**FORM 10-QSB**

 

**Securities and ExchangeCommission**

**Washington,D. C. 20549**

## ** **

**(Mark One)**

**ý****          ****QUARTERLY REPORT UNDER SECTION 13OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934**

 

**For the quarterly period ended  September 30, 2005**

 

**OR**

 

**o****          ****TRANSITION REPORT PURSUANT TO SECTION 13or 15(d) OFTHE SECURITIES EXCHANGE ACT OF 1934**

 

**For the transition period from                       to                       .**

 

**Commission file number                     0-16257**

 

**Pace Medical, Inc.**

(Exact name of small businessissuer as specified in its charter)

 
| **Massachusetts**                                       | ** ** | **04-2867416**       |
|---------------------------------------------------------|------------|----------------------|
| (State or  other jurisdiction of                        |       | (I.R.S.  Employer    |
| incorporation  or organization)                         |       | identification  No.) |
|                                                    |       |                 |
| **391  Totten Pond Road, Waltham, Massachusetts 02451** |
| (Address of  principal executive offices)               |
|                                                    |       |                 |
| **(781) 890-5656**                                      |
| (Issuer’s  telephone number, including area code)  |

 

Check whether the issuer (1) filed allreports required to be filed by Section 13 or 15(d) of the ExchangeAct during the past 12 months (or for such shorter period that the registrantwas required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days.   Yes  ý   No  o

 

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

 

Indicate the number of shares outstanding ofeach of the issuer’s classes of common equity, as of November 14, 2005.

 

3,354,870 shares of Common Stock, par value$.01 per share

 

Transitional Small Business Disclosureformat:    Yes  o   No  ý

 

 

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**PART I- FINANCIAL INFORMATION**

 
| **Item 1.** | ** ** | **Financial Statements.**                            |
|-------------|------------|------------------------------------------------------|
|        |       |                                                 |
| a)          |       | Condensed Consolidated Balance Sheets                |
|        |       |                                                 |
| b)          |       | Condensed Consolidated Statements of Operations      |
|        |       |                                                 |
| c)          |       | Condensed Consolidated Statements of Cash Flows      |
|        |       |                                                 |
| d)          |       | Notes to Condensed Consolidated Financial Statements |

 

2

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**PACEMEDICAL, INC. AND SUBSIDIARYCONDENSED CONSOLIDATEDBALANCE SHEETS**

