UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549  FORM 10-QSB  x

                        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                            SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended
            September 30, 2007  o

                        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                            SECURITIES EXCHANGE ACT OF 1934
 For the Transition Period From ________ to _________  Commission File Number
            333-119234  THE FLOORING ZONE, INC. (Exact name of registrant as specified in its charter)  Nevada

                        

                        20-0019425(State or other jurisdiction of

                        

                        (I.R.S. Employerincorporation or organization)

                        

                        Identification No.)3441 Cypress Mill Road, Suite 103Brunswick, Georgia

                        

                        31520(Address of principal executive offices)

                        

                        (Zip Code)
  (912) 279-1642 (Registrant’s telephone number, including area code)  Check whether the issuer (1) filed all reports required to be filed by
            Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for any
            shorter period that the registrant was required to file such reports) and (2) has been
            subject to such filing requirements for the past 90 days. Yes x No
            o  Indicate by check mark whether the registrant is a shell company (as
            defined in Rule 12b-2 of the Exchange Act.) Yes
            o No x  As
            of November 15, 2007, the registrant had 19,569,750 shares of
            common stock, par value $0.001, issued and outstanding.  Transitional small business disclosure format. Yes
            o No x     THE FLOORING ZONE, INC. FORM 10-QSB TABLE OF CONTENTS  PART I
            — FINANCIAL INFORMATION  Item 1. Financial StatementsCondensed Consolidated Balance Sheet (Unaudited) as
                            of

                            September 30, 2007

                        2Condensed Consolidated Statements of Operations
                            (Unaudited) for the

                            three and nine month periods ended September 30, 2007
                            and 2006

                        3Condensed Consolidated Statements of Cash Flows
                            (Unaudited) for the

                            nine month periods ended September 30, 2007 and
                            2006

                        4Notes to Condensed Consolidated Financial Statements
                            (Unaudited)

                        5Item 2. Management’s Discussion and Analysis of
                            Financial Condition

                            and Results of Operations

                        8Item 3. Controls and Procedures

                        16PART II — OTHER INFORMATIONItem 6. Exhibits

                        17Signatures

                        17
    1    PART I. FINANCIAL INFORMATION  Item
            1. Financial Information  The Flooring Zone, Inc. Condensed Consolidated Balance Sheet
 September 30, 2007 (Unaudited)  Current assets:Cash
        $
        605Inventory
        
        45,758Total current assets
        
        46,363Property & equipment, net
        
        150,656Other assets:Intangible assets, net
        
        4,144Deposits
        
        6,061Total other assets
        
        10,205TOTAL ASSETS
        $
        207,224
    See
            accompanying notes to financial statements  2    The Flooring Zone, Inc.
 Condensed Consolidated Balance Sheet-[continued] September 30, 2007 (Unaudited)  LIABILITIES AND STOCKHOLDERS’ DEFICIT  Current liabilities:Accounts payable
        $
        185,889Bank overdraft
        
        29,898Line of credit-related party
        
        944,710Accrued liabilities
        
        20,428Current portion long-term debt
        
        280,556Total current liabilities
        
        1,461,481Long-term liabilities:Note payable-related party
        
        1,050,916Long-term debt
        
        437,748Current portion long-term debt
        
        (280,556)Total long-term liabilities
        
        1,208,108Total liabilities
        
        2,669,589Stockholders deficit:Preferred Stock, 10,000,000 shares authorized $.001 par valuevalue: No shares issued and outstanding
        
        -Common stock, 100,000,000 shares authorized $.001 parvalue; 19,569,750 shares issued and outstanding
        
        19,570Additional paid in capital
        
        627,257Accumulated deficit
        
        (3,109,192)Total stockholders deficit
        
        (2,462,365)TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT
        $
        207,224
  See
            accompanying notes to financial statements  3    The Flooring Zone, Inc.
 Condensed Consolidated Statements of
                            Operations
 For the three month and nine month periods ended
                            September 30, 2007 and 2006.
 (Unaudited)  Three months ended

                            September 30,

                        

                        Nine months ended

                            September 30,2007

                        

                        2006

                        

                        2007

                        

