United States
                       Securities and Exchange Commission
                              Washington, DC 20549

                                   FORM 10-QSB

                  Quarterly Report Under Section 13 or 15(d) of
                       the Securities Exchange Act of 1934


For the Quarter Ended                                     Commission File Number
   June 30, 2006                                                  333-119234


                             THE FLOORING ZONE, INC.
              -----------------------------------------------------
             (Exact name of registrant as specified in its charter)

                                     NEVADA
          -------------------------------------------------------------
          (State or other jurisdiction of incorporation or organization

                                   20-0019425
                      ------------------------------------
                      (I.R.S. Employer Identification No.)


                   3219 Glynn Avenue, Brunswick, Georgia 31520
                   -------------------------------------------
                    (Address of principal executive offices)

                                 (912) 264-0505
               ---------------------------------------------------
              (Registrant's telephone number, including area code)


Securities registered pursuant to Section 12 (b) of the Act:  None.

Securities registered pursuant to section 12(g) of the Exchange Act: Common,
$0.001 par value

Check whether the Issuer filed all reports required to be filed by section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such report(s), Yes [X] No [ ]

Check whether the Issuer has been subject to such filing requirements for the
past 90 days. Yes [X] No [ ]

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

As of September 12, 2006 we had 19,569,750 shares of our $0.001 par value,
common stock outstanding.

<PAGE>

                             THE FLOORING ZONE, INC.
                                   FORM 10-QSB
                                TABLE OF CONTENTS


PART I -- FINANCIAL INFORMATION

     Item 1.  Financial Statements

         Condensed Consolidated Balance Sheets (Unaudited) as of
            June 30, 2006 .................................................... 3

         Condensed Consolidated Statements of Operations (Unaudited) for
           the three and six months ended June 30, 2006 and 2005.............. 5

         Condensed Consolidated Statements of Cash Flows (Unaudited) for
           the six months ended June 30, 2006 and 2005........................ 6

         Notes to Condensed Consolidated Financial Statements (Unaudited)..... 7

     Item 2.  Management's Discussion and Analysis of Financial Condition
              and Results of Operations....................................... 8

     Item 3.  Controls and Procedures.........................................16


PART II -- OTHER INFORMATION

     Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.....17

     Item 6.  Exhibits........................................................17

     Signatures...............................................................18

                                       2
<PAGE>

                          PART I FINANCIAL INFORMATION

Item 1.  Financial Statements
<TABLE>
<CAPTION>
                                             The Flooring Zone, Inc.
                                      Condensed Consolidated Balance Sheet
                                                  June 30, 2006
                                                   (Unaudited)


                                                       ASSETS



         Current assets:
<S>                                                                                 <C>
             Cash                                                                   $             1,768

             Accounts receivable, net                                                           139,988

             Inventory                                                                          403,164

             Prepaid expense                                                                      4,230
                                                                                    -------------------

                   Total current assets                                                         549,150



         Property & equipment, net                                                              230,668



         Other assets:

              Intangible assets, net                                                              5,411

              Deposits                                                                            6,031
                                                                                    -------------------

                   Total other assets                                                            11,442
                                                                                    -------------------

         TOTAL ASSETS                                                               $           791,260
                                                                                    ===================




                                 See accompanying notes to financial statements

                                                       3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                             The Flooring Zone, Inc.
                                Condensed Consolidated Balance Sheet-[continued]
                                                  June 30, 2006
                                                   (Unaudited)

                                      LIABILITIES AND STOCKHOLDERS' DEFICIT


         Current liabilities:
<S>                                                                                 <C>
             Accounts payable                                                       $           289,052

             Line of credit-related party                                                     1,595,826

             Customer deposits                                                                   29,271

             Accrued liabilities                                                                  8,029

             Current portion long-term debt                                                     102,259
                                                                                    -------------------

                   Total current liabilities                                                  2,024,437

         Long-term liabilities:

             Note payable-related party                                                          79,761

             Long-term debt                                                                     487,770

             Current portion long-term debt                                                    (102,259)
                                                                                    -------------------

                   Total long-term liabilities                                                  465,272

                       Total liabilities                                                      2,489,709

         Stockholders' deficit:

             Preferred Stock, 10,000,000 shares authorized $.001 par value
                value: No shares issued and outstanding                                               -

             Common stock, 100,000,000 shares authorized $.001 par
                value; 19,569,750 shares issued and outstanding                                  19,570

             Additional paid in capital                                                         627,257

             Accumulated deficit                                                             (2,345,276)
                                                                                    -------------------

