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# U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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# FORM 10-QSB

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# QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

# For the quarter ended: September 30, 2005

# Commission File Number: 0-27554

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PACE Health Management Systems, Inc.
(Exact name of small business issuer as specified in its charter)

|                                | 
|------------------------------- | 
|Iowa                            | 
|(State or other jurisdiction of | 
|incorporation or organization)  | 

2116 Financial Center
666 Walnut
Des Moines, IA 50309
(Address and zip code of principal executive offices)

(515) 244-5746
Issuers telephone -number, including area code)

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Check whether the issuer (1) 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 of the filing requirements for at least the past
90 days.   YES
x
NO
o

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

State the number of shares outstanding of each of the issuers classes
of common stock, as of the latest practicable date:

|Class                |  | Number of Shares OutstandingNovember 14, 2005
|-------------------- |  | ---------------------------------------------
|Common Stock, no par |  | 5,716,074                                    

Transitional Small Business Disclosure Format (Check
one):   YES
o
NO
x
.





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# PACE HEALTH MANAGEMENT SYSTEMS, INC.

# PART I.   FINANCIAL INFORMATION

|                                                                                                  | Page
|------------------------------------------------------------------------------------------------- | ----
|ITEM 1.   FINANCIAL STATEMENTS (UNAUDITED)                                                        |     
|                                                                                                 
|Condensed Balance Sheets September 30, 2005 and December 31, 2004                                 |     
|                                                                                                 
|Condensed Statements of Operations Three Months and Nine Months Ended September 30, 2005 and 2004 |     
|                                                                                                 
|Condensed Statements of Cash Flows Nine Months Ended September 30, 2005 and 2004                  |     
|                                                                                                 
|Notes to Condensed Financial Statements                                                           |     
|                                                                                                 
|ITEM 2.   MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION                               |     
|                                                                                                 
|ITEM 3.   CONTROLS AND PROCEDURES                                                                 |     
|                                                                                                 
|                                                                                                 
|PART II.   OTHER INFORMATION                                                                      |     
|                                                                                                 
|ITEM 6.   EXHIBITS                                                                                |     

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# PART I.   FINANCIAL INFORMATION

# ITEM 1.    FINANCIAL STATEMENTS

# PACE HEALTH MANAGEMENT SYSTEMS, INC.
CONDENSED BALANCE SHEETS(UNAUDITED)

|                                                                 | September 30,2005 |  | December 31,2004
|---------------------------------------------------------------- | ----------------- |  | ----------------
|ASSETS                                                           |                   |  |                 
|CURRENT ASSETS:                                                  |                   | 
|Cash and cash equivalents                                        |                   |  | $               
|Interest receivable                                              |                   |  |                 
|Prepaid expenses                                                 |                   |  |                 
|                                                                 |                   |  |                 
|                                                                 |                   |  | $               
|                                                                 |                   |  |                 
|                                                                
|LIABILITIES AND SHAREHOLDERS EQUITY                            
|CURRENT LIABILITIES:                                             |                   | 
|Accounts payable                                                 |                   |  | $               
|                                                                 |                   |  |                 
|Total current liabilities                                        |                   |  |                 
|                                                                 |                   |  |                 
|                                                                
|SHAREHOLDERS EQUITY:                                           
|Preferred stock, no par value, authorized 1,000,000 shares;      |                   | 
|issued none                                                      |                   |  |                 
|Convertible participating preferred stock, Series A, no par     
|value; authorized 4,000,000 shares; issued and outstanding      
|2,875,000 shares                                                 |                   |  |                 
|Common stock, no par value; authorized 20,000,000 shares; issued |                   | 
|and outstanding 5,716,074 shares                                 |                   |  |                 
|Additional paid-in capital                                       |                   |  |                 
|Accumulated (deficit)                                            |                   |  |                 
|                                                                 |                   |  |                 
|                                                                 |                   |  |                 
|                                                                 |                   |  |                 
|                                                                 |                   |  | $               
|                                                                 |                   |  |                 

See Notes to Condensed Financial Statements.

