
            
            2005CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                loss
            
            $
            (2,999,358
            )
            $
            (4,120,994
            )Adjustments
                to reconcile net loss to net cash provided by (used in)operating
                activities:Depreciation
            
            
            57,007
            
            
            33,686Value
                of Common Stock and Warrants issued in exchange for
                services
            
            
            2,172,653
            
            
            2,944,729Value
                of Common Stock issued for debt converted to stock
            
            
            325,946
            
            
            -Value
                of Common Stock issued for additions to Capitalized
                Software
            
            
            315,000
            
            
            1,603,248Value
                of Preferred Stock issued for additions to Capitalized
                Software
            
            
            1,375,000
            
            
            -(Increase)/Decrease
                in Capitalized Software
            
            
            (3,003,256
            )
            
            (2,148,461
            )(Increase)/Decrease
                in Accounts Receivable
            
            
            (477,082
            )
            
            3,023(Increase)/Decrease
                in Excess Costs Over Billings on UncompletedContracts
            
            
            (34,138
            )
            
            (126,729
            )(Increase)/Decrease
                in Other Assets
            
            
            (45,740
            )
            
            -Increase/(Decrease)
                in Interest Payable
            
            
            16,526
            
            
            -Increase/(Decrease)
                in Accounts Payable
            
            
            8,301
            
            
            323,116NET
                CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
            
            
            (2,289,141
            )
            
            (1,488,382
            )CASH
                FLOWS FROM INVESTMENT ACTIVITIES:Investment
                in subsidiary operations
            
            
            -
            
            
            (148,335
            )Purchase
                of property and equipment
            
            
            (71,161
            )
            
            (45,717
            )NET
                CASH PROVIDED BY (USED IN) INVESTMENT ACTIVITIES
            
            
            (71,161
            )
            
            (194,052
            )CASH
                FLOWS FROM FINANCING ACTIVITIES:Proceeds
                from sale of common stock
            
            
            -
            
            
            475,000Net
                Adjustments to Paid in Capital and Retained Earnings
            
            
            3,477
            
            
            -Note
                Payables converted to stock
            
            
            (325,946
            )
            
            -Principal
                Reductions on Notes Payable
            
            
            (191,019
            )
            
            -Increase/(Decrease)
                in borrowings on Line of Credit
            
            
            2,749,109
            
            
            1,475,050NET
                CASH PROVIDED BY (USED IN) INVESTMENT ACTIVITIES
            
            
            2,235,621
            
            
            1,950,050NET
                INCREASE IN CASH ANDCASH
                EQUIVALENTS
            
            
            (124,681
            )
            
            267,616CASH
                AND CASH EQUIVALENTS:Beginning
                of Period
            
            
            292,383
            
            
            24,767End
                of Period
            
            $
            167,702
            
            $
            292,383





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




15





**HouseRaising,
                Inc. and Subsidiaries****Consolidated
                Statement of Stockholders' Equity****For
                the years ended December 31, 2006 and
                2005**




Series
                A
            
            Series
                A
            
            Class
                A
            
            Class
                A
            
            Class
                B
            
            Class
                BCommon
            
            Common
            
            Preferred
            
            Preferred
            
            Preferred
            
            Preferred
            
            AdditionalShares
            
            Stock
            
            Shares
            
            Stock
            
            Shares
            
            Stock
            
            Paid-in
            
            Retained(000's)
            
            $
            
            (000's)
            
            $
            
            (000's)
            
            $
            
            Capital
            
            DeficitBalances,
                January 1, 2005
            
            
            36,460
            
            $
            36,460
            
            
            1,000
            
            
            1,000
            
            
            -
            
            
            -
            
            $
            7,754,494
            
            $
            (1,707,822
            )Issuance
                of A shares for services
            
            
            8,126
            
            
            8,126
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            5,151,871
            
            
            -Adjustments
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            1,753
            
            
            (47
            )Net
                Income (loss) for the year
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (4,120,994
            )Balances,
                December 31, 2005
            
            
            44,586
            
            $
            44,586
            
            
            1,000
            
            $
            1,000
            
            
            -
            
            $
            -
            
            $
            12,908,118
            
            $
            (5,828,863
            )Issuance
                of A shares for services
            
            
            6,183
            
            
            6,183
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            2,151,602
            
            
            -Issuance
                of A shares for funds
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Issuance
                of Class B Preferred Stock
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            800
            
            
            800
            
            
            1,999,200
            
            
            -Warrants
                issued for services
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            30,814
            
            
            -Adjustments
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (50
            )
            
            3,527Net
                income (loss) for the year
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (2,999,358
            )Balances,
                December 31, 2006
            
            
            50,769
            
            $
            50,769
            
            
            1,000
            
            $
            1,000
            
            
            800
            
            $
            800
            
            $
            17,089,684
            
            $
            (8,824,694
            )




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




16


**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 the Carolinas, LLC (N.C. LLC)—10/17/2006 owned 100% by HouseRaisingUSA,
      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 Greater Charlotte, LLC (N.C. LLC)—5/23/2003 owned 100% by HouseRaising,
      Inc.