                        2006Revenues:Sales

                        $       294,688

                        

                        $        616,391

                        

                        $         742,780

                        

                        $     1,761,514Related Party Sales

                        11,289

                        

                        22,760

                        

                        210,925

                        

                        273,215Net revenues

                        305,977

                        

                        639,151

                        

                        953,705

                        

                        2,034,729Less cost of sales

                        191,099

                        

                        417,403

                        

                        605,789

                        

                        1,521,498Gross profit

                        114,878

                        

                        221,748

                        

                        347,916

                        

                        513,231General and administrative expenses

                        78,409

                        

                        208,995

                        

                        342,594

                        

                        587,175Loss on sale of asset

                        -

                        

                        -

                        

                        6,579

                        

                        -Net income (loss) from operations

                        36,469

                        

                        12,753

                        

                        (1,257)

                        

                        (73,944)Other income (expense):

                            Interest Income

                        -

                        

                        -

                        

                        -

                        

                        -Interest expense

                        (39,700)

                        

                        (55,755)

                        

                        (105,269)

                        

                        (143,048)Total other income(expense)

                        (39,700)

                        

                        (55,755)

                        

                        (105,269)

                        

                        (143,048)Net income (loss) before taxes

                        (3,231)

                        

                        (43,002)

                        

                        (106,526)

                        

                        (216,992)Income taxes

                        -

                        

                        -

                        

                        -

                        

                        -Net income (loss)

                        $        (3,231)

                        

                        $        (43,002)

                        

                        $        (106,526)

                        

                        $       (216,992)
  Income (loss) per share-basic anddiluted

                        $(0.01)

                        

                        $(0.01)

                        

                        $(0.01)

                        

                        $(0.01)Weighted average shares outstanding-basic and diluted

                        19,569,750

                        

                        19,569,750

                        

                        19,569,750

                        

                        19,569,750
  See accompanying notes to financial statements  4    The Flooring Zone, Inc. Condensed Consolidated Statements of Cash Flows For
            the nine month periods ended September 30, 2007 and 2006 (Unaudited)  9/30/2007
        
        9/30/2006CASH FLOWS FROM OPERATING ACTIVITESNet income (loss)
        $
        (106,526)
        $
        (216,992)Adjustments to reconcile net income (loss) to net   cash used in operating activities:Depreciation and amortization
        
        23,221
        
        17,871Loss on disposal of asset
        
        6,579
        
        -Decrease (increase) in accounts receivable
        
        53,575
        
        (13,431)Decrease (increase) in inventories
        
        110,503
        
        (72,557)Decrease (increase) in deposits
        
        (30)
        
        -Increase (decrease) in accounts payable
        
        (38,484)
        
        (42,466)Increase (decrease) in accrued liabilities
        
        3,423
        
        (4,206)Increase (decrease) in customer deposits
        
        (32,727)
        
        (31,694)Increase in bank overdraft
        
        29,898
        
        -Net cash provided by (used in) operating activities
        
        49,432
        
        (363,475)CASH FLOWS FROM INVESTING ACTIVITIESProceeds from sale of equipment
        
        6,000
        
        -Net cash provided by investing activities
        
        6,000
        
        -CASH FLOWS FROM FINANCING ACTIVITIESNet borrowing (payments) on line of credit-related party
        
        33,912
        
        399,200Net borrowing (payments) on long term debt
        
        (114,219)
        
        (67,870)Net cash provided by (used in) financing activities
        
        (80,307)
        
        331,330NET INCREASE (DECREASE) IN CASH
        
        (24,875)
        
        32,145CASH AT BEGINNING OF PERIOD
        
        25,480
        
        64,282CASH AT END OF PERIOD
        $
        605
        $
        32,137SUPPLEMENTAL DISCLOSURESCash paid for interest
        $
        105,279
        $
        143,103Cash paid for income taxes
        
        -
        
        -
   See
            accompanying notes to financial statements  5    The Flooring Zone, Inc. Notes to Condensed Consolidated Financial Statements September 30, 2007  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 the applicable regulations of the Securities and Exchange
            Commission’s rules 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 September 30, 2007. 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 nine months ended
            September 30, 2007 and 2006 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, 2006 filed with the Securities and Exchange
            Commission.  Note 2

