UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

(Mark One)
[X]      QUARTERLY  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
         ACT OF 1934 For the quarterly period ended: NOVEMBER 30, 2006

[ ]      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         (IRS Employer Identification No.)
      incorporation or organization)


       SUITE 300, 441 - 5TH AVENUE S.W., CALGARY, ALBERTA, CANADA T2P 2V1
                    (Address of principal executive offices)

                                 (403) 441-4390
                           (Issuer's telephone number)

      1220 - 666 BURRARD STREET, VANCOUVER, BRITISH COLUMBIA V6C 2X8 CANADA
              (Former name, former address and former fiscal year,
                         if changed since last report)

       Check whether the issuer (1) filed all reports required to be filed
      by Section 13 or 15(d) of the Exchange Act during the past 12 months
      (or for such shorter period that the registrant was required to file
      such reports), and (2) has been subject to such filing requirements
                      for the past 90 days. Yes [X] No [ ]

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

    State the number of shares outstanding of each of the issuer's classes of
                common equity, as of the latest practicable date:
            15,791,774 SHARES OF COMMON STOCK, $.001 PAR VALUE, AS OF
                                NOVEMBER 30, 2006


  Transitional Small Business Disclosure Format (check one);  Yes [  ] No [X]


<PAGE>
PATCH INTERNATIONAL INC.
November 30, 2006
(unaudited)
                                                                            Page

Consolidated Balance Sheets                                                 3

Consolidated Statements of Operations                                       4

Consolidated Statements of Cash Flows                                       5

Notes to the Consolidated Financial Statements                              6



















                                       2


<PAGE>



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

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
                                                                                         NOVEMBER 30,            MAY 31,
                                                                                             2006                 2006
----------------------------------------------------------------------------------------------------------------------------
                                                                                               $                    $
<S>                                                                                       <C>                   <C>
ASSETS

Current Assets
     Cash and cash equivalents                                                             8,965,508             4,473,444
     Accounts receivable                                                                      11,761                29,260
     Prepaid expenses and other                                                              190,697                70,603
----------------------------------------------------------------------------------------------------------------------------
Total Current Assets                                                                       9,167,966             4,573,307
Available-for-sale securities (Note 3)                                                     4,712,000             7,241,000
Property and equipment, Net                                                                    1,422                 1,452
Oil and gas interests (successful efforts method) (Note 4)                                 5,542,342             2,964,017
----------------------------------------------------------------------------------------------------------------------------
Total Assets                                                                              19,423,730            14,779,776
============================================================================================================================
LIABILITIES & STOCKHOLDERS' EQUITY

Current Liabilities
     Accounts payable and accrued liabilities                                                285,026               215,694
     Income taxes payable                                                                  4,479,917             2,181,000
     Due to related parties (Note 5)                                                          48,466                86,878
----------------------------------------------------------------------------------------------------------------------------
Total Current Liabilities                                                                  4,813,409             2,483,572
Asset retirement obligations (Note 6)                                                         34,144                34,379
----------------------------------------------------------------------------------------------------------------------------
Total Liabilities                                                                          4,847,553             2,517,951
----------------------------------------------------------------------------------------------------------------------------
Non-Controlling Interest                                                                     551,562               570,862

STOCKHOLDERS' EQUITY

Preferred Stock:
 1,000,000 preferred shares authorized with par value of $0.01 per share;
 none issued and outstanding                                                                       -                     -

Common Stock:
 25,000,000 common shares authorized with par value of $0.001 per share;
 15,791,774 shares issued and outstanding (May 31, 2006 - 15,163,112 shares)                  15,792                15,163

Additional paid-in capital                                                                 4,427,176             3,335,380
Stock subscriptions receivable                                                               (35,000)                    -
Accumulated other comprehensive income                                                     4,762,858             7,352,558
Retained earnings                                                                          4,855,344               987,862
Less 2,000 common stock held in treasury, at cost                                             (1,555)                    -
----------------------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity                                                                14,024,615            11,690,963
----------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity                                                19,423,730            14,779,776
============================================================================================================================
</TABLE>


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

                                       3
<PAGE>
PATCH INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Stated in U.S. Dollars)
(unaudited)

<TABLE>
<CAPTION>
                                                        FOR THE THREE   FOR THE THREE    FOR THE SIX      FOR THE SIX
                                                         MONTHS ENDED    MONTHS ENDED    MONTHS ENDED     MONTHS ENDED
                                                         NOVEMBER 30,    NOVEMBER 30,    NOVEMBER 30,     NOVEMBER 30,
                                                             2006            2005            2006             2005
------------------------------------------------------------------------------------------------------------------------
                                                              $               $               $                $
<S>                                                       <C>             <C>             <C>              <C>
Revenue
     Oil and gas                                              17,988          33,597          65,609           84,082
------------------------------------------------------------------------------------------------------------------------
Expenses
     Consulting                                              363,261         320,539         627,748          429,429
     Depletion, depreciation, impairment and                  15,183           7,429          40,539           34,625
     accretion
     General and administrative                               90,819          35,255         151,507           74,353
     Investor relations and marketing                        259,683          38,108         483,373           91,466
     Oil and gas production, royalties and other              17,012          27,568          28,833           37,418
     Professional fees                                        40,663          49,916          96,024           94,488
     Related party compensation (Note 5)                     154,299          46,607         268,089           96,026
------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses                                     952,798         525,422       1,708,527          857,805
------------------------------------------------------------------------------------------------------------------------
Operating Loss                                              (934,810)       (491,825)     (1,642,918)        (773,723)
------------------------------------------------------------------------------------------------------------------------
Other Income

     Interest and other                                      110,440           1,425         150,746            1,425
     Gain on sale of available-for-sale securities         6,640,000       5,953,001       7,609,599        5,953,001
     Non-controlling interest in net loss                     12,005               -          19,765                -
------------------------------------------------------------------------------------------------------------------------
Total Other Income                                         6,774,323       5,954,426       7,792,524        5,954,426
------------------------------------------------------------------------------------------------------------------------
Income Before Income Taxes                                 5,839,513       5,462,601       6,149,606        5,180,703

Provision For Income Taxes                                (1,987,092)     (2,100,000)     (2,278,501)      (2,100,000)
------------------------------------------------------------------------------------------------------------------------
Net Income                                                 3,852,421       3,362,601       3,871,105        3,080,703

Other Comprehensive Income (Loss) (Note 8)

     Available-for-sale securities:
         Reclassification to realized gain                (3,877,486)     (1,988,780)     (4,623,768)      (1,988,780)
         Holding gain (loss)                               1,431,486      (2,785,220)      2,094,768        3,396,780
------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in unrealized gain on                 (2,446,000)     (4,774,000)     (2,529,000)       1,408,000
available-for-sale securities

Foreign currency translation adjustment                      (93,227)              -         (60,699)               -
------------------------------------------------------------------------------------------------------------------------
Other Comprehensive Income (Loss)                         (2,539,227)     (4,774,000)     (2,589,699)       1,408,000
------------------------------------------------------------------------------------------------------------------------
Comprehensive Income  (Loss)                               1,313,194      (1,411,399)      1,281,406        4,488,703
========================================================================================================================

Net Income Per Share

     Basic                                                      0.24            0.62            0.25             0.58
     Diluted                                                    0.24            0.61            0.24             0.57

Weighted Average Number Of Common Stock Outstanding

     Basic                                                15,779,000       5,401,000      15,665,000        5,321,000
     Diluted                                              16,194,000       5,496,000      16,080,000        5,416,000
</TABLE>

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

                                       4
<PAGE>
PATCH INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in U.S. Dollars)
(unaudited)

<TABLE>
<CAPTION>
                                                                                            FOR THE             FOR THE
                                                                                           SIX MONTHS          SIX MONTHS
                                                                                             ENDED               ENDED
                                                                                          NOVEMBER 30,        NOVEMBER 30,
                                                                                              2006                2005
---------------------------------------------------------------------------------------------------------------------------
                                                                                                $                   $
<S>                                                                                       <C>                 <C>
Operating Activities
     Net income                                                                            3,871,105           3,080,703
     Adjustments to reconcile net loss to net cash used by operating activities:
        Depletion, depreciation, impairment and accretion                                     40,539              34,625
        Stock-based compensation                                                             554,643             241,129
        Shares issued for services                                                           211,095                   -
        Gain on sale of available-for-sale securities                                     (7,609,599)         (5,953,001)
        Non-controlling interest in net loss                                                 (19,765)                  -
        Decrease (increase) in accounts receivable                                            19,621              (3,691)
        (Increase) decrease in prepaid expenses and other                                    (30,946)              1,230
        Increase in accounts payable and accrued liabilities                                  69,980              23,855
        Increase in income taxes payable                                                   2,298,917           2,100,000
-------------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities                                                       (594,410)           (475,150)
-------------------------------------------------------------------------------------------------------------------------

Investing Activities
     Oil and gas interests                                                                (2,660,480)            (41,693)
     Proceeds on sale of available-for-sale securities                                     7,609,600           5,953,001
-------------------------------------------------------------------------------------------------------------------------
Net cash provided by investing activities                                                  4,949,120           5,911,308
-------------------------------------------------------------------------------------------------------------------------

