UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

(Mark One)
[X]  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
     1934
     FOR THE FISCAL YEAR ENDED MAY 31, 2005

[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
     OF 1934
     For the transition period from                   to
                                    ------------------   --------------

                         Commission file number: 0-28627

                            PATCH INTERNATIONAL INC.
                 (Name of small business issuer in its charter)

                   NEVADA                               87-0393257
       (State or other jurisdiction of               (I.R.S. Employer
       incorporation or organization)               Identification No.)

   666 BURRARD STREET, SUITE 1220, VANCOUVER, BRITISH COLUMBIA V6C 2X8 CANADA
               (Address of principal executive offices) (Zip Code)

                    Issuer's telephone number: (604) 688-7640

       Securities registered under Section 12(b) of the Exchange Act: NONE

         Securities registered under Section 12(g) of the Exchange Act:

                          COMMON STOCK, $.001 PAR VALUE
                                (Title of class)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 [ ] No [X]

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will be contained,  to
the  best  of  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. [ ]

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

State issuer's revenues for its most recent fiscal year:  $108,411

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates  computed by reference to the price at which the common equity
was sold,  or the average bid and asked  price of such  common  equity,  as of a
specified date within the past 60 days: $5,707,356 AS OF SEPTEMBER 9, 2005

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest  practicable date:  5,356,559 SHARES OF COMMON STOCK AS
OF SEPTEMBER 9, 2005

Transitional Small Business Disclosure Format (Check one):  Yes    ; No   X
                                                               ----     -----

<PAGE>

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS.

         The   Company's   business   originally   was   the   development   and
commercialization of non-prescription  therapeutics and nutraceuticals  designed
to prevent inflammation and their sequelae, and the development of cosmetics for
skin conditions.  The Company had not generated any revenues from product sales,
royalties or license fees. Due to the inability of the Company to obtain funding
and/or partners to pursue its pharmaceutical  projects, it decided to seek other
business  opportunities.  On October  20,  2003,  the  Company  entered  into an
Arrangement  Agreement to acquire  Patch Energy Inc., a  privately-held  company
existing under the CANADA BUSINESS CORPORATIONS ACT ("Patch").

         Patch's  principal  business has been the exploration,  development and
production  of oil and natural gas  reserves  through  participation  in farmout
arrangements  where third  parties act as the operator of the  project.  Patch's
main focus had been on its assets  located in the Kerrobert area in the Province
of Saskatchewan, Canada. Principal capital expenditures of Patch through May 31,
2005 have been US$330,291 for the acquisition,  exploration,  and development of
its interests in the oil and gas properties.

         At the Patch  shareholders'  meeting on February  20,  2004,  the Patch
shareholders approved the Plan of Arrangement. As of March 15, 2004, the Company
acquired Patch as a wholly-owned subsidiary.

         On June 15, 2004,  the Company  changed its domicile to Nevada and name
by merging into its wholly-owned subsidiary,  Patch International Inc., a Nevada
corporation.

BACKGROUND AND CORPORATE STRUCTURE

         The Company was  incorporated as Praxis  Pharmaceuticals,  Inc. on June
20, 1997 under the laws of the State of Nevada ("Praxis-Nevada").  In June 1998,
Praxis-Nevada  engaged in a reverse  acquisition  transaction with  Micronetics,
Inc.,  a  company   incorporated  in  Utah  on  December  31,  1981,  where  the
shareholders of Praxis-Nevada gained control over Micronetics.  Micronetics then
changed its name to Praxis  Pharmaceuticals  Inc.  Immediately after the reverse
acquisition  transaction,  the shareholders of Praxis-Nevada  held approximately
98% of the outstanding shares of the Company.  Praxis-Nevada was merged into the
Company  effective  June  30,  2002,  thereby  eliminating  Praxis-Nevada  as  a
subsidiary of the Company.

         A wholly owned Australian subsidiary,  Praxis Pharmaceuticals Australia
Pty.  Ltd.  (ACN 082 811 630) was  formed in May 1998 as a private  company.  In
October 1999 an equity  investment  was made in this  subsidiary  by  Rothschild
Bioscience  Managers  Limited  (now known as GBS Venture  Partners  Ltd),  which
reduced the  Company's  equity  ownership to 35%. The funds raised were used for
the development of autoimmune  disease  research  licensed from Anutech Pty Ltd,
the  development  arm of the Australian  National  University.  Praxis-Australia
changed  its  name to  "Pharmaxis  Ltd"  in  June  2002.  An  additional  equity
investment  was made in Pharmaxis in August 2002,  which  reduced the  Company's
equity ownership to 19.6%. The Company's equity ownership was further reduced to
10.4% upon  completion  of an initial  public  offering by Pharmaxis in November
2003, and currently stands at 8.6%.  Pharmaxis is listed on the Australian Stock
Exchange  under the  symbol  "PXS".  Pharmaxis  is a  specialist  pharmaceutical
company committed to the research,  development and  commercialization  of human
therapeutic  products for chronic  respiratory  and autoimmune  diseases and the
development of an improved lung function test.

         The Pharmaxis  shares are  restricted  from trading until  November 11,
2005. The Company is proposing the  distribution of a dividend of 560,000 of its
11,200,000  Pharmaxis  shares on or after November 11, 2005, to  shareholders of
record as of July 30, 2004.

         A second wholly owned  Australian  subsidiary,  Praxis  Pharmaceuticals
International Pty. Ltd. (ACN 092 654 870)  ("Praxis-International"),  was formed
on May 2, 2000. Praxis-International was dissolved effective March 3, 2004.


                                       2
<PAGE>

         As of March 15, 2004, the Company consummated the Arrangement Agreement
with Patch under which the Company acquired Patch, a privately-held  oil and gas
company continued under the laws of Canada, in a stock-for-stock transaction. As
a result of the acquisition,  Patch is a wholly owned subsidiary of the Company.
In the  arrangement,  each issued  common share of Patch was  exchanged  for one
common share of the Company.  A total of 1,823,262 shares were issued,  bringing
the issued and outstanding shares of the Company to 3,822,437. David Stadnyk, an
officer and director of the Company,  controlled approximately two-thirds of the
Patch shares, and now controls  approximately 21.8% of the outstanding shares of
the Company.

         As of July 25, 2005, the Company  effected a 1-for-10  reverse split of
its common  stock.  All share amounts have been adjusted to reflect this reverse
split unless otherwise noted.

HISTORY AND DEVELOPMENT OF PATCH ENERGY INC.

         DEVELOPMENT OF PATCH. Patch was incorporated on February 11, 2002 under
the name "Patch Energy Inc." by  registration  of Memorandum  and Articles under
the COMPANY ACT of British Columbia,  Canada.  Effective January 16, 2003, Patch
continued jurisdiction of incorporation from the COMPANY ACT of British Columbia
to the  CANADA  BUSINESS  CORPORATIONS  ACT and as a result  is now a  federally
incorporated company.

         THE  BUSINESS  OF  PATCH.  Patch's  principal  business  has  been  the
exploration,  development and production of oil and natural gas reserves through
participation in farmout arrangements where third parties act as the operator of
the project.  Patch's main focus had been on its assets located in the Kerrobert
area in the Province of Saskatchewan, Canada.

PRINCIPAL PRODUCTS

         Patch conducts  exploration  activities to locate natural gas and crude
petroleum.  Patch  produces light crude oil in  Saskatchewan  and natural gas in
California.  Such products are  generally  sold at the wellhead to purchasers in
the immediate area where the products are produced.

COMPETITION

         Oil and gas exploration and acquisition of undeveloped  properties is a
highly  competitive  and speculative  business.  Patch competes with a number of
other companies,  including major oil companies and other independent  operators
which are more  experienced and which have greater  financial  resources.  Patch
does not hold a significant competitive position in the oil and gas industry.

GOVERNMENTAL REGULATION/ENVIRONMENTAL ISSUES

         Patch's  oil  and  gas  operations  are  subject  to  various  federal,
provincial and local  governmental  regulations.  Matters  subject to regulation
include  discharge  permits for drilling  operations,  drilling and  abandonment
bonds,  reports  concerning  operations,  the  spacing of wells,  and pooling of
properties  and taxation.  From time to time,  regulatory  agencies have imposed
price controls and  limitations on production by restricting the rate of flow of
oil and gas wells below actual production capacity in order to conserve supplies
of oil and gas. The production,  handling, storage,  transportation and disposal
of oil and gas, by-products thereof, and other substances and materials produced
or used in connection with oil and gas operations are also subject to regulation
under  federal,  state,  provincial  and  local  laws and  regulations  relating
primarily  to the  protection  of human  health  and the  environment.  To date,
expenditures  related to  complying  with these  laws,  and for  remediation  of
existing environmental  contamination,  have not been significant in relation to
the results of operations of Patch.  The  requirements  imposed by such laws and
regulations are frequently changed and subject to  interpretation,  and Patch is
unable to predict the ultimate cost of  compliance  with these  requirements  or
their effect on its operations.

         Patch is subject to laws and regulations  that control the discharge of
materials  into  the  environment,   require  removal  and  cleanup  in  certain
circumstances,  require the proper  handling and disposal of waste  materials or
otherwise relate to the protection of the  environment.  In operating and owning
petroleum  interests,  it may be liable


                                       3
<PAGE>

for damages and the costs of removing hydrocarbon spills for which Patch would
be held responsible. Laws relating to the protection of the environment have in
many jurisdictions become more stringent in recent years and may, in certain
circumstances, impose strict liability, rendering Patch liable for environmental
damage without regard to actual negligence or fault. Such laws and regulations
may expose it to liability for the conduct of, or conditions caused by, others
or for acts of Patch. Patch believes that it has complied in all material
respects with applicable environmental laws and regulations.

EMPLOYEES

         As of August 31, 2005, the Company had 1 full-time employee.

         The Company's opportunity for success depends largely upon the efforts,
abilities, and decision-making of its directors and executive officers. The loss
any of the Company's key personnel  could, to varying  degrees,  have an adverse
effect on its operations and research and development  efforts.  The loss of any
one of them would have a material  adverse  affect on the  Company.  The Company
does not currently maintain "key-man" life insurance on its executive officers.


ITEM 2.  DESCRIPTION OF PROPERTY.

EAST CORNING PROJECT, TEHAMA COUNTY, CALIFORNIA

         On April 4,  2002,  Patch  loaned  $70,000 to  Fairchild  International
Corporation  ("Fairchild"),  an oil and gas exploration  company,  pursuant to a
convertible  promissory  note  which  bore  interest  at 8% per  annum  and  was
convertible  into common  shares of  Fairchild.  As  consideration  for the loan
Fairchild  assigned to Patch a 20% working  interest in Fairchild's  oil and gas
interests in Tehama  County,  California.  The note also  provided that Patch be
granted  a right  of  first  refusal  to  participate  as to 50% of  Fairchild's
interest in respect of any oil and gas  exploration or production  opportunities
Fairchild  may  participate  in the future.  On July 16, 2002,  Patch elected to
convert the loan into 1,750,000 common shares of Fairchild.

         Fairchild has a farmout agreement with Olympic Resources (Arizona) Ltd.
giving it a right to earn a 3.75% interest in five test wells. As of January 31,
2004,  Fairchild had earned a 3.75% interest in four of the five test wells as a
result of which Patch held a 0.75%  interest  in such wells.  Under the terms of
the agreement with Fairchild,  Patch was to receive its  proportionate  share of
the revenues from such wells once  Fairchild has received  revenues equal to the
costs  incurred by Fairchild to earn the interest in the wells.  By letter dated
December 15, 2004, Patch relinquished its right to its working interest in these
wells. For the fiscal years ended May 31, 2005 and 2004, Patch received $213 and
$16,792,  respectively,  in  revenues  from its 0.75%  interest in the four test
wells.

         The East Corning  Project is located  approximately  100 miles north of
Sacramento, within the main Forbes depositional fairway.

KERROBERT AREA, SASKATCHEWAN, CANADA

         On May 1, 2002,  Patch entered into a farmout  agreement  (the "Farmout
Agreement")  with True  Energy Inc.  ("True  Energy")  and  Arsenal  Energy Inc.
("Arsenal  Energy"),  pursuant to which it  participated  in the drilling of ten
test wells located in the Kerrobert area of  Saskatchewan,  Canada.  Pursuant to
the terms of the Farmout  Agreement,  Patch had the right to earn 12.5% interest
in the Farmout Lands (as defined in the Farmout  Agreement) by incurring 15.625%
of the  drilling  costs for the  wells.  The lands that are  encompassed  by the
Farmout  Agreement  pursuant  to which  Patch  acquired  its  interest  are more
particularly described as:

         Twp. 33, Rge. 23 W3M:  Lsd's 9, 11, 14, 15 & 16 of Section 8
         Twp. 33, Rge. 24 W3M:  Lsd's 2, 3, 4, 6, 7, 8 & N/2 of Section 13
         Twp. 33, Rge. 24 W3M:  SW/4, NE/4 & Lsd's 12, 13 & 14 of Section 15
         Twp. 33, Rge. 24 W3M:  N/2, SW/4 & Lsd's 2 & 7 of Section 23
         Twp. 33, Rge. 24 W3M:  N/2, SW/4 & Lsd's 2, 7 & 8 of Section 25
         Twp. 33, Rge. 24 W3M:  S/2, NW/4 of Section 26


                                       4
<PAGE>

         The assets cover approximately 40 acres, with the potential of up to 80
drillable  locations,  as well spacing rules in Saskatchewan allow one-half acre
per  location.  Patch  earned a 12.5%  working  interest in 10 test wells on the
properties in January 2003 however it assigned a 4.167% working  interest in the
10 test  wells to  Fairchild,  pursuant  to the  Fairchild  First  Participation
Agreement described below.

         On December 2, 2002, Patch entered into a participation  agreement with
Fairchild (the "Fairchild First Participation Agreement"). Pursuant to the terms
of the Farmout  Agreement,  Patch had the right to earn a 12.5%  interest in the
Farmout Lands (as defined in the Farmout  Agreement) by incurring 15.625% of the
costs (the "Initial  Costs")  associated  with the Test Wells (as defined in the
Farmout  Agreement).  Pursuant  to the  terms  of the  participation  agreement,
Fairchild  had the right to earn up to a one-third  (1/3) share of the  Interest
(the  "Partial  Interest"),  being a  4.167%  interest  in the 10 Test  Wells in
consideration  of incurring an equal portion of the costs to a maximum of 5.208%
of the costs  associated  with the Test Wells.  In order for Fairchild to earn a
Partial  Interest,  it was to pay for costs  otherwise  to be  incurred by Patch
pursuant  to the  terms of the  Farmout  Agreement,  equal to the  amount of the
Partial  Interest to be earned by Fairchild (the "Partial  Costs") and Fairchild
was to pay such Partial Costs as and when requested by Patch in order that Patch
might  fulfill its  obligations  under the Farmout  Agreement  in respect of the
Partial Costs  provided  that, if Fairchild  failed to make such  payments,  its
right to earn the  Partial  Interest  would  cease and the  agreement  was to be
terminated.

         On  February  10,  2003,  Patch  entered  into  another   participation
agreement with Fairchild  ("Fairchild Second Participation  Agreement") in order
that it may earn a partial  interest  in a further  10 well drill  program.  The
parties to the Farmout  Agreement  are  proposing  to carry out a further 9 well
drill program (the "Second  Program").  Under the terms of the Fairchild  Second
Participation  Agreement"),  Fairchild could earn a 1.75% interest in the Second
Program,  being a one-sixth  share of Patch's  interest in the Second Program in
consideration  of incurring an equal percentage of the costs associated with the
Second Program.

