**U.S.
      SECURITIES AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-KSB**


(Mark
      One)


x
            **ANNUAL
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934**





**For
      Fiscal Year Ended: March 31, 2008**





**OR**





**o**
            **TRANSITION
                REPORT UNDER 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 small business issuer as specified in its
                charter)





**Nevada**
            
            **36-4528166**(State
                or other jurisdiction of
              incorporation
                or organization)
            
            (I.R.S.
                Employer
              Identification
                No.)**100
                Europa Drive, Suite 455, Chapel Hill, North
                Carolina**
            
            **27517**(Address
                of principal executive offices)
            
            (Zip
                Code)





**(919)
                933-2720**(Registrant’s
                telephone number, including area
                code)





Securities
      registered under Section 12(b) of the Exchange Act: **None**


Name
      of
      each Exchange on Which Registered: **None**


Securities
      registered under Section 12(g) of the Exchange Act: **None**







Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act. x




Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for such shorter period
      that the issuer 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 contained in this form, and no disclosure will be contained,
      to
      the best of issuer’s knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of this Form 10-KSB or any amendment
      to
      this Form 10-KSB. x




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




State
      issuer’s revenues for its most recent fiscal year. None




State
      the
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates computed by reference to the price at which the common equity
      was
      sold, or the average bid and asked price of such common equity as of a specified
      date within the past 60 days.




As
      of
      June 20, 2008 there were 4,150,000 issued and outstanding shares of our common
      stock, $.00001 par value, held by non-affiliates. The aggregate value of the
      securities held by non-affiliates on June 20, 2008 was approximately $622,500
      based on the average bid and asked price of our common stock on June 20, 2008,
      which was $0.15 per share.




State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of the latest practicable date: 11,218,457 shares of common stock, $0.00001
      par value, as of June 20, 2008.




Transitional
      Small Business Disclosure Format (check one): Yes  ̈ No x




**DOCUMENTS
      INCORPORATED BY REFERENCE**




Not
      Applicable





**TABLE
      OF CONTENTS**


Item
                Number and Caption
            
            PageForward
              Looking Statements
            
            3PART
                1Item
                1. Description of Business
            
            3Item
                2. Description of Property
            
            4Item
                3. Legal Proceedings
            
            4Item
                4. Submission of Matters to Vote of Security Holders
            
            4PART
                IIItem
                5. Market for Common Equity and Related Stockholders
            
            5Item
                6. Plan of Operation
            
            6Item
                7. Financial Statements
            
            7Item
                8. Changes in and Disagreements with Accountants on Accounting and
                Financial Disclosure
            
            8Item
                8A. Controls and Procedure
            
            8Item
                8B. Other Information
            
            8PART
                IIIItem
                9. Directors, Executive Officers, Promoters, Control Persons and
                Corporate
                Governance; Compliance with Section 16(a) of the Exchange Act
            
            9Item
                10. Executive Compensation
            
            11Item
                11. Security Ownership of Certain Beneficial Owners and Management
            
            12Item
                12. Certain Relationships and Related Transactions , and Director
                Independence
            
            13Item
                13. Exhibits
            
            14Item
                14. Principal Accountant Fees and Services
            
            15


-2-





**FORWARD-LOOKING
      STATEMENTS**




*Except
      for historical information, this report contains forward-looking statements
      within the meaning of Section 21E of the Securities Exchange Act of 1934. Such
      forward-looking statements involve risks and uncertainties, including, among
      other things, statements regarding our business strategy, future revenues and
      anticipated costs and expenses. Such forward-looking statements include, among
      others, those statements including the words “expects,” “anticipates,”
“intends,” “believes” and similar language. Our actual results may differ
      significantly from those projected in the forward-looking statements. Factors
      that might cause or contribute to such differences include, but are not limited
      to, those discussed in the sections “Plan of Operation” and “Description of
      Business”. You are cautioned not to place undue reliance on the forward-looking
      statements, which speak only as of the date of this report. We undertake no
      obligation to publicly release any revisions to the forward-looking statements
      or reflect events or circumstances taking place after the date of this
      document.*





**PART
      I**





**ITEM
      1.**  **BUSINESS**





**Recent
      Events**





We
      were
      incorporated on April 2, 2003, to offer a comprehensive supply of, market and
      distribute commercial upholstery, drapery, bedspread, panel, and wall covering
      fabrics to the interior designer industry and individual retail customers on
      our
      proprietary Internet website.





We
      have
      determined that we cannot continue with our business operations as outlined
      in
      our original business plan because of a lack of financial results and resources;
      therefore, although we may return to our intended business operations at a
      later
      date, we have redirected our focus towards identifying and pursuing options
      regarding the development of a new business plan and direction. We intend to
      explore various business opportunities that have the potential to generate
      positive revenue, profits and cash flow in order to financially accommodate
      the
      costs of being a publicly held company. However, we cannot assure you that
      there
      will be any other business opportunities available, or of the nature of any
      business opportunity that we may find, or of the financial resources required
      of
      any possible business opportunity.





**General**





We
      have
      minimal operating costs and expenses at the present time due to our limited
      business activities. We may, however, be required to raise additional capital
      over the next twelve months to meet our current administrative expenses, and
      we
      may do so in connection with or in anticipation of possible acquisition
      transactions. This financing may take the form of additional sales of our equity
      securities and/or loans from our directors. There is no assurance that
      additional financing will be available, if required, or on terms favorable
      to
      us.





We
      are
      not currently engaging in any product research and development and have no
      plans
      to do so in the foreseeable future. We have no present plans to purchase or
      sell
      any plant or significant equipment. We also have no present plans to add
      employees although we may do so in the future if we engage in any merger or
      acquisition transactions


-3-


**Private
      Placement**





On
      February 7, 2008, we sold 500,000 shares of our common stock to one investor
      at
      a price of $0.10 per share, or $50,000 in the aggregate, in a private placement
      exempt from registration under the federal securities laws pursuant to Section
      4(2) of the Securities Act of 1933, as amended. There was no other cash provided
      by financing activities for the three months ended March 31, 2008.





**Employees;
      Identification of Certain Significant Employees.**





We
      are a
      development stage company and currently have no employees, other than our
      officers and directors. We will hire additional employees on an as needed
      basis.





**Offices**





Our
      offices are 100 Europa Drive, Suite 455, Chapel Hill, North Carolina 27517.
      Our
      telephone number is (919) 933-2720. This is an office leased to our president,
      Peter Reichard. Mr. Reichard allows us to use approximately 200 square feet
      of
      the office for our operations. Pursuant to an oral agreement with Mr. Reichard,
      we pay $400 per month in rent.





**ITEM
      2.**  **DESCRIPTION
      OF PROPERTY**





We
      do not
      own any property. We maintain our statutory registered agent's office at 101
      Convention Center Drive, Suite 700, Las Vegas, Nevada 89109 and our business
      office is 100 Europa Drive, Suite 455, Chapel Hill, North Carolina 27517. Our
      telephone number is (919) 933-2720. This is the office of our President, Peter
      Reichard, and the current business office of Tryon Capital Ventures, LLC. We
      pay
      Mr. Reichard rent of $400 per month.








