UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

**Form 10-QSB**

 

(Mark One)

| x | **QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|---|---------------------------------------------------------------------------------------|

For the quarterly period ended: November 30, 2005

 

| o | **TRANSITION REPORT UNDER SECTION 13 OF 15(d) OF THE EXCHANGE ACT** |
|---|---------------------------------------------------------------------|

For the transition period from _____________________ to __________________

 

Commission file number **0-28627**

 

**PATCH INTERNATIONAL INC.**

(Exact name of small business issuer as specified in its charter)

 

 

| **Nevada**

(State or other jurisdiction of incorporation

or organization)

  | **87-0393257**

(IRS Employer Identification No.)

  |
|-------------------------------------------------------------------------------------|-----------------------------------------------------------|

                                                

**1220 – 666 Burrard Street, Vancouver, British Columbia V6C 2X8 Canada**

(Address of principal executive offices)

 

**(604) 688-2790**

(Issuer’s telephone number)

 

**Not applicable**

|   | (Former name, former address and former fiscal year, if changed since last report) |
|--------|------------------------------------------------------------------------------------|

 

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 x   No o 

 

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

 

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

**5,436,559****shares of Common Stock, $.001 par value, as of**

**November 30, 2005**

 

Transitional Small Business Disclosure Format (check one);  Yes o No x

 

1

 

 

 

 

 

| **Patch International Inc.**                   |   |
|------------------------------------------------|--------|
| November 30, 2005                              |   |
|                                           |   |
|                                           | Index  |
|                                           |   |
| Consolidated Balance Sheets                    | 3      |
|                                           |   |
| Consolidated Statements of Operations          | 4      |
|                                           |   |
| Consolidated Statements of Cash Flows          | 5      |
|                                           |   |
| Notes to the Consolidated Financial Statements | 6      |
|                                           |   |

 

 

2

 

 

 

**PATCH INTERNATIONAL INC.**

**CONSOLIDATED BALANCE SHEETS**

(Stated in U.S. Dollars)

 

|                                                                                                                                                                   |   | **November 30,**

**2005**

**(unaudited)** |   | **May 31,**

**2005** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------|--------|-----------------------|
|                                                                                                                                                                   |   |                                        |   |                  |
| ASSETS                                                                                                                                                                 |   |                                        |   |                  |
|                                                                                                                                                                   |   |                                        |   |                  |
| Current Assets                                                                                                                                                         |   |                                        |   |                  |
| Cash and cash equivalents                                                                                                                                              | $      | 5,743,642                                   | $      | 128,872               |
| Accounts receivable                                                                                                                                                    |   | 25,445                                      |   | 21,754                |
| Prepaid expenses and other                                                                                                                                             |   | -                                           |   | 1,230                 |
|                                                                                                                                                                   |   |                                        |   |                  |
| Total Current Assets                                                                                                                                                   |   | 5,769,087                                   |   | 151,856               |
| Property and equipment, net                                                                                                                                            |   | 1,724                                       |   | 2,074                 |
| Oil and gas interests (successful efforts method) (Note 4)                                                                                                             |   | 207,764                                     |   | 198,284               |
| Available-for-sale securities (Note 3)                                                                                                                                 |   | 7,415,000                                   |   | 6,007,000             |
|                                                                                                                                                                   |   |                                        |   |                  |
| Total Assets                                                                                                                                                           | $      | 13,393,575                                  | $      | 6,359,214             |
|                                                                                                                                                                   |   |                                        |   |                  |
| LIABILITIES & STOCKHOLDERS’ EQUITY                                                                                                                            |   |                                        |   |                  |
|                                                                                                                                                                   |   |                                        |   |                  |
| Current Liabilities                                                                                                                                                    |   |                                        |   |                  |
| Accounts payable and accrued liabilities                                                                                                                               | $      | 276,509                                     | $      | 250,592               |
| Income taxes payable                                                                                                                                                   |   | 2,100,000                                   |   | -                     |
| Due to related parties (Note 5)                                                                                                                                        |   | 247,775                                     |   | 342,813               |
|                                                                                                                                                                   |   |                                        |   |                  |
| Total Current Liabilities                                                                                                                                              |   | 2,624,284                                   |   | 593,405               |
|                                                                                                                                                                   |   |                                        |   |                  |
| Commitments (Note 8)                                                                                                                                                   |   |                                        |   |                  |
|                                                                                                                                                                   |   |                                        |   |                  |
| STOCKHOLDERS’ EQUITY                                                                                                                                              |   |                                        |   |                  |
|                                                                                                                                                                   |   |                                        |   |                  |
| Preferred stock: 

