##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended January 31, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to  .
 COMMISSION FILE NUMBER: 001-32994
 OILSANDS QUEST INC.
  Colorado
    
    98-0461154(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 205, 707  7th Avenue SW, Calgary, Alberta, Canada T2P 3H6
 (Issuers telephone number)
 (Former name, former address and former fiscal year, if changed since last report)
 þ o
 o o þ o
 o þ




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##### 



OILSANDS QUEST INC.
FORM 10Q FOR THE QUARTER ENDED
JANUARY 31, 2008
 ItemPart I. Financial Information1. Financial StatementsUnaudited Consolidated Balance Sheets as of January 31, 2008 and April 30, 2007
    
    
    3Unaudited Consolidated Statements of Operations for the Three and Nine Months Ended January 31, 2008 and 2007
    
    
    4Unaudited Consolidated Statements of Stockholders Equity and Comprehensive Income for the Nine Months Ended January 31, 2008 and 2007
    
    
    5Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended January 31, 2008 and 2007
    
    
    6Unaudited Notes to Consolidated Financial Statements
    
    
    72. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    154. Controls and Procedures
    
    
    23Part II Other Information1A. Risk Factors
    
    
    242. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    256. Exhibits
    
    
    27Signatures
    
    
    28Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
  Cautionary Statement about Forward-Looking Statements
  
    
    the amount and nature of future capital, exploration and development expenditures;
 
    
    the timing of exploration and development activities;
 
    
    business strategies and development of our business plan and exploration programs; and
 
    
    potential estimates as to the volume and nature of petroleum deposits that are expected to
be found present when lands are developed in a project.




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##### Table of Contents



OILSANDS QUEST INC.
(An Exploration Stage Company)
Consolidated Balance Sheets
(Unaudited)
 January 31,
    
    
    April 30,2008
    
    
    2007ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    46,779,074
    
    
    $
    32,393,871Accounts receivable
    
    
    1,368,617
    
    
    
    1,283,415Short-term investments (note 2)
    
    
    41,912,194
    
    
    
    2,000,000Prepaid expenses
    
    
    718,482
    
    
    
    152,481Available for sale securities
    
    
    112,911
    
    
    
    284,630Total Current Assets
    
    
    90,891,278
    
    
    
    36,114,397Property and Equipment(note 3)
    
    
    597,959,253
    
    
    
    520,301,141Total Assets
    
    $
    688,850,531
    
    
    $
    556,415,538LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    11,971,306
    
    
    $
    5,170,063Loan payable (note 4)
    
    
    
    
    
    
    22,589,681Flow-through share premium liability (note 7)
    
    
    
    
    
    
    2,535,187Total Current Liabilities
    
    
    11,971,306
    
    
    
    30,294,931Deferred Taxes
    
    
    150,999,014
    
    
    
    139,287,062162,970,320
    
    
    
    169,581,993STOCKHOLDERS EQUITYCapital StockPreferred stock, par value of $0.001 each, 10,000,000 shares authorized
1 Series B Preferred share outstanding (note 6)
    
    
    1
    
    
    
    1Common stock, par value of $0.001 each, 500,000,000 shares authorized
213,094,263 and 164,624,278 shares outstanding at January 31, 2008
and April 30, 2007 respectively
    
    
    213,094
    
    
    
    164,624Additional Paid-in Capital
    
    
    675,153,053
    
    
    
    519,265,628Deficit Accumulated During Exploration Stage
    
    
    (195,478,346
    )
    
    
    (131,435,609
    )Other Comprehensive Income (Loss)
    
    
    45,992,409
    
    
    
    (1,161,099
    )Total Stockholders Equity
    
    
    525,880,211
    
    
    
    386,833,545Total Liabilities and Stockholders Equity
    
    $
    688,850,531
    
    
    $
    556,415,538
   3




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##### Table of Contents



OILSANDS QUEST INC.
(An Exploration Stage Company)
Consolidated Statements of Operations
(Unaudited)
 FromThree Months Ended
    
    
    Nine Months Ended
    
    
    Inception onJanuary 31,
    
    
    January 31,
    
    
    April 3, 1998 to2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    January 31, 2008ExpendituresExploration costs
    
    $
    35,549,282
    
    
    $
    10,057,967
    
    
    $
    58,099,970
    
    
    $
    12,655,436
    
    
    $
    95,950,217Stock-based compensation expense
    
    
    3,716,058
    
    
    
