SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 
 FORM
10-KSB
 
 Annual
Report Under Section 13 or 15(d) of
 the
Securities Exchange Act of 1934
 
 For the
Fiscal Year Ended: December
31, 2007
 
 Commission
File No. 000-53220
 
 BY DESIGN,
INC.
 (Exact
Name of Small Business Issuer as specified in its charter)
 
 Nevada
              20-3305472(State
      or other jurisdiction
              (IRS
      Employer File Number)of
      incorporation)
 
 2519
      East Kentucky Ave.Denver,
      CO
              80209(Address
      of principal executive offices)
              (zip
      code)
 
 
 (303)
660-6964
 (Registrant's
telephone number, including area code)
 
 Securities
Registered Pursuant to Section 12(b) of the Act: None
 
 Securities
Registered Pursuant to Section 12(g) of the Act:
 
 Common Stock, $.0.001 per
share par value
 
 
 Check
whether issuer is not required to file reports pursuant to Section 13 or 15(d)
of the Exchange Act [ ]
 
 Indicate
by check mark whether the Registrant (1) has filed all Reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 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: [ ]
 
 Check if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is 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.
[X]
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act):  Yes []   No
[X].
 
 Registrant's
revenues for its most recent fiscal year were $297,498. The aggregate market
value of the voting stock held by nonaffiliates is approximately $100,000.Our shares of common stock
are quoted on the Pink Sheets under the trading symbol BYDE. The shares became
trading on July 25, 2006 but there is no extensive history of trading. The bid
and asked price has been $ 0.25 and $1.10 during the entire time the shares have
been quoted.The
number of shares outstanding of the Registrant's common stock, as of the latest
practicable date:  May 1, 2008, was 9,197,802.
 
  
  
 
 FORM
10-KSB
 
 By
Design, Inc.
 
 INDEX
  PagePART
      IItem
      1. Description of Business
              3Item
      2. Description of Property
              12Item
      3. Legal Proceedings
              12Item
      4. Submission of Matters to a Vote of Security Holders
              12PART
      IIItem
      5. Market for Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
              13Item
      6. Management's Discussion and Analysis of Financial Condition and Results
      of Operations
              14Item
      7. Financial Statements
              F-1Item
      8. Changes in and Disagreements with Accountants on Accounting and
      Financial Disclosures
              20Item
      8A. Controls and Procedures
              20Item
      8B. Other Information
              20PART
      IIIItem
      9. Directors, Executive Officers, Promoters and Control Persons;
      Compliance with Section 16(a) of the Exchange Act
              20Item
      10. Executive Compensation
              21Item
      11. Security Ownership of Certain Beneficial Owners
      and Management
              21Item
      12. Certain Relationships and Related Transactions
              22Item
      13. Exhibits and Reports on Form 8-K
              23Item
      14. Principal Accountant Fees and Services
              23Financial
      Statements pages
              F-1
      – F-15Signatures
              24
   - 2 -
  
 
 For
purposes of this document, unless otherwise indicated or the context otherwise
requires, all references herein to “BYDE,” “By Design,” “we,” “us,” and “our,”
refer to By Design, Inc., a Nevada corporation and our wholly-owned
subsidiaries. Except as we might otherwise specifically indicate, all references
us include our subsidiaries.
  Forward-Looking
Statements
 
 The
following discussion contains forward-looking statements regarding us, our
business, prospects and results of operations that are subject to certain risks
and uncertainties posed by many factors and events that could cause our actual
business, prospects and results of operations to differ materially from those
that may be anticipated by such forward-looking statements. Factors that may
affect such forward-looking statements include, without limitation: our ability
to successfully develop new products and services for new markets; the impact of
competition on our revenues, changes in law or regulatory requirements that
adversely affect or preclude clients from using us for certain applications;
delays our introduction of new products or services; and our failure to keep
pace with our competitors.
 
 When used
in this discussion, words such as "believes", "anticipates", "expects",
"intends" and similar expressions are intended to identify forward-looking
statements, but are not the exclusive means of identifying forward-looking
statements. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this report. We
undertake no obligation to revise any forward-looking statements in order to
reflect events or circumstances that may subsequently arise. Readers are urged
to carefully review and consider the various disclosures made by us in this
report and other reports filed with the Securities and Exchange Commission that
attempt to advise interested parties of the risks and factors that may affect
our business.
 
 
 PART
I
 
 Item
1. DESCRIPTION OF BUSINESS.
 
 
 Risk
Factors
 
 You
should carefully consider the risks and uncertainties described below
and the other information in this document before deciding to invest in
shares of our common stock.
 
 The
occurrence of any of the following risks could materially and
adversely affect our business, financial condition and operating result. In
this case, the trading price of our common stock could decline and you
might lose all or part of your investment.
 
 We
have had a history of losses and may continue to have losses in the
future.  We have a negative stockholders equity. As a result, we may
never become profitable, and we could go out of business.
 
 From 2003
through December 31, 2005, we generated no revenue. Our predecessor was in
operation from 1996 but had no revenue starting in 2003. We became incorporated
in our present form in February, 2005. Our revenues for the fiscal year ended
December 31, 2006 were $419,695. We had a net loss of $97,040 for this period.
Our revenues for the fiscal year ended December 31, 2007 were $297,498. We had a
net loss of $217,910 for this period. We have had a history of losses because we
were unable to generate sufficient revenues to be profitable. At December 31,
2006 we had an accumulated deficit of $132,731 and a negative stockholders’
equity of $43,630. At December 31, 2007 we had an accumulated deficit of
$350,641 and a negative stockholders’ equity of $252,540. Our sales depend upon
the number of customers we can generate.  We cannot guarantee we will
ever develop a substantial number of customers. Even if we develop a substantial
number of customers, there is no assurance that we will become a profitable
company. We may never become profitable, and, as a result, we could go out of
business.
  - 3 -
  We
have no history of sustained profitability. As a result, we may never become
profitable, and we could go out of business.
 
 From 2003
through December 31, 2005, we generated no revenue. Our predecessor was in
operation from 1996 but had no revenue starting in 2003. We became incorporated
in our present form in February, 2005. Our revenues for the fiscal year ended
December 31, 2006 were $419,695. We had a net loss of $72,920 for this period.
Our revenues for the fiscal year ended December 31, 2007 were $297,498. We had a
net loss of $221,750 for this period. We have had a history of losses because we
were unable to generate sufficient revenues to be profitable. At December 31,
2006 we had an accumulated deficit of $108,611 and a negative stockholders’
equity of $19,510. At December 31, 2007 we had an accumulated deficit of
$330,361 and a negative stockholders’ equity of $232,260. Our sales depend upon
the number of customers we can generate.  We cannot guarantee we will
ever develop a substantial number of customers. Even if we develop a substantial
number of customers, there is no assurance that we will become a profitable
company. We may never become profitable, and, as a result, we could go out of
business.
  Because
we had incurred continuing operating losses, our accountants have expressed
doubts about our ability to continue as a going concern.
  For the
fiscal year ended December 31, 2006 and 2007, our accountants have expressed
doubt about our ability to continue as a going concern as a result of our
continued net losses. Our ability to achieve and maintain profitability and
positive cash flow is dependent upon:
  ●
              our
      ability to locate clients who will purchase our products and use our
       services; and
  ●
                our
      ability to generate
revenues.
  Based
upon current plans, we may incur operating losses in future periods because we
may, from time to time, be incurring expenses but not generating sufficient
revenues. We expect approximately $500,000 in operating costs over the next
twelve months. We cannot guarantee that we will be successful in generating
sufficient revenues or other funds in the future to cover these operating costs.
Failure to generate sufficient revenues will cause us to go out of
business.
 
 We are
only minimally capitalized. Because we are only minimally capitalized, we expect
to experience a lack of liquidity for the foreseeable future in our ongoing
operations. We will adjust our expenses as necessary to prevent cash flow or
liquidity problems. However, we expect we will need additional financing of some
type, which we do not now possess, to fully develop our operations. We expect to
rely principally upon our ability to raise additional financing, the success of
which cannot be guaranteed. We will look at both equity and debt financing,
including loans from our principal shareholder. However, at the present time, we
have no definitive plans for financing in place, other than the funds which have
previously been loaned to us by Ms. Underwood. In the event that we need
additional capital, Ms. Underwood has agreed to loan such funds as may be
necessary through December 31, 2008 for working capital purposes. To the extent
that we experience a substantial lack of liquidity, our development in
accordance with our proposed plan may be delayed or indefinitely postponed, our
operations could be impaired, we may never become profitable, fail as an
organization, and our investors could lose some or all of their
investment.
  Our
limited operating history makes it difficult for us to evaluate our future
business prospects and make decisions based on those estimates of our future
performance. As a result, an investor could lose his entire
investment.
  The
concept for our business was developed in 1996. However, we had no revenues from
2003 until 2006. Even though we have operated as a corporation since 2005, we
have a limited operating history. This factor makes it difficult to evaluate our
business on the basis of historical operations. As a consequence, our past
results may not be indicative of future results. Although this is true for any
business, it is particularly true for us because of our limited operating
history. Reliance on historical results may hinder our ability to anticipate and
timely adapt to increases or decreases in sales, revenues or expenses. For
example, if we overestimate our future sales for a particular period or periods
based on our historical growth rate, we may increase our overhead and other
operating expenses to a greater degree than we would have if we correctly
anticipated the lower sales level for that period and reduced our controllable
expenses accordingly. If we make poor budgetary decisions as a result of
unreliable historical data, we could continue to incur losses, which may result
in a decline in our stock price.
  - 4 -
  Our
operations are subject to our ability to successfully market our services and
products. We have no substantial history of being able to successfully market
our services and products. If we cannot successfully market our services and
products, we may never become profitable and an investor could lose his entire
investment.
 
 Our
operations will depend, among other things, upon our ability to develop and to
market our services and products to the residential and commercial builders. We
market interior and exterior design consulting services to real estate
developers and builders for their real estate projects. The sale of these
consulting services includes our recommendations for the purchase of accessories
and architectural elements to be included or placed in the residential and
commercial spaces, as built or retrofitted. These consulting services and
associated products will be sold through By Design, Inc.  Our subsidiary,
known as Stone Select, LLC, markets hand-carved interior and exterior natural
stone ornamentation and architectural elements. Stone Select, LLC’s principal
products consist of fireplace surrounds, kitchen range hoods, flooring, base and
case trim materials, exterior ornamentation, fountains, planters, , and exterior
window and door surrounds. At the present time, most of the sales of Stone
Select, LLC come from natural stone fireplace surrounds, kitchen range hoods,
and trim materials. At the present time, most of the sales of Stone Select, LLC
come from fireplace surrounds, kitchen range hoods, and trim materials. If we
cannot find a combination of sufficient customers for our consulting services
and purchasers of the hand-carved interior and exterior natural stone
ornamentation and architectural elements sold through Stone Select, LLC, we may
never become profitable. An investor could lose his entire
investment.
 
