ForTable the three and nine month periods ended September 30, 2008, the Company generated revenue of $19,066 and $130,500, respectively, primarily resulting from sales generated by its retail store opened in New York City in December 2007. Revenue of $0 and $96,287, respectively, generated in the three and nine month periods ended September 30, 2007, resulted from wholesale sales activity. Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~March 3031, ~~2008~~2010

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from to

Commission File No. 000-26257

INCA DESIGNS, INC.

(Exact Name of Registrant as Specified in Its Charter)


Nevada		11-3461611
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

2317 Collins Avenue, Miami Beach, FL 33139		(305) 673-9170
(Address of Principal Executive Offices)		(Issuer’s Telephone Number)

976 Lexington Avenue, New York, NY 10021

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ¨ No x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No x¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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

The number of shares outstanding of the Issuer’s Common Stock as of ~~July~~November 915, 2010 was ~~714~~1,~~894~~075,~~814~~789,314.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

In the opinion of management, the accompanying unaudited financial statements included in this Form 10-Q reflect all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the results of operations for the periods presented. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year.

Unaudited Consolidated Balance Sheet as of September 30, 2008 and Consolidated Balance Sheet as of December 31, 2007		3
Unaudited Condensed Consolidated Balance Sheet as of March 31, 2010 and Consolidated Balance Sheet as of December 31, 2009		3
Unaudited Consolidated Statements of Operations for the three and nine months ended September 30, 2008 and 2007		4
Unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2010 and 2009		4
Unaudited Consolidated Statement of Stockholders’ Deficit for the period from January 1, 2007 through September 30, 2008		5
Unaudited Condensed Consolidated Statement of Stockholders’ Deficit for the period from January 1, 2009 through March 31, 2010		5
Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2008 and 2007		6
Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2010 and 2009		6
Notes to Unaudited Consolidated Financial Statements		7-18
Notes to Unaudited Condensed Consolidated Financial Statements		7 to 14

INCA DESIGNS, INC. AND ~~SUBSIDIARIES~~SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30,2008Unaudited			December 31,2007
	March 31,2010			December 31,2009
	(Unaudited)
ASSETS
Current Assets:
Cash	$	24,~~934~~448		$	143,~~172~~010
Accounts receivable, net of allowance for doubtful accounts of $0 at September 30, 2008 and December 31, 2007		6,178			72,662
Accounts receivable, net of allowance for doubtful accounts of $0		5,842			28,697
Inventory		85198,~~832~~337			89193,~~085~~870
Other current assets		—			52,905
Total current assets		208,627			225,577
Total current assets		94,944			228,824
Fixed Assets:
Store equipment		1927,~~497~~565			1727,~~476~~565
Leasehold improvements		21199,~~536~~418			21199,~~536~~418
Construction in progress		204,418			—
		226,983			226,983
		245,451			39,012
Accumulated depreciation		(46,738	)		(39,455	)
Accumulated depreciation		(6,003	)		(2,193	)
Net fixed assets		180,245			187,528
Net fixed assets		239,448			36,819
Other Assets:
Security deposits		5821,~~923~~250			5821,~~923~~250
Lease purchase costs, net of amortization of $18,307 and $6,102 at September 30, 2008 and December 31, 2007, respectively		101,693			113,898
Website, net of amortization of $3,000 and $1,500 at March 31, 2010 and December 31, 2009		15,000			16,500
		160,616			172,821
		36,250			37,750
Total assets	$	~~495~~425,~~008~~122		$	~~438~~450,~~464~~855
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities:
Convertible notes payable, net of debt discount of $198,370 and $434,958 at September 30, 2008 and December 31, 2007, respectively	$	1,131,630		$	865,042
Due to officer and related parties	$	1,189,277		$	1,120,956
Notes and loans payable		859,000			859,000
Convertible notes payable		1,040,000			1,040,000
Related party convertible notes payable, net of debt discount of $229,513 and $0 at September 30, 2008 and December 31, 2007, respectively		80,487			—
Accrued interest		969,796			851,017
Derivative liabilities		—			250,697
Related party convertible notes payable		600,000			600,000
Accounts payable		234,107			295,654
Accrued expenses and other liabilities		142,126			121,577
Accrued expenses and other liabilities		259,497			107,232
Accounts payable		134,520			150,364
Accrued interest		648,038			403,525
Note payable		100,000			100,000
Due to officer and related parties		248,752			658,325
Bank overdraft		4,939			39,068
Total current liabilities		34,~~461~~180,~~511~~658			34,~~439~~022,~~475~~982
Commitments and Contingencies		—			—
Stockholders’ Deficit:
Preferred stock - par value $0.0001; 10,000,000 shares authorized; no shares issued and outstanding		—			—
Common stock - par value $0.0001; 2,500,000,000 shares authorized; 714,894,814 and 52,309,814 shares issued and outstanding at September 30, 2008 and December 31, 2007, respectively		71,489			5,231
Common stock - par value $0.0001; 2,500,000,000 shares authorized; 714,894,814 shares issued and outstanding		71,489			71,489
Additional paid-in capital		23,~~981~~576,~~186~~956			~~678~~3,~~044~~576,956
Accumulated deficit		(67,~~019~~403,~~178~~981	)		(37,~~684~~220,~~286~~572	)
Total stockholders’ deficit		(23,~~966~~755,~~503~~536	)		(3,~~001~~572,~~011~~127	)
Total liabilities and stockholders’ deficit	$	~~495~~425,~~008~~122		$	~~438~~450,~~464~~855

The accompanying footnotes are an integral part of these condensed consolidated financial statements.

INCA DESIGNS, INC. AND ~~SUBSIDIARIES~~SUBSIDIARY

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE ~~AND NINE~~ MONTHS ENDED ~~SEPTEMBER~~MARCH 3031, ~~2008~~2010 AND ~~2007~~2009

	September 30, 2008						September 30, 2007
	March 31,
	For the ThreeMonths ThenEnded			For the NineMonths ThenEnded			For the ThreeMonths ThenEnded			For the NineMonths ThenEnded
	2010			2009
Revenues, net	$	19111,~~066~~678		$	~~130~~59,~~500~~497		$	—		$	~~96,287~~
Cost of revenues		565,~~326~~366			5334,~~297~~508			—			~~49,157~~
Gross profit		1346,~~740~~312			7724,~~203~~989			—			~~47,130~~
Operating expenses:
General and administrative		~~205~~78,~~232~~997			~~586~~168,~~806~~324			~~245,099~~			~~501,561~~
Selling expense		2123,~~846~~162			~~101~~15,~~805~~999			~~116,469~~			~~344,265~~
Depreciation and amortization		48,~~608~~783			1614,~~015~~486			~~2,490~~			~~2,490~~
Total operating expense		~~231~~110,~~686~~942			~~704~~198,~~626~~809			~~364,058~~			~~848,316~~
Operating income (loss)		(217,946	)		(627,423	)		(364,058	)		(801,186	)
Operating loss		(64,630	)		(173,820	)
Other income (expense)
Other expense
Interest expense		~~(90~~118,~~208~~779	)		~~(244~~110,~~513~~047	)		~~(104,178~~	)		~~(1,452,165~~	)
Amortization of debt discount		~~(1,340,148~~—	)		(1139,~~786,612~~998	)		~~(209,916~~	)		~~(275,000~~	)
Change in derivatives		—			323,418			522,000			396,600
Loss on write-off of lease costs		—			94,967
Debt extinguishment		—			—			154,789			154,789
Loss on disposal of assets		—			22,139
Other income		—			238			—			1,000
Total other expense		118,779			367,151
Total other income (expense)		(1,430,356	)		(1,707,469	)		362,695			(1,174,776	)
Loss before taxes		(183,409	)		(540,971	)
Income (loss) before taxes		(1,648,302	)		(2,334,892	)		(1,363	)		(1,975,962	)
Provision for income taxes		—			—
Provision for income taxes		—			—			—			—
Net loss	$	(183,409	)	$	(540,971	)
Net income (loss)	$	(1,648,302	)	$	(2,334,892	)	$	(1,363	)	$	(1,975,962	)
Earnings Per Share, Basic and Diluted:
Earnings Per Share, Basic and Diluted:
Net loss	$	(0.00	)	$	(0.00	)
Net income (loss)	$	(0.00	)	$	(0.01	)	$	(0.00	)	$	(0.06	)
Weighted Average Number of Shares Outstanding		714,894,814			714,894,814
Weighted Average Number of Shares Outstanding		707,692,803			272,365,416			52,309,814			34,295,904

The accompanying footnotes are an integral part of these condensed consolidated financial statements.

INCA DESIGNS, INC. AND ~~SUBSIDIARIES~~SUBSIDIARY

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT

FOR THE PERIOD FROM JANUARY 1, ~~2007~~2009 THROUGH ~~SEPTEMBER~~MARCH 3031, ~~2008~~2010

	Common Stock					~~AdditionalPaid InCapital~~		~~Members’Deficit~~AdditionalPaid InCapital			AccumulatedDeficit			Total
	Shares		~~Amount~~		Amount
Balance, January 1, 2007	20,000,000		$	2,000		$	—	$	(951,042	)	$	(14,578	)	$	(963,620	)
Balance, January 1, 2009		714,894,814			$	71,489		$	3,576,956			(6,865,096	)	$	(3,216,651	)
Effects of merger and recapitalization pursuant to execution of Security Exchange Agreement	6,246,064			625			—		951,042			(3,334,628	)		(2,382,961	)
Net loss		—				—			—			(355,476	)		(355,476	)
Shares issued in exchange for debt	26,063,750			2,606			678,044		—			—			680,650
Balance, December 31, 2009		714,894,814				71,489			3,576,956			(7,220,572	)		(3,572,127	)
Net loss	—	—		—		—	—		—			(~~335~~183,~~080~~409	)		(~~335~~183,~~080~~409	)
Balance, December 31, 2007	52,309,814			5,231			678,044		—			(3,684,286	)		(3,001,011	)
Balance, March 31, 2010		714,894,814			$	71,489		$	3,576,956		$	(7,403,981	)	$	(3,755,536	)
Shares issued for debt conversion	662,585,000			66,258			596,327		—			—			662,585
Extinguishment of derivative liabilities	—			—			66,815		—			—			66,815
Beneficial conversion feature of convertible note	—			—			1,640,000		—			—			1,640,000
Net loss	—			—			—		—			(2,334,892	)		(2,334,892	)
Balance, September 30, 2008	714,894,814		$	71,489		$	2,981,186	$	—		$	(6,019,178	)	$	(2,966,503	)

The accompanying footnotes are an integral part of these condensed consolidated financial statements.

