U.S.
      SECURITIES AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





FORM
      10-KSB/A





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.




**EXPLANATORY
      NOTE:**





This
      amendment to the annual report on Form 10-KSB for period ended December 31,
      2006
      of registrant HouseRaising, Inc. (HRAI) is being filed to remove reference
      to
“other comprehensive income,” and provide supplemental information on stock used
      for payment of services (and show cash flow information without these non-cash
      items), additional information on revenue sources and recognition, additional
      details on impairment of long-lived assets, additional details on issuance
      of
      restricted and free-trading shares for services rendered, details of the
      convertible preferred shares issued, details on future lease payments, details
      of numerator and denominator on fully-diluted share calculation, additional
      information on critical accounting policy regarding capitalized software,
      additional information under liquidity section of management discussion and
      analysis and additional wording to controls and procedures to conform with
      required language. There have been no changes to the overall net cash flows,
      net
      income (loss) or balance sheet totals. This amendment to the annual report
      on
      Form 10-KSB/A includes changes to make the following statements clear, changes
      references from “Form 10-KSB” to “Form 10-KSB/A,” and provides new Chief
      Executive Officer and Chief Financial Officer certifications in place of the
      original certifications (HRAI Exhibits 31.1, 31.2, 31.3, 32.1, 32.2, 32.3).





The
      rest of this page is left intentionally blank





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          1
          -


HOUSERAISING,
      INC.


FORM
      10-KSB/A





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
            6ITEM
                3.
            Legal
                Proceedings
            7ITEM
                4.
            Submission
                of Matters to a Vote of Security Holders
            7PART
                IIITEM
                5.
            Market
                for Registrants Common Equity and Related Stockholder
                Matters
            7ITEM
                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
            30ITEM
                8.
            Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure
            35ITEM
                8A.
            Controls
                and Procedures
            35ITEM
                8B.
            Other
                Matters
            36PART
                IIIITEM
                9.
            Directors,
                Executive Officers of the Registrant
            38ITEM
                10.
            Executive
                Compensation
            38ITEM
                11.
            Security
                Ownership of Certain Beneficial Owners and Management
                RelatedStockholder
                Matters
            39ITEM
                12.
            Certain
                Relationships and Related Transactions
            39ITEM
                13.
            Principal
                Accountant Fees and Services
            39PART
                IVITEM
                14.
            Exhibits
                and Reports on Form 8-K
            40Signatures
            41





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          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 four separate sources and
      marketing strategies. Each revenue source serves the design/build segment of
      the
      homebuilding industry.




-
          4
          -




***(1)
      Revenues from Custom Homebuilding Operations:*** Operating within zone territories through wholly-owned subsidiaries,
      HouseRaising creates revenues from building and managing custom home and
      renovation projects. 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. 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 and not the
      builder, collecting a fee for management services provided.





***(2) Revenues
      from Realty Services:***  Operating
      within zone territories through a wholly-owned subsidiary, HouseRaisingRealty,
      LLC, HouseRaising 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. HouseRaisingRealty 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, through a wholly-owned subsidiary,
      HouseRaisingDisasterRelief, LLC. 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 custom
      homebuilding opportunities whereby HouseRaising either performs the role of
      general manager for a fee or actually builds the home with one of the Company’s
      builders. 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 educational
      opportunities, cost savings and economies of scale created by HouseRaising’s
      vendor relationships. This Internet-based revenue stream represents the price
      builders pay HouseRaising for memberships.





**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.





**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.”




-
          5
          -




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





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





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





**Competition:**





The
      homebuilding business is highly competitive and fragmented. However,
      HouseRaising’s competition is not the large national 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.





**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.




-
          6
          -




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.




**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.




-
          7
          -




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.





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.




-
          8
          -




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





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





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





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





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





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





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





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.




-
          9
          -




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
            
            $
            0.25




2006
                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 Compa ny'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;


·
            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.