                   Total stockholders' deficit                                               (1,698,449)
                                                                                    -------------------

         TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                                $           791,260
                                                                                    ===================



                                 See accompanying notes to financial statements

                                                       4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                     The Flooring Zone, Inc.
                                              Condensed Consolidated Statements of
                                      Operations For the three month and six month periods
                                                  ended June 30, 2006 and 2005
                                                           (Unaudited)



                                                Three months ended June 30,            Six months ended June 30,
                                                  2006               2005               2006               2005
                                            ------------------ ------------------ ------------------ ------------------

Revenues:
<S>                                         <C>                <C>                <C>                <C>
 Sales                                      $         774,111  $         926,128  $       1,395,578  $       1,784,681

 Licensing Fees                                             0                  0                  0              2,500
                                            -----------------  -----------------  -----------------  -----------------

Net revenues                                          774,111            926,128          1,395,578          1,787,181

 Less cost of sales                                   607,384            608,283          1,104,095          1,090,695
                                            -----------------  -----------------  -----------------  -----------------

Gross profit                                          166,727            317,845            291,483            696,486

General and administrative expenses                   186,044            294,308            378,180            642,555
                                            -----------------  -----------------  -----------------  -----------------

    Net income (loss) from operations                 (19,317)            23,537            (86,697)            53,931


Other income (expense):

  Interest expense                                    (56,536)           (23,039)           (87,292)           (43,765)
                                            -----------------  -----------------  -----------------  -----------------

       Total other income (expense)                   (56,536)           (23,039)           (87,292)           (43,765)
                                            -----------------  -----------------  -----------------  -----------------

Net income (loss) before taxes                        (75,853)               498           (173,989)            10,166

       Income taxes                                         -                  -                  -                  -
                                            -----------------  -----------------  -----------------  -----------------

 Net income (loss)                          $         (75,853) $             498  $        (173,989) $          10,166
                                            =================  =================  =================  =================


Income (loss) per share-basic and diluted   $           (0.01) $            0.00  $           (0.01) $            0.00
                                            =================  =================  =================  =================

Weighted average shares outstanding -
  basic and diluted                                35,403,083         38,522,145         36,986,417         38,475,423
                                            =================  =================  =================  =================


                                         See accompanying notes to financial statements

                                                               5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                     The Flooring Zone, Inc.
                                         Condensed Consolidated Statements of Cash Flows
                                     For the six month periods ended June 30, 2006 and 2005
                                                           (Unaudited)


                                                                                   6/30/2006             6/30/2005
                                                                                --------------       ----------------

CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                            <C>                   <C>
Net income (loss)                                                              $      (173,989)      $         10,166

Adjustments to reconcile net income (loss) to net cash used
  in operating activities:

  Depreciation and amortization                                                         11,914                 21,245

  Decrease (increase) in accounts receivable                                           (10,780)                   (69)

  Decrease (increase) in inventories                                                  (172,557)              (217,295)

  Decrease (increase) in prepaid expenses                                                    -                 (8,120)

  Increase (decrease) in accounts payable                                               (8,422)                32,400

  Increase (decrease) in accrued liabilities                                            (7,592)                 1,592

  Increase (decrease) in customer deposits                                             (44,789)                 5,039
                                                                                --------------       ----------------

      Net cash used in operating activities                                           (406,215)              (155,042)

CASH FLOWS FROM INVESTING ACTIVITIES

  Purchase of property and equipment                                                         -                 (6,748)

  Purchase of intangible assets                                                              -                      -
                                                                                --------------       ----------------

      Net cash used in investing activities                                                  -                 (6,748)

CASH FLOWS FROM FINANCING ACTIVITIES

Net borrowing (payments) on line of credit-related party                               390,101                 15,000

Net borrowing (payments) on  long term debt                                            (46,400)               (70,676)

Proceeds from the issuance of common stock                                                   -                222,100
                                                                                --------------       ----------------

      Net cash provided by financing activities                                        343,701                166,424
                                                                                --------------       ----------------

                         NET INCREASE IN CASH                                          (62,514)                 4,634

CASH AT BEGINNING OF PERIOD                                                             64,282                 90,092
                                                                                --------------       ----------------

CASH AT END OF PERIOD                                                           $        1,768       $         94,726
                                                                                ==============       ================

SUPPLEMENTAL DISCLOSURES

 Cash paid for interest                                                         $       87,347       $         43,765

 Cash paid for income taxes                                                                  -                      -


                                         See accompanying notes to financial statements

                                                               6
</TABLE>
<PAGE>

                             The Flooring Zone, Inc.
              Notes to Condensed Consolidated Financial Statements
                                  June 30, 2006


Note 1   ORGANIZATION AND INTERIM FINANCIAL STATEMENTS

         Organization - The Flooring Zone, Inc. (the "Company) is a corporation
         organized under the laws of the State of Nevada on May 5, 2003. The
         company's business operations provide for full-service retail floor
         covering products and services.