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




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




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




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




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




Freeman
      Custom Homes, LLC (S.C. LLC)—PENDING owned 50% by HouseRaising of Greater
      Charlotte, LLC




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




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




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




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




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




Robinson
      Custom Homes LLC (N.C. LLC)—PENDING owned 50% by HouseRaising of Greater
      Charlotte, LLC




HouseRaisingManagement,
      LLC (N.C. LLC)—dissolved 2/23/07




HouseRaising
      of Asheville, LLC (N.C. LLC)—dissolved 2/23/07




HouseRaising
      of Wilmington, LLC (N.C. LLC)—dissolved 2/23/07





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. The Company enters into a fee based management contract with each
      homebuilder that 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 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.





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.





17




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





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 assets will commence amortization when the asset
      is considered to be in the post-implementation phase (i.e. when the development
      of internal use software is completed) which was originally projected to be
      in
      2006, but has been changed to 2007. At such time, the capitalized software
      costs
      will be amortized on a straight-line basis over the estimated economic life
      of
      the asset to be determined.





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.
      In some cases there are “true-up” provisions which would result in more or less
      shares to be issued; however, the expense or capital expenditure would have
      already been reflected on the company’s financial statements at the time
      services were rendered.





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. Accordingly, 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.





18





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





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. 121, *“Accounting
      for the Impairment of Long-Lived Assets to be Disposed of”* 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.





19




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





Recent
      Accounting Pronouncement (cont’)





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.





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.





20




**NOTE
      C—INCOME TAXES (CONT’)**





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
            
            $
            -





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.




21




**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**





22




**NOTE
      G—WARRANTS (CONT’)**





The
      following table shows the future warrants to consultants, independent
      contractors and employees that the Company will issue:




