Filed
Pursuant to Rule 424(b)(2)
Registration
No. 333-162677
PROSPECTUS
SUPPLEMENT
(To
Prospectus dated November 3, 2009)
DEJOUR
ENTERPRISES LTD.
10,766,665
Units
We are
offering 10,766,665 of our common shares, no par value, warrants to purchase a
total of 8,075,000 of our common shares, and up to 8,075,000 of our common
shares issuable from time to time upon the exercise of the
warrants. We are offering the common shares and warrants in units,
each unit consisting of one common share together with three-quarters of one
warrant, each whole warrant exercisable at a price of $0.40 for one common share
any time from June 22, 2010 until December 21, 2014. The units will be sold at a
negotiated price of $0.30 per unit. Units will not be issued or
certificated. The common shares and warrants are immediately separable and will
be issued separately. We do not expect that the warrants will be
listed for trading on any securities exchange.
Our
common shares are traded on the Toronto Stock Exchange and on the NYSE Amex, in
both cases under the symbol “DEJ.” On December 17, 2009, the last
reported sale price of our common shares on the Toronto Stock Exchange was
Cdn$0.30 per common share and on the NYSE Amex was $0.2811 per common
share.
There is
currently no market through which the warrants may be sold and purchasers may
not be able to resell the warrants. purchased This may affect the pricing of the
warrants in the secondary market, the transparency and availability of trading
prices, and the liquidity of the warrants.
The aggregate
market value of our outstanding voting and non-voting common equity held by
non-affiliates on December 17, 2009 was approximately
$19.3
million. We have not issued any securities pursuant to Instruction I.B.5 of Form
F-3 during the 12 calendar month period that ends on and includes the date
hereof.
Investing
in our securities involves a high degree of risk. See the sections
entitled “Risk Factors” on page S-11 of this prospectus supplement, “Risk
Factors and Uncertainties” on page 7 of the accompanying base prospectus, and in
the documents incorporated by reference into this prospectus supplement and the
accompanying base prospectus.
Neither
the United States Securities Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus supplement or the accompanying base
prospectus. Any representation to the contrary is a criminal
offense.
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Per Unit
(1)
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Total
(2)
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Public
offering price
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$
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0.300
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$
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3,229,999.50
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Placement
agent’s fee
(3)
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$
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0.018
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$
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193,799.97
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Proceeds
to us, before expenses
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$
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0.282
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$
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3,036,199.53
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(1)
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A
unit consists of one common share together with three-quarters of one
warrant. This table excludes common shares issuable upon exercise of the
warrants offered hereby.
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(2)
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This
table is based on the sale of 10,766,665 units and does not reflect the
proceeds from the exercise of warrants covering 8,075,000 additional
common shares registered in this offering which have an exercise price of
$0.40 per common share. See “Description of Warrants” in this prospectus
supplement.
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(3)
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In
addition, the placement agent will receive that number of
warrants equal to 6% of the number of units sold in this
offering. See “Plan of Distribution” in this prospectus
supplement.
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Rodman
& Renshaw, LLC acted as the placement agent in connection with this
offering. The lead placement agent is not purchasing or selling any
of these securities nor is it required to sell any specific number or dollar
amount of securities, but has agreed to use its reasonable best efforts to sell
the securities offered by this prospectus supplement.
We expect
that delivery of the securities being offered pursuant to this prospectus
supplement will be made on or about December 22, 2009.
Rodman &
Renshaw, LLC
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THE DATE OF THIS PROSPECTUS SUPPLEMENT IS DECEMBER 18,
2009.
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TABLE
OF CONTENTS
PROSPECTUS
SUPPLEMENT
ABOUT
THIS PROSPECTUS SUPPLEMENT
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S-1
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ENFORCEMENT
OF CIVIL LIABILITIES
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S-1
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FORWARD-LOOKING
STATEMENTS
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S-2
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PROSPECTUS
SUPPLEMENT SUMMARY
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S-4
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THE
OFFERING
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S-9
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RISK
FACTORS
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S-11
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USE
OF PROCEEDS
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S-12
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CONSOLIDATED
CAPITALIZATION
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S-12
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MARKET
FOR COMMON SHARES
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S-13
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DESCRIPTION
OF COMMON SHARES
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S-15
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DESCRIPTION
OF WARRANTS
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S-16
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PLAN
OF DISTRIBUTION
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S-17
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CERTAIN
U.S. FEDERAL INCOME TAX CONSIDERATIONS
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S-19
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INTERESTS
OF NAMED EXPERTS AND COUNSEL
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S-24
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LEGAL
MATTERS
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S-25
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EXPERTS
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S-25
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DOCUMENTS
INCORPORATED BY REFERENCE
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S-25
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WHERE
YOU CAN FIND MORE INFORMATION
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S-26
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EXPENSES
OF THE OFFERING
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S-27
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BASE
PROSPECTUS
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ABOUT
THIS PROSPECTUS
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1
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SUMMARY
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2
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RISK
FACTORS AND UNCERTAINTIES
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7
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DOCUMENTS
INCORPORATED BY REFERENCE
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12
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CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
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13
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USE
OF PROCEEDS
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14
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DESCRIPTION
OF COMMON SHARES
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14
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DESCRIPTION
OF WARRANTS
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15
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DESCRIPTION
OF UNITS
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17
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PLAN
OF DISTRIBUTION
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18
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INTERESTS
OF NAMED EXPERTS AND COUNSEL
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EXPERTS
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20
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WHERE
YOU CAN FIND MORE INFORMATION
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ABOUT
THIS PROSPECTUS SUPPLEMENT
This
document is in two parts. The first part is this prospectus supplement, which
describes the specific terms of this offering of common shares and warrants, and
also adds to and updates information contained in the accompanying base
prospectus and the documents incorporated by reference into this prospectus
supplement and the accompanying base prospectus. The second part is the
accompanying base prospectus, which gives more general information, some of
which may not be applicable to this offering
. To the extent
there is a conflict between information contained in this prospectus supplement
and information contained in the accompanying base prospectus or any document
incorporated by reference, the information in this prospectus supplement shall
control.
This
prospectus supplement relates to a registration statement on Form F-3 that we
filed with the Securities and Exchange Commission utilizing a shelf registration
process. Under this shelf registration process, we may, from time to time,
offer, sell and issue any of the securities or any combination of the securities
described in the accompanying base prospectus in one or more offerings. You
should read this prospectus supplement, the accompanying base prospectus and
documents incorporated into this prospectus supplement and the accompanying base
prospectus.
You
should rely only on the information contained in or incorporated by reference
into this prospectus supplement and the accompanying base prospectus. We have
not, and the placement agent has not, authorized any other person to provide you
with additional or different information. If anyone provides you with additional
or different information, you should not rely on it. We are not, and the
placement agent is not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus supplement, the accompanying base
prospectus, and the documents incorporated by reference herein and therein is
accurate only as of the respective dates of such documents. Our business,
financial condition, results of operations and prospects may have changed since
those dates.
Unless
stated otherwise or the context otherwise requires, references in this
prospectus supplement and the accompanying base prospectus to the “Company,”
“Dejour,” “we” or “us” includes Dejour Enterprises Ltd. and each of its
subsidiaries.
Currency
and Financial Information
Unless
otherwise stated, currency amounts in this prospectus supplement are stated in
United States dollars. References in this prospectus supplement to
“$” are to U.S. dollars and references to “Cdn$” are to Canadian
dollars. The consolidated financial statements incorporated by
reference in this prospectus supplement and the accompanying base prospectus,
and the selected consolidated financial data derived therefrom included in this
prospectus supplement, are presented in Canadian dollars. On December
17, 2009, the noon exchange rate as reported by the Bank of Canada for one
United States dollar expressed in Canadian dollars was Cdn$1.0714.
The
financial statements incorporated by reference into this prospectus supplement
and the accompanying base prospectus, and the selected consolidated financial
data derived therefrom included in this prospectus supplement, have been
prepared in accordance with Canadian generally accepted accounting principles
and they are subject to Canadian auditing and auditor independence standards,
and, therefore, they may not be comparable to the financial statements of United
States companies. A discussion of the principal differences between our
financial results as calculated under Canadian GAAP and under United States GAAP
is contained in Note 22 to our audited consolidated financial statements for the
year ended December 31, 2008 as filed in Amendment No. 1to our Annual Report on
Form 20-F, filed on October 26, 2009, and Note 18 to our unaudited financial
statements for the three and six months ended June 30, 2009, all of which are
incorporated by reference into this prospectus supplement and the accompanying
base prospectus.
ENFORCEMENT
OF CIVIL LIABILITIES
The
enforcement by investors of civil liabilities under U.S. federal securities laws
may be affected adversely by the fact that we are incorporated under the laws of
British Columbia, Canada, that some or all of our officers and directors are
residents of countries other than the United States, that some or all of the
placement agent or experts named in this prospectus supplement and the
accompanying base prospectus may be residents of a countries other than the
United States, and that a substantial portion of the assets of Dejour and said
persons may be located outside the United States.
FORWARD-LOOKING
STATEMENTS
This
prospectus supplement, the accompanying base prospectus and the documents
incorporated by reference herein and therein contain
“forward-looking-statements” within the meaning of applicable securities
legislation. Any statements that express or involve predictions, expectations,
beliefs, plans, projections, objectives, assumptions or future events or
performance (often, but not always, using words or phrases such as “expects” or
“does not expect”, “is expected”, “anticipates” or “does not anticipate”,
“plans”, “estimates” or “intends”, or stating that certain actions, events or
results “may”, “could”, “would”, “might” or “will” be taken, occur or be
achieved) are not statements of historical fact and may be forward-looking
statements. The forward-looking statements contained in this prospectus
supplement, the accompanying base prospectus and the documents incorporated by
reference concern, among other things:
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anticipated
results and developments in our operations in future
periods,
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planned
exploration and, if warranted, development of our
properties;
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business
strategy and objectives;
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plans
related to our business;
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drilling
plans and schedules;
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timing
of production test results;
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timing
of production and well completion;
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anticipated
production results;
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results
of recent acquisitions and our ability to successfully integrate
acquisitions into our current business;
and
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use
of proceeds from this offering.
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These
statements relate to analyses and other information that are based on forecasts
of future results, estimates of amounts not yet determinable and assumptions of
our management.
Forward-looking
statements are subject to a variety of known and unknown risks, uncertainties
and other factors that could cause actual events or results to differ from those
expressed or implied by the forward-looking statements, including, without
limitation:
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risks
related to our cumulative unsuccessful exploration
efforts;
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risks
related to our working capital deficit, minimal positive cash flow and no
recent history of earnings;
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risks
related to our ability to pay existing debt from operating
revenue;
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risks
related to our dependence on key
personnel;
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risks
related to the meeting the requirements of Sarbanes-Oxley Act of 2002,
including potential loss of investor confidence in our financial
statements and retention and recruitment issues with officers and
directors;
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risks
related to our status as a foreign private issuer under US securities
legislation;
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risks
related to enforcement of judgments against us outside the United
States;
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risks
related to the instability of current market conditions and our ability to
complete necessary financings;
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risks
related our oil and gas exploration efforts being
unsuccessful;
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risks
related to hydrocarbon exploration operating and drilling
hazards;
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risks
related to competition in the oil and gas
industry;
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risks
related to volatility in commodity
prices;
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risks
related to uncertainty in oil and gas reserve
estimates;
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risks
related to our ability to replace our oil and natural gas
reserves;
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risks
related to our operations being subject to environmental
regulations;
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risks
related to our uncertainty in the title to our
properties;
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risks
related to the increased regulatory expenses and scrutiny under the Kyoto
Protocol;
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risks
related to our common shares; and
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risks
related to the warrants.
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This list
is not exhaustive of the factors that may affect occurrence of the results
contemplated by our forward-looking statements. Some of the important risks and
uncertainties that could affect the occurrence of the results contemplated by
our forward-looking statements are described further under the sections entitled
“Risk Factors” beginning on page S-11 of this prospectus supplement and “Risk
Factors and Uncertainties” beginning on page 7 of the accompanying base
prospectus. Should one or more of these risks or uncertainties materialize, or
should our underlying assumptions prove incorrect, actual results may vary
materially from those anticipated, believed, estimated or expected. We caution
you not to place undue reliance on any such forward-looking statements, which
speak only as of the date made. Except to the extent required by law, we
disclaim any obligation to update or revise any forward-looking statements to
reflect events or circumstances after the date of such statements or to reflect
the occurrence of anticipated or unanticipated events.
We qualify all the forward-looking
statements contained in this Prospectus by the foregoing cautionary
statements.
PROSPECTUS
SUPPLEMENT SUMMARY
The
following summary provides an overview of certain information about Dejour and
may not contain all the information that is important to you. This summary is
qualified in its entirety by, and should be read together with, the information
contained in other parts of this prospectus supplement, the accompanying base
prospectus and the documents incorporated herein and therein by reference. You
should carefully read this entire prospectus supplement, the accompanying base
prospectus and the documents that we incorporate herein and therein by reference
before making a decision about whether to invest in our securities.
The
Company
Dejour
Enterprises Ltd. was incorporated as “Dejour Mines Limited” on March 29, 1968
under the laws of the Province of Ontario. By articles of amendment dated
October 30, 2001, the issued shares were consolidated on the basis of one (1)
new share for every fifteen (15) old shares and the name of the Company was
changed to Dejour Enterprises Ltd. On June 6, 2003, the shareholders approved a
resolution to complete a one-for-three-share consolidation, which became
effective on October 1, 2003. Dejour was continued in British Columbia under the
Business Corporations Act
(British Columbia)
in
2005.
Our
authorized capital consists of an unlimited number of common
shares. There are no indentures or agreements limiting the payment of
dividends and there are no conversion rights, special liquidation rights,
pre-emptive rights or subscription rights attaching to our common
shares.
Our
executive office is located at:
Suite #
598 – 999 Canada Place,
Vancouver,
BC V6C 3E1
Canada
Telephone:
(604) 638-5050
Our
Business
Since the
divestiture of our uranium exploration properties in December 2006, we are
principally an exploration-stage company engaged in the acquisition, exploration
and development of oil and gas properties. Our direct interest in uranium
exploration properties was sold to Titan Uranium Inc. in 2006 in exchange for
Titan common shares. We sold all of our Titan common shares between January and
April 2009, but retain a 1% net smelter royalty (which we refer to as an “
NSR
”) on all the properties
sold to Titan, and a 10% carried working interest in each lease through a
completed bankable feasibility study, after which we may elect to participate in
project development at a 10% interest or convert this interest to an additional
1% NSR.
Our
current focus is on oil and gas properties located in the United States and
Canada. We currently hold approximately 140,000 net acres of oil and gas leases
in the Peace River Arch area of northwestern British Columbia and northeastern
Alberta, Canada, and in the Piceance and Uinta Basins in the U.S. Rocky
Mountains. At this time, our principal producing properties are
located in Canada.
Our
business objective is to grow our oil and gas production and generate sufficient
cash flow to continue to expand company operations and enhance shareholder
value. We intend to achieve our objectives through a
strategy of acquiring oil and gas assets in areas and projects that we believe
have high potential and through prudent investment and management.
As of the
end of our fiscal year ended December 31, 2008, we had proven reserves and
production of oil and gas in British Columbia and Alberta, Canada. Reserves
attributable to us located in the State of Colorado as of December 31, 2007 were
exchanged for additional exploration acreage.
In 2009,
our focus was on the restructuring of our assets and operations in order to
reduce debt and lower operating costs. This was accomplished through
non-core asset dispositions and reduction of operating and overhead
costs. In the second quarter of 2009 we completed the sale of our 13%
working interest in our Drake/Woodrush project and the sale of our entire
interest in the Carson Creek area for a total sale price of Cdn$4,440,000 in
cash. Subsequent to June 30, 2009, we disposed of an additional 7%
working interest in our Drake/Woodrush project for cash proceeds of
Cdn$1,260,000. At the same time, we restructured and extended
short-term notes equal to Cdn$3,420,000 and converted another Cdn$2,776,000 of
short-term debt to equity in our company. As a result, we reduced our
outstanding liabilities (excluding asset retirement obligations and future
income tax liabilities) from Cdn$16.38 million as of March 31, 2009 to
approximately Cdn$6.5 million as of the date of this prospectus
supplement. Asset and debt restructuring, combined with operating
cost reductions of approximately Cdn$2,000,000 per year have positioned Dejour
to undertake the further development of our core properties in the current
commodity price environment.
Our
resource property interests are described below:
United
States Oil and Gas Properties
1. Colorado/Utah Oil and Gas
Project
In July
2006, we successfully concluded the purchase of a 25% working interests in 267
oil and gas leases covering 254,068 net acres (397 sections of land) in the
Piceance and Uinta Basins of Western Colorado and Eastern Utah for a total cost
of Cdn$ 25,152,510 in cash, stock, note and debentures.
Subsequently,
we acquired an interest in an additional 21,866 net acres that are contained
within an Area of Mutual Interest as defined in the purchase
agreement.
In June
2008, we entered into a Purchase and Sale Agreement with Retamco Operating, a
partner in the Colorado/Utah project. Under the Agreement, we exchanged our 25%
working interest in certain leases of approximately 3,500 acres at North Barcus
Creek and two wells and US$4,000,000 for an additional 64,000 net
acres.
In
November 2008, we signed a joint-venture agreement with Laramie Energy II LLC
(which we refer to as “
Laramie
”) covering 22,000
gross acres (15,700 net to Dejour) in the Rangely Project. Under the terms of
the Agreement, Laramie will begin a continuous drilling program on the leases in
the second half of 2009 and will have the right to earn and purchase at a
predetermined priceup to 55% of the acreage covered under the agreement by
completing at least four commercially productive wells over the next three to
four years.
During
fiscal 2008, certain leases expired. As of December 31, 2008, we had
approximately 128,000 net acres in the Colorado/Utah Project.
The total
current area of projects in which we have an interest is 272,777 acres net to
the Laramie Joint-Venture (approximately 128,000 acres net to Dejour) in 397
sections of land. Our interest in the individual leases ranges
from 25% to 72%, subject to an 80%-87.% net revenue interest except for one
lease, in a total of 296 leases. We are the operator of approximately
125,000 acres gross (72% working interest Dejour and 28% working interest for
Brownstone). The other acreage includes approximately 150,000 acres gross (65%
working interest Retamco, 25% working interest Dejour, and 10% working interest
Brownstone) with Retamco as the operator, and approximately 14,000 acres gross
(25% working interest Dejour, 10% working interest Brownstone, and 65% working
interest Fidelity) with Fidelity Exploration and Production
Company as the operator.
2. Tinsley
Prospect
As of
March 31, 2008, we hold a 35% working interest in 8,349 gross and 7,057 net
acres. The Mississippi based operator is seeking an investor for the project
with the objective of drilling additional wells in 2010.
Canadian
Oil and Gas Properties
Our
wholly-owned subsidiary, Dejour Energy (Alberta) Ltd. (which we refer to as
“
DEAL
”), currently has
interests in oil and gas properties in the Peace River Arch located in
northeastern British Columbia and northwestern Alberta.
Since
commencing exploration on its Peace River Arch properties, we have drilled or
participated in drilling 16 wells on nine different project
areas. Seven wells (five gas, one oil and one gas and oil) have
commenced production. Tie-in of two additional wells has been suspended due to
low commodity prices.
