UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-QSB





(Mark
One)





ý           QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934





For the
quarterly period ended: February 29, 2008





o           TRANSITION
REPORT UNDER SECTION 13 OR 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
            87-0393257(State
      or other jurisdiction of incorporation or organization)
            (IRS
      Employer Identification No.)








Suite
1670, 700 – 2nd Street S.W., Calgary, Alberta, Canada T2P 2W1


(Address
of principal executive offices)





(403)
441-4390


(Issuer’s
telephone number)





Suite
300, 441 – 5th Avenue
S.W., Calgary, Alberta, Canada T2P 2V1


(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 ý   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
ý





State the
number of shares outstanding of each of the issuer’s classes of common equity,
as of the latest practicable date:  34,025,724shares of Common Stock, $.001 par
value, as of April 2, 2008





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





PATCH
INTERNATIONAL INC.





FORM
10-QSB


FOR
THE NINE MONTHS ENDED


FEBRUARY
29, 2008





INDEX





PagePART I – FINANCIAL
      INFORMATIONItem
      1.
            Financial
      StatementsConsolidated
      Balance Sheets (unaudited)
            3Consolidated
      Statements of Operations (unaudited)
            4Consolidated
      Statements of Cash Flows (unaudited)
            5Consolidated
      Statements of Stockholders’ Equity (Deficit) (unaudited)
            6Notes
      to the Consolidated Financial Statements (unaudited)
            7Item
      2.
            Management’s
      Discussion and Analysis or Plan of Operation
            15Item
      3.
            Controls
      and Procedures
            20PART II – OTHER
      INFORMATIONItem
      1.
            Legal
      Proceedings
            22Item
      2.
            Unregistered
      Sales of Equity Securities and Use of Proceeds
            22Item
      3.
            Defaults
      Upon Senior Securities
            22Item
      4.
            Submission
      of Matters to a Vote of Security Holders
            22Item
      5.
            Other
      Information
            22Item
      6.
            Exhibits
            22SIGNATURES
            
            24








2





Patch
      International Inc.Consolidated
      Balance Sheets(Unaudited)February
      29,
            
            
            May
      31,(U.S.
      Dollars)
            
            2008
            
            
            2007ASSETSCurrent
      AssetsCash
      and cash equivalents
            
            $
            1,577,717
            
            
            $
            6,590,466Accounts
      receivable
            
            
            28,899
            
            
            
            18,966Due
      from related parties (Note 4)
            
            
            1,007,785
            
            
            
            1,009,697Prepaid
      expenses and other
            
            
            279,623
            
            
            
            71,4802,894,024
            
            
            
            7,690,609Marketable
      securities (Note 5)
            
            
            175,000
            
            
            
            850,000Joint
      venture receivable (Note 6)
            
            
            357,660
            
            
            
            323,394Property
      and equipment
            
            
            123,083
            
            
            
            98,916Oil
      and gas interests (successful efforts method) (Note 7)
            
            
            40,465,212
            
            
            
            37,658,925$
            44,014,979
            
            
            $
            46,621,844LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      LiabilitiesAccounts
      payable and accrued liabilities
            
            $
            1,249,035
            
            
            $
            2,756,345Income
      tax payable
            
            
            3,175,305
            
            
            
            2,785,763Due
      to related parties (Note 4)
            
            
            1,000,000
            
            
            
            1,000,0005,424,340
            
            
            
            6,542,108Exchangeable
      shares (Note 8)
            
            
            -
            
            
            
            20,150,772Special
      warrants (Note 9)
            
            
            -
            
            
            
            26,505,862Asset
      retirement obligations (Note 10)
            
            
            150,161
            
            
            
            129,959Deferred
      income taxes
            
            
            409,145
            
            
            
            -5,983,646
            
            
            
            53,328,701STOCKHOLDERS'
      EQUITYClass
      A Preferred Voting Stock
            
            
            -
            
            
            
            -1
      share authorized with par value of $0.01 per share;1
      share issued and outstandingClass
      B Preferred Voting Stock
            
            
            -
            
            
            
            -10,000
      shares authorized with par value of $0.01 per share;1
      share issued and outstandingCommon
      Stock
            
            
            34,026
            
            
            
            20,240300,000,000
      common shares authorized with par value of $0.001 per
share34,025,724
      shares issued and outstanding (May 31, 2007 - 20,239,774
      shares)Exchangeable
      shares (Note 8)
            
            
            12,507,376
            
            
            
            -Additional
      paid-in capital
            
            
            27,301,829
            
            
            
            10,111,507Stock
      subscriptions receivable
            
            
            -
            
            
            
            (38,500
            )Accumulated
      other comprehensive income
            
            
            900,251
            
            
            
            837,870Retained
      earnings (deficit)
            
            
            (2,712,149
            )
            
            
            (17,637,974
            )38,031,333
            
            
            
            (6,706,857
            )$
            44,014,979
            
            
            $
            46,621,844Future
      operations (Note 2)Commitments
      (Note 14)The
      accompanying notes are an integral part of these consolidated financial
      statements


3


Patch
      International Inc.Consolidated
      Statements of Operations(Unaudited)
              
              Three
      Months Ended
              
              
              Nine
      Months EndedFebruary
      29,
              
              
              February
      29,(U.S.
      Dollars)
              
              2008
              
              
              2007
              
              
              2008
              
              
              2007RevenueOil
      and gas
              
              $
              45
              
              
              $
              3,567
              
              
              $
              8,177
              
              
              $
              12,738ExpensesOil
      and gas production and royalties
              
              
              10,269
              
              
              
              7,560
              
              
              
              54,840
              
              
              
              13,255General
      and administrative
              
              
              872,058
              
              
              
              2,761,088
              
              
              
              2,919,070
              
              
              
              4,387,829Interest
              
              
              111,295
              
              
              
              -
              
              
              
              111,295
              
              
              
              -Depletion,
      depreciation, accretion and impairment of oil and gas
      interests
              
              
              1,729,491
              
              
              
              7,584
              
              
              
              1,749,798
              
              
              
              48,123Dry
      hole costs
              
              
              8,180
              
              
              
              1,291,483
              
              
              
              536,662
              
              
              
              1,291,483Geological
      and geophysical costs
              
              
              566
              
              
              
              -
              
              
              
              102,281
              
              
              
              -2,731,859
              
              
              
              4,067,715
              
              
              
              5,473,946
              
              
              
              5,740,690Other
      income (expenses)Interest
      and other
              
              
              20,218
              
              
              
              (38,075
              )
              
              
              119,512
              
              
              
              112,671Financing
      costs (Note 9)
              
              
              (306,231
              )
              
              
              -
              
              
              
              (946,853
              )
              
              
              -Holding
      gain on exchangeable shares and special warrants (Notes 8 and
      9)
              
              
              -
              
              
              
              -
              
              
              
              18,178,828
              
              
              
              -Holding
      loss on marketable securities (Note 5)
              
              
              (56,871
              )
              
              
              -
              
              
              
              (729,621
              )
              
              
              -Gain
      on foreign exchange
              
              
              957,037
              
              
              
              -
              
              
              
              3,870,352
              
              
              
              -Loss
      on foreign exchange relating to current income tax payable
              
              
              (200,040
              )
              
              
              -
              
              
              
              (389,542
              )
              
              
              -Gain
      on sale of marketable securities
              
              
              -
              
              
              
              6,074,719
              
              
              
              -
              
              
              
              13,684,318414,113
              
              
              
              6,036,644
              
              
              
              20,102,676
              
              
              
              13,796,989Income
      (loss) before income taxes and discontinued operations
              
              
              (2,317,701
              )
              
              
              1,972,496
              
              
              
              14,636,907
              
              
              
              8,069,037Provision
      for income taxesCurrent
              
              
              -
              
              
              
              392,760
              
              
              
              -
              
              
              
              2,671,261Deferred
      (reduction)
              
              
              (732,225
              )
              
              
              196,766
              
              
              
              (288,918
              )
              
              
              196,766(732,225
              )
              
              
              589,526
              
              
              
              (288,918
              )
              
              
              2,868,027Income
      (loss) before discontinued operations
              
              
              (1,585,476
              )
              
              
              1,382,970
              
              
              
              14,925,825
              
              
              
              5,201,010Discontinued
      operations (Note 12)
              
              
              -
              
              
              
              29,959
              
              
              
              -
              
              
              
              83,024Net
      income (loss)
              
              
              (1,585,476
              )
              
              
              1,412,929
              
              
              
              14,925,825
              
              
              
              5,284,034Other
      comprehensive income (loss) (Note 13)Marketable
      securities:Reclassification
      to realized gain
              
              
              -
              
              
              
              (2,617,231
              )
              
              
              -
              
              
              
              (7,240,999
              )Holding
      gain
              
              
              -
              
              
              
              (2,094,768
              )
              
              
              -
              
              
              
              -Increase
      (decrease) in unrealized gain on marketable securities
              
              
              -
              
              
              
              (4,711,999
              )
              
              
              -
              
              
              
              (7,240,999
              )Foreign
      currency translation adjustment
              
              
              (40,704
              )
              
              
              (119,035
              )
              
              
              62,381
              
              
              
              (179,734
              )Other
      comprehensive income (loss) (Note 13)
              
              
              (40,704
              )
              
              
              (4,831,034
              )
              
              
              62,381
              
              
              
              (7,420,733
              )Comprehensive
      income (loss)
              
              $
              (1,626,180
              )
              
              $
              (3,418,105
              )
              
              $
              14,988,206
              
              
              $
              (2,136,699
              )Net
      income (loss) per shareBasic
              
              $
              (0.04
              )
              
              $
              0.07
              
              
              $
              0.43
              
              
              $
              0.31Diluted
              
              $
              (0.04
              )
              