         On March 27, 2003,  Patch entered into a  participation  agreement (the
"Micron  Participation  Agreement") with Micron Enviro Systems, Inc. ("Micron").
The Micron Participation Agreement provides that Micron may earn a 3.5% interest
in the Second Program in  consideration  of incurring 5% of the costs associated
therewith,  provided that if Micron incurs less than 5% of the costs  associated
with the Second Program the partial  interest earned by Micron shall be adjusted
pro rata from the full 3.5% earned when 5% of such costs are incurred.

         On April 3,  2003,  Patch  entered  into an  amendment  agreement  (the
"Fairchild   Amendment   Agreement")  to  the  Fairchild  Second   Participation
Agreement. Patch confirmed with Fairchild that its ability to continue to earn a
12.5%  interest in any wells drilled on the Farmout Lands under the terms of the
Farmout  Agreement is contingent upon us paying 15.625% of the costs  associated
with such wells. The Fairchild  Amendment  Agreement  provides that Fairchild is
now obligated to incur 2.5% of the costs associated with the second 9 well drill
program on the Farmout Lands in order to earn a 1.75% interest in such wells, as
opposed to incurring  1.75% of the costs as the  Fairchild  First  Participation
Agreement  provided  for,  reflecting  the  increased  costs to  which  Patch is
subject.

         On April 29, 2003,  Patch entered into a  participation  agreement (the
"Butler Participation Agreement") with Butler Developments Corp. ("Butler"). The
Butler Participation  Agreement provides that Butler may earn a 3.5% interest in
the Second  Program in  consideration  of incurring  5% of the costs  associated
therewith and payment to us of $15,000.

         As of January  31,  2003,  Patch had earned the 12.5%  interest  in the
initial 10 Test Wells and, in  connection  therewith,  incurred  $112,809 as its
share  of  the  costs  associated  with  the  Test  Wells.  Fairchild  has  also
contributed  its 5.208% share of the costs  associated  with the initial 10 Test
Wells,  being  $37,601  and as a result  has earned a 4.167%  interest  in these
wells. As a result, Patch's net interest in the initial 10 test wells is 8.333%.

         On November 5, 2003, Patch entered into a participation  agreement with
Fairchild in order that  Fairchild  earn a 6.75% working  interest in future oil
wells in the Kerrobert drilling program. In consideration of Fairchild incurring
8.4375% of the costs  associated with any such  subsequent  wells. As of January
31, 2004, a total of 19 wells had been drilled on the Farmout Lands.


                                       5
<PAGE>

         On  November  14,  2003 Patch  entered  into a farmout  agreement  with
Bluenose Group Ltd.  whereby Patch had the right, by assuming 12.5% of the costs
associated  with a test well to be drilled  in the  Browning  area of  southeast
Saskatchewan,  to earn a 12.5%  working  interest  in the test  well and a 6.25%
working interest in the balance of the lands covered by the farmout agreement.

         On  February  10,  2003,  True  Energy has also  advised  Patch that it
proposes to  undertake a second 9 test well program on the lands and has advised
Patch that the initial contribution required by Patch in order to participate in
this program is approximately  $42,000,  based upon Patch being obligated to pay
15% of the costs  associated  with the program in order to earn a 12.5%  working
interest in the 9 test wells.  Patch has also confirmed with Micron,  Butler and
Fairchild that they will  participate  under the  Participation  Agreements they
have  with  Patch.  As a  result,  Butler,  Micron  and  Fairchild  will  assume
responsibility for 5%, 5% and 2.5%,  respectively,  of the costs of the second 9
test  well  program  and  on  completion   will  earn  3.5%,   3.5%  and  1.75%,
respectively,  of the interest in the wells.  This will leave Patch  responsible
for  3.125%  of the  costs  and on  completion  Patch  will be left with a 3.75%
interest in the second 9 test wells.

         As of April  15,  2005,  Fairchild  relinquished  its  interest  in the
Kerrobert oil field back to the Company.

BEAR CANYON PROJECT, ALBERTA, CANADA

         By a  participation  agreement  dated  March 10,  2005 with Park  Place
Petroleum Inc., the Company  acquired a 25% working  interest in the Bear Canyon
gas project,  located in Northeast Alberta. During the fiscal year ended May 31,
2005, the Company did not incur any expenses on this project.

         The project  consisted of one initial well, with the potential to drill
multiple  wells if the first were to be  successful.  The  formation  of primary
interest  on this  property  is the  Bluesky at a depth of  approximately  1,050
meters.  The well was spudded on July 15, 2005, but the operator  concluded that
the well was not economic due to excess water.

MCLEOD PROJECT, ALBERTA, CANADA

         Pursuant  to a  farmout  agreement  dated  May 30,  2005  with  Winstar
Resources Ltd.  ("Winstar"),  the Company  acquired a 10% working  interest in a
test well,  known as the "McLeod  Project",  located in Alberta.  The Company is
responsible  for 10% of the costs.  As of May 31, 2005, the Company had incurred
$68,155 towards the drilling costs. The Company's working interest is subject to
a convertible  sliding scale,  gross  overriding  royalty reserved to Winstar of
5%-12% on oil and 12% on natural gas and other petroleum substances.

         The project is approximately 100 miles west of Edmonton,  near the town
of Edson.  The well was spudded on June 3, 2005.  Casing was cemented to a total
depth of 1,939 TVD meters. There are four zones on the property,  which received
either,  or both oil and gas shows from all of the zones. The well was fraced in
late August 2005.  The  operator  believes  that a  commercial  gas well will be
viable from the project.

MANAHUILLA CREEK PROJECT, GOLIAD COUNTY, TEXAS

         On November 6, 2003 Patch entered into a  participation  agreement with
Fairchild  in order for  Fairchild  to  participate  in an oil and gas  prospect
located in Goliad County, Texas. Patch holds a September 30, 2003 agreement with
PB  Energy  USA,  Inc.  ("PB")  whereby  Patch  has a right to  acquire  a 3.75%
participating  working  interest in a test well and the oil and gas lands leased
by PB in Goliad County by paying 5% of the acquisition  costs  ($15,000),  5% of
the costs of the test well and 3.75% of the costs relating to the development of
the oil and gas lands. Under the agreement with Fairchild, Fairchild has a right
to earn  one-half of Patch's  interest  (1.875%)  by paying  one-half of Patch's
costs.  Through January 31, 2004, Fairchild has paid Patch $7,500 being one-half
of the $15,000 previously paid by Patch on account of the acquisition costs.

                                       6
<PAGE>

         The Manahuilla Creek project is a proposed  drilling area targeting the
expanded  Yegua trend,  which is an over pressured  gas-condensate  trend in the
Middle-Eocene of the onshore Gulf Coast Basin. The project covers  approximately
1,265 gross acres of oil and gas leases.

         Drilling  began on the initial test well,  the BB Gayle #1 well, in May
2004.  On June 1,  2004,  Patch  reported  that  the BB  Gayle  #1 well had been
drilled,  logged,  with casing set from 7,000 feet to the surface,  and cemented
from 5,000 feet. The targeted Yegua formation was encountered from 6,150 feet to
6,798 feet. Many gas shows were reported while  drilling,  along with many small
drilling breaks of 8 inches to 12 inches,  indicating laminated sand and shales.
When the Yegua was first  penetrated,  the mud was gas cut from 14.4  pounds per
gallon to 8.8 pounds per gallon, with over a 900-unit gas show.

         In August 2004, the operator, PB Energy USA, Inc., confirmed a definite
gas zone after  completing the perforation  program on the BB Gayle #1 well. The
Jackson  formation was perforated  below 5,000 feet,  coinciding with the dipole
sonic log shows and the mud log shows.  The  operator  is  presently  looking at
other zones to find a commercially  viable zone. The test well was  subsequently
shut-in.

         As of April 15, 2005, Fairchild relinquished its interest in Manahuilla
Creek Project back to the Company.

UKRAINE

         In  September  2003,  Patch  signed  a  letter  of  understanding  with
NAFTOGAZ,  the  state-run  oil  company of  Ukraine.  On  November 7, 2003 Patch
entered into an agreement with Fairchild  whereby Patch agreed to negotiate with
Fairchild so as to give Fairchild the  opportunity to participate in any venture
Patch may become involved in as a result of its relationship with NAFTOGAZ.

         Negotiations  with  NAFTOGAZ  are still in process.  The  parties  have
agreed  to  continue  formal  discussions.  At the  present,  Ukraine  is having
political elections and under the advice of Ukrainian legal counsel,  Patch will
wait until after the elections to continue its due diligence and  finalizing any
potential agreements.

         In August 2004, Patch signed a memorandum of  understanding  with Firma
HAS to joint  venture  with respect to several  producing  oil and gas fields of
Chernigivska,  Sumska,  Poltavaska,  and Kharkivska  regions of Ukraine,  and to
further explore these properties for future targets. No costs have been incurred
to date.

TUNISIA, NORTH AFRICA

         The Company  signed a Memorandum  of  Understanding  with  Carthago Oil
Company,  Tunisia,  for the right to acquire  40% of an oil and gas  interest in
Northern Tunisia by committing  approximately $4,000,000 to fund a work program,
which includes the drilling of one well. The terms of the Memorandum  expired on
April 30, 2005.

COMPANY RESERVE ESTIMATES

         No estimates of total,  proved net oil or gas reserves  have been filed
with or  included  in  reports  to any  federal  authority  or agency  since the
beginning of the last fiscal year.

PRODUCTIVE WELLS

         The  following  summarizes  our  productive  wells as of May 31,  2005.
Productive wells are producing wells capable of production.  Gross wells are the
total number of wells in which we have a working interest. Net wells are the sum
of our fractional working interests owned in the gross wells.

AREA            GROSS OIL WELLS   NET OIL WELLS   GROSS GAS WELLS  NET GAS WELLS
----            ---------------   -------------   ---------------  -------------
Saskatchewan          19              2.97              -                -
TOTAL                 19              2.97              -                -
                      ==              ====              =                =


                                       7
<PAGE>


OIL AND GAS ACREAGE

         The following table sets forth the undeveloped and developed  leasehold
acreage, by area, held by us as of May 31, 2005.  Undeveloped acres are acres on
which wells have not been  drilled or completed to a point that would permit the
production of commercial quantities of oil and gas, regardless of whether or not
such acreage  contains proved  reserves.  Developed  acres are acres,  which are
spaced or assignable to  productive  wells.  Gross acres are the total number of
acres  in  which  we  have a  working  interest.  Net  acreage  is  obtained  by
multiplying gross acreage by our working interest  percentage in the properties.
The table  does not  include  acreage  in which we have a  contractual  right to
acquire or to earn through drilling projects,  or any other acreage for which we
have not yet received leasehold assignments.

                           UNDEVELOPED ACRES             DEVELOPED ACRES
    AREA                GROSS              NET        GROSS              NET
    ----                -----              ---        -----              ---
    Saskatchewan          -                 -          760               2.97
         Total            -                 -          760               2.97
                          =                 =          ===               ====

DRILLING ACTIVITY

         During fiscal 2003,  Patch  participated  in drilling four gas wells in
Tehama County, California. In December 2003, Patch spudded the first of 10 wells
drilled in phase 1 of the Kerrobert  project in Saskatchewan,  Canada. Of the 14
wells drilled during 2003, 14 were initially commercially viable.

         During the fiscal year ended May 31, 2004, Patch  participated in phase
2 of the Kerrobert project in Saskatchewan for a total of nine wells. Patch also
participated in the Browning project in  Saskatchewan,  which was a dry hole. Of
the 10 wells drilled during fiscal 2004, 9 of 10 were commercially viable.

         During  the fiscal  year ended May 31,  2005,  Patch  relinquished  its
rights to its working  interest in the East Corning  Project in California.  The
test well in the Manahuilla Creek Project was shut-in as it was not commercially
viable.

         Subsequent  to May 31,  2005,  Patch  participated  in the Bear  Canyon
Project  and McLeod  Project in  Alberta,  Canada.  The Bear Canyon well was not
economic  and the  commercial  viability  of the  McLeod  well  has not yet been
determined.

PRESENT ACTIVITIES

         Patch  is  currently  waiting  to see if the  McLeod  project  will  be
commercially viable. Patch expects to have results by the end of September 2005.
Patch is continuing to look at projects in North America,  South America,  North
Africa, Ukraine, and middle eastern countries.

OFFICE SPACE

         The  executive  offices  for the  Company and Patch are located at 1220
Park Place, 666 Burrard Street,  Vancouver,  British  Columbia,  Canada V6C 2X8.
This space accommodates all of its executive and administrative offices.


ITEM 3.  LEGAL PROCEEDINGS.

         None.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         None.

                                       8
<PAGE>

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

         The  Company's  common stock has been traded on the OTC Bulletin  Board
since July 23, 1998, except for two periods during which the stock was traded on
the  "Pink  Sheets":  March 9,  2000 to  November  21,  2000 and June 3, 2003 to
January 8, 2004. The trading symbol was changed from "PAII" to "PTII"  effective
July 25,  2005.  The  following  table  sets forth the range of high and low bid
quotations  for  each  fiscal  quarter  for the  last two  fiscal  years.  These
quotations  reflect  inter-dealer  prices without retail mark-up,  markdown,  or
commissions and may not necessarily represent actual transactions.

                                                      BID PRICES

2004 FISCAL YEAR

Quarter ending 08/31/03                    $0.50                        $0.20
Quarter ending 11/30/03                    $1.10                        $0.20
Quarter ending 02/29/04                    $1.40                        $0.80
Quarter ending 05/31/04                    $2.30                        $0.80

2005 FISCAL YEAR

Quarter ending 08/31/04                    $1.65                        $0.56
Quarter ending 11/30/04                    $0.95                        $0.45
Quarter ending 02/29/05                    $1.30                        $0.40
Quarter ending 05/31/05                    $1.30                        $0.56

         On  September  9, 2005,  the closing bid price for the common stock was
$1.37. The number of record holders of the common stock as of September 9, 2005,
was 367 according to the Company's  transfer agent.  Holders of shares of common
stock are entitled to dividends when, and if, declared by the board of directors
out of funds legally available therefor.


ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

         The  following  discussion  of the  financial  condition and results of
operations for the Company should be read in conjunction  with the  accompanying
financial statements and related footnotes.

GENERAL

         The   Company's   business   originally   was   the   development   and
commercialization of non-prescription  therapeutics and nutraceuticals  designed
to prevent inflammation and their sequelae, and the development of cosmetics for
skin conditions.  The Company had not generated any revenues from product sales,
royalties or license fees. Due to the inability of the Company to obtain funding
and/or partners to pursue its pharmaceutical  projects, it decided to seek other
business  opportunities.  As of March 15,  2004,  the  Company  consummated  the
Arrangement  Agreement  with Patch  under which the Company  acquired  Patch,  a
privately-held  oil and gas  company  continued  under the laws of Canada,  in a
stock-for-stock  transaction. As a result of the acquisition,  Patch is a wholly
owned subsidiary of the Company. In the arrangement, each issued common share of
Patch was exchanged  for one common share of the Company.  A total of 18,232,625
shares (1,823,262  post-reverse  split shares) were issued,  bringing the issued
and outstanding shares of the Company to 38,224,372 at that time.

         The  acquisition  has  been  treated  for  accounting  purposes  as  an
acquisition by Patch of the net assets and  liabilities of the Company.  Because
Patch is deemed to be the purchaser for accounting  purposes,  the  consolidated
financial  statements are presented as a  continuation  of Patch and include the
results of operations of Patch since

                                       9
<PAGE>

incorporation on February 11, 2002, and the results of operations of the Company
since the date of acquisition on March 15, 2004.

