U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 for the quarterly period ended September 30, 2004
[ ] 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
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HOUSERAISING, INC.
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(Exact name of small business issuer as specified in its charter)
TECHNOLOGY CONNECTIONS,INC.
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(Former name of registrant)
North Carolina 56-2253025
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
4801 East Independence Road, Suite 201,Charlotte,North Carolina 28212
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(Address of principal executive offices)
(704) 532-2121
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(Issuer's telephone number)
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 [ ]
Number of shares of common stock outstanding as of
November 9, 2004: 32,017,262
Number of shares of preferred stock outstanding as of
November 9, 2004: 1,000,000
INDEX TO FORM 10-QSB
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Page No.
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PART I
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Item 1. Financial Statements
Balance Sheet - September 30, 2004 (unaudited) 2
Statements of Operations - Three and Nine Months Ended
September 30, 2004 and 2003 (unaudited) 3
Statements of Cash Flows - Nine Months Ended
September 30, 2004 and 2003 (unaudited) 4
Notes to Financial Statements (unaudited) 5-6
Item 2. Management's Discussion and Analysis of Financial Condition
And Results of Operations 7-10
PART II
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Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
HOUSERAISING, INC.
CONSOLIDATED CONDENSED BALANCE SHEET
SEPTEMBER 30, 2004
(UNAUDITED)
==============================================================================
ASSETS
2004
------------
CURRENT ASSETS
Cash and Cash Equivalents $ 6,483
Inventory 3,000
Accounts Receivable, net of allowance for doubtful
accounts of $31,564 25,941
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TOTAL CURRENT ASSETS 35,424
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PROPERTY AND EQUIPMENT
Property and Equipment 139,964
Accumulated Depreciation (69,486)
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Net Property and Equipment 70,478
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OTHER ASSETS
Other Assets 1,818
Capitalized Software 7,955,485
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Net Other Assets 7,957,303
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TOTAL ASSETS $ 8,063,205
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LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current Liabilities:
Accounts Payable and Accrued Expenses $ 480,852
Excess of Outstanding Checks over Bank Balance 134
Interest Payable 62,716
Notes Payable 680,853
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TOTAL LIABILITIES 1,224,555
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STOCKHOLDERS' EQUITY
Preferred Stock ($.001 par value, 5,000,000 authorized:
none issued and outstanding)
Preferred Stock Class A Convertible ($.001 par value,
5,000,000 authorized: 1,000,000 issued and outstanding) 1,000
Common Stock Series A ($.001 par value, 90,000,000 shares
authorized: 30,293,712 shares issued and outstanding) 30,294
Common Stock Subscribed but not Issued 2,057,536
Additional Paid-in-Capital 5,787,317
Retained Deficit (1,037,497)
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TOTAL STOCKHOLDERS' EQUITY 6,838,650
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 8,063,205
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The accompanying notes are an integral part of the financial statements
HOUSERAISING, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
(UNAUDITED)
===============================================================================================================
Three Months Ended September 30, Nine Months Ended September 30,
2004 2003 2004 2003
------------ ------------ ------------ ------------
SALES AND COST OF SALES:
Sales $ - $ 50,536 $ 39,026 $ 50,536
Cost of sales - 31,608 28,471 31,608
------------ ------------ ------------ ------------
Gross Profit - 18,928 10,555 18,928
OTHER REVENUES:
Sales and service fees 33,333 2,000 57,856 4,600
Other income - 2,515 6,000 2,515
------------ ------------ ------------ ------------
NET REVENUES 33,333 23,443 74,411 26,043
OPERATING EXPENSES:
Selling, general and administrative 44,116 148,412 147,966 215,512
Consulting fees 350 5,000 23,400 5,000
------------ ------------ ------------ ------------
44,466 153,412 171,366 220,512
------------ ------------ ------------ ------------
OTHER EXPENSE:
Interest expense 22,165 16,684 62,716 40,715
------------ ------------ ------------ ------------
NET LOSS $ (33,298) $ (146,653) $ (159,671) $ (235,184)
============ ============ ============ ============
Net Loss Per Common Share
Basic & Fully Diluted $ (0.004) $ (0.12) $ (0.03) $ (0.19)
============ ============ ============ ============
Weighted Average Common
Shares Outstanding 9,411,501 1,265,510 4,660,212 1,265,510
============ ============ ============ ============
The accompanying notes are an integral part of the financial statements
HOUSERAISING,INC.
