**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**WASHINGTON,      DC 20549**

**FORM      10-Q**

**x      QUARTERLY REPORT      PURSUANT TO SECTION 13 OR 15(d) **

**OF      THE SECURITIES EXCHANGE ACT OF 1934**

**August      31, 2008**

**000-52065**

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**Grace      5, Inc.**

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| **Delaware**                                                                 |   | **20-3708668**                                      |
|------------------------------------------------------------------------------|--------|-----------------------------------------------------|
| (State                or other jurisdiction of incorporation ororganization) |   | (I.R.S.                Employer Identification No.) |

**2      Bridge Avenue**

**Red      Bank, New Jersey 07701**

**(732) 530-9007 **

**N/A**

**www.SourlisLaw.com**

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

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**TABLE      OF CONTENTS**

| **ITEM                1. FINANCIAL INFORMATION**                                                                                  |   |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                              |   |
| Item                1. Financial Statements                                                                                       | 3      |
|                                                                                                                              |   |
| Item                2. Management’s Discussion and Analysis of Financial Condition and Results                of Operations | 10     |
|                                                                                                                              |   |
| Item                3. Quantitative and Qualitative Disclosures About Market                Risk                                  | 12     |
|                                                                                                                              |   |
| Item              4T. Controls and Procedures                                                                                | 12     |
|                                                                                                                              |   |
| **PART                II - OTHER INFORMATION**                                                                                    |   |
|                                                                                                                              |   |
| Item                1. Legal Proceedings                                                                                          | 13     |
|                                                                                                                              |   |
| Item                1A. Risk Factors                                                                                              | 13     |
|                                                                                                                              |   |
| Item                2. Unregistered Sales of Equity Securities and Use of                Proceeds                                 | 13     |
|                                                                                                                              |   |
| Item                3. Defaults Upon Senior Securities                                                                            | 13     |
|                                                                                                                              |   |
| Item                4. Submission of Matters to a Vote of Security Holders                                                        | 13     |
|                                                                                                                              |   |
| Item                5. Other Information                                                                                          | 13     |
|                                                                                                                              |   |
| Item                6. Exhibits                                                                                                   | 13     |

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**PART      I - FINANCIAL INFORMATION**

**Item      1.**
**      Financial Statements.**

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|                                                                                                                                      |   | August 31, 2008 |    | May                31, 2008 |   |
|-------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------|---------|-----------------------------|--------|
|                                                                                                                                      |   | (Unaudited)               |    | (Audited)                   |   |
| Assets                                                                                                                                    |   |                      |    |                        |   |
|                                                                                                                                      |   |                      |    |                        |   |
| Total                assets                                                                                                               |   | $                         | -       |                        | $      | - |   |
|                                                                                                                                      |   |                      |    |                        |   |   |   |
| LIABILITIES                AND STOCKHOLDER'S EQUITY                                                                                       |   |                      |    |                        |   |   |   |
|                                                                                                                                      |   |                      |    |                        |   |   |   |
| Current                liabilities                                                                                                        |   |                      |    |                        |   |   |   |
| Accounts                payable                                                                                                           |   |                      | -       |                        |   | 2,000 |   |
| Total                liabilities                                                                                                          |   |                      | -       |                        |   | 2,000 |   |
|                                                                                                                                      |   |                      |    |                        |   |  |   |
| Commitment                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      |                        |   | 10 |   |
| Additional                paid-in capital                                                                                                 |   |                      | 10,534  |                        |   | 7,784 |   |
| Deficit                accumulated during the development stage                                                                           |   |                      | (10,544 | )                           |   | (9,794 | ) |
|                                                                                                                                      |   |                      |    |                        |   |   |   |
| Total                stockholder's equity (deficit)                                                                                       |   |                      | -       |                        |   | (2,000 | ) |
|                                                                                                                                      |   |                      |    |                        |   |   |   |
| Total                liabilities and stockholder's equity (deficit)                                                                       |   | $                         | -       |                        | $      | - |   |