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

10,000,000 common shares authorized with par value of $0.001 per share; 5,436,559 shares issued and outstanding (May 31, 2005 – 5,101,364 shares) |   | 5,437                                       |   | 5,101                 |
|                                                                                                                                                                   |   |                                        |   |                  |
| Additional paid-in capital                                                                                                                                             |   | 1,932,932                                   |   | 1,418,489             |
|                                                                                                                                                                   |   |                                        |   |                  |
| Stock subscriptions receivable                                                                                                                                         |   | (4,000)                                     |   | (4,000)               |
|                                                                                                                                                                   |   |                                        |   |                  |
| Accumulated other comprehensive income (Note 7)                                                                                                                        |   | 7,414,999                                   |   | 6,006,999             |
|                                                                                                                                                                   |   |                                        |   |                  |
| Retained Earnings (Deficit)                                                                                                                                            |   | 1,419,923                                   |   | (1,660,780)           |
|                                                                                                                                                                   |   |                                        |   |                  |
| Total Stockholders’ Equity                                                                                                                                        |   | 10,769,291                                  |   | 5,765,809             |
|                                                                                                                                                                   |   |                                        |   |                  |
| Total Liabilities and Stockholders’ Equity                                                                                                                        | $      | 13,393,575                                  | $      | 6,359,214             |
|                                                                                                                                                                        |        |                                             |        |                       |  |

 

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

 

3

 

 

 

**PATCH INTERNATIONAL INC.**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

(Stated in U.S. Dollars)

(unaudited)

 

 

|                                                | **For the Three Months Ended**

**November 30,**

**2005** | **For the Three Months Ended**

**November 30,**

**2004** | **For the Six Months Ended**

**November 30,**

**2005** | **For the Six Months Ended**

**November 30,**

**2004** |
|-----------------------------------------------------|------------------------------------------------------------|------------------------------------------------------------|----------------------------------------------------------|----------------------------------------------------------|
|                                                |                                                       |                                                       |                                                     |                                                     |
| Revenue                                             |                                                       |                                                       |                                                     |                                                     |
| Oil and gas                                         | $       33,597                                             | $        21,063                                            | $       84,082                                           | $        43,786                                          |
|                                                |                                                       |                                                       |                                                     |                                                     |
|                                                |                                                       |                                                       |                                                     |                                                     |
| Expenses                                            |                                                       |                                                       |                                                     |                                                     |
| Consulting                                          | 320,539                                                    | 208,983                                                    | 429,429                                                  | 231,108                                                  |
| Depletion, depreciation and impairment              | 7,429                                                      | 41,510                                                     | 34,625                                                   | 49,061                                                   |
| Investor relations                                  | 38,108                                                     | 46,103                                                     | 91,466                                                   | 77,103                                                   |
| General and administrative                          | 35,255                                                     | 28,620                                                     | 74,353                                                   | 55,420                                                   |
| Oil and gas production, royalties and other         | 27,568                                                     | 6,909                                                      | 37,418                                                   | 17,276                                                   |
| Professional fees                                   | 49,916                                                     | 29,935                                                     | 94,488                                                   | 40,184                                                   |
| Related party administration                        | 46,607                                                     | 33,250                                                     | 96,026                                                   | 66,500                                                   |
| Loss on write-off of proposed acquisition           | -                                                          | -                                                          | -                                                        | 21,000                                                   |
| Loss on sale of trading securities                  | -                                                          | 3,658                                                      | -                                                        | 15,930                                                   |
|                                                |                                                       |                                                       |                                                     |                                                     |
| Total Operating Expenses                            | 525,422                                                    | 398,968                                                    | 857,805                                                  | 573,582                                                  |
|                                                |                                                       |                                                       |                                                     |                                                     |
| Operating Loss                                      | (491,825)                                                  | (377,905)                                                  | (773,723)                                                | (529,796)                                                |
|                                                |                                                       |                                                       |                                                     |                                                     |
| Other Revenue                                       |                                                       |                                                       |                                                     |                                                     |
|                                                |                                                       |                                                       |                                                     |                                                     |
| Interest                                            | 1,425                                                      | -                                                          | 1,425                                                    | -                                                        |
| Gain on sale of available-for-sale securities       | 5,953,001                                                  | -                                                          | 5,953,001                                                | -                                                        |
|                                                |                                                       |                                                       |                                                     |                                                     |
| Total Other Revenue                                 | 5,954,426                                                  | -                                                          | 5,954,426                                                | -                                                        |
|                                                |                                                       |                                                       |                                                     |                                                     |
| Income (Loss) Before Income Taxes                   | 5,462,601                                                  | (377,905)                                                  | 5,180,703                                                | (529,796)                                                |
|                                                |                                                       |                                                       |                                                     |                                                     |
| Provisions For Income Taxes                         | (2,100,000)                                                | -                                                          | (2,100,000)                                              | -                                                        |
|                                                |                                                       |                                                       |                                                     |                                                     |
| Net Income (Loss)                                   | $  3,362,601                                               | $   (377,905)                                              | $  3,080,703                                             | $   (529,796)                                            |
|                                                |                                                       |                                                       |                                                     |                                                     |
|                                                |                                                       |                                                       |                                                     |                                                     |
| Net Income (Loss) Per Share                         |                                                       |                                                       |                                                     |                                                     |
| Basic                                               | $            0.62                                          | $          (0.09)                                          | $            0.58                                        | $           (0.13)                                       |
| Diluted                                             | $            0.61                                          | $          (0.09)                                          | $            0.57                                        | $           (0.13)                                       |
|                                                |                                                       |                                                       |                                                     |                                                     |
| Weighted Average Number Of Common Stock Outstanding |                                                       |                                                       |                                                     |                                                     |
| Basic                                               | 5,401,000                                                  | 4,288,000                                                  | 5,321,000                                                | 4,199,000                                                |
| Diluted                                             | 5,496,000                                                  | 4,288,000                                                  | 5,416,000                                                | 4,199,000                                                |