              $
              0.07
              
              
              $
              0.38
              
              
              $
              0.31Weighted
      average number of common shares outstandingBasic
              
              
              43,952,213
              
              
              
              19,173,000
              
              
              
              34,838,667
              
              
              
              16,820,000Diluted
              
              
              43,952,213
              
              
              
              19,209,000
              
              
              
              39,651,307
              
              
              
              16,856,000The
      accompanying notes are an integral part of these consolidated financial
      statements




4





Patch
      International Inc.Consolidated
      Statements of Cash Flows(Unaudited)Three
      Months Ended
            
            
            Nine
      Months Ended(U.S.
      Dollars)
            
            February
      29,
            
            
            February
      29,2008
            
            
            2007
            
            
            2008
            
            
            2007Operating
      ActivitiesNet
      income (loss)
            
            $
            (1,585,476
            )
            
            $
            1,412,929
            
            
            $
            14,925,825
            
            
            $
            5,284,034Adjustment
      of items not involving cashDepletion,
      depreciation, accretion and impairment of oil and gas
      interests
            
            
            1,729,491
            
            
            
            20,175
            
            
            
            1,749,798
            
            
            
            48,878General
      and administrative
            
            
            -
            
            
            
            (211,095
            )
            
            
            -
            
            
            
            -Stock-based
      compensation
            
            
            215,738
            
            
            
            1,830,033
            
            
            
            986,874
            
            
            
            2,384,676Financing
      costs
            
            
            306,231
            
            
            
            -
            
            
            
            946,853
            
            
            
            -Holding
      gain on exchangeable shares and special warrants
            
            
            -
            
            
            
            -
            
            
            
            (18,178,828
            )
            
            
            -Gain
      on sale of marketable securities
            
            
            -
            
            
            
            (6,074,719
            )
            
            
            -
            
            
            
            (13,684,318
            )Holding
      loss on marketable securities
            
            
            56,871
            
            
            
            -
            
            
            
            729,621
            
            
            
            -Gain
      on foreign exchange
            
            
            (957,037
            )
            
            
            -
            
            
            
            (3,870,352
            )
            
            
            -Non-controlling
      interest in net loss
            
            
            -
            
            
            
            (3,884
            )
            
            
            -
            
            
            
            (23,649
            )Deferred
      (reduction) income taxes
            
            
            (732,225
            )
            
            
            196,766
            
            
            
            (288,918
            )
            
            
            196,766(Increase)
      decrease in accounts receivable
            
            
            263,114
            
            
            
            (120,243
            )
            
            
            (44,199
            )
            
            
            (100,622
            )Increase
      (decrease) in prepaid expenses and other
            
            
            10,713
            
            
            
            (8,433
            )
            
            
            (208,143
            )
            
            
            (39,379
            )Decrease
      in due from related parties
            
            
            (174
            )
            
            
            (98,562
            )
            
            
            1,912
            
            
            
            (98,562
            )Decrease
      in accounts payable and accrued liabilities
            
            
            (354,025
            )
            
            
            (6,399,780
            )
            
            
            (1,507,310
            )
            
            
            (6,329,800
            )Increase
      (decrease) in income taxes payable
            
            
            200,040
            
            
            
            (1,808,656
            )
            
            
            389,542
            
            
            
            490,261Net
      cash used in continuing operations
            
            
            (846,739
            )
            
            
            (11,265,469
            )
            
            
            (4,367,325
            )
            
            
            (11,871,715
            )Discontinued
      operations
            
            
            -
            
            
            
            (11,836
            )
            
            
            -
            
            
            
            -Net
      cash used in operating activities
            
            
            (846,739
            )
            
            
            (11,277,305
            )
            
            
            (4,367,325
            )
            
            
            (11,871,715
            )Investing
      ActivitiesThird
      party contribution to limited partnership
            
            
            -
            
            
            
            171,223
            
            
            
            -
            
            
            
            171,223Deposit
            
            
            -
            
            
            
            84,724
            
            
            
            -
            
            
            
            84,724Purchase
      of equipment
            
            
            -
            
            
            
            (66,660
            )
            
            
            (38,132
            )
            
            
            (66,660
            )Oil
      and gas interests
            
            
            (42,301
            )
            
            
            (11,506,920
            )
            
            
            (973,357
            )
            
            
            (14,167,400
            )Proceeds
      on sale of marketable securities
            
            
            -
            
            
            
            6,074,719
            
            
            
            -
            
            
            
            13,684,319Net
      cash used in investing activities
            
            
            (42,301
            )
            
            
            (5,242,914
            )
            
            
            (1,011,489
            )
            
            
            (293,794
            )Financing
      ActivitiesRepayments
      to related parties
            
            
            -
            
            
            
            37,268
            
            
            
            -
            
            
            
            -Proceeds
      from special warrants
            
            
            -
            
            
            
            18,759,033
            
            
            
            -
            
            
            
            18,759,033Proceeds
      from common stock
            
            
            -
            
            
            
            3,429,680
            
            
            
            -
            
            
            
            3,632,680Acquisition
      of treasury stock
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (6,309
            )Net
      cash provided by financing activities
            
            
            -
            
            
            
            22,225,981
            
            
            
            -
            
            
            
            22,385,404Effect
      of exchange rate changes on cash
            
            
            64,833
            
            
            
            (301,479
            )
            
            
            366,065
            
            
            
            (323,548
            )Change
      in cash and cash equivalents for the period
            
            
            (824,207
            )
            
            
            5,404,283
            
            
            
            (5,012,749
            )
            
            
            9,896,347Cash
      and cash equivalents, beginning of period
            
            
            2,401,924
            
            
            
            8,965,508
            
            
            
            6,590,466
            
            
            
            4,473,444Cash
      and cash equivalents, end of period
            
            $
            1,577,717
            
            
            $
            14,369,791
            
            
            $
            1,577,717
            
            
            $
            14,369,791CASH
      AND CASH EQUIVALENTS CONSISTS OF:Cash
      in bank
            
            
            12,159
            
            
            
            1,868,072
            
            
            
            12,159
            
            
            
            1,868,072Term
      deposits
            
            
            1,565,558
            
            
            
            12,501,719
            
            
            
            1,565,558
            
            
            
            12,501,719$
            1,577,717
            
            
            $
            14,369,791
            
            
            $
            1,577,717
            
            
            $
            14,369,791SUPPLEMENTAL
      CASH FLOW INFORMATIONTaxes
      paid
            
            $
            -
            
            
            $
            2,256,649
            
            
            $
            -
            
            
            $
            2,256,649Interest
      paid
            
            $
            -
            
            
            $
            49,494
            
            
            $
            -
            
            
            $
            49,494The
      accompanying notes are an integral part of these consolidated financial
      statements





5





Patch
      International Inc.Consolidated
      Statements of Stockholders' Equity (Deficit)(Unaudited)AccumulatedAdditional
            
            
            Stock
            
            
            Other
            
            
            Retained
            
            
            TotalPreferred
      Stock
            
            
            Common
      Stock
            
            
            Exchangeable
            
            
            Paid-in
            
            
            Subscriptions
            
            
            Comprehensive
            
            
            Earnings
            
            
            Stockholders'Shares
            
            
            Amount
            
            
            Shares
            
            
            Amount
            
            
            Shares
            
            
            Capital
            
            
            Receivable
            
            
            Income
      (Loss)
            
            
            (Deficit)
            
            
            EquityBalance,
      May 31, 2006
            
            
            -
            
            
            $
            -
            
            
            
            15,163,112
            
            
            $
            15,163
            
            
            $
            -
            
            
            $
            3,335,380
            
            
            $
            -
            
            
            $
            7,352,558
            
            
            $
            987,862
            
            
            $
            11,690,963Stock
      options exercised for cash
            
            
            -
            
            
            $
            -
            
            
            
            1,590,000
            
            
            $
            1,590
            
            
            $
            -
            
            
            $
            1,144,410
            
            
            $
            (38,500
            )
            
            $
            -
            
            
            $
            -
            
            
            $
            1,107,500Common
      stock issued by private placement
            
            
            -
            
            
            $
            -
            
            
            
            3,240,000
            
            
            $
            3,240
            
            
            $
            -
            
            
            $
            2,601,229
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            2,604,469Acquisition
      of common stock, subsequently cancelled
            
            
            -
            
            
            $
            -
            
            
            
            (3,588
            )
            
            $
            (3
            )
            
            $
            -
            
            
            $
            (1,127
            )
            
            $
            -
            
            
            $
            -
            
            
            $
            (3,624
            )
            
            $
            (4,754
            )Acquisition
      of common stock
            
            
            -
            
            
            $
            -
            
            
            
            (2,000
            )
            
            $
            (2
            )
            
            $
            -
            
            
            $
            (1,553
            )
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            (1,555
            )Share
      issuance costs
            
            
            -
            
            
            $
            -
            
            
            
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            (102,922
            )
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            (102,922
            )Stock-based
      compensation
            
            
            -
            
            
            $
            -
            
            
            
            252,250
            
            
            $
            252
            
            
            $
            -
            
            
            $
            3,136,090
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            3,136,342Accumulated
      other comprehensive income
            
            
            -
            
            
            $
            -
            
            
            
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            (6,514,688
            )
            
            $
            -
            
            
            $
            (6,514,688
            )Net
      loss for the year
            
            
            -
            
            
            $
            -
            
            
            
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            (18,622,212
            )
            
            $
            (18,622,212
            )Balance,
      May 31, 2007
            
            
            -
            
            
            $
            -
            
            
            
            20,239,774
            
            
            $
            20,240
            
            
            $
            -
            
            
            $
            10,111,507
            
            
            $
            (38,500
            )
            
            $
            837,870
            
            
            $
            (17,637,974
            )
            
