**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      DC 20549**




**FORM
      10-QSB**




**x**
            **Quarterly
                Report Pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934****FOR
                THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2007****or****o**
            **Transition
                Report Pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934****For
                the transition period from __________ to
                __________**




**Commission
      File Number 000-52089**




**DESIGN
      SOURCE, INC.**


(Exact
      name of registrant as specified in its charter)




**NEVADA**
            
            **36-4528166**(State
                of other jurisdiction of incorporation or organization)
            
            (IRS
                Employer Identification Number)




**100
      Europa Drive**


**Suite
      455**


**Chapel
      Hill, North Carolina 27517**


(Address
      of principal executive offices)




**(919)
      933-2720**


(Registrant’s
      telephone number, including area code)




Check
      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 o




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes x  No o




As
      of
      November 5, 2007, the Company had 10,718,457 shares of common stock
      outstanding.









**PART
      I - FINANCIAL INFORMATION**




**ITEM
      1. INTERIM FINANCIAL STATEMENTS**




**Design
      Source, Inc.**


**(A
      Development Stage Company)**




**September
      30, 2007**




IndexBalance
                Sheets
            
            F-1Statements
                of Operations
            
            F-2Statement
              of Stockholders' Equity
              (Deficit)
            
            F-3Statements
                of Cash Flows
            
            F-4Condensed
                Notes to the Financial Statements
            
            F-5




1


**DESIGN
                  SOURCE, INC.****(A
                  Development Stage Company)****BALANCE
                  SHEETS**




September
                  30,
              
              March
                    31,2007
              
              2007(unaudited)**ASSETS**CURRENT
                  ASSETSCash
              
              $
              389
              
              $
              5,259**TOTAL
                  ASSETS**
              
              $
              389
              
              $
              5,259**LIABILITIES
                  AND STOCKHOLDERS' EQUITY**CURRENT
                  LIABILITIESAccounts
                  payable
              
              $
              -
              
              $
              2,248TOTAL
                  CURRENT LIABILITIES
              
              
              -
              
              
              2,248TOTAL
                  LIABILITIES
              
              
              -
              
              
              2,248COMMITMENTS
                  AND CONTINGENCIES
              
              
              -
              
              
              -STOCKHOLDERS'
                  EQUITYCommon
                  stock, $0.00001 par value, 100,000,000 shares
                  authorized,10,718,457
                  and 10,718,457 shares issued and outstanding, respectively
              
              
              108
              
              
              108Additional
                  paid-in capital
              
              
              535,815
              
              
              535,815Accumulated
                  deficit during development stage
              
              
              (535,534
              )
              
              (532,912
              )TOTAL
                  STOCKHOLDERS' EQUITY
              
              
              389
              
              
              3,011**TOTAL
                  LIABILITIES AND STOCKHOLDERS' EQUITY**
              
              $
              389
              
              $
              5,259




F-1


**DESIGN
                  SOURCE, INC.****(A
                  Development Stage Company)****STATEMENTS
                  OF OPERATIONS**


From
                  Inception(April
                  2, 2003)Three
                  Months Ended
              
              Six
                  Months Ended
              
              throughSeptember
                  30,
              
              September
                  30,
              
              September
                  30,
              
              September
                  30,
              
              September
                  30,2007
              
              2006
              
              2007
              
              2006
              
              2007(unaudited)
              
              (unaudited)
              
              (unaudited)
              
              (unaudited)
              
              (unaudited)REVENUES
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -EXPENSESGeneral
                  and administrative
              
              
              (55
              )
              
              6,769
              
              
              68
              
              
              9,160
              
              
              44,595Meals
                  and entertainment
              
              
              -
              
              
              -
              
              
              -
              
              
              520
              
              
              1,050Advertising
                  and marketing
              
              
              -
              
              
              3,970
              
              
              -
              
              
              8,050
              
              
              6,000Automobile
                  expense
              
              
              -
              
              
              821
              
              
              -
              
              
              1,169
              
              
              1,713Professional
                  fees
              
              
              -
              
              
              29,910
              
              
              2,467
              
              
              35,452
              
              
              101,827Rent
                  and utilities
              
              
              -
              
              
              7,614
              
              
              -
              
              
              14,356
              
              
              26,814Stock
                  compensation
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              327,500Telephone
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              5,049Travel
              