**ITEM
      3.**  **LEGAL
      PROCEEDINGS**





We
      are
      not presently a party to any litigation.





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





During
      the fourth quarter, there were no matters submitted to a vote of our
      shareholders.


-4-


**PART
      II**





**ITEM
              5.**
            **MARKET
                FOR COMMON STOCK AND RELATED STOCKHOLDER
                MATTERS**





A
      limited
      market exists for our securities, but there is no assurance that a regular
      trading market will develop, or if developed, that it will be sustained. A
      shareholder in all likelihood, therefore, will be unable to resell the
      securities referred to herein should he or she desire to do so. Furthermore,
      it
      is unlikely that a lending institution will accept our securities as pledged
      collateral for loans unless a regular trading market develops.





Our
      shares are traded on the Bulletin Board operated by the National Association
      of
      Securities Dealers, Inc. under the symbol “DSGS.”A summary of the closing high
      and low bids by quarter for the 2008 and 2007 fiscal years is as
      follows:





**Fiscal
                Quarter**
            
            **High
                Bid**
            
            **Low
                Bid****2008**Fourth
                Quarter 01-01-08 to 03-31-08
            
            $
            0.15
            
            $
            0.15Third
                Quarter 10-01-07 to 12-31-07
            
            $
            0.15
            
            $
            0.15Second
                Quarter 07-01-07 to 09-30-07
            
            $
            0.15
            
            $
            0.15First
                Quarter 04-01-07 to 06-30-07
            
            $
            0.15
            
            $
            0.15**2007**Fourth
                Quarter 01-01-07 to 03-31-07
            
            $
            0.15
            
            $
            0.15Third
                Quarter 10-01-06 to 12-31-06
            
            $
            0.15
            
            $
            0.05Second
                Quarter 07-25-06 to 09-30-06
            
            
            None
            
            
            None





Of
      the
      11,218,457 shares of common stock outstanding as of June 20, 2008, 7,068,457
      shares are owned by our officers and directors and may only be resold in
      compliance with the Securities Act of 1933.





At
      June
      20, 2008, there were 15 holders of record.





**Dividends**




We
      have
      not declared any cash dividends, nor do we intend to do so. We are not subject
      to any legal restrictions respecting the payment of dividends, except that
      they
      may not be paid to render us insolvent. Dividend policy will be based on our
      cash resources and needs and it is anticipated that all available cash will
      be
      needed for our operations in the foreseeable future.





**Securities
      authorized for issuance under equity compensation plans**





We
      do not
      have any equity compensation plans and accordingly we have no securities
      authorized for issuance thereunder.


-5-





**ITEM
      6.**  **PLAN
      OF OPERATION**




We
      were
      incorporated on April 2, 2003, to offer a comprehensive supply of, market and
      distribute commercial upholstery, drapery, bedspread, panel, and wall covering
      fabrics to the interior designer industry and individual retail customers on
      our
      proprietary Internet website.





We
      have
      determined that we cannot continue with our business operations as outlined
      in
      our original business plan because of a lack of financial results and resources;
      therefore, although we may return to our intended business operations at a
      later
      date, we have redirected our focus towards identifying and pursuing options
      regarding the development of a new business plan and direction. We intend to
      explore various business opportunities that have the potential to generate
      positive revenue, profits and cash flow in order to financially accommodate
      the
      costs of being a publicly held company. However, we cannot assure you that
      there
      will be any other business opportunities available, or of the nature of any
      business opportunity that we may find, or of the financial resources required
      of
      any possible business opportunity.





We
      have
      minimal operating costs and expenses at the present time due to our limited
      business activities. To meet our current needs for cash we completed a private
      placement of our common stock on February 7, 2008 and raised $50,000. We believe
      that the $50,000 we raised will be sufficient to meet our administrative
      expenses for the next six to 12 months. We may, however, be required to raise
      additional capital over the next twelve months to meet our current
      administrative expenses, and we may do so in connection with or in anticipation
      of possible acquisition transactions. This financing may take the form of
      additional sales of our equity securities and/or loans from our directors.
      There
      is no assurance that additional financing will be available, if required, or
      on
      terms favorable to us.





**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.





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.


-6-





**PART
      III**





**ITEM
      7.**  **FINANCIAL
      STATEMENTS.**





Index
      to
      Financial Statements





PageReport
                of Independent Registered Public Accounting Firm – Sherb & Co.,
                LLP
            F-1Report
              of Independent Registered Public Accounting Firm – Williams &
              Webster, P.S.
            F-2Balance
                Sheets as of March 31, 2008 and March 31, 2007
            F-3Statements
                of Operations for the years ended March 31, 2008 and March 31, 2007
                and
                for the period from April 2, 2003 (inception) through March 31, 2008
            F-4Statement
                of Stockholders’ Deficit
            F-5Statements
                of Cash Flows for the years ended March 31, 2008 and March 31, 2007
                and
                for the period from April 2, 2003 (inception) through March 31, 2008
            F-6Notes
                to Financial Statements
            F-7


-7-


REPORT
      OF
      INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





**To
      the Stockholders and Board of Directors Design Source, Inc. (A Development
      Stage
      Company):**




We
      have
      audited the accompanying balance sheet of Design Source, Inc. (A Development
      Stage Company) as of March 31, 2008 and the related statement of operations,
      stockholders' equity and cash flows for the year ended March 31, 2008. The
      period beginning April 2, 2003 (Inception) through March 31, 2007 were audited
      by the predecessor accounting firms. These financial statements are the
      responsibility of the Company's management. Our responsibility is to express
      an
      opinion on these financial statements based on our audit.




We
      conducted our audit in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. The Company is not required to
      have, nor were we engaged to perform, an audit of its internal control over
      financial reporting as a basis for designing audit procedures that are
      appropriate in the circumstances, but not for the purpose of expressing an
      opinion on the effectiveness of the Company's internal control over financial
      reporting. Accordingly we express no such opinion. An audit includes examining,
      on a test basis, evidence supporting the amounts and disclosures in the
      financial statements. An audit also includes assessing the accounting principles
      used and significant estimates made by management, as well as evaluating the
      overall financial statement presentation. We believe that our audits provide
      a
      reasonable basis for our opinion.




In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the financial position of the Company as of March 31, 2008
      and the results of their operations and their cash flows for the year ended
      March 31, 2008 and the period beginning April 2, 2003 (Inception) through March
      31, 2007 which were audited by the predecessor accounting firms, in conformity
      with accounting principles generally accepted in the United States of
      America.




The
      accompanying financial statements have been prepared assuming that the Company
      will continue as a going concern. The Company has incurred significant losses
      as
      more fully described in Note 2. These issues raise substantial doubt about
      the
      Company's ability to continue as a going concern. Management's plans in regard
      to these matters are also described in Note 2. The financial statements do
      not
      include any adjustments that might result from the outcome of this
      uncertainty.





/s/Sherb
                & Co., LLPCertified
                Public AccountantsNew
                York, New YorkJune
                20, 2008


F-1


Design
        Source, Inc.
 Chapel
        Hill, North Carolina
 
 
 **REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
 
 
 We
        have
        audited the accompanying balance sheets of Design Source, Inc. (a development
        stage company) as of March 31, 2007, and the related statements of operations,
        stockholders’ equity and cash flows for the year then ended. These financial
        statements are the responsibility of the Company’s management. Our
        responsibility is to express an opinion on these financial statements based
        on
        our audit.
 