            $
            (6,706,857
            )Conversion
      of special warrants - Sept.14, 2007 (note 9)
            
            
            -
            
            
            $
            -
            
            
            
            13,121,790
            
            
            $
            13,122
            
            
            $
            -
            
            
            $
            15,629,382
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            15,642,504Conversion
      of bonus warrants - Sept.25, 2007 (note 9)
            
            
            -
            
            
            $
            -
            
            
            
            664,160
            
            
            $
            664
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            664Reclassify
      exchangeable shares to equity (note 8)
            
            
            -
            
            
            $
            -
            
            
            
            -
            
            
            $
            -
            
            
            $
            12,507,376
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            12,507,376Recovery
      of stock subscriptons receivable
            
            
            -
            
            
            $
            -
            
            
            
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            38,500
            
            
            $
            -
            
            
            $
            -
            
            
            $
            38,500Share
      issuance costs
            
            
            -
            
            
            $
            -
            
            
            
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            (1,986
            )
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            (1,986
            )Stock-based
      compensation
            
            
            -
            
            
            $
            -
            
            
            
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            1,562,926
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            1,562,926Accumulated
      other comprehensive income
            
            
            -
            
            
            $
            -
            
            
            
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            62,381
            
            
            $
            -
            
            
            $
            62,381Net
      income for the period
            
            
            -
            
            
            $
            -
            
            
            
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            14,925,825
            
            
            $
            14,925,825Balance,
      February 29, 2008
            
            
            -
            
            
            $
            -
            
            
            
            34,025,724
            
            
            $
            34,026
            
            
            $
            12,507,376
            
            
            $
            27,301,829
            
            
            $
            -
            
            
            $
            900,251
            
            
            $
            (2,712,149
            )
            
            $
            38,031,333The
      accompanying notes are an integral part of these consolidated financial
      statements




6
 Patch
International Inc.
 Notes to
the Consolidated Financial Statements
 February
29, 2008 (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.  These unaudited
interim consolidated financial statements 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, 2007.  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 the
Company’s audited financial statements and notes thereto, included in the Form
10-KSB for the fiscal year ended May 31, 2007, has been omitted.  The
results of operations for the nine months ended February 29, 2008 are not
necessarily indicative of results that may be expected for the fiscal year
ending May 31, 2008.  These unaudited interim financial statements
reflect all adjustments which are, in the opinion of management, necessary for a
fair statement of the results for the interim periods presented.
 
 2.           FUTURE
OPERATIONS AND GOING CONCERN
 
 The
financial statements have been prepared on a going concern basis.  As
at February 29, 2008, the Company reported a deficit of $2.7 million,
stockholder’s equity of $38 million and a working capital deficiency of $2.5
million.  Additional funding will be required to cover the
administrative costs of the Company for the upcoming year and for expenditures
connected with the acquisition, exploration and appraisal of new and existing
oil and gas projects.
 
 The
ultimate development of the Company’s oil and gas projects, if proven
commercial, will require additional funding.  The Company’s future
operations are dependent upon its ability to obtain additional funding and
ultimately achieve profitable operations.  The Company intends to
explore the availability of obtaining additional funding and the magnitude of
its discretionary capital expenditure program will be dependent on such
funding.  The outcome of these matters cannot be predicted with
certainty at this time.  The financial statements do not include any
adjustments to the amounts and classification of assets and liabilities that may
be necessary should the Company be unable to secure additional funding or
achieve profitable operations.
 
 3.           RECENT
PRONOUNCEMENTS
 
 In
December 2007, the FASB issued SFAS 141R, "Business Combinations" and SFAS 160,
"NonControlling Interests in Consolidated Financial Statements". The new
statements require most identifiable assets, liabilities, noncontrolling
interests, and goodwill acquired in a business combination to be recorded at
"full fair value" and require noncontrolling interests to be reported as a
component of equity, which changes the accounting or transactions with
noncontrolling interest holders. The new statements are a joint project with the
IASB. Both statements are effective for periods beginning on or after December
15, 2008. Management is in the process of reviewing the requirements of this
recent statement.
 
 In
February 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
159, “The Fair Value Option
for Financial Assets and Financial Liabilities—Including an Amendment of FASB
Statement No. 115.”  This pronouncement permits entities to use
the fair value method to measure certain financial assets and liabilities by
electing an irrevocable option to use the fair value method at specified
election dates.  After election of the option, subsequent changes in
fair value would result in the recognition of unrealized gains or losses as
period costs during the period the change occurred.  SFAS No. 159
becomes effective as of the beginning of the first fiscal year that begins after
November 15, 2007, with early adoption permitted.  However, entities
may not retroactively apply the provisions of SFAS No. 159 to fiscal years
preceding the date of adoption.  The Company is currently evaluating
the impact that SFAS No. 159 may have on the financial position, results of
operations and cash flows of the Company.
  In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. The
objective of SFAS 157 is to increase consistency and comparability in fair value
measurements and to expand disclosures about fair value
measurements.  SFAS 157 defines fair value, establishes a framework
for measuring fair value in generally accepted accounting principles, and
expands disclosures about fair value measurements. SFAS 157 applies under other
accounting pronouncements that require or permit fair value measurements and
does not require any new fair value measurements. The provisions of SFAS No. 157
are effective for fair value measurements made in fiscal years beginning after
November 15, 2007. The adoption of this statement is not expected to have a
material effect on the Company’s future reported financial position or results
of operations.
  In
February 2008, the FASB issued SFAS No. 157-2, “Effective Date of FASB Statement No.
157”.  This FASB Staff Position (FSP) delays the effective date
of FASB Statement No. 157, “Fair Value Measurements”, for non-financial assets
and non-financial liabilities, except for items that are recognized or disclosed
at fair value in the financial statements on a recurring basis (at least
annually) to fiscal years beginning after November 15, 2008.  The
delay is
  7
 
 Patch
International Inc.
 Notes to
the Consolidated Financial Statements
 February
29, 2008 (unaudited)
 3.           RECENT
PRONOUNCEMENTS (Continued)
  intended
to allow the Board and constituents additional time to consider the effect of
various implementation issues that have arisen, or may arise, from the
application of FASB Statement No. 157.
  Statement
161, which amends FASB Statement No. 133,Accounting for Derivative Instruments and
Hedging Activities, requires companies with derivative instruments to
disclose information about how and why a company uses derivative instruments,
how derivative instruments and related hedged items are accounted for under
Statement 133, and how derivative instruments and related hedged items affect a
company's financial position, financial performance, and cash flows. The
required disclosures include the fair value of derivative instruments and their
gains or losses in tabular format, information about credit-risk-related
contingent features in derivative agreements, counterparty credit risk, and the
company's strategies and objectives for using derivative instruments. The
Statement expands the current disclosure framework in Statement 133. Statement
161 is effective prospectively for periods beginning on or after November 15,
2008. The Company plans to provide these additional disclosures in the first
quarter of 2009.
 
 4.           DUE
TO/FROM RELATED PARTIES
  a)
              Related
      parties include former and current directors and officers and companies
      with common management and directorships.  Related party
      accounts are unsecured with no fixed terms of interest.  At
      February 29, 2008, $1,007,785 (May 31, 2007 - $1,009,697) was due from a
      current director of the Company.
  b)
              An
      officer and the then sole director of the Company earned a fee of
      $1,000,000 for the facilitation of the acquisition of the Firebag Oil
      Sands Project owned by in 1289307 Alberta Ltd. (as disclosed in Note 8(b))
      by the Company.  These properties were previously owned by a
      company controlled by this officer who was at the time the sole director
      of the Company.
  The above
transactions have been measured in these financial statements at the exchange
amount which is the amount of consideration established and agreed to by the
related parties.
 
 5.           MARKETABLE
SECURITIES
 
 As a part
of its sale of assets to Great Northern Oilsands Inc. (“GNOS”) (Note 12), the
Company received 1,000,000 Rule 144 restricted common shares of GNOS with a
value of $1,956,990 (CAD$2,100,000).  Effective April 16, 2007, GNOS
announced the forward split of its common stock on a 50 to 1
basis.  As a result, the Company holds 50,000,000 shares of GNOS at
February 29, 2008 with a market value for the shares at February 29, 2008 of
$175,000.The holding loss for the nine month period ended February 29, 2008 is
$729,621.  These shares are held in trust for the Company and have
been classified as marketable securities.
 
 Market
      ValueFebruary
      29, 200850,000,000
      ordinary shares -- Great Northern Oilsands Inc.
                
                $
                175,000
 
 6.           JOINT
VENTURE RECEIVABLE
 
 Pursuant
to the terms of the Farmout Agreement on the Dover (Ells) property, the Company
has earned an 80% working interest in the joint lands by drilling 16 evaluation
wells on the property.  Subsequent to meeting its earning requirements
the Company drilled an additional 3 evaluation wells on the
property.  The Company is responsible for its 80% share of the costs
of these 3 additional evaluation wells and pursuant to the terms of the Farmout
Agreement the Company will finance its joint venture partner for its 20% share
of the costs of these 3 additional evaluation wells.  The joint
venture partner’s share of the additional well costs will be repaid upon the
earlier of the sale of the Company’s interest in the property or 10 years from
the abandonment of these 3 additional wells.  Interest shall accrue on
the outstanding amount at the Bank of Canada’s prime rate plus 1% until the
amount is repaid.  At February 29, 2008, the amount owing to the
Company is $357,660.
 