    3,366,840
    
    
    
    12,449,285
    
    
    
    36,577,862
    
    
    
    53,830,998Corporate salaries
    
    
    894,067
    
    
    
    425,846
    
    
    
    2,195,510
    
    
    
    1,398,634
    
    
    
    4,923,678Professional fees
    
    
    944,031
    
    
    
    409,100
    
    
    
    1,842,140
    
    
    
    1,414,416
    
    
    
    5,604,965Depreciation
    
    
    284,020
    
    
    
    
    
    
    
    786,094
    
    
    
    
    
    
    
    1,153,921Office
    
    
    268,205
    
    
    
    89,950
    
    
    
    691,279
    
    
    
    576,083
    
    
    
    2,176,096Corporate communication
    
    
    250,311
    
    
    
    61,757
    
    
    
    527,593
    
    
    
    242,597
    
    
    
    4,250,929Foreign exchange (gain) loss
    
    
    (309,551
    )
    
    
    1,026
    
    
    
    (496,744
    )
    
    
    82,511
    
    
    
    (295,722
    )Board fees and expenses
    
    
    78,018
    
    
    
    65,338
    
    
    
    234,341
    
    
    
    150,955
    
    
    
    481,365Travel
    
    
    213,925
    
    
    
    46,987
    
    
    
    457,355
    
    
    
    156,134
    
    
    
    922,984Transfer agent fee
    
    
    156,466
    
    
    
    58,800
    
    
    
    229,924
    
    
    
    245,303
    
    
    
    835,367Interest and bank charges
    
    
    1,057
    
    
    
    274
    
    
    
    2,111
    
    
    
    25,055
    
    
    
    1,021,107Consulting
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,607,784
    
    
    
    13,944,336Non-cash financing expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,472,143Management fee
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    414,60242,045,889
    
    
    
    14,583,885
    
    
    
    77,018,858
    
    
    
    57,132,770
    
    
    
    221,686,986Other ItemsInterest income
    
    
    (669,670
    )
    
    
    (387,834
    )
    
    
    (1,779,541
    )
    
    
    (1,129,377
    )
    
    
    (3,583,564
    )Gain on extinguishment of certain
liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (936,469
    )Net loss before income tax recovery and
non-controlling shareholder interest
    
    
    41,376,219
    
    
    
    14,196,051
    
    
    
    75,239,317
    
    
    
    56,003,393
    
    
    
    217,166,953Income tax (recovery)
    
    
    (3,962,636
    )
    
    
    69,447
    
    
    
    (11,196,580
    )
    
    
    (1,026,727
    )
    
    
    (13,565,353
    )Net loss before non-controlling
shareholder interest
    
    
    37,413,583
    
    
    
    14,265,498
    
    
    
    64,042,737
    
    
    
    54,976,666
    
    
    
    203,601,600Non-controlling shareholder interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,151,083
    )
    
    
    (8,123,254
    )Net loss
    
    $
    37,413,583
    
    
    $
    14,265,498
    
    
    $
    64,042,737
    
    
    $
    49,825,583
    
    
    $
    195,478,346Net Loss Per Share
    
    $
    (0.18
    )
    
    $
    (0.10
    )
    
    $
    (0.33
    )
    
    $
    (0.38
    )Weighted Average Number of
Common Shares Outstanding
    
    
    203,812,609
    
    
    
    141,989,112
    
    
    
    191,222,536
    
    
    
    129,974,884
   4




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##### Table of Contents



OILSANDS QUEST INC.
(An Exploration Stage Company)
Consolidated Statements of Stockholders Equity and Comprehensive Income
(Unaudited)
 DeficitAccumulatedAdditional
    
    
    Other
    
    
    During the
    
    
    TotalCommon Stock
    
    
    Preferred Stock
    
    
    paid-in
    
    
    Comprehensive
    
    
    Exploration
    
    
    Stockholders'Shares
    
    
    Par Value
    
    
    Shares
    
    
    Par Value
    
    
    Capital
    
    
    Income (Loss)
    
    
    Stage
    
    
    EquityBalance, April 30, 2007
    
    
    164,624,278
    
    
    $
    164,624
    
    
    
    1
    
    
    $
    1
    
    
    $
    519,265,628
    
    
    $
    (1,161,099
    )
    
    $
    (131,435,609
    )
    
    $
    386,833,545Common stock issued for:Cash
    
    
    41,626,431
    
    
    
