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 February 28, 2007

[_]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

                For the transition period from ______ to ________

                          Commission File No. 000-52061

--------------------------------------------------------------------------------
                                  GRACE 1, INC.
        (Exact name of small business issuer as specified in its charter)
--------------------------------------------------------------------------------


                  Delaware                            20-3708225
                  --------                            ----------
      (State or other jurisdiction of              (I.R.S.  Employer
         incorporation or formation)              Identification No.)

                   2 Bridge Avenue, Red Bank, New Jersey 07701
               (Address of principal executive offices) (Zip Code)

                    Issuer's telephone number: (732) 530-9007

                                    No change
              (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

Securities registered under Section 12(b) or 12(g) of the Exchange Act None

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 such
shorter period that the issuer was required to file such  reports),  and (2) has
been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

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

Transitional Small Business Disclosure Format: Yes o No x

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest  practicable date:  100,000 shares of common stock, par
value $.0001 per share, outstanding as of March 19, 2007.
<PAGE>

GRACE 1, INC.
INDEX
February 28, 2007
--------------------------------------------------------------------------------


PART I - FINANCIAL STATEMENTS

Item 1. Financial Statements                                                  3

Item 2. Management's Discussion and Analysis or Plan of Operations            6

Item 3. Controls and Procedures                                               6

PART II - OTHER INFORMATION                                                   7

Item 1. Legal Proceedings                                                     7

Item 2. Changes in Securities                                                 7

Item 3.  Defaults Upon Senior Securities                                      7

Item 4. Submission of Matters to a Vote of Security Holders                   7

Item 5. Other Information                                                     7

Item 6. Exhibits and Reports of Form 8-K                                      7

                                       2
<PAGE>

PART I - FINANCIAL STATEMENTS

Item 1. Financial Statements

GRACE 1, INC.
A DEVELOPMENT STAGE COMPANY
BALANCE SHEET - (Unaudited)
February 28, 2007
--------------------------------------------------------------------------------

ASSETS

Total assets                                                            $    --
                                                                        =======

LIABILITIES AND STOCKHOLDER'S EQUITY

   Due to shareholder                                                        --
                                                                        -------

Total liabilities                                                       $    --
                                                                        -------

Commitment and contingencies                                                 --

Stockholder's equity
     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

     Additional paid-in capital                                           2,784

     Deficit accumulated during the development stage                    (2,794)
                                                                        -------

Total stockholder's equity                                                   --
                                                                        =======

Total liabilities and stockholder's equity                              $    --
                                                                        =======

See notes to unaudited financial statements

                                      F-1
<PAGE>

GRACE 1, INC.
A DEVELOPMENT STAGE COMPANY
STATEMENTS OF OPERATIONS
(unaudited)
--------------------------------------------------------------------------------

                                                                    Period from
                                                                    October 27,
                                                       For the         2005
                                                     three months   (inception)
                                                        ended         through
                                                      February 28,  February 28,
                                                         2007           2007
                                                      ---------      ---------

Net sales                                             $      --      $      --

Cost of sales                                                --             --
                                                      ---------      ---------

Gross profit                                                 --             --
                                                      ---------      ---------

General and administrative expenses                         310          2,794
                                                      ---------      ---------

Net (loss)                                            $    (310)     $  (2,794)
                                                      =========      =========

Basic and diluted (loss) per common share                   NIL      $   (0.03)

Weighted average number of common shares outstanding    100,000        100,000
                                                      =========      =========

See notes to unaudited financial statements

                                      F-2
<PAGE>

GRACE 1, INC.
A DEVELOPMENT STAGE COMPANY
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY - (Unaudited)
For the period October 27, 2005 (Inception) to February 28, 2007
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                                     Deficit
                                                                                                   Accumulated
                                                                                        Additional  During the
                                        Preferred Stock           Common Stock           Paid-In   Development   Stockholder's
                                       Shares      Amount       Shares      Amount       Capital      Stage          Equity
                                       ------      ------      -------      -------      -------      -------       -------

<S>                                    <C>         <C>         <C>          <C>          <C>          <C>           <C>
Balance - October 27, 2005                 --      $   --           --      $    --      $    --      $    --       $    --

Issuance of common shares                  --          --      100,000           10           90           --           100


Capital contributions - shareholder        --          --           --           --        2,694           --         2,694