  8
 Patch
International Inc.
 Notes to
the Consolidated Financial Statements
 February
29, 2008 (unaudited)
  7.           OIL
AND GAS INTERESTS
  February
      29,
                
                
                May
      31,OIL
      AND GAS INTERESTS -- SUCCESSFUL EFFORTS METHOD
                
                2008
                
                
                2007Balance
      beginning of the period
                
                $
                37,658,925
                
                
                $
                2,964,017Expenditures
      and acquisitions
                
                
                1,612,300
                
                
                
                48,457,902Foreign
      currency translation adjustment
                
                
                83,132
                
                
                
                2,108,970Dispositions
                
                
                -
                
                
                
                (2,651,277
                )Depletion,
      depreciation and impairment of oil and gas property
                
                
                1,749,798
                
                
                
                (5,087,858
                )Dry
      well and abandoned interests
                
                
                (536,662
                )
                
                
                (5,664,773
                )Geological
      and geophysical costs
                
                
                (102,281
                )
                
                
                (2,468,056
                )Balance
      end of the period
                
                $
                40,465,212
                
                
                $
                37,658,925
 Effective
December 15, 2006, the Company acquired Damascus Energy Inc. (Note 8(a)) for
total share consideration of $12,442,965.  The Oil and Gas Interests
acquired in this transaction were valued at $23,475,628 with the majority of
this value attributable to the Dover (Ells) Oil Sands
Project.  Through additional drilling and seismic activity, the
Company has earned an 80% working interest on the Dover (Ells)
lands.  Effective January 16, 2007, the Company acquired 1289307
Alberta Ltd. (Note 8(b)).  The Oil and Gas Interests acquired in this
transaction were valued at $5,417,197, all attributable to the Firebag Oil Sands
Project.
 
 Additional
drilling and seismic activity has earned the Company a 75% working interest on
the Firebag lands.
 
 During
the year ended May 31, 2007, the Company disposed of the majority of its
non-core conventional oil and gas asset base in the transaction with Great
Northern Oilsands Inc. (Note 12).  All properties retained by the
Company are classified as unproved properties as no proven reserves
exist.  All activity relating to Oil and Gas Interests by the Company
is located in Canada.
 
 In
accordance with successful efforts accounting for oil and gas interests the
Company has expensed all geological and geophysical costs incurred and the
drilling costs associated with the Firebag properties as the drilling results on
the property did not support recoverability of these costs.  In
addition, the Company has charged to earnings approximately $1.8 million of the
carrying value of its costs of acquiring its interests in the undeveloped
properties of the Company.
 
 8.           ACQUISITIONS
 
 a)
              The
      Company entered into a Share Exchange Agreement dated December 1, 2006,
      with Damascus Energy Inc. (“Damascus”), whereby the Company would acquire
      100% of the issued and outstanding share capital of
      Damascus.  The transaction closed on December 15, 2006, and is
      accounted for using the purchase method.  By acquiring Damascus,
      the Company received the right to earn up to an 80% working interest in
      the Dover Oil Sands Project.  Under the terms of the Share
      Exchange Agreement, because the Company did not have enough authorized
      shares to effect the transaction, Patch Energy Inc. (“Energy”) acquired
      all of the issued and outstanding common shares of Damascus (18,852,978
      common shares) in consideration for one share of Class A Preferred Voting
      Stock of the Company and 9,426,489 shares of Series A Preferred Stock of
      Energy (the “Exchangeable Shares”) that are exchangeable for 9,426,489
      shares of the Company’s common stock.  The Exchangeable Shares
      may be exchanged when the Company has increased its authorized common
      stock, however, no recourse exists should approval not be received by the
      Company allowing for the conversion of the Exchangeable Shares into the
      Company’s common stock.  The shares were valued at $1.32 per
      share based upon the market price of the Company’s common shares at the
      closing date of the transaction.  During the current fiscal
      year, adjustments may be made to finalize the purchase price
      equation.  The president of Damascus, who was also a director of
      Energy prior to the acquisition, was appointed to serve as a director of
      the Company.  During the year ended May 31, 2007, a director of
      Energy received $244,840 (CAD$283,019) in connection with the
      acquisition.
  9
 Patch
International Inc.
 Notes to
the Consolidated Financial Statements
 February
29, 2008 (unaudited)
   8.           ACQUISITIONS
(Continued)
  The purchase price was allocated to the
following assets and liabilities:
 
 Accounts
      receivable
                
                $
                279,368Oil
      and gas interests
                
                
                23,475,628Accounts
      payable and accrued liabilities
                
                
                (7,597,054
                )Other
      current liabilities
                
                
                (427,871
                )Asset
      retirement obligations
                
                
                (73,534
                )Deferred
      income taxes
                
                
                (3,213,572
                )Paid
      by issuance of 9,426,489 shares of Series A preferred stock of Patch
      Energy Inc., and 1 share of Class A preferred voting stock of Patch
      International Inc.
                
                $
                12,442,965
 b)
              The
      Company entered into a Share Exchange Agreement dated December 21, 2006
      with 1289307 Alberta Ltd. (“1289307”), whereby the Company would acquire
      100% of the issued and outstanding share capital of
      1289307.  The transaction closed on January 16, 2007 and is
      accounted for using the purchase method.  By acquiring 1289307
      the Company received the right to earn up to a 75% working interest in the
      Firebag Oil Sands Project.  Under the terms of the Share
      Exchange Agreement, since the Company did not have enough authorized
      shares to effect the transaction, Energy acquired all of the issued and
      outstanding common shares of 1289307 (500,000 common shares) in
      consideration for one share of Class B
Preferred
 
 Voting
Stock of the Company and 500,000 shares of Energy that are exchangeable for
500,000 shares of the Company’s common stock.  The Exchangeable Shares
will be exchanged when the Company has increased its authorized common stock,
however no recourse exists should approval not be received by the Company
allowing for the conversion of the Exchangeable Shares into the Company’s common
stock.  The shares were valued at $1.32 per share, based upon the
market price of the Company’s common shares at the closing date of the
transaction.
 
 The
      purchase price was allocated to the following assets and
      liabilities:
  Accounts
      receivable
                
                $
                1Oil
      and gas interests
                
                
                5,417,197Other
      current liabilities
                
                
                (4,417,197
                )Promissory
      note payable -- Note 4(b)
                
                
                (1,000,000
                )Purchase
      price
                
                $
                1
 
 The
holders of the Series A Preferred shares of Patch Energy Inc. do not have any
voting or economic interest in the operations and assets of Patch Energy
Inc.
 
 The
purchase price, represented by the Series A Preferred Stock of Energy which is
exchangeable into common stock of the Company, as disclosed in both Notes 8 (a)
and (b) totals $12,507,376 (May 31, 2007 - $20,150,772) and is based on the
market price of $1.26 per share on September 14, 2007.  In accordance
with EITF-00-19 “Accounting for Derivative Financial Instruments Indexed to, and
Potentially Settled in a Company’s Own Stock”, the Company determined that share
settlement was not within the control of the Company prior to September 14, 2007
as shareholder approval was required.  As a result of receiving
shareholder approval to increase the authorized capital stock of the Company, at
the Special Meeting of Stockholders held on September 14, 2007, the balance at
this date has been reclassified to stockholder’s equity.
 
  10
 Patch
International Inc.
 Notes to
the Consolidated Financial Statements
 February
29, 2008 (unaudited)
  8.           ACQUISITIONS
(Continued)
 
 Issued
                
                
                Issue
      Price
                
                
                $Exchangeable
      shares:Issued
      on acquisition of Damascus (Note 8(a))
                
                
                9,426,489
                
                
                $
                1.32
                
                
                
                12,442,965Issued
      in conjunction with the acquisition of 1289307 (Note 8(b))
                
                
                500,000
                
                
                $
                1.32
                
                
                
                660,0009,926,489
                
                
                
                
                
                
                
                13,102,965Fair
      value adjustment
                
                
                -
                
                
                
                
                
                
                
                7,047,807Balance,
      May 31, 2007
                
                
                9,926,489
                
                
                
                
                
                
                
                20,150,772Fair
      value adjustment (to September 14, 2007)
                
                
                -
                
                
                
                
                
                
                
                (7,643,396
                )Balance
      - reclassified to stockholder's equity
                
                
                9,926,489
                
                
                
                
                
                
                
                12,507,376
 
 9.           SPECIAL
WARRANTS AND FLOW-THROUGH SPECIAL WARRANTS
 
 On
February 27, 2007, the Company completed a private placement of 8,302,000
Special Warrants at $1.50 per Special Warrant, and 4,653,750 Flow-through
Special Warrants at $1.65 per Flow-through Special Warrant for total gross
proceeds of $20,131,687. Net proceeds of $18,759,033 were received, after
commissions and professional fees paid. Of the Flow-through Special Warrants,
4,408,750 were issued on a brokered basis, and 245,000 were issued on a
non-brokered basis.
 
 Each
Special Warrant entitled the holder to acquire one Unit of the Company, for no
additional consideration.  Each Unit consisted of one share of the
Company’s common stock, subject to the Company increasing its authorized number
of shares of common stock and one common share Bonus Warrant.  Each
Bonus Warrant entitled the holder to receive, without additional consideration,
up to 0.10 shares or 830,200 of the Company’s common stock, subject to the
Company not completing certain filings on or before April 28, 2007 and not, (i)
becoming a “reporting issuer” in any province or territory of Canada; (ii)
having a registration statement declared effective in the United States; and
(iii) having its common stock listed on the TSX Venture Exchange or Toronto
Stock Exchange on or before September 25, 2007.  Financing costs of
$298,872 have been recorded for the year ended May 31, 2007 (May 31, 2006 – Nil)
which represents the market value of the Company’s common stock issued to
satisfy the exercise of the Bonus Warrants at the date the Bonus Warrants became
exercisable.
 
 Each
Flow-through Special Warrant entitled the holder to acquire, for no additional
consideration, one share of the Company’s common stock upon the Company
increasing its authorized number of shares of the Company’s common
stock.
 