 We
        conducted our audit in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audit to obtain reasonable assurance about whether the financial
        statements are free of material misstatement. An audit includes examining,
        on a
        test basis, evidence supporting the amounts and disclosures in the financial
        statements. An audit also includes assessing the accounting principles used
        and
        significant estimates made by management, as well as evaluating the overall
        financial statement presentation. We believe that our audits provide a
        reasonable basis for our opinion.
 
 In
        our
        opinion, the financial statements referred to above present fairly, in all
        material respects, the financial position of Design Source, Inc. as of March
        31,
        2007 and the results of its operations, stockholders’ equity and its cash flows
        for the year then ended, in conformity with accounting principles generally
        accepted in the United States of America.
 
 The
        accompanying financial statements have been prepared assuming that the Company
        will continue as a going concern. As discussed in Note 2 to the financial
        statements, the Company’s significant operating losses raise substantial doubt
        about its ability to continue as a going concern. Management’s plans regarding
        the resolution of this issue are also discussed in Note 2. The financial
        statements do not include any adjustments that might result from the outcome
        of
        this uncertainty.
 
 
 /s/
        Williams & Webster, P.S.
 
 Williams
        & Webster, P.S.
 *Certified
        Public Accountants*
 Spokane,
        Washington
 July
        12,
        2007




F-2




DESIGN
      SOURCE, INC.


(a
      development stage company)




Balance
      Sheets


March 31,
            
            March 31,2008
            
            2007**ASSETS**CURRENT
                ASSETSCash
            
            $
            22,372
            
            $
            5,259**TOTAL
                ASSETS**
            
            $
            22,372
            
            $
            5,259**LIABILITIES
                AND STOCKHOLDERS' EQUITY**CURRENT
                LIABILITIESAccounts
                payable
            
            $
            5,000
            
            $
            2,248TOTAL
                CURRENT LIABILITIES
            
            
            5,000
            
            
            2,248TOTAL
                LIABILITIES
            
            
            5,000
            
            
            2,248COMMITMENTS
                AND CONTINGENCIES
            
            
            -
            
            
            -STOCKHOLDERS'
                EQUITYCommon
                stock, $0.00001 par value, 100,000,000 shares authorized, 11,218,457
                and
                10,718,457 shares issued and outstanding, respectively
            
            
            113
            
            
            108Additional
                paid-in capital
            
            
            585,810
            
            
            535,815Accumulated
                deficit during development stage
            
            
            (568,551
            )
            
            (532,912
            )TOTAL
                STOCKHOLDERS' EQUITY
            
            
            17,372
            
            
            3,011**TOTAL
                LIABILITIES AND STOCKHOLDERS' EQUITY**
            
            $
            22,372
            
            $
            5,259




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


F-3


DESIGN
      SOURCE, INC.


(a
      development stage company)


**Statements
      of Operations**





From Inception(April 2, 2003)For the Year Ended
            
            throughMarch 31,
            
            March 31,
            
            March 31,2008
            
            2007
            
            2008REVENUES
            
            $
            -
            
            $
            -
            
            $
            -EXPENSESGeneral
                and administrative
            
            
            314
            
            
            59,280
            
            
            63,128Professional
                fees
            
            
            35,331
            
            
            35,262
            
            
            148,443Taxes
            
            
            -
            
            
            1,036
            
            
            1,036Management
                fees
            
            
            -
            
            
            28,919
            
            
            28,919Stock
                compensation
            
            
            -
            
            
            327,500
            
            
            327,500Total
                Expenses
            
            
            35,645
            
            
            451,997
            
            
            569,026LOSS
                FROM OPERATIONS
            
            
            (35,645
            )
            
            (451,997
            )
            
            (569,026
            )OTHER
                INCOME (EXPENSE)Interest
                income
            
            
            6
            
            
            2,122
            
            
            2,128Interest
                expense
            
            
            -
            
            
            (573
            )
            
            (1,653
            )Total
                Other Income (Expense)
            
            
            6
            
            
            1,549
            
            
            475LOSS
                BEFORE TAXES
            
            
            (35,639
            )
            
            (450,448
            )
            
            (568,551
            )INCOME
                TAX EXPENSE
            
            
            -
            
            
            -
            
            
            -NET
                LOSS
            
            $
            (35,639
            )
            $
            (450,448
            )
            $
            (568,551
            )NET
                LOSS PER SHARE,BASIC
                AND DILUTED
            
            $
            (0.00
            )
            $
            (0.09
            )WEIGHTED
                AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC AND
                DILUTED
            
            
            11,218,457
            
            
            4,847,772




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


F-4


DESIGN
        SOURCE, INC.
 (a
        development stage company)


**Statement
      of Stockholder’s 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 per share for payment of advances
                and
                expense 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 share for 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
            )
            
            3,011Sale
                of common stock at $0.10 per share
            
            
            500,000
            
            
            5
            
            
            49,995
            
            
            -
            
            
            -
            
            
            50,000Net
                loss for the period ended March 31, 2008
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (35,639
            )
            
            (35,639
            )Balance,
                March 31, 2008
            
            
            11,218,457
            
            $
            113
            
            $
            585,810
            
            $
            -
            
            $
            (568,551
            )
            $
            17,372





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


F-5


DESIGN
      SOURCE, INC.


(a
      development stage company)


**Statements
      of Cash Flows**




From InceptionFor the Year Ended
            
            (April 2, 2003)Ended
            
            Ended
            
            throughMarch 31,
            
            March 31,
            
            March 31,2008
            
            2007
            
            2008CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                loss
            
            $
            (35,639
            )
            $
            (450,448
            )
            $
            (568,551
            )Adjustments
                to reconcile net loss to net cash used by operating
                activities:Increase
                (Decrease) in accounts payable
            
            
            2,752
            
            
            (22,100
            )
            
            5,000Increase
                (Decrease) in accrued interest
            
            
            -
            
            
            (1,080
            )
            
            -Stock
                issued for compensation
            
            
            -
            
            
            327,500
            
            
            327,500Issuance
                of common stock for reimbursement of expenses
            
            
            -
            
            
            -
            
            
            25,923Net
                cash used by operating activities
            
            
            (32,887
            )
            
            (146,128
            )
            
            (210,128
            )CASH
                FLOWS FROM FINANCING ACTIVITIES:Proceeds
                from shareholder loans
            
            
            -
            
            
            -
            
            
            21,560Repayment
                of shareholder loans
            
            
            -
            
            
            (21,560
            )
            
            (21,560
            )Proceeds
                from issuance of common stock
            
            
            50,000
            
            
            12,500
            
            
            232,500Net
                cash provided by (used in) financing activities
            
            
            50,000
            
            
            (9,060
            )
            
            232,500NET
                INCREASE (DECREASE) IN CASH
            
            
            17,113
            
            
            (155,188
            )
            
            22,372CASH,
                BEGINNING OF PERIOD
            
            
            5,259
            
            
            160,447
            
            
            -CASH,
                END OF PERIOD
            
            $
            22,372
            
            $
            5,259
            
            $
            22,372SUPPLEMENTAL
                CASH FLOW INFORMATION:Interest
                paid
            
            $
            -
            
            $
            573
            
            $
            1,653Income
                taxes paid
            
            $
            -
            
            $
            -
            
            $
            -





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


F-6


DESIGN
        SOURCE, Inc.
 (A
        Development Stage Company)
 
 NOTES
        TO
        THE FINANCIAL STATEMENTS
 MARCH
        31,
        2008




**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.




**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 has been 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. As reflected in the financial statements,
      the
      Company incurred net losses of $35,639 and $450,448 for the years ended March
      31, 2008 and 2007, respectively. In addition, the Company had an accumulated
      deficit of $568,551 at March 31, 2008. Since its inception, the Company has
      not
      generated any revenues and has minimal cash resources.