                        INVENTORY
  Inventories are stated at lower of cost or market and
                            consist of the following:
  9/30/07Flooring material

                        

                        45,758Total

                        

                        $                    45,758
  6   The Flooring Zone, Inc. Notes to Condensed Consolidated Financial Statements September 30, 2007 (Unaudited)  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 $3,109,192 and a negative working capital of
            $1,415,118. 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. If we are
            unsuccessful in obtaining additional funding, we may be unable to continue operations
            as we have insufficient working capital necessary to meet its expenses and service our
            debt. The financial statements do not include any adjustments that might result from
            the outcome of this uncertainty.  Note 4

                        RECENT ACCOUNTING PRONOUNCEMENTS
  In February 2007, the FASB issued SFAS 159 “The Fair Value Option
            for Financial Assets and Financial Liabilities.”  This statement permits
            entities to choose to measure many financial instruments and certain other items at
            fair value that are not currently  required to be measured at fair value. The
            objective is to improve financial reporting by providing entities with the opportunity
            to mitigate volatility in reported earnings caused by measuring related assets and
            liabilities differently without having to apply complex hedge accounting provisions.
            This statement requires a business entity to report unrealized gains and losses on
            items for which the fair value option has been elected in earnings at each subsequent
            reporting date. An entity may decide whether to elect the fair value option for each
            eligible item on its election date, subject to certain requirements described in the
            statement. SFAS 159 is effective for fiscal years beginning after November 15, 2007. We
            are currently reviewing the requirements of this statement and, at this point in time,
            have not determined the impact, if any, that this statement may have on our results of
            operations and financial position.  7    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 nine months ended September 30, 2007 and 2006. This discussion
            should be read in conjunction with the financial statements and financial statement
            footnotes included in this report.  Forward-Looking Statements  Certain statements of our expectations contained herein, including, but
            not limited to statements regarding sales, commodity price, inflation and deflation,
            and capital expenditures, among other things, constitute “forward-looking
            statements.” Such statements are based 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, consumer confidence, our
            ability to negotiate favorable terms with suppliers, unanticipated weather conditions
            and the impact of competition. 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 a retail store in Brunswick, Georgia.  Going Concern  We will need additional working capital to service our debt and fund our
            operations. We have not generated sufficient revenue from operations to meet our
            operating expenses, have accumulated a deficit of $3,109,192 since inception and have a
            negative working capital of $1,415,118. These factors raises substantial doubt about
            our ability to continue as a going concern. To continue operations, we will need to
            obtain additional funding. This funding may be sought by means of private equity or
            debt financing. We currently have no commitments from any party to provide funding and
            there is no way to predict when, or if, any such funding could materialize. There is no
            assurance that we will be successful in obtaining additional funding on attractive
            terms or at all. If we are unsuccessful in obtaining additional funding, we may be
            unable to continue operations as we have insufficient working capital necessary to meet
            our expenses and service our
            debt.  8     Results of Operations  Comparison of the three months ended September 30, 2007 and
            2006.  Our business plan when we commenced operations was to build a network of
            company-owned retail stores throughout the southeastern United States beginning in
            Georgia and Florida and spreading from the smaller markets where our existing stores
            were located into larger, more profitable markets. Based on that business model, we