ACCOUNTING POLICIES

         The Company follows the successful efforts method of accounting for its
oil and gas producing  activities.  Under this method, all costs associated with
productive  exploratory wells and productive or nonproductive  development wells
are capitalized while the costs of nonproductive exploratory wells are expensed.
If an exploratory well finds oil and gas reserves, but a determination that such
reserves  can be  classified  as  proved is not made  after  one year  following
completion  of  drilling,  the costs of  drilling  are  charged  to  operations.
Indirect exploratory expenditures,  including geophysical costs and annual lease
rentals,  are expensed as incurred.  Unproved  oil and gas  properties  that are
individually  significant are periodically assessed for impairment of value, and
a loss is  recognized  at the time of  impairment  by  providing  an  impairment
allowance.  Capitalized  costs of producing oil and gas  properties  and related
support  equipment,  after considering  estimated  dismantlement and abandonment
costs  and  estimated  salvage  values,  are  depreciated  and  depleted  by the
unit-of-production method.

         On the sale or retirement of a complete unit of a proved property,  the
cost and related  accumulated  depreciation,  depletion,  and  amortization  are
eliminated  from  the  property  accounts,  and  the  resultant  gain or loss is
recognized.  On the retirement or sale of a partial unit of proved property, the
cost is charged to accumulated  deprecation,  depletion, and amortization with a
resulting gain or loss  recognized in income.  On the sale of an entire interest
in an unproved property for cash or cash equivalent, gain or loss on the sale is
recognized,  taking into consideration the amount of any recorded  impairment if
the  property  had been  assessed  individually.  If a  partial  interest  in an
unproved  property is sold, the amount received is treated as a reduction of the
cost of the interest  retained.  In joint ventured oil and gas  exploration  and
production  activities,  the accounts  reflect only the Company's  proportionate
interest in such activities.

RESULTS OF OPERATIONS

         The  Company  generated  $97,415 in oil and gas  revenues  for the 2005
fiscal year,  a decrease of $18,048 or 15.6% from fiscal 2004.  The decrease was
due to decreased production from all of its properties.  Oil and gas production,
royalties and other  expenses also decreased from $108,378 in 2004 to $26,904 in
2005.  Costs in 2004  included dry well costs of $57,604 in 2004, as compared to
$1,324 in 2005.

         The Company also generated  $6,150 in gain on the sale of common shares
of Fairchild during fiscal 2004. While the Company did not recognize any gain in
2005, the Company  generated  $10,996 in gain on  relinquishment  of oil and gas
properties.

         Expenses,  other than oil and gas production expenses,  were $1,103,970
for fiscal 2005, an increase of $555,863 or 101.4% over fiscal 2004. The Company
incurred  consulting  fees of  $178,236  in 2005 as compared to $29,500 in 2004,
stock-based compensation of $284,354 in 2005 as compared to $203,400 in 2004 due
to equity compensation paid to consultants in lieu of cash. The Company incurred
increased  professional  fees  ($98,271 in 2005 as compared to $69,909 in fiscal
2004) and increased investor relations expenses ($189,782 in 2005 as compared to
$69,495 in 2004) due to the Company's increased level of activity.

         As a result of the  significantly  increased  expenses in 2005, the net
loss for fiscal 2005 was  $1,022,463,  an increase of $487,591  (91.1%) over the
loss for 2004 of $534,872.

LIQUIDITY AND CAPITAL RESOURCES

         For the fiscal year ended May 31, 2005,  the Company used  $307,826 for
its  operations,  as  compared to $142,609  for the 2004 fiscal  year.  This was
primarily  due to the loss  generated  in fiscal  2005.  The  Company  also used
$79,725 for investing  activities in 2005,  primarily for oil and gas interests.
This compared to using $108,306 in fiscal 2004. Financing activities  consisting
of the sale of stock  provided  $477,810  and  $251,975 in fiscal 2005 and 2004,
respectively.


                                       10
<PAGE>

         At May 31,  2005,  the  Company's  working  capital  was a  deficit  of
$441,549, as compared to a deficit of $288,736 at May 31, 2004.

         The Company will be dependent upon proceeds from the sale of securities
until its operations  generate revenues  sufficient to cover operating expenses.
There is no assurance  that the Company  will be able to obtain such  additional
funds on favorable terms, if at all. The Company's inability to raise sufficient
funds could require it to delay, scale back or eliminate certain activities.

         The  report of the  Company's  independent  auditors  on the  financial
statements for the year ended May 31, 2005,  includes an  explanatory  paragraph
relating  to the  uncertainty  of the  Company's  ability to continue as a going
concern.  The Company has suffered losses from operations.  The Company needs to
generate revenues and successfully attain profitable  operations.  These factors
raise  substantial  doubt  about the  Company's  ability to  continue as a going
concern.  There  can be no  assurance  that it will be able to  reach a level of
operations that would finance its day to day activities.

PLAN OF OPERATION

         The Company  requires cash to support its  operations  for at least the
next 12 months.  The  Company  does not  anticipate  any change in the number of
employees  or the  acquisition  of plant  or  equipment  in the next 12  months.
However,  it lacks  sufficient  cash to maintain its status as a public company.
The Company will have to engage in one or more  offerings of debt and/or  equity
securities. There can be no assurance that it will be successful in this effort.


ITEM 7.  FINANCIAL STATEMENTS.

         See pages beginning with page F-1.


ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.

         None.


ITEM 8A. CONTROLS AND PROCEDURES.

         On May 31, 2005,  David Stadnyk,  our principal  executive  officer and
principal  financial officer,  made an evaluation of our disclosure controls and
procedures.   In  his  opinion,  the  disclosure  controls  and  procedures  are
effective.  There have been no changes in our internal  controls that materially
affected,  or are reasonably likely to materially  affect,  our internal control
over financial reporting.


ITEM 8B. OTHER INFORMATION.

         None.





                                       11
<PAGE>


                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

         The officers and directors of the Company are as follows:

NAME                               AGE      POSITION

David Stadnyk                      43       President and Treasurer and director

Winston Cabell                     35       Secretary and director

         The term of office of each director ends at the next annual  meeting of
the  Company's  stockholders  or when such  director's  successor is elected and
qualifies. The term of office of each officer ends at the next annual meeting of
the Company's board of directors,  expected to take place  immediately after the
next annual meeting of stockholders, or when such officer's successor is elected
and qualifies.

         The last annual  meeting  was held on August 30,  1999,  in  Vancouver,
British Columbia.

         DAVID  STADNYK has been the  President  and Treasurer and a director of
the Company  since August 2002.  He  previously  served as the  Secretary  and a
director of the Company from June 19, 1998 to October 20, 2000.  Mr. Stadnyk has
diverse experience in corporate  management and finance.  He currently serves as
the chairman of Grand Slam Radio which launched team 1040, Vancouver's first and
only 24-hour sports radio station,  and chairman of Stadnyk  Corporate  Group, a
venture  corporate  finance and investment firm. Mr. Stadnyk was the chairman of
Starlight Sports & Entertainment,  a sports entertainment company that owned the
Vancouver  Whitecaps and Vancouver  Breakers,  professional  soccer teams,  from
October 1999 to May 2002. He was also the president of A.C. Global Capital Group
Corp., a CDNX-listed capital pool company,  from July 1999 to September 2002. He
has  served as the  Chairman,  President,  Secretary  and a  director  of Goanna
Resources,  Inc.,  a publicly  listed  mining  company  (now known as  Fairchild
International Corporation) from its inception in June 1997 to March 1999. He was
the  President  and CEO of  Alexander  News  International,  a  publicly  traded
newspaper  publishing  chain in Canada,  from July 1994 to  February  1997.  Mr.
Stadnyk  was also a licensed  stockbroker  with  Midland  Walwyn  Capital  Inc.,
Yorkton  Securities Inc., and Georgia Pacific Securities Corp. from 1988 to 1991
in Canada.  From July 1997 to September 2000, Mr. Stadnyk has been the executive
director  of  Alexander  Cox & Co.  based in Sydney,  Australia  and  Vancouver,
British  Columbia,  which engaged in financial  consulting  and venture  capital
funding. He is a graduate of the University of British Columbia.

         WINSTON CABELL has been a director of the Company since August 2002 and
the  corporate  Secretary  since  September  2002.  Mr.  Cabell  has been in the
financial  services  industry since 1996. Since then, he has worked with various
publicly traded companies.  Duties have included investor relations and securing
major  financing for these  companies.  Prior to joining the financial  services
industry,  Mr.  Cabell spent 8 years on the  professional  squash  circuit.  Mr.
Cabell is  currently  a director of a private  oil and gas  exploration  company
located in Canada.

         No other  directorships are held by each director in any company with a
class of securities registered pursuant to Section 12 of the Securities Exchange
Act of 1934 or any  company  registered  as an  investment  company,  under  the
Investment Company Act of 1940.

         Messrs. Stadnyk and Cabell may be deemed to be "promoters" and "control
persons" of the Company,  as that term in defined in the Securities Act of 1933.
There are no other control persons.

KEY CONSULTANT

         ARUN  DEY has  been the  Senior  Executive  Vice  President  and  Chief
Operating  Officer of the  Company  since  September  2005.  Mr. Dey has been an
advisor in the oil and gas  industry  to  several  international  clients  since
October 2002.  From 1985 to September 2002, he worked for Alberta Energy Company
Ltd. (now EnCana


                                       12

<PAGE>

Corporation),  of  Calgary,  Alberta.  He  held  numerous  engineering,  project
management,  and management positions during his 18 years with that company. The
last  position  he held was that of  president  of the South  American  Ventures
Business Unit, Midstream Division. Mr. Dey received a Bachelor of Science degree
in  chemical  engineering  in  1971  from  Heriot-Watt  University,   Edinburgh,
Scotland,  United  Kingdom.  He is a  registered  professional  engineer  in the
province of Alberta, Canada.

ADVISORY BOARD OF DIRECTORS

         In May 2005,  Khaled  Echikh was  appointed to the  Company's  Advisory
Board of  Directors,  as  Director  of North  African  Affairs.  He is a trained
geologist  with  almost  40  years'  experience  in  North  African  oil and gas
ventures.  For the past 10 years, Mr. Echikh worked as an independent consultant
in Algeria, Libya, England, and France for several oil and gas companies.

CODE OF ETHICS

         The Company  has not yet  adopted a code of ethics that  applies to its
principal executive officers,  principal financial officer, principal accounting
officer or controller,  or persons performing  similar  functions,  since it has
been focusing its efforts on obtaining  financing  for the company.  The Company
expects to adopt a code by the end of the current fiscal year.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         Officers  and  directors,  and  persons  who  own  more  than  10% of a
registered  class of the  Company's  equity  securities,  are  required  to file
reports of ownership and changes in ownership  with the  Securities and Exchange
Commission pursuant to Section 16(a) of the Securities Exchange Act of 1934. The
following  table sets forth reports that were not filed on a timely basis during
the most recently completed fiscal year:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
REPORTING PERSON                                    DATE REPORT DUE                       DATE REPORT FILED
--------------------------------------------------------------------------------------------------------------------
<S>                                               <C>                                         <C>
David Stadnyk                                     Form 4 due 11/02/04                         06/09/05
--------------------------------------------------------------------------------------------------------------------
David Stadnyk                                     Form 4 due 02/25/05                         03/08/05
--------------------------------------------------------------------------------------------------------------------
David Stadnyk                                     Form 4 due 04/21/05                         04/22/05
--------------------------------------------------------------------------------------------------------------------
David Stadnyk                                     Form 4 due 06/07/05                         06/09/05
--------------------------------------------------------------------------------------------------------------------
Winston Cabell                                    Form 4 due 05/04/04                         06/09/04
--------------------------------------------------------------------------------------------------------------------
Winston Cabell                                    Form 4 due 05/10/04                         06/09/04
--------------------------------------------------------------------------------------------------------------------
Winston Cabell                                    Form 4 due 05/14/04                         06/09/04
--------------------------------------------------------------------------------------------------------------------
Winston Cabell                                    Form 4 due 06/03/04                         06/09/04
--------------------------------------------------------------------------------------------------------------------
Winston Cabell                                    Form 4 due 07/27/04                         08/11/04
--------------------------------------------------------------------------------------------------------------------
Winston Cabell                                    Form 4 due 07/14/04                         09/24/04
--------------------------------------------------------------------------------------------------------------------
Winston Cabell                                    Form 4 due 08/13/04                         11/04/04
--------------------------------------------------------------------------------------------------------------------
Winston Cabell                                    Form 4 due 11/02/04                         06/09/05
--------------------------------------------------------------------------------------------------------------------
Winston Cabell                                    Form 4 due 01/20/05                         03/07/05
--------------------------------------------------------------------------------------------------------------------
Winston Cabell                                    Form 4 due 03/04/05                         06/09/05
--------------------------------------------------------------------------------------------------------------------
</TABLE>


                                       13
<PAGE>


ITEM 10. EXECUTIVE COMPENSATION.

         The following  table sets forth  information  the  remuneration  of the
Company's  chief  executive  officers and all executive  officers that earned in
excess of $100,000 per annum during any part of the last three fiscal years:

<TABLE>
                           SUMMARY COMPENSATION TABLE
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
                                                                            LONG TERM COMPENSATION
                                ANNUAL COMPENSATION                  --------------------------------------
                                                                              AWARDS             PAYOUTS
                   ------------------------------------------------------------------------------------------------------
                                                         OTHER        RESTRICTED   SECURITIES
    NAME AND                                             ANNUAL          STOCK     UNDERLYING      LTIP        ALL OTHER
    PRINCIPAL                                          COMPENSA-       AWARD(S)     OPTIONS/      PAYOUTS       COMPENSA-
    POSITION         YEAR    SALARY ($)    BONUS ($)     TION($)          ($)       SARS (#)        ($)         TION ($)
-------------------------------------------------------------------------------------------------------------------------
<S>                  <C>      <C>            <C>      <C>              <C>          <C>            <C>          <C>
David Stadnyk(1)<F1> 2005     113,583        -0-          -0-            -0-        55,000         -0-          -0-
                     2004     108,000        -0-          -0-            -0-        45,000         -0-          -0-
                     2003       -0-          -0-          -0-          $25,000      75,000         -0-          -0-
-------------------------------------------------------------------------------------------------------------------------
 Brett Charlton      2002       -0-          -0-      $13,124 (3)<F3>    -0-          -0-          -0-          -0-
       (2)<F2>
-------------------------------------------------------------------------------------------------------------------------
-----------------------
<FN>
(1)<F1>  Mr. Stadnyk has been the President since August 31, 2002.  Salary for
         2004 consists of  compensation  from the Company and Patch for the
         entire fiscal year ended May 31, 2004.
(2)<F2>  Dr. Charlton was the President from June 1998 to August 31, 2002.
(3)<F3>  These  amounts  were  paid by the  Company  for  services  rendered  in
         connection  with the scientific  conduct of research and development to
         Neysa  Investments  Pty.  Ltd., a company  owned and  controlled by Dr.
         Charlton.
</FN>
</TABLE>

<TABLE>
                      OPTION/SAR GRANTS IN LAST FISCAL YEAR
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                          NUMBER OF SECURITIES         % OF TOTAL
                               UNDERLYING         OPTIONS/SARS GRANTED
                          OPTIONS/SARS GRANTED      TO EMPLOYEES IN        EXERCISE OR BASE
NAME                               (#)                FISCAL YEAR            PRICE ($/SH)          EXPIRATION DATE
--------------------------------------------------------------------------------------------------------------------
<S>                              <C>                      <C>                    <C>                 <C>
David Stadnyk                    40,000                   3.3%                   $0.70               10/29/2009
                                 15,000                   0.1%                   $0.70               04/19/2010
--------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
         AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
                                OPTION/SAR VALUES
<CAPTION>
---------------------------------------------------------------------------------------------------------------------

                                                                         NUMBER OF SECURITIES
                                                                              UNDERLYING        VALUE OF UNEXERCISED
                                                                             UNEXERCISED            IN-THE-MONEY
                                                                           OPTIONS/SARS AT         OPTIONS/SARS AT
                                                                              FY-END (#)             FY-END ($)
                          SHARES ACQUIRED ON                                 EXERCISABLE/           EXERCISABLE/
NAME                         EXERCISE (#)         VALUE REALIZED ($)        UNEXERCISABLE           UNEXERCISABLE
----------------------------------------------------------------------------------------------------------------------
<S>                               <C>                    <C>                 <C>                    <C>
David Stadnyk                     -0-                    -0-                 100,000/-0-            $16,000/$-0-
----------------------------------------------------------------------------------------------------------------------
</TABLE>

         As of December 1, 2002, the Company  entered into  management  services
agreements  with David Stadnyk and Winston  Cabell.  Both  agreements  are for a
three-year  term  commencing  December 1, 2002 and ending November 30, 2005. The
Company  agreed to pay David Stadnyk  $4000 per month and Winston  Cabell $2,500
per month for their  services as President and Secretary,  respectively.  If the
Company should elect to terminate the agreement,  it would be required to pay an
amount equal to 12 months' salary upon such termination.  Mr. Cabell's agreement
was terminated effective December 31, 2003. He waived his rights to payment upon
termination.