INCA DESIGNS, INC. AND ~~SUBSIDIARIES~~SUBSIDIARY

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE ~~NINE~~THREE MONTHS ENDED ~~SEPTEMBER~~MARCH 3031, ~~2008~~2010 AND ~~2007~~2009

	September 30,
	March 31,
	2008			2007
	2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(2183,~~334,892~~409	)	$	(1540,~~975,962~~971	)
Adjustments to reconcile net loss to net cash flows from operating activities:
Depreciation and amortization expense		168,~~015~~783			214,~~490~~486
Change in fair value of derivative instruments		(323,418	)		(396,600	)
Amortization of debt discount		—			139,998
Recognition of expense-derivative conversion feature		—			1,255,042
Write-off of lease purchase costs, net		—			94,967
Amortization of debt discount		1,786,612			275,000
Disposal of fixed assets		—			22,139
Extinguishment of debt		—			(154,789	)
Bad debt expense		(5,850	)		(4,950	)
Changes in assets and liabilities:
Restricted cash		—			100,000
Accounts receivable		22,855			(382	)
Accounts receivable		72,334			77,392
Inventory		(4,467	)		(41,076	)
Inventory		3,253			(106,358	)
Prepaid expenses and other current assets		—			22,319
Prepaid expenses and other current assets		52,905			(121,905	)
Accounts payable		(49,574	)		(66,338	)
Accounts payable		(61,547	)		160,695
Accrued interest		118,779			110,047
Accrued interest		244,513			199,095
Accrued expenses and other current liabilities		20,150			6,293
Accrued expenses and other current liabilities		291,853			213,897
Net cash flows used in operating activities		(66,883	)		(238,518	)
Net cash flows used in operating activities		(258,222	)		(476,953	)
CASH FLOWS FROM INVESTING ACTIVITIES		—			—
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment		(2,021	)		(17,476	)
Construction in progress		(204,418	)		—
Lease purchase costs		—			(120,000	)
Issuance of loan receivable, net		—			(142,325	)
Net cash flows used in investing activities		(206,439	)		(279,801	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from related party loan		~~103~~88,~~423~~321			—243,100
Proceeds from convertible notes payable		350,000			675,000
Repayment of related party loan		(20,000	)		—
Net cash flows provided by financing activities		~~453~~68,~~423~~321			~~675~~243,~~000~~100
Decrease in cash		(11,238	)		(81,754	)
Increase in cash		1,438			4,582
Cash, beginning of period		143,~~172~~010			814,~~754~~735
Cash, end of period	$	24,~~934~~448		$	—9,317
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest	$	—		$	—
Cash paid for income taxes	$	—		$	—
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES:
Conversion of notes payable into common stock	$	662,585		$	680,650

The accompanying footnotes are an integral part of these condensed consolidated financial statements.

INCA DESIGNS, INC. AND ~~SUBSIDIARIES~~SUBSIDIARY

NOTES TO ~~UNAUDITED~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~SEPTEMBER~~MARCH 3031, ~~2008~~2010

NOTE A – ~~THE~~BASIS ~~COMPANY~~OF PRESENTATION

~~INCA~~Throughout ~~Designs,~~these ~~Inc.~~Notes ~~and~~to ~~Subsidiaries~~Consolidated (Financial Statements, the terms “we,” “us,” “our,” “INCA,” or “our Company”) ~~was~~refers ~~formed~~to inINCA ~~Nevada~~Designs, inInc., ~~1998~~and ~~under~~unless ~~the~~otherwise ~~name~~specified, ofincludes ~~Accident~~its ~~Prevention~~wholly ~~Plus~~owned subsidiary, S2 New York Design, Inc., Ina ~~December~~New ~~2004,~~York ~~the~~corporation ~~Company~~("S2NY"), ~~changed~~and ~~its~~S2NY’s ~~name~~wholly toowned ~~Transportation~~limited ~~Safety~~liability ~~Technology~~corporations, ~~Inc.~~INCA Inof ~~March~~South Beach, ~~2007~~LLC, ~~the~~a ~~Company~~Florida ~~changed~~corporation ~~its~~(“INCA ~~name~~of toSB”), and INCA ~~Designs~~on Lex, ~~Inc~~LLC, a New York corporation (“INCA on LEX”) or collectively (“S2NY’s subsidiaries").

~~The~~Interim ~~Company~~reporting ~~designs, contracts for the manufacture of, and retails comprehensive collections of resort wear, swimwear and accessories for the upscale designer market.~~

While the information presented in the accompanying interim consolidated financial statements is unaudited, it includes all adjustments, which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented in accordance with accounting principles generally accepted in the United States of America. These interim financial statements follow the same accounting policies and methods of application as used in the December 31, 2009 audited financial statements of the Company. All adjustments are of a normal, recurring nature. Interim financial statements and the notes thereto do not contain all of the disclosures normally found in year-end audited financial statements and these Notes to Consolidated Financial Statements are abbreviated and contain only certain disclosures related to the three month periods ended March 31, 2010 and 2009. It is suggested that these interim financial statements be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2009. Operating results for the three months ended March 31, 2010 are not necessarily indicative of the results that can be expected for the year ending December 31, 2010.

NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

~~Principles~~Fair Value of ~~Consolidation~~Financial Instruments

The ~~accompanying~~carrying amounts reported in the consolidated balance ~~financial~~sheets ~~statements~~as ~~include~~of ~~the~~March 31, 2010 and December 31, 2009 for cash, accounts receivable, accounts payable and accrued expenses and other liabilities approximate the fair value because of the ~~Company~~immediate ~~and~~or ~~its~~short-term ~~wholly~~maturity ~~owned~~of ~~subsidiaries~~these financial instruments. ~~All intra-company~~The ~~accounts~~fair ~~and~~value ~~transactions~~of ~~have~~debt ~~been~~approximates ~~eliminated~~its incarrying ~~consolidation~~value at the stated or discounted rate of the debt to reflect recent market conditions.

InReclassification ~~the opinion~~ of ~~management,~~Certain ~~the~~Securities ~~accompanying unaudited~~and ~~consolidated~~Obligations ~~financial~~under ~~statements~~ASC ~~included in this Form 10~~815-Q40 ~~reflect~~– ~~all~~Contracts adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the results of operations for the periods presented. The results of operations for the periods presented are not necessarily indicative of the results to be ~~expected~~Settled ~~for~~with ~~the~~Company’s ~~full~~Own ~~year~~Equity.

~~Cash~~The Company committed to issue more common shares than authorized by its Article of Incorporation. If the Company would be required to settle all of its outstanding warrants and ~~Cash~~liabilities ~~Equivalents~~with common shares as of March 31, 2010, the Company would be required to issue up to approximately 956,000,000 common shares over its authorized amount of 2,500,000,000 common shares, representing 250,000,000 shares for the settlement of warrants and 706,000,000 shares for the settlement of outstanding convertible debt.

~~For~~Pursuant ~~purposes~~to ofASC ~~the~~815-40, ~~Statements~~Derivatives ofand ~~Cash~~Hedging ~~Flows~~– Contracts in Entity’s Own Equity, the Company’s ~~considers~~policy ~~amounts~~with ~~held~~regard byto ~~financial~~settling ~~institutions~~outstanding ~~and~~financial ~~short-term~~instruments ~~investments~~is ~~with an~~to ~~original~~settle ~~maturity~~those ofwith 90the ~~days~~latest ormaturity ~~less~~date tofirst, bewhich ~~cash~~essentially ~~and~~sets ~~cash~~the ~~equivalents.~~order ~~The~~of ~~Company~~preference ~~periodically~~for ~~deposits~~settling ~~cash~~the ~~with~~ financial instruments. ~~institutions~~Therefore, inon ~~excess~~March 31, of2010, the ~~maximum~~Company ~~federal~~determined ~~insurance~~that ~~limits~~no ~~(FDIC)~~reclassification ofwas ~~$250,000 per bank~~required.

Trade Accounts Receivable

Trade accounts receivable are customer obligations due under normal trade terms. The Company provides an allowance for doubtful accounts, which is based upon a review of outstanding receivables, historical collection information and existing economic conditions. Normal trade accounts receivable are due 30 days from invoice date and considered past due after that. At September 30, 2008 there were no past due trade accounts receivable and therefore no allowance for doubtful accounts was provided. Trade accounts receivable past due more than 90 days are considered delinquent. Delinquent receivables are written off based on individual credit evaluations, results of collection efforts, and specific circumstances of the customer. Recoveries of accounts previously written off are recorded as reductions of bad debt expense when received.

Inventories

Inventory is stated at the lower of cost (First-In, First-Out (“FIFO”) method) or market. Inventories consist primarily of finished goods.

INCA DESIGNS, INC. AND ~~SUBSIDIARIES~~SUBSIDIARY

NOTES TO ~~UNAUDITED~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~—(Continued)~~

~~SEPTEMBER~~MARCH 3031, ~~2008~~2010

NOTE BC – ~~SUMMARY~~GOING CONCERN ~~OF SIGNIFICANT ACCOUNTING POLICIES (continued)~~

~~Fixed~~The ~~Assets~~accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company incurred a loss from operations of approximately $65,000 during the three months ended March 31, 2010, had an accumulated deficit, and had negative cash flow from operations of approximately $67,000. These matters raise substantial doubt about the Company's ability to continue as a going concern.

~~Fixed~~NOTE ~~assets~~D ~~are~~– ~~recorded~~CONVERTIBLE atNOTES ~~cost.~~PAYABLE Depreciation expense is recorded using primarily the straight-line method. Amortization of leasehold improvements is provided using the straight-line method, generally over the lesser of the term of the lease or ten years. Depreciation of furniture and fixtures and electronic equipment are based on the estimated useful lives of the assets, generally three years for electronic equipment, five years for other equipment, and seven years for furniture and fixtures.