    41,626
    
    
    
    
    
    
    
    
    
    
    
    149,555,186
    
    
    
    
    
    
    
    
    
    
    
    149,596,812Premium on flow-through shares
allocated to liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,379,276
    )
    
    
    
    
    
    
    
    
    
    
    (4,379,276
    )Acquisition of royalty and Triple 7
joint venture interest
    
    
    750,000
    
    
    
    750
    
    
    
    
    
    
    
    
    
    
    
    3,291,750
    
    
    
    
    
    
    
    
    
    
    
    3,292,500Employee compensation
    
    
    44,000
    
    
    
    44
    
    
    
    
    
    
    
    
    
    
    
    116,387
    
    
    
    
    
    
    
    
    
    
    
    116,431Exchange of Exchangeable Shares
    
    
    6,049,554
    
    
    
    6,050
    
    
    
    
    
    
    
    
    
    
    
    (6,050
    )
    
    
    
    
    
    
    
    
    
    
    Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,449,285
    
    
    
    
    
    
    
    
    
    
    
    12,449,285Share issue costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,737,683
    )
    
    
    
    
    
    
    
    
    
    
    (6,737,683
    )Proceeds from exercise of subsidiary warrants
and options (post reorganization)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,597,826
    
    
    
    
    
    
    
    
    
    
    
    1,597,826Other comprehensive incomeUnrealized loss on available for sale
securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (171,719
    )
    
    
    
    
    
    
    (171,719
    )Exchange gain on translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    47,325,227
    
    
    
    
    
    
    
    47,325,227Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (64,042,737
    )
    
    
    (64,042,737
    )Balance, January 31, 2008
    
    
    213,094,263
    
    
    $
    213,094
    
    
    
    1
    
    
    $
    1
    
    
    $
    675,153,053
    
    
    $
    45,992,409
    
    
    $
    (195,478,346
    )
    
    $
    525,880,211Balance, April 30, 2006
    
    
    115,046,408
    
    
    $
    115,046
    
    
    
    
    
    
    
    
    
    
    $
    77,724,920
    
    
    $
    256,085
    
    
    $
    (62,640,868
    )
    
    $
    15,455,183Common stock issued for:Cash
    
    
    12,267,991
    
    
    
    12,268
    
    
    
    
    
    
    
    
    
    
    
    52,756,921
    
    
    
    
    
    
    
    
    
    
    
    52,769,189Settlement of debt
    
    
    3,523,727
    
    
    
    3,524
    
    
    
    
    
    
    
    
    
    
    
    18,689,096
    
    
    
    
    
    
    
    
    
    
    
    18,692,620Cashless exercise of warrants
    
    
    2,213,953
    
    
    
    2,214
    
    
    
    
    
    
    
    
    
    
    
    (2,214
    )
    
    
    
    
    
    
    
    
    
    
    Preferred shares issued on reorganization
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    1
    
    
    
    319,022,947
    
    
    
    
    
    
    
    
    
    
    
    319,022,948Exchange of Exchangeable Shares
    
    
    20,147,257
    
    
    
    20,147
    
    
    
    
    
    
    
    
    
    
    
    (20,147
    )
    
    
    
    
    
    
    
    
    
    
    Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,577,862
    
    
    
    
    
    
    
    
    
    
    
    36,577,862Share issue costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,945,299
    )
    
    
    
    
    
    
    
    
    
    
    (1,945,299
    )Proceeds from exercise of subsidiary warrants
and options (post reorganization)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    615,062
    
    
    
    
    
    
    
    
    
    
    
    615,062Other comprehensive incomeExchange loss on translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,011,647
    )
    
    
    
    
    
    
    (2,011,647
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (49,825,583
    )
    
    
    (49,825,583
    )Balance, January 31, 2007
    
    
    153,199,336
    
    
    $
    153,199
    
    
    
    1
    
    
    $
    1
    
    
    $
    503,419,148
    
    
    $
    (1,755,562
    )
    
    $
    (112,466,451
    )
    
    $
    389,350,335
   5




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##### Table of Contents



OILSANDS QUEST INC.
(An Exploration Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
 From Inception onNine Months Ended
    
    
    April 3, 1998January 31,
    
    
    Through to2008
    
    
    2007
    
    
    January 31, 2008Operating ActivitiesNet loss
    
    $
    (64,042,737
    )
    