 We
have no experience as a public company.
 
 We have
never operated as a public company. We have no experience in complying with the
various rules and regulations which are required of a public company. As a
result, we may not be able to operate successfully as a public company, even if
our operations are successful. We plan to comply with all of the various rules
and regulations which are required of a public company. However, if we cannot
operate successfully as a public company, your investment may be materially
adversely affected. Our inability to operate as a public company could be the
basis of your losing your entire investment in us.
 
 There
are factors beyond our control which may adversely affect us. Any, all, or a
combination of general market conditions and changing consumer tastes could
cause an investor could lose his entire investment
 
 Our
operations may also be affected by factors which are beyond our control,
principally general market conditions and changing consumer
tastes.  Any of these problems, or a combination thereof, could have
affect on our viability as an entity. We may never become profitable, fail as an
organization, and our investors could lose some or all of their
investment.
  Intense
competition in our market could prevent us from developing revenue and prevent
us from achieving annual profitability. In either situation, we may never become
profitable, fail as an organization, and our investors could lose some or all of
their investment.
  We are
organized to provide defined interior design services to our clients through By
Design, Inc. and sell stone products through our subsidiary, Stone Select, LLC.
The barriers to entry are not significant. All aspects of our business are
highly competitive. We face strong competitors in all areas of our business. Our
services and products could be rendered noncompetitive or obsolete. Any increase
in competition may cause us to lose market share or compel us to reduce prices
to remain competitive, which could result in reduced margins for our products.
Competitive pressures may not only impair our margins but may also impact our
revenues and our growth. Almost all of our competitors are larger than us and
have greater financial resources than we do.  Many of them have
substantially greater experience in interior design.   Increased
competition with these companies could curtail price increases or could require
price reductions or increased spending on marketing and sales, any of which
could adversely affect our results of operations. Competition from larger and
more established companies is a significant threat and is expected to
increase.
  - 5 -
  We
currently have only two suppliers.  The loss of either would have a
negative effect on our business.
  We
currently purchase finished products from only two suppliers. Each of these
suppliers provides us with essentially the same inventory which we sell through
Stone Select, LLC., which are hand-carved interior and exterior natural stone
ornamentation and architectural elements. These are fireplace surrounds, kitchen
range hoods, flooring, including base and case, and window surrounds. The loss
of either supplier would have a negative effect on our business because we would
not have sufficient inventory to sell. If we cannot replace a lost supplier, we
would see a severe decline in revenue from the sale of products. As a result, we
may never become profitable, fail as an organization, and our investors could
lose some or all of their investment.
  Fluctuations
in the supply and prices of raw materials could negatively impact our
financial results.
  Under
normal market conditions, these materials are generally available on the open
market. From time to time, however, the prices and availability of these raw
materials may fluctuate significantly, which could impair our ability to procure
necessary products, or increase the cost of our products. If material costs
increase, and we are unable to pass along, or are delayed in passing along,
those increases to our customers, we will experience reductions to our profit
margins and our ability to generate a profit will be reduced or eliminated
completely.
  Many
of our customers are in cyclical industries, which may affect the demand for
our products.
  Many of
our customers, especially for our commercial products, are in businesses and
industries that are cyclical in nature and sensitive to changes in general
economic conditions. As a result, the demand for our products by these customers
depends, in part, upon general economic conditions. Downward economic cycles
affecting the industries of our customers will reduce sales of our products. If
general economic conditions deteriorate, we may suffer reductions in our sales
and profitability. To date, we have not seen the slowdown in the housing market
affect us, but it could. A general slowdown in the housing market may affect
everyone, including us, which would reduce our ability to generate a
profit.
  The
industry in which we operate are highly competitive. Our principal competitors
is larger and  has greater financial resources than we
do.
  We
operate in a very competitive industry. Our principal competitor, Materials
Marketing, Inc., of Denver, Colorado, is larger and has greater financial
resources than we do. However, we potentially compete with a diverse group of
competitors ranging from internet businesses to traditional brick-and-mortar
companies, many of which have greater resources than we do. We believe that
barriers to entry in this business are not significant and start-up costs are
relatively low, so our competition may increase in the future. Our belief that
there are minimal barriers to entry is based on our observation that operations
such as ours do not require the ownership of warehouses, showrooms or factories
to operate, which we think is because (i) our direct ship business can be
operated with minimal warehousing needs and costs, which are significantly less
than traditional models, (ii) wholesale product orders can be placed after
receipt of client orders, in order to further reduce warehousing needs, (iii)
samples can be shown to clients at little or no cost, without the necessity of
showroom space for actual product, (iv) if a competitor wants showroom space, it
is typically available for lease at competitive rates in most United States
markets, and (v) all manufacturing can be done by third party suppliers, so
there is no need to own or lease a manufacturing facility. New competitors may
be able to launch new businesses similar to ours, and current competitors
may  replicate our business model, at a relatively low cost. If
competitors with significantly greater resources than ours decide to replicate
our business model, they may be able to quickly gain recognition and acceptance
of their business methods, products and services through marketing and
promotion. We may not have the resources to compete effectively with current or
future competitors. If we are unable to effectively compete, we will lose sales
to our competitors and our revenues will decline.
  We
import all of our products from China and Mexico. As a result, all of our
current revenues come from products imported from outside the United
States.
  We expect
imports from international markets to continue to represent a significant
portion of our products. Accordingly, our business is subject to risks related
to the differing legal, political, social and regulatory requirements and
economic conditions of many jurisdictions. Risks inherent in international
operations include the following:
  - 6 -
   •
              agreements
      may be difficult to enforce and receivables owed to us difficult to
      collect;•
              foreign
      customers may have longer payment cycles;•
              foreign
      countries may impose additional withholding taxes or otherwise tax our
      foreign income, or adopt other restrictions on foreign trade or
      investment, including currency exchange controls;•
              foreign
      operations may experience staffing difficulties and labor
      disputes;•
              transportation
      and other shipping costs may increase;•
              foreign
      governments may nationalize private enterprises;•
              unexpected
      adverse changes in export duties, quotas and tariffs and difficulties in
      obtaining export licenses;•
              intellectual
      property rights may be more difficult to enforce;•
              fluctuations
      in exchange rates may affect product demand and may adversely affect the
      profitability in U.S. dollars of products we import where payment for
      our products is made in the local currency;•
              general
      economic conditions in the countries in which we operate could have an
      adverse effect on operations in those countries;•
              our
      business and profitability in a particular country could be affected by
      political or economic repercussions on a domestic, country specific or
      global level from terrorist activities and the response to such
      activities;•
              unexpected
      adverse changes in foreign laws or regulatory requirements may occur;
      and•
              compliance
      with a variety of foreign laws and regulations may be
      burdensome.
  We
have certain key customers.
  Our
relationships with certain key residential building customers are important to
us and our subsidiary, Stone Select, LLC. Stone Select, LLC. has four major
customers. In 2007, sales to its four largest customers were approximately 55%
of its total net sales, with the largest customer accounting for approximately
20% of sales, and the others between approximately 10% and 13%. In 2006, sales
to its largest customer were approximately  26% of its total net
sales. Sales to its second largest customer accounted for approximately 14% of
sales. Although Stone Select, LLC. sells various types of products through
various channels of distribution, we believe that the loss of a substantial
portion of Stone Select, LLC.’s sales to residential builders could have a
significant affect impact on our ability to be profitable.
  Our
success will be dependent upon our management’s efforts. We cannot sustain
profitability without the efforts of our management.
  Our
success will be dependent upon the decision making of our directors and
executive officers. These individuals intend to commit as much time as necessary
to our business, but this commitment is no assurance of success. The loss of any
or all of these individuals, particularly Ms. Deanie Underwood, our President,
could have a material, adverse impact on our operations. We have no written
employment agreements with any officers and directors, including Ms. Underwood.
We have not obtained key man life insurance on the lives of any of our officers
or directors.
 
 Our
stock price may be volatile, and you may not be able to resell your shares at or
above the public sale price.
  There has
been, and continues to be, a limited public market for our common stock.
Although our common stock is quoted in the Pink Sheets, an active trading market
for our shares has not, and may never develop or be sustained. If you purchase
shares of common stock, you may not be able to resell those shares at or above
the initial price you paid. The market price of our common stock may fluctuate
significantly in response to numerous factors, some of which are beyond our
control, including the following:
  - 7 -
  
 *    actual
or anticipated fluctuations in our operating results;
 
 *    changes
in financial estimates by securities analysts or our failure to perform in line
with such estimates;
 
 *    changes
in market valuations of other interior design oriented companies, particularly
those that market services such as ours;
 
 *    announcements
by us or our competitors of significant innovations, acquisitions, strategic
partnerships, joint ventures or capital commitments;
 
 *    introduction
of product enhancements that reduce the need for our products or
services;
 
 *    the
loss of one or more key clients; and
 
 *    departures
of key personnel.
 
 Of our
total outstanding shares as of March 15, 2008, a total of 9,000,000, or
approximately 98%, will be restricted from immediate resale but may be sold into
the market in the near future. See "Federal Securities Law Consequences", 
below. This could cause the market price of our common stock to drop
significantly, even if our business is doing well.
 
 As
restrictions on resale end, the market price of our stock could drop
significantly if the holders of restricted shares sell them or are perceived by
the market as intending to sell them.
 
 Because our stock is traded on the
Pink Sheets, it has a limited public trading market. As a result, it may be difficult or
impossible for you to liquidate your investment.
 
 While our
common stock currently is listed for trading, we have had only a few trades. We
are quoted on the Pink Sheets. We cannot assure that such a market will improve
in the future, even if our securities are listed on the NASD Bulletin Board. The
NASD Bulletin Board requires that we be a reporting company under the Securities
Exchange Act of 1934. However, we cannot guarantee that we will be accepted for
listing on the NASD Bulletin Board. Further, we cannot assure that an investor
will be able to liquidate his investment without considerable delay, if at all.
If a more active market does develop, the price may be highly volatile. Our
limited operating history, lack of profitability, negligible stock liquidity,
potential extreme price and volume fluctuations, and regulatory burdens may have
a significant impact on the market price of the common stock. It is also
possible that the relatively low price of our common stock may keep many
brokerage firms from engaging in transactions in our common stock.
  Applicable
SEC rules governing the trading of “Penny Stocks” limit the liquidity of our
common stock, which may affect the trading price of our common
stock.
  Our
common stock is currently quoted on the Pink Sheets.  Since our common
stock continues to trade well below $5.00 per share, our common stock is
considered a “penny stock” and is subject to SEC rules and regulations that
impose limitations upon the manner in which our shares can be publicly
traded.  These regulations require the delivery, prior to any
transaction involving a penny stock, of a disclosure schedule explaining the
penny stock and the associated risks.  Under these regulations,
certain brokers who recommend such securities to persons other than established
customers or certain accredited investors must make a special written
suitability determination for the purchaser and receive the written purchaser’s
agreement to a transaction prior to purchase.  These regulations have
the effect of limiting the trading activity of our common stock and reducing the
liquidity of an investment in our common stock
   - 8 -
  Buying
low-priced penny stocks is very risky and speculative.
 