Financing Activities
     Repayments to related parties                                                           (37,268)            (95,038)
     Common stock issued for cash                                                            203,000             273,650
     Acquisition of treasury stock                                                            (6,309)                  -
-------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities                                                    159,423             178,612
-------------------------------------------------------------------------------------------------------------------------

Effect of exchange rate changes on cash                                                      (22,069)                  -

Change in cash and cash equivalents for the period                                         4,492,064           5,614,770

Cash and cash equivalents, beginning of period                                             4,473,444             128,872
-------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period                                                   8,965,508           5,743,642
=========================================================================================================================

CASH AND CASH EQUIVALENTS CONSIST OF:
      Cash in bank                                                                         2,183,610           1,767,139
      Term deposits                                                                        6,781,898           3,976,503
-------------------------------------------------------------------------------------------------------------------------
                                                                                           8,965,508           5,743,642
=========================================================================================================================

SUPPLEMENTAL CASH FLOW INFORMATION
     Taxes paid                                                                                    -                   -
     Interest paid                                                                                 -                   -
=========================================================================================================================
</TABLE>


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


                                       5
<PAGE>
PATCH INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2006
(Stated in U.S. Dollars)
(unaudited)


1.   BASIS OF PRESENTATION

     The unaudited  consolidated financial information furnished herein reflects
     all  adjustments,  which in the opinion of  management,  are  necessary  to
     fairly state the Company's  consolidated financial position and the results
     of its consolidated  operations for the periods  presented.  This report on
     Form 10-QSB should be read in conjunction  with the Company's  consolidated
     financial  statements  and notes  thereto  included in the  Company's  Form
     10-KSB for the fiscal year ended May 31, 2006. 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  Form
     10-KSB  for the fiscal  year  ended May 31,  2006,  has been  omitted.  The
     results of operations for the six-month  period ended November 30, 2006 are
     not  necessarily  indicative of results that may be expected for the fiscal
     year ending May 31, 2007.


2.   RECENT PRONOUNCEMENTS

     In September 2006, the FASB issued SFAS No. 158, "EMPLOYERS' ACCOUNTING FOR
     DEFINED  BENEFIT PENSION AND OTHER  POSTRETIREMENT  PLANS - AN AMENDMENT OF
     FASB  STATEMENTS  NO. 87, 88, 106, AND  132(R)".  This  statement  requires
     employers to recognize the  overfunded or  underfunded  status of a defined
     benefit  postretirement  plan (other than a multiemployer plan) as an asset
     or  liability  in its  statement  of  financial  position  and to recognize
     changes  in that  funded  status  in the year in which  the  changes  occur
     through   comprehensive   income  of  a  business   entity  or  changes  in
     unrestricted  net assets of a not-for-profit  organization.  This statement
     also  requires an employer to measure the funded status of a plan as of the
     date  of  its  year-end  statement  of  financial  position,  with  limited
     exceptions. The provisions of SFAS No. 158 are effective for employers with
     publicly  traded equity  securities as of the end of the fiscal year ending
     after  December 15, 2006. 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 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 June 2006, the Financial  Accounting  Standards Board (FASB) issued FASB
     Interpretation  No. 48,  "ACCOUNTING  FOR  UNCERTAINTY IN INCOME TAXES,  AN
     INTERPRETATION OF FASB STATEMENTS NO. 109". FIN 48 clarifies the accounting
     for  uncertainty in income taxes by prescribing a two-step  method of first
     evaluating  whether  a  tax  position  has  met  a  more  likely  than  not
     recognition threshold and second,  measuring that tax position to determine
     the amount of benefit to be recognized in the financial statements.  FIN 48
     provides guidance on the presentation of such positions within a classified
     statement of financial  position as well as on derecognition,  interest and
     penalties,  accounting in interim periods,  disclosure, and transition. FIN
     48 is effective for fiscal years  beginning  after  December 15, 2006.  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.


                                       6
<PAGE>
PATCH INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2006
(Stated in U.S. Dollars)
(unaudited)


2.   RECENT PRONOUNCEMENTS (CONTINUED)

     In March 2006, the FASB issued SFAS No. 156,  "ACCOUNTING  FOR SERVICING OF
     FINANCIAL  ASSETS,  AN AMENDMENT OF FASB STATEMENT NO. 140,  ACCOUNTING FOR
     TRANSFERS  AND  SERVICING  OF  FINANCIAL  ASSETS  AND   EXTINGUISHMENTS  OF
     LIABILITIES".  This statement requires all separately  recognized servicing
     assets and servicing  liabilities be initially  measured at fair value,  if
     practicable, and permits for subsequent measurement using either fair value
     measurement  with  changes  in fair  value  reflected  in  earnings  or the
     amortization  and  impairment   requirements  of  Statement  No.  140.  The
     subsequent  measurement  of  separately  recognized  servicing  assets  and
     servicing  liabilities at fair value  eliminates the necessity for entities
     that  manage  the  risks   inherent  in  servicing   assets  and  servicing
     liabilities with derivatives to qualify for hedge accounting  treatment and
     eliminates the characterization of declines in fair value as impairments or
     direct write-downs.  SFAS No. 156 is effective for an entity's first fiscal
     year beginning  after September 15, 2006. 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  2006,  the FASB issued SFAS No. 155,  "ACCOUNTING  FOR CERTAIN
     HYBRID  FINANCIAL  INSTRUMENTS-AN  AMENDMENT OF FASB STATEMENTS NO. 133 AND
     140",  to simplify  and make more  consistent  the  accounting  for certain
     financial  instruments.  SFAS No. 155 amends SFAS No. 133,  "ACCOUNTING FOR
     DERIVATIVE  INSTRUMENTS  AND  HEDGING  ACTIVITIES",  to permit  fair  value
     re-measurement  for  any  hybrid  financial  instrument  with  an  embedded
     derivative  that  otherwise  would require  bifurcation,  provided that the
     whole  instrument  is  accounted  for on a fair value  basis.  SFAS No. 155
     amends  SFAS  No.  140,  "ACCOUNTING  FOR THE  IMPAIRMENT  OR  DISPOSAL  OF
     LONG-LIVED ASSETS", to allow a qualifying  special-purpose entity to hold a
     derivative  financial  instrument  that  pertains to a beneficial  interest
     other than another derivative financial instrument. SFAS No. 155 applies to
     all  financial  instruments  acquired or issued  after the  beginning of an
     entity's  first fiscal year that begins  after  September  15,  2006,  with
     earlier application allowed. 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.


3.   AVAILABLE-FOR-SALE SECURITIES

     At November 30, 2006, the Company owns 2,791,937 (May 31, 2006 - 6,791,937)
     ordinary  shares of Pharmaxis  Ltd.  ("Pharmaxis"),  an Australian  company
     listed on the Australian  Stock Exchange.  The Company records the ordinary
     shares of Pharmaxis at market value,  net of tax. At November 30, 2006, the
     market value is recorded at $4,712,000, after tax of $2,026,000,  resulting
     in  an  unrealized   gain  of  $4,711,999,   which  is  recorded  as  other
     comprehensive income, a separate component of stockholders' equity.

     During the  six-month  period ended  November  30,  2006,  the Company sold
     4,000,000 Pharmaxis shares for gross proceeds of $7,609,600, and realized a
     gain of $7,609,599, before applicable taxes.

                                                        November 30,
                                                            2006
                                                     ------------------
     2,791,937 ordinary shares                           $ 4,712,000
                                                     ==================


                                                           May 31,
                                                            2006
                                                     ------------------
     6,791,937 ordinary shares                           $ 7,241,000
                                                     ==================

     The Company paid Australian taxes of $2,201,416 (AUS$2,861,657) on sales of
     Pharmaxis  shares up to May 31, 2006, on December 1, 2006.  The Company has
     accrued an additional  estimate of Australian  taxes for  subsequent  share
     sales, totalling $2,278,501 (AUS$3,002,056) as at November 30, 2006.


                                       7
<PAGE>
PATCH INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2006
(Stated in U.S. Dollars)
(unaudited)


4.   OIL AND GAS INTERESTS
<TABLE>
<CAPTION>
                                                                                  November 30,        May 31,
                                                                                      2006              2006
                                                                                ---------------    ---------------
<S>                                                                             <C>                <C>
OIL AND GAS INTERESTS - SUCCESSFUL EFFORTS METHOD

Balance beginning of the period                                                 $    2,964,017     $      198,284
Expenditures                                                                         2,611,988          3,029,321
Depletion and depreciation                                                             (33,663)          (193,888)
Dry well and abandoned interests                                                             -            (69,700)
                                                                                ---------------    ---------------
Balance end of the period                                                       $    5,542,342     $    2,964,017
                                                                                ===============    ===============

Represented by:

British Columbia, Canada
Non-producing interests                                                         $      439,186     $            -
                                                                                ---------------    ---------------
                                                                                       439,186                  -
Alberta, Canada
Non-producing interests                                                              4,994,136          2,846,147
Producing interests subject to depletion and amortization                              155,591            150,739
Accumulated depletion and depreciation                                                (142,934)          (121,060)
                                                                                ---------------    ---------------
                                                                                     5,006,793          2,875,826
Saskatchewan, Canada
Producing interests subject to depletion and amortization                              300,265            243,004
Accumulated depletion and depreciation                                                (203,902)          (154,813)
                                                                                ---------------    ---------------
                                                                                        96,363             88,191
                                                                                ---------------    ---------------
                                                                                $    5,542,342     $    2,964,017
                                                                                ===============    ===============
</TABLE>

     a)  British Columbia, Canada

         (i)    The Company  entered  into an  Agreement  with Terra Energy Corp
                dated  October 12,  2006,  to acquire a 20% working  interest in
                certain mineral rights on two Blocks of land. As at November 30,
                2006, the Company has paid $417,206 in cash call advances on the
                property, and incurred $21,980 in exploration expenditures.