~~Fair~~As ~~Value~~ of ~~Financial~~March 31, ~~Instruments~~2010 and December 31, 2009, the Company had the following convertible promissory notes (the “Convertible Notes”) listed below.

The carrying amounts reported in the consolidated balance sheets as of September 30, 2008 and December 31, 2007 for cash, accounts receivable, inventories, prepaid expenses and other current assets, accounts payable and accrued expenses and other current liabilities approximate the fair value because of the immediate or short-term maturity of these financial instruments. The fair value of long-term debt and capital lease obligations approximates its carrying value at the stated or discounted rate of the debt to reflect recent market conditions.


	March 31, 2010		December 31, 2009
	(Unaudited)
On July 17, 2008, the Company issued a Convertible Promissory Note to an individual for $250,000 with a due date of July 15, 2009 (the “July Note 2008”). The July 2008 Note accrues interest at a rate of 18% per annum and is convertible into the Company’s common stock at a rate of $0.001 per share. The July 2008 Note contains 4.99% ownership cap provisions. The Note is currently in default. The shares underlying the July 2008 Note are covered under a registration rights agreement. In conjunction with the July 2008 Note, the Company issued Warrants to purchase 250,000,000 shares of Common Stock of the Company with an exercise price of $0.001 per share.	$	250,000	$	250,000

Income Taxes

Income taxes are provided for the tax effect of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to differences for financial and income tax reporting related to net operating losses that are available to offset future federal and state income taxes. The deferred tax assets and liabilities represent the future tax consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled.

Revenue Recognition

Revenue from product sales is recognized when the product has been shipped and collectibility is reasonably assured. Revenue recognized from these sales is net of applicable provisions for refunds, discounts and allowances.

Earnings Per Share

The Company calculates earnings per share (“EPS”) in accordance with ASC 260, “Earnings Per Share”, which requires the computation and disclosure of two EPS amounts, basic and diluted. Basic EPS is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted EPS is computed based on the weighted average number of common shares outstanding plus all potentially dilutive common shares outstanding during the period. Such potential dilutive common shares consist of stock options, non-vested shares (restricted stock) and warrants. Potential common shares that have an anti-dilutive effect totaling 1,640,000,000 are excluded from the diluted earnings per share.

INCA DESIGNS, INC. AND ~~SUBSIDIARIES~~SUBSIDIARY

NOTES TO ~~UNAUDITED~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~—(Continued)~~

~~SEPTEMBER~~MARCH 3031, ~~2008~~2010

NOTE BD – ~~SUMMARY~~CONVERTIBLE OFNOTES ~~SIGNIFICANT~~PAYABLE ~~ACCOUNTING POLICIES~~ (~~continued~~Continued)

Stock Based Compensation


On May 21, 2007, the Company assumed and reissued a Convertible Promissory Note with an effective date of November 20, 2006 to an individual for $100,000 with a due date of September 30, 2007 (the “Note”). The Note accrued interest at a rate of 24% per annum and is convertible into the Company’s common stock at a rate of $0.001 per share. The Note is currently in default. Upon default, the interest rate increased to 25% per annum. The shares underlying the Note are covered under a registration rights agreement. In conjunction with the Note, the Company issued Warrants to purchase 200,000 shares of Common Stock of the Company with an exercise price of $0.50 per share, all of which expired unexercised on October 31, 2009.	100,000	100,000

On May 21, 2007, the Company assumed and reissued a Convertible Promissory Note with an effective date of November 20, 2006 to an individual for $125,000 with a due date of September 30, 2007 (the “Note”). The Note accrues interest at a rate of 24% per annum and is convertible into the Company’s common stock at a rate of $0.001 per share. The Note is currently in default. Upon default, the interest rate increased to 25% per annum. The shares underlying the Note are covered under a registration rights agreement. In conjunction with the Note, the Company issued Warrants to purchase 250,000 shares of Common Stock of the Company with an exercise price of $0.50 per share, all of which expired unexercised on October 31, 2009.	125,000	125,000

On May 21, 2007, the Company assumed and reissued a Convertible Promissory Note with an effective date of November 20, 2006 to an individual for $100,000 with a due date of September 30, 2007 (the “Note”). The Note accrues interest at a rate of 24% per annum. The Note is currently in default. Upon default, the interest rate increased to 25% per annum and is convertible into the Company’s common stock at a rate of $0.001 per share. The shares underlying the Note are covered under a registration rights agreement. In conjunction with the Note, the Company issued Warrants to purchase 200,000 shares of Common Stock of the Company with an exercise price of $0.50 per share, all of which expired unexercised on October 31, 2009.	100,000	100,000

The Company follows the requirements of ASC 718-10, Share Based Payments with regard to stock-based compensation issued to employees. The Company has various employment agreements and consulting arrangements that call for stock to be awarded to the employees and consultants at various times as compensation and periodic bonuses. The expense for this stock based compensation is equal to the fair value of the stock that was determined by using the closing trading price on the day the stock was awarded multiplied by the number of shares awarded.

Debt Discounts

Costs incurred with parties who are providing long-term financing, which include the intrinsic value of beneficial conversion features associated with the underlying debt, are reflected as a debt discount. These discounts are generally amortized over the life of the related debt. Amortization expense is included in interest expense on the Unaudited Consolidated Statement of Operations. Amortization of debt discounts for the nine months ended September 30, 2008 and 2007 was $1,786,612 and $275,000 respectively. The Company has unamortized debt discount at September 30, 2008 and December 31, 2007 totaling $427,883 and $434,958, respectively.

Shipping and Handling Costs

The Company expenses all shipping and handling costs as incurred. These costs are included in operating expense.

Use of Estimates

The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent assets and liabilities. We evaluate our estimates, including those related to contingencies, on an ongoing basis. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Recently Issued Accounting Pronouncements

In October 2009, the FASB issued ASU 2009-13, Multiple-Deliverable Revenue Arrangements, (amendments to FASB ASC Topic 605, Revenue Recognition) (“ASU 2009-13”). ASU 2009-13 requires entities to allocate revenue in an arrangement using estimated selling prices of the delivered goods and services based on a selling price hierarchy. The amendments eliminate the residual method of revenue allocation and require revenue to be allocated using the relative selling price method. ASU 2009-13 should be applied on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with early adoption permitted. The Company does not expect adoption of ASU 2009-13 to have a material impact on the Company’s results of operations or financial condition.

INCA DESIGNS, INC. AND ~~SUBSIDIARIES~~SUBSIDIARY

NOTES TO ~~UNAUDITED~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~—(Continued)~~

~~SEPTEMBER~~MARCH 3031, ~~2008~~2010

NOTE BD – ~~SUMMARY~~CONVERTIBLE OFNOTES ~~SIGNIFICANT~~PAYABLE ~~ACCOUNTING POLICIES~~ (~~continued~~Continued)

In April 2010, the FASB issue ASU 2010-17, Revenue Recognition – Milestone Method (“ASU 2010-17”). ASU 2010-17 provides guidance on the criteria that should be met for determining whether the milestone method of revenue recognition is appropriate. A vendor can recognize consideration that is contingent upon achievement of a milestone in its entirety as revenue in the period in which the milestone is achieved only if the milestone meets all criteria to be considered substantive. The following criteria must be met for a milestone to be considered substantive. The consideration earned by achieving the milestone should (1) be commensurate with either the level of effort required to achieve the milestone or the enhancement of the value of the item delivered as a result of a specific outcome resulting from the vendor’s performance to achieve the milestone; (2) related solely to past performance; and (3) be reasonable relative to all deliverables and payment terms in the arrangement. No bifurcation of an individual milestone is allowed and there can be more than one milestone in an arrangement. Accordingly, an arrangement may contain both substantive and nonsubstantive milestones. ASU 2010-17 is effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. Management is currently evaluating the potential impact of ASU 2010-17 on our financial statements.


On May 21, 2007, the Company assumed and reissued a Convertible Promissory Note with an effective date of November 20, 2006 to an individual for $100,000 with a due date of September 30, 2007 (the “Note”). The Note accrues interest at a rate of 24% per annum and is convertible into the Company’s common stock at a rate of $0.001 per share. The Note is currently in default. Upon default, the interest rate increased to 25% per annum. The shares underlying the Note are covered under a registration rights agreement. In conjunction with the Note, the Company issued Warrants to purchase 200,000 shares of Common Stock of the Company with an exercise price of $0.50 per share, all of which expired unexercised on October 31, 2009.	100,000	100,000

On May 21, 2007, the Company assumed and reissued a Convertible Promissory Note with an effective date of November 20, 2006 to an individual for $75,000 with a due date of September 30, 2007 (the “Note”). The Note accrues interest at a rate of 24% per annum and is convertible into the Company’s common stock at a rate of $0.001 per share. The Note is currently in default. Upon default, the interest rate increased to 25% per annum. The shares underlying the Note are covered under a registration rights agreement. In conjunction with the Note, the Company issued Warrants to purchase 150,000 shares of Common Stock of the Company with an exercise price of $0.50 per share, all of which expired unexercised on October 31, 2009.	75,000	75,000

On June 20, 2007, the Company issued a Convertible Promissory Note to an entity for $200,000 with a due date of June 20, 2008 (the “Note”). The Note accrues interest at a rate of 10% per annum and is convertible into the Company’s common stock at a rate of $0.001 per share. The Note is currently in default. The shares underlying the Note are covered under a registration rights agreement. In December 2007, the Company made a $20,000 payment towards principle. On July 1, 2008, the entity converted $160,000 of the principle balance into 160,000,000 restricted shares of Common Stock of the Company.	20,000	20,000

Management does not believe there would have been a material effect on the accompanying financial statements had any other recently issued, but not yet effective, accounting standards been adopted in the current period.

Going Concern

As of September 30, 2008, the Company had minimal cash, a loss from operations, was in default of certain convertible debt obligations and was in arrears with trade creditors and payroll taxes. In addition, the Company was in arrears with respect to revised payment arrangements with its bank debt. Should the bank take action against the Company the results could adversely affect the Company. The foregoing matters raise substantial doubt about the ability of the Company to continue as a going concern.

The financial statements do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should the Company be unable to continue in operation.