              
              48
              
              
              -
              
              
              93
              
              
              -
              
              
              4,234Taxes,
                  licenses, and permits
              
              
              -
              
              
              -
              
              
              -
              
              
              532
              
              
              3,476Consulting
              
              
              -
              
              
              1,670
              
              
              -
              
              
              1,670
              
              
              13,751Total
                  Expenses
              
              
              (7
              )
              
              50,754
              
              
              2,628
              
              
              70,909
              
              
              536,009LOSS
                  FROM OPERATIONS
              
              
              7
              
              
              (50,754
              )
              
              (2,628
              )
              
              (70,909
              )
              
              (536,009
              )OTHER
                  INCOME (EXPENSE)Interest
                  income
              
              
              -
              
              
              933
              
              
              6
              
              
              1,737
              
              
              2,128Interest
                  expense
              
              
              -
              
              
              (270
              )
              
              -
              
              
              (573
              )
              
              (1,653
              )Total
                  Other Income (Expense)
              
              
              -
              
              
              663
              
              
              6
              
              
              1,164
              
              
              475LOSS
                  BEFORE TAXES
              
              
              7
              
              
              (50,091
              )
              
              (2,622
              )
              
              (69,745
              )
              
              (535,534
              )INCOME
                  TAX EXPENSE
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -NET
                  LOSS
              
              $
              7
              
              $
              (50,091
              )
              $
              (2,622
              )
              $
              (69,745
              )
              $
              (535,534
              )NET
                  INCOME (LOSS) PER SHARE,BASIC
                  AND DILUTED
              
              $
              (0.00
              )
              $
              (0.01
              )
              $
              (0.00
              )
              $
              (0.02
              )WEIGHTED
                  AVERAGE NUMBER OFCOMMON
                  SHARES OUTSTANDING,BASIC
                  AND DILUTED
              
              
              10,718,457
              
              
              4,168,457
              
              
              10,718,457
              
              
              4,168,457




F-2


**DESIGN
                  SOURCE, INC.****(A
                  Development Stage Company)****STATEMENT
                  OF STOCKHOLDERS' EQUITY
                  (DEFICIT)**
  DeficitAccumulated
              
              TotalAdditional
              
              Stock
              
              During
              
              Stockholders'Common
                  Stock
              
              Paid-in
              
              Subscription
              
              Development
              
              EquityShares
              
              Amount
              
              Capital
              
              Receivable
              
              Stage
              
              (Deficit)Balance,
                  April 2, 2003 (Inception)
              
              
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -Stock
                  issued upon incorporation at $0.05 pershare
                  for payment of advances andexpense
                  reimbursement
              
              
              435,000
              
              
              4
              
              
              21,746
              
              
              -
              
              
              -
              
              
              21,750Stock
                  issued for cash at $0.05 per share
              
              
              200,000
              
              
              2
              
              
              9,998
              
              
              -
              
              
              -
              
              
              10,000Stock
                  issued for expense reimbursement at$0.05
                  per share
              
              
              83,457
              
              
              1
              
              
              4,172
              
              
              -
              
              
              -
              
              
              4,173Net
                  loss for the period ended March 31, 2004
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (30,760
              )
              
              (30,760
              )Balance,
                  March 31, 2004
              
              
              718,457
              
              
              7
              
              
              35,916
              
              
              -
              
              
              (30,760
              )
              
              5,163Net
                  loss for the year ended March 31, 2005
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (16,676
              )
              
              (16,676
              )Balance,
                  March 31, 2005
              
              
              718,457
              
              
              7
              
              
              35,916
              
              
              -
              
              
              (47,436
              )
              
              (11,513
              )Stock
                  issued for cash at $0.05 per sharefor
                  cash and subscription receivable
              
              
              3,320,000
              
              
              33
              
              
              165,967
              
              
              (6,000
              )
              
              -
              
              
              160,000Net
                  loss for the year ended March 31, 2006
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (35,028
              )
              
              (35,028
              )Balance,
                  March 31, 2006
              
              
              4,038,457
              
              
              40
              
              
              201,883
              
              
              (6,000
              )
              
              (82,464
              )
              
              113,459Payment
                  of stock subscription receivable
              
              
              -
              
              
              -
              
              
              -
              
              
              6,000
              
              
              -
              
              
              6,000Stock
                  issued for cash at $0.05 per share
              
              
              130,000
              
              
              2
              
              
              6,498
              
              
              -
              
              
              -
              
              
              6,500Stock
                  issued for compensation at $0.05 per share
              
              
              6,550,000
              
              
              66
              
              
              327,434
              
              
              -
              
              
              -
              
              
              327,500Net
                  loss for the year ended March 31, 2007
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (450,448
              )
              
