UNITED
        STATES
 ***SECURITIES
        AND EXCHANGE COMMISSION***
 WASHINGTON,
        D.C. 20549
 
 **______________________**
 
 **FORM
        10-QSB**
 **______________________**
 
 x
                    **QUARTERLY
                        REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                        EXCHANGE ACT OF
                        1934**
  **For
          the quarterly period ended September 30, 2004**
 
 o
                      **TRANSITION
                          REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                          EXCHANGE ACT OF
                          1934**
  **For
          the transition period from ______ to
          ______**
 Commission
        file number: **33-17264-NY**
 
 **PATCO
        INDUSTRIES, LTD.**
 **** (Exact
        name of small business issuer as specified in its charter)
 
 **Delaware**
              
              **11-2856146**(State
                  or other jurisdiction of
                incorporation
                  or organization)
              
              (I.R.S.
                  Employer
                Identification
                  Number)**295
                  East Main Street, Suite 1**
                **Ashland,
                  Oregon**
              
              **97520**(Address
                  of principal executive offices)
              
              (Zip
                  Code)Issuer’s
                  telephone number:**(541)
                  482-9106**
 
 
 
 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 issuer was required to file such reports), and (2) has
        been
        subject to such filing requirements for the past 90 days.
 Yes
o
        No x
 
 There
        were 178,562,500 shares of common stock outstanding on July 14,
        2005.
 
 Transitional
        Small Business Disclosure Format: Yes o No x
   
  
   **TABLE
        OF CONTENTS**
  
 **PART
                  I. FINANCIAL INFORMATION**Item
                  1.
              Financial
                  StatementsBalance
                  Sheet as of September 30, 2004 and December 31, 2003
              1Statement
                  of Operations for the Three and Nine Months Ended September 30,
                  2004 and
                  2003
              2Statement
                  of Cash Flows for the Three and Nine Months Ended September 30,
                  2004 and
                  2003
              3Notes
                  to Unaudited Financial Statements
              4Item
                  2.
              Management’s
                  Discussion and Analysis or Plan of Operation
              8Item
                  3.
              Controls
                  and Procedures
              8**PART
                  II. OTHER INFORMATION**Item
                  1.
              Legal
                  Proceedings
              9Item
                  2.
              Unregistered
                  Sales of Equity Securities and Use of Proceeds
              9Item
                  3.
              Defaults
                  Upon Senior Securities
              9Item
                  4.
              Submission
                  of Matters to a Vote of Security Holders
              9Item
                  5.
              Other
                  Information
              9Item
                  6.
              Exhibits
              10
 
 
 
 
 
 
   
   **PART
        I. FINANCIAL INFORMATION**
  **ITEM
                1.**
              **FINANCIAL
                  STATEMENTS**
  **Patco
                  Industries, Ltd.****Balance
                  Sheet**(Amounts
                  expressed in United States dollars unless otherwise stated)September
                  30,
              
              December
                  31,2004
              
              2003ASSETS
              
              (Unaudited)Total
                  Assets
              
              $
              —
              
              $
              —LIABILITIES
                  & STOCKHOLDERS’ EQUITYTotal
                  Liabilities
              
              $
              —
              
              $
              —Stockholders’
                  Equity:Common
                  Stock - 300,000,000 shares authorized;
              
              
              179
              
              
              179178,562,500
                  issued and outstandingAccumulated
                  deficit
              
              
              (179
              )
              
              (179
              )Total
                  Stockholders' Equity
              
              
              —
              
              
              —Total
                  Liabilities & Stockholders’ Equity
              
              $
              —
              
              $
              —
 
 
  
 
 
 
 
 
 
 The
        accompanying notes are an integral part of these financial
        statements.
  1
  
 **Patco
                  Industries, Ltd.****Statement
                  of Operations**(Amounts
                  expressed in United States dollars unless otherwise stated)
                (Unaudited)For
                  The Three Months Ended
              
              For
                  The Nine Months EndedSeptember
                  30,
              
              September
                  30,2004
              
              2003
              
              2004
              
              2003Other
                  Income (Expense)
              