     b)  Alberta, Canada

         (i)    The Company entered into an Agreement dated November 8, 2005, to
                acquire  a  working   interest  in  a  project  located  in  the
                Lloydminster  area of Alberta.  In accordance  with the terms of
                the Agreement the Company  drilled a test well and a second well
                proposed by the Farmor. These wells are ready for production but
                are not producing  yet. By drilling and completing the test well
                the Company earned a 30% working  interest in the balance of the
                farmout  lands  and a 50%  working  interest  in the  test  well
                spacing unit subject to a  convertible  after payout  overriding
                royalty such that if converted reduces the Company's interest to
                a 30% working  interest  The second  well was  drilled  with the
                Farmor  having  to  participate  by  converting  his  overriding
                royalty prior to drilling into a working  interest.  As a result
                the  Company  paid 30% of the cost of the second  well to earn a
                30% working  interest in that well spacing  unit.  All the lands
                are  subject  to  a  1%  gross  overriding   royalty  and  Crown
                royalties.  As at November  30,  2006,  the Company has incurred
                $296,444 in exploration expenditures on these two wells.

                                       8
<PAGE>
PATCH INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2006
(Stated in U.S. Dollars)
(unaudited)

4.   OIL AND GAS INTERESTS (CONTINUED)

     b)  Alberta, Canada (continued)

         (ii)   The Company entered into an Agreement dated November 8, 2005, to
                acquire  a  working   interest  in  a  project  located  in  the
                Atlee-Buffalo  area of Alberta.  In accordance with the terms of
                the Agreement the Company  drilled a test well.  This  potential
                gas well is awaiting completion pending negotiation of a pooling
                agreement with a third party.  Upon  completion the Company will
                earn a 30% working  interest in the balance of the farmout lands
                and a 50% working interest in the test well spacing unit subject
                to an overriding  royalty  convertible after payout such that if
                converted  reduces  the  Company's  interest  to a  30%  working
                interest.  The lands are also  subject to a 1% gross  overriding
                royalty  and Crown  royalties.  As at  November  30,  2006,  the
                Company has incurred  $214,169 in  exploration  expenditures  on
                this well.

         (iii)  On May 30, 2005, the Company  acquired a 10% working interest in
                a test  well  (the  "McLeod"  project)  located  in  Alberta  by
                incurring  10% of the costs.  The well was  drilled in June 2005
                and commenced operations in November 2005.

         (iv)   The Company  entered into an Agreement dated January 4, 2006, to
                acquire a 100% working  interest in a test well project  located
                in the Halkirk  area of Alberta.  The well has been  drilled and
                perforated and the Company is waiting to test flow rates pending
                further  swabbing.  Upon completion the Company will earn a 100%
                interest in the test well spacing unit subject to an  overriding
                royalty  such that if converted  after  pay-out the Company will
                revert to a 50%  working  interest in the well and a 50% working
                interest  in the  balance of the  farmout  lands.  The lands are
                subject to a 1% gross overriding royalty and Crown royalties. As
                at  November  30,  2006 the  Company  has  incurred  $270,753 in
                exploration expenditures in respect of this project.

         (v)    The Company entered into a Farmout and  Participation  Agreement
                dated January 19, 2006, to acquire a working interest in oil and
                gas leases  ("Block  A" and  "Block B") in the Peace  River arch
                area of Alberta.  Under the terms of the Agreement,  the Company
                made a payment of  $687,439 to the  title-holder  of the farmout
                lands.  The Company  will earn a 90% working  interest in a test
                well and  spacing  unit,  subject  to a  convertible  overriding
                royalty  exercisable after payout such that if exercised reduces
                the Company's interest to 54%, and a 54% working interest in the
                balance  of Block A lands,  by  incurring  90% of the costs of a
                test  well to be  spudded  on the  Block A lands no  later  than
                February 1, 2007.  The Company will earn a 90% working  interest
                in  the  second  test  well  and  spacing  unit,  subject  to  a
                convertible  overriding royalty exercisable after payout that if
                exercised  reduces  the  Company's  interest  to 54%,  and a 54%
                working  interest in the  balance of Block B lands by  incurring
                90% of the  costs of a test  well to be  spudded  on the Block B
                lands no later than February 1, 2007. The lands are subject to a
                1% gross overriding royalty and Crown royalties.  As at November
                30,  2006,  the  Company  has  incurred  $71,426 in  exploration
                expenditures in respect of this project.

         (vi)   On April 5, 2006,  Energy acquired three crown oil sands leases,
                comprising four sections  (1,024  hectares) in the Alberta Crown
                Oil Sands for a cost of $402,866.  The initial lease term is for
                15 years with  annual  rental  payable to the  Alberta  Crown of
                $3.18 per hectare and Crown royalties on production.


                                       9
<PAGE>
PATCH INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2006
(Stated in U.S. Dollars)
(unaudited)

4.   OIL AND GAS INTERESTS (CONTINUED)

     b)  Alberta, Canada (continued)

         (vii)  On February 28, 2006, the Partnership  entered into an agreement
                for the  acquisition  of an Alberta oil sands  property  located
                just south of Fort  McMurray  in the area of  Leismer,  Alberta,
                Canada.  The property is divided into two half  sections  called
                Block A and  Block B. On March 2,  2006,  the  Partnership  paid
                $722,000 and issued  437,500 shares of the Company at a price of
                $1.08 per share, for a 40% working interest in Block A. On March
                30, 2006 the Partnership  paid an additional  $451,250 to earn a
                further 40% working interest in Block A. The Partnership has the
                option,  exercisable  on or before April 1, 2007,  to acquire an
                80%  interest  in  Block B for the  payment  of  $1,173,250  and
                100,000  additional  shares of the Company.  Both Blocks A and B
                are subject to a 5% overriding royalty and crown royalties.  The
                Partnership  must fund 80% of the costs of a 3D seismic  program
                covering  approximately  1.2  square  miles over the Block A and
                Block B lands on or before March 1, 2007. The  Partnership  must
                also  fund a Test  Well on the  Block  A  lands,  which  must be
                spudded by March 1, 2007.  The  Partnership  is required to fund
                80% of the total cost of the test well.

         (viii) The Company entered into a Participation Agreement with Highview
                Resources Ltd.  ("Highview")  dated June 6, 2006, to acquire 50%
                of Highview's  majority interest in two sections of land located
                near to the City of Red Deer in Central Alberta,  Canada.  Under
                the terms of the  Agreement,  the Company  paid 50% of past land
                acquisition  and seismic  costs  incurred by Highview of $53,855
                and has  incurred  $43,130  in  respect  of its  share  of a new
                seismic program.  An additional seismic program on this property
                is now under  consideration.  Under  the terms of a Pooling  and
                Seismic  Option  Agreement  with a third party,  the Company and
                Highview can elect to drill a test well in and earn 100% in each
                section subject to a 12% non convertible  overriding  royalty of
                12%, reduced  proportionately by the acreage contribution of the
                Company and Highview in each section. Crown royalties will apply
                on any production.

         (ix)   The Company entered into an Agreement with Vanguard  Exploration
                Corp.  dated July 7, 2006, in the Rich / Rumsey area of Alberta,
                Canada to acquire a 26.25% working  interest in certain  mineral
                rights on a quarter section of land and the right to participate
                as to 35% in a test well and an option  well over two  sections,
                convertible  by a third  party  after  payout  to a 21%  working
                interest.  Crown royalties will apply on any  production.  Under
                the terms of the  Agreement,  the Company paid a prospect fee of
                $59,586 to cover a share of seismic and land acquisition  costs.
                The Company also paid $499,780 towards its share of the drilling
                and casing  costs of a test  Well,  which has been  drilled  and
                cased back to a secondary target.

         (x)    The Company  entered into an Agreement  with Pine Petroleum Ltd.
                dated  September 25, 2006, to earn a 40% interest in a test well
                in the Medicine Hat Area, Alberta. In the event the Test Well is
                successful,  the interest will be reduced to 20%. As at November
                30, 2006,  the Company has  committed  to cash call  advances of
                $122,408 (paid subsequent to November 30, 2006).

         (xi)   On  November  15,  2006,  Energy  acquired  five crown oil sands
                leases,  comprising  eight sections (5,061 acres) at the Alberta
                Crown Oil Sands for a cost of $620,458.  The initial  lease term
                is for 15 years with annual rental  payable to the Alberta Crown
                of $3.18 per hectare and Crown royalties on production.

     c)  Saskatchewan, Canada

         (i)    On May 1, 2002, the Company acquired a 12.5% working interest in
                ten test wells located in Saskatchewan  by incurring  15.625% of
                the costs. The Company participated in a second set of nine test
                wells in Saskatchewan,  Canada,  by agreeing to incur 15.625% of
                the costs to earn a 12.5% working interest.