 The
shares being offered are defined as a penny stock under the Securities and
Exchange Act of 1934, and rules of the Commission. The Exchange Act and such
penny stock rules generally impose additional sales practice and disclosure
requirements on broker-dealers who sell our securities to persons other than
certain accredited investors who are, generally, institutions with assets in
excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or
annual income exceeding $200,000, or $300,000 jointly with spouse, or in
transactions not recommended by the broker-dealer. For transactions covered by
the penny stock rules, a broker-dealer must make a suitability determination for
each purchaser and receive the purchaser's written agreement prior to the sale.
In addition, the broker-dealer must make certain mandated disclosures in penny
stock transactions, including the actual sale or purchase price and actual bid
and offer quotations, the compensation to be received by the broker-dealer and
certain associated persons, and deliver certain disclosures required by the
Commission. Consequently, the penny stock rules may affect the ability of
broker-dealers to make a market in or trade our common stock and may also affect
your ability to resell any shares you may purchase in the public
markets.
  We
do not expect to pay dividends on common stock.
 
 We have
not paid any cash dividends with respect to our common stock, and it is unlikely
that we will pay any dividends on our common stock in the foreseeable future.
Earnings, if any, that we may realize will be retained in the business for
further development and expansion.
 
 General
  We are a
Nevada corporation. Our principal business address is 2519 East Kentucky Ave.,
Denver, Colorado 80209. Our telephone number is (303) 660-6964.We
were incorporated under the laws of the State of Nevada on February 23, 2005. We
have active operations. We market interior and exterior design consulting
services to real estate developers and builders for their real estate projects.
The sale of these consulting services includes our recommendations for the
purchase of accessories and architectural elements to be included or placed in
the residential and commercial spaces, as built or retrofitted. These consulting
services and associated products will be sold through By Design,
Inc.  We currently have no active projects in By Design,
Inc.
 
 We have a
subsidiary known as Stone Select, LLC which markets hand-carved interior and
exterior natural stone ornamentation and architectural elements Stone Select,
LLC’s principal products consist of fireplace surrounds, kitchen range hoods,
flooring, base and case trim materials, exterior ornamentation, fountains,
planters, , and exterior window and door surrounds. At the present time, most of
the sales of Stone Select, LLC come from natural stone fireplace surrounds,
kitchen range hoods, and trim materials. At the present time, all of our
revenues are generated through our subsidiary, Stone Select, LLC. We currently
operate exclusively in the Denver, Colorado Metropolitan area. We market and
sell all of our products and services to commercial and residential builders and
interior designers. Our target market is a custom home in the three to twenty
million dollar price range. We have no website but Stone Select, LLC operates a
website at www.stoneselect,us.
  We were
incorporated as a successor to an operation which began in 1996. The predecessor
company was a sole proprietorship owned by Ms. Deanie Underwood also known as
“By Design.” This company provided interior design and refurbishment work
similar to the present company and averaged two to three clients per year but
had no activity in the two years prior to be being acquired by us. It was
marginally profitable in most years it was operational. This company has been
absorbed into us and is no longer in existence. We acquired the assets of this
sole proprietorship in a tax-free exchange under the Internal Revenue Code in
February, 2005.
 
 In July,
2005, we completed a registered offering of our common shares under the
provisions of the Colorado securities laws and under an exemption from the
federal securities laws. We sold a total of 197,802 common shares at a price of
$0.50 per share to a total of forty investors. We raised a total of $98,901 in
this offering.
 
 We have
not been subject to any bankruptcy, receivership or similar
proceeding.
  - 9 -
  Organization
 
 As
of December 31, 2007, we are comprised of one corporation with one
majority-owned subsidiary, Stone Select, LLC., and a wholly-owned subsidiary,
Stone Select Imports, Inc.  Unaffiliated third parties, Craig and
Susie Bush, collectively own 49% of Stone Select, LLC.  We have
ownership and voting control of 51% of Stone Select, LLC.  All of our
operations are conducted through Stone Select, LLC. Stone Select Imports, Inc.
currently has no operations, and we have no plans to conduct any operations in
the future.
 
 Operations
 
 Our
original focus is in the Denver, Colorado metropolitan area, but we plan to
expand throughout the State of Colorado. We focus in the broad area of interior
design for homes, including the wholesale and in retail sales of imported
cantera stone, decorative iron, and carved wood furniture. Our activities
include both working with remodeling projects by contractors and new
construction by real estate developers. We can act as a fee-based consultant to
our clients in their various projects. We can market interior design consulting
services to real estate developers for their real estate projects. The sale of
these consulting services includes our recommendations for the purchase of
accessories to be placed in the spaces where we may assemble the interiors.
These consulting services and associated products will be sold through By
Design, Inc. We plan to charge a fixed hourly fee to be negotiated on a
case-by-case basis. We would also mark up the cost of any products which we
would sell in connection with our interior design consulting services. We
currently have no active projects and generate no revenue in By Design,
Inc.
  We have a
subsidiary known as Stone Select, LLC which markets hand-carved interior and
exterior natural stone ornamentation and architectural elements. Stone Select,
LLC’s principal products consist of fireplace surrounds, kitchen range hoods,
flooring, including base and case, and window and door surrounds. At the present
time, most of the sales of Stone Select, LLC come from fireplace surrounds and
kitchen range hoods and trim materials. At the present time, all of our revenues
are generated through our subsidiary, Stone Select, LLC. We currently operate
exclusively in the Denver, Colorado Metropolitan area. We market and sell all of
our products and services to commercial and residential builders and interior
designers. We sell our products between the manufacturer and customer and carry
limited inventories, for direct sale and as sample products for order. Our
target market is a custom home in the three to twelve million dollar price
range. We have no website, but Stone Select, LLC operates a website at www.stoneselect,us.
 
 We market
and sell all of our products and services to commercial and residential builders
and interior designers. Our target market is a custom home in the three to
twenty million dollar price range.
  We
currently work with four main clients: Trillium Homes; Landmark Homes; Bond
General Contractors; and Casey Jones, home contractor.  All are
private companies doing construction in the Denver, Colorado market. Each of
these four developers builds custom homes in the three to twenty million dollar
price range. In addition, to a lesser degree, we also work with Mesa Properties
and Alexander Homes, who are also private companies doing construction in the
Denver, Colorado market. We continuously look for referrals from builders and
architects who work in this target market. One of the architects with whom we
work is Mr. Craig Bush, who, with his wife, own 49% of Stone Select, LLC. We
have no website, but Stone Select, LLC operates a website at www.stoneselect,us.
 
 We import
all of our products from China and Mexico. We have one supplier each in China
and Mexico. We import essentially the same products from each supplier. All of
the products are sold on a custom design basis. As a result, we do not carry a
substantial inventory of products.
 
 At the
present time, we have no plans to raise any additional funds within the next
twelve months. Any working capital will be expected to be generated from
internal operations. In the event that we need additional capital, Ms. Underwood
has agreed to loan such funds as may be necessary through December 31, 2008 for
working capital purposes. However, we reserve the right to examine possible
additional sources of funds, including, but not limited to, equity or debt
offerings, borrowings, or joint ventures. Limited market surveys have never been
conducted to determine demand for our products and services. Therefore, there
can be no assur­ance that any of its objectives will be
achieved.
  - 10 -
  In
addition we plan to expand through acquisition. We will not only look at our
present industry but will reserve the right to investigate and, if warranted,
merge with or acquire the assets or common stock of an entity actively engaged
in business which generates revenues. We will seek opportunities for long-term
growth potential as opposed to short-term earnings. As of the date hereof, we
have no business opportunities under investigation. None of our officers,
directors, or affiliates have engaged in any preliminary contact or discussions
with any representative of any other company regarding the possibility of an
acquisition or merger between us and such other company.
 
 Markets
 
 Our
marketing plan is focused completely on developing our customer base and
individual projects. We utilize the expertise of our officers to develop our
business. In addition, we continually identify commercial - light industrial
real estate space adequate for displaying stone, iron, and carved wood products
for use by the interior design and construction trades.
 
 Each
Officer and Director utilizes his or her previous contacts in business to
develop potential opportunities.
  Raw
Materials
  We
do not use raw materials in our business. We acquire finished products from our
two suppliers. However, the use of and ability to acquire raw materials could be
a material factor in our operations if our suppliers cannot obtain sufficient
raw materials to provide us with finished products. However, we have found raw
materials to be readily available and not a material factor at the present
time.
 
 Clients
and Competition
 
 We
currently work with four main clients, who are custom builders: Trillium Homes;
Landmark Homes; Bond General Contractors; and Casey Jones, home contractor. All
are private companies doing construction in the Denver, Colorado market. Each of
these four developers builds custom homes in the three to twenty million dollar
price range. In addition, to a lesser degree, we also work with Mesa Properties
and Alexander Homes, who are also private companies doing construction in the
Denver, Colorado market.
 
 With
respect to our four main clients, we rely upon them collectively for a majority
of our revenues. In 2007, sales to Stone Select, LLC.’s four largest customer
were approximately 55% of its total net sales, with the largest customer
accounting for approximately 20% of sales, and the others between 10% and 13%.
In 2006, sales to its largest customer were approximately  26% of its
total net sales. Sales to its second largest customer accounted for
approximately 14% of sales. Each of these four developers builds custom homes in
the three to twelve million dollar price range and are affected by market trends
in that segment of the real estate industry. We believe that we have a good
relationship with each of them. Mr. Craig Bush, who, with his wife, own 49% of
Stone Select, LLC., provides architectural services to our clients from time to
time. However, their use of our products remains dependent upon their ability to
market homes. We also receive referrals from contractors for remodeling and new
construction.
 
 Backlog
 
 At
December 31, 2007, we had no backlogs.
 
 Employees
 
 We have two
full-time employees, our President, Ms. Deanie Underwood, President and Mr.
Bradley Underwood, Secretary-Treasurer. None of our employees draws a salary. We
reimburse our employees for all necessary and customary business related
expenses.
 
 We have
no plans or agreements which provide health care, insurance or compensation on
the event of termination of employment or change in our control.
 
 We do not
pay our Directors separately for any Board meeting they
attend.
  - 11 -
  Proprietary
Information
 
 We
own no proprietary information.
 
 Government
Regulation
 
 Since we
are associated with the real estate industry, all of our projects have and will
require local governmental approval with respect to zoning and construction code
compliance. We will only require government approval on a project-by-project
basis and only when we have projects pending. The extent of the approval varies
with the project and the jurisdiction and cannot be quantified except as it
relates to specific projects.
 
 We
believe the effect of complying with existing or probable governmental
regulations is a managed cost of our business operations but could be
significant. Each real estate project requires prior government approval.
However, the cost cannot be quantified except as it relates to specific
projects.
 