         Interim financial statements - The accompanying condensed consolidated
         financial statements are unaudited and have been prepared in accordance
         with generally accepted accounting principles for interim financial
         information. Accordingly, they do not include all of the information
         and footnotes required by accounting principles for complete financial
         statements generally accepted in the United States of America. In the
         opinion of management, the accompanying consolidated financial
         statements contain all adjustments, consisting of normal recurring
         accruals, necessary for a fair presentation of our financial position
         as of June 30, 2006. There has not been any change in the significant
         accounting policies of The Flooring Zone, Inc. for the periods
         presented. The results of operations for the three months and six
         months ended June 30, 2006 and 2005 are not necessarily indicative of
         the results for a full-year period. It is suggested that these
         unaudited condensed consolidated financial statements be read in
         conjunction with the consolidated financial statements and the notes
         thereto included in the Company's Annual Report on Form 10-KSB for the
         fiscal year ended December 31, 2005 filed with the Securities and
         Exchange Commission (the "SEC").

         Stock based compensation- On January 1, 2006, the Company adopted the
         fair value recognition provisions of Statement of Financial Accounting
         Standards (SFAS) No. 123R, "Share-Based Payment," using the modified
         prospective method. However, for the three and six months ended June
         30, 2006, the Company's results of operations do not reflect any
         compensation expense because the Company had no new stock options
         granted under its stock incentive plans during the first six months of
         fiscal year 2006 and no previous stock option grants which vested
         during the first six months of fiscal year 2006.

         Prior to the first quarter of fiscal year 2006, the Company accounted
         for its stock-based employee compensation arrangements in accordance
         with the provisions and related interpretations of Accounting
         Principles Board Opinion No. 25, "Accounting for Stock Issued to
         Employees." Had compensation cost for stock-based compensation been
         determined consistent with SFAS No. 123R, the net loss and net loss per
         share for the six months ended June 30, 2005 would have been adjusted
         to the following pro forma amounts:

                                                               6/30/2005
                                                           ------------------

          Net income, as reported                          $          10,166

          Compensation cost under fair value-based
            accounting method, net of tax                                  -
                                                           ------------------

          Net income, pro forma                                       10,166

          Net income per share-basic and diluted:

              As reported                                  $            0.00

              Pro forma                                    $            0.00

                                        7
<PAGE>

                             The Flooring Zone, Inc.
              Notes to Condensed Consolidated Financial Statements
                                  June 30, 2006
                                   (Unaudited)

Note 2   INVENTORY

         Inventories are stated at lower of cost or market and consist of the
         following:

                                                      6/30/06
                                                ---------------------

                    Flooring material                        403,164
                                                ---------------------

                                         Total  $            403,164
                                                =====================

Note 3   GOING CONCERN

         The accompanying financial statements have been prepared on a going
         concern basis, which contemplates the realization of assets and the
         satisfaction of liabilities in the normal course of business. As shown
         in the financial statements, the Company has an accumulated deficit of
         $2,345,276, and a negative working capital of $1,475,287. These factors
         raise substantial doubt about the Company's ability to continue as a
         going concern.

         Management plans include obtaining additional debt financing to cover
         the shortfalls in revenue and allowing the Company to begin purchasing
         inventory at a discount, and making changes in operations to reduce
         expenses. The Company may also seek additional equity financing through
         the sale of its shares, although the Company currently has no
         commitments for additional equity financing and there is no guarantee
         that the Company can obtain equity financing on acceptable terms or at
         all. The financial statements do not include any adjustments that might
         result from the outcome of this uncertainty.

Note 4   COMMON STOCK

         In November 2005, Jimmy Lee resigned as the Company's President, CEO
         and director. Mr. Lee returned his 19,000,000 shares of the Company's
         common stock. In return the Company agreed to remove his name from all
         debt and personal guarantees. In June 2006 the Company did remove Mr.
         Lee's name from all debt of the Company and canceled the stock
         certificates.


            Item 2. Management's Discussion and Analysis of Financial
                       Condition and Results of Operations

         This discussion summarizes the significant factors affecting our
consolidated operating results, financial condition, liquidity and capital
resources during the three and six months ended June 30, 2006 and 2005. This
discussion should be read in conjunction with the financial statements and
financial statement footnotes included in this registration statement.

