UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
DC 20549





FORM
10-Q





(Mark
One)





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





For the
quarterly period ended August 31, 2009


OR


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




For the
transition period
from ___________________________ to ___________________________





Commission
file number: 000-52064





GRACE
4, INC.





(Exact
Name of Registrant as Specified in Its Charter)





Delaware
              
              20-3708625(State of Other Jurisdiction of Incorporation or
                Organization)
              
              (I.R.S. Employer Identification Number)2 Bridge Avenue
                Red Bank, New Jersey 07701
              
              07701(Address
      of Principal Executive Offices)
              
              (Zip
      Code)





(732)
530-9007





(Registrant’s
Telephone Number, Including Area Code)





N/A


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





Copies
to:


The
Sourlis Law Firm


Virginia
K. Sourlis, Esq.


The
Galleria


2 Bridge
Avenue


Red Bank,
New Jersey 07701


(732)
530-9007


www.SourlisLaw.com





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yesx  Noo





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




Large
      accelerated filer
                 ̈
                Accelerated
      filer
                 ̈Non-accelerated
      filer
                 ̈
                Smaller
      reporting company
                x





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





Indicate
the number of shares outstanding of each of the registrant’s classes of common
stock, as of the latest practicable date.





As of
October 13, 2009, there were 100,000 shares of common stock outstanding and no
shares of preferred stock outstanding.













GRACE 4,
INC.


A
DEVELOPMENT STAGE COMPANY


INDEX


August
31, 2009




TABLE
OF CONTENTS





PagePART
      I – FINANCIAL INFORMATIONItem
      1.
                    Financial
      Statements
                    
                    3Item
      2.
                    Management’s
      Discussion and Analysis of Financial Condition and Plan
      of  Operations
                    
                    8Item
      3.
                    Quantitative
      and Qualitative Disclosures About Market Risk
                    
                    10Item
      4T.
                    Controls
      and Procedures
                    
                    10PART
      II – OTHER INFORMATIONItem
      1.
                    Legal
      Proceedings
                    
                    11Item
      1A.
                    Risk
      Factors
                    
                    11Item
      2.
                    Unregistered
      Sale of Equity Securities and Use of Proceeds
                    
                    11Item
      3.
                    Defaults
      Upon Senior Securities
                    
                    11Item
      4.
                    Submission
      of Matters to a Vote of Security Holders
                    
                    11Item
      5.
                    Other
      Information
                    
                    11Item
      6.
                    Exhibits
                    
                    1111SIGNATURES
                    
                    
                    11




2





PART
I





Item
1. Financial Statements.





GRACE
      4, INC.A
      DEVELOPMENT STAGE COMPANYBALANCE
      SHEETSAugust 31, 2009
                                  
                                  
                                  May 31, 2009(Unaudited)
                                  
                                  
                                  (Audited)ASSETSCash
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  -Prepaid
      expenses
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Total
      assets
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -LIABILITIES AND STOCKHOLDER'S
      EQUITYCurrent liabilitiesAccounts
      payable
                                  
                                  
                                  1,650
                                  
                                  
                                  
                                  500Total
      liabilities
                                  
                                  
                                  1,650
                                  
                                  
                                  
                                  500Commitment
      and contingencies
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Stockholder's equity
    (deficit)Preferred
      stock, $.0001 par value, authorized 10,000,000 shares, none
      issued
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Common
      stock, $.0001 par value, authorized 100,000,000 shares 100,000 issued and
      outstanding
                                  
                                  
                                  10
                                  
                                  
                                  
                                  10Additional
      paid-in capital
                                  
                                  
                                  12,184
                                  
                                  
                                  
                                  12,034Deficit
      accumulated during the development stage
                                  
                                  
                                  (13,844
                                  )
                                  
                                  
                                  (12,544
                                  )Total
      stockholder's equity (deficit)
                                  
                                  
                                  (1,650
                                  )
                                  
                                  
                                  (500
                                  )Total
      liabilities and stockholder's equity (deficit)
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  -





The
financial information presented herein has been prepared by management without
audit by


independent
certified public accountants.