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|                                                                                                         |   |                      |    |                      |   | For the period   |   |
|--------------------------------------------------------------------------------------------------------------|--------|---------------------------|---------|---------------------------|--------|----------------------------|--------|
|                                                                                                         |   | For the three   |    | For the three   |   | October 27, 2005 |   |
|                                                                                                         |   | months ended         |    | months ended         |   | (Inception) to        |   |
|                                                                                                         |   | August 31, 2008 |    | August 31, 2007 |   | August 31, 2008  |   |
|                                                                                                         |   | (Unaudited)               |    | (Unaudited)               |   | (Unaudited)                |   |
|                                                                                                         |   |                      |    |                      |   |                       |   |
| Net                sales                                                                                     |   | $                         | -       |                      | $      | -                          |   | $ | - |   |
|                                                                                                         |   |                      |    |                      |   |                       |   |   |   |   |
| Cost                of sales                                                                                 |   |                      | -       |                      |   | -                          |   |   | - |   |
|                                                                                                         |   |                      |    |                      |   |                       |   |   |   |   |
| Gross                profit                                                                                  |   |                      | -       |                      |   | -                          |   |   | - |   |
|                                                                                                         |   |                      |    |                      |   |                       |   |   |   |   |
| General                and administrative expenses                                                           |   |                      | 750     |                      |   | 750                        |   |   | 10,544 |   |
|                                                                                                         |   |                      |    |                      |   |                       |   |   |   |   |
| Net                loss                                                                                      |   | $                         | (750    | )                         |   | (750                       | )      | $ | (10,544 | ) |
|                                                                                                         |   |                      |    |                      |   |                       |   |   |   |   |
| Weighted                average number of common shares outstanding (basic and fully                diluted) |   |                      | 100,000 |                      |   | 100,000                    |   |   | 100,000 |   |
|                                                                                                         |   |                      |    |                      |   |                       |   |   |   |   |
| Basic                and diluted (loss) per common share                                                     |   | $                         | (0.01   | )                         | $      | (0.01                      | )      | $ | (0.11 | ) |

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|                                               |   |               |    |               |   |                    |   | Deficit               |   |                  |   |
|----------------------------------------------------|--------|--------------------|---------|--------------------|--------|-------------------------|--------|-----------------------|--------|-----------------------|--------|
|                                               |   |               |    |               |   |                    |   | Accumulated           |   |                  |   |
|                                               |   |               |    |               |   | Additional              |   | During the  |   | Stockholder's    |   |
|                                               |   | Common Stock  |    | Paid-In            |   |  Development  |   | Equity                |   |
|                                               |   |  Shares  |    |  Amount  |   |  Capital      |   | Stage                 |   |  (Deficit)  |   |
|                                               |   |               |    |               |   |                    |   |                  |   |                  |   |
| Balance                - October 27, 2005          |   |               | -       |               | $      | -                       |   | $                     | -      |                  | $      | - |   | $ | - |   |
|                                               |   |               |    |               |   |                    |   |                  |   |                  |   |   |   |   |   |   |
| Issuance                of common shares           |   |               | 100,000 |               |   | 10                      |   |                  | 90     |                  |   | - |   |   | 100 |   |
|                                               |   |               |    |               |   |                    |   |                  |   |                  |   |   |   |   |   |   |
| Net                loss                            |   |               | -       |               |   | -                       |   |                  | -      |                  |   | (100 | ) |   | (100 | ) |
|                                               |   |               |    |               |   |                    |   |                  |   |                  |   |   |   |   |   |   |
| Balance,                June 02, 2006 (1)          |   |               | 100,000 |               |   | 10                      |   |                  | 90     |                  |   | (100 | ) |   | - |   |
|                                               |   |               |    |               |   |                    |   |                  |   |                  |   |   |   |   |   |   |
| Capital                contributions - shareholder |   |               | -       |               |   | -                       |   |                  | 2,694  |                  |   | - |   |   | 2,694 |   |
|                                               |   |               |    |               |   |                    |   |                  |   |                  |   |   |   |   |   |   |
| Net                (loss)                          |   |               | -       |               |   | -                       |   |                  | -      |                  |   | (5,194 | ) |   | (5,194 | ) |
|                                               |   |               |    |               |   |                    |   |                  |   |                  |   |   |   |   |   |   |
| Balance,                May 31, 2007               |   |               | 100,000 |               |   | 10                      |   |                  | 2,784  |                  |   | (5,294 | ) |   | (2,500 | ) |
|                                               |   |               |    |               |   |                    |   |                  |   |                  |   |   |   |   |   |   |
| Capital                contributions - shareholder |   |               | -       |               |   | -                       |   |                  | 5,000  |                  |   | - |   |   | 5,000 |   |
|                                               |   |               |    |               |   |                    |   |                  |   |                  |   |   |   |   |   |   |
| Net                loss                            |   |               | -       |               |   | -                       |   |                  | -      |                  |   | (4,500 | ) |   | (4,500 | ) |
|                                               |   |               |    |               |   |                    |   |                  |   |                  |   |   |   |   |   |   |
| Balance,                May 31, 2008               |   |               | 100,000 |               |   | 10                      |   |                  | 7,784  |                  |   | (9,794 | ) |   | (2,000 | ) |
|                                               |   |               |    |               |   |                    |   |                  |   |                  |   |   |   |   |   |   |
| Capital                contributions - shareholder |   |               |    |               | 2,750  |                    |   | -                     |   |                  | 2,750  |   |
|                                               |   |               |    |               |   |                    |   |                  |   |                  |   |   |   |   |   |   |
| Net                loss                            |   |               |    |               |   |                    |   |                  |   |                  |   | (750 | ) |   | (750 | ) |
|                                               |   |               |    |               |   |                    |   |                  |   |                  |   |   |   |   |   |   |
| Balance,                August 31, 2008            |   |               | 100,000 |               | $      | 10                      |   | $                     | 10,534 |                  | $      | (10,544 | ) | $ | - |   |