              (450,448
              )Balance,
                  March 31, 2007
              
              
              10,718,457
              
              
              108
              
              
              535,815
              
              
              -
              
              
              (532,912
              )
              
              3,011Net
                  loss for the period ended September 30, 2007
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (2,622
              )
              
              (2,622
              )Balance,
                  September 30, 2007
              
              
              10,718,457
              
              $
              108
              
              $
              535,815
              
              $
              -
              
              $
              (535,534
              )
              $
              389


F
          -
          3




**DESIGN
                  SOURCE, INC.****(A
                  Development Stage Company)****STATEMENTS
                  OF CASH FLOWS**


From
                  InceptionFor
                  the Six Months
              
              (April
                  2, 2003)Ended
              
              Ended
              
              throughSeptember
                  30,
              
              September
                  30,
              
              September
                  30,2007
              
              2006
              
              2007(unaudited)
              
              (unaudited)
              
              (unaudited)CASH
                  FLOWS FROM OPERATING ACTIVITIES:Net
                  loss
              
              $
              (2,622
              )
              $
              (69,745
              )
              $
              (535,534
              )Adjustments
                  to reconcile net loss to net cash used by operating
                  activities:Increase
                  (Decrease) in accounts payable
              
              
              (2,248
              )
              
              (15,906
              )
              
              -Increase
                  (Decrease) in accrued interest
              
              
              -
              
              
              (1,080
              )
              
              -Stock
                  issued for compensation
              
              
              -
              
              
              -
              
              
              327,500Expenses
                  paid by officer
              
              
              -
              
              
              -
              
              
              24,923Net
                  cash used by operating activities
              
              
              (4,870
              )
              
              (86,731
              )
              
              (183,111
              )CASH
                  FLOWS FROM FINANCING ACTIVITIES:Issuance
                  of common stock for cash advances
              
              
              -
              
              
              -
              
              
              1,000Proceeds
                  from shareholder loans
              
              
              -
              
              
              -
              
              
              21,560Repayment
                  of shareholder loans
              
              
              -
              
              
              (21,560
              )
              
              (21,560
              )Proceeds
                  from issuance of common stock
              
              
              -
              
              
              12,500
              
              
              182,500Net
                  cash provided (used in) by financing activities
              
              
              -
              
              
              (9,060
              )
              
              183,500NET
                  INCREASE (DECREASE) IN CASH
              
              
              (4,870
              )
              
              (95,791
              )
              
              389CASH,
                  BEGINNING OF PERIOD
              
              
              5,259
              
              
              160,447
              
              
              -CASH,
                  END OF PERIOD
              
              $
              389
              
              $
              64,656
              
              $
              389SUPPLEMENTAL
                  CASH FLOW INFORMATION:Interest
                  paid
              
              $
              -
              
              $
              -
              
              $
              -Income
                  taxes paid
              
              $
              -
              
              $
              -
              
              $
              -




F-4


**DESIGN
        SOURCE, INC.**
 **(A
        Development Stage Enterprise)**
 **CONDENSED
        NOTES TO THE UNAUDITED FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2007**





**NOTE
        1 - ORGANIZATION AND** **BASIS
        OF PRESENTATION**
 
 Design
        Source, Inc. (hereinafter “the Company”) was incorporated on April 2, 2003 under
        the laws of the State of Nevada for the purpose of offering textiles to the
        commercial designer market utilizing the internet. The Company’s headquarters is
        located in Chapel Hill, North Carolina. The Company is a development stage
        enterprise.
  The
        Company’s year end is March 31.
 
 The
        foregoing unaudited financial statements have been prepared in accordance
        with
        generally accepted accounting principles for interim financial information
        and
        with the instructions to Regulation S-B as promulgated by the Securities
        and
        Exchange Commission (“SEC”). Accordingly, theses financial statements do not
        include all of the disclosures required by generally accepted accounting
        principles in the United States of America for complete financial statements.
        These unaudited interim financial statements should be read in conjunction
        with
        the audited financial statements for the period ended March 31, 2007. In
        the
        opinion of management, the unaudited interim financial statements furnished
        herein include all adjustments, all of which are of a normal recurring nature,
        necessary for a fair statement of the results for the interim period presented.
        Operating results for the six-month period ending September 30, 2007 are
        not
        necessarily indicative of the results that may be expected for the year ending
        March 31, 2008.
 