 On
September 14, 2007, the Company received shareholder approval to increase its
authorized capital stock and the Special Warrants, Flow-through Special Warrants
and the 166,040 Bonus Warrants which were issuable as the result of the Company
not meeting its April 28, 2007 filing deadlines, as described above, were
converted into 13,121,790 common shares of the Company.  An additional
664,160 Bonus Warrants were converted into 664,160 shares of the Company’s
common stock, without additional consideration, as the September 25, 2007 filing
deadlines were also not met by the Company.
 
 The
Company paid $1,183,646 in cash commissions to the agents and issued
non-transferable agents’ warrants to purchase up to 762,645 shares of the
Company’s common stock at an exercise price of $1.50 per share on the later
of:  (i) February 27, 2008; and (ii) six months from the date the
securities issued under the private placement are free from trading restrictions
in the United States and Canada, but no later than February 27,
2009.  Effective March 14, 2008, 762,645 Agent’s warrants became fully
exercisable.
 
 The fair
value of the Agents’ warrants of $1,281,244 was estimated using the
Black-Scholes option pricing model using the following weighted-average
assumptions: a dividend yield of 0.0%; expected volatility of 138%; risk free
interest rate of 4.54%; and expected life of 2 years.  For the nine
months ended February 29, 2008, $946,853 has been determined to be the fair
value representing the vested portion of the Agents’ warrants and has been
included in financing costs.
 
 Prior to
September 14, 2007, the Company had accounted for the net proceeds received from
the sale of the Special Warrants and the Flow-through Special Warrants and the
value of the Bonus Warrants as a liability on the face of the balance
sheet.  In accordance with EITF–00-19, the Company determined that
share settlement of the Special Warrants, Flow-through Special Warrants and
Bonus Warrants was not within the control of the Company, as shareholder
approval was required, and therefore, the value of these instruments was
classified as a liability and was fair valued at September 14, 2007, using the
market price of $1.26 per share.  Upon receipt of the required
approvals, this amount was reclassified to stockholder’s equity.
 
  11
 Patch
International Inc.
 Notes to
the Consolidated Financial Statements
 February
29, 2008 (unaudited)
  9.           SPECIAL
WARRANTS AND FLOW-THROUGH SPECIAL WARRANTS (Continued)
  Issued
                
                
                Issue
      Price
                
                
                $Special
      Warrants
                
                
                8,302,000
                
                
                $
                1.50
                
                
                
                12,453,000Flow-through
      Special Warrants
                
                
                4,653,750
                
                
                $
                1.65
                
                
                
                7,678,68720,131,687Less:  Commissions
      and professional fees
                
                
                -
                
                
                
                
                
                
                
                (1,372,654
                )Net
      proceeds
                
                
                
                
                
                
                
                
                
                
                18,759,033Agent's
      Warrants
                
                
                762,645
                
                
                
                
                
                
                
                334,391Bonus
      warrants
                
                
                166,040
                
                
                
                
                
                
                
                298,87213,884,435
                
                
                
                
                
                
                
                19,392,296Fair
      value adjustments:Special
      Warrants and Flow-through Special Warrants
                
                
                -
                
                
                
                
                
                
                
                7,113,196Agent's
      Warrants
                
                
                -
                
                
                
                
                
                
                
                (37,819
                )Bonus
      Warrants
                
                
                -
                
                
                
                
                
                
                
                38,189Balance,
      May 31, 2007
                
                
                13,884,435
                
                
                
                
                
                
                
                26,505,862Agent's
      warrants
                
                
                -
                
                
                
                
                
                
                
                370,137Fair
      value adjustments:Special
      Warrants and Flow-through Special Warrants
                
                
                -
                
                
                
                
                
                
                
                (10,920,639
                )Agent's
      Warrants
                
                
                -
                
                
                
                
                
                
                
                (127,850
                )Bonus
      Warrants
                
                
                -
                
                
                
                
                
                
                
                (185,006
                )Balance,
      September 14, 2007
                
                
                13,884,435
                
                
                
                
                
                
                
                15,642,504
  10.           ASSET
RETIREMENT OBLIGATIONS
 
 The total
future asset retirement obligation was estimated by management based on the
Company’s net ownership in wells and facilities, estimated costs to reclaim and
abandon wells and facilities and the estimated timing of the costs to be
incurred in future periods.  At February 29, 2008, the total
undiscounted value of the total asset retirement obligation is estimated to be
$166,835.  These payments are expected to be made over the next 3
years.  The Company’s credit adjusted risk free rate of 6.5 percent
and an inflation rate of 3.0 percent were used to calculate the present value of
the asset retirement obligation.
 
 The
following table reconciles the Company’s asset retirement
obligations:
 
 For
      the nine
                
                
                For
      the yearmonths
      ended
                
                
                endedFebruary
      29, 2008
                
                
                May
      31, 2007Asset
      retirement obligations, beginning of period
                
                $
                129,959
                
                
                $
                34,379Liabilities
      acquired
                
                
                -
                
                
                
                73,534Revisions
                
                
                12,842
                
                
                
                20,858Accretion
                
                
                7,360
                
                
                
                1,188Asset
      retirement obligations, end of period
                
                $
                150,161
                
                
                $
                129,959
 
  12
 Patch
International Inc.
 Notes to
the Consolidated Financial Statements
 February
29, 2008 (unaudited)
  11.           STOCK-BASED
COMPENSATION
 
 A summary
of the Company’s stock option activity is as follows:
 
 For
      the nine months ended
                
                
                For
      the year endedFebruary
      29, 2008
                
                
                May
      31, 2007Weighted
                
                
                
                
                
                WeightedStock
      Options
                
                Number
      of
                
                
                Average
                
                
                Number
      of
                
                
                AverageOptions
                
                
                Exercise
      Price
                
                
                Options
                
                
                Exercise
      PriceBalance,
      beginning of period
                
                
                3,225,000
                
                
                $
                1.40
                
                
                
                2,272,500
                
                
                $
                0.75Granted
                
                
                1,490,000
                
                
                
                0.40
                
                
                
                4,265,000
                
                
                
                1.33Expired
                
                
                -
                
                
                
                -
                
                
                
                (300,000
                )
                
                
                0.39Forfeited
                
                
                (465,000
                )
                
                
                1.80
                
                
                
                (672,500
                )
                
                
                0.60Cancelled
                
                
                -
                
                
                
                -
                
                
                
                (750,000
                )
                
                
                1.20Exercised
                
                
                -
                
                
                
                -
                
                
                
                (1,590,000
                )
                
                
                0.72Balance,
      end of period
                
                
                4,250,000
                
                
                $
                1.01
                
                
                
                3,225,000
                
                
                $
                1.40
 
 As at
February 29, 2008, the weighted average remaining contractual life of the
outstanding options is 4.25 years.
 
 During
the nine months ended February 29, 2008, stock-based compensation amounting to
$986,874 (February 28, 2007 - $2,384,676) was recorded.
 
 During
the nine-month period ended February 29, 2008, 1,490,000 options were granted
with a fair value of $0.26 which was estimated using the Black-Scholes option
pricing model using the following weighted average assumptions: a dividend yield
of 0.0%, expected volatility of 124%, risk free interest rate of 4.0%, and
expected life of 3.0 years.
 
 The
weighted average fair value of the options granted during the year ended May 31,
2007 was $1.73 and was estimated using the Black-Scholes option pricing model
using the following weighted-average assumptions: a dividend yield of 0.0%;
expected volatility of 148%; risk free interest rate of 4.59%; and expected life
of 5.0 years.
 
 A total
of 683,333 options, with an exercise price of $1.20 per option are
vested.  The remaining 3,566,667 outstanding options at February 29,
2008 are non-vested and will vest one-third on each of the first, second and
third anniversaries from the date the option is granted.
 
 12.           DISCONTINUED
OPERATIONS
 
 On March
8, 2007, the Company completed a disposition of the majority of the Company’s
conventional oil and gas properties in Western Canada to Great Northern Oilsands
Inc.  The Company received cash, before transaction costs, of $778,590
(CAD$900,000) and 1,000,000 Rule 144 restricted shares of Great Northern
Oilsands Inc.  The shares received were valued at $1,816,710
(CAD$2,100,000) at the date of the transaction, for total consideration of
$2,595,300 (CAD$3,000,000).
 
 The
results of discontinued operations are summarized as follows:
  For
      the nine months endedFebruary
      29,2008
                
                
                2007$
                
                
                
                $Revenue:Oil
      and Gas
                
                
                -
                
                
                
                87,581Expenses
                
                
                -
                
                
                
                28,206Net
      operating income from discontinued operations
                
                
                -
                
                
                
                59,375
 
  13
 Patch
International Inc.
 Notes to
the Consolidated Financial Statements
 February
29, 2008 (unaudited)
  13.           OTHER
COMPREHENSIVE INCOME / (LOSS)
 
 Components
of other comprehensive income (loss) are as follows:
  For
      the nine months endedFebruary
      29, 2008Before
      Tax Amount
                
                
                Tax
      (Expense) or Benefit
                
                
                Net-of-Tax
      AmountForeign
      currency translation adjustment
                
                $
                62,381
                
                
                $
                -
                
                
                $
                62,381Other
      comprehensive income
                
                $
                62,381
                
                
                $
                -
                
                
                $
                62,381For
      the nine months endedFebruary
      28, 2007Before
      Tax Amount
                
                
                Tax
      (Expense) or Benefit
                
                
                Net-of-Tax
      AmountMarketable
      securities:Decrease
      in unrealized gain on marketable securities
                
                $
                (10,344,284
                )
                
                $
                3,103,285
                
                
                $
                (7,240,999
                )Holding
      gain
                
                
                -
                
                
                
                -
                
                
                
                -(Decrease)
      in unrealized gain on marketable securities
                
                
                (10,344,284
                )
                
                
                3,103,285
                
                
                
                (7,240,999
                )comprehensive
      incomeForeign
      currency translation adjustment
                
                
                (179,734
                )
                
                
                -
                
                
                
                (179,734
                )Other
      comprehensive income (loss)
                
                $
                (10,524,018
                )
                
                $
                3,103,285
                
                
                $
                (7,420,733
                )
 
 14.           COMMITMENTS
AND CONTINGENCIES
 
 The
Company has entered into lease arrangements for office space to June
2009.  The future minimum lease payments total $335,491.
 