During
fiscal 2008, we acquired 6,352 gross and net acres of lands in the Montney
natural gas area in northeastern British Columbia. The acreage is adjacent
to existing pipeline infrastructure, and was acquired via government oil and gas
auction. As at December 31, 2008, DEAL had an average interest of 54% in
approximately 39,283 gross acres in the Peace River Arch.
Subsequent
to the year-end, we disposed of some interests in our Canadian oil and gas
properties in exchange for cash proceeds, as described below.
Our
Canadian oil and gas property interests are described below:
1.
Drake/Woodrush
In 2007,
we purchased 2,108 acres of land in the Drake area of northeast British
Columbia. In the second quarter of 2007, we drilled two gas wells, which were
tied in and producing.
Working
interest in lands earned last winter has been increased from 60% to 92% on 700
of the 1,400 acres earned. Interest in the remaining 700 acres remains at 100%
before payout and 60% after payout. Final locations for the 2007/8 winter
drilling were chosen based on interpretation of 3D seismic data purchased over
all our working interest land in the area.
We
drilled four wells during the 2007/2008 winter season. Two of the wells were
drilled on lands earned previously. The other two wells were drilled to evaluate
the deeper Halfway formation as well as the Notikewin sands on land purchased at
crown sale in which we have a 100% working interest. The deeper wells
encountered significant quantities of sour gas and oil, which required the
purchase and installation of additional equipment, facilities, and pipeline.
These four wells were drilled and completed for production in Q1
2008.
We have
budgeted approximately $1,500,000 for drilling and development at Drake/Woodrush
in fiscal 2009. British Columbia has granted producers in the Northeastern
portion of the Province a royalty-free production holiday, and we intend to
focus our current work on the Woodrush oil pool to take advantage of the lowered
royalty rates and the higher oil commodity prices. Scheduled work includes high
resolution 3D seismic, and drilling of one new well during the fourth quarter
and up to two additional wells in the first quarter of 2010.. The capacity of
the infrastructure placed on the project has been designed for this additional
development.
Subsequent
to the 2008 year-end, we sold 20% of our interest in Woodrush/Drake to unrelated
third parties for approximately $3,600,000 cash. Funds from the sale were used
primarily to reduce our outstanding bank line of credit.
2. Saddle
Hills
In the
Saddle Hills area of Alberta, we participated in a joint-venture in drilling a
well in the first quarter of 2007 on a five section block of land at 30% working
interest to earn 30% subject to 10% non-convertible royalty. The first well
tested over 1.5 MMcf/d in total from two zones. The operator drilled one
additional location on the property in Q1 2008 which has also been completed and
tested over 1.5 MMcf/d total from two zones. The operator has not tied in either
of the two wells for production. DEAL completed a seismic program on behalf of
the joint venture to aid in future development plans.
3.
Manning
In the
Manning area of British Columbia, we participated at 40% working interest in a
farm-in on seven sections of land. A test well commenced drilling in
December 2007 and was completed in early 2008, and tested at rates of over 1.5
MMcf/d with water. This operator has not tied in the well for production, but
the operator has earned us an interest in all seven sections subject to
non-convertible royalty.
4. Carson
Creek
At Carson
Creek, Alberta, land was purchased privately by DEAL and a test well commenced
drilling in late 2007. The well was completed in early 2008 and tested at
approximately 3.0 MMcf/d with 100 bbls natural gas liquids per MMcf
gas.
Subsequent
to the year-end, in June 2009, we completed the sale of our 100% working
interest in Carson Creek to an unrelated third party for $2,100,000.
5. Buick Creek
(Montney)
In 2008,
DEAL acquired 6,352 acres net and gross in the emerging Montney natural gas
resource play in Northeastern British Columbia. The acreage was acquired at a
Provincial Government drilling right auction. These lands are adjacent to
necessary pipeline infrastructure. In early 2009, we also acquired an existing
wellbore which we intend to use for re-entry and testing of the
play.
Total
U.S. and Canadian Holdings
Our
landholdings as of December 17, 2009 were as follows (in acres):
|
|
Undeveloped
|
|
Developed
|
|
Total
|
|
|
|
Gross
|
|
|
Net
|
|
Gross
|
|
Net
|
|
Gross
|
|
|
Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Colorado/Utah,
US
|
|
|
272,777
|
|
|
|
128,000
|
|
Nil
|
|
Nil
|
|
|
272,777
|
|
|
|
128,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tinsley,
US
|
|
|
7,057
|
|
|
|
2,470
|
|
Nil
|
|
Nil
|
|
|
7,057
|
|
|
|
2,470
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canada
|
|
|
30,811
|
|
|
|
16,829
|
|
10,553
|
|
6,465
|
|
|
41,364
|
|
|
|
23,294
|
|
Recent
Developments
On
October 22, 2009, we completed the second tranche of a private placement of
“flow-through” common shares. In connection with this transaction, we sold
375,000 flow-through shares at a price of Cdn$0.60 per share, for gross proceeds
of Cdn$225,000. Total gross proceeds in combination with the first tranche, in
connection with which we sold 1,333,333 flow-through shares on October 14, 2009,
was Cdn$1,601,000. We paid a total finder's fee of Cdn$83,980 in cash in
connection with the private placement. All offers and sales of flow-through
shares in the private placement were made in Canada.
On
December 2, 2009, we announced the successful acquisition of over 2,000 acres of
leasehold in northeast British Columbia adjacent to our existing leasehold at
Woodrush and on trend with the Halfway oil pool discovered by us in early 2008.
Through this lease acquisition and a 3D seismic program currently underway, we
anticipate to significantly augment the area and volumetric extent of our 73.5%
owned Halfway oil pool. We have commenced our winter exploration
drilling program at Woodrush. We expect to drill up to three new oil wells
during this program. The first well, expected to be completed and in production
by the end of December, offsets the initial discovery well at Woodrush, in
production since 2008. The balance of the drilling plan is scheduled for
completion during the first quarter of 2010.
Glossary
of Abbreviations and Terms
Bbl.
One stock tank
barrel, or 42 U.S. gallons liquid volume, used in reference to oil or other
liquid hydrocarbons.
Developed Acreage
The number
of acres that are allocated or assignable to producing wells or wells capable of
production.
Gross Acres
The total surface
acres under which we have a working interest in an oil & gas
lease.
MMcf.
One million cubic feet
of natural gas at standard atmospheric pressure.
MMcf/d.
One MMcf
per day.
Net Acres
A net acre is deemed
to exist when the sum of our fractional ownership working interests in lease net
acres equals one. The number of net acres is the sum of the fractional working
interests owned in lease net acres expressed as whole numbers and fractions
thereof.
Net Smelter Royalty (NSR)
A
royalty that is a certain percentage of the revenue generated by the mine by
selling its product, minus the expenses of producing the product.
Undeveloped Acreage
Lease
acres on which wells have not been drilled or completed to a point that would
permit the production of commercial quantities of oil and gas regardless of
whether or not such acreage contains proved reserves.
Working Interest
An interest
in an oil and gas lease that gives the owner of the interest the right to drill
and produce oil and gas on the leased acreage and requires the owner to pay a
share of the costs of drilling and production operations. The share of
production to which a working interest owner is entitled will always be smaller
than the share of costs that the working interest owner is required to bear,
with the balance of the production accruing to the owners of
royalties.
THE
OFFERING
The
following is a brief summary of certain terms of this offering and is not
intended to be complete. It does not contain all of the information that will be
important to a holder of common shares and warrants. For a more complete
description of our common shares and warrants, see the sections entitled
“Description of Common Shares” and “Description of Warrants” in this
prospectus supplement and the accompanying base prospectus.
Offering:
|
10,766,665
units. Each unit consists of one common share and
three-quarters of one warrant. The common shares and warrants
offered hereby are immediately separable and will be issued
separately.
|
|
|
Warrants:
|
Each
whole warrant will entitle the holder to purchase one common share,
subject to adjustment and early termination, at any time from
June 22, 2010 until December 21, 2014 at an exercise price
of $0.40. The warrants will be freely transferable, subject to
the terms and conditions of the form of warrant. See the
section entitled “Description of Warrants” in this prospectus supplement
and the accompanying base prospectus.
In
the event that (i) our common shares trade on a Trading Market (as defined
in the subscription agreement to which this term sheet is attached) in the
United States at a volume weighted average price of greater than $1.00 per
common share for a period of 20 consecutive trading days at any time after
the closing of this offering, (ii) the average daily volume for such
20-day period exceeds $100,000 per trading day and (iii) the holder is not
in possession of material non-public information provided to the holder by
us, we may exercise a call right for cancellation of all or any of the
warrants by giving notice pursuant to the terms of the warrants to the
holders thereof and in such case any warrant not exercised within 30
trading days after such notice shall be terminated.
|
|
|
Amount:
|
$3,229,999.50
|
|
|
Price
to the Public:
|
$0.30
per unit
|
|
|
Common
Shares Outstanding Before Offering
(1)
:
|
85,002,555 common
shares
|
|
|
Common
Shares Outstanding After Offering
(2)
:
|
95,769,220
common shares
|
|
|
Placement
Agent’s Fee:
|
We
have agreed to pay the placement agent a fee equal to $0.018 for each unit
sold pursuant to the offering. In addition, the placement agent
will receive warrants equal to 6% of the number of units sold in this
offering. The warrants shall have the same terms as the warrants issued to
purchasers except the exercise price shall be 125% of the five day volume
weighted average market price per share, but in no event less than 125% of
the public offering price pursuant to FINRA Rule
5110.
|
(1)
|
These
figures do not include 4,318,500 common shares reserved for issuance
pursuant to outstanding stock options, which are exercisable at a weighted
average price of Cdn $0.45 per common share, 6,015,151 common shares
reserved for issuance pursuant to outstanding warrants, which are
exercisable at a price of Cdn $0.53 per common share, as at December 18,
2009.
|
|
To
the extent any options are exercised, new options are issued under our
equity incentive plans, or we otherwise issue additional shares of common
stock or securities exercisable for or convertible into shares of common
stock, there will be further dilution to new investors. As of
the date of this prospectus supplement, there are 8,500,256 shares of
common stock available for issuance under our equity incentive
plans.
|
(2)
|
Does
not include 8,075,000 common shares issuable upon exercise of warrants
issued pursuant to this offering and does not include 645,999 common
shares issuable pursuant to placement agent warrant issued to the
placement agent pursuant to this offering. Assuming exercise of
all the warrants and all the placement agent warrants, the aggregate
common shares outstanding would be
104,490,218.
|
Use
of Proceeds:
|
The
net proceeds from the sale of the units in this offering are estimated to
be approximately $2.9 million, after deducting the placement agent’s
fee and estimated offering expenses. We intend to use the net proceeds
from this offering to explore and develop our oil and gas properties,
for working capital and for general corporate
purposes.
|
Canadian
Resale Restrictions:
|
There
are restrictions under Canadian securities laws on investors' ability to
resell the common shares and common shares issuable upon exercise of
the warrants over the facilities of the Toronto Stock Exchange, or
otherwise resell the common shares and common shares issuable upon
exercise of the warrants in Canada or to or for the benefit of
a resident of Canada. Unless permitted under Canadian
securities laws, the common shares and common shares issuable upon
exercise of the warrants may not be traded before the date that is four
(4) months and a day after the closing date of the offering. Any physical
certificate representing the common shares and, if they are issued
before the date which four months and a day after closing, the common
shares issuable upon the exercise of the warrants, will bear the following
legend:
“UNLESS
PERMITTED UNDER CANADIAN SECURITIES LEGISLATION, THE HOLDER OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE MUST NOT TRADE SUCH SECURITIES
BEFORE [
INSERT DATE THAT
IS 4 MONTHS AND A DAY AFTER THE CLOSING DATE
] ON THE TORONTO STOCK
EXCHANGE OR IN CANADA OR TO OR FOR THE BENEFIT OF A RESIDENT OF
CANADA
WITHOUT
PRIOR WRITTEN APPROVAL OF THE TORONTO STOCK EXCHANGE AND COMPLIANCE WITH
ALL APPLICABLE CANADIAN SECURITIES LAWS, THE SECURITIES REPRESENTED BY
THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE
TRADED ON OR THROUGH THE FACILITIES OF THE TORONTO STOCK EXCHANGE OR IN
CANADA OR TO OR FOR THE BENEFIT OF A CANADIAN RESIDENT UNTIL [
INSERT DATE WHICH IS FOUR
MONTHS AFTER CLOSING
]. DELIVERY OF THIS CERTIFICATE MAY NOT
CONSTITUTE GOOD DELIVERY IN SETTLEMENT OF TRANSACTIONS ON CANADIAN STOCK
EXCHANGES,”
Any
physical certificate representing the warrants will bear the following
legend:
“UNLESS
PERMITTED UNDER CANADIAN SECURITIES LEGISLATION, THE HOLDER OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE MUST NOT TRADE SUCH SECURITIES
BEFORE [
INSERT DATE THAT
IS 4 MONTHS AND A DAY AFTER THE CLOSING DATE
] IN CANADA OR TO OR
FOR THE BENEFIT OF A RESIDENT OF CANADA.”
|
|
|
Risk
Factors:
|
Investing
in the units involves risks that are described in the “Risk Factors”
section beginning on page S-11 of this prospectus supplement and the “Risk
Factors and Uncertainties” section beginning on page 7 of the accompanying
base prospectus and, to the extent applicable, the “Risk Factors” sections
of our annual report on Form 20-F for the fiscal year ended December 31,
2008, as amended, as filed with the Securities and Exchange
Commission.
|
|
|
Tax
Considerations:
|
Purchasing
the common shares and warrants and exercising the warrants may have tax
consequences in the United States and Canada. See the section entitled
“Certain U.S. Federal Income Tax Considerations” in this prospectus
supplement.
|
|
|
Listing
Symbol:
|
Our common shares are traded on
the Toronto Stock Exchange and on the NYSE Amex, in both cases under the
symbol “DEJ.”
There is no market through which the
warrants may be sold and purchasers may not be able to resell the warrants
purchased in the
offering.
|
RISK
FACTORS
An
investment in a company engaged in oil and gas exploration involves an
unusually high amount of risk, both unknown and known, present and potential,
including, but not limited to the risks enumerated below.
Our
failure to successfully address the risks and uncertainties described below
would have a material adverse effect on our business, financial condition and/or
results of operations, and the trading price of our common stock may decline and
investors may lose all or part of their investment. We cannot assure you
that we will successfully address these risks or other unknown risks that may
affect our business.
The
following is a short description of the risks and uncertainties that are more
fully described under the heading “Risk Factors and Uncertainties” beginning on
page 7 in the accompanying base prospectus:
|
·
|
Cumulative
unsuccessful exploration efforts by our personnel could result in our
having to cease operation;
|
|
·
|
We
have a working capital deficit, minimal positive cash flow and no recent
history of significant earnings and are dependent upon public and private
distributions of equity as well as debt to obtain capital in order to
sustain operations. Public distributions of share capital result in
dilution to existing shareholders;
|
|
·
|
We
may require additional capital in order to repay amounts
due;
|
|
·
|
We
have a current bank loan due and subject to reveiw which is currently in
progress;
|
|
·
|
We
are dependent on key personnel and the absence of any of these individuals
could result in us having to cease
operation;
|
|
·
|
New
legislation, including the Sarbanes-Oxley Act of 2002, may make it
difficult for us to retain or attract officers and
directors;
|
|
·
|
As
a "foreign private issuer”, we are exempt from the Section 14 proxy rules
and Section 16 of the Securities Exchange Act of 1934, as amended, which
may result in shareholders having less complete and timely
data;
|
|
·
|
It
may be difficult to enforce judgments or bring actions outside the United
States against us and certain of our directors and
officers;
|
|
·
|
Risks
related to general economic
conditions;
|
|
·
|
Oil
and gas exploration has a high degree of risk and our exploration efforts
may be unsuccessful, which would have a negative effect on our
operations;
|
|
·
|
Hydrocarbon
exploration and production have substantial operating and drilling hazards
which could result in failure of our projects or substantial liabilities
which may not be covered by
insurance;
|
|
·
|
The
oil and gas industry is highly competitive, and if we are unsuccessful in
competing with other oil and gas companies, it would negatively affect our
ability to operate;
|
|
·
|
Commodity
prices may not support corporate
profit;
|
|
·
|
Oil
and gas reserve information is estimated and may not be economic to
produce;
|
|
·
|
We
may not be able to successfully replace our oil and natural gas
reserves;
|
|
·
|
Our
operations are subject to substantial environmental regulations which
could have a negative effect on our operations and financial
condition;
|
|
·
|
Our
title to our properties may be disputed by third parties which could
result in our losing title to our
properties;
|
|
·
|
Canada
is a signatory to the Kyoto Protocol which could negatively change future
operations by restricting our activities or increasing operating
costs;
|
|
·
|
Our
stock price has been volatile and your investment in our common shares
could suffer a decline in value;
|
|
·
|
Dilution
through employee/director/consultant/agents options could adversely affect
our shareholders; and
|
|
·
|
Because
we may not pay any dividends on our common shares, investors seeking
short-term dividend income or liquidity should not purchase our common
shares.
|
Additional
Risk Factors
The
issuance of additional common shares may negatively affect the
trading price of our common shares.
We have
issued equity securities in the past and may continue to issue equity securities
to finance our activities in the future, including to finance future
acquisitions, or as consideration for acquisitions of businesses or
assets. In addition, outstanding options and warrants to purchase our
common shares may be exercised, resulting in the issuance of additional common
shares. The issuance by us of additional common shares would result in dilution
to our shareholders, and even the perception that such an issuance may occur
could have a negative effect on the trading price of our common
shares.
There can be no
assurance as to the liquidity of the trading market for the warrants or that a
trading market for the warrants will develop.
There is
currently no public market through which the warrants offered hereby may be sold
and we do not intend to apply for the listing of the warrants on any securities
exchange. This may affect the pricing of the warrants in the secondary market,
the transparency and availability of trading prices, and the liquidity of the
warrants.
USE
OF PROCEEDS
The net
proceeds to us from the sale of the units in this offering are estimated to be
approximately $2.9 million, based on an offering price of $0.30 per unit
and the sale of all of the units offered by this prospectus supplement, and
after deducting the placement agent’s fee and estimated offering
expenses. We intend to use the net proceeds from the offering to
explore and develop our
oil and gas properties, for working capital and for general corporate
purposes.
Until
such time as the net proceeds of the offering are used as described above, we
intend to invest the net proceeds primarily in bank deposits or other
substantially similar secure deposits in financial institutions.
Depending
on opportunities, economic conditions and the results of the activities
described above we may use a portion of the net proceeds to invest in property
acquisitions or complete other corporate activities designed to achieve our
corporate goals. Estimated costs and the scope of
such activities cannot be determined at this time.
CONSOLIDATED
CAPITALIZATION
Since
September 30, 2009, there have been no changes to our share capital, on a
consolidated basis, except for
2,710,332
shares issued pursuant to a private placement of flow-through shares and 317,500
shares issued pursuant to option exercises subsequent to September 30,
2009
.
The
following table sets forth our cash and consolidated capitalization as at
September 30, 2009 on an actual basis and as adjusted to give effect to the
distribution of the common shares and warrants offered under this prospectus
supplement after deducting the placement agent’s fee and the estimated expenses
of the offering payable by us (assuming the application of the net proceeds from
this offering as described under the section entitled “Use of Proceeds”).