                                       10
<PAGE>
PATCH INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2006
(Stated in U.S. Dollars)
(unaudited)

4.   OIL AND GAS INTERESTS (CONTINUED)

     c)  Saskatchewan, Canada (continued)

         (ii)   The Company entered into a participation agreement on the second
                nine test wells with Micron Enviro Systems Inc. ("Micron") dated
                March 27, 2003 whereby Micron earned a 3.5% working  interest in
                those wells by incurring 5% of the associated costs. The Company
                also entered into a participation  agreement on those same wells
                with Butler Development  Corporation  ("Butler") dated April 28,
                2003 whereby Butler earned a 3.5% working  interest by incurring
                5% of the  associated  costs and by paying the  Company  $13,614
                (CAD$15,000).  Effective  June 30, 2006 the Company  re-acquired
                Butler  Development's  3.5% working  interest in the second nine
                Kerrobert wells for $9,025.


5.   DUE TO RELATED PARTIES

     a)  Related  parties  include  directors  and officers and  companies  with
         common  management  and  directorships.   Related  party  accounts  are
         unsecured with no fixed terms of interest or repayment. At November 30,
         2006, $48,466 (May 31, 2006 - $86,878) was due to related parties.

     b)  On May 1, 2005, the Company entered into a management  agreement with a
         director and the former  President of the Company for a term of 5 years
         with  payments  of  $175,000  per annum.  On May 1, 2006,  the  Company
         entered into a management  agreement  with the President of the Company
         for a term of 1 year with payment of $60,000 per annum. On December 16,
         2005, the Company  entered into a management  agreement with a director
         of the Company with payments of $5,446 (CAD$6,000) per quarter.  During
         the six-month  period ended November 30, 2006, the Company paid $90,715
         (2005 - $87,500) in management fees.


6.   ASSET RETIREMENT OBLIGATIONS


                                                    For the Six     For the Year
                                                   Months Ended      Ended May
                                                   November 30,          31,
                                                       2006             2006
                                                   -----------------------------

     Beginning asset retirement obligations         $   34,379       $        -
                                                                              -
     Additions related to new properties                     -

     Liabilities incurred                                    -           32,834
     Effects of foreign exchange translation            (1,037)               -
     Deletions related to property disposals                 -                -
     Accretion                                             802            1,545
                                                   -----------------------------
     Total asset retirement obligations             $   34,144       $   34,379
                                                   =============================


7.   COMMON STOCK

     During the six month period ended  November  30, 2006,  the Company  issued
     380,000 shares of common stock and received  $203,000 in cash proceeds from
     the  exercise of 380,000  stock  options.  The Company has recorded a stock
     subscription receivable of $35,000 related to these stock option exercises.

     On June 23,  2006,  the Company  purchased  3,588 of its shares on the open
     market at an average price of $1.32 per share.


                                       11
<PAGE>
PATCH INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2006
(Stated in U.S. Dollars)
(unaudited)


7.   COMMON STOCK (CONTINUED)

     On July 26, 2006,  the Company  issued  222,250 shares of common stock at a
     price of $1.25 per share for investor relation services. As at November 30,
     2006,  $73,983  related to the future  portion  of the  agreement  has been
     recorded as prepaid expenses.

     On September  15, 2006,  the Company  purchased  2,000 of its shares on the
     open market at a price of $0.78 per share.

     On October  24,  2006,  the  Company  issued  30,000  shares  for  investor
     relations  services  valued at $23,100.  As at November 30,  2006,  $15,835
     related to the future portion of the agreement has been recorded as prepaid
     expenses.

     On November 3, 2006, the Company filed a form S-8 Registration Statement in
     connection  with a 2006 Stock  Option  Plan  allowing  for the  granting of
     options to acquire up to a total of 1,500,000 shares.

     The Company had previously  proposed the distribution of a cash dividend on
     a pro-rata  basis of 50% of the net proceeds of the sale of its  investment
     in Pharmaxis Ltd. (the "Pharmaxis Shares").  Net proceeds include the costs
     associated  with the sale of the Pharmaxis  shares and related  taxes.  The
     directors  of the Company had fixed July 30, 2004 as the record  date.  The
     Company did not receive approval from the NASD and the SEC; therefore,  the
     board of  directors  is unable to declare a dividend  for  shareholders  of
     record as of July 30, 2004 and cannot proceed with the dividend payment.

     On September 22, 2005, the Company filed a form S-8 Registration  Statement
     in  connection  with a 2005 Stock Option Plan  allowing for the granting of
     options to acquire up to a total of 2,250,000 shares.

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

                                                      November 30, 2006
                                                ----------------------------
                                                                  Weighted
                                                      Number       Average
                                                          of      Exercise
                                                     Options         Price
                                                ----------------------------

          Balance, beginning of period             2,272,500         $0.75
          Granted                                    240,000          0.90
          Cancelled/Expired                         (750,000)         0.43
          Exercised                                 (380,000)         0.63
                                                ----------------------------

          Balance, end of period                   1,382,500         $0.75
                                                ============================

     As at November 30, 2006, the following options are outstanding:

<TABLE>
<CAPTION>
                                               OUTSTANDING                               EXERCISABLE
                               ---------------------------------------------     --------------------------
                                                   Weighted
                                                    Average        Weighted                        Weighted
                                      Number      Remaining         Average            Number       Average
                                          of    Contractual        Exercise                of      Exercise
               Exercise Price         Shares   Life (years)           Price            Shares         Price
     ----------------------------------------------------------------------      --------------------------
<S>                                <C>                 <C>            <C>           <C>               <C>
            $     0.26 - 0.79        312,500           3.00           $0.34           312,500         $0.34
            $     0.80 - 0.90      1,070,000           1.34           $0.87         1,070,000         $0.87
                               --------------------------------------------      --------------------------
                                   1,382,500                                        1,382,500
                               ============================================      ==========================
</TABLE>


                                       12

<PAGE>
PATCH INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2006
(Stated in U.S. Dollars)
(unaudited)


7.   COMMON STOCK (CONTINUED)

     Prior to June 1, 2006, the Company  accounted for stock-based  awards under
     the recognition and measurement  provisions of Accounting  Principles Board
     Opinion ("APB") No. 25,  "ACCOUNTING  FOR STOCK ISSUED TO EMPLOYEES"  using
     the  intrinsic  value method of  accounting.  Effective  June 1, 2006,  the
     Company  adopted  the fair value  recognition  provisions  of SFAS No. 123R
     "SHARE BASED PAYMENTS",  using the modified prospective  transition method.
     Under that  transition  method,  compensation  cost is  recognized  for all
     stock-based  payments  granted  prior to,  but not yet vested as of June 1,
     2006,  based on the grant date fair value  estimated in accordance with the
     original  provisions  of  SFAS  No.  123,  and  compensation  cost  for all
     stock-based payments granted subsequent to June 1, 2006, based on the grant
     date fair value  estimated in accordance  with the provisions of SFAS 123R.
     Results for prior periods have not been restated.

     As a result of adopting SFAS 123R on June 1, 2006, the Company's income for
     the six-month  period ended November 30, 2006 is $177,374 higher than if it
     had  continued to account for  share-based  compensation  under APB No. 25.
     Basic and  diluted  net income  per share for the  six-month  period  ended
     November 30, 2006 would have been $0.01 per share higher than as reported.

     During  the  six  month  period  ended   November  30,  2006,   stock-based
     compensation  amounting  to  $554,643  was  recorded.  During the six month
     period ended November 30, 2006, stock options for stock-based  compensation
     were issued as follows: 50,000 stock options priced at $0.90 per share, and
     190,000 stock options priced at $0.90 per share.  Stock-based  compensation
     also  includes  amounts  relating to the repricing of 485,000 stock options
     from $1.54 to $0.90 per share,  which  were  previously  granted on May 15,
     2006.

     For the six-month  period ended  November 30, 2005, had  compensation  cost
     been  recognized on the basis of fair value,  pursuant to SFAS No. 123, net
     loss and loss per share would have been as follows:

<TABLE>
<CAPTION>
                                                                           Three Months         Six Months
                                                                               Ended               Ended
                                                                           November 30,        November 30,
                                                                                2005                2005
<S>                                                                        <C>                   <C>
    Net income (loss) - as reported                                          $3,362,601          $3,080,703
    Add: Stock-based compensation expense included in net loss -
    as reported                                                                 177,152             241,129
    Deduct: Stock-based compensation expense determined under
    fair value method                                                          (398,962)           (462,939)
                                                                           ----------------------------------

    Net income (loss) - Pro-Forma                                            $3,140,791          $2,858,893
                                                                           ==================================

       Basic net income (loss) per share - as reported                           $ 0.62              $ 0.58
                                                                           ==================================
       Diluted net income (loss) per share - as reported                         $ 0.61              $ 0.57
                                                                           ==================================

       Basic net income (loss) per share - Pro-Forma                             $ 0.58              $ 0.54
                                                                           ==================================
       Diluted net income (loss) per share - Pro-Forma                           $ 0.57              $ 0.53
                                                                           ==================================
</TABLE>

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


                                       13
<PAGE>
PATCH INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2006
(Stated in U.S. Dollars)
(unaudited)

7.   COMMON STOCK (CONTINUED)

     The weighted average fair value of the options granted during the six month
     period  ended  November  30,  2006 was  $0.71 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 283%; risk
     free interest rate of 4.74%; and expected life of 1.74 years.