    $
    (49,825,583
    )
    
    $
    (195,478,346
    )Non-cash adjustments to net lossStock-based compensation expense
    
    
    12,449,285
    
    
    
    36,577,862
    
    
    
    53,830,998Deferred income tax (recovery)
    
    
    (11,394,174
    )
    
    
    (1,026,727
    )
    
    
    (13,763,159
    )Depreciation
    
    
    786,094
    
    
    
    
    
    
    
    1,153,921Operating expenses paid with shares
    
    
    116,431
    
    
    
    
    
    
    
    11,070,439Non-controlling shareholder interest
    
    
    
    
    
    
    (5,151,083
    )
    
    
    (8,123,254
    )Non-cash financing expense
    
    
    
    
    
    
    
    
    
    
    36,472,143Gain on extinguishment of certain liabilities
    
    
    
    
    
    
    
    
    
    
    (936,469
    )Write off of exploration property
    
    
    
    
    
    
    
    
    
    
    856,359Other
    
    
    
    
    
    
    34,894
    
    
    
    126,220Changes in Non-Cash Working CapitalAccounts receivable and prepaid expenses
    
    
    (481,455
    )
    
    
    (565,861
    )
    
    
    (878,848
    )Accounts payable
    
    
    6,288,934
    
    
    
    4,125,798
    
    
    
    13,534,137Cash Used in Operating Activities
    
    
    (56,277,622
    )
    
    
    (15,830,700
    )
    
    
    (102,135,859
    )Investing ActivitiesCapital expenditures
    
    
    (13,467,554
    )
    
    
    (19,184,103
    )
    
    
    (70,841,678
    )Short-term investment (note 2)
    
    
    (39,912,194
    )
    
    
    
    
    
    
    (41,912,194
    )Other investments
    
    
    
    
    
    
    
    
    
    
    (416,799
    )Cash Used in Investing Activities
    
    
    (53,379,748
    )
    
    
    (19,184,103
    )
    
    
    (113,170,671
    )Financing ActivitiesIssuance of shares for cash
    
    
    142,859,131
    
    
    
    50,823,890
    
    
    
    239,752,128Bank loan
    
    
    (21,207,500
    )
    
    
    
    
    
    
    Shares issued on exercise of subsidiary options and warrants
post reorganization
    
    
    1,597,826
    
    
    
    
    
    
    
    2,653,411Shares issued by subsidiary to non-controlling interest
    
    
    
    
    
    
    570,955
    
    
    
    7,663,666Convertible debentures
    
    
    
    
    
    
    
    
    
    
    8,384,496Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    1,120,206Common stock returned to treasury
    
    
    
    
    
    
    
    
    
    
    (15,212
    )Cash Provided by Financing Activities
    
    
    123,249,457
    
    
    
    51,394,845
    
    
    
    259,558,695Inflow of Cash
    
    
    13,592,087
    
    
    
    16,380,042
    
    
    
    44,252,165Effects of exchange rate changes on cash
    
    
    793,116
    
    
    
    (2,215,676
    )
    
    
    2,526,909Cash, Beginning of Period
    
    
    32,393,871
    
    
    
    22,127,315
    
    
    
    Cash, End of Period
    
    $
    46,779,074
    
    
    $
    36,291,681
    
    
    $
    46,779,074Non-Cash Financing ActivitiesCommon stock issued for properties
    
    $
    3,292,500
    
    
    $
    
    
    
    $
    7,129,942Warrants granted on purchase of properties
    
    $
    
    
    
    $
    
    
    
    $
    1,763,929Common stock issued for services
    
    $
    116,431
    
    
    $
    1,204,383
    
    
    $
    10,504,594Common stock issued for debt settlement
    
    $
    
    
    
    $
    18,692,620
    
    
    $
    28,401,029
   6




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##### Table of Contents



OILSANDS QUEST INC.
(An Exploration Stage Company)
Notes to Consolidate Financial Statements
(Unaudited)
 1. DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS
   2. BASIS OF PRESENTATION
      3. PROPERTY AND EQUIPMENT
 January 31,
    
    
    April 30,2008
    
    
    2007OQI Sask Oil Sands Exploration Permits
    
    $
    585,499,153
    
    
    $
    511,999,565OQI Sask Oil Sands Exploration Licences
    
    
    2,323,073
    
    
    
    Pasquia Hills Oil Shale Exploration Permits
    
    
    3,854,648
    
    
    