The
accompanying notes should be read in conjunction with the financial
statements


3





GRACE
      4, INC.A
      DEVELOPMENT STAGE COMPANYSTATEMENTS
      OF OPERATIONSFor
      the periodFor
      the three
                          
                          
                          For
      the three
                          
                          
                          October
      27, 2005months
      ended
                          
                          
                          months
      ended
                          
                          
                          (Inception)
      toAugust 31, 2009
                          
                          
                          August 31, 2008
                          
                          
                          August 31, 2009(Unaudited)
                          
                          
                          (Unaudited)
                          
                          
                          (Unaudited)Net
      sales
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -Cost
      of sales
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Gross
      profit
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -General
      and administrative expenses
                          
                          
                          1,300
                          
                          
                          
                          750
                          
                          
                          
                          13,844Net
      loss
                          
                          $
                          (1,300
                          )
                          
                          $
                          (750
                          )
                          
                          $
                          (13,844
                          )Weighted
      average number of  common shares outstanding (basic and fully
      diluted)
                          
                          
                          100,000
                          
                          
                          
                          100,000
                          
                          
                          
                          100,000Basic
      and diluted (loss) per common share
                          
                          $
                          (0.01
                          )
                          
                          $
                          (0.01
                          )
                          
                          $
                          (0.14
                          )





The
financial information presented herein has been prepared by management without
audit by


independent
certified public accountants.





The
accompanying notes should be read in conjunction with the financial
statements


4




GRACE
      4, INC.A
      DEVELOPMENT STAGE COMPANYSTATEMENTS
      OF CASH FLOWSPeriod
      fromFor
      the three
                            
                            
                            For
      the three
                            
                            
                            October
      27, 2005months
      ended
                            
                            
                            months
      ended
                            
                            
                            (inception
      ) toAugust
      31, 2009
                            
                            
                            August
      31, 2008
                            
                            
                            August
      31, 2009(Unaudited)
                            
                            
                            (Unaudited)
                            
                            
                            (Unaudited)Cash
      flows from operating activitiesNet
      (loss)
                            
                            $
                            (1,300
                            )
                            
                            $
                            (750
                            )
                            
                            $
                            (13,844
                            )Adjustments
      to reconcile net (loss) to net cash used in operating
      activities:(Increase)
      decrease in prepaid expenses
                            
                            
                            -
                            
                            
                            
                            -Increase
      (decrease) in accounts payable
                            
                            
                            1,150
                            
                            
                            
                            (2,000
                            )
                            
                            
                            1,650Net
      cash (used in) operating activities
                            
                            
                            (150
                            )
                            
                            
                            (2,750
                            )
                            
                            
                            (12,194
                            )Cash
      flows from financing activitiesProceeds
      from issuance of common stock
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            100Proceeds
      from additional capital contributions
                            
                            
                            150
                            
                            
                            
                            2,750
                            
                            
                            
                            12,094Net
      cash provided by financing activities
                            
                            
                            150
                            
                            
                            
                            2,750
                            
                            
                            
                            12,194Net
      increase in cash and cash equivalents
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -Cash
      - beginning of period
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -Cash
      - end of period
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            -Supplemental
      disclosure of cash flow information:Taxes
      paid
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -Interest
      paid
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            -





The
financial information presented herein has been prepared by management without
audit


by
independent certified public accountants.





The
accompanying notes should be read in conjunction with the financial
statements.


5


GRACE 4,
INC.


A
DEVELOPMENT STAGE COMPANY


NOTES TO
FINANCIAL STATEMENTS


August
31, 2009










NOTE
1.    BASIS OF PRESENTATION AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Nature of
Business





Grace 4,
Inc. (“the Company”) was incorporated in the State of Delaware on October 27,
2005 and is currently in its development stage.  Since inception and
through August 31, 2009, the Company has not maintained any
operations.





As a
blank check company, the Company’s business is to pursue a business combination
through acquisition, or merger with, an existing company. As of the date of the
financial statements, the Company has made no efforts to identify a possible
business combination. As a result, the Company has not conducted negotiations or
entered into a letter of intent concerning any target business. No assurances
can be given that the Company will be successful in locating or negotiating with
any target company. Since inception, the Company has been engaged in
organizational efforts.





Basis of
Presentation





The
accompanying unaudited financial statements have been prepared in accordance
with U.S. generally accepted accounting principles and pursuant to the rules and
regulations of the Securities and Exchange Commission (the “SEC”) and reflect
all adjustments, consisting of normal recurring adjustments, which management
believes are necessary to fairly present the financial position, results of
operations and cash flows of the Company for the respective periods
presented.  The results of operations for an interim period are not
necessarily indicative of the results that may be expected for any other interim
period or the year as a whole. The accompanying unaudited financial statements
should be read in conjunction with the audited financial statements and notes
thereto in the Company’s Annual Report on Form 10-K for the fiscal year ended
May 31, 2009 as filed with the SEC on July 17, 2009.