**#
                shares**
            
            **Price
                per Share**
            
            **Exercise
                Date**
            
            **Expiration**
                **Date**
            
            **Vesting
                Term (yrs)**
            
            **Warrants
                vesting per year**
            
            **Warrants
                Vesting as of 12/31/06**
            
            **Accrual
                12/31/2006**300,000
            
            $
            1.00
            
            
            01/08/03
            
            
            01/08/08
            
            
            5
            
            
            60,000
            
            
            60,000
            
            $
            600100,000
            
            $
            0.50
            
            
            04/19/04
            
            
            04/19/09
            
            
            5
            
            
            20,000
            
            
            20,000
            
            
            200100,000
            
            $
            1.50
            
            
            11/01/04
            
            
            11/01/09
            
            
            5
            
            
            20,000
            
            
            20,000
            
            
            200100,000
            
            $
            1.50
            
            
            11/01/04
            
            
            11/01/09
            
            
            5
            
            
            20,000
            
            
            20,000
            
            
            2005,000
            
            $
            1.24
            
            
            03/04/05
            
            
            03/04/10
            
            
            5
            
            
            1,000
            
            
            1,000
            
            
            105,000,000
            
            $
            0.50
            
            
            Special
            
            
            06/23/15
            
            
            4
            
            
            1,250,000
            
            
            1,250,000
            
            
            15,000500,000
            
            $
            1.75
            
            
            04/07/05
            
            
            04/07/15
            
            
            5
            
            
            100,000
            
            
            100,000
            
            
            1,000833,333
            
            $
            0.50
            
            
            02/01/07
            
            
            02/01/17
            
            
            2
            
            
            416,667
            
            
            416,667
            
            
            4,1672,000,000
            
            $
            0.50
            
            
            02/01/07
            
            
            02/01/17
            
            
            3
            
            
            666,667
            
            
            0
            
            
            -800,000
            
            $
            0.50
            
            
            02/01/07
            
            
            02/01/17
            
            
            2
            
            
            400,000
            
            
            400,000
            
            
            4,0001,200,000
            
            $
            0.50
            
            
            02/01/07
            
            
            02/01/17
            
            
            3
            
            
            400,000
            
            
            0
            
            
            -400,000
            
            $
            0.50
            
            
            02/01/07
            
            
            02/01/17
            
            
            2
            
            
            200,000
            
            
            200,000
            
            
            2,0001,200,000
            
            $
            0.50
            
            
            02/01/07
            
            
            02/01/17
            
            
            3
            
            
            400,000
            
            
            0
            
            
            -80,000
            
            $
            0.50
            
            
            10/31/05
            
            
            10/31/15
            
            
            5
            
            
            16,000
            
            
            16,000
            
            
            160200,000
            
            $
            0.50
            
            
            01/03/05
            
            
            01/13/15
            
            
            5
            
            
            40,000
            
            
            40,000
            
            
            40025,000
            
            $
            0.50
            
            
            01/01/05
            
            
            01/01/15
            
            
            5
            
            
            5,000
            
            
            5,000
            
            
            5025,000
            
            $
            1.00
            
            
            01/01/05
            
            
            01/01/15
            
            
            5
            
            
            5,000
            
            
            5,000
            
            
            50250,000
            
            $
            0.50
            
            
            01/01/05
            
            
            01/01/15
            
            
            5
            
            
            50,000
            
            
            50,000
            
            
            500250,000
            
            $
            1.00
            
            
            01/01/05
            
            
            01/01/15
            
            
            5
            
            
            50,000
            
            
            50,000
            
            
            500250,000
            
            $
            0.50
            
            
            01/01/05
            
            
            01/01/15
            
            
            5
            
            
            50,000
            
            
            50,000
            
            
            500250,000
            
            $
            1.00
            
            
            01/01/05
            
            
            01/01/15
            
            
            5
            
            
            50,000
            
            
            50,000
            
            
            500250,000
            
            $
            0.50
            
            
            08/01/06
            
            
            08/01/16
            
            
            5
            
            
            50,000
            
            
            20,833
            
            
            208200,000
            
            $
            0.50
            
            
            05/08/06
            
            
            05/08/16
            
            
            4
            
            
            50,000
            
            
            33,333
            
            
            33340,000
            
            $
            0.00
            
            
            07/24/00
            
            
            N/A
            
            
            4
            
            
            10,000
            
            
            0
            
            
            -50,000
            
            $
            1.20
            
            
            2003
            
            
            N/A
            
            
            5
            
            
            10,000
            
            
            10,000
            
            
            100250,000
            
            $
            0.50
            
            
            11/08/06
            
            
            11/08/16
            
            
            5
            
            
            50,000
            
            
            8,333
            
            
            83100,000
            
            $
            0.50
            
            
            01/02/07
            
            
            01/02/17
            
            
            5
            
            
            20,000
            
            
            0
            
            
            -500,000
            
            $
            0.50
            
            
            01/02/07
            
            
            01/02/17
            
            
            5
            
            
            100,000
            
            
            0
            
            
            -200,000
            
            $
            0.50
            
            
            12/02/06
            
            
            12/02/16
            
            
            5
            
            
            40,000
            
            
            3,333
            
            
            3310,000
            
            
            N/A
            
            
            12/02/06
            
            
            12/02/16
            
            
            5
            
            
            2,000
            
            
            2,000
            
            
            20**16,568,333**
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            **$**
            **30,815**




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





On
      July
      20, 2006, the Company adopted 2006 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 2,000,000 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—RELATED PARTY TRANSACTIONS**





During
      2006, the Company issued 1,794,078 Common Shares to its Chairman and CEO in
      exchange for services, valued at $560,344. The Company also issued the Chairman
      and CEO 200,000 Convertible, Class B Preferred Shares in exchange for services,
      valued at $500,000. Conversion of these preferred shares is 10 to 1 and expires
      in 3 years.





23




**NOTE
      I—RELATED PARTY TRANSACTIONS (CONT’)**





During
      2006, the Company issued 1,127,016 Common Shares to its President and founder
      of
      the Company in exchange for services, valued at $262,500. The Company also
      issued the President 500,000 Convertible, Class B Preferred Shares in exchange
      for services, valued at $1,250,000. Conversion of these preferred shares is
      10
      to 1 and expires in 3 years.





During
      2006, the Company had an outstanding Note Payable due to officers of the Company
      in the amount of $216,174.





**NOTE
      J—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.





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.





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. 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. 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. 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.





**NOTE
      K—NOTES PAYABLE**





**Notes
      payable at December 31, 2006 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.
              
              $
              13,177Secured
                  note payable to an unrelated party.Bearing
                  15% interest.
              
              $
              155,000Unsecured
                  note payable to an unrelated party.Bearing
                  0% interest.
              
              $
              1,851
              **Secured
                  demand note payable to a related party.Bearing
                  6% interest.
              
              $
              216,174Total
                  Current Portion
              
              $
              391,842




**
      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.




24




**NOTE
      K—NOTES PAYABLE (CONT’)**




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 (this will eliminate the Secured note payable to an
      unrelated part in the amount of $155,000 bearing interest rate of 15%--as shown
      above—which will be reflected in the first quarter 2007 results.)





In
      addition, the secured demand note payable to a related party in the amount
      of
      $216,174 bearing interest of 6% has been paid in full during the first quarter
      of 2007.





**NOTE
      L—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 $1,000,000
      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, 2007. 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, 2007. 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. The Company’s total Line of Credit outstanding as of
      December 31, 2006 was $4,052,109.