    3,854,648Eagles Nest Oil Sands Lease
    
    
    2,277,962
    
    
    
    1,016,934Equipment
    
    
    5,237,706
    
    
    
    3,797,821599,192,542
    
    
    
    520,668,968Less: Accumulated Amortization
    
    
    1,233,289
    
    
    
    367,827Net Book Value
    
    $
    597,959,253
    
    
    $
    520,301,141
  7




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##### Table of Contents



OILSANDS QUEST INC.
(An Exploration Stage Company)
Notes to Consolidate Financial Statements
(Unaudited)
 3. PROPERTY AND EQUIPMENT  (continued)
      The Alberta Mines and Minerals Act
  The Petroleum and Natural Gas Amendment Regulations 2007
(Saskatchewan
  Oil Shale Regulations, 1964
  8




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##### Table of Contents



OILSANDS QUEST INC.
(An Exploration Stage Company)
Notes to Consolidate Financial Statements
(Unaudited)
 3. PROPERTY AND EQUIPMENT  (continued)
 (continued)
 The Petroleum and Natural Gas Regulations, 1969 (Saskatchewan)
   4. LOAN PAYABLE
  5. SUBSIDIARY OPTIONS AND WARRANTS OUTSTANDING
   Weighted AverageNumber
    
    Exercise Price (CDN)Issued and outstanding, April 30, 2007
    
    
    16,000
    
    
    $
    2.00Exercised
    
    
    (16,000
    )
    
    $
    2.00Issued and outstanding, January 31, 2008
    
    
    
  9




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##### Table of Contents



OILSANDS QUEST INC.
(An Exploration Stage Company)
Notes to Consolidate Financial Statements
(Unaudited)
 5. SUBSIDIARY OPTIONS AND WARRANTS OUTSTANDING  (continued)
  Weighted AverageNumber
    
    Exercise Price (CDN)Issued and outstanding, April 30, 2007
    
    
    1,775,000
    
    
    $
    16.55Exercised
    
    
    (135,000
    )
    
    $
    11.63Issued and outstanding, January 31, 2008
    
    
    1,640,000
    
    
    $
    16.96
 Number
    
    Number
    
    Weighted AverageExercise
    
    Outstanding at
    
    Exercisable at
    
    Remaining ContractualPrice (CDN)
    
    January 31, 2008
    
    January 31, 2008
    
    Life$
    0.50
    
    
    
    100,000
    
    
    
    100,000
    
    
    1.78 years$
    3.00
    
    
    
    100,000
    
    
    
    100,000
    
    
    2.50 years$
    6.00
    
    
    
    515,000
    
    
    
    515,000
    
    
    3.03 years$
    25.00
    
    
    
    875,000
    
    
    
    675,000
    
    
    3.25 years$
    50.00
    
    
    
    50,000
    
    
    
    25,000
    
    
    3.50 years1,640,000
    
    
    
    1,415,000
    
    
    3.05 years
  6. PREFERRED SHARES
  OQI SaskExchangeableOQI Sask
    
    Shares issuable
    
    TotalExchangeable
    
    on exercise of OQI
    
    ExchangeableShares
    
    Sask options
    
    SharesBalance, April 30, 2007
    
    
    33,527,359
    
    
    
    14,739,930
    
    
    
    48,267,289OQI Sask options and warrants exercised
    
    
    1,242,730
    
    
    
    (1,242,730
    )
    
    
    Exchangeable Shares exchanged into
OQI common shares
    
    
    (6,049,554
    )
    
    
    
    
    
    
    (6,049,554
    )Balance, January 31, 2008
    
    
    28,720,535
    
    
    
    13,497,200
    
    
    
    42,217,735
  10




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##### Table of Contents



OILSANDS QUEST INC.
(An Exploration Stage Company)
Notes to Consolidate Financial Statements
(Unaudited)
 7. COMMON STOCK
          11




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##### Table of Contents



OILSANDS QUEST INC.
(An Exploration Stage Company)
Notes to Consolidate Financial Statements
(Unaudited)
 8. STOCK OPTIONS
  Stock option
    
    Exercise
    
    NumberExpiry Date
    
    Price
    
    of Options8-Feb-08
    
    $
    4.62
    
    
    
    250,00017-Feb-09
    
    $
    4.57
    
    
    
    250,0001-May-11
    
    $
    6.75
    
    
    
