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, 2004

[ ]  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 incorporation        (I.R.S. Employer
             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 no  disclosure  of  delinquent  filers  in  response  to  Item  405 of
Regulation S-B is 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. [ ]

State issuer's revenues for its most recent fiscal year:  $121,613

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: $2,401,627 AS OF AUGUST 17, 2004

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:  42,385,071 SHARES OF COMMON STOCK AS
OF AUGUST 17, 2004

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,
2004 have been US$202,926 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.  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.

         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.

         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 were issued,  bringing
the issued and outstanding  shares of the Company to 38,224,372.  David


                                       2
<PAGE>


Stadnyk, an officer and director of the Company,  controlled  approximately two-
thirds  of the  Patch  shares,  and  now  controls  approximately  33.5%  of the
outstanding shares of the Company.

GREENLAB AGRONOMICS INC.

         On June 17, 2004,  Patch signed a letter of intent to acquire  Greenlab
Agronomics Inc., a privately-held corporation, headquartered in Canada. Greenlab
is a Canadian  registered company that owns and operates an international  group
of satellite agronomic,  bio product and environmental  companies. The operating
structure  is  by  international  subsidiary  company  holdings,  joint  venture
agreements,  and sovereign state relations.  Greenlab holds and manages land for
the  purposes of  producing  natural and bio  products for the creation of clean
water,  organic foods,  fruits,  table oils, and safe energy.  As of the date of
this report, Patch does not expect to complete an acquisition of Greenlab.

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.


                                       3
<PAGE>


         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 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, 2004, the Company had 2 full-time employees.

         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 has earned the 3.75% interest in four of the five test wells as
a result of which Patch holds a 0.75% interest in such wells. Under the terms of
the agreement with Fairchild, Patch is 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.  For the fiscal years
ended May 31, 2004 and 2003, Patch received  $16,792 and $19,594,  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


                                       4
<PAGE>

         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

         The assets cover approximately 40 acres, with the potential of up to 60
drillable  locations.  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  $68,772  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


                                       5

<PAGE>

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.

         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.

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.

         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 Company hopes to find out if
the well is commercially viable by year-end.

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.


                                       6
<PAGE>

         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.

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,  2004.
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.

<TABLE>
<CAPTION>
AREA                         GROSS OIL WELLS         NET OIL WELLS          GROSS GAS WELLS         NET GAS WELLS
<S>                                <C>                    <C>                      <C>                  <C>
California                          -                        -                     4                    0.027
Saskatchewan                       19                     2.97                     -                        -
Texas                               -                        -                     1                    0.050
                                   --                     ----                     -                    -----
TOTAL                              19                     2.97                     5                    0.077
                                   ==                     ====                     =                    =====
</TABLE>

OIL AND GAS ACREAGE

         The following table sets forth the undeveloped and developed  leasehold
acreage, by area, held by us as of May 31, 2004.  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
    California                -                 -        8,700             87.00
    Saskatchewan              -                 -          760              2.97
    Texas                     -                 -        1,265             63.25
                              -                 -       ------            ------
         Total                -                 -       10,725            153.22
                              =                 =       ======            ======

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.

PRESENT ACTIVITIES

         Patch is currently  waiting to see if the Manahuilla Creek project will
be commercially  viable. Patch expects to have results by the end of 2004. Patch
is continuing to look at project in North America,  Ukraine,  and middle eastern
countries. At present no project has been finalized.


                                       7
<PAGE>

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.


                                     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  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
2003 FISCAL YEAR

Quarter ending 08/31/02                 $0.14                        $0.03
Quarter ending 11/30/02                 $0.18                        $0.03
Quarter ending 02/28/03                 $0.18                        $0.05
Quarter ending 05/31/03                 $0.06                        $0.03

2004 FISCAL YEAR

Quarter ending 08/31/03                 $0.05                        $0.02
Quarter ending 11/30/03                 $0.11                        $0.02
Quarter ending 02/29/04                 $0.14                        $0.08
Quarter ending 05/31/04                 $0.23                        $0.08

         On October 12,  2004,  the  closing bid price for the common  stock was
$0.058.  The number of record holders of the common stock as of August 17, 2004,
was 370 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.

         On March 15, 2004, the Company issued 18,232,625 shares of common stock
to the  shareholders of Patch in exchange for their shares of Patch.  The shares
were exempt from registration pursuant to Section 3(a)(10) of the Securities Act
of 1933,  as the Supreme  Court of British  Columbia  approved  the  arrangement
between the Company and Patch. No underwriters were involved in the transaction.

                                       8
<PAGE>

         Also on March 15, 2004,  the Company  issued  639,059  shares of common
stock to Winston  Cabell as payment for  accrued  but unpaid  salary for January
2003 through  December 2003 in the amount of $30,000,  pursuant to the exemption
from registration contained in Section 4(2) of the Securities Act of 1933.


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

RESULTS OF OPERATIONS

         The Company  generated  $115,463 in oil and gas  revenues  for the 2004
fiscal year, an increase of $40,679 or 54.4% over fiscal 2003.  The increase was
due to increased production from its Saskatchewan  properties.  However, oil and
gas production,  royalties and other expenses also increased from $45,291in 2003
to  $108,378  in  2004,  making  Patch's  oil  and  gas  operations   marginally
profitable. The increase in costs was due primarily to dry well costs of $57,604
in 2004, as compared to $19,389 in 2003.

         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
2003,  the Company  generated  $35,027 of interest and  financing fee revenue in
2003.

         Expenses, other than oil and gas production expenses, were $548,107 for
fiscal  2004,  an increase of $404,538 or 281.8% over fiscal  2003.  The Company
incurred  stock-based  compensation  of  $203,400 in 2004 as compared to $nil in
2003 due to equity compensation paid to consultants in lieu of cash. The Company
incurred increased  professional fees ($69,909 in 2004 as compared to $14,405 in
fiscal  2003)  due to the  costs of the  acquisition  and  subsequent  change of
domicile  transactions.  Investor relations expenses increased from $nil in 2003
to $69,495 in 2004 in connection with the acquisition of Patch by the Company.