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# PACE HEALTH MANAGEMENT SYSTEMS, INC.
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)

|                                             | Three months endedSeptember 30, |  | Nine months endedSeptember 30,
|-------------------------------------------- | ------------------------------- |  | ------------------------------
|
|NET REVENUES                                 |                                 |  | $                             
|                                             |                                 |  |                               
|                                            
|COSTS AND EXPENSES                           |                                 | 
|General and administrative                   |                                 |  |                               
|                                             |                                 |  |                               
|                                             |                                 |  |                               
|                                             |                                 |  |                               
|                                            
|(Loss) from operations                       |                                 |  |                               
|                                            
|INTEREST INCOME                              |                                 |  |                               
|                                             |                                 |  |                               
|                                            
|(Loss) before income taxes                   |                                 |  |                               
|                                            
|PROVISION FOR INCOME TAXES                   |                                 |  |                               
|                                             |                                 |  |                               
|Net (Loss)                                   |                                 |  | $                             
|PREFERRED DIVIDENDS IN ARREARS               |                                 |  |                               
|                                             |                                 |  |                               
|                                            
|Net (Loss) available to common shareholders  |                                 |  | $                             
|                                             |                                 |  |                               
|                                            
|(LOSS) PER SHARE                             |                                 | 
|Basic                                        |                                 |  | $                             
|                                             |                                 |  |                               
|Fully diluted                                |                                 |  | $                             
|                                             |                                 |  |                               
|                                            
|WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
|EQUIVALENT SHARES OUTSTANDING                |                                 |  |                               
|                                             |                                 |  |                               

See Notes to Condensed Financial Statements

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# PACE HEALTH MANAGEMENT SYSTEMS, INC.
CONDENSED STATEMENTS OF CASH FLOWS(UNAUDITED)

|                                                     | Nine months endedSeptember 30,
|---------------------------------------------------- | ------------------------------
|
|CASH FLOWS FROM OPERATING ACTIVITIES                 |                               
|Net (Loss)                                           |                               
|Change in working capital components:               
|(Increase) in prepaid expenses and other receivables |                               
|Increase in accounts payable                         |                               
|                                                     |                               
|Net cash (used in) operating activities              |                               
|                                                     |                               
|                                                    
|                                                    
|                                                    
|                                                     |                               
|                                                    
|Net (decrease) in cash and cash equivalents          |                               
|                                                    
|CASH AND CASH EQUIVALENTS                            |                               
|Beginning                                            |                               
|                                                     |                               
|Ending                                               |                               
|                                                     |                               

See Notes to Condensed Financial Statements.

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# PACE HEALTH MANAGEMENT SYSTEMS, INC.
NOTES TOCONDENSED FINANCIAL STATEMENTS (UNAUDITED)

# Note 1.   Basis of presentation

The accompanying financial information should be read in conjunction with the
annual financial statements and notes thereto for the year ended December 31, 2004. The financial information included herein is
unaudited; such information reflects all adjustments, which, in the opinion of management, are necessary in order to make the
financial statements not misleading.

The results of operations for the three and nine month periods presented are
not necessarily indicative of the results to be expected for the entire fiscal year.

# Note 2.   Basic and diluted (loss) per share

On January 1, 1997 the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 128, Earnings per Share, which requires the Company to present basic and diluted income (loss) per share
amounts. Basic income (loss) per share is based on the weighted average number of common shares outstanding during the period.
Diluted income (loss) per share is based on the weighted average number of common shares and dilutive potential common shares
outstanding during the period. Dilutive potential common shares consist of stock options and warrants (using the treasury stock
method) and convertible preferred stock (using the if-converted method). The effect of stock options, warrants, and convertible
preferred stock was not included in the computation because to do so would have been antidilutive. At September 30, 2005, there
are approximately 70,000 shares issuable under warrant or option arrangements and 10,231,000 shares issuable under conversion of
Series A convertible participating preferred stock.

# Note 3.   Related Party Transactions

Administration expenses related to Equity Dynamics, Inc., an entity wholly
owned by a Director of the Company, totaled $12,500 and $13,250 for the three months ended September 30, 2005 and 2004,
respectively, and totaled $37,500 and $41,750 for the nine months ended September 30, 2005 and 2004, respectively.

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# ITEM 2.    MANAGEMENTS DISCUSSIONAND ANALYSIS OR PLAN OF OPERATION

# General

Prior to October 1998, PACE developed and marketed advanced patient care
management software systems that enabled healthcare providers to standardize the delivery of care, maximize resource utilization
and improve clinical outcomes. On October 7, 1998, the Company completed the sale of substantially all of its assets to, and the
assumption of certain of its liabilities by, Minnesota Mining and Manufacturing Company (the Transaction).