-
          10
          -





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**Insurance
                Proceeds Realized
            
            
            500,000
            
            
            -Other
                Income
            
            
            23,578
            
            
            188Total
                Other Revenues
            
            
            523,578
            
            
            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
            
            
            (2,999,358
            )
            
            (4,120,994
            )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
            
            
            40,467,025





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:Value
                of Stock issued for services deducted as expenses (non cash
                item)
            
            
            2,172,654
            
            
            2,944,726Depreciation
            
            
            57,007
            
            
            33,686(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
            
            
            (1,301,830
            )
            
            (943,172
            )CASH
                FLOWS FROM INVESTMENT ACTIVITIES:Investment
                in subsidiary operations
            
            
            -
            
            
            (148,335
            )(Increase)/Decrease
                in Capitalized Software
            
            
            (1,313,257
            )
            
            (545,210
            )Purchase
                of property and equipment
            
            
            (71,161
            )
            
            (45,717
            )NET
                CASH PROVIDED BY (USED IN) INVESTMENT ACTIVITIES
            
            
            (1,384,418
            )
            
            (739,262
            )CASH
                FLOWS FROM FINANCING ACTIVITIES:Proceeds
                from sale of common stock
            
            
            -
            
            
            475,000Net
                Adjustments to Paid in Capital and Retained Earnings
            
            
            3,477
            
            
            -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
            
            
            2,561,567
            
            
            1,950,050NET
                    INCREASE IN CASH AND CASH EQUIVALENTS
            
            
            (124,681
            )
            
            267,616CASH
                AND CASH EQUIVALENTS:Beginning
                of Period
            
            
            292,383
            
            
            24,767End
                of Period
            
            $
            167,702
            
            $
            292,383***SUPPLEMENTAL
                DISCLOSURES OF CASH FLOW INFORMATION:******CASH
                PAID DURING THE YEAR FOR:******Interest***
            
            ***$***
            ***224,212***
            
            ***$***
            ***96,180******NON-CASH
                OPERATING ACTIVITIES:******Value
                of Common Stock and Warrants issued in exchange for
                services***
            
            ***$***
            ***2,172,653***
            
            ***$***
            ***2,944,726******Value
                of Common Stock issued for additions to Capitalized
                Software***
            
            ***$***
            ***315,000***
            
            
            ***1,603,248******Value
                of Preferred Stock issued for additions to Capitalized
                Software***
            
            ***$***
            ***1,375,000***
            
            
            ***-******NON-CASH
                FINANCING ACTIVITIES:******Value
                of Common Stock issued for debt converted to
                stock***
            
            ***$***
            ***325,946***
            
            
            ***-***




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. As of the date of this report, the Company has not signed any
      design/build contracts with any of the 50% limited liability companies. All
      design/build contracts have been engagements between HouseRaising’s 100% owned,
      licensed building companies, principally HouseRaising of Greater Charlotte,
      LLC
      and HouseRaising of the Gulf Coast, LLC. While the company fully expects to
      have
      signed agreements with the parties involved in the 50% limited liability
      companies, it is still evaluating the economic impact of various costs, such
      as
      state insurance requirements, of using this vehicle for building homes. Until
      such time as this matter is resolved, the company will continue to sign all
      contracts with its 100% owned, licensed building companies. 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.




-
          17
          -




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





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





Management’s
      Use of Estimates —The
      preparation of consolidated financial statements in conformity with accounting
      principles generally accepted in the United States of America requires
      management to make estimates and assumptions that affect the reported amounts
      of
      assets and liabilities and disclosures of contingent assets and liabilities
      at
      the date of consolidated financial statements and the reported amounts of
      revenues and expenses during the reporting period. Actual results could differ
      from those estimates.





Revenue
      Recognition —The
      Company’s revenue is derived from 1) selling, designing, managing and building
      custom residential homes and renovation projects which reflect the home’s
      contract price [Custom Homebuilding Operations]; 2) commissions from real estate
      sales transactions of land, new homes or a customer’s existing home [Realty
      Services]; and 3) other fees, including a) consulting fees for disaster relief
      services [Disaster Relief Services]; b) membership fees for builder members
      that
      wish to take advantage of services provided by the company for independent
      builders [Builder Memberships]; and c) marketing fees for co-branding agreements
      [Other Revenues].





Revenues
      and profits from Custom Homebuilding Operations (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. The Company recognizes sales and service fees (6% of the home’s
      contract price) in the initial construction stage for interior design,
      architectural and structural engineering drawings provided to the customer.
      There are instances where sales and services fees will be the only services
      provided to a customer. The balance of the sales and service fees (4% of the
      home’s contract price) is recognized when the contract is completed.





Commissions
      from real estate sales transactions are recorded when paid at closing.
      Consulting fees, membership fees and marketing fees are all recorded as earned
      and paid.





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), 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.





-
          18
          -





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





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.





