**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**FORM      10-QSB**

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

**ACT      OF 1934**

**.      000-52065**

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**GRACE      5, INC.**

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

**N/A**

**www.SourlisLaw.com**

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| **PART                I - FINANCIAL STATEMENTS**                                                       |   |
|--------------------------------------------------------------------------------------------------------|--------|
|                                                                                                   |   |
| Item                1. Financial Statements                                                            | 3      |
|                                                                                                   |   |
| Item                2. Management’s Discussion and Analysis or Plan of                Operations | 10     |
|                                                                                                   |   |
| Item                3. Controls and Procedures                                                         | 10     |
|                                                                                                   |   |
| **PART                II - OTHER INFORMATION**                                                         |   |
|                                                                                                   |   |
| Item                1. Legal Proceedings                                                               | 11     |
|                                                                                                   |   |
| Item                2. Changes in Securities                                                           | 11     |
|                                                                                                   |   |
| Item                3. Defaults Upon Senior Securities                                                 | 11     |
|                                                                                                   |   |
| Item                4. Submission of Matters to a Vote of Security Holders                             | 11     |
|                                                                                                   |   |
| Item                5. Other Information                                                               | 11     |
|                                                                                                   |   |
| Item                6. Exhibits and Reports of Form 8-K                                                | 11     |

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**PART      I - FINANCIAL STATEMENTS**

| GRACE                5, INC.                      |   |   |
|---------------------------------------------------|--------|--------|
| A                DEVELOPMENT STAGE COMPANY        |   |   |
| BALANCE                SHEETS                     |   |   |
| November                30, 2007 and May 31, 2007 |   |   |

|                                                                                                                                    |   | 11/30/2007    |   | 5/31/2007 |   |
|-----------------------------------------------------------------------------------------------------------------------------------------|--------|---------------|--------|-----------|--------|
|                                                                                                                                    |   | **Unaudited** |   |      |   |
| Assets                                                                                                                                  |   |          |   |      |   |   |   |
| Prepaid                  expenses                                                                                                       |   | $             | -      |      | $      | 1,500 |   |
|                                                                                                                                    |   |          |   |      |   |   |   |
| Total                  assets                                                                                                           |   | $             | -      |      | $      | 1,500 |   |
|                                                                                                                                    |   |          |   |      |   |   |   |
| LIABILITIES                  AND STOCKHOLDER'S EQUITY (DEFICIT)                                                                         |   |          |   |      |   |   |   |
|                                                                                                                                    |   |          |   |      |   |   |   |
| Current                  liabilities                                                                                                    |   |          |   |      |   |   |   |
| Accounts                  payable                                                                                                       |   | $             | 1,214  |      | $      | 4,000 |   |
|                                                                                                                                    |   |          |   |      |   |   |   |
| Total                  liabilities                                                                                                      |   |          | 1,214  |      |   | 4,000 |   |
|                                                                                                                                    |   |          |        |      |   |  |   |
| 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                                                                                             |   |          | 5,320  |      |   | 2,784 |   |
| Deficit                  accumulated during the development stage                                                                       |   |          | (6,544 | )         |   | (5,294 | ) |
|                                                                                                                                    |   |          |   |      |   |   |   |
| Total                  stockholder's equity (deficit)                                                                                   |   |          | (1,214 | )         |   | (2,500 | ) |
|                                                                                                                                    |   |          |   |      |   |   |   |
| Total                  liabilities and stockholder's equity (deficit)                                                                   |   | $             | -      |      | $      | 1,500 |   |