8.   TAX EFFECTS OF OTHER COMPREHENSIVE (LOSS)/INCOME

     Components of other comprehensive income (loss) are as follows:

<TABLE>
<CAPTION>
                                                                                For the Six Months Ended
                                                                                    November 30, 2006
                                                               ---------------------------------------------------------
                                                                  Before-Tax          Tax (Expense)        Net-of-Tax
                                                                    Amount              Or Benefit           Amount
                                                               ---------------------------------------------------------
<S>                                                             <C>                  <C>                 <C>
     Available-for-sale securities:
         Decrease in unrealized gain on available for sale
         securities                                             $ (6,605,383)        $  1,981,615        $ (4,623,768)
         Holding gain                                              2,992,526             (897,758)          2,094,768
                                                               ---------------------------------------------------------
     (Decrease) in unrealized gain on available-for-sale          (3,612,857)           1,083,857          (2,529,000)
         securities
     Foreign currency translation adjustment                         (60,699)                   -             (60,699)
                                                               ---------------------------------------------------------
     Other comprehensive (loss)                                 $ (3,673,556)        $  1,083,857        $ (2,589,699)
                                                               =========================================================
</TABLE>

<TABLE>
<CAPTION>
                                                                                For the Six Months Ended
                                                                                    November 30, 2005
                                                               --------------------------------------------------------
                                                                   Before-Tax        Tax (Expense)        Net-of-Tax
                                                                     Amount            Or Benefit           Amount
                                                               --------------------------------------------------------
<S>                                                             <C>                  <C>                 <C>
     Available-for-sale securities:
         Decrease in unrealized gain on available for sale
         securities                                             $ (2,841,114)        $    852,334        $ (1,988,780)
         Holding gain                                              4,852,543           (1,455,763)          3,396,780
                                                               --------------------------------------------------------
     Other comprehensive income                                 $  2,011,429         $   (603,429)       $  1,408,000
                                                               ========================================================
</TABLE>

9.   COMMITMENTS

     a)  The Company entered into a management  agreement dated May 1, 2005 with
         a Director  and Former  President  of the Company for the  provision of
         management  services  for a term of 5 years  at a rate of  $14,583  per
         month.

     b)  The  Company entered into a consulting  agreement dated May 1, 2005 for
         the provision of consulting services for a term of 5 years at a rate of
         $6,250 per month.

     c)  The Company  entered into a consulting  agreement  effective  April 15,
         2006,  for the  provision of  consulting  services for a term of twelve
         months at a rate of $10,000 per month.

     d)  The Company entered into a consulting  agreement  effective December 1,
         2005,  with a director of the Company for the  provision of  consulting
         services at a rate of $1,815 (CAD$2,000) per month.


                                       14
<PAGE>
PATCH INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2006
(Stated in U.S. Dollars)
(unaudited)

9.   COMMITMENTS (CONTINUED)

     e)  The Company entered into an agreement with the President of the Company
         dated May 1, 2006 for the provision of services for a term of one year,
         thereafter renewable on a monthly basis, at a rate of $5,000 per month.

     f)  The Company entered into a consulting  agreement dated May 12, 2006 for
         the provision of consulting services for a term of 6 months, thereafter
         renewable  on a  monthly  basis,  at a rate of $3,630  (CAD$4,000)  per
         month.

     g)  The Company entered into a consulting  agreement dated May 12, 2006 for
         the provision of consulting services for a term of 6 months, thereafter
         renewable on a monthly basis, $4,084 (CAD$4,500) per month.

     As a result of the Share  Exchange  Agreement  dated  December 1, 2006,  as
     described  in  Note  10(a),  the  Company  terminated  all  consulting  and
     management  agreements  with  directors  and  officers  and paid a total of
     $286,618 (CAD$325,000) as severance pay.


10.  SUBSEQUENT EVENTS
     a)  The Company entered into a Share Exchange  Agreement  dated December 1,
         2006 to acquire 100% of the issued and  outstanding  share  capital  of
         Damascus Energy Inc. ("Damascus"),  a private corporation  incorporated
         under the laws of Alberta. The transaction closed on December 15, 2006,
         and is accounted for using the purchase  method with the Company  being
         identified  as the  acquirer.  Under  the  terms of the Share  Exchange
         Agreement, Patch Energy Inc. (a wholly-owned subsidiary of the Company)
         acquired all of the issued and outstanding common shares of Damascus in
         consideration  for one share of Class A Preferred  Voting  Stock of the
         Company (the "Preferred  Voting Share") and 9,426,489  shares of Series
         A Preferred Stock of Patch Energy (the  "Exchangeable Shares") that are
         exchangeable  for  9,426,489 shares of  the Company's common stock. The
         directors  of  the  Company  resigned  and  Mr.  Michael  Vandale,  the
         president of  Damascus,  was  appointed  to  serve as a director of the
         Company.   Mr. Vandale was a director of Patch Energy Inc. prior to the
         acquisition,  and received  $264,570  (CAD$300,000) in connection  with
         the Damascus acquisition.

         The primary asset of Damascus is a farmout  agreement  between Damascus
         and Bounty  Developments Ltd. that grants Damascus the right to earn up
         to an 80% working  interest in the Dover Oil Sands Project,  located in
         the  Fort  McMurray  area of  central  Alberta,  Canada.  This  project
         consists of 32 contiguous  square miles of land  approximately 40 miles
         northwest of Fort McMurray,  representing 20,840 acres. Pursuant to the
         terms of the  agreement,  Damascus has earned a 30%  undivided  working
         interest  in  the  project  in  exchange  for  payment  of   $6,686,125
         (CAD$7,581,500)  to Bounty, for reimbursement for all expenditures made
         to  date on the  project  and  the  issuance  of  4,425,231  shares  of
         Damascus'  common  stock to  Bounty.  Damascus  will be able to earn an
         additional 50% in the project,  subject to spudding 16 evaluation wells
         at mutually agreeable  locations and completion of a 2D seismic program
         on the properties on or before March 31, 2007.

     b)  The Company closed 2 tranches of a private placement and issued a total
         of 3,240,000  shares at a price of CAD$1.00 per share on a flow-through
         basis for aggregate  gross proceeds of $2,857,356  (CAD$3,240,000).  In
         connection with the private placement,  the Company paid a finder's fee
         of 7% $197,854 (CAD$224,350),  of which $116,675 (CAD$132,300) was paid
         to Mr. Michael Vandale. The shares were issued pursuant to Regulation S
         under the  Securities  Act of 1933, as the sales were made in "offshore
         transactions".

     c)  The  Company  received  $596,750  upon  the  exercise  of 847,500 stock
         options.


                                       15
<PAGE>
PATCH INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2006
(Stated in U.S. Dollars)
(unaudited)


10.  SUBSEQUENT EVENTS (CONTINUED)

     d)  The Company entered into a letter  agreement dated December 21, 2006 to
         acquire from  non-related  parties  100% of the issued and  outstanding
         common  shares  of  1289307   Alberta   Ltd.,  a  private   corporation
         incorporated  under the laws of Alberta  ("Holdco"),  in  consideration
         for,  directly or indirectly,  500,000  shares of the Company's  common
         stock (the  "Acquisition")  and the  assumption of $1,000,000 of Holdco
         debt. An Alberta  numbered  company wholly owned by Michael S. Vandale,
         the Company's President and CEO, owns 100% of the Holdco debt.

         Completion of the Acquisition is contingent upon the  satisfaction of a
         number of conditions  including  the  completion  of  satisfactory  due
         diligence by the Company and Holdco;  the preparation of a satisfactory
         engineering  evaluation;  the  entering  into a formal  share  exchange
         agreement and related documentation,  between the Company and Holdco in
         form and  content  satisfactory  to each of them;  and any  regulatory,
         shareholder, director or other approvals as may be required.

         The primary asset of Holdco is a farmout  agreement  between Holdco and
         Bounty  Developments  Ltd.  ("Bounty")  that grants Holdco the right to
         earn up to a 75% working interest in 18 square miles of land located in
         Townships 91-92, Range 2 W4M (the "Firebag Oil Sands Project"),  in the
         Fort McMurray area of central  Alberta,  Canada.  The Firebag Oil Sands
         Project  consists  of  18  contiguous  sections  of  100%  owned  lands
         approximately  20  miles  east of Fort  McMurray,  representing  11,520
         acres.

         Pursuant to the terms of the farmout  agreement,  Holdco must  complete
         the  following  payments  and work  program to earn up to a 75% working
         interest in the Firebag Oil Sands Project:

         Holdco shall earn a 25% undivided  working  interest in the Firebag Oil
         Sands Project subject to the following:
            a)  a payment to Bounty in the amount of $881,900 (CAD$1,000,000) on
                or before December 18, 2006 (paid);
            b)  a payment to Bounty in the amount of $881,900 (CAD$1,000,000) on
                or before December 22, 2006 (paid);  and
            c)  a payment to Bounty in the amount of $2,733,890  (CAD$3,100,000)
                on or before January 15, 2007.

         Holdco shall reimburse Bounty for all expenditures  made or liabilities
         incurred by Bounty to such date in maintaining,  permits, approvals and
         equipment commitments, and in obtaining land, engineering,  geological,
         geophysical and other services  reasonably  required to allow the first
         year  evaluation  wells to be  drilled  and the  seismic  program to be
         completed.