The table
should be read in conjunction with our audited annual consolidated financial
statements as at and for the year ended December 31, 2008, our unaudited
consolidated financial statements as at and for the three and nine months ended
September 30, 2009, in each case including the notes thereto, and the
management’s discussion and analysis thereof, incorporated in each case by
reference into this prospectus supplement and the accompanying base
prospectus.
|
|
As at
September 30, 2009
|
|
|
|
Actual
(Unaudited)
|
|
As
Adjusted
(2)
(Unaudited)
|
|
Cash
and cash equivalents
|
|
Cdn$402,958
|
|
Cdn$3,509,728
|
|
|
|
|
|
|
|
Shareholders’
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
Capital: Authorized: Unlimited number of common shares without par value;
81,974,723 common shares issued and outstanding as of September 30, 2009;
92,741,388 common shares issued and outstanding as adjusted
(1)
|
|
|
67,768,245
|
|
70,875,015
|
|
|
|
|
|
|
|
|
Contributed
Surplus
|
|
|
6,340,733
|
|
6,340,733
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
(32,336,797
|
)
|
(32,336,797
|
)
|
|
|
|
|
|
|
|
Accumulated
other comprehensive income (loss)
|
|
|
(6,844
|
)
|
(6,844
|
)
|
Total
Shareholder’s Equity
|
|
|
41,765,337
|
|
44,872,107
|
|
Total
Capitalization
|
|
Cdn$41,765,337
|
|
Cdn$44,872,107
|
|
(1)
|
These
figures do not include
4,490,364
common shares reserved for issuance pursuant to outstanding stock options,
which are exercisable at a weighted average price of Cdn$0.46 per common
share, or 6,015,151 common shares reserved for issuance pursuant to
outstanding warrants, which are exercisable at a weighted average price of
Cdn$0.53.
|
(2)
|
As
Adjusted does not include 8,075,000 common shares issuable upon exercise
of warrants issued pursuant to this offering and does not include 645,999
common shares issuable pursuant to placement agent warrant issued to the
placement agent pursuant to this offering. Assuming exercise of
all the warrants and all the placement agent warrants shares outstanding
would be 101,462,387.
|
MARKET
FOR COMMON SHARES
Our common shares are traded on the
Toronto Stock Exchange and on the NYSE Amex, in both cases under the symbol
“DEJ.”
The following tables set forth for the periods indicated,
the high and low closing prices in Canadian dollars of our common shares traded
on the Toronto Stock Exchange and the TSX Venture Exchange and in
United States dollars on the NYSE Amex. The Company traded on the
Toronto Stock Exchange Venture Exchange in Vancouver, British Columbia, Canada,
until November 20, 2008 when it began trading on the TSX. The Company changed
its symbol to “DEJ” after a one for three share consolidation
effective October 1, 2003. The Company changed its Toronto Stock Exchange
trading symbol on May 23, 2007 to “DEJ” to coincide with its listing on the
American Stock Exchange (now NYSE Amex) on the same day under the symbol
“DEJ”.
The
following table contains the annual high and low market prices for the five most
recent fiscal years:
Toronto
Stock Exchange (Cdn$)
|
|
High
|
|
|
Low
|
|
|
|
|
|
|
|
|
|
|
2008
(1)
|
|
$
|
2.17
|
|
|
$
|
0.23
|
|
2007
|
|
$
|
3.28
|
|
|
$
|
1.02
|
|
2006
|
|
$
|
2.97
|
|
|
$
|
0.99
|
|
2005
|
|
$
|
1.07
|
|
|
$
|
0.41
|
|
2004
|
|
$
|
0.50
|
|
|
$
|
0.21
|
|
(1)
Common
shares listed on Toronto Stock Exchange on November 20, 2008.
NYSE
Amex ($)
|
|
High
|
|
|
Low
|
|
2008
|
|
$
|
2.17
|
|
|
$
|
0.25
|
|
2007
(1)
|
|
$
|
2.95
|
|
|
$
|
1.29
|
|
(1)
Shares listed for trading on NYSE Amex on May 7, 2007
The
following table contains the high and low market prices for our common shares on
the Toronto Stock Exchange and the NYSE Amex for each fiscal quarter for the two
most recent fiscal years and any subsequent period:
Toronto Stock Exchange
(Cdn$)
|
|
High
|
|
|
Low
|
|
2009
|
|
|
|
|
|
|
Q4
(through December 17, 2009)
|
|
$
|
0.65
|
|
|
$
|
0.30
|
|
Q3
|
|
$
|
0.57
|
|
|
$
|
0.24
|
|
Q2
|
|
$
|
0.50
|
|
|
$
|
0.23
|
|
Q1
|
|
$
|
0.76
|
|
|
$
|
0.23
|
|
2008
|
|
|
|
|
|
|
|
|
Q4
(1)
|
|
$
|
0.84
|
|
|
$
|
0.33
|
|
Q3
|
|
$
|
1.97
|
|
|
$
|
0.61
|
|
Q2
|
|
$
|
2.17
|
|
|
$
|
1.37
|
|
Q1
|
|
$
|
1.81
|
|
|
$
|
1.20
|
|
2007
|
|
|
|
|
|
|
|
|
Q4
|
|
$
|
2.35
|
|
|
$
|
1.30
|
|
Q3
|
|
$
|
2.76
|
|
|
$
|
1.02
|
|
Q2
|
|
$
|
3.28
|
|
|
$
|
2.18
|
|
Q1
|
|
$
|
3.07
|
|
|
$
|
2.13
|
|
(1)
Common shares listed on
Toronto Stock Exchange on November 20, 2008.
NYSE Amex
($)
|
|
High
|
|
|
Low
|
|
2009
|
|
|
|
|
|
|
Q4
(through December 17, 2009)
|
|
$
|
0.64
|
|
|
$
|
0.2761
|
|
Q3
|
|
$
|
0.525
|
|
|
$
|
0.21
|
|
Q2
|
|
$
|
0.45
|
|
|
$
|
0.184
|
|
Q1
|
|
$
|
0.67
|
|
|
$
|
0.12
|
|
2008
|
|
|
|
|
|
|
|
|
Q4
|
|
$
|
0.80
|
|
|
$
|
0.25
|
|
Q3
|
|
$
|
2.00
|
|
|
$
|
0.60
|
|
Q2
|
|
$
|
2.17
|
|
|
$
|
1.33
|
|
Q1
|
|
$
|
1.95
|
|
|
$
|
0.93
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
Q4
|
|
$
|
2.36
|
|
|
$
|
1.31
|
|
Q3
|
|
$
|
2.95
|
|
|
$
|
1.29
|
|
Q2
(1)
|
|
$
|
2.65
|
|
|
$
|
2.04
|
|
(1)
Shares listed for trading on NYSE Amex on May 7, 2007
The
following table contains the high and low market prices for our common shares on
the Toronto Stock Exchange and the NYSE Amex for each of the most recent six
months:
TSX
(Cdn$)
|
|
High
|
|
|
Low
|
|
November,
2009
|
|
$
|
0.52
|
|
|
$
|
0.39
|
|
October,
2009
|
|
$
|
0.65
|
|
|
$
|
0.46
|
|
September,
2009
|
|
$
|
0.57
|
|
|
$
|
0.34
|
|
August,
2009
|
|
$
|
0.43
|
|
|
$
|
0.24
|
|
July,
2009
|
|
$
|
0.38
|
|
|
$
|
0.24
|
|
June,
2009
|
|
$
|
0.40
|
|
|
$
|
0.33
|
|
NYSE
Amex ($)
|
|
High
|
|
|
Low
|
|
November,
2009
|
|
$
|
0.4887
|
|
|
$
|
0.37
|
|
October,
2009
|
|
$
|
0.64
|
|
|
$
|
0.40
|
|
September,
2009
|
|
$
|
0.525
|
|
|
$
|
0.30
|
|
August,
2009
|
|
$
|
0.37
|
|
|
$
|
0.21
|
|
July,
2009
|
|
$
|
0.31
|
|
|
$
|
0.22
|
|
June,
2009
|
|
$
|
0.45
|
|
|
$
|
0.28
|
|
On
December 17, 2009, the closing price of our common shares on the TSX was
Cdn$0.30 per common share and on the NYSE Amex was $0.2811 per common
share.
DESCRIPTION
OF COMMON SHARES
We are
authorized to issue an unlimited number of common shares of which, as of
December 18, 2009, 85,002,555 are issued and outstanding. Our common
shares are entitled to one vote per share on all matters submitted to a vote of
the shareholders, including the election of directors. Except as otherwise
required by law the holders of our common shares will possess all voting power.
Generally, all matters to be voted on by shareholders must be approved by a
majority (or, in the case of election of directors, by a plurality) of the votes
entitled to be cast by all common shares that are present in person or
represented by proxy. One holder of our common shares issued, outstanding
and entitled to vote, represented in person or by proxy, is necessary to
constitute a quorum at any meeting of our shareholders.
The
holders of our common shares will be entitled to such cash dividends as may be
declared from time to time by our board of directors from funds available
therefor.
Upon
liquidation, dissolution or winding up of our company, holders of common shares
are entitled to receive pro rata our assets, if any, remaining after payments of
all debts and liabilities. No common shares have been issued subject to
call or assessment. There are no pre-emptive or conversion rights and no
provisions for redemption or purchase for cancellation, surrender, or sinking or
purchase funds attaching to our common shares.
In the
event of any merger or consolidation with or into another company in connection
with which our common shares are converted into or exchangeable for shares,
other securities or property (including cash), all holders of our common shares
will be entitled to receive the same kind and amount of shares and other
securities and property (including cash).
There are
no indentures or agreements limiting the payment of dividends on our common
shares and there are no special liquidation rights or subscription rights
attaching to our common shares.
Alteration
of Share Structure
We may
alter our authorized share structure by directors’ resolution or ordinary
resolution of our shareholders, in each case determined by the directors,
to:
(a)
|
create
one or more classes or series of shares or, if none of the shares of a
series of a class or series of shares are allotted or issued, eliminate
that class or series of shares;
|
(b)
|
increase,
reduce or eliminate the maximum number of shares that we are authorized to
issue out of any class or series of shares or establish a maximum number
of shares that we are authorized to issue out of any class or series of
shares for which no maximum is
established;
|
(c)
|
subdivide
all or any of our unissued, or fully paid issued,
shares;
|
(d)
|
if
the company is authorized to issue shares of a class or shares with par
value;
|
|
(i)
|
decrease
the par value of those shares; or
|
|
(ii)
|
if
none of the shares of that class of shares are allotted or issued,
increase the par value of those
shares;
|
(e)
|
change
all or any of its unissued, or fully paid issued, shares with par value
into shares without par value or any of its unissued shares without par
value into shares with par value;
|
(f)
|
alter
the identifying name of any of its shares;
or
|
by
ordinary resolution of its shareholders otherwise alter its share or authorized
share structure.
Cash
Dividends
As of the
date of this prospectus supplement, we have not paid any cash dividends to
shareholders. The declaration of any future cash dividend will be at the
discretion of our board of directors and will depend upon our earnings, if any,
our capital requirements and financial position, our general economic
conditions, and other pertinent conditions. It is our present intention not to
pay any cash dividends in the foreseeable future, but rather to reinvest
earnings, if any, in our exploration activities.
DESCRIPTION
OF WARRANTS
Each
whole warrant will entitle the holder to purchase one common share, subject to
adjustment and early termination, at any time from June 22, 2010 until
December 21, 2014 at an exercise price of $0.40 per common
share. The warrants will be freely transferable, subject to Canadian
securities laws and the terms and conditions of the form of
warrant.
In the
event that (i) our common shares trade on a Trading Market (as defined in the
subscription agreement to which this term sheet is attached) in the United
States at a volume weighted average price of greater than $1.00 per common share
for a period of 20 consecutive trading days at any time after the closing of
this offering, (ii) the average daily volume for such 20-day period exceeds
$100,000 per trading day and (iii) the holder is not in possession of material
non-public information provided to the holder by us, we may exercise a call
right for cancellation of all or any of the warrants by giving notice pursuant
to the terms of the warrants to the holders thereof and in such case any warrant
not exercised within 30 trading days after such notice shall be
terminated.
Holders
of the warrants may exercise their warrants to purchase common shares on or
before the expiration date by delivering a notice of exercise form,
appropriately completed and duly signed and payment in cash of the exercise
price for the number of common shares with respect to which the warrant is being
exercised. Warrants may be exercised in whole or in part, but only for full
common shares.
The
common shares issuable on exercise of the warrants will be, when issued in
accordance with the terms of the warrants, duly and validly authorized, issued
and fully paid and non-assessable. We will authorize and reserve at least the
number of common shares issuable upon exercise of all outstanding
warrants.
If we
effect certain stock-based distributions or changes in our capital structure,
such as a stock split or consolidation or stock dividend to all shareholders,
then we will adjust the exercise price and/or number of shares purchasable under
the warrants as required in the warrant certificate to preserve the rights of
the warrant holders. If we effect a merger or consolidation or other
reorganization in which our common shares are reclassified or in which we
are not the surviving corporation, the warrants will become exercisable for the
securities which the holder would have received if the holder had exercised the
warrants in full immediately prior to the reorganization event.
The
number of common shares that may be acquired by a holder upon any exercise of a
warrant shall be limited to the extent necessary to ensure that, following such
exercise (or other issuance), the total number of common shares then
beneficially owned by such holder and its affiliates and any other persons whose
beneficial ownership of common shares would be aggregated with the holder’s for
purposes of Section 13(d) of the Exchange Act, does not exceed 4.999% of the
total number of issued and outstanding common shares (including for such purpose
the shares of common shares issuable upon such exercise). A holder may increase
or decrease this limitation by written notice to us, but any such increase or
decrease may not be effective until the 61
st
day
after notice is delivered to us and shall in no event increase the limitation to
exceed 9.999%.
No
fractional common shares will be issued in connection with the exercise of a
warrant. In lieu of fractional shares, we will pay the holder an amount in cash
equal to the fractional amount multiplied by the exercise price of the
warrant.
Subject
to compliance with Canadian securities laws a warrant may be transferred by
a holder in whole or in part without our consent by the holder executing an
assignment in the form attached to the warrant and upon payment of any necessary
tax or other governmental charge imposed upon such transfer.
If there
is not an effective registration statement filed with the Securities and
Exchange Commission registering the common shares issuable upon exercise of the
warrants at the time the warrants are exercised, the warrants may be exercised
on a cashless basis, pursuant to the terms of the warrants.
The
warrants will not be listed on any securities exchange or automated quotation
system, and we do not intend to arrange for any exchange or quotation system to
list or quote the warrants.
This is a
brief description of the material features of the warrants, not a complete a
statement of all the terms. We have filed the form of warrant as part of our
“free-writing prospectus” with the Securities and Exchange Commission on
December 17, 2009, in connection with this offering. See “Where You
Can Find More Information” on page S-26.
PLAN
OF DISTRIBUTION
Pursuant
to General Instruction I.B.5. of Form F-3, we are permitted to utilize the
registration statement of which this prospectus supplement and the accompanying
base prospectus form a part to sell a maximum amount of securities equal to
one-third of the aggregate market value of our outstanding voting and non-voting
common equity held by our non-affiliates in any 12-month period. We may, from
time to time, offer the securities registered hereby up to this maximum
amount.
We are
offering the units through a placement agent. Subject to the terms
and conditions of a placement agency agreement, dated December 3, 2009, Rodman
& Renshaw, LLC has agreed to act as our exclusive placement agent in
connection with this offering. The placement agent is not purchasing or selling
any of the units offered by this prospectus supplement or the accompanying base
prospectus, nor is it required to arrange for the purchase or sale of any
specific number or dollar amount of the units, but it has agreed to use best
efforts to arrange for the sale of all of the units offered.
We will
enter into a securities purchase agreement directly with investors in connection
with this offering, and we will only sell to investors who have entered into
securities purchase agreement.
Confirmations
and definitive prospectuses will be distributed to all investors who agree to
purchase the securities in this offering, informing investors of the closing
date as to such units. We currently anticipate that closing of the sale of
the units we are offering will take place on or about December 22, 2009.
Investors will also be informed of the date and manner in which they must
transmit the purchase price for their units purchased.
On the
scheduled closing date, the following will occur:
|
·
|
we will receive funds in the
amount of the aggregate purchase price for the units we
sell;
|
|
·
|
we will deliver to each of the
investors, through the Deposit Withdrawal Agent Commission system, the
common shares being
purchased;
|
|
·
|
we will deliver a copy to each
investor of the warrants being purchased and will arrange for delivery of
the original warrants within 3 business days of the closing date;
and
|
|
·
|
Rodman & Renshaw, LLC will
receive the placement agent’s fee and placement agent
’
s warrants
in accordance with the terms of the placement agency
agreement.
|
Pursuant
to the placement agency agreement, we have agreed to pay the placement agent an
aggregate fee equal to 6% of the aggregate gross proceeds raised in connection
with the offering. The following table shows the per share and total fees we
will pay to the placement agents in connection with the sale of the units
offered pursuant to this prospectus supplement and the accompanying prospectus,
assuming the purchase of all of the securities offered hereby and excluding
proceeds that we may receive upon exercise of the warrants.
Per unit
placement agent fee
|
|
$
|
0.018
|
|
Total
placement agent fees
|
|
$
|
193,799.97
|
|
In
addition, we agreed to issue compensation warrants to the placement agent to
purchase that number of common shares equal to 6% of the aggregate number
of units sold in the offering, which will allow them to purchase an aggregate of
up to 645,999 common shares. The placement agent warrants will be
substantially on the same terms as the warrants offered hereby, except that
the placement agent warrants will have an exercise price equal to $0.46
(which is 125% of 5-day volume weight average trading price on the date of this
offering, but not less than 125% of the public offering price), will expire on
November 3, 2012 (five years from the effective date of our shelf
registration statement or commencment of sales)
and will otherwise comply with Rule 5110
of the Financial Institutions Regulatory Authority ("FINRA") in that for a
period of six months after the issuance date of the compensation warrants (which
shall not be earlier than the closing date of the offering pursuant to which the
compensation warrants are
being issued), neither the compensation
warrants nor any warrant shares issued upon exercise of the
compensation warrants shall be sold,
transferred, assigned, pledged, or hypothecated, or be the subject of
any hedging, short sale, derivative,
put, or call transaction that would result in the effective economic
disposition of the securities by any
person for a period of 180 days immediately following the date of effectiveness
or commencement of sales of the offering pursuant to which the compensation
warrants are
being issued, except the transfer of any
security:
|
·
|
by operation of law or by reason
of reorganization of the
Company;
|
|
·
|
to any NASD member firm
participating in this offering and the officers or partners thereof, if
all securities so transferred remain subject to the lock-up restriction
described above for the remainder of the time
period;
|
|
·
|
if the aggregate amount of
securities of the Company held by the placement agent or related person do
not exceed 1% of the securities being
offered;
|
|
·
|
that is beneficially owned on a
pro-rata basis by all equity owners of an investment fund, provided that
no participating member manages or otherwise directs investments by the
fund, and participating members in the aggregate do not own more than 10%
of the equity in the fund;
or
|
|
·
|
the exercise or conversion of any
security, if all securities received remain subject to the lock-up
restriction set forth above for the remainder of the time
period.
|
Subject
to compliance with FINRA Rule 5110(f)(2)(D), we have also agreed to reimburse
the placement agent’s out-of-pocket accountable expenses actually incurred by
the placement agent or persons associated with the placement agent (with
supporting invoices/receipts) up to a maximum of 0.8% of the aggregate gross
proceeds raised in the placement, but in no event more than
$30,000.