 For the year ended May 31,2008
                
                
                2009
                
                
                2010$
                61,800
                
                
                $
                252,638
                
                
                $
                21,053
 
 Subsequent
to February 29, 2008, the Company terminated the lease agreement.
 
 The
Company has received several claims relating to work performed with respect to
its planned 2007/2008 winter drilling program.  These claims total
$2.4 million.  As these activities were not authorized by the Company,
it is management’s view that the claims are without merit.  Amounts
paid, if any, by the Company to settle this dispute will be recorded when the
amounts become known.
 
  14
  Item
2.                      Management’s
Discussion and Analysis or Plan of Operation





The
following discussion of the financial condition and results of operations for
Patch International Inc. (“we,” “us,” or “our”) should be read in conjunction
with the accompanying financial statements and related footnotes and our
financial statements and related footnotes for the periods ended May 31, 2007
included in our Annual Report on Form 10-KSB.





Accounting
Policies





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





Recent
Pronouncements





In
February 2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
157-2, “Effective Date of FASB Statement No. 157”.  This FASB Staff
Position (FSP) delays the effective date of FASB Statement No. 157, “Fair Value
Measurements”, for non-financial assets and non-financial liabilities, except
for items that are recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually) to fiscal years beginning
after November 15, 2008.  The delay is intended to allow the Board and
constituents additional time to consider the effect of various implementation
issues that have arisen, or may arise, from the application of FASB Statement
No. 157.





Statement
161, which amends FASB Statement No. 133, Accounting for Derivative Instruments
and Hedging Activities, requires companies with derivative instruments to
disclose information about how and why a company uses derivative instruments,
how derivative instruments and related hedged items are accounted for under
Statement 133, and how derivative instruments and related hedged items affect a
company's financial position, financial performance, and cash flows. The
required disclosures include the fair value of derivative instruments and their
gains or losses in tabular format, information about credit-risk-related
contingent features in derivative agreements, counterparty credit risk, and the
company's strategies and objectives for using derivative instruments. The
Statement expands the current disclosure framework in Statement
133.  Statement 161 is effective prospectively for periods beginning
on or after November 15, 2008.  We plan to provide these additional
disclosures in the first quarter of 2009.





In
December 2007, the FASB issued SFAS 141R, “Business Combinations” and SFAS 160,
“Non-Controlling Interests in Consolidated Financial Statements”.  The
new statements require most identifiable assets, liabilities, non-controlling
interests, and goodwill acquired in a business combination to be recorded at
“full fair value” and require non-controlling interests to be reported as a
component of equity, which changes the accounting or transactions with
non-controlling interest holders.  The new statements are a joint
project with the IASB.  Both statements are effective for periods
beginning on or after December 15, 2008.  Management is in the process
of reviewing the requirements of this recent statement.





In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial
Assets and Financial Liabilities—Including an Amendment of FASB Statement No.
115.”  This pronouncement permits entities to use the fair value
method to measure certain financial assets and liabilities by electing an
irrevocable option to use the fair value method at specified election
dates.  After election of the option, subsequent changes in fair value
would result in the recognition of unrealized gains or losses as period costs
during the period the change occurred.  SFAS No. 159 becomes effective as
of the beginning of the first fiscal year that begins after November 15, 2007,
with early adoption permitted.  However, entities may not
retroactively apply the provisions of SFAS No. 159 to fiscal years






15
 
  preceding
the date of adoption.  The Company is currently evaluating the impact
that SFAS No. 159 may have on the financial position, results of operations and
cash flows of the Company.





In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. The
objective of SFAS 157 is to increase consistency and comparability in fair value
measurements and to expand disclosures about fair value
measurements.  SFAS 157 defines fair value, establishes a framework
for measuring fair value in generally accepted accounting principles, and
expands disclosures about fair value measurements.  SFAS 157 applies
under other accounting pronouncements that require or permit fair value
measurements and does not require any new fair value
measurements.  The provisions of SFAS No. 157 are effective for fair
value measurements made in fiscal years beginning after November 15,
2007.  The adoption of this statement is not expected to have a
material effect on the Company’s future reported financial position or results
of operations.





Results
of Operations





On March
8, 2007, we sold the majority of our conventional oil and gas properties (see
Note 12 of the Notes to Consolidated Financial Statements).  As a
result, net operating revenue derived from the properties disposed of in this
transaction were reclassified into Discontinued Operations for the three- and
nine-month periods ended February 28, 2007.





Three Months
Ended February 29, 2008.  Our one minor property, at MacLeod,
Alberta, Canada, did not produce for the majority of the three-month period
ended February 29, 2008, generating revenue of $45.  Oil and gas
production expenses, comprised mainly of fixed costs, totaled $10,269 for a net
operating loss of $10,224.  This compared to a net operating loss of
$3,993 during the three-month period ended February 28, 2007.  The
properties which were included in the disposition to Great Northern Oilsands
Inc. generated operating income of $29,959 during the three-month period ended
February 28, 2007.





General
and administrative costs for the three-month period ended February 29, 2008
totaled $872,058 compared to $2,761,088 during the same period of
2007.  The decrease in general and administrative costs relates to a
reduction in non-cash charges combined with our decreased activity
levels.  The non-cash component, related to stock-based compensation,
included in general and administrative costs totaled $215,738 for the three
months ended February 29, 2008 compared to $1,830,033 during the same period the
previous year.  At February 29, 2008, we have a total of 4,250,000
stock options issued and outstanding with a weighted average exercise price of
$1.01 and a remaining contractual life of 4.25 years.  At February 29,
2008, 683,333 stock options, with an exercise price of $1.20 per stock option,
were vested.  The balance of the decrease in general and
administrative costs is attributed to reduced activity levels during the
quarter.





During
the three-month period ended February 29, 2008, we recorded interest expense of
$111,295 (2007 – Nil) which represents the accrued interest charges on the
outstanding income tax payable amount.  The income tax payable relates
to the Australian taxes payable on the prior year gain from the sale of the
Pharmaxis Ltd. shares.





Depletion,
depreciation, accretion and impairment of oil and gas interests, dry hole costs
and geological and geophysical costs totaled $1,738,237 during the three months
ended February 29, 2008 compared to $1,299,067 during the three-month period
ended February 28, 2007.  Included for the three-month period ended
February 29, 2008, was a charge for impairment of oil and gas interests of
$1,719,023, reflecting a reduction in the market value of our undeveloped
lands.  In accordance with the guidelines surrounding successful
efforts method of accounting we have expensed all geological and geophysical
costs incurred and dry hole costs (primarily associated with the Firebag Oil
Sands Project).





During
the three months ended February 29, 2008, we earned interest and other income of
$20,218 compared to an expense of $38,075 during the same three-month period in
2007.  Interest income was earned primarily through the short-term
investment of available cash balances.





We
recorded financing costs of $306,231 during the three months ended February 29,
2008.  These costs are associated with the amortization of the
Black-Scholes fair value of the Agents’ Warrants issued in connection with the
private placement of Special Warrants and Flow-through Special
Warrants.





16


We
recorded a holding loss on marketable securities of $56,871 relating to the
shares that we hold in Great Northern Oilsands Inc. (as described in Note 5 of
the Consolidated Financial Statements).


We
recorded a gain on foreign exchange of $957,037 during the three-month period
ended February 29, 2008 as a result of the appreciation in the value of the
Canadian dollar in comparison to the United States dollar.





During
the three-month period ended February 28, 2007, we recorded a gain before
applicable taxes of $6,074,719 on the sale of 2,791,937 Pharmaxis Ltd.
shares.  As of May 31, 2007, we did not own any shares of Pharmaxis
Ltd. and we were not involved in any transactions during the three-month period
ended February 29, 2008 which involved Pharmaxis Ltd. shares.





A foreign
exchange loss of $200,040 was recorded for the three-month period ended February
29, 2008, relating to the Australian taxes payable on the prior year gain from
the sale of the Pharmaxis Ltd. shares.





Net loss
for the period was $1,585,476 ($0.04 per share basic and diluted) compared to
net income of $1,412,929 ($0.07 per share basic and diluted) for the three
months ended February 28, 2007.





Other
comprehensive income comprised a foreign currency translation adjustment loss of
$40,704 for the three-month period ended February 29, 2008, as compared to a
loss of $119,035 in the same period in 2007.  During the three-month
period ended February 28, 2007, we also recorded a holding loss of $2,094,768
and a loss of $2,617,231 on the reclassification of the Pharmaxis Ltd shares to
realized gain.





Comprehensive
loss for the three months ended February 29, 2008 is $1,626,180 as compared to a
comprehensive loss of $3,418,105 during the three-month period ended February
28, 2007.





Nine Months Ended
February 29, 2008.  We continue to hold one minor producing
property, at MacLeod, Alberta, Canada, and during the nine-month period ended
February 29, 2008, this property generated revenue of $8,177 and incurred oil
and gas production and royalty expense of $54,840 for a net operating loss of
$46,663.  This compared to net operating loss of $517 during the
nine-month period ended February 28, 2007.  The properties which were
included in the disposition to Great Northern Oilsands Inc. generated operating
income of $83,024 during the nine-month period ended February 28,
2007.