NOTE C – STOCKHOLDERS’ EQUITY

Preferred Stock

At September 30, 2008, the Company had 10,000,000 shares of Preferred Stock, par value $0.0001 authorized and none outstanding. The rights, limitations and preferences of the Preferred Stock can be designated by the Company’s Board of Directors.

Common Stock

At September 30, 2008, the Company had 2,500,000,000 shares of Common Stock, $0.0001 par value authorized, with 714,894,814 shares of Common Stock issued and outstanding.

INCA DESIGNS, INC. AND ~~SUBSIDIARIES~~SUBSIDIARY

NOTES TO ~~UNAUDITED~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~—(Continued)~~

~~SEPTEMBER~~MARCH 3031, ~~2008~~2010

NOTE CD – ~~STOCKHOLDERS’~~CONVERTIBLE ~~EQUITY~~NOTES PAYABLE (~~continued~~Continued)

On June 27, 2008, the Company’s Board of Directors approved an amendment to the Company’s Articles of Incorporation to increase the number of authorized shares of Common Stock to 2,500,000,000.


On October 2, 2007, the Company issued a Convertible Promissory Note to an entity for $250,000 with a due date of October 1, 2008 (the “Note”). The Note accrues interest at a rate of 10% per annum and is convertible into the Company’s common stock at a rate of $0.001 per share. The Note called for separate fundings of $50,000 each on October 2, October 18, November 12, and December 7, 2007 and January 10, 2008. The Note is currently in default. The shares underlying the Note are covered under a registration rights agreement. In December 2007, the Company made a $50,000 payment towards principal.		200,000		200,000

On November 28, 2007, the Company issued a Convertible Promissory Note to an entity for $70,000 with a due date of November 28, 2008 (the “Note”). The Note accrues interest at a rate of 10% per annum and is convertible into the Company’s common stock at a rate of $0.001 per share. The Note is currently in default. The shares underlying the Note are covered under a registration rights agreement.		70,000		70,000

		1,040,000		1,040,000

Debt Discount		-0-		-0-


TOTAL	$	1,040,000	$	1,040,000

~~On July 1,~~Amortization ~~2008,~~of ~~Stacy Josloff, (“Josloff”),~~ the ~~Company’s~~debt ~~Chief~~discount ~~Executive~~totaled ~~Officer,~~$0 ~~Chief Financial Officer,~~ and ~~Treasurer converted~~ $~~171~~62,~~293~~499 ~~of her outstanding promissory note with the Company in exchange~~ for ~~171,292,500 shares of~~ the ~~Company’s~~three ~~Common~~months ~~Stock.~~ended ~~Also on July~~March 131, ~~2008,~~2010 ~~Josloff sold $171,293 of her outstanding promissory note to Stephanie Hirsch, the Company’s President~~ and ~~Secretary (“Hirsch”)~~2009, ~~at which time Hirsch converted the $171,293 in~~ ~~exchange for 171,292,500 shares of Common Stock~~respectively.

OnNOTE ~~July 1,~~E ~~2008,~~– ~~two~~NOTES ~~entities~~PAYABLE each converted $90,000 of the principle balance of their $180,000 convertible promissory notes and their $70,000 convertible promissory notes into 90,000,000 and 70,000,000 shares of Common Stock of the Company respectively. Shares of Common Stock of the Company issued under these conversions totaled 320,000,000.

~~Warrant~~In April 2007, the Company issued a Single Payment Promissory Note to ~~Purchase~~an ~~Common~~individual ~~Stock~~for $100,000. The note accrues interest at a rate of 15% per annum and was due on April 2, 2008. This obligation is currently in default.

At September 30, 2008, the Company had issued and outstanding warrants to purchase common stock of the Company (the “Warrants”) totaling 1,000,000, none having been exercised at September 30, 2008. The Warrants have an exercise price of $0.50 per share and are covered under a registration right agreement. Of this amount, 350,000 Warrants expired unexercised on September 30, 2009 and 650,000 Warrants expired unexercised on October 31, 2009.

NOTE D – CONVERTIBLE PROMISSORY NOTES

As of September 30, 2008 and December 31, 2007, the Company had the following convertible promissory notes (the “Convertible Notes”) listed below. On June 27, 2008, the Company’s Board of Directors approved a change in the conversion rate for the below listed Convertible Notes from “a forty percent discount to the market price of the Company’s Common Stock or $0.50 per share, whichever is lower” to a fixed conversion rate of $0.001 per share.

		September 30,2008			December 31,2007
On May 21, 2007, the Company assumed and reissued a Convertible Promissory Note with an effective date of November 20, 2006 to an individual for $100,000 with a due date of September 30, 2007 (the “Note”). The Note accrues interest at a rate of 24% per annum. The Note is currently in default. The shares underlying the Note are covered under a registration rights agreement. In conjunction with the Note, the Company issued Warrants to purchase 200,000 shares of Common Stock of the Company with an exercise price of $0.50 per share, none having been exercised at September 30, 2008, all of which expired unexercised on October 31, 2009.		$	100,000		$	100,000

INCA DESIGNS, INC. AND ~~SUBSIDIARIES~~SUBSIDIARY

NOTES TO ~~UNAUDITED~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~—(Continued)~~

~~SEPTEMBER~~MARCH 3031, ~~2008~~2010

NOTE DF – ~~CONVERTIBLE~~RELATED PARTIES ~~PROMISSORY NOTES (continued)~~

On May 21, 2007, the Company assumed and reissued a Convertible Promissory Note with an effective date of November 20, 2006 to an individual for $125,000 with a due date of September 30, 2007 (the “Note”). The Note accrues interest at a rate of 24% per annum. The Note is currently in default. The shares underlying the Note are covered under a registration rights agreement. In conjunction with the Note, the Company issued Warrants to purchase 250,000 shares of Common Stock of the Company with an exercise price of $0.50 per share, none having been exercised at September 30, 2008, all of which expired unexercised on October 31, 2009.	125,000	125,000
On May 21, 2007, the Company assumed and reissued a Convertible Promissory Note with an effective date of November 20, 2006 to an individual for $100,000 with a due date of September 30, 2007 (the “Note”). The Note accrues interest at a rate of 24% per annum. The Note is currently in default. The shares underlying the Note are covered under a registration rights agreement. In conjunction with the Note, the Company issued Warrants to purchase 200,000 shares of Common Stock of the Company with an exercise price of $0.50 per share, none having been exercised at September 30, 2008, all of which expired unexercised on October 31, 2009.	100,000	100,000
On May 21, 2007, the Company assumed and reissued a Convertible Promissory Note with an effective date of November 20, 2006 to an individual for $100,000 with a due date of September 30, 2007 (the “Note”). The Note accrues interest at a rate of 24% per annum. The Note is currently in default. The shares underlying the Note are covered under a registration rights agreement. In conjunction with the Note, the Company issued Warrants to purchase 200,000 shares of Common Stock of the Company with an exercise price of $0.50 per share, none having been exercised at September 30, 2008, all of which expired unexercised on October 31, 2009.	100,000	100,000

Related party convertible notes payable

On June 25, 2008, INCA issued a Convertible Promissory Note to Josloff, for $652,585 with a due date of July 1, 2009 (the “Note”). The Note was issued in consideration for amounts previously advanced to the Company by Josloff. The Note accrues interest at a rate of 10% per annum. The Note is convertible into shares of the Company’s Common Stock at any time after the date of issuance at a fixed conversion price of $.001 per share. On July 1, 2008 Josloff converted $171,293 into 171,292,500 shares of the Company’s Common Stock. Also on July 1, 2008 Josloff sold $171,293 to a then officer and director of the Company, which shares were, on July 1, 2008, also converted into 171,292,500 shares of the Company’s Common Stock. At March 31, 2010, the outstanding balance was $310,000. Debt discount was fully amortized at December 31, 2009. Amortization of debt discount totaled $0 and $77,499 for the three months ended March 31, 2010 and 2009, respectively.

During 2008 and 2007, a related party loaned the Company $50,000 and $470,000, respectively, of which $70,000 was repaid during 2007. The Company delivered three separate convertible promissory notes to the related party for $250,000, $200,000, and $70,000. These convertible promissory notes accrued interest at 10% per annum. On June 27, 2008, the Company’s Board of Directors approved a change in the conversion rate for the these convertible promissory notes from “a forty percent discount to the market price of the Company’s Common Stock or $0.50 per share, whichever is lower” to a fixed conversion rate of $0.001 per share. On July 1, 2008 the related party agreed to forbear from exercising certain rights under its convertible promissory notes including the collection of default interest and legal actions for a period of six months beginning July 1, 2008 or on the 11^th day from the date the related party delivers a Notice of Conversion of $160,000 of its $180,000 convertible promissory notes then in default. Upon expiration of the forbearance agreement, the interest rate on any unpaid balance of the convertible promissory notes increased to 25% per annum. At March 31, 2010 and December 31, 2009 the outstanding balance was $290,000. On October 12, 2010, the related party converted $360,895 of the principal and interest of the convertible promissory notes into 360,894,500 shares of its Common Stock.

Due to officers and related parties

At March 31, 2010 and December 31, 2009, Josloff had an amount due from the Company of $1,051,427 and $963,106, respectively. The loans accrue interest at a rate of 6% per annum.

At March 31, 2010 and December 31, 2009, a related party had an amount due from the Company of $137,850 and $157,850, respectively. The loans accrue interest at a rate of 6% per annum. In March 2010, the Company made a $20,000 payment to the related party.