 

 

 

 

 

 

 

 

 

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

 

4

 

 

 

**PATCH INTERNATIONAL INC.**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

(Stated in U.S. Dollars)

(unaudited)

 

 

|                                                                          | **For the Six Months Ended**

**November 30,**

**2005** | **For the Six Months Ended**

**November 30,**

**2004** |
|-------------------------------------------------------------------------------|----------------------------------------------------------|----------------------------------------------------------|
|                                                                          |                                                     |                                                     |   |   |
|                                                                          |                                                     |                                                     |   |   |
|                                                                          |                                                     |                                                     |   |   |
| Operating Activities                                                          |                                                     |                                                     |   |   |
| Net income (loss) for the period                                              | $                                                        | 3,080,703                                                | $ | (529,796) |
| Adjustments to reconcile net loss to net cash used 

by operating activities: |                                                     |                                                     |   |   |
| Depletion, depreciation and impairment                                        |                                                     | 34,625                                                   |   | 49,061 |
| Stock based compensation                                                      |                                                     | 241,129                                                  |   | 144,399 |
| Loss on sale of trading securities                                            |                                                     | -                                                        |   | 15,930 |
| Write-off of proposed acquisition                                             |                                                     | -                                                        |   | 21,000 |
| Gain on sale of available-for-sale securities                                 |                                                     | (5,953,001)                                              |   | - |
| (Increase) decrease in accounts receivable                                    |                                                     | (3,691)                                                  |   | 20,333 |
| Decrease in prepaid expenses and other                                        |                                                     | 1,230                                                    |   | 36,956 |
| Increase in accounts payable and accrued liabilities                          |                                                     | 23,855                                                   |   | 100,045 |
| Increase in income taxes payable                                              |                                                     | 2,100,000                                                |   | - |
| (Decrease) increase in due to related parties                                 |                                                     | (95,038)                                                 |   | 48,260 |
|                                                                          |                                                     |                                                     |   |   |
| Net cash used in operating activities                                         |                                                     | (570,188)                                                |   | (93,812) |
|                                                                          |                                                     |                                                     |   |   |
| Investing Activities                                                          |                                                     |                                                     |   |   |
| Cash paid for proposed acquisition                                            |                                                     | -                                                        |   | (21,000) |
| Oil and gas interests                                                         |                                                     | (41,693)                                                 |   | (381) |
| Acquisition of equipment                                                      |                                                     | -                                                        |   | (2,592) |
| Acquisition of trading securities                                             |                                                     | -                                                        |   | (1,655) |
| Proceeds on sale of trading securities                                        |                                                     | -                                                        |   | 14,058 |
| Proceeds on sale of available-for-sale securities                             |                                                     | 5,953,001                                                |   | - |
|                                                                          |                                                     |                                                     |   |   |
| Net cash provided by (used in) investing activities                           |                                                     | 5,911,308                                                |   | (11,570) |
|                                                                          |                                                     |                                                     |   |   |
| Financing Activities                                                          |                                                     |                                                     |   |   |
| Common stock issued for cash                                                  |                                                     | 273,650                                                  |   | 79,260 |
|                                                                          |                                                     |                                                     |   |   |
| Net cash provided by financing activities                                     |                                                     | 273,650                                                  |   | 79,260 |
|                                                                          |                                                     |                                                     |   |   |
| Change in cash and cash equivalents for the period                            |                                                     | 5,614,770                                                |   | (26,122) |
|                                                                          |                                                     |                                                     |   |   |
| Cash and cash equivalents, beginning of period                                |                                                     | 128,872                                                  |   | 38,613 |
|                                                                          |                                                     |                                                     |   |   |
| Cash and cash equivalents, end of period                                      | $                                                        | 5,743,642                                                | $ | 12,491 |
|                                                                          |                                                     |                                                     |   |   |
|                                                                          |                                                     |                                                     |   |   |
| **NON-CASH FINANCING ITEMS**                                                  |                                                     |                                                     |   |   |
| Common stock issued for debt                                                  | $                                                        | -                                                        | $ | 52,164 |
| Stock options exercised for debt                                              |                                                     | -                                                        |   | 89,990 |
|                                                                          |                                                     |                                                     |   |   |
| **SUPPLEMENTAL CASH FLOW INFORMATION**                                        |                                                     |                                                     |   |   |
| Taxes paid                                                                    | $                                                        | -                                                        | $ | - |
| Interest paid                                                                 |                                                     | -                                                        |   | - |

 

 

 

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

 

5

 

**PATCH INTERNATIONAL INC.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

NOVEMBER 30, 2005

(Stated in U.S. Dollars)

(unaudited)

 

 

 

| **1.** | **BASIS OF PRESENTATION** |
|--------|---------------------------|

 

The unaudited consolidated financial information furnished herein reflects all adjustments, which in the opinion of management, are necessary to fairly state the Company’s consolidated financial position and the results of its consolidated operations for the periods presented.  This report on Form 10-QSB should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Company’s Form 10-KSB for the fiscal year ended May 31, 2005.  The Company assumes that the users of the interim financial information herein have read or have access to the audited financial statements for the preceding fiscal year and that the adequacy of additional disclosure needed for a fair presentation may be determined in that context.  Accordingly, footnote disclosure, which would substantially duplicate the disclosure contained in theCompany’s Form 10-KSB for the fiscal year ended May 31, 2005, has been omitted.  The results of operations for the six-month period ended November 30, 2005 are not necessarily indicative of results that may be expected for the fiscal year ending May 31, 2006.