            spent a great deal of time and effort developing infrastructure and personnel to
            support a much larger network of stores than we had at the time. We had planned to fund
            the first phase of our expansion into several larger markets through a public offering
            of our equity securities. We undertook this public offering during 2005. The public
            offering, which closed in September 2005, however, did not provide sufficient funds to
            implement our business plan. As a result, during the latter part of 2005 and throughout
            2006 and into 2007 we have undertaken various measures to consolidate our operations,
            to reduce redundant staffing and to eliminate unnecessary infrastructure in an effort
            to control costs, decrease losses and move toward profitability. While these efforts
            have led to decreased sales volumes and revenue, they have also led to decreased cost
            of sales, operating expenses and net loss during the three and nine months ended
            September 30, 2007.  Net Revenues
  During the three months ended September 30, 2007, we realized a 52%
            decrease in net revenues. This decrease in net revenues is primarily attributable to
            the closing of our Yulee, Florida store during the fourth quarter 2006 and the
            resulting decrease in sales volume coupled with an overall slow down in construction in
            southeastern Georgia, where our store is located. As a result of the closing of our
            Yulee store and the slow down in construction, we anticipate that sales volume and
            correspondingly revenue will be lower throughout the 2007 fiscal year as compared to
            the 2006 fiscal year. We closed the Yulee store because it was under-performing. While
            the closing of the Yulee store will result in lower revenue, we believe we will realize
            a corresponding decrease in expenses that will offset the lost revenue.  Gross Profit
  Our gross profit is directly affected by our cost of sales. Cost of
            sales includes all direct costs of floor coverings, materials used in installation and
            installers’ pay. Our cost of sales and gross profits are directly affected by the
            prices we pay for the products we sell. If we are able to purchase product at lower
            prices, we are able to improve our gross profit. Our gross profit is also influenced by
            changes in the percentage of products sold to retail customers versus contractors. 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 typically also realize profit from the sale of materials used in
            installation. Contractors typically use their own subcontractors to install the floor
            covering products they purchase. Some subcontractors will provide their own materials
            for installation rather than purchase it from us.  9    Cost of sales during the three months ended September 30, 2007 was 54%
            lower than during the three months ended September 30, 2006. This decrease in cost of
            sales is partially attributable to the 52% decrease in net revenues from sales
            resulting from the closing of our Yulee store. As a percentage of net revenues, cost of
            sales was 62% during the third quarter 2007 compared to 65% during the third quarter
            2006. At the end of the 2006 fiscal year and to throughout the first nine months of
            2007 we have taken a number of steps to decrease our cost of sales as a percentage of
            revenue and to hopefully improve our margins. We negotiated agreements with several new
            vendors to supply our hardwood and tile needs. Under these agreements we will be able
            to purchase hardwood and tile products at lower cost that we were paying during 2006.
            We also increased our retail prices to our customers for most flooring products by an
            average of 10%. We believe these steps should lead to improved gross margins on product
            sales. We expect cost of sales as a percentage of net revenue to continue to be lower
            throughout 2007. During the third quarter 2007 our gross profit decreased 48%, but as a
            percentage of revenue, improved to 38% from 35% during the third quarter
            2006.  General and Administrative
                            Expenses
  General and administrative expenses for the quarter ended September 30,
            2007, decreased $130,586, or 62%, to $78,409. As a percentage of sales revenue, general
            and administrative expenses decreased to 26% during the third quarter 2007 from 33%
            during the second quarter 2006. During the three months ended September 30, 2007 and
            2006, general and administrative costs consisted of:  Three months endedSeptember 30, 2007