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| GRACE                5, INC.               |   |   |   |   |
|--------------------------------------------|--------|--------|--------|--------|
| A                DEVELOPMENT STAGE COMPANY |   |   |   |
| STATEMENTS                OF OPERATIONS    |   |   |   |
| (Unaudited)                                |   |   |   |   |

|                                                                                                         |   |                        |          |                            |   |                           |   | For the period    |          |
|--------------------------------------------------------------------------------------------------------------|--------|-----------------------------|---------------|---------------------------------|--------|--------------------------------|--------|-----------------------------|---------------|
|                                                                                                         |   | For the three     |          | For                the six |   | For the period       |   | October 27, 2005  |          |
|                                                                                                         |   | months ended           |          | months ended               |   | June 2, 2006 to |   | (Inception) to         |          |
|                                                                                                         |   | November 30, 2007 |          | November 30, 2007     |   | November 30, 2006    |   | November 30, 2007 |          |
|                                                                                                         |   | **Unaudited**               |          | **Unaudited**                   |   | **Unaudited**                  |   | **Unaudited**               |          |
|                                                                                                         |   |                        |          |                            |   |                           |   |                        |          |
|                                                                                                         |   |                        |          |                            |   |                           |   |                        |          |
| Net                sales                                                                                     |   | $                           | -             |                            | $      | -                              |   | $                           | -             |   | $ | - |   |
|                                                                                                         |   |                        |          |                            |   |                           |   |                        |          |   |   |   |   |
| Cost                of sales                                                                                 |   |                        | -             |                            |   | -                              |   |                        | -             |   |   | - |   |
|                                                                                                         |   |                        |          |                            |   |                           |   |                        |          |   |   |   |   |
| Gross                profit                                                                                  |   |                        | -             |                            |   | -                              |   |                        | -             |   |   | - |   |
|                                                                                                         |   |                        |          |                            |   |                           |   |                        |          |   |   |   |   |
| General                  and administrative Expenses                                                         |   |                        | 500           |                            |   | 1,250                          |   |                        | 2,484         |   |   | 6,544 |   |
|                                                                                                         |   |                        |          |                            |   |                           |   |                        |          |   |   |   |   |
| Net                loss                                                                                      |   | $                           | (500          | )                               | $      | (1,250                         | )      | $                           | (2,484        | ) | $ | (6,544 | ) |
|                                                                                                         |   |                        |          |                            |   |                           |   |                        |          |   |   |   |   |
| Weighted                average number of common shares outstanding (basic and fully                diluted) |   |                        | 100,000  |                            |   | 100,000                   |   |                        | 100,000  |   |   | 100,000  |   |
|                                                                                                         |   |                        |          |                            |   |                           |   |                        |          |   |   |   |   |
| Basic                  and diluted (loss) per common share                                                   |   | $                           | (0.005        | )                               | $      | (0.013                         | )      | $                           | (0.025        | ) | $ | (0.065 | ) |

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| GRACE                5, INC.                                                                   |   |   |   |   |   |   |   |
|------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
| A                DEVELOPMENT STAGE COMPANY                                                     |   |   |   |   |   |   |
| STATEMENTS                OF CHANGES IN STOCKHOLDER'S EQUITY (DEFICIT)                         |   |   |   |
| For                the period October 27, 2005 (Inception) to November 30,                2007 |   |   |   |   |
| **Unaudited**                                                                                  |   |   |   |   |   |   |   |

|                                               |   |                           |   |                        |   |    |   |        |    |       |   | Deficit                   |   |          |   |
|----------------------------------------------------|--------|--------------------------------|--------|-----------------------------|--------|---------|--------|-------------|---------|------------|--------|---------------------------|--------|---------------|--------|
|                                               |   |                           |   |                        |   |    |   |        |    |       |   | Accumulated               |   |          |   |
|                                               |   |                           |   |                        |   |    |   |        |    | Additional |   | During                the |   | Stockholder's |   |
|                                               |   | Preferred                Stock |   | Common                Stock |   | Paid-In |   | Development |    | Equity     |   |
|                                               |   | Shares                         |   | Amount                      |   | 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              |   |                           | -      |                        | $      | -       |   |        | 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 |   |                           | -      |                        |   | -       |   |        | -       |       |   | -                         |   |          | 2,536  |   |   | - |   |   | 2,536 |   |
|                                               |   |                           |   |                        |   |    |   |        |    |       |   |                      |   |          |   |   |   |   |   |   |   |   |
| Net                (loss)                          |   |                           | -      |                        |   | -       |   |        | -       |       |   | -                         |   |          | -      |   |   | (1,250 | ) |   | (1,250 | ) |
|                                               |   |                           |   |                        |   |    |   |        |    |       |   |                      |   |          |   |   |   |   |   |   |   |   |
| Balance,                November 30, 2007          |   |                           | -      |                        | $      | -       |   |        | 100,000 |       | $      | 10                        |   | $             | 5,320  |   | $ | (6,544 | ) | $ | (1,214 | ) |