         As a result of the  significantly  increased  expenses in 2004, the net
loss for fiscal 2004 was  $534,872,  an increase of $455,823  (576.6%)  over the
loss for 2003 of $79,049.

LIQUIDITY AND CAPITAL RESOURCES

         For the fiscal year ended May 31, 2004,  the Company used  $142,609 for
its operations,  as compared to having  operations  provide $34,697 for the 2003
fiscal year.  This was primarily due to the loss  generated in fiscal


                                       9
<PAGE>

2004. The Company also used $108,306 for investing activities in 2004, primarily
for oil and gas  interests.  This  compared to using  $177,729  in fiscal  2003.
Financing  activities  consisting  of the sale of stock  provided  $251,975  and
$176,670 in fiscal 2004 and 2003, respectively.

         At May 31,  2004,  the  Company's  working  capital  was a  deficit  of
$288,736, as compared to a deficit of $36,651 at May 31, 2003.

         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, 2004,  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.

         Steele & Co.  resigned as the  independent  auditors for the Company as
of  April  9,  2003.  The  resignation  was  due  to  the  death  of  one of its
accountants, which left that firm short-staffed.

         On June 27,  2003,  the  Company's  board  of  directors  approved  the
election of Morgan & Company to audit the  financial  statements  for the fiscal
year  ended  May 31,  2003.  During  the two most  recent  fiscal  years and the
subsequent  interim  period,  neither  the  Company  nor  anyone  on its  behalf
consulted Morgan & Company regarding the application of accounting principles to
a specific completed or contemplated  transaction,  or the type of audit opinion
that might be rendered on the Company's financial statements.

         The audit  report of Steele & Co. on the  financial  statements  of the
Company  as of and for the  fiscal  years  ended  May 31,  2002 and 2001 did not
contain an adverse  opinion or  disclaimer of opinion and was not modified as to
uncertainty, audit scope, or accounting principles, except as follows:

         The audit  reports of Steele & Co. on the  financial  statements of the
Company as of and for the fiscal  years ended May 31, 2002 and 2001  contained a
separate paragraph stating: "The accompanying  consolidated financial statements
have been prepared  assuming that the Company will continue as a going  concern.
As discussed  in Note 2 to the  financial  statements,  the Company has suffered
losses from  operations  and there is no revenue  stream from  operations.  As a
result,  there is uncertainty  about its ability to continue as a going concern.
The financial  statements do not include any adjustments  that might result from
the outcome of this uncertainty."

                                       10
<PAGE>

         During the Company's  two most recent  fiscal years and the  subsequent
interim  period ending April 9, 2003,  there were no  disagreements  between the
Company and Steele & Co. on any matter of  accounting  principles  or practices,
financial  statement  disclosure,  or auditing scope or procedure  which, if not
resolved  to the  satisfaction  of Steele & Co.,  would have caused that firm to
make reference to the subject matter of the  disagreement in connection with its
audit  report.  The  Company  requested  Steele  & Co.  to  furnish  it a letter
addressed to the Commission stating whether it agreed with the above statements.
A copy of that  letter,  dated  July 7, 2003,  was filed as Exhibit  16.1 to the
Company's Form 8-K dated April 9, 2003.

         There were no other  "reportable  events" as that term is  described in
Item 304a(1)(v) of Regulation S-K occurring within the Company's two most recent
fiscal years and the subsequent interim period ending April 9, 2003.


ITEM 8A. CONTROLS AND PROCEDURES.

         On May 31, 2004,  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.

         The delinquency of this report is due to a lack of funds, as opposed to
inadequate controls and procedures.


ITEM 8B. OTHER INFORMATION.

         None.


                                    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                      42       President and Treasurer and director

Winston Cabell                     32       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.


                                       11
<PAGE>

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.

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:

--------------------------------------------------------------------------------
REPORTING PERSON           DATE REPORT DUE                DATE REPORT FILED
--------------------------------------------------------------------------------
David Stadnyk            Form 4 due 01/05/04                  01/14/04
--------------------------------------------------------------------------------
David Stadnyk            Form 4 due 03/17/04                  03/18/04
--------------------------------------------------------------------------------
David Stadnyk            Form 4 due 03/17/04                  05/13/04
--------------------------------------------------------------------------------
David Stadnyk            Form 4 due 03/30/04                  04/12/04
--------------------------------------------------------------------------------
David Stadnyk            Form 4 due 04/28/04                  05/13/04
--------------------------------------------------------------------------------
David Stadnyk            Form 4 due 05/05/04                  05/13/04
--------------------------------------------------------------------------------
Winston Cabell           Form 4 due 03/17/04                  03/18/04
--------------------------------------------------------------------------------
Winston Cabell           Form 4 due 03/26/04                  04/02/04
--------------------------------------------------------------------------------
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
--------------------------------------------------------------------------------


                                       12

<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>
<CAPTION>
                           SUMMARY COMPENSATION TABLE
-----------------------------------------------------------------------------------------------------------------------
                                     ANNUAL COMPENSATION                    LONG TERM 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        2004     108,000        -0-          -0-            -0-        450,000        -0-          -0-
       (1)<F1>       2003       -0-          -0-          -0-          $25,000      750,000        -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>
<CAPTION>
                      OPTION/SAR GRANTS IN LAST FISCAL YEAR
--------------------------------------------------------------------------------------------------------------------
                          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                    200,000                 12.9%                  $0.065               10/02/2006
                                 250,000                 35.7%                  $0.100               11/24/2006
--------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                 AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
---------------------------------------------------------------------------------------------------------------------
                                                                         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-                 800,000/-0-             $5,000/$-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


                                       13

<PAGE>


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 August 17, 2004.  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                              13,844,232 (2)<F2>                    31.9%
Vancouver, BC  V6C 2X8 Canada

Winston Cabell                                              1,396,849 (3)<F3>                      3.3%
666 Burrard Street, Suite 1220
Vancouver, BC V6C 2X8 Canada
Officers and directors as a group (2 persons)               15,241,081 (4)<F4>                    34.8%
____________
<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  August  17,  2004,  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 42,385,071 shares outstanding.