**NOTE
      M—SUBSEQUENT EVENTS**





On
      February 2, 2007, the Company completed an equity for debt swap with its final
      bridge lender to issue 424, 801 shares in exchange for a reduction of $212,401
      in bridge loan and accumulated interest. The shares of common stock sold are
      not
      entitled to any registration rights, and the investor will rely on Rule 144
      under the Act in order to sell the shares of common stock on the
      Over-the-Counter Bulletin Board after satisfying the Rule’s requirements. There
      are no underwriting discounts or commissions in this transaction. The shares
      were issued in reliance on an exemption from registration under the Securities
      Act of 1933, as amended, pursuant to Section 4(2) thereof. The bases for the
      availability of this exemption include the facts that: (1) the issuance was
      an
      isolated private transaction which did not involve a public offering; (2) there
      was only one offeree; (3) the offeree agreed to the imposition of a restrictive
      legend on the face of the stock certificate representing the restricted shares,
      to the effect that he would not resell the shares unless they were registered
      or
      an exemption from registration was available; (4) the offeree was a
      sophisticated investor with substantial net worth and the ability to bear the
      risk of the investment; (5) there were no subsequent or contemporaneous public
      offerings of the stock; (6) the stock was not broken down into smaller
      denominations; and (7) the negotiations involving the equity for debt swap
      and
      the issuance of the restricted stock pursuant thereto took place directly
      between the offeree and management of the Company.





In
      2007,
      the Company established builder partnerships forming five new limited liability
      companies (LLC) with the names: Barrow-Hundley Homes, LLC; Harris Homes, LLC;
      Hawn Homes, LLC; Trojan Custom Homes, LLC; West Custom Homes, LLC and White
      Homes, LLC. HouseRaising is 50% owner of each of these LLCs and the managing
      member. The Company also dissolved three limited liability companies:
      HouseRaisingManagement, LLC, HouseRaising of Asheville, LLC and HouseRaising
      of
      Wilmington, LLC.





25





**ITEM
      7. 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
      December 31, 2006**





*(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**





**2006
      HIGHLIGHTS:**




·
            Total
                sales rose to $1.25 million from $584 thousand last year, a 114%
                increase;




·
            Total
                sales and other comprehensive income rose to $1.77 million, a 254%
                increase;




·
            Gross
                profit increased to $270 thousand from $87 thousand last year, a
                three-fold increase;




·
            Gross
                profit with other revenues and other comprehensive income rose to
                $793
                thousand, a nine-fold increase;




·
            Net
                loss for year was $2.99 million, down from $4.12 million in the previous
                year;




·
            Signed
                agreements for $6.1 million in custom homes expected to be built
                over the
                next 12 months, which is $4.1 million higher than year-end last year;




·
            Signed
                operating agreements with approximately ten (10) experienced homebuilders
                (Series 200 level) to develop local operations to build approximately
                10-20 homes each, whereby the builder operates a new jointly-owned
                limited
                liability company that uses our System Ctechnology and processes on which HouseRaising receives service fees
                and
                share profits equally on completed projects (these home sales are
                not
                included in the $6.1 million figure noted
                above);




·
            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).





**SIGNIFICANT
      DEVELOPMENTS SINCE YEAR-END:**




·
            Launched
                HouseRaisingRealty, LLC to assist homebuyers in disposing of their
                existing homes or acquiring lots for their new custom homes. As of
                the
                filing of this report, HouseRaisingRealty
                has:




·
            Closed
                sales transactions totaling $1,390,475 which generates $37,290 in
                commission income to the Company;




·
            Have
                pending sales transactions totaling approximately $4,500,000 which
                will
                generate approximately $150,000 in commission income to the Company;
                and




·
            Have
                active listings for sales of approximately $7 million.




·
            Leased
                and built out 10,000 feet for the New Orleans Design
                Center/Offices.




**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 from use 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.





26




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 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 five to 20 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.





**RESULTS
      OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2006**


**COMPARED
      TO DECEMBER 31, 2005**





**SALES
      AND COST OF SALES**





**Sales**





The
      Company had Sales (new home and renovation sales) of $1,249,221 for the twelve
      months ending December 31, 2006, compared to $534,153 for the same period in
      2005, which represents a doubling of such sales. Sales increased due to the
      completion of new construction and remodeling projects in the greater Charlotte
      area in the second half of 2006 as the company started to implement its business
      plan and develop operations in the Carolinas Zone. 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. The
      sales and service fees of $153,777 recorded in 2006 were associated with new
      and
      on-going projects that are expected to be completed in the next 12 months.
      This
      compares to service fees of $50,313 recorded in 2005, a three-fold increase.
      Going forward we would expect sales and service fee revenue to continue to
      grow
      commensurate with increases in new contract sales.





As
      of the
      end of the first quarter of 2007, the Company has new contracts totaling
      approximately $6,100,000 in sales that are projected to be completed over the
      next 12 months, which reflects a $4,100,000 increase from the number reported
      in
      our Annual Report on 10-KSB for the period ending December 31, 2005 as filed
      on
      March 31, 2006. In addition, 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 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 total
      project sales based on the contract amount due to design and build projects,
      in
      the quarter in which the sale is approved and closed.





**Cost
      of Sales**





The
      cost
      of real estate 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). The total cost of sales for completed projects in 2006 was $978,701
      compared to $497,685 in 2005. The increase is a result of the increase in sales
      completed in 2006 versus 2005.





**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 a builder partnership relationship the company divides profits
      with
      the builder, which is accounted for as a cost to the project.