We
estimate that our share of the total expenses of the offering, excluding the
placement agent’s fees, will be approximately $
165,000
,
which includes approximately $
26,400
in reimbursable expenses paid to the placement agent.
We will
not provide any member of FINRA, or any independent broker-dealer with placement
agent compensation in excess of 8% of the initial gross proceeds from the
placement or sale by such FINRA member or independent broker-dealer of any
securities being offered hereby.
We have
agreed to indemnify the placement agent against certain liabilities, including
liabilities under the Securities Act of 1933, as amended, and liabilities
arising from breaches of representations and warranties contained in the
placement agency agreement. We have also agreed to contribute to payments the
placement agent may be required to make in respect of such
liabilities.
The
placement agency agreement provides that the placement agent’s obligation to
place the units depends on the satisfaction of the conditions contained in the
placement agency agreement including, but not limited to:
|
·
|
the
representations and warranties made by us to the placement agent are
true;
|
|
·
|
there
is no adverse material change in our business;
and
|
|
·
|
we
deliver customary closing documents to the placement
agent.
|
It is
anticipated that we will arrange for an instant deposit of the common shares to
or for the account of the placement agent through the book-entry facilities of
DTC on the closing date of this offering. No certificate evidencing the common
shares will be issued to purchasers, except in limited circumstances, and
registration will be made in the depositary services of DTC. Purchasers will
receive only a customer confirmation from the placement agent or other
registered dealer who is a DTC participant and from or through whom a beneficial
interest in the common shares is purchased. The warrants will be delivered in
registered, certificated form.
The
placement agency agreement will be included as an exhibit to our Report on
Form 6-K that will be furnished to the Securities and Exchange Commission
in connection with the closing of this offering. We have filed the form of
securities purchase agreement as part of our “free-writing prospectus” with the
Securities and Exchange Commission on December 17, 2009, in connection with this
offering. See “Where You Can Find More Information” on page
S-26.
Canadian
Distribution Restrictions
There are
restrictions under Canadian securities laws on investors' ability to resell
the common shares and common shares issuable upon exercise of the warrants
over the facilities of the Toronto Stock Exchange, or otherwise resell
the common shares and common shares issuable upon exercise of the
warrants in Canada or to or for the benefit of a resident of
Canada. Unless permitted under Canadian securities laws, the common
shares and common shares issuable upon exercise of the warrants may not be
traded over the facilities of the Toronto Stock Exchange, or in Canada or to or
for the benefit of a resident of Canada, before the date that is four (4) months
and a day after the closing date of the offering. Any physical certificate
representing the common shares and, if they are issued before the date
which four months and a day after closing, the common shares issuable upon
the exercise of the warrants, will bear the following legend:
“UNLESS
PERMITTED UNDER CANADIAN SECURITIES LEGISLATION, THE HOLDER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE MUST NOT TRADE SUCH SECURITIES BEFORE [
INSERT DATE THAT IS 4 MONTHS AND A
DAY AFTER THE CLOSING DATE
] ON THE TORONTO STOCK EXCHANGE OR IN CANADA OR
TO OR FOR THE BENEFIT OF A RESIDENT OF CANADA.
WITHOUT
PRIOR WRITTEN APPROVAL OF THE TORONTO STOCK EXCHANGE AND COMPLIANCE WITH ALL
APPLICABLE CANADIAN SECURITIES LAWS, THE SECURITIES REPRESENTED BY THIS
CERTIFICATE MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE TRADED ON OR
THROUGH THE FACILITIES OF THE TORONTO STOCK EXCHANGE OR IN CANADA OR TO OR FOR
THE BENEFIT OF A CANADIAN RESIDENT UNTIL [
INSERT DATE WHICH IS FOUR MONTHS
AFTER CLOSING
]. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE GOOD
DELIVERY IN SETTLEMENT OF TRANSACTIONS ON CANADIAN STOCK
EXCHANGES.”
Any
physical certificate representing the warrants will bear the following
legend:
“UNLESS
PERMITTED UNDER CANADIAN SECURITIES LEGISLATION, THE HOLDER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE MUST NOT TRADE SUCH SECURITIES BEFORE [
INSERT DATE THAT IS 4 MONTHS AND A
DAY AFTER THE CLOSING DATE
] IN CANADA OR TO OR FOR THE BENEFIT OF A
RESIDENT OF CANADA.
CERTAIN
U.S. FEDERAL INCOME TAX CONSIDERATIONS
The
following is a general summary of certain material U.S. federal income tax
considerations applicable to a U.S. Holder (as defined below) arising from and
relating to the acquisition, ownership and disposition of units acquired
pursuant to this prospectus supplement, the acquisition, ownership, and
disposition of common shares acquired as part of the units (which we refer to in
this section as the “unit shares”), the exercise, disposition, and lapse of
warrants acquired as part of the units, and the acquisition, ownership, and
disposition of common shares received on exercise of the warrants (which we
refer to in this section as the “warrant shares”).
This
summary is for general information purposes only and does not purport to be a
complete analysis or listing of all potential U.S. federal income tax
considerations that may apply to a U.S. Holder as a result of the acquisition of
units pursuant to this prospectus supplement. In addition, this
summary does not take into account the individual facts and circumstances of any
particular U.S. Holder that may affect the U.S. federal income tax
considerations applicable to such U.S. Holder. Accordingly, this
summary is not intended to be, and should not be construed as, legal or U.S.
federal income tax advice with respect to any U.S. Holder. Each U.S.
Holder should consult its own tax advisor regarding the U.S. federal, U.S. state
and local, and foreign tax consequences relating to the acquisition, ownership,
and disposition of units, unit shares, warrants, and warrant
shares.
No ruling
from the U.S. Internal Revenue Service (which we refer to as the “IRS”) or legal
opinion has been requested, or will be obtained, regarding the US. federal
income tax considerations applicable to U.S. Holders as discussed in this
summary. This summary is not binding on the IRS, and the IRS is not
precluded from taking a position that is different from, and contrary to, the
positions taken in this summary. In addition, because the authorities
on which this summary is based are subject to various interpretations, the IRS
and the U.S. courts could disagree with one or more of the positions taken in
this summary.
NOTICE
PURSUANT TO IRS CIRCULAR 230: NOTHING CONTAINED IN THIS SUMMARY CONCERNING ANY
U.S. FEDERAL TAX ISSUE IS INTENDED OR WRITTEN TO BE USED, AND IT CANNOT BE USED,
BY A U.S. HOLDER (AS DEFINED BELOW), FOR THE PURPOSE OF AVOIDING U.S. FEDERAL
TAX PENALTIES UNDER THE CODE (AS DEFINED BELOW). THIS SUMMARY WAS
WRITTEN TO SUPPORT THE PROMOTION OR MARKETING OF THE TRANSACTIONS OR MATTERS
ADDRESSED BY THIS PROSPECTUS SUPPLEMENT. EACH U.S. HOLDER SHOULD SEEK
U.S. FEDERAL TAX ADVICE, BASED ON SUCH U.S. HOLDER’S PARTICULAR CIRCUMSTANCES,
FROM AN INDEPENDENT TAX ADVISOR.
Scope
of this Summary
Authorities
This
summary is based on the Internal Revenue Code of 1986, as amended (which we
refer to as the “Code”), Treasury Regulations (whether final, temporary, or
proposed), U.S. court decisions, published IRS rulings, published administrative
positions of the IRS, and the Convention Between Canada and the United States of
America with Respect to Taxes on Income and on Capital, signed September 26,
1980, as amended (the “Canada-U.S. Tax Convention”), that are applicable and, in
each case, as in effect and available, as of the date of this prospectus
supplement. Any of the authorities on which this summary is based
could be changed in a material and adverse manner at any time, and any such
change could be applied on a retroactive basis and could affect the U.S. federal
income tax considerations described in this summary. This summary
does not discuss the potential effects, whether adverse or beneficial, of any
proposed legislation that, if enacted, could be applied on a retroactive
basis.
U.S.
Holders
For
purposes of this summary, a “U.S. Holder” is a beneficial owner of units, unit
shares, warrants, or warrant shares acquired pursuant to this prospectus
supplement that is (a) an individual who is a citizen or resident of the
U.S. for U.S. federal income tax purposes, (b) a corporation, or other
entity classified as a corporation for U.S. federal income tax purposes, that is
created or organized in or under the laws of the U.S. or any state in the U.S.,
including the District of Columbia, (c) an estate if the income of such
estate is subject to U.S. federal income tax regardless of the source of such
income, or (d) a trust if (i) such trust has validly elected to be
treated as a U.S. person for U.S. federal income tax purposes or (ii) a
U.S. court is able to exercise primary supervision over the administration of
such trust and one or more U.S. persons have the authority to control all
substantial decisions of such trust.
Non-U.S.
Holders
For
purposes of this summary, a “Non-U.S. Holder” is a beneficial owner of units,
unit shares, warrants, or warrant shares that is neither a U.S. Holder nor a
partnership. This summary does not address any U.S. federal income
tax considerations applicable to Non-U.S. Holders. Accordingly, a
Non-U.S. Holder should consult its own tax advisor regarding the U.S. federal,
U.S. state and local, and foreign tax consequences (including the potential
application of and operation of any tax treaties) relating to the acquisition,
ownership, and disposition of units, unit shares, warrants, and warrant
shares.
U.S. Holders Subject to
Special U.S. Federal Income Tax Rules Not Addressed
This
summary does not address the U.S. federal income tax considerations applicable
to U.S. Holders that are subject to special provisions under the Code,
including: (a) U.S. Holders that are tax-exempt organizations, qualified
retirement plans, individual retirement accounts, or other tax-deferred
accounts; (b) U.S. Holders that are financial institutions, underwriters,
insurance companies, real estate investment trusts, or regulated investment
companies or that are broker-dealers, dealers, or traders in securities or
currencies that elect to apply a mark-to-market accounting method; (c) U.S.
Holders that have a “functional currency” other than the U.S. dollar; (d) U.S.
Holders that own units, unit shares, warrants or warrant shares as part of a
straddle, hedging transaction, conversion transaction, constructive sale, or
other arrangement involving more than one position; (e) U.S. Holders that
acquired units, unit shares, warrants or warrant shares in connection with the
exercise of employee stock options or otherwise as compensation for services;
(f) U.S. Holders that hold units, unit shares, warrants or warrant shares other
than as a capital asset within the meaning of Section 1221 of the Code; or (g)
U.S. Holders that own, directly, indirectly, or by attribution, 10% or more, by
voting power or value, of the outstanding shares of the Company. The
summary below also does not address the impact of this offering on U.S. persons
who are U.S. expatriates or former long-term residents of the U.S. subject to
Section 877 of the Code. U.S. Holders and others that are subject to
special provisions under the Code, including U.S. Holders described immediately
above, should consult their own tax advisors.
If an
entity that is classified as partnership (or “pass-through” entity) for U.S.
federal income tax purposes holds units, unit shares, warrants or warrant
shares, the U.S. federal income tax consequences applicable to such partnership
(or “pass-through” entity) and the partners of such partnership (or owners of
such “pass-through” entity) generally will depend on the activities of the
partnership (or “pass-through” entity) and the status of such partners (or
owners). Partners of entities that are classified as partnerships
(and owners of “pass-through” entities) for U.S. federal income tax purposes
should consult their own tax advisor regarding the U.S. federal income tax
consequences relating to the acquisition, ownership, and disposition of units,
unit shares, warrants, and warrant shares.
Tax Consequences Other than
U.S. Federal Income Tax Consequences Not Addressed
This
summary does not address the U.S. state and local, U.S. federal estate and gift,
U.S. federal alternative minimum tax, or foreign tax consequences to U.S.
Holders relating to the acquisition, ownership, and disposition of units, unit
shares, warrants, and warrant shares. Each U.S. Holder should consult
its own tax advisor regarding the U.S. state and local, U.S. federal estate and
gift, U.S. federal alternative minimum tax and foreign tax consequences relating
to the acquisition, ownership, and disposition of units, unit shares, warrants,
and warrant shares.
U.S.
Federal Income Tax Consequences of the Acquisition of Units
For U.S.
federal income tax purposes, the acquisition by a U.S. Holder of a unit will be
treated as the acquisition of an “investment unit” consisting of two
components: a component consisting of one unit share and a component
consisting of three-quarters of one warrant. The purchase price for
each unit will be allocated between these two components in proportion to their
relative fair market values at the time the unit is purchased by the U.S.
Holder. This allocation of the purchase price for each unit will
establish a U.S. Holder’s initial tax basis for U.S. federal income tax purposes
in the unit share and three-quarters of one warrant that comprise each
unit.
For this
purpose, the Company will allocate $0.23 of the purchase price for the unit to
the unit share and $0.07 of the purchase price for each unit to the
three-quarters of one of one warrant. However, the IRS will not be
bound by the Company’s allocation of the purchase price for the units, and
therefore, the IRS or a U.S. court may not respect the allocation set forth
above. Each U.S. Holder should consult its own tax advisor regarding
the allocation of the purchase price for the units.
U.S.
Federal Income Tax Consequences of the Exercise and Disposition of
Warrants
Exercise of
Warrants
A U.S.
Holder should not recognize gain or loss on the exercise of a warrant and
related receipt of a warrant share (unless cash is received in lieu of the
issuance of a fractional warrant share). A U.S. Holder’s initial tax
basis in the warrant share received on the exercise of a warrant should be equal
to the sum of (a) such U.S. Holder’s tax basis in such warrant plus (b) the
exercise price paid by such U.S. Holder on the exercise of such
warrant. Subject to the “passive foreign investment company” (or
“PFIC”, as defined below) rules discussed below, a U.S. Holder’s holding period
for the warrant share received on the exercise of a warrant should begin on the
date that such warrant is exercised by such U.S. Holder..
Disposition of
Warrants
A U.S.
Holder will recognize gain or loss on the sale or other taxable disposition of a
warrant in an amount equal to the difference, if any, between (a) the amount of
cash plus the fair market value of any property received and (b) such U.S.
Holder’s tax basis in the warrant sold or otherwise disposed of. As
noted below under “Disposition of unit shares and warrant shares”, such gain or
loss will generally be treated as “U.S. source” for purposes of the U.S. foreign
tax credit calculations. Subject to the PFIC rules discussed below,
any such gain or loss generally will be a capital gain or loss (provided that
the warrant share to be issued on the exercise of such warrant would have been a
capital asset within the meaning of Section 1221 of the Code if acquired by the
U.S. Holder), which will be long-term capital gain or loss if the warrant is
held for more than one year
Expiration of Warrants
Without Exercise
Subject
to the PFIC rules discussed below, upon the lapse or expiration of a warrant, a
U.S. Holder will recognize a loss in an amount equal to such U.S. Holder’s tax
basis in the warrant. Any such loss generally will be a capital loss
and will be long-term capital loss if the warrants are held for more than one
year. Deductions for capital losses are subject to complex
limitations under the Code.
Certain Adjustments to the
Warrants
Under
Section 305 of the Code, an adjustment to the number of warrant shares that will
be issued on the exercise of the warrants, or an adjustment to the exercise
price of the warrants, may be treated as a constructive distribution to a U.S.
Holder of the warrants if, and to the extent that, such adjustment has the
effect of increasing such U.S. Holder’s proportionate interest in the “earnings
and profits” or assets of the Company, depending on the circumstances of such
adjustment (for example, if such adjustment is to compensate for a distribution
of cash or other property to shareholders of the Company). (See more
detailed discussion of the rules applicable to distributions made by the Company
at “U.S. Federal Income Tax Consequences of the Acquisition, Ownership, and
Disposition of Unit Shares and Warrant Shares – Distributions on Unit Shares and
Warrant Shares” below).
U.S.
Federal Income Tax Consequences of the Acquisition, Ownership, and Disposition
of Unit Shares and Warrant Shares
Distributions on Unit Shares
and Warrant Shares
Subject
to PFIC rules discussed below, a U.S. Holder that receives a distribution,
including a constructive distribution, with respect to a unit share or warrant
share will be required to include the amount of such distribution in gross
income as a dividend (without reduction for any Canadian income tax withheld
from such distribution) to the extent of the current or accumulated “earnings
and profits” of the Company, as computed for U.S. federal income tax
purposes. To the extent that a distribution exceeds the current and
accumulated “earnings and profits” of the Company, such distribution will be
treated first as a tax-free return of capital to the extent of a U.S. Holder's
tax basis in the unit shares or warrant shares and thereafter as gain from the
sale or exchange of such unit shares or warrant shares. (See “ Sale
or Other Taxable Disposition of unit shares and/or Warrant Shares”
below). However, the Company does not intend to maintain the
calculations of earnings and profits in accordance with U.S. federal income tax
principles, and each U.S. Holder should therefore assume that any distribution
by the Company with respect to the unit shares or warrant share will constitute
ordinary dividend income. Dividends received on unit shares or
warrant shares generally will not be eligible for the “dividends received
deduction”.
For tax
years beginning before January 1, 2011, a dividend paid to a U.S. Holder who is
an individual, estate or trust by the Company generally will be taxed at the
preferential tax rates applicable to long-term capital gains if the Company is a
“qualified foreign corporation” as defined under Section 1(h)(11) of the Code
(which we refer to as “QFC”) and certain holding period requirements for the
unit shares or warrant shares are met. The Company generally will be
a QFC if the Company is eligible for the benefits of the Canada-U.S. Tax
Convention or the unit shares or warrant shares are readily tradable on an
established securities market in the U.S. However, even if the
Company satisfies one or more of these requirements, the Company will not be
treated as a QFC if the Company is a PFIC for the tax year during which it pays
a dividend or for the preceding tax year. (See the section below
under the heading “Passive Foreign Investment Company Rules”).
If the
Company does not constitute a PFIC, but a dividend paid to a U.S. Holder
otherwise fails to qualify for the preferential tax rates discussed above, such
a dividend generally will be taxed at ordinary income tax rates (and not at the
preferential tax rates applicable to long-term capital gains).
Sale or Other Taxable
Disposition of Unit Shares and/or Warrant Shares
Subject
to the PFIC rules discussed below, upon the sale or other taxable disposition of
unit shares or warrant shares, a U.S. Holder generally will recognize capital
gain or loss in an amount equal to the difference between (i) the amount of cash
plus the fair market value of any property received and (ii) such U.S. Holder’s
tax basis in such unit shares or warrant shares sold or otherwise disposed
of. Such gain generally will be treated as “U.S. source” for purposes
of applying the U.S. foreign tax credit rules unless the gain is subject to tax
in Canada and is resourced as “foreign source” under the Canada-U.S. Tax
Convention and such U.S. Holder elects to treat such gain or loss as “foreign
source.” (See more detailed discussion at “Foreign Tax Credit”
below).
Preferential
tax rates apply to long-term capital gain of a U.S. Holder that is an
individual, estate, or trust. There are currently no preferential tax
rates for long-term capital gain of a U.S. Holder that is a
corporation. Deductions for capital losses are subject to significant
limitations under the Code.
Foreign Tax
Credit
A U.S.
Holder who pays (whether directly or through withholding) Canadian income tax
with respect to dividends paid on the unit shares and warrant shares generally
will be entitled, at the election of such U.S. Holder, to receive either a
deduction or a credit for such Canadian income tax paid. This
election is made on a year-by-year basis and applies to all foreign taxes paid
(whether directly or through withholding) by a U.S. Holder during a
year.