              $
              —
              
              $
              —
              
              $
              —
              
              $
              —Total
                  other income (expense)
              
              
              —
              
              
              —
              
              
              —
              
              
              —Net
                  loss
              
              $
              —
              
              $
              —
              
              $
              —
              
              $
              —Basic
                  and diluted loss per common share
              
              $
              —
              
              $
              —
              
              $
              —
              
              $
              —Basic
                  and diluted weighted average shares
                outstanding
              
              
              178,562,500
              
              
              178,562,500
              
              
              178,562,500
              
              
              178,562,500
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 The
        accompanying notes are an integral part of these financial
        statements.
  2
  
 **Patco
                  Industries, Ltd.****Statement
                  of Cash Flows**(Amounts
                  expressed in United States dollars unless otherwise stated)
                (Unaudited)For
                  The Three Months Ended
              
              For
                  The Nine Months EndedSeptember
                  30,
              
              September
                  30,2004
              
              2003
              
              2004
              
              2003Cash
                  flows from operations:
                Net
                  loss
              
              $
              —
              
              $
              —
              
              $
              —
              
              $
              —Net
                  cash provided by (used in) operations
              
              
              —
              
              
              —
              
              
              —
              
              
              —Cash
                  flows from investing--
              
              
              —
              
              
              —
              
              
              —
              
              
              —Cash
                  flows from financing--
              
              
              —
              
              
              —
              
              
              —
              
              
              —Increase
                  (decrease) in cash
              
              
              —
              
              
              —
              
              
              —
              
              
              —Cash,
                  beginning balance
              
              
              —
              
              
              —
              
              
              —
              
              
              —Cash,
                  ending balance
              
              $
              —
              
              $
              —
              
              $
              —
              
              $
              —
 
 
 
  
 
 
 
 
 
 The
        accompanying notes are an integral part of these financial
        statements.
  3
  
 **Patco
        Industries, Ltd.**
 **Notes
        to Unaudited Financial Statements**
 **September
        30, 2004**
 
 
 
 NOTE
        1 -
        SIGNIFICANT ACCOUNTING POLICIES AND PROCEDURES
 
 Description
        of Business
 
 The
        Company has no operations and does not carry on business. It was incorporated
        in
        Delaware on March 20, 1987 under the name Redwing Ventures, Inc., and changed
        its name to Patco Industries, Ltd. on June 16, 1989.
 
 The
        unaudited financial statements and notes are presented as permitted by Form
        10-QSB. These financial statements have been prepared by the Company pursuant
        to
        the rules and regulations of the Securities and Exchange Commission (the
“SEC”).
        Certain information and footnote disclosures, normally included in financial
        statements prepared in accordance with generally accepted accounting principles,
        have been omitted pursuant to such SEC rules and regulations. The accompanying
        financial statements at September 30, 2004 and for the three and nine-month
        periods ended September 30, 2004 and 2003 are unaudited, but include all
        adjustments, consisting of normal recurring entries, which the Company’s
        management believes to be necessary for a fair presentation of the periods
        presented. Interim results are not necessarily indicative of results for
        a full
        year. The statements should be read in conjunction with the Company’s audited
        financial statements in its Annual Report on Form 10-K filed with the SEC.
        The
        Company’s operating results will fluctuate for the foreseeable future.
        Therefore, period-to-period comparisons should not be relied upon as predictive
        of the results in future periods.
 
 Estimates
 
 The
        preparation of financial statements in conformity with generally accepted
        accounting principles requires management to make estimates and assumptions
        that
        affect the reported amounts of assets and liabilities and disclosure of
        contingent assets and liabilities at the date of the financial statements
        and
        the reported amounts of revenue and expenses during the reporting period.
        Actual
        results could differ from those estimates.
 
 Cash
        and cash equivalents
 
 The
        Company does not maintain a cash balance. For the purpose of the statements
        of
        cash flows, all highly liquid investments with an original maturity of three
        months or less are considered to be cash equivalents.
 