Use of
Estimates





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported revenues and expenses during the
reporting periods. Because of the use of estimates inherent in the financial
reporting process, actual results may differ significantly from those
estimates.





Cash and Cash
Equivalents





For
purposes of the statement of cash flows, the Company considers highly liquid
financial instruments purchased with a maturity of three months or less to be
cash equivalents.





For the
period October 27, 2005 (inception) through August 31, 2009, the Company did not
maintain any bank accounts.





Fair Value of Financial
Instruments





The fair
value of accounts payable and accrued expenses approximate the carrying amount
of these financial instruments due to their short-term maturity.





Net Loss Per Share
Calculation





In
February 1997, the FASB issued SFAS No. 128, “Earnings per Share.” Basic net
loss per common share ("EPS") is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding for the
period.   Diluted earnings per shares is computed by dividing net
income by the weighted average shares outstanding, assuming all dilutive
potential common shares were issued.





The
weighted-average number of common shares outstanding for computing basic EPS for
the three months ended August 31, 2009 and August 31, 2008 were 100,000,
respectively.





Income
Taxes





Income
taxes are provided for using the liability method of accounting in accordance
with SFAS No. 109 "Accounting for Income Taxes," and clarified by FIN 48,
"Accounting for Uncertainty in Income Taxes an interpretation of FASB Statement
No. 109." A deferred tax asset or liability is recorded for all temporary
differences between financial and tax reporting. Temporary differences are the
differences between the reported amounts of assets and liabilities and their tax
basis.


6





Deferred
tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all of the deferred
tax assets will not be realized. Deferred tax assets and liabilities are
adjusted for the effect of changes in tax laws and rates on the date of
enactment.





Recently Issued Accounting
Pronouncements





As of
August 31, 2009, the Company does not expect any of the recently issued
accounting pronouncements to have a material impact on its financial condition
or results of operations.





NOTE
2.              
PREFERRED
STOCK





The
Company is authorized to issue 10,000,000 shares of preferred stock. The
Preferred Stock of the Company shall be issued by the Board of Directors of the
Company in one or more classes or one or more series within any class and such
classes or series shall have such voting powers, full or limited, or no voting
powers, and such designations, preferences, limitations or restrictions as the
Board of Directors of the Company may determine, from time to time.




As of
August 31, 2009, there was no preferred stock of the Company issued and
outstanding.





NOTE
3.              
COMMON
STOCK





The
Company is authorized to issue 100,000,000 shares of common stock. On October
27, 2005, the Company issued 100,000 shares of common stock for total
consideration of $10 to the sole shareholder of the Company.





Holders
of shares of common stock shall be entitled to cast one vote for each share held
at all stockholders’ meetings for all purposes, including the election of
directors. The common stock does not have cumulative voting rights. No holder of
shares of stock of any class shall be entitled as a matter of right to subscribe
for or purchase or receive any part of any new or additional issue of shares of
stock of any class, or of securities convertible into shares of stock of any
class, whether now hereafter authorized or whether issued for money, for
consideration other than money, or by way of dividend.





As of
August 31, 2009, there were 100,000 shares of common stock of the Company issued
and outstanding.





NOTE
4.              
RELATED PARTY
TRANSACTIONS





The
Company utilizes the office space and equipment of its sole stockholder at no
cost to the Company. Management estimates such amounts to be
immaterial.





For the
three months ended August 31, 2009 and August 31, 2008, the rent expense was
zero.





NOTE
5.              
INCOME
TAXES





As of
August 31, 2009, the Company has approximately $5,399 in gross deferred tax
assets resulting from net operating loss carry forwards. A valuation allowance
has been recorded to fully offset these deferred tax assets because the future
realization of the related income tax benefits is uncertain. Accordingly, the
net provision for income taxes is zero for the period October 27, 2005
(inception) to August 31, 2009.





As of
August 31, 2009, the Company has federal net operating loss carry forwards of
approximately $13,844  available to offset future taxable income
through 2026.





For the
period October 27, 2005 (inception) to August 31, 2009, the difference between
the tax provision at the statutory federal income tax rate and the tax provision
attributable to loss before income taxes is as follows (in
percentages):




Statutory
      federal income tax rate
                
                
                -34
                %State
      taxes - net of federal benefits
                
                
                -5
                %Valuation
      allowance
                
                
                39
                %Income
      tax rate – net
                
                
                0
                %





NOTE
7.              
GOING
CONCERN





The
Company’s financial statements have been presented on the basis that it is a
going concern in the development stage, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business. As
of the date of these financial statements, the Company has made no efforts to
identify a possible business combination.