27




HouseRaising’s
      net revenues were $270,520 for the twelve months ending December 31, 2006
      compared to $86,781 for the same period in 2005 (more than a three fold
      increase) which reflects the substantial increase in new home construction
      and
      renovation projects and on-going marketing efforts the past year. Management
      would expect the Company’s gross profits to grow as we obtain new construction
      and remodeling work in the Carolinas and Gulf Coast in 2007 and continue the
      roll-out of the Company’s membership, disaster relief and new real estate
      brokerage operation.





**OTHER
      REVENUES**





The
      Company earned $23,578 in other income for the period ending December 31, 2006,
      principally from marketing fees associated with the Company’s contractual
      relationship with SunTrust Mortgage and membership fees from new Builder members
      that have decided to partner with HouseRaising. This compares to $188 for the
      same period in 2005. The company will 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 year ended December 31, 2006 was $3,793,456 compared to
      $4,207,963 for the same period in 2005. The decrease in expenses was due to
      a
      substantial decrease in consulting fees from the second quarter of 2005 to
      2006.
      Consulting fees reflects business consulting services and investor relations
      expenses which decreased to $289,519 in the second quarter, 2006 from $1,149,180
      in the second quarter 2005. This is principally because the company incurred consulting
      fees in the second quarter, 2005 in an effort to maintain our stock price in
      response to what we believe was a “wave of coordinated naked short selling”
which we reported to the NASD as described in our filing with the SEC on Form
      8-K on May 9, 2005. These fees were principally investor relations and related
      consulting services which was substantially funded through the issuance of
      restricted shares of common stock. The Company does not expect such expenses
      to
      reoccur. The
      total
      consulting, professional fees and salaries (stock based compensation) for the
      full year of 2006 was $2,172,654 as compared to $2,944,726 for the full year
      of
      2005.





Selling,
      general and administrative expenses were slightly higher for the twelve months
      ending December 31, 2006 versus 2005, increasing from $1,133,371 in 2005 to
      $1,318,767 in 2006. These expenses reflect costs related to developing
      HouseRaising’s Carolinas and Gulf Coast zone operations, 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
      Greater Charlotte and Gulf Coast regions, 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, a one time issuance of Preferred Stock
      Shares to management, and previously committed payments for services provided
      to
      the company.





The
      Company incurred a one-time bad debt expense on a builder receivable that it
      does not believe will be collected in the near term and has thus written off
      the
      receivable of $22,918. The Company had depreciation expense in the amount of
      $54,905 in 2006 compared to $33,686 in 2005. This reflects an increase in the
      company’s investment in property and equipment, particularly its design center
      in Charlotte. The Company will expect this to increase as it commences
      depreciating the company’s principal asset, System-C, over a 15-year
      period.





The
      Company had interest expense of $224,212 for the year ended December 31, 2006
      compared to $96,180 for the same period in 2005. 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.
      The
      interest recorded in 2006 was principally for the company’s line of credit with
      Wachovia Bank and some interest associated with the bridge lenders. The interest
      recorded in 2005 was principally to reimburse bridge lenders to HouseRaising
      as
      well as to the Technology Connections predecessor entity. The company has
      completed equity for debt swap with its final bridge lender in the first quarter
      of 2007 and paid off the secured demand note payable to a related part in the
      amount of $216,174 which will both be reflected in the results for first
      quarter, 2007. Going forward the level of interest expense will be based
      principally on the Wachovia line of credit drawn.





28




**OTHER
      COMPREHENSIVE INCOME**





The
      Company realized $500,00 in other income for the period ending December 31,
      2006 from a one-time payment of $500,000 associated with a key-man life
      insurance policy the company had on its founder Robert V. McLemore who passed
      way in November, 2006.





**INCOME
      / LOSSES**





The
      net
      loss for the year ended December 31, 2006 was $2,999,358 versus a net loss
      of
      $4,120,994 in the same period in 2005, a decrease of approximately 25% or
      $1,121,636. The decrease in net losses is directly attributable to an increase
      in sales associated with new construction and remodeling projects and a decrease
      in consulting fees in 2006 versus 2005. Future income/losses will depend on
      the
      success of implementing the company’s business plan in 2007. The company does
      already have approximately $6,100,000 of new home construction work in process
      for 2007 which is a $4,100,000 increase from last year at this time, 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 and Mooresville,
      North
      Carolina; Beaufort and Sunset (near Charleston), Columbia and Greenville, South
      Carolina; Gulfport, Mississippi and 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.





**Liquidity
      and Capital Resources**





Cash
      flows used in operations were $2,289,141 for the twelve months ended December
      31, 2006 versus $1,488,382 for the same period in 2005. This reflects a net
      increase in cash used by operations of $800,759 principally due to a decrease
      in
      common stock issued for services for the twelve months and slight increase
      in
      expenditures on capitalized software offset by a decrease in net operating
      loss.





Cash
      flows used in investment activities were $71,161 and $194,052 for the year
      ended
      December 31, 2006 and 2005, 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.