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
(UNAUDITED)
==========================================================================================================
2004 2003
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss (159,671) (235,184)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 10,335 11,480
Common stock subscribed for services 29,375 1,659,311
(Increase) decrease in operating assets:
Accounts receivable 33,654 (148,240)
Inventory (3,000) -
Captalized software (425,953) (1,212,589)
Increase in operating liabilities:
Accounts payable and accrued expenses 343,165 7,106
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NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (172,095) 81,884
------------ ------------
CASH FLOWS FROM INVESTMENT ACTIVITIES:
Purchase of property and equipment (24,468) -
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NET CASH (USED IN) INVESTMENT ACTIVITIES (24,468) -
CASH FLOWS FROM FINANCING ACTIVITIES:
Decease in excess of outstanding checks (16,295) -
Proceeds from sale of common stock 41,200 -
Proceeds from note payable 178,141 -
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 203,046 -
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 6,483 81,884
CASH AND CASH EQUIVALENTS:
Beginning of period - -
------------ ------------
End of period 6,483 81,884
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest 62,716 40,715
============ ============
Stock issued for services - -
============ ============
The accompanying notes are an integral part of the financial statements
HOUSERAISING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2004 (UNAUDITED)
ITEM 1.
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NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
In the opinion of management, the unaudited condensed consolidated financial
statements contain all adjustments consisting only of normal recurring accruals
considered necessary to present fairly the Company's financial position at
September 30, 2004, the results of operations for the three and nine month
periods ended September 30, 2004 and 2003, and cash flows for the nine months
ended September 30, 2004 and 2003. The results for the period ended September
30, 2004, are not necessarily indicative of the results to be expected for the
entire fiscal year ending December 31, 2004.
The interim unaudited consolidated financial statements should be read in
conjunction with the Company's annual report on Form 10-KSB as filed with the
Securities and Exchange Commission.
NOTE 2 - GOING CONCERN AND LIQUIDITY
The Company has experienced losses from operations of $33,298 and $146,653
during the three months ended September 30, 2004 and 2003, respectively, and
$159,671 and $235,184 during the nine months ended September 30, 2004 and 2003,
respectively, has yet to generate an internal cash flow and has negative working
capital as of September 30, 2004. These factors raise substantial doubt about
the Company's ability to continue as a going concern. The Company's continued
existence is dependent upon its ability to resolve its liquidity problems,
principally by obtaining equity funding, increasing sales and achieving
profitable operations.
The eventual outcome of management's plans cannot be ascertained with any degree
of certainty. The accompanying financial statements do not include any
adjustments that might result from the outcome of these risks and uncertainties.
NOTE 3 - ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
disclosures of contingent assets and liabilities at the date of financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NOTE 4 - COMMON STOCK ISSUANCES
During the nine months ended September 30, 2004, the Company issued 1,637,087
shares of common stock to consultants for services which were expensed at fair
value. The interim financial statements for the nine months ended September 30,
2004 include expenses and capitalized costs associated with these in the total
amount of $592,810.
NOTE 5 - LOSS PER SHARE
Statement of Financial Accounting Standard ("SFAS") No. 128 requires dual
presentation of basic and diluted 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 years presented.
There were no adjustments required to net loss for the years presented in the
computation of diluted earnings per share.
NOTE 6 - ACQUISITION AND RELATED REORGANIZATION
On February 19, 2004, HouseRaising, Inc., a Delaware corporation, Technology
Connections, Inc., a North Carolina corporation, and the shareholders of
HouseRaising, Inc., executed an Agreement and Plan of Merger (the "Merger
Agreement"), pursuant to which HouseRaising, Inc. agreed to merge with and into
Technology Connections, Inc., (the "Merger") with the HouseRaising, Inc.