INCA DESIGNS, INC. AND ~~SUBSIDIARIES~~SUBSIDIARY

NOTES TO ~~UNAUDITED~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~—(Continued)~~

~~SEPTEMBER~~MARCH 3031, ~~2008~~2010

NOTE DG – ~~CONVERTIBLE~~COMMITMENTS AND ~~PROMISSORY~~CONTINGENCIES ~~NOTES (continued)~~

On May 21, 2007, the Company assumed and reissued a Convertible Promissory Note with an effective date of November 20, 2006 to an individual for $75,000 with a due date of September 30, 2007 (the “Note”). The Note accrues interest at a rate of 24% per annum. The Note is currently in default. The shares underlying the Note are covered under a registration rights agreement. In conjunction with the Note, the Company issued Warrants to purchase 150,000 shares of Common Stock of the Company with an exercise price of $0.50 per share, none having been exercised at September 30, 2008, all of which expired unexercised on October 31, 2009.	75,000	75,000
On June 20, 2007, the Company issued a Convertible Promissory Note to an entity for $200,000 with a due date of June 20, 2008 (the “Note”). The Note accrues interest at a rate of 10% per annum. The Note is currently in default. The shares underlying the Note are covered under a registration rights agreement. In December 2007, the Company made a $20,000 payment towards principal. On July 1, 2008, the entity converted $90,000 of the principal balance into 90,000,000 restricted shares of Common Stock of the Company.	90,000	180,000
On June 20, 2007, the Company issued a Convertible Promissory Note to an entity for $200,000 with a due date of June 20, 2008 (the “Note”). The Note accrues interest at a rate of 10% per annum. The Note is currently in default. The shares underlying the Note are covered under a registration rights agreement. In December 2007, the Company made a $20,000 payment towards principal. On July 1, 2008, the entity converted $90,000 of the principal balance into 90,000,000 restricted shares of Common Stock of the Company.	90,000	180,000
On October 2, 2007, the Company issued a Convertible Promissory Note to an entity for $250,000 with a due date of October 1, 2008 (the “Note”). The Note accrues interest at a rate of 10% per annum. The Note called for principal payments of $50,000 each of October 2, October 18, November 12, and December 7, 2007 and January 10, 2008. The Note is currently in default. The shares underlying the Note are covered under a registration rights agreement. In December 2007, the Company made a $50,000 payment towards principal.	200,000	150,000

INCA DESIGNS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

SEPTEMBER 30, 2008

NOTE D – CONVERTIBLE PROMISSORY NOTES (continued)

On October 2, 2007, the Company issued a Convertible Promissory Note to an entity for $250,000 with a due date of October 1, 2008 (the “Note”). The Note accrues interest at a rate of 10% per annum. The Note called for separate fundings of $50,000 each on October 2, October 18, November 12, and December 7, 2007 and January 10, 2008. The Note is currently in default. The shares underlying the Note are covered under a registration rights agreement. In December 2007, the Company made a $50,000 payment towards principal.		200,000			150,000
On November 28, 2007, the Company issued a Convertible Promissory Note to an entity for $70,000 with a due date of November 28, 2008 (the “Note”). The Note accrues interest at a rate of 10% per annum. The Note is currently in default. The shares underlying the Note are covered under a registration rights agreement. On July 1, 2008, the entity converted $70,000 of the principal balance into 70,000,000 restricted shares of Common Stock of the Company.		-0-			70,000
On November 28, 2007, the Company issued a Convertible Promissory Note to an entity for $70,000 with a due date of November 28, 2008 (the “Note”). The Note accrues interest at a rate of 10% per annum. The Note is currently in default. The shares underlying the Note are covered under a registration rights agreement. On July 1, 2008, the entity converted $70,000 of the principal balance into 70,000,000 restricted shares of Common Stock of the Company.		-0-			70,000
On July 17, 2008, the Company issued a Convertible Promissory Note to an individual for $250,000 with a due date of July 15, 2009 (the “Note”). The Note accrues interest at a rate of 18% per annum. The Note is currently in default. The Note contains 4.99% ownership cap provisions. The shares underlying the Note are covered under a registration rights agreement.		250,000			-0-
		1,330,000			1,300,000
Debt Discount		(198,370	)		(434,958	)
TOTAL	$	1,131,630		$	865,042

Amortization of the debt discount totaled $1,786,612 and $521,677 for the nine months ended September 30, 2008 and the year ended December 31, 2007, respectively.

INCA DESIGNS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

SEPTEMBER 30, 2008

NOTE E – NOTES AND LOANS PAYABLE

As of September 30, 2008, the Company has the following notes and loan obligations.

	September 30,2008		December 31,2007
The principal balance on promissory notes with a financial institution totaled $484,000. The note carries an interest rate of 9.25% per annum. In August 2002, the Company negotiated a settlement with the financial institution with payment terms of $5,000 per month on the promissory notes. During the nine months ended September 31, 2008, no payments were made. This obligation is currently in default.	$	484,000	$	484,000
In June 2002, the Company issued a note for $150,000 with a maturity date of July 1, 2006 and an interest rate of one (1%) percent. As a result of a default for non-payment, the interest rate on the note accelerated to fifteen (15%) percent per annum on the date of maturity. The default also prompted a late charge of five (5%) per annum on any overdue amount. This obligation is currently in default.		150,000		150,000
In October 2004, the Company issued a promissory note for $62,500 with a maturity date of April 30, 2005 and an interest rate (5.75%) equal to the Prime Rate on the day prior to the date the principal payment is due. This obligation is currently in default.		62,500		62,500
In December 2004, the Company issued a promissory note for $62,500 with a maturity date of April 30, 2005 and an interest rate (5.75%) equal to the Prime Rate on the day prior to the date the principal payment is due. This obligation is currently in default.		62,500		62,500
In April 2007, the Company issued a Single Payment Promissory Note to an individual for $100,000. The note accrues interest at a rate of 15% per annum and is due on April 2, 2008. This obligation is currently in default.		100,000		100,000
TOTAL	$	859,000	$	859,000

INCA DESIGNS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

SEPTEMBER 30, 2008

NOTE F – RELATED PARTY CONVERTIBLE PROMISSORY NOTE

On June 25, 2008, INCA issued a Convertible Promissory Note to Josloff, for $652,585 with a due date of July 1, 2009 (the “Note”). The Note was issued in consideration for amounts advanced to the Company by Josloff. The Note accrues interest at a rate of 10% per annum. The Note is currently in default. The Note is convertible into shares of the Company’s Common Stock at any time after the date of issuance at a fixed conversion price of $.001 per share. On July 1, 2008 Josloff converted $171,293 into 171,292,500 shares of the Company’s Common Stock. Also on July 1, 2008 Josloff sold $171,293 to then officer and director of the Company, which shares were, on July 1, 2008, also converted into 171,292,500 shares of the Company’s Common Stock. At September 30, 2008, the outstanding balance was $310,000. Debt discount at September 30, 2008 totaled $229,513. Amortization of debt discount totaled $80,487 for the nine month period ended September 30, 2008.

NOTE G – ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses and other liabilities consist of the following:

	September 30,2008		December 31,2007
Advances	$	96,628	$	-0-
Loans (non-interest bearing)		81,756		81,756
Accrued expense-other		30,258		-0-
Payroll taxes		26,563		18,225
Customer deposits and store credits		24,292		7,251
TOTAL	$	259,497	$	107,232

NOTE H – DUE TO OFFICERS AND OTHER RELATED PARTIES

Amounts due to officers and other related parties consisted of the following:

	September 30,2008		December 31,2007
Advances from officer	$	47,362	$	596,525
Advances from related party		201,390		61,800
TOTAL	$	248,752	$	658,325

The amounts are non-interest bearing and have no stated terms of repayment.

NOTE I – DERIVATIVES

In accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” and EITF 00-19 “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock”, the conversion features associated with the convertible debentures are variable and contain an embedded derivative that requires bifurcation from their host contacts. The company has recognized the embedded derivatives as a liability at the date the debentures were issued. As of September 30, 2008, the change in the fair value of the derivatives resulted in an accounting gain of $390,233. As of July 1, 2008, the conversion rate for all outstanding convertible debt was changed to a fixed conversion rate of $0.001, thereby eliminated the requirement for further treatment of the embedded derivatives. At September 30, 2008 and December 31, 2007, the unamortized portion of the debt discount related to the derivatives and the fair value of the derivative liabilities was $0 and $250,697, respectively.

INCA DESIGNS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

SEPTEMBER 30, 2008

NOTE J – CONSTRUCTION IN PROGRESS

As of September 30, 2008, the Company incurred $204,418 in construction costs related to leasehold improvements associated with the Company’s retail lease of property at 2317 Collins Avenue, Miami Beach, FL (See Note K). Upon taking occupancy of the property these costs will be reclassified as Leasehold Improvement and will be amortized over the life of the lease.

NOTE K – COMMITMENTS AND CONTINGENCIES

Leases

976 Lexington Avenue, New York, NY

On August 16, 2007, ~~the Company’s wholly-owned subsidiary,~~ INCA on LEX, LLC, purchased ~~its~~the ~~lease~~remaining ~~from~~term of the ~~prior~~lease ~~occupant~~for of the property ~~for~~on 976 Lexington Avenue from the ~~sum~~prior ofoccupant ~~$120,000~~for ~~and~~a ~~reimbursement~~total of $30150,000 ~~that~~(the is“Lexington ~~held~~Ave. asLease”). The price included a security deposit ~~for~~of a$30,000 ~~total~~(the “Security Deposit”) and purchase fee of $~~150~~120,000 (the “~~Lexington~~Lease ~~Ave.~~Purchase ~~Lease~~Cost”). The original term of the lease was ~~originally~~ for ten years, ~~and~~commencing ~~commenced~~ on January 1, 2005 with monthly payments of $10,000. The Lease Purchase Cost was amortized over the remaining life of the lease.

On February 28, 2009, the Company vacated the premises, terminated its lease on the property (forfeiting its ~~$30,000~~Security ~~security deposit~~Deposit), and was released from the remaining term of the lease. The Security Deposit was applied to rent expense and the unamortized balance of the Lease Purchase Cost of $94,967 was written off in 2009. The Company also recorded a loss on disposal of fixed assets of $22,139 for the write-off of store equipment and leasehold improvements in the first quarter of 2009. Rent expenses for the three months ended March 31, 2010 and 2009 was $0 and $22,510, respectively.

Rent expense for the nine months ended September 30, 2008 and the period from August 16 through December 31, 2007 was $98,330 and $58,521, respectively.

2317 Collins Avenue, Miami Beach, FL

In June 2006, while renovations were in progress, the Company’s wholly-owned subsidiary, INCA of South Beach, LLC, entered into a 10 year Retail Lease with Sandy Lane Retail, LLC for retail space totaling approximately 1,000 square feet located in the Hotel Gansevoort South, 2317 Collins Avenue, Miami Beach, FL (the Collins Ave. Lease”). The Company took occupancy in November 2008. Terms of the Collins Ave. Lease include a security deposit of $21,250 and monthly payments of $7,083 for years 1 through 3 with a 3% escalation each year for years 4 through 10.