(2)<F2>  Includes 1,000,000 shares issuable upon the exercise of stock options.

(3)<F3>  Includes 380,000 shares issuable upon exercise of stock options.

(4)<F4>  Includes 1,380,000 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.

EQUITY COMPENSATION PLAN INFORMATION

         The following  table sets forth  information  as of the end of the most
recently completed fiscal year, May 31, 2004:

<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                    0                           --                        2,968,762
approved by security holders
--------------------------------------------------------------------------------------------------------------------
Equity compensation plans not            4,405,000                      $0.12                         -0-
approved by security holders
--------------------------------------------------------------------------------------------------------------------
Total                                    4,405,000                      $0.12                      2,968,762
--------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       14

<PAGE>

         On August 30, 1999,  the  Company's  shareholders  adopted a 1999 Stock
Option Plan under which a total of 1,698,330 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.

         Options have been granted under this plan as follows:

         Balance, May 31, 2002................................    1,332,220
         Granted..............................................            0
         Exercised............................................            0
         Cancelled/expired....................................   (1,332,220)
                                                               -------------
         Balance, May 31, 2003................................            0
         Granted..............................................            0
         Exercised............................................            0
         Cancelled/expired....................................            0
                                                               -------------
         Balance, May 31, 2004................................            0
                                                               =============

Options have been granted outside the plan as follows:

         Balance, May 31, 2002................................    1,250,000
         Granted..............................................    2,950,000
         Exercised............................................   (2,670,000)
         Cancelled/expired....................................            0
                                                               -------------
         Balance, May 31, 2003................................    1,530,000
         Granted..............................................    4,500,000
         Exercised............................................   (1,625,000)
         Cancelled/expired....................................            0
                                                               -------------
         Balance, May 31, 2004................................    4,405,000
                                                               =============


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, 2004 and 2003, $239,686 and $110,168, respectively, were owed to directly or
indirectly to Mr. Stadnyk.

         In addition,  the Company has shared  office  facilities  with entities
owned  or  controlled  by  David  Stadnyk.  The  Company  was  charged  for  its
proportional share of rent and administrative  services.  During the years ended
May 31, 2004 and 2003, $5,580 and $5,903,  respectively,  were paid for rent and
services.

         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


                                       15
<PAGE>


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.  Subsequent to
May 31,  2004,  300,000  common  shares of  Fairchild  were sold for proceeds of
$6,365.

         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  August  17,  2004,  David  Stadnyk  controlled
approximately 30.3% 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>
------------------------------------------------------------------------------------------------------------------


                                       16

<PAGE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
    REGULATION                                                                                        SEQUENTIAL
    S-B NUMBER                                         EXHIBIT                                       PAGE NUMBER
------------------------------------------------------------------------------------------------------------------
<S>                 <C>                                                                                  <C>
       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
------------------------------------------------------------------------------------------------------------------
       10.1         1999 Stock Option Plan (1)<F1>                                                       N/A
------------------------------------------------------------------------------------------------------------------
       10.2         Termination of License and Research & Development Agreement dated February           N/A
                    28, 2001 between Praxis Pharmaceuticals, Inc. and Fairchild International
                    Corporation (4)<F4>
------------------------------------------------------------------------------------------------------------------
       10.3         Amendment to Termination Agreement between Praxis Pharmaceuticals, Inc. and          N/A
                    Fairchild International Corporation (5)<F5>
------------------------------------------------------------------------------------------------------------------
       10.4         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>
------------------------------------------------------------------------------------------------------------------
       10.5         Management services agreement with David Stadnyk dated December 1, 2002 (6)<F6>      N/A
------------------------------------------------------------------------------------------------------------------
       10.6         Management services agreement with Winston Cabell dated December 1, 2002 (6)<F6>     N/A
------------------------------------------------------------------------------------------------------------------
       10.7         Assignment of Invention with Clearcoll Pty Limited dated February 11, 2003           N/A
                    (6)<F6>
------------------------------------------------------------------------------------------------------------------
       10.8         Letter agreement dated March 14, 2003 amending Termination Agreement with            N/A
                    Fairchild International Corporation (6)<F6>
------------------------------------------------------------------------------------------------------------------
       10.9         Management services agreement between Patch Energy Inc. and David Stadnyk
                    dated February 11, 2002
------------------------------------------------------------------------------------------------------------------
      10.10         Letter agreement dated February 18, 2004 regarding Termination Agreement
                    with Fairchild International Corporation
------------------------------------------------------------------------------------------------------------------
        21          Subsidiaries of the registrant
------------------------------------------------------------------------------------------------------------------
       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.

                                       17
<PAGE>

(4)<F4>  Incorporated  by  reference to the exhibits filed with the registrant's
         current report on Form 8-K dated February 28, 2001.
(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 exhibit filed with the registrant's
         annual report on Form 10-KSB for the fiscal year ended May 31, 2003.

</FN>
</TABLE>

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

AUDIT FEES

         For the  fiscal  years  ended  May 31,  2004 and  2003,  the  principal
accountants  for the Company billed $13,351 and $12,533,  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 2004 and 2003.

TAX FEES

         For the  fiscal  years  ended  May 31,  2004 and  2003,  the  principal
accountants for the Company did not render any services for tax compliance,  tax
advice, and tax planning work.