 

| **2.** | **RECENT PRONOUNCEMENTS** |
|--------|---------------------------|

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

 

In December 2004, the FASB issued SFAS No. 153, “*Exchanges of Nonmonetary Assets - An Amendment of APB Opinion No. 29*”.  The guidance in APB Opinion No. 29, “*Accounting for Nonmonetary Transactions*”, is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged.  The guidance in that Opinion, however, included certain exceptions to that principle.  SFAS No. 153 amends Opinion No. 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance.  A nonmonetary exchange has commercial substance if the future cashflows of the entity are expected to change significantly as a result of the exchange.  The provisions of SFAS No. 153 are effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005.  The adoption of this standard did not have a material effect on the Company’s results of operations or financial position.

 

In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 123R, “*Share Based Payment*”.  SFAS 123R is a revision of SFAS No. 123 “*Accounting for Stock-Based Compensation*”, and supersedes APB Opinion No. 25, “*Accounting for Stock Issued to Employees*” and its related implementation guidance.  SFAS 123R establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services.  It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fairvalue of the entity’s equity instruments or that may be settled by the issuance of those equity instruments.  SFAS 123R focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions.  SFAS 123R requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions).  That cost will be recognized over the period during which an employee is required to provide service in exchange for the award – the requisite service period (usually the vesting period).  SFAS 123R requires that the compensation cost relating to share-based payment transactions be recognized in financial statements.  That cost will be measured based on the fair 

 

6

 

**PATCH INTERNATIONAL INC.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

NOVEMBER 30, 2005

(Stated in U.S. Dollars)

(unaudited)

 

 

value of the equity or liability instruments issued.  Public entities that file as small business issuers will be required to apply SFAS 123R in the first interim or annual reporting period that begins after December 15, 2005.  The adoption of this standard is not expected to have a material effect on the Company’s results of operations or financial position.

 

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

 

| **3.** | **AVAILABLE-FOR-SALE SECURITIES** |
|--------|-----------------------------------|

 

At November 30, 2005, the Company owned 7,491,937 (May 31, 2005 – 11,200,000) ordinary shares of Pharmaxis Ltd. (“Pharmaxis”), an Australian company listed on the Australian Stock Exchange, which is an equity interest of approximately 4.3%.  The Company records the ordinary shares of Pharmaxis at fair value, but has recognized a discount of 7.5% from quoted market value of securities held for resale due to the lack of marketability of the Company’s holdings due to 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 November 30, 2005, the discounted market value is recorded at $7,415,000, net of tax of $3,178,000, resulting in an unrealized gain of $7,414,999, which is recorded as other comprehensive income, a separate component ofstockholders’ equity. 

 

During the period ended November 30, 2005, the Company sold 3,708,063 Pharmaxis shares for gross proceeds of $5,953,001, and realized a gain of $5,953,001, before applicable taxes.  The Company has entered into an agreement, which restricts the Company from trading or disposing of its interest in 7,280,000 of its Pharmaxis shares until 90 days from November 9, 2005.  This restriction may be extended by up to a further 34 days if certain Pharmaxis reporting conditions exist. 

 

|                      |   | November 30,  |
|---------------------------|--------|---------------|
|                      |   | 2005          |
|                      |   |          |
|                      |   |          |
| 7,491,937 ordinary shares |   | $   7,415,000 |
|                      |   |          |

 

 

|                       |   | May 31,       |
|----------------------------|--------|---------------|
|                       |   | 2005          |
|                       |   |          |
|                       |   |          |
| 11,200,000 ordinary shares |   | $   6,007,000 |
|                       |   |          |

 

 

 

7

 

**PATCH INTERNATIONAL INC.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

NOVEMBER 30, 2005

(Stated in U.S. Dollars)

(unaudited)

 

 

|   | **4.** | **OIL AND GAS INTERESTS** |
|--------|--------|---------------------------|

 

|                                                | November 30, 2005   | May 31,

2005 |
|-----------------------------------------------------|---------------------|---------------|
|                                                |                |          |
| Proved oil and gas properties and related equipment |                |          |
| - California, USA                                   | $                 - | $     15,638  |
| - Saskatchewan, Canada                              | 212,113             | 212,113       |
|                                                |                |          |
|                                                | 212,113             | 227,751       |
| Non-producing oil and gas properties                |                |          |
| - Alberta, Canada                                   |                |          |
| - Bear Canyon project                               | 22,832              | -             |
| - McLeod project                                    | 89,079              | 68,155        |
| - Texas, USA                                        | 34,385              | 34,385        |
|                                                | 358,409             | 330,291       |
| Accumulated depletion and impairment                | (150,645)           | (132,007)     |
|                                                |                |          |
| Balance, end of period                              | $    207,764        | $ 198,284     |

 

|   | 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 participated 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.  