These
      circumstances raise substantial doubt about the Company's ability to continue
      as
      a going concern. The consolidated financial statements do not include any
      adjustments that might result from the outcome of this uncertainty. Management's
      efforts have been directed towards the development and implementation of a
      plan
      to generate sufficient revenues to cover all of its present and future costs
      and
      expenses. For the twelve-month subsequent period, the Company anticipates that
      its minimum operating cash requirements to continue as a going concern will
      be
      approximately $55,000.


F-7


DESIGN
      SOURCE, Inc.


(A
      Development Stage Company)





NOTES
      TO
      THE FINANCIAL STATEMENTS


MARCH
      31,
      2008


The
      Company has determined that it cannot continue with our business operations
      as
      outlined in our original business plan because of a lack of financial results
      and resources; therefore, although we may return to our intended business
      operations at a later date, we have redirected our focus towards identifying
      and
      pursuing options regarding the development of a new business plan and direction.
      The Company intends to explore various business opportunities that have the
      potential to generate positive revenue, profits and cash flow in order to
      financially accommodate the costs of being a publicly held company. However,
      the
      Company cannot assure that there will be any other business opportunities
      available nor the nature of the business opportunity, nor indication of the
      financial resources required of any possible business opportunity.





The
      Company has minimal operating costs and expenses at the present time due to
      its
      limited business activities. The Company, however, be required to raise
      additional capital over the next twelve months to meet our current
      administrative expenses, and we may do so in connection with or in anticipation
      of possible acquisition transactions. This financing may take the form of
      additional sales of our equity securities and/or loans from our directors.
      There
      is no assurance that additional financing will be available, if required, or
      on
      terms favorable to the Company.





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.




The
      accompanying financial statements have been prepared, in accordance with
      accounting principles generally accepted in the United States (“U.S. GAAP”) and
      pursuant to the rules and regulations of the Securities and Exchange Commission
      (the “SEC”).





Cash
      and Cash Equivalents


For
      purposes of the statement of cash flows, the Company considers all short-term
      debt with original maturities of three months or less to be cash
      equivalents.





Compensated
      Absences


Currently,
      the Company has no employees; therefore, no liability has been recorded in
      the
      accompanying financial statements. The Company's policy will be to recognize
      the
      costs of compensated absences when employees earn such benefits.





Concentration
      of Risk


The
      Company maintains its cash in primarily one business checking account, the
      funds
      of which are insured by the Federal Deposit Insurance
      Corporation.


F-8


DESIGN
        SOURCE, Inc.
 (A
        Development Stage Company)
 
 NOTES
        TO
        THE FINANCIAL STATEMENTS
 MARCH
        31,
        2008




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 March
      31, 2008 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.





Revenue
      Recognition


The
      Company recognizes revenue from sales when there is persuasive evidence that
      an
      arrangement exists, services have been rendered, the seller's price to the
      buyer
      is determinable, and collectibility is reasonably assured.





Provision
      for Taxes


Income
      taxes are provided based upon the liability method of accounting pursuant to
      Statement of Financial Accounting Standards No. 109, "Accounting for Income
      Taxes" (hereinafter "SFAS No. 109"). Under this approach, deferred income taxes
      are recorded to reflect the tax consequences in future years of differences
      between the tax basis of assets and liabilities and their financial reporting
      amounts at each year-end. A valuation allowance is recorded against the deferred
      tax asset if management does not believe the Company has met the "more likely
      than not" standard imposed by SFAS No. 109 to allow recognition of such an
      asset.





Derivative
      Instruments


The
      Financial Accounting Standards Board issued Statement of Financial Accounting
      Standards No. 133, "Accounting for Derivative Instruments and Hedging
      Activities," (hereinafter "SFAS No. 133") as amended by SFAS No. 137,
      "Accounting for Derivative Instruments and Hedging Activities – Deferral of
      the Effective Date of FASB No. 133", and SFAS No. 138, "Accounting for Certain
      Derivative Instruments and Certain Hedging Activities" and SFAS No. 149,
      "Amendment of Statement 133 on Derivative Instruments and Hedging Activities".
      These statements establish accounting and reporting standards for derivative
      instruments, including certain derivative instruments embedded in other
      contracts, and for hedging activities. They require that an entity recognize
      all
      derivatives as either assets or liabilities in the consolidated balance sheet
      and measure those instruments at fair value. If certain conditions are met,
      a
      derivative may be specifically designated as a hedge, the objective of which
      is
      to match the timing of gain or loss recognition on the hedging derivative with
      the recognition of (i) the changes in the fair value of the hedged asset or
      liability that are attributable to the hedged risk or (ii) the earnings effect
      of the hedged forecasted transaction. For a derivative not designated as a
      hedging instrument, the gain or loss is recognized in income in the period
      of
      change. Historically, the Company has not entered into derivatives contracts
      to
      hedge existing risks or for speculative purposes. During the years ended March
      31, 2008 and 2007, the Company has not engaged in any transactions that would
      be
      considered derivative instruments or


hedging
      activities.


F-9


DESIGN
      SOURCE, Inc.


(A
      Development Stage Company)





NOTES
      TO
      THE FINANCIAL STATEMENTS


MARCH
      31,
      2008


Basic
      and Diluted Earnings (Loss) Per Share


The
      Company utilizes Statement of Financial Accounting Standards No. 128, "Earnings
      Per Share". Basic earnings per share is calculated on the weighted effect of
      all
      common shares issued and outstanding, and is calculated by dividing net income
      available to common stockholders by the weighted average shares outstanding
      during the period. Diluted earnings per share, which is calculated by dividing
      net income available to common stockholders by the weighted average number
      of
      common shares used in the basic earnings per share calculation, plus the number
      of common shares that would be issued assuming conversion of all potentially
      dilutive securities outstanding, is not presented separately as it is
      anti-dilutive.





Web
      Site Development


The
      Company must develop a web site to facilitate its business plan. Costs incurred
      in this project will be expensed as incurred in accordance with Statement of
      Position 98-1, "Accounting for the Costs of Computer Software Developed or
      Obtained for Internal Use" as amplified by Emerging Issues Task Force Abstract
      No. 00-2, "Accounting for Web Site Development Costs." During the years ended
      March 31, 2008 and 2007 respectively, the Company had incurred $42 and $4,183
      of
      web site development costs.