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





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





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





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





Impairment
      of Long-Lived Assets —The
      Company evaluated the recoverability of its property and equipment, and other
      assets in accordance with Statements of Financial Accounting Standards (SFAS)
      No. 144, *“Accounting
      for the Impairment or Disposal of Long-Lived Assets”* which
      requires recognition of impairment of long-lived assets in the event the net
      book value of such assets exceeds the estimated future undiscounted cash flows
      attributable to such assets or the business to which such intangible assets
      relate. Each year the company uses its operating forecast for the subsequent
      three year period and the Gordon method of projecting a terminal value for
      future results based on the third-year cash flow projections to determine the
      estimated future undiscounted cash flows attributable to its principal asset.
      The company then also calculates discounted cash flows using a 20% discount
      rate. In both instances there was not impairment. A material assumption used
      in
      determining the recoverability of the capitalized software is projected revenue
      which is based on existing signed contracts and projected growth as the company
      expands its operations. Actual results for 2005 and 2006 did not meet the cash
      flow projections prepared in our assessment of the recoverability of the
      capitalized software as of December 31, 2004 and 2005. The projections for
      revenue for these two periods were below forecast by 93% and 85% respectively.
      The principal reason that these projections were not achieved is that the time
      to develop the capitalized software was significantly greater than expected.
      If
      this situation were to continue for an indefinite period of time, this may
      have
      resulted in the capitalized software being impaired. The Company did, however,
      complete the capitalized software as of December 31, 2006 and will commence
      depreciating the asset in 2007. The Company provides the value of signed
      contracts under Management Discussion and Analysis as indication of expected
      future revenues. Going forward, if the Company is not able to generate
      sufficient design/build contracts, it is possible the capitalized software
      could
      be impaired.





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




-
          19
          -




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





Recent
      Accounting Pronouncement (cont’)


instrument
      on a fair value basis. SFAS 155 eliminates the need to bifurcate the derivative
      from its host, as previously required under Statement of Financial Accounting
      Standards No. 133, Accounting for Derivative Instruments and Hedge Accounting.
      SFAS 155 also amends SFAS 133 by establishing a requirement to evaluate
      interests in securitized financial assets to determine whether they are free standing
      derivatives or whether they contain embedded derivatives that require
      bifurcation. SFAS 155 is effective for all hybrid financial
      instruments acquired or issued by the Company on or after January 1, 2007.
      The
      Company does not anticipate any material impact to its financial condition
      or
      results of operations as a result of the adoption of SFAS 155.





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





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





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




-
          20
          -




**NOTE
      C—INCOME TAXES**





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





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





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





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





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.





-
          21
          -




**NOTE
      F—EQUITY**





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




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





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





The
      following provides details of the restricted stock transactions for various
      services, additions to capitalized software and debt converted to equity. These
      transactions have been recorded according to FAS 123R. Whenever possible the
      Company has used the valuation of services provided and then calculated the
      number of shares associated with this valuation. Occasionally it is not possible
      to set an exact value of services provided and the value of the stock becomes
      a
      fair and reasonable estimate of that value.


**RESTRICTED
          SHARES**
 Closing Price on
                
                
                
                BasisIssue Date
                
                Value
                      of
                
                forYahoo! Finance
                
                Transaction
                
                Valuation1/23/2006
                
                (a)
                    Various individuals (X-Mas)
                