 

The Company entered into a participation agreement with Micron Enviro Systems Inc. (“Micron”) dated March 27, 2003 where Micron earned 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 earned a 3.5% working interest by incurring 5% of the associated costs and by paying the Company CAD$15,000 (received).

 

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

 

|   | b) | Alberta, Canada |
|--------|----|-----------------|

 

|   | 1) | By a Participation Agreement dated March 10, 2005, the Company acquired a 25% working interest in the Bear Canyon gas project. During the period ended November 30, 2005, the well was drilled and shut-in and the Company recognized an impairment charge of $22,832. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|   | 2) | On May 30, 2005, the Company acquired a 10% working interest in a test well (the “McLeod” project) located in Alberta by incurring 10% of the costs. As at November 30, 2005, the Company incurred $89,079 towards the drilling costs. The well was drilled in June 2005 and was completed in the three months ended November 30, 2005. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|   | 3) | The Company entered into Agreements dated November 8, 2005, to acquire a 50% working interest in three projects located in the Lloydminster, Elnora and Atlee-Buffalo areas of Alberta. Under the terms of the Agreements, the three test wells are to be spudded no later than December 31, 2005. The Company will then earn a 50% interest in the test wells and a 30% interest in the balance of the farmout lands. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

8

 

**PATCH INTERNATIONAL INC.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

NOVEMBER 30, 2005

(Stated in U.S. Dollars)

(unaudited)

 

 

|   | 4. | **OIL AND GAS INTERESTS (Continued)** |
|--------|----|---------------------------------------|

 

|   | c) | California, USA |
|--------|----|-----------------|

 

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

 

|   | d) | Texas, USA |
|--------|----|------------|

 

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

 

|   | e) | Ukraine |
|--------|----|---------|

 

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

 

|   | f) | Bolivia |
|--------|----|---------|

 

The Company entered into an agreement dated November 1, 2005, to acquire a 30% working interest in the Warnes Field project, Santa Cruz, Bolivia, in consideration for a maximum purchase price of $1,000,000.  The Company has 90 days to perform due diligence. 

 

| **5.** | **DUE TO RELATED PARTIES** |
|--------|----------------------------|

 

|   | a) | Related parties include directors and officers and companies with common management and directorships.  Related party accounts are unsecured with no fixed terms of interest or repayment.  At November 30, 2005, amounts owing of $247,775 (May 31, 2005 - $342,813) were due to related parties. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|   | b) | On May 1, 2005, the Company entered into a management agreement with the President of the Company for a term of 5 years with payments of $175,000 per annum.  During the six months ending November 30, 2005, the Company paid $87,500 (2004 - $24,000) in related party administration fees. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|   | c) | During the six months ending November 30, 2005, the Company paid to an Officer of the Company $8,526 (2004 - $nil) in related party administration fees. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------|

 

| **6.** | **COMMON STOCK** |
|--------|------------------|

 

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

 

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

 

 

9

 

**PATCH INTERNATIONAL INC.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

NOVEMBER 30, 2005

(Stated in U.S. Dollars)

(unaudited)

 

 

|   | 6. | **COMMON STOCK (Continued)** |
|--------|----|------------------------------|

 

The Company is proposing the distribution of a cash dividend on a pro-rata basis of 50% of the net proceeds of the sale of its investment in Pharmaxis Ltd. Net proceeds includes the costs related to the sale of the shares and related taxes.  The directors have fixed July 30, 2004 as the record date.  Each shareholder of record will receive the equivalent net proceeds of the sale of one Pharmaxis share for each 7.497 of pre-reverse stock split Patch International Inc. shares owned.  The distribution will take place after the Company has completed the final sale of its Pharmaxis investment and is subject to the Company receiving all required regulatory approvals.

 

Effective September 22, 2005, the Company filed a form S-8 Registration Statement in connection with a 2005 Stock Option Plan allowing for the granting of options to acquire shares up to a total of 900,000 shares.

 

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

 

|                         | November 30, 

2005 |               |
|------------------------------|---------------------|--------------------|
|                         | Number              | Weighted 

Average |   |
|                         | of                  | Exercise           |   |
|                         | Options             | Price              |   |
|                         |                |               |   |
| Balance, beginning of period | 548,000             | $0.70              |   |
| Granted                      | 515,000             | $1.32              |   |
| Cancelled                    | -                   | -                  |   |
| Exercised                    | (275,000)           | $0.71              |   |
|                         |                |               |   |
| Balance, end of period       | 788,000             | $1.12              |   |

 

As at November 30, 2005, the following options are outstanding:

 

|     | 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 |
|     |        |         |        |   |   |   |   |   |   |  
$

0.65 – 1.40

788,000

2.82

 

$  1.12

 

788,000

 

$  1.12

 
 

 

 

 

 

 

 

 

 

 

 
 

 

788,000

2.82

 

$  1.12

 

788,000

 

$  1.12

 
 

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 servicesare provided and the compensation earned. During the six months ended November 30, 2005, stock-based compensation for consultants amounting to $241,129 was recorded on 100,000 stock options priced at $1.00 per share and 225,000 stock options priced at $1.40 per share and is included in consulting expenses. 