 
| ** **                                                                   | ** ** | **SEPTEMBER 30, 2005** | ** ** | **DECEMBER 31, 2004** | ** ** |
|------------------------------------------------------------------------------|------------|-----------------------------|------------|----------------------------|------------|
| ** **                                                                   | ** ** | **(Unaudited)**             | ** ** | **(See note below)**       | ** ** |
| ASSETS                                                                       |       |                        |       |                       |       |
|                                                                         |       |                        |       |                       |       |
| Current assets:                                                              |       |                        |       |                       |       |
| Cash and cash equivalents                                                    |       | $                           | 705,180    |                       | $          | 902,198 |   |
| Accounts receivable                                                          |       | 160,640                     |       | 215,504                    |       |
| Inventories:                                                                 |       |                        |       |                       |       |
| Raw  materials                                                               |       | 251,407                     |       | 271,812                    |       |
| Work-in-process                                                              |       | 51,342                      |       | 119,876                    |       |
| Finished  goods                                                              |       | 169,122                     |       | 79,707                     |       |
|                                                                         |       | 471,871                     |       | 471,395                    |       |
| Other current assets                                                         |       | 39,276                      |       | 39,309                     |       |
| Total  current assets                                                        |       | 1,376,967                   |       | 1,628,406                  |       |
|                                                                         |       |                        |       |                       |       |
| Property and equipment, net                                                  |       | 10,758                      |       | 18,812                     |       |
| Other assets                                                                 |       | 254,025                     |       | 248,626                    |       |
| TOTAL ASSETS                                                                 |       | $                           | 1,641,750  |                       | $          | 1,895,844 |   |
|                                                                         |       |                        |       |                       |       |
| LIABILITIES AND SHAREHOLDERS’ EQUITY                                    |       |                        |       |                       |       |
|                                                                         |       |                        |       |                       |       |
| Current liabilities:                                                         |       |                        |       |                       |       |
| Accounts payable                                                             |       | $                           | 183,714    |                       | $          | 241,779 |   |
| Accrued expenses                                                             |       | 55,317                      |       | 118,396                    |       |
| Total  current liabilities                                                   |       | 239,031                     |       | 360,175                    |       |
|                                                                         |       |                        |       |                       |       |
| Shareholders’ equity:                                                   |       |                        |       |                       |       |
| Common stock, $.01 par value, 5,000,000  shares authorized, 3,400,870 issued |       | 34,009                      |       | 34,009                     |       |
| Additional paid-in capital                                                   |       | 3,147,151                   |       | 3,147,151                  |       |
| Accumulated other comprehensive income                                       |       | 244,109                     |       | 355,011                    |       |
| Accumulated deficit                                                          |       | (1,990,803                  | )          | (1,968,755                 | )          |
|                                                                         |       | 1,434,466                   |       | 1,567,416                  |       |
| Less Treasury Stock, at Cost, 46,000 shares                                  |       | (31,747                     | )          | (31,747                    | )          |
| Total  Shareholders’ Equity                                             |       | 1,402,719                   |       | 1,535,669                  |       |
|                                                                         |       |                        |       |                       |       |
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY                              |       | $                           | 1,641,750  |                       | $          | 1,895,844 |   |

 

Note:      Thebalance sheet at December 31, 2004 has been taken from the auditedfinancial statements at that date.

 

The accompanying notes are anintegral part of these condensed consolidated financial statements.

 

3

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**PACEMEDICAL, INC. AND SUBSIDIARYCONDENSED CONSOLIDATEDSTATEMENTS OF OPERATIONS(Unaudited)**

 
| ** **           | ** ** | **For the Three Months  ended September 30** | ** ** | **For the Nine months  ended September 30** | ** ** |
|----------------------|------------|---------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **           | ** ** | **2005**                                          | ** ** | **2004**                                         | ** ** | **2005** | ** ** | **2004** | ** ** |
| Net sales            |       | $                                                 | 289,572    |                                             | $          | 398,577 |   | $ | 1,205,063 |   | $ | 1,008,491 |   |
|                 |       |                                              |       |                                             |       |   |   |   |   |   |   |   |   |
| Cost of sales        |       | 141,232                                           |       | 237,691                                          |       | 527,680 |   | 589,766 |   |
|                 |       |                                              |       |                                             |       |   |   |   |   |
| Gross Margin         |       | 148,340                                           |       | 160,886                                          |       | 677,383 |   | 418,725 |   |
|                 |       |                                              |       |                                             |       |   |   |   |   |
| Operating expenses   |       | 254,146                                           |       | 196,345                                          |       | 726,908 |   | 598,128 |   |
|                 |       |                                              |       |                                             |       |   |   |   |   |
| Loss from operations |       | (105,806                                          | )          | (35,459                                          | )          | (49,525 | ) | (179,403 | ) |
|                 |       |                                              |       |                                             |       |   |   |   |   |
| Other income         |       | 1,632                                             |       | 6,953                                            |       | 27,477 |   | 15,245 |   |
|                 |       |                                              |       |                                             |       |   |   |   |   |
| Net loss             |       | $                                                 | (104,174   | )                                                | $          | (28,506 | ) | $ | (22,048 | ) | $ | (164,158 | ) |
|                 |       |                                              |       |                                             |       |   |   |   |   |   |   |   |   |
| Net loss per share:  |       |                                              |       |                                             |       |   |   |   |   |
|                 |       |                                              |       |                                             |       |   |   |   |   |
| Basic                |       | $                                                 | (.03       | )                                                | $          | (.01 | ) | $ | (.01 | ) | $ | (.05 | ) |
|                 |       |                                              |       |                                             |       |   |   |   |   |   |   |   |   |
| Diluted              |       | $                                                 | (.03       | )                                                | $          | (.01 | ) | $ | (.01 | ) | $ | (.05 | ) |

 

The accompanying notes are an integral part of these condensedconsolidated financial statements.

