Despite a damaging report last month from a group of disgruntled investors that said AOL’s Patch was not a “viable business,” the service still had a good month in May as it set an all-time high for traffic and revenue.

Patch, AOL’s local news dispensary, served 11.7 million users in May, marking a 14% increase in users from April when the platform had 10.3 million users. Last month’s record is also an 11% increase over Patch’s previous traffic record, which was recorded in August 2011 with 10.6 million users. In month-to-month growth, Patch saw a 12% increase in visits per unique visitor in May.

“We are extremely gratified to see these measures of the traction we have gained in our communities and in our business since our launch just over 3 years ago,” commented Jon Brod, CEO & Co-Founder of Patch, said in a statement. “We are laser-focused on continuing to serve our users and advertisers with high-quality content and impactful products, and building upon our success to date in innovative and engaging ways.”

Patch’s revenue also hit a new high water mark in May, besting the previous record set in November of last year. The platform’s total revenue for May was 14% higher than the previous record and 17% higher than April’s revenue.

AOL Chairman and CEO Tim Armstrong, who founded and later sold Patch to AOL after he’d joined AOL, expects that Patch will generate between $40 and $50 million in revenue this year, a projection likely based on the fact that Patch has already booked for 2012 130% of its total 2011 revenue.

While AOL didn’t release any actual money numbers associated with Patch’s good month o’ May, Patch might need to do a little better than $50 million to finally be considered a success. Bloomberg cites the aforementioned group of disgruntled investors, Starboard, who estimated that Patch lost $147 million last year with only $15,000 coming from each of Patch’s 800-plus news sites. While the prospective $50 million that Patch hopes to generate this year would offset another fiscal year loss, it remains to be seen if the hyper-local news service can inch closer to actually producing a profit in the future.