                19,000
                
                0.50
                
                $
                9,500
                
                Value
                    of Stock Price3/6/2006
                
                (b)
                    D. Uselton
                
                300,000
                
                0.32
                
                
                100,000
                
                Value
                    of Services3/6/2006
                
                (c.)
                    K. Michno
                
                10,714
                
                0.32
                
                
                3,000
                
                Value
                    of Services3/21/2006
                
                (d)
                    Crescent Fund, LLC
                
                150,000
                
                0.40
                
                
                75,000
                
                Value
                    of Services4/5/2006
                
                (e)
                    C. Schimmoeller
                
                190,000
                
                0.36
                
                
                95,000
                
                Private
                    Placement Offering4/5/2006
                
                (e)
                    R. Brashear
                
                75,000
                
                0.36
                
                
                37,500
                
                Private
                    Placement Offering4/5/2006
                
                (e)
                    M. Averesch
                
                100,000
                
                0.36
                
                
                50,000
                
                Private
                    Placement Offering4/10/2006
                
                (e)
                    R. Kahle
                
                60,000
                
                0.39
                
                
                30,000
                
                Private
                    Placement Offering4/18/2006
                
                (f)
                    K. Michno
                
                24,925
                
                0.45
                
                
                5,000
                
                Value
                    of Services4/21/2006
                
                (g)
                    J. Yoh
                
                100,000
                
                0.40
                
                
                50,000
                
                Private
                    Placement Offering4/24/2006
                
                (h)
                    M. Brach
                
                600,000
                
                0.41
                
                
                180,000
                
                Value
                    of Services5/3/2006
                
                (f)
                    K. Michno
                
                13,158
                
                0.40
                
                
                2,500
                
                Value
                    of Services6/13/2006
                
                (e)
                    D. Wittlinger
                
                226,892
                
                0.28
                
                
                113,446
                
                Private
                    Placement Offering6/22/2006
                
                (i)
                    Cortland Fund
                
                500,000
                
                0.29
                
                
                150,000
                
                Private
                    Placement Offering7/27/2006
                
                (i)
                    Cortland Fund
                
                200,000
                
                0.30
                
                
                60,000
                
                Value
                    of Stock Price7/27/2006
                
                (f)
                    K. Michno
                
                8,065
                
                0.30
                
                
                2,500
                
                Value
                    of Services8/11/2006
                
                (j)
                    R. A. Garverick
                
                21,482
                
                0.26
                
                
                8,000
                
                Value
                    of Services10/3/2006
                
                (f)
                    K. Michno
                
                16,686
                
                0.33
                
                
                5,000
                
                Value
                    of Services10/3/2006
                
                (f)
                    K. Michno
                
                16,686
                
                0.30
                
                
                5,000
                
                Value
                    of Services2,632,608
                
                
                
                $
                981,446
 
 (a)-1000
        shares for 20 independent contracts as holiday bonus (two partially year
        bonuses
        for 333 and 667 shares, respectively)
 (b)
        IR/Consulting engagement with D. Uselton
 (c)
        IR/Consulting expense for K. Michno for March
 (d)
        Crescent Fund, LLC engagement for IR/Consulting and potentially capital raise
        for 3 months
 (e)-Agreement
        to swap debt for equity with bridge lenders
 (f)
        IR/Consulting expense for K. Michno for quarter
 (g)-PPM
        Investment
 (h)
        IR/Consulting engagement with M. Brach
 (i)-PPM
        Investment
 (j)-Services
        rendered for Gulf Coast
 
 -
            22
            -




**NOTE
      F—EQUITY (CONT’D)**





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


**FREE
          TRADING STOCK FOR SERVICES**
  Closing
                    Price on
                
                
                
                BasisExpense/
                
                
                
                
                
                Issue
                    Date
                
                Value
                    of
                
                forCapital
                
                
                
                
                