 

4

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**PACEMEDICAL, INC. AND SUBSIDIARYCONDENSED CONSOLIDATEDSTATEMENTS OF CASH FLOWS(Unaudited)**

 
| ** **                                                                            | ** ** | **NINE MONTHS ENDED** | ** ** |
|---------------------------------------------------------------------------------------|------------|-----------------------|------------|
| ** **                                                                            | ** ** | **SEPTEMBER 30** | ** ** |
| ** **                                                                            | ** ** | **2005**              | ** ** | **2004** | ** ** |
|                                                                                  |       |                  |       |   |   |
| CASH FLOWS FROM OPERATING ACTIVITIES:                                                 |       |                  |       |   |   |
|                                                                                  |       |                  |       |   |   |
| Net income  (loss)                                                                    |       | $                     | (22,048    | ) | $ | (164,158 | ) |
| Adjustments  to reconcile net income (loss) to net cash used in operating activities: |       |                  |       |   |   |
| Depreciation  and amortization                                                        |       | 10,085                |       | 1,588 |   |
| Changes in  assets and liabilities, net:                                              |       | (183,024              | )          | (175,429 | ) |
|                                                                                  |       |                  |       |   |   |
| Net cash  used in operating activities                                                |       | (194,987              | )          | (337,999 | ) |
|                                                                                  |       |                  |       |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                                 |       |                  |       |   |   |
|                                                                                  |       |                  |       |   |   |
| Purchases of  property and equipment                                                  |       | 2,031                 |       | 1,435 |   |
|                                                                                  |       |                  |       |   |   |
| NET DECREASE IN CASH AND CASH EQUIVALENTS                                             |       | (197,018              | )          | (339,434 | ) |
|                                                                                  |       |                  |       |   |   |
| CASH AND CASH EQUIVALENTS AT BEGINNING OF  PERIOD                                     |       | 902,198               |       | 1,060,791 |   |
|                                                                                  |       |                  |       |   |   |
| CASH AND CASH EQUIVALENTS AT END OF PERIOD                                            |       | $                     | 705,180    |   | $ | 721,357 |   |

 

The accompanying notes are anintegral part of these condensed consolidated financial statements.

 

5

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**PACEMEDICAL, INC. AND SUBSIDIARYNOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS**

 

1.             The accompanyingunaudited consolidated financial statements and these notes have been condensedand do not contain all disclosures required by generally accepted accountingprinciples.  See notes to auditedconsolidated financial statements contained in the Company’s annual report.

 

2.             In the opinion of theCompany, the accompanying unaudited condensed consolidated financial statementscontain all adjustments, all of which are normal and recurring, necessary topresent fairly the financial position of the Company and its subsidiary as of September 30,2005 and the results of their operations for the three and nine months ended September 30,2005 and September 30, 2004 and their cash flows for the nine months endedSeptember 30, 2005 and September 30, 2004.

 

3.             The results ofoperations for the three and nine months ended September 30, 2005 are notnecessarily indicative of the results to be expected for the full year.