         Upon Holdco earning its initial 25% undivided  working  interest in the
         Firebag  Oil  Sands  Project,  Holdco  shall  earn  an  additional  25%
         undivided  working interest (an aggregate 50% working  interest) in the
         Firebag Oil Sands  Project  subject to spudding 8  evaluation  wells at
         mutually agreeable  locations on the properties and the completion of a
         2D seismic  program on the  properties  at a minimum cost of $1,058,280
         (CAD$1,200,000)  but not to  exceed  $1,322,850  (CAD$1,500,000)  on or
         before March 31, 2007.

         Upon Holdco earning its initial 50% undivided  working  interest in the
         Firebag  Oil  Sands  Project,  Holdco  shall  earn  an  additional  25%
         individual  working interest (an aggregate 75% working interest) in the
         Firebag Oil Sands Project, subject to the following:
              a)  a   payment   to   Bounty   in  the   amount   of   $2,204,750
                  (CAD$2,500,000) on or before April 1, 2007; and
              b)  on or before  April 1, 2008,  spudding 4  evaluation  wells at
                  mutually  agreeable   locations  on  the  properties  and  the
                  completion  of a 2D  seismic  program on the  properties  at a
                  minimum  cost of  $485,045  (CAD$550,000)  but  not to  exceed
                  $573,235 (CAD$650,000) on or before March 31, 2008.


                                       16

<PAGE>


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following  discussion  of the financial  condition and results of operations
for the Company should be read in conjunction  with the  accompanying  financial
statements and related footnotes.

GENERAL

The Company's business originally was the development and  commercialization  of
non-prescription   therapeutics   and   nutraceuticals   designed   to   prevent
inflammation  and their  sequelae,  and the  development  of cosmetics  for skin
conditions.  The Company had not  generated  any revenues  from  product  sales,
royalties or license fees. Due to the inability of the Company to obtain funding
and/or partners to pursue its pharmaceutical  projects, it decided to seek other
business  opportunities.  As of March 15,  2004,  the  Company  consummated  the
Arrangement  Agreement with Patch Energy Inc. ("Energy") under which the Company
acquired Energy, a privately-held  oil and gas company  continued under the laws
of Canada,  in a  stock-for-stock  transaction.  As a result of the acquisition,
Energy is a wholly owned  subsidiary of the Company.  In the  arrangement,  each
issued common share of Energy was exchanged for one common share of the Company.
A total of 18,232,625 shares  (4,558,155  post-reverse and forward split shares)
were  issued,  bringing  the issued  and  outstanding  shares of the  Company to
38,224,372 at that time.

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

A 10:1 reverse split of the Company's stock was made effective on July 25, 2005.
A 2.5 forward split of the Company's stock was made effective on March 27, 2006.

On February 3, 2006 the Company, through Energy, formed a new subsidiary,  Patch
Oilsands Ltd.  ("Oilsands").  On February 27, 2006 the Company,  through Energy,
formed Patch Oilsands Limited  Partnership  ("Partnership") in which Energy owns
75% of the Limited  Partnership  units.  Oilsands manages the Partnership in its
capacity as General Partner.

As Energy's  activities are now conducted in Canada, the functional  currency of
Energy was changed to the Canadian dollar effective June 1, 2006.

ACCOUNTING POLICIES

The Company follows the successful  efforts method of accounting for its oil and
gas  producing  activities.   Under  this  method,  all  costs  associated  with
productive exploratory wells and productive or 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.

On the sale or retirement of a complete unit of a proved property,  the cost and
related  accumulated  depreciation,  depletion,  and amortization are eliminated
from the property accounts, and the resultant gain or loss is recognized. On the
retirement or sale of a partial unit of proved property,  the cost is charged to
accumulated  deprecation,  depletion,  and amortization with a resulting gain or
loss  recognized  in income.  On the sale of an entire  interest  in an unproved
property for cash or cash  equivalent,  gain or loss on the sale is  recognized,
taking into consideration the amount of any recorded  impairment if the property
had been assessed individually. If a partial interest in an unproved property is
sold, the amount  received is treated as a


                                       17
<PAGE>

reduction of the cost of the interest  retained.  In joint  ventured oil and gas
exploration and production  activities, the accounts reflect only  the Company's
proportionate interest in such activities.

Prior to June 1, 2006, the Company  accounted for  stock-based  awards under the
recognition and measurement  provisions of Accounting  Principles  Board Opinion
("APB") No. 25,  "ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES," using the intrinsic
value method of accounting. Effective June 1, 2006, the Company adopted the fair
value recognition  provisions of SFAS No. 123R "SHARE BASED PAYMENTS," using the
modified   prospective   transition   method.   Under  that  transition  method,
compensation  cost is recognized for all share-based  payments granted prior to,
but not yet  vested  as of June 1,  2006,  based on the grant  date  fair  value
estimated  in  accordance  with the  original  provisions  of SFAS NO. 123,  and
compensation  cost for all share-based  payments  granted  subsequent to June 1,
2006,  based on the grant  date fair  value  estimated  in  accordance  with the
provisions of SFAS 123R. Results for prior periods have not been restated.

RESULTS OF OPERATIONS

THREE MONTHS ENDED NOVEMBER 30, 2006. The Company  generated  $17,988 in oil and
gas revenues for the three months ended November 30, 2006  ("2006"),  a decrease
of $15,609 or 46% from the  comparable  three  months  ended  November  30, 2005
("2005").  The decrease was due to a decrease in production offset in part by an
increase  in  price.  Oil and  gas  production,  royalties  and  other  expenses
decreased  $10,556 or 38% to $17,012 in 2006 from $27,568 in 2005.  As a result,
net oil and gas operations produced a negligible profit of $976 in 2006 versus a
profit of $6,029 in 2005, a decline of $5,053 or 84%.

Expenses, other than oil and gas production expenses, were $935,786 for 2006, as
compared to $497,854  for 2005,  an increase of $437,932 or 88%. The increase in
non-oil and gas expenses is primarily due to increases in the following  expense
categories:  Consulting  expense increased by $42,722 or 13% to $363,261 in 2006
as compared to $320,539 in 2005. Consulting expense in 2006 included $234,520 of
stock  based  compensation  expense as  compared  to $177,152 in 2005 and shares
issued for  services  expense of $nil in 2006  versus  $77,400 in 2005 for a net
decrease in stock based  compensation  and shares  issued for  services  expense
included  in  consulting   expense  in  2006  of  $20,032  or  8%.  General  and
administrative  expense increased $55,564 or 158% to $90,819 in 2006 as compared
to $35,255 in 2005 primarily due to incurring $15,000 of directors and officers'
insurance  expense  in 2006  versus  $nil in 2005.  Investor  relations  expense
increased by $221,575 or 581% in 2006 to $259,683 as compared to $38,108 in 2005
due to an increase in the number of investor relations service  providers;  also
2006 expense  included  $146,172 paid in shares for services as compared to $nil
in 2005.  Related  party  compensation  expense  increased  $107,692  or 231% to
$154,299  in 2006 as  compared to $46,607 in 2005.  Related  party  compensation
expense includes $106,662 of stock option expense in 2006 as compared to $nil in
2005 as a result of the  Company's  adoption  of SFAS 123R to account  for stock
based  compensation for directors and officers.  The increase in expenses in the
Company  overall  reflect  the  increased  level of  activity  in the Company in
respect of its oil and gas  operations  as well as  operations  relating  to the
disposition of its share position in Pharmaxis Ltd.

As a result of the increase in expenses in 2006 versus 2005 the Company incurred
an  operating  loss of $934,810 as compared to $491,825 in 2005,  an increase in
operating loss of $442,985 or 90%.

The Company realized a gain before  applicable taxes of $6,640,000 from the sale
of its available for sale Pharmaxis  shares in 2006 as compared to $5,953,001 in
2005.  The  Company  earned  interest  income of $44,736 in 2006 as  compared to
$1,425 in 2005. As a result the Company had income before taxes of $5,839,513 in
2006 as compared to income of  $5,462,601  in 2005, an increase in income before
taxes of $376,912.

Provision for income taxes is  $1,987,092  for 2006 as compared to $2,100,000 in
2005.

Net income for 2006 is  $3,852,421  as compared to net income of  $3,362,601  in
2005, an increase in net income of $489,820.

Other  comprehensive  loss comprised a decrease in unrealized  gain on available
for sale  Pharmaxis  securities of $2,446,000 in 2006, as compared to $4,774,000
in 2005, and a foreign currency translation  adjustment loss


                                       18
<PAGE>

of $93,227 in 2006,  as  compared  to $nil in 2005.  The decrease in  unrealized
gain on available for sale Pharmaxis  securities of $2,446,000 in 2006 is due to
the  reclassification of available for sale Pharmaxis securities holding gain of
$3,877,486 to realized gain in 2006, as compared to $1,988,780 in 2005,  and the
holding gain on available for sale Pharmaxis securities of $1,431,486 in 2006 as
compared to a holding loss of $2,785,220 in 2005.

Comprehensive  income is $1,313,194 in 2006 as compared to a comprehensive  loss
of $1,411,399 in 2005, an increase in comprehensive income of $2,724,593.