         As of February 11,  2002,  Patch  entered  into a  management  services
agreement with David Stadnyk.  The agreement is for a three-year term commencing
February  11, 202 and ending  February  11,  2005 and  automatically  renews for
successive  terms on a  year-to-year  basis  unless  notice  of  non-renewal  is
effected by Patch or Mr.  Stadnyk.  Patch agreed to pay Mr. Stadnyk  $60,000 per
annum for services provided.

         As of May 1, 2005,  the  Company  entered  into a  management  services
agreement with David Stadnyk that superseded the December 1, 2002 agreement. The
new  agreement is for a term of five years,  ending April 30, 2010.  The Company
agrees to pay Mr. Stadnyk $175,000 per annum for his services to the Company. In
connection with the new management services agreement,  the Company entered into
a change of control agreement as of May 1,


                                       14
<PAGE>

2005,  which provides that if a change of control  occurs,  Mr. Stadnyk shall be
entitled to terminate his employment  with the Company and receive  payment from
the Company equal to the greater of (i) the remaining base  compensation  due to
him  for  the  remaining  term  of the  management  services  agreement  or (ii)
US$175,000.  Such  amount is  payable  in cash or shares of the  Company  at the
option of Mr. Stadnyk. For the purposes of this agreement,  change of control is
defined as:

         o   the acquisition of 20% or more of the voting power;
         o   a  consolidation or  merger by the Company  with or into any person
             whereby  the  Company's  outstanding  shares are changed in any way
             (other than a transaction  which has been approved by the Company's
             directors;
         o   a change in a majority of the board of director of the Company; or
         o   the  resignation or removal of a majority of the board of directors
             other than a transaction or series of transactions  which  involves
             a  sale  of  securities  or  assets of the  Company  with which Mr.
             Stadnyk is involved as a purchaser in any manner.


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
         AND RELATED STOCKHOLDER MATTERS.

         The following table provides certain information as to the officers and
directors  individually  and as a group,  and the holders of more than 5% of the
Company's common stock, as of September 9, 2005. Except as otherwise  indicated,
the persons named in the table have sole voting and investing power with respect
to all shares of common stock owned by them.

<TABLE>
<CAPTION>
            NAME AND ADDRESS OF OWNER                   NUMBER OF SHARES OWNED             PERCENT OF CLASS (1)<F1>
<S>                                                         <C>                                   <C>
David Stadnyk
666 Burrard Street, Suite 1220                              1,268,674 (2)<F2>                     23.2%
Vancouver, BC  V6C 2X8 Canada

Winston Cabell                                               140,050 (3)<F3>                       2.6%
666 Burrard Street, Suite 1220
Vancouver, BC V6C 2X8 Canada
Officers and directors as a group (2 persons)               1,408,724 (4)<F4>                     25.5%
------------
<FN>
(1)<F1>  Where persons listed on this table have the right to obtain  additional
         shares of common stock through the exercise of  outstanding  options or
         warrants or the  conversion of  convertible  securities  within 60 days
         from  September  9,  2005,  these  additional  shares  are deemed to be
         outstanding for the purpose of computing the percentage of common stock
         owned by such  persons,  but are not deemed to be  outstanding  for the
         purpose  of  computing  the  percentage  owned  by  any  other  person.
         Percentages are based on 5,356,559 shares outstanding.

(2)<F2>  Includes 100,000 shares issuable upon the exercise of stock options.

(3)<F3>  Includes 73,000 shares issuable upon exercise of stock options.

(4)<F4>  Includes 173,000 shares issuable upon exercise of stock options.
</FN>
</TABLE>

CHANGES IN CONTROL

         We are not  aware of any  arrangements  that may  result in a change in
control of the Company.




                                       15
<PAGE>


EQUITY COMPENSATION PLAN INFORMATION

         The following  table sets forth  information  as of the end of the most
recently completed fiscal year, May 31, 2005:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                                Number of securities to be    Weighted average exercise
                                  issued upon exercise of       price of outstanding         Number of securities
                                   outstanding options,         options, warrants and       remaining available for
Plan category                       warrants and rights                rights                   future issuance
-------------------------------------------------------------------------------------------------------------------
<S>                                       <C>                           <C>                           <C>
Equity compensation plans                 30,000                        $0.56                         -0-
approved by security holders
-------------------------------------------------------------------------------------------------------------------
Equity compensation plans not             518,000                       $0.71                         -0-
approved by security holders
-------------------------------------------------------------------------------------------------------------------
Total                                     548,000                       $0.70                         -0-
-------------------------------------------------------------------------------------------------------------------
</TABLE>

         1999 STOCK OPTION PLAN. On August 30, 1999, the Company's  shareholders
adopted a 1999 Stock  Option  Plan under  which a total of 169,833  shares  were
reserved  initially for grant to provide incentive  compensation to officers and
key  employees.  The  number of shares  available  for grant  adjusts  annually,
commencing  on the first day of the next fiscal year to a number equal to 15% of
the number of shares outstanding on last day of the fiscal year just completed.

         The board of directors  administers the Stock Option Plan.  Options may
be granted for up to 10 years at not less than the fair market value at the time
of grant,  except  that the term may not exceed five years and the price must be
110% of fair market value for any person who at the time of grant owns more than
10% of the total voting power of the Company.  Unless otherwise  specified in an
optionee's   agreement,   options   granted   under   the   plan  to   officers,
officer/directors,  and employees will become vested with the optionee after six
months.  The Plan will remain in effect until the board of directors  terminates
it,  except that no  incentive  stock  option,  as defined in Section 422 of the
Internal Revenue Code, may be granted after July 8, 2009.

         Options may be  exercised  by payment of the option  price (i) in cash,
(ii) by tender of shares of Company  common stock which have a fair market value
equal to the option price, or (iii) by such other  consideration as the board of
directors may approve at the time the option is granted.

         2004 STOCK OPTION PLAN.  On October 29, 2004,  the  Company's  Board of
Directors  adopted a 2004 Stock Option Plan under which  incentive stock options
and  non-qualified  stock options to purchase a total of 1,200,000 shares may be
granted to employees, and non-employees, such as directors and officers.

         The board of directors  administers the Stock Option Plan.  Options may
be granted for up to 10 years at not less than the fair market value at the time
of grant,  except  that the term may not exceed five years and the price must be
110% of fair market value for any person who at the time of grant owns more than
10% of the total voting power of the Company.  Unless otherwise  specified in an
optionee's  agreement,  options  granted  under  the  Plan  shall  vest  in full
immediately.  The Plan  will  remain in  effect  until  the  board of  directors
terminates it, except that no incentive stock option,  as defined in Section 422
of the Internal Revenue Code, may be granted after October 29, 2014.

         Options may be  exercised  by payment of the option  price (i) in cash,
(ii) by tender of shares of Company  common stock which have a fair market value
equal to the option price, or (iii) by such other  consideration as the board of
directors may approve at the time the option is granted.



                                       16
<PAGE>


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         DAVID STADNYK.  David Stadnyk and/or  companies  under his control have
advanced  sums to the  Company  from  time to time for  working  capital  needs.
Interest did not accrue and there was no date established for repayment.  At May
31, 2005 and 2004, $342,813 and $239,686, respectively, were owed to directly or
indirectly to Mr. Stadnyk.

         FAIRCHILD  INTERNATIONAL  INC.  The  Company  entered  into a Research,
Development   and  Licence   Agreement   with   Fairchild   International   Inc.
("Fairchild"),  an affiliate at the time, dated as of May 11, 1999, which closed
September  30, 1999.  Under that  agreement,  Fairchild  obtained an  exclusive,
worldwide license to make, use, and sell products and processes developed by the
Company relating to arthritis and dermal wrinkles in consideration for 2,600,000
shares of Fairchild common stock (valued at $26,000 initially,  but subsequently
written down to $1) and royalty payments based upon revenues earned by Fairchild
from the sale of any developed products. In addition, a research and development
agreement  was entered  into  whereby the  Company was  contracted  to conduct a
research program to be funded by Fairchild for a total amount of $250,000. (This
agreement,  including  "Schedule  C", was filed as Exhibit 10.1 to the Company's
registration  statement on Form 10-SB.) A first  installment of $62,500 was paid
on October 1, 1999.  Quarterly  payments  of $50,000  were to be made  beginning
January  1, 2000,  with a final  payment of  $37,500  due  October 1, 2000.  The
January 1, 2000 and April 1, 2000 installments were paid.

         As of February 28, 2001, as a result of Fairchild's uncertain financial
condition and lateness in  achievement  of milestones by the Company,  Fairchild
and the  Company  agreed to  terminate  the  Research,  Development  and Licence
Agreement (the "Termination Agreement").  The Company had received only $162,500
of the funding and Fairchild  had expressed  doubt about its ability to continue
the funding. Under the Termination Agreement, the Company retained the 2,600,000
Fairchild  shares and agreed to pay Fairchild 30% of the net revenues from sales
of the two applications in the field of use up to a maximum of $250,000 over the
first three years of sales (the "Royalty Obligation"). Fairchild and the Company
amended the  termination  agreement  and have agreed that so long as the Company
pays  Fairchild a total of $175,000 by May 31, 2004,  that amount will be deemed
to be in full and complete satisfaction of the Royalty Obligation.

         On February 18, 2004, the Company entered into a letter  agreement with
Fairchild in which the parties  confirmed their mutual  agreement to be bound by
the original terms of the Termination Agreement. The Company is to pay Fairchild
30% of the net  revenues  from sales up to a maximum of $250,000  over the first
three years of sales, provided that Fairchild  acknowledges that it has received
$59,423 as of the date of the letter agreement.

         On April 4, 2002,  Patch loaned  $70,000 to Fairchild to a  convertible
promissory  note which bore  interest at 8% per annum and was  convertible  into
common shares of Fairchild.  As consideration for the loan Fairchild assigned to
Patch a 20% working  interest in  Fairchild's  oil and gas  interests  in Tehama
County,  California.  The note also  provided  that  Patch be granted a right of
first refusal to participate as to 50% of Fairchild's interest in respect of any
oil and gas exploration or production opportunities Fairchild may participate in
the future.  On July 16, 2002,  Patch elected to convert the loan into 1,750,000
common shares of Fairchild.

         During the year ended May 31, 2004,  the Company  sold  776,550  common
shares of  Fairchild  for  proceeds of $30,488.  The Company  also  purchased an
additional  91,000  common  shares of Fairchild at a cost of $3,772.  During the
year ended May 31, 2005,  all of the remaining  common shares of Fairchild  were
sold for proceeds of $14,059.

         The Company  entered an assumption and  cancellation  of debt agreement
with  Fairchild  whereby  Cdn$14,213.57  owed by  Fairchild to Patch Energy were
offset against Cdn$16,028.07 owed by the Company to Fairchild.  Fairchild agreed
to cancel the remaining debt of Cdn$1,814.50 and relinquish its interests in the
Kerrobert oil field and the Manahuilla Creek oil field in consideration  for the
assumption by the Company of certain debts owed by Fairchild to the following:

         o    Grand Slam Radio, Inc. in the amount of Cdn$6,089.29;
         o    David Stadnyk, in the amount of Cdn$14,316.62;

                                       17
<PAGE>

         o    George Tsafalas in the amount of Cdn$3,491.88; and
         o    Byron Cox in the amount of Cdn$582.89.

         PATCH  ENERGY INC. On October 20,  2003,  the Company  entered  into an
Arrangement  Agreement to acquire Patch. At the time, David Stadnyk owned 69% of
the outstanding shares of Patch and was its sole director and President.  In the
arrangement,  each issued  common  share of Patch was  exchanged  for one common
share  of the  Company.  As of  September  9,  2005,  David  Stadnyk  controlled
approximately 21.8% of the outstanding shares of the Company.


ITEM 13. EXHIBITS.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
    REGULATION                                                                                        SEQUENTIAL
    S-B NUMBER                                         EXHIBIT                                       PAGE NUMBER
------------------------------------------------------------------------------------------------------------------
<S>                 <C>                                                                                  <C>
       2.1          Stock Exchange Agreement with Micronetics, Inc. (1)<F1>                              N/A
------------------------------------------------------------------------------------------------------------------
       2.2          Arrangement Agreement made among Praxis Pharmaceuticals Inc. and Patch               N/A
                    Energy Inc. dated as of October 20, 2003 (2)<F2>
------------------------------------------------------------------------------------------------------------------
       2.3          Articles of Merger Merging Praxis Pharmaceuticals Inc., a Utah Corporation,          N/A
                    into Patch International Inc., a Nevada Corporation (3)<F3>
------------------------------------------------------------------------------------------------------------------
       3.1          Articles of Incorporation, as amended
------------------------------------------------------------------------------------------------------------------
       3.2          Bylaws
------------------------------------------------------------------------------------------------------------------
       3.3          Certificate of Change Pursuant to NRS 78.209 (4)<F4>                                 N/A
------------------------------------------------------------------------------------------------------------------
       10.1         1999 Stock Option Plan (1)<F1>                                                       N/A
------------------------------------------------------------------------------------------------------------------
       10.2         Shareholders Agreement dated August 23, 2002 among Praxis Pharmaceuticals            N/A
                    Inc., Perpetual Trustees Nominees Limited, Rothschild Bioscience Managers
                    Limited, CM Capital Investments Pty Ltd, CIBC Australia VC Fund LLC,
                    Mooroolbark Technology Pty Ltd, The Australian National University and
                    Pharmaxis Pty Ltd, Dr. William Cowden and Dr. Brett Charlton (5)<F5>
------------------------------------------------------------------------------------------------------------------
       10.3         Management services agreement between Patch Energy Inc. and David Stadnyk            N/A
                    dated February 11, 2002 (6)<F6>
------------------------------------------------------------------------------------------------------------------
       10.4         Letter agreement dated February 18, 2004 regarding Termination Agreement             N/A
                    with Fairchild International Corporation (6)<F6>
------------------------------------------------------------------------------------------------------------------
       10.5         2004 Stock Option Plan (7)<F7>                                                       N/A
------------------------------------------------------------------------------------------------------------------
       10.6         Assumption and Cancellation of Debt agreements with Fairchild International
                    Corporation dated April 15, 2005
------------------------------------------------------------------------------------------------------------------
       10.7         Management services agreement with David Stadnyk dated May 1, 2005
------------------------------------------------------------------------------------------------------------------
       10.8         Change of Control Agreement with David Stadnyk dated May 1, 2005
------------------------------------------------------------------------------------------------------------------
        21          Subsidiaries of the registrant
------------------------------------------------------------------------------------------------------------------


                                       18
<PAGE>

<CAPTION>
------------------------------------------------------------------------------------------------------------------
    REGULATION                                                                                        SEQUENTIAL
    S-B NUMBER                                         EXHIBIT                                       PAGE NUMBER
------------------------------------------------------------------------------------------------------------------
<S>                 <C>                                                                                  <C>
       31.1         Rule 13a-14(a) Certification of Principal Executive and Financial Officer
------------------------------------------------------------------------------------------------------------------
       32.1         Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to
                    Section 906 of the Sarbanes-Oxley Act of 2002
------------------------------------------------------------------------------------------------------------------
------------------
<FN>
(1)<F1>  Incorporated by reference to the exhibits  filed with the  Registration
         Statement on Form 10-SB, file no. 0-28627.
(2)<F2>  Incorporated by reference  to the exhibits filed with the  registrant's
         current report on Form 8-K dated March 15, 2004.
(3)<F3>  Incorporated by reference  to the exhibit filed  with the  registrant's
         current report on Form 8-K dated June 15, 2004.
(4)<F4>  Incorporated by reference to the exhibit  filed  with the  registrant's
         current report on Form 8-K dated July 8, 2005.
(5)<F5>  Incorporated  by  reference to the exhibits filed with the registrant's
         annual report on Form 10-KSB for the fiscal year ended May 31, 2002.
(6)<F6>  Incorporated  by reference to the exhibits filed with the  registrant's
         annual report on Form 10-KSB for the fiscal year ended May 31, 2004.
(7)<F7>  Incorporated by reference  to the exhibits filed with the  registrant's
         registration  statement  on  Form S-8, file  number  333-120277,  filed
         November 8, 2004.
</FN>
</TABLE>


ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

AUDIT FEES

         For the  fiscal  years  ended  May 31,  2005 and  2004,  the  principal
accountants  for the Company billed $13,780 and $13,351,  respectively,  for the
audit of the annual  financial  statements  and review of  financial  statements
included in the Form 10-QSB filings of the Company.