 

4.             Basic net income(loss) per share is computed by dividing net income (loss) by the weightedaverage number of common shares outstanding during the period.  Diluted net income (loss) per share iscomputed by dividing net income by the weighted average number of common anddilutive common equivalent shares outstanding during the period, except wherethe effect would be anti-dilutive.  Thenumber of dilutive common equivalent shares outstanding during the period hasbeen determined in accordance with the treasury-stock method.  Common equivalent shares consist of commonstock issuable upon the exercise of outstanding options.

 
| ** **                          | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
|-------------------------------------|------------|--------------------------------------------|------------|-------------------------------------------|------------|
| ** **                          | ** ** | **2005**                                   | ** ** | **2004**                                  | ** ** | **2005** | ** ** | **2004** | ** ** |
|                                |       |                                       |       |                                      |       |   |   |   |   |
| Net income (loss)                   |       | $                                          | (104,174   | )                                         | $          | (28,506 | ) | $ | (22,048 | ) | $ | (164,158 | ) |
|                                |       |                                       |       |                                      |       |   |   |   |   |
| Weighted-average shares outstanding |       | 3,354,870                                  |       | 3,354,870                                 |       | 3,354,870 |   | 3,354,870 |   |
|                                |       |                                       |       |                                      |       |   |   |   |   |
| Basic net income (loss) per share   |       | $                                          | (.03       | )                                         | $          | (.01 | ) | $ | (.01 | ) | $ | (.05 | ) |
|                                |       |                                       |       |                                      |       |   |   |   |   |
|                                |       |                                       |       |                                      |       |   |   |   |   |
| Weighted-average shares outstanding |       | 3,354,870                                  |       | 3,354,870                                 |       | 3,354,870 |   | 3,354,870 |   |
|                                |       |                                       |       |                                      |       |   |   |   |   |
| Dillutive Common Equivalent Shares  |       | —                                     |       | —                                    |       | — |   | — |   |
|                                |       |                                       |       |                                      |       |   |   |   |   |
| Diluted net income (loss) per share |       | $                                          | (.03       | )                                         | $          | (.01 | ) | $ | (.01 | ) | $ | (.05 | ) |

 

6

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5.             For the periods ended September 30, 2005and 2004, options to purchase 755,000 and 360,000 common shares, respectively,were outstanding.

 

6.             Comprehensive lossincludes net loss and foreign currency translation adjustments.  Comprehensive loss for the three and ninemonths ended September 30, 2005 and 2004 was as follows:

 
| ** **                      | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
|---------------------------------|------------|--------------------------------------------|------------|-------------------------------------------|------------|
| ** **                      | ** ** | **2005**                                   | ** ** | **2004**                                  | ** ** | **2005** | ** ** | **2004** | ** ** |
| Net (loss)                      |       | $                                          | (104,174   | )                                         | $          | (28,506 | ) | $ | (22,048 | ) | $ | (164,158 | ) |
|                            |       |                                       |       |                                      |       |   |   |   |   |
| Currency Translation Adjustment |       | 9,126                                      |       | (14,405                                   | )          | (110,902 | ) | 4,801 |   |
|                            |       |                                       |       |                                      |       |   |   |   |   |
| Total                           |       | $                                          | (113,300   | )                                         | $          | (42,911 | ) | $ | (132,950 | ) | $ | (159,357 | ) |

 

7.     Stock-BasedCompensation

 

The Company applies Statement of FinancialAccounting Standards (“SFAS”) No. 123, *Accounting for Stock-BasedCompensation*, as amended by SFAS No. 148, *Accountingfor Stock Based Compensation Transition and Disclosure, an amendment to FASBStatement No. 123*, to its stock compensation arrangements,which requires entities to recognize as expense over the vesting period thefair value of stock-based awards on the date of grant or measurement date.  For employee stock-based awards, however,SFAS Nos. 123 and 148 allow entities to continue to apply the intrinsic valuemethod under the provisions of Accounting Principles Board (“APB”) Opinion No. 25and provide pro forma net earnings disclosures as if the fair-value-basedmethod defined in SFAS No. 123 had been applied.  The Company has elected to apply theprovisions of APB Opinion No. 25 and provide the pro forma disclosures ofSFAS Nos. 123 and 148.