 We
believe that the cost of compliance with federal, state and local environmental
laws will not be significant because we do not plan to choose projects which are
subject to significant environmental costs or regulations. In any case, we plan
to choose our projects to minimize the effects of governmental regulations. At
the present time, we are not awaiting any governmental approvals.
 
 Research
and Development
 
 We have
never spent any amount in research and development activities.
 
 Environmental
Compliance
 
 We
believe that we are not subject to any material costs for compliance with any
environmental laws.
  How
to Obtain Our SEC Filings
 
 We file
annual, quarterly, and special reports, proxy statements, and other information
with the Securities Exchange Commission (SEC). Reports, proxy statements and
other information filed with the SEC can be inspected and copied at the public
reference facilities of the SEC at 100 F Street N.E., Washington, DC 20549. Such
material may also be accessed electronically by means of the SEC's website at
www.sec.gov.
 
 Our investor relations department can
be contacted at our principal executive office located at our principal office,located at2519
East Kentucky Ave., Denver, Colorado 80209. Our telephone number is (303)
660-6964.
 
 ITEM
2. DESCRIPTION OF PROPERTY.
 
 We
currently occupy office space on a rent-free basis from one of our officers, Mr.
Bradley Underwood, which is also Mr. Underwood’s home. We own office equipment
to furnish our offices. We own a truck and a forklift which we use in our
business. All of our management activities are performed in
Colorado.
  Our
subsidiary, Stone Select, LLC, has a 1,200 square foot showroom and a 3,000
square foot warehouse. We rent the showroom from an unaffiliated third party for
$1,500 per month on a month-to-month lease. We rent the warehouse from an
unaffiliated third party for $2,700 per month on a two year lease which expires
April, 2009.
 
 ITEM
3. LEGAL PROCEEDINGS.
 
 We are not a party to any material
legal proceedings, nor is our property the subject of any material legal
proceeding.
  ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
 
 We held no shareholders meeting in the
fourth quarter of our fiscal year.
  - 12 -
  
 PART
II
 
 ITEM
5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
 
 Holders
  As
of May 1, 2008, there were 83 record holders of our common stock and there
were 9,197,802 shares of our common stock outstanding.
 
 Market
Information
  Our shares of common stock are quoted on the Pink Sheets under the trading
symbol BYDE. The shares became trading on July 25, 2006 but there is no
extensive history of trading. The bid and asked price has been $ 0.25 and $1.10
during the entire time the shares have been quoted. The quotations reflect
interdealer prices, without retail mark-up, mark-down or commission, and may not
represent actual transactions.
 
 Dividend
Policy
 
 We have not previously declared or paid any dividends on our common stock
and do not anticipate declaring any dividends in the foreseeable future. The
payment of dividends on our common stock is within the discretion of our board
of directors. We intend to retain any earnings for use in our operations and the
expansion of our business. Payment of dividends in the future will depend on our
future earnings, future capital needs and our operating and financial condition,
among other factors that our board of directors may deem relevant. We are not
under any contractual restriction as to our present or future ability to pay
dividends.
 
 Equity
Compensation Plan Information
 
 We have no outstanding stock options or other equity compensation
plans.
 
 The
Securities Enforcement and Penny Stock Reform Act of 1990
 
 The Securities Enforcement and Penny Stock Reform Act of 1990
require additional disclosure and documentation related to the market for penny
stock and for trades in any stock defined as a penny stock. Unless we can
acquire substantial assets and trade at over $5.00 per share on the bid, it is
more likely than not that our securities, for some period of time, would be
defined under that Act as a "penny stock." As a result, those who trade in our
securities may be required to provide additional information related to their
fitness to trade our shares. These requirements present a substantial burden on
any person or brokerage firm who plans to trade our securities and would thereby
make it unlikely that any liquid trading market would ever result in our
securities while the provisions of this Act might be applicable to those
securities.
 
 Any broker-dealer engaged by the purchaser for the purpose of
selling his or her shares in us will be subject to Rules 15g-1 through 15g-10 of
the Securities and Exchange Act. Rather than creating a need to comply with
those rules, some broker-dealers will refuse to attempt to sell penny
stock.
 
 The penny
stock rules require a broker-dealer, prior to a transaction in a penny stock not
otherwise exempt from those rules, to deliver a standardized risk disclosure
document prepared by the Commission, which:
 
 -    contains
a description of the nature and level of risk in the market for penny stocks in
both public offerings and secondary trading;
 
 -    contains
a description of the broker's or dealer's duties to the customer  and
of the rights and remedies available to the customer with respect to
a  violation to such duties or other requirements of
the Securities Act of  1934, as amended;
  - 13 -
  
 -    contains
a brief, clear, narrative description of a dealer market, including "bid" and
"ask" prices for penny stocks and the significance of the spread between the bid
and ask price;
 
 -    contains
a toll-free telephone number for inquiries on disciplinary actions;
 
 -    defines
significant terms in the disclosure document or in the conduct of trading penny
stocks; and
 
 -    contains
such other information and is in such form (including language, type, size and
format) as the Securities and Exchange Commission shall require by rule or
regulation;
 
 The
broker-dealer also must provide, prior to effecting any transaction in a penny
stock, to the customer:
 
 -  the
bid and offer quotations for the penny stock;
  -  the
compensation of the broker-dealer and its salesperson in the
transaction;
  -  the
number of shares to which such bid and ask prices apply, or other comparable
information relating to the depth and liquidity of the market for such stock;
and
  -  monthly
account statements showing the market value of each penny stock held in the
customer's account.
 
 In
addition, the penny stock rules require that prior to a transaction in a penny
stock not otherwise exempt from those rules; the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written acknowledgment of the receipt
of a risk disclosure statement, a written agreement to transactions involving
penny stocks, and a signed and dated copy of a written suitability statement.
These disclosure requirements will have the effect of reducing the trading
activity in the secondary market for our stock because it will be subject to
these penny stock rules. Therefore, stockholders may have difficulty selling
their securities.
  Stock
Transfer Agent
 
 The
stock transfer agent for our securities is Corporate Stock Transfer of Denver,
Colorado.  Their address is 3200 Cherry Creek Drive South, Suite 430,
Denver, Colorado 80209. Their phone number is (303)282-4800.
 
 Dividend
Policy
 
 We
have not previously declared or paid any dividends on our common stock and do
not anticipate declaring any dividends in the foreseeable future. The payment of
dividends on our common stock is within the discretion of our board of
directors. We intend to retain any earnings for use in our operations and the
expansion of our business. Payment of dividends in the future will depend on our
future earnings, future capital needs and our operating and financial condition,
among other factors that our board of directors may deem relevant. We are not
under any contractual restriction as to our present or future ability to pay
dividends.
 
 ITEM
6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
 
 This
Management’s Discussion and Analysis or Plan of Operation contains
forward-looking statements that involve future events, our future performance
and our expected future operations and actions. In some cases, you can identify
forward-looking statements by the use of words such as “may”, “will”, “should”,
“anticipate”, “believe”, “expect”, “plan”, “future”, “intend”, “could”,
“estimate”, “predict”, “hope”, “potential”, “continue”, or the negative of these
terms or other similar expressions. These forward-looking statements are only
our predictions and involve numerous assumptions, risks and uncertainties. Our
actual results or actions may differ materially from these forward-looking
statements for many reasons, including, but not limited to, the matters
discussed in this report under the caption “Risk Factors”. We urge you not to
place undue reliance on these forward-looking statements, which speak only as of
the date of this prospectus. We undertake no obligation to publicly update any
forward looking-statements, whether as a result of new information, future
events or otherwise.
  - 14 -
  
 The
following discussion of our financial condition and results of operations should
be read in conjunction with our financial statements and the related notes
included in this report.
  The
following table provides selected financial data about us for the years ended
December 31, 2006 and 2007. For detailed financial information, see the
audited Financial Statements included in this document.
  Balance
      Sheet Data: 12/31/07Cash
              
              $
              28,434Total
      assets
              
              $
              162,071Total
      liabilities
              
              $
              394,331Shareholders'
      equity
              
              $
              (232,260)Balance Sheet Data:
      12/31/06Cash
              
              $
              43,042Total
      assets
              
              $
              336,487Total
      liabilities
              
              $
              355,997Shareholders'
      equity
              
              $
              (19,510)
  Operating Data:
      12/31/07Revenue
              
              $
              297,498Operating
      Expenses
              
              $
              283,176Net
      Loss
              
              $
              221,750Operating Data:
      12/31/06Revenue
              
              $
              419,695Operating
      Expenses
              
              $
              296,803Net
      Loss
              
              $
              72,920
  Results
of Operations
  The concept for
our business was developed in 1996. However, we had no revenues from 2003 until
2006. Even though we have operated as a corporation since 2005, we have a
limited operating history. This factor makes it difficult to evaluate our
business on the basis of historical operations. As a consequence, our past
results may not be indicative of future results. Although this is true for any
business, it is particularly true for us because of our limited operating
history. Reliance on historical results may hinder our ability to anticipate and
timely adapt to increases or decreases in sales, revenues or expenses. In
addition, we have a history of losses. Furthermore, our losses may continue into
the future. We have never had a profitable fiscal year.
  Our accountants have expressed
doubt about our ability to continue as a going concern as a result of our
continued net losses. Our ability to achieve and maintain profitability and
positive cash flow is dependent upon our ability to locate clients who will
purchase our products and use our services and our ability to generate
revenues.
  The revenues for all of the
relevant periods in this discussion came from sales of products in our
subsidiary, Stone Select, LLC. We had no revenues from our interior design
consulting operated through By Design, Inc. We currently have no active projects
and generate no revenue in By Design, Inc. but continue to look for potential
projects.
  For the twelve months ended
December 31, 2007, sales were $297,498. For the twelve months ended December 31,
2006, sales were $419,695. We were involved in fewer projects in 2007 compared
to 2006.
  - 15 -
   Our
revenues decreased from 2006  to 2007 primarily because of declining
construction activities in the Denver area and the resulting lack of demand for
our stone products and improvement during this period. We had no revenues from
our interior design consulting operated through By Design, Inc. We currently
have no active projects and generate no revenue in our By Design, Inc. but
continue to look for potential projects.  Our ability to attract new
clients is related to our marketing efforts, including the use of
referrals.
 
 For the
twelve months ended December 31, 2007, cost of goods sold were $221,496, as
compared to $195,786 for the twelve months ended December 31, 2006. Costs of
goods sold include all direct costs incurred in selling products. However, the
cost of goods sold was exclusive of depreciation, which was shown as separate
line items at $221,496 and $195,786, respectively. All such depreciation was
related exclusively to our fixed assets.  In addition, in 2007, we
wrote off a substantial portion of our inventory, which is shown as a separate
line item. We do not separate sales of different product lines into operating
segments. Our cost of goods increased in 2007 compared to 2006 principally
because of higher material costs. We also experienced increased freight charges
because we imported more products from China. Our freight costs were
approximately $4,000 in 2007 compared to approximately $2,000 in
2006.
  The
difference between sales and cost of goods sold is gross profit. Our gross
profit for the twelve months ended December 31, 2007, was $76,002 as compared to
gross profit for the twelve months ended December 31, 2006 of $223,909. The
higher material and freight costs in 2007 compared to 2006 are directly
reflected in our lower gross profit.
 