    1,000,00014-Aug-11
    
    $
    6.75
    
    
    
    1,000,0001-May-12
    
    $
    6.75
    
    
    
    1,000,0001-May-13
    
    $
    6.75
    
    
    
    1,000,00018-May-08
    
    $
    6.00
    
    
    
    300,00018-May-09
    
    $
    6.00
    
    
    
    30,00023-Aug-08
    
    $
    5.05
    
    
    
    75,00023-Aug-11
    
    $
    5.05
    
    
    
    2,862,5002-Oct-11
    
    $
    3.89
    
    
    
    400,0001-Dec-11
    
    $
    5.25
    
    
    
    50,00029-Jun-12
    
    $
    2.47
    
    
    
    100,0001-Aug-12
    
    $
    4.27
    
    
    
    4,100,75031-Aug-12
    
    $
    5.04
    
    
    
    30,00011-Oct-12
    
    $
    4.60
    
    
    
    150,00011-Jan-13
    
    $
    4.59
    
    
    
    115,00012,713,250
  1,000,000
    
    
    options at $6.75 with an expiry date of May 1, 2013 which vest on May 1, 2008;715,000
    
    
    options at $5.05 which vest as to 357,500 in each of 2008 and 2009 on August 23;100,000
    
    
    options at $3.89 which vest as to 50,000 in each of 2008 and 2009 on October 2;12,500
    
    
    options at $5.25 which vest as to 6,250 in each of 2008 and 2009 on December 1;75,000
    
    
    options at $2.47 which vest as to 25,000 on each of June 29, 2008, 2009, and 2010;3,072,750
    
    
    options at $4.27 which vest as to 1,024,250 in each of 2008, 2009 and 2010 on August 1;22,500
    
    
    options at $5.04 which vest as to 7,500 on February 28, 2008 and 15,000 on August 31, 2008;112,500
    
    
    options at $4.60 which vest as to 37,500 on each of October 11, 2008, 2009, and 2010;86,250
    
    
    options at $4.59 which vest as to 28,750 on each of January 11, 2009, 2010, and 2011;1,655,000
    
    
    options which vest on or after dates between August 23 and December 1, 2009 as to 413,750 upon achieving a 750 million bitumen in place (BIP) barrel count defined as the high resource (P10) estimate of bitumen in place (as determined in accordance with National Instrument 51-101 Standard of Disclosure for Oil and Gas Activities issued by the securities regulatory authorities in Canada) and 413,750 options thereafter for each 250 million increase in the BIP barrel count.6,851,500
  12




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##### Table of Contents



OILSANDS QUEST INC.
(An Exploration Stage Company)
Notes to Consolidate Financial Statements
(Unaudited)
 8. STOCK OPTIONS  (continued)
  WeightedNumber of
    
    AverageOptions
    
    Exercise PriceBalance, April 30, 2007
    
    
    10,125,000
    
    
    $
    5.33Granted during the nine months ended January 31, 2008
    
    
    4,507,000
    
    
    $
    4.19Exercised
    
    
    (1,456,250
    )
    
    $
    2.62Cancelled
    
    
    (462,500
    )
    
    $
    4.95Balance, January 31, 2008
    
    
    12,713,250
    
    
    $
    5.27
    Expected life (years)
    
    
    5Risk free interest rate
    
    
    4.44
    %Expected volatility
    
    
    124
    %Dividend yield
    
    
    0
    %
  9. WARRANTS
  Expiry
    
    Exercise
    
    Number ofDate
    
    Price
    
    WarrantsDecember 5, 2009
    
    $
    6.75
    
    
    
    6,325,0006,325,000
  WeightedNumber
    
    AverageOf Warrants
    
    Exercise PriceBalance, April 30, 2007
    
    
    8,856,067
    
    
    $
    1.98Exercised
    
    
    (8,856,067
    )
    
    $
    1.98Warrants issued
    
    
    6,325,000
    
    
    $
    6.75Balance, January 31, 2008
    
    
    6,325,000
    
    
    $
    6.75
  13




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##### Table of Contents



OILSANDS QUEST INC.
(An Exploration Stage Company)
Notes to Consolidate Financial Statements
(Unaudited)
 10. COMPREHENSIVE INCOME
  Three months ended January 31,
    
    
    Nine months ended January 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Net Loss
    