 Loss
        per share
 
 Net
        loss
        per share is provided in accordance with Statement of Financial Accounting
        Standards No. 128 (SFAS #128) “Earnings
        Per
        Share”. Basic
        loss per share is computed by dividing losses available to common stockholders
        by the weighted average number of common shares outstanding during the period.
        The Company had no dilutive common stock equivalents, such as stock options
        or
        warrants as of September 30, 2004.
 
 Segment
        reporting
 
 The
        Company follows Statement of Financial Accounting Standards No. 130,
“Disclosures About Segments of an Enterprise and Related Information”. The
        Company operates as a single segment and will evaluate additional segment
        disclosure requirements as it expands its operations.
 
 Dividends
 
 The
        Company has not yet adopted any policy regarding payment of dividends. No
        dividends have been paid or declared since inception.
  4
 
 Income
        taxes
 
 The
        Company follows Statement of Financial Accounting Standard No. 109, “Accounting
        for Income Taxes” (“SFAS No. 109”) for recording the provision for income taxes.
        Deferred tax assets and liabilities are computed based upon the difference
        between the financial statement and income tax basis of assets and liabilities
        using the enacted marginal tax rate applicable when the related asset or
        liability is expected to be realized or settled. Deferred income tax expenses
        or
        benefits are based on the changes in the asset or liability each period.
        If
        available evidence suggests that it is more likely than not that some portion
        or
        all of the deferred tax assets will not be realized, a valuation allowance
        is
        required to reduce the deferred tax assets to the amount that is more likely
        than not to be realized. Future changes in such valuation allowance are included
        in the provision for deferred income taxes in the period of change.
 
 Deferred
        income taxes may arise from temporary differences resulting from income and
        expense items reported for financial accounting and tax purposes in different
        periods. Deferred taxes are classified as current or non-current, depending
        on
        the classification of assets and liabilities to which they relate. Deferred
        taxes arising from temporary differences that are not related to an asset
        or
        liability are classified as current or non-current depending on the periods
        in
        which the temporary differences are expected to reverse.
 
 Recent
        pronouncements
 
 In
        November 2004, the FASB issued SFAS No. 151, “Inventory Costs, an amendment of
        ARB No. 43, Chapter 4”. The amendments made by Statement 151 clarify that
        abnormal amounts of idle facility expense, freight, handling costs, and wasted
        materials (spoilage) should be recognized as current period charges and require
        the allocation of fixed production overheads to inventory based on the normal
        capacity of the production facilities. The guidance is effective for inventory
        costs incurred during fiscal years beginning after June 15, 2005. Earlier
        application is permitted for inventory costs incurred during fiscal years
        beginning after November 23, 2004.
 
 In
        December 2004, the FASB issued SFAS No.152, “Accounting for Real Estate
        Time-Sharing Transactions, an amendment of FASB Statements No. 66 and 67
        (SFAS
        152)”. The amendments made by Statement 152 amend FASB Statement No. 66,
        Accounting for Sales of Real Estate, to reference the financial accounting
        and
        reporting guidance for real estate time-sharing transactions that is provided
        in
        AICPA Statement of Position (SOP) 04-2, Accounting for Real Estate Time-Sharing
        Transactions. This Statement also amends FASB Statement No. 67, Accounting
        for
        Costs and Initial Rental Operations of Real Estate Projects, to state that
        the
        guidance for (a) incidental operations and (b) costs incurred to sell real
        estate projects does not apply to real estate time-sharing transactions.
        The
        accounting for those operations and costs is subject to the guidance in SOP
        04-2. This Statement is effective for financial statements for fiscal years
        beginning after June 15, 2005, with earlier application encouraged.
 