 

Had compensation expense for awards under theCompany’ s Stock Option Plans been determined based  on the fair value method set forth in SFAS No. 123,the effect on the Company’s net income (loss) and per share amounts would havebeen as follows:

 

7

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| ** **                                                                               | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
|------------------------------------------------------------------------------------------|------------|--------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                                                               | ** ** | **2005**                                   | ** ** | **2004**                                  | ** ** | **2005** | ** ** | **2004** | ** ** |
| Net income (loss), as reported                                                           |       | $                                          | (104,174   | )                                         | $          | (28,506 | ) | $ | (22,048 | ) | $ | (164,158 | ) |
|                                                                                     |       |                                       |       |                                      |       |   |   |   |   |
| Less:  Compensation expense for option awards determined under fair value based  method. |       | (8,932                                     | )          | —                                    |       | (64,877 | ) | — |   |
|                                                                                     |       |                                       |       |                                      |       |   |   |   |   |
| Pro forma net income (loss)                                                              |       | $                                          | (113,106   | )                                         | $          | (28,506 | ) | $ | (86,925 | ) | $ | 164,158 |   |
|                                                                                     |       |                                       |       |                                      |       |   |   |   |   |
| Net income  (loss) per share:                                                            |       |                                       |       |                                      |       |   |   |   |   |
| As reported—basic  and diluted                                                      |       | $                                          | (.03       | )                                         | $          | (.01 | ) | $ | (.01 | ) | $ | (.05 | ) |
| Pro forma—basic  and diluted                                                        |       | $                                          | (.03       | )                                         | $          | (.01 | ) | $ | (.03 | ) | $ | (.05 | ) |

 

8.             RecentAccounting Pronouncements

 

*Stock Based Compensation*

 

In December 2004, the FASB issuedFinancial Accounting Standards No. 123 (revised 2004) (FAS 123R), *“Share-Based Payment”*. FAS 123R replaces FAS No. 123, *“Accounting for Stock Based Compensation”*, and supersedesAPB Opinion No. 25, *“Accounting for StockIssued to Employees”*.  FAS123R requires compensation expense, measured as the fair value at the grantdate, related to share-based payment transactions to be recognized in thefinancial statements over the period that an employee provides service inexchange for the award. The Company intends to adopt FAS 123R using the “modifiedprospective” transition method as defined in FAS 123R. Under the modifiedprospective method, companies are required to 1) record compensation costprospectively for the unvested portion, as of the date of adoption, ofpreviously issued and outstanding awards over the remaining vesting period ofsuch awards. FAS 123R is effective January 1, 2006. Based on the currentoptions outstanding, we do not anticipate the adoption of this statement toresult in the recognition of material additional compensation cost in the yearof adoption.

 

*Inventory Costs*

 

In November 2004, the FASB issued SFAS No. 151,*“Inventory Costs, an amendment of ARB No 43.Chapter 4”*.  SFAS No. 151clarifies the accounting for abnormal amounts of idle facility expense,freight, handling costs and wasted material. SFAS No. 151 is effective forthe inventory costs incurred during fiscal years beginning after June 15,2005. We do not believe the adoption of SFAS No. 151 will have a materialeffect on our consolidated financial position, results of operations or cashflows.

 

8

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**Item 2.****            Management’sDiscussion and Analysis of Financial Condition and Results of Operations.**

 

**General**

 

Revenues for the thirdquarter of 2005 were lower than expected due primarily to component shortagesas discussed in more detail below.   TheCompany reported a net loss for the quarter of $104,174, compared to a net lossof $28,506 in the corresponding prior year period.

 

### **Liquidity and CapitalResources**

### ** **

As of September 30, 2005, the Company had cash and cashequivalents of $705,180 and working capital of $1,137,936.  The working capital at September 30,2005 was  $130,295 less than the amountat December 31, 2004, owing primarily to lower sales and exchange ratevariations.   The Company’s cash flowshave historically tracked its operating results.