Recently
      Issued Accounting Pronouncements Affecting The Company


*Statement
      of Financial Accounting Standard Statement No. 141 (revised 2007) Business
      Combinations*


In
      December 2007, the Financial Accounting Standard Board (“FASB”) issued FASB
      Statement No. 141 (revised 2007), Business Combinations. This Statement replaces
      FASB Statement No. 141, Business Combinations. This Statement retains the
      fundamental requirements in Statement 141 that the acquisition method of
      accounting (which Statement 141 called the purchase method) be used for all
      business combinations and for an acquirer to be identified for each business
      combination. This Statement defines the acquirer as the entity that obtains
      control of one or more businesses in the business combination and establishes
      the acquisition date as the date that the acquirer achieves control. This
      Statement’s scope is broader than that of Statement 141, which applied only to
      business combinations in which control was obtained by transferring
      consideration. By applying the same method of accounting—the acquisition
      method—to all transactions and other events in which one entity obtains control
      over one or more other businesses, this Statement improves the comparability
      of
      the information about business combinations provided in financial
      reports.





This
      Statement requires an acquirer to recognize the assets acquired, the liabilities
      assumed, and any noncontrolling interest in the acquiree at the acquisition
      date, measured at their fair values as of that date, with limited exceptions
      specified in the Statement. That replaces Statement 141’s cost-allocation
      process, which required the cost of an acquisition to be allocated to the
      individual assets acquired and liabilities assumed based on their estimated
      fair
      values.





This
      Statement applies to all transactions or other events in which an entity (the
      acquirer) obtains control of one or more businesses (the acquirer), including
      those sometimes referred to as “true mergers” or “mergers of equals” and
      combinations achieved without the transfer of consideration, for example, by
      contract alone or through the lapse of minority veto rights. This Statement
      applies to all business entities, including mutual entities that previously
      used
      the pooling-of-interests method of accounting for some business combinations.
      It
      does not apply to: (a) The formation of a joint venture, (b) The acquisition
      of
      an asset or a group of assets that does not constitute a business, (c) A
      combination between entities or businesses under common control, (d) A
      combination between not-for-profit organizations or the acquisition of a
      for-profit business by a not-for-profit organization.


F-10


DESIGN
      SOURCE, Inc.


(A
      Development Stage Company)





NOTES
      TO
      THE FINANCIAL STATEMENTS


MARCH
      31,
      2008


This
      Statement applies prospectively to business combinations for which the
      acquisition date is on or after the beginning of the first annual reporting
      period beginning on or after December 15, 2008. An entity may not apply it
      before that date. Management believes this Statement will have no impact on
      the
      financial statements of the Company once adopted.





*Statement
      of Financial Accounting Standard Statement No. 160 Noncontrolling Interests
      in
      Consolidated Financial Statements—an amendment of ARB No.
      51*





In
      December 2007, the FASB issued FASB Statement No. 160 – Noncontrolling
      Interests in Consolidated Financial Statements – an amendment of ARB No.
      51. This Statement applies to all entities that prepare consolidated financial
      statements, except not-for-profit organizations, but will affect only those
      entities that have an outstanding noncontrolling interest in one or more
      subsidiaries or that deconsolidate a subsidiary. Not-for-profit organizations
      should continue to apply the guidance in Accounting Research Bulletin No. 51,
      Consolidated Financial Statements, before the amendments made by this Statement,
      and any other applicable standards, until the Board issues interpretative
      guidance.





This
      Statement amends ARB 51 to establish accounting and reporting standards for
      the
      noncontrolling interest in a subsidiary and for the deconsolidation of a
      subsidiary. It clarifies that a noncontrolling interest in a subsidiary is
      an
      ownership interest in the consolidated entity that should be reported as equity
      in the consolidated financial statements. Before this Statement was issued,
      limited guidance existed for reporting noncontrolling interests. As a result,
      considerable diversity in practice existed. So-called minority interests were
      reported in the consolidated statement of financial position as liabilities
      or
      in the mezzanine section between liabilities and equity. This Statement improves
      comparability by eliminating that diversity.





A
      noncontrolling interest, sometimes called a minority interest, is the portion
      of
      equity in a subsidiary not attributable, directly or indirectly, to a parent.
      The objective of this Statement is to improve the relevance, comparability,
      and
      transparency of the financial information that a reporting entity provides
      in
      its consolidated financial statements by establishing accounting and reporting
      standards that require: (a) The ownership interests in subsidiaries held by
      parties other than the parent be clearly identified, labeled, and presented
      in
      the consolidated statement of financial position within equity, but separate
      from the parent’s equity, (b) The amount of consolidated net income attributable
      to the parent and to the noncontrolling interest be clearly identified and
      presented on the face of the consolidated statement of income, (c) Changes
      in a
      parent’s ownership interest while the parent retains its controlling financial
      interest in its subsidiary be accounted for consistently. A parent’s ownership
      interest in a subsidiary changes if the parent purchases additional ownership
      interests in its subsidiary or if the parent sells some of its ownership
      interests in its subsidiary. It also changes if the subsidiary reacquires some
      of its ownership interests or the subsidiary issues additional ownership
      interests. All of those transactions are economically similar, and this
      Statement requires that they be accounted for similarly, as equity transactions,
      (d) When a subsidiary is deconsolidated, any retained noncontrolling equity
      investment in the former subsidiary be initially measured at fair value. The
      gain or loss on the deconsolidation of the subsidiary is measured using the
      fair
      value of any noncontrolling equity investment rather than the carrying amount
      of
      that retained investment, (e) Entities provide sufficient disclosures that
      clearly identify and distinguish between the interests of the parent and the
      interests of the noncontrolling owners.


F-11


DESIGN
      SOURCE, Inc.


(A
      Development Stage Company)





NOTES
      TO
      THE FINANCIAL STATEMENTS


MARCH
      31,
      2008


This
      Statement is effective for fiscal years, and interim periods within those fiscal
      years, beginning on or after December 15, 2008 (that is, January 1, 2009, for
      entities with calendar year-ends). Earlier adoption is prohibited. This
      Statements hall be applied prospectively as of the beginning of the fiscal
      year
      in which this Statement is initially applied, except for the presentation and
      disclosure requirements. The presentation and disclosure requirements shall
      be
      applied retrospectively for all periods presented. Management believes this
      Statement will have no impact on the financial statements of the Company once
      adopted.





Other
      accounting standards that have been issued or proposed by the FASB or other
      standards-setting bodies that do not require adoption until a future date are
      not expected to have a material impact on the financial statements upon
      adoption.





**NOTE
      3 – EQUITY TRANSACTIONS**





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.


F-12


DESIGN
      SOURCE, Inc.


(A
      Development Stage Company)





NOTES
      TO
      THE FINANCIAL STATEMENTS


MARCH
      31,
      2008


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.