 In
        December 2004, the FASB issued SFAS No.153, “Exchanges of Nonmonetary Assets, an
        amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions.” The
        amendments made by Statement 153 are based on the principle that exchanges
        of
        nonmonetary assets should be measured based on the fair value of the assets
        exchanged. Further, the amendments eliminate the narrow exception for
        nonmonetary exchanges of similar productive assets and replace it with a
        broader
        exception for exchanges of nonmonetary assets that do not have commercial
        substance. Previously, Opinion 29 required that the accounting for an exchange
        of a productive asset for a similar productive asset or an equivalent interest
        in the same or similar productive asset should be based on the recorded amount
        of the asset relinquished. Opinion 29 provided an exception to its basic
        measurement principle (fair value) for exchanges of similar productive assets.
        The Board believes that exception required that some nonmonetary exchanges,
        although commercially substantive, be recorded on a carryover basis. By focusing
        the exception on exchanges that lack commercial substance, the Board believes
        this Statement produces financial reporting that more faithfully represents
        the
        economics of the transactions. The Statement is effective for nonmonetary
        asset
        exchanges occurring in fiscal periods beginning after June 15, 2005. Earlier
        application is permitted for nonmonetary asset exchanges occurring in fiscal
        periods beginning after the date of issuance. The provisions of this Statement
        shall be applied prospectively.
 
 In
        December 2004, the FASB issued SFAS No.123 (revised 2004), “Share-Based
        Payment”. Statement 123(R) will provide investors and other users of financial
        statements with more complete and neutral financial information by requiring
        that the compensation cost relating to share-based payment transactions be
        recognized
  5
  in
        financial statements. That cost will be measured based on the fair value
        of the
        equity or liability instruments issued. Statement 123(R) covers a wide range
        of
        share-based compensation arrangements including share options, restricted
        share
        plans, performance-based awards, share appreciation rights, and employee
        share
        purchase plans. Statement 123(R) replaces FASB Statement No. 123, Accounting
        for
        Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for
        Stock Issued to Employees. Statement 123, as originally issued in 1995,
        established as preferable a fair-value-based method of accounting for
        share-based payment transactions with employees. However, that Statement
        permitted entities the option of continuing to apply the guidance in Opinion
        25,
        as long as the footnotes to financial statements disclosed what net income
        would
        have been had the preferable fair-value-based method been used. Public entities
        (other than those filing as small business issuers) will be required to apply
        Statement 123(R) as of the first interim or annual reporting period that
        begins
        after June 15, 2005.
 
 In
        December 2004, the FASB issued two Staff Positions, FSP FAS 109-1, Application
        of FASB Statement 109 “Accounting for Income Taxes” to the Tax Deduction on
        Qualified Production Activities Provided by the American Job Creation Act
        of
        2004, and FSP FAS 109-2 Accounting and Disclosure Guidance for the Foreign
        Earnings Repatriation Provision within the American Jobs Creation Act of
        2004.
 
 NOTE
        2 -
        GOING CONCERN
 
 These
        financial statements have been prepared in accordance with generally accepted
        accounting principles applicable to a going concern which contemplates the
        realization of assets and the satisfaction of liabilities and commitments
        in the
        normal course of business. The Company is a shell corporation with no operations
        or income. The Company is exploring the possibility of engaging in a reverse
        merger with a private company that has current operations. There can be no
        assurance that the Company will be successful at consummating such a
        transaction.
 
 These
        conditions raise substantial doubt about the Company's ability to continue
        as a
        going concern. These financial statements do not include any adjustments
        that
        might arise from this uncertainty.
 
 NOTE
        3 -
        INCOME TAXES
 
 The
        Company accounts for income taxes under Statement of Financial Accounting
        Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"), which
        requires use of the liability method. SFAS No. 109 provides that deferred
        tax
        assets and liabilities are recorded based on the differences between the
        tax
        bases of assets and liabilities and their carrying amounts for financial
        reporting purposes, referred to as temporary differences. Deferred tax assets
        and liabilities at the end of each period are determined using the currently
        enacted tax rates applied to taxable income in the periods in which the deferred
        tax assets and liabilities are expected to be settled or realized.
 
 The
        provision for income taxes differs from the amount computed by applying the
        statutory federal income tax rate to income before provision for income taxes.
        The sources and tax effects of the differences are as follows:
 
 U.S. federal statutory
                rate
              (34.0%
              )Valuation
                reserve
              34.0%Total
              —
                  %
 
 As
        of
        September 30, 2004, the Company has a net operating loss carryforward of
        $179
        for tax purposes, which will be available to offset future taxable income.
        If
        not used, this carryforward will expire in 2022. The deferred tax asset relating
        to the operating loss carryforward has been fully reserved.
 