Forward-Looking Statements

         Certain statements of our expectations contained herein, including, but
not limited to statements regarding sales growth, new stores, increases in
comparable store sales, commodity price inflation and deflation, and capital
expenditures constitute "forward-looking statements." Such statements are based

                                       8
<PAGE>

on currently available operating, financial and competitive information and are
subject to various risks and uncertainties that could cause actual results to
differ materially from our historical experience and our present expectations.
These risks and uncertainties include but are not limited to, fluctuations in
and the overall condition of the U.S. economy, stability of costs and
availability of sourcing channels, conditions affecting new store development,
our ability to implement new technologies and processes, our ability to attract,
train, and retain highly-qualified associates, unanticipated weather conditions
and the impact of competition and regulatory and litigation matters. Undue
reliance should not be placed on such forward-looking statements, as such
statements speak only as of the date on which they are made.

General

         The Flooring Zone, Inc. is a Nevada corporation organized on May 5,
2003, to operate full service retail floorcovering stores. We have a
wholly-owned subsidiary, The Flooring Zone of Georgia, Inc. The Georgia
corporation was formed in 2000, by the founders of The Flooring Zone, Inc., and
was established to develop our business concept in the retail floorcovering
industry. Through our subsidiary we operate two retail stores. We have stores in
Brunswick, Georgia and Yulee, Florida. We also maintain administrative offices
and warehouse facilities in Brunswick, Georgia.

Results of Operations

Comparison of the three months ended June 30, 2006 and 2005.

         During the three months ended June 30, 2006, we realized net loss of
$75,853 compared to a net income of $498 during the three months ended June 30,
2005.

         Revenues

         We generate revenue primarily from the sale of flooring products. We
sell flooring products to two groups - retail customers and contractors. Retail
customers generally pay higher prices for product than contractors.
Historically, about 60% to 70% of our product sales have been to retail
customers. In the current fiscal year we believe we are experiencing a shift in
our traditional customer mix. To date this year, contractors have accounted for
approximately 50% of our product sales. We believe this shift in our customer
mix is, at least, partially due to Mr. Carroll taking a more active role in the
day-to-day operations of the Company following his appointment as CEO. Mr.
Carroll has been involved in the construction industry in Georgia for a number
of years and we believe the increase in product sales to contractors has
resulted from his relationships in the industry. While we realize smaller
margins on products sold to contractors, we believe such decreases in net
revenue are being partially offset by decreases in other expenses, including
advertising and display costs. Contractors, unlike most retail customers,
represent routine repeat business. Contractors buy product often and in larger
quantities than do retail customers. As our customer mix shifts to a higher
percentage of contractor sales we have and may continue to decrease our
advertising and display expenses as we decrease our need to constantly drive new
retail customers to our stores.

         During the three months ended June 30, 2006 average retail product
prices were fairly constant, although we increased prices for supplies such as
carpet pad, glue, etc., approximately 10% higher as compared to the same quarter

                                       9
<PAGE>

of 2005. Despite higher retail prices for supplies, overall we realized a 16%
decrease in revenue from product sales. This decrease in revenue from product
sales in the three months ended June 30, 2006 is primarily the result of the
closing of our St. Mary's store. As discussed above, another contributing factor
to our decreased revenue from sales is the shift in our customer mix because
contractors typically pay lower prices for product than do retail customers. We
expect that revenue from product sales will continue to be lower throughout the
rest of the 2006 fiscal year as compared to the 2005 fiscal year because of the
closing of the St. Mary's store.

         Gross Profit

         Our gross profit is directly affected by our costs of sales. Cost of
sales includes all direct costs of floor coverings, materials used in
installation and installation labor. As with revenues, our cost of sales and
gross profit are directly affected by changes in the percentage of products sold
to retail customers versus contractors. As discussed above, the prices we can
charge contractors are lower than the prices we can charge retail customers
therefore, our profit margin on product sales to retail customers is greater.
Moreover, we often realize profit from providing installation services to retail
customers. Conversely, contractors typically use their own subcontractors to
install the floor covering products they purchase. These subcontractors provide
the materials used in installation and the installation labor.