 

Management believes that its working capital should suffice to ensurethat its on-going operations are financed adequately.   In the short term, however, additionalequity and or debt financing may be sought to continue funding research anddevelopment, capital equipment, replacement inventories, and to expand theCompany’s marketing operations.  Theobtaining of additional capital through the issuance of equity securities mayresult in dilution of existing shareholders’ interests.

 

**Results of Operations - Three Months ended September 30,2005 versus Three Months ended September 30, 2004**

 

Net sales in the third quarter of 2005 decreased 27% from the sales inthe third quarter of 2004.   This was dueprimarily to lower than expected sales revenue caused by our inability to shipproduct.  Delays in obtaining certaincomponents from vendors was the major factor affecting our ability to shipcustomer orders.  These components havesince been obtained, and the Company expects the resulting backlog to increasesales in the fourth quarter.

 

The Company’s margins in the third quarter were substantially higherthan those seen in 2004 (51% in 2005 compared to 40% in 2004).  This occurred due to the product mix ofsales.

 

Operating expenses increased 29% during the three months ended September 30,2005 versus the three months ended September 30, 2004, primarily due tothe hiring of additional management personnel. Management anticipates some increase in its operating expendituresduring the balance of 2005.

 

No tax benefit was recorded for the three months ended September 30,2005 owing to uncertainty regarding the Company’s ability to use net operatingloss carryforwards in both the U.S. and U.K.

 

9

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Net loss for the quarter was $104,174 or $.03per share in contrast to a net loss of $28,506 or $.01 per share in the thirdquarter of 2004.

 

**Results of Operations - Nine Months ended September 30,2005 versus Nine Months ended September 30, 2004**

 

Net sales in the nine months ended September 30, 2005 increased19% from the sales in the nine months ended September 30, 2004.  This was due primarily to increased productavailability in the first two quarters, strong international sales andattending major industry trade shows.

 

The Company’s margins in the first three quarters of 2005 were higherthan those seen in 2004 (56% in 2005 compared to 42% in 2004).   This occurred due to a change in productmix.  It should be noted that pricing hasremained firm on all products.

 

Operating expenses increased 22% during the nine months ended September 30,2005 compared to the nine months ended September 30, 2004, primarily dueto the hiring of additional management personnel.  Management anticipates some increase in itsoperating expenditures during the balance of 2005.

 

No tax provision was recorded for the nine months ended September 30,2005 owing to the Company’s ability to use net operating loss carryforwards inthe United States.

 

Net loss for the first three quarters of 2005 was $22,048 or $.01 pershare in contrast to a net loss of $164,158 or $.05 per share in the firstthree quarters of 2004.

 

**Factors That May Affect Future Results**

 

From time to time, information provided by the Company or statementsmade by its employees may contain “forward-looking” information which involvesrisks and uncertainties.  In particular,statements contained in this report which are not historical facts (includingbut not limited to the Company’s expectations regarding business strategy, newproduct availability, pricing, anticipated operating results, market share, therate at which backlogs of orders can be filled, operating expenses andanticipated working capital) may be “forward-looking” statements.  The Company’s actual results may differ fromthose stated in any forward-looking statements. Factors that may cause such differences include, but are not limited to,risks associated with the introduction of new products including supplierperformance, risks associated with the manufacture of existing products,including supplier performance, development of markets for new products andexisting products offered by the Company, personnel requirements, the Company’srelationships with distributors and OEM’s, the economic health of such OEM’s,government regulation, competition and general economic conditions.

 

10

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**Critical Accounting Policies**

 

The critical accounting policies are those that the Company believesare the more significant judgments and estimates used in the preparation of theCompany’s condensed consolidated financial statements.  As of September 30,2005 there have been no material changes to the critical accounting policies asdescribed in the Company’s Management’s Discussion and Analysis of FinancialCondition and Results of Operations and in the Notes to the consolidatedfinancial statements included in the Company’s Annual Report on Form 10-Kfor the year ended December 31, 2004.