Cash
      flows provided by financing activities were $2,235,621 and $1,950,050,
      respectively, for the twelve months ended December 31, 2006 and 2005. The
      increase was principally due to issuance of common stock associated with the
      equity-for-debt swap with the company’s bridge lenders that occurred in the
      first nine months of 2006 (see Note 12 of Notes to Consolidated Financial
      Statements and Part II, Item 2 Changes in Securities of Form 10-QSB filed with
      the SEC on August 14, 2006 for more information) and the increase in borrowings
      on notes payable, principally draws on a bank loan with Wachovia.





We
      had
      cash on hand of $167,702 and a working capital deficit of $3,906,297 as of
      December 31, 2006, 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.





In
      early
      2006, the Company entered into agreements with some of the bridge lenders to
      convert their debt obligations into restricted stock of the company and warrants
      for future purchase of restricted stock of the company through our Private
      Placement Memorandum as described in Form 10-QSB filed with the SEC on August
      14
      2006 and on February 2, 2007, the Company completed equity for debt swap with
      its final bridge lender to issue 424,801 shares in exchange for a reduction
      of
      $212,400.62 in bridge loan and accumulated interest as further described under
      Note M of Notes to the Consolidated Financial Statements.





Overall,
      we have funded our cash needs from inception through December 31, 2006 with
      a
      series of debt and equity transactions. The Company’s principal source of
      working capital in 2006 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.





29




Going
      forward we will rely substantially on new revenue from our business development
      efforts and have the line of credit from Wachovia bank to sustain our business
      for the next twelve months. The company has approximately $6,100,000 of new
      home
      construction work in process for 2007, a new real estate brokerage operation
      that has already generated new income and a pipeline of prospective customers
      which is consistent with implementing our business plan. The Company has 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 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 operations and bank funding primarily to
      expand sales and marketing efforts of its homebuilding operations (new home
      and
      renovation 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,
      implementing marketing and sales for its disaster relief services, implementing
      marketing and sales for its realty brokerage operations and on-going software
      development to improve its system. The Company may also consider selective
      acquisition opportunities that may assist in the successful implementation
      of
      its business plan (see Note 9B Other Matters for further discussion on this
      item).





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 is 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 not 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
      8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE.**





None





**ITEM
      8A. CONTROLS AND PROCEDURES**





*QuarterlyEvaluation
      of Controls* .
      As of
      the end of the period covered by this annual report on Form 10-KSB, 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-14(a)/15d-14(a) Certifications"). This section of the annual report contains
      the information concerning the Evaluation referred to in the Rule
      13a-14(a)/15d-14(a) Certifications. This information should be read in
      conjunction with the Rule 13a-14(a)/15d-14(a) Certifications for a more complete
      understanding of the topic presented.





*Disclosure
      Controls* .
      Disclosure Controls are 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. Disclosure Controls are also designed with the objective of
      ensuring that material information relating to us is made known to the CEO
      and
      the CFO by others, particularly during the period in which the applicable report
      is being prepared.





*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.





30




*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.





**ITEM
      8B. 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.





**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.





31




**Other
      Events**





On
      November 27, 2006, HouseRaising of the Gulf Coast, LLC (the “Company”), a
      subsidiary of HouseRaising, Inc. (the “Registrant”), entered into a Lease
      Agreement (“Lease”) with CSC Investments, LLC (“Lessor”) whereby the Company
      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 31, 2011 with a five year option to lease 9,828 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
      initiative.





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 has 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.





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.





32





**PART
      III**





**ITEM
      9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT**





Information
      for this item concerning HouseRaising, Inc. executive officers and their
      business experience is incorporated by reference from page 9-10 of the Company’s
      Definitive Information Statement on Schedule14-C filed pursuant to the Company’s
      2007 Annual Shareholders Meeting (the “Definitive Information Statement”).
      Information on the current HouseRaising, Inc. directors and their business
      experience and directorships is incorporated herein by reference from pages
      4-7
      of the Definitive Information Statement.





**Family
      relationships; director arrangements**





Christine
      M. Carriker, Chief Administrative Officer, Secretary/Treasurer and Director
      and
      Elizabeth A. McLemore, Director are sisters and the daughters of the deceased
      founder, Robert V. McLemore.




**Code
      of Ethics**





The
      company formulated and adopted a code of ethics after working with its legal
      counsel and Audit Committee that applies to our company and our principal chief
      executive officer, principal financial officer, principal accounting officer
      or
      controller, or person performing similar functions (the “Code of Ethics”). A
      copy of the Code of Ethics was attached as Exhibit 14.1 to SEC Form 10-KSB
      filed
      on March 30, 2005 and is incorporated herein by reference. The Code of Ethics
      was designed with the intent to deter wrongdoing, and to promote the following:




·
            Honest
                and ethical conduct, including the ethical handling of action or
                apparent
                conflicts of interest between personal and professional
                relationships;




·
            Full,
                fair, accurate, timely and understandable disclosure in reports and
                documents that a small business issuer files with, or submits to,
                the
                Commission and in other public communications made by the small business
                issuer;




·
            Compliance
                with applicable governmental laws, rules and
                regulations;




·
            The
                prompt internal reporting of violations of the code to an appropriate
                person or persons identified in the code;
                and




·
            Accountability
                for adherence to the code.