         Gross profit during the second fiscal quarter of 2006, was $166,727, a
47% decrease from the $317,845 gross profit realized during the second fiscal
quarter of 2005. As discussed above, during the three months ended June 30, 2006
we realized a 16% decrease in net revenue. While cost of sales remained nearly
unchanged during the second quarter 2006 compared to the second quarter 2005. As
a result of decreased revenue and increasing prices we pay for product, cost of
products sold, cost of sales as a percentage of net revenues increased from 66%
during the second quarter 2005 to 78% during the second quarter 2006. During the
quarter we also revisited certain previously completed jobs to perform repair
work that was performed at our expense, which resulted in an increase to our
costs of product sold, with no corresponding increase to revenue. Due to rising
fuel costs, the cost of installation supplies and floor padding increased. We
also paid surcharges on all shipments, which further increased cost of sales for
the period.

         For the reasons detailed above, as our customer mix continues to shift
to a higher percentage of contractors, we anticipate cost of sales will continue
to represent a higher percentage of net revenues than it has historically. As
discussed above, however, we believe this decrease in margins can be at least
partially offset by decreases in other expenses.

         General and Administrative Expenses

         General and administrative expenses for the three months ended June 30,
2006, decreased $108,264, or 37% to $186,044 compared to the three months ended
June 30, 2005. As a percentage of sales revenue general and administrative
expenses decrease to 24% during the quarter ended June 30, 2006, compared to 32%

                                       10
<PAGE>

during the quarter ended June, 30, 2005. During the three months ended June 30,
2006 and 2005, general and administrative costs consisted of:

                                                 Three Months Ended
                                       June 30, 2006           June 30, 2005
                                        ------------            ------------

Salaries & benefits costs               $     68,716            $    120,265
Advertising & display costs                    5,575                  28,086
Occupancy costs & utilities                   69,856                  73,872
Legal & accounting costs                      15,507                   8,308
Other                                         26,390                  63,777
                                        ------------            ------------
                                        $    186,044            $    294,308
                                        ============            ============

         The 43% reduction in salaries and benefits costs in the three months
ended June 30, 2006 compared to the same three month period 2005 is the result
of a reduction in our work force. This reduction in our work force resulted from
the closing of our St. Mary's store and a reduction in our retails sales and
accounts payable departments. In anticipation of expansion, we had hired more
retail sales and accounts payable personnel than we needed to operate our
current locations. With the decision not to expand at the current time, we laid
off several persons. We do not expect significant additional changes salaries
and benefits throughout the balance of 2006.

         During the quarter ended June 30, 2006, advertising and display costs
decreased by 80% compared to the same period of 2005. As explained above, this
decrease is primarily attributable to the closing of our St. Mary's store. We
anticipate the advertising and display costs will continue at lower rates during
the balance of the 2006 fiscal year as a result of closing of the St. Mary's
store and as a result of reduced marketing costs as we focus more attention on
product sales to contractors rather than retail buyers

         Occupancy costs and utilities during the second quarter 2006 compared
to the same quarter 2005, decreased 5% as a result of the closing of the St.
Mary's store. We had an increase in waste services because in previous periods
we shared these costs with a neighbor. This arrangement no longer exists. We
expect these costs to remain constant in the upcoming quarters.

         Legal and accounting costs increased 86% during the three months ended
June 30, 2006 compared to the three months ended June 30, 2005. We anticipate
legal and accounting costs to continue at levels consistent with or higher than
the second quarter 2006 as we begin to incur legal and accounting costs in
connection with our ongoing public reporting obligations.

         Other costs decreased 58% during the quarter ended June 30, 2006 as
compared to the quarter ending June 30, 2005 as we continued our efforts to
control expenses. We anticipate other costs will to remain fairly constant in
upcoming quarters.

         Net Income

         For the reasons discussed above, our net loss in the second quarter
2006 was $75,853 compared to a net income of $498 in the second quarter 2005. We
expect that net loss will decrease in upcoming quarters.

                                       11
<PAGE>

         For the six months ended June 30, 2006 and 2005

         We incurred a net loss of $173,989 through the six months ended June
30, 2006, compared to net income of $10,166 during the six months ended June 30,
2005.

         Revenues

         During the first six months of fiscal 2006 average retail product
prices were fairly constant, although we increased prices for supplies such as
carpet pad, glue, etc., approximately 10% higher as compared to the same period
of 2005 Despite higher retail prices for supplies, overall we have realized a
22% decrease in revenue from product sales. This decrease in revenue from
product sales in the first two quarters of 2006 is primarily the result of the
closing of our St. Mary's store. As discussed above, another contributing factor
to our decreased revenue from sales is the shift in our customer mix because
contractors typically pay lower prices for product than do retail customers. We
expect that revenue from product sales will continue to be lower throughout the
rest of the 2006 fiscal year as compared to the 2005 fiscal year because of the
closing of the St. Mary's store.