 **NOTE
        2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**
 
 This
        summary of significant accounting policies is presented to assist in
        understanding the accompanying financial statements. The financial statements
        and notes are representations of the Company’s management, which is responsible
        for their integrity and objectivity. These accounting policies conform to
        accounting principles generally accepted in the United States of America
        and
        have been consistently applied in the preparation of the financial
        statements.
 
 Accounting
        Method
  The
        Company’s financial statements are prepared using the accrual basis of
        accounting in accordance with accounting principles generally accepted in
        the
        United States of America.
 
 Development
        Stage Activities
  The
        Company has been in the development stage since its formation and has not
        realized any revenue from operations. It is primarily engaged in offering
        textiles to the commercial designer market utilizing the internet.
 
 Going
        Concern
  The
        accompanying financial statements have been prepared assuming that the Company
        will continue as a going concern.
  F
            - 5
 **DESIGN
            SOURCE, INC.**
 **(A
            Development Stage Enterprise)**
 **CONDENSED
            NOTES TO THE UNAUDITED FINANCIAL STATEMENTS**
 **SEPTEMBER
            30, 2007**
 At
        September 30, 2007, the Company had an accumulated deficit during the
        development stage of $535,534. Since its inception, the Company has not
        generated any revenues and has minimal cash resources. These conditions raise
        substantial doubt about the Company’s ability to continue as a going concern.
        For the twelve-month subsequent period, the Company anticipates that its
        minimum
        operating cash requirements to continue as a going concern will be approximately
        $50,000. Management’s business plan is to develop a website to offer textiles to
        the commercial design market. Management also plans to raise capital through
        the
        sale of shares of common stock. The ability of the Company to continue in
        existence is dependent upon management’s successful development and
        implementation of its business plan resulting in profitable operations.
        The financial statements do not include any adjustments relating to the
        recoverability and classification of recorded assets, or the amounts and
        classification of liabilities that might be necessary in the event the Company
        cannot continue in existence.
 
 Fair
        Value of Financial Instruments
  The
        Company's financial instruments as defined by Statement of Financial Accounting
        Standards No.
        107,
        "Disclosures about Fair Value of Financial Instruments," may include cash,
        receivables, advances,
        accounts payable and accrued expenses. All such instruments are accounted
        for on
        a historical cost basis, which, due to the short maturity of these financial
        instruments, approximates fair value at September 30, 2007 and March 31,
        2007.
 
 Use
        of
        Estimates
  The
        process of preparing financial statements in conformity with accounting
        principles generally accepted in the United States of America requires the
        use
        of estimates and assumptions regarding certain types of assets, liabilities,
        revenues, and expenses. Such estimates primarily relate to unsettled
        transactions and events as of the date of the financial statements. Accordingly,
        upon settlement, actual results may differ from estimated amounts.
 
 **NOTE
        3 - COMMON STOCK**
 
 The
        Company is authorized to issue 100,000,000 shares of $0.00001 par value common
        stock. All shares have equal voting rights, are non-assessable and have one
        vote
        per share. Voting rights are not cumulative and, therefore, the holders of
        more
        than 50% of the common stock could, if they choose to do so, elect all of
        the
        directors of the Company.
 
 Upon
        incorporation, the Company issued 435,000 shares of common stock at a price
        of
        $0.05 per share as reimbursement of a cash advance in the amount of $1,000
        and
        expenses paid personally by a director totaling $20,750.
 
 During
        the period ending March 31, 2004, an additional 283,457 shares of common
        stock
        were issued at $0.05 per share for reimbursement of expenses paid personally
        by
        a director totaling $4,173 and for cash totaling $10,000.
 
 During
        the period ending March 31, 2006, an additional 3,320,000 shares of common
        stock
        were issued at $0.05 per share for cash totaling $160,000 and subscription
        receivable of $6,000.
  F
            - 6
 **DESIGN
            SOURCE, INC.**
 **(A
            Development Stage Enterprise)**
 **CONDENSED
            NOTES TO THE UNAUDITED FINANCIAL STATEMENTS**
 **SEPTEMBER
            30, 2007**
 During
        the year ended March 31, 2007, 130,000 shares of common stock were issued
        at
        $0.05 per share for cash totaling $6,500 to outside investors; 6,550,000
        share
        of common stock were issued to its officers for compensation at $0.05 per
        share
        for $327,500 and $6,000 subscription receivable was received.
 