                Yahoo!
                    Finance
                
                Transaction
                
                Valuation1/12/2006
                
                Cap
                
                A.
                    Welch
                
                26,785
                
                0.28
                
                $
                7,500
                
                Value
                    of Services1/19/2006
                
                Cap
                
                R.V.
                    McLemore
                
                312,500
                
                0.28
                
                
                87,500
                
                Value
                    of Services1/19/2006
                
                Exp
                
                G.
                    J. Wessling
                
                486,063
                
                0.2891
                
                
                139,781
                
                Value
                    of Services3/31/2006
                
                Exp
                
                M.
                    Moskowitz
                
                37,500
                
                0.47
                
                
                15,000
                
                Value
                    of Services4/4/2006
                
                Exp
                
                H.
                    Martin
                
                11,486
                
                0.37
                
                
                4,020
                
                Value
                    of Services4/6/2006
                
                Exp
                
                G.
                    J. Wessling
                
                405,466
                
                0.35
                
                
                139,781
                
                Value
                    of Services4/6/2006
                
                Cap
                
                R.
                    V. McLemore
                
                250,000
                
                0.35
                
                
                87,500
                
                Value
                    of Services5/16/2006
                
                Exp
                
                H.
                    Martin
                
                7,895
                
                0.38
                
                
                3,000
                
                Value
                    of Services6/7/2006
                
                Exp
                
                A.
                    Sharader
                
                5,136
                
                0.35
                
                
                1,800
                
                Value
                    of Services6/7/2006
                
                Exp
                
                D.
                    Helms
                
                5,136
                
                0.35
                
                
                1,800
                
                Value
                    of Services6/9/2006
                
                Exp
                
                S.
                    Morris
                
                49,219
                
                0.28
                
                
                15,750
                
                Value
                    of Services8/7/2006
                
                Exp
                
                G.
                    J. Wessling
                
                447,877
                
                0.28
                
                
                140,289
                
                Value
                    of Services8/7/2006
                
                Cap
                
                R.
                    V. McLemore
                
                282,258
                
                0.28
                
                
                87,500
                
                Value
                    of Services8/14/2006
                
                Exp
                
                P.
                    Amos
                
                15,615
                
                0.24
                
                
                3,000
                
                Value
                    of Services9/13/2006
                
                Exp
                
                C.
                    Skibo
                
                420,168
                
                0.25
                
                
                200,000
                
                Value
                    of Services9/13/2006
                
                Exp
                
                H.
                    Martin
                
                18,750
                
                0.25
                
                
                5,625
                
                Value
                    of Services10/26/2006
                
                Exp
                
                G.
                    J. Wessling
                
                454,672
                
                0.3090
                
                
                140,493
                
                Value
                    of Services10/26/2006
                
                Cap
                
                R.
                    V. McLemore
                
                282,258
                
                0.31
                
                
                87,500
                
                Value
                    of Services10/31/2006
                
                Exp
                
                M.
                    Moskowitz
                
                24,286
                
                0.38
                
                
                8,500
                
                Value
                    of Services0
                
                0
                
                
                0Shares
                    Issued to Date:
                
                3,543,070
                
                Year
                    Total
                
                $
                1,176,33
                    9


-
          23
          -




**NOTE
      F—EQUITY (CONT’D)**





CONVERTIBLE
      PREFERRED STOCK





As
      of the
      end of fiscal 2006, we had two authorized and outstanding series of Convertible
      Preferred Stock, as follows: (i) 1,000,000 shares of issued and outstanding
      Class A Voting Convertible Preferred Stock, and (ii) 800,000 shares of issued
      and outstanding Class B Voting Convertible Preferred Stock,. The terms and
      conditions of each series of Convertible Preferred Stock are as
      follows:





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





2.
            **Class
                B Voting Convertible Preferred Stock, $.001 par value**–
                Each share of the 800,000 issued and outstanding shares of Class
                B Voting
                Preferred Stock (the “Class B Preferred Stock”) is convertible, at the
                option of the holder, at any time after three years from the date
                of
                issuance thereof, into ten (10) shares of fully paid and non-assessable
                shares of common stock. The holders are not entitled to receive any
                dividend on the shares of Class B Preferred Stock. The holders are
                entitled to a liquidation preference in the amount of $1.00 per share
                of
                Class B Preferred Stock. The holders of Class B Preferred Stock are
                entitled to a class vote on any merger, sale of assets, combination
                or
                reorganization involving the corporation, or other fundamental corporation
                transaction involving the corporation, with the holders of Class
                B
                Preferred Stock having one vote per share. On all other matters,
                the Class
                B Preferred Stock votes with the common stockholders as one combined
                class, with the holders of the Class B Preferred Stock having ten
                (10)
                votes per share of such stock owned.. The corporation has agreed
                that it
                shall not, without the consent of the majority of the holders of
                Class B
                Preferred Stock: 1) take any action which would either alter, change
                or
                affect the rights, preferences, privileges or restrictions of the
                Class B
                Preferred Stock or increase the number of shares of such series or
                designate any other series of Preferred Stock; 2) make fundamental
                changes
                to the business of the corporation; 3) make any changes to the terms
                of
                the Class B Preferred Stock or to the corporation’s articles of
                incorporation or By-Laws, including by designation of any stock;
                4) create
                any new class of shares having preferences over or being on a parity
                with
                the Class B Preferred Stock as to dividends or assets, subject to
                certain
                exceptions; 5) accrue any indebtedness in excess of $30,000,000;
                6)
                repurchase any of the corporation’s common stock; 7) sell, convey or
                otherwise dispose of, or create or incur any mortgage, lien, charge
                or
                encumbrance on or security interest in or pledge of, or sell or lease
                back, all or substantially all of the property or business of the
                corporation or more than 50% of the stock of the corporation; 8)
                make any
                sale of additional Class B Preferred Stock. Finally, the holders
                of Class
                B Preferred Stock and common stock voting together on combined class
                shall
                be entitled to elect the directors comprising the Board of Directors
                (and
                to fill any vacancies with respect thereto). Waivers of these covenants
                have been routinely granted, inasmuch as Robert V. McLemore, the
                late
                President of the corporation, and Gregory J. Wessling, the Chairman
                and
                CEO of the corporation, together own 700,000 shares of the Class
                B
                Preferred Stock, representing 87.5% of the outstanding
                shares.