ALL OTHER FEES

         There were no other fees billed by the  principal  accountants  for the
Company other than those disclosed above for fiscal years 2004 and 2003.

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.






                                       18


<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:  October 15, 2004                   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     October 15, 2004
-------------------------------               Accounting Officer)
David Stadnyk


/s/ WINSTON CABELL                            Secretary and director                   October 15, 2004
-------------------------------
Winston Cabell
</TABLE>












                                       19

<PAGE>







                            PATCH INTERNATIONAL INC.

                     (formerly PRAXIS PHARMACEUTICALS INC.)


                        CONSOLIDATED FINANCIAL STATEMENTS


                                  MAY 31, 2004
                            (Stated in U.S. Dollars)






<PAGE>


                                          [MORGAN & COMPANY LETTERHEAD]

                          INDEPENDENT AUDITORS' REPORT



The Board of Directors and Stockholders of
Patch International Inc.
(Formerly Praxis Pharmaceuticals, Inc.)

We  have  audited  the  accompanying   consolidated   balance  sheets  of  Patch
International  Inc. (formerly Praxis  Pharmaceuticals,  Inc.) as of May 31, 2004
and 2003, and the related consolidated  statements of operations,  shareholders'
equity  (deficiency),  and cash flows for the years ended May 31, 2004 and 2003.
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.
(formerly  Praxis  Pharmaceuticals,  Inc.) as of May 31, 2004 and 2003,  and the
results of their  operations  and their  cash flows for the years  ended May 31,
2004 and 2003, 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 this uncertainty.




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

September 17, 2004                                         Chartered Accountants



<PAGE>



PATCH INTERNATIONAL INC.
May 31, 2004

                                                                        Index

Independent Auditors' Report                                             F-1

Consolidated Balance Sheets                                              F-2

Consolidated Statements of Operations                                    F-3

Consolidated Statements of Cash Flows                                    F-4

Consolidated Statement of Changes in Stockholders' Equity                F-5

Notes to the Consolidated Financial Statements                           F-6






<PAGE>



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


<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
                                                                                              May 31,             May 31,
                                                                                                 2004                2003
--------------------------------------------------------------------------------------------------------------------------
<S>                                                                                 <C>                <C>

ASSETS

Current Assets
     Cash                                                                           $         38,613   $           37,553
     Accounts receivable                                                                      35,327               38,427
     Trading securities (Note 4)                                                              28,334               48,900
     Prepaid expenses and other                                                               71,330                7,378
--------------------------------------------------------------------------------------------------------------------------

Total Current Assets                                                                         173,604              132,258
Oil and gas interests (successful efforts method)  (Note 6)                                  130,440              109,876
Available-for-sale securities (Note 5)                                                     1,575,000                    -
--------------------------------------------------------------------------------------------------------------------------

Total Assets                                                                        $      1,879,044   $          242,134
==========================================================================================================================

LIABILITIES & STOCKHOLDERS' EQUITY

 Current Liabilities
     Accounts payable and accrued liabilities                                       $        211,952   $           33,888
     Due to related parties (Note 7)                                                         250,388              135,021
--------------------------------------------------------------------------------------------------------------------------

Total Current Liabilities                                                                    462,340              168,909
--------------------------------------------------------------------------------------------------------------------------

 Going Concern (Note 1)

STOCKHOLDERS' EQUITY

 Preferred stock:
 10,000,000 preferred shares authorized with par value of $0.001 per share; none
 issued and outstanding                                                                            -                    -

 Common stock:
 50,000,000 common shares authorized with par value of $0.001 per share;
 40,288,431 shares issued and outstanding (May 31, 2003 - 17,337,000 shares)                  40,288              176,670

 Additional paid-in capital                                                                2,062,733                    -

Accumulated other comprehensive income (loss)  (Note 9)                                      (48,000)                   -

 Deficit                                                                                    (638,317)            (103,445)
--------------------------------------------------------------------------------------------------------------------------

Total Stockholders' Equity                                                                 1,416,704               73,225
--------------------------------------------------------------------------------------------------------------------------

Total Liabilities and Stockholders' Equity                                          $      1,879,044   $          242,134
==========================================================================================================================

</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,
                                                                                            2004           2003
--------------------------------------------------------------------------------------------------------------------
<S>                                                                                    <C>             <C>
Revenue
     Oil and gas                                                                       $   115,463     $    74,784
     Interest and financing fees                                                                 -          35,027
     Gain on sale of trading securities                                                      6,150               -
--------------------------------------------------------------------------------------------------------------------
                                                                                           121,613         109,811
--------------------------------------------------------------------------------------------------------------------

Expenses
     Consulting                                                                              4,500               -
     Depletion                                                                              57,889          14,597
     Investor relations                                                                     69,495               -
     General and administrative                                                             45,914           5,214
     Oil and gas production, royalties and other                                           108,378          45,291
     Professional fees                                                                      69,909          14,405
     Related party administration                                                           97,000          93,333
     Stock-based compensation                                                              203,400               -
     Loss on sale of trading securities                                                          -          16,020
--------------------------------------------------------------------------------------------------------------------

                                                                                           656,485         188,860
--------------------------------------------------------------------------------------------------------------------

Net Loss for the Year                                                                  $  (534,872)    $   (79,049)
====================================================================================================================


Net Loss Per Share
     Basic                                                                             $     (0.02)    $     (0.01)
     Diluted                                                                                 (0.02)          (0.01)

Weighted Average Number Of Common Shares Outstanding
     Basic                                                                              22,221,000       7,553,000
     Diluted                                                                            23,198,000       7,553,000

</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,
                                                                                                   2004             2003
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                                                         <C>               <C>