    $
    37,413,583
    
    
    $
    14,265,498
    
    
    $
    64,042,737
    
    
    $
    49,825,583Other comprehensive incomeUnrealized loss on available
for sale securities
    
    
    141,326
    
    
    
    
    
    
    
    171,719
    
    
    
    Foreign exchange (gain) loss
on translation
    
    
    23,568,238
    
    
    
    1,573,620
    
    
    
    (47,325,227
    )
    
    
    2,011,647Total Comprehensive Loss
    
    $
    61,123,147
    
    
    $
    15,839,118
    
    
    $
    16,889,229
    
    
    $
    51,837,230
 11. RELATED PARTY TRANSACTIONS
     12. SUBSEQUENT EVENTS
   14




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
  Three Months Ended January 31, 2008:
 
    
    During the three months ended January 31, 2008, $88.8 million, net of issuance costs,
was raised through a marketed public offering and proceeds of warrant and option exercises.
 
    
    Exploration costs incurred during the three months ended January 31, 2008 were $35.6
million compared to $10.0 million during the same period in 2007. Exploration activities
undertaken during the period are summarized below and included site preparation activities
for the reservoir field tests planned for 2008/2009.
 
    
    In November 2007, the Company announced the results of the independent review
and evaluation of the Axe Lake Discovered Resources by McDaniel & Associates Ltd. based on
data obtained from the results of drilling up to March 31, 2007 and other sources,
including the physical examination of cores and geophysical logs. The independent review
and evaluation was prepared and presented in accordance with the Canadian standards set out
in the Canadian Oil and Gas Evaluation Handbook (COGEH) and National Instrument NI 51-101.
 
    
    In January 2008, the Company formed a wholly owned subsidiary, Oilsands Quest Technology
Inc., devoted to in-situ oil sands technology assessment and development; and acquired two
oil sands exploration permits totaling 46,080 acres in Alberta for a cost of $9.7 million
($10 million CDN) in a public offering of Crown Oil Sands Rights.
 Nine Months Ended January 31, 2008:
 
    
    During the nine months ended January 31, 2008, $144.4 million, net of issuance costs,
was raised through private placement share issuances, a marketed public offering and
proceeds of warrant and option exercises.
 
    
    In May 2007, the Company repaid a loan payable of $22.6 million ($25.0 million CDN)
originally incurred to fund the acquisition of oil sands exploration permits in Alberta
adjacent to its Saskatchewan oil sands permits.
 
    
    Exploration costs incurred during the nine months ended January 31, 2008 were $58.1
million compared to $12.6 million during the same period in 2007 due to increased
exploration activities summarized below.
 
    
    The Company continued to advance its pre-commercialization evaluation studies of its Axe
Lake Discovery, which has included laboratory tests, reservoir simulations,
investigating well configurations and well completion alternatives for various recovery
programs. Plans for a comprehensive reservoir test program summarized below have been
initiated.
 
    
    The Company has opened a technical facility in Calgary, Alberta and has finalized plans
including securing office space for a technical office in Regina, Saskatchewan.
  15




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16




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##### Table of Contents




    
    continue exploration activities, which include drilling and seismic programs, in
Saskatchewan and on adjacent Alberta permits;
 
    
    evaluate drilling data and perform laboratory studies of bitumen characterization and
recovery methods by using core samples obtained from exploration
drilling;
 
    
    undertake computer reservoir modeling and simulation studies;
 
    
    conduct environmental programs to establish base-line data and facilitate regulatory
approvals;
 
    
    engineer and procure surface and downhole equipment for reservoir field tests;
 
    
    develop engineering timelines and designs of pilot plan production testing facilities;
 
    
    conduct advanced economic feasibility and risk assessment studies for full commercial
project development;
 
    
    conduct reservoir field tests to confirm laboratory studies; and
 
    
    initiate joint venture partnership negotiations for the development of the Axe Lake
Discovery.
    17




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Liquidity and Capital Resources
        18




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19




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Changes in Financial Condition
  Three Months Ended January 31, 2008 as compared to January 31, 2007.
 Nine Months Ended January 31, 2008 as compared to January 31, 2007.
  Three Months Ended January 31, 2008 as compared to January 31, 2007.
 Nine Months Ended January 31, 2008 as compared to January 31, 2007.
  Three Months Ended January 31, 2008 as compared to January 31, 2007.
 Nine Months Ended January 31, 2008 as compared to January 31, 2007.
  20