**Change
      in Principal Officers**





On
      January 11, 2007, the Board of Directors of the Registrant met and agreed that
      in light of the recent death of Robert V. McLemore, its President and Founder,
      that it would appoint Mr. Gregory J. Wessling, its Chairman and Chief Executive
      Officer, to the additional position of President. In addition, the Board of
      Directors of the Registrant adopted a resolution that the By-Laws would be
      amended to create the position of Founder-Emeritus and Mr. McLemore would
      hereafter be remembered by being given that title posthumously.





**Change
      in By-laws**





On
      January 11, 2007, the Board of Directors of the Registrant also adopted a
      resolution to amend the By-laws of the Company pursuant to Article Seven
      thereof, to reduce the number of the Board of Directors from 8 members to 7
      members. As a result of Mr. Robert V. McLemore’s passing, the vacancy on the
      Board of Directors would thereby be eliminated.





**ITEM
      10. EXECUTIVE COMPENSATION**





The
      information required under this item for HouseRaising, Inc. is incorporated
      by
      reference from pages 12-18 of the Definitive Information Statement.





**Board
      Compensation**





Directors
      who are also officers of the Company do not receive directors’ fees or other
      amounts in compensation for participation on the Board of Directors or a
      committee of the Board of Directors. All other directors are each paid travel
      expenses for each meeting of the Board of Directors attended.





33




**2004
      Non-Qualified Stock Compensation Plan and Amendment
      Thereto**





The
      Company adopted a 2004 Non-Qualified Stock Compensation Plan on September 28,
      2004, and filed a Registration Statement on Form S-8 with the Commission to
      register shares awarded under the Plan on the same date. The Compensation
      Committee of the Board of Directors issues common stock and awards options
      to
      employees, directors, officers, consultants, advisors and other persons
      associated with our Company. The 2004 Plan is intended to provide a method
      whereby our company would be stimulated by the personal involvement of our
      employees, directors, officers, consultants, advisors and other persons in
      our
      business and reward such involvement, thereby advancing the interests of our
      Company and all of its shareholders. A total of 3,000,000 shares of common
      stock
      were authorized under the 2004 Plan and all 3,000,000 shares have been
      awarded.





On
      July
      20, 2006, the Company filed a new registration statement to register an
      additional 2,000,000 shares of Common Stock of the same class as those for
      which
      the Initial Registration Statement, as amended, and the Plan, as amended, is
      effective.





On
      December 29, 2006. the Company filed a new registration statement to register
      an
      additional 2,000,000 shares of Common Stock of the same class as those for
      which
      the Initial Registration Statement, as amended, and the Plan, as amended, is
      effective.





**Management
      Agreements with Key Personnel**





The
      company has management agreements with its Chief Technology Officer, Chief
      Administrative Officer and Chief Financial Officer, the form of which is
      attached herewith as Exhibit 10.2. The material terms of each of these
      management agreements are set forth in our Definitive Information Statement
      and
      are hereby incorporated by reference. Mr. Wessling has a Management Agreement
      with the Company dated June 23, 2005 to serve as CEO as reported on SEC Form
      8-K
      filed on July 1, 2005 and, as amended, August 10, 2006 as reported on SEC Form
      8-K filed on August 17, 2006.




**Executive
      Management Compensation**





The
      HouseRaising Compensation Committee, composed of 3 directors of HouseRaising,
      Inc. approves executive compensation for the Named Executive Officers. The
      information required to be disclosed concerning the Compensation Committee
      is
      incorporated herein by reference to pages 12-18 of the Company’s Definitive
      Information Statement. Actions of HouseRaising’s Compensation Committee are
      subject to ratification by the full HouseRaising, Inc. Board of Directors.





**ITEM
      11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS**





Information
      concerning security ownership of certain beneficial owners and management,
      and
      related stockholder matters, is incorporated by reference from the Company’s
      Definitive Information Statement.





**Section
      16(a) beneficial ownership reporting compliance**





Section
      16(a) of the Exchange Act, requires the Company's officers, Directors, and
      persons who beneficially own more than ten percent of the Common Stock to file
      reports of securities ownership and changes in such ownership with the
      Securities and Exchange Commission. Officers, directors and greater than ten
      percent beneficial owners also are required by rules promulgated by the
      Securities and Exchange Commission to furnish the Company with copies of all
      Section 16(a) forms they file. The information required by this item is
      incorporated herein by reference to pages 8 and 10-11 of the Company’s
      Definitive Information Statement.





**ITEM
      12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.**





Except
      as
      hereafter described, none of our directors or executive officers had a direct
      or
      indirect material interest in any transaction during the last two years, or
      proposed transaction, to which the Company was a party. The Company has a loan
      payable to stockholders at December 31, 2006 consisting of unsecured note
      payable to the Estate of Robert V. McLemore. As of December 31, 2006, the amount
      due on this 12-month, 6% per annum loan was $216,173. This loan was paid off
      as
      of March 31, 2007.