Cash Flows from Operating Activities
     Net loss for the year                                                                  $      (534,872)  $      (79,049)
     Add back non-cash items:
         Depletion                                                                                   57,889           14,597
         Loss (gain) on sale of trading securities                                                   (6,150)          16,020
         Financing fees                                                                                   -          (35,027)
         Write-off of oil and gas property                                                           57,604           19,389
         Stock based compensation                                                                   203,400                -

     Change in non-cash operating assets and liabilities:
         Decrease (increase) in accounts receivable                                                   3,100          (38,426)
         Increase in prepaid expenses and other                                                     (63,953)          (7,378)
         Increase in accounts payable and accrued liabilities                                        73,348           30,844
         Increase in due to related parties                                                          67,025          113,727
-----------------------------------------------------------------------------------------------------------------------------

Net cash provided by (used in) operating activities                                                (142,609)          34,697
-----------------------------------------------------------------------------------------------------------------------------

Cash Flows from Investing Activities
     Cash acquired in business combination                                                            1,034                -
     Oil and gas interests                                                                         (136,056)        (112,809)
     Acquisition of trading securities                                                               (3,772)         (70,000)
     Proceeds on sale of trading securities                                                          30,488            5,080
-----------------------------------------------------------------------------------------------------------------------------

Net cash provided by (used in) investing activities                                                (108,306)        (177,729)
-----------------------------------------------------------------------------------------------------------------------------


Cash Flows from Financing Activities
     Stock subscriptions received                                                                     1,700          176,670
     Common stock issued for cash                                                                   250,275                -
-----------------------------------------------------------------------------------------------------------------------------

Net cash provided by financing activities                                                           251,975          176,670
-----------------------------------------------------------------------------------------------------------------------------


Change in cash for the year                                                                           1,060           33,638

Cash, beginning of year                                                                              37,553            3,915
-----------------------------------------------------------------------------------------------------------------------------

Cash, end of year                                                                           $        38,613   $       37,553
=============================================================================================================================


SUPPLEMENTAL CASH FLOW INFORMATION
     Taxes paid                                                                                           -                -
     Interest paid                                                                                      495                -

</TABLE>




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

                                      F-4
<PAGE>

PATCH INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
(Stated in U.S. Dollars)




<TABLE>
<CAPTION>
                                                                     CAPITAL IN       ACCUMULATED
                                           COMMON STOCK               EXCESS OF          OTHER
                                   -----------------------------      PAR VALUE      COMPREHENSIVE
                                       SHARES         AMOUNT                              LOSS            DEFICIT          TOTAL
                                   -------------------------------------------------------------------------------------------------
<S>                                   <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.       20,630,806         20,631         229,389                  -               -         250,020

Fair value of shares issued in
  connection with the
  acquisition of Patch Energy
  Inc.                                 18,232,625         18,232       1,452,744                  -               -       1,470,976

Stock options exercised                 1,425,000          1,425         177,200                  -               -         178,625

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

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

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

Balance, May 31, 2004                  40,288,431   $     40,288  $    2,062,733    $       (48,000)    $  (638,317)   $  1,416,704
                                   =================================================================================================

</TABLE>




              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, 2004 and 2003
                            (Stated in U.S. Dollars)

1.   OPERATIONS AND GOING CONCERN

     a)    ORGANIZATION AND NATURE OF OPERATIONS

           Patch International,  Inc. 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., 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  shell  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. See Note 3.

           These consolidated financial statements include the accounts of Patch
           International,   Inc.  and  its  wholly-owned  subsidiaries:   Praxis
           Pharmaceuticals  International Pty. Ltd. (an Australian company), and
           Praxis  Pharmaceuticals,  Inc.,  (incorporated in the State of Utah),
           together "the Company".

     b)    GOING CONCERN

           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. The Company suffered losses from
           operations  of  $534,872  for the year  ended  May 31,  2004  (2003 -
           $79,049).   These  factors  raise  substantial  doubt  regarding  the
           Company's ability to continue as a going concern.  These consolidated
           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, prepaid expenses and other,
           accounts payable and accrued liabilities,  and amounts due to related
           parties, approximated fair value at May 31, 2004 and May 31, 2003.

     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.

     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-6

<PAGE>


PATCH INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2004
(Stated in U.S. Dollars)


2.   SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     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.

     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 anti-dilutive.

     h)    NEW ACCOUNTING PRONOUNCEMENTS
           In May 2003, the Financial  Accounting  Standards Board (FASB) issued
           Statement  of   Financial   Accounting   Standard   (SFAS)  No.  150,
           "Accounting for Certain Financial Instruments with Characteristics of
           both Liabilities and Equity".  SFAS No. 150 establishes standards for
           how an issuer classifies and measures certain  financial  instruments
           with characteristics of both liabilities and equity. It requires that
           an issuer classify a financial instrument that is within its scope as
           a liability (or an asset in some circumstances).  The requirements of
           SFAS No. 150 apply to  issuers'  classification  and  measurement  of
           freestanding  financial  instruments,  including  those that comprise
           more than one option or forward contract. SFAS No. 150 does not apply
           to features that are embedded in a financial instrument that is not a
           derivative in its  entirety.  SFAS No. 150 is effective for financial
           instruments  entered  into  or  modified  after  May  31,  2003,  and
           otherwise is effective at the beginning of the first  interim  period
           beginning  after June 15,  2003,  except for  mandatorily  redeemable
           financial instruments of non-public entities. It is to be implemented
           by  reporting  the  cumulative  effect of a change  in an  accounting
           principle for financial  instruments created before the issuance date
           of SFAS No. 150 and still  existing at the  beginning  of the interim
           period of adoption.  Restatement  is not  permitted.  The adoption of
           this standard did not have a material effect on the Company's results
           of operations or financial position.