-
          24
          -





**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**




-
          25
          -




**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.




-
          26
          -




**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.





The
      aggregate amount of rental expense for the years ended December 31, 2006 and
      2005 are as follows:





**2006**
            
            **2005**Aggregate
                Rental Expense
            
            $
            142,495
            
            $
            77,322




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




Year
                ending December 31:
            
            Minimum Rental
            
            Contingent Rental
            
            Sublease Rental2007
            
            $
            281,690
            
            
            -
            
            $
            -2008
            
            
            273,037
            
            
            -
            
            
            -2009
            
            
            273,277
            
            
            -
            
            
            -2010
            
            
            264,336
            
            
            -
            
            
            -2011
            
            
            240,080
            
            
            -
            
            
            -$
            1,332,419




-
          27
          -




**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.





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.




-
          28
          -




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





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





**For
                the Year Ended December 31, 2006**
            
            **For
                the Year Ended December 31, 2005****Income**
            
            **Shares**
            
            **Per-Share**
            
            **Income**
            
            **Shares**
            
            **Per-Share****(Numerator)**
            
            **(Denominator)**
            
            **Amount**
            
            **(Numerator)**
            
            **(Denominator)**
            
            **Amount****Net
                Income/(Loss)**
            
            $
            (2,999,358
            )
            
            
            
            
            
            
            $
            (4,120,994
            )**Basic
                EPS**Income
                available to common stockholders
            
            
            (2,999,358
            )
            
            48,183,225
            
            $
            (0.06
            )
            
            (4,120,994
            )
            
            40,467,025
            
            $
            (0.10
            )**Effect
                of Dilutive Securities**Warrants
            
            
            -
            
            
            -
            
            
            
            
            
            -
            
            
            -Convertible
                preferred stock
            
            
            -
            
            
            -
            
            
            
            
            
            -
            
            
            -**Diluted
                EPS**Net
                Income/(Loss)
            
            $
            (2,999,358
            )
            
            48,183,225.00
            
            $
            (0.06
            )
            $
            (4,120,994
            )
            
            40,467,025.00
            
            $
            (0.10
            )





**NOTE
      N—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.




-
          29
          -





**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 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 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:


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


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


o
            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.




-
          30
          -




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. The Company completed 2 new homes and 4 renovation
      contracts for the period ending December 31, 2006 compared to 1 new home and
      1
      renovation contract for the same period in 2005.





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.




-
          31
          -




**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.





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 realized $523,578 in total other revenues in 2006 versus $188 for the
      same period in 2005. The
      Company realized $500,000 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. 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.




A
      breakdown of Company revenue streams is provided below:




For
                  Period
              
              For
                  PeriodEnding
              
              EndingDecember 31, 2006
              
              December 31, 2005**HOUSERAISING
                  REVENUE STREAM:****Revenues
                  from Custom Homebuilding Operations:**
              
              $
              1,249,221
              
              $
              584,466**Revenues
                  from Realty Services:**
              
              
              0
              
              
              0**Revenues
                  from Disaster Relief Services:**
              
              
              0
              
              
              0**Revenues
                  from Builders Memberships:**
              
              
              1,500
              
              
              0**Other
                  Revenues (including co-branding agreements):**
              
              
              22,078
              
              
              188**TOTAL
                  REVENUES**
              
              $
              1,272,799
              
              $
              584,654**Number
                  of New Custom Homes Completed:**
              
              
              2
              
              
              1**Number
                  of Remodeling Projects Completed:**
              
              
              4
              
              
              1





**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.




-
          32
          -




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.








**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.





Critical
      Accounting Policy.