AUDIT-RELATED FEES

         There  were no fees  billed  for  services  reasonably  related  to the
performance of the audit or review of the financial  statements outside of those
fees disclosed above under "Audit Fees" for fiscal years 2005 and 2004.

TAX FEES

         For the  fiscal  years  ended  May 31,  2005 and  2004,  the  principal
accountants for the Company billed $640 and $nil for tax compliance, tax advice,
and tax planning work for fiscal years 2005 and 2004.

ALL OTHER FEES

         There were no other fees billed by the  principal  accountants  for the
Company other than those disclosed above for fiscal years 2005 and 2004.

PRE-APPROVAL POLICIES AND PROCEDURES

            Prior to engaging its  accountants to perform a particular  service,
the  Company's  board of  directors  obtains an  estimate  for the service to be
performed.  All of the services  described  above were  approved by the board of
directors in accordance with its procedures.






                                       19
<PAGE>


                                   SIGNATURES

         In  accordance  with  Section  13 or 15(d)  of the  Exchange  Act,  the
registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized.

                                        PATCH INTERNATIONAL INC.



Date:  September 13, 2005               By:      /s/ DAVID STADNYK
                                           -------------------------------------
                                             David Stadnyk, President

         In accordance  with the Exchange Act, this report has been signed below
by the following  persons on behalf of the  registrant and in the capacities and
on the dates indicated.

<TABLE>
<CAPTION>
                   SIGNATURE                                      TITLE                              DATE
<S>                                               <C>                                         <C>

                                                  President, Treasurer and director
/s/ DAVID STADNYK                                 (Principal Executive, Financial, and        September 13, 2005
--------------------------------------------
David Stadnyk                                     Accounting Officer)


/s/ WINSTON CABELL                                Secretary and director                      September 13, 2005
--------------------------------------------
Winston Cabell
</TABLE>













                                       20

<PAGE>

                        CONSOLIDATED FINANCIAL STATEMENTS


                                  MAY 31, 2005
                            (Stated in U.S. Dollars)




                          INDEPENDENT AUDITORS' REPORT


The Board of Directors and Stockholders of
Patch International Inc.

We  have  audited  the  accompanying   consolidated   balance  sheets  of  Patch
International  Inc.  as of May 31, 2005 and 2004,  and the related  consolidated
statements of operations,  shareholders' equity (deficiency), and cash flows for
the  years  ended May 31,  2005 and 2004.  These  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of Patch International Inc. as of
May 31, 2005 and 2004, and the results of their  operations and their cash flows
for the  years  ended May 31,  2005 and  2004,  in  conformity  with  accounting
principles generally accepted in the United States of America

These  financial  statements  have been prepared  assuming that the Company will
continue as a going concern. As discussed in Note 1 to the financial statements,
unless  the  company  attains  future   profitable   operations  and/or  obtains
additional financing,  there is substantial doubt about the Company's ability to
continue as a going concern.  Management's plans in regards to these matters are
discussed in Note 1. The  financial  statements  do not include any  adjustments
that might result from the outcome of the uncertainty.

As  discussed  in  Note  16  to  its  consolidated   financial   statements  the
accompanying consolidated financial statements of Patch International Inc. as of
May 31, 2004 and for the year ended have been restated.



Vancouver, B.C.                                   /s/ Morgan & Company

August 10, 2005                                   Chartered Accountants








                                      F-1


<PAGE>

PATCH INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
(Stated in U.S. Dollars)


<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
                                                                                          MAY 31,             MAY 31,
                                                                                            2005               2004
------------------------------------------------------------------------------------------------------------------------
                                                                                                            (RESTATED -
                                                                                                             NOTE 16)
<S>                                                                                 <C>                <C>
ASSETS

Current Assets
     Cash                                                                           $        128,872   $         38,613
     Accounts receivable                                                                      21,754             35,327
     Trading securities (Note 5)                                                                   -             28,334
     Prepaid expenses and other                                                                1,230             71,330
------------------------------------------------------------------------------------------------------------------------

Total Current Assets                                                                         151,856            173,604
Property and equipment, net                                                                    2,074                  -
Oil and gas interests (successful efforts method) (Note 7)                                   198,284            130,440
Available-for-sale securities (Note 6)                                                     6,007,000                  1
------------------------------------------------------------------------------------------------------------------------

Total Assets                                                                        $      6,359,214   $        304,045
========================================================================================================================

LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)

 Current Liabilities
     Accounts payable and accrued liabilities                                       $        250,592   $        211,952
     Due to related parties (Note 8)                                                         342,813            250,388
------------------------------------------------------------------------------------------------------------------------

Total Current Liabilities                                                                    593,405            462,340
------------------------------------------------------------------------------------------------------------------------

 Going Concern (Note 1)

STOCKHOLDERS' EQUITY

 Preferred stock:
 1,000,000 preferred shares authorized with par value of $0.001 per share; none
 issued and outstanding                                                                            -                  -

 Common stock:
 10,000,000 common shares authorized (2004 - 100,000,000) with par value of
 $0.001 per share;
 5,101,364 shares issued and outstanding (2004 - 4,028,843 shares)                             5,101              4,028

 Additional paid-in capital                                                                1,418,489            475,994

Stock subscriptions receivable                                                                (4,000)                 -

Accumulated other comprehensive income  (Note 10)                                          6,006,999                  -

 Deficit                                                                                  (1,660,780)          (638,317)
------------------------------------------------------------------------------------------------------------------------

Total Stockholders' Equity (Deficit)                                                       5,765,809           (158,295)
------------------------------------------------------------------------------------------------------------------------

Total Liabilities and Stockholders' Equity (Deficit)                                $      6,359,214   $        304,045
========================================================================================================================

</TABLE>


              The accompanying notes are an integral part of these
                        consolidated financial statements

                                      F-2
<PAGE>
PATCH INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Stated in U.S. Dollars)

<TABLE>
<CAPTION>
                                                                                        YEAR ENDED      YEAR ENDED
                                                                                          MAY 31,        MAY 31,
                                                                                            2005           2004
----------------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>               <C>
Revenue
     Oil and gas                                                                     $      97,415     $   115,463
     Gain on sale of trading securities                                                          -           6,150
     Gain on relinquishment of oil and gas properties                                       10,996               -
----------------------------------------------------------------------------------------------------------------------

                                                                                           108,411         121,613
----------------------------------------------------------------------------------------------------------------------

Expenses
     Consulting                                                                            178,236          29,500
     Depletion, depreciation and impairment                                                 59,097          57,889
     Investor relations                                                                    189,782          69,495
     General and administrative                                                            142,061          45,914
     Oil and gas production, royalties and other                                            26,904         108,378
     Professional fees                                                                      98,271          69,909
     Related party administration                                                          115,239          72,000
     Stock-based compensation                                                              284,354         203,400
     Loss on write-off of proposed acquisition                                              21,000               -
     Loss on sale of trading securities                                                     15,930               -
----------------------------------------------------------------------------------------------------------------------

                                                                                         1,130,874         656,485
----------------------------------------------------------------------------------------------------------------------

Net Loss for the Year                                                                $  (1,022,463)    $  (534,872)
======================================================================================================================

Net Loss Per Share
     Basic and diluted                                                               $      (0.23)     $     (0.24)

Weighted Average Number Of Common Shares Outstanding
     Basic and diluted                                                                   4,457,000       2,222,000


</TABLE>







              The accompanying notes are an integral part of these
                        consolidated financial statements


                                      F-3

<PAGE>
PATCH INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in U.S. Dollars)


<TABLE>
<CAPTION>
                                                                                                YEAR ENDED       YEAR ENDED
                                                                                                  MAY 31,         MAY 31,
                                                                                                   2005             2004
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                                                         <C>                <C>

Cash Flows from Operating Activities
     Net loss for the year                                                                  $   (1,022,463)    $    (534,872)
     Add back non-cash items:
         Depletion, depreciation and impairment                                                     59,097            57,889
         Loss (gain) on sale of trading securities                                                  15,930            (6,150)
         Gain on relinquishment of oil and gas                                                     (10,996)                -
         Write-off of oil and gas property                                                               -            57,604
         Write-off of proposed acquisition                                                          21,000                 -
         Stock based compensation                                                                  284,354           203,400

     Change in non-cash operating assets and liabilities:
         Decrease in accounts receivable                                                            13,573             3,100
         Increase (decrease) in prepaid expenses and other                                          39,474           (63,953)
         Increase in accounts payable and accrued liabilities                                      188,784            73,348
         Increase in due to related parties                                                        103,421            67,025
-----------------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities                                                             (307,826)         (142,609)
-----------------------------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities
     Cash acquired in business combination                                                               -             1,034
     Cash paid for proposed acquisition                                                            (21,000)                -
     Oil and gas interests                                                                         (68,536)         (136,056)
     Acquisition of equipment                                                                       (2,593)                -
     Acquisition of trading securities                                                              (1,655)           (3,772)
     Proceeds on sale of trading securities                                                         14,059            30,488
-----------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities                                                              (79,725)         (108,306)
-----------------------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities
     Stock subscriptions received                                                                        -             1,700
     Common stock issued for cash                                                                  477,810           250,275
-----------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities                                                          477,810           251,975
-----------------------------------------------------------------------------------------------------------------------------
Change in cash for the year                                                                         90,259             1,060

Cash, beginning of year                                                                             38,613            37,553
-----------------------------------------------------------------------------------------------------------------------------
Cash, end of year                                                                           $      128,872     $      38,613
=============================================================================================================================


NON-CASH FINANCING ITEMS
     Common stock issued for debt                                                           $        52,164    $           -
     Stock options exercised for debt                                                               125,240                -

SUPPLEMENTAL CASH FLOW INFORMATION
     Taxes paid                                                                             $             -    $           -
     Interest paid                                                                                        -                -
</TABLE>



              The accompanying notes are an integral part of these
                        consolidated financial statements

                                      F-4
<PAGE>
PATCH INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(Stated in U.S. Dollars)


<TABLE>
<CAPTION>
                                                                                              ACCUMULATED
                                           COMMON STOCK         CAPITAL IN      STOCK            OTHER
                                    -------------------------    EXCESS OF   SUBSCRIPTIONS   COMPREHENSIVE
                                        SHARES       AMOUNT      PAR VALUE     RECEIVABLE        INCOME       DEFICIT       TOTAL
                                    ------------------------------------------------------------------------------------------------
<S>                                 <C>          <C>           <C>          <C>            <C>            <C>           <C>

Balance, May 31, 2002                         1  $         -   $         -  $         -    $         -    $   (24,396)  $   (24,396)

Common stock issued for cash
 at $0.001                           11,669,999       11,670             -            -              -              -        11,670

Common stock issued for cash
 at $0.02                             5,000,000      100,000             -            -              -              -       100,000

Common stock issued for cash
 at $0.10                               667,000       66,700             -            -              -              -        66,700

Stock subscription receivable                 -       (1,700)            -            -              -              -        (1,700)

Net loss for the year                         -            -             -            -              -        (79,049)      (79,049)
                                    ------------------------------------------------------------------------------------------------

Balance, May 31, 2003                17,337,000      176,670             -            -              -       (103,445)        73,225

Stock subscription received                   -        1,700             -            -              -              -         1,700

Common stock issued for cash
 at $0.08                               895,625       71,650             -            -              -              -        71,650

Adjustment to number of common
 stock issued and outstanding as
 a result of the acquisition
 of Patch Energy Inc.
    Patch Energy Inc.               (18,232,625)    (250,020)            -            -              -              -      (250,020)

    Praxis Pharmaceuticals, Inc.      2,063,081        2,063       247,957            -              -              -        250,020

Fair value of shares issued in
 connection with the acquisition
 of Patch Energy Inc.                 1,823,262        1,823      (153,846)           -              -              -      (152,023)

Stock options exercised                 142,500          142       178,483            -              -              -       178,625

Stock based compensation                      -            -       203,400            -              -              -       203,400

Net Loss for the year                         -            -             -            -              -       (534,872)     (534,872)
                                    ------------------------------------------------------------------------------------------------

Balance, May 31, 2004                 4,028,843        4,028       475,994            -              -       (638,317)     (158,295)

Stock options exercised for cash        831,800          832       480,978       (4,000)             -              -       477,810

Stock options exercised for debt        188,557          189       125,051            -              -              -       125,240

Stock issued for debt                    52,164           52        52,112            -              -              -        52,164

Stock based compensation                      -            -       284,354            -              -              -       284,354

Accumulated other comprehensive
  income                                      -            -             -            -      6,006,999              -     6,006,999

Net Loss for the year                         -            -             -            -              -     (1,022,463)   (1,022,463)
                                    ------------------------------------------------------------------------------------------------

Balance, May 31, 2005                 5,101,364  $     5,101   $ 1,418,489   $   (4,000)   $ 6,006,999    $(1,660,780)  $ 5,765,809
                                    ================================================================================================
</TABLE>

All per share amounts have been  retroactively  restated to reflect the 1 for 10
reverse common stock split on July 25, 2005.



              The accompanying notes are an integral part of these
                        consolidated financial statements

                                      F-5
<PAGE>
                            PATCH INTERNATIONAL INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              MAY 31, 2005 and 2004
                            (Stated in U.S. Dollars)

1.   OPERATIONS AND GOING CONCERN

     a)  Organization and Nature of Operations

         Patch International, Inc. (the "Company") was incorporated in the State
         of  Nevada on June 20,  1997.  Effective  June 15,  2004,  the  Company
         changed its domicile from Utah to Nevada. Effective March 15, 2004, the
         Company  acquired all the issued and outstanding  common stock of Patch
         Energy Inc.  ("Patch"),  a private company involved in the exploration,
         development  and  production  of oil  and  natural  gas.  Prior  to the
         acquisition,  the Company was a non-operating  corporation with nominal
         net assets.  The acquisition is a capital  transaction in substance and
         therefore has been accounted for as a recapitalization  of the Company.
         Accordingly, because Patch is deemed to be the purchaser for accounting
         purposes,  these consolidated  financial  statements are presented as a
         continuation  of Patch and include the results of  operations  of Patch
         since incorporation on February 11, 2002, and the results of operations
         of the Company  since the date of  acquisition  on March 15, 2004.  See
         Note 4.