SIX MONTHS ENDED NOVEMBER 30, 2006. The Company generated $65,609 in oil and gas
revenues for the six months  ended  November  30, 2006  ("2006"),  a decrease of
$18,473 or 22% from the  comparable six months ended November 30, 2005 ("2005").
The decrease was due to a decrease in  production  offset in part by an increase
in price. Oil and gas production,  royalties and other expenses decreased $8,585
or 23% to $28,833 in 2006 from  $37,418  in 2005.  As a result,  net oil and gas
operations  produced a profit of  $36,776 in 2006  versus a profit of $46,664 in
2005, a decline of $9,888 or 21%.

Expenses,  other than oil and gas production expenses, were $1,679,694 for 2006,
as compared to $820,387 for 2005, an increase of $859,307 or 105%.  The increase
in non-oil and gas  expenses is  primarily  due to  increases  in the  following
expense categories:  Consulting expense increased by $198,319 or 46% to $627,748
in 2006 as compared to $429,429  in 2005.  Consulting  expense in 2006  included
$377,269 of stock based compensation expense as compared to $241,129 in 2005 and
shares issued for services  expense of $nil in 2006 versus $77,400 in 2005 for a
net increase in stock based  compensation and shares issued for services expense
included  in  consulting  expense  in  2006  of  $58,740  or  18%.  General  and
administrative expense increased $77,154 or 104% to $151,507 in 2006 as compared
to $74,353 in 2005 primarily due to incurring $30,000 of directors and officers'
insurance  expense  in 2006  versus  $nil in 2005.  Investor  relations  expense
increased by $391,907 or 428% in 2006 to $483,373 as compared to $91,466 in 2005
due to an increase in the number of investor relations service  providers;  also
2006 expense  included  $211,095 paid in shares for services as compared to $nil
in 2005.  Related  party  compensation  expense  increased  $172,063  or 179% to
$268,089  in 2006 as  compared to $96,026 in 2005.  Related  party  compensation
expense includes $177,374 of stock option expense in 2006 as compared to $nil in
2005 as a result of the  Company's  adoption  of SFAS 123R to account  for stock
based  compensation for directors and officers.  The increase in expenses in the
Company  overall  reflect  the  increased  level of  activity  in the Company in
respect of its oil and gas  operations  as well as  operations  relating  to the
disposition of its share position in Pharmaxis Ltd.

As a result of the increase in expenses in 2006 versus 2005 the Company incurred
an operating  loss of $1,642,918 as compared to $773,723 in 2005, an increase in
operating loss of $869,195 or 112%.

The Company realized a gain before  applicable taxes of $7,609,599 from the sale
of its available for sale Pharmaxis  shares in 2006 as compared to $5,953,001 in
2005.  The  Company  earned  interest  income of $85,578 in 2006 as  compared to
$1,425 in 2005. As a result the Company had income before taxes of $6,149,606 in
2006 as compared to income of  $5,180,703  in 2005, an increase in income before
taxes of $968,903.

Provision for income taxes is  $2,278,501  for 2006 as compared to $2,100,000 in
2005.

Net income for 2006 is  $3,871,105  as compared to net income of  $3,080,703  in
2005, an increase in net income of $790,402.

Other  comprehensive  loss comprised a decrease in unrealized  gain on available
for sale Pharmaxis  securities of $2,529,000 in 2006, as compared to an increase
in unrealized  gain of $1,408,000 in 2005,  and a foreign  currency  translation
adjustment loss of $60,699 in 2006, as compared to $nil in 2005. The decrease in
unrealized gain on available for sale Pharmaxis securities of $2,529,000 in 2006
is due to the  reclassification  of  available  for  sale  Pharmaxis  securities
holding gain of  $4,623,768  to realized gain in 2006, as compared to $1,988,780
in 2005,  and the holding gain on available  for sale  Pharmaxis  securities  of
$2,094,768 in 2006 as compared to $3,396,780 in 2005.


                                       19

<PAGE>

Comprehensive  income is $1,281,406 in 2006 as compared to $4,488,703 in 2005, a
decrease in comprehensive income of $3,207,297.

LIQUIDITY AND CAPITAL RESOURCES

For 2006,  the Company used cash of $594,410  for its  operating  activities  as
compared to $475,150 in 2005.  Investing  activities provided cash of $4,949,120
in 2006 as compared to $5,911,308 in 2005.  The Company  expended  $2,660,480 on
its oil and gas  interests  in 2006 as compared to $41,693 in 2005.  The Company
realized gross proceeds on the sale of  available-for-sale  Pharmaxis securities
of $7,609,600 in 2006 as compared to $5,953,001 in 2005.

Financing activities provided $159,423 from the sale of stock, net of repayments
to related  parties,  in 2006 as  compared  to  $178,612  in 2005.  The  Company
acquired  5,588 shares of its common stock for $6,309 under the Company's  stock
repurchase plan in 2006. The Company did not repurchase any shares of its common
stock in 2005.  The Company also repaid  $37,268 to related  parties in 2006, as
compared to $95,038 in 2005.

At November 30, 2006, the Company had working  capital of $4,354,557 as compared
to $2,089,735 as at May 31, 2006.

As  at  November  30,  2006,  the  Company  owned  2,791,937  available-for-sale
Pharmaxis  shares,  recorded at a net of taxes  market  value of  $4,712,000  as
compared to 6,791,937  available-for-sale  Pharmaxis  shares with a net of taxes
market value of $7,241,000 as at May 31, 2006.

The Company  believes it will have  sufficient  working capital on hand together
with expected proceeds from the proposed sale of its remaining  Pharmaxis shares
and  potential  proceeds  from the  expected  future  sales of stock to fund its
2006/2007  planned oil and gas program of capital  expenditures  and operations,
and to pay its corporate  obligations as they arise over the next 12 months,  to
repurchase  shares  under its share  repurchase  program and to pay its proposed
dividend if it is approved by the regulatory authorities.

PLAN OF OPERATION

In December 2006, the Company  completed its acquisition of Damascus Energy Inc.
("Damascus"),  whose main asset is a farmout  agreement with Bounty  Development
Ltd.  pertaining  to the Dover Oil Sands  Project in the Fort  McMurray  area of
central Alberta, Canada. Under the terms of the farmout agreement,  Damascus has
the right to earn an 80% working interest in the Dover Oil Sands Project,  which
consists of 32 square miles of 100% owned lands,  representing  20,480 acres. As
of the date of this report,  Damascus has earned an initial 30% working interest
in the Dover Oil Sands Project and can earn an additional  50% working  interest
subject to spudding  evaluation  wells at mutually  agreeable  locations and the
completion  of a 2D seismic  program on the  properties  on or before  March 31,
2007.

Also in December  2006, the Company  entered into a letter  agreement to acquire
1289307 Alberta Ltd.  ("Holdco"),  whose main asset is a farmout  agreement with
Bounty Development Ltd.  pertaining to the Firebag Oil Sands Project in the Fort
McMurray  area of  central  Alberta,  Canada.  Under  the  terms of the  farmout
agreement,  Holdco has the right to earn a 75%  working  interest in the Firebag
Oil Sands  Project,  which  consists  of 18 square  miles of 100%  owned  lands,
representing  11,520 acres. If the Company  completes the acquisition of Holdco,
and if Holdco  earns its initial  25% working  interest in the Firebag Oil Sands
Project,  it will be  required  to spud 8  evaluation  wells and  complete  a 2D
seismic  program on the  properties at a minimum cost of $1,058,280 by March 31,
2007 if it wants to earn an additional 25% working interest,  for a total of 50%
working interest.  Upon earning this 50% working interest,  Holdco would have to
pay Bounty  $2,204,750 by April 1, 2007 and spud 4 evaluation wells and complete
a 2D seismic  program on the  properties  at a minimum cost of $485,045 by March
31, 2008 if it wants to earn an additional 25% working interest,  for a total of
75% working interest.

The Company completed a private placement of 3,240,000 common shares,  issued on
a  flow-through  basis at a  subscription  price of CAD$1.00 per share for gross
proceeds of  $2,857,356.  The proceeds will be used to fund  development  of the
Dover Oil Sands Project.


                                       20
<PAGE>

The  Company  intends to use  proceeds  from the future  sales of its  remaining
Pharmaxis  shares  and  share  sales  to  fund  partially  the  acquisition  and
exploration of oil and gas properties and for working capital.

Based on the lands from the Damascus  acquisition and the letter  agreement with
Holdco,  the Company intends to completely fulfill its farm in obligation to the
Dover property with a 63-mile 2D seismic program and a 16-well  drilling program
scheduled  to commence  immediately.  Capital  expenditures  for the seismic and
drilling program are estimated to be $8.4 million.  The Company is also focusing
on  fulfilling  earning  terms on the  Firebag  asset by shooting 47 miles of 2D
seismic,  and to complete a 12-well  drilling  program  before  April 2007.  The
capital  expenditures  for this program are estimated to be $6.85  million.  The
Company  also  intends to  participate  in future  oil sands  land sales  and/or
acquire oil sands leases/participation from third parties.

The Company has a 75% majority  interest in Patch Oilsands  Limited  Partnership
(the  "Partnership").  The Partnership has a working interest in a 1/2 oil sands
section (Block A) at Leismer,  Alberta,  Canada.  The  Partnership  also has the
option,  exercisable  on or before April 1, 2007,  to acquire an 80% interest in
the  adjoining  1/2 section  (Block B) for a payment of  $1,173,250  and 100,000
shares of Patch  International  Inc.  The  Company is  required  to  undertake a
seismic work program over both Block A and Block B and spud a test well in Block
A on or before March 1, 2007. The Company is planning a seismic work program for
this winter.  The Company is negotiating an extension of the drill spud date and
the Block B option acquisition date.