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##### Table of Contents



Three Months Ended January 31, 2008 as compared to January 31, 2007.
 Nine Months Ended January 31, 2008 as compared to January 31, 2007.
  Three Months Ended January 31, 2008 as compared to January 31, 2007.
 Nine Months Ended January 31, 2008 as compared to January 31, 2007.
  Three Months Ended January 31, 2008 as compared to January 31, 2007.
 Nine Months Ended January 31, 2008 as compared to January 31, 2007.
  Three Months Ended January 31, 2008 as compared to January 31, 2007.
 Nine Months Ended January 31, 2008 as compared to January 31, 2007.
  21




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##### Table of Contents



Three Months Ended January 31, 2008 as compared to January 31, 2007.
 Nine Months Ended January 31, 2008 as compared to January 31, 2007.
  Three Months Ended January 31, 2008 as compared to January 31, 2007.
 Nine Months Ended January 31, 2008 as compared to January 31, 2007.
  Three Months Ended January 31, 2008 as compared to January 31, 2007.
 Nine Months Ended January 31, 2008 as compared to January 31, 2007.
    Three Months Ended January 31, 2008 as compared to January 31, 2007.
 Nine Months Ended January 31, 2008 as compared to January 31, 2007.
   22




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##### Table of Contents



Critical Accounting Policies
    Foreign currency translation
   
 Item 4. Controls and Procedures
     23




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PART II  OTHER INFORMATION
 
 ITEM 1A. Risk Factors
  Fiscal Regime
      24




---



##### Table of Contents



Regulatory Framework
 2008 Climate Change Strategy Strategy
 Strategy
 Strategy
   
 ITEM 2. Unregistered Sales of Equity Securities
     25




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26




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##### Table of Contents



ITEM 6. Exhibits.
 3.1
    
    Articles of Incorporation,as amended. (1), (2), (3), (4), (5)3.2
    
    By laws, as amended.(6)(7)31.1
    
    Certification of CEO Pursuant to Exchange Act Rules 13a-14 and 15d-14, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.31.2
    
    Certification of CFO Pursuant to Exchange Act Rules 13a-14 and 15d-14, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed
herewith.32.1
    
    Certification of CEO Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.32.2
    
    Certification of CFO Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.
 
 (1)
    
    Incorporated by reference from Form 10-SB, filed October 14, 1999; and Form
8-K, filed November 29, 2004.(2)
    
    Incorporated by reference from Form 10-QSB dated December 14, 2005.(3)
    
    Incorporated by reference from Form 8-K dated March 13, 2006.(4)
    
    Incorporated by reference from Form 8-K dated August 14, 2006.(5)
    
    Incorporated by reference herein from Form 10-QSB filed December 15, 2006.(6)
    
    Incorporated by reference herein from Form 8-K filed July 26, 2007.(7)
    
    Incorporated by reference herein from Form 8-K filed November 23, 2007.  27




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##### Table of Contents



SIGNATURES
  OILSANDS QUEST INC.Date: March 14, 2008
    By:
    /s/ Christopher H. HopkinsChristopher H. Hopkins, President,Chief Executive Officer and Director Date: March 14, 2008
    By:
    /s/ Karim HirjiKarim Hirji, Chief Financial Officer andChief Accounting Officer  28




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EXHIBIT INDEX
 ExhibitNo.
    
    Description3.1
    
    Articles of Incorporation,as amended. (1), (2), (3), (4), (5)3.2
    
    By laws, as amended.(6)(7)31.1
    
    Certification of CEO Pursuant to Exchange Act Rules 13a-14 and 15d-14, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.31.2
    
    Certification of CFO Pursuant to Exchange Act Rules 13a-14 and 15d-14, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed
herewith.32.1
    
    Certification of CEO Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.32.2
    
    Certification of CFO Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.
 
 (1)
    
    Incorporated by reference from Form 10-SB, filed October 14, 1999; and Form
8-K, filed November 29, 2004.(2)
    
    Incorporated by reference from Form 10-QSB dated December 14, 2005.(3)
    
    Incorporated by reference from Form 8-K dated March 13, 2006.(4)
    
    Incorporated by reference from Form 8-K dated August 14, 2006.(5)
    
    Incorporated by reference herein from Form 10-QSB filed December 15, 2006.(6)
    
    Incorporated by reference herein from Form 8-K filed July 26, 2007.(7)
    
    Incorporated by reference herein from Form 8-K filed November 23, 2007.  29