3.   ACQUISITION OF SUBSIDIARY

     Effective March 15, 2004, Praxis Pharmaceuticals,  Inc. ("Praxis") acquired
     100% of the issued and outstanding shares of Patch Energy Inc. ("Patch") by
     issuing  18,232,625 shares of common stock in a one for one 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 Praxis prior to the acquisition
     was 20,630,806  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 Praxis shareholders  holding 53% of
     the total issued and  outstanding  common  shares,  and Patch  shareholders
     having a total of 47% of the total issued and outstanding  common shares of
     38,863,431  after  the  close  of  the  acquisition.   Even  though  Praxis
     shareholders  ended up with 53% of the total issued and outstanding  common
     shares after the  acquisition,  the former  shareholders  of Patch did have
     control as outlined in items (b), (c) and (d) of paragraph 17 of SFAS 141.

     - the existence of a large minority voting interest in the combined entity;
     - control of the board of the combined entity; and
     - domination of the senior management of the combined entity.


                                      F-7
<PAGE>


PATCH INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2004
(Stated in U.S. Dollars)

3.   ACQUISITION OF SUBSIDIARY (CONTINUED)

     Accordingly, the transaction, which is referred to as a "reverse takeover",
     has been treated for accounting  purposes as an acquisition by Patch of the
     net assets and  liabilities  of Praxis.  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 Praxis since the date of  acquisition on March 15,
     2004.  Praxis  had  net  assets  of  $1,470,975  at the  acquisition  date;
     therefore, the 18,232,625 shares of common stock issued on acquisition were
     issued at a fair value of $1,470,975.  Accordingly,  Praxis' net assets are
     included in the  consolidated  balance sheet at their  previously  recorded
     amounts.

     The acquisition is summarized as follows:

     Cash                                               $     1,034
     Available for sale securities                        1,623,000
     Accounts payable, and accrued liabilities             (115,216)
     Due to related parties                                 (37,843)
                                                    ----------------
     Net assets acquired                               $  1,470,975
                                                    ================

4.   TRADING SECURITIES
<TABLE>
<CAPTION>
                                                                                   May 31, 2004     May 31, 2003
                                                                                =================================
<S>                                                                             <C>               <C>
     Trading Securities, 944,450 common shares (market value $28,334)
     (2003 - 1,630,000 common shares (market value $48,900))                    $        28,334   $       48,900
                                                                                =================================
</TABLE>

     On April 4, 2002 the  Company  loaned  $70,000 to  Fairchild  International
     Corporation  ("Fairchild")  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 the Company
     a 20%  working  interest in  Fairchild's  oil and gas  interests  in Tehama
     County,  California.  The note also  provided that the Company 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,  the loan was
     converted into 1,750,000 common shares of Fairchild.

     During the year ended May 31, 2003,  the common  shares of  Fairchild  were
     reclassified  from "Available for sale securities" to "Trading  Securities"
     per SFAS No. 115  "ACCOUNTING  FOR CERTAIN  INVESTMENTS  IN DEBT AND EQUITY
     SECURITIES".  As a result of this  reclassification,  an unrealized holding
     loss of $16,020 was included in the Company's statement of operations.

     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.

     Subsequent to May 31, 2004,  300,000  common shares of Fairchild  were sold
     for proceeds of $6,365.

5.   AVAILABLE-FOR-SALE SECURITIES

     The Company owns  approximately a 10% equity interest in Pharmaxis Ltd., an
     Australian  company listed on the Australian  Stock Exchange.  These shares
     are  restricted  from trading  until  November  10,  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, 2004, the  discounted  market value is recorded at
     $1,575,000,  net of tax of  $280,000,  resulting in an  unrealized  loss of
     $48,000,  which is  recorded  as other  comprehensive  income,  a  separate
     component of shareholders' equity.

                                                   May 31,          May 31,
                                                      2004             2003
                                              ----------------------------------

     11,200,000 ordinary shares               $   1,575,000       $        -
                                              ==================================


                                      F-8

<PAGE>


PATCH INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2004
(Stated in U.S. Dollars)

6.   OIL AND GAS INTERESTS
<TABLE>
<CAPTION>
                                                                                     May 31,          May 31,
                                                                                        2004             2003
                                                                                ---------------- ----------------
<S>                                                                             <C>              <C>
     OIL AND GAS INTERESTS - SUCCESSFUL EFFORTS METHOD

     Balance beginning of the year                                              $     109,876    $            -
     Expenditures                                                                      78,453           143,862
     Depletion                                                                        (57,889)          (14,597)
     Dry well and abandoned interests                                                       -           (19,389)
                                                                                ---------------- ----------------

     Balance end of the year                                                    $     130,440    $      109,876
                                                                                ================ ================

     Represented by:

     California, U.S.A.
     Producing interests subject to depletion and amortization                  $      15,638    $       15,638
     Accumulated depletion                                                            (15,099)          (11,498)
                                                                                ---------------- ----------------

                                                                                          539             4,140
                                                                                ---------------- ----------------
     Texas, U.S.A.
     Non-producing interests                                                            2,816                 -
                                                                                ---------------- ----------------

     Saskatchewan, Canada
     Producing interests subject to depletion and amortization                        184,473           108,835
     Accumulated depletion                                                            (57,388)           (3,099)
                                                                                ---------------- ----------------

                                                                                      127,085           105,736
                                                                                ---------------- ----------------

                                                                                $     130,440    $      109,876
                                                                                ================ ================

     CAPITALIZED COSTS RELATING TO OIL AND
     GAS PRODUCING ACTIVITIES
                                                                                     May 31,             May 31,
                                                                                        2004                2003
                                                                                ---------------- -----------------

     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      184,472                  -
     Non-producing oil and gas properties - Texas, U.S.A.                              2,816                  -
     Non-producing oil and gas properties - Saskatchewan, Canada                           -            108,835
                                                                                ---------------- -----------------

     Sub-total                                                                       202,926            124,473
     Accumulated depletion                                                           (72,486)           (14,597)
                                                                                ---------------- -----------------