                        

                        September 30, 2006Salaries & benefits costs

                        

                        $   45,903

                        

                        $     88,858Advertising & display costs

                        

                        1,819

                        

                        2,319Occupancy costs & utilities

                        

                        10,103

                        

                        78,294Legal & accounting costs

                        

                        5,000

                        

                        5,000Other

                        

                        15,584

                        

                        34,524Total

                        

                        $   78,409

                        

                        $  208,995
  The 48% reduction in salaries and benefits costs during the three months
            ended September 30, 2007 is the result of a reduction in our work force from the
            closing of our Yulee store. At this time we do not anticipate additional reductions to
            our workforce. Nor do we anticipate an increase in our workforce until such time as
            revenue from operations, need and market conditions justifies expansion of our
            operations. We anticipate, that salaries and benefits costs will continue to be lower
            throughout fiscal 2007 as a result of closing our Yulee store.  During the quarter ended September 30, 2007, we decreased our
            advertising and display costs by 22% compared to the same period of 2006. As explained
            above, this decrease is primarily attributable to the closing of our Yulee store. We
            anticipate advertising and display costs will remain lower throughout the rest of
            2007.  10    Occupancy
            costs and utilities during the third quarter 2007 compared to the second quarter 2006
            decreased 87% as a result of closing our Yulee store. As part of our effort to decrease
            overhead and operating expenses, we no longer inventory product. Rather, we now order
            product for our customers as it is ordered. Our store location in Brunswick, Georgia,
            which included warehouse space, was much larger than we needed. Therefore, during
            August 2007 we negotiated a termination of the lease at our Brunswick store and moved
            to a smaller location in Brunswick. As a result of the closing of our Yulee store and
            the relocation of our Brunswick store to a smaller, less expensive location, we
            anticipate occupancy costs and utilities will continue to be lower throughout
            2007.  Legal and accounting costs remain unchanged during the three months
            ended September 30, 2007 and 2006. While these costs were unchanged during the current
            quarter, we anticipate they will increase in upcoming quarters.  Other costs decreased 55% during the three months ended September 30,
            2007 as we continued our efforts to control expenses. We anticipate other costs will to
            remain fairly constant throughout the rest of 2007.  Net Income from Operations
  As a result of the closing of our Yulee store during the fourth quarter
            2006 with its associated costs and our other efforts to decrease expense, we were able
            to realize net income from operations of $36,469 during the third quarter 2007 compared
            to net income from operations of $12,753 during the third quarter 2006. We plan to
            continue our efforts to improve product sales and reduce costs and expenses in an
            effort to increase net income from operations.  Interest Expense
  During the third quarter 2007 we incurred interest expense of $39,700
            compared to interest expense of $55,755 during the third quarter 2006. Interest expense
            decreased 29% as a result of as a result of loans from a shareholder at significantly
            lower rates than we were previously
            paying.  Net Loss
  Our net loss during the third quarter 2007 was $3,231 compared to
            $43,002 during the third quarter 2006. As discussed above, this decrease in net loss is
            primarily the result of decreases in the costs of goods sold and general and
            administrative expenses even in spite of decreased revenue during the third quarter
            2007 compared to the third quarter 2006.  For the nine months ended September 30, 2007 and
                            2006
  We incurred a net loss of $106,526 through the nine months ended
            September 30, 2007, compared to a net loss of $216,992 during the nine months ended
            September 30,
            2006.  11     Revenues
  During the first nine months of 2007, we realized a 53% decrease in net
            revenues, despite the fact that average retail product prices during the first nine
            months of 2007 were approximately 10% higher than during the nine months ended
            September 30, 2007. This decrease in net revenues is primarily attributable to the
            closing of our Yulee, Florida store during the fourth quarter 2006 and the resulting
            decrease in sales volume coupled with an overall slowdown in construction in
            southeastern Georgia, where our store is located. As a result of the closing of our
            Yulee store and the slowdown in construction, our sales volume and correspondingly
            revenue have been lower throughout the 2007 fiscal year as compared to the 2006 fiscal
            year. We closed the Yulee store because it was under-performing. While the closing of
            the Yulee store has resulted in lower revenue, we have also realized a decrease in
            expenses that will offset the lost revenue.  Gross Profit
  Gross profit during the first nine months of 2007 was $347,916, 32%
            lower than the $513,231 gross profits realized during the first nine months of 2006.
            During the first nine months of 2007, we realized a 53% decrease in net revenue. We
            also realized a 60% decrease in cost of sales during the first nine months of 2007
            compared to the first nine months of 2006. As a result of decreased revenue and
            decreased cost of products sold, cost of sales as a percentage of net revenues
            decreased from 75% during the first nine months of 2006 to 64% during the first nine
            months of 2007.  General and Administrative
                            Expenses
  General and administrative expenses for the nine months ended September
            30, 2007, decreased $244,581, or 42% to $342,594 compared to the nine months ended
            September 30, 2006. As a percentage of net revenue, however, general and administrative
            expense increased to 36% during the nine months ended September 30, 2007 from 29%
            during the nine months ended September 30, 2006. During the nine months ended September
            30, 2007 and 2006, general and administrative costs consisted of:  Nine months endedSeptember 30, 2007

                        

                        September 30, 2006Salaries & benefits costs

                        

                        $ 144,601

                        

                        $ 235,349Advertising & display costs

                        

                        7,164

                        

                        18,325Occupancy costs & utilities

                        

                        85,319

                        