 Operating
expenses, which include depreciation and general and administrative expenses for
the twelve months ended December 31, 2007 were $283,176. Our operating expenses
for the twelve months ended December 31, 2006 were $296,803. The major
components of operating expenses include rent, marketing costs, professional
fees, which consist of legal and accounting costs, and telephone expenses.
In 2007, we had significantly lower general and administrative expenses, which
was a result of better cost controls for marketing and professional fees.
However, we took a write-down of inventory in 2007 in the amount of $153,384.
While we believe that we still be able to market this inventory, the products
will probably be sold on a liquidation basis. We have no other material
inventory write-offs which we anticipate in the future.
  Each at
December 31, 2006 and December 31, 2007, we had one payable due to Ms. Underwood
for $334,447 and $323,447, respectively, for working capital advances made to
us. This payable is due on demand, is an oral agreement and unsecured.  In
2007 we agreed to accrue interest on the advances at 6% per annum. Interest
expense under this agreement in 2007 was $20,070 with accrued interest payable
at December 31, 2007 in the same amount. We have no ability at the current time
to repay related party advances. In the event that we need additional capital,
Ms. Underwood has agreed to loan such funds as may be necessary through December
31, 2008 for working capital purposes.
  As a
result of the foregoing, we had a net loss of $221,750 (-$0.02 per share) for
the twelve months ended December 31, 2007 compared to a net loss of $72,920
(-$0.01 per share) for the twelve months ended December 31, 2006.
 
 We
believe that the potential sales for 2008 could look better than 2007 because we
have two projects which we have recently developed which could provide
substantial sales and which will occupy most of the year 2008.  As a
result, our potential sales could be closer to our 2006 numbers than those of
2007. However, it is too early to predict with certainty. We currently have a
policy of acquiring inventory for specific projects, as opposed to ordering the
inventory and attempting to market it.  Also, we feel that we have
implemented better controls over our operating expenses. Because we do not pay
salaries, operating expenses are expected to remain fairly constant with respect
to sales except for costs associated with marketing. Hence each additional sale
and correspondingly the gross profit of such sale have minimal offsetting
operating expense. Thus, additional sales should become a profit at a higher
return on sales rates as a result of not needing to expand our operational
expenses at the same pace. Our marketing costs have been approximately $6,000,
which was used primarily for magazine advertising. While we believe that this
magazine advertising was successful, we have not scheduled another magazine
advertising placement until the second quarter of  2008. We plan to
continue to focus our marketing on the Denver Metropolitan area through
referrals for 2008, so we do not believe that our marketing costs will increase
substantially through the second quarter of 2008.
  - 16 -
 
 To try to
operate at a break-even level based upon our current level of anticipated
business activity, we believe that we must generate approximately $500,000 in
revenue per year. However, if our forecasts are inaccurate, we will need to
raise additional funds. In the event that we need additional capital, Ms.
Underwood has agreed to loan such funds as may be necessary through December 31,
2008 for working capital purposes.
 
 On the
other hand, we may choose to scale back our operations to operate at break-even
with a smaller level of business activity, while adjusting our overhead to meet
the revenue from current operations. In addition, we expect that we will need to
raise additional funds if we decide to pursue more rapid expansion, the
development of new or enhanced services and products, appropriate responses to
competitive pressures, or the acquisition of complementary businesses or
technologies, or if we must respond to unanticipated events that require us to
make additional investments. We cannot assure that additional financing will be
available when needed on favorable terms, or at all.
 
 We expect
to incur operating losses in future periods because we will be incurring
expenses and not generating sufficient revenues. We expect approximately
$500,000 in operating costs over the next twelve months. We cannot guarantee
that we will be successful in generating sufficient revenues or other funds in
the future to cover these operating costs. Failure to generate sufficient
revenues or additional financing when needed could cause us to go out of
business.
  Liquidity
and Capital Resources
  As of
December 31, 2007, we had cash or cash equivalents of $28,434 compared to
$43,042 in cash or cash equivalents as of December 31, 2006.
 
 Net cash
used for operating activities was $13,940 for the twelve months ended December
31, 2007 compared to $228,459 for the twelve months ended December 31, 2006. The
major difference was that we did not purchase as much inventory for the twelve
months ended December 31, 2007, compared to the twelve months ended December 31,
2006.
 
 Cash
flows used for investing activities were $11,668 for the twelve months ended
December 31, 2007 compared to $52,663 for the twelve months ended December 31,
2006. All consisted of purchases of fixed assets, which consisted of a truck and
a forklift.
 
 Cash
flows provided by financing activities were $11,000 for the twelve months ended
December 31, 2007 compared to $293,447 for the twelve months ended December 31,
2006. These cash flows were all related to borrowings from related
parties.
 
 We
believe that we have sufficient capital in the short term for our current level
of operations. This is because we believe that we can attract sufficient product
sales and services within our present organizational structure and resources to
become profitable in our operations. Additional resources would be needed to
expand into additional locations, which we have no plans to do at this time. We
do not anticipate needing to raise additional capital resources in the next
twelve months. In the event that we need additional capital, Ms. Underwood has
agreed to loan such funds as may be necessary through December 31, 2008 for
working capital purposes.
 
 Our
principal source of liquidity will be our operations. We expect variation in
revenues to account for the difference between a profit and a loss. Also
business activity is closely tied to the economy of Denver and the U.S. economy.
Because we currently only sell stone products, a slow down in purchases of
construction materials has had a negative impact to our business in the latter
half of 2007. We have no idea to what extent this may affect us in 2008,
although we have started our fiscal year with two projects which could provide
substantial sales and which will occupy most of 2008. In any case, we try to
operate with minimal overhead. Our primary activity will be to seek to develop
clients and, consequently, our sales. If we succeed in expanding our client base
and generating sufficient sales, we will become profitable. We cannot guarantee
that this will ever occur. Our plan is to build our company in any manner which
will be successful.
 
 Off-Balance
Sheet Arrangements
  We have no off-balance sheet arrangements with any party.
  - 17 -
  Plan
of Operation
  Our plan
for the next twelve months immediately is to operate at a profit or at break
even. Our plan is to sell more of our products, especially our fireplace
surrounds, kitchen hoods, interior and exterior natural stone ornamentation and
architectural elements, to become profitable in our operations. In addition, we
plan to use our referral sources to develop interior design business for By
Design, Inc.
  Currently,
we are conducting business only through Stone Select, LLC and in only one
location in the Denver Metropolitan area. We have no plans to expand into other
locations or areas. We believe that the timing of the completion of the
milestones needed to become profitable can be achieved as we are presently
organized with sufficient business.
 
 Other
than the shares offered by last offering no other source of capital has been
identified or sought.
 
 If we are
not successful in our operations we will be faced with several
options:
 
 1.
              Cease
      operations and go out of business;
 
 2.
              Continue
      to seek alternative and acceptable sources of
  capital;
 
 3.
              Bring
      in additional capital that may result in a change of control;
      or
  4.
                Identify a candidate for acquisition
      that seeks access to the public marketplace and its financing
  sources.
  Currently,
we believe that we have sufficient capital or access to capital to implement our
proposed business operations or to sustain them for the next twelve months. In
the event that we need additional capital, Ms. Underwood has agreed to loan such
funds as may be necessary through December 31, 2008 for working capital
purposes.
 
 If we can
sustain profitability, we could operate at our present level
indefinitely.
 
 To date,
we have never had any discussions with any possible acquisition candidate nor
have we any intention of doing so.
 
 Proposed
Milestones to Implement Business Operations
  At the
present time, we are operating from one location in the Denver Metropolitan
area. Our plan is to make our operation profitable by the end of our fiscal year
2008. We estimate that we must generate approximately $500,000 in sales per year
to be profitable.
 
 We
believe that we can be profitable or at break even at the end of the current
fiscal year, assuming sufficient sales. Based upon our current plans, we have
adjusted our operating expenses so that cash generated from operations and from
working capital financing is expected to be sufficient for the foreseeable
future to fund our operations at our currently forecasted levels. To try to
operate at a break-even level based upon our current level of anticipated
business activity, we believe that we must generate approximately $500,000 in
revenue per year. However, if our forecasts are inaccurate, we will need to
raise additional funds. In the event that we need additional capital, Ms.
Underwood has agreed to loan such funds as may be necessary through December 31,
2008 for working capital purposes
  On the
other hand, we may choose to scale back our operations to operate at break-even
with a smaller level of business activity, while adjusting our overhead to meet
the revenue from current operations . In addition, we expect that we will need
to raise additional funds if we decide to pursue more rapid expansion, the
development of new or enhanced services and products, appropriate responses to
competitive pressures, or the acquisition of complementary businesses, or if we
must respond to unanticipated events that require us to make additional
investments. We cannot assure that additional financing will be available when
needed on favorable terms, or at all.
  - 18 -
 
 We might
incur operating losses in future periods because we will be incurring expenses
and not generating sufficient revenues. We expect approximately $500,000 in
operating costs over the next twelve months. We cannot guarantee that we will be
successful in generating sufficient revenues or other funds in the future to
cover these operating costs. Failure to generate sufficient revenues or
additional financing when needed could cause us to go out of
business
  In the
event that we need additional capital, Ms. Underwood has agreed to loan such
funds as may be necessary through December 31, 2008 for working capital
purposes. Otherwise, no commitments to provide additional funds have been made
by management or current shareholders. There is no assurance that additional
funds will be made available to us on terms that will be acceptable, or at all,
if and when needed. We expect to continue to generate and increase sales, but
there can be no assurance we will generate sales sufficient to continue
operations or to expand.
 
 We
also are planning to rely on the possibility of referrals from clients and will
strive to satisfy our clients. We believe that referrals will be an effective
form of advertising because of the quality of service that we bring to clients.
We believe that satisfied clients will bring more and repeat
clients.
 
 In the
next 12 months, we do not intend to spend any material funds on research and
development and do not intend to purchase any large equipment.
 
 Recently
Issued Accounting Pronouncements
 
 We do not
expect the adoption of any recently issued accounting pronouncements to have a
significant impact on our net results of operations, financial position, or cash
flows.
 
 Seasonality
 
 We do not
expect our sales to be impacted by seasonal demands for our products and
services.
 
 ITEM
7. FINANCIAL STATEMENTS.
 
 Our
consolidated financial statements of commencing on page F-1 are included with
this prospectus.  These financial statements have been prepared on the
basis of accounting principles generally accepted in the United States and are
expressed in US dollars.
 
  - 19 -









BYDESIGN,
INC.
 
