Grace 3, Inc. - FORM 10-Q - January 14, 2010

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EX-31.1 - Grace 3, Inc.	v171267_ex31-1.htm
EX-32.1 - Grace 3, Inc.	v171267_ex32-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended November 30, 2009

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

For the transition period from ___________________________ to ___________________________

Commission file number: 000-52063

GRACE 3, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware		20-3708559
(State of Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification Number)

735 Broad Street, Suite 400 Chattanooga, TN		37402
(Address of Principal Executive Offices)		(Zip Code)

(423) 265-5062

(Registrant’s Telephone Number, Including Area Code)

N/A

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

Copies to:

The Sourlis Law Firm

Virginia K. Sourlis, Esq.

214 Broad Street

Red Bank, New Jersey 07701

T: (732) 530-9007

F: (732) 530-9008

www.SourlisLaw.com

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

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

Large accelerated filer	o	Accelerated filer	o

Non-accelerated filer	o	Smaller reporting company	x

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

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

As of January 14, 2010, there were 100,000 shares of common stock outstanding and no shares of preferred stock outstanding.

GRACE 3, INC.

A DEVELOPMENT STAGE COMPANY

INDEX

November 30, 2009

TABLE OF CONTENTS

		Page
PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements	3

Item 2.	Management’s Discussion and Analysis of Financial Condition and Plan of Operations	9

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	11

Item 4T.	Controls and Procedures	12

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	12

Item 1A.	Risk Factors	12

Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds	12

Item 3.	Defaults Upon Senior Securities	12

Item 4.	Submission of Matters to a Vote of Security Holders	12

Item 5.	Other Information	12

Item 6.	Exhibits	13

SIGNATURES		13

PART I

Item 1. Financial Statements.

GRACE 3, INC.

A DEVELOPMENT STAGE COMPANY

BALANCE SHEETS

	November 30, 2009			5/31/2009
	(Unaudited)			(Audited)
Assets

Total Assets	$	-		$	-

Liabilities and Stockholders’ Equity (Deficit)

Current Liabilities
Accounts payable		7,025			4,500
Due to shareholder		27,938			16,075
Total liabilities		34,963			20,575

Commitment and contingencies		-			-

Stockholders’ 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		9,784			9,784
Deficit accumulated during the developmental stage		(44,757	)		(30,369	)

Total stockholders’ equity (deficit)		(34,963	)		(20,575	)

	$			$

GRACE 3, INC.

A DEVELOPMENT STAGE COMPANY

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

FOR THE PERIOD OCTOBER 27, 2005 (INCEPTION) TO NOVEMBER 30, 2009

(Unaudited)

							Deficit
							Accumulated
					Additional		During the			Stockholders'
	Common Stock				Paid-In		Development			Equity
	Shares		Amount		Capital		Stage			(Deficit)


Balance-October 27, 2005		-	$	-	$	-	$	-		$	-
Issuance of common shares		100,000		10		90		-			100
Net loss		-		-		-		(100	)		(100	)

Balance, June 02, 2006(1)		100,000		10		90		(100	)		-
Capital contributions-shareholder		-		-		2,694		-			2,694
Net(loss)		-		-		-		(5,194	)		(5,194	)
Balance, May 31, 2007		100,000		10		2,784		(5,294	)		(2,500	)

Capital contributions-shareholder				-		5,000		-			5,000
Net(loss)								(4,500	)		(4,500	)
Balance, May 31, 2008		100,000		10		7,784		(9,794	)		(2,000	)

Capital contributions-shareholder						2,000					2,000
Net(loss)								(20,575	)		(20,575	)
Balance, May 31, 2009		100,000		10		9,784		(30,369	)		(20,575	)

Capital contributions-shareholder
Net(loss)								(14,388	)		(14,388	)
Balance, November 30, 2009		100,000	$	10	$	9,784	$	(44,757	)	$	(34,963	)

(1)

Restated for comparison purposes

The financial information presented herein has been prepared by management without audit by independent certified public accountants.

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

GRACE 3, INC.

A DEVELEOPMENT STAGE COMPANY

STATEMENT OF OPERATIONS

	For the three			For the three			For the six
	months ended			months ended			months ended
	November 30, 2009			November 30, 2008			November 30, 2009
	(Unaudited)			(Unaudited)			(Unaudited)

Net Sales	$	-		$	-		$	-

Cost of sales		-			-			-
Gross profit		-			-			-

General and administrative expenses		3,525			2,000			14,388
Net loss		(3,525	)		(2,000	)		(14,388	)

Weighted average number of common shares
Outstanding (basic and fully diluted)		100,000			100,000			100,000

Basic and diluted (loss) per common share	$	(0.035	)		(0.020	)		(0.144	)

GRACE 3, INC.