 

10

 

**PATCH INTERNATIONAL INC.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

NOVEMBER 30, 2005

(Stated in U.S. Dollars)

(unaudited)

 

 

**6.**

**COMMON STOCK (Continued)**

 

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

 

 

Three Months Ended

Six Months Ended

 

November 30,

November 30,

 

2005

2004

2005

2004

 

 

 

 

 

Net income (loss) - as reported

$  3,362,601

$ (377,905)

$  3,080,703

$  (529,796)

Add: Stock-based compensation expense included in net loss - as reported

177,152

144,399

241,129

144,399

Deduct: Stock-based compensation expense determined under fair value method

(398,962)

(178,294)

(462,939)

(178,294)

 

 

 

 

 

Net income (loss) - Pro-Forma 

$  3,140,791

$  (411,800)

$  2,858,893

$  (563,691)

 

Basic net income (loss) per share – 

as reported

 

$          0.62

 

$        (0.09)

 

$          0.58

 

$    (0.13)

Diluted net income (loss) per share – 

as reported

 

$          0.61

 

$        (0.09)

 

$          0.57

 

$    (0.13)

 

 

 

 

 

Basic net income (loss) per share – 

Pro-Forma 

 

$          0.58

 

$        (0.04)

 

$          0.54

 

$    (0.13)

Diluted net income (loss) per share – 

Pro-Forma 

 

$          0.57

 

$        (0.04)

 

$          0.53

 

$    (0.13)

 

The fair value of each option granted during the six months November 30, 2005 was estimated using the Black-Scholes option pricing model assuming a dividend yield of 0.0%, expected volatility of 164%, risk free interest rate of 3.66%, and weighted average expected option terms of 1.83 years. 

 

**7.**

**COMPREHENSIVE INCOME (LOSS)**

 

Components of comprehensive income (loss) are as follows:

 

 

Three Months Ended

Six Months Ended

 

November 30,

November 30,

 

2005

2004

2005

2004

 

 

 

 

 

Net income (loss) for the period

$   3,362,601

$  (377,905)

$  3,080,703

$  (529,796)

 

 

 

 

 

Other comprehensive income (loss)

arising during the period 

Securities held-for-resale:

Reclassification adjustment – realized 

gain (loss)

Holding gain (loss)

(4,035,498)

(738,502)

-

1,421,000

(1,988,780)3,396,780

-

2,279,000

Net gain (loss) on securities held-for-

resale recognized in other comprehensive 

income

(4,774,000)

1,421,000

1,408,000

2,279,000

 

 

 

 

 

Comprehensive income (loss) for the period

 

$ (1,411,399)

 

$  1,043,095

 

$  4,488,703 

 

$ 1,749,204 

 

 

11

 

**PATCH INTERNATIONAL INC.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

NOVEMBER 30, 2005

(Stated in U.S. Dollars)

(unaudited)

 

 

 

**8.**

**COMMITMENTS**

 

 

a)

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

 

 

b)

On October 31, 2005, the Company entered into a consulting agreement effective October 15, 2005 for a term of six months with payments of $5,000 per month and 30,000 restricted shares of common stock (issued subsequent to November 30, 2005).

 

**9.**

**SUBSEQUENT EVENTS**

 

 

a)

On December 2, 2005, the Company granted options to acquire 50,000 shares of common stock exercisable at a price of $1.10 per share for a term of five years, and 30,000 shares of common stock exercisable at a price of $1.10 per share for a term of one year.

 

 

b)

On December 16, 2005, the Company entered into a consulting agreement with a director of the Company with payments of $20,534 (CDN$24,000) per annum, commencing December 1, 2005.

 

 

c)

In December 2005, the Company purchased 72,500 shares of its common stock in the open market at an average price of $1.22 per share.

 

12

 

 

 

**Item 2.  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 Energy Inc. (“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 exchangedfor one common share of the Company.  A total of 18,232,625 shares (1,823,262 post-reverse split shares) were issued, bringing the issued and outstanding shares of the Company to 38,224,372 at that time.  

 

The acquisition has been treated for accounting purposes as an acquisition by Patch of the net assets and liabilities of the Company.  Because Patch is deemed to be the purchaser for accounting purposes, the consolidated financial statements are presented as a continuation of Patch and include the results of operations of Patch since incorporation on February 11, 2002, and the results of operations of the Company since the date of acquisition on March 15, 2004.  

 

**Accounting Policies**

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

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

 

**Results of Operations**

 

***Three Months Ended November 30, 2005.***The Company generated $33,597 in oil and gas revenues for the three months ended November 30, 2005, an increase of $12,534 or 59.5% from the comparable 2004 period. The increase was due to an increase in the market price of oil, as opposed to an increase in production.  Oil and gas production, royalties and other expenses increased from $6,909 in 2004 to $27,568 in 2005, making Patch’s oil and gas operations less profitable for the 2005 quarter than in 2004.  