 NOTE
        4 -
        FIXED ASSETS
 
 The
        Company does not own or lease fixed assets. There were no fixed asset additions
        or deletions during the three months ended September 30, 2004. The Company
        recorded no depreciation expense for the three months ended September 30,
        2004.
 
 6
  NOTE
        5 -
        RELATED PARTY TRANSACTIONS
 
 The
        Company does not lease or rent any property. The Company’s office services are
        provided without charge by its current Chief Executive Officer. Such costs
        are
        immaterial to the financial statements and, accordingly, have not been reflected
        therein.
 
 NOTE
        6 -
        STOCKHOLDERS' EQUITY
 
 There
        were 178,562,500 shares of common stock outstanding on June 30, 2005. There
        have
        been no issuances of common stock during the past three years.
 
 NOTE
        7 -
        WARRANTS AND OPTIONS
 
 There
        are
        no warrants or options outstanding to acquire any additional shares of common
        stock.
 
 NOTE
        8 -
        SUBSEQUENT EVENT
 
 The
        Company has entered an Agreement and Plan of Reorganization (the “Agreement”)
        dated May 5, 2005 with Spectral Molecular Imaging, Inc., a Nevada corporation
        (“Spectral”), as amended effective as of June 30, 2005, pursuant to which, on
        the terms and subject to the conditions of the Agreement, the Company will
        acquire Spectral as a wholly-owned subsidiary. The acquisition will be
        accomplished through the merger (the “Merger”) of a newly formed subsidiary of
        the Company with and into Spectral, with Spectral as the surviving corporation
        and to issue shares of Company common stock to the stockholders of Spectral.
        It
        is anticipated that prior to the Merger, the Company will effect a reverse
        stock
        split of approximately .00434 for one of the outstanding shares of Company
        Common Stock so that the Company will have 825,000 shares of Company Common
        Stock issued and outstanding immediately prior to the Merger.
  Upon
        the
        effectiveness of the Merger, each share of Spectral Common Stock issued and
        outstanding immediately prior to the Merger shall be converted into one share
        of
        Company Common Stock and each outstanding option or warrant to purchase Spectral
        Common Stock, whether or not then exercisable, shall be converted into an
        option
        or warrant to purchase one share of Company Common Stock at a price equal
        to the
        exercise price in effect immediately prior to the Merger.
  Completion
        of the merger is subject to certain closing conditions, including Spectral
        completing a financing of a minimum of $850,000, which may be increased by
        Spectral in its sole discretion to up to $2,000,000, in gross offering proceeds
        from the sale of Spectral equity securities. The completion of the Merger
        is
        expected to be on or before September 30, 2005. However, there can be no
        assurance that the Company will be successful at consummating this
        transaction.
 
  7
  **ITEM
                2.**
              **MANAGEMENT’S
                  DISCUSSION AND ANALYSISOR
                  PLAN OF OPERATION**
  This
        quarterly report contains forward-looking statements within the meaning of
        the
        federal securities laws. These include statements about our expectations,
        beliefs, intentions or strategies for the future, which Patco Industries,
        Ltd.
        (the “Company”) indicates by words or phrases such as
“anticipate,”“expect,”“intend,”“plan,”“will,”“the Company believes,”“management
        believes” and similar language. The forward-looking statements are based on the
        Company’s current expectations and are subject to certain risks, uncertainties
        and assumptions. The Company’s actual results may differ materially from results
        anticipated in these forward-looking statements. The Company bases its
        forward-looking statements on information currently available to it, and
        the
        Company assumes no obligation to update them.
  The
        Company has no operations or income and does not carry on business. The Company
        is exploring the possibility of engaging in a reverse merger with a private
        company that has current operations. There can be no assurance that the Company
        will be successful at consummating such a transaction.
  **ITEM
                3.**
              **CONTROLS
                  AND PROCEDURES**
  The
        Company’s Chief Executive Officer and principal financial officer, William C.
        Patridge, has concluded, based on his evaluation as of the end of the period
        covered by this report, that the Company’s disclosure controls and procedures
        (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and
        15d-15(e)) are effective to ensure that information required to be disclosed
        in
        the reports that it files or submits under the Securities Exchange Act of
        1934
        is recorded, processed, summarized and reported within the time periods
        specified in the Securities and Exchange Commission’s rules and forms, and that
        such information is accumulated and communicated to the Company’s management,
        including William C. Patridge, its Chief Executive Officer and principal
        financial officer, as appropriate, to allow timely decisions regarding required
        disclosures.
  There
        has
        been no change in the Company’s internal controls over financial reporting
        during its most recent fiscal quarter that has materially affected, or is
        reasonably likely to materially affect, its internal controls over financial
        reporting.
  