INCA DESIGNS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

SEPTEMBER 30, 2008

NOTE K – COMMITMENTS AND CONTINGENCIES (continued)

Leases (continued)

2317 Collins Avenue, Miami Beach, FL (continued)

Future minimum rent payments are as follows:

2008	$	14,166
2010	$	63,750
2009		84,996
2011		85,624
2010		84,996
2012		90,502
2011		85,420
2013		93,218
2012		87,978
2014		96,014
Thereafter		~~463~~400,~~715~~369
	$	~~821~~829,~~271~~477

Simultaneous with the vacating of its office on 976 Lexington Avenue, the Company moved its entire operation to Miami Beach, Florida and moved its corporate office to 2317 Collins Avenue, Miami, FL 33139. Rent expense for each of the three month periods ended March 31, 2010 and 2009 was $21,250.

~~Litigation~~13

Management is not aware of any legal proceedings contemplated by any governmental authority or other party involving the Company or its properties. No director, officer or affiliate of the Company is (i) a party adverse to the Company in any legal proceedings, or (ii) has an adverse interest to the Company in any legal proceedings. Management is not aware of any other legal proceedings pending or that have been threatened against the Company or its properties. As of September 30, 2008, the Company owed approximately $18,000 in payroll taxes originating in periods prior to 1999. Federal and state tax liens have been filed against the Company in connection with unpaid payroll taxes. Although the Internal Revenue Service and the Employment Commission of the State of New York have filed liens against the Company, respectively, as a result of unpaid payroll taxes, these governmental entities have not initiated legal proceedings against the Company to seize the Company’s assets to pay such taxes.

NOTE L – SUBSEQUENT EVENTS

Settlement Agreement

On October 8, 2008, Hirsch, the Company, Josloff, Izzy Goldreich (Hirsch’s husband) (“Goldreich”) and other unrelated parties entered into a Settlement Agreement and Release (the “Settlement Agreement”), whereby (I) with respect to the Company, (i) Hirsch received certified funds equal to all unpaid salary through her resignation date; (ii) Hirsch’s medical insurance was maintained by the Company for six (6) months from the date of settlement, whereupon further maintenance would be the responsibility of Hirsch; and (iii) Goldreich, with respect to $61,800 owed to him by the Company (the “Goldreich Loan”), settled in full and released the Company of any and all claims he might have then and in the future in connection with the Goldreich Loan; (II) with respect to Josloff and the Company, both Josloff and the Company agreed to a general indemnification wherein Hirsch and Goldreich would be indemnified and held harmless against any and all claims, obligations, liabilities, etc. which may be imposed on, incurred by or asserted at any time against Hirsch or Goldreich with respect to INCA or any of its subsidiaries or affiliates; and (III) with respect to Josloff, contemporaneous with the execution of the Settlement Agreement, Hirsch and Josloff entered into a Stock Transfer Agreement whereby 171,293,500 shares of Common Stock of the Company owned by Hirsch was transferred to Josloff as settlement of a demand promissory note between Hirsch and Josloff.

INCA DESIGNS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2010

NOTE H – SUBSEQUENT EVENTS

In October 2010, a related party converted a portion of its convertible notes payable. The amount of the conversion totaled $360,895 in principle and interest. The Company issued 360,894,500 shares of its Common Stock.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

The following discussion and analysis provides information which management of the Company believes to be relevant to an assessment and understanding of the Company’s results of operations and financial condition. This discussion should be read together with the Company’s financial statements and the notes to the financial statements, which are included in this report. This information should also be read in conjunction with the information contained in our Form 10-~~KSB,~~K ~~Form~~for ~~10-KSB/A,~~the ~~and~~year ~~Form 10-KSB/A~~ended December 31, ~~Amendment~~2009 2 filed with the Securities and Exchange Commission (“SEC”) on ~~March 28, August 18,~~ ~~and September~~November 2315, ~~2008,~~2010 ~~respectively,~~ including the audited financial statements and notes included therein. The reported results will not necessarily reflect future results of operations or financial condition.

Caution Regarding Forward-Looking Statements

~~This~~When ~~Quarterly~~used in this Report, onthe ~~Form~~words ~~10-Q~~“may,” ~~contains~~“will,” “expect, “ “anticipate,” “continue,” “estimate,” “intend,” and similar expressions are intended to identify forward-looking statements”, aswithin ~~that~~the ~~term~~meaning isof ~~defined~~Section 27A inof the ~~Private~~ Securities Act of 1933, as amended (the “Act”) and Section 21E of the ~~Litigation~~Securities ~~Reform~~Exchange Act of ~~1995.~~1934, ~~These~~as ~~statements~~amended ~~relate~~(the to“Exchange ~~future~~Act”) regarding events, orconditions and financial trends which may affect the Company’s future ~~financial~~plans ~~performance.~~of ~~Some~~operations, ~~discussions~~business instrategy, ~~this~~operating ~~report~~results ~~may~~and ~~contain~~financial ~~forward-looking~~position. These statements ~~that~~are ~~involve~~projections ~~risk~~and are subject to known and ~~uncertainty.~~unknown Arisks, ~~number~~uncertainties, ~~of important~~and other factors ~~could~~that may cause ~~the~~our ~~Company’s~~ actual results, levels of activity, performance or achievements to ~~differ~~be materially different from ~~those~~any future results, levels of activity, performance or achievements expressed inor ~~any~~implied by these forward-looking statements. ~~made~~Those byrisks include the ~~Company~~risks identified in ~~this~~Section 1A: ~~report~~Risk Factors in the Company Form 10-K for year ended December 31, 2009. Although ~~Forward~~we believe that the expectations reflected in the forward-looking statements are ~~often~~reasonable, ~~identified~~we bycannot ~~words~~guarantee ~~like “believe,”~~future ~~“expect~~results,” ~~“estimate,”~~levels ~~“anticipate,”~~of ~~“intend~~activity,” ~~“project”~~or ~~and~~achievements. ~~similar~~You ~~words~~should ornot ~~expressions~~place ~~that~~undue certainty on these forward-looking statements, which apply only as of the date of this report. Except as required by ~~their~~applicable ~~nature~~law, ~~refer~~we do not intend to ~~future~~update ~~events~~any of the forward-looking statements.

InThis ~~some~~Report ~~cases,~~contains ~~the~~certain ~~reader~~estimates ~~can~~and ~~also~~plans ~~identify~~related ~~forward-looking~~to ~~statements~~us byand ~~terminology~~the ~~such~~industry asin ~~“may,”~~which ~~“will,” “should,”~~we ~~“plans~~operate,” ~~“predicts,”~~which ~~“potential,”~~assumes orcertain ~~“continue~~events,” ortrends ~~the~~and ~~negative~~activities ofwill ~~these~~occur ~~terms~~and orthe ~~other~~projected ~~comparable~~information ~~terminology.~~based ~~These~~on those ~~statements~~assumptions. ~~are~~We ~~only~~do ~~predictions~~not ~~and~~know ~~involve~~that ~~known~~all ~~and~~of ~~unknown~~our ~~risks, uncertainties,~~assumptions ~~and~~are ~~other~~accurate. ~~factors~~If ~~that~~our ~~may~~assumptions ~~cause~~are ~~the~~wrong ~~Company’s~~about ~~actual~~any ~~results~~events, ~~levels~~trends ofand ~~activity~~activities, ~~performance~~then orour ~~achievements~~estimates tofor future growth for our business may also be ~~materially~~wrong. ~~different~~There ~~from~~can ~~any~~be ~~future~~no ~~results,~~assurances that ~~levels~~any of ~~activity,~~our ~~performance~~estimates oras ~~achievements~~to ~~expressed~~our ~~or implied~~business bygrowth ~~these~~will ~~forward-looking~~be ~~statements~~achieved.

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, or achievements. The reader should not place undue certainty on these forward-looking statements, which apply only as of the date of this report. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or the Company’s predictions. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements in an effort to conform these statements to actual results.

Overview

The Company was incorporated in Nevada in 1998 under the name Accident Prevention Plus, Inc. In December 2004, the Company filed an amendment to its Articles of Incorporation and thereby changed its name to Transportation Safety Technology, Inc. The name was changed to INCA Designs, Inc. in March 2007.

During fiscal 2005 all of the Company’s officers and directors abandoned their respective positions with the Company. In October 2006, Mark Smith was approved as the Company’s court-appointed custodian by the Second Judicial District Court of the State of Nevada, in and for the County of Washoe, (the “Court”) of Transportation Safety Technology, Inc., and filed paperwork with the State of Nevada naming himself as sole officer and director. Mr. Smith, using independent consulting firms, performed appropriate searches directed by the Court to determine that the Company was inactive and had no liens or judgments outstanding. Mr. Smith provided the Court with the independent consulting reports and on November 8, 2006 the Court filed an Order Approving (the) Report and Discharging (the) Custodian.

During the three months ended March 31, 2005, the Company and its wholly owned subsidiaries International Purchasing Services, NY, Inc. and Accident Prevention Plus, LLC ceased operations and remained inactive until May 21, 2007, when the Company and S2 New York Design Corp., a New York corporation (“S2”) entered into a Securities Exchange Agreement (the “Securities Exchange Agreement”) whereby INCA acquired 100% of the issued and outstanding shares of common stock of S2 in exchange for 26,000,000 shares of the Company’s common stock. Also on May 21, 2007, Stacy Josloff (named Chairperson) (“Josloff”) and Stephanie Hirsch (“Hirsch”) were approved as members of the Board of Directors, while Josloff was appointed Chief Executive Officer, Chief Financial Officer, and Treasurer and Hirsch was appointed President and Secretary.

On June 27, 2008, the Company’s Board of Directors approved an amendment to the Company’s Articles of Incorporation to increase the number of authorized shares of common stock to 2,500,000,000. The Company established the record date for those shareholders entitled to vote on the matter as July 2, 2008. On August 13, 2008, the Company filed a Certificate of Amendment to its Articles of Incorporation to effect the above-mentioned increase in authorized common shares.