A DEVELEOPMENT STAGE COMPANY

STATEMENT OF OPERATIONS

				For the period
	For the six			October 27, 2005
	months ended			(Inception) to
	November 30, 2008			November 30, 2009
	(Unaudited)			(Unaudited)

Net sales	$	-		$	-

Cost of sales		-			-

Gross Profit		-			-

General and administrative expense		10,500			44,757

Net loss		(10,500	)		(44,757	)

Weighted average number of common shares
Outstanding (basic and fully diluted)		100,000			100,000

Basic and diluted (loss) per common share	$	(0.105	)	$	(0.448	)

The financial information presented herein has be prepared by management without audit by independent certified public accountants.

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

GRACE 3, INC.

A DEVELOPMENT STAGE COMPANY

STATEMENT OF CASH FLOWS

	For the three			For the three			For the six
	months ended			months ended			months ended
	November 30, 2009			November 30, 2008			November 30, 2009
	(Unaudited)			(Unaudited)			(Unaudited)

Cash flows from operating activities
Net (loss)	$	(3,525	)	$	(2,000	)	$	(14,388	)

Adjustments to reconcile net (loss) to net cash
Used in operating activities:
(Increase) decrease in prepaid expenses
Increase (decrease) in accounts payable		(375	)		(5,750	)		2,525

Net cash (used in) operating activities		(3,900	)		(7,750	)		(11,863	)

Cash flows from financing activities
Proceeds from shareholders loan		3,900			7,750			11,863
Proceeds from issuance of common stock
Proceeds from additional capital contributions

Net cash provided by financing activities		-			-			-

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		-			-			-

GRACE 3, INC.

A DEVELOPMENT STAGE COMPANY

STATEMENT OF CASH FLOWS

				For the period
	For the six			October 27, 2005
	months ended			(Inception) to
	November 30, 2008			November 30, 2009
	(Unaudited)			(Unaudited)

Cash flows from operating activities	$	(10,500	)	$	(44,757	)
Net (loss)

Adjustments to reconcile net (loss) to net cash
Used in operating activities:
(Increase) decrease in prepaid expenses
Increase (decrease) in accounts payable		750			7,025

Net cash (used in) operating activities		(9,750	)		(37,732	)

Cash flows from financing activities
Proceeds from shareholders loan		7,750			27,938
Proceeds from issuance of common stock		10
Proceeds from additional capital contributions		2,000			9,784

Net cash provided by financing activities		9,750			37,732

Net cash provided by financing activities		-			-

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		-			-

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

Forward-Looking Statements

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

Plan of Operation; Going Concern

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

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

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

The Company’s management will supervise the search for target companies as potential candidates for a business combination. The Company may enter into agreements with other consultants to assist in locating a target company and may share stock received by it or cash resulting from the sale of its securities with such other consultants.

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

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

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

Changes in Control of Registrant

On July 7, 2008 (the “Effective Date”), pursuant to the terms of a Stock Purchase Agreement (the “Agreement”), Broad Street Ventures, LLC, a limited liability company formed in the State of Colorado (“BSV”) purchased a total of 96,000 shares of the issued and outstanding common stock of Grace 3, Inc., a Delaware corporation (the “Company”), from Getting You There, LLC, the sole shareholder of the Company (“GYT”). The total of 96,000 shares represents 96% of the shares of outstanding common stock of the Company (the “Acquisition”).

Also, as part of the Acquisition and pursuant to the Agreement, the following changes to the Company’s directors and officers occurred:

Virginia K. Sourlis resigned as the Company’s President, Chief Executive Officer, Chief Financial Officer and Secretary and Sole Director effective July 18, 2008

As of July 18, 2008, Douglas Dyer was appointed as the Company’s President and Sole Director.

Results of Operations

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

Assets. At November 30, 2009, the Company had $0 in assets, compared to $0 at May 31, 2009.

Liabilities. At November 30, 2009, the Company had $34,963 in total liabilities. At May 31, 2009, the Company had total liabilities of $20,575. Total liabilities consisted of Accounts Payable and Amounts due to a Shareholder. The Accounts Payable consists of legal and accounting fees accrued for the preparation and filing the Registration Statement on Form 10-SB filed on June 19, 2006 and annual and quarterly reports filed since the effectiveness of such registration statement. Accounts Payable increased from $4,500 at May 31, 2009 to $7,025 at November 30, 2009. Amounts due to a Shareholder increased from $16,075 at May 31, 2009 to $27,938 at November 30, 2009.

Comparison of Three Months Ended November 30, 2009 to November 30, 2008

Revenues. For the three months ended November 30, 2009 and November 30, 2008 and for the period from October 27, 2005 (Inception) to November 30, 2009, the Company had no activities that produced revenues from operations.