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|                                                                                                        |   |                      |   |                      |   | Period from           |   |
|-------------------------------------------------------------------------------------------------------------|--------|---------------------------|--------|---------------------------|--------|----------------------------|--------|
|                                                                                                        |   | For the three   |   | For the three   |   | October 27, 2005 |   |
|                                                                                                        |   | months ended         |   | months ended         |   | (inception ) to  |   |
|                                                                                                        |   | August 31, 2008 |   | August 31, 2007 |   | August 31, 2008  |   |
|                                                                                                        |   | (Unaudited)               |   | (Unaudited)               |   | (Unaudited)                |   |
|                                                                                                        |   |                      |   |                      |   |                       |   |
| Cash                flows from operating activities                                                         |   |                      |   |                      |   |                       |   |
| Net                (loss)                                                                                   |   | $                         | (750   | )                         | $      | (750                       | )      | $ | (10,544 | ) |
|                                                                                                        |   |                      |   |                      |   |                       |   |   |   |   |
| Adjustments                to reconcile net (loss) to net cash used in operating                activities: |   |                      |   |                      |   |                       |   |   |   |   |
| (Increase)                decrease in prepaid expenses                                                      |   |                      | -      |                      |   | 1,500                      |   |   | - |   |
| Increase                (decrease) in accounts payable                                                      |   |                      | (2,000 | )                         |   | (1,571                     | )      |   | (2,000 | ) |
|                                                                                                        |   |                      |   |                      |   |                       |   |   |   |   |
| Net                cash (used in) operating activities                                                      |   |                      | (2,750 | )                         |   | (821                       | )      |   | (12,544 | ) |
|                                                                                                        |   |                      |   |                      |   |                       |   |   |   |   |
| Cash                flows from financing activities                                                         |   |                      |   |                      |   |                       |   |   |   |   |
| Proceeds                from issuance of common stock                                                       |   |                      | -      |                      |   | -                          |   |   | 10 |   |
| Proceeds                from additional capital contributions                                               |   |                      | 2,750  |                      |   | 821                        |   |   | 12,534 |   |
|                                                                                                        |   |                      |   |                      |   |                       |   |   |   |   |
| Net                cash provided by financing activities                                                    |   |                      | 2,750  |                      |   | 821                        |   |   | 12,544 |   |
|                                                                                                        |   |                      |   |                      |   |                       |   |   |   |   |
| Net                increase in cash and cash equivalents                                                    |   |                      | -      |                      |   | -                          |   |   | - |   |
|                                                                                                        |   |                      |   |                      |   |                       |   |   |   |   |
| Cash                - beginning of period                                                                   |   |                      | -      |                      |   | -                          |   |   | - |   |
|                                                                                                        |   |                      |   |                      |   |                       |   |   |   |   |
| Cash                - end of period                                                                         |   | $                         | -      |                      | $      | -                          |   | $ | - |   |
|                                                                                                        |   |                      |   |                      |   |                       |   |   |   |   |
| Supplemental                disclosure of cash flow information:                                            |   |                      |   |                      |   |                       |   |   |   |   |
| Taxes                paid                                                                                   |   |                      | -      |                      |   | -                          |   |   | - |   |
| Interest                paid                                                                                |   | $                         | -      |                      | $      | -                          |   | $ | - |   |

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**Financial      Statements and Notes Thereto**