Stockholders receiving in the aggregate 27,288,732 shares of common stock and
1,000,000 shares of Class A Convertible Preferred Stock of Technology
Connections, Inc. in exchange for their shares of HouseRaising, Inc. In
addition, pursuant to the Merger Agreement, Technology Connections, Inc. agreed
to change its corporate name from "Technology Connections, Inc." to
"HouseRaising, Inc." prior to the closing.
The shares of Class A Convertible Preferred Stock to be issued in the Merger are
convertible into ten (10) shares of fully paid and non-assessable shares of
common stock five (5) years after the date of issuance, and they have a class
vote to approve or disapprove any merger, sale of assets, combination or
reorganization involving HouseRaising, or other fundamental corporate
transaction involving HouseRaising, Inc. In addition, each share of Class A
Convertible Preferred Stock issued in the Merger is entitled to ten (10) votes
per share on all matters on which the common stock votes on upon issuance.
In connection with the Merger, Technology Connections, Inc. filed a preliminary
Information Statement on Schedule 14C with the Commission, and, after a period
of review and comments, filed with the Commission and mailed to its shareholders
a definitive Information Statement on Schedule 14C, which disclosed the details
of the Merger to its shareholders.
On August 30, 2004, a Special Shareholders Meeting was held at which a majority
of the shareholders of Technology Connections, Inc. voted in favor of: (i) a
resolution to amend the Articles of Incorporation of Technology Connections,
Inc. in order to change its name from "Technology Connections, Inc." to
"HouseRaising, Inc."; (ii) a resolution to approve the Merger, pursuant to which
HouseRaising, Inc. was merged with and into Technology Connections, Inc., with
Technology Connections, Inc. being the surviving corporation in the Merger, and
27,288,732 shares of Common Stock of Technology Connections, Inc. and 1,000,000
shares of Class A Voting Convertible Preferred Stock of Technology Connections,
Inc. were issued in exchange for all of issued and outstanding shares of
HouseRaising, Inc.; and (iii) a resolution to elect a new Board of Directors
consisting of Robert V. McLemore, Robert M. Burroughs, Ludwik F. Zon, Grant S.
Neerings, Kristy M. Carriker, Thomas E. Schubert, James S. O'Connor and Kevin
Kyzer.
On August 31, 2004, the Merger was consummated when Articles of Merger were
filed by the parties with the Secretary of State of the State of North Carolina.
This acquisition was accounted for as a reverse merger wherein HouseRaising,
Inc. was the accounting acquirer and Technology Connections, Inc. was the legal
acquirer. Accordingly, the accounting acquirer recorded the assets purchased and
liabilities assumed as part of the merger and the entire equity section of the
legal acquirer was eliminated with negative book value acquired offset against
the paid in capital of the accounting acquirer, in accordance with SFAS #141. In
addition, the applicable financial statements for the comparable periods for the
three months and nine months ended September 30, 2003 are also those of the
accounting acquirer, HouseRaising, Inc., for comparability purposes.
NOTE 7 - EMPLOYMENT CONTRACT COMMITMENTS
We are committed to employment agreements with our President and Chief Executive
Officer. The agreements with our President and Chief Executive Officer expire in
November, 2008 and December, 2008, respectively.