General
and administrative costs for the nine-month period ended February 29, 2008
totaled $2,919,070 compared to $4,387,829 during the same period of
2007.  The decrease in general and administrative costs relates to a
reduction in non-cash charges combined with our decreased activity
levels.  The non-cash component, related to stock-based compensation,
included in general and administrative costs totaled $986,874 for the nine
months ended February 29, 2008 compared to $2,384,676 during the same period the
previous year.   The balance of the decrease in general and
administrative costs is attributed to reduced activity levels during the
period.





During
the nine-month period ended February 29, 2008 we recorded interest expense of
$111,295 (2007 – Nil) which represents the accrued interest charges on the
outstanding income tax payable amount.  The income tax payable relate
to the Australian taxes payable on the prior year gain from the sale of the
Pharmaxis Ltd. shares.





Depletion,
depreciation, accretion and impairment of oil and gas interests, dry hole costs
and geological and geophysical costs totaled $2,388,741 during the nine months
ended February 29, 2008 compared to $1,339,606 during the nine-month period
ended February 28, 2007.  Included for the nine-month period ended
February 29, 2008, was a charge for impairment of oil and gas interests of
$1,719,023, reflecting a reduction in the market value of our undeveloped
lands.  In accordance with the guidelines surrounding successful
efforts method of accounting we have expensed all geological and geophysical
costs incurred and dry hole costs (primarily associated with the Firebag Oil
Sands Project).





We earned
interest and other income of $119,512 in the nine-month period ended February
29, 2008 compared to $112,671 during the same nine-month period in
2007.  Interest income was earned primarily through the short-term
investment of available cash balances.





17


We
recorded financing costs of $946,853 during the nine months ended February 29,
2008.  These costs are associated with the amortization of the
Black-Scholes fair value of the Agents’ Warrants issued in connection with the
private placement of Special Warrants and Flow-through Special
Warrants.


We
recorded a holding gain of $18,178,828 resulting from the difference between the
fair market value of the Exchangeable Shares, Special Warrants, Flow-through
Special Warrants, Agents’ Warrants, and Bonus Warrants at September 14, 2007 and
the recorded values at May 31, 2007.





We
recorded a holding loss on marketable securities of $729,621 relating to the
shares that we hold in Great Northern Oilsands Inc. (as described in Note 5 of
the Consolidated Financial Statements).





We
recorded a gain on foreign exchange of $3,870,352 during the nine-month period
ended February 29, 2008 as a result of the appreciation in the value of the
Canadian dollar in comparison to the United States dollar.





During
the nine-month period ended February 28, 2007, we recorded a gain before
applicable taxes of $13,684,318 on the sale of 6,791,937 Pharmaxis Ltd.
shares.  As of May 31, 2007, we did not own any shares of Pharmaxis
Ltd. and we were not involved in any transactions during the nine-month period
ended February 29, 2008 which involved Pharmaxis Ltd. shares.





A foreign
exchange loss of $389,542 was recorded for the nine-month period ended February
29, 2008, relating to the Australian taxes payable on the prior year gain from
the sale of the Pharmaxis Ltd. shares.





Net
income for the period was $14,925,825 ($0.43 per share basic and $0.38 per share
diluted) compared to $5,284,034 ($0.31 per share basic and diluted) for the nine
months ended February 28, 2007.  As described above, net income for the
nine-month period ended February 29, 2008 includes a one-time holding gain of
$18,178,828.





Other
comprehensive income comprised a foreign currency translation adjustment gain of
$62,381 in 2008, compared to a loss of $179,734 in 2007.





Comprehensive
income for the nine months ended February 29, 2008 is $14,988,206 as compared to
a comprehensive loss of $2,136,699 during the nine-month period ended February
28, 2007.





Liquidity
and Capital Resources





For the
three and nine months ended February 29, 2008, we used cash of $846,739 and
$4,367,325 compared to $11,277,305 and $11,871,715 during the same periods in
2007 from our operating activities.  Investing activities during 2008
include the purchase of equipment for $38,132 and an investment in our oil and
gas properties totaling $1,612,300 ($973,357 net of dry hole costs and
geological and geophysical costs).  This compares to an investment of
$14,167,400 in our oil and gas properties for the nine-month period ended
February 28, 2007.  Also for the nine-month period ended February 28,
2007 we realized gross proceeds on the sale of available-for-sale Pharmaxis
securities of $13,684,319 compared to Nil in 2008.





There
were Nil funds generated from financing in the nine-month period ended February
29, 2008 as compared to $22,391,713 during the same period in
2007.  We used $6,309 to acquire shares of our common stock under our
stock repurchase plan in 2007 compared to Nil in 2008.





On
September 14, 2007, the shareholders of the Company approved the increase in the
authorized capital stock of the Company.  As a result the Special
Warrants, Flow-through Special Warrants and Bonus Warrants were converted, for
no additional consideration, into 13,785,950 common shares of the
Company.  As of February 29, 2008 the Company has a total of
34,025,724 common shares issued and outstanding.  In addition, the
9,926,489 Exchangeable Shares of the Company which were issued on the
acquisition of Damascus Energy Inc. and 1289307 Alberta Ltd. were reclassified
on the balance sheet to Stockholders’ Equity.  These shares are
exchangeable into common stock of the Company, for no additional consideration,
upon direction by the exchangeable shareholder.





At
February 29, 2008, we had a working capital deficiency of $2,530,316 as compared
to a surplus of $1,148,501 as of May 31, 2007.  We no longer own any
shares of Pharmaxis Ltd., as these were all sold prior to May






18
 
  31,
2007.  We hold 50,000,000 shares of Great Northern Oilsands Inc. with
a market value at February 29, 2008 of $175,000.





Additional
financing will be required to fund future capital expenditures and to pay our
corporate obligations over the next 12 months.





The
financial statements have been prepared on a going concern
basis.  Additional funding will be required to cover the
administrative costs of the Company for the upcoming year and for expenditures
connected with the acquisition, exploration and appraisal of new and existing
oil and gas projects.





The
ultimate development of the Company’s oil and gas projects, if proven
commercial, will require additional funding.  The Company’s future
operations are dependent upon its ability to obtain additional funding and
ultimately achieve profitable operations.  The Company intends to
explore the availability of obtaining additional funding and the magnitude of
its discretionary capital expenditure program will be dependent on such
funding.  The outcome of these matters cannot be predicted with
certainty at this time.  The financial statements do not include any
adjustments to the amounts and classification of assets and liabilities that may
be necessary should the Company be unable to secure additional funding or
achieve profitable operations.





On
January 22, 2008, we announced that the board of directors has unanimously
approved a process to review strategic alternatives to maximize shareholder
value. The board of directors has retained CIBC World Markets Inc. (“CIBC World
Markets”) as its exclusive financial advisor to assist in exploring strategic
alternatives. These alternatives may include the sale of the company, merger,
reorganization or such other alternatives that are considered to be in the best
interest of Patch shareholders.  The Board of Directors remains
committed to maximizing shareholder value as a result of this process. The
process has yielded a number of competitive proposals, which are under review by
the Board of Directors.  Negotiations with potential counterparties
are underway.  However, there is no assurance that a definitive
agreement will be reached.





Contractual
Obligation





In
November 2007, we entered into a lease arrangement for office space to June
2009.  The future minimum lease payments for the year ended May 31,
2008 are $61,800, May 31, 2009 - $252,638 and May 31, 2010 $21,053 for a total
lease obligation of $335,491.  Subsequent to February 29, 2008, the
Company terminated the lease agreement.





Plan
of Operation





As
discussed above, on January 22, 2008, we retained CIBC World Market to assist in
the process to review and explore strategic alternatives.  These
alternatives may include the sale of the company, merger, reorganization, or
such other alternatives that are considered to be in the best interest of Patch
shareholders.  During the nine months ended February 28, 2008, we
expended $1,650,432 on equipment and exploration of our
properties.  We believe that significant additional financing is
required to continue to develop our properties.  We believe that
engaging in a strategic alternative, such as selling or merging our Company with
another entity, will improve our financing options and accelerate the
development of our properties.  We are reviewing several possible
candidate companies as sale or merger prospects.  There can be no
assurances that we will be able to complete a strategic alternative transaction,
such as sale or merger of our Company.





We
believe that changing our jurisdiction of incorporation will improve our ability
to enter into a strategic alternative transaction.  We believe that
investment interest in our Company and properties is from Canadian sources, and
any strategic transaction will be with Canadian entities.  As such, on
March 24, 2008, we filed a Registration Statement on Form S-4 outlining a
proposal for our voting stockholders to consider and to vote upon a proposal to
change the Company’s jurisdiction of incorporation from Nevada to Alberta,
Canada by adopting certain resolutions and a plan of conversion under Chapter
92A of the Nevada Revised Statues.  If approved, stock in our Company,
a Nevada corporation, will be exchanged for stock of our relocated Company, an
Alberta corporation.  Approval of the change of jurisdiction requires
the affirmative vote of at least a majority of the outstanding Voting
Stock.





19


We have
received, from the TSX Venture Exchange (the “Exchange”) conditional approval
for the listing of our common shares on the Exchange.  The listing of
the shares is conditional on us fulfilling certain requirements.





If we are
unsuccessful in completing a strategic alternative transaction, we may seek
other options to allow us to continue the development of our
properties.  We are still evaluating the options that may be available
to us to accomplish such development.  If we do develop the properties
ourselves, we intend to focus on the oil sands lease development within the Ells
River area.  Such activity will focus on further exploration,
delineation and development of the Ells River asset in preparation for a
comprehensive SAGD pilot plant application to the Alberta Energy and Utilities
Board and Alberta Environment.  In addition to the exploration, we
will also need to perform a series of tests to ascertain the viable source for
water as part of the SAGD application and development plans.  Within
the Muskwa property, exploration activities may include drilling and testing of
oil samples for viscosity and pressure transient analysis.





