SEC Comment Letter for PATCH INTERNATIONAL — May 27, 2005
PATCH INTERNATIONAL INC/CN (CIK 0001064481)
Date: May 27, 2005 · CIK: 0001064481 · Accession: 0000000000-05-026332
AI Filing Summary & Sentiment
File numbers found in text: 000-28627
Show Raw Text
<DOCUMENT>
<TYPE>LETTER
<SEQUENCE>1
<FILENAME>filename1.txt
<TEXT>
Mail Stop 04-05
May 27, 2005
Mr. David Stadnyk
President, Treasurer and Director
Patch International, Inc.
666 Burrard Street, Suite 1220
Vancouver, British Columbia V6C 2X8
Re: Patch International, Inc.
10-KSB for the fiscal year ended May 31, 2004
Filed October 18, 2004
File No. 000-28627
Dear Mr. Stadnyk:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
information so we may better understand your disclosure. After
reviewing this information, we may raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
10-KSB for the year ended May 31, 2004
Description of Property, page 4
Kerrobert Area, Saskatchewan, Canada, page 4
1. We note your disclosure that "The assets cover approximately 40
acres, with the potential of up to 60 drillable locations." Please
explain to us and expand your statement in future filings to
explain
how well spacing rules in Saskatchewan allow 2/3 acres per
location.
2. Here you state, "As of January 31, 2003, Patch had earned the
12.5% interest [and paid 15.625% of the 8/8ths cost] in the
initial
10 Test Wells and, in connection therewith, incurred $112,809 as
its
share of the costs associated with the Test Wells." This implies
that the 8/8ths cost for the initial 10 Test Wells is $721,978
[=112,809/.15625]. You continue, "Fairchild has also contributed
its
5.208% share of the costs associated with the initial 10 Test
Wells,
being $68,772 and as a result has earned a 4.167% interest in
these
wells. As a result, Patch`s net interest in the initial 10 test
wells is 8.333%." The 8/8ths cost implied here is $1,320,507
[=68,772/.05208]. Amend your future documents to eliminate this
inconsistency in 8/8ths well costs.
Drilling Activity, page 7
3. You indicate that you have drilled 23 "commercially viable"
wells
in 2003 and 2004, but your table of productive wells has only 19
gross producing wells. Please amend future documents to eliminate
or
to explain this inconsistency.
Market for Common Equity and Related Stockholder Matters, page 8
4. We note your disclosure stating that you issued 639,059 shares
of
common stock to a company executive as payment for accrued but
unpaid
salary of $30,000. Given the quoted market price of your shares
on
the date of issuance, it appears the stock conveyed had a value
significantly in excess of your liability. Tell us how you
determined the number of shares that were issued and describe the
accounting effects of recording this transaction in your financial
statements.
Management`s Discussion and Analysis or Plan of Operation, page 9
Results of Operations, page 9
5. You state that you have made equity compensation to consultants
in
lieu of cash. If you made such compensation as payment for your
year-end proved reserve estimates, explain to us how you were
satisfied that the consultant avoided any conflict of interest.
6. You explain that the increase in revenue for 2004 was primarily
due to increased production from your Canadian properties.
However,
in your schedule on page F-15, you show that total production for
the
year ended May 31, 2004 declined significantly when compared to
production in 2003. Please reconcile these disclosures for us.
Notes to Consolidated Financial Statements, page F-6
Note 3 - Acquisition of Subsidiary, page F-7
7. In the first paragraph on page F-6, you refer to Patch
International Inc. (f.k.a. Praxis Pharmaceuticals) prior to the
acquisition of Patch Energy Inc. as a "non-operating shell
corporation with nominal net assets." However, the assets and net
assets contributed by Praxis Pharmaceuticals, which you list on
page
F-8, appear to account for 86% of the total assets, and virtually
all
of the stockholders equity of the combined entities as of May 31,
2004. Additionally, you disclose that the former Praxis
Pharmaceuticals shareholders received 53% of the total issued and
outstanding common shares of the combined company. Taking into
consideration the above factors, please explain to us the reasons
you
decided to account for the transaction as a reverse takeover, with
Praxis Pharmaceuticals as the target entity. Please address items
(a) through (e) of SFAS 141 paragraph 17 in their entirety when
formulating your response.
Note 5 - Available-For-Sale Securities, page F-8
8. You disclose that you have recognized a discount from the
quoted
market value of securities held for sale due to several factors,
including lack of marketability due to trading restrictions,
ability
to dispose of a large block of shares, and the risk associated
with a
startup company. Please submit a schedule showing the per share
and
aggregate market values of the shares for each period presented,
as
well as the discounts associated with each factor you identify,
reconciled to the amounts utilized in your valuations. Tell us
how
the discounts were determined and describe any information that
you
have about the investee that you believe is not reflected in the
quoted market price of its shares.
Note 8 - Common Stock, page F-12
9. Tell us why you have not disclosed stock option activity for
all
periods presented, as is generally required under SFAS 123,
paragraph
47.
Note 13 - Schedule of Supplementary Information on Oil and Gas
Operations, page F-15
Reserve Quantity Information (Unaudited), page F-15
10. You attribute your proved reserve disclosures to "...estimates
prepared for the operator of the Company`s oil and gas interests.
Such estimates are inherently imprecise and may be subject to
substantial revisions." Amend future documents to disclose that
you
bear the ultimate responsibility for the proved reserve estimates
in
this document. Please also tell us the source(s) of your
disclosed
proved reserve estimates and standardized measure.
11. You disclose: $18,770 "future cash flows" from U.S. proved
reserves of 136,255[no units]; $323,105 future cash flows from
Canadian proved reserves of 137,727[no units]. Amend your future
documents to adhere to the requirements of Financial Accounting
Standard 69. Please disclose: proved reserve figures with the
proper units - MCF of gas or barrels of crude oil; future cash
inflows that are derived from year-end prices; proved developed
reserve volumes; and line items for proved reserve revisions.
Adhere
to the presentation formats as illustrated in FAS 69. You may
contact us for assistance in this or any other matter.
As appropriate, please amend your filing and respond to
these
comments within 10 business days or tell us when you will provide
us
with a response. You may wish to provide us with marked copies of
the amendment to expedite our review. Please furnish a cover
letter
with your amendment that keys your responses to our comments and
provides any requested information. Detailed cover letters
greatly
facilitate our review. Please understand that we may have
additional
comments after reviewing your amendment and responses to our
comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing includes all information required under the Securities
Exchange Act of 1934 and that they have provided all information
investors require for an informed investment decision. Since the
company and its management are in possession of all facts relating
to
a company`s disclosure, they are responsible for the accuracy and
adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filings;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filings or
in
response to our comments on your filings.
You may contact Mark A. Wojciechowski at (202) 551-3759 or,
in
his absence, Karl Hiller at (202) 551-3686 if you have questions
regarding comments on the financial statements and related
matters.
You may contact Ronald Winfrey, Petroleum Engineer, at (202) 551-
3704
if you have questions related to engineering issues and related
disclosures. Please contact me at (202) 551-3740 with any other
questions.
Sincerely,
H. Roger Schwall
Assistant Director
??
??
??
??
Mr. David Stadnyk
Patch International, Inc.
May 27, 2005
Page 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
DIVISION OF
CORPORATION FINANCE
</TEXT>
</DOCUMENT>