Pursuant to the agreement with our President, he shall receive $500,000 as soon
as practical following the execution of the agreement payable via issuance of
1,000,000 common shares valued at $.50 per share. Commencing on January 1, 2005,
and on the first day of each subsequent calendar quarter, the President shall be
issued 125,000 shares of our common stock or $62,500. The employment contract
allows HouseRaising to compensate executive with common stock until it has
received its initial capital raise of $5,000,000. We are committed to pay the
President for the remaining balance of the fifty month term $250,000 per annum
payable at the rate of $20,833 per month for the twelve months there under,
$287,500 per annum payable at a rate of $23,958 per month for the second twelve
months, $330,625 per annum payable at a rate of $27,552 per month for the third
twelve months, $380,219 per annum payable at a rate of $31,685 per month for the
remaining months of the initial term. In addition, the President is eligible for
a bonus up to 75% of his annual salary upon completion of our objectives and
performance criteria to be mutually agreed upon. Specifically, if we are
successful in completing the initial capital raise of $5,000,000, then the first
year's objectives shall be deemed to have been met. If we raise $10,000,000 in a
financing, then the first two year's objectives shall be deeded to have been
met. Moreover, if during the first year of operations we reach a market
capitalization of $50,000,000 or more, then the first year's objectives shall be
deemed to have been met. If in the second year of operation a market
capitalization of $75,000,000 or more is achieved, then the second year's
objectives shall be deemed to have been met, and if, in the third year of
operation, a market capitalization of $110 million or more is achieved, then the
third year's objectives shall be deemed to have been met.
We also granted our President an option for 5,000,000 shares of common stock at
a price of $.50 per share exercisable at any time during the ensuing ten years.
If in the event a financing causes his fully diluted equity ownership to drop
below 15% of the total outstanding shares issued, then we are committed to
increase the number of shares covered by this option to bring his total shares
to 15%, not to exceed a total of 6,000,000 shares. The stock option shall vest
25% upon the closing of a financing, and the balance over a three year period.
Notwithstanding the above, after the initial 25% vesting of the option grant,
all of the remaining options will vest upon our reaching a market capitalization
of $75,000,000 or more.
Pursuant to the agreement with our Chief Executive Officer, he shall receive
200,000 common shares as soon as practical following the execution of the
agreement payable. Commencing on January 1, 2005, and on the first day of each
subsequent calendar quarter the Chief Executive Officer shall be issued 200,000
shares of our common stock or $75,000. The employment contract allows
HouseRaising to compensate executive with common stock until it receives its
initial capital raise of $5,000,000. We are committed to pay the Chief Executive
Officer for the remaining balance of the fifty-two month term, $300,000 per
annum payable at the rate of $25,000 per month for the twelve months there
under, $345,000 per annum payable at a rate of $28,750 per month for the second
twelve months, $396,750 per annum payable at a rate of $33,062 per month for the
third twelve months, $456,262 per annum payable at a rate of $38,021 per month
for the remaining months of the initial term. In addition, the Chief Executive
Officer is eligible for a bonus up to 75% of his annual salary upon completion
of our objectives and performance criteria to be mutually agreed upon.
Specifically, if we are successful in completing the initial capital raise of
$5,000,000, then the first year's objectives shall be deemed to have been met.
If we raise $10,000,000 in a financing, then the first two year's objectives
shall be deemed to have been met. Moreover, if during the first year of
operations we reach a market capitalization of $50,000,000 or more, then the
first year's objectives shall be deemed to have been met. If in the second year
of operation a market capitalization of $75,000,000 or more is achieved, then
the second year's objectives shall be deemed to have been met, and if, in the
third year of operation, a market capitalization of $110 million or more is
achieved, then the third year's objectives shall be deemed to have been met.
We also granted our Chief Executive Officer an option for 5,000,000 shares of
common stock at a price of $.50 per share exercisable at any time during the
ensuing ten years. If in the event a financing causes his fully diluted equity
ownership to drop below 15% of the total outstanding shares issued, then we are
committed to increase the number of shares covered by this option to bring his
total shares to 15%, not to exceed a total of 6,000,000 shares. The stock option
shall vest 25% upon the closing of a financing, and the balance over a three
year period. Notwithstanding the above, after the initial 25% vesting of the
option grant, all of the remaining options will vest upon our reaching a market
capitalization of $75,000,000 or more.
