**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**

**August      31, 2007**

**.       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**

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|                                                                |   | August                31, 2007 |   | May                31, 2007 |   |
|---------------------------------------------------------------------|--------|--------------------------------|--------|-----------------------------|--------|
|                                                                |   | **(Unaudited)**                |   | **(Audited)**               |   |
| Assets                                                              |   |                           |   |                        |   |
| Prepaid                expenses                                     |   | $                              | -      |                        | $      | 1,500 |   |
|                                                                |   |                           |   |                        |   |   |   |
| Total                assets                                         |   | $                              | -      |                        | $      | 1,500 |   |
|                                                                |   |                           |   |                        |   |   |   |
| LIABILITIES                AND STOCKHOLDER'S EQUITY                 |   |                           |   |                        |   |   |   |
|                                                                |   |                           |   |                        |   |   |   |
| Current                liabilities                                  |   |                           |   |                        |   |   |   |
| Accounts                payable                                     |   | $                              | 2,429  |                        | $      | 4,000 |   |
|                                                                |   |                           |   |                        |   |   |   |
| Total                liabilities                                    |   |                           | 2,429  |                        |   | 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                           |   |                           | 3,605  |                        |   | 2,784 |   |
| Deficit                accumulated during the development stage     |   |                           | (6,044 | )                           |   | (5,294 | ) |
|                                                                |   |                           |   |                        |   |   |   |
| Total                stockholder's equity (deficit)                 |   |                           | (2,429 | )                           |   | (2,500 | ) |
|                                                                |   |                           |   |                        |   |   |   |
| Total                liabilities and stockholder's equity (deficit) |   | $                              | -      |                        | $      | 1,500 |   |

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|                                                     |   |                           |    |                          |   | For                the period   |   |
|----------------------------------------------------------|--------|--------------------------------|---------|-------------------------------|--------|---------------------------------|--------|
|                                                     |   | For                the three   |    | For                the three  |   | October                27, 2005 |   |
|                                                     |   | months                ended    |    | months                ended   |   | (Inception)                to   |   |
|                                                     |   | August                31, 2007 |    | August                31 2006 |   | August                31, 2007  |   |
|                                                     |   | **(Unaudited)**                |    | **(Unaudited)**               |   | **(Unaudited)**                 |   |
| Net                sales                                 |   | $                              | -       |                          | $      | -                               |   | $ | - |   |
|                                                     |   |                           |    |                          |   |                            |   |   |   |   |
| Cost                of sales                             |   |                           | -       |                          |   | -                               |   |   | - |   |
|                                                     |   |                           |    |                          |   |                            |   |   |   |   |
| Gross                profit                              |   |                           | -       |                          |   | -                               |   |   | - |   |
|                                                     |   |                           |    |                          |   |                            |   |   |   |   |
| General                and administrative expenses       |   |                           | 750     |                          |   | 200                             |   |   | 6,044 |   |
|                                                     |   |                           |    |                          |   |                            |   |   |   |   |
| Net                loss                                  |   | $                              | (750    | )                             | $      | (200                            | )      | $ | (6,044 | ) |
|                                                     |   |                           |    |                          |   |                            |   |   |   |   |
| Weighted                average number of                |   |                           |    |                          |   |                            |   |   |   |   |
| common                shares outstanding                 |   |                           |    |                          |   |                            |   |   |   |   |
| (basic                and fully diluted)                 |   |                           | 100,000 |                          |   | 100,000                         |   |   | 100,000 |   |
|                                                     |   |                           |    |                          |   |                            |   |   |   |   |
| Basic                and diluted (loss) per common share |   | $                              | (0.008  | )                             | $      | (0.002                          | )      | $ | (0.060 | ) |