         These consolidated  financial  statements include the accounts of Patch
         International,  Inc. and its  wholly-owned  subsidiary,  Patch  Energy,
         Inc., which was incorporated in British Columbia, Canada.

     b)  Going Concern

         As of May 31, 2005,  the Company had not reached a level of operations,
         which would finance day-to-day activities. These consolidated financial
         statements  have been prepared on the assumption  that the Company is a
         going   concern,   meaning  it  will  continue  in  operation  for  the
         foreseeable  future  and will be able to realize  assets and  discharge
         liabilities in the ordinary  course of operations.  Different  bases of
         measurement  may be  appropriate  when a  company  is not  expected  to
         continue   operations  for  the  foreseeable   future.   The  Company's
         continuation as a going concern is dependent upon its ability to attain
         profitable  operations and generate funds therefrom and/or raise equity
         capital  or   borrowings   sufficient   to  meet   current  and  future
         obligations.  Management  intends to support the Company by  exercising
         stock options and/or  warrants,  advancing  funds  necessary or raising
         funds  through  private  placements  until the  Company  can  achieve a
         profitable level of operations.

         The Company  incurred losses from operations of $1,022,463 and $534,872
         for the years  ended May 31,  2005 and 2004,  respectively.  At May 31,
         2005 the Company had a working  capital  deficiency of $441,549 (2004 -
         $288,736)  and  has  insufficient  revenues  to  offset  operating  and
         administrative expenses.  These conditions,  among others, give rise to
         substantial  doubt about the  Company's  ability to continue as a going
         concern. These financial statements do not include any adjustments that
         might arise from this uncertainty.

2.   SIGNIFICANT ACCOUNTING POLICIES

     a)  Basis of Presentation

         These   financial   statements  and  related  notes  are  presented  in
         accordance with accounting  principles generally accepted in the United
         States, and are expressed in US dollars.  The Company's fiscal year-end
         is May 31.

     b)  Use of Estimates

         The  preparation of financial  statements in conformity  with generally
         accepted  accounting  principles  requires management to make estimates
         and  assumptions  that  affect the amounts  reported  in the  financial
         statements and accompanying  disclosures.  Although these estimates are
         based on management's  best knowledge of current events and actions the
         Company may undertake in the future, actual results may differ from the
         estimates.

     c)  Financial Instruments

         The carrying amounts of financial  instruments including cash, accounts
         receivable,   trading   securities,   accounts   payable   and  accrued
         liabilities,  and amounts  due to related  parties,  approximated  fair
         value at May 31, 2005 and 2004.

     d)  Investments

         The Company's available for sale securities are carried at the lower of
         cost or estimated  realizable value. The Company's  trading  securities
         are carried at market value.

                                      F-6

<PAGE>
PATCH INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2005
(Stated in U.S. Dollars)

2.   SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     a)  Property and Equipment

         Property and equipment  consists of computer  hardware,  is recorded at
         cost and is being amortized using the declining balance method over its
         estimated useful life at the rate of 30% per annum.

     b)  Oil and Gas Interests

         The Company follows the successful efforts method of accounting for its
         oil  and  gas  producing  activities.  Under  this  method,  all  costs
         associated  with  productive   exploratory   wells  and  productive  or
         nonproductive  development  wells  are  capitalized  while the costs of
         nonproductive  exploratory  wells are expensed.  If an exploratory well
         finds oil and gas reserves,  but a determination that such reserves can
         be classified as proved is not made after one year following completion
         of drilling, the costs of drilling are charged to operations.  Indirect
         exploratory expenditures,  including geophysical costs and annual lease
         rentals, are expensed as incurred. Unproved oil and gas properties that
         are individually  significant are periodically  assessed for impairment
         of  value,  and a loss  is  recognized  at the  time of  impairment  by
         providing an impairment  allowance.  Capitalized costs of producing oil
         and gas properties and related  support  equipment,  after  considering
         estimated  dismantlement  and abandonment  costs and estimated  salvage
         values, are depreciated and depleted by the unit-of-production method.

         On the sale or retirement of a complete unit of a proved property,  the
         cost and related accumulated depreciation,  depletion, and amortization
         are eliminated  from the property  accounts,  and the resultant gain or
         loss is  recognized.  On the  retirement  or sale of a partial  unit of
         proved  property,  the  cost is  charged  to  accumulated  deprecation,
         depletion, and amortization with a resulting gain or loss recognized in
         income.  On the sale of an entire interest in an unproved  property for
         cash or cash equivalent, gain or loss on the sale is recognized, taking
         into  consideration  the  amount  of  any  recorded  impairment  if the
         property had been assessed  individually.  If a partial  interest in an
         unproved  property  is  sold,  the  amount  received  is  treated  as a
         reduction of the cost of the interest  retained.  In joint ventured oil
         and gas exploration  and production  activities,  the accounts  reflect
         only the Company's proportionate interest in such activities.

     c)  Asset Retirement Obligations

         The Company  accounts for asset  retirement  obligations  in accordance
         with  the  provisions  of SFAS 143  "ACCOUNTING  FOR  ASSET  RETIREMENT
         OBLIGATIONS". SFAS 143 requires the Company to record the fair value of
         an asset retirement obligation as a liability in the period in which it
         incurs a legal  obligation  associated  with the retirement of tangible
         long-lived  assets  that  result  from the  acquisition,  construction,
         development and/or normal use of the assets.

     e)  Income Taxes

         The Company  uses the  liability  method to account  for income  taxes.
         Under this method,  deferred tax assets and  liabilities are determined
         based on  differences  between  financial  reporting  and tax  bases of
         assets  and  liabilities.  Deferred  tax  assets  and  liabilities  are
         measured  using  enacted tax rates and laws that will be in effect when
         the differences are expected to reverse.

         Deferred tax assets are reduced by a valuation  allowance  when,  based
         upon currently available  information,  it is more likely than not that
         some  portion or all of the  deferred  tax assets will not be realized.
         Deferred  tax assets and  liabilities  are  adjusted for the effects of
         changes in tax laws and rates on the date of enactment.

     f)  Stock Based Compensation

         The Company accounts for stock based employee and director compensation
         arrangements  in accordance  with  provisions of Accounting  Principles
         Board  ("APB")  Opinion  No.  25 -  "ACCOUNTING  FOR  STOCK  ISSUED  TO
         EMPLOYEES",   and  related  interpretations,   and  complies  with  the
         disclosure  provisions  of SFAS No. 123 -  "ACCOUNTING  FOR STOCK BASED
         COMPENSATION".  Under APB No. 25, compensation  expense is based on the
         difference,  if any,  on the date the  number of shares  receivable  is
         determined, between the estimated fair value of the Company's stock and
         the  exercise  price of options to  purchase  that  stock.  Stock based
         compensation  arrangements  for others are recorded at their fair value
         as the services are provided and the compensation earned.



                                      F-7

<PAGE>
PATCH INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2005
(Stated in U.S. Dollars)

2.   SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     g)  Loss Per Share

         The Company  computes loss per share in accordance  with SFAS No. 128 -
         "EARNINGS PER SHARE".  Under the provisions of SFAS No. 128, basic loss
         per share is computed using the weighted average number of common stock
         outstanding  during the  periods.  Diluted  loss per share is  computed
         using the weighted  average number of common and  potentially  dilutive
         common stock  outstanding  during the period.  As the Company generated
         net losses in each of the periods presented, the basic and diluted loss
         per share is the same as any  exercise of options or warrants  would be
         anti-dilutive.

3.   RECENT PRONOUNCEMENTS

     In May 2005, the Financial  Accounting  Standards  Board (FASB) issued SFAS
     No. 154,  "Accounting  Changes and Error Corrections - A Replacement of APB
     Opinion No. 20 and SFAS No. 3". SFAS 154 changes the  requirements  for the
     accounting  for and  reporting  of a change  in  accounting  principle  and
     applies to all voluntary changes in accounting  principle.  It also applies
     to changes required by an accounting  pronouncement in the unusual instance
     that the  pronouncement  does not include specific  transition  provisions.
     SFAS 154 requires  retrospective  application to prior  periods'  financial
     statements of changes in accounting  principle,  unless it is impracticable
     to determine either the period-specific effects or the cumulative effect of
     the change.  The  provisions of SFAS No. 154 are  effective for  accounting
     changes and  correction  of errors  made in fiscal  years  beginning  after
     December 15, 2005.  The adoption of this standard is not expected to have a
     material  effect  on the  Company's  results  of  operations  or  financial
     position.

     In December 2004,  the FASB issued SFAS No. 153,  "EXCHANGES OF NONMONETARY
     ASSETS - AN  AMENDMENT  OF APB OPINION NO. 29". The guidance in APB Opinion
     No.  29,  "ACCOUNTING  FOR  NONMONETARY  TRANSACTIONS",  is  based  on  the
     principle that exchanges of nonmonetary  assets should be measured based on
     the fair value of the  assets  exchanged.  The  guidance  in that  Opinion,
     however, included certain exceptions to that principle. SFAS No. 153 amends
     Opinion No. 29 to eliminate  the  exception  for  nonmonetary  exchanges of
     similar  productive  assets and  replaces it with a general  exception  for
     exchanges of nonmonetary  assets that do not have commercial  substance.  A
     nonmonetary  exchange has commercial  substance if the future cash flows of
     the  entity  are  expected  to  change  significantly  as a  result  of the
     exchange.  The  provisions of SFAS No. 153 are  effective  for  nonmonetary
     asset exchanges  occurring in fiscal periods beginning after June 15, 2005.
     Early  application  is  permitted  and  companies  must apply the  standard
     prospectively.  The  adoption of this  standard  is not  expected to have a
     material  effect  on the  Company's  results  of  operations  or  financial
     position.

     In December 2004, the Financial  Accounting  Standards  Board (FASB) issued
     Statement of Financial  Accounting  Standard (SFAS) No. 123R,  "Share Based
     Payment".  SFAS  123R  is a  revision  of  SFAS  No.  123  "Accounting  for
     Stock-Based  Compensation",  and supersedes APB Opinion No. 25, "Accounting
     for Stock Issued to  Employees"  and its related  implementation  guidance.
     SFAS 123R  establishes  standards for the  accounting for  transactions  in
     which an entity exchanges its equity instruments for goods or services.  It
     also  addresses  transactions  in which an  entity  incurs  liabilities  in
     exchange  for goods or  services  that are  based on the fair  value of the
     entity's equity instruments or that may be settled by the issuance of those
     equity   instruments.   SFAS  123R  focuses  primarily  on  accounting  for
     transactions  in which an entity obtains  employee  services in share-based
     payment  transactions.  SFAS 123R  requires a public  entity to measure the
     cost of  employee  services  received  in  exchange  for an award of equity
     instruments  based on the grant-date  fair value of the award (with limited
     exceptions).  That cost will be recognized  over the period during which an
     employee  is required  to provide  service in exchange  for the award - the
     requisite  service period (usually the vesting period).  SFAS 123R requires
     that the compensation cost relating to share-based payment  transactions be
     recognized in financial statements. That cost will be measured based on the
     fair value of the equity or liability  instruments issued.  Public entities
     that file as small business  issuers will be required to apply SFAS 123R in
     the first interim or annual reporting period that begins after December 15,
     2005.  The  adoption of this  standard  is not  expected to have a material
     effect on the Company's results of operations or financial position.

     In March 2005, the SEC staff issued Staff Accounting Bulletin No. 107 ("SAB
     107") to give guidance on the implementation of SFAS 123R. The Company will
     consider SAB 107 during implementation of SFAS 123R.

     The FASB has also  issued  SFAS  No.  151 and 152,  but they  will not have
     relationship to the operations of the Company.  Therefore a description and
     its impact for each on the Company's operations and financial position have
     not been disclosed.

                                      F-8

<PAGE>
PATCH INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2005
(Stated in U.S. Dollars)

4.   ACQUISITION OF SUBSIDIARY

     Effective  March 15,  2004,  the  Company  acquired  100% of the issued and
     outstanding  shares of Patch Energy Inc.  ("Patch")  by issuing  18,232,625
     (1,823,262  split-adjusted)  shares of common  stock in a one for ten share
     exchange.  Patch was a private British Columbia corporation involved in the
     exploration, development and production of oil and natural gas.

     A summary of the transaction is as follows:

     The issued  and  outstanding  share  capital  of the  Company  prior to the
     acquisition was 2,063,081 split-adjusted shares of common stock. The issued
     and  outstanding  share  capital  of  Patch  prior to the  acquisition  was
     18,232,625  shares  of  common  stock.  The  transaction  resulted  in  the
     Company's  shareholders  holding  53% of the total  issued and  outstanding
     split-adjusted  common shares, and Patch shareholders having a total of 47%
     of the  total  issued  and  outstanding  split-adjusted  common  shares  of
     3,886,343  after the close of the  acquisition.  The  transaction  has been
     treated as a  recapitalization  of the Company with Patch being  treated as
     the acquirer.  Accordingly the results of operations presented are those of
     Patch since  incorporation on February 11, 2002,  together with the results
     of operations of the Company since March 15, 2004.

     Even though former  shareholders of the Company controlled 53% of the total
     issued and outstanding shares after the acquisition, former shareholders of
     Patch  effectively  controlled  the combined  entity as there were no other
     blocks of share  capital  equal to or greater  than 5% of the total  issued
     capital.  A former  majority  shareholder  of Patch also had the ability to
     elect the majority of the board of the combined  entity,  and management of
     the  combined  entity  comprises  that  one  former  Patch  shareholder  as
     President,  Chief  Executive  Officer  and  Director.  For  these  reasons,
     pursuant  to  paragraph  (7  (b),  (c) and (d) of  Statement  of  Financial
     Accounting  Standards,  No.  141  "Business  Combinations",  Patch has been
     treated as the acquirer corporation.

     The Company had net liabilities of $152,024 at the acquisition date and are
     included in the  consolidated  balance sheet at their  previously  recorded
     amounts.

     The acquisition is summarized as follows:

         Cash                                          $    1,034
         Investment                                             1
         Accounts payable, and accrued liabilities       (115,216)
         Due to related parties                           (37,843)
                                                     -------------
         Net liabilities acquired                      $ (152,024)
                                                     =============

5.   TRADING SECURITIES

<TABLE>
<CAPTION>
                                                                 May 31, 2005      May 31, 2004
                                                                 ------------------------------
<S>                                                              <C>             <C>
         Trading Securities,
         (2004 - 944,450 common shares (market value $28,334))   $           -   $      28,334
                                                                 ==============================
</TABLE>




                                      F-9
<PAGE>
PATCH INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2005
(Stated in U.S. Dollars)

6.   AVAILABLE-FOR-SALE SECURITIES

     The Company owns  approximately  an 8.6% equity interest in Pharmaxis Ltd.,
     an Australian company listed on the Australian Stock Exchange. These shares
     are  restricted  from trading until  November 11, 2005 and therefore at May
     31, 2004, in accordance with SFAS 115  "ACCOUNTING FOR CERTAIN  INVESTMENTS
     IN DEBT AND EQUITY SECURITIES",  this investment was carried at cost of $1.
     Commencing  from November 11, 2004, the Company  recorded its investment at
     fair value.  At May 31, 2005,  the Company has  recognized a discount  from
     quoted  market  value of  securities  held for resale due to the  following
     factors: lack of marketability of the Company's holdings due to the trading
     restriction  to  November  2005,  the  ability  to dispose of large - block
     holdings in a timely manner,  and the risk associated with an investment in
     a startup company engaged in research and development. At May 31, 2005, the
     discounted  market  value  is  recorded  at  $6,007,000,   net  of  tax  of
     $2,217,751,  resulting  in an  unrealized  gain  of  $6,006,999,  which  is
     recorded  as  other   comprehensive   income,   a  separate   component  of
     shareholders' equity.