See exhibits herein for both employment agreements attached to this filing.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
- --------
We are hereby providing cautionary statements identifying important factors that
could cause our actual results to differ materially from those projected in
forward looking statements made in this quarterly report on Form 10-QSB. Any
statements that express, or involve discussions as to, expectations, beliefs,
plans, objectives, assumptions or future events or performance (often, but not
always, through the use of words or phrases such as "likely will result," "are
expected to," "will continue," "is anticipated," "estimated," "intends," "plans"
and "projection") are not historical facts and may be forward looking statements
and involve estimates and uncertainties which could cause actual results to
differ materially from those expresses in the forward looking statements.
Accordingly, any such statements are qualified in their entirety by reference
to, and are accompanied by, the following key factors that have a direct bearing
on our results of operations: the absence of contracts with customers or
suppliers; our ability to maintain and develop relationships with customers and
suppliers; our ability to successfully integrate acquired businesses or new
brands; the impact of competitive products and pricing; supply constraints or
difficulties; changes in the construction industry; the retention and
availability of key personnel; and general economic and business conditions.
We caution that the factors described herein could cause actual results to
differ materially from those expressed in any forward-looking statements such
that the investors should not place undue reliance on any such forward-looking
statements. Further, any forward-looking statement speaks only as of the date on
which such statement is made, and we undertake no obligation to update any
forward-looking statement to reflect events or circumstances after the date on
which such statement is made or to reflect the occurrence of unanticipated
events or circumstances. Consequently, no forward-looking statement can be
guaranteed.
New factors emerge from time to time, and it is not possible for us to predict
all such factors. Further, we cannot assess the impact of each such factor on
our results of operations or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from those contained in
any forward-looking statements.
Overview
HouseRaising, Inc., ("HRI") provides a proprietary turnkey home design and build
management system that it markets to regional homebuilders. Our customers are
principally located in the Southeast USA with a current concentration in North
and South Carolina. We operate with thirteen separately incorporated limited
liability companies to be located in thirteen regions:
* HouseRaising of Greater Charlotte, LLC-50% owned by us -50% was
sold in June 2003 to three unrelated individuals.
* HouseRaising of the Triangle, LLC-100% owned by us
* HouseRaising of the Triad, LLC-100% owned by us
* HouseRaising of Greenville, LLC-100% owned by us
* HouseRaising of Columbia, LLC-100% owned by us
* HouseRaising of Asheville, LLC-100% owned by us
* HouseRaising of Wilmington, LLC-100% owned by us
* HouseRaising of Myrtle Beach, LLC-100% owned by us
* HouseRaising of Charleston, LLC-100% owned by us
* HouseRaising of Blowing Rock, LLC-100% owned by us
* HouseRaising of OBX, LLC-100% owned by us
* HouseRaising of Pinehurst, LLC-100% owned by us
* HouseRaising of Central North Carolina, LLC--100% owned by us
These limited liability companies provide managerial services to our
homebuilding operations. These limited liability companies operate within
specific guidelines and operating procedures established by HouseRaising, Inc.
documents. We enter 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 July 2003, we formed 2 new subsidiaries, HouseRaisingAcademy, LLC and
HouseRaisingUSA, LLC. HouseRaisingAcademy, LLC develops and manages our
internet based E-Learning and Homebuilder Management System currently in
development. HouseRaisingUSA, LLC is responsible for organizing and owning the
13 regional franchise limited liability companies.
Results of Operations
For the three and nine months ended September 30, 2004 and 2003 (unaudited).
Revenues.
Net revenues for the three months ended September 30, 2004 and 2003 were $33,333
and $23,443, respectively, an increase of $9,890 or 42%. Sales for the nine
months ended September 30, 2004 and 2003 were $74,411 and $26,043, respectively,
an increase of $48,368 or 185%. Sales increased due to more new construction and
remodeling in the Charlotte area. All revenues were from unrelated third parties
and were made primarily from new home buyers.
Cost of Sales.
The cost of sales includes the building expense plus other direct costs
associated with new constructions, such as subcontractors and permits. It is
customary to experience variations in the cost of sales as a percentage of net
sales based on the types of homes at any given location and the related cost of
labor to complete the jobs.