 As
        of
        September 30, 2007, the Company had issued no additional shares of common
        stock.
 
 **NOTE
        4 - INCOME TAXES**
 
 At
        September 30, 2007 and March 31, 2007, the Company had calculated deferred
        tax
        assets of approximately $216,891 and $215,829 respectively calculated at
        a
        combined federal and state expected rate of 40.5%. As management of the Company
        cannot determine that it is more likely than not that the Company will realize
        the benefit of the net deferred tax asset, a valuation allowance equal to
        the
        net deferred tax asset has been recorded.
 
 The
        significant components of the deferred tax assets at September 30, 2007 and
        March 31, 2007 were as follows:
 
 Sept
                  30, 2007
              
              March
                  31, 2007Net
                  operating loss carryforward:
              
              $
              535,534
              
              $
              532,912Deferred
                  tax asset
              
              $
              216,891
              
              $
              215,829Deferred
                  tax asset valuation allowance
              
              
              (216,891
              )
              
              (215,829
              )Net
                  deferred tax asset
              
              $
              -
              
              $
              -
  At
        September 30, 2007 and March 31, 2007, the Company has net operating loss
        carryforwards of $535,534 and $532,912 respectively, which begin to expire
        in
        the year 2027. The change in the allowance account from March 31, 2007 to
        September 30, 2007 was $1,062.
 
 F
            - 7




**ITEM
      2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
      OPERATION**




This
      section of the report includes a number of forward-looking statements that
      reflect our current views with respect to future events and financial
      performance. Forward-looking statements are often identified by words like:
      believe, expect, estimate, anticipate, intend, project and similar expressions,
      or words which, by their nature, refer to future events. You should not place
      undue certainty on these forward-looking statements, which apply only as of
      the
      date of this report. These forward-looking statements are subject to certain
      risks and uncertainties that could cause actual results to differ materially
      from historical results or our predictions.




We
      are a
      development stage corporation and have just initiated operations, but have
      not
      generated or realized any revenues from our business operations.




Our
      auditors have issued a going concern opinion. This means that our auditors
      believe there is substantial doubt that we can continue as an on-going business
      for the next twelve months. We completed a private placement of our common
      stock
      in 2006. We raised $172,500 by selling 3,450,000 restricted shares of our common
      stock to 38 persons. We have not generated any revenues. The only operations
      we
      have engaged in are the creation of the website and the development of a
      business plan. We continue to believe the technical aspects of our website
      will
      be sufficiently developed. We have exhausted the proceeds from the private
      placement.




We
      have
      used up the proceeds and need to find alternative sources, such as a second
      private placement of securities, a joint venture or strategic partner or loans
      from our officers or others in order for us to maintain our operations. At
      the
      present time, we have not made any arrangements to raise the additional cash.




Currently,
      we have no financing plans.




**Plan
      of Operation**




We
      will
      not be conducting any product research or development other than the development
      of a database of potential customers and our belief of their wants and needs.
      We
      have examined websites selling different home furnishings. We do not expect
      to
      purchase or sell plant or significant equipment other than to establish an
      office which will include computer equipment, office equipment and supplies,
      telephones and other assets needed for operation of our business.




Our
      specific goal is to profitably sell a comprehensive supply of products on our
      Internet website to the interior design industry and individual retail
      customers. We concluded this from our own analysis of the market channels,
      researched the industry on the Internet, and held discussions with knowledgeable
      industry participants. We have not conducted any research regarding our plan
      to
      develop a website and offering textiles to the commercial design market.




We
      will
      attempt to accomplish the foregoing through the following
      milestones:




1.
      We
      will continue to work out of our offices in Chapel Hill and our officers will
      continue to handle any administrative work.




2




2.
      We
      need to raise additional capital through the sale of common stock or through
      loans. Currently, we have not initiated a program to raise cash.