<TABLE>
<CAPTION>
                                                                           May 31,           May 31,
                                                                            2005               2004
                                                                      ---------------------------------
                                                                                            (Restated -
                                                                                             Note 16)
<S>                                                                   <C>              <C>
        11,200,000 ordinary shares                                    $   6,007,000    $           1
                                                                      =================================
</TABLE>

7.   OIL AND GAS INTERESTS
<TABLE>
<CAPTION>
                                                                           May 31,          May 31,
                                                                            2005             2004
                                                                      ---------------  ---------------
<S>                                                                   <C>              <C>
        OIL AND GAS INTERESTS - SUCCESSFUL EFFORTS METHOD

        Balance beginning of the year                                 $     130,440    $     109,876
        Expenditures                                                        127,365           78,453
        Depletion                                                           (25,136)         (57,889)
        Dry well and abandoned interests                                    (34,385)               -
                                                                      ---------------  ---------------
        Balance end of the year                                       $     198,284    $     130,440
                                                                      ===============  ===============

        Represented by:

        California, U.S.A.
        Producing interests subject to depletion and amortization     $      15,638    $      15,638
        Accumulated depletion                                               (15,638)         (15,099)
                                                                      ---------------  ---------------
                                                                                  -              539
                                                                      ---------------  ---------------
        Texas, U.S.A.
        Non-producing interests                                                   -            2,816
                                                                      ---------------  ---------------
        Alberta, Canada
        Non-producing interests                                              68,155                -
                                                                      ---------------  ---------------
        Saskatchewan, Canada
        Producing interests subject to depletion and amortization           212,113          184,473
        Accumulated depletion                                               (81,984)         (57,388)
                                                                      ---------------  ---------------
                                                                            130,129          127,085
                                                                      ---------------  ---------------
                                                                      $     198,284    $     130,440
                                                                      ===============  ===============
</TABLE>


                                      F-10

<PAGE>
PATCH INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2005
(Stated in U.S. Dollars)

7.   OIL AND GAS INTERESTS (CONTINUED)

<TABLE>
<CAPTION>
       CAPITALIZED COSTS RELATING TO OIL AND
       GAS PRODUCING ACTIVITIES

                                                                                       May 31,            May 31,
                                                                                        2005              2004
                                                                                  ---------------    ---------------
<S>                                                                               <C>                 <C>

       Proved oil and gas properties and related equipment - California, U.S.A.   $       15,638      $      15,638
       Proved oil and gas properties and related equipment - Saskatchewan, Canada        212,113            184,472
       Non-producing oil and gas properties - Alberta, Canada                             68,155                  -
       Non-producing oil and gas properties - Texas, U.S.A.                                    -              2,816
                                                                                  ---------------     --------------
       Sub-total                                                                         295,906            202,926
       Accumulated depletion                                                             (97,622)           (72,486)
                                                                                  ---------------     --------------
                                                                                  $      198,284      $     130,440
                                                                                  ===============     ==============

       COSTS INCURRED IN OIL AND GAS ACQUISITION,
       EXPLORATION AND DEVELOPMENT ACTIVITIES
                                                                                       May 31,            May 31,
                                                                                        2005               2004
                                                                                  ---------------     --------------
       Exploration costs - Texas, U.S.A.                                          $       31,569      $       2,816

       Development costs - Alberta, Canada                                                68,155                  -
       Development costs - Saskatchewan, Canada                                           27,641             75,637
                                                                                  ---------------     --------------
                                                                                  $      127,365      $      78,453
                                                                                  ===============     ==============

       RESULTS OF OPERATIONS FROM PRODUCING ACTIVITIES -
       TEXAS, U.S.A.
                                                                                       May 31,            May 31,
                                                                                        2005               2004
                                                                                  ---------------     --------------
       Impairment of oil costs                                                    $      (34,385)     $           -
                                                                                  ---------------     --------------
       Net loss from producing activities                                         $      (34,385)     $           -
                                                                                  ===============     ==============

       RESULTS OF OPERATIONS FROM PRODUCING ACTIVITIES -
       CALIFORNIA, U.S.A.
                                                                                       May 31,            May 31,
                                                                                        2005               2004
                                                                                  ---------------     --------------
       Oil and gas sales                                                          $          213      $      16,792
       Production costs                                                                     (356)            (7,956)
       Depletion                                                                            (540)            (3,600)
                                                                                  ---------------     --------------
       Net (loss) income from producing activities                                $         (683)     $       5,236
                                                                                  ===============     ==============

       RESULTS OF OPERATIONS FROM PRODUCING ACTIVITIES -
       SASKATCHEWAN, CANADA
                                                                                       May 31,            May 31,
                                                                                        2005               2004
                                                                                  ---------------     --------------
       Oil and gas sales                                                          $       97,202      $      98,671
       Production costs                                                                  (25,224)           (42,817)
       Depletion                                                                         (24,596)           (54,289)
       Dry well costs                                                                     (1,324)           (57,604)
                                                                                  ---------------     --------------
       Net income (loss) from producing activities                                $       46,058      $    (56,039)
                                                                                  ===============     ==============
</TABLE>
                                      F-11

<PAGE>
PATCH INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2005
(Stated in U.S. Dollars)

7.   OIL AND GAS PROPERTIES (CONTINUED)

     a)  Saskatchewan, Canada


         On May 1, 2002,  the Company  acquired a 12.5% working  interest in ten
         test wells located in Saskatchewan  by incurring  15.625% of the costs.
         The Company  entered  into a  participation  agreement  with  Fairchild
         International Corporation ("Fairchild") whereby Fairchild will earn one
         third of the Company's  interest in the ten test wells by incurring one
         third of the associated  costs.  The Company agreed to participate in a
         second set of nine test wells in Saskatchewan,  Canada,  by agreeing to
         incur 15.625% of the costs to earn a 12.5% working interest.  Fairchild
         will also earn the right to earn  1.75% of the  Company's  interest  by
         incurring  2.5% of the  associated  costs.  The Company  entered into a
         participation agreement dated November 5, 2003 with Fairchild where the
         Company  granted to Fairchild a 6.75% interest in any subsequent  wells
         to be drilled on the Farmout Lands pursuant to a Farmout Agreement,  as
         detailed  above,  in  consideration  of incurring  8.4375% of the costs
         associated with any such subsequent wells. During the period, Fairchild
         relinquished its interest in all the above wells back to the Company.

         The Company entered into a  participation  agreement with Micron Enviro
         Systems  Inc.  ("Micron")  dated March 27, 2003 where Micron can earn a
         3.5%  working  interest by incurring 5% of the  associated  costs.  The
         Company  also  entered  into  a  participation  agreement  with  Butler
         Development  Corporation  ("Butler")  dated April 28, 2003 where Butler
         can earn a 3.5%  working  interest by  incurring  5% of the  associated
         costs and by paying the Company CAD$15,000 (received).

         On November 14, 2003, the Company  acquired a 12.5% working interest in
         a test well  located in  Saskatchewan  and 6.25% in the  balance of the
         Farmout Lands,  by incurring 12.5% of the costs. A total of $1,324 (May
         31, 2004  -$57,604)  in costs  related to this well has been charged to
         operations,  as the well  was  shut-in.

     b)  Alberta,  Canada

         (a)    By a Participation  Agreement  dated March 10, 2005, the Company
                acquired a 25% working  interest in the Bear Canyon gas project.
                From the date of the  Participation  Agreement  to May 31, 2005,
                the  Company  did  not  incur  any  expenses  on  this  project.
                Subsequently,  the well was drilled and shut-in.

         (b)    On May 30, 2005, the  Company acquired a 10% working interest in
                a test  well  (the  "McLeod"  project)  located  in  Alberta  by
                incurring  10% of the costs.  As at May 31,  2005,  the  Company
                incurred  $68,155  towards  the  drilling  costs.  The  well was
                drilled in June, 2005 and is awaiting completion.

     c)  California, USA

         The  Company has 0.75 of 1% of an interest in four test wells in Tehama
         County, California. The Company relinquished its interest in these test
         wells in fiscal 2005.

     d)  Texas, USA

         The Company entered into a participation  agreement dated September 30,
         2003 with PB Energy USA Inc. ("PB"),  where the Company was granted the
         right  to earn a 3.75%  working  interest  in a Test  Well  and a 3.75%
         working  interest in 3 tracts of land  totalling 856 acres lying within
         the Goliad  County of Texas,  USA (the  "Program  Lands")  known as the
         Manahuilla  Creek  Project,  by paying 5% of the  Prospect  Acquisition
         Costs (being  US$15,000  (paid)),  5% of the Test Well  Operations  and
         3.75% of the costs of Development  of Program Lands.  The test well has
         been shut-in.

     e)  Ukraine

         The Company  signed a  Memorandum  of  Understanding  with Firma HAS to
         drill several wells in the oil and gas fields of Chernigivska,  Sumska,
         Poltavaska and  Kharkivska  regions of Ukraine which have been approved
         by the Ukrainian government. No costs have been incurred to date.

     f)  Tunisia, North Africa

         The Company  signed a Memorandum  of  Understanding  with  Carthago Oil
         Company,  Tunisia,  for  the  right  to  acquire  40% of an oil and gas
         interest in Northern Tunisia by committing  approximately $4,000,000 to
         fund a work program which  includes the drilling of one well. The terms
         of the Memorandum expired on April 30, 2005.

                                      F-12

<PAGE>
PATCH INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2005
(Stated in U.S. Dollars)

8.   DUE TO RELATED PARTIES

     a)  Related  parties  include  directors  and officers and  companies  with
         common  management  and  directorships.   Related  party  accounts  are
         unsecured  with no fixed  terms of interest  or  repayment.  At May 31,
         2005,  amounts owing of $342,813  (2004 - $250,388) were due to related
         parties.

     b)  Effective  February 11, 2003,  the Company  entered into two management
         services agreements with directors and officers. The payments due under
         these  agreements  are $85,000  per annum for 2 years.  During the year
         ended  May 31,  2005,  $55,000  in  management  fees  were  charged  to
         operations (2004 - $60,000).

     c)  The Company  entered  into  management  agreements  for  administration
         fees  aggregating  $6,500 per month  commencing  December  31,  2002 to
         November 30, 2005 with directors and officers.  An agreement  which had
         required payments of $2,500 per month was terminated effective December
         31, 2003. On May 1, 2005, the Company entered into a revised  agreement
         superseding  the remaining  agreement.  The revised  agreement is for a
         term of 5 years with  payments of $175,000  per annum.  During the year
         ending May 31,  2005,  the Company  paid,  $60,239  (2004 - $12,000) in
         related party administration fees.

9.   COMMON STOCK

     Effective July 25, 2005, the Company  effected a reverse stock split on the
     basis of the issue of one new common share for the  cancellation  of 10 old
     common shares. All share amounts have been  retroactively  adjusted for all
     periods presented.

     Share purchase warrants are outstanding to purchase 89,563 shares of common
     stock at a price of $1.20 per share on or before January 6, 2006.

     The Company is proposing the distribution of a dividend on a pro rata basis
     of a total of 560,000 of the shares, or the proceeds,  of its investment in
     Pharmaxis Ltd. ("Pharmaxis"), on or after November 11, 2005, being the date
     that the escrow  restrictions  attaching to such shares  expire.  For every
     0.7239 shares of Patch,  one share of Pharmaxis or its cash equivalent will
     be  distributed.  The  directors of the Company have fixed July 30, 2004 as
     the record date for  determining  shareholders  entitled to  participate in
     such  distribution.  The record date is subject to  receiving  all required
     regulatory approvals and fulfilling all necessary statutory requirements in
     order to permit the distribution to occur.

     During the year ended May 31, 2005,  the Company  issued  52,164  shares of
     common stock at $1.00 per share in extinguishment of debt totaling $52,164,
     and  issued  188,557  shares  of  common  stock  pursuant  to stock  option
     exercises in extinguishment of debt totaling $125,240.


     A summary of the Company's stock option activity is as follows:

<TABLE>
<CAPTION>
                                                May 31, 2005                               May 31, 2004
                                        ------------------------------     --------------------------------
                                                             Weighted                             Weighted
                                                  Number      Average                Number        Average
                                                      of     Exercise                    of       Exercise
                                                 Options        Price               Options          Price
                                        ------------------------------     --------------------------------
<S>                                           <C>               <C>                <C>               <C>
       Balance, beginning of period              440,500        $1.20               153,000          $1.00
       Granted                                 1,227,857        $0.60               450,000          $1.20
       Cancelled                                (100,000)       $1.30                     -              -
       Exercised                              (1,020,357)       $0.60              (162,500)         $1.10
                                        ------------------------------     --------------------------------
       Balance, end of period                    548,000        $0.70               440,500          $1.20
                                        ==============================     ================================
</TABLE>

     During the year ended May 31, 2005,  137,500  stock  options were  repriced
     from $1.65 to $0.70 per share.

     As at May 31, 2005, the following options are outstanding:

<TABLE>
<CAPTION>
                                          OUTSTANDING                                    EXERCISABLE
                       --------------------------------------------------    ------------------------------------
                                               Weighted                                                 Weighted
                                                Average         Weighted                                 Average
                              Number          Remaining          Average               Number           Exercise
             Exercise             of        Contractual         Exercise                   of              Price
                Price         Shares       Life (years)            Price               Shares           Weighted
     -------------------------------------------------------------------     ------------------------------------
<S>                          <C>                   <C>             <C>                <C>                  <C>
     $    0.55 - 1.00        548,000               2.85            $0.70              548,000              $0.70
                       --------------------------------------------------    ------------------------------------
                             548,000               2.85            $0.70              548,000              $0.70
                       ==================================================    ====================================
</TABLE>

                                      F-13

<PAGE>
PATCH INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2005
(Stated in U.S. Dollars)


9.   COMMON STOCK (CONTINUED)

     The Company  accounts for stock based  employee  and director  compensation
     arrangements in accordance with provisions of Accounting  Principles  Board
     ("APB")  Opinion No. 25 - "ACCOUNTING  FOR STOCK ISSUED TO EMPLOYEES",  and
     related  interpretations,  and complies with the  disclosure  provisions of
     SFAS No. 123 - "ACCOUNTING FOR STOCK BASED COMPENSATION". Under APB No. 25,
     compensation  expense is based on the  difference,  if any, on the date the
     number of shares receivable is determined, between the estimated fair value
     of the Company's  stock and the exercise  price of options to purchase that
     stock.  Stock based  compensation  arrangements  for others are recorded at
     their fair value as the services are provided and the compensation  earned.
     During  the  year  ended  May  31,  2005,   stock-based   compensation  for
     consultants  amounting to $284,354 was recorded on 1,152,857 stock options;
     662,857  stock  options  priced at $0.70 per share,  30,000  stock  options
     priced  at  $0.56,  100,000  stock  options  priced  at $0.55 per share and
     360,000  stock  options at $0.45 per share.  Also during the year ended May
     31,  2005,  a director  and an officer of the  Company  received a total of
     75,000 stock options priced at $0.70 per share for consulting services.

     Had compensation cost been recognized on the basis of fair value,  pursuant
     to SFAS No. 123, net loss and loss per share would have been as follows:

<TABLE>
<CAPTION>
                                                                                         May 31,          May 31,
                                                                                            2005             2004
<S>                                                                                <C>               <C>
          Net Loss - as reported                                                   $  (1,022,463)    $   (534,872)
            Add: Stock-based compensation expense included in net loss - as
            reported                                                                     284,354          203,400
            Deduct: Stock-based compensation expense determined under fair value
            method                                                                      (327,444)        (203,400)
                                                                                   --------------------------------

          Net Loss - Pro-Forma                                                     $  (1,065,553)    $   (534,872)
                                                                                   ================================

          Basic and diluted net loss per share - as reported                            $  (0.23)         $ (0.24)
                                                                                   --------------------------------

          Basic and diluted net loss per share - Pro-Forma                              $  (0.24)         $ (0.24)
                                                                                   ================================
</TABLE>

     The fair value of each  option  granted  during the year ended May 31, 2005
     was estimated  using the  Black-Scholes  option  pricing  model  assuming a
     dividend  yield of 0.0%,  expected  volatility of 216%,  risk free interest
     rate of 2.4%, and weighted average expected option terms of .73 years.