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| ***a.  *** | *Use                of Estimates *-                The preparation of the statement of financial condition in conformity                with                accounting principles generally accepted in the United States requires                management to make estimates and assumptions that affect the amounts                of                assets and liabilities and disclosure of contingent assets and liabilities                at the date of the statement of financial condition and reported                amounts                of revenues and expenses during the reporting period. Actual results                could                differ from those estimates. |
|----------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ***b.  *** | *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, 2008, the Company did not maintain any bank                accounts. |
|----------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ***c.  *** | *Income                Taxes*                -                The Company utilizes the liability method of accounting for income                taxes.                Under the liability method, deferred tax assets and liabilities are                determined based on the differences between financial reporting basis                and                tax basis of the assets and liabilities and are measured using enacted                tax                rates that will be in effect when the differences are expected to                reverse.                An allowance against deferred tax assets is recognized, when it is                more                likely than not, that such tax benefits will not be                realized. |
|----------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ***d.  *** | *Loss                per Common Share*                -                Basic loss per share is calculated using the weighted-average number                of                common shares outstanding during each period as required by the Financial                Accounting Standards Board (FASB) under Statement of Financial Accounting                Standards (SFAS) No. 128. Diluted loss per share includes potentially                dilutive securities such as outstanding options and warrants, using                various methods such as the treasury stock or modified treasury stock                method in the determination of dilutive shares outstanding during                each                period. The Company does not have any potentially dilutive                instruments. |
|----------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ***e.  *** | *Fair                Value of Financial Instruments -*                The carrying value of cash equivalents and accrued expenses approximates                fair value due to their short term                nature. |
|----------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

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**Item      2.  **
**M**
**anagement’s      Discussion and Analysis of Financial Condition and Results of      Operations.**

**Plan      of Operation; Going Concern**

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**Results      of Operations**

***Comparison      of Three Months Ended August 31, 2008 to August 31,      2007***

*General.      *

*Assets*

*Liabilities.*
* *

*Revenues*

*Net      Loss*

*General      and Administrative Expenses*

**Liquidity      and Capital Resources**

|                                                     |   | **For                  the Three month****period                  ended****August                  31, 2008** |   | **Period                  from October 26, 2005 (Inception) to August 31,** |   |
|----------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------|--------|
|                                                     |   | **2008**                                                                                                      |   | **2007**                                                                    |   | **2008** |   |
|                                                     |   | **(Unaudited)**                                                                                               |   | **(Unaudited)**                                                             |   | **(Audited)** |   |
|                                                     |   |                                                                                                          |   |                                                                        |   |   |   |
| Cash                  Used in Operating activities       |   | $                                                                                                             | (2,750 | )                                                                           | $      | (821 | ) | $ | (12,544 | ) |
| Investing                  activities                    |   | $                                                                                                             | 0      |                                                                        | $      | 0 |   | $ | 0 |   |
| Cash                  Provided from Financing activities |   | $                                                                                                             | 2,750  |                                                                        | $      | 821 |   | $ | 12,544 |   |
|                                                     |   |                                                                                                          |   |                                                                        |   |   |   |   |   |   |
| Net                  effect on cash                      |   | $                                                                                                             | 0      |                                                                        | $      | 0 |   | $ | 0 |   |

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**Off-Balance      Sheet Arrangements**

**Item      3.  **
**Quantitative      and Qualitative Disclosure About Market Risk.**

**Item      4T. **
**Controls      and Procedures. **

*Evaluation      of disclosure controls and procedures.*

*Changes      in internal controls.*

*Limitations      on the Effectiveness of Controls*

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**PART      II - OTHER INFORMATION**

**Item      1.**
** **
**Legal      Proceedings.**

**Item      1A.**
**Risk      Factors.**

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

**Item      3.**
** **
**Defaults      Upon Senior Securities.**

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

**Item      5.**
** **
**Other      Information.**

**Item      6.**
** **
**Exhibits.**

**Exhibit      Index**

| 31.1   |   |  Certification                pursuant to Section 302 of Sarbanes Oxley Act of 2002                |
|--------|--------|---------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                    |
| 32.1   |   |  Certification                pursuant to Section 906 of Sarbanes Oxley Act of                2002 |

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|   | **GRACE                5, INC.**                                                                                                                                                                            |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                        |
|   | By:                                                                                                                                                                                               | /s/                Virginia K. Sourlis |
|   | Virginia                K. SourlisChief                Executive Officer andChief                Financial Officer (Principal                Executive Officer)(Principal                Financial Officer) |

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