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| GRACE                5, INC.               |   |   |   |   |
|--------------------------------------------|--------|--------|--------|--------|
| A                DEVELOPMENT STAGE COMPANY |   |   |   |
| STATEMENTS                OF CASH FLOWS    |   |   |   |   |
|                                       |   |   |   |   |

|                                                               |   |                        |   |                        |   |                               |   | For the period    |   |
|--------------------------------------------------------------------|--------|-----------------------------|--------|-----------------------------|--------|------------------------------------|--------|-----------------------------|--------|
|                                                               |   | For the three     |   | For the six       |   | For the                period |   | October 27, 2005  |   |
|                                                               |   | months ended           |   | months ended           |   | June 2, 2006 to     |   | (Inception) to         |   |
|                                                               |   | November 30, 2007 |   | November 30, 2007 |   | November 30, 2006        |   | November 30, 2007 |   |
|                                                               |   | **Unaudited**               |   | **Unaudited**               |   | **Unaudited**                      |   | **Unaudited**               |   |
|                                                               |   |                        |   |                        |   |                               |   |                        |   |
| Cash                  flows from operating activities Net (loss)   |   | $                           | (500   | )                           | $      | (1,250                             | )      | $                           | (2,484 | ) | $ | (6,544 | ) |
|                                                               |   |                        |   |                        |   |                               |   |                        |   |   |   |   |   |
| Adjustments                to reconcile net (loss) to net          |   |                        |   |                        |   |                               |   |                        |   |   |   |   |   |
| cash                used in operating activities:                  |   |                        |   |                        |   |                               |   |                        |   |   |   |   |   |
| (Increase)                decrease in prepaid expenses             |   |                        | -      |                        |   | 1,500                              |   |                        | -      |   |   | - |   |
| Increase                (decrease) in accounts payable             |   |                        | -      |                        |   | (2,786                             | )      |                        | -      |   |   | 1,214 |   |
|                                                               |   |                        |   |                        |   |                               |   |                        |   |   |   |   |   |
| Net                cash (used in) operating activities             |   |                        | (500   | )                           |   | (2,536                             | )      |                        | (2,484 | ) |   | (5,330 | ) |
|                                                               |   |                        |   |                        |   |                               |   |                        |   |   |   |   |   |
| Cash                flows from financing activities                |   |                        |   |                        |   |                               |   |                        |   |   |   |   |   |
| Proceeds                from issuance of common stock              |   |                        | -      |                        |   | -                                  |   |                        | -      |   |   | 100 |   |
| Proceeds                from additional capital contributions      |   |                        | 500    |                        |   | 2,536                              |   |                        | 2,484  |   |   | 5,230 |   |
|                                                               |   |                        |   |                        |   |                               |   |                        |   |   |   |   |   |
| Net                cash provided by financing activities           |   |                        | 500    |                        |   | 2,536                              |   |                        | 2,484  |   |   | 5,330 |   |
|                                                               |   |                        |   |                        |   |                               |   |                        |   |   |   |   |   |
| 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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|   | ***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 November 30, 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. |
|--------|----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | ***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. |
|--------|----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**PART      II - OTHER INFORMATION**

| *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                                       |

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|   | Grace                  5, Inc.                 |
|--------|------------------------------------------------|
|   |                                           |
|   | By:                                            | /s/                  Virginia K. Sourlis |
|   | Virginia                  K. Sourlis           |
|   | President                                      |
|   | (Principal                  Executive Officer) |
|   | (Principal                  Financial Officer) |

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