On September 5, 2008, Hirsch resigned as President and Secretary, while giving notice to the Company that it was in breach of her employment agreement for failure to pay her base salary (see Recent Events for further details related to the settlement of this claim). On September 9, 2008, Hirsch gave notice to the Company that she was also resigning as a director of the Company.

On February 28, 2009, the Company moved its entire operation to Miami, Florida. The Company moved its office to 2317 Collins Avenue, Miami, FL 33139, which is the also the office of its wholly owned subsidiary, INCA of South Beach, LLC, a Florida corporation (“INCA of South Beach”).

INCA designs, contracts for the manufacture of, and retails comprehensive collections of resort wear, swimwear and accessories. INCA believes that its unique designs, innovative sourcing, product positioning, wide range of price points, and commitment to branding attracts a customer seeking a ‘resort lifestyle experience.’ INCA’s cross-generational collections are timeless and sophisticated emphasizing beautiful fabrics, a great fit and price points positioned well below that of the upscale designer market. INCA believes a significant market exists for attainable luxury fashions purchased by a wide age range of strong fashionable women who are seeking sophisticated, high-quality, culturally driven collections.

Recent Events

On October 812, ~~2008,~~2010 ~~Hirsch, the Company, Josloff, Izzy Goldreich (Hirsch’s husband) (“Goldreich”) and other unrelated parties entered into~~ a ~~Settlement~~related ~~Agreement~~party ~~and~~converted Release (the “Settlement Agreement”), whereby (I) with respect to the Company, (i) Hirsch received certified funds equal to all unpaid salary through her resignation date; (ii) Hirsch’s medical insurance was maintained by the Company for six (6) months from the date of settlement, whereupon further maintenance would be the responsibility of Hirsch; and (iii) Goldreich, with respect to $61360,~~800~~895 ~~owed to him by the Company (the “Goldreich Loan”), settled in full and released the Company~~ of ~~any~~debt and all claims he might have then and in the future in connection with the Goldreich Loan; (II) with respect to Josloff and the Company, both Josloff and the Company agreed to a general indemnification wherein Hirsch and Goldreich would be indemnified and held harmless against any and all claims, obligations, liabilities, etc. which may be imposed on, incurred by or asserted at any time against Hirsch or Goldreich with respect to INCA or any of its subsidiaries or affiliates; and (III) with respect to Josloff, contemporaneous with the execution of the Settlement Agreement, Hirsch and Josloff entered into ~~a Stock Transfer Agreement whereby 171~~360,~~293~~894,500 shares of ~~restricted Common Stock of~~ the Company’s ~~owned~~Common ~~by Hirsch was transferred to Josloff as settlement of a demand promissory note between Hirsch and Josloff~~Stock.

On February 28, 2009, INCA on LEX, LLC, a New York corporation (“INCA on LEX”), the Company’s wholly owned subsidiary, vacated the premises and terminated its lease on property located at 976 Lexington Avenue, New York, NY. INCA on LEX forfeited it $30,000 security agreement and was released from the remaining term of the lease. Simultaneous with the vacating of its office on 976 Lexington Avenue, New York, NY, the Company moved its entire operation to Miami, Florida. The Company moved its office to 2317 Collins Avenue, Miami, FL 33139, which is the also the office of its wholly owned subsidiary, INCA of South Beach, LLC, a Florida corporation (“INCA of South Beach”).

Results of Operations

The following discussion and analysis sets forth the major factors that affected the Company’s results of operations and financial condition reflected in the unaudited financial statements for the ~~nine~~three month period ended ~~September~~March 3031, ~~2008~~2010. This discussion and analysis should be read in conjunction with the information contained in our Annual Report on Form 10-KSB, Form 10-KSB/A, and Form 10-KSB/A, Amendment 2 filed with the SEC on March 28, August 18, and September 23, 2008, respectively, including the audited financial statements and notes included therein.

~~Results~~15 ~~of Operations – Comparison of Three and Nine Months Ending September 30, 2008 and 2007~~

~~During~~ Report ~~the~~on ~~three~~Form ~~and~~10-K ~~nine~~for ~~month~~year ~~periods~~ ended ~~September~~December 3031, ~~2008,~~2009 ~~general~~filed ~~and~~with ~~administration~~the ~~costs totaled~~SEC ~~$205,232~~on ~~and $586~~November 15,~~806,~~ ~~respectively~~2010, ~~compared~~including ~~to $245,099 and $501,561 for~~ the ~~same~~audited ~~periods~~financial instatements ~~2007. The decrease of $39,867 for the three month comparison reflects $100,000 ($40,000 in August 2007~~ and ~~$60,000~~notes inincluded ~~October~~therein. ~~2007)~~This ~~associated~~discussion ~~with~~should ~~the~~not ~~2007~~be ~~settlement~~construed ~~agreement~~to ~~between~~imply ~~the~~that ~~Company and two former officer/directors, while~~ the ~~increase~~results ofdiscussed ~~$85,245~~herein ~~for~~will ~~the~~necessarily ~~nine~~continue ~~month~~into ~~comparison is primarily a result of added costs associated with expansion of~~ the ~~business during the first half of the 2008. Selling expense totaled $21~~future,~~846~~ ~~and~~or ~~$101,805,~~that ~~respectively,~~any ~~for~~conclusion ~~the~~reached ~~three~~herein ~~and~~will ~~nine~~necessarily ~~month~~be ~~periods~~indicative ~~ended~~of ~~September 30,~~actual ~~2008~~operating ~~compared~~results toin ~~$116,469 and $344,265 for~~ the ~~same periods in 2007~~future. ~~The~~Such ~~decreases~~discussion ~~of $94,623 and $242,460 reflect~~represents ~~the~~only ~~reductions in advertising and trade show costs associated with wholesale sales while~~ the ~~Company~~best ~~focuses~~present onassessment ~~its~~of ~~retail~~our ~~sales efforts~~management.

~~For~~Results ~~the~~of ~~three~~Operations ~~and~~– ~~nine~~Comparison ~~month~~of ~~periods ended September 30, 2008,~~ the ~~Company~~Three ~~had~~Months ~~operating~~Ended ~~losses totaling $217~~March 31,~~946 and $627,423,~~ ~~respectively,~~2010 ~~compared to operating loss of $364,058~~ and ~~$801,186~~2009 ~~for the same periods in 2007, resulting in decreases of $146,112 and $173,763, respectively.~~

~~During~~For the three ~~and~~months ~~nine month periods~~ ended ~~September~~March 3031, ~~2008~~2010, ~~other~~the ~~income~~Company ~~(expense)~~had ~~totaled~~revenues ~~$(1,430,356)~~of ~~and~~ $(1111,~~707,469), respectively,~~678 compared to ~~$362,695~~revenues ~~and~~of $(159,~~174,776)~~497 for the same ~~periods~~period in ~~2007~~2009. The ~~change~~Company ofattributes this $152,~~793,051~~181 ~~for the three month comparison reflects the~~ increase into ~~amortization~~expanded ofproduct ~~debt~~lines ~~discount of approximately $1,130,000 and the decrease of interest expense totaling approximately $14,000, offset by the change~~ in ~~fair~~its ~~value~~retail oflocation ~~the derivative instruments totaling approximately $522,000~~ and the ~~extinguishment~~addition of ~~certain~~wholesale ~~debt~~business ~~totaling~~during ~~approximately $155,000. The change of $532,693 for~~ the ~~nine month~~first ~~comparison~~quarter ~~reflects the increase in amortization~~ of debt discount of approximately $1,512,000 offset by the recognition of expense related to the derivative conversion feature of certain convertible promissory notes payable totaling approximately $1,255,000, the change in fair value of the derivative instruments totaling approximately $73,000, extinguishment of certain debt totaling approximately $155,000 and the increase of interest expense totaling approximately $48,0002010.

For the three months ended March 31, 2010, the Company had an operating loss totaling $64,630 compared to operating loss of $173,820 for the same period in 2009. The Company attributes this decrease of $109,190 in operating loss to the increase in gross profit resulting from the increase in revenue, along with further reductions in general and administrative costs.

The Company recorded a reduction in other expenses totaling $248,372. This was attributable to (i) debt discount being fully amortized at December 31 2009, resulting in a reduction of amortization expense of $139,998; and (ii) no write-offs or disposals during the three months ended March 31, 2010, resulting in a reduction of such costs of $117,106. These reductions were partially offset by an $8,732 increase in interest expense during the three months ended March 31, 2010 compared to the same period in 2009. This increase is related to additional loans made to the Company since March 31, 2009.

As a result of the reduction in other expense during the three months ended March 31, 2010, the Company recorded a net loss of $183,409 for the period in 2010, compared to a net loss of $540,971 for the period in 2009, a $357,562 improvement.

Liquidity and Capital Resources

~~The~~INCA ~~Company~~began ~~had~~its $2current operations in 2007,~~934~~ ~~cash~~and onhas ~~hand~~not as ofyet ~~September 30,~~attained ~~2008.~~a ~~Since~~level ~~September 30,~~of ~~2008,~~operations ~~revenue~~which ~~and~~allows ~~funds~~it ~~provided~~to bymeet ~~Josloff~~its current ~~have~~overhead. ~~sustained~~We ~~the~~do ~~Company’s~~not ~~operation.~~contemplate ~~Josloff~~attaining profitable operations until late 2012, nor is ~~not~~there ~~obligated~~any toassurance ~~continue~~that such ~~funding~~an operating level can ever be achieved. ~~Management~~We ofwill ~~the~~be ~~Company~~dependent ~~does~~upon ~~not~~obtaining ~~believe~~additional ~~that~~financing ~~its~~in ~~cash~~order onto ~~hand~~adequately fund working capital, infrastructure, manufacturing expenses and ~~anticipated~~significant ~~revenues~~marketing/investor ~~will~~related beexpenditures ~~sufficient~~to gain market recognition, so that we can achieve a level of revenue adequate to ~~fund~~support ~~its~~our ~~operations~~cost ~~for~~structure, ~~the~~none ~~next~~of ~~twelve~~which can be ~~months~~assured. ToWhile ~~supplement~~INCA ~~the~~has ~~aforementioned~~funded ~~cash~~its oninitial ~~hand~~operations with private placements of equity and ~~anticipated~~bridge ~~revenues~~loans, ~~the~~there ~~Company~~can ~~intends~~be no assurance that adequate financing will continue to ~~attempt~~be available to ~~secure~~us ~~additional~~and, ~~funding~~if available, on terms that are favorable to ~~insure~~us. These ~~continuing~~factors ~~operations~~raise ~~over~~substantial ~~the~~doubt ~~next~~about ~~twelve~~our ~~months.~~ability Into ~~the~~continue ~~event~~as a going concern and the ~~Company~~accompanying isconsolidated ~~unsuccessful~~financial instatements ~~its efforts~~do tonot ~~secure~~include ~~additional~~any ~~capital,~~adjustments itrelated ~~would~~to ~~have~~the arecoverability ~~material~~or ~~adverse~~classification ~~effect~~of onasset carrying amounts or the ~~Company’s~~amounts ~~results~~and classification of ~~operations~~liabilities ~~and~~that ~~financial~~may ~~condition~~result should we be unable to continue as a going concern.