 CONSOLIDATED FINANCIAL
STATEMENTS
 
 December
31, 2006,
 & December
31, 2007
 (Audited)
 
 F-1
 
  
 BY DESIGN, INC.
 Consolidated Financial
Statements
 
 
 
 TABLE OF CONTENTS
 
 
 PageREPORT
      OF INDEPENDENT REGISTEREDPUBLIC
      ACCOUNTING FIRM
              F-3CONSOLIDATED
      FINANCIAL STATEMENTSConsolidated balance
      sheets
              F-4Consolidated statements of
      operations
              F-5Consolidated statements of
      stockholders’ equity
              F-6Consolidated statements of cash
      flows
              F-7Notes to consolidated financial
      statements
              F-8
   F-2
 
 RONALD R.
CHADWICK, P.C.
 Certified
Public Accountant
 2851
South Parker Road, Suite 720
 Aurora,
Colorado  80014
 Telephone
(303)306-1967
 Fax
(303)306-1944
 Email:
rcpc35@hotmail.com
 
 
 REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Board of
Directors
 By
Design, Inc.
 Denver,
Colorado
 
 I have
audited the accompanying consolidated balance sheets of By Design, Inc. as of
December 31, 2006 and 2007, and the related consolidated statements of
operations, stockholders' equity and cash flows for the years then ended. 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 audit.
 
 I
conducted my audit 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
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated 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 audit provides a reasonable basis for
my opinion.
 
 In my
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of By Design, Inc.
as of December 31, 2006 and 2007, and the consolidated results of its operations
and its cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States of America.
 
 As discussed in Note 5 to the
financial statements, the Company determined in the current year that 2006
depreciation expense was overstated. Accordingly, the 2006 and 2007 financial
statements have been restated.
 
 The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 7 to the
financial statements the Company has suffered recurring losses from operations
and has a working capital deficitthat raise substantial doubt about its ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note 7. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
 
 Aurora,
Colorado                                                                            /s/ Ronald R.
Chadwick, P.C.
 April 29,
2008                                                                                      RONALD
R. CHADWICK, P.C.


F-3




BY DESIGN,
INC.
 CONSOLIDATED BALANCE
SHEETS
  Dec.
      31, 2006
                
                
                Dec.
      31, 2007(As Restated)
                
                
                (As Restated)ASSETSCurrent
      assetsCash
                
                $
                43,042
                
                
                $
                28,434Accounts receivable
                
                
                59,025
                
                
                
                16,495Inventory
                
                
                160,998
                
                
                
                41,109Total current
      assets
                
                
                263,065
                
                
                
                86,038Fixed
      assets
                
                
                77,160
                
                
                
                88,828Less accumulated depreciation
                
                
                (7,838
                )
                
                
                (16,895
                )Other
      assets
                
                
                4,100
                
                
                
                4,10073,422
                
                
                
                76,033Total
      Assets
                
                $
                336,487
                
                
                $
                162,071LIABILITIES
      & STOCKHOLDERS' EQUITYCurrent
      liabilitiesAccounts
      payable
                
                $
                -
                
                
                $
                825Related party
      payables
                
                
                3,503
                
                
                
                11,939Related party
      advances
                
                
                323,447
                
                
                
                334,447Accrued
      interest payable
                
                
                
                
                
                
                20,070Other
      liabilities
                
                
                29,047
                
                
                
                27,050Total current
      liabilties
                
                
                355,997
                
                
                
                394,331Total
      Liabilities
                
                
                355,997
                
                
                
                394,331Stockholders'
      EquityPreferred
      stock, $.01 par value;1,000,000 shares authorized;No shares issued & outstanding
                
                
                -
                
                
                
                -Common
      stock, $.001 par value;50,000,000 shares authorized;9,197,802 shares issued&
      outstanding
                
                
                9,198
                
                
                
                9,198Additional
      paid in capital
                
                
                79,903
                
                
                
                88,903Accumulated
      deficit
                
                
                (108,611
                )
                
                
                (330,361
                )Total
      Stockholders' Equity
                
                
                (19,510
                )
                
                
                (232,260
                )Total
      Liabilities and Stockholders' Equity
                
                $
                336,487
                
                
                $
                162,071
  The
accompanying notes are an integral part of the consolidated financial
statements.
  F-4
 
 BY DESIGN, INC.
 CONSOLIDATED STATEMENTS OF
OPERATIONS
  Year
      Ended
                
                
                Year
      EndedDec.
      31, 2006
                
                
                Dec.
      31, 2007(As Restated)
                
                
                (As Restated)Sales
                
                $
                419,695
                
                
                $
                297,498Cost
      of goods sold (exclusive ofdepreciation
      shown separately below)
                
                
                195,786
                
                
                
                221,496Gross
      profit
                
                
                223,909
                
                
                
                76,002Operating
      expenses:Amortization
      & depreciation
                
                
                7,077
                
                
                
                9,057General
      and administrative
                
                
                289,726
                
                
                
                120,735Write
      offs - inventory
                
                
                
                
                
                
                153,384296,803
                
                
                
                283,176Income
      (loss) from operations
                
                
                (72,894
                )
                
                
                (207,174
                )Other
      income (expense):Interest
      income
                
                
                10
                
                
                
                318Interest
      expense
                
                
                (36
                )
                
                
                (20,070
                )Rebates
                
                
                
                
                
                
                5,176(26
                )
                
                
                (14,576
                )Income
      (loss) beforeprovision
      for income taxes
                
                
                (72,920
                )
                
                
                (221,750
                )Provision
      for income tax
                
                
                -
                
                
                
                -Net
      income (loss)
                
                $
                (72,920
                )
                
                $
                (221,750
                )Net
      income (loss) per share(Basic
      and fully diluted)
                
                $
                (0.01
                )
                
                $
                (0.02
                )Weighted
      average number ofcommon
      shares outstanding
                
                
                9,197,802
                
                
                
                9,197,802
  The
accompanying notes are an integral part of the consolidated financial
statements.
  F-5
  
 BY DESIGN, INC.
 CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY
  Common
      Stock
                
                
                
                
                
                
                
                
                Stock-Amount
                
                
                Paid
      in
                
                
                Accumulated
                
                
                holders'Shares
                
                
                ($.001
      Par)
                
                
                Capital
                
                
                Deficit
                
                
                EquityBalances
      at December 31, 2005
                
                
                9,197,802
                
                
                $
                9,198
                
                
                $
                100,903
                
                
                $
                (35,691
                )
                
                $
                74,410Distributions
                
                
                
                
                
                
                
                
                
                
                (30,000
                )
                
                
                
                
                
                
                (30,000
                )Donated
      services - officers
                
                
                
                
                
                
                
                
                
                
                9,000
                
                
                
                
                
                
                
                9,000Net
      income (loss) for the period
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (72,920
                )
                
                
                (72,920
                )Balances
      at December 31, 2006 -As restated
                
                
                9,197,802
                
                
                $
                9,198
                
                
                $
                79,903
                
                
                $
                (108,611
                )
                
                $
                (19,510
                )Donated
      services - officers
                
                
                
                
                
                
                
                
                
                
                9,000
                
                
                
                
                
                
                
                9,000Net
      income (loss) for the period
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (221,750
                )
                
                
                (221,750
                )Balances
      at December 31, 2007 -As restated
                
                
                9,197,802
                
                
                $
                9,198
                
                
                $
                88,903
                
                
                $
                (330,361
                )
                
                $
                (232,260
                )
  The
accompanying notes are an integral part of the consolidated financial
statements.
  F-6
  BY DESIGN, INC.
 CONSOLIDATED STATEMENTS OF CASH
FLOWS
  Year
      Ended
                
                
                Year
      EndedDec.
      31, 2006
                
                
                Dec.
      31, 2007(As Restated)
                
                
                (As Restated)Cash
      Flows From Operating Activities:Net
      income (loss)
                
                $
                (72,920
                )
                
                $
                (221,750
                )Adjustments
      to reconcile net loss tonet
      cash provided by (used for)operating
      activities:Amortization
      & depreciation
                
                
                7,077
                
                
                
                9,057Donated
      services
                
                
                9,000
                
                
                
                9,000Accounts
      receivable
                
                
                (59,025
                )
                
                
                42,530Inventory
                
                
                (139,038
                )
                
                
                (33,495
                )Accrued
      payables
                
                
                29,047
                
                
                
                284Write
      offs
                
                
                
                
                
                
                153,384Other
      assets
                
                
                (2,600
                )Other
      liabilities
                
                
                
                
                
                
                27,050Net cash provided by (used
      for)operating
      activities
                
                
                (228,459
                )
                
                
                (13,940
                )Cash
      Flows From Investing Activities:Fixed
      assets
                
                
                (52,663
                )
                
                
                (11,668
                )Net
      cash provided by (used for)investing
      activities
                
                
                (52,663
                )
                
                
                (11,668
                )
  (Continued
On Following Page)
 The
accompanying notes are an integral part of the consolidated financial
statements.
 F-7
  BY DESIGN, INC.
 CONSOLIDATED STATEMENTS OF CASH
FLOWS
 (Continued
From Previous Page)
  Year
      Ended
                  
                  
                  Year
      EndedDec.
      31, 2006
                  
                  
                  Dec.
      31, 2007(As Restated)
                  
                  
                  (As Restated)Cash
      Flows From Financing Activities:Related
      party advances - borrowings
                  
                  
                  323,447
                  
                  
                  
                  11,000Paid
      in capital
                  
                  
                  (30,000
                  )Net cash provided by (used
      for)financing
      activities
                  
                  
                  293,447
                  
                  
                  
                  11,000Net
      Increase (Decrease) In Cash
                  
                  
                  12,325
                  
                  
                  
                  (14,608
                  )Cash
      At The Beginning Of The Period
                  
                  
                  30,717
                  
                  
                  
                  43,042Cash
      At The End Of The Period
                  
                  $
                  43,042
                  
                  
                  $
                  28,434Schedule Of Non-Cash
      Investing And Financing ActivitiesNoneSupplemental
      DisclosureCash
      paid for interest
                  
                  $
                  36
                  
                  
                  $
                  -Cash
      paid for income taxes
                  
                  $
                  -
                  
                  
                  $
                  -
 The
accompanying notes are an integral part of the consolidated financial
statements.
 F-8
  BY
DESIGN, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2006 and 2007
  
 NOTE
1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
 
 By
Design, Inc. (the “Company”), was incorporated in the State of Nevada on
February 23, 2006. The Company was formed to market and supply home design
products to residential and commercial builders and developers. The Company may
also engage in any other business permitted by law, as designated by the Board
of Directors of the Company.
 
 Principles of
consolidation
 
 The
accompanying consolidated financial statements include the accounts of By
Design, Inc. and its 51% owned subsidiary. All intercompany accounts and
transactions have been eliminated in consolidation.
 
 Use of
Estimates
 
 The
preparation of consolidated financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during
the reportingperiod. Actual results could differ from
those estimates.
 