         Gross Profit

         Gross profit during the first six months of 2006 was $291,483, 58%
lower than the $696,486 gross profits realized during the first six months of
2005. During the first six months of 2006, we realized a 22% decrease in net
revenue. We also realized a 1% increase in cost of sales during the first six
months of 2006 compared to the first six months of 2005. As a result of
decreased revenue and increased cost of products sold, cost of sales as a
percentage of net revenues increased from 61% during the first six months of
2005 to 79% during the first six months of 2006. During the first six months of
2006 we also revisited certain previously completed jobs to perform repair work
that was performed at our expense, which resulted in an increase to our costs of
product sold, with no corresponding increase to revenue.

         For the reasons detailed above, as our customer mix continues to shift
to a higher percentage of contractors, we anticipate cost of sales will continue
to represent a higher percentage of net revenues than it has historically. Also,
we have experienced increases in costs of sales due to an increase in costs of
installation supplies and floor padding that fluctuates with the price of fuel.
As discussed above, however, we believe this decrease in margins can be at least
partially offset by decreases in other expenses.

         General and Administrative Expenses

         General and administrative expenses for the six months ended June 30,
2006, decreased $264,375, or 41% to $378,180 compared to the six months ended
June 30, 2005, and as a percentage of sales revenue it decreased to 27% during
the six months ended June 30, 2006 as compared to 36% for the first six months

                                       12
<PAGE>

ended June 30, 2005. During the six months ended June 30, 2006 and 2005, general
and administrative costs consisted of:

                                                   Six Months Ended
                                         June 30, 2006          June 30, 2005
                                          -----------            ------------

Salaries & benefits costs                 $   146,491            $    250,146
Advertising & display costs                    16,006                  49,436
Occupancy costs & utilities                   133,969                 150,992
Legal & accounting costs                       24,505                  35,808
Other                                          57,209                 156,173
                                          -----------            ------------
                                          $   378,180            $    642,555
                                          ===========            ============

         The 41% reduction in salaries and benefits costs in the six months
ended June 30, 2006 compared to 2005 is the result of a reduction in our work
force. This reduction in our work force resulted from the closing of our St.
Mary's store and a reduction in our retails sales and accounts payable
departments. In anticipation of expansion, we had hired more retail sales and
accounts payable personnel than we needed to operate our current locations. With
the decision not to expand at the current time, we laid off several persons. We
do not expect significant additional changes salaries and benefits throughout
the balance of 2006.

         During the six months ended June 30, 2006 we decreased our advertising
and display costs by 67% compared to the same period of 2005. As explained
above, this decrease is primarily attributable to the closing of our St. Mary's
store and a reduction in advertising as our traditional customer mix continues
to shift to focus more attention on product sales to contractors rather than
retail buyers.

         Occupancy costs and utilities during the six months ended June 30, 2006
compared to the same period of 2005, decreased by 11% as a result of the closing
of the St. Mary's store. We expect these costs to remain relatively constant in
the upcoming quarters.

         Legal and accounting costs decreased 32%% to $24,505 during the six
month period ended June 30, 2006 compared to the six month period ended June 30,
2005. We believe this decrease in legal and accounting costs is more an issue of
timing than a reflection of any long-term reduction in legal and accounting
costs and we expect legal and accounting costs to continue at levels consistent
with or higher than the amounts incurred during the prior fiscal year.

         Other costs decreased 63% to $57,209 during the six month period ended
June 30, 2006 compared to the six month period ended June 30, 2005 as we
continued our efforts to control expenses. We anticipate other costs will to
remain fairly constant in upcoming quarters.

         Net Income

         For the reasons disclosed above, during the six months ended June 30,
2006 we realized a net loss of $173,989 compared to net income $10,166 during
the first six months of 2004. While we expect net losses to decrease in upcoming
quarters, we do expect to continue to realize net losses through the balance of
the current fiscal year.

                                       13
<PAGE>

         Liquidity and Capital Resources

         Our capital resources have consisted of revenues from operations, funds
raised through the sale of our common stock and debt. During the fourth quarter
2005 we completed a public offering of our securities pursuant to an effective
SB-2 registration statement. The funds raised in the SB-2 have since been used
to fund our operations. As shown in our financial statements, we have an
accumulated deficit of $2,345,276, and negative working capital of $1,475,287.
These factors raise substantial doubt about our ability to continue as a going
concern.