 

 

13

 

 

 

Expenses, other than oil and gas production expenses, were $497,854 for the quarter ended November 30, 2005, as compared to non-oil and gas production expenses of $392,059 for the comparable 2004 period, an increase of $105,795 or 27.0%.  The increase in expenses is due primarily to significantly higher consulting, professional fees, general and administrative, and related party administration expenses in 2005, offset in part by a reduction in depletion, depreciation and impairment expense in 2005.  Of the $320,539 of consulting expenses, $177,152 was recorded for stock-based compensation, consisting of stock options.  The increase reflects the greater level of activity on the part of the Company with regard to its oil and gas operations, as well as operations relating to the disposition of its position in Pharmaxis.  During the quarter ended November 30, 2005, the Company engaged the servicesof a consultant to assist with the disposition of the Pharmaxis shares, as well as other matters.  The consulting agreement requires payment of $5,000 per month and the issuance of 30,000 restricted shares of common stock (issued subsequent to November 30, 2005).

 

As a result of the significantly increased expenses for the quarter ended November 30, 2005, the operating loss was $491,825, an increase of $113,920 (30.1%) over the loss for 2004 of $377,905.

 

During the quarter ended November 30, 2005, the Company realized a gain of $5,953,001 from the sale of 3,708,063 Pharmaxis shares, before applicable taxes.  Provision has been made for taxes of $2,100,000, resulting in net income for the quarter of $3,362,601.  In comparison, the net loss for the quarter ended November 30, 2004 was $377,905. 

 

***Six Months Ended November 30, 2005.***  The Company generated $84,082 in oil and gas revenues for the six months ended November 30, 2005, an increase of $40,296 or 92.0% from the comparable 2004 period.  The increase was due to an increase in the market price of oil, as opposed to an increase in production.  Oil and gas production, royalties and other expenses increased from $17,276 in 2004 to $37,418 in 2005, making Patch’s oil and gas operations more profitable in 2005 than in 2004.  

 

Expenses, other than oil and gas production expenses, were $820,387 for the six months ended November 30, 2005, as compared to non-oil and gas production expenses of $556,306 for the comparable 2004 period, an increase of $264,081 or 47.5%.  The increase in expenses is due primarily to significantly higher consulting, investor relations, professional fees, general and administrative, and related party administration expenses in 2005, offset in part by a reduction in depletion, depreciation and impairment in 2005 and no losses in 2005 associated with the write off of a proposed acquisition and sale of trading securities which were incurred in 2004.  Of the $429,429 of consulting expenses, $241,129 was recorded for stock-based compensation, consisting of stock options.  The increase reflects the greater level of activity on the part of the Company with regard to its oil and gas operations, aswell as operations relating to the disposition of its position in Pharmaxis.  

 

As a result of the significantly increased expenses for the six months ended November 30, 2005, the operating loss was $773,723, an increase of $243,927 (46.0%) over the loss for 2004 of $529,796.

 

During the six months ended November 30, 2005, the Company realized a gain of $5,953,001 from the sale of 3,708,063 Pharmaxis shares, before applicable taxes.  Provision has been made for taxes of $2,100,000, resulting in net income for the six-month period of $3,080,703.  In comparison, the net loss for the six months ended November 30, 2004 was $529,796. 

 

**Liquidity and Capital Resources**

 

For the six months ended November 30, 2005, the Company used $570,188 for its operations, as compared to $93,812 for the 2004 period.  This was primarily due to the operating loss generated in fiscal 2005.  The Company’s sale of Pharmaxis shares provided cash of $5,953,001, while $41,693 was used for oil and gas interests, resulting in net cash of $5,911,308 provided by investing activities in 2005.  This compared to using $11,570 in fiscal 2004.  Financing activities consisting of the sale of stock provided $273,650 and $79,260 in fiscal 2005 and 2004, respectively.

 

At November 30, 2005, the Company’s working capital was $3,144,803, as compared to a deficit of $441,549 at May 31, 2005.  

 

14

 

 

 

At November 30, 2005, the Company has recognized a 7.5% discount from the quoted market value of its 7,491,937 shares of Pharmaxis Ltd., due to the following factors:

 

 

**•**

Lack of marketability of the Company’s holdings due to 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 November 30, 2005, the discounted market value is recorded at $7,415,000, net of tax of $3,178,000, resulting in an unrealized gain of $7,414,999, which is recorded as accumulated other comprehensive income, a separate component of stockholders’ equity.  At May 31, 2005, the discounted market value was recorded at $6,007,000.

 

The Company believes it has sufficient working capital on hand, together with proceeds from its proposed sales of its Pharmaxis shares, to fund its planned expected oil and gas operations and expenses for the next 12 months.

 

**Plan of Operation**

 

The Company is planning to use a portion of the proceeds from the sale of its Pharmaxis shares to fund the acquisition and exploration of oil and gas properties and to repurchase some of it shares.  