                                                                                $    130,440     $      109,876
                                                                                ================ =================

     COSTS INCURRED IN OIL AND GAS ACQUISITION,
     EXPLORATION AND DEVELOPMENT ACTIVITIES
                                                                                     May 31,             May 31,
                                                                                        2004                2003
                                                                                ---------------- -----------------

     Acquisition of properties
     Proved - California, U.S.A.                                                $          -     $       15,638
     Exploration costs - Texas, U.S.A.                                                 2,816                  -
     Development costs - Saskatchewan, Canada                                         75,637            108,835


</TABLE>
                                      F-9

<PAGE>

PATCH INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2004
(Stated in U.S. Dollars)


6.   OIL AND GAS PROPERTIES (CONTINUED)

     RESULTS OF OPERATIONS FROM PRODUCING ACTIVITIES -
     CALIFORNIA, U.S.A.
<TABLE>
<CAPTION>
                                                                                     May 31,           May 31,
                                                                                        2004              2003
                                                                                ----------------  ----------------
<S>                                                                             <C>               <C>
     Oil and gas sales                                                          $     16,792      $      19,594
     Production costs                                                                 (7,956)            (8,838)
     Depletion                                                                        (3,600)           (11,499)
     Dry well costs                                                                        -            (19,389)
                                                                                ----------------  ----------------

     Net income (loss) from producing activities                                $      5,236      $     (20,132)
                                                                                ================  ================

     RESULTS OF OPERATIONS FROM PRODUCING ACTIVITIES -
     SASKATCHEWAN, CANADA
                                                                                     May 31,           May 31,
                                                                                        2004              2003
                                                                                ----------------  ----------------

     Oil and gas sales                                                          $     98,671      $      55,190
     Production costs                                                                (42,817)           (17,064)
     Depletion                                                                       (54,289)            (3,098)
     Dry well costs                                                                  (57,604)                 -
                                                                                ----------------  ----------------

     Net income (loss) from producing activities                                $    (56,039)     $      35,028
                                                                                ================  ================
</TABLE>

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  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).

     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.

     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 $57,604 in costs related
     to this well has been charged to operations ($1,324 in the current period),
     as the well was shut-in.

b)   California, USA

     The  Company  has 0.75 of 1% of an  interest  in four test  wells in Tehama
     County,  California  as  consideration  for  providing a loan to  Fairchild
     International Corporation.

                                      F-10

<PAGE>


PATCH INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2004
(Stated in U.S. Dollars)


6.   OIL AND GAS PROPERTIES (CONTINUED)

     c)    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 Company entered into a sub-participation agreement dated November
           6, 2003,  with  respect to the PB Energy  Agreement,  with  Fairchild
           International Corporation ("Fairchild"),  where the Company agreed to
           grant to  Fairchild a 1.875%  interest in a Test Well and the Program
           Lands in consideration of incurring 1.875% of the costs.


7.   DUE TO RELATED PARTIES

     a)    The  Company  shares  office facilities and has common management and
           directorships  with a number of public and private  corporate related
           parties. The Company is charged for office rentals and administrative
           services on a proportional cost basis.  Management  believes that the
           methods  of cost  allocations  and  resultant  costs are  reasonable.
           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,
           2004, amounts owing of $250,388 (May 31, 2003 - $135,021) 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, 2004,  $85,000 in management  fees were charged to
           operations (2003 - $93,333).

     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. Under the remaining agreement,  $12,000 in related
           party  administration  fees was charge to operations  during the year
           ended May 31, 2004 (2003 - $NIL).





                                      F-11

<PAGE>


PATCH INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2004
(Stated in U.S. Dollars)

8.   COMMON STOCK

     Share  purchase  warrants are  outstanding  to purchase  895,625  shares of
     common stock at a price of $0.12 on or before January 6, 2006.


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


                                         May 31, 2004
                                  -----------------------------
                                                      Weighted
                                           Number      Average
                                               of     Exercise
                                          Options        Price
                                  -----------------------------

     Balance, beginning of period       1,530,000         0.10
     Issued                             4,500,000         0.12
     Cancelled/Forfeited                        -            -
     Exercised                         (1,625,000)        0.11
                                  -----------------------------


    Balance, end of period              4,405,000         0.12
                                  =============================

    As at May 31, 2004, 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>
     $    0.06 - 0.10      2,330,000               2.27             0.08            2,330,000               0.08
          0.11 - 0.15        700,000               0.42             0.14              700,000               0.14
          0.16 - 0.20      1,375,000               2.79             0.17            1,375,000               0.17
                       --------------------------------------------------    ------------------------------------

                           4,405,000               2.14            $0.12            4,405,000              $0.12
                       ==================================================    ====================================
</TABLE>

     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.

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

<TABLE>
<CAPTION>
                                                                                         May 31,          May 31,
                                                                                            2004             2003
<S>                                                                                 <C>                 <C>
     Net Loss - as reported                                                             (534,872)         (79,049)
        Add: Stock-based compensation expense included in net loss - as reported         203,400                -
        Deduct: Stock-based compensation expense determined under fair value method     (203,400)               -
                                                                                    -------------------------------
     Net Loss - Pro-Forma                                                               (534,872)         (79,049)
                                                                                    ===============================


     Basic and Diluted net loss per share - as reported                                $   (0.02)       $   (0.01)
                                                                                    -------------------------------

     Basic and Diluted net loss per share - Pro-Forma                                  $   (0.02)       $   (0.01)
                                                                                    ================================
</TABLE>

     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.