3.
      We
      will work to contact and negotiate with large industry leaders to offer their
      product on our website. We will also attempt to locate smaller, new
      manufacturers to offer their product on a more exclusive basis. We hope to
      have
      one contract signed within the next 90 days. The foregoing is based upon our
      officers’ cumulative business experience in other fields, however, our officers
      and directors do not have any experience in the commercial design business.
      We
      will however continue to contact small and large companies to offer their
      products on our website and we will carry out our marketing plan. The execution
      of additional contracts with suppliers and the development of the website will
      be ongoing during the life of our operations. As more products are added and
      as
      our customer data base expands, we will have to be continually upgrading the
      website. We believe that it will cost up to $10,000 in order to have our website
      fully operational and $5,000 to have our data base initially ready to receive
      information. We do not have the money to fund this. The creation and operation
      of the website and the data base is not dependent upon signing any contracts
      with a manufacturer. At some point we will have industry information available
      on our website and be able to accept orders for the products we will sell.
      As
      additional contracts are signed with suppliers, we will up-grade the website.
      As
      our customer base increases we will up-grade the data base. Both upgrades will
      be ongoing during the life of our operations. In addition to offering commercial
      upholstery, drapery, bedspread, panel, and wall-covering fabrics, we will pass
      on industry information to interior designers that we acquire from other
      interior designers and manufacturers of commercial upholstery, drapery,
      bedspread, panel, and wall-covering fabrics we will sell.




4.
      As
      soon as our website is operational, we will begin to market our website in
      the
      United States and in Canada through traditional sources such as trade magazines,
      conventions and conferences, newspaper advertising, billboards, telephone
      directories and flyers/mailers. We will attempt to target purchasers of
      commercial upholstery, drapery, bedspread, panel, and wall-covering fabrics
      such
      as interior designers and individual consumers. We may utilize inbound links
      that connect directly to our website from other sites. Potential customers
      can
      simply click on these links to become connected to our website from search
      engines and community and affinity sites. We believe that it will cost $40,000
      for our marketing campaign. We don’t have the money to fund our marketing
      campaign. Marketing and advertising will be focused on promoting our website
      to
      prospective customers through direct sales and will be based on the list of
      prospects developed from our database. Direct sales to the interior designers
      and individual customer will be accomplished through e-mail, telephone calls
      and
      mailings. Advertising will be considered and used to support the e-mail,
      telephone calls and mailings in certain market segments. The advertising
      campaign will include the design and printing of various sales materials. The
      cost of developing the campaign is estimated to cost $40,000. Marketing is
      an
      ongoing matter which will continue during the life of our operations. We also
      believe that we should begin to see results from our marketing campaign within
      30 days from the initiation of a complete marketing initiative. The foregoing
      is
      based upon our officers’ cumulative business experience in other fields,
      however, our officers and directors do not have any experience in the commercial
      design business and there is in fact no assurance that the foregoing event
      will
      occur.




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5.
      Part
      of our marketing program includes sourcing out and identifying interior
      designers and individual consumers who may become potential buyers of commercial
      upholstery, drapery, bedspread, panel, and wall-covering fabrics from our
      website. The process of sourcing out suppliers includes identifying
      manufacturers, large and small by research into existing databases via the
      Internet and research in trade magazines and directories. This process will
      start as soon as our office is operational and will be ongoing during the life
      of our operations. Sourcing customers may consist of telephone surveys and
      may
      contain questions which would determine the marketing approach and acceptability
      of specific products. It will also involve research into existing databases
      available via the Internet to target and extract the applicable names and
      contacts to create our own customized database. The database will be comprised
      of two components: suppliers and customers. Supplier information is readily
      available from online fabric mill directories, and an example can be found
      at
      www.apparelsearch.com/fabric.htm. The principal source of customers will be
      interior designers. Mail lists are available from organizations such as the
      American Society of Interior Designers, which sells database information at
      a
      cost of $120 per thousand names, and World Wide Art Resources, which sells
      regional interior designer databases such as Florida Interior Designers
      Directory with up to 2,275 contacts at a cost of $68.25. We will attempt to
      prepare a database of up to 75 suppliers and up to 10,000 interior designers.
      The database preparation should take approximately four weeks to complete.
      We
      intend to look into the databases of design schools, interior design associates,
      trade magazines as well as telephone directories. Databases for design schools,
      interior design associates, and trade magazines are publicly available through
      internet research, telephone directories, and periodical research. The cost
      to
      source and analyze all of the material to identify suitable candidates to
      develop and maintain the database is estimated to cost $15,000. We estimate
      the
      time to be approximately two weeks. Our current officers and directors will
      undertake to prepare the database.




6.
      Within
      90 days from the successful launch of our website, we believe that we will
      begin
      receiving orders from purchasers. The foregoing is based upon our officers’
cumulative business experience in other fields, however, our officers and
      directors do not have any experience in the commercial design business and
      there
      is in fact no assurance that the foregoing event will occur.