 8
 
 
 **PART
        II. OTHER INFORMATION**
   **ITEM
                1.**
              **LEGAL
                  PROCEEDINGS.**
  None.
  **ITEM
                2.**
              **UNREGISTEREDSALES OF EQUITY SECURITIES AND USE OF
                  PROCEEDS**
  None.
  **ITEM
                3.**
              **DEFAULTS
                  UPON SENIOR SECURITIES.**
  None.
  **ITEM
                4.**
              **SUBMISSIONOF
                  MATTERS TO A VOTE OF SECURITY HOLDERS.**
  None.
  **ITEM
                5.**
              **OTHERINFORMATION.**
  The
        Company has entered an Agreement and Plan of Reorganization (the “Agreement”)
        dated May 5, 2005 with Spectral Molecular Imaging, Inc., a Nevada corporation
        (“Spectral”), as amended effective as of June 30, 2005, pursuant to which, on
        the terms and subject to the conditions of the Agreement, the Company will
        acquire Spectral as a wholly-owned subsidiary. The acquisition will be
        accomplished through the merger (the “Merger”) of a newly formed subsidiary of
        the Company with and into Spectral, with Spectral as the surviving corporation
        and to issue shares of Company common stock to the stockholders of Spectral.
        It
        is anticipated that prior to the Merger, the Company will effect a reverse
        stock
        split of approximately .00434 for one of the outstanding shares of Company
        Common Stock so that the Company will have 825,000 shares of Company Common
        Stock issued and outstanding immediately prior to the Merger.
  Upon
        the
        effectiveness of the Merger, each share of Spectral Common Stock issued and
        outstanding immediately prior to the Merger shall be converted into one share
        of
        Company Common Stock and each outstanding option or warrant to purchase Spectral
        Common Stock, whether or not then exercisable, shall be converted into an
        option
        or warrant to purchase one share of Company Common Stock at a price equal
        to the
        exercise price in effect immediately prior to the Merger.
  Completion
        of the merger is subject to certain closing conditions, including Spectral
        completing a financing of a minimum of $850,000, which may be increased by
        Spectral in its sole discretion to up to $2,000,000, in gross offering proceeds
        from the sale of Spectral equity securities. The completion of the Merger
        is
        expected to be on or before September 30, 2005. However, there can be no
        assurance that the Company will be successful at consummating this
        transaction.
  9
 
  **ITEM
                6.**
              **EXHIBITS**
  **Exhibit**
                **Number**
              **Description**31.1
              Certification
                  of the Chief Executive Officer pursuant to Section 302 of the
                  Sarbanes-Oxley Act31.2
              Certification
                  of the principal financial officer pursuant to Section 302 of the
                  Sarbanes-Oxley Act32
              Certification
                  pursuant to Section 906 of the Sarbanes-Oxley Act
 
 
   10
   **SIGNATURES**
  
 Pursuant
        to the requirements of the Securities Exchange Act of 1934, the Registrant
        has
        duly caused this report to be signed on its behalf by the undersigned thereunto
        duly authorized.
  PATCO
                  INDUSTRIES, LTD.
                (Registrant)Date:July
                  14, 2005
              By:/s/
                  William C. Patridge
                William
                  C. Patridge
                Chief
                  Executive Officer (principal executive officer and principal financial
                  and
                  accounting officer)
 
 
 
  11