                        212,263Legal & accounting costs

                        

                        38,978

                        

                        29,505Other

                        

                        66,532

                        

                        91,733Total

                        

                        $ 342,594

                        

                        $ 587,175
   The 39% reduction in salaries and benefits costs in the nine months
            ended September 30, 2007 compared to 2006 is the result of a reduction in our work
            force from the closing of our Yulee store. At this time we do not anticipate additional
            reductions to our workforce. Nor do we anticipate an increase in our workforce until
            such time as revenue from operations, need and market conditions justifies expansion of
            our  12    operations. We anticipate, that salaries and benefits costs will
            continue to be lower throughout fiscal 2007 as a result of closing our Yulee
            store.  During the nine months ended September 30, 2007 we decreased our
            advertising and display costs by 61% compared to the same period of 2006. This decrease
            is primarily attributable to the closing of our Yulee store. We anticipate advertising
            and display costs will remain lower throughout the rest of 2007.  Occupancy costs and utilities during the nine months ended September 30,
            2007 compared to the same period of 2006, decreased 60% as a result of the closing of
            our Yulee store and relocating our Brunswick store. We expect costs will be lower
            throughout the remainder of 2007.  Legal and accounting costs increased 32% to $38,978 during the nine
            month period ended September 30, 2007 compared to the nine month period ended September
            30, 2006. We anticipate legal and accounting expenses will remain consistent or
            increase in upcoming fiscal quarters in connection with our reporting
            obligations.  Other costs decreased 27% to $66,532 during the nine month period ended
            September 30, 2007 compared to the nine month period ended September 30, 2006 as we
            continued our efforts to control expenses. We anticipate other costs will to remain
            fairly constant in upcoming quarters.  Net Loss
  For the reasons disclosed above, during the nine months ended September
            30, 2007 we realized a net loss of $106,526 compared to a net loss of $216,992 during
            the first nine months of 2006. 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.  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
            $3,109,192 and negative working capital of $1,415,118. 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. As noted above, we have also been making changes in operations
            to reduce expenses. We may 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. As noted above, these factors raise substantial doubt about our ability to
            continue as a going concern. Given the foregoing, we may also investigate other
            business opportunities that will allow us to realize the highest value for our
            shareholders.  13    During the nine months ended September 30, 2007 and 2006 cash was
            primarily used to fund operations. See below for additional discussion and analysis of
            cash flow.  Nine months ended September 30, 2007

                        

                        Nine months ended September 30, 2006Net cash provided by (used in) operatingactivities

                        $       49,432

                        

                        $
                            (363,475)Net cash provided by investing activities

                        $         6,000

                        

                        $               -Net cash provided by (used in) financingactivities

                        $    (80,307)

                        

                        $     331,330NET INCREASE (DECREASE) IN CASH

                        $    (24,875)

                        

                        $      32,145
   As discussed herein, during the nine months ended September 30, 2007
            compared to the nine months ended September 30, 2006, product sales, cost of sales and
            general and administrative expenses decreased leading to a decrease in net loss from
            $216,992 to $106,526. We also realized decreases in accounts payable and inventory as
            we made a conscious effort to reduce amounts owed to vendors in an effort to improve
            our relations and hopefully the pricing we receive from the vendors we work with
            coupled with our efforts to eliminate inventory and to order product only when it is
            ordered by the customer.  During the nine months ended September 30, 2007 total liabilities
            increased to $2,669,589 from $2,459,775 as we continued to rely on loans and a credit
            line from a related-party to fund the short falls in our operating revenue.  As of September 30, 2007 and 2006, we had cash on hand of $605 and
            $32,137, respectively.  Summary of Material Contractual Commitments  The
                            following table lists our significant commitments as of September 30,
                            2007.
   Payments Due by Fiscal YearContractual Commitments

                        

                        Total

                        

                        Less than 1 year

                        

                        2-3 years

                        

                        4-5 years

                        

                        After

                            5 yearsLines of Credit-Related Party

                        

                        $   944,710

                        

                        $   944,710

                        

                        $         -0-

                        

                        $          -0-

                        

                        $           -0-Notes Payable – Related Party

                        