7





The
Company’s sole shareholder shall fund the Company’s activities while the Company
takes steps to locate and negotiate with a business entity through acquisition,
or merger with, an existing company; however, there can be no assurance these
activities will be successful.





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





Forward-Looking
Statements





This
Report contains statements that we believe are, or may be considered to be,
“forward-looking statements” within the meaning of the Private Securities
Litigation Reform Act of 1995. All statements other than statements of
historical fact included in this Report regarding the prospects of our industry
or our prospects, plans, financial position or business strategy, may constitute
forward-looking statements. In addition, forward-looking statements generally
can be identified by the use of forward-looking words such as “may,” “will,”
“expect,” “intend,” “estimate,” “foresee,” “project,” “anticipate,” “believe,”
“plans,” “forecasts,” “continue” or “could” or the negatives of these terms or
variations of them or similar terms. Furthermore, such forward-looking
statements may be included in various filings that we make with the SEC or press
releases or oral statements made by or with the approval of one of our
authorized executive officers. Although we believe that the expectations
reflected in these forward-looking statements are reasonable, we cannot assure
you that these expectations will prove to be correct. These forward-looking
statements are subject to certain known and unknown risks and uncertainties, as
well as assumptions that could cause actual results to differ materially from
those reflected in these forward-looking statements. Readers are cautioned not
to place undue reliance on any forward-looking statements contained herein,
which reflect management’s opinions only as of the date hereof. Except as
required by law, we undertake no obligation to revise or publicly release the
results of any revision to any forward-looking statements. You are advised,
however, to consult any additional disclosures we make in our reports to the
SEC. All subsequent written and oral forward-looking statements attributable to
us or persons acting on our behalf are expressly qualified in their entirety by
the cautionary statements contained in this Report.




Plan
of Operation; Going Concern





The
Company has not realized any revenues from operations since inception, and its
plan of operation for the next twelve months is to locate a suitable acquisition
or merger candidate and consummate a business combination. There is substantial
doubt that we will continue as a going concern. The Company may need additional
cash advances from its stockholder or loans from other parties to pay for
operating expenses until the Company consummates a merger or business
combination with a privately-held operating company. Although it is currently
anticipated that the Company can satisfy its cash requirements with additional
cash advances or loans from other parties, if needed, for at least the next
twelve months, the Company can provide no assurance that it can continue to
satisfy its cash requirements for such period.





Since our
formation on October 27, 2005, our purpose has been to effect a business
combination with an operating business which we believe has significant growth
potential. We are currently considered to be a “blank check” company in as much
as we have no specific business plans, no operations, revenues or employees. We
currently have no definitive agreements or understanding with any prospective
business combination candidates and have not targeted any business for
investigation and evaluation nor are there any assurances that we will find a
suitable business with which to combine. The implementation of our business
objectives is wholly contingent upon a business combination and/or the
successful sale of securities in the company.





Management
anticipates seeking out a target company through solicitation. Such solicitation
may include newspaper or magazine advertisements, mailings and other
distributions to law firms, accounting firms, investment bankers, financial
advisors and similar persons, the use of one or more Internet websites and
similar methods. No estimate can be made as to the number of persons who will be
contacted or solicited. Management may engage in such solicitation directly or
may employ one or more other entities to conduct or assist in such solicitation.
Management and its affiliates will pay referral fees to consultants and others
who refer target businesses for mergers into public companies in which
management and its affiliates have an interest. Payments are made if a business
combination occurs, and may consist of cash or a portion of the stock in the
Company retained by management and its affiliates, or both.





The
Company and/or its sole shareholder will supervise the search for target
companies as potential candidates for a business combination. The Company and/or
its sole shareholder may pay as their own expenses any costs incurred in
supervising the search for a target company. The Company and/or its shareholder
may enter into agreements with other consultants to assist in locating a target
company and may share stock received by it or cash resulting from the sale of
its securities with such other consultants.





As a
result of our limited resources, we expect to effect only a single business
combination. Accordingly, the prospects for our success will be entirely
dependent upon the future performance of a single business. Unlike certain
entities that have the resources to consummate several business combinations or
entities operating in multiple industries or multiple segments of a single
industry, we will not have the resources to diversify our operations or benefit
from the possible spreading of risks or offsetting of losses. A target business
may be dependent upon the development or market acceptance of a single or
limited number of products, processes or services, in which case there will be
an even higher risk that the target business will not prove to be commercially
viable.