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
      March 31, 2007, the Company had issued no additional shares of common stock.
      During the year ended March 31, 2008, 500,000 shares of common stock were issued
      at $0.10 per share for cash totaling $50,000 to Milestone Enhanced Fund
      Ltd;




**NOTE
      4 – INCOME TAXES**





At
      March
      31, 2008 and March 31, 2007, the Company had calculated deferred tax assets
      of
      approximately $229,000 and $215,000, respectively calculated at a combined
      federal and state expected rate of 42.5%. 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 March 31, 2008 and March
      31, 2007 were as follows:





March 31, 2008
            
            March 31, 2007Net
                operating loss carryforward:
            
            $
            568,551
            
            $
            532,912Deferred
                tax asset – net operating losses
            
            $
            229,000
            
            $
            215,000Deferred
                tax asset valuation allowance
            
            
            (229,000
            )
            
            (215,000
            )Net
                deferred tax asset
            
            $
            0
            
            $
            0


F-13


DESIGN
        SOURCE, Inc.
 (A
        Development Stage Company)
 
 NOTES
        TO
        THE FINANCIAL STATEMENTS
 MARCH
        31,
        2008


At
      March
      31, 2008 and March 31, 2007, the Company has net operating loss carryforwards
      of
      $566,000 and $531,000 respectively, which begin to expire in the year 2027.
      The
      change in the allowance account from March 31, 2007 to March 31, 2008 was
      $14,000.





**NOTE
      5 - RELATED PARTY DEBT AND TRANSACTIONS**





In
      2004
      and 2005, Company directors loaned the Company a total of $21,560. The
      underlying notes were unsecured with interest at 5%, and a scheduled maturity
      of
      October 2007 for all principal and accrued interest. There were no monthly
      note
      payments due during the term of the loans. As of March 31,2008and 2007, all
      shareholder loans and accrued interest had been repaid.


F-14


**ITEM
              8.**
            **CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                DISCLOSURE**.





Not
      applicable.





**ITEM
      8A.**  **CONTROLS
      AND PROCEDURES** .





(a) *Management’s
      Annual Report on Internal Control Over Financial Reporting.* The
      management of Design Source, Inc. is responsible for establishing and
      maintaining an adequate system of internal control over financial reporting
      (as
      defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended
      (the “Exchange Act”)). Under the supervision and with the participation of our
      senior management, consisting of Peter Reichard, our chief executive officer
      and
      chief financial officer, we 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 Exchange Act as of the end of the period
      covered by this report (the “Evaluation Date”). Based on this evaluation, our
      chief executive officer and chief financial officer concluded, as of the
      Evaluation Date, that our disclosure controls and procedures are effective
      such
      that the information relating to us required to be disclosed in our Securities
      and Exchange Commission (“SEC”) reports (i) is recorded, processed, summarized
      and reported within the time periods specified in SEC rules and forms, and
      (ii)
      is accumulated and communicated to our management, including our chief executive
      officer and chief financial officer, as appropriate to allow timely decisions
      regarding required disclosure.




Our
      internal control over financial reporting is a process designed to provide
      reasonable assurance regarding the reliability of financial reporting and the
      preparation of financial statements for external purposes of accounting
      principles generally accepted in the United States. Because of its inherent
      limitations, internal control over financial reporting may not prevent or detect
      misstatements. Therefore, even those systems determined to be effective can
      provide only reasonable assurance of achieving their control objectives. In
      evaluating the effectiveness of our internal control over financial reporting,
      our management used the criteria set forth by the Committee of Sponsoring
      Organizations of the Treadway Commission (COSO) in *Internal
      Control—Integrated Framework* .
      Based
      on this evaluation, our management concluded that, as of March 31, 2008, our
      internal control over financial reporting was effective based on those
      criteria.  This
      annual report does not include an attestation report of our registered public
      accounting firm regarding internal control over financial reporting.
      Management’s report was not subject to attestation by our registered public
      accounting firm pursuant to temporary rules of the Securities and Exchange
      Commission that permit us to provide only management’s report in this annual
      report.




(b) *Changes
      in Internal Control over Financial Reporting* .
      There
      were no changes in our internal control over financial reporting that occurred
      during the last fiscal quarter of the period covered by this report that have
      materially affected or are reasonably likely to materially affect our internal
      control over financial reporting.





**ITEM
      8B.**  **OTHER
      INFORMATION**





On
      February 7, 2008, we sold 500,000 shares of our common stock to one investor
      at
      a price of $0.10 per share, or $50,000 in the aggregate, in a private placement
      exempt from registration under the federal securities laws pursuant to Section
      4(2) of the Securities Act of 1933, as amended. There was no other cash provided
      by financing activities for the three months ended March 31,
      2008.


-8-


**ITEM
              9.**
            **DIRECTORS,
                EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
                SECTION
                16(a) OF THE EXCHANGE ACT.**





The
      members of our board of directors serve until their successors are elected
      and
      qualified. Our officers are elected by the board of directors to a term of
      one
      (1) year and serve until their successors are duly elected and qualified, or
      until they are removed from office. The board of directors has no nominating
      or
      compensation committees.





The
      name,
      address, age and position of our present officers and directors are set forth
      below:





**Name and Address**
            
            **Age**
            
            **Position(s)**Peter A. Reichard
            
            52
            
            president, treasurer, chief executive officer,2211 Wright Avenue
            
            
            
            chief financial officerGreensboro, North Carolina 27403
            
            
            
            and a member of the board of directorsPeter L. Coker
            
            66
            
            secretary and a member of the board of12804 Morehead
            
            
            
            directorsChapel Hill, North Carolina 27517





The
      persons named above have held their offices/positions since inception of our
      company and are expected to hold their offices/positions until the next annual
      meeting of our stockholders.





**Background
      of officers and directors**





Peter
      A.
      Reichard has served as our President, Treasurer, and member of our board of
      directors since September 2003. Mr. Reichard is a partner of Tryon Capital
      Ventures, LLC, which is engaged in the business of assisting and promoting
      start-up companies. He has been with the firm since March 2003. From February
      2003 to December 2003, Mr. Reichard was a partner in Tryon Capital, a
      partnership which was engaged in the business of assisting and promoting
      start-up companies. Tryon Capital was a boutique merchant banking firm located
      in the Research Triangle Park in North Carolina. It was designed to reenergize
      and stimulate struggling early-state and middle market companies by combining
      analyses, strategy, people and money. Tryon Capital is no longer in business.
      Accordingly, there is no affiliation between Tryon Capital and Tryon Capital
      Ventures LLC. During the months from December 2002 through March 2003, Mr.
      Reichard was involved with establishing the Sandpiper Fund, an early stage
      venture fund in eastern North Carolina. From October 2001 through December
      2002,
      Mr. Reichard was the Finance Director for the Erskine Bowles for U.S. Senate
      campaign. He served as the Finance Director for the Mike Easley for Governor
      campaign from January 1999 through October 2001. From January 1985 through
      December 1998, Mr. Reichard was employed by the Greensboro Area Chamber of
      Commerce. He began as Manager of Membership/Government Affairs, and then after
      three years became Vice President and four years later, President, a position
      he
      held for six years. Mr. Reichard holds a Bachelor of Arts degree in political
      science from Guilford College (1980).