21As of March 31, 2010, the Company’s cash balance was $4,448. Outstanding debt as of March 31, 2010 totaled $4,180,658 including $1,789,277 in loans from related parties. The Company’s working capital deficit as of March 31, 2010 was $3,972,031.

Since March 31, 2010, funds necessary to sustain the business have been derived from operations and loans from Stacy Josloff, the Company’s President and CEO. As of March 31, 2010, the Company owed Ms. Josloff the principle amount of approximately $1,361,000. There is no guarantee that Ms. Josloff will continue such funding, and funds from operations may not be adequate to continue operations. The Company will need to raise additional capital to expand operations to the point at which the Company can achieve profitability. The terms of financing that may be raised may not be on terms acceptable to the Company. If adequate funds cannot be raised, our business may fail.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements.

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

The Company is a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act and, as such, is not required to provide the information required under this item.

Item 4T.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company’s management carried out an evaluation, under the supervision and with the participation of Josloff, the Company’s Chief Executive Officer, and Chief Financial Officer of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of ~~September~~ March 3031, ~~2008~~2010, pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, Josloff concluded that the Company’s disclosure controls and procedures as of ~~September~~March 3031, ~~2008~~2010 were not effective and had the following material weaknesses: (i) Josloff is the Company’s sole executive and financial officer, (ii) the Company has no qualified internal accounting personnel, and (iii) the above weaknesses provide for no separation of accounting and financial procedures.

Changes in Internal Controls

There were no changes in our internal controls over financial reporting during the three month period ended ~~September~~March 3031, ~~2008~~2010 that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.

PART II - OTHER INFORMATION

Item 1.

Legal Proceedings

None.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

OnNone ~~July 1,~~for ~~2008~~period ~~the~~ended Company issued a total of 662,580,000 shares of its common stock to six investors (including the Company’s CEO, who received 171,293,500 shares). The shares were issued in partial satisfaction of promissory notes held by the six investors, and were issued at a rate of $.001 per share. The sales were exempt pursuant to SectionMarch ~~4(2) of the Securities Act since the sales were not made in a public offering and were made to individuals who had access to detailed information about INCA Designs~~31, ~~Inc~~2010. ~~and were each acquiring the shares for his or her own account. There were no underwriters.~~

Item 3.

Defaults upon Senior Securities

Instrument in Default	Date of Default	Nature of Default	Principle andInterest Dueat July 9,2010		Penalty
$100,000 Convertible Promissory Note dated November 20, 2006	July 12, 2008	Non-payment of amount due	$	187,267	Conversion rate reduced to $0.001 at time of default
$100,000 Convertible Promissory Note dated November 26, 2006	July 12, 2008	Non-payment of amount due	$	187,267	Conversion rate reduced to $0.001 at time of default
$125,000 Convertible Promissory Note dated November 26, 2006	July 12, 2008	Non-payment of amount due	$	234,083	Conversion rate reduced to $0.001 at time of default
$75,000 Convertible Promissory Note dated May 16, 2006	July 12, 2008	Non-payment of amount due	$	131,700	Conversion rate reduced to $0.001 at time of default
$100,000 Convertible Promissory Note dated May 16, 2006	July 12, 2008	Non-payment of amount due	$	175,600	Conversion rate reduced to $0.001 at time of default
$200,000 Convertible Promissory Note dated June 20, 2007 ($90,000 Current Balance)	July 12, 2008	Non-payment of amount due	$	127,661	NA
$200,000 Convertible Promissory Note dated June 20, 2007 ($90,000 Current Balance)	July 12, 2008	Non-payment of amount due	$	127,661	NA
$250,000 Convertible Promissory Note dated October 2, 2007 ($200,000 Current Balance)	July 12, 2008	Non-payment of amount due	$	253,108	NA
$250,000 Convertible Promissory Note dated October 2, 2007 ($200,000 Current Balance)	July 12, 2008	Non-payment of amount due	$	253,108	NA
$652,585 Convertible Promissory Note dated June 25, 2008 ($310,000 Current Balance)	July 1, 2008	Non-payment of amount due	$	373,776	NA
$250,000 Convertible Promissory Note dated July 17, 2008	July 15, 2009	Non-payment of amount due	$	340,789	NA

The below table lists each Convertible Promissory Note (“Note”) issued by the Company in default as a result of non-payment as of the date of this filing.


Notes in Default	Date of Default		Principle and Interest Currently Outstanding		Penalty
$100,000 Note Dated November 20, 2006		July 12, 2008	$	185,653	Interest rate increase to highest rate allowable by law
$100,000 Note Dated November 26, 2006		July 12, 2008	$	185,653	Interest rate increase to highest rate allowable by law
$125,000 Note Dated November 26, 2006		July 12, 2008	$	230,313	Interest rate increase to highest rate allowable by law
$75,000 Note Dated May 16, 2006		July 12, 2008	$	139,490	Interest rate increase to highest rate allowable by law
$100,000 Note Dated May 16, 2006		July 12, 2008	$	185,986	Interest rate increase to highest rate allowable by law

Item 4. Reserved


$200,000 Note Dated June 20, 2007 ($20,000 Current Balance)	July 12, 2008	$	50,897	Interest rate increase to highest rate allowable by law
$250,000 Note Dated October 2, 2007 ($200,000 Current Balance)	July 12, 2008	$	318,858	Interest rate increase to highest rate allowable by law
$70,000 Note Dated November 30, 2007 (20,000 Current Balance)	July 12, 2008	$	57,507	Interest rate increase to highest rate allowable by law
$652,585 Note Dated June 25, 2008 ($310,000 Current Balance)	July 1, 2009	$	440,685	Interest rate increase to highest rate allowable by law
$250,000 Note Dated July 17, 2008	July 15, 2009	$	354,792	N/A

Item 4.

Submission of Matters to a Vote of Security Holders.

None.

Item 5.

Other Information

None.

Item 6.

Exhibits

Exh.No.	Date of Document	Description of Document
Exh. No.	Date of Document	Description of Document
3.1	October 28, 1998	Articles of Incorporation (1)
3.2	March 3,1999	Certificate of Amendment to Articles of Incorporation (1)
3.3	October 27, 2004	Certificate of Amendment to Articles of Incorporation (name change to Transportation Safety Technology, Inc.) (2)
3.4	March 9, 2007	Certificate to Accompany Restated Articles (name change to INCA Designs, Inc.) (3)
3.5	May 1, 2007	Certificate of Amendment to Articles of Incorporation (3)
3.6	August 13, 2008	Certificate of Amendment to Articles of Incorporation (58)
3.7	N/A	Bylaws (3)
10.1	July 17, 2008	Convertible Promissory Note for $250,000 issued to Richard Girouard (*)
10.0	June 13, 2006	Building Lease for INCA of South Beach, LLC in Miami Beach, Florida (8)
21.1	March 28, 2008	List of Subsidiaries (3)
10.1	May 21, 2007	Employment Agreement with Stacy Josloff (7)
31.1	July 9, 2010	Certification of Chief Executive Officer and Chief Financial Officer of Periodic Report pursuant to Rule 13a-14a and Rule 14d-14(a) (*)
10.3	September 7, 2007	First Amendment to Lease for INCA of South Beach, LLC (8)
32.1	July 9, 2010	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 (*)
10.4	June 25, 2008	Convertible Note for $652,585 issued to Stacy Josloff (4)
10.5	July 17, 2008	Convertible Promissory Note for $250,000 issued to Richard Girouard (5)
10.6	October 15, 2008	Settlement Agreement and Release (6)
31.1	November 15, 2010	Certification of Chief Executive Officer and Chief Financial Officer of Periodic Report pursuant toRule 13a-14a.*
32.1	November 15, 2010	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14b.*

(1) Previously filed with Form 10B12G filed with the ~~SEC~~Commission on June 3, 1999.

(2) Previously filed with the Preliminary Information Statement filed with the ~~SEC~~Commission on June 18, 2004.

(3) Previously filed with Form ~~10KSB~~10-KSB for year ended December 31, 2007 filed with the ~~SEC~~Commission on March 28, 2008.

(4) Previously filed with Form 8K8-K filed with the ~~SEC~~Commission on July 2, 2008.

(5) Previously filed with Form ~~10Q~~10-Q for quarter ended ~~June~~September 30, 2008 filed with the ~~SEC~~Commission on ~~August~~July 199, ~~2008~~2010.

(*6) ~~Filed~~Previously ~~herewith~~filed with Form 8-K filed with the Commission on October 15, 2008.

24(7) Previously filed with Form 8-K filed with the Commission on October 15, 2007.

(8)	Previously filed with Form 10-K for year ended December 31, 2008 filed with the Commission on November 1, 2010.

(*)	Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

DATE: July 9, 2010


DATE: November 15, 2010

	INCA DESIGNS, INC.

	By:	/s/ Stacy Josloff
		Stacy Josloff, President and Chief Executive Officer

	By:	/s/ Stacy Josloff
		Stacy Josloff, Chief Financial Officer and Accounting Officer

~~INCA~~19 ~~DESIGNS, INC. By: /S/ STACY JOSLOFF Stacy Josloff, President and Chief Executive Officer By: /S/ STACY JOSLOFF Stacy Josloff, Principal Financial and Accounting Officer~~

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