Our
officers and directors are only required to devote a very limited portion of
their time to our affairs on a part-time or as-needed basis. We expect to use
outside consultants, advisors, attorneys and accountants as necessary, none of
which will be hired on a retainer basis. We do not anticipate hiring any
full-time employees so long as we are seeking and evaluating business
opportunities.


8


We expect
our present management to play no managerial role in the Company following a
merger or business combination. Although we intend to scrutinize closely the
management of a prospective target business in connection with our evaluation of
a business combination with a target business, our assessment of management may
be incorrect. We cannot assure you that we will find a suitable business with
which to combine.





Results
of Operations





Comparison
of Three Months Ended August 31, 2009 to August 31, 2008





General. The Company has not
conducted any active operations since inception, except for its efforts to
locate a suitable acquisition or merger transaction. No revenue has been
generated by the Company during such period, and it is unlikely the Company will
have any revenues unless it is able to effect an acquisition of or merger with
another operating company, of which there can be no assurance.





Assets. At August 31, 2009,
the Company had $0 in assets, compared to $0 at May 31, 2009.





Liabilities.At August
31, 2009, the Company had $1,650 in total liabilities. At May 31, 2009, the
Company had total liabilities of $500. Total liabilities consisted of accounts
payable. The accounts payable consists of accounting fees and SEC filing
fees.





Revenues. For the three month
periods ended August 31, 2009 and August 31, 2008 and for the period from
October 27, 2005 (Inception) to August 31, 2009, the Company had no activities
that produced revenues from operations.





Net Loss. For the three month
period ended August 31, 2009 and August 31, 2008, the Company had a net loss of
$1,300 and $750, respectively. From the Company’s date of inception (October 27,
2005) to August 31, 2009, the Company had net losses of $13,844. These losses
were due to accounting, audit and other professional service fees incurred in
relation to the filing of the Company’s Registration Statement on Form 10-SB
filed on June 19, 2006 and annual and quarterly reports filed since the
effectiveness of such registration statement.





General and Administrative
Expenses. For the three months ended August 31, 2009 and August 31, 2008,
the Company had general and administrative expenses of $1,300 and $750,
respectively. From the Company’s date of inception (October 27, 2005) to August
31, 2009, the Company had general and administrative expenses of $13,844. These
expenses were due to legal, accounting, audit and other professional service
fees incurred in relation to the filing of the Company’s Registration Statement
on Form 10-SB filed on June 19, 2006 and annual and quarterly reports filed
since the effectiveness of such registration statement.





Liquidity
and Capital Resources





As of
August 31, 2009, the Company had $0 in total assets. At May 31, 2009, the
Company had $0 in total assets. The Company’s current liabilities at August 31,
2009 and at May 31, 2009, totaled $1,650 and $500, respectively, comprised of
accounts payable.





The
following is a summary of the Company's cash flows from operating, investing,
and financing activities:





For the
Three Months Ended August 31, 2009 and August 31, 2008 and


the
Period from October 27, 2005 (Date of Inception) to August 31, 2009





For the Three Months Ended
                          August
      31,
                        
                        Period from
                          October 27,
                          2005 to
                          August
      31,2009
                        
                        
                        2008
                        
                        
                        2009Net
      Cash (Used in) Operating  Activities
                        
                        $
                        (150)
                        
                        
                        $
                        (2,750
                        )
                        
                        $
                        (12,194
                        )Investing
      Activities
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        -Net
      Cash Provided from Financing Activities
                        
                        $
                        150
                        
                        
                        $
                        2,750
                        
                        
                        $
                        12,194Net
      effect on cash
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        -





The
Company has no assets and has generated no revenues since inception. The Company
is also dependent upon the receipt of capital investment or other financing to
fund its ongoing operations and to execute its business plan of seeking a
combination with a private operating company. If continued funding and capital
resources are unavailable at reasonable terms, the Company may not be able to
implement its plan of operations.


9


As of
August 31, 2009, the Company had no capital resources to fund administrative
expenses pending acquisition of an operating company. The Company has not
realized any revenues from operations since inception, and its plan of operation
for the next twelve months is to locate a suitable acquisition or merger
candidate and consummate a business combination. There is substantial doubt that
we will continue as a going concern. The Company may need additional cash
advances from its stockholder or loans from other parties to pay for operating
expenses until the Company consummates a merger or business combination with a
privately-held operating company. Although it is currently anticipated that the
Company can satisfy its cash requirements with additional cash advances or loans
from other parties, if needed, for at least the next twelve months, the Company
can provide no assurance that it can continue to satisfy its cash requirements
for such period.