**ITEM
      13. PRINCIPAL ACCOUNTANT FEES AND SERVICES**





The
      information required under this item is incorporated by reference to the
      relevant information in the section relating to the Audit Committee Report
      of
      the Company’s Definitive Information Statement filed with the Commission (but no
      other part of the “Audit Committee Report” is incorporated by
      reference).





34


**PART
      IV**





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





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





Subsequent
      to September 30, 2006, the Company filed the following Current Reports on Forms
      8-K with the SEC as follows:


Dated
                  (filing date)
              
              Items
                  ReportedNovember
                  27, 2006 (November 29, 2006)
              
              Form
                  8-K Departure of Directors or Principal OfficersNovember
                  28, 2006 (November 29, 2006)
              
              Form
                  8-K Entry into a Material Definitive AgreementJanuary
                  11, 2007 (January 22, 2007)
              
              Form
                  8-K Entry into a Material Definitive Agreement; Unregistered Sales
                  of
                  Equity Securities; Amendments to Articles of Incorporation or Bylaws;
                  Appointment of Principal OfficersFebruary
                  2, 2007 (February 12, 2007)
              
              Form
                  8-K Unregistered Sales of Equity SecuritiesFebruary
                  9, 2007 (February 13, 2007)
              
              Form
                  8-K Entry into a Material Definitive
                  Agreement





**(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)10.1
              
              Management
                  agreement with Gregory J. Wessling, Chairman & Chief Executive Officer
                  (incorporated by reference from Form 8-K filed on July 1, 2005
                  and, as
                  amended, on Form 8-K filed on August 17, 2006)10.2
              
              Form
                  of Management Agreement entered into with our Chief Financial Officer,
                  Chief Technology Officer and Chief Administrative
                  Officer*.14.1
              
              The
                  Company’s Code of Ethics (incorporated by reference from Exh 14.1 to Form
                  10-KSB filed March 30, 2005)16.1
              
              Letter
                  on Change in Certifying Accountant (incorporated by reference from
                  Exh. 16
                  to a Form 8K/A filed October 5, 2004)21
              
              Subsidiaries
                  of the Registrant*31.1
              
              Rule
                  13a-14(a)/15d-14(a) Certification of Gregory J. Wessling, Chairman
                  and
                  Chief Executive Officer*31.2
              
              Rule
                  13a-14(a)/15d-14(a) Certification of Richard A. von Gnechten, Chief
                  Financial Officer*31.3
              
              Rule
                  13a-14(a)/15d-14(a) Certification of Christine M. Carriker,
                  Secretary/Treasurer & 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
                  and Chief
                  Administrative Officer*
  *-Filed
        herewith





-signature
      page follows-




35





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:
              April 2, 2007
            
            /s/
                Gregory J. WesslingGregory
                J. Wessling
                Chairman
                  of the Board,
                Chief
                  Executive Officer and President
                (Principal
                  Executive Officer)


Date:
                April 2, 2007
              
              /s/
                    Richard A. von GnechtenRichard
                    A. von Gnechten
                  Chief
                      Financial Officer
                    (Principal
                      Financial Officer)
 Date:
                    April 2, 2007
                  
                  /s/
                          Christine M. CarrikerChristine
                        M. Carriker
                      Chief
                            Administrative Officer
                          and
                            Secretary/Treasurer
                          (Principal
                            Accounting
                            Officer)




Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed below by the following persons on behalf of the registrants and in the
      capacities indicated on April 2, 2007.


Signature
              
              Title/s/
                  Gregory J. Wessling
              
              Chairman
                  of the Board of Directors, Chief Executive OfficerGregory
                  J. Wessling
              
              (Principal
                  Executive Officer)/s/
                  Richard A. von Gnechten
              
              Chief
                  Financial Officer of HouseRaising, Inc.Richard
                    A. von Gnechten
              
              (Principal
                  Financial Officer)/s/
                  Christine M. Carriker
              
              Chief
                  Administrative Officer, Secretary/TreasurerChristine
                    M. Carriker
              
              and
                  Director of HouseRaising, Inc.
                  (Principal
                    Accounting Officer)/s/
                  Grant Neerings
              
              Chief
                  Technology Officer and Director of HouseRaising, Inc.
                  andGrant
                    Neerings
              
              President
                  and Chief Manager of HouseRaisingAcademy,
                  LLC
  36
  /s/
                  Robert M. Burroughs
              
              Director
                  of HouseRaising, Inc.Robert
                    M. Burroughs/s/
                  Daniel S. Fogel
              
              Director
                  of HouseRaising, Inc.Daniel
                    S. Fogel/s/
                  Elizabeth A. McLemore
              
              Director
                  of HouseRaising, Inc.Elizabeth
                    A. McLemore/s/
                  James S. O’Connor
              
              Director
                  of HouseRaising, Inc.James
                    S. O’Connor





37