     The fair value of each  option  granted  during the year ended May 31, 2004
     was estimated  using the  Black-Scholes  option  pricing  model  assuming a
     dividend  yield of 0.0%,  expected  volatility of 264%,  risk free interest
     rate of 1.8%, and weighted average expected option terms of 1.75 years.

10.  ACCUMULATED OTHER COMPREHENSIVE LOSS

<TABLE>
<CAPTION>
                                                                        May 31,          May 31,
                                                                           2005             2004
<S>                                                                <C>               <C>
         Net Loss for the year                                     $ (1,022,463)     $  (534,872)

         Unrealized holding gain arising during the year              6,006,999                -
                                                                   ------------------------------
         Comprehensive gain (loss) for the year                    $  4,984,536      $  (534,872)
                                                                   ==============================
</TABLE>

11.  COMMITMENTS

     a)  The  Company  entered into  a letter  of intent  with Mr. Danilo Mancin
         ("Mancin") to jointly pursue  commercial  opportunities  in Algeria and
         Libya. As consideration  for Mancin's  services,  the Company agreed to
         pay $3,000 per month up to the earlier of March 31, 2005 or the date on
         which a  commercial  transaction  is entered  into subject to specified
         terms as described in the service agreement, and issue stock options to
         acquire  40,000  common  shares of the Company at an exercise  price of
         $0.70 per share for a term of 5 years. The Company also agreed to issue
         250,000  common  shares upon  execution of the first  agreement,  and a
         further 250,000 common shares upon completion of the first transaction.
         During the year ended May 31, 2005,  Mancin received options to acquire
         40,000 common shares,  however no agreement was reached  between Mancin
         and the Company and is no longer being pursued.

                                      F-14

<PAGE>
PATCH INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2005
(Stated in U.S. Dollars)

11.  COMMITMENTS (CONTINUED)

     b)  On  May 1, 2005,  the Company entered into a consulting agreement for a
         term of 5 years with payments of $75,000 per annum.

12.  SUBSEQUENT EVENTS

     a)  The  Company  received  $137,750  upon  the  exercise  of 200,000 stock
         options at  various  prices  ranging  from $0.55 per share to $0.70 per
         share of common stock.

     b)  The Company is proposing a private  placement  offering  consisting  of
         $1,500,000  convertible  debentures,  convertible into units. Each unit
         will be convertible  into one share of common stock at $0.10 per share.
         The debenture will have a one year term,  bearing interest at 14.5% per
         annum.

13.  INCOME TAX

     The Company provides deferred income taxes for differences  between the tax
     reporting   basis  and  the  financial   reporting   basis  of  assets  and
     liabilities.   The  Company   follows  the  provisions  of  SFAS  No.  109,
     "ACCOUNTING FOR INCOME TAXES". Pursuant to SFAS 109 the Company is required
     to compute tax asset benefits for net operating losses carried forward. The
     potential  benefit of net U.S.  operating losses has not been recognized in
     the financial  statements  because the Company cannot be assured that it is
     more likely than not that it will  utilize  the net U.S.  operating  losses
     carried  forward in future  years.  At May 31,  2005,  the  Company had net
     operating losses for U.S. federal income tax purposes of $2,342,000,  which
     begin expiring in fiscal 2024, and had non-capital loss  carryforwards  for
     Canadian  income tax purposes of $510,000,  which begin  expiring in fiscal
     2011. When the future  utilization of some portion of the  carryforwards is
     determined  not to be "more  likely  than not," a  valuation  allowance  is
     provided to reduce the recorded tax benefits  from such assets.  At May 31,
     2005, a valuation  allowance of $1,011,000 was provided to reduce  deferred
     tax assets to nil.

     Income tax expense was as follows:

                                                    May 31,            May 31,
                                                     2005               2004
                                                       $                  $

         Current
            Canadian                                     -                   -
            United States                                -                   -

         Deferred:
            Canadian                                     -                   -
            United States                                -                   -
         -----------------------------------------------------------------------

         Total income tax expense                        -                   -
         =======================================================================



     A reconciliation  of the statutory federal income tax rate to the Company's
     effective tax rate follows:

                                                      Canada       United States

         Statutory federal income tax rate              38%             35%
         Change in valuation allowance                 (38%)           (35%)
         -----------------------------------------------------------------------
         Total income tax expense                        -               -
         =======================================================================


     The deferred tax liabilities and assets were as follows:

                                                    May 31,         May 31,
                                                     2005            2004
                                                       $               $

         Deferred tax assets
         - Net operating loss carryforwards       (1,011,000)       (737,000)
         - Less valuation allowance                1,011,000         737,000
         -----------------------------------------------------------------------
         Net deferred tax assets                           -               -
         =======================================================================


                                      F-15
<PAGE>
PATCH INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2005
(Stated in U.S. Dollars)


14.  GEOGRAPHIC AND SEGMENTED INFORMATION

     The  Company  has  one  reportable   segment  consisting  of  oil  and  gas
     operations,  except for the Company's investment in Pharmaxis.  The Company
     derives revenues from the oil and gas operations from the sale of petroleum
     products. The Company's operations are in Canada and the United States.

     GEOGRAPHIC:

                                                      May 31,         May 31,
        Long-lived assets:                             2005            2004
                                                  -------------   --------------
                                                                    (Restated -
                                                                      Note 16)

        United States                             $          -    $       3,355
        Canada                                         200,358          127,085
        Australia                                    6,007,000                1
                                                  -------------   --------------
        Total long-lived assets                   $  6,207,358    $     130,441
                                                  =============   ==============


                                                     May 31,           May 31,
        Revenues from external customers:              2005             2004
                                                  -------------   --------------
        United States                             $        213    $      16,792
        Canada                                          97,202           98,671
                                                  -------------   --------------
        Total revenues from external customers    $     97,415    $     115,463
                                                  =============   ==============

15.  SCHEDULE OF SUPPLEMENTARY INFORMATION ON OIL AND GAS OPERATIONS

     RESERVE QUANTITY INFORMATION (UNAUDITED)

     The estimated  quantities  of proved oil and gas reserves  disclosed in the
     table  below  are  based  upon  estimates   prepared  for  the  Company  by
     independent  petroleum  engineers.  Such estimates are inherently imprecise
     and may be subject to substantial revisions. The Company bears the ultimate
     responsibility for proved reserves estimates.

     Revisions may occur because current prices of oil and gas and current costs
     of operating are subject to  fluctuations.  Past  performance of wells does
     not  necessarily  guarantee  future  performance and rates used to estimate
     decline of reserves could vary from that which is projected.











                                      F-16
<PAGE>
PATCH INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2005
(Stated in U.S. Dollars)



15.  SCHEDULE OF SUPPLEMENTARY INFORMATION ON OIL AND GAS OPERATIONS (CONTINUED)

     All  quantities  shown in the table are  proved  reserves  and are  located
     within the United States and Canada.

        STANDARDIZED MEASURE OF DISCOUNTED FUTURE
        NET CASH FLOWS RELATING TO PROVED OIL
        AND GAS RESERVES (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                      May 31,           May 31,
                                                                                       2005              2004
                                                                                  ---------------   ---------------
                                                                                        GAS               GAS
                                                                                       (mcf)             (mcf)
<S>                                                                               <C>               <C>
        Proved, developed and undeveloped reserves (United States)

        Balance beginning of the year                                                    136,000           290,000
        Production                                                                             -          (154,000)
        Sales of minerals in place                                                      (136,000)                -
                                                                                  ---------------   ---------------
        Balance end of the year                                                                -           136,000
                                                                                  ===============   ===============

        Standardized Measure of Discounted Future Net Cash Flows (United States)

        Future cash flows                                                         $            -    $       19,000
        Future operating expenses                                                              -            (5,000)
                                                                                  ---------------   ---------------
                                                                                               -            14,000
        10% annual discount for estimated timing of cash flows                                 -            (1,000)
                                                                                  ---------------   ---------------
        Standardized measure of discounted future net cash flows                  $            -    $       13,000
                                                                                  ===============   ===============

                                                                                       OIL                OIL
                                                                                      (bbls)            (bbls)
        Proved, developed and undeveloped reserves (Canada)
        Balance beginning of the year                                                     12,000            10,000
        Discoveries                                                                            -             6,000
        Revision to estimates                                                              2,000                 -
        Production                                                                        (3,000)           (4,000)
                                                                                  ---------------   ---------------
        Balance end of the year                                                           11,000            12,000
                                                                                  ===============   ===============

        Standardized Measure of Discounted Future Net Cash Flows (Canada)
        Future cash flows                                                         $      523,000    $      323,000
        Future operating expenses                                                       (229,000)         (216,000)
                                                                                  ---------------   ---------------
                                                                                         294,000           107,000
        10% annual discount for estimated timing of cash flows                           (60,000)           (6,000)
                                                                                  ---------------   ---------------
        Standardized measure of discounted future net cash flows                  $      234,000    $      101,000
                                                                                  ===============   ===============
</TABLE>


                                      F-17
<PAGE>
PATCH INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2005
(Stated in U.S. Dollars)



15.  SCHEDULE OF SUPPLEMENTARY INFORMATION ON OIL AND GAS OPERATIONS (CONTINUED)

     RESERVE QUANTITY INFORMATION (UNAUDITED)

     Future  cash flows are  computed by  applying  fiscal  period end prices of
     natural gas and oil to period end  quantities of proved natural gas and oil
     reserves.  Future  operating  expenses and  development  costs are computed
     primarily  by  the  Company's   petroleum   engineers  by  estimating   the
     expenditures  to be incurred in  developing  and  producing  the  Company's
     proved  natural gas and oil  reserves  at the end of the  period,  based on
     period end costs and assuming continuation of existing economic conditions.

     Future income taxes are based on period end statutory  rates,  adjusted for
     tax basis and applicable tax credits.  A discount factor of ten percent was
     used to  reflect  the  timing of future net cash  flows.  The  standardized
     measure of  discounted  future net cash flows is not  intended to represent
     the  replacement  cost of fair value of the  Company's  natural gas and oil
     properties.  An estimate of fair value would also take into account,  among
     other things, the recovery of reserves not presently  classified as proved,
     anticipated  future changes in prices and costs, and a discount factor more
     representative of the time value of money and the risks inherent in reserve
     estimate of natural gas and oil producing operations.

16.  RESTATEMENT

     The Company's  investment in Pharmaxis Ltd. had previously been recorded at
     fair value. The shares are restricted from trading until November 10, 2005.
     The Company has restated the  financial  statements  for the year ended May
     31, 2004, to record the investment at cost.  The previously  reported total
     assets have been reduced by $1,574,999, additional paid-in capital has been
     reduced by $1,622,999 and comprehensive loss has been increased by $48,000.
     The adjustment to additional  paid-in  capital arises from the reduction in
     the value of the investment acquired in the reverse takeover referred to in
     Note 4, from $1,623,000 to $1.

                                                          May 31,
<TABLE>
<CAPTION>
                                                            2004                             May 31,
                                                       (As Originally                          2004
                                                         Reported)        Adjustment        (Restated)
                                                             $                 $                $
<S>                                                      <C>              <C>                  <C>

         Investment                                      1,575,000        (1,574,999)                1

         Additional paid-in capital                      2,062,733        (1,622,999)          439,734

         Accumulated other comprehensive income            (48,000)           48,000                -

</TABLE>

17.  RESTATED QUARTERLY INFORMATION (UNAUDITED)

     As a result of the  restatement  referred  to in Note 16, the  Company  has
     restated the unaudited  financial  statements  for all quarters  commencing
     November 30, 2003 to August 31, 2004.  For the quarter  ended  November 30,
     2003, the previously reported total assets has been reduced by $754,999 and
     comprehensive  income has been reduced by $754,999.  For the quarter  ended
     February 29, 2004, the previously reported total assets has been reduced by
     $1,582,999 and comprehensive income has been reduced by $1,582,999. For the
     quarter ended August 31, 2004,  the  previously  reported  total assets has
     been reduced by $2,432,999,  additional paid-in capital has been reduced by
     $1,622,999 and comprehensive  income has been reduced by $810,000.  For the
     quarter ended November 30, 2004, as the restriction is less than a one-year
     period, the investment is classified as  available-for-sale  securities and
     an adjustment to accumulated  comprehensive  income and additional  paid-in
     capital has been made in the amount of $1,622,999.

     The following is a summary of the unaudited restated balance sheets for the
     quarters  ended November 30, 2003,  February 29, 2004,  August 31, 2004 and
     November 30, 2004:




                                      F-18


<PAGE>
PATCH INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2005
(Stated in U.S. Dollars)


17.  RESTATED QUARTERLY INFORMATION (UNAUDITED) (CONTINUED)

<TABLE>
                            PATCH INTERNATIONAL INC.
                             RESTATED BALANCE SHEETS
<CAPTION>
                                                     November 30,    August 31,    February 29,   November 30,
                                                         2004           2004           2004           2003
                                                     (unaudited)     (unaudited)   (unaudited)     (unaudited)
----------------------------------------------------------------------------------------------------------------
<S>                                                  <C>             <C>            <C>             <C>
ASSETS

CURRENT
  Cash                                               $     12,491    $     1,774    $     1,034     $     1,136
  Accounts receivable                                      14,994         27,688              -               -
  Trading securities                                            -         11,351              -               -
  Prepaid expenses                                          2,805         72,952              -               -
----------------------------------------------------------------------------------------------------------------

                                                           30,290        113,765          1,034           1,136
PROPERTY AND EQUIPMENT                                      2,463              -              -               -
OIL AND GAS INTERESTS (SUCCESSFUL EFFORTS METHOD)         113,459        123,270              -               -
INVESTMENT                                                      -              1              1               1
AVAILABLE-FOR-SALE SECURITIES                           3,854,000              -              -               -
----------------------------------------------------------------------------------------------------------------

TOTAL ASSETS                                         $  4,000,212    $   237,036    $     1,035     $     1,137
================================================================================================================

LIABILITIES

CURRENT
  Accounts payable and accrued liabilities           $    169,843    $   167,359    $   115,216     $    99,921
  Due to related parties                                  298,649        296,450         61,135          45,293
----------------------------------------------------------------------------------------------------------------
                                                          468,492        463,809        176,351         145,214
----------------------------------------------------------------------------------------------------------------

STOCKHOLDERS' EQUITY (DEFICIT)

PREFERRED STOCK:
  Authorized: 1,000,000 preferred shares with par
  value of $0.001
  Issued and outstanding: nil                                   -              -              -               -

COMMON STOCK:
  Authorized: 100,000,000 common shares with par
  value of $0.001
  Issued and outstanding:
    November 30, 2004 - 45,088,641 shares
    August 31, 2004 - 42,385,071 shares
    February 29, 2004 - 19,991,747 shares
    November 30, 2003 - 19,991,747 shares                  45,089         42,385         19,990          19,990
ADDITIONAL PAID-IN CAPITAL                                933,746        635,425      1,582,534       1,582,534
STOCK SUBSCRIPTIONS RECEIVABLE                           (133,000)      (114,375)             -               -
ACCUMULATED OTHER COMPREHENSIVE INCOME                  3,853,999              -              -               -
DEFICIT                                                (1,168,114)      (790,208)    (1,777,840)     (1,746,601)
----------------------------------------------------------------------------------------------------------------

                                                        3,531,720       (226,773)      (175,316)       (144,077)
----------------------------------------------------------------------------------------------------------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
  (DEFICIT)                                          $  4,000,212    $   237,036    $     1,035     $     1,137
================================================================================================================
</TABLE>



                                      F-19