Net (loss)                                 --          --           --           --           --       (2,794)       (2,794)
                                       ------      ------      -------      -------      -------      -------       -------

Balance, February 28, 2007                 --          --      100,000      $    10      $ 2,784      $(2,794)           --
                                       ======      ======      =======      =======      =======      =======       =======
</TABLE>

See notes to unaudited financial statements

                                      F-3
<PAGE>


GRACE 1, INC.
A DEVELOPMENT STAGE COMPANY
STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------

                                                                    Period from
                                                                    October 27,
                                                        For the        2005
                                                      three months  (inception)
                                                         ended        through
                                                      February 28,  February 28,
                                                         2007          2007
                                                       -------       -------
Cash flows from operating activities
Net (loss)                                             $  (310)      $(2,794)

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

Net cash used in operating activities                     (310)       (2,794)
                                                       -------       -------
Cash flows from financing activities:
Proceeds from issuance of common stock                      --           100
Capital contributions - shareholder                        310         2,694
                                                       -------       -------

Net cash provided by financing activities                  310         2,794
                                                       -------       -------

Net increase in cash and cash equivalents                   --            --

Cash and cash equivalents - beginning of period             --            --
                                                       -------       -------

Cash and cash equivalents - end of period              $    --       $    --
                                                       =======       =======

See notes to unaudited financial statements

                                      F-4
<PAGE>

GRACE 1, INC.
A Development Stage Company
NOTES TO UNAUDITED FINANCIAL STATEMENTS
February 28, 2007
--------------------------------------------------------------------------------

NOTE 1. DEVELOPMENT STAGE COMPANY

      Grace 1, Inc. ("the Company") was incorporated in the State of Delaware on
      October 27, 2005 and is currently in its development stage.

      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.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      The Company's accompanying financial statements are prepared in accordance
      with U.S. generally accepted  accounting  principles in the United States.
      Significant accounting policies are as follows:

      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
            February 28, 2007, 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.

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

                                       3
<PAGE>

GRACE 1, INC.
A Development Stage Company
NOTES TO UNAUDITED FINANCIAL STATEMENTS
February 28, 2007
--------------------------------------------------------------------------------


NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued)

      f.    New  Accounting  Pronouncement  - In September  2006,  the Financial
            Accounting  Standards Board issued Statement of Financial Accounting
            Standards  No.  157 ("FAS  157"),  Fair  Value  Measurements,  which
            defines fair value, establishes a framework for measuring fair value
            in generally accepted accounting  principles  ("GAAP"),  and expands
            disclosures  about fair value  measurements.  FAS 157 applies  under
            other  accounting  pronouncements  that require or permit fair value
            measurements.  Prior to FAS 157, there were different definitions of
            fair value and limited  guidance for applying  those  definitions in
            GAAP.   Moreover,   that  guidance  was  dispersed  among  the  many
            accounting  pronouncements  that  require  fair value  measurements.
            Differences in that guidance created  inconsistencies  that added to
            the  complexity in applying  GAAP.  The changes to current  practice
            resulting  from the  application of FAS 157 relate to the definition
            of fair value,  the  methods  used to measure  fair  value,  and the
            expanded  disclosures  about  fair  value  measurements.  FAS 157 is
            effective for financial statements issued for fiscal years beginning
            after  November 15, 2007,  and interim  periods  within those fiscal
            years.  The Company  does not expect the adoption of FAS 157 to have
            an effect on its financial statements.

NOTE 3. 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.

NOTE 4. COMMON STOCK

The Company is  authorized  to issue  100,000,000  shares of Company  Stock.  On
October 27, 2005,  the Company  issued  100,000 shares of Common Stock for total
consideration of $100 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.

NOTE 6 RELATED PARTY TRANSACTIONS

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

During the three months ended February 28, 2007, the Company reclassified $2,484
of costs paid by the sole  shareholder of the Company from Due to shareholder to
Additional paid-in capital.