7.
      Once
      the website is fully operational, we will locate and negotiate agreements with
      a
      suitable number of manufacturers to offer their commercial upholstery, drapery,
      bedspread, panel, and wall-covering fabrics for sale; and, we have begun to
      receive orders for commercial upholstery, drapery, bedspread, panel, and
      wall-covering fabrics, we will hire one or two part time salesperson(s) to
      call
      on interior design firms to introduce them to our website. The salesperson(s)
      will also call on various manufacturers to continue to source new products
      to
      offer for sale.




In
      summary, it has proven to be a more difficult task to get our company fully
      operational but we continue to work our business plan while we seek new sources
      of cash to support the ongoing operations. The foregoing is based upon our
      officers’ cumulative business experience in other fields, however, our officers
      and directors do not have any experience in the commercial design business
      and
      there is in fact no assurance that the foregoing event will occur.




4




Until
      our
      website is fully operational, we do not believe that large industry leaders
      will
      provide us with their best prices. We believe, however, that once our website
      is
      operational and we have developed a significant database of customers, large
      industry leaders will provide us with their best prices. There is no guarantee
      that the large industry leaders will provide us with their best prices.




If
      the
      manufacturers do not provide their products to us on reasonable terms, we may
      have to suspend or cease operations.




We
      will
      not be conducting any research and we are not going to buy or sell any plant
      or
      significant equipment during the next twelve months, other than in conjunction
      with opening our office, acquiring office equipment and the development of
      our
      website and database.




If
      we
      cannot generate sufficient revenues to continue operations, we will suspend
      or
      cease operations. Because we have been unable to generate revenues over the
      preceding year we will begin to seek out other sources of cash including new
      investors, joint venture and strategic partners or loans from our officers
      or
      directors. If we cease operations, we do not know what we will do and we do
      not
      have any plans to do anything. We have no plans to statutorily dissolve at
      this
      time under any circumstances nor do we have any plans to enter into any merger
      or acquisition.




**Limited
      operating history; need for additional capital**




There
      is
      no historical financial information about us upon which to base an evaluation
      of
      our performance. We are a development stage company and have not generated
      any
      revenues. We cannot guarantee we will be successful in our business operations.
      Our business is subject to risks inherent in the establishment of a new business
      enterprise, including limited capital resources and possible cost overruns
      due
      to price and cost increases in services.




To
      become
      profitable and competitive, we have to locate and negotiate agreements with
      manufacturers to offer their products for sale to us at pricing that will enable
      us to establish and sell the products to our clientele.




We
      have
      no assurance that future financing will be available to us on acceptable terms.
      If financing is not available on satisfactory terms, we may be unable to
      continue, develop or expand our operations. Equity financing could result in
      additional dilution to existing shareholders.




**Results
      of operations**




**From
      Inception on April 2, 2003 to September 30, 2007**




Since
      inception, we have incorporated the company, hired the attorney, and hired
      an
      auditor. We prepared a business plan. We also prepared and filed a registration
      statement with the SEC, which we subsequently withdrew. We have been creating
      an
      Internet website. Our loss since inception is $535,534, of which $327,500 is
      for
      stock compensation to our officers and directors, $101,827 is for professional
      fees, $13,751 of consulting was paid to Tryon Capital Ventures, LLC, a merchant
      banking group that includes Mr. Reichard, our president and Mr. Coker, our
      secretary, for the preparation of the business plan. Other expenses since
      inception include $44,595 for general and administrative; $1,050 for meals
      and
      entertainment; $6,000 for advertising and marketing; $26,814 for rent; $5,049
      for telephone; $4,234 for travel; and $3,476 for taxes. There is $1,653 for
      interest expense which is offset by $2,128 in interest income.




5




**Liquidity
      and capital resources**




As
      of the
      date of this report, we have yet to generate any revenues from our business
      operations.




Since
      inception, we sold 518,457 shares of common stock to one of our officers for
      $25,923 consideration. Additionally, since inception we sold 200,000 shares
      of
      common stock to one individual for $10,000.




In
      March
      2006, we completed a private placement of our common stock pursuant to the
      exemption from registration contained in Reg. 506 of the Securities Act of
      1933.
      We raised gross proceeds of $172,500, net $158,000 after offering expenses
      of
      $14,500, by selling 3,450,000 restricted shares of our common stock to 38
      persons. We have exhausted the money.