The cost of sales for the three months ended September 30, 2004 and 2003 were
$-0- and $31,608 respectively, an increase of $31,608 or greater than 100%. The
cost of sales for the nine months ended September 30, 2004 and 2003 were $28,471
and $31,608, respectively, a decrease of $3,137, or 10%. The decrease in cost of
sales is correlative to the decrease in gross sales directly attributable to the
costs.
Expenses.
Total expenses for the three months ended September 30, 2004 and 2003 were
$44,466 and $153,412, respectively. Total expenses for the nine months ended
September 30, 2004 and 2003 were $171,366 and $220,512, respectively. The
decrease in expenses is attributable to fewer professional fees incurred via
payment of common stock in lieu of cash. We issued shares of common stock to
professionals and consultants to assist us with marketing, investor relations
and general business consulting. Common stock was paid as we curtailed
operations due to a cash shortage.
All of our accounts payable and accrued expenses are trade payables in
connection within the course of business.
We expect stability in expenses through the year 2004 as the Company moves
toward developing its business plan.
Income / Losses.
Net loss for the three months ended September 30, 2004 was $33,298 versus net
loss of $146,653 in the same period in 2003, a decrease of $113,355. Net loss
for the nine months ended September 30, 2004 was $159,671 versus net loss of
$235,184 in the same period in 2003, a decrease of $75,513. The decreases in net
losses are directly attributable to the decreases in expenses above. We expect
to continue to incur losses at least through the year 2004.
Impact of Inflation.
We believe that inflation has had a negligible effect on operations since
inception. We believe that we can offset inflationary increases in the cost of
labor by increasing sales and improving operating efficiencies.
Liquidity and Capital Resources.
Cash flows used in operations were $172,095 for the nine months ended September
30, 2004 and cash flows provided $81,884 for the same period in 2003. Cash flows
used in operations were primarily attributable to our net losses and to the
$425,953 increase in capitalized software.
Cash flows generated by financing activities were $203,046 and $-0-,
respectively, for the nine months ended September 30, 2004 and 2003. Cash flows
for the 2004 period included $178,141 proceeds from notes payable. The loans
bear interest at various rates and are within the current twelve month operating
cycle. Cash flows also included $41,200 in proceeds from the sale of our common
stock during the nine months ended September 30, 2004.
Overall, we have funded our cash needs from inception through September 30,
2004 with a series of debt and equity transactions. If we are unable to receive
additional cash from our related parties, we may need to rely on financing from
outside sources through debt or equity transactions. Our related parties are
under no legal obligation to provide us with capital infusions. Failure to
obtain such financing could have a material adverse effect on operations and
financial condition.
We had cash on hand of $6,483 and a working capital deficit of $1,189,131
as of September 30, 2004 which is not sufficient to fund our operations through
the next twelve months. Our working capital deficit is primarily due to current
obligations in account payable and notes payable. We will substantially rely on
the existence of revenue from our business; however, we have no current or
projected capital reserves that will sustain our business for the next 12
months. Also, if the projected revenues fall short of needed capital we may not
be able to sustain our capital needs for the next twelve months. We will then
need to obtain additional capital through equity or debt financing to sustain
operations for an additional year. A lack of significant revenues beginning in
the first half of 2005 will significantly affect our cash position and move us
towards a position where the raising of additional funds through equity or debt
financing will be necessary. Our current level of operations would require
capital of approximately $150,000 to sustain operation through year 2004 and
approximately $200,000 per year thereafter. Modifications to our business plans
or additional property acquisitions may require additional capital for us to
operate.
On a long-term basis, liquidity is dependent on continuation and expansion
of operations, receipt of revenues, and additional infusions of capital and debt
financing. Our current capital and revenues are insufficient to fund such
expansion. If we choose to launch such an expansion campaign, we will require
substantially more capital. If necessary, we will raise this capital through an
additional stock offering. The funds raised from this offering will be used to
market our services as well as expand operations and contribute to working
capital. If we are unable to raise additional capital, our growth potential will
be adversely affected and we will have to significantly modify our plans. For
example, if we are unable to raise sufficient capital to develop our business
plan, we may need to:
- - Seek projects that are less in value or that may be projected to be less
profitable
- - Seek smaller projects, which are less capital intensive, in lieu of larger
contract projects, or
- - Seek projects that are outside our immediate area to secure terms favorable
to us.