Complex
limitations apply to the foreign tax credit, including the general limitation
that the credit cannot exceed the proportionate share of a U.S. Holder’s U.S.
federal income tax liability that such U.S. Holder’s “foreign source” taxable
income bears to such U.S. Holder’s worldwide taxable income. In
applying this limitation, a U.S. Holder’s various items of income and deduction
must be classified, under complex rules, as either “foreign source” or “U.S.
source.” In addition, this limitation is calculated separately with
respect to specific categories of income. Dividends paid by the
Company generally will constitute “foreign source” income and generally will be
categorized as “passive category income.” Because the foreign tax
credit rules are complex, each U.S. Holder should consult its own tax advisor
regarding the foreign tax credit rules.
Receipt of Foreign
Currency
The
amount of any distribution paid in foreign currency to a U.S. Holder in
connection with the ownership of unit shares or warrant shares, or on the sale,
exchange or other taxable disposition of the Company’s unit shares, warrants or
warrant shares generally will be equal to the U.S. dollar value of such foreign
currency based on the exchange rate applicable on the date of actual or
constructive receipt (regardless of whether such foreign currency is converted
into U.S. dollars at that time). If the foreign currency received is
not converted into U.S. dollars on the date of receipt, a U.S. Holder will have
a basis in the foreign currency equal to its U.S. dollar value on the date of
receipt. A U.S. Holder that receives foreign currency and converts
such foreign currency into U.S. dollars at a conversion rate other than the rate
in effect on the date of receipt may have a foreign currency exchange gain or
loss, which generally would be treated as U.S. source ordinary income or loss
for foreign tax credit purposes. Each U.S. Holder should consult its
own U.S. tax advisor regarding the U.S. federal income tax consequences of
receiving, owning, and disposing of foreign currency.
Passive
Foreign Investment Company Rules
If the
Company were to constitute a PFIC (as defined below) for any year during a U.S.
Holder’s holding period, then certain different and potentially adverse tax
consequences would apply to such U.S. Holder’s acquisition, ownership and
disposition of units, common shares, warrants, and warrant shares.
The
Company generally will be a PFIC under Section 1297 of the Code if, for a
taxable year, (a) 75% or more of the gross income of the Company for such
taxable year is passive income or (b) 50% or more of the assets held by the
Company either produce passive income or are held for the production of passive
income, based on the fair market value of such assets (or on the adjusted tax
basis of such assets, if the Company is not publicly traded and either is a
“controlled foreign corporation” or makes an election). “Gross
income” generally means all revenues less the cost of goods sold, and “passive
income” includes, for example, dividends, interest, certain rents and royalties,
certain gains from the sale of stock and securities, and certain gains from
commodities transactions. Active business gains arising from the sale
of commodities generally are excluded from passive income if substantially all
of a foreign corporation’s commodities are (a) stock in trade of such foreign
corporation or other property of a kind which would properly be included in
inventory of such foreign corporation, or property held by such foreign
corporation primarily for sale to customers in the ordinary course of business,
(b) property used in the trade or business of such foreign corporation that
would be subject to the allowance for depreciation under Section 167 of the
Code, or (c) supplies of a type regularly used or consumed by such foreign
corporation in the ordinary course of its trade or business.
In
addition, for purposes of the PFIC income test and asset test described above,
if the Company owns, directly or indirectly, 25% or more of the total value of
the outstanding shares of another corporation, the Company will be treated as if
it (a) held a proportionate share of the assets of such other corporation and
(b) received directly a proportionate share of the income of such other
corporation. In addition, for purposes of the PFIC income test and
asset test described above, “passive income” does not include any interest,
dividends, rents, or royalties that are received or accrued by the Company from
a “related person” (as defined in Section 954(d)(3) of the Code), to the extent
such items are properly allocable to the income of such related person that is
not passive income.
Under
certain attribution rules, if the Company is a PFIC, U.S. Holders will be deemed
to own their proportionate share of any subsidiary of the Company which is also
a PFIC (which we refer to as a ‘‘Subsidiary PFIC’’), and will be subject to U.S.
federal income tax on (i) a distribution on the shares of a Subsidiary PFIC or
(ii) a disposition of shares of a Subsidiary PFIC, both as if the holder
directly held the shares of such Subsidiary PFIC.
The
Company does not believe that it was a PFIC for the taxable year ended December
31, 2008, and based on current business plans and financial expectations, the
Company does not expect to be a PFIC for the current taxable year and for the
taxable year ending December 31, 2010. The determination of whether
the Company will be a PFIC for a taxable year depends, in part, on the
application of complex U.S. federal income tax rules, which are subject to
differing interpretations. In addition, whether the Company will be a
PFIC for its current taxable year depends on the assets and income of the
Company over the course of each such taxable year and, as a result, cannot be
predicted with certainty as of the date of this prospectus supplement.
Consequently, there can be no assurance regarding the Company’s PFIC status for
any taxable year during which U.S. Holders hold common shares, and there can be
no assurance that the IRS will not challenge the determination made by the
Company concerning its PFIC status.
Under the
default PFIC rules, a U.S. Holder would be required to treat any gain recognized
upon a sale or disposition of our common shares as ordinary (rather than
capital), and any resulting U.S. federal income tax may be increased by an
interest charge which is not deductible by non-corporate U.S.
Holders. Rules similar to those applicable to dispositions will
generally apply to distributions in respect of our common shares which exceed a
certain threshold level.
While
there are U.S. federal income tax elections that sometimes can be made to
mitigate these adverse tax consequences (including, without limitation, the “QEF
Election” and the “Mark-to-Market Election”), such elections are available in
limited circumstances and must be made in a timely manner. Under
proposed Treasury Regulations, if a U.S. holder has an option, warrant, or other
right to acquire stock of a PFIC (such as the units or the warrants), such
option, warrant or right is considered to be PFIC stock subject to the default
rules of Section 1291 of the Code. However, the holding period for
the warrants Shares will begin on the date a U.S. Holder acquires the
units. This will impact the availability of the QEF Election and
Mark-to-Market Election with respect to the warrant shares. Thus, a
U.S. Holder will have to account for warrant shares and unit shares under the
PFIC rules and the applicable elections differently. U.S. Holders are
urged to consult their own tax advisers regarding the potential application of
the PFIC rules to the ownership and disposition of units, common shares,
warrants, and warrant shares, and the availability of certain U.S. tax elections
under the PFIC rules.
U.S.
Holders should be aware that, for each taxable year, if any, that the Company or
any Subsidiary PFIC is a PFIC, the Company can provide no assurances that it
will satisfy the record keeping requirements of a PFIC, or that it will make
available to U.S. Holders the information such U.S. Holders require to make a
QEF Election under Section 1295 of the Code with respect of the Company or any
Subsidiary PFIC. Each U.S. Holder should consult its own tax advisor
regarding the availability of, and procedure for making, a QEF Election with
respect to the Company and any Subsidiary PFIC.
Subject
to certain specific rules, foreign income and withholding taxes paid with
respect to any distribution in respect of stock in a PFIC should qualify for the
foreign tax credit. The rules relating to distributions by a PFIC are
complex, and a U.S. Holder should consult with its own tax advisor with respect
to any distribution received from a PFIC.
Information
Reporting; Backup Withholding Tax
Under
U.S. federal income tax law and Treasury regulations, certain categories of U.S.
Persons must file information returns with respect to their investment in, or
involvement in, a foreign corporation. Penalties for failure to file
certain of these information returns are substantial. U.S. Persons
who acquire units through this prospectus supplement and hold unit shares,
warrants and warrant shares should consult with their own tax advisors regarding
the requirements of filing information returns, and if applicable, any
Mark-to-Market election or QEF election.
Payments
made within the U.S., or by a U.S. payor or U.S. middleman, of dividends on, and
proceeds arising from certain sales or other taxable dispositions of the unit
shares and warrant shares may be subject to information reporting and backup
withholding tax, at the rate of 28%, if a U.S. Holder (a) fails to furnish such
U.S. Holder’s correct U.S. social security or other taxpayer identification
number (generally on Form W-9), (b) furnishes an incorrect U.S. taxpayer
identification number, (c) is notified by the IRS that such U.S. Holder has
previously failed to properly report items subject to backup withholding tax, or
(d) fails under certain circumstances to certify, under penalty of perjury, that
such U.S. Holder has furnished its correct U.S. taxpayer identification number
and that the IRS has not notified such U.S. Holder that it is subject to backup
withholding tax. However, U.S. Holders that are corporations
generally are excluded from these information reporting and backup withholding
tax rules. Any amounts withheld under the U.S. backup withholding tax
rules will be allowed as a credit against a U.S. Holder’s U.S. federal income
tax liability, if any, or will be refunded, if such U.S. Holder furnishes
required information to the IRS. Each U.S. Holder should consult its
own tax advisor regarding the information reporting and backup withholding tax
rules.
INTERESTS
OF NAMED EXPERTS AND COUNSEL
None.
LEGAL
MATTERS
Certain
legal matters relating to Canadian law, including the validity of the common
shares and warrants comprising the units offered by the prospectus supplement,
will be passed upon for us by DuMoulin Black LLP, Vancouver,
Canada. Certain legal matters relating to United States law will be
passed upon for us by Dorsey & Whitney LLP, Vancouver, Canada and Denver,
Colorado. Certain United States legal matters will be passed upon for
the placement agent by Weinstein Smith LLP, New York, New York.
EXPERTS
Our
consolidated financial statements as of December 31, 2008 and 2007, and for the
years ended December 31, 2008, 2007 and 2006, have been incorporated by
reference herein in reliance upon the report of Dale Matheson Carr-Hilton
Labonte LLP, independent registered public accounting firm, given upon the
authority of that firm as experts in accounting and auditing.
Information
relating to the Company’s oil and gas properties in this prospectus supplement
and the documents incorporated by reference herein has been derived from
reports, statements or opinions prepared or certified by Gustavson Associates,
LLC and GLJ Petroleum Consultants and this information has been included in
reliance on such persons’ and company’s expertise.
DOCUMENTS
INCORPORATED BY REFERENCE
The
Securities and Exchange Commission allows us to “incorporate by reference”
information that we file with the Securities and Exchange
Commission. This means that we can disclose important information to
you by referring you to those documents. Any information we reference
in this manner is considered part of this prospectus
supplement. Information we file with the Securities and Exchange
Commission after the date of this prospectus supplement will automatically
update and, to the extent inconsistent, supersede the information contained in
this prospectus supplement.
We
incorporate by reference the documents listed below and future filings we make
with the Securities and Exchange Commission pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Securities Exchange Act of 1934, as amended, (excluding,
unless otherwise provided therein or herein, information furnished pursuant any
Report on Form 6-K) after the date of this prospectus supplement until the
termination of the offering under this prospectus supplement.
|
(a)
|
Our
Annual Report on Form 20-F for the fiscal year ended December 31, 2008, as
filed on June 30, 2009, excluding Item
17;
|
|
(b)
|
Amendment
No. 1 to our Annual Report on Form 20-F for the fiscal year ended December
31, 2009, as filed on October 23,
2009;
|
|
(c)
|
Our
Report on Form 6-K as furnished on October 23, 2009, which includes our
unaudited consolidated financial statements as at and for the three and
six month periods ended June 30,
2009;
|
|
(d)
|
Our
Report on Form 6-K as furnished on November 16, 2009, which includes our
unaudited consolidated financial statements as at and for the three and
six month periods ended September 30, 2009;
and
|
|
(d)
|
The
description of our securities contained in our Registration Statement on
Form 8-A filed with the Securities and Exchange Commission on May 22,
2007, including any amendment or report filed for the purpose of updating
such description.
|
We will
furnish without charge to any person, upon written or oral request, a copy of
any or all of the above documents, other than exhibits to such documents which
are not specifically incorporated by reference into those
documents. You should direct any requests for documents
to:
Suite #
598 – 999 Canada Place,
Vancouver,
BC V6C 3E1
Canada
Telephone:
(604) 638-5050
Facsimile:
(604) 638-5051
Email:
rhodgkinson@dejour.com or mwong@dejour.com
The
information relating to us contained in this prospectus supplement and the
accompanying base prospectus is not comprehensive and should be read together
with the information contained in the documents incorporated by
reference. Descriptions contained in the documents incorporated by
reference as to the contents of any contract or other document may not be
complete. You should refer to the copy of such contract or other
document filed as an exhibit to our filings.
WHERE
YOU CAN FIND MORE INFORMATION
We have
filed a registration statement on Form F-3 with the Securities and Exchange
Commission under the Securities Act of 1933 in connection with this offering.
This prospectus supplement and the accompanying base prospectus are part of the
registration statement. This prospectus supplement and the accompanying base
prospectus do not contain all of the information set forth in the registration
statement, as permitted by the rules and regulations of the Securities and
Exchange Commission. Each statement made in this prospectus supplement
concerning a document filed as an exhibit to the registration statement is
qualified by reference to that exhibit for a complete statement of its
provisions. The information on the Securities and Exchange Commission’s website
is not part of this prospectus supplement or the accompanying base prospectus,
and any references to the Securities and Exchange Commission’s website or any
other website are inactive textual references
only.
We file
annual and other reports and other information with the Securities and Exchange
Commission. You may read and copy any report or document we file, and the
registration statement, including the exhibits, may be inspected at the
Securities and Exchange Commission’s public reference room located at 100 F
Street, N.E., Washington, D.C. 20549. Please call the Securities and Exchange
Commission at 1-800-SEC-0330 for further information on the public reference
room. Our Securities and Exchange Commission filings are also available to the
public from the Securities and Exchange Commission’s website at
http://www.sec.gov
.
EXPENSES
OF THE OFFERING
The
following table sets forth the various expenses to be incurred by us in
connection with the issuance and distribution of the securities being registered
hereby. All amounts are estimated except the Securities and Exchange Commission
registration fee, NYSE Amex listing fee and FINRA filing fee.
Securities
and Exchange Commission registration fee
|
|
$
|
1,395
|
|
Printing
expenses
|
|
|
500
|
|
Legal
fees and expenses
|
|
75,00
|
|
NYSE
Amex listing fees
|
|
|
45,000
|
|
FINRA
filing fee
|
|
|
3,000
|
|
Accounting
fees and expenses
|
|
5,000
|
|
Transfer
agent fees
|
|
|
5,000
|
|
Miscellaneous
expenses
|
|
30,105
|
|
|
|
|
|
|
Total
|
|
$
|
165,000
|
|
DEJOUR
ENTERPRISES LTD.
$25,000,000
Common
Shares
Warrants
Units
|
Dejour
Enterprises Ltd. may offer and sell, from time to time, up to $25,000,000
aggregate initial offering price of our common shares, no par value (which we
refer to as “Common Shares”), warrants to purchase Common Shares (which we refer
to as “Warrants”) or any combination of Common Shares or Warrants (which we
refer to as “Units”) (collectively, the Common Shares, Warrants and Units are
referred to as the “Securities”) in one or more transactions under this
prospectus (which we refer to as the “Prospectus”).
This
Prospectus provides you with a general description of the Securities that we may
offer. Each time we offer Securities, we will provide you with a prospectus
supplement (which we refer to as a “Prospectus Supplement”) that describes
specific information about the particular Securities being offered and may add,
update or change information contained in this Prospectus. You should read both
this Prospectus and any Prospectus Supplement, together with any additional
information which is incorporated by reference herein or
therein.
This
Prospectus may not be used to offer or sell securities without the Prospectus
Supplement which includes a description of the method and terms of that
offering.
We may
sell the Securities on a continuous or delayed basis to or through underwriters,
dealers or agents or directly to purchasers. The Prospectus Supplement, which we
will provide to you each time we offer Securities, will set forth the names of
any underwriters, dealers or agents involved in the sale of the Securities, and
any applicable fee, commission or discount arrangements with
them. For additional information on the methods of sale, you should
refer to the section entitled “Plan of Distribution” in this
Prospectus.
Our
common shares are traded on the Toronto Stock Exchange and on the NYSE Amex in
both cases under the symbol “DEJ.” On November 3, 2009, the last
reported sale price of common shares on the Toronto Stock Exchange was Cdn$0.47
per common share and on the NYSE Amex was $0.437 per common
share.
There is
currently no market through which the Securities, other than the Common Shares,
may be sold and purchasers may not be able to resell the Securities purchased
under this Prospectus. This may affect the pricing of the Securities,
other than the Common Shares, in the secondary market, the transparency and
availability of trading prices, the liquidity of these Securities and the extent
of issuer regulation.
The
aggregate market value of our outstanding voting and non-voting common equity
held by non-affiliates on November 3, 2009 was approximately $28 million. We
have not issued any securities pursuant to Instruction I.B.5 of Form F-3 during
the 12 calendar month period that ends on and includes the date
hereof.
Investing
in the Securities involves risks. See “Risk Factors and
Uncertainties” on page 7.
These
securities have not been approved or disapproved by the U.S. Securities and
Exchange Commission (“SEC”) or any state securities commission nor has the SEC
or any state securities commission passed upon the accuracy or adequacy of this
Prospectus. Any representation to the contrary is a criminal
offense.
THE DATE OF THIS PROSPECTUS IS
NOVEMBER 3,
2009.
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TABLE OF CONTENTS
ABOUT
THIS PROSPECTUS
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1
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|
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SUMMARY
|
|
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2
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RISK
FACTORS AND UNCERTAINTIES
|
|
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7
|
|
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DOCUMENTS
INCORPORATED BY REFERNCE
|
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12
|
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|
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CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
|
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13
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USE
OF PROCEEDS
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14
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DESCRIPTION
OF COMMON SHARES
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14
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DESCRIPTION
OF WARRANTS
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15
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DESCRIPTION
OF UNITS
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17
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PLAN
OF DISTRIBUTION
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18
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INTERESTS
OF NAMED EXPERTS AND COUNSEL
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19
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EXPERTS
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20
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WHERE
YOU CAN FIND MORE INFORMATION
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ABOUT
THIS PROSPECTUS
This
Prospectus is a part of a registration statement that we have filed with the SEC
utilizing a “shelf” registration process. Under this shelf
registration process, we may sell the Securities described in this Prospectus in
one or more offerings up to a total dollar amount of initial aggregate offering
price of $25,000,000. This Prospectus provides you with a general
description of the Securities that we may offer. The specific terms of the
Securities in respect of which this Prospectus is being delivered will be set
forth in a Prospectus Supplement and may include, where applicable: (i) in
the case of Common Shares, the number of Common Shares offered, the offering
price and any other specific terms of the offering; (ii) in the case of
Warrants, the designation, number and terms of the Common Shares purchasable
upon exercise of the Warrants, any procedures that will result in the adjustment
of those numbers, the exercise price, dates and periods of exercise, and the
currency or the currency unit in which the exercise price must be paid and any
other specific terms; and (iii) in the case of Units, the designation, number
and terms of the Common Shares or Warrants comprising the Units. A
Prospectus Supplement may include specific variable terms pertaining to the
Securities that are not within the alternatives and parameters set forth in this
Prospectus.
In
connection with any offering of the Securities (unless otherwise specified in a
Prospectus Supplement), the underwriters or agents may over-allot or effect
transactions which stabilize or maintain the market price of the Securities
offered at a higher level than that which might exist in the open
market. Such transactions, if commenced, may be interrupted or
discontinued at any time. See “Plan of Distribution”.