On
      February 16, 2007, we issued 3,275,000 restricted shares of common stock to
      Mr.
      Reichard, our president and 3,275,000 restricted shares of common stock to
      our
      secretary, Mr. Coker as compensation for services rendered to us. The shares
      were issued pursuant to the exemption from registration contained in Section
      4(2) of the Securities Act of 1933. Messrs Reichard and Coker were in possession
      of all information that could be found in a Form SB-2 registration statement
      and
      were sophisticated investors, being our existing officers and
      directors.




As
      of
      September 30, 2007, our total assets were $389 consisting of cash and we had
      $0
      in liabilities.




**Critical
      accounting policies and estimates**




Management
      has reviewed the financial statement disclosures for the list of the most
      important accounting policies that the Company has. Management feels that the
      accounting policies that are estimate based, fair value, and revenue recognition
      are the most important accounting policies that the Company has.




**Recent
      accounting pronouncements**




In
      February 2007, the Financial Accounting Standards Board issued Statement of
      Financial Accounting Standards No. 159, “The Fair Value Option for Financial
      Assets and Financial Liabilities - Including an amendment of FASB Statement
      No.
      115” (hereinafter “SFAS No. 159”). This statement permits entities to choose to
      measure many financial instruments and certain other items at fair value. The
      objective is to improve financial reporting by providing entities with the
      opportunity to mitigate volatility in reported earnings caused by measuring
      related assets and liabilities differently without having to apply complex
      hedge
      accounting provisions. This Statement is expected to expand the use of fair
      value measurement, which is consistent with the Board’s long-term measurement
      objectives for accounting for financial instruments. This statement is effective
      as of the beginning of an entity’s first fiscal year that begins after November
      15, 2007, although earlier adoption is permitted. Management has not determined
      the effect that adopting this statement would have on the Company’s financial
      condition or results of operation.




6




In
      September 2006, the Financial Accounting Standards Board issued Statement of
      Financial Accounting Standards No. 158, “Employers’ Accounting for Defined
      Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements
      No. 87, 88, 106, and 132(R)” (hereinafter “SFAS No. 158”). This statement
      requires an employer to recognize the overfunded or underfunded positions of
      a
      defined benefit postretirement plan (other than a multiemployer plan) as an
      asset or liability in its statement of financial position and to recognize
      changes in that funded status in the year in which the changes occur through
      comprehensive income of a business entity or changes in unrestricted net assets
      of a not for profit organization. This statement also requires an employer
      to
      measure the funded status of a plan as of the date of its year end statement
      of
      financial position, with limited exceptions. The adoption of this statement
      had
      no immediate material effect on the Company’s financial condition or results of
      operations.




**ITEM
      3. CONTROLS AND PROCEDURES**




Under
      the
      supervision and with the participation of our management, including our
      principal executive officer and principal financial officer, we have conducted
      an evaluation of the effectiveness of the design and operation of our disclosure
      controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under
      the
      Securities and Exchange Act of 1934, as of the end of the period covered by
      this
      report. Based on this evaluation, our principal executive officer and principal
      financial officer concluded as of the evaluation date that our disclosure
      controls and procedures were effective such that the material information
      required to be included in our Securities and Exchange Commission reports is
      recorded, processed, summarized and reported within the time periods specified
      in SEC rules and forms relating to our company, particularly during the period
      when this report was being prepared.





Additionally,
      there were no significant changes in our internal controls or in other factors
      that could significantly affect these controls subsequent to the evaluation
      date. We have not identified any significant deficiencies or material weaknesses
      in our internal controls, and therefore there were no corrective actions
      taken.




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**PART
      II - OTHER INFORMATION**




**ITEM
      6. EXHIBITS**




The
      following Exhibits are attached hereto:




**Exhibit
                No.**
            
            **Document
                Description**31.1
            
            Certification
                of Principal Executive Officer and Principal Financial Officer pursuant
                to
                Rule 13a-15(a) and Rule 15d-15(a), promulgated under the Securities
                Exchange Act of 1934, as amended.32.1
            
            Certification
                of Chief Executive Officer and Chief Financial Officer Pursuant to
                18
                U.S.C. Section 1350, as adopted pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002.




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**SIGNATURES**




In
      accordance with the requirements of the Exchange Act, the registrant caused
      this
      report to be signed on its behalf by the undersigned, thereunto duly
      authorized.




**DESIGN
                SOURCE, INC.**
              (Registrant)BY:
            /S/
                PETER REICHARDPeter
                ReichardPresident,
                Principal Executive Officer, Treasurer, Principal Financial Officer,
                Principal Accounting Officer and member of the Board of
                Directors




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