 

The Company entered into an agreement as of November 1, 2005 to acquire a 30% working interest in the Warnes Field project, Santa Cruz, Bolivia, subject to the completion of satisfactory due diligence.  The purchase price is to be agreed upon at the conclusion of the Company’s due diligence and is not to exceed $1,000,000.  The Company has 90 days to perform the due diligence.

 

The Company also entered into agreements in November 8, 2005 to acquire a 50% working interest in three projects located in the Lloydminster, Elnora and Atlee-Buffalo areas of Alberta, Canada.  Under the terms of the agreements, the three test wells are to be spudded no later than December 31, 2005.  The Company will then earn a 50% interest in the test wells and a 30% interest in the balance of the farmout lands. Drilling on all three prospects has been delayed due to the need to complete licensing activities and the availability of a rig.

 

In December 2005, the Company purchased 72,500 shares of its common stock in the open market at an average price of $1.22 per share.  The Company had announced its intention to repurchase its shares in November 2005.

 

**Forward-Looking Statements**

Certain statements in this Quarterly Report on Form 10-QSB and the Company’s Annual Report on Form 10-KSB for its fiscal year ended May 31, 2005, as well as statements made by the Company in periodic press releases and oral statements made by the Company’s officials to analysts and shareholders in the course of presentations about the Company, constitute “forward-looking statements.”  Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward looking statements.  Such factors include, among other things, (1) general economic and business conditions; (2) interest rate changes; (3) the relative stability of the debt and equity markets; (4) requiredaccounting changes; and (5) other factors over which the Company has little or no control. 

 

**Item 3.**

**Controls And Procedures**

 

On November 30, 2005, David Stadnyk, our principal executive officer and principal financial officer, made an evaluation of our disclosure controls and procedures.  In his opinion, the disclosure controls and procedures are effective.  There have been no changes in our internal controls that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

15

 

 

 

**PART II - OTHER INFORMATION**

 

**Item 1.**

**Legal Proceedings**

 

Not Applicable.

 

**Item 2.**

**Unregistered Sales of Equity Securities and Use of Proceeds**

 

During the quarter ended November 30, 2005, 60,000 shares of common stock were issued as compensation for services of an investor relations company.  The shares were valued at $77,400.

 

**Item 3.**

**Defaults Upon Senior Securities**

 

Not Applicable.

 

**Item 4.**

**Submission of Matters to a Vote of Security Holders**

 

Not Applicable.

 

**Item 5.**

**Other Information**

 

Not Applicable.

 

**Item 6.**

**Exhibits**

 

**Regulation**

**S-B Number**

 

**Exhibit**

2.1

Stock Exchange Agreement with Micronetics, Inc. (1)

2.2

Arrangement Agreement made among Praxis Pharmaceuticals Inc. and Patch Energy Inc. dated as of October 20, 2003 (2)

2.3

Articles of Merger Merging Praxis Pharmaceuticals Inc., a Utah Corporation, into Patch International Inc., a Nevada Corporation (3)

3.1

Articles of Incorporation, as amended (4)

3.2

Bylaws (4)

3.3

Certificate of Change Pursuant to NRS 78.209 (5)

10.1

1999 Stock Option Plan (1)

10.2

Shareholders Agreement dated August 23, 2002 among Praxis Pharmaceuticals 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 (6)

10.3

Management services agreement between Patch Energy Inc. and David Stadnyk dated February 11, 2002 (7)

10.4

Letter agreement dated February 18, 2004 regarding Termination Agreement with Fairchild International Corporation (7)

 

 

16

 

 

 

 

**Regulation**

**S-B Number**

 

**Exhibit**

10.5

2004 Stock Option Plan (8)

10.6

Assumption and Cancellation of Debt agreements with Fairchild International Corporation dated April 15, 2005 (4)

10.7

Management services agreement with David Stadnyk dated May 1, 2005 (4)

10.8

Change of Control Agreement with David Stadnyk dated May 1, 2005 (4)

21

Subsidiaries of the registrant (4)

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

                

(1)

Incorporated by reference to the exhibits filed with the Registration Statement on Form 10-SB, file no. 0-28627.

(2)

Incorporated by reference to the exhibits filed with the registrant’s current report on Form 8-K dated March 15, 2004.

(3)

Incorporated by reference to the exhibit filed with the registrant’s current report on Form 8-K dated June 15, 2004.

(4)

Incorporated by reference to the exhibits filed with the registrant’s annual report on Form 10-KSB for the fiscal year ended May 31, 2005.

(5) 

Incorporated by reference to the exhibit filed with the registrant’s current report on Form 8-K dated July 8, 2005.

(6)

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.

(7)

Incorporated by reference to the exhibits filed with the registrant’s annual report on Form 10-KSB for the fiscal year ended May 31, 2004.

(8) 

Incorporated by reference to the exhibits filed with the registrant’s registration statement on Form S-8, file number 333-120277, filed November 8, 2004.

 

**SIGNATURES**

 

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

 

 

**PATCH INTERNATIONAL INC.**

**(Registrant)**

 

 

Date:  January 16, 2006

By:          /s/ David Stadnyk                                    

 

David Stadnyk, President

(Principal financial officer)

 

 

17

 

 

 

 

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