Net Loss. For the three month periods ended November 30, 2009 and November 30, 2008, the Company had a net loss of $3,525 and $2,000, respectively. From the Company’s date of inception (October 27, 2005) to November 30, 2009, the Company had net losses of $44,757. These losses were mostly due to legal, accounting, audit and other professional service fees incurred in relation to the filing of the Company’s Registration Statement on Form 10-SB filed on June 19, 2006 and annual and quarterly reports filed since the effectiveness of such registration statement.

General and Administrative Expenses. For the three months ended November 30, 2009 and November 30, 2008, the Company had general and administrative expenses of $3,525 and $2,000, respectively. From the Company’s date of inception (October 27, 2005) to November 30, 2009, the Company had general and administrative expenses of $44,757. These expenses were due to legal, accounting, audit and other professional service fees incurred in relation to the filing of the Company’s Registration Statement on Form 10-SB filed on June 19, 2006 and annual and quarterly reports filed since the effectiveness of such registration statement.

Comparison of Six Months Ended November 30, 2009 to November 30, 2008

Revenues. For the six months ended November 30, 2009 and November 30, 2008 and for the period from October 27, 2005 (Inception) to November 30, 2009, the Company had no activities that produced revenues from operations.

Net Loss. For the six month periods ended November 30, 2009 and November 30, 2008, the Company had a net loss of $14,388 and $10,500, respectively. From the Company’s date of inception (October 27, 2005) to November 30, 2009, the Company had net losses of $44,757. These losses were mostly due to legal, accounting, audit and other professional service fees incurred in relation to the filing of the Company’s Registration Statement on Form 10-SB filed on June 19, 2006 and annual and quarterly reports filed since the effectiveness of such registration statement.

Liquidity and Capital Resources

At November 30, 2009, the Company had $0 in total assets. At May 31, 2009, the Company had $0 in total assets. The Company’s current liabilities at November 30, 2009 and at May 31, 2009, totaled $34,963 and $20,575, respectively, comprised of accounts payable and advances/loans from shareholders’.

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

For the Six Months Ended November 30, 2009 and November 30, 2008 and

The Period from (October 27, 2005) Date of Inception to November 30, 2009

	For the Six Months Ended November 30,				Period from October 27, 2005 to November 30,
	2009		2008		2009
Net Cash (Used In) Operating Activities	$	11,863	$	9,750	$	37,732
Investing Activities	$	0	$	0	$	0
Net Cash Provided from Financing Activities	$	11,683	$	9,750	$	37,732
Net Effect on Cash	$	0	$	0	$	0

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

At November 30, 2009, the Company had no capital resources to fund administrative expenses pending acquisition of an operating company. The Company has not realized any revenues from operations since inception, and its plan of operation for the next twelve months is to locate a suitable acquisition or merger candidate and consummate a business combination. There is substantial doubt that we will continue as a going concern. The Company may need additional cash advances from its stockholder or loans from other parties to pay for operating expenses until the Company consummates a merger or business combination with a privately-held operating company. Although it is currently anticipated that the Company can satisfy its cash requirements with additional cash advances or loans from other parties, if needed, for at least the next twelve months, the Company can provide no assurance that it can continue to satisfy its cash requirements for such period.

Off-Balance Sheet Arrangements

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

Going Concern

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

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

Item 3. Quantitative and Qualitative Disclosures about Market Risk

N/A.

Item 4T. Controls and Procedures.

Evaluation of Controls and Procedures.

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

Evaluation of Disclosure Controls and Procedures

Based on their evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of November 30, 2009, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures were not effective to ensure that the information required to be disclosed by us in this Report was (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and instructions for Form 10-Q.

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

●

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

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

Changes in Internal Controls.

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended November 30, 2009 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II

OTHER INFORMATION

Item 1. Legal Proceedings.

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

Item 1A. Risk Factors.

N/A.

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

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 under the exemption from registration afforded the Company under Section 4(2) of the Securities Act of 1933, as amended due to the fact that the issuance did not involve a public offering of securities.

Item 3. Defaults Upon Senior Securities.

None.

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

None.

Item 5. Other Information.

None

Item 6. Exhibits.

Exhibit No.		Description

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

*3.2		Bylaws

31.1		Certification by Douglas A. Dyer, the Principal Executive Officer and Principal Financial Officer of Grace 3, Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification by Douglas A. Dyer, the Principal Executive Officer and Principal Financial Officer of Grace 3, Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* Filed as an exhibit to the Company’s Registration Statement on Form 10-SB (File No. 000-52061), as filed with the Securities and Exchange Commission on June 19, 2006, and incorporated herein by this reference.

SIGNATURES

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

Dated: January 14, 2010

GRACE 3, INC.

By: /s/ DOUGLAS A. DYER

Douglas A. Dyer

President

(Principal Executive Officer)

(Principal Financial Officer)

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