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. Inasmuch as a major portion
of our activities is the receipt of revenues from the sales of our new home
services, our business operations may be adversely affected by our competitors
and prolonged recessionary periods.
ITEM 3. CONTROLS AND PROCEDURES
- --------
Quarterly Evaluation of Controls
As of the end of the period covered by this quarterly report on Form
10-QSB, We evaluated the effectiveness of the design and operation of (i) our
disclosure controls and procedures ("Disclosure Controls"), and (ii) our
internal control over financial reporting ("Internal Controls"). This evaluation
("Evaluation") was performed by our Chief Executive Officer, Charles M. Skibo
("CEO") and Kristy M. Carriker, Chief Financial Officer. In this section, we
present the conclusions of our CEO and CFO based on and as of the date of the
Evaluation, (i) with respect to the effectiveness of our Disclosure Controls,
and (ii) with respect to any change in our Internal Controls that occurred
during the most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect our Internal Controls.
CEO and CFO Certifications
Attached to this annual report, as Exhibits 31.1 and 31.2, are certain
certifications of the CEO and CFO, which are required in accordance with the
Exchange Act and the Commission's rules implementing such section (the "Rule
13a-14(a)/15d-14(a) Certifications"). This section of the annual report contains
the information concerning the Evaluation referred to in the Rule
13a-14(a)/15d-14(a) Certifications. This information should be read in
conjunction with the Rule 13a-14(a)/15d-14(a) Certifications for a more complete
understanding of the topic presented.
Disclosure Controls and Internal Controls
Disclosure Controls are procedures designed with the objective of ensuring
that information required to be disclosed in our reports filed with the
Commission under the Exchange Act, such as this annual report, is recorded,
processed, summarized and reported within the time period specified in the
Commission's rules and forms. Disclosure Controls are also designed with the
objective of ensuring that material information relating to the Company is made
known to the CEO and the CFO by others, particularly during the period in which
the applicable report is being prepared. Internal Controls, on the other hand,
are procedures which are designed with the objective of providing reasonable
assurance that (i) our transactions are properly authorized, (ii) the Company's
assets are safeguarded against unauthorized or improper use, and (iii) our
transactions are properly recorded and reported, all to permit the preparation
of complete and accurate financial statements in conformity with accounting
principles generally accepted in the United States.
Limitations on the Effectiveness of Controls
Our management does not expect that our Disclosure Controls or our Internal
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
costs. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances so 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 and Internal
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 our Internal Controls, and to make modifications if
and as necessary. Our external auditors also review Internal Controls in
connection with their audit and review activities. Our intent in this regard is
that the Disclosure Controls and the Internal Controls will be maintained as
dynamic systems that change (including improvements and corrections) as
conditions warrant.
Among other matters, we sought in our Evaluation to determine whether there
were any significant deficiencies or material weaknesses in our Internal
Controls, which are reasonably likely to adversely affect our ability to record,
process, summarize and report financial information, or whether we had
identified any acts of fraud, whether or not material, involving management or
other employees who have a significant role in our Internal Controls. This
information was important for both the Evaluation, generally, and because the
Rule 13a-14(a)/15d-14(a) Certifications, Item 5, require that the CEO and CFO
disclose that information to our Board (audit committee), and to our independent
auditors, and to report on related matters in this section of the annual report.
In the professional auditing literature, "significant deficiencies" are referred
to as "reportable conditions". These are control issues that could have
significant adverse affect on the ability to record, process, summarize and
report financial data in the financial statements. A "material weakness" is
defined in the auditing literature as a particularly serious reportable
condition where the internal control does not reduce, to a relatively low level,
the risk that misstatement caused by error or fraud may occur in amounts that
would be material in relation to the financial statements and not be detected
within a timely period by employee in the normal course of performing their
assigned functions. We also sought to deal with other controls matters in the
Evaluation, and in each case, if a problem was identified; we considered what
revisions, improvements and/or corrections to make in accordance with our
ongoing procedures.