Following the Transaction, the Company has no ongoing operations and no
revenues and has minimal operating expenses. The Company presently has no employees. The Companys September 30, 2005 balance
sheet reflects cash and cash equivalents of approximately $1.75 million and no material liabilities.

The net proceeds from the Transaction will be retained by the Company pending
a determination of whether to engage in a follow-on transaction. The Company has been seeking a business combination with another
entity, before considering possible liquidation and distribution of its assets. The Company believes that with the cash on hand
and net operating loss carryforwards, subject to the limitation of such carryforwards under the Internal Revenue Code, such a
combination may be attractive to potential partners and would better serve the interests of the Companys shareholders. As of
the date of this Form 10-QSB, no definitive agreement has been signed for a follow-on transaction. If no suitable business
combination is identified, the Company may elect to liquidate and distribute the remaining net proceeds to shareholders. If the
Company liquidated at the present time, all of the net assets of the Company would be paid to holders of the Companys
preferred stock.

# RESULTS OF OPERATIONS

General and administrative:   General and
administrative expenses include bookkeeping costs, legal fees, expenses associated with shareholder relations and SEC reporting
requirements, and insurance. General and administrative expenses were $27,480 and $27,693 for the three months ended September 30,
2005 and 2004, respectively, representing a decrease of 0.8%. General and administrative expenses were $82,351 and $86,829 for the
nine months ended September 30, 2005 and 2004, respectively, representing a decrease of 5.2%, due mainly to a decrease in auditing
and administrative fees.

Interest Income:   Interest income was $14,320 and
$4,713 for the three months ended September 30, 2005 and 2004, respectively, representing an increase of 203.8%. Interest income
was $30,246 and $13,913 for the nine months ended September 30, 2005 and 2004, respectively, representing an increase of 117.4%.
The increase is due mainly to higher interest yielding investments.

Provision for income taxes:   No provision for income
tax benefit has been recorded due to the Company recording a valuation allowance on the deferred tax assets.

# LIQUIDITY AND CAPITAL RESOURCES

Net cash used in operating activities for the nine months ended September 30,
2005 and 2004 was $56,955 and $70,515, respectively. The Company has no ongoing operations and no revenues and has minimal
operating expenses. The Companys September 30, 2005 balance sheet reflects cash and cash equivalents of approximately $1.75
million and no material liabilities.

The net proceeds from the transaction will be retained by the Company pending
a determination of whether to engage in a follow-on transaction. The Company has been seeking a business combination with another
entity, before considering possible liquidation and distribution of its assets. As of the date of this Form 10-QSB, no definitive
agreement has been signed for a follow-on transaction. If no suitable business combination is identified, the Company may elect to
liquidate and distribute the remaining net proceeds to shareholders. If the Company liquidated at the present time, all of the net
assets of the Company would be paid to holders of the Companys preferred stock.

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# ITEM 3.    CONTROLS AND PROCEDURES

The Company maintains disclosure controls and procedures designed to ensure
that the information the Company must disclose in its filings with the Securities and Exchange Commission is recorded, processed,
summarized and reported on a timely basis. The Companys director and acting chief executive officer and acting chief
financial officer has reviewed and evaluated the Companys disclosure controls and procedures as defined in Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act) as of the end of the period
covered by this report (the Evaluation Date). Based on such evaluation, he has concluded that, as of the Evaluation
Date, the Companys disclosure controls and procedures are effective in bringing to his attention on a timely basis material
information relating to the Company required to be included in the Companys periodic filings under the Exchange Act.

There have not been any changes in the Companys internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the Companys most recent
fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Companys internal control
over financial reporting.

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# PART II.   OTHER INFORMATION

# ITEM 6.   EXHIBITS

| | 31     Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32     Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------

# SIGNATURES

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

|                           | PACE HEALTH MANAGEMENT SYSTEMS, INC.(Registrant)                                 
|-------------------------- | ---------------------------------------------------------------------------------
|                          
|Dated:   November 14, 2005 | /s/   John Pappajohn                                                             
|                           | John Pappajohn, Director,Acting Chief Executive andActing Chief Financial Officer
|                          

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