                        1,050,916

                        

                        3,424

                        

                        29,612

                        

                        33,963

                        

                        983,917Long-term Debt

                        

                        437,748

                        

                        173,426

                        

                        264,322

                        

                        -0-

                        

                        -0-Operating leases

                        

                        44,000

                        

                        44,000

                        

                        -0-

                        

                        -0-

                        

                        -0-Total

                        

                        $2,477,374

                        

                        $1,165,560

                        

                        $ 293,934

                        

                        $   33,963

                        

                        $  983,917
   14     Off-Balance Sheet Financing Arrangements  As of September 30, 2007 and 2006, we had no off-balance sheet financing
            arrangements.  Critical Accounting Policies  Revenue Recognition
  We recognize revenue according to Staff Accounting Bulletin 104,
            Revenue Recognition which clarifies U.S.
            generally accepted accounting principles for 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.  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 Financial Accounting Standards  In February 2007, the FASB issued SFAS 159 “The Fair Value Option
            for Financial Assets and Financial Liabilities.”  This statement permits
            entities to choose to  15    measure many financial instruments and certain other items at fair value
            that are not currently  required to be measured at fair value. The objective is to
            improve financial reporting by providing entities with the opportunity to mitigate
            volatility in reported earnings caused by measuring related assets and liabilities
            differently without having to apply complex hedge accounting provisions. This statement
            requires a business entity to report unrealized gains and losses on items for which the
            fair value option has been elected in earnings at each subsequent reporting date. An
            entity may decide whether to elect the fair value option for each eligible item on its
            election date, subject to certain requirements described in the statement. SFAS 159 is
            effective for fiscal years beginning after November 15, 2007. We are currently
            reviewing the requirements of this statement and, at this point in time, have not
            determined the impact, if any, that this statement may have on our results of
            operations and financial position. Item 3. Controls and Procedures  Evaluation of Disclosure Controls and Procedures  We maintain disclosure controls and procedures, as such term is defined
            in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
            amended (the “Exchange Act”), that are designed to provide reasonable
            assurance that information required to be disclosed by us in the reports that we file
            or submit under the Exchange Act is recorded, processed, summarized and reported within
            the time periods specified in the SEC rules and forms, and that such information
            is accumulated and communicated to our management, including our principal executive
            officer and principal financial officer, as appropriate, to allow timely decisions
            regarding required financial disclosures. Because of inherent limitations, our
            disclosure controls and procedures, no matter how well designed and operated, can
            provide only reasonable, and not absolute, assurance that the objectives of such
            disclosure controls and procedures are met.  As of the end of the period covered by this Report we conducted an
            evaluation, under the supervision and with the participation of our management,
            including our principal executive officer and principal financial officer, of the
            effectiveness of the design and operation of our disclosure controls and procedures
            pursuant to Exchange Act Rules 13a-15(b) and 15d-15(b). Based on this
            evaluation, our principal executive officer and principal financial officer concluded
            that our disclosure controls and procedures were effective as of September 30,
            2007.  Changes in Internal Control over Financial Reporting  There were no changes in our internal control over financial reporting
            during the quarter ended September 30, 2007 that materially affected, or are reasonably
            likely to materially affect, our internal control over financial reporting.  16     PART II - OTHER INFORMATION  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 2002Exhibit 31.2

                        

                        Certification of Principal Financial Officer Pursuant to
                            Section 302 of the Sarbanes-Oxley Act of 2002Exhibit 32.1

                        

                        Certification of Principal Executive Officer Pursuant to
                            Section 906 of the Sarbanes-Oxley Act of 2002Exhibit 32.2

                        

                        Certification of Principal Executive Officer Pursuant to
                            Section 906 of the Sarbanes-Oxley Act of 2002
   SIGNATURES  In accordance with Section 12 of the Securities Exchange Act of 1934,
            the registrant caused this report to be signed on its behalf, thereunto duly
            authorized.  THE FLOORING ZONE, INC.   Date:

                        November 19, 2007

                        

                        By:

                        /s/ Michael CarrollMichael CarrollChief Executive Officer and

                            Chief Financial Officer
    17