Conclusions
Based upon the Evaluation, the Company's CEO and CFO have concluded that,
subject to the limitations noted above, our Disclosure Controls are effective 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 to provide reasonable assurance that our financial statements are
fairly presented inconformity with accounting principles 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 4. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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We do not have any material risk with respect to changes in foreign currency
exchange rates, commodities prices or interest rates. We do not believe that we
have any other relevant market risk with respect to the categories intended to
be discussed in this item of this report.
PART II. OTHER INFORMATION
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Item 1. Legal Proceedings
On May 25, 2004, we were served with a summons and complaint in a case styled as
"Maxim Advisors, LLC v. Technology Connections, Inc.", a civil action in the
Circuit Court of Lafayette County, MI. The Plaintiff is demanding judgment for
our stock valued at $17,849 for non-payment of services provided in preparing
our SEC filings during 2003. We intend to vigorously defend all claims, inasmuch
as the plaintiff's work was inadequate and resulted in our temporarily becoming
de-listed from the OTC Bulletin Board last year.
On June 23, 2004, a Default Judgment was filed in Mecklenburg County in a case
entitled "Yuriy Taginstev, plaintiff, vs. Technology Connections, Inc. and Kevin
G. Kyzer, defendants." The plaintiff was awarded a judgment against us and Mr.
Kyzer, jointly and severally, for actual damages in the amount of the original
promissory note of $50,000; plus pre-judgment interest in the amount of $10,859
and late fees in the amount of $100. This amount accrues interest at the rate of
8% per annum. We were also taxed with attorney fees in the amount of $9,144 in
addition to the relief awarded above. This judgment was awarded against
Technology Connections, Inc. and Kevin G. Kyzer, and, due to the merger,
resulted in HouseRaising, Inc. acquiring this judgment.
Item 2. Changes in Securities
Pursuant to the above mentioned exchange and reorganization, 27,308,732
unregistered and restricted common shares and 1,000,000 shares of Class A
convertible preferred shares were issued to various HouseRaising shareholders
under section 4(2) of The Securities Act of 1933 during the quarter ended
September 30, 2004.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
A majority of the security holders voted in favor of consummating the above
mentioned exchange and reorganization and for the issuance of 27,308,732
unregistered and restricted common shares and 1,000,000 shares of Class A
convertible preferred shares.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
None.
(1) A Form S-8 Post Effective Amendment that was previously filed on July 29,
2004 is incorporated by reference herein.
(2) Forms PRE 14C that was previously filed on August 5, 2004, among other
dates in prior quarterly filings is incorporated by reference herein.
(3) A Form DEF 14C that was previously filed on August 10, 2004 is incorporated
by reference herein.
(4) A Form S-8 "2004 Non-Qualified Stock Compensation Plan" that was previously
filed on September 28, 2004 is incorporated by reference herein.
(5) A Form 8-K relating to the completion of the above mentioned acquisition
that was previously filed on September 7, 2004 is incorporated by reference
herein.
(6) Forms 8-K and 8-K/A that were previously filed on September 27, 2004 and
October 5, 2004, respectively, is incorporated by reference herein.
(7) Employment agreement with Robert V. McLemore, President.
(8) Employment agreement with Charles M. Skibo, Chief Executive Officer
-signature page follows-
SIGNATURES
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Pursuant to the requirements 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)
/s/ Robert V. McLemore
Date: November 9, 2004 -------------------------
Robert V. McLemore
President
/s/ Charles M. Skibo
Date: November 9, 2004 -----------------------
Charles M. Skibo
Chief Executive Officer
/s/ Kristy M. Carriker
Date: November 9, 2004 -------------------------
Kristy M. Carriker
Chief Financial Officer