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**(Unaudited)**

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|                                               |   |                           |   |                        |   |    |   |        |    |       |   | 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 |   |
|                                               |   |                           |   |                        |   |    |   |        |    |       |   |                      |   |          |   |   |   |   |   |   |   |   |
| Capital                contributions - stockholder |   |                           | -      |                        |   | -       |   |        | -       |       |   | -                         |   |          | -      |   |   | - |   |   | - |   |
|                                               |   |                           |   |                        |   |    |   |        |    |       |   |                      |   |          |   |   |   |   |   |   |   |   |
| Net                (loss)                          |   |                           | -      |                        |   | -       |   |        | -       |       |   | -                         |   |          | -      |   |   | (100 | ) |   | (100 | ) |
|                                               |   |                           |        |                        |   |         |   |        |    |       |   |                      |   |          |   |   |   |   |   |   |   |   |
| Balance,                June 02, 2006              |   |                           | -      |                        |   |    |   | $           | 100,000 |       | $      | 10                        |   | $             | 90     |   | $ | (100 | ) | $ | - |   |
|                                               |   |                           |   |                        |   |    |   |        |    |       |   |                      |   |          |   |   |   |   |   |   |   |   |
| Capital                contributions - stockholder |   |                           | -      |                        |   | -       |   |        | -       |       |   | -                         |   |          | 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 - stockholder |   |                           | -      |                        |   | -       |   |        | -       |       |   | -                         |   |          | 821    |   |   | - |   |   | 821 |   |
|                                               |   |                           |   |                        |   |    |   |        |    |       |   |                      |   |          |   |   |   |   |   |   |   |   |
| Net                (loss)                          |   |                           | -      |                        |   | -       |   |        | -       |       |   | -                         |   |          | -      |   |   | (750 | ) |   | (750 | ) |
|                                               |   |                           |   |                        |   |    |   |        |    |       |   |                      |   |          |   |   |   |   |   |   |   |   |
| Balance,                August 31, 2007            |   |                           | -      |                        | $      | -       |   |        | 100,000 |       | $      | 10                        |   | $             | 3,605  |   | $ | (6,044 | ) | $ | (2,429 | ) |

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|                                                             |   | For                the threemonths                ended |   | For                the threemonths                ended |   | For                the periodOctober                26, 2006(Inception)                to |   |
|------------------------------------------------------------------|--------|---------------------------------------------------------|--------|---------------------------------------------------------|--------|-------------------------------------------------------------------------------------------|--------|
|                                                             |   | August                  31, 2007                        |   | August                  31 2006                         |   | August                  31, 2007                                                          |   |
|                                                             |   | **(Unaudited)**                                         |   | **(Unaudited)**                                         |   | **(Unaudited)**                                                                           |   |
| Cash                flows from operating activities              |   |                                                    |   |                                                    |   |                                                                                      |   |
| Net                (loss)                                        |   | $                                                       | (750   | )                                                       | $      | (200                                                                                      | )      | $ | (6,044 | ) |
|                                                             |   |                                                    |   |                                                    |   |                                                                                      |   |   |   |   |
| Adjustments                to reconcile net (loss) to net        |   |                                                    |   |                                                    |   |                                                                                      |   |   |   |   |
| cash                used in operating activities:                |   |                                                    |   |                                                    |   |                                                                                      |   |   |   |   |
| (Increase)                decrease in prepaid expenses           |   |                                                    | 1,500  |                                                    |   | -                                                                                         |   |   | - |   |
| Increase                (decrease) in accounts payable           |   |                                                    | (1,571 | )                                                       |   | -                                                                                         |   |   | 2,339 |   |
|                                                             |   |                                                    |   |                                                    |   |                                                                                      |   |   |   |   |
| Net                cash (used in) operating activities           |   |                                                    | (821   | )                                                       |   | (200                                                                                      | )      |   | (3,705 | ) |
|                                                             |   |                                                    |   |                                                    |   |                                                                                      |   |   |   |   |
| Cash                flows from financing activities              |   |                                                    |   |                                                    |   |                                                                                      |   |   |   |   |
| Proceeds                from issuance of common stock            |   |                                                    | -      |                                                    |   | -                                                                                         |   |   | 100 |   |
| Proceeds                from additional capital contributions    |   |                                                    | 821    |                                                    |   | 200                                                                                       |   |   | 3,605 |   |
|                                                             |   |                                                    |   |                                                    |   |                                                                                      |   |   |   |   |
| Net                cash provided by financing activities         |   |                                                    | 821    |                                                    |   | 200                                                                                       |   |   | 3,705 |   |
|                                                             |   |                                                    |   |                                                    |   |                                                                                      |   |   |   |   |
| 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 August 31, 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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**SIGNATURES**

|         | Dated: October 5, 2007                                                                       |
|--------------|----------------------------------------------------------------------------------------------|
|         |                                                                                         |   |
|         | **GRACE                5, INC.**                                                             |
|    |                                                                                    |    |
|              | By:                                                                                | /s/ VIRGINIA              K. SOURLIS |
|         | Virginia              K. Sourlis                                                             |
|         | President,                Chief Executive Officer and Chief                Financial Officer |
|         | (Principal                Executive Officer and Principal Financial                Officer)  |

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