-9-


Peter
      L.
      Coker has served as our Secretary and member of our board of directors since
      September 2003. Mr. Coker is a partner of Tryon Capital Ventures, LLC, is
      engaged in the business of assisting and promoting start-up companies. He has
      been with the firm since January 2004. From June 2001 to December 2003, Mr.
      Coker was a partner in Tryon Capital, a partnership which was engaged in the
      business of assisting and promoting start-up companies. Tryon Capital was a
      boutique merchant banking firm located in the Research Triangle Park in North
      Carolina. It was designed to reenergize and stimulate struggling early-state
      and
      middle market companies by combining analyses, strategy, people and money.
      Tryon
      Capital is no longer in business. Accordingly, there is no affiliation between
      Tryon Capital and Tryon Capital Ventures LLC. Mr. Coker currently sits on the
      Board of Directors of eTrials Worldwide, Inc., and The North Carolina State
      University Investment Fund (as Chairman of the Board). From February 2004 to
      November 2004, Mr. Coker was chairman of the board of directors of Beijing
      Med-Pharm Corporation. Prior to his work at Tryon Capital Ventures, he was
      a
      managing director of Tryon Capital Holdings, LLC, which is also an investment
      banking firm from June 2001 through December 2003. As Senior Managing Director
      for Capital Investment Partners, LLC, from June 1996 through May 2001, Mr.
      Coker
      worked with small companies primarily in North Carolina that needed financing.
      He would perform due diligence on them, help structure the new financing and
      search for interested investors. Mr. Coker has a Bachelor of Arts degree in
      Economics from North Carolina State University (1966) and an Master of Arts
      degree in Economics from North Carolina (1968).





**Involvement
      in Certain Legal Proceedings**





Not
      applicable.





**Audit
      Committee and Charter**





We
      have a
      separately-designated audit committee of the board. Audit committee functions
      are performed by our board of directors. None of our directors are deemed
      independent. All directors also hold positions as our officers. Our audit
      committee is responsible for: (1) selection and oversight of our independent
      accountant; (2) establishing procedures for the receipt, retention and treatment
      of complaints regarding accounting, internal controls and auditing matters;
      (3)
      establishing procedures for the confidential, anonymous submission by our
      employees of concerns regarding accounting and auditing matters; (4) engaging
      outside advisors; and, (5) funding for the outside auditors and any outside
      advisors engagement by the audit committee.





**Audit
      Committee Financial Expert**





None
      of
      our directors or officers have the qualifications or experience to be considered
      a financial expert. We believe the cost related to retaining a financial expert
      at this time is prohibitive. Further, because of our limited operations, we
      believe the services of a financial expert are not warranted.


-10-


**Code
      of Ethics**





We
      have
      adopted a corporate code of ethics. We believe our code of ethics is reasonably
      designed to deter wrongdoing and promote honest and ethical conduct; provide
      full, fair, accurate, timely and understandable disclosure in public reports;
      comply with applicable laws; ensure prompt internal reporting of code
      violations; and provide accountability for adherence to the code.





**Disclosure
      Committee and Charter**





We
      have a
      disclosure committee and disclosure committee charter. Our disclosure committee
      is comprised of all of our officers and directors. The purpose of the committee
      is to provide assistance to the Chief Executive Officer and the Chief Financial
      Officer in fulfilling their responsibilities regarding the identification and
      disclosure of material information about us and the accuracy, completeness
      and
      timeliness of our financial reports.





**Section
      16(a) of the Securities Exchange Act of 1934**





Pursuant
      to Section 16(a) of the Exchange Act and the rules issued thereunder, our
      executive officers and directors are required to file with the SEC reports
      of
      ownership and changes in ownership of our common stock. Copies of such reports
      are required to be furnished to us. Based solely on review of the copies of
      such
      reports furnished to us, or written representations that no other reports were
      required, we believe that during the year ended March 31, 2008, all officers,
      directors and greater than 10% stockholders complied with all applicable Section
      16(a) filing requirements.





**ITEM
      10.**  **EXECUTIVE
      COMPENSATION**





The
      following table sets forth the compensation paid by us for the last two fiscal
      years ending March 31 for each of our officers. This information includes the
      dollar value of base salaries, bonus awards and number of stock options granted,
      and certain other compensation, if any. The compensation discussed addresses
      all
      compensation awarded to, earned by, or paid or named executive officers.




**Executive
      Officer Compensation Table**


**Non-****Equity**
              
              **Nonqualified****Name**
              
              
              
              
              
              
              
              
              
              
              
              **Incentive**
              
              **Deferred**
              
              **All****and**
              
              
              
              
              
              
              
              **Stock**
              
              **Option**
              
              **Plan**
              
              **Compensation**
              
              **Other****Principal**
              
              
              
              **Salary**
              
              **Bonus**
              
              **Awards**
              
              **Awards**
              
              **Compensation**
              
              **Earnings**
              
              **Compensation**
              
              **Total****Position**
              
              **Year**
              
              **(US$)**
              
              **(US$)**
              
              **(US$)**
              
              **(US$)**
              
              **(US$)**
              
              **(US$)**
              
              **(US$)**
              
              **(US$)****(a)**
              
              **(b)**
              
              **(c)**
              
              **(d)**
              
              **(e)**
              
              **(f)**
              
              **(g)**
              
              **(h)**
              
              **(i)**
              
              **(j)**Peter
                  A. Reichard
              
              
              2008
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0President
              
              
              2007
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0Peter
                  L. Cokerard
              
              
              2008
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0Vice
                  President
              
              
              2007
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0


-11-





We
      have
      no employment agreements with any of our officers. We do not contemplate
      entering into any employment agreements until such time as we begin profitable
      operations.





The
      compensation discussed herein addresses all compensation awarded to, earned
      by,
      or paid to our named executive officers.





There
      are
      no other stock option plans, retirement, pension, or profit sharing plans for
      the benefit of our officers and directors other than as described
      herein.





**Compensation
      of Directors**





The
      members of our board of directors are not compensated for their services as
      directors. The board has not implemented a plan to award options to any
      directors. There are no contractual arrangements with any member of the board
      of
      directors. We have no director's service contracts.





**Long-Term
      Incentive Plan Awards**





We
      do not
      have any long-term incentive plans that provide compensation intended to serve
      as incentive for performance.





**Indemnification**





Under
      our
      Articles of Incorporation and Bylaws of the corporation, we may indemnify an
      officer or director who is made a party to any proceeding, including a law
      suit,
      because of his position, if he acted in good faith and in a manner he reasonably
      believed to be in our best interest. We may advance expenses incurred in
      defending a proceeding. To the extent that the officer or director is successful
      on the merits in a proceeding as to which he is to be indemnified, we must
      indemnify him against all expenses incurred, including attorney's fees. With
      respect to a derivative action, indemnity may be made only for expenses actually
      and reasonably incurred in defending the proceeding, and if the officer or
      director is judged liable, only by a court order. The indemnification is
      intended to be to the fullest extent permitted by the laws of the State of
      Nevada.





Regarding
      indemnification for liabilities arising under the Securities Act of 1933, which
      may be permitted to directors or officers under Nevada law, we are informed
      that, in the opinion of the Securities and Exchange Commission, indemnification
      is against public policy, as expressed in the Act and is, therefore,
      unenforceable.





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





The
      following table sets forth, as of the date of this report, the total number
      of
      shares owned beneficially by each of our directors, officers and key employees,
      individually and as a group, and the present owners of 5% or more of our total
      outstanding shares. The stockholders listed below have direct ownership of
      their
      shares and possess sole voting and dispositive power with respect to the shares.