 

**Item 3. Controls and Procedures**

 

As of the end of the period covered by this report, our President andChief Executive Officer and our Treasurer performed an evaluation of theeffectiveness of the design and operation of the Company’s disclosure controlsand procedures pursuant to Exchange Act Rule 13a-14.  Based upon that evaluation, the President andChief Executive Officer and the Treasurer concluded that the Company’sdisclosure controls and procedures are effective in ensuring the reporting ofmaterial information required to be included in the Company’s periodic filingswith the Securities and Exchange Commission. There were no significant changes in the Company’s internal controlsover financial reporting or in other factors that could significantly affectthese internal controls over financial reporting subsequent to the date of themost recent evaluation.

 

11

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**PART II- OTHER INFORMATION**

 

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

 

At the Company’s Annual Meeting ofStockholders held on September 3, 2005, the following persons were electedas Directors of the Company:

 
| ** **            | ** ** | **Votes  for** | ** ** | **Votes  Withheld** |
|-----------------------|------------|----------------|------------|---------------------|
|                  |       |           |       |                |
| Steven E.  Hanson     |       | 2,455,434      |       | 74,200              |
| Ralph E.  Hanson      |       | 2,455,434      |       | 74,200              |
| George F.  Harrington |       | 2,455,434      |       | 74,200              |
| Derrick  Ebden        |       | 2,455,434      |       | 74,200              |

 

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

 

Exhibits:

 
| 31.1   |   | Certification of the President and Chief  Executive Officer pursuant to Rules 13a -14 and 15d -14 promulgated  under the Securities Exchange Act of 1934, as amended, as adopted pursuant to  section 302 of the Sarbanes-Oxley Act of 2002. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                   |
| 31.2   |   | Certification of the Treasurer pursuant to Rules 13a  -14 and 15d -14 promulgated under the Securities Exchange Act of 1934, as  amended, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of  2002.                             |
|   |   |                                                                                                                                                                                                                                                   |
| 32     |   | Certifications pursuant to 18 U.S.C. Section 1350,  as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                    |

 

12

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**SIGNATURES**

 

Pursuant to the requirements of theSecurities Exchange Act of 1934, the registrant has duly caused this report tobe signed on its behalf by the undersigned thereunto duly authorized.

 

 
|   |                    | **PACE MEDICAL, INC.**            |
|--------|-------------------------|-----------------------------------|
|   |                    | (Registrant)                      |
|   |                    |                              |
|   |                    |                              |
| Date:  | November 14,  2005 |                              |   | /s/ Steven E. Hanson |   |
|   |                    | Steven E. Hanson, President       |
|   |                    |  and Chief Executive Officer |
|        |                         |                                   |  |  |  |

 

13

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PACE MEDICAL, INC.

FORM 10-QSB

September 30, 2005

EXHIBIT INDEX

 
| **Exhibit No.** | ** ** | **Description**                                                                                                                                                                                                                                    |
|----------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                 |       |                                                                                                                                                                                                                                               |
| 31.1                 |       | Certification  of President and Chief Executive Officer pursuant to Rules 13a -14 and  15d -14 promulgated under the Securities Exchange Act of 1934, as amended, as  adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002. |
|                 |       |                                                                                                                                                                                                                                               |
| 31.2                 |       | Certification  of Treasurer pursuant to Rules 13a -14 and 15d -14 promulgated under the  Securities Exchange Act of 1934, as amended, as adopted pursuant to section 302  of the Sarbanes-Oxley Act of 2002.                             |
|                 |       |                                                                                                                                                                                                                                               |
| 32                   |       | Certifications  pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906  of the Sarbanes-Oxley Act of 2002                                                                                                                |

 

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