Please
carefully read both this Prospectus and any Prospectus Supplement together with
the documents incorporated herein by reference under “Documents Incorporated by
Reference” and the additional information described below under “Where You Can
Find More Information.”
Owning
securities may subject you to tax consequences in the United
States. This Prospectus or any applicable Prospectus Supplement may
not describe these tax consequences fully. You should read the tax
discussion in any Prospectus Supplement with respect to a particular offering
and consult your own tax advisor with respect to your own particular
circumstances.
References
in this Prospectus to “$” are to United States dollars. Canadian dollars are
indicated by the symbol “Cdn$”.
You
should rely only on the information contained in this Prospectus. We
have not authorized anyone to provide you with information different from that
contained in this Prospectus. The distribution or possession of this
Prospectus in or from certain jurisdictions may be restricted by
law. This Prospectus is not an offer to sell the Securities and is
not soliciting an offer to buy the Securities in any jurisdiction where the
offer or sale is not permitted or where the person making the offer or sale is
not qualified to do so or to any person to whom it is not permitted to make such
offer or sale. The information contained in this Prospectus is
accurate only as of the date of this Prospectus, regardless of the time of
delivery of this Prospectus or of any sale of the Securities. Our
business, financial condition, results of operations and prospects may have
changed since that date.
In this
Prospectus and in any Prospectus Supplement, unless the context otherwise
requires, references to “Dejour,” the “Company,” “we,” “us,” or “our” refers to
Dejour Enterprises Ltd. and/or its wholly owned subsidiaries.
SUMMARY
The
Company
Dejour
Enterprises Ltd. was incorporated as “Dejour Mines Limited” on March 29,
1968 under the laws of the Province of Ontario. By articles of amendment
dated October 30, 2001, the issued shares were consolidated on the basis
of one (1) new for every fifteen (15) old shares and the name of the
company was changed to Dejour Enterprises Ltd. On June 6, 2003, the
shareholders approved a resolution to complete a one-for-three-share
consolidation, which became effective on October 1, 2003. Dejour was
continued in British Columbia under the
Business Corporations Act
(British Columbia)
in 2005.
Our
authorized capital consists of an unlimited number of common
shares. There are no indentures or agreements limiting the
payment of dividends and there are no conversion rights, special
liquidation rights, pre-emptive rights or subscription
rights.
Our
executive office is located at:
Suite
# 598 – 999 Canada Place,
Vancouver,
BC V6C 3E1
Canada
Telephone:
(604) 638-5050
Facsimile:
(604) 638-5051
Website:
www.dejour.com
Email:
rhodgkinson@dejour.com or mwong@dejour.com
The
contact person is: Mr. Robert L. Hodgkinson, Chairman and Chief Executive
Officer or Mr. Mathew H. Wong, Chief Financial Officer and Corporate
Secretary.
Our
fiscal year ends December 31
st
.
Our
Business
Since
the divestiture of our uranium exploration properties in December 2006, we
are principally an exploration-stage company engaged in the acquisition,
exploration and development of oil and gas properties. Our direct interest
in uranium exploration properties were sold to Titan Uranium Inc. in 2006
for Titan common shares. We sold all of our Titan common shares between
January and April 2009, but retain a 1% NSR on all the properties sold to
Titan, and a 10% carried working interest in each lease through a
completed bankable feasibility study, after which we may elect to
participate in project development at a 10% interest or convert this
interest to an additional 1% NSR.
Our
current focus is on oil and gas properties located in the United States
and Canada. We currently hold approximately 140,000 net acres of oil and
gas leases in The Peace River Arch of northwestern British Columbia and
northeastern Alberta, Canada, and the Piceance and Uinta Basins in the US
Rocky Mountains. At this time, our principal producing
properties are located in Canada.
Our
business objective is to grow our oil and gas production and generate
sufficient cash flow to continue to expand company operations and enhance
shareholder value. This will be accomplished through a strategy
of acquiring oil and gas assets in areas and projects that we believe have
high potential and through prudent investment and management, increase the
value of these assets.
As
of the end of our most recent fiscal year ended December 31, 2008, we had
proven reserves and production of oil and gas in British Columbia and
Alberta, Canada. Reserves attributable to us located in the State of
Colorado as of December 31, 2007 were exchanged for additional exploration
acreage.
In
2009 the company’s focus was the restructuring of current assets and
operations to reduce debt and lower operating costs. This was
accomplished through non core asset dispositions and reduction of
operating and overhead costs. In the second quarter of 2009 we
completed the sale of a 13% of our working interest in our Drake/Woodrush
project and the sale of our entire interest in the Carson Creek area for a
total sale price of Cdn$4,440,000. Subsequent to June 30, 2009,
we disposed of an additional 7% working interest in our Drake/Woodrush
project for proceeds of Cdn$1,260,000. At the same time, we
also restructured and extended short-term notes equal to Cdn$3,420,000 and
converted another Cdn$2,776,000 of short-term debt to equity in the
Company. As a result, we reduced our outstanding liabilities
(excluding asset retirement obligations and future income tax liabilities)
from Cdn$16.38 million as of March 31, 2009 to approximately Cdn$6.5
million as of this date. Asset and debt restructuring, combined
with operating cost reductions of approximately Cdn$2,000,000 per year
have positioned Dejour to undertake the further development of its core
properties in the current commodity price
environment.
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Our
resource property interests are described below:
United
States Oil and Gas Properties
1. Colorado/Utah Oil
and Gas Project
In
July 2006, we successfully concluded the purchase of a 25% working
interests in 267 oil and gas leases covering 254,068 net acres (397
sections of land) in the Piceance and Uinta Basins of Western Colorado and
Eastern Utah for a total cost of Cdn$ 25,152,510 in cash, stock, note and
debentures.
Subsequently,
we acquired an interest in an additional 21,866 net acres that are
contained within an Area of Mutual Interest as defined in the purchase
agreement.
In
June 2008, we entered into a Purchase and Sale Agreement with Retamco
Operating, a partner in the Colorado/Utah project. Under the Agreement, we
exchanged our 25% Working Interest in certain leases of approximately
3,500 acres at North Barcus Creek and two wells and US$4,000,000 for an
additional 64,000 net acres.
In
November 2008, we signed a joint-venture agreement with Laramie Energy II
LLC (which we refer to as “Laramie”) covering 22,000 gross acres (15,700
net to Dejour) in the Rangely Project. Under the terms of the Agreement,
Laramie will begin a continuous drilling program on the leases in the
second half of 2009 and will have the right to earn and purchase at a
predetermined priceup to 55% of the acreage covered under the agreement by
completing at least four commercially productive wells over the next three
to four years.
During
Fiscal 2008, certain leases expired. As of December 31, 2008, we had
approximately 128,000 net acres in the Colorado/Utah Project.
The
total current area of projects in which we have an interest is 272,777
acres net to the Joint-Venture (approximately 128,000 acres net to Dejour)
in 397 sections of land. Our interest in the individual
leases ranges from 25% to 72%, subject to an 80%-87.% Net Revenue Interest
(which we refer to as “NRI”) except for 1 lease, in a total of 296 leases,
We are the operator of approximately 125,000 acres gross (72% WI Dejour
and 28% WI for Brownstone). The other acreage includes approximately
150,000 acres gross (65% WI Retamco, 25% WI Dejour, and 10% WI Brownstone)
with Retamco as the Operator, and approximately 14,000 acres gross (25% WI
Dejour, 10% WI Brownstone, and 65% WI Fidelity) with Fidelity as the
Operator.
2. Tinsley
Prospect
As
of March 31, 2008, we hold a 35% working interest in 8,349 gross and 7,057
net acres. The Mississippi based operator is seeking an investor for the
project with the objective of drilling additional wells in
2010.
Canadian
Oil and Gas Properties
Our
wholly-owned subsidiary, Dejour Energy (Alberta) Ltd., currently has
interests in oil and gas properties in the Peace River Arch located in
northeastern British Columbia and northwestern Alberta.
Since
commencing exploration on its Peace River Arch properties, we have drilled
or participated in drilling 16 wells on 9 different project areas. 7 wells
(5 gas, 1 oil and 1 gas and oil) have commenced production. Tie-in of 2
additional wells has been suspended due to low commodity
prices.
During
fiscal 2008, we acquired 6,352 gross and net acres of lands in the Montney
natural gas area in Northeastern British Columbia. The acreage is
adjacent to existing pipeline infrastructure, and was acquired via
government oil and gas auction. As at December 31, 2008, DEAL had an
average interest of 54% in approximately 39,283 gross acres in the Peace
River Arch.
Subsequent
to the year-end, we disposed of some of its interests in our Canadian oil
and gas properties in exchange for cash proceeds, as described
below.
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Our
Canadian oil and gas property interests are described below:
1.
Drake/Woodrush
In
2007, we purchased 2,108 acres of land in the Drake area of northeast
British Columbia. In the second quarter of 2007, we drilled two gas wells,
which were tied in and producing.
Working
interest in lands earned last winter has been increased from 60% to 92% on
700 of the 1,400 acres earned. Interest in the remaining 700 acres remains
at 100% before payout and 60% after payout. Final locations for the 2007/8
winter drilling were chosen based on interpretation of 3D seismic data
purchased over all our working interest land in the area.
We
drilled four wells during the 2007/2008 winter season. Two of the wells
were drilled on lands earned previously. The other two wells were drilled
to evaluate the deeper Halfway formation as well as the proven Notikewin
sands on land purchased at crown sale in which we have a 100% WI.
The deeper wells encountered significant quantities of sour gas and
oil, which required the purchase and installation of additional equipment,
facilities, and pipeline. These four wells were drilled and completed for
production in Q1 2008.
We
have budgeted approximately $1,500,000 for drilling and development at
Drake/Woodrush in fiscal 2009. British Columbia has granted producers in
the Northeastern portion of the Province a royalty-free production
holiday, and we intend to focus our current work on the Woodrush oil pool
to take advantage of the lowered royalty rates and the higher oil
commodity prices. Scheduled work includes high resolution 3D seismic, and
drilling of onenew well during the fourth quarter and up to two additional
wells in the first quarter of 2010.. The capacity of the infrastructure
placed on the project has been designed for this additional
development.
Subsequent
to the 2008 year-end, we have sold 20% interest in Woodrush/Drake to
unrelated third parties for approximately $3,600,000 cash. Funds from the
sale of the interest were used primarily to reduce our outstanding bank
line of credit.
2. Saddle
Hills
In
the Saddle Hills area of Alberta, we participated in drilling a well in
the first quarter of 2007 on a five section block of land at 30% working
interest to earn 30% subject to 10% non-convertible royalty. The first
well tested over 1.5 MMcf/d in total from two zones. The operator drilled
one additional location on the property in Q1 2008 which has also been
completed and tested over 1.5 mmcf/day total from two zones.. The operator
has not tied in either of the two wells for production. DEAL completed a
seismic program on behalf of the joint venture to aid in future
development plans.
3.
Manning
In
the Manning area of British Columbia, we participated at 40% working
interest in a farm-in on seven sections of land. A test well commenced
drilling in December 2007 and was completed in early 2008, and tested at
rates of over 1.5 MMcf/d with water. This operator has not tied in the
well for production, but it has earned us an interest in all seven
sections subject to non-convertible royalty.
4. Carson
Creek
At
Carson Creek, Alberta, land was purchased privately by DEAL and a test
well commenced drilling in late 2007. The well was completed in early 2008
and tested at approximately 3.0 MMcf/d with 100 bbls natural gas liquids
per MMcf gas.
Subsequent
to the year-end, in June 2009, we completed the sale of our 100% working
interest in Carson Creek to an unrelated third party for
$2,100,000.
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5. Buick Creek
(Montney)
In 2008,
DEAL acquired 6,352 acres net and gross in the emerging Montney natural gas
resource play in Northeastern British Columbia. The acreage was acquired at a
Provincial Government drilling right auction. These lands are adjacent to
necessary pipeline infrastructure. In early 2009, we also acquired an existing
wellbore which we intend to use for re-entry and testing of the
play.
Our
landholdings as of October 23, 2009 were as follows:
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Undeveloped
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Developed
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Total
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Gross
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Net
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Gross
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|
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Net
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|
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Gross
|
|
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Net
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Colorado/Utah,
US
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272,777
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128,000
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Nil
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Nil
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272,777
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|
|
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128,000
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|
|
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Tinsley,
US
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7,057
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2,470
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Nil
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Nil
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7,057
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2,470
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Canada
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28,730
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14,748
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10,553
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6,465
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39,283
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21,213
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Recent
Developments
On
October 22, 2009, we completed the second tranche of a private placement of
"flow-through" common shares. In connection with this transaction, we sold
375,000 flow-through shares at a price of Cdn.$0.60 per share, for gross
proceeds of Cdn$225,000. Total gross proceeds in combination with the first
tranche, in connection with which we sold 1,333,333 flow-through shares on
October 14, 2009, is Cdn$1,601,000. We have paid a total finders fee of
Cdn$83,980 in cash in connection with the private placement. All offers
and sales of flow-through shares in the private placement have been made in
Canada.
The
Securities Offered under this Prospectus
We may
offer the Common Shares, Warrant or Units with a total value of up to
$25,000,000 from time to time under this Prospectus, together with any
applicable Prospectus Supplement and related free writing prospectus, at prices
and on terms to be determined by market conditions at the time of
offering. This Prospectus provides you with a general description of
the Securities we may offer. Each time we offer Securities, we will
provide a Prospectus Supplement that will describe the specific amounts, prices
and other important terms of the Securities including, to the extent
applicable:
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aggregate
offering price;
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voting
or other rights; and
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important
United States federal income tax
considerations.
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A
Prospectus Supplement and any related free writing prospectus that we may
authorize to be provided to you may also add, update or change information
contained in this Prospectus or in documents we have incorporated by
reference. However, no Prospectus Supplement or free writing
prospectus will offer a security that is not registered and described in this
Prospectus at the time of the effectiveness of the registration statement of
which this Prospectus is a part.
We may
sell the Securities on a continuous or delayed basis to or through underwriters,
dealers or agents or directly to purchasers. The Prospectus Supplement, which we
will provide to you each time we offer Securities, will set forth the names of
any underwriters, dealers or agents involved in the sale of the Securities, and
any applicable fee, commission or discount arrangements with
them.
Common
Shares
We
may offer Common Shares. Holders of Common Shares are entitled
to one vote per Common Share on all matters that require shareholder
approval. Holders of our Common Shares are entitled to
dividends when and if declared by our Board of Directors. Our
Common Shares are described in greater detail in this Prospectus under
“Description of Common Shares.”
Warrants
We
may offer Warrants for the purchase of Common Shares, in one or more
series, from time to time. We may issue Warrants independently
or together with Common Shares and the Warrants may be attached to or
separate from such securities.
The
Warrants will be evidenced by warrant certificates and may be issued under
one or more warrant indentures, which are contracts between us and a
warrant trustee for the holders of the Warrants. In this
Prospectus, we have summarized certain general features of the Warrants
under “Description of Warrants.” We urge you, however, to
read any Prospectus Supplement and any free writing prospectus that we may
authorize to be provided to you related to the series of Warrants being
offered, as well as the complete warrant indentures and warrant
certificates that contain the terms of the Warrants. Specific
warrant indentures will contain additional important terms and provisions
and will be filed as exhibits to the registration statement of which this
Prospectus is a part, or incorporated by reference from a current report
on Form 8-K that we file with the SEC.
Units
We
may offer Units consisting of Common Shares or Warrants to purchase any of
such securities in one or more series. In this Prospectus, we
have summarized certain general features of the Units under “Description
of Units.” We urge you, however, to read any Prospectus
Supplement and any free writing prospectus that we may authorize to be
provided to you related to the series of Units being
offered. We may evidence each series of units by unit
certificates that we will issue under a separate unit agreement with a
unit agent. We will file as exhibits to the registration
statement of which this Prospectus is a part, or will incorporate by
reference from a current report on Form 8-K that we file with the
SEC, the unit agreements that describe the terms of the series of Units
the Company is offering before the issuance of the related series of
Units.
THIS
PROSPECTUS MAY NOT BE USED TO OFFER OR SELL ANY SECURITIES UNLESS
ACCOMPANIED BY A PROSPECTUS
SUPPLEMENT.
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RISK
FACTORS AND UNCERTAINTIES
An
investment in a mine service and an exploration stage mining company with a
short history of operations such as ours involves an unusually high amount of
risk, both unknown and known, present and potential, including, but not limited
to the risks enumerated below.
Our
failure to successfully address the risks and uncertainties described below
would have a material adverse effect on our business, financial condition and/or
results of operations, and the trading price of our common stock may decline and
investors may lose all or part of their investment. We cannot assure you
that we will successfully address these risks or other unknown risks that may
affect our business.
Estimates
of mineralized material are forward-looking statements inherently subject to
error. Although resource estimates require a high degree of assurance in the
underlying data when the estimates are made, unforeseen events and
uncontrollable factors can have significant adverse or positive impacts on the
estimates. Actual results will inherently differ from estimates. The unforeseen
events and uncontrollable factors include: geologic uncertainties including
inherent sample variability, metal price fluctuations, variations in mining and
processing parameters, and adverse changes in environmental or mining laws and
regulations. The timing and effects of variances from estimated values cannot be
accurately predicted.
Risks
Pertaining to the Company:
Cumulative
Unsuccessful Exploration Efforts By Our Personnel Could Result In Our Having to
Cease Operation.
The
expenditures to be made by us in the exploration of our properties as described
herein may not result in discoveries of oil and natural gas in commercial
quantities. Many exploration projects do not result in the discovery of
commercially recoverable oil and gas deposits and this occurrence could
ultimately result in our having to cease operations.
We
Have a Working Capital Deficit, Minimal Positive Cash Flow and No Recent History
of Significant Earnings and Are Dependent Upon Public and Private Distributions
of Equity to Obtain Capital in Order to Sustain Operations. Public Distributions
of Capital Result in Dilution to Existing Shareholders.
As of
September 30, 2009, we had a working capital deficit of approximately
($2,400,000). One of our oil and gas projects has advanced to the commercial
production stage, but current cash flow is insufficient to meet our cash
requirements. We do not know if it will ever achieve self-sustaining commercial
oil and gas operations. Historically, the only source of funds available to us
has been through the sale of its common shares, debt and bank borrowings, and
the sale of assets. Any future additional equity financing would cause dilution
to current stockholders.
We
May Require Additional Capital in Order to Repay Amounts Due.
As of
December 31, 2008, we had a Promissory Note with Brownstone, our U.S. working
interest partner, with a balance of Cdn$4,604,040 (US$3,780,000) due on the
earlier of completing an equity or debt financing, or July 1,
2009. We also borrowed Cdn$1,950,000 under a Promissory Note issued
by, and borrowed a further Cdn$600,000 from, a company controlled by our CEO
(“
HEC
”). These
amounts are secured by our assets.
As of
September 30, 2009, we had reached agreements with the lenders to restructure
the debt amounts through the issuance of common stock and warrants and the
issuance of new debt instruments due in November 1, 2010. As of
September 30, 2009, the outstanding balances on loans from Brownstone and HEC
totaled Cdn$3,420,000. We may need to raise additional capital to
meet the new due dates of November 1, 2010. If we are unable to repay
these amounts, the lenders could foreclose upon our assets, which could
ultimately result in us having to curtail or cease operations.
We
have a current bank loan due and subject to renewal on December 15,
2009.