Off-Balance
Sheet Arrangements





The
Company does not have any off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on the Company’s financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that is
material to investors.





Going
Concern





The
Company’s financial statements have been presented on the basis that it is a
going concern in the development stage, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business. As
of the date of these financial statements, the Company has made no efforts to
identify a possible business combination.





The
Company’s shareholder shall fund the Company’s activities while the Company
takes steps to locate and negotiate with a business entity through acquisition,
or merger with, an existing company; however, there can be no assurance these
activities will be successful. These matters raise substantial doubt about
the Company’s ability to continue as a going concern.





Item 3.  Quantitative and Qualitative
Disclosures about Market Risk





N/A.





Item
4T. Controls and Procedures.





Evaluation
of Controls and Procedures.





In
accordance with Exchange Act Rules 13a-15 and 15d-15, our management is required
to perform an evaluation under the supervision and with the participation of the
Company’s management, including the Company’s principal executive officer and
principal financial officer, of the effectiveness of the design and operation of
the Company’s disclosure controls and procedures as of the end of the
period.




Evaluation
of Disclosure Controls and Procedures




Based on
their evaluation of our disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Exchange Act) as of August 31, 2009, our
Principal Executive Officer and Principal Financial Officer have concluded that
our disclosure controls and procedures were  not  effective to
ensure that the information required to be disclosed by us in this Report was
(i) recorded, processed, summarized and reported within the time periods
specified in the SEC’s rules and instructions for Form 10-Q.





Our
Principal Executive Officer and Principal Financial Officer have concluded that
our disclosure controls and procedures had the following
deficiency:




●
            We
      were unable to maintain any segregation of duties within our business
      operations due to our reliance on a single individual fulfilling the role
      of sole officer and director. While this control deficiency did not result
      in any audit adjustments to our 2007 through 2009 interim or annual
      financial statements, it could have resulted in a material misstatement
      that might have been prevented or detected by a segregation of duties.
      Accordingly we have determined that this control deficiency constitutes a
      material weakness.





To the
extent reasonably possible, given our limited resources, our goal is, upon
consummation of a merger with a private operating company, to separate the
responsibilities of principal executive officer and principal financial officer,
intending to rely on two or more individuals. We will also seek to expand our
current board of directors to include additional individuals willing to perform
directorial functions. Since the recited remedial actions will require that we
hire or engage additional personnel, this material weakness may not be overcome
in the near term due to our limited financial resources. Until such remedial
actions can be realized, we will continue to rely on the advice of outside
professionals and consultants.


10


Changes
in Internal Controls.





No change
in our internal control over financial reporting (as defined in Rules 13a-15(f)
and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended
August 31, 2009 that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial
reporting.





PART
II


OTHER
INFORMATION





Item
1. Legal Proceedings.





The
Company is currently not a party to any pending legal proceedings and no such
action by or to the best of its knowledge, against the Company has been
threatened.





Item
1A. Risk Factors.





N/A




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





None





Item
3. Defaults Upon Senior Securities.





None.





Item
4. Submission of Matters to a Vote of Security Holders.





None.





Item
5. Other Information.





None




Item
6. Exhibits.





Exhibit No.
                                
                                Description*3.1
                                
                                Certificate
      of Incorporation, as filed with the Delaware Secretary of State on October
      27, 2005.*3.2
                                
                                Bylaws31.1
                                
                                Certification
      by Virginia K. Sourlis, the Principal Executive Officer and Principal
      Financial Officer of Grace 4, Inc., pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      200232.1
                                
                                Certification
      by Virginia K. Sourlis, the Principal Executive Officer and Principal
      Financial Officer of Grace 4, Inc., pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002







* Filed
as an exhibit to the Company’s Registration Statement on Form 10-SB (File No.
000-52064), as filed with the Securities and Exchange Commission on June 19,
2006, and incorporated herein by this reference.





SIGNATURES





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





Dated:  October
13, 2009


Grace
      4, Inc.By:
                    /s/
      VIRGINIA K. SOURLISVirginia
      K. SourlisPresident(Principal
      Executive Officer)(Principal
      Financial
Officer)


11