                                       4
<PAGE>

GRACE 1, INC.
A Development Stage Company
NOTES TO UNAUDITED FINANCIAL STATEMENTS
February 28, 2007
--------------------------------------------------------------------------------

NOTE 7 INTERIM FINANCIAL STATEMENTS

The accompanying  Interim Financial Statements of the Company as of February 28,
2007,  the three months ended  February 28, 2007 and for the period  October 27,
2005 (inception) through February 28, 2007 have been prepared in accordance with
accounting   principles  generally  accepted  for  interim  financial  statement
presentation  and  in  accordance  with  the  instructions  to  Regulation  S-B.
Accordingly,  they do not include all of the information and footnotes  required
by accounting  principles  generally  accepted in the United States for complete
financial statement presentation.  In the opinion of management, all adjustments
for a fair statement of the results of operations and financial position for the
interim period presented have been included.

All  such  adjustments  are  of  a  normal  recurring  nature.   This  financial
information  should be read in  conjunction  with the Financial  Statements  and
notes thereto  included in the Company's Form 10-SB12G filed with the Securities
and Exchange  Commission on June 19, 2006,  which  contained  audited  financial
statements as of June 2, 2006 and for the period October 27, 2005 (inception) to
June 2, 2006.

NOTE 8 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.

                                       5
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
        OF OPERATIONS PLAN OF OPERATION

The  Company is  continuing  its  efforts to locate a merger  Candidate  for the
purpose of a merger.  It is possible  that the  Company  will be  successful  in
locating  such a merger  candidate  and closing  such  merger.  However,  if the
Company  cannot  effect a non-cash  acquisition,  the  Company may have to raise
funds from a private  offering of its securities under Rule 506 of Regulation D.
There is no assurance the Company would obtain any such equity funding.

Plan of Operation.
The Company has not realized any revenues from operations since October 27, 2005
(inception),  and its plan of operation  for the next twelve  months shall be to
continue its efforts to locate suitable acquisition candidates.

Results of Operations.
The Company has not conducted any active operations since inception,  except for
its  efforts to locate  suitable  acquisition  candidates.  No revenue  has been
generated by the Company from October 27, 2005 (inception) to February 27, 2007.
It is unlikely the Company will have any revenues unless it is able to effect an
acquisition,  or merger  with an  operating  company,  of which  there can be no
assurance.

Liquidity and Capital Resources

At February 28, 2007,  the Company had no capital  resources  and will rely upon
the  issuance  of  common  stock  and  additional  capital   contributions  from
shareholders to fund administrative expenses pending acquisition of an operating
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 World Wide Web
sites 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 shareholders  will supervise the search for target  companies
as  potential  candidates  for  a  business  combination.  The  Company  and  or
shareholders may pay as their own expenses any costs incurred in supervising the
search for a target  company.  The  Company and or  shareholders  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.

Item 3. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures.

We maintain  disclosure controls and procedures that are designed to ensure that
information  required  to be  disclosed  in our  reports  filed  pursuant to the
Securities  Exchange Act of 1934, as amended (the "Exchange  Act"), is recorded,
processed,  summarized  and reported  within the time  periods  specified in the
Securities and Exchange  Commission's rules,  regulations and related forms, and
that such information is accumulated and communicated to our principal executive
officer  and  principal  financial  officer,  as  appropriate,  to allow  timely
decisions regarding required disclosure.

As of February 28, 2007, we carried out 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.  Based on this evaluation,
our principal  executive officer and principal  financial officer concluded that
our disclosure controls and procedures were effective.

                                       6
<PAGE>

Changes in internal controls.
There have been no changes in our  internal  controls or in other  factors  that
could  significantly  affect these  controls and  procedures  during the quarter
ended February 28, 2007.

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 2. Changes in Securities.

        None

Item 3. Defaults Upon Senior Securities.

        None

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

No matter was submitted during the quarter ending February 28, 2007,  covered by
this report to a vote of the Company's shareholders, through the solicitation of
proxies or otherwise.

Item 5. Other Information.

        None

Item 6. Exhibits and Reports of Form 8-K.

        (a)   Exhibits

*3.1  Certificate  of  Incorporation,  as filed with the  Delaware  Secretary of
      State on October 27, 2005.

*3.2  By-Laws

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

* Filed as an exhibit to the Company's  Registration Statement on Form 10-SB, as
filed  with  the  Securities  and  Exchange  Commission  on June 19,  2006,  and
incorporated herein by this reference.

        (b)   Reports of Form 8-K

              None

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, there unto
duly authorized.

Dated:  March 21, 2007
Grace 1, Inc.
By: /s/ Virginia K. Sourlis
    -----------------------
    President


                                       7