Our
subsidiary, Dejour Energy (Alberta) Ltd. (“
DEAL
”), has secured a
revolving operating loan facility with a Canadian Bank for up to Cdn$1,780,000.
The facility is secured by DEAL’s oil and gas assets in Canada. Subsequent
to September 30, 2009, the terms of the Canadian bank line of credit of
Cdn$1,780,000 were extended to December 15, 2009, and the adjusted working
capital ratio requirement was waived for the three-month period ending September
30, 2009. If we are unable to renew the facility with our existing bank or
refinance this facility with another bank, we may be required to repay the
entire amount borrowed under the facility, or, if unable to repay, may lose
certain of our Canadian assets.
We
Are Dependent on Key Personnel and the Absence of Any of These Individuals Could
Result in Us Having to Cease Operation.
While
engaged in the business of exploring mineral properties, the nature of our
business, our ability to continue our exploration of potential exploration
projects, and to develop a competitive edge in the marketplace, depends, in
large part, on our ability to attract and maintain qualified key management
personnel. Competition for such personnel is intense and we may not be
able to attract and retain such personnel. Our growth will depend, on the
efforts of our Senior Management, particularly its CEO, Robert Hodgkinson, our
President of Dejour (USA), Harrison Blacker, our President of DEAL, Charles
Dove, and Corporate Secretary and Chief Financial Officer Mr. Mathew
Wong.
New
legislation, including the Sarbanes-Oxley Act of 2002, may make it difficult for
us to retain or attract officers and directors.
We may be
unable to attract and retain qualified officers, directors and members of board
committees required to provide for our effective management as a result of the
recent and currently proposed changes in the rules and regulations which govern
publicly-held companies. Sarbanes-Oxley Act of 2002 has resulted in a series of
rules and regulations by the Securities and Exchange Commission that increase
responsibilities and liabilities of directors and executive officers. The
perceived increased personal risk associated with these recent changes may deter
qualified individuals from accepting these roles.
As
a "Foreign Private Issuer”, We Are Exempt from the Section 14 Proxy Rules and
Section 16 of the 1934 Securities Act May Result in Shareholders Having Less
Complete and Timely Data.
The
submission of proxy and annual meeting of shareholder information (prepared to
Canadian standards) on Form 6-K may result in shareholders having less complete
and timely data. As a foreign Private Issuer, our officers, directors and
principal shareholders are exempt from Exchange Act Section 16’s short-swing
insider disclosure and profit recovery provisions. The exemption from Section 16
rules regarding sales of common shares by insiders may result in shareholders
having less data.
It
may be difficult to enforce judgments or bring actions outside the United States
against Us and certain of our directors and officers.
We are a
Canadian corporation and certain of our directors and officers are neither
citizens nor residents of the United States. A substantial part of
our assets and of several of these persons is located outside the United
States. As a result, it may be difficult or impossible for an
investor:
·
|
to
enforce in courts outside the United States judgments obtained in United
States courts based upon the civil liability provisions of United States
federal securities laws against us and these persons;
or
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·
|
to
bring in courts outside the United States an original action to enforce
liabilities based upon United States federal securities laws against us
and these persons.
|
General
economic conditions
The
recent unprecedented events in global financial markets have had a profound
impact on the global economy. Many industries, including the gold
mining industry, are impacted by these market conditions. Some of the
key impacts of the current financial market turmoil include contraction in
credit markets resulting in a widening of credit risk, devaluations and high
volatility in global equity, commodity, foreign exchange and precious metal
markets, and a lack of market liquidity. A continued or worsened
slowdown in the financial markets or other economic conditions, including but
not limited to, consumer spending, employment rates, business conditions,
inflation, fuel and energy costs, consumer debt levels, lack of available
credit, the state of the financial markets, interest rates, and tax rates may
adversely affect our growth and
profitability. Specifically:
·
|
the
global credit/liquidity crisis could impact the cost and availability of
financing and our overall
liquidity;
|
·
|
the
volatility of oil and gas prices may impact our revenues, profits and cash
flow;
|
·
|
volatile
energy prices, commodity and consumables prices and currency exchange
rates impact potential production costs;
and
|
·
|
the
devaluation and volatility of global stock markets impacts the valuation
of our equity securities.
|
These
factors could have a material adverse effect on our financial condition and
results of operations.
Risks
Pertaining to the Industry
Oil
and Gas Exploration Has a High Degree of Risk and Our Exploration Efforts May Be
Unsuccessful, Which Would Have a Negative Effect on Our Operations.
There is
no certainty that the expenditures to be made by us in the exploration of its
current projects, or any additional project interests we may acquire, as
described herein, will result in discoveries of recoverable oil and gas in
commercial quantities. An exploration project may not result in the
discovery of commercially recoverable reserves and the level of recovery of
hydrocarbons from a property may not be a commercially recoverable (or viable)
reserve which can be legally and economically exploited. If exploration is
unsuccessful and no commercially recoverable reserves are defined, management
would be required to evaluate and acquire additional projects which would
require additional capital, or we would have to cease operations
altogether.
Hydrocarbon
Exploration and Production Has Substantial Operating and Drilling Hazards Which
Could Result in Failure of Our Projects or Substantial Liabilities Which May Not
Be Covered by Insurance.
Oil and
natural gas exploration and production operations are subject to all the risks
and hazards typically associated with such operations. Hazards include well
fires, explosions, blowouts, and oil spills, each of which could result in
substantial damage to oil and natural gas wells, producing facilities, other
property and the environment or in personal injury. Although the operator of
each property in which we have an interest typically maintains liability
insurance in an amount which they consider adequate, the nature of these risks
is such that liabilities could exceed policy limits, in which event we, as an
owner of an interest in these wells or as the operator, could incur significant
costs that could have a materially adverse effect upon its financial condition.
Oil and natural gas production operations are also subject to all the risks
typically associated with such operations, including premature decline of
reservoirs and the invasion of water into producing formations. Any unforeseen
hazard could result in the failure of our operations on that project, which
would have a negative effect on our financial condition or cause us to cease
operations altogether.
The
Oil and Gas Industry is Highly Competitive, and if We Are Unsuccessful in
Competing With Other Oil and Gas Companies, It Would Negatively Affect Our
Ability to Operate.
The oil
and gas industry is highly competitive, including the acquisition of property
interests, equipment, skilled personnel, and product marketing. We are required
to directly compete with a substantial number of other oil and gas companies.
Many of these other companies, both public and private, have significantly
greater financial and personnel resources than us. Such competitors could outbid
us for such projects, equipment or personnel, or produce oil and gas at lower
costs which would have a negative effect on our operations and financial
condition, including forcing us to cease operations altogether.
Commodity
Prices May Not Support Corporate Profit.
The
petroleum industry in general is intensely competitive and there is no assurance
that, even if commercial quantities of oil or gas are discovered and developed,
a profitable market will exist for the sale of same. Factors beyond our
control may affect the marketability of any substances discovered. The
price of natural resources are volatile over short periods of time, and is
affected by numerous factors beyond our control, including international
economic and political trends, expectations of inflation, currency exchange
fluctuations, interest rates and global or regional consumption patterns,
speculative activities and increased production due to improved recovery
techniques. If we are unable to economically produce oil and gas from its
projects, it would have a negative effect on our financial condition, or require
us to cease operations altogether.
Oil
and Gas Reserve Information is Estimated and May Not Be Economic to
Produce.
Our oil
and gas reserves have been independently evaluated in accordance with applicable
securities laws by independent professional consultants. These evaluations are
based, in part, on a number of assumptions and variable factors such as
historical and initial production rates, production decline rates, ultimate
recovery of reserves, amount and timing of capital expenditures, marketability
of oil and gas production, royalty rates, operating costs, and taxes and
government levies. These assumptions were based on forecasts in effect and use
at the time of the preparation of the report and may be subject to change or
factors outside of our control. Actual production, cash flows, and recovery
rates from these reserve estimates will vary, and such variations could have a
material effect on our operations and financial condition.
We
Must Successfully Replace Our Oil and Natural Gas Reserves.
Our
future oil and natural gas reserves, production and cash flows to be derived
therefrom are highly dependent on our success in exploring the current reserve
base and acquiring or discovering new reserves. Without the successful addition
of new reserves, any existing reserves we may have at any particular time and
the production therefrom will decline over time as such existing reserves are
exploited. A future increase in our reserves will depend not only on our ability
to develop any properties it may have from time to time, but also on our ability
to select and acquire suitable prospects or producing properties. If we are
unsuccessful in discovering and successfully exploiting additional reserves, it
will have a negative effect on our operations and financial
condition.
Our
Operations Are Subject to Substantial Environmental Regulations Which Could Have
a Negative Effect on Our Operations and Financial Condition.
Our
current and anticipated future operations require permits from various federal,
provincial and local governmental authorities and such operations are and will
be governed by laws and regulations governing various elements of the petroleum
industry. Our exploration and production activities are subject to various
laws governing land use, the protection of the environment, prospecting,
development, production, exports, taxes, labor standards, occupational health,
waste disposal, toxic substances, and other matters. Such operations and
exploration activities are also subject to substantial regulation under these
laws by governmental agencies and may require that we obtain permits from
various governmental agencies.
We
believe it is in substantial compliance with all material laws and regulations
which currently apply to our activities. All permits which we may require for
future exploration may not be obtainable on reasonable terms or such laws and
regulations, or new legislation or modifications to existing legislation, could
have an adverse effect on any project that we might undertake.
Failure
to comply with applicable laws, regulations and permitting requirements may
result in enforcement actions thereunder, including orders issued by regulatory
or judicial authorities causing operations to cease or be curtailed, and may
include corrective measures requiring capital expenditures, installation of
additional equipment or remedial actions.
Amendments
to current laws, regulations and permits governing operations and activities of
oil and gas companies, or more stringent implementation thereof, could have a
material adverse impact on us, which may adversely effect our financial
condition, or require us to cease operations altogether.
Our
Title to Our Properties May Be Disputed By Third Parties Which Could Result in
Our Losing Title to Our Properties.
We have
only done a preliminary title survey of its exploration properties in accordance
with industry standards. These procedures do not guarantee our title and
therefore, in accordance with the laws of the jurisdictions in which these
properties are situated, their existence and area could be in doubt.
Unregistered agreements or transfers, or native land claims, may affect title.
If title is disputed, we will have to defend its ownership through the
courts, which would likely be an expensive and protracted process and have a
negative effect on our operations and financial condition. In the event of an
adverse judgment, we would lose its property rights.
Canada
is a Signatory to the Kyoto Protocol Which Could Negatively Change Future
Operations By Restricting Our Activities or Increasing Operating
Costs.
Canada is
a signatory to the United Nation’s Framework Convention on Climate Change and
has ratified the Kyoto Protocol to set legally binding targets to reduce
nationwide emissions of “greenhouse gases”, including carbon dioxide, methane,
and nitrous oxide. Oil and gas exploration and production and other petroleum
operations and related activities emit some greenhouse gases, which may subject
the Canadian oil and gas industry, including the Company, to legislation or
other regulatory initiatives designed to regulate emissions of greenhouse
gasses. The federal government of Canada has proposed a Climate Change Plan for
Canada, which suggests further legislation will set greenhouse gases emission
reduction requirements for various industrial activities, including oil and gas
exploration and production. Future federal legislation as well as Provincial
emission reduction requirements, may require the reduction of emissions produced
by our operations and facilities. These new requirements and the additional
costs required to comply could have a material effect on our operations and
financial condition.
Risks
Associated With Our Common Shares
Our
stock price has been volatile and your investment in our common shares could
suffer a decline in value.
Our
common shares are traded on the Toronto Stock Exchange and the NYSE Amex.
The market price of our common shares may fluctuate significantly in
response to a number of factors, some of which are beyond our control. These
factors include price fluctuations of precious metals, government regulations,
disputes regarding mining claims, broad stock market fluctuations and economic
conditions in the United States.
Dilution
Through Employee/Director/Consultant/Agents Options Could Adversely Affect
Dejour’s Stockholders.
Because
our success is highly dependent upon its respective employees, we have granted
to some or all of its key employees, directors and consultants options to
purchase common shares as non-cash incentives. To the extent that
significant numbers of such options may be granted and exercised, the interests
of our other stockholders may be diluted. As of September 30, 2009,
there were 4,490,364 share purchase options outstanding, of which 1,153,489
share purchase options are vested and exercisable. If all the vested options
were exercised, it would result in an additional 1,153,489 common shares being
issued and outstanding. (For a breakdown of dilution, refer to the risk factor
entitled: “Dejour Has Minimal Positive Cash Flow and No Recent History of
Significant Earnings and Is Dependent Upon Public and Private Distributions of
Equity to Obtain Capital in Order to Sustain Operations. Public Distributions of
Capital Result in Dilution to Existing Shareholders”)
Because
we may not pay any dividends on our common shares, investors seeking short-term
dividend income or liquidity should not purchase our shares.
We do not
currently anticipate declaring and paying dividends to our shareholders in the
near future. It is our current intention to apply net earnings, if any, in the
foreseeable future to increasing our working capital. Prospective investors
seeking or needing dividend income or liquidity should, therefore, not purchase
our common stock. While our wholly owned drilling subsidiary provides revenues,
we currently have no revenues and a history of losses from our exploration
activity, so there can be no assurance that we will ever have sufficient
earnings to declare and pay dividends to the holders of our shares, and in any
event, a decision to declare and pay dividends is at the sole discretion of our
board of directors, who currently do not intend to pay any dividends on our
common shares for the foreseeable future.
DOCUMENTS
INCORPORATED BY REFERNCE
The SEC
allows us to “incorporate by reference” information it files with the
SEC. This means that we can disclose important information to you by
referring you to those documents. Any information we reference in
this manner is considered part of this Prospectus. Information we
file with the SEC after the date of this Prospectus will automatically update
and, to the extent inconsistent, supersede the information contained in this
Prospectus.
We
incorporate by reference the documents listed below and future filings we make
with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934, as amended (which we refer to as the “Exchange Act”)
(excluding, unless otherwise provided therein or herein, information furnished
pursuant any Report on Form 6-K) after the date of the initial filing of this
registration statement on Form S-3 to which this Prospectus relates until the
termination of the offering under this Prospectus.
|
(a)
|
Our
Annual Report on Form 20-F for the fiscal year ended December 31, 2008, as
filed on June 30, 2009, excluding Item
17;
|
|
(b)
|
Our
Amended Annual Report on Form 20-F for the fiscal year ended December 31,
2009, as filed on October 23, 2009;
|
|
(b)
|
Our
Report on Form 6-K as filed October 23, 2009
,
which includes the
Registrant’s unaudited consolidated financial statements as at and for the
three and six month periods ended June 30,
2009.;
|
|
(f)
|
The
description of the Registrant’s securities contained in the Registrant’s
Registration Statement on Form 8-A filed with the Securities and Exchange
Commission on May 22, 2007, including any amendment or report filed for
the purpose of updating such description;
and
|
|
(g)
|
all
other documents filed by us with the SEC under Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act, after the date of this Prospectus but before
the end of the offering of the Securities pursuant to this
Prospectus.
|
We will
furnish without charge to each person, including any beneficial owner to whom a
prospectus is delivered, on written or oral request, a copy of any or all of the
above documents, other than exhibits to such documents which are not
specifically incorporated by reference therein. You should direct any
requests for documents to:
Suite #
598 – 999 Canada Place,
Vancouver,
BC V6C 3E1
Canada
Telephone:
(604) 638-5050
Facsimile:
(604) 638-5051
Website:
www.dejour.com
Email:
rhodgkinson@dejour.com or mwong@dejour.com
The
information relating to us contained in this Prospectus is not comprehensive and
should be read together with the information contained in the incorporated
documents. Descriptions contained in the incorporated documents as to
the contents of any contract or other document may not contain all of the
information which is of interest to you. You should refer to the copy
of such contract or other document filed as an exhibit to our
filings.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
Prospectus and the documents incorporated herein by reference contain
“forward-looking-statements” within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements concern our
anticipated results and developments in the our operations in future periods,
planned exploration and, if warranted, development of its properties, plans
related to its business and other matters that may occur in the future. These
statements relate to analyses and other information that are based on forecasts
of future results, estimates of amounts not yet determinable and assumptions of
management.
Any
statements that express or involve discussions with respect to predictions,
expectations, beliefs, plans, projections, objectives, assumptions or future
events or performance (often, but not always, using words or phrases such as
“expects” or “does not expect”, “is expected”, “anticipates” or “does not
anticipate”, “plans”, “estimates” or “intends”, or stating that certain actions,
events or results “may”, “could”, “would”, “might” or “will” be taken, occur or
be achieved) are not statements of historical fact and may be forward-looking
statements. Forward-looking statements are subject to a variety of known and
unknown risks, uncertainties and other factors which could cause actual events
or results to differ from those expressed or implied by the forward-looking
statements, including, without limitation:
·
|
risks
related to our cumulative unsuccessful exploration
efforts;
|
·
|
risks
related to our working capital deficit, minimal positive cash flow and no
recent history of earnings;
|
·
|
risks
related to our ability to pay existing debt from operating
revenue;
|
·
|
risks
related to our dependence on key
personnel;
|
·
|
risks
related to the Sarbanes-Oxley Act of
2002;
|
·
|
risks
related to our status as a foreign private issuer under US securities
legislation;
|
·
|
risks
related to enforcement of judgments against us outside the United
States;
|
·
|
risks
related to current market
conditions;
|
·
|
risks
related our oil and gas exploration efforts being
unsuccessful;
|
·
|
risks
related to hydrocarbon exploration operating and drilling
hazards;
|
·
|
risks
related to competition in the oil and gas
industry
|
·
|
risks
related to commodity prices
|
·
|
risks
related to oil and gas reserve
estimates
|
·
|
risks
related to our ability to replace our oil and natural gas
reserves
|
·
|
risks
related to our operations being subject to environmental
regulations
|
·
|
risks
related to our title to properties
|
·
|
risks
related to the Kyoto Protocol; and
|
·
|
risks
related to our common shares.
|
This list
is not exhaustive of the factors that may affect our forward-looking statements.
Some of the important risks and uncertainties that could affect forward-looking
statements are described further under the sections titled “Risk Factors and
Uncertainties” of this Prospectus. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated, believed, estimated
or expected. We caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. We disclaim
any obligation subsequently to revise any forward-looking statements to reflect
events or circumstances after the date of such statements or to reflect the
occurrence of anticipated or unanticipated events.
We
qualify all the forward-looking statements contained in this Prospectus by the
foregoing cautionary statements.
USE
OF PROCEEDS
Unless
otherwise indicated in the applicable Prospectus Supplement, the net proceeds
from the sale of Common Shares will be used by us for acquisitions, exploration
and development of existing or acquired mineral properties, working capital
requirements, to repay indebtedness outstanding from time to time or for other
general corporate purposes. We may, from time to time, issue Common
Shares or other securities otherwise than through the offering of Common Shares
pursuant to this Prospectus.
DESCRIPTION OF COMMON SHARES
Common
Shares
We are
authorized to issue an unlimited number of common shares of which, as of
November 3, 2009, 84,752,555 are issued and outstanding. Our common
shares are entitled to one vote per share on all matters submitted to a vote of
the shareholders, including the election of directors. Except as otherwise
required by law the holders of our common shares will possess all voting power.
Generally, all matters to be voted on by shareholders must be approved by a
majority (or, in the case of election of directors, by a plurality) of the votes
entitled to be cast by all common shares that are present in person or
represented by proxy. One holder of shares of our capital stock issued,
outstanding and entitled to vote, represented in person or by proxy, is
necessary to constitute a quorum at any meeting of our
shareholders.