         We have been working to obtain additional debt financing to cover the
shortfalls in revenue and to allow us to begin purchasing inventory at a
discount. As noted above, we have also been making changes in operations to
reduce expenses. We may also seek additional equity financing through the sale
of our shares, although we currently have no commitments for additional equity
financing and there is no guarantee that we can obtain equity financing on
acceptable terms or at all.

         During the first six months of 2006 and 2005 cash was primarily used to
fund operations. See below for additional discussion and analysis of cash flow.

                                                       Six Months Ended
                                              June 30, 2006      June 30, 2005
                                              -------------      -------------

Net cash used in operating activities          $ (406,215)        $ (155,042)
Net cash used in investing activities                   -         $   (6,748)
Net cash provided by financing activities      $  343,701         $  166,424
                                               ----------         ----------
                                               $  (62,514)        $    4,634
                                               ==========         ==========
NET INCREASE (DECREASE) IN CASH

         As discussed herein, during the six months ended June 30, 2006 compared
to the six months ended June 30, 2005 product sales decreased leading to a
reduction in net income of $10,166 to a net loss of $173,989. In addition to the
reduction in cash from operating activities resulting from the net loss of
$173,989, we also realized an increase in accounts receivable and decreases in
accounts payable, accrued liabilities and customer deposits.

         We used $0 net cash in investing activities to acquire equipment during
the first six months of 2006, compared to $6,748 during the first six months of
2005.

         Net cash provided from financing activities was $343,701 during the six
months ended June 30, 2006 compared to $166,424 during the six months ended June
30, 2005, a 107% increase. During the six months ended June 30, 2006 we repaid
$46,400 in long term debt compared to $70,676 during the first six months of
2005. It is important to note that during the first six months of 2005 most of
the cash provided from financing activities came from the sale of our equity
securities. By contrast, during the six months ended June 30, 2006, cash flow
from financing activities was the result of borrowing on a line of credit
extended by a related party.

         At June 30, 2006 and 2005, we had cash on hand of $1,768 and $94,726,
respectively.

                                       14
<PAGE>

Summary of Material Contractual Commitments

         The following table lists our significant commitments as of June 30,
2005.
<TABLE>
<CAPTION>
                                                              Payments Due by Fiscal Year

Contractual Commitments                Total           2005           2006         2007        2008     Thereafter
--------------------------------------------------------------------------------------------------------------------
<S>                                 <C>            <C>             <C>          <C>         <C>        <C>
Line of Credit-Related Party         1,595,825      1,595,825             -            -           -           -
Note Payable-Related Party              79,761         28,388        51,373
Notes Payable                          474,277         22,737        47,344       50,575     353,621
Capital Leases                          13,493          4,674         8,819            -           -
Operating Leases                       688,005         73,289       149,338      152,170     155,098     158,110
                                    ----------     ----------      --------     --------    --------    --------
         TOTAL                      $2,851,361     $1,724,913      $256,874     $202,745    $508,719    $158,110
                                    ==========     ==========      ========     ========    ========    ========
</TABLE>

Off-Balance Sheet Financing Arrangements

         As of June 30, 2005 and 2004, we had no off-balance sheet financing
arrangements.

Critical Accounting Policies

         Revenue Recognition

         We recognize revenues in accordance with the Securities and Exchange
Commission, Staff Accounting Bulletin (SAB) number 104, "Revenue Recognition in
Financial Statements." SAB 104 clarifies application of U. S. generally accepted
accounting principles to revenue transactions. Accordingly, revenue is
recognized when an order has been received, the price is fixed and determinable,
the order is shipped and installed, collection is reasonably assured and we have
no significant obligations remaining. Licensing fees are royalties paid to us
for licensing the use of the name The Flooring Zone. The royalties range from
1-2% of the licensee's commercial sales volume.

         We record accounts receivable for sales which have been delivered but
for which money has not been collected. An allowance for doubtful accounts is
provided for accounts deemed potentially uncollectible based on analysis and
aging of accounts. For customer purchases or deposits paid in advance, we record
a liability until products are shipped or installed.

         Merchandise Inventory

         We record inventory at the lower of cost or market, cost being
determined on a first-in, first-out method. We do not believe our merchandise
inventories are subject to significant risk of obsolescence in the near-term,
and we have the ability to adjust purchasing practices based on anticipated
sales trends and general economic conditions.