 Cash and cash
equivalents
 
 The
Company considers all highly liquid investments with an original maturity of
three months or less as cash equivalents.
 
 Accounts
receivable
 
 The
Company reviews accounts receivable periodically for collectability and
establishes an allowance for doubtful accounts and records bad debt expense when
deemed necessary. At December 31, 2006 and 2007 the Company had no balance in
its allowance for doubtful accounts.
 
 Property and
equipment
 
 Property
and equipment are recorded at cost and depreciated under straight line methods
over each item's estimated useful life.
 
 Minority
Interest
 
 The
Company’s subsidiary has minority members, representing ownership interests of
49% at December 31, 2006 and 2007.  Allocation of their proportionate
net losses beyond $100 would result in negative capital accounts. Accordingly,
their investment is shown as $0 at
  F-9
  BY
DESIGN, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2006 and 2007
  
 NOTE
1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES  (Continued):
 
 December
31, 2006 and 2007 and all losses subsequent to the minority members' capital
accounts reaching zero have been charged to the majority member. Gains have also
been credited to the majority member, until such time as the minority members'
capital accounts exceed zero.
 
 Inventories
 
 Inventories,
consisting of building materials, are stated at the lower of cost or market
(first-in, first-out method). Costs capitalized to inventory include the
purchase price, transportation costs, and any other expenditures incurred in
bringing the goods to the point of sale and putting them in saleable condition.
Costs of good sold include those expenditures capitalized to
inventory.
 
 The
Company in 2006 purchased a wide variety of inventory items to stock its
warehouse and showroom. The Company wrote off a large portion of its inventory
in 2007, as the inventory, mostly purchased in 2006 was determined to be slow
moving, and the likelihood of its eventual sale and recoupment of cost unknown
after a year. The Company in 2007 began only bringing in inventory items backed
up by a prior order from a customer, so as to avoid overstocking.
 
 Revenue
recognition
 
 Revenue
is recognized on an accrual basis as earned under contract terms. Specifically,
revenue from product sales is recognized subsequent to a customer ordering a
product at an agreed upon price, delivery has occurred, and collectibility is
reasonably assured.
 
 Advertising
costs
 
 Advertising
costs are expensed as incurred. The Company recorded no advertising costs in
2006, and $6,100 in advertising costs in 2007.
 
 Income
tax
 
 The
Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109 (“SFAS 109”). Under SFAS 109 deferred taxes are provided on a
liability method whereby deferred tax assets are recognized for deductible
temporary differences and operating loss carryforwards and deferred tax
liabilities are recognized for taxable temporary differences. Temporary
differences are the differences between the reported amounts of assets and
liabilities and their tax bases. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that
some portion or all of the deferred tax assets will not be realized. Deferred
tax assets and liabilities are adjusted for the effects of changes in tax laws
and rates on the date of enactment.
  F-10
  BY
DESIGN, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2006 and 2007
  
 NOTE
1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued):
 
 Net income (loss) per
share
 
 The net
income (loss) per share is computed by dividing the net income (loss) by the
weighted average number of shares of common outstanding. Warrants, stock
options, and common stock issuable upon the conversion of the Company's
preferred stock (if any), are not included in the computation if the effect
would be anti-dilutive and would increase the earnings or decrease loss per
share.
 
 Financial
Instruments
 
 The
carrying value of the Company’s financial instruments, as reported in the
accompanying balance sheets, approximates fair value.
 
 Long-Lived
Assets
 
 In
accordance with Statement of Financial Accounting Standard 144 “Accounting for
the Impairment or Disposal of Long-Lived Assets”, the Company regularly reviews
the carrying value of intangible and other long-lived assets for the existence
of facts or circumstances, both internally and externally, that may suggest
impairment. If impairment testing indicates a lack of recoverability, an
impairment loss is recognized by the Company if the carrying amount of a
long-lived asset exceeds its fair value.
 
 Products and services,
geographic areas and major customers
 
 The
Company earns revenue from the sale of building materials, but does not separate
sales of different product lines into operating segments. All sales each year
were domestic and to external customers. In 2006 one major customer accounted
for approximately 26% of sales or $110,000, and one customer for approximately
14% of sales or $59,000. In 2007 four major customers accounted for approximate
sales as follows:  20% or $60,000, 13.5% or $40,000, 11% or $32,000,
and 10.5% or $31,000.
 
 Recent Accounting
Pronouncements
 
 In March
2005, the FASB issued SFAS No. 123 (revised 2004), "Share-Based Payment". SFAS
123(r) requires that the cost resulting from all share-based payment
transactions be recognized in the consolidated financial statements. The Company
has adopted the provisions of SFAS No. 123(r) which are effective in general for
transactions entered into or modified after June 15, 2006. The adoption did not
have a material effect on the results of operations of the Company.
 
 In May
2005, the Financial Accounting Standards Board (FASB) issued SFAS No. 154,
“Accounting Changes and Error Corrections – A Replacement of APB Opinion No. 20
and SFAS No. 3”. SFAS 154 changes the requirements for the accounting for and
reporting of a change in accounting principle and applies to all voluntary
changes in
  F-11
 BY
DESIGN, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2006 and 2007
   NOTE
1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued):
 
 accounting
principle. It also applies to changes required by an accounting pronouncement in
the unusual instance that the pronouncement does not include specific transition
provisions. SFAS 154 requires retrospective application to prior periods’
consolidated financial statements of changes in accounting principle, unless it
is impracticable to determine either the period-specific effects or the
cumulative effect of the change. The Company has adopted the provisions of SFAS
No. 154, which are effective for accounting changes and correction of errors
made in fiscal years beginning after December 15, 2006. The adoption did not
have a material effect on the results of operations of the Company. In February
2007 the FASB issued SFAS No. 155 “Accounting for Certain Hybrid Financial
Instruments – an amendment of FASB Statements No. 133 and 140”, to simplify and
make more consistent the accounting for certain financial instruments. The
Company has adopted the provisions of SFAS No. 155, which are effective in
general for financial instruments acquired or issued in fiscal years beginning
after September 15, 2007. The adoption did not have a material effect on the
results of operations of the Company.
  In March
2006 the FASB issued SFAS No. 156 "Accounting for Servicing of Financial Assets,
an amendment of FASB Statement No. 140, Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities". This statement requires
all separately recognized servicing assets and servicing liabilities be
initially measured at fair value, if practicable, and permits for subsequent
measurement using either fair value measurement with changes in fair value
reflected in earnings or the amortization and impairment requirements of
Statement No. 140. The Company has adopted the provisions of SFAS No. 156, which
are effective in general for an entity's fiscal year beginning after September
15, 2007. The adoption did not have a material effect on the results of
operations of the Company.
 
 In
December 2006 the FASB issued SFAS No. 157 “Fair Value Measurements”, to improve
consistency and comparability in fair value measurements, and to expand related
disclosures. The Company has adopted the provisions of SFAS No. 157, which are
effective for consolidated financial statements for fiscal years beginning after
November 15, 2007. The adoption did not have a material effect on the results of
operations of the Company.
 
 
 NOTE
2. RELATED PARTY TRANSACTIONS
 
 The
Company at December 31, 2006 and 2007 had a payable due to a Company officer for
$323,447 and $334,447 for due on demand, unsecured, working capital advances
made to the Company. Prior to 2007 the advances were non-interest bearing. In
2007 the Company agreed to accrue interest on the advances at 6% per annum.
Interest expense under this agreement in 2007 was $20,070 with accrued interest
payable at December 31, 2007 in the same amount.
 F-12
 BY
DESIGN, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2006 and 2007
 
 
 NOTE
2. RELATED PARTY TRANSACTIONS (Continued):
 
 The
Company also recorded compensation expense of $500 per month in 2006 and
2007   for administrative and management services donated to the
Company by officers, and $250 per month for office space donated by an officer.
Total donated services expense for the same periods was $9,000 each
period.
 
 
 NOTE
3. INCOME TAXES
 
 Deferred
income taxes arise from the temporary differences between financial statement
and income tax recognition of net operating losses. These loss carryovers are
limited under the Internal Revenue Code should a significant change in ownership
occur.
 
 At
December 31, 2006 and 2007 the Company had net operating loss carryforwards of
approximately$50,000 and $118,000 which begin to expire in
2025. The deferred tax asset of $29,000 and $46,000 created by the net operating
losses has been offset by a 100% valuation allowance. The change in the
valuation allowance in 2006 and 2007 was $19,801 and $17,101.
 
 
 NOTE
4. FIXED ASSETS
 
 Fixed
asset values recorded at cost are as follows:
 2006
                    
                    
                    2007Furniture
      & fixtures
                    
                    $
                    9,927
                    
                    
                    $
                    9,927Shop
      equipment
                    
                    
                    6,420
                    
                    
                    
                    6,420Computer
      equipment
                    
                    
                    3,160
                    
                    
                    
                    4,928Leasehold
      improvements
                    
                    
                    57,653
                    
                    
                    
                    67,55377,160
                    
                    
                    
                    88,828Less
      accumulated depreciation
                    
                    
                    (7,838
                    )
                    
                    
                    (16,895
                    )Total
                    
                    $
                    69,322
                    
                    
                    $
                    71,933
  Depreciation
expense in 2006 and 2007 was $7,077and $9,057.
 F-13
 BY
DESIGN, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2006 and 2007
 
 
 NOTE
5. RESTATEMENT
 
 The
Company in 2007 restated its 2006 and 2007 financial statements, as depreciation
expense was determined by the Company to have been too high in 2006 pursuant to
reasonable book depreciation rates.
 
 Prior
      to
                  
                  
                  Adjustment
                  
                  
                  AfterYear
      2006
                  
                  Adjustment
                  
                  
                  Amount
                  
                  
                  AdjustmentAccumulated
      depreciation
                  
                  $
                  31,958
                  
                  
                  $
                  (24,120
                  )
                  
                  $
                  7,838Accumulated
      deficit
                  
                  $
                  (132,731
                  )
                  
                  $
                  24,120
                  
                  
                  $
                  (108,611
                  )Stockholders’
      equity
                  
                  $
                  (43,630
                  )
                  
                  $
                  24,120
                  
                  
                  $
                  (19,510
                  )Depreciation
      expense
                  
                  $
                  31,197
                  
                  
                  $
                  (24,120
                  )
                  
                  $
                  7,077Net
      income (loss)
                  
                  $
                  (97,040
                  )
                  
                  $
                  24,120
                  
                  
                  $
                  (72,920
                  )
  Prior
      to
                  
                  
                  Adjustment
                  
                  
                  AfterYear
      2007
                  
                  Adjustment
                  
                  
                  Amount
                  
                  
                  AdjustmentAccumulated
      depreciation
                  
                  $
                  37,175
                  
                  
                  $
                  (20,280
                  )
                  
                  $
                  16,895Accumulated
      deficit
                  
                  $
                  (350,641
                  )
                  
                  $
                  20,280
                  
                  
                  $
                  (330,361
                  )Stockholders’
      equity
                  
                  $
                  (252,540
                  )
                  
                  $
                  20,280
                  
                  
                  $
                  (232,260
                  )Depreciation
      expense
                  
                  $
                  5,217
                  
                  
                  $
                  3,840
                  
                  
                  $
                  9,057Net
      income (loss)
                  
                  $
                  (217,910
                  )
                  
                  $
                  (3,840
                  )
                  
                  $
                  (221,750
                  )


F-14




BY
DESIGN, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 December
31, 2006 and 2007
 
   NOTE
6. LEASE COMMITMENT
 
 The
Company rents office space at $1,500 per month under a lease expiring in October
2008, renewable year to year, with possible price increases upon renewal, and
yard and warehouse space at approximately $2,000 per month plus costs under a
non-cancellable lease with no renewal option expiring in March 3008. Rent
expense under all leases for 2006 and 2007 was $41,400 and $54,725. Minimum
future rent expenses by year from December 31, 2007 forward under the leases
are: 2008 $38,000, and 2009 $6,000, or $44,000 total.
 