The
holders of shares of our common stock will be entitled to such cash dividends as
may be declared from time to time by our board of directors from funds available
therefore.
Upon
liquidation, dissolution or winding up of the Company, holders of common shares
are entitled to receive pro rata our assets, if any, remaining after payments of
all debts and liabilities. No shares have been issued subject to call or
assessment. There are no pre-emptive or conversion rights and no
provisions for redemption or purchase for cancellation, surrender, or sinking or
purchase funds.
In the
event of any merger or consolidation with or into another company in connection
with which shares of our common stock are converted into or exchangeable for
shares of stock, other securities or property (including cash), all holders of
shares of our common stock will be entitled to receive the same kind and amount
of shares of stock and other securities and property (including
cash).
There are
no indentures or agreements limiting the payment of dividends and there are no
special liquidation rights or subscription rights.
Alteration
of Share Structure
We may
alter our authorized share structure by directors’ resolution or ordinary
resolution of its shareholders, in each case determined by the directors,
to:
(a)
|
create
one or more classes or series of shares or, if none of the shares of a
series of a class or series of shares are allotted or issued, eliminate
that class or series of shares;
|
(b)
|
increase,
reduce or eliminate the maximum number of shares that the Company is
authorized to issue out of any class or series of shares or establish a
maximum number of shares that the company is authorized to issue out of
any class or series of shares for which no maximum is
established;
|
(c)
|
subdivide
all or any of its unissued, or fully paid issued,
shares;
|
(d)
|
if
the Company is authorized to issue shares of a class or shares with par
value;
|
|
(i)
|
decrease
the par value of those shares; or
|
|
(ii)
|
if
none of the shares of that class of shares are allotted or issued,
increase the par value of those
shares;
|
(e)
|
change
all or any of its unissued, or fully paid issued, shares with par value
into shares without par value or any of its unissued shares without par
value into shares with par value;
|
(f)
|
alter
the identifying name of any of its shares;
or
|
|
by
ordinary resolution of its shareholders otherwise alter its share or
authorized share structure
|
Cash
dividends
As of the
date of this Prospectus, we have not paid any cash dividends to stockholders.
The declaration of any future cash dividend will be at the discretion of our
board of directors and will depend upon our earnings, if any, our capital
requirements and financial position, our general economic conditions, and other
pertinent conditions. It is our present intention not to pay any cash dividends
in the foreseeable future, but rather to reinvest earnings, if any, in our
exploration activities.
DESCRIPTION
OF WARRANTS
The
following description, together with the additional information we may include
in any applicable Prospectus Supplements and free writing prospectuses,
summarizes the material terms and provisions of the Warrants that we may offer
under this Prospectus, which may consist of Warrants to purchase Common Shares
and may be issued in one or more series. Warrants may be offered
independently or together with Common Shares offered by any Prospectus
Supplement, and may be attached to or separate from those
Securities. While the terms we have summarized below will apply
generally to any Warrants that it may offer under this Prospectus, the Company
will describe the particular terms of any series of Warrants that it may offer
in more detail in the applicable Prospectus Supplement and any applicable free
writing prospectus. The terms of any Warrants offered under a
Prospectus Supplement may differ from the terms described below.
General
Warrants
will be issued under and governed by the terms of one or more warrant indentures
(each a “Warrant Indenture”) between the Company and a warrant trustee (which we
refer to as the “Warrant Trustee”) that we will name in the relevant Prospectus
Supplement. Each Warrant Trustee will be a financial institution
organized under the laws of Canada or any province thereof and authorized to
carry on business as a trustee.
This
summary of some of the provisions of the Warrants is not
complete. The statements made in this Prospectus relating to any
Warrant Indenture and Warrants to be issued under this Prospectus are summaries
of certain anticipated provisions thereof and do not purport to be complete and
are subject to, and are qualified in their entirety by reference to, all
provisions of the applicable Warrant Indenture. Prospective investors
should refer to the Warrant Indenture relating to the specific Warrants being
offered for the complete terms of the Warrants. We will file as
exhibits to the registration statement of which this Prospectus is a part, or
will incorporate by reference from a current report on Form 8-K that we
file with the SEC, any Warrant Indenture describing the terms and conditions of
Warrants we are offering before the issuance of such Warrants.
The
applicable Prospectus Supplement relating to any Warrants offered by us will
describe the particular terms of those Warrants and include specific terms
relating to the offering.
The
particular terms of each issue of Warrants will be described in the applicable
Prospectus Supplement. This description will include, where
applicable:
·
|
the
designation and aggregate number of
Warrants;
|
·
|
the price at which the Warrants will be
offered;
|
·
|
the
currency or currencies in which the Warrants will be
offered;
|
·
|
the
date on which the right to exercise the Warrants will commence and the
date on which the right will
expire;
|
·
|
the
number of Common Shares that may be purchased upon exercise of each
Warrant and the price at which and currency or currencies in which the
Common Shares may be purchased upon exercise of each
Warrant;
|
·
|
the
designation and terms of any Securities with which the Warrants will be
offered, if any, and the number of the Warrants that will be offered with
each Security;
|
·
|
the
date or dates, if any, on or after which the Warrants and the other
Securities with which the Warrants will be offered will be transferable
separately;
|
·
|
whether
the Warrants will be subject to redemption and, if so, the terms of such
redemption provisions;
|
·
|
whether
we will issue the Warrants as global securities and, if so, the identity
of the depositary of the global
securities;
|
·
|
whether
the Warrants will be listed on any
exchange;
|
·
|
material
United States and Canadian federal income tax consequences of owning the
Warrants; and
|
·
|
any
other material terms or conditions of the
Warrants.
|
Rights
of Holders Prior to Exercise
Prior to
the exercise of their Warrants, holders of Warrants will not have any of the
rights of holders of the Common Shares or Debt Securities issuable upon exercise
of the Warrants.
Exercise
of Warrants
Each
Warrant will entitle the holder to purchase the Securities that we specify in
the applicable Prospectus Supplement at the exercise price that we describe
therein. Unless we otherwise specify in the applicable Prospectus
Supplement, holders of the Warrants may exercise the Warrants at any time up to
the specified time on the expiration date that we set forth in the applicable
Prospectus Supplement. After the close of business on the expiration
date, unexercised Warrants will become void.
Holders
of the Warrants may exercise the Warrants by delivering the Warrant Certificate
representing the Warrants to be exercised together with specified information,
and paying the required amount to the Warrant Trustee in immediately available
funds, as provided in the applicable Prospectus Supplement. We will
set forth on the Warrant Certificate and in the applicable Prospectus Supplement
the information that the holder of the Warrant will be required to deliver to
the Warrant Trustee.
Upon
receipt of the required payment and the Warrant Certificate properly completed
and duly executed at the corporate trust office of the Warrant Trustee or any
other office indicated in the applicable Prospectus Supplement, we will issue
and deliver the securities purchasable upon such exercise. If fewer
than all of the Warrants represented by the Warrant Certificate are exercised,
then we will issue a new Warrant Certificate for the remaining amount of
Warrants. If we so indicate in the applicable Prospectus Supplement,
holders of the Warrants may surrender securities as all or part of the exercise
price for Warrants.
Anti-Dilution
The
Warrant Indenture will specify that upon the subdivision, consolidation,
reclassification or other material change of the Common Shares or any other
reorganization, amalgamation, merger or sale of all or substantially all of our
assets, the Warrants will thereafter evidence the right of the holder to receive
the securities, property or cash deliverable in exchange for or on the
conversion of or in respect of the Common Shares to which the holder of a Common
Share would have been entitled immediately after such
event. Similarly, any distribution to all or substantially all of the
holders of Common Shares of rights, options, warrants, evidences of indebtedness
or assets will result in an adjustment in the number of Common Shares to be
issued to holders of Warrants.
Global
Securities
We may
issue Warrants in whole or in part in the form of one or more global securities,
which will be registered in the name of and be deposited with a depositary, or
its nominee, each of which will be identified in the applicable Prospectus
Supplement. The global securities may be in temporary or permanent
form. The applicable Prospectus Supplement will describe the terms of any
depositary arrangement and the rights and limitations of owners of beneficial
interests in any global security. The applicable Prospectus Supplement will
describe the exchange, registration and transfer rights relating to any global
security.
Modifications
The
Warrant Indenture will provide for modifications and alterations to the Warrants
issued thereunder by way of a resolution of holders of Warrants at a meeting of
such holders or a consent in writing from such holders. The number of
holders of Warrants required to pass such a resolution or execute such a written
consent will be specified in the Warrant Indenture.
We may
amend any Warrant Indenture and the Warrants, without the consent of the holders
of the Warrants, to cure any ambiguity, to cure, correct or supplement any
defective or inconsistent provision, or in any other manner that will not
materially and adversely affect the interests of holders of outstanding
Warrants.
DESCRIPTION
OF UNITS
The
following description, together with the additional information we may include
in any applicable Prospectus Supplements, summarizes the material terms and
provisions of the Units that the Company may offer under this
Prospectus. While the terms we have summarized below will apply
generally to any Units that we may offer under this Prospectus, we will describe
the particular terms of any series of Units in more detail in the applicable
Prospectus Supplement. The terms of any Units offered under a
Prospectus Supplement may differ from the terms described below.
We will
file as exhibits to the registration statement of which this Prospectus is a
part, or will incorporate by reference from a current report on Form 8-K
that we file with the SEC, the form of unit agreement (“Unit Agreement”) between
the Company and a unit agent (“Unit Agent”) that describes the terms and
conditions of the series of Units we are offering, and any supplemental
agreements, before the issuance of the related series of Units. The
following summaries of material terms and provisions of the Units are subject
to, and qualified in their entirety by reference to, all the provisions of the
Unit Agreement and any supplemental agreements applicable to a particular series
of Units. We urge you to read the applicable Prospectus Supplements
related to the particular series of Units that we sell under this Prospectus, as
well as the complete Unit Agreement and any supplemental agreements that contain
the terms of the Units.
General
We may
issue units comprising one or more of Common Shares and Warrants in any
combination. Each Unit will be issued so that the holder of the Unit
is also the holder of each security included in the Unit. Thus, the
holder of a Unit will have the rights and obligations of a holder of each
included security. The Unit Agreement under which a Unit is issued
may provide that the securities included in the Unit may not be held or
transferred separately, at any time or at any time before a specified
date.
We will
describe in the applicable Prospectus Supplement the terms of the series of
Units, including:
·
|
the
designation and terms of the Units and of the securities comprising the
Units, including whether and under what circumstances those securities may
be held or transferred separately;
|
·
|
any
provisions of the governing Unit Agreement that differ from those
described below; and
|
·
|
any
provisions for the issuance, payment, settlement, transfer or exchange of
the Units or of the securities comprising the Units
.
|
The
provisions described in this section, as well as those described under
“Description of Common Shares” and “Description of Warrants” will apply to each
Unit and to any Common Share or Warrant included in each Unit,
respectively.
Issuance
in Series
We may
issue Units in such amounts and in numerous distinct series as we
determine.
Enforceability
of Rights by Holders of Units
Each Unit
Agent will act solely as our agent under the applicable Unit Agreement and will
not assume any obligation or relationship of agency or trust with any holder of
any Unit. A single bank or trust company may act as Unit Agent for
more than one series of Units. A Unit Agent will have no duty or
responsibility in case of any default by us under the applicable Unit Agreement
or Unit, including any duty or responsibility to initiate any proceedings at law
or otherwise, or to make any demand upon us. Any holder of a Unit
may, without the consent of the related Unit Agent or the holder of any other
Unit, enforce by appropriate legal action its rights as holder under any
security included in the Unit.
We, the
Unit Agents, and any of our or their agents may treat the registered holder of
any Unit Certificate as an absolute owner of the Units evidenced by that
certificate for any purpose and as the person entitled to exercise the rights
attaching to the Units so requested, despite any notice to the
contrary.
PLAN
OF DISTRIBUTION
General
We may
offer and sell the Securities, separately or together: (a) to one or more
underwriters or dealers; (b) through one or more agents; or (c) directly to one
or more other purchasers. The Securities offered pursuant to any Prospectus
Supplement may be sold from time to time in one or more transactions at: (i) a
fixed price or prices, which may be changed from time to time; (ii) market
prices prevailing at the time of sale; (iii) prices related to such prevailing
market prices; or (iv) other negotiated prices. We may only offer and
sell the Securities pursuant to a Prospectus Supplement during the period that
this Prospectus, including any amendments hereto, remains
effective. The Prospectus Supplement for any of the Securities being
offered thereby will set forth the terms of the offering of such Securities,
including the type of Security being offered, the name or names of any
underwriters, dealers or agents, the purchase price of such Securities, the
proceeds to us from such sale, any underwriting commissions or discounts and
other items constituting underwriters’ compensation and any discounts or
concessions allowed or re-allowed or paid to dealers. Only
underwriters so named in the Prospectus Supplement are deemed to be underwriters
in connection with the Securities offered thereby.
By
Underwriters
If
underwriters are used in the sale, the Securities will be acquired by the
underwriters for their own account and may be resold from time to time in one or
more transactions, including negotiated transactions, at a fixed public offering
price or at varying prices determined at the time of sale. Unless
otherwise set forth in the Prospectus Supplement relating thereto, the
obligations of underwriters to purchase the Securities will be subject to
certain conditions, but the underwriters will be obligated to purchase all of
the Securities offered by the Prospectus Supplement if any of such Securities
are purchased. We may offer the Securities to the public through
underwriting syndicates represented by managing underwriters or by underwriters
without a syndicate. We may agree to pay the underwriters a fee or
commission for various services relating to the offering of any
Securities. Any such fee or commission will be paid out of our
general corporate funds. We may use underwriters with whom we have a
material relationship. We will describe in the Prospectus Supplement,
naming the underwriter, the nature of any such relationship.
By
Dealers
If
dealers are used, and if so specified in the applicable Prospectus Supplement,
we will sell such Securities to the dealers as principals. The
dealers may then resell such Securities to the public at varying prices to be
determined by such dealers at the time of resale. Any public offering
price and any discounts or concessions allowed or re-allowed or paid to dealers
may be changed from time to time. We will set forth the names of the
dealers and the terms of the transaction in the applicable Prospectus
Supplement.
By
Agents
The
Securities may also be sold through agents designated by us. Any
agent involved will be named, and any fees or commissions payable by us to such
agent will be set forth, in the applicable Prospectus Supplement. Any
such fees or commissions will be paid out of our general corporate
funds. Unless otherwise indicated in the Prospectus Supplement, any
agent will be acting on a best efforts basis for the period of its
appointment.
Direct
Sales
Securities
may also be sold directly by us at such prices and upon such terms as agreed to
by us and the purchaser. In this case, no underwriters, dealers or
agents would be involved in the offering.
General
Information
Underwriters,
dealers and agents that participate in the distribution of the Securities
offered by this Prospectus may be deemed underwriters under the Securities Act,
and any discounts or commissions they receive from us and any profit on their
resale of the securities may be treated as underwriting discounts and
commissions under the Securities Act.
Underwriters,
dealers or agents who participate in the distribution of Securities may be
entitled under agreements to be entered into with us to indemnification by us
against certain liabilities, including liabilities under United States
securities legislation, or to contribution with respect to payments which such
underwriters, dealers or agents may be required to make in respect
thereof. Such underwriters, dealers or agents may be customers of,
engage in transactions with, or perform services for, us in the ordinary course
of business.
We may
enter into derivative transactions with third parties, or sell securities not
covered by this Prospectus to third parties in privately negotiated
transactions. If the applicable Prospectus Supplement indicates, in connection
with those derivatives, the third parties may sell securities covered by this
Prospectus and the applicable Prospectus Supplement, including in short sale
transactions. If so, the third parties may use securities pledged by us or
borrowed from us or others to settle those sales or to close out any related
open borrowings of stock, and may use securities received from us in settlement
of those derivatives to close out any related open borrowings of stock. The
third parties in such sale transactions will be identified in the applicable
Prospectus Supplement.
One or
more firms, referred to as “remarketing firms,” may also offer or sell the
Securities, if the Prospectus Supplement so indicates, in connection with a
remarketing arrangement upon their purchase. Remarketing firms will act as
principals for their own accounts or as agents for us. These remarketing firms
will offer or sell the Securities in accordance with the terms of the
Securities. The Prospectus Supplement will identify any remarketing firm and the
terms of its agreement, if any, with us and will describe the remarketing firm’s
compensation. Remarketing firms may be deemed to be underwriters in connection
with the Securities they remarket.
In
connection with any offering of Securities, underwriters may over-allot or
effect transactions which stabilize or maintain the market price of the
Securities offered at a level above that which might otherwise prevail in the
open market. Such transactions may be commenced, interrupted or
discontinued at any time.
Previously
Terminated Private Placement Offering
Pursuant
to Rule 155 of the Securities Act, the Company terminated all offering activity
in a private placement offering of its securities on October 15,
2009. At the time of termination, the Company had not established the
size of the offering or any terms for the proposed private placement of the
securities and had only engaged in preliminary discussions with a select few
accredited investors (as defined under Rule 501(a) of Regulation D under the
Securities Act). There were no offers to buy or indications of
interest at the time of termination and the Company has informed the accredited
investors with whom it met that any such offers to buy or indications of
interest will be rejected. No securities were sold in the private
placement. This Prospectus and any Prospectus Supplement supersedes
any selling materials used in relation to the private placement
offering.
INTERESTS
OF NAMED EXPERTS AND COUNSEL
None.
TRANSFER
AGENT AND REGISTRAR
Our
registrar and transfer agent for our common shares is Computershare Trust
Company of Canada located at 510 Burrard Street, Vancouver, British Columbia
Canada V5K 1A1.
LEGAL
MATTERS
The law
firm of DuMoulin Black LLP has acted as our counsel by providing an opinion on
the validity of the Securities offered in this Prospectus and applicable
Prospectus Supplements and counsel named in the applicable Prospectus Supplement
will pass upon legal matters for any underwriters, dealers or
agents. Certain legal matters related to this Prospectus will be
passed upon on our behalf by Dorsey & Whitney LLP with respect to matters of
United States law.
EXPERTS
Our
consolidated financial statements as of December 31, 2008 and 2007, and for the
years ended December 31, 2008, 2007 and 2006, have been incorporated by
reference herein in reliance upon the report of Dale Matheson Carr-Hilton
Labonte LLP, independent registered public accounting firm, given upon the
authority of that firm as experts in accounting and auditing.
WHERE
YOU CAN FIND MORE INFORMATION
We file
annual, quarterly and current reports, proxy statements and other information
with the SEC. Our SEC filings are available to the public over the
Internet at the SEC’s web site at http://www.sec.gov.
This
Prospectus is part of a registration statement and, as permitted by SEC rules,
does not contain all of the information included in the registration
statement. Whenever a reference is made in this Prospectus to any of
our contracts or other documents, the reference may not be complete and, for a
copy of the contract or document, you should refer to the exhibits that are part
of the registration statement. You may call the SEC at 1-800-SEC-0330
for more information on the public reference rooms and their copy
charges. You may also read and copy any document we file with the
SEC at the SEC’s public reference rooms at:
100 F
Street, N.E.
Room
1580
Washington,
D.C. 20549
DEJOUR
ENTERPRISES LTD.
December
18, 2009
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