                                       15
<PAGE>

         Vendor Funds

         We receive funds from vendors in the normal course of business for
purchase-volume-related rebates. Our accounting treatment for these
vendor-provided funds is consistent with Emerging Issues Task Force (EITF) 02-16
"Accounting by a Customer (Including a Reseller) for Certain Consideration
Received From a Vendor." Under EITF 02-16, purchase volume rebates should be
treated as a reduction of inventory cost, unless they represent a reimbursement
of specific, incremental and identifiable costs incurred by the customer to sell
the vendor's product. The purchase volume rebates that we receive do not meet
the specific, incremental and identifiable criteria in EITF 02-16. Therefore,
they are treated as a reduction in the cost of inventory and we recognize these
funds as a reduction of cost of sales when the inventory is sold.

Recently Issued Accounting Pronouncements

         In December 2004, the FASB issued SFAS No. 123R, Share-based Payment.
This standard is a revision of SFAS No. 123, Accounting for Stock-Based
Compensation, and supersedes Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, and its related implementation
guidance. SFAS No. 123R requires the measurement of the cost of employees
services received in exchange for an award of the entity's equity instruments
based on the grant-date fair value of the award. The cost will be recognized
over the period during which an employee is required to provide service in
exchange for the award. No compensation cost is recognized for equity
instruments for which employees do not render service. The Company adopted SFAS
No. 123R on January 1, 2006, which requires stock-based compensation expense to
be recognized against earnings for the portion of outstanding unvested awards,
based on the grant date fair value of those awards calculated using a
Black-Scholes pricing model under SFAS 123 for pro forma disclosure. The Company
is currently evaluating to what extent the entity's equity instruments will be
used in the future for employees services and the transition provisions of this
standard; therefore, the impact to the Company's financial statements of the
adoption of SFAS No. 123R cannot be predicted with certainty.

Item 3. Controls and Procedures

         Our principal executive officers and our principal financial officer
(the "Certifying Officers") are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e). Such officers have concluded (based upon their evaluations of
these controls and procedures as of the end of the period covered by this
report) that the Company's disclosure controls and procedures are effective to
ensure that information required to be disclosed by it in this report is
accumulated and communicated to management, including the Certifying Officers as
appropriate, to allow timely decisions regarding required disclosure.

         The Certifying Officers have also indicated that there were no
significant changes in the Company's internal controls over financial reporting
or other factors that could significantly affect such controls subsequent to the
date of their evaluation, and there were no significant deficiencies and
material weaknesses.

                                       16
<PAGE>

         Management, including the Certifying Officers, does not expect that the
Company's disclosure controls or its internal controls will prevent all error
and all fraud. A control system, no matter how well conceived and operated, can
provide only reasonable, not absolute, assurance that the objectives of the
control system are met. In addition, the design of a control system must reflect
the fact that there are resource constraints, and the benefits of controls must
be considered relative to their costs. Because of the inherent limitations in
all control systems, no evaluation of controls can provide absolute assurance
that all control issues and instances of fraud, if any, within a company have
been detected. These inherent limitations include the realities that judgments
in decision-making can be faulty, and that breakdowns can occur because of
simple error or mistake. Additionally, controls can be circumvented by the
individual acts of some persons, by collusion of two or more people or by
management override of the control. The design of any systems of controls is
also based in part upon certain assumptions about the likelihood of future
events, and there can be no assurance that any design will succeed in achieving
its stated goals under all potential future conditions. Because of these
inherent limitations in a cost-effective control system, misstatements due to
error or fraud may occur and may not be detected.

                           PART II - OTHER INFORMATION

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

         No instruments defining the rights of the holders of any class of
registered securities have been materially modified, limited or qualified during
the quarter ended June 30, 2006.

         During the quarter, we sold no shares that were not registered under
the Securities Act of 1933.

Item 6.  Exhibits

         Exhibits. The following exhibits are included as part of this report:

                  Exhibit 31.1      Certification of Principal Executive Officer
                                    Pursuant to Section 302 of the
                                    Sarbanes-Oxley Act of 2002
                  Exhibit 31.2      Certification of Principal Financial Officer
                                    Pursuant to Section 302 of the
                                    Sarbanes-Oxley Act of 2002
                  Exhibit 32.1      Certification of Principal Executive Officer
                                    Pursuant to Section 906 of the
                                    Sarbanes-Oxley Act of 2002
                  Exhibit 32.2      Certification of Principal Executive Officer
                                    Pursuant to Section 906 of the
                                    Sarbanes-Oxley Act of 2002

                                       17
<PAGE>

                                   SIGNATURES

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

                                       THE FLOORING ZONE, INC.



October 2, 2006                         /s/ Michael Carroll
                                       ----------------------------------------
                                       Michael Carroll, Chief Executive Officer



October 2, 2006                         /s/ Michael Carroll
                                       ----------------------------------------
                                       Michael Carroll, Chief Financial Officer

                                       18