Capitalized
      Software —During
      the development phase of the company, a substantial effort was spent on building
      the Capitalized Software, including the time and effort of several Executive
      officers because of their unique knowledge/expertise and given the Company’s
      small size. The Company capitalized 100% of the compensation for its Chief
      Technology Officer, 90% for its Founder/President and 75% for its Senior Vice
      President for the work performed in the development of System-C during 2005
      and
      2006. During these time periods, the Chief Technology Officer spent all of
      his
      time focused on the development of System-C (principally designing, coding,
      installing and testing the software), initially as a contractor to the company.
      The Founder/President spent over 40 years in the residential home-building
      industry and System-C is a reflection of his knowledge/experience, in essence
      migrating the manual process he followed into Capitalized Software (principally
      designing and testing the software). The Company has a separate Chairman/CEO
      perform the administrative functions of the company which are expensed. The
      Senior Vice President split her time between administrative responsibilities
      (expensed) and the development of the administrative components of System-C
      (designing and testing administrative components of the software). These
      allocations were based on self-assessment and some time-tracking on these
      development activities. See Note A—Summary of Significant Accounting Policies
      (Capitalized Software) for additional information on this critical accounting
      policy.




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          33
          -




**Liquidity
      and Capital Resources**





Cash
      flow s
      used in
      operations were $2,615,087 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 $1,126,705 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 $2,561,567 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.





Going
      forward we will rely substantially on new revenue from our business development
      efforts and an $8.1 million 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 is cash flow positive
      as of
      the end of the first quarter of 2007) with pending sales transaction of
      $4,500,000 and listings of $7,000,000 (on which the company would earn a sales
      commission), a new design/build zone operation in the Gulf Coast with a new
      10,000 square foot design center open for business in New Orleans in an area
      that needs to rebuild approximately 40,000 homes, and a pipeline of prospective
      new design/build customers in the Carolinas and Gulf Coast which is consistent
      with implementing our business plan. The company has completed its capitalized
      software and fully implement which we would expect to be used for generating
      new
      design/build sales in the Carolinas and the Gulf Coast. The Company has signed
      operating agreements with 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).





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.





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 it’s principle operations are in attractive markets, the Carolinas
      and Gulf Coast region, and that the custom home building sector is less impacted
      by overall economic conditions, but there is no guarantee this will remain
      so
      going forward. The company has provided a detailed list of risks and cautionary
      statements at the beginning of this document.




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          34
          -




**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-15(e)/15d-15(e) Certifications"). This section of the annual report contains
      the information concerning the Evaluation referred to in the Rule
      13a-15(e)/15d-15(e) Certifications. This information should be read in
      conjunction with the Rule 13a-15(e)/15d-15(e) Certifications for a more complete
      understanding of the topic presented.





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





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





*Scope
      of the Evaluation* .
      The CEO
      and CFO's evaluation of our Disclosure Controls included a review of the
      controls' (i) objectives, (ii) design, (iii) implementation, and (iv) the effect
      of the controls on the information generated for use in this annual 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.




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          35
          -




*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.





**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.




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          36
          -




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.




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          37
          -




**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, 20 05
      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.




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          38
          -




**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 wi th
      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).




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**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-15(e)/15d-15(e) Certification of Gregory J. Wessling, Chairman
                and
                Chief Executive Officer*31.2
            
            Rule
                13a-15(e)/15d-15(e) Certification of Richard A. von Gnechten, Chief
                Financial Officer*31.3
            
            Rule
                13a-15(e)/15d-15(e) Certification of Christine M. Carriker,
                Secretary/Treasurer & ChiefAdministrative
                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-




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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: February
                6, 2008
            
            
            /s/
                Gregory J. WesslingGregory
                J. WesslingChairman
                of the Board,Chief
                Executive Officer and President(Principal
                Executive Officer)Date:
                February 6, 2008
            
            
            /s/
                Richard A. von GnechtenRichard
                A. von GnechtenChief
                Financial Officer(Principal
                Financial Officer)Date:
                February 6, 2008
            
            
            /s/
                Christine M. CarrikerChristine
                M. CarrikerChief
                Administrative Officerand
                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 February
      6 ,
      2008.





Signature
            
            Title/s/Gregory
                J. Wessling
            
            Chairman
                of the Board of Directors, Chief Executive Officer and
                President(Principal
                Executive Officer)Gregory
                J. Wessling/s/Richard
                A. von Gnechten
            
            Chief
                Financial Officer of HouseRaising, Inc.(Principal
                Financial Officer)Richard
                A. von Gnechten/s/Christine
                M. Carriker
            
            Chief
                Administrative Officer, Secretary/Treasurerand
                Director of HouseRaising, Inc.Christine
                M. Carriker
            
            (Principal
                Accounting Officer)/s/Grant
                Neerings
            
            Chief
                Technology Officer and Director of HouseRaising, Inc.
                andPresident
                and Chief Manager of HouseRaisingAcademy, LLCGrant
                Neerings




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          41
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/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




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