On April 5,  2006,  Energy  acquired  three oil sands  leases,  comprising  four
sections (1,024 hectares), at the Alberta Crown Oil Sands sale. The Company will
establish a future work program on these leases based on the engineering  report
it has obtained.

The  Company has begun  production  its two oil wells  located at  Lloydminster,
Alberta, Canada.

The Company intends to enter into a pooling  agreement to allow it to complete a
potential gas well at  Atlee-Buffalo,  Alberta,  Canada.  The Company intends to
continue to participate in production at its well at McLeod, Alberta, Canada.

The Company intends to undertake  measurement of gas flow rates after completion
of swabbing at the well drilled and perforated at Halkirk, Alberta, Canada.

The  Company has a working  interest  in an oil and gas  project  located in the
Peace  River Arch area of Alberta,  Canada.  The Company is required to spud two
test wells on this property by February 1, 2007.  The Company is  negotiating to
swap one of the test well commitments for a seismic work program  commitment and
additional  land  acquisition  commitment.  Assuming  the revised  Agreement  is
completed  the Company  intends  undertake the seismic work program this winter.
The Company is negotiating an extension of the drill spud dates.

The Company has a seismic option and participation  interest in a gas project at
Red Deer, Alberta,  Canada. The Company is currently considering further seismic
work on this property before deciding whether to proceed with a drill program.

In light of the aggressive  operations program for 2007, the Company anticipates
that  additional  capitalization  between  $15  million to $20  million  will be
required  to  successfully  complete  all  planned  operations.  The Company has
engaged in  specific  discussions  with  certain  financing  parties in plans to
financially  facilitate  the  collective  operations.  The Company is  currently
determining the most effective means to facilitate the financing; however, there
can be no assurance that any such financing efforts will be successful.  If such
efforts are not successful,  management has not yet formulated its plans to deal
with a shortfall.

FORWARD-LOOKING STATEMENTS

Certain  statements  in this  Quarterly  Report on Form 10-QSB and the Company's
Annual  Report on Form 10-KSB for its fiscal year ended May 31, 2006, as well as
statements  made by the Company in periodic press


                                       21
<PAGE>

releases and oral  statements  made  by the Company's  officials to analysts and
shareholders  in  the  course of  presentations  about  the  Company, constitute
"forward-looking  statements." Such forward-looking statements involve known and
unknown risks,  uncertainties,  and  other  factors  that  may  cause the actual
results,  performance or achievements of the Company to be materially  different
from any future results,  performance or achievements  expressed  or  implied by
the  forward  looking  statements.  Such factors include,  among  other  things,
(1)  general economic and  business conditions;  (2) interest rate changes;  (3)
the relative  stability of the debt and equity markets;  (4) required accounting
changes; and (5) other factors over which the Company has little or no control.


ITEM 3.  CONTROLS AND PROCEDURES

Our principal  executive  officer and principal  financial officer evaluated our
disclosure  controls and  procedures as of the end of the period covered by this
report.  In his opinion,  the disclosure  controls and procedures are effective.
There have been no changes in our internal control over financial reporting that
occurred  during  our last  fiscal  quarter  that  materially  affected,  or are
reasonably  likely to materially  affect,  our internal  control over  financial
reporting.


                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

Not Applicable.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following is a summary of shares repurchased for cancellation by the Company
in the quarter ended November 30, 2006.

<TABLE>
-------------------------------------------------------------------------------------------------------------------
              (A) TOTAL NUMBER     (B) AVERAGE     (C) TOTAL NUMBER OF SHARES   (D) MAXIMUM NUMBER (OR APPROXIMATE
   PERIOD       OF SHARES (OR       PRICE PAID    (OR UNITS) PURCHASED AS PART  DOLLAR VALUE) OF SHARES (OR UNITS)
              UNITS) PURCHASED       PER SHARE     OF PUBLICLY ANNOUNCED PLANS    THAT MAY YET BE PURCHASED UNDER
                                     (OR UNIT)           OR PROGRAMS                 THE PLANS OR PROGRAMS
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
<S>                 <C>               <C>                    <C>                              <C>
Sep 1, 2006         2,000             $0.78                  204,338                          473,162
 - Sep 30,
    2006
-------------------------------------------------------------------------------------------------------------------
Oct 1, 2006           0                 0                       0                             473,162
 - Oct 31,
    2006
-------------------------------------------------------------------------------------------------------------------
Nov 1, 2006           0                 0                       0                             473,162
 - Nov 30,
    2006
-------------------------------------------------------------------------------------------------------------------
   Total            2,000             $0.78                  204,338                          473,162
-------------------------------------------------------------------------------------------------------------------
</TABLE>
------------------
1)   The  share  repurchase  program  was  announced November 17, 2005 effective
     December 1, 2005

                                       22
<PAGE>


2)   677,500 post forward split shares were approved
3)   The repurchase program ends November 30, 2006

On October 24, 2006, the Company issued 30,000 shares of common stock at a price
of $0.77 per share for investor  relation  services.  The Company has recorded a
prepaid expense of $15,835 related to the future portion of the agreement.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

Not Applicable.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not Applicable.

ITEM 5.  OTHER INFORMATION

Not Applicable.

ITEM 6.  EXHIBITS

REGULATION
S-B NUMBER                                  EXHIBIT

    2.1      Stock Exchange Agreement with Micronetics, Inc. (1)

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

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

    2.4      Share Exchange Agreement among the shareholders of Damascus Energy
             Inc., Patch Energy Inc., Patch International Inc., and Damascus
             Energy Inc. dated December 15, 2006 (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)

    4.1      Certificate of Designation of Class A Preferred Voting Stock (4)

   10.1      1999 Stock Option Plan (1)

   10.2      Shareholders Agreement dated August 23, 2002 among Praxis
             Pharmaceuticals Inc., Perpetual Trustees Nominees Limited,
             Rothschild Bioscience Managers Limited, CM Capital Investments Pty
             Ltd, CIBC Australia VC Fund LLC, Mooroolbark Technology Pty Ltd,
             The Australian National University and Pharmaxis Pty Ltd, Dr.
             William Cowden and Dr. Brett Charlton (8)

   10.3      Letter agreement dated February 18, 2004 regarding Termination
             Agreement with Fairchild International Corporation (9)


                                       23

<PAGE>
REGULATION
S-B NUMBER                                  EXHIBIT

   10.4      2005 Stock Option Plan (10)

   10.5      Assumption and Cancellation of Debt agreements with Fairchild
             International Corporation dated April 15, 2005 (5)

   10.6      Management services agreement with David Stadnyk dated May 1, 2005
             (5)

   10.7      Change of Control Agreement with David Stadnyk dated May 1, 2005
             (5)

   10.8      2006 Stock Option Plan (11)

   10.9      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 (4)

   10.10     Support Agreement among Patch International Inc., Patch Energy
             Inc., and 1286664 Alberta Ltd. dated December 15, 2006 (4)

   10.11     Letter agreement with 1289307 Alberta Ltd. dated December 21, 2006
             (12)

    21       Subsidiaries of the registrant (4)

   31.1      Rule 13a-14(a) Certification of Principal Executive and Financial
             Officer

   32.1      Certification Pursuant to 18 U.S.C. Section 1350 as Adopted
             Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
-------------

(1)   Incorporated  by  reference to the  exhibits  filed with the  Registration
      Statement on Form 10-SB, file no. 0-28627.
(2)   Incorporated  by  reference to the  exhibits  filed with the  registrant's
      current report on Form 8-K dated March 15, 2004.
(3)   Incorporated  by  reference  to the  exhibit  filed with the  registrant's
      current report on Form 8-K dated June 15, 2004.
(4)   Incorporated  by  reference to the  exhibits  filed with the  registrant's
      current report on Form 8-K dated December 15, 2006.
(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.
(6)   Incorporated  by  reference to the  exhibits  filed with the  registrant's
      current report on Form 8-K dated July 8, 2005.
(7)   Incorporated  by  reference to the  exhibits  filed with the  registrant's
      current report on Form 8-K dated March 14, 2006.
(8)   Incorporated  by  reference to the  exhibits  filed with the  registrant's
      annual report on Form 10-KSB for the fiscal year ended May 31, 2002.
(9)   Incorporated  by  reference to the  exhibits  filed with the  registrant's
      annual report on Form 10-KSB for the fiscal year ended May 31, 2004.
(10)  Incorporated  by  reference to the  exhibits  filed with the  registrant's
      registration  statement  on  Form  S-8,  file  number  333-128627,   filed
      September 27, 2005.
(11)  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.
(12)  Incorporated  by  reference to the  exhibits  filed with the  registrant's
      current report on Form 8-K dated December 21, 2006.



                                       24

<PAGE>


                                   SIGNATURES

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

                                  PATCH INTERNATIONAL INC.
                                  (REGISTRANT)

Date:  January 15, 2007           By:  /s/ MICHAEL S. VANDALE
                                     -------------------------------------------
                                     Michael S. Vandale, President and Chief
                                     Executive Officer (Acting principal
                                     financial officer)




























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