-12-





**Name and Address**
            
            **Number of**
            
            **Percentage of****Beneficial Owner [1]**
            
            **Shares**
            
            **Ownership [2]**Peter
                A. Reichard [3]
            
            
            3,275,0000
            
            
            29.19
            %2211
                Wright AvenueGreensboro,
                North Carolina 27403Peter
                L. Coker [4]
            
            
            3,793,457
            
            
            33.81
            %12804
                MoreheadChapel
                Hill, North Carolina 27517**All
                officers and directors as a group (2 persons)**
            
            
            **7,068,457**
            
            
            **63.01**
            **%**





[1]
            Beneficial
                Ownership is determined in accordance with the rules of the SEC and
                generally includes voting or investment power with respect to securities.





[2]
            Percentage
                based upon 11,218,457 shares of common stock outstanding as of June
                20,
                2008.


[3]
            Does
                not include 200,000 shares owned by Lawrence J. Reichard, the brother
                of
                Peter A. Reichard, as to which Peter A. Reichard disclaims beneficial
                ownership.


[4]
            Includes
                518,457 shares owned byTryonCapital, LLC, as to which shares Mr. Coker is the beneficial
                owner.





**Changes
      in Control**





There
      are
      no arrangements which may result in a change of control of Design Source.





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





We
      currently use a portion of Peter Reichard’s office space in consideration of
      $400.00 per month. The rent was established through negotiations and payment
      began as of April 1, 2006. The rent charged by Mr. Reichard is not more
      favorable to Mr. Reichard than rent charged by an unaffiliated third party.
      The
      rental agreement is oral. There are no written documents evidencing the rental
      agreement.





**Director
      Independence**





We
      are
      not subject to listing requirements of any national securities exchange or
      inter-dealer quotation system which has requirements that a majority of the
      board of directors be “independent” and, as a result, we are not at this time
      required to have our Board comprised of a majority of “Independent Directors.”


-13-


**PART
      IV**





**ITEM
      13.**  **EXHIBITS**





**Exhibits**





The
      following Exhibits are being filed with this Annual Report on Form
      10-KSB:




Exhibit
              No.
            
            SEC Report
              Reference Number
            
            Description3.1
            
            3.1
            
            Articles of Incorporation of Registrant as
                filed with the Nevada Secretary of State on April 2, 2003 (1)3.2
            
            3.2
            
            By-Laws
                of Registrant (1)14
            
            14.1
            
            Code
                of Ethics (2)21
            
            *
            
            List
                of Subsidiaries31.1/31.2
            
            *
            
            Rule
                13(a) – 14(a)/15(d) – 14(a) Certification of Principal Executive
                and Financial Officer32.1/32.2
            
            *
            
            Rule
                1350 Certification of Chief Executive and Financial Officer99.1
            
            99.1
            
            Subscription
                Agreement (1)99.2
            
            99.1
            
            Audit
                Committee Charter (2)99.3
            
            99.2
            
            Disclosure
                Committee Charter (2)




*
        Filed
        herewith.




(1)
            Filed
                with the Securities and Exchange Commission on June 4, 2004 as an
                exhibit,
                numbered as indicated above, to the Registrant’s registration statement
                (SEC File No. 333-116161) on Form SB-2, which exhibit is incorporated
                herein by reference.




(2)
            Filed
                with the Securities and Exchange Commission on June 29, 2006 as an
                exhibit, numbered as indicated above, to the Registrant’s Form 10-KSB for
                the fiscal year ended March 31, 2006 (SEC File No. 333-116161), which
                exhibit is incorporated herein by
                reference.


-14-


**ITEM
      14.**  **PRINCIPAL
      ACCOUNTING FEES AND SERVICES**





Audit
      Fees .




The
      aggregate fees billed to us by our principal accountant for services rendered
      during the fiscal years ended March 31, 2008 and March 31, 2007 are set forth
      in
      the table below:





Fee Category
            
            Fiscal year ended February 29, 2008
            
            Fiscal year ended February 28, 2007Audit
                fees (1)
            
            $
            12,000
            
            $
            17,000Audit-related
                fees (2)
            
            
            0
            
            
            0Tax
                fees (3)
            
            
            0
            
            
            0All
                other fees (4)
            
            
            0
            
            
            0Total
                fees
            
            $
            12,000
            
            $
            17,000





(1)
            Audit
                fees consists of fees incurred for professional services rendered
                for the
                audit of consolidated financial statements, for reviews of our interim
                consolidated financial statements included in our quarterly reports
                on
                Form 10-QSB and for services that are normally provided in connection
                with
                statutory or regulatory filings or
                engagements.





(2)
            Audit-related
                fees consists of fees billed for professional services that are reasonably
                related to the performance of the audit or review of our consolidated
                financial statements, but are not reported under “Audit fees.”





(3)
            Tax
                fees consists of fees billed for professional services relating to
                tax
                compliance, tax planning, and tax
                advice.





(4)
            All
                other fees consists of fees billed for all other
                services.





Audit
      Committee’s Pre-Approval Practice .





Our
      audit
      committee’s pre-approval policies and procedures described in paragraph
      (c)(7)(i) of Rule 2-01 of Regulation S-X consisted of our audit committee
      pre-approval of all accounting related activities prior to the performance
      of
      any services by any accountant or auditor.


-15-


**SIGNATURES**





Pursuant
      to the requirements of the Securities Act of 1933, the registrant certifies
      that
      it has reasonable grounds to believe that it meets all of the requirements
      for
      filing of this Form 10-KSB and has duly caused this report to be signed on
      its
      behalf by the undersigned, thereunto duly authorized, in Chapel Hill, North
      Carolina, on this 30th day of June, 2008.





DESIGN
                SOURCE, INC.By:
            /s/ Peter A. ReichardPeter A. ReichardPresident, Principal Executive Officer, Treasurer, Principal
              Financial Officer, Principal Accounting Officer and
              member of the Board of Directors




KNOW
      ALL
      MEN BY THESE PRESENT, that each person whose signature appears below constitutes
      and appoints, Peter Reichard, as true and lawful attorney-in-fact and agent,
      with full power of substitution, for her and in her name, place and stead,
      in
      any and all capacities, to sign any and all amendment (including post-effective
      amendments) to this report, and to file the same, therewith, with the Securities
      and Exchange Commission, and to make any and all state securities law or blue
      sky filings, granting unto said attorney-in-fact and agent, full power and
      authority to do and perform each and every act and thing requisite or necessary
      to be done in about the premises, as fully to all intents and purposes as she
      might or could do in person, hereby ratifying the confirming all that said
      attorney-in-fact and agent, or any substitute or substitutes, may lawfully
      do or
      cause to be done by virtue hereof.





**Signature**
            
            **Title**
            
            **Date**/s/
                Peter a. Reichard
            
            President,
                Principal Executive Officer,
            
            June
                30, 2008Peter
                A. Reichard
            
            Treasurer,
                Principal Financial Officer, Principal
              Accounting
                Officer, and a member of the Board of
              Directors/s/
                Peter L. Coker
            
            Secretary
                and a member of the Board of
            
            June
                30, 2008Peter
                L. Coker
            
            Directors.


-16-