 NOTE
7. GOING CONCERN
 
 The
Company has suffered recurring losses from operations and has a working capital
deficit. These conditions raise substantial doubt about the Company’s ability to
continue as a going concern. The Company may raise additional capital through
the sale of its equity securities, through offerings of debt securities, or
through borrowings from financial institutions. Management believes that actions
presently being taken to obtain additional funding provide the opportunity for
the Company to continue as a going concern.
 
 NOTE
8.  STOCK OFFERING
 
 The
Company is currently planning to register up to 197,802 shares of its common
stock for resale by selling shareholders, under cover of a Form S-1. The Company
will receive no proceeds from the sale of the 197,802 shares of common stock.
The costs of this offering will be paid by the
Company.


F-15
  
 ITEM
8. DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
 
 We did
not have any disagreements on accounting and financial disclosures with our
present accounting firm during the reporting period.
 
 ITEM
8A. CONTROLS AND PROCEDURES.
 
 Evaluation
of Disclosure Controls and Procedures
 
 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 its disclosure controls and
procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e)
and 15d-15(e)). That evaluation was performed under the supervision and with the
participation of our management, including our Chief Executive Officer and Chief
Financial Officer. Based on that evaluation, our Chief Financial Officer
concluded that our disclosure controls and procedures are effective in timely
alerting him to material information required to be included in its periodic SEC
filings.
 
 Changes
in Internal Control over Financial Reporting
 
 We have
made no significant change in our internal control over financial reporting
during the most recent fiscal quarter covered by this annual report on Form
10-KSB that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
 
 ITEM
8B. OTHER INFORMATION.
 
 Nothing
to report.
 
 
 PART
III
 
 ITEM
9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS;
COMPLIANCE   WITH SECTION 16(a) OF THE EXCHANGE ACT.
 
 Set forth
below are the names of our directors and officers, all positions and offices
held with us, the period during which he or she has served as such, and the
business experience during at least the last five years:
  Name
              
              Age
              
              Positions and Offices
      HeldDeanie
      J. Underwood
              
              52
              
              President,
      Chief Executive Officer, Treasurer,
                Chief
      Financial Office and DirectorBradley
      C. Underwood
              
              26
              
              Vice
      President, Secretary and Director
  Our Directors will serve in such capacity until our next annual meeting of
shareholders and until their successors have been elected and qualified. The
officers serve at the discretion of our Directors. Deanie J. Underwood is the
step-mother of Bradley C. Underwood. There are no arrangements or other
understandings between any of our directors or officers or any other person
pursuant to which any officer or director was or is to be selected as an officer
or director. None of our Directors are independent but are a part of, and are
controlled by our management.
 
 Ms. Underwood has been our President, Chief Executive and Financial Officer,
Treasurer and a Director since our inception.  She has been involved
in this business since 1996, through our unincorporated predecessor. This has
been her principal occupation during this period.
  Mr. Underwood has been our Vice President, Secretary and a Director since our
inception. He has been involved in this business since 2001, through our
unincorporated predecessor. Prior to that time, he was a student. He has a B.S.
in Finance from Denver University.
 
 -
20 -
 
 Committees
of the Board of Directors
 
 There are
no committees of the Board of Directors.
 
 Section 16(a)
Beneficial Ownership Reporting Compliance
 
 Section 16(a)
of the Securities Exchange Act of 1934 (the “34 Act”) requires our officers and
directors and persons owning more than ten percent of the Common Stock, to file
initial reports of ownership and changes in ownership with the Securities and
Exchange Commission (“SEC”). Additionally, Item 405 of Regulation S-B
under the 34 Act requires us to identify in its Form 10-KSB and proxy statement
those individuals for whom one of the above referenced reports was not filed on
a timely basis during the most recent year or prior years. We have nothing to
report in this regard.
  Code
of Ethics
 
 Our Board
of directors has not adopted a code of ethics but plans to do so in the
future.
 
 Options/SAR
Grants and Fiscal Year End Option Exercises and Values
 
 We have
not had a stock option plan or other similar incentive compensation plan for
officers, directors and employees, and no stock options, restricted stock or SAR
grants were granted or were outstanding at any time.
 
 Item
10. EXECUTIVE COMPENSATION
 
 None of
our officers or director received or was entitled to receive remuneration in
excess of $100,000 for the fiscal years ended December 31, 2007 or 2006. Our
officers and directors do not receive any compensation for their services
rendered to us, nor have they received such compensation in the
past.  As of the date of this registration statement, we have no
funds available to pay the officers and directors.  Further, the
officers and directors are not accruing any compensation pursuant to any
agreement with us. We have no plans to pay any compensation to our officers or
directors in the future.
  None of
our officers and directors will receive any finder’s fee, either directly or
indirectly, as a result of their respective efforts to implement our business
plan outlined herein.
  No
retirement, pension, profit sharing, stock option or insurance programs or other
similar programs have been adopted by us for the benefit of its
employees.
  ITEM
11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
 
 The
following sets forth the number of shares of our $.0.001 par value common stock
beneficially owned by (i) each person who, as of May 1, 2008, was known by
us to own beneficially more than five percent (5%) of its common stock; (ii) our
individual Directors and (iii) our Officers and Directors as a group. A total of
9,197,802 shares of common stock were issued and outstanding as of May 1,
2008.
 
 Name
      and Address
              Amount
      and Nature of
              Percent
      ofof
      Beneficial Owner
              Beneficial Ownership(1)(2)
              ClassDeanie
      J. Underwood(3)
              4,400,702
              48%2519
      East Kentucky Ave.Denver,
      Colorado 80209Bradley
      C. Underwood (3)
              4,400,702
              48%2519
      East Kentucky Ave.Denver,
      Colorado 80209All
      Officers and Directors as a Group
                (two
      persons)
              8,800,702
              96%
 
 
 -
21 -
 
 ________________
 
 (1) All ownership is
beneficial and of record, unless indicated otherwise.
 (2) Beneficial owners
listed above have sole voting and investment power with respect to the shares
shown. Deanie J. Underwood is the step-mother of Bradley C. Underwood. However,
each person disclaims ownership of the other’s shares.
 (3)Includes 702
shares owned in the name of the Underwood Family Partners, LLC. for which Deanie
and Bradley Underwood are beneficiaries.
  
 ITEM
12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
 
 We
currently occupy office space on a rent-free basis from one of our officers, Mr.
Bradley Underwood, which is also Mr. Underwood’s home.
  Our
subsidiary, Stone Select, LLC, has a 1,200 square foot showroom and a 3,000
square foot warehouse. We rent the showroom from an unaffiliated third party for
$1,500 per month on a month-to-month lease. We rent the warehouse from an
unaffiliated third party for $2,700 per month on a two year lease which expires
April, 2009.
 
 Each at
December 31, 2006 and December 31, 2007, we had one payable due to Ms. Underwood
for $334,447 and $323,447, respectively, for working capital advances made to
us. This payable is due on demand, is an oral agreement and unsecured. In 2007 we
agreed to accrue interest on the advances at 6% per annum. Interest expense
under this agreement in 2007 was $20,070 with accrued interest payable at
December 31, 2007 in the same amount. We have no ability at the current time to
repay related party advances. In the event that we need additional capital, Ms.
Underwood has agreed to loan such funds as may be necessary through December 31,
2008 for working capital purposes.
 
 We also
recorded compensation expense of $500 per month in 2007, 2006 for administrative
and management services donated to us by officers, and $250 per month for office
space donated by an officer. Total donated services expense for the same periods
were $9,000.
 
 Unaffiliated third parties, Craig and Susie Bush, collectively own 49% of Stone
Select, LLC. We have ownership and voting control of 51% of Stone Select,
LLC.
  -
22 -
   ITEM
13. EXHIBITS AND REPORTS ON FORM 8-K.
 
 The
following financial information is filed as part of this report:
 
 (a)        (1)
FINANCIAL STATEMENTS
 
 (2)
SCHEDULES
 
 (3)
EXHIBITS. The following exhibits required by Item 601 to be filed herewith are
incorporated by reference to previously filed documents:
  Exhibit
      No.
              Description3.1
              Articles
      of Incorporation of By Design, Inc.*3.2
              Bylaws
      of By Design, Inc.*4.1
              Stock
      Specimen *21.1
              List
      of Subsidiaries*31.1
              Certification
      of CEO/CFO pursuant to Sec. 30232.1
              Certification
      of CEO/CFO pursuant to Sec. 906
  * Previously filed
 
 (b)    
Reports on Form 8-K. No reports have ever been filed under cover of Form
8-K.
   ITEM
14: PRINCIPAL ACCOUNTANT FEES AND SERVICES
 
 Our financial statements for the fiscal
years ended December 31, 2007 and 2006, along with the related consolidated
statements of operations, stockholders’ equity and cash flows have been audited by Ronald R.
Chadwick, P.C., of Aurora, Colorado, independent registered public accounting
firm, to the extent and for the period set forth in their report, and are set
forth in this prospectus in reliance upon such report given upon the authority
of them as experts in auditing and accounting.
 
 Our
independent auditor, Ronald R. Chadwick, P.C., Certified Public Accountants,
billed an aggregate of  $7,500 for the fiscal year ended December 31, 2007
and $6,000 for the year ended December 31, 2006 and for professional services
rendered for the audit of the Company's annual financial statements and review
of the financial statements included in its quarterly reports.
 
 We do not
have an audit committee and as a result our entire board of directors performs
the duties of an audit committee. Our board of directors evaluates the scope and
cost of the engagement of an auditor before the auditor renders audit and
non-audit services.
  -
23 -
 
 
 SIGNATURES
 
 In
accordance with Section 12 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 on May 13, 2008.
 
 
 BY
      DESIGN, INC.By:
              /s/
      Deanie J. UnderwoodDeanie
      J. UnderwoodChief
      Executive Officer and President
                (principal
      executive officer and principal financial and accounting
      officer)
  - 24
-