                                      F-12
<PAGE>


PATCH INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2004
(Stated in U.S. Dollars)

9.   ACCUMULATED OTHER COMPREHENSIVE LOSS

<TABLE>
<CAPTION>
                                                                      May 31,          May 31,
                                                                         2004             2003
<S>                                                              <C>                <C>
     Net Loss for the year                                       $   (534,872)      $  (79,049)

     Unrealized holding loss arising during the year                  (48,000)               -
                                                               ----------------------------------
     Comprehensive loss for the year                             $   (582,872)      $  (79,049)
                                                               ==================================
</TABLE>

10.  SUBSEQUENT EVENTS

     (a)   The  Company is  proposing the  distribution of a stock dividend on a
           pro  rata  basis  of a  total  of  5,600,000  of the  shares,  or the
           proceeds, of Pharmaxis Pharmaceuticals Pty Ltd., on or after November
           15, 2005,  being the date that the escrow  restrictions  attaching to
           such shares  expire.  For every 7.239  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.

     (b)   The  Company  signed  a  letter of  intent dated  June 30, 2004  with
           Greenlab Agronomics Inc. ("Greenlab"),  a private company, to acquire
           100% of the  issued  and  outstanding  shares of  Greenlab.  Greenlab
           produces the bio-fuels such as ethanol from its organic  agricultural
           produces.  Its  current  major  operational  activities  are  in  the
           Ukraine.

     (c)   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 government.

     (d)   The  Company received $95,250 upon the exercise  of  1,050,000  stock
           options at various prices ranging from $0.065 per share to $0.165 per
           share of common stock.

     (e)   The Company agreed to settle debt in the amount of $52,164 by issuing
           521,640 shares of common stock at a price of $0.10 per share.

11.  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.  The  Company  has a U.S.  tax loss of
     $307,521 to offset  future years  taxable  income  expiring  commencing  in
     fiscal 2024.

Income tax expense was as follows:

                                                   May 31,             May 31,
                                                     2004               2003
                                                      $                   $

     Current
        Canadian                                         -                   -
        United States                                    -                   -

     Deferred:
        Canadian                                         -                   -
        United States                                    -                   -
     ---------------------------------------------------------------------------
     Total income tax expense                            -                   -
     ===========================================================================


                                      F-13


<PAGE>


PATCH INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2004
(Stated in U.S. Dollars)


11.  INCOME TAX (CONTINUED)

     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              37.6%               34.0%
     Change in valuation allowance                 (37.6%)             (34.0%)
     ---------------------------------------------------------------------------
     Total income tax expense                          -                   -
     ===========================================================================


     The deferred tax liabilities and assets were as follows:

                                                 May 31,            May 31,
                                                   2004               2003
                                                    $                  $

     Deferred tax assets
      - Net operating loss carryforwards        (737,224)           (33,281)
      - Less valuation allowance                 737,224             33,281
     ---------------------------------------------------------------------------
     Net deferred tax assets                           -                  -
     ===========================================================================


     At May 31,  2004,  the Company had net  operating  losses for U.S.  federal
     income tax purposes of $1,879,000, which begin expiring in fiscal 2024, and
     had  non-capital  loss  carryforwards  for Canadian  income tax purposes of
     $261,000,  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,  2004,  a valuation  allowance  of
     $737,224 was provided to reduce deferred tax assets to nil.

12.  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:                             2004             2003
                                                  --------------  --------------

          United States                           $       3,355   $       4,140
          Canada                                        127,085         105,736
          Australia                                   1,575,000               -
                                                  -------------- ---------------
          Total long-lived assets                 $   1,705,440   $     109,876
                                                  ==============  ==============


                                                       May 31,          May 31,
          Revenues from external customers:              2004             2003
                                                  --------------  --------------

          United States                           $      16,792   $      19,594
          Canada                                         98,671          55,190
          Australia                                           -               -
                                                  --------------  --------------
          Total revenues from external customers  $     115,463   $      74,784
                                                  ==============  ==============


                                      F-14
<PAGE>


PATCH INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2004
(Stated in U.S. Dollars)

13.  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  operator  of the
     Company's oil and gas interests.  Such  estimates are inherently  imprecise
     and may be subject to substantial revisions.

     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.

     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,
                                                                                       2004              2003
                                                                                  ----------------  ----------------
                                                                                        GAS               GAS
<S>                                                                               <C>               <C>
     Proved, developed and undeveloped reserves (United States)

     Balance beginning of the year                                                       289,837                  -
     Discoveries                                                                               -          1,080,182
     Production                                                                         (153,582)          (790,345)
                                                                                  ----------------  ----------------
     Balance end of the year                                                             136,255            289,837
                                                                                  ================  ================

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

     Future cash flows                                                            $       18,770    $        62,571
     Future operating expenses                                                            (4,748)           (11,590)
                                                                                  ----------------  ----------------
                                                                                          14,022             50,981
     10% annual discount for estimated timing of cash flows                                 (701)            (2,459)
                                                                                  ----------------  ----------------
     Standardized measure of discounted future net cash flows                     $       13,321    $        48,522
                                                                                  ================  ================

     Proved, developed and undeveloped reserves (Canada)

     Balance beginning of the year                                                       100,891                  -
     Discoveries                                                                          84,000            120,000
     Production                                                                          (47,164)           (19,109)
                                                                                  ----------------  ----------------
     Balance end of the year                                                             137,727            100,891
                                                                                  ================  ================

     Standardized Measure of Discounted Future Net Cash Flows (Canada)

     Future cash flows                                                            $      323,105    $       428,711
     Future operating expenses                                                          (215,949)          (198,946)
                                                                                  ----------------  ----------------
                                                                                         107,156            229,765
     10% annual discount for estimated timing of cash flows                               (5,951)            (8,591)
                                                                                  ----------------  ----------------
     Standardized measure of discounted future net cash flows                     $      101,205    $       221,174
                                                                                  ================  ================
</TABLE>

                                      F-15

<PAGE>


PATCH INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2004
(Stated in U.S. Dollars)


13.  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.















                                      F-16