Forward-Looking
Statements





Certain
statements in this Quarterly Report on Form 10-QSB and our Annual Report on Form
10-KSB for our fiscal year ended May 31, 2007, as well as statements made by us
in periodic press releases and oral statements made by our officials to analysts
and shareholders in the course of presentations about our company, constitute
“forward-looking statements.”  Such forward-looking statements involve
known and unknown risks, uncertainties, and other factors that may cause the
actual results, our performance or achievements 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) required accounting
changes; and (5) other factors over which we have little or no
control.





Item
3.                      Controls
And Procedures





We have
adopted an internal control system that is designed to provide reasonable
assurance to management and the board of directors that the financial statements
present fairly its financial position and activities. The system was designed by
management, which is responsible for establishing and maintaining adequate
internal controls over the Company’s financial reporting.





The
Company’s Chief Operating Officer and Interim Chief Financial Officer evaluated
the overall design of internal control procedures during the period ended
February 29, 2008, and concluded that, because of its recent growth and the
inherent complexity of the accounting for some of its transactions, the Company
does not have sufficient specialized knowledge to address certain technical and
complicated accounting issues.  During the period, the Company has
from time-to-time utilized the services of consultants which have provided
specialized financial reporting and taxation skills (who are independent of
management and the Company’s auditors) to assist the Company with its financial
reporting of complex accounting issues and with its tax provision
calculations.  We have identified conditions that we believe are
material weaknesses in internal controls due to a lack of segregation of duties
in accounting and financial reporting activities as a result of the limited
number of Company employees engaged in the authorization, recording, processing
and reporting of transactions.  As a remedy to these deficiencies the
Chief Operating Officer and Interim Chief Financial Officer perform periodic
reviews of financial information to ensure that transactions are properly
recorded.  During the period we have continued to implement a number
of steps to establish a stronger control environment which will reduce the
opportunity to override internal controls.  Dual signatures are
required for all checks issued and we have implemented a more formal process for
the approval of all disbursements.  The implementation of these
internal controls has resulted in improved internal control over financial
reporting for the Company.





Under the
supervision and with the participation of our management, including our Chief
Operating Officer and Interim Chief Financial Officer, we conducted an
evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934) as of February 29, 2008 (the “Evaluation
Date”).  Based on this evaluation, our Chief Executive Officer and
Interim Chief Financial Officer concluded that, as of the Evaluation Date, due
to the material weaknesses in internal controls identified above our disclosure
controls and procedures are not effective.  Our management has
determined that all matters to be disclosed in this report have been fully and
accurately reported.





20


As of
December 31, 2007, our Chief Financial Officer resigned.  However, our
former Chief Financial Officer will continue in a consulting capacity for a
transition period in order to fulfill our financial accounting and reporting
obligations.  Furthermore, we plan to continue our use of consultants
to provide specialized accounting and reporting skills in order to strengthen
our internal and disclosure controls and procedures.





21


PART
II – OTHER INFORMATION





Item
1.                      Legal
Proceedings





Not
Applicable.





Item
2.                      Unregistered
Sales of Equity Securities and Use of Proceeds





On
January 24, 2008, we issued options to purchase 1,500,000 shares of common stock
at $0.40 per share to officers, directors and consultants in consideration for
services to be rendered to our Company.  The options have a 5-year
life and vest by thirds on each of the three anniversaries of the date of
grant.  The options were issued pursuant to Section 4(2) of the
Securities Act of 1933 and/or Rule 506 promulgated thereunder or Regulation S,
as certain sales were made in “offshore transactions.”





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
            Exhibit2.1
            Arrangement
      Agreement made among Praxis Pharmaceuticals Inc. and Patch Energy Inc.
      dated as of October 20, 2003 (1)2.2
            Articles
      of Merger Merging Praxis Pharmaceuticals Inc., a Utah Corporation, into
      Patch International Inc., a Nevada Corporation (2)2.3
            Share
      Exchange Agreement among the shareholders of Damascus Energy Inc., Patch
      Energy Inc., Patch International Inc., and Damascus Energy Inc. dated
      December 15, 2006 (3)2.4
            Share
      Exchange Agreement among the shareholders of 1289307 Alberta Ltd., Patch
      Energy Inc., Patch International Inc., and 1289307 Alberta Ltd. dated
      January 16, 2007 (4)3.1
            Articles
      of Incorporation, as amended (5)3.2
            Bylaws
      (5)3.3
            Certificate
      of Change Pursuant to NRS 78.209 (6)3.4
            Certificate
      of Change Pursuant to NRS 78.209 (7)3.5
            Certificate
      of Amendment to Articles of Incorporation (8)4.1
            Certificate
      of Designation of Class A Preferred Voting Stock (3)4.2
            Certificate
      of Designation of Class B Preferred Voting Stock (4)4.3
            Form
      of Non-Flow-Through Special Warrant Certificate (9)4.4
            Form
      of Flow-Through Special Warrant Certificate (9)4.5
            Form
      of Bonus Warrant Certificate (9)4.6
            Form
      of Agent Warrant Certificate (9)10.1
            Management
      services agreement with David Stadnyk dated May 1, 2005
  (5)10.2
            Change
      of Control Agreement with David Stadnyk dated May 1, 2005
    (5)10.3
            2006
      Stock Option Plan (10)10.4
            Exchange
      and Voting Trust Agreement among Patch International Inc., Patch Energy
      Inc., 1286664 Alberta Ltd., and the shareholders of Damascus Energy Inc.
      dated December 15, 2006 (3)






22


Regulation
              S-B
      Number
            Exhibit


10.5
            Support
      Agreement among Patch International Inc., Patch Energy Inc., and 1286664
      Alberta Ltd. dated December 15, 2006 (3)10.6
            Farmout
      Agreement Between Damascus Energy Inc. and Bounty Developments Ltd. dated
      November 30, 2006 (11)10.7
            Exchange
      and Voting Trust Agreement among Patch International Inc., Patch Energy
      Inc., 1286664 Alberta Ltd., and the shareholders of 1289307 Alberta Ltd.
      dated January 16, 2007 (4)10.8
            Support
      Agreement among Patch International Inc., Patch Energy Inc., and 1286664
      Alberta Ltd. dated January 16, 2007 (4)10.9
            Farmout
      Agreement dated December 12, 2006 (4)10.10
            Conveyance
      Agreement among 1289307 Alberta Ltd and 1286664 Alberta Ltd. dated
      December 21, 2006 (4)10.11
            Demand
      Promissory Note issued by 1289307 Alberta Ltd to 1286664 Alberta Ltd.
      dated December 21, 2006 (4)10.12
            Amending
      Agreement between Bounty Developments Ltd., 1286664 Alberta Ltd., and
      Damascus Energy Inc. dated January 22, 2007 (4)10.13
            Agency
      Agreement among Patch International Inc., Canaccord Capital Corporation
      and Wellington West Capital Markets Inc. dated February 27, 2007
      (9)10.14
            Amending
      Agreement between Bounty Developments Ltd., 1286664 Alberta Ltd., and
      Damascus Energy Inc. dated February 20, 2007 (11)10.15
            Amending
      Agreement between Bounty Developments Ltd. and 1286664 Alberta Ltd., dated
      April 16, 2007 (11)10.16
            Confirmation
      of Earning between Damascus Energy Inc. and Bounty Developments Ltd. dated
      April 16, 2007 (11)10.17
            2007
      Stock Option Plan (12)16
            Letter
      from Morgan & Company dated March 8, 2007 (13)31.1
            Rule
      13a-14(a) Certification of Principal Executive Officer and Principal
      Financial Officer32.1
            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 registrant’s current report on
      Form 8-K dated March 15, 2004, filed March 19,
  2004.


(2)
            Incorporated
      by reference to the exhibit filed with the registrant’s current report on
      Form 8-K dated June 15, 2004, filed June 15,
  2004.


(3)
            Incorporated
      by reference to the exhibits filed with the registrant’s current report on
      Form 8-K dated December 15, 2006, filed December 26,
  2006.


(4)
            Incorporated
      by reference to the exhibits filed with the registrant’s current report on
      Form 8-K dated January 16, 2007, filed February 6,
  2007.


(5)
            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, filed September 14,
      2005.


(6)
            Incorporated
      by reference to the exhibits filed with the registrant’s current report on
      Form 8-K dated July 8, 2005, filed July 19,
  2005.


(7)
            Incorporated
      by reference to the exhibits filed with the registrant’s current report on
      Form 8-K dated March 14, 2006, filed March 14,
  2006.


(8)
            Incorporated
      by reference to the exhibit filed with the registrant’s current report on
      Form 8-K dated September 14, 2007, filed September 17,
    2007.


(9)
            Incorporated
      by reference to the exhibits filed with the registrant’s current report on
      Form 8-K dated February 27, 2007, filed March 1,
  2007.


(10)
            Incorporated
      by reference to the exhibits filed with the registrant’s annual report on
      Form 10-KSB for the fiscal year ended May 31, 2006, filed August 24,
      2006.


(11)
            Incorporated
      by reference to the exhibits filed with the registrant’s quarterly report
      on Form 10-QSB for the quarter ended February 28, 2007, filed April 30,
      2007.


(12)
            Incorporated
      by reference to the exhibits filed with the registrant’s current report on
      Form 8-K/A dated September 14, 2007, filed November 15,
    2007.






23






(13)
            Incorporated
      by reference to the exhibits filed with the registrant’s current report on
      Form 8-K dated March 3, 2007, filed March 9,
  2007.








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.Date:  April
      15, 2008
            By:/s/ Jason G.
      DagenaisJason G. Dagenais, Chief
      Operating Officerand Interim Chief Financial
      Officer